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PART
III
Item
10. Directors, Executive Officers, and Corporate Governance
Directors
The
names and ages of our directors are:
Ronald
Andrews, Jr., 62, joined our Board of Directors in April 2018 and has served as our President and Chief Executive Officer since July
1, 2019. Mr. Andrews has over 30 years of experience in the molecular diagnostics and genomics industries, including experience integrating
companies acquired in mergers. Mr. Andrews is the founder and former principal of the Bethesda Group, a consulting firm that advises
companies in the molecular diagnostics and genomics fields. Prior to founding the Bethesda Group in 2015, where he served as Senior Partner
until August 2019, Mr. Andrews served as President, Genetic Sciences Division of Thermo Fisher Scientific from September 2013 to December
2014, and as President, Medical Sciences Venture for Life Technologies from February 2012 to September 2013 when Life Technologies was
acquired by Thermo Fisher. From 2004 to December 2010, Mr. Andrews was the Chief Executive Officer and Vice Chairman of the Board of
Clarient, Inc., a cancer diagnostics company, and from December 2010 to February 2012 he served as CEO of GE Molecular Diagnostics after
Clarient was acquired by GE Healthcare. Mr. Andrews oversaw the transition of Clarient, Inc. into GE Healthcare and established a strategic
plan to integrate in vivo and in vitro diagnostic tests and expand GE’s presence in oncology. Mr. Andrews also held management
positions with companies in diagnostics and related medical fields, including Roche Molecular Diagnostics, Immucor, Inc. and Abbott Labs.
Mr. Andrews also serves as a director of Precipio, Inc. and previously served as a director of Oxford ImmunoTec. Mr. Andrews is also
a member of the Board of Governors of CancerLinQ LLC, a wholly-owned non-profit subsidiary of the American Society of Clinical Oncology.
Mr. Andrews received a BS degree in Biology and Chemistry from Wofford College. We believe Mr. Andrew’s extensive experience holding
senior leadership, management and board positions within other biopharmaceutical companies will make him a valuable resource to our Company.
Andrew
Arno, 62, joined our Board of Directors in June 2015 and has 30 years of experience handling a wide range of corporate and financial
matters, including work as an investment banker and strategic advisor to emerging growth companies. He is currently Vice Chairman of
Special Equities Group, LLC, a privately held investment banking firm affiliated with Dawson James Securities Inc. and previously with
Bradley Woods & Co. Ltd., and he has held this role since June 2019. Mr. Arno previously served as Vice Chairman at Chardan Capital
Markets, LLC, from July 2015 to June 2019. From June 2013 until July 2015, Mr. Arno served as Managing Director of Emerging Growth Equities,
an investment bank, and Vice President of Sabr, Inc., a family investment group. He was previously President of LOMUSA Limited, an investment
banking firm. From 2009 to 2012, Mr. Arno served as Vice Chairman and Chief Marketing Officer of Unterberg Capital, LLC, an investment
advisory firm that he co-founded. He was also Vice Chairman and Head of Equity Capital Markets of Merriman Capital LLC, an investment
banking firm, and served on the board of the parent company, Merriman Holdings, Inc. Mr. Arno currently serves on the boards of directors
of Smith Micro Software, Inc. and Independa Inc., both software companies, and Comhear Inc., an audio technology R&D company. Mr.
Arno previously served as a director of Asterias Biotherapeutics, Inc. from August 2014 until it was acquired by Lineage Cell Therapeutics,
Inc. in March 2019. Mr. Arno received a BS degree from George Washington University. We believe Mr. Arno’s financial expertise
and his experience as a director on other public company boards will make him a valuable resource to our Company.
Jennifer
Levin Carter, 58, joined our Board of Directors in August 2020. Dr. Carter is a healthcare executive, investor, board member and
entrepreneur with a track record of developing and investing in innovative strategies and solutions at the intersection of and healthcare
IT and services, digital health and machine learning, precision medicine, and genomics. Dr. Carter has been a Managing Director at Sandbox
Industries and Blue Venture Fund since March 2021. Sandbox provides healthcare-related investment management exclusively for the Blue
Venture Fund. Previously, Dr. Carter served as Managing Director of JLC Precision Health Strategies from July 2020 to April 2021 and
VP and Head of Precision Health at Integral Health (now Valo Health), a Flagship Pioneering company, from March 2019 to August 2020.
In 2018, Dr. Carter founded TrialzOWN, Inc. a healthcare company that was acquired in the development stage by Integral Health in March
2019. Prior to serving as CEO of TrialzOWN, Dr. Carter founded N-of-One, Inc. and served as its Chief Executive Officer from 2008 to
2012, and as its Chief Medical Officer from 2012 until its acquisition by Qiagen in 2019. At N-of-One, Dr. Carter led the development
of the platform to create award-winning novel treatment strategies for cancer patients. Prior to founding N-of-One, Dr. Carter spent
nine years working as an Investment Consultant with Levin Capital Strategies and with other groups specializing in biotechnology and
life sciences investments evaluating existing and emerging markets, new medical technologies, and early-stage companies. After obtaining
her medical degree, Dr. Carter practiced internal medicine at Mount Auburn Hospital in Cambridge, MA. Dr. Carter serves on the board
of directors of CareMax, Inc. Dr. Carter received a BS degree from Yale University, an MD from Harvard Medical School, an MPH from the
Harvard School of Public Health, and an MBA from MIT. We believe Dr. Carter’s extensive experience holding leadership positions
within investment firms and other healthcare companies, her medical expertise and her experience as director on other boards will make
her a valuable resource to our Company.
Melinda
Griffith, 67, joined our Board of Directors in July 2019. Ms. Griffith brings to our Board her years of business development and
legal experience in advising public and private companies in the diagnostics and life sciences sectors. Ms. Griffith currently is the
Chief Legal Counsel of CZI BioHub. She was Vice President of Strategic Alliance Management and Chief Legal Counsel at the Parker Institute
for Cancer Immunotherapy from 2016 to 2022. Since 2015, Ms. Griffith has served as the Chair of the Board of Directors of Thrive Networks,
a non-profit organization supporting healthcare, water and sanitation, and education projects in Vietnam, Cambodia and Laos. Previously,
Ms. Griffith worked at Clarient, Inc., a CLIA-certified cancer testing lab, where she served as Senior Vice President from 2010 through
2013, as General Counsel from 2010 to 2011, and as Chief Compliance Officer and head of Business Development and Product Strategy from
2011 to 2013, where she aided the company through the public tender offer and sale process to GE Healthcare. Ms. Griffith previously
served in executive roles at Axys Pharmaceuticals from 1992 to 1995, Genelabs Technologies from 1995 to 1998, Tethys Bioscience from
2008 to 2009, and CardioDx from 2014 to 2015. Additionally, Ms. Griffith served as the global head of licensing and law for Hoffmann
La-Roche’s molecular diagnostic business from 1998 to 2007, where she oversaw the worldwide PCR licensing programs and directed
its IP strategy and litigation in U.S. and foreign courts and agencies. Ms. Griffith directed GE Healthcare’s Congressional and
Medicare lobbying efforts to address CMS coverage and reimbursement determinations for in vitro diagnostic tests from 2011 to 2013, and
was on the Board of Directors of the California Clinical Laboratory Association from 2012 to 2013. Ms. Griffith received a JD from the
University of California, Hastings College of the Law, and a BS degree in Business Administration from the University of California,
Berkeley. She is admitted to practice law in New York and California. We believe Ms. Griffith’s legal expertise, her extensive
experience holding leadership positions within other biopharmaceutical companies and her experience as a director on other boards will
make her a valuable resource to our Company.
Alfred
D. Kingsley, 79, joined the Board of Directors in September 2009 and served as Chairman of the Board from December 2010 until April
2018. Mr. Kingsley is also the Chairman of the Board of Directors of Lineage Cell Therapeutics, Inc. (Lineage), a biotechnology company
that was formerly BioTime. Mr. Kingsley’s long career in corporate finance and mergers and acquisitions includes substantial experience
in helping companies to improve their management and corporate governance, and to restructure their operations in order to add value
for shareholders. As Chairman of the Board of Lineage and formerly of Oncocyte, Mr. Kingsley has been instrumental in structuring their
equity and debt financings and their business acquisitions. Mr. Kingsley has been general partner of Greenway Partners, L.P., a private
investment firm, and President of Greenbelt Corp., a business consulting firm, since 1993. Mr. Kingsley was Senior Vice-President of
Icahn and Company and its affiliated entities for more than 25 years. Mr. Kingsley served as a director of Asterias Biotherapeutics,
Inc. from September 2012 until it was acquired by Lineage in March 2019. Mr. Kingsley holds a BS degree in economics from the Wharton
School of the University of Pennsylvania, and a JD degree and LLM in taxation from New York University Law School. We believe Mr. Kingsley’s
extensive experience in corporate finance, mergers and acquisitions and corporate governance, and his experience as a director on other
boards will make him a valuable resource to our Company.
Andrew
J. Last, 62, joined the Board of Directors in December 2015. Dr. Last shares with our Board his many years of senior management
experience commercializing products internationally in the genomics and life-sciences industries. Since 2019, Dr. Last has served as
Executive Vice President and Chief Operating Officer of Bio-Rad Laboratories, Inc., a global leader in developing, manufacturing,
and marketing a broad range of innovative products for the life science research and clinical diagnostic markets. From December 2017
to April 2019, Dr. Last previously served as Chief Commercial Officer at Berkeley Lights Inc., a digital cell biology company
focused on enabling and accelerating the rapid development and commercialization of biotherapeutics and other cell-based products,
and as Chief Operating Officer of Intrexon Corporation, a company using synthetic biology to focus on programming biological systems
to alleviate disease, remediate environmental challenges, and provide sustainable food and industrial chemicals from August 2016 to
December 2017. From 2010 to 2016, Dr. Last was Executive Vice President and Chief Operating Officer of Affymetrix, a biotechnology
company. Before joining Affymetrix, Dr. Last served as Vice President, Global and Strategic Marketing of BD Biosciences and as
General Manager of Pharmingen from 2004 to 2010. From 2002 to 2004, Dr. Last held management positions at Applied Biosystems, Inc.,
including as Vice President and General Manager from 2003 to 2004 and Vice President of Marketing 2002 to 2003. Earlier in his
career, he served in a variety of management positions at other companies, including Incyte Genomics and Monsanto. Dr. Last holds PhD and MS degrees with specialization in Agrochemical Chemicals and Bio-Aeronautics, respectively, from Cranfield University, and a
BS degree in Biological Sciences from the University of Leicester in the United Kingdom. We believe Dr. Last’s extensive
experience holding senior leadership positions within other biopharmaceutical companies and his many years of experience
commercializing products in the genomics and life-sciences industries will make him a valuable resource to our Company.
Cavan
Redmond, 61, joined our Board of Directors in August 2015 and was appointed Chairman of the Board in April 2018. Mr. Redmond brings
to our Board decades of executive pharmaceutical and healthcare experience demonstrating leadership in a diverse compliment of healthcare
areas. Since 2014, Mr. Redmond has served as Partner for Zarsy, LLC. Mr. Redmond served as Chief Executive Officer of WebMD from May
2012 until May 2013. From August 2011 until May 2012, Mr. Redmond served as Group President, Animal Health, Consumer Healthcare and Corporate
Strategy of Pfizer Inc., a pharmaceutical company. He served as Pfizer’s Group President, Animal Health, Consumer Healthcare, Capsugel
and Corporate Strategy from December 2010 until August 2011 and as its Senior Vice President and Group President, Pfizer Diversified
Businesses from October 2009 until December 2010. Prior to Pfizer’s acquisition of Wyeth, a pharmaceutical company, Mr. Redmond
served as President, Wyeth Consumer Healthcare and Animal Health Business. Before that, he held the positions of President, Wyeth Consumer
Healthcare from December 2007 until May 2009 and served on Wyeth Pharmaceuticals’ Executive Leadership Team. At Wyeth, Mr. Redmond
served as General Manager and Executive Vice President of Wyeth Biopharma which grew into a leading global biotech company under his
leadership. Mr. Redmond also served as a director of Lineage Cell Therapeutics, Inc. from February 2018 through July 2019 and has served
on the boards of directors of The Wistar Institute of Anatomy and Biology and the Arthritis Foundation. Mr. Redmond received a BA degree
in Political Science and Government from the University of Maryland, and a Master of Administrative Sciences from Johns Hopkins University.
We believe Mr. Redmond’s executive pharmaceutical and healthcare experience, his extensive experience holding leadership positions
within other healthcare companies and his experience as a director on other boards will make him a valuable resource to our Company.
Code
of Ethics
We
have adopted a Code of Business Conduct and Ethics (“Code of Ethics”) that applies to our principal executive officer, our
principal financial officer and principal accounting officer, our other executive officers, and our directors. The purpose of the Code
of Ethics is to deter wrongdoing and to promote the conduct of all Oncocyte business in accordance with high standards of integrity,
including, among other things: (i) compliance with applicable governmental laws, rules, and regulations; (ii) honest and ethical conduct,
including the ethical handling of actual or apparent conflicts of interest; (iii) the prompt internal reporting of any suspected violations
of the Code of Ethics to appropriate persons or through Oncocyte’s Compliance Hotline/Helpline; (iv) complete cooperation in the
investigation of reported violations and the provision of truthful, complete and accurate information; and (v) accountability for adherence
to the Code of Ethics. A copy of our Code of Ethics has been posted on our internet website and can be found at www.Oncocyte.com.
We intend to disclose any future amendments to certain provisions of our Code of Ethics, and any waivers of those provisions granted
to our principal executive officers, principal financial officer, principal accounting officer or controller or persons performing similar
functions, by posting the information on our website at www.Oncocyte.com within four business days following the date of the amendment
or waiver.
Audit
Committee
The
Board of Directors has an Audit Committee, the members of which are independent in accordance with Rule 5605(a)(2) and Rule 5605(c)(2)
of The Nasdaq Stock Market LLC (“Nasdaq”) and Section 10A-3 under the Exchange Act.
The
members of the Audit Committee are Andrew Arno (Chair), Andrew Last, Jennifer Levin Carter and Alfred Kingsley. The Audit Committee held
eight meetings during 2021. The purpose of the Audit Committee is to recommend the engagement of our independent registered public accountants,
to review their performance and the plan, scope, and results of the audit, and to review and approve the fees we pay to our independent
registered public accountants. The Audit Committee also will review our accounting and financial reporting procedures and controls. The
Audit Committee has a written charter that requires the members of the Audit Committee to be directors who are independent in accordance
with the applicable Nasdaq Rules and Rule 10A-3 under the Exchange Act. A copy of the Audit Committee Charter has been posted on our
internet website and can be found at www.Oncocyte.com.
Our
Board of Directors has determined that Andrew Arno meets the criteria of an “audit committee financial expert” within the
meaning of the SEC’s regulations based on his many years of experience in the investment banking industry, and his audit committee
service at another company, including the evaluation of financial statements.
Executive
Officers
Ronald
Andrews, Chief Executive Officer and President, Mitchell Levine, Chief Financial Officer, Douglas Ross, MD PhD, Chief Science
Officer, Padma Sundar, Chief Commercial Officer, and Li Yu, Vice President, Controller and Chief Accounting Officer are our executive
officers.
Mitchell
Levine, 62, joined Oncocyte as Chief Financial Officer in November 2017. In 2000, Mr. Levine founded Enable Capital Management LLC,
the general partner of Enable Growth Partners, L.P., which provided growth capital to privately and publicly traded companies, catalyzing
transformative corporate innovation, job growth, and economic expansion in Technology, Life Sciences, Consumer Products, and Energy.
Mr. Levine left Enable when it closed in 2017. Prior to founding Enable, Mr. Levine was a founding member of The Shemano Group, a leading
San Francisco-based investment bank that focused on the capital needs of growth companies. He has also worked at Bear Stearns and Lehman
Brothers. Mr. Levine received his BA degree from the University of California, Davis.
Gisela
Paulsen, 56, was appointed Chief Operating Officer in October 2021. Ms. Paulsen previously served as the General Manager, Precision
Oncology of Exact Sciences Corporation, a molecular diagnostics company specializing in the detection of early stage cancers, from April
2020 to April 2021. Prior to joining Exact Sciences, Ms. Paulsen served in various management roles at F. Hoffmann-La Roche Ltd., multinational
healthcare company, and Genentech, Inc, a biotechnology company which became a subsidiary of Roche, since November 2005. She served as
Roche and Genentech’s Senior Vice President, Global Head, Product Development, Clinical Operations from January 2018 to April 2020,
as Roche and Genentech’s Vice President, Global Head, Product Development, Global Product Strategy & Late-Stage Portfolio Finance
beginning from March 2017 to February 2018, and as Genentech’s Vice President, Access Solutions from September 2014 to February
2017. Ms. Paulsen received a BS in pharmacy and an MS in pharmaceutics and drug delivery from Uppsala University in Sweden.
Douglas
Ross, MD PhD, 62, was appointed Chief Science Officer during March 2020. Prior to joining Oncocyte, Dr. Ross was a
principal of the Bethesda Group, LLC, biomedical consulting company that he co-founded in 2015. From 2014, until founding Bethesda
Group, Dr. Ross served as Chief Scientific Officer of CardioDx, Inc., a molecular diagnostics company specializing in cardiovascular
genomics. In 2011 Dr. Ross joined the Medical Science Division of Life Technologies and served as its Chief Scientific Officer on a
consulting basis until that company was acquired by Thermo Fisher Scientific in 2013. Dr. Ross’s private sector career started
in 2000 as Chief Scientific Officer of Applied Genomics, Inc. (AGI), a company he co-founded after post-doctoral training at
Stanford University. AGI translated insights from gene expression patterns into immunohistochemistry multivariate assays targeted to
actionable clinical problems. In 2009, Clarient, Inc., a national pathology reference laboratory, acquired AGI and Dr. Ross
continued his role as Chief Scientific Officer. General Electric Healthcare acquired Clarient in December 2010, and Dr. Ross
continued as Chief Scientific Officer, working with the business development and partnership teams at Clarient and capital teams at
GE Healthcare. Dr. Ross obtained his MD and his PhD in Pathology from the University of Washington while studying at the Fred
Hutchinson Cancer Research Center in Seattle, Washington.
Padma
Sundar, 48, was appointed Chief Commercial Officer during January 2021 after serving as Senior Vice President—Marketing and
Market Access since May 2019. Before joining Oncocyte, Ms. Sundar served as Vice President of Strategy and Market Access at CellMax Life,
a liquid biopsy company, from 2017 until 2019, and she served as Director of Marketing at Guardant Health, Inc., cancer diagnostics company,
from 2016 until 2017. Previously, Ms. Sundar was Senior Director at Roche Sequencing and was Senior Director for the oncology portfolio
at Affymetrix. Ms. Sundar began her career at McKinsey and Company, and received her MBA and MPH from the University of California, Berkeley,
and her B.A. in Chemistry from the University of Delhi.
Li
Yu, 49, was appointed Vice President, Controller, and Principal Accounting Officer effective May 18, 2021. Ms. Yu is a Certified
Public Accountant who brings to Oncocyte more than 20 years of accountancy experience. Prior to joining Oncocyte, Ms. Yu served as Vice
President and Corporate Controller for Acacia Research Corporation for two years, as Controller of Key Data Systems, Inc. from 2018 to
2019, and as Assistant Controller of Lantronix, Inc. from 2014 to 2017. Previously, Ms. Yu held a number of accounting positions with
major corporations, including Conexant Systems, Inc., The Home Depot Supply, Mankind Corporation, and Buena Vista International TV, part
of the Walt Disney Company. Ms. Yu received an MS in Accountancy from Wake Forest University.
Delinquent
Section 16(a) Reports
Section
16(a) of the Exchange Act, requires our directors and executive officers and persons who own more than ten percent (10%) of a registered
class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock
and other Oncocyte equity securities.
To
our knowledge, based solely on our review of the copies of Forms, 3 and 4 and amendments thereto filed during the last fiscal year, and
Forms 5 and amendments thereto filed with respect to the last fiscal year, by the Reporting Persons, or written representation from the
Reporting Persons that no Form 5 was required, Mr. Andrews and Ms. Yu were each delinquent in filing one Form 4, which each pertained
to one transaction being reported late, respectively.
Item
11. Executive Compensation
Director
Compensation
Directors
and members of committees of the Board of Directors who are salaried employees of Oncocyte are entitled to receive compensation as employees
but are not compensated for serving as directors or attending meetings of the Board or committees of the Board. All directors are entitled
to reimbursements for their out-of-pocket expenses incurred in attending meetings of the Board or committees of the Board.
Prior
to June 24, 2021, non-employee directors, other than the Chairman of the Board of Directors, received an annual fee of $35,000 for their
service on the Board of Directors. In addition, directors who served on the Audit Committee, the Compensation Committee, the Nominating/Corporate
Governance Committee, Science and Technology Committee or the Finance Committee received, in addition to other fees payable to them as
directors, the following annual fees which were paid in quarterly installments:
|
● |
Audit
Committee Chairman: $15,000 |
|
● |
Audit
Committee Member other than Chairman: $7,500 |
|
● |
Compensation
Committee Chairman: $10,000 |
|
● |
Compensation
Committee Member other than Chairman: $5,000 |
|
● |
Nominating/Corporate
Governance Committee Chairman: $10,000 |
|
● |
Nominating/Corporate
Governance Committee Member other than Chairman: $5,000 |
|
● |
Science
and Technology Committee Chairman: $10,000 |
|
● |
Science
and Technology Committee Member other than Chairman: $5,000 |
|
● |
Finance
and Strategy Committee Member: $5,000 |
After
June 24, 2021 non-employee directors, other than the Chairman of the Board of Directors, received an annual fee of $73,500 in cash for
their service on the Board of Directors. Our Chairman received an annual cash fee of $83,500 after June 24, 2021 for his service as Chairman
of the Board of Directors and for his service on the Board of Directors. In addition to cash fees, non-employee directors received options
to purchase 45,000 shares of common stock under our 2018 Equity Incentive Plan (as amended, the “Incentive Plan”) and 10,000
restricted stock units under the Incentive Plan during 2021.
The
annual fee of cash was paid in quarterly installments, and the stock options and restricted stock units will vest one year from the date
of grant, subject to the non-employee director’s continued service as a director of Oncocyte or a subsidiary from the date of grant
until the vesting date or, if earlier, until the next annual meeting of shareholders. The options will expire if not exercised ten years
from the date of grant.
The
following table summarizes certain information concerning the compensation paid during the past fiscal year to each of the persons who
served as directors during the year ended December 31, 2021 and who were not our employees on the date the compensation was earned.
Name | |
Fees Earned Or Paid in Cash | | |
Option Awards (1) | | |
Stock Awards(1) | | |
Total | |
Andrew Arno | |
$ | 69,250 | | |
$ | 193,185 | | |
$ | 54,600 | | |
$ | 317,035 | |
Jennifer Levin Carter | |
$ | 54,250 | | |
$ | 193,185 | | |
$ | 54,600 | | |
$ | 302,035 | |
Melinda Griffith | |
$ | 64,250 | | |
$ | 193,185 | | |
$ | 54,600 | | |
$ | 312,035 | |
Alfred D. Kingsley | |
$ | 56,750 | | |
$ | 193,185 | | |
$ | 54,600 | | |
$ | 304,535 | |
Andrew J. Last | |
$ | 73,000 | | |
$ | 193,185 | | |
$ | 54,600 | | |
$ | 320,785 | |
Cavan Redmond | |
$ | 83,000 | | |
$ | 193,185 | | |
$ | 54,600 | | |
$ | 330,785 | |
(1) |
Options
granted will vest and become exercisable one year from the date of grant, subject to the non-employee director’s continued
service as a director of Oncocyte or a subsidiary from the date of grant until the vesting date or, if earlier, until the next annual
meeting of shareholders, but must be reported here at the aggregate grant date fair value, as if all options were fully vested and
exercisable at the date of grant. Values are computed in accordance with FASB Accounting Standards Codification (ASC) Topic 718,
Compensation - Stock Compensation. We used the Black-Scholes Pricing Model to compute option fair values based on applicable
exercise and stock prices, an expected option term, volatility assumptions, and risk-free interest rates. |
Stock
awards consist entirely of restricted stock units (“RSUs”) and are valued in the table at the aggregate grant date fair value
based on the closing price of Oncocyte common stock as quoted on the applicable trading market as if the stock awards were fully vested.
Beginning on March 8, 2021, our common stock began trading on the NASDAQ Global Market under the symbol “OCX”, and prior
to that date our common stock was traded on the NYSE American under the same symbol.
The
following table summarizes the aggregate number of shares subject to outstanding equity awards held by our non-employee directors as
of December 31, 2021:
Name | |
Aggregate Number of
RSU Awards | | |
Aggregate Number of
Option Awards | |
Andrew Arno | |
| 10,000 | | |
| 248,520 | |
Jennifer Levin Carter | |
| 10,000 | | |
| 102,000 | |
Melinda Griffith | |
| 10,000 | | |
| 147,000 | |
Alfred D. Kingsley | |
| 10,000 | | |
| 383,300 | |
Andrew J. Last | |
| 10,000 | | |
| 248,520 | |
Cavan Redmond | |
| 10,000 | | |
| 263,520 | |
Executive
Compensation
Smaller
Reporting Company
We
are a “smaller reporting company” as defined in the rules and regulations of the SEC. As a smaller reporting company we may
take advantage of specified reduced disclosure and other requirements that are otherwise applicable, in general, to public companies
that are not smaller reporting companies. Accordingly, this Proxy Statement includes reduced disclosure about our executive compensation
arrangements.
The
following tables show certain information relating to the compensation of our President and Chief Executive Officer and the two highest
paid individuals other than our President and Chief Executive Officer who were serving as executive officers at year end and whose total
individual compensation exceeded $100,000 during 2021. We refer to such executive officers as our “Named Executive Officers”.
Summary
Compensation Table
Name and principal position | |
Year | |
Salary | | |
Bonus | | |
Stock Awards(1) | | |
Option Awards(1) | | |
Nonqualified Deferred Compensation Earnings(2) | | |
All Other Compensation(3) | | |
Total | |
Ronald Andrews | |
2021 | |
$ | 480,000 | | |
$ | 297,600 | | |
$ | — | | |
$ | 2,120,000 | (4) | |
$ | — | | |
$ | 24,238 | | |
$ | 2,921,838 | |
President and Chief Executive Officer | |
2020 | |
$ | 487,385 | | |
$ | 465,600 | (5) | |
$ | — | | |
$ | 68,500 | (6) | |
$ | 9,190 | | |
$ | 16,175 | | |
$ | 1,046,850 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Mitchell Levine | |
2021 | |
$ | 356,895 | | |
$ | 110,638 | | |
$ | — | | |
$ | 1,081,200 | (7) | |
$ | — | | |
$ | 13,182 | | |
$ | 1,561,915 | |
Chief Financial Officer | |
2020 | |
$ | 361,999 | (8) | |
$ | 131,670 | | |
$ | 44,800 | (9) | |
$ | 504,431 | (10) | |
$ | 721 | (8) | |
$ | 14,839 | | |
$ | 1,058,460 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Douglas Ross | |
2021 | |
$ | 375,000 | | |
$ | 165,750 | | |
$ | — | | |
$ | 1,081,200 | (12) | |
$ | — | | |
$ | 18,187 | | |
$ | 1,640,137 | |
Chief Science Officer(11) | |
2020 | |
$ | 375,000 | (13) | |
$ | — | | |
$ | — | | |
$ | 386,500 | (14) | |
$ | 379 | (13) | |
$ | 11,245 | | |
$ | 980,437 | |
(1) |
Option
awards granted under our 2010 Employee Stock Option Plan (the “Option Plan”) or under our Incentive Plan are valued at
the aggregate grant date fair value, as if all options were fully vested and exercisable at the date of grant. Except as otherwise
indicated below, one quarter of the options will vest upon completion of 12 full months of continuous employment measured from the
grant date, and the balance of the options shall vest in 36 equal monthly installments commencing on the first anniversary of the
date of grant, based upon the completion of each month of continuous employment. Amounts shown in this column do not reflect dollar
amounts actually received by our Named Executive Officers. Instead, these amounts reflect the aggregate grant date fair value of
each stock option granted, computed in accordance with the provisions of FASB ASC Topic 718. For stock options that have performance-based
(sometimes referred to as milestone-based) vesting conditions, compensation is shown in the tables in the same manner as Oncocyte
recorded stock based compensation expense for the grant on the basis of the estimated probability that the vesting condition will
be met or the determination that the condition has been met. We used the Black-Scholes Pricing Model to compute option fair values
based on applicable exercise and stock prices, an expected option term, volatility assumptions, and risk-free interest rates. Our
Named Executive Officers will only realize compensation upon exercise of the stock options and to the extent the trading price of
our common stock is greater than the exercise price of such stock options at the time of exercise. |
Stock
awards consist entirely of restricted stock units (“RSUs”) and are valued in the table at the aggregate grant date fair value
based on the closing price of Oncocyte common stock as quoted on the applicable trading market as if the stock awards were fully vested.
Beginning on March 8, 2021, our common stock began trading on the NASDAQ Global Market under the symbol “OCX”, and prior
to that date our common stock was traded on the NYSE American under the same symbol.
For
a full discussion of Oncocyte’s accounting of stock-based compensation under ASC 718, please refer to Note 2 to our consolidated
financial statements found in our Annual Report.
(2) |
Reflects
interest accrued and paid to those executives who elected to enter into Deferral Agreements in May 2020, pursuant to which the executives
agreed to defer a portion of their compensation and to receive interest on the deferred amount. Mr. Andrews agreed to defer 30% of
his base salary, and $186,240 of a discretionary bonus that otherwise would have been payable in cash. Mr. Levine agreed to defer
20% of his base salary and Dr. Ross agreed to defer 10% of his base salary. On December 11, 2020, Messrs. Andrews and Levine and
Dr. Ross received payment of their deferred compensation and accrued interest. Mr. Andrews received payment in cash and Mr. Levine
and Dr. Ross received payment in cash and shares of Oncocyte common stock valued at the closing price of the common stock on the
NYSE American on December 8, 2020. |
|
|
(3) |
Other
compensation consists primarily of employer contributions to employee accounts under our 401(k) plan. |
|
|
(4) |
In
February 2021, Mr. Andrews was granted 500,000 stock options exercisable at an exercise price of $5.34 per share. |
|
|
(5) |
The
amount of Mr. Andrews bonus includes RSUs for 106,221 shares of common stock under our Incentive Plan that Mr. Andrews agreed to
accept in lieu of $279,360 in cash as part of his discretionary bonus. The number of RSUs granted was determined based on the $279,360
divided by the $2.63 per share closing price of Oncocyte common stock on May 7, 2020. The RSUs vested on May 7, 2021, the anniversary
of the grant date. |
|
|
(6) |
In
July 2020, Mr. Andrews was granted 50,000 stock options exercisable at an exercise price of $1.68 per share. |
|
|
(7) |
In
February 2021, Mr. Levine was granted 255,000 stock options exercisable at an exercise price of $5.34 per share. |
|
|
(8) |
Of
the total salary earned and interest accrued on deferred salary, $20,950 was paid in 10,121 shares of common stock at $2.07 per share
based on the closing price of Oncocyte common stock on the payment date. |
|
|
(9) |
In
April 2020, Mr. Levine was granted 20,000 RSUs which vested one year from the date of grant in April 2021. The fair value of the
RSUs was measured as of the April 28, 2020 grant date based on the closing price of Oncocyte common stock quoted on the NYSE American
on that date. |
|
|
(10) |
In
February 2020, Mr. Levine was granted 204,000 stock options exercisable at an exercise price of $2.63 per share. The amount shown
in the table also includes $69,911 of value for stock options granted in May 2018 that vested during June 2020 when the performance
conditions required for vesting were met. |
|
|
(11) |
Dr.
Ross was appointed Chief Science Officer effective March 23, 2020. |
|
|
(12) |
In
February 2021, Dr. Ross was granted 255,000 stock options exercisable at an exercise price of $5.34 per share. |
|
|
(13) |
Of
the total salary earned and interest accrued on deferred salary, $11,007 was paid in 5,317 shares of common stock at $2.07 per share
based on the closing price of Oncocyte common stock on the payment date. |
|
|
(14) |
In
March 2020, Dr. Ross was granted 250,000 stock options exercisable at an exercise price of $1.93 per share. |
Executive
Employment Agreements, Deferral Agreements, and Change of Control Provisions
Employment
Agreements
We
have entered into Employment Agreements with our Named Executive Officers.
Pursuant
to his employment agreement, dated June 4, 2019, the annual salary of our President and Chief Executive Officer Ronald Andrews, was set
at $480,000. Mr. Andrews is also eligible to receive annual bonuses, to the extent approved by the Board of Directors in its discretion,
based on the achievement of predetermined company and individual objectives set by the Board of Directors or its Compensation Committee
from time to time. During 2021, Mr. Andrews was awarded a discretionary bonus of $297,600.
Pursuant
to his employment agreement, Mr. Andrews received the following equity awards under the Incentive Plan: (i) options to purchase 950,000
shares of Oncocyte common stock effective on the date his employment commenced (the “Initial Grant”); (ii) options to purchase
50,000 shares of common stock, effective on upon his completion of one year of continuous service as an employee (the “Second Grant”);
and (iii) RSUs with respect to 65,000 shares of common stock, effective upon his completion of one year of continuous service as an employee.
The exercise price of the options in the Initial Grant and Second Grant was the fair market value of a share of Oncocyte common stock
on the applicable effective date of grant, determined in accordance with the Incentive Plan.
The
vesting schedule of the options in the Initial Grant pursuant to which the options became or will become exercisable is as follows: twenty-five
percent of the options vested upon Mr. Andrew’s completion of one year of continuous service as an employee, and the balance of
the options began to vest in 36 equal monthly installments, commencing on the first anniversary of the effective date of the Initial
Grant, subject to his continued service as an employee on the applicable vesting date.
The
options in the Second Grant vested upon Mr. Andrew’s completion of one year of continuous service as an employee from the effective
date of the Second Grant. The 65,000 RSUs vested on July 1, 2021.
If
we terminate Mr. Andrews’ employment without “cause,” or if he resigns for “good reason,” then, in addition
to the severance benefits described below under “Change in Control and Severance Plan,” Mr. Andrews will be entitled to receive
(a) payment of such portion of any bonus earned through the actual attainment of such objective performance goals as may have been set
by the Compensation Committee or the Board for the year in which his employment terminates without cause; (b) payment, for a period of
twelve months, of any health insurance benefits that he was receiving at the time of termination of his employment under an employee
health insurance plan subject to COBRA, and (c) his unvested stock options that vest based on the attainment of performance goals or
milestones shall vest (1) fully to the extent such performance goals or milestones have been achieved as of the date of termination of
his employment, as determined by the Board or Compensation Committee, and (2) pro rata to the extent of pro rata achievement of performance
goals or milestones, as determined by the Board or Compensation Committee, during the elapsed portion of the performance period ending
on the date of termination of his employment.
During
2021, the annual salary of Mitchell Levine our Chief Financial Officer was $356,895. Pursuant to Mr. Levine’s employment agreement,
dated November 15, 2017, he is eligible to receive annual cash incentive bonus awards determined by the Board of Directors, with a target
bonus of not less than 40% of his base salary, based on his achievement of specific, objectively determinable, performance goals at target
levels for the year.
During
2021, the annual salary of Douglas Ross, our Chief Scientific Officer, was $375,000. Pursuant to his employment agreement, dated March
23, 2020, he is eligible to receive annual cash incentive bonus awards determined by the Board of Directors, with a target bonus of not
less than 50% of his base salary, based on the achievement of specific, objectively determinable, individual and company performance
goals at target levels for the year.
Change
in Control and Severance Plan
We
have adopted the Oncocyte Corporation Change in Control and Severance Plan (the “CIC Plan”) which provides change in control
and other severance benefits to a select group of our management or highly compensated employees, including our executive officers, who
have executed a Change in Control and Severance Agreement (“CIC Agreement”) and who otherwise satisfy the conditions set
forth in their CIC Agreement and the provisions of the CIC Plan. Pursuant to the CIC Plan, we have entered into CIC Agreements with our
Named Executive Officers. Each of their CIC Agreements has the effect of modifying the executive’s employment agreement and provides
that if we terminate the executive’s employment without “cause” or if the executive resigns for “good reason”,
the executive will receive a severance payment in the amount of 12 months of his or her base salary and accelerated vesting of stock
options, restricted stock units, and any other equity awards (“Equity Awards”) that were schedule to vest based on the passage
of time during the 12 months following the termination of employment.
In
addition to the foregoing severance benefits, if a termination of the executive’s employment without “cause” or a resignation
for “good reason” occurs within three months before or twelve months after a “change in control,” the executive
will also receive his or her target bonus for the year and the vesting of all Equity Awards will be fully accelerated. In addition to
the foregoing, the terminated executive will receive a lump sum payment (which shall not be grossed up for applicable income and employment
taxes) equal to twelve months of the premium costs of group health plan continuation coverage under the Consolidated Omnibus Budget Reconciliation
Act of 1985 (“COBRA”) to the same extent provided under Oncocyte’s group health plan. In order to receive the severance
benefits, the executive must execute and comply with a separation agreement and general release of all claims against Oncocyte.
Outstanding
Equity Awards at Fiscal Year End
The
following table summarizes certain information concerning stock options and other equity awards granted by us under the Option Plan and
the Incentive Plan held as of December 31, 2021 by our Named Executive Officers:
Equity
Awards Outstanding At Year-End
Option Awards |
Name | |
Number of Securities Underlying Unexercised Options Exercisable | | |
Number of Securities Underlying Unexercised Options Unexercisable (1) | | |
Equity Incentive plan awards: Number of securities underlying unexercised unearned options (#) | | |
Option Exercise Price | | |
Option Expiration Date |
Ronald Andrews | |
| 20,000 | (2) | |
| — | | |
| — | | |
$ | 2.10 | | |
April 1, 2028 |
| |
| | | |
| | | |
| | | |
| | | |
|
| |
| 45,000 | (3) | |
| — | | |
| — | | |
$ | 2.40 | | |
August 29, 2028 |
| |
| | | |
| | | |
| | | |
| | | |
|
| |
| 593,750 | (4) | |
| 356,250 | | |
| — | | |
$ | 2.51 | | |
June 30, 2029 |
| |
| | | |
| | | |
| | | |
| | | |
|
| |
| 18,750 | (5) | |
| 31,250 | | |
| — | | |
$ | 1.68 | | |
June 30, 2030 |
| |
| | | |
| | | |
| | | |
| | | |
|
| |
| — | | |
| 500,000 | (6) | |
| — | | |
$ | 5.34 | | |
February 24, 2031 |
| |
| | | |
| | | |
| | | |
| | | |
|
Mitchell Levine | |
| 200,000 | (7) | |
| — | | |
| — | | |
$ | 5.90 | | |
November 15, 2027 |
| |
| | | |
| | | |
| | | |
| | | |
|
| |
| 86,458 | (8) | |
| 5,208 | | |
| — | | |
$ | 2.35 | | |
May 22, 2028 |
| |
| | | |
| | | |
| | | |
| | | |
|
| |
| 168,438 | (9) | |
| 76,563 | | |
| — | | |
$ | 3.52 | | |
March 13, 2029 |
| |
| | | |
| | | |
| | | |
| | | |
|
| |
| — | | |
| 204,000 | (10) | |
| — | | |
$ | 2.63 | | |
February 9, 2030 |
| |
| | | |
| | | |
| | | |
| | | |
|
| |
| — | | |
| 255,000 | (11) | |
| — | | |
$ | 5.34 | | |
February 24, 2031 |
| |
| | | |
| | | |
| | | |
| | | |
|
Douglas Ross | |
| 109,375 | (12) | |
| 140,625 | | |
| — | | |
$ | 1.93 | | |
March 22, 2030 |
| |
| | | |
| | | |
| | | |
| | | |
|
| |
| — | | |
| 255,000 | (13) | |
| — | | |
$ | 5.34 | | |
February 24, 2031 |
(1) |
Except
as otherwise indicated below, one quarter of the options shall vest upon completion of 12 full months of continuous employment measured
from the date of grant, and the balance of the options will vest in 36 equal monthly installments commencing on the first anniversary
of the date of grant, based upon the completion of each month of continuous employment. |
|
|
(2) |
The
date of grant was April 2, 2018 for services of Mr. Andrews as a non-employee director of Oncocyte. The options vested on the first
anniversary of the grant date. |
|
|
(3) |
The
date of grant was August 30, 2018 for services of Mr. Andrews as a non-employee director of Oncocyte. The options vested on the first
anniversary of the grant date. |
|
|
(4) |
The
date of grant was July 1, 2019. |
(5) |
The
date of grant was July 1, 2020. |
|
|
(6) |
The
date of grant was February 25, 2021. |
|
|
(7) |
These
options were granted to Mr. Levine upon his appointment as Chief Financial Officer on November 16, 2017. |
|
|
(8) |
The
date of grant was May 23, 2018. Included in the number of options exercisable is 41,666 options which vested in June 2020 based on
certain performance conditions for vesting having been met. |
|
|
(9) |
The
date of grant was March 14, 2019. |
|
|
(10) |
The
date of grant was February 10, 2020. |
|
|
(11) |
The
date of grant was February 25, 2021. |
|
|
(12) |
The
date of grant was March 23, 2020. |
|
|
(13) |
The
date of grant was February 25, 2021. |
The
Incentive Plan
The
following summary of the Incentive Plan is a summary only and does not purport to include all of the terms of the Incentive Plan, and
is qualified by the full terms of the Incentive Plan.
We
have adopted the Incentive Plan that permits us to grant awards, or Awards, consisting of stock options, the grant or sale of restricted
stock (“Restricted Stock”), the grant of stock appreciation rights (“SARs”), and the grant of hypothetical units
issued with reference to our common stock (“Restricted Stock Units” or “RSUs”), for up to 21,000,000 shares of
our common stock. The Incentive Plan also permits Oncocyte to issue such other securities as our Board of Directors (the “Board”)
or the Compensation Committee (the “Committee”) administering the Incentive Plan may determine. Awards of stock options,
Restricted Stock, SARs, and RSUs (“Awards”) may be granted under the Incentive Plan to Oncocyte employees, directors, and
consultants.
Awards
may vest and thereby become exercisable or have restrictions on forfeiture lapse on the date of grant or in periodic installments or
upon the attainment of performance goals, or upon the occurrence of specified events. Awards may not vest, in whole or in part, earlier
than one year from the date of grant. Vesting of an Award after the date of grant may be accelerated only in the limited circumstances
specified in the Incentive Plan. In the case of the acceleration of vesting of any performance-based Award, acceleration of vesting shall
be limited to actual performance achieved, pro rata achievement of the performance goal(s) on the basis for the elapsed portion of the
performance period, or a combination of actual and pro rata achievement of performance goals.
No
person shall be granted, during any one-year period, options to purchase, or SARs with respect to, more than 1,000,000 shares in the
aggregate, or any Awards of Restricted Stock or RSUs with respect to more than 500,000 shares in the aggregate. If an Award is to be
settled in cash, the number of shares on which the Award is based shall not count toward the individual share limit.
No
Awards may be granted under the Incentive Plan more than ten years after the date upon which the Incentive Plan was adopted by the Board,
and no options or SARs granted under the Incentive Plan may be exercised after the expiration of ten years from the date of grant.
Stock
Options
Options
granted under the Incentive Plan may be either “incentive stock options” within the meaning of Section 422(b) of the Internal
Revenue Code of 1986, as amended, or “non-qualified” stock options that do not qualify incentive stock options. Incentive
stock options may be granted only to Oncocyte employees and employees of subsidiaries. The exercise price of stock options granted under
the Incentive Plan must be equal to the fair market of our common stock on the date the option is granted. In the case of an optionee
who, at the time of grant, owns more than 10% of the combined voting power of all classes of Oncocyte stock, the exercise price of any
incentive stock option must be at least 110% of the fair market value of the common stock on the grant date, and the term of the option
may be no longer than five years. The aggregate fair market value of common stock (determined as of the grant date of the option) with
respect to which incentive stock options become exercisable for the first time by an optionee in any calendar year may not exceed $100,000.
The
exercise price of an option may be payable in cash or in common stock having a fair market value equal to the exercise price, or in a
combination of cash and common stock, or other legal consideration for the issuance of stock as the Board or Committee may approve.
Generally,
options will be exercisable only while the optionee remains an employee, director or consultant, or during a specific period thereafter,
but in the case of the termination of an employee, director, or consultant’s services due to death or disability, the period for
exercising a vested option shall be extended to the earlier of 12 months after termination or the expiration date of the option.
Restricted
Stock and Restricted Stock Units
In
lieu of granting options, we may enter into purchase agreements with employees under which they may purchase or otherwise acquire Restricted
Stock or RSUs subject to such vesting, transfer, and repurchase terms, and other restrictions. The price at which Restricted Stock may
be issued or sold will be not less than 100% of fair market value. Employees or consultants, but not executive officers or directors,
who purchase Restricted Stock may be permitted to pay for their shares by delivering a promissory note or an installment payment agreement
that may be secured by a pledge of their Restricted Stock. Restricted Stock may also be issued for services actually performed by the
recipient prior to the issuance of the Restricted Stock. Unvested Restricted Stock for which we have not received payment may be forfeited,
or we may have the right to repurchase unvested shares upon the occurrence of specified events, such as termination of employment.
Subject
to the restrictions set with respect to the particular Award, a recipient of Restricted Stock generally shall have the rights and privileges
of a shareholder, including the right to vote the Restricted Stock and the right to receive dividends; provided that, any cash dividends
and stock dividends with respect to the Restricted Stock shall be withheld for the recipient’s account, and interest may be credited
on the amount of the cash dividends withheld. The cash dividends or stock dividends so withheld and attributable to any particular share
of Restricted Stock (and earnings thereon, if applicable) shall be distributed to the recipient in cash or, at the discretion of the
Board or Committee, in shares of common stock having a fair market value equal to the amount of such dividends, if applicable, upon the
release of restrictions on the Restricted Stock and, if the Restricted Stock is forfeited, the recipient shall have no right to the dividends.
The
terms and conditions of a grant of RSUs shall be determined by the Board or Committee. No shares of common stock shall be issued at the
time a RSU is granted. A recipient of Restricted Stock Units shall have no voting rights with respect to the RSUs. Upon the expiration
of the restrictions applicable to a RSU, we will either issue to the recipient, without charge, one share of common stock per RSU or
cash in an amount equal to the fair market value of one share of common stock.
At
the discretion of the Board or Committee, each RSU (representing one share of common stock) may be credited with cash and stock dividends
paid in respect of one share (“Dividend Equivalents”). Dividend Equivalents shall be withheld for the recipient’s account,
and interest may be credited on the amount of cash Dividend Equivalents withheld. Dividend Equivalents credited to a recipient’s
account and attributable to any particular RSU (and earnings thereon, if applicable) shall be distributed in cash or in shares of common
stock having a fair market value equal to the amount of the Dividend Equivalents and earnings, if applicable, upon settlement of the
RSU. If a RSU is forfeited, the recipient shall have no right to the related Dividend Equivalents.
SARs
An
SAR is the right to receive, upon exercise, an amount payable in cash or shares, or a combination of shares and cash, equal to the number
of shares subject to the SAR that is being exercised, multiplied by the excess of (a) the fair market value of a common share on the
date the SAR is exercised, over (b) the exercise price specified in the SAR Award agreement. SARs may be granted either as free-standing
SARs or in tandem with options. No SAR may be exercised later than 10 years after the date of grant.
The
exercise price of an SAR shall not be less than 100% of the fair market value of one share of common stock on the date of grant. An SAR
granted in conjunction with an option shall have the same exercise price as the related option, shall be transferable only upon the same
terms and conditions as the related option, and shall be exercisable only to the same extent as the related option; provided, however,
that the SAR by its terms shall be exercisable only when the fair market value per share exceeds the exercise price per share of the
SAR or related option. Upon any exercise of an SAR granted in tandem with an option, the number of shares for which the related option
shall be exercisable shall be reduced by the number of shares for which the SAR has been exercised. The number of shares for which an
SAR issued in tandem with an option shall be exercisable shall be reduced by the number of shares for which the related option has been
exercised.
Repricing
Prohibition
The
Incentive Plan prohibits any modification of the purchase price or exercise price of an outstanding option or other Award if the change
would effect a “repricing’ without shareholder approval. As defined in the Incentive Plan, “repricing” means
a reduction in the exercise price of an outstanding option or SAR or cancellation of an “underwater” or “out-of-the-money”
Award in exchange for other Awards or cash. An “underwater” or “out-of-the-money” Award is defined to mean an
Award for which the exercise price is less than the “fair market value” of Oncocyte common stock. The fair market value is
generally determined by the closing price of Oncocyte common stock on the Nasdaq Stock Market LLC or any other national securities exchange
or inter-dealer quotation system on which Oncocyte common stock is traded.
Limitation
on Share Recycling
Shares
subject to an Award shall not again be made available for issuance or delivery under the Incentive Plan if those shares are (a) shares
tendered in payment of an option, (b) shares delivered or withheld by us to satisfy any tax withholding obligation, (c) shares covered
by a stock-settled SAR or other Award that were not issued upon the settlement of the Award, or (d) shares repurchased by us using the
proceeds from option exercises. Only shares subject to an Award that is cancelled or forfeited or expires prior to exercise or realization
may be regranted under the Incentive Plan.
Other
Compensation Plans
We
do not have any pension plans, defined benefit plans, or non-qualified deferred compensation plans other than those described above.
We do make contributions to 401(k) plans for participating executive officers and other employees.
Item
12. Security Ownership of Certain Beneficial Owners and Management, and Related Stockholder Matters
The
following table sets forth information as of April 25, 2022 concerning beneficial ownership of our common stock by each shareholder known
by us to be the beneficial owner of 5% or more of our outstanding shares of common stock. Information concerning certain beneficial owners
of more than 5% of the outstanding common stock is based upon information disclosed by such owners in their reports on Schedule 13D or
Schedule 13G and/or Section 16 reports.
Shareholder | |
Number of Shares | | |
Percent of Total | |
| |
| | |
| |
Broadwood Partners, L.P. (1) Broadwood Capital, Inc. Neal Bradsher 724 Fifth Avenue, 9th Floor New York, New York 10019 | |
| 23,778,109 | | |
| 19.99 | % |
| |
| | | |
| | |
Pura Vida Investments, LLC (2) Efrem Kamen 150 East 52nd Street, Suite 32001 New York, NY 10022 | |
| 21,021,513 | | |
| 17.74 | % |
| |
| | | |
| | |
Halle Special Situations Fund LLC 767 5th Avenue, 44th Floor New York, NY 10153 | |
| 7,129,456 | | |
| 6.0 | % |
(1) |
Includes
23,774,964 shares beneficially owned by Broadwood Partners, L.P. and 3,145 shares owned by Neal Bradsher. Broadwood Capital, Inc.
is the general partner of Broadwood Partners, L.P. Neal Bradsher is the President of Broadwood Capital, Inc. Broadwood Capital, Inc.
shares voting power over and may be deemed to beneficially own the 23,774,964 shares owned by Broadwood Partners, L.P. Mr. Bradsher
shares voting power over and may be deemed to beneficially own 23,771,033 shares owned by Broadwood Partners, L.P. Broadwood Partners,
L.P. also holds (i) 6,003,752 warrants to purchase up to 3,001,876 shares of common stock, and (ii) 5,882.35 shares of Series A Convertible
Preferred Stock convertible into 3,884,675 shares of common stock. Each of the warrants and the Series A Convertible Preferred Stock
is subject to a blocker provision that prevents Broadwood Partners, L.P. from exercising or converting the securities, as applicable,
if it would be more than a 19.99% beneficial owner of the shares following such exercise or conversion. |
|
|
(2) |
Includes
shares and warrants held by Pura Vida Master Fund, Ltd. (the “Pura Vida Master Fund”) and certain separately managed
accounts (the “Accounts”). Pura Vida Investments, LLC (“PVI”) serves as the investment manager to the Pura
Vida Master Fund and the Accounts. Efrem Kamen serves as the managing member of PVI. PVI and Mr. Kamen may be deemed to have shared
voting and dispositive power with respect to the shares owned directly by the Pura Vida Master Fund and the Accounts. PVI and Mr.
Kamen disclaim beneficial ownership of those shares except to the extent of their pecuniary interest therein. |
|
|
(3) |
Includes
shares held by Halle Special Situations Fund LLC. John Peter Gutfreund is the investment manager and a control person of Halle Capital
Partners GP LLC, the managing member of Halle Special Situations Fund LLC. In such capacity, Mr. Gutfreund may be deemed to beneficially
own these securities. Halle Special Situations Fund LLC also owns warrants to purchase 3,564,728 shares of common stock, subject
to a beneficial ownership limitation of 4.9%. Mr. Gutfreund additionally has the right to acquire 768,941 shares of common stock
upon the conversion of certain shares of Series A Convertible Preferred Stock, subject to a beneficial ownership limitation of 4.9%. |
Security
Ownership of Management
The
following table sets forth information as of April 25, 2022 concerning beneficial ownership of our common stock and equity awards by
each member of the Board of Directors, all Named Executive Officers, and all executive officers and directors as a group.
| |
Number of Shares | | |
Percent of Total | |
Ronald Andrews (1) | |
| 1,248,610 | | |
| 1.34 | % |
| |
| | | |
| | |
Mitchell Levine (2) | |
| 779,994 | | |
| *% | |
| |
| | | |
| | |
Douglas Ross (3) | |
| 240,629 | | |
| *% | |
| |
| | | |
| | |
Alfred D. Kingsley (4) | |
| 861,523 | | |
| *% | |
| |
| | | |
| | |
Andrew Arno (5) | |
| 413,016 | | |
| *% | |
| |
| | | |
| | |
Andrew J. Last (6) | |
| 278,690 | | |
| *% | |
| |
| | | |
| | |
Cavan Redmond (7) | |
| 426,830 | | |
| *% | |
| |
| | | |
| | |
Melinda Griffith (8) | |
| 147,000 | | |
| *% | |
| |
| | | |
| | |
Jennifer Levin Carter (9) | |
| 102,000 | | |
| *% | |
| |
| | | |
| | |
All executive officers and directors as a group (12 persons) (10) | |
| 4,943,941 | | |
| 5.15 | % |
*Less
than 1%
(1) |
Includes
937,916 shares that may be acquired through the exercise of stock options that are presently exercisable or that may become exercisable
within 60 days, and 17,482 shares that may be acquired upon the exercise of certain warrants. Excludes 92,084 shares that may be
acquired upon the exercise of certain stock options that are not presently exercisable and that will not become exercisable within
60 days and 535,000 RSUs that are currently unvested and will not vest within 60 days. |
|
|
(2) |
Includes
689,419 shares that may be acquired through the exercise of stock options that are presently exercisable or that may become exercisable
within 60 days, and 3,495 shares that may be acquired upon the exercise of certain warrants. Excludes 393,747 shares that may be
acquired upon the exercise of certain stock options that are not presently exercisable and that will not become exercisable within
60 days. |
|
|
(3) |
Includes
220,312 shares that may be acquired through the exercise of stock options that are presently exercisable or that may become exercisable
within 60 days. Excludes 384,688 shares that may be acquired upon the exercise of certain stock options that are not presently exercisable
and that will not become exercisable within 60 days. |
|
|
(4) |
Includes
384,111 shares held solely by Mr. Kingsley, and 75,345 shares held by Greenbelt Corp. and 18,767 shares held by Greenway Partners,
LP, which are affiliates of Mr. Kingsley. Mr. Kingsley disclaims beneficial ownership of 15,069 shares held by Greenbelt Corp. Excludes
10,000 shares that may be acquired upon the exercise of certain stock options that are not presently exercisable and that will not
become exercisable within 60 days. Includes 383,300 shares that may be acquired through the exercise of stock options that are presently
exercisable or that may become exercisable within 60 days. |
|
|
(5) |
Includes
248,520 shares that may be acquired through the exercise of stock options that are presently exercisable or that may become exercisable
within 60 days and 52,447 shares that may be acquired upon the exercise of certain warrants. |
|
|
(6) |
Includes
248,520 shares that may be acquired through the exercise of stock options that are presently exercisable or that may become exercisable
within 60 days. |
(7) |
Includes
263,520 shares that may be acquired through the exercise of stock options that are presently exercisable or that may become exercisable
within 60 days and 52,447 shares that may be acquired upon the exercise of certain warrants. |
|
|
(8) |
Includes
147,000 shares that may be acquired through the exercise of stock options that are presently exercisable or that may become exercisable
within 60 days. |
|
|
(9) |
Includes
102,000 shares that may be acquired through the exercise of stock options that are presently exercisable or that may become exercisable
within 60 days. |
|
|
(10) |
Includes
3,665,479 shares that may be acquired upon the exercise of certain stock options that are presently exercisable or that may become
exercisable within 60 days, and 125,871 shares that may be acquired upon the exercise of certain warrants. Excludes 2,046,347 shares
that may be acquired upon the exercise of certain stock options that are not presently exercisable and that will not become exercisable
within 60 days, and 535,000 RSUs that are currently unvested and will not vest within 60 days. |
Item
13. Certain Relationships and Related Transactions, and Director Independence
Shared
Facilities Agreement and Relationship with Lineage
During
2009, Oncocyte and Lineage entered into a Shared Facilities Agreement pursuant to which Lineage provided Oncocyte with the use of office
and laboratory facilities, laboratory and office equipment and supplies, utilities, insurance, and the services of Lineage employees
and contractors, for which we have reimbursed Lineage, either through cash payments, shares of our common stock, or delivering convertible
promissory notes. Lineage provided us with the use of its facilities, equipment and supplies, utilities, and personnel at its cost until
2016, and at its cost plus 5% thereafter. Oncocyte ceased using shared services from Lineage during October 2019 and ceased using Lineage’s
office and laboratory facilities under the Shared Facilities Agreement effective December 31, 2019 at which time the Shared Facilities
Agreement terminated. Total fees incurred under the Shared Facilities Agreement during 2019 were $1.2 million, which have been paid in
full.
Prior
to January 7, 2021, Lineage beneficially owned more than 5% of the outstanding shares of Oncocyte common stock. Alfred D. Kingsley, who
is a member of our Board of Directors, is also a director of Lineage. Broadwood Partners, L.P. (“Broadwood”) beneficially
owns more than 5% of the outstanding common shares of Lineage. All of our directors and beneficial owners of more than 5% of our outstanding
common stock (“5% Shareholders”) as reported in this Report, in the aggregate beneficially own more than 20% of the outstanding
common shares of Lineage. The fact that certain of our directors and 5% Shareholders own Lineage common shares should not be considered
to mean that they constitute or are acting in concert as a “group” with respect to those shares or that they otherwise share
power or authority to vote or dispose of the shares that each of them own.
Certain
Sales of Equity Securities
During
March 2018, Oncocyte entered into securities purchase agreements with Broadwood and George Karfunkel, each of whom beneficially own more
than 5% of our outstanding common stock, pursuant to which Broadwood purchased 3,968,254 shares of common stock, and Mr. Karfunkel purchased
3,968,254 shares of common stock for $1.26 per share. Under the securities purchase agreements, we agreed to register the shares for
resale under the Securities Act of 1933, as amended (the “Securities Act”), not later than 60 days after the closing of the
sale of the shares. We also agreed to pay liquidated damages calculated in the manner provided in the securities purchase agreement if
we did not file the registration statement in a timely manner. Because the registration statement was not filed as required by the securities
purchase agreement, during 2019 we paid $300,000 to Broadwood on account of liquidated damages owed.
During
February 2019, Broadwood purchased 533,333 shares of our common stock for $3.75 per share, the same price paid by other investors, in
an underwritten public offering of our common stock.
During
November 2019, we sold a total of 5,058,824 shares of common stock for $1.70 per share in cash in an offering registered under the Securities
Act. Broadwood purchased 1,176,471 shares, and certain funds and accounts managed by Pura Vida Investments, LLC (“Pura Vida”)
purchased 2,941,176 shares, on the same terms as other investors.
During
January 2020, we sold 768,376 shares of common stock to Broadwood, and 2,755,400 shares of common stock to certain funds and accounts
managed by Pura Vida, for $2.156 per share in an offering registered under the Securities Act.
During
April 2020, we sold a total of 4,733,700 shares of common stock for $2.27 per share in cash in an offering registered under the Securities
Act. Broadwood purchased 1,050,000 shares, and certain funds and accounts managed by Pura Vida Investments purchased 600,000 shares,
on the same terms as other investors.
During
January 2021, we sold a total of 7,301,410 shares of our common stock for $3.424 per share in an offering registered under the Securities
Act. Broadwood purchased 1,460,280 shares, and certain funds and accounts managed by Pura Vida Investments purchased 5,841,130 shares,
on the same terms as other investors.
During
February 2021, we sold a total of 8,947,000 shares of our common stock for $4.50 per share in an offering registered under the Securities
Act. Broadwood purchased 600,000 shares on the same terms as other investors.
During
2021, we entered into a Warrant Exercise Agreement with Broadwood, pursuant to which (i) we agreed to reduce the exercise price of a
common stock warrant held by Broadwood to purchase up to 573,461 shares of common stock from $3.25 per share to $3.1525 per share; and
(ii) Broadwood agreed to exercise the common stock warrant in full on or prior to September 30, 2021. Shortly after executing the Warrant
Exercise Agreement, Broadwood exercised the common stock warrant in full and received 573,461 shares in exchange for payment to us of
$1,807,835.81.
Securities
Purchase Agreement and Underwriting Agreement
Preferred
Stock Offering
On
April 13, 2022, Oncocyte entered into the Purchase Agreement with certain investors, including Broadwood L.P., a shareholder currently
holding 19.99% of Oncocyte’s outstanding securities as of the date of this report, in a registered direct offering of 11,765 total
shares of Oncocyte’s Series A Convertible Preferred Stock (the “Preferred Stock”), which shares of Preferred Stock
are convertible into a total of 7,689,542 shares of Oncocyte’s Common Stock, at a conversion price of $1.53 (the “Preferred
Stock Offering”). Prior to Broadwood entering into the Securities Purchase Agreement for shares of Series A Preferred Stock, and
prior to the Underwritten Offering (defined below), Broadwood beneficially owned approximately 19.2% of our Common Stock, as reported
in its then most recent statement of beneficial ownership on Schedule 13D. Broadwood has a direct material interest in this transaction
and purchased 5,882.35 shares in this transaction and on the same terms as other investors.
The
purchase price of each share of Preferred Stock was $850, which included an original issue discount to the stated value of $1,000 per
share, and Broadwood specifically paid $5,000,000 in connection with its purchase of the Preferred Stock. The closing of the Preferred
Stock Offering will occur in two equal tranches of $5,000,000 each for aggregate gross proceeds from both closings of $10,000,000. The
first closing will occur on the second trading day following the date that the Secretary of State accepts the Certificate of Determination.
The second closing will occur on the earlier of (a) the second (2nd) trading day following the date that we receive notice
from an Investor to accelerate the second closing and (b) a date selected by us on or after October 8, 2022 and on or prior to March
8, 2023. Broadwood is prohibited from converting shares of Preferred Stock into shares of Common Stock if, as a result of such conversion,
Broadwood, together with its affiliates, would own more than 4.99% of the shares of Common Stock then issued and outstanding (provided
Broadwood may elect, at the first closing, to increase such beneficial ownership limitation solely as to itself up to 19.99% of the number
of shares of Common Stock outstanding immediately after giving effect to the conversion). On April 8, 2024 or the earlier occurrence
of certain events or transactions specified in the Purchase Agreement, Oncocyte will mandatorily redeem all of the Preferred Stock from
certain investors, including Broadwood, for a cash payment calculated in accordance with the terms of the Purchase Agreement.
Underwritten
Offering
Further,
on April 13, 2022, Oncocyte entered into an Underwriting Agreement (the “Underwriting Agreement”) with BTIG, LLC as representative
of the underwriters named therein (the “Underwriters”), pursuant to which Oncocyte agreed to issue and sell to the Underwriters
in an underwritten public offering (the “Underwritten Offering”) shares of Common Stock and warrants to purchase shares of
Common Stock. Pursuant to this Underwritten Offering, Broadwood acquired (i) 6,003,752 shares of Common Stock, and (ii) 6,003,752 warrants
to purchase up to 3,001,876 shares of Common Stock at an exercise price of $1.53 per share (the “Warrants”). Pura Vida, a
shareholder currently holding 19.99% of Oncocytes outstanding securities as of the date of this report, acquired (i) 4,984,093 shares
of Common Stock, and (ii) 4,984,093 Warrants to purchase up to 747,614 shares of Common Stock. Prior to the sale of the Common Stock
and Warrants to Broadwood and Pura Vida, and prior to Broadwood entering into the Securities Purchase Agreement for shares of Series
A Preferred Stock, Broadwood beneficially owned approximately 19.2% of our Common Stock, as reported in its then most recent statement
of beneficial ownership on Schedule 13D, and Pura Vida beneficially owned approximately 15.54% of our Common Stock, as reported in its
then most recent statement of beneficial ownership on Schedule 13G. The Warrants (i) are currently exercisable, subject to a beneficial
ownership limitation that prevents Broadwood from exercising the Warrants if it would be more than a 19.99% beneficial owner of Oncocyte’s
Common Stock following such exercise, and (ii) expire on April 19, 2027. If at the time of exercise there is no effective registration
statement registering, or the prospectus contained therein is not available for the issuance of the Common Stock to the Holder, then
this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise”.
There
is no established public trading market for the Warrants, and Oncocyte does not expect a market to develop. In addition, Oncocyte does
not intend to apply for listing of the Warrants on the Nasdaq or any other national securities exchange or interdealer quotation system.
The aggregate purchase price paid for the 6,003,752 shares of Common Stock and the Warrants purchased by Broadwood pursuant to the Underwritten
Offering was $7,999,999.54. The aggregate purchase price paid for the 4,984,093 shares of Common Stock and the Warrants purchased by
Pura Vida pursuant to the Underwritten Offering was $6,641,303.92.
Director
Independence
Our
Board of Directors has determined that Andrew Arno, Jennifer Levin Carter, Melinda Griffith, Alfred Kingsley, Andrew Last, and Cavan
Redmond, qualify as “independent” in accordance with Rule 5605(a)(2) of The Nasdaq Stock Market LLC (“Nasdaq”).
The members of our Audit Committee meet the additional independence standards under Nasdaq Rule 5605(c)(2) and Rule 10A-3 under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and the members of our Compensation Committee meet the additional
independence standards under Nasdaq Rule 5605(d)(2). Our independent directors received no compensation or remuneration for serving as
directors except as disclosed under “CORPORATE GOVERNANCE—Compensation of Directors.” None of these directors, nor
any of the members of their respective families, have participated in any transaction with us that would disqualify them as “independent”
directors under the standards described above. Ronald Andrews, Jr. does not qualify as “independent” because he is our Chief
Executive Officer and President.
Item
14. Principal Accounting Fees and Services
WithumSmith+Brown,
PC (“Withum”) audited our annual financial statements for the fiscal year ended December 31, 2021 and OUM & Co., LLP
(“OUM”) audited our financial statements for the fiscal year ended December 31, 2020.
Audit
Fees, Audit Related Fees, Tax Fees and Other Fees
The
following table sets forth the aggregate fees billed to us during the fiscal years ended December 31, 2021 and 2020 by Withum and OUM,
as applicable, for such years:
| |
2021(3) | | |
2020 | |
Audit Fees (1) | |
$ | 269,880 | | |
$ | 206,400 | |
Audit Related Fees (2) | |
| 358,119 | | |
| 145,202 | |
Total Fees | |
$ | 627,999 | | |
$ | 351,602 | |
(1) |
Audit
Fees consist of fees billed for professional services rendered for the audit of Oncocyte’s annual financial statements included
in our Annual Report on Form 10-K, and review of the interim financial statements included in our Quarterly Reports on Form 10-Q,
as applicable, and services that are normally provided by our independent registered public accountants in connection with statutory
and regulatory filings or engagements. |
|
|
(2) |
Audit-Related
Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review
of our consolidated financial statements and are not reported under “Audit Fees.” This category includes fees related
to non-routine SEC filings. |
|
|
(3) |
Please
note that this column for 2021 contains the total fees paid by the Company to Withum (as the successor to OUM) and OUM during the
fiscal year 2021. |
Pre-Approval
of Audit and Permissible Non-Audit Services
Our
Audit Committee requires pre-approval of all audit and non-audit services. Other than de minimis services incidental to audit
services, non-audit services shall generally be limited to tax services such as advice and planning and financial due diligence services.
All fees for such non-audit services must be approved by the Audit Committee, except to the extent otherwise permitted by applicable
SEC regulations. The Committee may delegate to one or more designated members of the Committee the authority to grant pre-approvals,
provided such approvals are presented to the Committee at a subsequent meeting. During 2021, all of the fees paid to Withum and OUM,
as applicable, were approved by the Audit Committee.