Filing summary
Entity and period: The supplied filing is AgeX Therapeutics, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2020, filed August 14, 2020. This does not match the request metadata naming Serina Therapeutics, Inc.; confirm the intended company before relying on this summary. Dollar amounts below are in millions unless noted.
Financial performance and position
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $0.414 | $0.380 | $0.929 | $0.768 |
| Gross profit | $0.378 | $0.327 | $0.859 | $0.652 |
| Operating expenses | $3.003 | $3.769 | $6.679 | $7.216 |
| Operating loss | $(2.625) | $(3.442) | $(5.820) | $(6.564) |
| Net loss attributable to AgeX | $(2.689) | $(3.089) | $(5.876) | $(6.222) |
| Loss per share, basic and diluted | $(0.07) | $(0.08) | $(0.16) | $(0.17) |
- Gross margin was approximately 91% in Q2 and 92% for the first half, versus approximately 86% and 85%, respectively, in the comparable 2019 periods.
- Revenue was mainly from LifeMap Sciences’ biomedical database subscriptions and advertising. First-half subscription and advertising revenue was $0.636 million; grant revenue was $0.122 million.
- At June 30, cash and cash equivalents were $1.033 million, current assets $2.104 million, and current liabilities $5.147 million. Total liabilities were $6.879 million; stockholders’ deficit was $2.122 million. Accumulated deficit was $92.1 million.
- The cash flow statement reports first-half operating cash use of $4.308 million, investing cash use of $0.008 million, and financing cash inflow of $2.992 million. Ending cash, cash equivalents and restricted cash were $1.133 million.
- Cash flow discrepancy: MD&A separately says net cash used in operating activities was $1.6 million for the first half. This conflicts with the $4.308 million in the cash flow statement; the filing text does not reconcile the values clearly.
Changes versus prior period
- First-half revenue increased 21%, driven chiefly by higher grant and other service revenue; subscription and advertising revenue increased 2.6%.
- Operating expenses declined 7% for the first half. Q2 R&D fell 18% and G&A fell 22% year over year, reflecting reduced shared-service costs, lower compensation and other savings. These comparisons include approximately $0.195 million of restructuring charges in Q2.
- Despite lower operating expenses, Q2 net loss attributable to AgeX improved to $2.689 million from $3.089 million. First-half net loss attributable to AgeX was $5.876 million, versus $6.222 million.
- Cash and cash equivalents declined from $2.352 million at December 31, 2019 to $1.033 million at June 30, 2020. Current liabilities rose to $5.147 million from $3.297 million, including new Juvenescence and PPP borrowings.
Outlook, risks and unusual items
- Going concern: Management stated that available cash, the Juvenescence facility and PPP proceeds would not meet anticipated funding needs for the 12 months from filing. The filing says substantial doubt exists about the company’s ability to continue as a going concern and that additional capital is needed in the near term.
- Financing and debt: By June 30, AgeX had drawn $2.5 million under a new $8 million Juvenescence facility and $2 million under a separate facility. Additional draws under the new facility are at Juvenescence’s discretion and carry potential share and warrant dilution; security and guarantee provisions may apply. AgeX also recorded a $0.433 million PPP loan at 1% interest, with forgiveness uncertain.
- Subsequent financing: On July 27, AgeX borrowed another $1 million under the new facility, bringing draws to $3.5 million, and issued Juvenescence 28,500 shares and warrants for 375,939 shares. A July 21 amendment revised collateral, guarantee and share-issuance provisions.
- Operating plans: In April, AgeX initiated layoffs affecting 11 R&D employees. Management expected lower expenses after the reductions, but said certain development work would be deferred. No specific revenue, earnings or cash runway guidance was provided.
- Listing risk: NYSE American notified AgeX that it failed continued-listing standards, including the $2 million stockholders’ equity threshold. The exchange accepted a compliance plan targeting compliance by December 1, 2021, with quarterly reviews; failure could lead to delisting.
- COVID-19: Remote work, social-distancing measures and possible employee absences could disrupt operations; management said the financial impact could not be reliably estimated. The pandemic may also hinder access to financing.
- The company reported no material litigation and no off-balance-sheet arrangements. Management said disclosure controls were effective and there were no material changes in internal control over financial reporting.
Important facts for investors to verify
- Whether AgeX Therapeutics, Inc., rather than Serina Therapeutics, Inc., is the intended filing subject.
- The inconsistent first-half operating cash-use figures of $4.308 million in the cash flow statement and $1.6 million in MD&A.
- Actual cash availability, near-term burn and financing needs, including the extent to which Juvenescence will permit further draws.
- The status and terms of PPP loan forgiveness and the potential dilution, collateral and guarantee consequences of financing arrangements.
- Progress against the NYSE American compliance plan and the risk and consequences of delisting.
- Effects of staffing reductions and deferred R&D work on development programs and future operating costs.