Serina Therapeutics, Inc. quarterly report, Q3 FY2023

Business context and reporting period

Filing identity: The supplied filing is AgeX Therapeutics, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2023—not a Serina Therapeutics filing. AgeX describes itself as a biotechnology company developing therapies for aging and degenerative diseases. It entered into a merger agreement with Serina in August 2023; the proposed merger remained subject to stockholder approvals and other conditions.

Unless noted otherwise, financial amounts below are in thousands of dollars. AgeX reported minimal revenue and continued operating losses.

Key financial metrics

At September 30, 2023, cash and cash equivalents were $397, with a further $50 of restricted cash. Current assets were $1,141 and current liabilities were $3,204, a $2,063 working-capital deficit. Total assets were $12,210, including a $10,379 convertible note receivable from Serina. Total liabilities were $3,897; Juvenescence loans, net of debt issuance costs, totaled $2,219, of which $1,526 was current. Accumulated deficit was $127.6 million.

Cash used in investing activities was $10.0 million, entirely the loan advanced to Serina. Financing activities provided $15.5 million, entirely from Juvenescence credit facilities. Cash, cash equivalents and restricted cash declined $248 over the nine-month period to $447.

Material changes versus the prior comparable period

• Nine-month revenue rose to $86 from $26, including $21 of NIH grant revenue and $65 of research-product revenue. Revenue remained very small relative to operating costs.
• Nine-month operating expenses increased 24% to $6,447. R&D decreased 32% to $552, while G&A increased 34% to $5,895, largely due to merger-related legal and consulting costs and other professional fees.
• Nine-month net loss attributable to AgeX widened to $11,347 from $7,759. Interest expense, net, rose to $4,928 from $2,357, primarily reflecting amortization and write-off of debt issuance costs and other debt-related expense.
• In July, AgeX exchanged $36 million of Juvenescence indebtedness for Series A and Series B preferred stock. The shares were initially classified outside permanent equity under GAAP; a November 7 amendment allowed permanent-equity classification. A pro forma presentation showed stockholders’ equity of $8,313, versus a GAAP-reported stockholders’ deficit of $27,645 at September 30.

Outlook, management commentary, risks and unusual items

• Going concern: Management stated that available cash and credit, including the subsequent $4.4 million increase in the Juvenescence line, would not meet anticipated funding needs for the next 12 months. The filing says this raises substantial doubt about AgeX’s ability to continue as a going concern and that substantial additional funding is needed.
• Subsequent borrowing: AgeX drew the remaining $1 million then available under the Secured Note in October. On November 9, Juvenescence made another $4.4 million available, subject to its discretion to approve and fund individual draws. The credit is secured; subsidiaries also provided guarantees and liens under the amendment.
• Merger: The proposed transaction would make Serina a wholly owned AgeX subsidiary. The filing estimated that, immediately after closing, Serina equity holders would own about 75% and pre-merger AgeX stockholders about 25% of the combined company on a pro forma fully diluted basis, subject to stated assumptions. A reverse split in the range of 1-for-35 to 1-for-36 was contemplated. Neither closing nor the anticipated ownership split was assured.
• Serina note: The $10 million note earns 7% simple interest and had a $10.379 million carrying amount at quarter-end. If the merger closes, the note is to be canceled for no consideration—a material potential consequence for AgeX’s reported asset.
• Debt and dilution: Juvenescence debt is secured by substantially all of AgeX’s assets and carries restrictions on additional borrowing and certain transactions. Conversion of preferred stock or loans, and warrant exercises, could materially dilute existing holders. The July debt-for-preferred-stock exchange also generated substantial debt-issuance-cost amortization/write-off in interest expense.
• Listing status: AgeX had received a delisting notice in May after failing NYSE American stockholders’ equity standards. Following the November preferred-stock amendment, AgeX said it informed the exchange of the remedy and believed it was again compliant; investors should verify the exchange’s determination.
• Research and development: AgeX reported a minimal workforce and reduced internal R&D activity, relying more on outsourcing and licensing efforts. Management cautioned that this limits development progress and may make fundraising more difficult. The NIH awarded a grant of up to approximately $341,000 for cardiovascular technology development over one year; revenue is recognized as allowable costs are incurred.
• Other events and risks: AgeX gave notice in November that it would terminate certain HyStem license and sublicense agreements, effective 60 days after notice. Management reported no material litigation known to it. The filing provided no financial guidance or quantified revenue forecast.

Important facts for investors to verify

1. Confirm the filing entity: this is AgeX Therapeutics’ 10-Q, despite the request identifying Serina Therapeutics.
2. Check the status and terms of the AgeX–Serina merger, required approvals, reverse split, and expected ownership allocation.
3. Verify actual availability and draw conditions for the Juvenescence credit, near-term cash runway, and funding needs underlying the going-concern warning.
4. Review the Serina note’s treatment if the merger closes, and the amended preferred-stock classification and NYSE American listing status.
5. Assess potential dilution from preferred-stock and debt conversions, warrants, and the merger-related securities arrangements.