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Assets Held for Sale and Discontinued Operations
 3 Months Ended
Mar. 31, 2023
Discontinued Operations and Disposal Groups [Abstract]  
Assets Held for Sale and Discontinued Operations

16. Assets Held for Sale and Discontinued Operations

 

Razor Disposal

 

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.

 

During the quarter ended March 31, 2023, the Company recorded the final adjustment related to the disposal, including final working capital adjustments, and recorded a loss of $1.3 million during the quarter. 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 unaudited condensed consolidated statements of operations for all periods presented, and we have reclassified their assets and liabilities as held for sale for the year ended December 31, 2022.

 

Laboratory equipment sold and held for sale

 

On January 31, 2023, the Company entered into an agreement to sell laboratory equipment for $0.2 million. As of March 31, 2023, the Company classified the equipment not yet sold as held for sale in current assets in the unaudited condensed consolidated balance sheet, as all the criteria of ASC subtopic 360-10, Property, Plant, and Equipment (“ASC 360-10”) have been met and the transaction was qualified as assets held for sale. The balance included in current assets held for sale related to this transaction was $0.2 million.

 

In March 2023, the Company entered into an agreement to auction equipment for $0.1 million net proceeds. The auction was finalized on March 21, 2023, and the Company recorded a loss of $0.3 million which is included in the loss on disposal and held-for-sale assets, on the unaudited condensed consolidated statement of operations.

 

On March 31, 2023, the Company entered into an agreement to sell laboratory equipment for $0.2 million. As a result, the Company classified the equipment as held for sale as current assets, in the unaudited condensed consolidated balance sheet, as all the criteria of ASC subtopic 360-10, Property, Plant, and Equipment (“ASC 360-10”) have been met and the transaction was qualified as assets held for sale. This equipment was written down to its fair value, less cost to sell, to $0.2 million in the unaudited condensed consolidated balance sheet. As a result of the expected sale, the Company recorded an impairment loss of $1.0 million on held-for-sale assets, in the unaudited condensed consolidated statement of operations. A portion of the held for sale equipment of $0.2 million was sold on April 20, 2023.

 

The Company classified its results of operations as discontinued operations for all periods presented in the accompanying unaudited condensed consolidated statements of operations. We have retrospectively adjusted the amounts reported for the quarter ended March 31, 2022, in the following table to give effect to such reporting of discontinued operations. For the quarter ended March 31, 2023, discontinued operations reflect operating results of Razor up to the closing of the sale, while discontinued operations during the quarter ended March 31, 2022 reflect the operating result of Razor for the entire quarter.

 

The Company’s unaudited condensed consolidated balance sheets and consolidated statements of operations report discontinued operations separate from continuing operations. Our unaudited condensed consolidated statements of comprehensive income (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.

 

 

ONCOCYTE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The following table represents the results of the discontinued operation of Razor (in thousands):

 

 

   2023   2022 
   Three Months Ended 
   March 31, 
   2023   2022 
Net revenue  $421   $1,044 
           
Cost of revenues   507    1,824 
Research and development   702    3,121 
Sales and marketing   498    2,971 
General and administrative   329    6 
Loss from discontinued operations   1,311    - 
Net loss from discontinued operations  $(2,926)  $(6,878)

 

The following table represents the carrying amounts of the held for sale related assets and liabilities as of March 31, 2023 and carrying amounts of the held for sale related assets and liabilities of discontinued operations as of December 31, 2022 (in thousands):

 

   March 31,   December 31, 
   2023   2022 
ASSETS          
CURRENT ASSETS          
Cash and cash equivalents  $-   $1,510 
Accounts receivable   -    - 
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)
Assets held for sale   421    - 
TOTAL ASSETS   421    2,121 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
CURRENT LIABILITIES          
Accounts payable  $160   $492 
Accrued compensation   -    248 
Accrued expenses and other current liabilities   76    1,265 
TOTAL LIABILITIES   236    2,005 

 

The following table summarizes cash used related to Razor as of and for the three months ended March 31, 2023 and 2022 (in thousands):

 

          
   Three Months Ended 
   March 31, 
    2023    2022 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net cash used in operating activities  $(4,357)  $(5,532)
           

CASH FLOWS FROM INVESTING ACTIVITIES:

          
Net cash used in investing activities  $-   $(114)