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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39635

 

Surrozen, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

98-1556622

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

171 Oyster Point Blvd, Suite 400, South San Francisco, California

94080

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (650) 489-9000

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

SRZN

 

The Nasdaq Capital Market

Redeemable warrants, each whole warrant exercisable for one share of Common Stock

 

SRZNW

 

The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No

As of November 10, 2021, there were 35,027,407 shares of common stock, par value $0.0001 per share, issued and outstanding.

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

1

 

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020

1

 

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2021 and 2020

2

 

Unaudited Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020

3

 

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

35

 

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

82

Item 3.

Defaults Upon Senior Securities

82

Item 4.

Mine Safety Disclosures

82

Item 5.

Other Information

82

Item 6.

Exhibits

83

Signatures

85

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

SURROZEN, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 

 

 

September 30, 2021

 

 

December 31, 2020

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

61,096

 

 

$

34,982

 

Prepaid expenses and other current assets

 

 

3,835

 

 

 

1,042

 

Short-term investments

 

 

49,071

 

 

 

14,200

 

Total current assets

 

 

114,002

 

 

 

50,224

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

5,194

 

 

 

5,836

 

Operating lease right-of-use assets

 

 

4,855

 

 

 

5,556

 

Long-term investments

 

 

25,255

 

 

 

 

Other assets

 

 

925

 

 

 

39

 

Restricted cash

 

 

405

 

 

 

405

 

Total assets

 

$

150,636

 

 

$

62,060

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

 

1,831

 

 

$

1,776

 

Accrued liabilities

 

 

8,495

 

 

 

3,394

 

Lease liabilities, current portion

 

 

2,215

 

 

 

2,108

 

Total current liabilities

 

 

12,541

 

 

 

7,278

 

 

 

 

 

 

 

 

Lease liabilities, noncurrent portion

 

 

6,056

 

 

 

7,489

 

Warrant liabilities

 

 

8,308

 

 

 

 

Total liabilities

 

 

26,905

 

 

 

14,767

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 6 and Note 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 10,000,000 shares authorized; no shares
   issued and outstanding as of September 30, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $0.0001 par value, 500,000,000 shares authorized as of
   September 30, 2021 and December 31, 2020;
35,027,407 and 18,256,628
   shares issued and outstanding as of September 30, 2021 and
   December 31, 2020, respectively

 

 

4

 

 

 

2

 

Additional paid-in-capital

 

 

251,438

 

 

 

135,292

 

Accumulated other comprehensive loss

 

 

(16

)

 

 

 

Accumulated deficit

 

 

(127,695

)

 

 

(88,001

)

Total stockholders’ equity

 

 

123,731

 

 

 

47,293

 

Total liabilities and stockholders’ equity

 

$

150,636

 

 

$

62,060

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

1


 

SURROZEN, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

10,418

 

 

$

6,958

 

 

$

29,284

 

 

$

17,034

 

General and administrative

 

 

3,287

 

 

 

1,683

 

 

 

10,112

 

 

 

4,937

 

Total operating expenses

 

 

13,705

 

 

 

8,641

 

 

 

39,396

 

 

 

21,971

 

Loss from operations

 

 

(13,705

)

 

 

(8,641

)

 

 

(39,396

)

 

 

(21,971

)

Interest income

 

 

14

 

 

 

6

 

 

 

30

 

 

 

82

 

Other expense, net

 

 

(328

)

 

 

 

 

 

(328

)

 

 

 

Net loss

 

 

(14,019

)

 

 

(8,635

)

 

 

(39,694

)

 

 

(21,889

)

Unrealized loss on marketable securities

 

 

(16

)

 

 

 

 

 

(16

)

 

 

 

Comprehensive loss

 

$

(14,035

)

 

$

(8,635

)

 

$

(39,710

)

 

$

(21,889

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share attributable to common
   stockholders, basic and diluted

 

$

(0.51

)

 

$

(0.47

)

 

$

(1.86

)

 

$

(1.43

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used in computing net
   loss per share attributable to common
   stockholders, basic and diluted

 

 

27,401,956

 

 

 

18,507,423

 

 

 

21,291,480

 

 

 

15,261,552

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

2


 

SURROZEN, INC.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity

(Unaudited)

(In thousands, except share amounts)

 

 

 

Redeemable convertible

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated
other

 

 

 

 

 

Total

 

 

 

preferred stock

 

 

Common stock

 

 

paid-in

 

 

comprehensive

 

 

Accumulated

 

 

stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

loss

 

 

deficit

 

 

equity

 

Balance at December 31, 2020, as previously reported

 

 

95,289,932

 

 

$

133,097

 

 

 

8,648,718

 

 

$

1

 

 

$

2,196

 

 

$

 

 

$

(88,001

)

 

$

(85,804

)

Retroactive application of recapitalization

 

 

(95,289,932

)

 

 

(133,097

)

 

 

9,607,910

 

 

 

1

 

 

 

133,096

 

 

 

 

 

 

 

 

 

133,097

 

Balance at December 31, 2020, after effect of Business
   Combination

 

 

 

 

 

 

 

 

18,256,628

 

 

 

2

 

 

 

135,292

 

 

 

 

 

 

(88,001

)

 

 

47,293

 

Exercises of stock options

 

 

 

 

 

 

 

 

76,370

 

 

 

 

 

 

196

 

 

 

 

 

 

 

 

 

196

 

Restricted stock granted

 

 

 

 

 

 

 

 

122,950

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Reclassification to liability for early exercised stock
   options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(120

)

 

 

 

 

 

 

 

 

(120

)

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30

 

 

 

 

 

 

 

 

 

30

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

475

 

 

 

 

 

 

 

 

 

475

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,022

)

 

 

(13,022

)

Balance at March 31, 2021, after effect of Business
   Combination

 

 

 

 

 

 

 

 

18,455,948

 

 

 

2

 

 

 

135,873

 

 

 

 

 

 

(101,023

)

 

 

34,852

 

Exercises of stock options

 

 

 

 

 

 

 

 

50,179

 

 

 

 

 

 

109

 

 

 

 

 

 

 

 

 

109

 

Restricted stock granted

 

 

 

 

 

 

 

 

70,258

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock forfeited

 

 

 

 

 

 

 

 

(16,467

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification to liability for early exercised stock
   options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(65

)

 

 

 

 

 

 

 

 

(65

)

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

47

 

 

 

 

 

 

 

 

 

47

 

Repurchase of early exercised stock options

 

 

 

 

 

 

 

 

(1,142

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

532

 

 

 

 

 

 

 

 

 

532

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,653

)

 

 

(12,653

)

Balance at June 30, 2021, after effect of Business
   Combination

 

 

 

 

 

 

 

 

18,558,776

 

 

 

2

 

 

 

136,496

 

 

 

 

 

 

(113,676

)

 

 

22,822

 

Issuance of common stock upon Business Combination
  and PIPE Financing, net of transaction costs and warrant
  liabilities

 

 

 

 

 

 

 

 

16,440,757

 

 

 

2

 

 

 

114,246

 

 

 

 

 

 

 

 

 

114,248

 

Exercises of stock options

 

 

 

 

 

 

 

 

27,874

 

 

 

 

 

 

72

 

 

 

 

 

 

 

 

 

72

 

Reclassification to liability for early exercised stock
   options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(40

)

 

 

 

 

 

 

 

 

(40

)

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

48

 

 

 

 

 

 

 

 

 

48

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

616

 

 

 

 

 

 

 

 

 

616

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16

)

 

 

 

 

 

(16

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,019

)

 

 

(14,019

)

Balance at September 30, 2021

 

 

 

 

$

 

 

 

35,027,407

 

 

$

4

 

 

$

251,438

 

 

$

(16

)

 

$

(127,695

)

 

$

123,731

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

3


 

SURROZEN, INC.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity

(Unaudited)

(In thousands, except share amounts)

 

 

 

Redeemable convertible

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

 

 

preferred stock

 

 

Common stock

 

 

paid-in

 

 

Accumulated

 

 

stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

equity

 

Balance at December 31, 2019, as previously reported

 

 

66,718,509

 

 

$

83,211

 

 

 

8,178,290

 

 

$

1

 

 

$

1,459

 

 

$

(55,285

)

 

$

(53,825

)

Retroactive application of recapitalization

 

 

(66,718,509

)

 

 

(83,211

)

 

 

4,977,197

 

 

 

 

 

 

83,211

 

 

 

 

 

 

83,211

 

Balance at December 31, 2019, after effect of Business
   Combination

 

 

 

 

 

 

 

 

13,155,487

 

 

 

1

 

 

 

84,670

 

 

 

(55,285

)

 

 

29,386

 

Issuance costs of Series C redeemable convertible preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

 

 

 

(7

)

Exercises of stock options

 

 

 

 

 

 

 

 

39,441

 

 

 

 

 

 

84

 

 

 

 

 

 

84

 

Reclassification to liability for early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(75

)

 

 

 

 

 

(75

)

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22

 

 

 

 

 

 

22

 

Restricted stock forfeited

 

 

 

 

 

 

 

 

(5,123

)

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

180

 

 

 

 

 

 

180

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,287