Item 1.01 Entry into a Material Definitive Agreement.
Merger Agreement Amendment
On February 26, 2021, Cancer Genetics, Inc. (the "Company" or "CGI") entered
into Amendment No. 2 to Agreement and Plan of Merger and Reorganization (the
"Amendment") with StemoniX, Inc. ("StemoniX") and CGI Acquisition, Inc., a
wholly owned subsidiary of CGI ("Merger Sub"), which amends the Agreement and
Plan of Merger and Reorganization dated August 21, 2020, as previously amended
on February 8, 2021 (the "Original Merger Agreement" and, as amended by the
Amendment, the "Merger Agreement") whereby Merger Sub will be merged with and
into StemoniX, with StemoniX surviving the merger as a wholly-owned subsidiary
of CGI (the "Merger"). The Original Merger Agreement, prior to its amendment on
February 8, 2021, had conditions that included (A) that the Company shall have
consummated a financing transaction (the "Private Placement") no later than the
closing of the Merger resulting in aggregate gross proceeds of $10 million (or
such other amount as the Company and StemoniX agree), which condition (the
"Financing Condition") was amended on February 8, 2021 to only require that
StemoniX have sold an aggregate of $5 million of its Series C Preferred Stock
(as defined below) prior to the closing of the Merger, and (B) that the shares
of common stock of CGI (the "Common Stock") (or Common Stock underlying other
securities of CGI) being issued in the Merger shall have been approved for
listing on the Nasdaq Stock Market ("Nasdaq").
As previously reported, on February 16, 2021, CGI consummated a registered
direct offering of its common stock with certain institutional investors
pursuant to which the Company issued to the investors an aggregate of 2,777,778
shares of the Company's common stock at an offering price of $6.30 per share for
gross proceeds of approximately $17.5 million (the "CGI RD Financing"). The net
proceeds to the Company from the CGI RD Financing were approximately $15.8
million, after deducting placement agent fees and expenses and estimated
offering expenses payable by the Company.
CGI and StemoniX have confirmed in the Amendment that the CGI RD Financing is to
be treated as part of the "Private Placement" under the Merger Agreement, such
that any securities to be issued therein will be deemed to be outside of, and
not considered in computing the number of securities of CGI to be issued with
respect, to the existing 78/22% ratio, and so will dilute the historic holders
of CGI and StemoniX securities ratably. In addition, the cash raised in the CGI
RD Financing will not be included in either company's Net Cash (as defined in
the Merger Agreement) in determining any adjustments required to such ratio. The
parties also agreed that any condition of the Merger Agreement requiring either
party to raise additional cash prior to closing shall be deemed satisfied other
than if required to satisfy Nasdaq initial listing requirements of the
post-merger company, and that StemoniX will not issue nor commit to issue any
further securities without the consent of CGI (other than under its option plan,
upon conversion of already outstanding convertible securities, or as otherwise
permitted under the Merger Agreement, including additional Convertible Notes (as
defined below) provided for in the Merger Agreement and the up to $2 million of
Series C Preferred Stock that is the subject of a binding purchase agreement as
of the date hereof).
The foregoing description of the Amendment does not purport to be complete and
is qualified in its entirety by the full text of the Amendment, a copy of which
is filed as Exhibit 2.1 hereto and is incorporated by reference herein.
Item 8.01 Other Events.
StemoniX Series C Preferred Stock and Convertible Notes
As previously reported, on January 28, 2021, StemoniX entered into a stock
purchase agreement (the "Series C Preferred Stock Purchase Agreement") with two
institutional accredited investors pursuant to which StemoniX agreed to issue
shares of its Series C Convertible Preferred Stock (the "Series C Preferred
Stock") for an aggregate purchase price of $5 million. Also as previously
reported, one of those investors determined thereafter to acquire $3 million of
StemoniX Convertible Notes ("Convertible Notes") in lieu of acquiring the same
amount of Series C Preferred Stock.
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The offering by StemoniX of its Series C Preferred Stock was originally intended
to partially satisfy the Financing Condition and be part of the Private
Placement. On February 18, 2021, StemoniX and the remaining investor committed
to issuing and purchasing, respectively, $2 million of Series C Preferred Stock
and, in light of the consummation of the CGI RD Financing, amended and restated
the Series C Preferred Stock Purchase Agreement to provide that only $2 million
of Series C Preferred Stock would be issued in the aggregate. Accordingly, the
Amendment provides that the investor will not have the right to appoint a board
observer on the board of the post-merger company, as had been contemplated in
the Merger Agreement if $5 million of Series C Preferred Stock had been sold.
As described above and reported in the Company's Registration Statement on Form
S-4, as amended on February 8, 2021, and declared effective by the SEC on
February 12, 2021 (Registration No. 333-249513), an institutional investor
agreed to purchase an aggregate of approximately $3 million of Convertible Notes
and related warrants to purchase StemoniX common stock from StemoniX, which
purchase was consummated on February 23, 2021.
Extension Granted by Nasdaq
On February 18, 2021, the Listing Qualifications Staff at the Nasdaq Stock
Market ("Nasdaq") granted CGI an extension to regain compliance from its
previously reported deficiency of not having held an annual stockholder meeting
in 2020, under Nasdaq Rule 5810(c)(2)(G). The extension provides that CGI has
until June 29, 2021 to either (i) complete the Merger and receive approval for
trading of the post-merger company's securities on Nasdaq or (ii) hold an annual
meeting of CGI's stockholders.
Additional Information about the Proposed Merger and Where to Find It
In connection with the proposed merger between CGI and StemoniX, CGI has filed
relevant materials with the SEC, including a registration statement on Form S-4,
as amended, that contains a proxy statement/prospectus/information statement.
INVESTORS AND SECURITY HOLDERS OF CGI AND STEMONIX ARE URGED TO READ THESE
MATERIALS (AS WELL AS AMENDMENTS AND SUPPLEMENTS THERETO AND ANY DOCUMENTS
INCORPORATED BY REFERENCE THEREIN) WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT CGI, STEMONIX AND THE PROPOSED MERGER. The
proxy statement/prospectus/information statement and other relevant materials
(when they become available), and any other documents filed by CGI with the SEC,
may be obtained free of charge at the SEC website at www.sec.gov. In addition,
investors and security holders may obtain free copies of the documents filed
with the SEC by CGI by directing a written request to: Cancer Genetics, Inc.,
c/o John A. Roberts, Chief Executive Officer, 201 Route 17 North 2nd Floor,
Rutherford, NJ 07070. Investors and security holders are urged to read the
Registration Statement and the other relevant materials when they become
available before making any voting or investment decision with respect to the
proposed merger.
This report shall not constitute an offer to sell or the solicitation of an
offer to sell or the solicitation of an offer to buy any securities, nor shall
there be any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such jurisdiction. No offering of securities in
connection with the proposed merger shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities Act of 1933,
as amended.
Participants in the Solicitation
CGI and its directors and executive officers and StemoniX and its directors and
executive officers may be deemed to be participants in the solicitation of
proxies from the shareholders of CGI in connection with the proposed transaction
under the rules of the SEC. Information about the directors and executive
officers of CGI and their ownership of shares of CGI's common stock is set forth
in its Annual Report on Form 10-K for the year ended December 31, 2019, which
was filed with the SEC on May 29, 2020, and in subsequent documents filed and to
be filed with the SEC, including the Registration Statement referred to above.
Additional information regarding the persons who may be deemed participants in
the proxy solicitations and a description of their direct and indirect interests
in the proposed merger, by security holdings or otherwise, are included in the
Registration Statement and other relevant materials to be filed with the SEC
when they become available. These documents are available free of charge at the
SEC web site (www.sec.gov) and from the Chief Executive Officer at CGI at the
address described above.
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Forward-Looking Statements
This report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. CGI and StemoniX generally
identify forward-looking statements by terminology such as "may," "should,"
"expects," "plans," "anticipates," "could," "intends," "target," "projects,"
"contemplates," "believes," "estimates," "predicts," "potential" or "continue"
or the negative of these terms or other similar words. These statements are only
predictions. CGI and StemoniX have based these forward-looking statements
largely on their then-current expectations and projections about future events
and financial trends as well as the beliefs and assumptions of management.
Forward-looking statements are subject to a number of risks and uncertainties,
many of which involve factors or circumstances that are beyond each of CGI's and
StemoniX's control. CGI's and StemoniX's actual results could differ materially
from those stated or implied in forward-looking statements due to a number of
factors, including but not limited to: (i) risks associated with CGI's and
StemoniX's ability to obtain the approval of Nasdaq for continued listing and
listing after the merger, and the shareholder approvals required to consummate
the proposed merger transaction and the timing of the closing of the proposed
merger transaction, including the risks that a condition to closing would not be
satisfied within the expected timeframe or at all or that the closing of the
proposed merger transaction will not occur; (ii) the outcome of any legal
proceedings that may be instituted against the parties and others related to the
Merger Agreement relating to the merger; (iii) the occurrence of any event,
change or other circumstance or condition that could give rise to the
termination of the Merger Agreement, (iv) unanticipated difficulties or
expenditures relating to the proposed merger transaction, the response of
business partners and competitors to the announcement of the proposed merger
transaction, and/or potential difficulties in employee retention as a result of
the announcement and pendency of the proposed merger transaction; (v) volatility
and uncertainty in the financial markets and general economic conditions, which
could have an adverse impact on CGI and/or StemoniX, and (vi) those risks
detailed in CGI's most recent Annual Report on Form 10-K and Quarterly Report on
Form 10-Q, and its registration statement on Form S-4, as amended, and
subsequent reports filed with the SEC, as well as other documents that may be
filed by CGI from time to time with the SEC. Accordingly, you should not rely
upon forward-looking statements as predictions of future events. Neither CGI nor
StemoniX can assure you that the events and circumstances reflected in the
forward-looking statements will be achieved or occur, and actual results could
differ materially from those projected in the forward-looking statements. The
forward-looking statements made in this communication relate only to events as
of the date on which the statements are made. Except as required by applicable
law or regulation, CGI and StemoniX undertake no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which the statement is made or to reflect the occurrence of unanticipated
events.
Item 9.01 Financial Statements and Exhibits.
Exhibit No. Description
2.1# Amendment No. 2 to Agreement and Plan of Merger and
Reorganization, by and among Cancer Genetics, Inc., StemoniX, Inc.,
and CGI Acquisition, Inc., dated February 26, 2021.
# Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of
Regulation S-K. CGI hereby undertakes to furnish supplemental copies of any of
the omitted schedules upon request by the SEC.
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