Business Context and Reporting Period
The supplied filing is AgeX Therapeutics, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2019, filed May 15, 2019. It is not identified in the filing as a Serina Therapeutics filing. AgeX is a biotechnology company developing therapies targeting aging-related conditions; its reported revenue primarily comes from subscription and advertising products at majority-owned LifeMap Sciences.
Financial Performance and Liquidity
Amounts below are in thousands of dollars except per-share data.
- Revenue: $388, up 62.3% from $239 in Q1 2018. Subscription and advertising revenue was $345, up 44.4%; grant and other revenue was $43 versus none reported a year earlier.
- Profitability: Gross profit was $325 versus $130; gross margin was approximately 84% versus 54%. Operating expenses were $3,447, down from $3,681. Operating loss was $3,122 versus $3,551. Net loss attributable to AgeX was $3,133, or $0.09 per share, compared with $235, or $0.01 per share.
- Period comparison: Q1 2018 included a $3,215 gain from the sale of the Ascendance investment; that gain did not recur. This chiefly explains the larger reported net loss in Q1 2019 despite a narrower operating loss.
- Cash flow: Operating activities used $2,618; investing activities used $3; financing activities provided $4,500 from warrant exercises. Cash increased $1,879 to $8,586 from year-end 2018.
- Balance sheet and liquidity: Current assets were $9,648 and current liabilities $2,294. Total liabilities were $2,294; the filing does not report interest-bearing debt. Accumulated deficit was $77,187. Management said cash at March 31 was expected to fund operations for at least twelve months from the financial statements’ issuance, but substantial additional funding would be needed thereafter.
Changes, Outlook, and Risks
- Research and development expense was $1,338, down 15.9%; the prior-year period included $800 of acquired in-process R&D. General and administrative expense rose 63.4% to $2,109, including higher stock compensation, insurance, consulting, legal and patent-related costs.
- Lower cost of sales reflected a change in LifeMap Sciences’ royalty terms, from a percentage of customer collections to a fixed annual fee effective January 1, 2019.
- AgeX reduced projected spending to extend its cash runway. Management cautioned that deferring development work is likely to delay research progress. No specific revenue or earnings guidance was provided.
- AgeX reported ongoing operating losses and negative operating cash flow, no committed additional financing, and reliance on future capital raises, collaborations or licensing. Inability to raise funds could force further delays, reductions or elimination of R&D programs; equity financing may dilute shareholders.
- A sublease for a new Alameda office and laboratory began April 2, 2019, with base monthly rent of about $35,867 for the first 12 months, increasing thereafter, plus operating costs; it expires December 31, 2020. AgeX gave notice on May 7 to end use of BioTime’s office and laboratory facilities effective July 31, 2019, while other shared-services provisions remained in place.
- The filing disclosed no material litigation and no material changes to prior risk factors except added discussion of anti-corruption compliance risks, including risks related to LifeMap Sciences’ activity in China.
Most Important Facts to Verify
- Confirm the issuer: this source is AgeX Therapeutics, Inc., not Serina Therapeutics, Inc.
- Reconcile the statements’ $43 of grant and other revenue with MD&A’s approximately $15 of NIH grant revenue and statement that other revenues were insignificant.
- Assess the assumptions behind management’s cash runway estimate, planned spending reductions, and need for additional financing.
- Review the costs and operational implications of the new facility and transition away from BioTime facilities.
- Consider potential shareholder dilution and program delays if additional financing is unavailable or unfavorable.