PROSPECTUS SUPPLEMENT NO.4	Filed Pursuant to Rule 424(b)(3)
(To the Prospectus dated April 7, 2023)	Registration No. 333-259496

Up to 31,612,349 Shares of Common Stock

(Including up to 7,217,991 Shares of Common Stock Issuable Upon Exercise of Warrants)

Up to 4,151,324 Warrants to Purchase Common Stock

This prospectus supplement updates and supplements the prospectus dated April 7, 2023 (as amended, the “Prospectus”), which forms a part of our Registration Statement on Form S-1 (No. 333-259496). This prospectus supplement is being filed to update and supplement the information in the Prospectus with the information contained in our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on November 8, 2023 (the “Report”). Accordingly, we have attached the Report to this prospectus supplement.

The Prospectus and this prospectus supplement relate to the issuance by us of an aggregate of up to 7,217,974 shares of our common stock, $0.0001 par value per share (the “Common Stock”), which consists of:

The Prospectus and this prospectus supplement also relate to the offer and sale from time to time by the selling securityholders named in the Prospectus or their permitted transferees (the “Selling Securityholders”) of:

The Selling Securityholders may offer, sell or distribute all or a portion of the registered securities publicly or through private transactions at prevailing market prices or at negotiated prices. We will not receive any of the proceeds from such sales of the shares of Common Stock or Warrants, except with respect to amounts received by us upon exercise of the Warrants. We will bear all costs, expenses and fees in connection with the registration of these securities, including with regard to compliance with state securities or “blue sky” laws. The selling securityholders will bear all commissions and discounts, if any, attributable to their sale of shares of Common Stock or Warrants. See the section titled “Plan of Distribution” in the Prospectus.

The Common Stock and Public Warrants are listed on The Nasdaq Capital Market (“Nasdaq”) under the symbols “SRZN” and “SRZNW” respectively. On November 7, 2023, the last reported sales price of our Common Stock was $0.4347 per share and the last reported sales price of our Public Warrants was $0.029 per Public Warrant.

This prospectus supplement should be read in conjunction with the Prospectus, including any other amendments or supplements thereto, which is to be delivered with this prospectus supplement. This prospectus supplement is qualified by reference to the Prospectus, including any other

 

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amendments or supplements thereto, except to the extent that the information in this prospectus supplement updates and supersedes the information contained therein.

This prospectus supplement is not complete without, and may not be delivered or utilized except in connection with, the Prospectus, including any other amendments or supplements thereto.

We are an “emerging growth company” and a “smaller reporting company” as defined under U.S. federal securities laws and, as such, have elected to comply with reduced public company reporting requirements. The Prospectus and this prospectus supplement comply with the requirements that apply to an issuer that is an emerging growth company and a smaller reporting company. We are incorporated in Delaware.

 

Investing in our securities involves a high degree of risk. You should review carefully the risks and uncertainties described in the section titled “Risk Factors” beginning on page 10 of the Prospectus, and under similar headings in any amendments or supplements to the Prospectus.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or passed upon the accuracy or adequacy of this prospectus supplement or the Prospectus. Any representation to the contrary is a criminal offense.

Prospectus supplement dated November 8, 2023

 

 

 

 

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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, 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	30-1374889
( 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 November 6, 2023, there were 30,575,047 shares of common stock, par value $0.0001 per share, issued and outstanding.
 

 

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Table of Contents

 

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Unaudited Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	1
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2023 and 2022	2
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	71
Item 3.	Defaults Upon Senior Securities	71
Item 4.	Mine Safety Disclosures	71
Item 5.	Other Information	71
Item 6.	Exhibits	72
Signatures		73

 

 

 

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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.

 

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

SURROZEN, INC.

Condensed Consolidated Balance Sheets

(In thousands, except per share amounts)

 

		September 30,				December 31,
		2023				2022
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	33,975			$	24,690
Accounts receivable			1,978				1,978
Short-term marketable securities			9,457				51,148
Prepaid expenses and other current assets			2,947				3,489
Total current assets			48,357				81,305
Property and equipment, net			2,483				3,630
Operating lease right-of-use assets			2,331				3,268
Restricted cash			426				405
Other assets			376				827
Total assets		$	53,973			$	89,435
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$	287			$	658
Accrued and other liabilities			3,953				6,848
Lease liabilities, current portion			2,432				2,226
Total current liabilities			6,672				9,732
Lease liabilities, noncurrent portion			1,527				3,376
Warrant liabilities			243				326
Total liabilities			8,442				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 September 30, 2023 and December 31, 2022			—				—
Common stock, $0.0001 par value, 500,000 shares authorized as of    September 30, 2023 and December 31, 2022; 30,575 and 30,088 shares issued and    outstanding as of September 30, 2023 and December 31, 2022, respectively			3				3
Additional paid-in-capital			258,309				254,892
Accumulated other comprehensive income (loss)			1				(241	)
Accumulated deficit			(212,782	)			(178,653	)
Total stockholders’ equity			45,531				76,001
Total liabilities and stockholders’ equity		$	53,973			$	89,435

 

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

 

 

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SURROZEN, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except per share amounts)

 

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2023				2022				2023				2022
Operating expenses:
Research and development		$	6,112			$	8,624			$	21,135			$	27,576
General and administrative			3,572				4,981				12,209				14,594
Restructuring			1,505				—				2,712				—
Total operating expenses			11,189				13,605				36,056				42,170
Loss from operations			(11,189	)			(13,605	)			(36,056	)			(42,170	)
Interest income			661				198				1,831				307
Other income, net			83				50				96				6,634
Net loss			(10,445	)			(13,357	)			(34,129	)			(35,229	)
Unrealized gain (loss) on marketable securities, net of tax			(4	)			52				242				(305	)
Comprehensive loss		$	(10,449	)		$	(13,305	)		$	(33,887	)		$	(35,534	)
Net loss per share attributable to common    stockholders, basic and diluted		$	(0.34	)		$	(0.38	)		$	(1.13	)		$	(1.01	)
Weighted-average shares used in computing net    loss per share attributable to common    stockholders, basic and diluted			30,497				34,968				30,182				34,926

 

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

 

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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
Issuance of common stock upon option exercises			6				—				3				—				—				3
Repurchase of early exercised stock options			(2	)			—				—				—				—				—
Vesting of early exercised stock options			—				—				6				—				—				6
Stock-based compensation expense			—				—				913				—				—				913
Other comprehensive loss			—				—				—				(4	)			—				(4	)
Net loss			—				—				—				—				(10,445	)			(10,445	)
Balance at September 30, 2023			30,575			$	3			$	258,309			$	1			$	(212,782	)		$	45,531

 

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

 

 

 

 

 

 

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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				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
Repurchase of early exercised stock options			(1	)			—				—				—				—				—
Vesting of early exercised stock options			—				—				23				—				—				23
Stock-based compensation expense			—				—				1,077				—				—				1,077
Other comprehensive loss			—				—				—				52				—				52
Net loss			—				—				—				—				(13,357	)			(13,357	)
Balance at September 30, 2022			35,123			$	4			$	255,789			$	(424	)		$	(177,878	)		$	77,491

 

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

 

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SURROZEN, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

	Nine Months Ended September 30,
	2023				2022
Operating activities:
Net loss	$	(34,129	)		$	(35,229	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,460				1,477
Stock-based compensation		3,200				2,972
Non-cash operating lease expense		937				1,024
Amortization of (discount) premium on marketable securities, net		(688	)			270
Change in fair value of warrant liabilities		(83	)			(6,969	)
Other expense related to the commitment shares issued to Lincoln Park		—				273
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		955				(885	)
Other assets		38				(398	)
Accounts payable		(371	)			(2,365	)
Accrued and other liabilities		(2,728	)			(2,433	)
Operating lease liabilities		(1,643	)			(1,677	)
Net cash used in operating activities		(33,052	)			(43,940	)
Investing activities:
Purchases of property and equipment		(398	)			(580	)
Purchases of marketable securities		(28,044	)			(20,894	)
Proceeds from maturities of marketable securities		70,665				57,870
Net cash provided by investing activities		42,223				36,396
Financing activities:
Proceeds from issuance of common stock upon exercise of stock options		3				—
Proceeds from issuance of common stock upon employee stock plan purchases		187				—
Repurchase of early exercised stock options		(55	)			(16	)
Net cash provided by (used in) financing activities		135				(16	)
Net increase (decrease) in cash, cash equivalents and restricted cash		9,306				(7,560	)
Cash, cash equivalents and restricted cash at beginning of period		25,095				33,496
Cash, cash equivalents and restricted cash at end of period	$	34,401			$	25,936
Supplemental disclosure of noncash investing and financing activities:
Purchases of property and equipment included in accounts payable	$	—			$	9
Vesting of early exercises of stock options	$	27			$	80

 

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:

 

	September 30,
	2023				2022
Cash and cash equivalents	$	33,975			$	25,531
Restricted cash		426				405
Cash, cash equivalents and restricted cash	$	34,401			$	25,936

 

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

 

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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 nine months ended September 30, 2023, the Company incurred a net loss of $10.4 million and $34.1 million, respectively. For the three and nine months ended September 30, 2022, the Company incurred a net loss of $13.4 million and $35.2 million, respectively. For the nine months ended September 30, 2023 and 2022, the Company used $33.1 million and $43.9 million of cash in operations, respectively. As of September 30, 2023, the Company had cash, cash equivalents and marketable securities of $43.4 million and an accumulated deficit of approximately $212.8 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 plan.

 

Management believes that the existing cash, cash equivalents and marketable securities are sufficient for the Company to continue operating activities for at least the next 12 months from the date of issuance of its unaudited consolidated financial statements. However, if the Company’s anticipated cash burn is greater than anticipated, the Company could use its capital resources sooner than expected which may result in the need to reduce future planned expenditures and/or raise additional capital to continue to fund the operations.

 

Note 2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The Company’s unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP, and pursuant to the regulations of the U.S. Securities and Exchange Commission, or SEC. As permitted under those rules, certain notes or other financial information that are normally required by GAAP have been condensed or omitted and accordingly, the consolidated balance sheet as of December 31, 2022 has been derived from the Company’s audited consolidated financial statements at that date but does not include all of the information required by GAAP for complete consolidated financial statements. These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of the Company’s consolidated financial statements. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ended December 31, 2023 or for any other interim period or future year.

 

The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated.

 

The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2023.

 

Use of Estimates

 

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions made in the accompanying unaudited condensed consolidated financial statements include certain accrued expenses for research and development activities. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that are believed to be reasonable under the circumstances,

 

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the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could materially differ from those estimates.

 

Concentration of Credit Risk

 

Financial instruments, which potentially subject the Company to significant concentration of credit risk, consist of cash, cash equivalents and marketable securities. The Company's cash is held by financial institutions that may at times exceed federally insured limits. However, the Company’s exposure to credit risk in the event of default by the financial institution is limited to the extent of amounts recorded on the unaudited condensed consolidated balance sheets. The Company believes it is not exposed to significant credit risk on cash. The Company’s cash equivalents and marketable securities are held in custodial accounts maintained by third-party custodians. The Company's policy is to invest cash in institutional money market funds and marketable securities with high credit quality to limit the amount of credit exposure. The Company currently maintains a portfolio of cash equivalents and marketable securities in a variety of securities, including money market funds, government bonds and commercial paper. The Company has not experienced any losses on its cash equivalents and marketable securities.

 

Marketable Securities

 

The Company invests its excess cash in government bonds and commercial paper. All marketable securities have been classified as available-for-sale and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities. The Company does not buy or hold securities principally for the purpose of selling them in the near future. The Company’s investment policy is focused on the preservation of capital, liquidity and return. From time to time, the Company may sell certain securities, but the objectives are generally not to generate profits on short-term differences in price.

 

Short-term marketable securities have maturities less than or equal to one year as of the balance sheet date. These marketable securities are carried at estimated fair value with unrealized holding gains or losses included in accumulated other comprehensive income (loss) in stockholders’ equity until realized. Gains and losses on marketable security transactions are reported on the specific-identification method. Interest income is recognized in the unaudited condensed consolidated statements of operations and comprehensive loss when earned.

 

The Company periodically evaluates its available-for-sale marketable securities for credit losses. When the fair value of a marketable security is below its amortized cost basis, the amortized cost is reduced to its fair value if it is more likely than not that the Company is required to sell the security before recovery of its amortized cost, or the Company has the intention to sell the security. If neither of these conditions are met, the Company determines whether the decline in fair value is due to credit losses by comparing the present value of the expected cash flows of the security with its amortized cost basis. The amount of credit losses recognized is limited to the excess of the amortized cost basis over the fair value of the security. An allowance for credit losses for the excess of amortized cost basis over the expected cash flows, if any, is recorded in other income, net on the unaudited condensed consolidated statements of operations. Any losses from declines in fair value that are not credit-related are included in accumulated other comprehensive income (loss) in stockholders’ equity.

 

Warrant Liabilities

The Company's warrants are classified as liabilities. At the end of each reporting period, any changes in fair value during the period are recognized in other income, net within the unaudited condensed consolidated statements of operations and comprehensive loss. The Company will continue to adjust the warrant liabilities for changes in the fair value until the earlier of a) the exercise or expiration of the warrants or b) the redemption of the warrants, at which time such warrants will be reclassified to additional paid-in capital.

Revenue Recognition

The Company records accounts receivable for amounts billed to the customer for which the Company has an unconditional right to consideration. The Company assesses accounts receivable for impairment and, to date, no impairment losses have been recorded.

The Company executed a Collaboration and Licensing Agreement, or CLA, with Boehringer Ingelheim International GmbH, or BI, in October 2022 to which the Company licensed certain rights to its intellectual property that is determined within the scope of ASC 606. The terms of the CLA include payments to the Company of a non-refundable upfront payment, development, regulatory and commercial milestone payments and royalties on net sales of licensed products.

The Company determined that the Company's intellectual property granted to BI represented one performance obligation for the purposes of conducting the partnership research and further development on SZN-413. The transaction price was determined to be the non-refundable upfront payment. Variable consideration related to future milestones was fully constrained because the Company

 

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cannot conclude that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur, given the inherent uncertainty of success with these future milestones. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. The Company will recognize sales-based royalties as revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalties that have been allocated have been satisfied (or partially satisfied).

 

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss attributable to common stock by the weighted-average number of shares of common stock outstanding for the period, without consideration for potential dilutive securities. Since the Company was in a loss position for the periods presented, basic net loss per share is the same as diluted net loss per share as the effects of the potentially dilutive securities are antidilutive. The following table presents the potential shares of common stock outstanding that were excluded from the computation of diluted net loss per share of common stock as of the periods presented because including them would have been antidilutive (in thousands):

 

		September 30,
		2023				2022
Options outstanding			4,752				3,811
Unvested restricted stock awards			69				117
Unvested restricted stock units			1,345				—
Unvested common stock subject to repurchase			2				29
Warrants to purchase common stock			5,907				7,219
Total			12,075				11,176

 

Note 3. Fair Value Measurement

 

The following tables summarize the Company’s financial assets and liabilities that are measured at fair value on a recurring basis (in thousands):

 

		As of September 30, 2023
		Level 1				Level 2				Level 3				Total
Assets:
Money market funds(1)		$	28,622			$	—			$	—			$	28,622
Commercial paper (2)			—				2,991				—				2,991
Government bonds			—				7,964				—				7,964
Total financial assets measured at fair value		$	28,622			$	10,955			$	—			$	39,577
Liabilities(3):
Public Warrants		$	112			$	—			$	—			$	112
PIPE Warrants			—				131				—				131
Total financial liabilities measured at fair value		$	112			$	131			$	—			$	243

 

 

 

8

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		As of December 31, 2022
		Level 1				Level 2				Level 3				Total
Assets:
Money market funds(1)		$	9,194			$	—			$	—			$	9,194
Commercial paper			—				22,549				—				22,549
Corporate bonds			—				10,797				—				10,797
Government bonds			—				17,802				—				17,802
Government agency debt securities(1)			—				3,982				—				3,982
Total financial assets measured at fair value		$	9,194			$