SER.AMEXSerina Therapeutics, INC
10-Q: Serina Therapeutics Reports First Quarter 2024 Results Following Merger, Cites Going Concern Uncertainty
Sentiment:
Quarterly Report
Serina Therapeutics reports a net loss of $9.4 million for the first quarter of 2024, following a merger and facing substantial doubt about its ability to continue as a going concern.
Capital raiseThe company expects to receive approximately $15 million from Juvenescence through the exercise of Post-Merger Warrants.The company will likely need to raise additional capital through equity offerings, debt financings, or other capital sources to fund its operations beyond the next twelve months.
Worse than expectedThe company reported a net loss of $9.4 million for the quarter, a significant downturn from the net income of $1.7 million in the same period last year.The company's operating expenses increased substantially, indicating higher spending without a corresponding increase in revenue.The company's management has expressed substantial doubt about its ability to continue as a going concern, signaling a significant financial risk.
Summary
- Serina Therapeutics, formerly AgeX Therapeutics, completed a merger with Legacy Serina on March 26, 2024, and changed its name.
- The company reported a net loss of $9.4 million for the three months ended March 31, 2024, compared to a net income of $1.7 million for the same period in 2023.
- Operating expenses increased significantly, with research and development expenses rising to $1.1 million and general and administrative expenses reaching $1.2 million.
- The company's cash and cash equivalents stood at $8.7 million as of March 31, 2024.
- Management has expressed substantial doubt about the company's ability to continue as a going concern, citing recurring losses and negative cash flows.
- The company expects to receive approximately $15 million from Juvenescence through the exercise of warrants, but this is not expected to be sufficient to fund operations for the next twelve months.
- The merger was treated as a reverse recapitalization, with Legacy Serina considered the accounting acquirer.
- Following the merger, Legacy Serina equity holders own approximately 75% of the company, and prior AgeX equity holders own approximately 25%.
Sentiment
Score: 2
Explanation: The document expresses significant concerns about the company's financial stability and ability to continue as a going concern, despite the merger and expected warrant proceeds. The substantial net loss and material weaknesses in internal controls further contribute to a negative outlook.
Positives
- The company completed a merger which has resulted in a new focus on Legacy Serina's drug product candidates.
- The company expects to receive $15 million in capital from Juvenescence through warrant exercises.
- The company has a pipeline of wholly-owned drug product candidates to treat neurological diseases and pain.
Negatives
- The company reported a significant net loss of $9.4 million for the first quarter of 2024.
- Operating expenses have increased substantially, impacting profitability.
- The company has expressed substantial doubt about its ability to continue as a going concern.
- The company's current cash reserves and expected warrant proceeds are not projected to be sufficient to fund operations for the next twelve months.
- The company has identified material weaknesses in its internal controls.
Risks
- The company faces substantial doubt about its ability to continue as a going concern due to recurring losses and negative cash flows.
- The company's current cash reserves and expected warrant proceeds are not projected to be sufficient to fund operations for the next twelve months.
- The company is subject to risks and uncertainties common to early-stage biotechnology companies, including technical risks, competition, and regulatory hurdles.
- The company has identified material weaknesses in its internal controls, which could affect the reliability of its financial reporting.
- The company may not be able to raise additional capital on favorable terms, or at all, which could force it to delay, reduce, or terminate its product development efforts.
- The company's therapeutic drug candidates require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization.
Future Outlook
The company expects to incur substantial expenditures in the foreseeable future for the development of its product candidates and will require additional financing to continue this development. Management believes that its cash and cash equivalents of $8.7 million as of March 31, 2024, along with the approximately $15 million of cash proceeds expected to be received from Juvenescence through the exercise of Post-Merger Warrants as provided in a Side Letter, will be used to fund Company operations but are not expected to be sufficient to satisfy the Company’s anticipated operating and other funding requirements for the twelve months from the issuance of these condensed consolidated interim financial statements.
Management Comments
- Management believes that its cash and cash equivalents of $8.7 million as of March 31, 2024, along with the approximately $15 million of cash proceeds expected to be received from Juvenescence through the exercise of Post-Merger Warrants as provided in a Side Letter, will be used to fund Company operations but are not expected to be sufficient to satisfy the Company’s anticipated operating and other funding requirements for the twelve months from the issuance of these condensed consolidated interim financial statements.
- Management has based its estimate of the funds needed to finance Company operations on assumptions that may prove to be wrong, and available capital resources could be exhausted sooner than expected.
Industry Context
The company operates in the biotechnology industry, which is characterized by high research and development costs, long development timelines, and significant regulatory hurdles. The company's focus on developing drug product candidates for neurological diseases and pain places it in a competitive market with other pharmaceutical and biotechnology companies.
Comparison to Industry Standards
- The company's financial performance is significantly below industry standards for established biotechnology companies, particularly in terms of profitability and cash flow.
- Many clinical-stage biotech companies experience losses, but the level of loss and the going concern warning are concerning.
- The company's reliance on a single grant for revenue is not typical for companies at this stage, which often have multiple revenue streams or partnerships.
- The company's high operating expenses, particularly in research and development, are typical for the industry, but the lack of revenue generation is a concern.
- Compared to companies like Alnylam Pharmaceuticals or BioMarin Pharmaceutical, which have successfully commercialized products, Serina is at a much earlier stage and faces significant financial challenges.
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| New Equity Incentive Plan | The company's Board of Directors adopted the 2024 Equity Incentive Plan on March 27, 2024, reserving 1,725,000 shares of common stock for grants. | 2024-03-27 | This plan will be used to attract and retain employees, directors, and consultants through stock options, restricted stock, and other equity-based awards. |
Legal Proceedings
- A purported stockholder of AgeX filed a putative shareholder class action and derivative lawsuit in the Superior Court of the State of California, County of Alameda, captioned Buttner, et al. v. AgeX Therapeutics, Inc., et al., Case No. 23CV057083. The plaintiff filed a request for dismissal of the action without prejudice and on March 5, 2024 the court entered an order dismissing the action per the plaintiffs request.
Related Party Transactions
- The company has significant related party transactions with Juvenescence, including loans, warrants, and a side letter agreement.
- AgeX transferred assets to UniverXome, which assumed AgeX's debt obligations to Juvenescence.
- Juvenescence agreed to exercise all Post-Merger Warrants it holds to provide the Company an additional $15 million in capital.
Stakeholder Impact
- Shareholders face significant risk due to the company's financial instability and going concern warning.
- Employees may be concerned about job security due to the company's financial challenges.
- Customers and partners may be hesitant to engage with the company due to its financial uncertainty.
- Creditors face increased risk of non-payment due to the company's financial difficulties.
Next Steps
- The company will continue to seek ways to remediate the identified material weaknesses in its internal controls.
- The company will need to secure additional financing to fund its operations and continue the development of its product candidates.
- The company will continue to advance its product candidates through clinical development.
- The company will explore strategic alternatives for the business, assets and/or stock of UniverXome, Reverse Bio, ReCyte and NeuroAirmid.
Key Dates
| Date | Description |
|---|---|
| 2022-02-14 | AgeX and Juvenescence entered into a Secured Convertible Promissory Note. |
| 2023-02-09 | AgeX and Juvenescence entered into an Amended and Restated Secured Convertible Promissory Note. |
| 2023-03-13 | AgeX and Juvenescence entered into a $10 Million Secured Convertible Promissory Note. |
| 2023-03-15 | Serina issued a Convertible Promissory Note to AgeX. |
| 2023-05-09 | AgeX and Juvenescence entered into an Allonge and Second Amendment to Amended and Restated Convertible Promissory Note. |
| 2023-06-02 | AgeX and Juvenescence entered into a Third Amendment to Amended and Restated Convertible Promissory Note. |
| 2023-07-26 | All of the Serina Convertible Notes were converted into shares of Legacy Serina Series A-5 Preferred Stock. |
| 2023-07-31 | AgeX and Juvenescence entered into a Fourth Amendment to the 2022 Secured Note and an amendment to the 2023 Secured Note. |
| 2023-08-29 | Date of the Merger Agreement between AgeX, Canaria Transaction Corporation, and Serina Therapeutics, Inc. |
| 2023-11-09 | AgeX and Juvenescence entered into the Allonge and Fifth Amendment to Amended and Restated Convertible Promissory Note. |
| 2024-01-01 | Start of the first quarter of 2024. |
| 2024-02-01 | AgeX Series A and B Preferred Stock automatically converted into common stock. |
| 2024-02-09 | AgeX and Juvenescence executed a Sixth Amendment to Amended and Restated Convertible Promissory Note. |
| 2024-03-14 | AgeX effected a reverse stock split of its common stock at a ratio of 1 for 35.17. |
| 2024-03-18 | Warrant Dividend Record Date. |
| 2024-03-19 | AgeX issued Post-Merger Warrants to stockholders. |
| 2024-03-26 | AgeX completed the merger with Legacy Serina and changed its name to Serina Therapeutics, Inc. |
| 2024-03-27 | The Company's Board of Directors adopted the 2024 Equity Incentive Plan. |
| 2024-03-31 | End of the first quarter of 2024. |
| 2024-05-08 | The Company entered into an Allonge and Eighth Amendment to the Amended and Restated Convertible Promissory Note. |
| 2024-05-09 | The number of shares of common stock outstanding was 8,413,889. |
Keywords
Merger, Biotechnology, Clinical-stage, Drug development, Going concern, Net loss, Financial results, Warrants, Juvenescence, Reverse recapitalization, Internal controls, POZ technology
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