Filing summary: AgeX Therapeutics, Inc. — Q3 2021 Form 10-Q
Entity note: The supplied filing is for AgeX Therapeutics, Inc., not Serina Therapeutics, Inc. It covers the quarter and nine months ended September 30, 2021; financial statement amounts below are in millions unless stated otherwise.
Business context and reporting period
AgeX is a preclinical biotechnology company developing regenerative and cell-based therapies for age-associated and degenerative diseases. Its platforms and programs include PureStem, UniverCyte, AGEX-BAT1, AGEX-VASC1 and induced tissue regeneration technology.
On March 15, 2021, AgeX disposed of and deconsolidated LifeMap Sciences. LifeMap results are presented as discontinued operations; 2021 consolidated results include LifeMap only through the disposition date, while 2020 comparisons include it for the full periods. This limits direct comparability.
Key financial metrics
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $0.024 | $0.069 | $0.117 | $0.203 |
| Gross profit | $0.022 | $0.052 | $0.099 | $0.182 |
| Operating expenses | $1.696 | $2.449 | $6.271 | $7.955 |
| Loss from continuing operations | $1.955 | $2.524 | $6.423 | $7.989 |
| Net loss attributable to AgeX | $1.955 | $2.543 | $6.517 | $8.419 |
| Net cash used in operating activities | Not provided for quarter | Not provided for quarter | $6.208 | $6.197 |
Gross margin was approximately 92% in Q3 2021 and 85% for the first nine months of 2021, based on reported revenue and gross profit. The company reported a $0.106 million gain on deconsolidation of LifeMap in the nine-month period and a $0.437 million gain from forgiveness of its Paycheck Protection Program loan.
At September 30, 2021, cash and cash equivalents were $0.731 million; cash, cash equivalents and restricted cash totaled $0.781 million. Current assets were $1.475 million, current liabilities $6.598 million, total liabilities $12.405 million, and stockholders’ deficit $9.978 million. The balance sheet reports Juvenescence loans at a combined net carrying amount of $11.407 million. Separately, the filing states that AgeX had borrowed $5.5 million under the 2019 facility and $7.5 million under the 2020 facility by quarter-end.
For the nine months, continuing-operations operating cash use was $6.118 million; investing activities provided $0.466 million, principally from the LifeMap sale; and financing activities provided $6.246 million. Cash and restricted cash increased $0.204 million from the beginning of the period.
Changes versus prior comparable periods
- Q3 revenue declined 65% to $0.024 million; nine-month revenue declined 42% to $0.117 million. Lower NIH grant revenue was a major factor, and AgeX no longer expects subscription and advertising revenue following the LifeMap disposition.
- Q3 R&D expense fell 58% to $0.275 million; nine-month R&D expense fell 62% to $1.080 million. Management attributed the declines to 2020 staff reductions, reduced research activity and closure of the laboratory facility.
- Q3 general and administrative expense declined 21% to $1.421 million, largely reflecting lower legal and consulting fees. Nine-month G&A rose slightly to $5.191 million.
- Net loss attributable to AgeX narrowed year over year in both periods, but the company continued to incur substantial losses and operating cash outflows.
- Cash and cash equivalents rose from $0.527 million at December 31, 2020 to $0.731 million at September 30, 2021, while total liabilities increased from $9.321 million to $12.405 million.
Outlook, risks and unusual items
- Going concern: Management states that available cash, potential remaining Juvenescence advances and potential ATM proceeds would not cover anticipated needs for the 12 months following issuance of the statements. The filing identifies substantial doubt about AgeX’s ability to continue as a going concern and says additional capital is required.
- Debt and financing dependence: Juvenescence is AgeX’s principal lender and a major stockholder. The 2019 facility balance of $6.0 million after an October 2021 draw, plus a $0.160 million origination fee, was due February 14, 2022. The 2020 facility had $7.5 million borrowed and a March 30, 2023 repayment date. Further advances are subject to lender discretion; loan terms include conversion rights, warrants and potential collateral and operating restrictions.
- Subsequent financing events: AgeX borrowed an additional $0.5 million under the 2019 facility on October 25, 2021. On November 8, 2021, the facility was amended to increase its size to $7.0 million, with further advances discretionary. AgeX also had an ATM authorization, with approximately $0.496 million gross proceeds raised through September 30, 2021.
- Potential dilution: Additional equity issuance, loan conversions and lender warrants may dilute current shareholders. AgeX reported approximately 37.939 million common shares outstanding at September 30, 2021.
- Listing risk: AgeX regained compliance with NYSE American listing standards in April 2021, but reported that its market capitalization later fell below the level providing an exemption from the stockholders’ equity requirement. The Exchange could take further action, including delisting proceedings.
- Operations and research: Staff reductions and the laboratory closure have reduced in-house development capacity. COVID-19 safety procedures slowed the University of California, Irvine research project; management expected initial work to conclude during 2022.
- Other matters: The PPP loan was forgiven in February 2021. The filing reports no material litigation known to AgeX and no material changes to previously disclosed risk factors other than the financing and going-concern risk. No specific financial guidance was provided.
Important facts for investors to verify
- AgeX’s identity and the LifeMap disposition’s effect on the comparability of reported results.
- Cash runway, actual financing needs and whether Juvenescence will provide discretionary advances on time.
- Loan principal, carrying value, maturities, conversion terms, security rights and any amendment or waiver after quarter-end.
- Progress and pricing of ATM sales, remaining offering capacity, and potential dilution from equity issuance, loan conversions and warrants.
- Current NYSE American listing status and the company’s ability to satisfy continued listing standards.
- The extent to which reduced staffing and the loss of laboratory facilities affect research programs and development timelines.