Insight Molecular Diagnostics Inc.: Form 10-Q for the period ended Sep 30, 2023

The matters addressed in this Item 2 that are not historical information constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, including statements about any of the following: any projections of earnings, revenue, cash, effective tax rate, use of net operating losses, or any other financial items; the plans, strategies and objectives of management for future operations or prospects for achieving such plans, and any statements of assumptions underlying any of the foregoing. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates,” and similar expressions are intended to identify forward-looking statements. While Oncocyte may elect to update forward-looking statements in the future, it specifically disclaims any obligation to do so, even if the Oncocyte estimates change and readers should not rely on those forward-looking statements as representing Oncocyte views as of any date subsequent to the date of the filing of this Report. Although we believe that the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to risks and Oncocyte can give no assurances that its expectations will prove to be correct. Actual results could differ materially from those described in this report because of numerous factors, many of which are beyond the control of Oncocyte. A number of important factors could cause the results of the company to differ materially from those indicated by such forward-looking statements, including those detailed under the heading “Risk Factors” in our Form 10-K for the year ended December 31, 2022, and our other reports filed with the SEC from time to time.

The following discussion should be read in conjunction with Oncocyte’s consolidated financial statements and the related notes provided under “Item 1- Financial Statements” above.

Recent Developments

Reverse Stock Split

At a special meeting of our shareholders, held on July 24, 2023, our shareholders approved a proposal granting the Company’s board of directors the authority to exercise its discretion to amend the Articles of Incorporation of the Company, as currently in effect, to effect a reverse stock split of the outstanding shares of the Company’s common stock at any time within one year after the date such shareholder approval was obtained at the special meeting and at any of certain specified reverse split ratios that were approved by the shareholders of the Company in connection therewith. On July 24, 2023, our board of directors approved the reverse stock split at a ratio of 1-for-20, and on that date, we filed a Certificate of Amendment of Articles of Incorporation with the Secretary State of the State of California to effect the reverse stock split.

Unless otherwise noted, all share and per share amounts set forth in this Report have been adjusted to reflect the impact of the reverse stock split.

Irvine Office Sublease Agreement

On August 8, 2023, Oncocyte and Subtenant entered into the Sublease Agreement, which subsequently became effective as of September 14, 2023, upon the execution and delivery by the Company, Subtenant, and Landlord, of the Consent Agreement, under which Landlord consented to the Sublease Agreement, on the terms and subject to the conditions set forth therein. The Sublease Agreement is subject and subordinate to the Irvine Lease. For additional information about the Sublease Agreement, see Note 7 to our consolidated financial statements included elsewhere in this Report.

Results of Operations

Summary Results of Operations

(In thousands, except percentage change values)

Results of Operations – Three Months Ended September 30, 2023 Compared with the Three Months Ended September 30, 2022

Revenues increased to $429,000 for the three months ended September 30, 2023, as compared to $67,000 in the comparable prior year, due to increased revenues in Pharma Services.

Loss from continuing operations was $6.5 million for the three months ended September 30, 2023, and $1.8 million for the three months ended September 30, 2022. The net change was comprised primarily of the changes in operating expenses and other income and expenses from continuing operations as follows:

• Pharma Services revenue increased by $356,000 due to an increased number of contracts performed during the period.
• Cost of revenues decreased by $155,000, primarily related to labor and allocated overhead associated with performing our Pharma Services.
• Cost of revenues - amortization of acquired intangibles remained at $22,000, and relates to noncash amortization of acquired intangible assets such as our customer relationship intangible assets acquired as part of the Insight merger.
• Research and development expenses increased by $713,000, as the Company continues development of DetermaIO, VitaGraft (formerly TheraSure Transplant Monitor), and DetermaCNI (formerly TheraSure - CNI Monitor). See below for additional details.
• Sales and marketing expenses increased by $308,000, primarily attributable to continued ramp in sales and marketing activities related to the transplant business, as well as support the commercialization efforts within oncology. See below for additional details.
• General and administrative expenses decreased by $3.2 million, primarily due to decreased stock-based compensation and personnel expenses. See below for additional details.
• Change in fair value of contingent consideration decreased by $5.7 million, from a gain of $6.1 million to a gain of $435,000, due to changes in discount rates and revised estimates on the timing of possible future payouts. Change is driven in part by the Chronix Amendment which amended the earnout considerations eliminated the Chronix Milestone Payments, 15% Royalty Payments and Sale Payment obligations (see Note 3 to our consolidated financial statements included elsewhere in this Report). See below for additional details.

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• Impairment loss increased due to a 2023 asset impairment charge of $1.8 million related to leasehold improvements (see Note 4 to our consolidated financial statements included elsewhere in this Report).
• Total other income (expense) increased by $136,000, from an expense of $112,000 in the three months ended September 30, 2022 to an income of $24,000 in the three months ended September 30, 2023, primarily due to interest income and the change in unrealized gain/loss on marketable equity securities. See below for additional details.

Results of Operations – Nine Months Ended September 30, 2023 Compared with the Nine months ended September 30, 2022

Revenues increased to $1.2 million for the nine months ended September 30, 2023, as compared to $684,000 in the comparable prior year, due to increased revenues in Pharma Services.

Loss from continuing operations was $8.9 million for the nine months ended September 30, 2023, and $6.6 million for the nine months ended September 30, 2022. The net change was comprised primarily of the changes in operating expenses and other income and expenses from continuing operations as follows:

• Pharma Services revenue increased by $453,000 due to an increased number of contracts performed during the period.
• Cost of revenues decreased by $9,000, primarily related to labor and allocated overhead associated with performing our Pharma Services.
• Cost of revenues - amortization of acquired intangibles decreased by $7,000, and relates to noncash amortization of acquired intangible assets such as our customer relationship intangible assets acquired as part of the Insight merger.
• Research and development expenses increased by $824,000, as the Company continues development of DetermaIO, VitaGraft (formerly TheraSure Transplant Monitor), and DetermaCNI (formerly TheraSure - CNI Monitor). See below for additional details.
• Sales and marketing expenses increased by $1.4 million, primarily attributable to continued ramp in sales and marketing activities related to the transplant business, as well as support the commercialization efforts within oncology. See below for additional details.
• General and administrative expenses decreased by $7.4 million, primarily due to decreased stock-based compensation and personnel expenses. See below for additional details.
• Change in fair value of contingent consideration decreased by $210,000, from a gain of $17.2 million to a gain of $16.9 million, due to changes in discount rates and revised estimates on the timing of possible future payouts. Change driven in part by the Chronix Amendment which amended the earnout considerations eliminated the Chronix Milestone Payments, 15% Royalty Payments and Sale Payment obligations (see Note 3 to our consolidated financial statements included elsewhere in this Report). See below for additional details.
• Impairment losses relate to two 2023 assets impairment charges, including $5.0 million to intangible assets (see Note 5 to our consolidated financial statements included elsewhere in this Report) and $1.8 million to leasehold improvements (see Note 4).
• Total other income (expense) increased by $340,000, from an expense of $246,000 in the nine months ended September 30, 2022, to an income of $94,000 in the nine months ended September 30, 2023, primarily due to interest income and the change in unrealized gain/loss on marketable equity securities. See below for additional details.

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Revenues

The following table shows our service revenues:

(In thousands, except percentage change values)

Pharma Services are generally performed on a time and materials basis. Upon our completion of the service to the customer in accordance with the contract, we have the right to bill the customer for the agreed upon price (either on a per test or per deliverable basis) and recognize the Pharma Services revenue at that time, on an accrual basis. Pharma Services revenues are generated under discrete agreements for particular customer projects that generally expire with the completion or termination of the customer’s project. Accordingly, different customers may account for greater or lesser portions of Pharma Services during different accounting periods, and Pharma Services revenues may exhibit a larger variance from accounting period to accounting period than other revenues such as DetermaRx testing revenues. Refer to Note 2 to our consolidated financial statements included elsewhere in this Report for additional revenue information.

Laboratory developed test services generally relate to payments received from sales prior to the Razor Sale Transaction (see Note 13 to our consolidated financial statements included elsewhere in this Report). Oncocyte generated revenue from performing DetermaRx tests on clinical samples through orders received from physicians, hospitals, and other healthcare providers. For all payers other than Medicare, Oncocyte must consider the novelty of the test, the uncertainty of receiving payment, or being subject to claims for a refund, from payers with whom it does not have a sufficient payment collection history or contractual reimbursement agreements. Accordingly, for those payers, Oncocyte has recognized revenue upon payment. Refer to Note 2 to our consolidated financial statements included elsewhere in this Report for additional revenue information.

Cost of Revenues

Cost of revenues generally consists of cost of materials; direct labor including payroll, payroll taxes, bonus, benefit and stock-based compensation; equipment and infrastructure expenses; clinical sample costs associated with performing Pharma Services; and amortization of acquired intangible assets. Infrastructure expenses include depreciation of laboratory equipment; allocated rent costs; and leasehold improvements. Cost of revenues for Pharma Services varies depending on the nature, timing, and scope of customer projects.

Research and Development Expenses

A summary of the main drivers of the change in research and development expenses is as follows:

(In thousands, except percentage change values)

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We expect to continue to incur a significant amount of research and development expenses during the foreseeable future. As of September 30, 2023, we will continue development of DetermaIO and VitaGraft. Our future research and development efforts and expenses will also depend on the amount of capital that we are able to raise to finance those activities and whether we acquire rights to any new diagnostic tests. A portion of our costs for leasing and operating our CLIA laboratories in California and Tennessee, and in Germany with Chronix, will also be included in research and development expenses to the extent allocated to the development of our diagnostic tests.

We may commence clinical trials of DetermaIO if we develop that diagnostic test to the point where we determine that its use as a clinical diagnostic appears to be feasible.

Sales and Marketing Expenses

A summary of the main drivers of the change in sales and marketing expenses is as follows:

(In thousands, except percentage change values)

We expect to continue to incur sales and marketing expenses during the foreseeable future as we complete product development and begin commercialization efforts for DetermaIO as a clinical test. Sales and marketing expenses will also increase if we successfully develop and begin commercializing DetermaCNI, and VitaGraft, or if we acquire and commercialize other diagnostic tests. Our commercialization efforts and expenses will also depend on the amount of capital that we are able to raise to finance commercialization of our tests. Our future expenditures on sales and marketing will also depend on the amount of revenue that those efforts are likely to generate. Because physicians are more likely to prescribe a test for their patients if the cost is covered by Medicare or health insurance, demand for our diagnostic and other tests and our expenditures on sales and marketing are likely to increase if our diagnostic or other tests qualify for reimbursement by Medicare or private health insurance companies.

General and Administrative Expenses

A summary of the main drivers of the change in general and administrative expenses is as follows:

(In thousands, except percentage change values)

Change in Fair Value of Contingent Consideration

We will pay contingent consideration if various payment milestones are triggered under the merger agreements through which we acquired Insight and Chronix. See Note 3 to our consolidated financial statements included elsewhere in this Report. Changes in the fair value of the contingent consideration will be based on our reassessment of the key assumptions underlying the determination of this liability as changes in circumstances and conditions occur from the Insight and Chronix acquisition dates to the reporting period being presented, with the subsequent changes in fair value recorded as part of our consolidated loss from operations for that period. See above change explanations for additional information.

Other Income and Expenses

Total other income (expenses) is primarily comprised of interest income and expense, and unrealized gains and losses on Lineage and AgeX marketable equity securities we hold (see Note 2 to our consolidated financial statements included elsewhere in this Report). Interest income is earned from money market funds we hold for capital preservation. In the prior year, interest expense was incurred under our loan payable to the Silicon Valley Bank, and under financing lease obligations. Interest income (expense), net, reflects the interest income earned from money market accounts in excess of interest expense incurred on our loans and financing obligations.

Income Taxes

Oncocyte did not record any provision or benefit for income taxes for the nine months ended September 30, 2023 and September 30, 2022, as Oncocyte had a full valuation allowance for the periods presented (see Note 10 to the consolidated financial statements included elsewhere in this Report).

A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. We established a full valuation allowance for all periods presented due to the uncertainty of realizing future tax benefits from our net operating loss carry-forwards and other deferred tax assets.

Liquidity and Capital Resources

Our foreseeable material cash requirements as of September 30, 2023, are recognized as liabilities or generally are otherwise described in Note 7, “Commitments and Contingencies,” to the consolidated financial statements included elsewhere in this Report. Cash requirements are generally derived from our operating and investing activities including expenditures for working capital, human capital, business development, investments in intellectual property, and business combinations. Our office lease obligations, net of sublease payments, and certain contingent obligations are further described in Note 3, “Business Combinations,” related to contingent consideration, and Note 7. Historically, we have not entered into any off-balance sheet arrangements.

Since formation, we have financed our operations primarily through the sale of our common stock, preferred stock and warrants. We have incurred operating losses and negative cash flows since inception and had an accumulated deficit of $272.5 million at September 30, 2023. We expect to continue to incur operating losses and negative cash flows for the near future. Our expectation to generate operating losses and negative operating cash flows in the future and the need for additional funding to support our planned operations raise substantial doubt regarding our ability to continue as a going concern for a period of one year after the date that the financial statements are issued.

At September 30, 2023, we had $13.8 million of cash and cash equivalents, and held shares of Lineage and AgeX common stock as marketable equity securities valued at $441,000. In 2022, we raised approximately $30,000 in net cash proceeds through sales of shares of our common stock through the ATM Offering. On June 1, 2022, Oncocyte received net proceeds of approximately $4.9 million from the Series A Preferred Stock issued from the first tranche of the Series A Preferred Stock Offering. On April 19, 2022, Oncocyte received net proceeds of approximately $32.8 million from the Underwritten Offering of 1,313,320 shares of common stock and 1,313,320 shares of April 2022 Warrants to purchase up to 656,660 shares of common stock.

On April 3, 2023, the Company entered into an agreement with certain members of the Company’s board of directors, and several institutional and accredited investors, including Broadwood Capital, L.P., the Company’s largest shareholder, relating to their purchase of an aggregate of up to 2,278,121 shares of its common stock at an offering price of $7.08 per share to board members and $6.03 per share to the other investors participating in the offering. The offering was intended to be priced ‘at-the market’ for purposes of complying with applicable Nasdaq Listing Rules. The aggregate gross proceeds from the offering were approximately $13.9 million before deducting offering expenses payable by the Company. The Company used approximately $1.1 million of the net proceeds to immediately redeem an aggregate of 1,064 shares of its Series A Convertible Preferred Stock and may thereafter elect to redeem additional shares. See Notes 1 and 8 to the consolidated financial statements included elsewhere in this Report for additional information about the Company’s going concern discussion and equity offerings.

We expect that our operating expenses will remain flat as we continue to manage our available cash. Although we intend to market our diagnostic tests in the United States through our own sales force, we are also beginning to make marketing arrangements with distributors in other countries. We may also explore a range of other commercialization options in order to enter overseas markets and to reduce our capital needs and expenditures, and the risks associated the timelines and uncertainty for attaining the Medicare reimbursement approvals that will be essential for the successful commercialization of additional cancer diagnostic tests. Those alternative arrangements could include marketing arrangements with other diagnostic companies through which we might receive a licensing fee and royalty on sales, or through which we might form a joint venture to market one or more tests and share in net revenues, in the United States or abroad.

In addition to sales and marketing expenses, we will incur expenses from leasing and improving our offices and laboratory facilities in Nashville, Tennessee. During the third quarter of 2023, we entered into a sublease arrangement for our main office (see “Irvine Office Sublease Agreement” discussion above).

We may need to meet significant cash payment or stock obligations to former Insight and Chronix shareholders in connection with our acquisition of those companies, as disclosed in Note 3 to the consolidated financial statements included elsewhere in this Report. To meet the future cash payment obligations, we may have to utilize cash on hand that would otherwise be available to us for other business and operational purposes, which could cause us to delay or reduce activities in the development and commercialization of our cancer tests.

We will need to continue to raise additional capital to finance our operations, including the development and commercialization of our diagnostic tests, and making payments that may become due under our obligations to former Chronix shareholders and former Insight shareholders, until such time as we are able to generate sufficient revenues to cover our operating expenses. Delays in the development of DetermaIO, or obtaining reimbursement coverage from Medicare for that diagnostic test and for the other diagnostic tests that we may develop or acquire, could prevent us from raising sufficient additional capital to finance the completion of development and commercial launch of those tests. Investors may be reluctant to provide us with capital until our tests are approved for reimbursement by Medicare or reimbursement by private healthcare insurers or healthcare providers, or until we begin generating significant amounts of revenue from performing those tests. The unavailability or inadequacy of financing or revenues to meet future capital needs could force us to modify, curtail, delay, or suspend some or all aspects of our planned operations. Sales of additional equity securities could result in the dilution of the interests of our shareholders. We cannot assure that adequate financing will be available on favorable terms, if at all.

Cash Used in Operations

During the nine months ended September 30, 2023, our total research and development expenses from continuing operations were $6.7 million, our sales and marketing expenses were $2.2 million, and our general and administrative expenses were $9.4 million. We also incurred $659,000 in cost of revenues, including $66,000 amortization of intangible expenses, in the first nine months of 2023. Net loss for the nine months ended September 30, 2023 amounted to $11.8 million and net cash used in operating activities amounted to $18.8 million. Our cash used in operating activities during the nine months ended September 30, 2023 does not include the following noncash items: $2.3 million in stock-based compensation; $16.9 million gain from change in fair value of contingent consideration; $6.8 million loss from asset impairments; $1.7 million loss related to discontinued operations; $1.3 million loss on disposal and held for sale assets; $1.4 million in depreciation and amortization expenses; $108,000 in other equity compensation expenses, and $8,000 in unrealized gain on marketable equity securities. Changes in operating assets and liabilities were approximately $3.5 million as an additional use of cash.

Cash Used in Investing Activities

During the nine months ended September 30, 2023, net cash used in investing activities was $1.2 million, attributable to cash sold in discontinued operations, partially offset by proceeds from the sale of equipment.

Cash Provided by Financing Activities

During the nine months ended September 30, 2023, net cash provided by financing activities was $12.2 million, attributable to the $13.4 million of net cash proceeds from the sale of shares of common stock, offset by redemption of Series A Preferred Stock of $1.1 million and repayments of financing lease obligations of $87,000.

Critical Accounting Estimates

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses and analyzes data in our consolidated financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles. Preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of our Board of Directors. Actual conditions may differ from our assumptions and actual results may differ from our estimates.

An accounting policy is deemed critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate are reasonably likely to occur, that could materially impact the financial statements. Management believes that there have been no significant changes during the nine months ended September 30, 2023 to the matters that we disclosed as our critical accounting estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022. Refer to additional discussion of “Significant Accounting Policies” in Note 2 to our consolidated financial statements included elsewhere in this Report.

Under SEC rules and regulations, as a smaller reporting company, we are not required to provide the information required by this item.

Evaluation of Disclosure Controls and Procedures

It is management’s responsibility to establish and maintain adequate internal control over all financial reporting pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 (“Exchange Act”). Our management, including our principal executive officer and principal financial officer, have reviewed and evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Following this review and evaluation, the principal executive officer and principal financial officer determined that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to management, including our principal executive officer, and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There were no changes in our internal control over financial reporting that occurred during the period covered by this Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our business, financial condition, results of operations and future growth prospects are subject to various risks, including those described in Item 1A “Risk Factors” of our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on April 12, 2023, which we encourage you to review. Other than as noted below, there have been no material changes from the risk factors disclosed in our most recent Annual Report on Form 10-K.

Our recently implemented reverse stock split may decrease the liquidity of our common stock and result in higher transaction costs.

The liquidity of our common stock may be negatively impacted by our implementation of a 1-for-20 reverse stock split on July 24, 2023, given the significantly reduced number of shares that are now issued and outstanding after the reverse stock split, and because our stock price did not increase commensurate with the ratio of the reverse stock split. In addition, as a result of our reverse stock split, we now have a greater number of shareholders who own “odd lots” of fewer than 100 shares of our common stock. Brokerage commission and other costs of transactions for the sale of odd lots are generally higher than the costs of transactions of more than 100 shares of common stock. Accordingly, a reverse stock split may not achieve the desired results of increasing marketability and liquidity of our common stock.

The effective increase in the authorized number of shares of our common stock as a result of our reverse stock split could have anti-takeover implications and result in further dilution to our existing shareholders.

In connection with the recent implementation of the reverse stock split, we maintained the total number of authorized shares of our common stock. The combination of a reverse stock split of our issued and outstanding shares, and maintaining the number of our authorized shares, has significantly increased our authorized shares relative to our issued and outstanding shares. This effective increase in the number of authorized shares will allow us to sell additional shares of our common stock (or securities convertible or exchangeable for our common stock), which would result in further dilution of our current shareholders. In addition, the effective increase in the number of authorized shares could, under certain circumstances, have anti-takeover implications. For example, the additional shares of common stock that have become available for issuance could be used by us to oppose a hostile takeover attempt or to delay or prevent changes in control or our management. Although our reverse stock split was prompted by business and financial considerations and not by the threat of any hostile takeover attempt, shareholders should be aware that our reverse stock split could facilitate future efforts by us to deter or prevent changes in control, including transactions in which our shareholders might otherwise receive a premium for their shares over then-current market prices.

There is substantial doubt about our ability to continue as a going concern and management’s plans to alleviate this condition may be unsuccessful. We will need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our operations.

Our expectation to generate operating losses and negative operating cash flows in the future and the need for additional funding to support our planned operations raise substantial doubt regarding our ability to continue as a going concern for a period of one year after the date that the financial statements are issued. See Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources” of this Report for a discussion of our cash position. Accordingly, we intend to complete additional equity financings and reduce spending in the remainder of fiscal 2023 and in 2024. However, due to several factors, including those outside management’s control, there can be no assurance that we will be able to complete additional equity financings. If we are unable to complete additional financings, management’s plans include further reducing or delaying operating expenses. We have concluded the likelihood that our plan to successfully obtain sufficient funding from one or more of these sources or adequately reduce expenditures, while reasonably possible, is less than probable. Accordingly, we have concluded that substantial doubt exists about our ability to continue as a going concern for a period of at least twelve months from the date of issuance of these consolidated financial statements.

Our fundraising efforts to raise additional funding may divert our management from their day-to-day activities, which may adversely affect our ability to conduct operations. In addition, we cannot guarantee that financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our shareholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equity or convertible securities would dilute all of our shareholders. The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire assets and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable, which may result in terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.

In addition to general economic and capital market trends and conditions, Oncocyte’s ability to raise sufficient additional capital to finance its operations from time to time will depend on a number of factors specific to Oncocyte’s operations such as operating revenues and expenses, progress in development of, or in obtaining reimbursement coverage from Medicare for DetermaIO and other future laboratory tests that Oncocyte may develop or acquire.

If we are unable to obtain funding on a timely basis, or if revenues from collaboration arrangements or financing sources are less than we have projected, we may be required to further revise our business plan and strategy, which may result in us significantly curtailing, delaying or discontinuing portions or all of our operations, or may result in our being unable to expand our operations or otherwise capitalize on our business opportunities. As a result, our business, financial condition and results of operations could be materially affected.