Serina Therapeutics, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Amounts are in U.S. dollars; financial statement amounts below are in millions unless noted.
Business context and reporting period
Serina is a clinical-stage biotechnology company developing drug candidates for neurological diseases and pain using its POZ polymer drug-delivery technology. On March 26, 2024, AgeX Therapeutics merged with Legacy Serina, changed its name to Serina Therapeutics, Inc., and began trading on NYSE American as SER. The transaction was accounted for as a reverse recapitalization, with Legacy Serina as the accounting acquirer. Accordingly, Q1 results primarily reflect Legacy Serina; the acquired business is included only from March 27 through March 31. The merger also moved certain legacy assets and liabilities to UniverXome, a subsidiary.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / March 31, 2024 comparison |
|---|---|---|
| Revenue | $0.005 million | $0.030 million in Q1 2023; all revenue was from a single government grant |
| Research and development expense | $1.106 million | $0.399 million in Q1 2023 |
| General and administrative expense | $1.220 million | $0.593 million in Q1 2023 |
| Operating loss | $2.321 million | $0.962 million in Q1 2023 |
| Net loss (income) | $(9.437) million | Net income of $1.658 million in Q1 2023 |
| Operating cash flow | $(1.577) million | $(0.709) million in Q1 2023 |
| Cash and cash equivalents | $8.706 million | $7.619 million at December 31, 2023; restricted cash was an additional $0.050 million |
| Total assets / liabilities | $10.856 million / $15.165 million | Stockholders’ deficit was $4.309 million |
The net loss included a $7.017 million noncash loss from the change in fair value of convertible notes. Q1 2023 included a $2.240 million inception-date fair-value gain and other fair-value gains; the period comparison is therefore substantially affected by noncash valuation items. Basic and diluted loss per share were each $3.38. Gross margin is not presented and is not meaningful given the company’s minimal grant revenue and development-stage operations.
Net cash used in investing activities was $0.014 million. Financing activities provided $2.728 million, primarily from a $2.400 million Juvenescence loan draw and $0.337 million in cash and restricted cash acquired in the merger. The company reported $10.439 million of Juvenescence-related debt, net of debt issuance costs: $9.746 million current and $0.693 million noncurrent. These obligations were assumed by UniverXome under the transaction documents and remain reflected in the consolidated statements.
Material changes, outlook, and risks
- Operating expenses rose: R&D increased 177% and G&A increased 106% year over year. Management attributed the increases to research services, patent-related costs, compensation and consulting, and merger-related legal and accounting expenses.
- Management expects R&D and G&A spending to increase as it advances candidates, including SER 252, and supports public-company operations. The filing does not provide numerical revenue, earnings, or cash-flow guidance.
- Management states that March 31 cash plus approximately $15 million expected from Juvenescence’s exercise of its Post-Merger Warrants is not expected to meet anticipated funding needs for the next twelve months; elsewhere, it says those resources are not expected to fund operations through calendar 2025. The company states that substantial doubt exists about its ability to continue as a going concern and that additional capital will be needed.
- Juvenescence holds 1,133,593 Post-Merger Warrants and agreed to exercise them for approximately $15 million, in installments due by May 31, 2024, November 30, 2024, and June 30, 2025. The warrants have a $13.20 exercise price; proceeds depend on completion of the exercises. On May 8, 2024, the 2022 loan repayment date was extended to December 31, 2024, and UniverXome received an additional $0.525 million credit, drawn May 9.
- The company reports that disclosure controls and procedures were ineffective at March 31, 2024 because of material weaknesses, including limited qualified accounting staff, inadequate segregation and validation controls, manual reporting processes, and limited internal-control monitoring experience. Remediation is underway but not complete.
- Risks include dependence on external financing, clinical and regulatory uncertainty, potential dilution, and debt covenants and collateral arrangements. A board special committee is exploring strategic alternatives for UniverXome and certain associated businesses and assets. A previously filed purported shareholder lawsuit relating to the merger was dismissed without prejudice on March 5, 2024.
Most important facts for investors to verify
- Whether and when Juvenescence completes the warrant exercises and the company receives the expected proceeds.
- Updated cash runway, financing needs, and the implications of the going-concern warning.
- Repayment terms, covenants, and collateral exposure under the Juvenescence debt arrangements, including the December 31, 2024 repayment date.
- Clinical, regulatory, and funding milestones for SER 252 and other development programs.
- Progress in remediating material weaknesses in financial reporting controls and any updates from the strategic-alternatives review.