Discontinued Operations of Razor

9 Months Ended

Sep. 30, 2023

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations of Razor

13. Discontinued Operations of Razor

On December 15, 2022, the Company entered into the Razor Stock Purchase Agreement with Dragon and Razor. Pursuant to the Razor Stock Purchase Agreement, Oncocyte agreed to sell, and Dragon agreed to purchase, 3,188,181 shares of common stock of Razor, which constitutes approximately 70% of the issued and outstanding equity interests of Razor on a fully-diluted basis. On February 16, 2023, Oncocyte completed the Razor Sale Transaction. In connection with the Razor Closing, Oncocyte transferred to Razor all of the assets and liabilities related to DetermaRx. While no monetary consideration was received for the sale of 70% of the equity interests of Razor, the transaction allows the Company to eliminate all development and commercialization costs with respect to DetermaRx. Following the Razor Closing, Oncocyte continues to own 1,366,364 shares of common stock of Razor, which constitutes approximately 30% of the issued and outstanding equity interests of Razor on a fully-diluted basis.

In addition to the transfer of 70% of the equity interests of Razor, the Razor Stock Purchase Agreement provided that Dragon would purchase furniture, fixtures, and equipment from the Company for a cash consideration of $115,660. Upon the Razor Closing, the Company deconsolidated the assets and liabilities of Razor as control of Razor has transferred to Dragon.

The Company recorded the final adjustment related to the disposal, including final working capital adjustments, and recognized a loss of $1.3 million during the first quarter of 2023. Including the impairment losses we recognized as of December 31, 2022 related to this transaction, we recorded an overall loss of $27.2 million. The operating results for Razor have been recorded in discontinued operations of the accompanying consolidated statements of operations for all periods presented, and we have reclassified their assets and liabilities as discontinued operations in the accompanying balance sheets. We have retrospectively adjusted the amounts reported for the period ended September 30, 2022, in the following table to give effect to such reporting of discontinued operations. For the period ended September 30, 2023, discontinued operations reflect operating results of Razor up to the closing of the sale.

The Company’s consolidated balance sheets and consolidated statements of operations report discontinued operations separate from continuing operations. Our consolidated statements of comprehensive loss, statements of shareholders’ equity and statements of cash flows combined continuing and discontinued operations. A summary of financial information related to the Company’s discontinued operations is as follows.

The following table represents the results of the discontinued operations of Razor:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2023		2022			2023			2022
	(In thousands)
Net revenue	$	-	$	950		$	421		$	3,824
Cost of revenues		-		1,855			507			5,854
Research and development		-		2,949			702			9,200
Sales and marketing		-		3,600			498			9,966
General and administrative		-		61			329			133
Loss from impairment of held for sale assets		-		-			1,311			-
Net loss from discontinued operations	$	-	$	(7,515	)	$	(2,926	)	$	(21,329	)

The following table represents the carrying amounts of the assets and liabilities of the discontinued operations of Razor:

	September 30,		December 31,
	2023		2022
	(In thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	-	$	1,510
Prepaid expenses and other current assets		-		346
Machinery and equipment, net, and construction in progress		-		211
Intangible assets, net		-		25,920
Impairment of held for sale assets		-		(25,866	)
TOTAL ASSETS	$	-	$	2,121
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	90	$	492
Accrued compensation		-		248
Accrued expenses and other current liabilities		-		1,265
Total current liabilities		90		2,005
TOTAL LIABILITIES	$	90	$	2,005

The following table summarizes cash used related to the discontinued operations of Razor:

	Nine Months Ended
	September 30,
	2023			2022
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash used in operating activities	$	(4,357	)	$	(15,744	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used in investing activities	$	-		$	(96	)