Serina Therapeutics, Inc. (SER) - Q3 2024 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended September 30, 2024. Serina Therapeutics, Inc. is a clinical-stage biotechnology company developing drug product candidates for neurological diseases and pain using its proprietary POZ drug delivery technology. The reporting period is significantly impacted by the completion of a reverse recapitalization merger with AgeX Therapeutics, Inc. on March 26, 2024. Following the merger, the company operates as a consolidated entity with Legacy Serina as the accounting acquirer. The company is headquartered in Huntsville, Alabama.
Key Financial Metrics
| Metric | Q3 2024 (3 Months) | Q3 2023 (3 Months) | YTD 2024 (9 Months) | YTD 2023 (9 Months) |
|---|---|---|---|---|
| Total Revenues | $14,000 | $29,000 | $70,000 | $66,000 |
| Net Income (Loss) | $1,383,000 | $1,752,000 | $(8,455,000) | $4,218,000 |
| Net Income (Loss) Attributable to Serina | $1,410,000 | $1,752,000 | $(8,401,000) | $4,218,000 |
| Operating Expenses | $5,326,000 | $1,492,000 | $11,569,000 | $3,436,000 |
| Cash and Cash Equivalents (Sept 30, 2024) | $3,185,000 | |||
| Total Debt (Net of issuance costs) | $11,155,000 | |||
| Warrant Liability | $6,744,000 |
Note: Figures in thousands except per share data. Net income for Q3 2024 was driven primarily by a $6.7 million gain from the change in fair value of warrant liabilities.
Material Changes vs. Prior Period
- Merger Impact: The March 2024 merger resulted in significant balance sheet restructuring. Legacy Serina's preferred stock was converted to common stock, and the company assumed AgeX's debt obligations and warrant liabilities.
- Expense Growth: Operating expenses increased significantly year-over-year. For the nine months ended Sept 30, 2024, R&D expenses rose to $5.1 million (from $1.5 million in 2023) and G&A expenses rose to $6.5 million (from $2.0 million in 2023). This is attributed to increased headcount, stock-based compensation, and professional fees related to the merger and public company compliance.
- Debt Structure: The company now carries significant debt obligations to Juvenescence Limited. As of Sept 30, 2024, total debt (current and non-current) net of issuance costs was approximately $11.2 million, compared to $3.0 million in convertible promissory notes at Dec 31, 2023.
- Non-Cash Gains/Losses: The YTD 2024 net loss of $8.5 million contrasts with a Q3 net income of $1.4 million due to a $10.4 million gain on the change in fair value of warrants in the nine-month period, partially offset by a $7.0 million loss on the change in fair value of convertible notes.
Guidance, Outlook, Risks, and Contingencies
- Going Concern Warning: Management has raised substantial doubt about the company's ability to continue as a going concern. Cash on hand ($3.2 million) plus expected proceeds from Juvenescence ($10 million) are not expected to be sufficient to fund operations for the next 12 months.
- Liquidity Plan: The company relies on a Side Letter agreement with Juvenescence, which commits to exercising remaining Post-Merger Warrants to provide an additional $10 million in capital. $5 million was received in June 2024; the remaining $5 million is scheduled for November 30, 2024, and June 30, 2025.
- Operational Outlook: The company plans to advance its lead product candidate, SER-252 (POZ-apomorphine), into Phase I clinical trials in 2025. A partnership with Enable Injections, Inc. was announced in May 2024 for this purpose.
- Internal Controls: The company disclosed material weaknesses in internal controls over financial reporting as of September 30, 2024, citing a lack of qualified accounting staff, inadequate segregation of duties, and reliance on manual processes. A remediation plan is underway.
- Risks: Key risks include the inability to secure additional financing, failure of clinical trials, and the potential inability to receive the committed funds from Juvenescence.
Investor Verification Checklist
- Cash Runway: Verify the exact timing and certainty of the remaining $10 million warrant exercise by Juvenescence, as this is critical to the going concern assessment.
- Debt Covenants: Review the terms of the 2022 and 2023 Secured Notes with Juvenescence, specifically regarding repayment dates (Dec 31, 2024 for 2022 Note) and security interests in assets.
- Internal Control Remediation: Monitor progress on the remediation plan for material weaknesses in financial reporting controls.
- Warrant Liability Volatility: Understand that net income/loss is heavily influenced by non-cash fair value adjustments of warrant liabilities, which may not reflect operational cash generation.
- Merger Integration: Assess the integration of Legacy Serina's operations and the status of assets transferred to the UniverXome subsidiary.