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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 June 30, 2023

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

As of August 7, 2023, there were 30,575,450 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 June 30, 2023 and December 31, 2022

1

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2023 and 2022

2

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022

3

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022

4

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

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

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

Item 4.

Controls and Procedures

23

 

 

 

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

70

Item 3.

Defaults Upon Senior Securities

70

Item 4.

Mine Safety Disclosures

70

Item 5.

Other Information

70

Item 6.

Exhibits

71

Signatures

72

 

 

 

i


 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Some of the statements contained in this Quarterly Report on Form 10-Q, or this Report, constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. These forward-looking statements include statements about future financial and operating results of Surrozen; statements about the plans, strategies and objectives of management for future operations of Surrozen; and statements regarding future performance. In some cases, you can identify these forward-looking statements by the use of terminology such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words or phrases.

 

These statements are based upon information available to us as of the date of this Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and such statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. Except to the extent required by applicable law, we are under no obligation (and expressly disclaim any such obligation) to update or revise our forward-looking statements whether as a result of new information, future events, or otherwise.
 

There are no guarantees that the transactions and events described will happen as described (or that they will happen at all). The forward-looking statements contained in this Report are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-looking statement.

 

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to the “company,” “Surrozen,” “we,” “us” and “our” refer to Surrozen, Inc.

 

ii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

SURROZEN, INC.

Condensed Consolidated Balance Sheets

(In thousands, except per share amounts)

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

36,496

 

 

$

24,690

 

Accounts receivable

 

 

1,978

 

 

 

1,978

 

Short-term marketable securities

 

 

16,899

 

 

 

51,148

 

Prepaid expenses and other current assets

 

 

2,206

 

 

 

3,489

 

Total current assets

 

 

57,579

 

 

 

81,305

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

2,966

 

 

 

3,630

 

Operating lease right-of-use assets

 

 

2,655

 

 

 

3,268

 

Restricted cash

 

 

405

 

 

 

405

 

Other assets

 

 

394

 

 

 

827

 

Total assets

 

$

63,999

 

 

$

89,435

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

186

 

 

$

658

 

Accrued and other liabilities

 

 

3,901

 

 

 

6,848

 

Lease liabilities, current portion

 

 

2,364

 

 

 

2,226

 

Total current liabilities

 

 

6,451

 

 

 

9,732

 

 

 

 

 

 

 

Lease liabilities, noncurrent portion

 

 

2,164

 

 

 

3,376

 

Warrant liabilities

 

 

326

 

 

 

326

 

Total liabilities

 

 

8,941

 

 

 

13,434

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 10,000 shares authorized; no shares
   issued and outstanding as of June 30, 2023 and December 31, 2022

 

 

 

 

 

 

Common stock, $0.0001 par value, 500,000 shares authorized as of
   June 30, 2023 and December 31, 2022;
30,571 and 30,088 shares issued and
   outstanding as of June 30, 2023 and December 31, 2022, respectively

 

 

3

 

 

 

3

 

Additional paid-in-capital

 

 

257,387

 

 

 

254,892

 

Accumulated other comprehensive income (loss)

 

 

5

 

 

 

(241

)

Accumulated deficit

 

 

(202,337

)

 

 

(178,653

)

Total stockholders’ equity

 

 

55,058

 

 

 

76,001

 

Total liabilities and stockholders’ equity

 

$

63,999

 

 

$

89,435

 

 

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 per share amounts)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

6,937

 

 

$

9,581

 

 

$

15,023

 

 

$

18,952

 

General and administrative

 

 

3,338

 

 

 

4,491

 

 

 

8,637

 

 

 

9,613

 

Restructuring

 

 

 

 

 

 

 

 

1,207

 

 

 

 

Total operating expenses

 

 

10,275

 

 

 

14,072

 

 

 

24,867

 

 

 

28,565

 

Loss from operations

 

 

(10,275

)

 

 

(14,072

)

 

 

(24,867

)

 

 

(28,565

)

Interest income

 

 

623

 

 

 

60

 

 

 

1,170

 

 

 

109

 

Other income (expense), net

 

 

265

 

 

 

87

 

 

 

13

 

 

 

6,584

 

Net loss

 

 

(9,387

)

 

 

(13,925

)

 

 

(23,684

)

 

 

(21,872

)

Unrealized gain (loss) on marketable securities, net of tax

 

 

55

 

 

 

(47

)

 

 

246

 

 

 

(357

)

Comprehensive loss

 

$

(9,332

)

 

$

(13,972

)

 

$

(23,438

)

 

$

(22,229

)

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

(0.31

)

 

$

(0.40

)

 

$

(0.79

)

 

$

(0.63

)

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

30,073

 

 

 

34,945

 

 

 

30,022

 

 

 

34,904

 

 

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

 

 

2


 

SURROZEN, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated
other

 

 

 

 

 

Total

 

 

 

Common stock

 

 

paid-in

 

 

comprehensive

 

 

Accumulated

 

 

stockholders’

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

income (loss)

 

 

deficit

 

 

equity

 

Balance at December 31, 2022

 

 

30,088

 

 

$

3

 

 

$

254,892

 

 

$

(241

)

 

$

(178,653

)

 

$

76,001

 

Repurchase of early exercised stock options

 

 

(9

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

13

 

 

 

 

 

 

 

 

 

13

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,129

 

 

 

 

 

 

 

 

 

1,129

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

191

 

 

 

 

 

 

191

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,297

)

 

 

(14,297

)

Balance at March 31, 2023

 

 

30,079

 

 

 

3

 

 

 

256,034

 

 

 

(50

)

 

 

(192,950

)

 

 

63,037

 

Issuance of common stock under employee stock purchase plan

 

 

492

 

 

 

 

 

 

187

 

 

 

 

 

 

 

 

 

187

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

 

8

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,158

 

 

 

 

 

 

 

 

 

1,158

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

55

 

 

 

 

 

 

55

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,387

)

 

 

(9,387

)

Balance at June 30, 2023

 

 

30,571

 

 

$

3

 

 

$

257,387

 

 

$

5

 

 

$

(202,337

)

 

$

55,058

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated
other

 

 

 

 

 

Total

 

 

 

Common stock

 

 

paid-in

 

 

comprehensive

 

 

Accumulated

 

 

stockholders’

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

loss

 

 

deficit

 

 

equity

 

Balance at December 31, 2021

 

 

35,034

 

 

$

4

 

 

$

252,464

 

 

$

(119

)

 

$

(142,649

)

 

$

109,700

 

Issuance of common stock under Equity Purchase Agreement

 

 

100

 

 

 

 

 

 

273

 

 

 

 

 

 

 

 

 

273

 

Repurchase of early exercised stock options

 

 

(8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

30

 

 

 

 

 

 

 

 

 

30

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

916

 

 

 

 

 

 

 

 

 

916

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(310

)

 

 

 

 

 

(310

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,947

)

 

 

(7,947

)

Balance at March 31, 2022

 

 

35,126

 

 

 

4

 

 

 

253,683

 

 

 

(429

)

 

 

(150,596

)

 

 

102,662

 

Repurchase of early exercised stock options

 

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

27

 

 

 

 

 

 

 

 

 

27

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

979

 

 

 

 

 

 

 

 

 

979

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(47

)

 

 

 

 

 

(47

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,925

)

 

 

(13,925

)

Balance at June 30, 2022

 

 

35,124

 

 

$

4

 

 

$

254,689

 

 

$

(476

)

 

$

(164,521

)

 

$

89,696

 

 

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

 

3


 

SURROZEN, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

Six Months Ended June 30,

 

 

2023

 

 

2022

 

Operating activities:

 

 

 

 

 

Net loss

$

(23,684

)

 

$

(21,872

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

Depreciation and amortization

 

977

 

 

 

1,007

 

Stock-based compensation

 

2,287

 

 

 

1,895

 

Non-cash operating lease expense

 

613

 

 

 

745

 

Amortization of (discount) premium on marketable securities, net

 

(480

)

 

 

235

 

Change in fair value of warrant liabilities

 

 

 

 

(6,919

)

Other expense related to the commitment shares issued to Lincoln Park

 

 

 

 

273

 

Changes in operating assets and liabilities:

 

 

 

 

 

Prepaid expenses and other current assets

 

1,696

 

 

 

1,309

 

Other assets

 

20

 

 

 

(418

)

Accounts payable

 

(472

)

 

 

(2,278

)

Accrued and other liabilities

 

(2,802

)

 

 

(2,590

)

Operating lease liabilities

 

(1,074

)

 

 

(1,174

)

Net cash used in operating activities

 

(22,919

)

 

 

(29,787

)

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(398

)

 

 

(435

)

Purchases of marketable securities

 

(18,690

)

 

 

 

Proceeds from maturities of marketable securities

 

53,665

 

 

 

14,000

 

Net cash provided by investing activities

 

34,577

 

 

 

13,565

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

Proceeds from issuance of common stock upon employee stock plan purchases

 

187

 

 

 

 

Repurchase of early exercised stock options

 

(39

)

 

 

(3

)

Net cash provided by (used in) financing activities

 

148

 

 

 

(3

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

11,806

 

 

 

(16,225

)

Cash, cash equivalents and restricted cash at beginning of period

 

25,095

 

 

 

33,496

 

Cash, cash equivalents and restricted cash at end of period

$

36,901

 

 

$

17,271

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

Vesting of early exercises of stock options

$

21

 

 

$

57

 

 

The following table presents a reconciliation of the Company’s cash, cash equivalents and restricted cash in the Company’s unaudited condensed consolidated balance sheets:

 

 

June 30,

 

 

2023

 

 

2022

 

Cash and cash equivalents

$

36,496

 

 

$

16,866

 

Restricted cash

 

405

 

 

 

405

 

Cash, cash equivalents and restricted cash

$

36,901

 

 

$

17,271

 

 

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

 

 

4


 

SURROZEN, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

 

Note 1. Organization and Business

 

Organization

Surrozen, Inc., or the Company, is a clinical stage biotechnology company committed to discovering and developing drug candidates to selectively modulate the Wnt pathway, a critical mediator of tissue repair, in a broad range of organs and tissues. The Company, a Delaware corporation, is located in South San Francisco, California. Surrozen Netherlands, B.V. was incorporated in May 2022 and located in Amsterdam, Netherlands as a wholly-owned subsidiary of the Company.

 

Liquidity

The Company has incurred net losses since inception. For the three and six months ended June 30, 2023, the Company incurred a net loss of $9.4 million and $23.7 million , respectively. For the three and six months ended June 30, 2022, the Company incurred a net loss of $13.9 million and $21.9 million, respectively. For the six months ended June 30, 2023 and 2022, the Company used $22.9 million and $29.8 million of cash in operations, respectively. As of June 30, 2023, the Company had cash, cash equivalents and marketable securities of $53.4 million and an accumulated deficit of approximately $202.3 million. The Company expects operating expenses to continue to be significant in connection with its ongoing clinical studies and anticipates the need to raise additional capital to continue to execute its long-range business pl