| Basis of Presentation and Summary of Significant Accounting Policies | 2.
Basis of Presentation and Summary of Significant Accounting Policies The
unaudited condensed consolidated interim financial statements presented herein, and discussed below, have been prepared in accordance
with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information
and with the instructions to Form 10-Q and Article 8 of Regulation S-X. In accordance with those rules and regulations certain information
and footnote disclosures normally included in comprehensive consolidated financial statements have been condensed or omitted. The condensed
consolidated balance sheet as of December 31, 2022 was derived from the audited consolidated financial statements at that date but does
not include all the information and footnotes required by U.S. GAAP. These condensed consolidated interim financial statements should
be read in conjunction with the audited consolidated financial statements and notes thereto included in AgeX’s Annual Report on
Form 10-K for the year ended December 31, 2022. The
accompanying condensed consolidated interim financial statements, in the opinion of management, include all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of AgeX’s financial condition and results of operations. The
condensed consolidated results of operations are not necessarily indicative of the results to be expected for any other interim period
or for the entire year. Principles
of consolidation The
consolidated financial statements include the accounts of AgeX and its subsidiaries in which AgeX has a controlling financial interest.
The consolidated financial statements also include certain variable interest entities in which AgeX is the primary beneficiary (as described
in more detail below). For consolidated entities where AgeX has less than 100 AgeX
assesses whether it is the primary beneficiary of a variable interest entity (“VIE”) at the inception of the arrangement
and at each reporting date. This assessment is based on its power to direct the activities of the VIE that most significantly impact
the VIE’s economic performance and AgeX’s obligation to absorb losses or the right to receive benefits from the VIE that
could potentially be significant to the VIE. If the entity is within the scope of the variable interest model and meets the definition
of a VIE, AgeX considers whether it must consolidate the VIE or provide additional disclosures regarding its involvement with the VIE.
If AgeX determines that it is the primary beneficiary of the VIE, AgeX will consolidate the VIE. This analysis is performed at the initial
investment in the entity or upon any reconsideration event. For entities AgeX holds as an equity investment that are not consolidated
under the VIE model, AgeX will consider whether its investment constitutes a controlling financial interest in the entity and therefore
should be considered for consolidation under the voting interest model. AgeX
has four subsidiaries, Reverse Bio, ReCyte Therapeutics, Inc. (“ReCyte”), and NeuroAirmid Therapeutics, Inc.
(“NeuroAirmid”), Canaria Transaction Corporation (“Merger Sub”), and has incorporated but not yet
capitalized a fourth subsidiary UniverXome Bioengineering, Inc.(“UniverXome”). Reverse Bio is a wholly owned subsidiary
of AgeX through which AgeX plans to finance its iTR TM TM 94.8 50 Consolidation Use
of estimates The
preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that
affect (i) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated
financial statements, and (ii) the reported amounts of revenues and expenses during the reporting period, in each case with consideration
given to materiality. Significant estimates and assumptions which are subject to significant judgment include those related to going
concern assessment of consolidated financial statements, useful lives associated with long-lived assets, including evaluation of asset
impairment, allowances for uncollectible accounts receivables, loss contingencies, deferred income taxes and tax reserves, including
valuation allowances related to deferred income taxes, determining the fair value of AgeX’s embedded derivatives in the convertible
notes payable and receivable, and assumptions used to value stock-based awards or other equity instruments and liability classified warrants.
Actual results could differ materially from those estimates. The financial information for private companies may not be available and,
even if available, that information may be limited and/or unreliable. To the extent there are material differences between the estimates
and actual results, AgeX’s future results of operations will be affected. See
Note 6, Warrant Liability Concentration
of credit risk and other risks and uncertainties Financial
instruments that potentially subject AgeX to concentrations of risk consist principally of cash equivalents and a convertible note receivable.
AgeX maintains its cash deposits in Federal Deposit Insurance Corporation insured financial institutions within the federally insured
limits. Even if balances were to exceed the federally insured limits, AgeX does not believe that it would be exposed to significant credit
risk due to the financial position of the depository institutions in which those deposits are held. AgeX
also monitors the creditworthiness of the borrower of the convertible promissory note. AgeX believes that any concentration of credit
risk in a convertible note receivable was mitigated in part by (i) AgeX’s right to convert loan amounts owed to AgeX into shares
of equity securities of the borrower in the event the borrower completes a financing in at least a designated amount, and (ii) AgeX’s
right to tender the convertible note receivable to a lender to settle a convertible note payable. See Notes 4, Convertible Note Receivable
Related Party Transactions Product
candidates developed by AgeX and its subsidiaries will require approvals or clearances from the United States Food and Drug Administration
or foreign regulatory agencies prior to commercial sales. There can be no assurance that any of the product candidates being developed
or planned to be developed by AgeX or its subsidiaries will receive any of the required approvals or clearances. If regulatory approval
or clearance were to be denied or any such approval or clearance was to be delayed, it would have a material adverse impact on AgeX. Fair
value measurements of financial instruments Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Fair value estimates discussed herein are based upon certain market assumptions and pertinent
information available to management as of the financial statement presentation date. The
carrying values of cash equivalents, accounts receivable and accounts payable, are carried at, or approximate, fair value as of the reporting
date because of their short-term nature. Fair values for AgeX’s warrant liabilities are estimated by utilizing valuation models that consider current and expected stock
prices, volatility, dividends, market interest rates, forward yield curves and discount rates. Such amounts and the recognition of such
amounts are subject to significant estimates that may change in the future. To
increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to
measure fair value (ASC 820-10-50, Fair Value Measurements and Disclosures
● Level
1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
● Level
2 – Inputs to the valuation methodology include observable quoted prices (other than quoted market prices included within Level
1) for similar assets or liabilities in active markets, and inputs that are observable for the assets or liabilities, either directly
or indirectly, for substantially the full term of the financial instruments.
● Level
3 – Inputs to the valuation methodology are unobservable; that reflect management’s own assumptions about the assumptions
market participants would make and significant to the fair value. In
determining fair value, AgeX utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable
inputs to the extent possible, and also considers counterparty credit risk in its assessment of fair value. For the periods presented,
AgeX has no financial assets recorded at fair value on a recurring basis, except for cash and cash equivalents primarily consisting of
money market funds. These assets are measured at fair value using the period-end quoted market prices as a Level 1 input. The carrying
amounts of accounts receivable, net, prepaid expenses and other current assets, related party amounts due to affiliates, accounts payable,
accrued liabilities and other current liabilities approximate fair values because of the short-term nature of these items. The discounted
conversion prices triggered by certain qualified events in the Serina Note and the $ 10 Convertible Note Receivable Related
Party Transactions Subsequent Events The
accounting guidance establishes a hierarchy which requires an entity to maximize the use of quoted market prices and minimize the use
of unobservable inputs. An asset or liability’s level is based on the lowest level of input that is significant to the fair value
measurement. Fair value estimates are reviewed at the origination date and again at each applicable measurement date and interim or annual
financial reporting dates, as applicable for the financial instrument, and are based upon certain market assumptions and pertinent information
available to management at those times. The
methods and significant inputs and assumptions utilized in estimating the fair value of the warrant liabilities, as well as the respective
hierarchy designations are discussed further in Note 6, Warrant Liability See
Note 6, Warrant Liability Cash,
cash equivalents, and restricted cash In
accordance with Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash Schedule of Cash, Cash Equivalents and Restricted Cash
September
30, 2023 (unaudited) December
31, 2022
Cash
and cash equivalents $ 397 $ 645
Restricted
cash (1) 50 50
Cash,
cash equivalents, and restricted cash as shown in the condensed consolidated statements of cash flows $ 447 $ 695
(1)
Restricted
cash entirely represents the deposit required to maintain AgeX’s corporate credit card program. Long-lived
intangible assets, net Long-lived
intangible assets, consisting primarily of acquired in-process research and development (“IPR&D”) and patents is stated
at acquired cost, less accumulated amortization. Amortization expense is computed using the straight-line method over the estimated useful
life of 10 Selected Balance Sheet Components Impairment
of long-lived assets AgeX
assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that such assets might be impaired
and the carrying value may not be recoverable. AgeX’s long-lived assets consists entirely of intangible assets. If events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable and the expected undiscounted future cash flows
attributable to the asset are less than the carrying amount of the asset, an impairment loss, equal to the excess of the carrying value
of the asset over its fair value, is recorded. As of September 30, 2023, there has been no impairment of long-lived assets. Leases AgeX
accounts for leases in accordance with ASU 2016-02, Leases Codification Improvements to Topic 842, Leases, Leases (Topic 842):
Targeted Improvements, (i) 75% or greater to
determine whether the lease term is a major part of the remaining economic life of the underlying asset and (ii) 90% or greater to determine
whether the present value of the sum of lease payments is substantially all of the fair value of the underlying asset ROU
assets represent an entity’s right to use an underlying asset during the lease term and lease liabilities represent an entity’s
obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date
based on the present value of lease payments over the lease term. If the lease agreement does not provide an implicit rate in the contract,
an entity uses its incremental borrowing rate based on the information available at commencement date in determining the present value
of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The lease terms
may include options to extend or terminate the lease when it is reasonably certain that the entity will exercise that option. Lease expense
for lease payments is recognized on a straight-line basis over the lease term. AgeX does not capitalize leases that have terms of twelve
months or less. AgeX
leases office space in Alameda, California. For 2022 base monthly rent was $ 1,074 844 Accounting
for warrants AgeX
determines the accounting classification of warrants it issues, as either liability or equity, by first assessing whether the warrants
meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company’s Own Stock Related Party Transactions Warrant Liability Revenue
recognition AgeX
recognizes revenue in a manner that depicts the transfer of control of a product or a service to a customer and reflects the amount of
the consideration it expects to receive in exchange for such product or service. In doing so, AgeX follows a five-step approach: (i)
identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price,
(iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) the customer obtains control
of the product or service. AgeX considers the terms of a contract and all relevant facts and circumstances when applying the revenue
recognition standard. AgeX applies the revenue recognition standard, including the use of any practical expedients, consistently to contracts
with similar characteristics and in similar circumstances. Grant
revenues – Research
and Development Arrangements. In
applying the provisions of Topic 606, AgeX has determined that government grants are out of the scope of Topic 606 because the government
entities do not meet the definition of a “customer”, as defined by Topic 606, as there is not considered to be a transfer
of control of good or services to the government entities funding the grant. In the absence of applicable guidance under U.S. GAAP, AgeX’s
policy is to recognize grant revenue when the related costs are incurred, provided that the applicable conditions under the government
contracts have been met. Only costs that are allowable under the grant award, certain government regulations and the National Institutes
of Health (“NIH”) supplemental policy and procedure manual may be claimed for reimbursement, and the reimbursements are subject
to routine audits from governmental agencies from time to time. Costs incurred are recorded in research and development expenses on the
accompanying consolidated statements of operations. AgeX
believes the recognition of revenue as costs are incurred and amounts become realizable is analogous to the concept of transfer of control
of a service over time under ASC 606. In
August 2023, AgeX was awarded a grant of up to approximately $ 341,000
from the NIH, National Heart, Lung and Blood
Institute. The NIH grant will provide funding for continued development of AgeX’s technologies toward treating cardiovascular disease
over a one year period starting September 1, 2023. Based on our evaluation under the accounting guidance aforementioned, this grant
agreement is accounted for as a contract to perform research and development services for others, in which case, grant revenue is recognized
when the related research and development expenses are incurred. Accordingly, grant funds are made available by the NIH as allowable
expenses are incurred. For the three and nine months ended September 30, 2023, AgeX incurred approximately $ 21,000 of allowable expenses under the NIH grant and
recognized a corresponding amount of grant revenues. ESI
BIO Research Products – Arrangements
with multiple performance obligations – Research
and development Research
and development expenses consist primarily of personnel costs and related benefits, including stock-based compensation, amortization
of intangible assets, outside consultants and contractors, sponsored research agreements with certain universities, and suppliers, and
license fees paid to third parties to acquire patents or licenses to use patents and other technology. Research and development expenses
incurred and reimbursed by grants from third parties or governmental agencies if any and as applicable, approximate the respective revenues
recognized in the condensed consolidated statements of operations. General
and administrative General
and administrative expenses consist primarily of compensation and related benefits, including stock-based compensation, for executive
and corporate personnel, and professional and consulting fees. Basic
and diluted net loss per share attributable to common stockholders Basic
loss per share is calculated by dividing net loss attributable to AgeX common stockholders by the weighted average number of shares of
common stock outstanding, net of unvested restricted stock or restricted stock units, subject to repurchase by AgeX, if any, during the
period. Diluted loss per share is calculated by dividing the net income attributable to AgeX common stockholders, if any, by the weighted
average number of shares of common stock outstanding, adjusted for the effects of potentially dilutive common stock issuable under outstanding
stock options, warrants, and restricted stock units, using the treasury-stock method, and convertible preferred stock, if any, using
the if-converted method, and treasury stock held by subsidiaries, if any. For
the three and nine months ended September 30, 2023 and 2022, because AgeX reported a net loss attributable to common stockholders, all
potentially dilutive common stock, comprised of stock options, restricted stock units and warrants, is antidilutive. The
following weighted average common stock equivalents were excluded from the computation of diluted net loss per share of common stock
for the periods presented because including them would have been antidilutive (in thousands): Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share
Three
Months Ended September
30, Nine
Months Ended September
30,
2023 2022 2023 2022
Stock
options 3,276 3,264 3,266 3,310
Warrants
(1) 12,132 10,616 12,716 8,947
Restricted
stock units - 9 - 12
(1) As
of September 30, 2023 and 2022, AgeX had issued Juvenescence warrants to purchase 11,539,348 10,919,485 Related Party Transactions Reclassifications Certain
reclassifications have been made to the prior period’s condensed consolidated interim financial statements to conform to current
year presentation. Additionally, certain financial information is presented on a rounded basis, which may cause minor differences. Recently
adopted accounting pronouncements In
June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments – Credit
Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In
March 2022, the FASB issued ASU No. 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method In
March 2022, the FASB issued ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings
and Vintage Disclosures On
July 14, 2023, the FASB issued ASU No. 2023-02, P resentation of Financial Statements (Topic 205), Income Statement – Reporting
Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation – Stock
Compensation | 2.
Summary of Significant Accounting Policies Basis of Presentation and Summary of Significant Accounting Policies Going
Concern Assessment AgeX
assesses going concern uncertainty for its consolidated financial statements to determine if AgeX has sufficient cash and cash equivalents
on hand and working capital to operate for a period of at least one year from the date the consolidated financial statements are issued
or are available to be issued, which is referred to as the “look-forward period” as defined by Financial Accounting Standards
Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-15. As part of this assessment, based on conditions
that are known and reasonably knowable to AgeX, AgeX will consider various scenarios, forecasts, projections, and estimates, and AgeX
will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, and its ability to delay
or curtail those expenditures or programs, if necessary, among other factors. Based on this assessment, as necessary or applicable, AgeX
makes certain assumptions concerning its ability to curtail or delay research and development programs and expenditures within the look-forward
period in accordance with ASU No. 2014-15 (see Note 1, Organization, Basis of Presentation and Liquidity Fair
Value Measurements of Financial Instruments Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Fair value estimates discussed herein are based upon certain market assumptions and pertinent
information available to management as of the financial statement presentation date. The
carrying values of cash equivalents, accounts receivable and accounts payable, are carried at, or approximate, fair value as of the reporting
date because of their short-term nature. The credit facility is reported at fair value as it bears market rates of interest. Fair values
for the AgeX’s warrant liabilities are estimated by utilizing valuation models that consider current and expected stock prices,
volatility, dividends, market interest rates, forward yield curves and discount rates. Such amounts and the recognition of such amounts
are subject to significant estimates that may change in the future. To
increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to
measure fair value (ASC 820-10-50, Fair Value Measurements and Disclosures
● Level
1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical
assets or liabilities in active markets.
● Level
2 – Inputs to the valuation methodology include quoted prices for similar assets or
liabilities in active markets, and inputs that are observable for the assets or liabilities,
either directly or indirectly, for substantially the full term of the financial instruments.
● Level
3 – Inputs to the valuation methodology are unobservable; that reflect management’s
own assumptions about the assumptions market participants would make and significant to the
fair value. The
following table summarizes fair value measurements by level as of December 31, 2022 for liabilities measured at fair value on a recurring
basis (in thousands): Schedule of Fair Value of Assets and
Liabilities Measured on Recurring Basis
Level
1 Level
2 Level
3 Total
Warrant liability $ - $ - $ 180 $ 180 There
were no warrant liabilities as of December 31, 2021. See Note 6, Warrant Liability In
determining fair value, AgeX utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable
inputs to the extent possible, and also considers counterparty credit risk in its assessment of fair value. For the periods presented,
AgeX has no financial assets recorded at fair value on a recurring basis, except for cash and cash equivalents primarily consisting of
money market funds. These assets are measured at fair value using the period-end quoted market prices as a Level 1 input. The
carrying amounts of accounts receivable, net, prepaid expenses and other current assets, related party amounts due to affiliates, accounts
payable, accrued liabilities and other current liabilities approximate fair values because of the short-term nature of these items. The
accounting guidance establishes a hierarchy which requires an entity to maximize the use of quoted market prices and minimize the use
of unobservable inputs. An asset or liability’s level is based on the lowest level of input that is significant to the fair value
measurement. Fair value estimates are reviewed at the origination date and again at each applicable measurement date and interim or annual
financial reporting dates, as applicable for the financial instrument, and are based upon certain market assumptions and pertinent information
available to management at those times. The
methods and significant inputs and assumptions utilized in estimating the fair value of the warrant liabilities, as well as the respective
hierarchy designations, are discussed further in Note 6, Warrant Liability Cash
and Cash Equivalents AgeX
considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of December
31, 2022 and 2021, AgeX’s cash balances totaled $ 0.6 0.6 Concentrations
of Credit Risk Concentration of credit risk and other risks
and uncertainties Financial
instruments that potentially subject AgeX to significant concentrations of credit risk consist primarily of cash and cash equivalents.
AgeX limits the amount of credit exposure of cash balances by maintaining its accounts in high credit quality financial institutions.
Cash equivalent deposits with financial institutions may occasionally exceed the limits of insurance on bank deposits; however, AgeX
has not experienced any losses on such accounts. Restricted
Cash Cash, cash equivalents, and restricted cash In
accordance with ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash Schedule
of Cash, Cash Equivalents and Restricted Cash
December
31,
2022 2021
Cash and cash equivalents $ 645 $ 584
Restricted
cash (1) 50 50
Cash, cash equivalents,
and restricted cash as shown in the consolidated statements of cash flows $ 695 $ 634
(1) Restricted
cash entirely represents the deposit required to maintain AgeX’s corporate credit card
program. All restricted cash was included in deposits in the consolidated balance sheets. Accounts
Receivable, Net AgeX
establishes an allowance for doubtful accounts based on the evaluation of the collectability of its receivables after considering a variety
of factors, including the length of time receivables are past due, significant events that may impair the customer’s ability to
pay, such as a bankruptcy filing or deterioration in the customer’s operating results or financial position, and historical experience.
If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted. There were no
amounts reserved for doubtful accounts as of December 31, 2022 and 2021. Long-Lived
Intangible Assets, Net Long-lived
intangible assets, consisting primarily of acquired in-process research and development (“IPR&D”) and patents is stated
at acquired cost, less accumulated amortization. Amortization expense is computed using the straight-line method over the estimated useful
life of 10 Selected Balance Sheet Components Impairment
of Long-Lived Assets AgeX
assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that such assets might be impaired
and the carrying value may not be recoverable. AgeX’s long-lived assets consist entirely of intangible assets. If events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable and the expected undiscounted future cash flows
attributable to the asset are less than the carrying amount of the asset, an impairment loss, equal to the excess of the carrying value
of the asset over its fair value, is recorded. As of December 31, 2022, there has been no impairment of long-lived assets. Leases AgeX
accounts for leases in accordance with ASU 2016-02, Leases Codification Improvements to Topic 842, Leases, Leases (Topic
842): Targeted improvements, ROU
assets represent an entity’s right to use an underlying asset during the lease term and lease liabilities represent an entity’s
obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date
based on the present value of lease payments over the lease term. If the lease agreement does not provide an implicit rate in the contract,
an entity uses its incremental borrowing rate based on the information available at commencement date in determining the present value
of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The lease terms
may include options to extend or terminate the lease when it is reasonably certain that the entity will exercise that option. Lease expense
for lease payments is recognized on a straight-line basis over the lease term. AgeX does not capitalize leases that have terms of twelve
months or less. On
November 3, 2020, AgeX entered into a one-year lease effective January 1, 2021 for 135 947 1,074 844 Accounting
for Warrants AgeX
determines the accounting classification of warrants it issues, as either liability or equity, by first assessing whether the warrants
meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company’s Own Stock Related Party Transactions Warrant Liability Stock-Based
Compensation AgeX
recognizes compensation expense related to employee option grants and restricted stock grants, if any, in accordance with FASB ASC 718,
Compensation – Stock Compensation AgeX
estimates the fair value of employee stock-based payment awards on the grant-date and recognizes the resulting fair value, net of estimated
forfeitures for grants prior to 2017, over the requisite service period. Upon adoption of ASU 2016-09 on January 1, 2017 as further discussed
below, forfeitures are accounted for as they occur instead of based on the number of awards that were expected to vest prior to adoption
of ASU 2016-09. AgeX
uses the Black-Scholes option pricing model for estimating the fair value of options granted under the Incentive Plan. The fair value
of each restricted stock grant, if any, is determined based on the value of the common stock granted or sold. AgeX has elected to treat
stock-based payment awards with time-based service conditions as a single award and recognizes stock-based compensation on a straight-line
basis over the requisite service period. Compensation
expense for non-employee stock-based awards is recognized in accordance with ASC 718. Stock option awards issued to non-employees, principally
consultants or outside contractors, as applicable, are accounted for at fair value using the Black-Scholes option pricing model. Management
believes that the fair value of the stock options and restricted stock units can more reliably be measured than the fair value of services
received. AgeX records compensation expense based on the then-current fair values of the stock options and restricted stock units at
the grant date. Compensation expense for non-employee grants is recorded on a straight-line basis in the consolidated statements of operations. The
Black-Scholes option pricing model requires AgeX to make certain assumptions including the fair value of the underlying common stock,
the expected term, the expected volatility, the risk-free interest rate and the dividend yield (see Note 8, Stock-Based Awards The
fair value of the shares of common stock underlying the stock options is determined in accordance with the Incentive Plan and is based
on prevailing market prices on the NYSE American where AgeX common stock is traded. The
expected term of employee stock options represents the weighted-average period that the stock options are expected to remain outstanding.
AgeX estimates the expected term of options granted using the “simplified method” provided under Staff Accounting Bulletin,
Topic 14, Because
AgeX’s common stock has public trading history of fewer than five years, AgeX has estimated the expected volatility using its own
stock price volatility to the extent applicable or a combination of its stock price volatility and the stock price volatility of peer
companies, for a period equal to the expected term of the options, which may exceed five years. The peer companies used include selected
public companies within the biotechnology industry with comparable characteristics to AgeX, including similarity in size, lines of business,
market capitalization, revenue and financial leverage. The
risk-free interest rate assumption is based upon observed interest rates on the United States government securities appropriate for the
expected term of AgeX’s stock options. The
dividend yield assumption is based on AgeX’s history and expectation of dividend payouts. AgeX has never declared or paid any cash
dividends on its common stock, and AgeX does not anticipate paying any cash dividends in the foreseeable future. All
excess tax benefits and tax deficiencies from stock-based compensation awards accounted for under ASC 718 are recognized as an income
tax benefit or expense, respectively, in the consolidated statements of operations. An excess income tax benefit arises when the tax
deduction of a share-based award for income tax purposes exceeds the compensation cost recognized for financial reporting purposes and,
a tax deficiency arises when the compensation cost exceeds the tax deduction. Stock-based
compensation expense for the years ended December 31, 2022 and 2021 consists of stock-based compensation under the AgeX 2017 Equity Incentive
Plan (see Note 8, Stock-Based Awards Certain
of AgeX’s consolidated subsidiaries have had their own share-based compensation plans; however, there are no awards granted and
outstanding under those plans as of December 31, 2022 and 2021. For share-based compensation awards granted by privately held consolidated
subsidiaries under their respective equity plans, AgeX determines the fair value of the options granted under those plans using similar
methodologies and assumptions AgeX used for its stock options discussed above. Although
the fair value of stock options and restricted stock units is determined in accordance with FASB guidance, changes in the assumptions
and allocations can materially affect the estimated value and therefore the amount of compensation expense recognized in the consolidated
financial statements. Income
Taxes AgeX
accounts for income taxes in accordance with ASC 740, which prescribes the use of the asset and liability method, whereby deferred tax
asset or liability account balances are calculated at the balance sheet date using current tax laws and enacted rates in effect. Valuation
allowances are established when necessary to reduce deferred tax assets when it is more likely than not that a portion or all of the
deferred tax assets will not be realized. AgeX’s judgments, estimates and projections regarding future taxable income may change
over time due to changes, among other factors, in market conditions, changes in tax laws, and tax planning strategies. If AgeX’s
assumptions and consequently its estimates change in the future, the valuation allowance may be increased or decreased, which may have
a material impact on AgeX’s consolidated financial statements. The
guidance also prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not
sustainable upon examination by taxing authorities. AgeX recognizes accrued interest and penalties related to unrecognized tax benefits
as income tax expense. No unrecognized tax benefits have been recorded and no amounts were accrued for the payment of interest and penalties
as of December 31, 2022 and 2021. AgeX does not expect that the total amount of unrecognized tax benefits will materially change over
the next twelve months. AgeX is currently unaware of any tax issues under review. Beginning
in 2018, the 2017 Tax Act subjects a U.S. stockholder to tax on Global Intangible Low Tax Income “GILTI” earned by certain
foreign subsidiaries. In general, GILTI is the excess of a U.S. shareholder’s total net foreign income over a deemed return on
tangible assets. The provision further allows a deduction of 50 Revenue
Recognition AgeX
recognizes revenue in a manner that depicts the transfer of control of a product or a service to a customer and reflects the amount of
the consideration it expects to receive in exchange for such product or service. In doing so, AgeX follows a five-step approach: (i)
identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price,
(iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) the customer obtains control
of the product or service. AgeX considers the terms of a contract and all relevant facts and circumstances when applying the revenue
recognition standard. AgeX applies the revenue recognition standard, including the use of any practical expedients, consistently to contracts
with similar characteristics and in similar circumstances. In
the applicable paragraphs below, AgeX has summarized its revenue recognition policies for its various revenue sources in accordance with
Topic 606. Revenue
recognition by source and geography The
following table presents AgeX’s consolidated revenues disaggregated by source for continuing operations (in thousands): Schedule
of Disaggregated of Revenues
Year
Ended December 31,
REVENUES: 2022 2021
Grant revenues $ - $ 104
Other revenues 34 40
Total
revenues $ 34 $ 144 The
following table presents consolidated revenues for continuing operations (in thousands), disaggregated by geography, based on the billing
addresses of customers: Schedule
of Disaggregated Geographical Revenue
Year
Ended December 31,
REVENUES: 2022 2021
United States $ 10 $ 107
Foreign 24 37
Total
revenues $ 34 $ 144 Subscription
and advertisement revenues ® ® LifeMap
Sciences licensed from third parties the databases and software it commercialized and had a contractual obligation to pay royalties to
the licensor on subscriptions sold. These costs were included in operating loss from discontinued operations on the consolidated statements
of operations when the cash was received and the royalty obligation was incurred as the royalty payments did not qualify for capitalization
of costs to fulfill a contract under ASC 340-40, Other Assets and Deferred Costs - Contracts with Customers LifeMap
Sciences recognized $ 0.3 Disposition and Deconsolidation
of LifeMap Sciences Grant
revenues – Research
and Development Arrangements. In
applying the provisions of Topic 606, AgeX has determined that government grants are out of the scope of Topic 606 because the government
entities do not meet the definition of a “customer”, as defined by Topic 606, as there is not considered to be a transfer
of control of good or services to the government entities funding the grant. In the absence of applicable guidance under U.S. GAAP, our
policy is to recognize grant revenue when the related costs are incurred, provided that the applicable conditions under the government
contracts have been met. Only costs that are allowable under the grant award, certain government regulations and the National Institutes
of Health’s supplemental policy and procedure manual may be claimed for reimbursement, and the reimbursements are subject to routine
audits from governmental agencies from time to time. Costs incurred are recorded in research and development expenses on the accompanying
consolidated statements of operations. On
April 8, 2020, AgeX was awarded a grant of up to approximately $ 386,000 104,000 ESI
BIO research products – Arrangements
with multiple performance obligations – Research
and Development Research
and development expenses consist primarily of personnel costs and related benefits, stock-based compensation, amortization of intangible
assets, and collaborative and contracted research and development fees. Research and development costs which have an alternative future
use will be capitalized as intangible assets, and costs with no future benefit or alternative use will be expensed as incurred. Research
and development expenses incurred and reimbursed by grants from third parties approximate the grant revenues recognized in the consolidated
statements of operations. General
and Administrative General
and administrative expenses include employee and director compensation allocated to general and administrative expenses, consulting fees
other than those paid for science-related consulting, license fees paid to third parties to acquire patents or licenses to use patents
and other technology, professional fees to maintain patents and trademarks, minimum annual royalties stipulated under license and sublicense
agreements with third parties, insurance costs allocated to general and administrative expenses, stock exchange-related costs, depreciation
expense, marketing costs, legal and accounting costs, office rent, and other miscellaneous expenses which are allocated to general and
administrative expense. Foreign
Currency Transaction Gains and Losses For
transactions denominated in other than the functional currency of AgeX or its subsidiaries, AgeX recognizes transaction gains and losses
in the consolidated statements of operations and classifies the gain or loss based on the nature of the item that generated it. Segments AgeX’s
executive management team, as a group, represents the entity’s chief operating decision makers. To date, AgeX’s executive
management team has viewed AgeX’s operations as one segment that includes the research and development of regenerative medicine
technologies targeting the diseases of aging and metabolic disorders, oncology, and neurological diseases and disorders, blood and vascular
system diseases and disorders, and pluripotent cell technologies. As a result, the financial information disclosed materially represents
all of the financial information related to AgeX’s sole operating segment. Basic
and Diluted Net Loss per Share Attributable to Common Stockholders Basic
loss per share is calculated by dividing net loss attributable to AgeX common stockholders by the weighted-average number of shares of
common stock outstanding, net of unvested restricted stock or restricted stock units, subject to repurchase by AgeX, if any, during the
period. Diluted loss per share is calculated by dividing the net income attributable to AgeX common stockholders, if any, by the weighted-average
number of shares of common stock outstanding, adjusted for the effects of potentially dilutive common stock issuable under outstanding
stock options, warrants, and restricted stock units, using the treasury-stock method, and convertible preferred stock, if any, using
the if-converted method, and treasury stock held by subsidiaries, if any. For
the years ended December 31, 2022 and 2021, because AgeX reported a net loss attributable to common stockholders, all potentially dilutive
common stock, comprised of stock options, restricted stock units and warrants, is antidilutive. The
following weighted-average common stock equivalents were excluded from the computation of diluted net loss per share of common stock
for the periods presented because including them would have been antidilutive (in thousands): Schedule
of Antidilutive Securities Excluded from Computation of Earnings Per Share
Year
Ended December 31,
2022 2021
Stock options 3,297 3,145
Warrants (1) 9,558 3,492
Restricted stock units 10 23
(1) As
of December 31, 2022 and 2021, AgeX issued Juvenescence warrants to purchase 12,129,260 3,512,098 Related Party Transactions Recently
Adopted Accounting Pronouncements In
May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50),
Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40) In
November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance Recently
Issued Accounting Pronouncements Not Yet Adopted In
June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments, In
March 2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and
Vintage Disclosures CARES
Act On
March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into law. The CARES
Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments,
net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations,
and technical corrections to tax depreciation methods for qualified improvement property. AgeX reviewed the provisions of the CARES Act
but does not expect it to have a material impact to its tax provision or its consolidated financial statements. AgeX obtained a loan
under the Paycheck Protection Program under the CARES Act, the repayment of which was forgiven in February 2021. |
