Surrozen, Inc./DE

Note 1. Orga nization and Business

Organization

Surrozen, Inc., or the Company, is a biotechnology company committed to discovering and developing drug candidates to selectively modulate the Wnt pathway, a critical mediator of tissue repair with a current focus in ophthalmology. The Company, a Delaware corporation, is located in South San Francisco, California and it operates and manages its business in one operating segment. Surrozen Netherlands, B.V. was incorporated in May 2022 and is located in Amsterdam, Netherlands as a wholly-owned subsidiary of the Company.

Liquidity

The Company has incurred net losses since inception. During the years ended December 31, 2024 and 2023, the Company incurred a net loss of$63.6 million and $43.0 million, respectively. During the years ended December 31, 2024 and 2023, the Company used $17.6 million and $40.4 million of cash in operations. As of December 31, 2024, the Company had cash and cash equivalents of $34.6 million and an accumulated deficit of approximately $285.3 million. The Company expects operating expenses to continue to be significant in connection with its ongoing clinical study 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 andthe gross proceeds of approximately $76.4 million received from the private placement in March 2025 (Note 17) are sufficient for the Company to continue operating activities for at least the next 12 months from the date of issuance of its 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.

Reverse Stock Split

On December 13, 2023, the Company filed a certificate of amendment to its certificate of incorporation to effect a 1-for-15 reverse stock split of the issued and outstanding common stock, or the Reverse Stock Split. As a result of the Reverse Stock Split, every 15 shares of issued and outstanding common stock was converted into one issued and outstanding share of common stock, without any change in par value per share. The Reverse Stock Split affected all shares of common stock outstanding immediately prior to the effectiveness of the Reverse Stock Split, as well as the number of shares of common stock available for issuance under the equity incentive plans and employee stock purchase plan. In addition, the Reverse Stock Split effected a reduction in the number of shares of common stock issuable upon the exercise of stock options, restricted stock units and warrants outstanding immediately prior to the effectiveness of the Reverse Stock Split with a corresponding increase in the exercise price per share applicable to such stock options and warrants. No fractional shares were issued because of the Reverse Stock Split. Stockholders who would otherwise be entitled to receive a fractional share received a cash payment in lieu thereof. All share and per share amounts in these consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Split.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The Company’s consolidated financial statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP, as determined by the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, and pursuant to the regulations of the U.S. Securities and Exchange Commission, or SEC. The consolidated financial statements include the accounts of the Company and its subsidiary. All intercompany transactions and balances have been eliminated.

Use of Estimates

Thepreparation of consolidated financial statements in conformity with U.S. 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions made in the accompanying consolidated financial statements include certain accrued expenses for research and development activities, valuation of operating lease right-of-use assets and lease liabilities, valuation of warrant asset, and fair value of warrants issued in connection with the closing of a private placement in April 2024. Management bases its estimates on historical experienceand on various other market-specific and relevant assumptions that are believed to be reasonable under the circumstances, 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 and cash equivalents. 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 consolidated balance sheets. The Company believes it is not exposed to significant credit risk on cash. The Company’s cash equivalents were held in custodial accounts maintained by third party custodians. The Company’s policy is to invest cash in institutional money market funds with high credit quality to limit the amount of credit exposure. The Company has not experienced any losses on its cash equivalents.

Cash and Cash Equivalents

Cash equivalents relate to securities having an original maturity of three months or less at the time of purchase. As of December 31, 2024 and 2023, cash and cash equivalents consisted of bank deposits and money market funds.

Restricted Cash

As of December 31, 2024 and 2023, the Company had $0.7 million of restricted cash consisting of a letter of credit for the Company’s facility lease and the collateral associated with the Company’s credit card program.

Property and Equipment

Property and equipment, including leasehold improvements, are recorded at cost net of accumulated depreciation and amortization. Major replacements and improvements that extend the useful lives of assets are capitalized, while general repairs and maintenance are charged to expense as incurred. Property and equipment are depreciated and amortized using the straight-line method over the estimated useful lives of the assets as follows:

When assets are retired or otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from the consolidated balance sheet and the resulting gain or loss is recognized in the period realized.

Leases

Material leases with a term longer than one year are recognized as right-of-use, or ROU, assets and lease liabilities in the Company’s consolidated balance sheets. The Company determines the lease classification and measurement of its ROU assets and lease liabilities at the lease commencement date and thereafter if modified. The Company uses its incremental borrowing rate, based on the information available at the commencement date, to determine the present value of lease payments if the rate implicit in the lease is not readily available. The ROU asset is based on the measurement of the lease liability and is adjusted for lease incentives provided by the landlord. Lease expense for the Company’s operating leases is recognized on a straight-line basis over the lease term. The lease term includes any renewal options and termination options that the Company is reasonably assured to exercise. For a lease modification, an evaluation is performed to determine if it should be treated as either a separate lease or a change in the accounting of an existing lease. When a modification does not result in a separate contract, the Company reassesses the lease classification, remeasures the related lease liability using an updated incremental borrowing rate that reflects the modified lease term, and adjusts the related ROU asset.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, including property and equipment and operating lease right-of-use assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. Recoverability is measured by comparing the carrying amount to the future net undiscounted cash flows which the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value.

Warrant Liabilities

The Company’s warrants are classified as liabilities and measured at fair value. Transaction costs associated with the warrant liabilities are recognized as other expenses when incurred. At the end of each reporting period, any change in fair value during the period is recognized in other (expense) income, net within the consolidated statements of operations and comprehensive loss. The Company will continue to adjust the warrant liabilities pertaining to the outstanding warrants 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 recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers (Topic 606), or by analogy, when its counterparty obtains control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for these goods or services. To determine revenue recognition for the arrangement that is within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services transferred to the customer. If the counterparty to a research and development arrangement is not a customer, services being provided align with the Company's ordinary activities, and the arrangement falls outside of the scope of all accounting standards, the Company applies ASC 606 by analogy and recognizes revenue related to such arrangement.

At contract inception, the Company assesses the goods or services promised within the contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes revenue for the amount of the transaction price that is allocated to the respective performance obligations when or as the performance obligations are satisfied. The Company constrains its estimate of the transaction price up to the amount (the variable consideration constraint) that a significant reversal of recognized revenue is not probable.

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

Licenses of Intellectual Property: If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable upfront fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promised goods or services, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable upfront fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Services: Service fees are recognized over time based on progress toward complete satisfaction of the performance obligation. For each performance obligation satisfied over time, the Company assesses the proper method to be used for recognition, either an input method to measure progress toward the satisfaction of services or an output method of determining the progress of completion of performance obligation.

Milestone Payments: At contract inception, the Company uses the most likely amount method evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price. If it is probable that a significant reversal of cumulative revenue would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received or the underlying activity has been completed. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. 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. Any such adjustments are recorded as revenue on a cumulative catch-up basis during the period of adjustment.

Royalties: The Company recognizes 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).

The incremental costs of obtaining a contract are expensed as and when incurred if the amortization period of the asset that would have been recognized is one year or less.

Research and development costs are expensed as incurred. Research and development costs consist of external and internal expenses directly attributable to the conduct of research and development programs. The external expenses include the costs of services provided by outside contractors, clinical research organizations and contract manufacturing organizations. The internal expenses include the costs of salaries, bonus, payroll taxes, stock-based compensation, employee benefits, materials, supplies, depreciation on and maintenance of research equipment, and the allocated facility-related costs, such as rent, utilities, insurance, repairs and maintenance, and general support services.

The Company has entered into and may continue to enter into licensing or subscription arrangements to access and utilize certain technology. In each case, the Company evaluates if the license agreement results in the acquisition of an asset or a business. To date, none of the Company’s license agreements have been considered an acquisition of a business. For asset acquisitions, the upfront payments to acquire such licenses, as well as any future milestone payments made before product approval that do not meet the definition of a derivative, are immediately recognized as research and development expense when they are paid or become payable, provided there is no alternative future use of the rights in other research and development projects.

Accrued Research and Development Expenses

The Company records accruals for estimated costs of research, preclinical, clinical, and manufacturing development, which are significant components of research and development expenses, within accrued and other liabilities in the accompanying consolidated balance sheets. A substantial portion of the Company’s preclinical studies, clinical trials and contract manufacturing activities is conducted by third-party service providers. The Company accrues for estimated costs of research and development activities conducted by third-party service providers based upon the estimated services provided but not yet invoiced. We estimate the amounts incurred in each period based on the information available and our knowledge of the nature of the contractual activities generating such costs. Payments made to third parties under these arrangements in advance of the performance of the related services are recorded as prepaid expenses until the services are rendered.

If the actual timing of the performance of services or the level of effort varies from the estimate, the Company adjusts accrued expenses or prepaid expenses accordingly, which impacts research and development expenses. For the years ended December 31, 2024 and 2023, the Company did not have any material differences between accrued costs and actual costs incurred. Although the Company does not expect its estimates to be materially different from amounts actually incurred, its understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period.

Stock-Based Compensation

The Company recognizes stock-based compensation expense for all stock-based awards. For stock awards, stock-based compensation cost is estimated on the grant date based on the closing price of the Company’s stock, with consideration of whether there is material nonpublic information that could impact the estimated fair value of awards. Stock-Based compensation cost is recognized as expense on a straight-line basis over the requisite service period. Under the Company’s employee stock purchase plan, stock-based compensation cost is measured at the beginning of the offering period and recognized on a straight-line basis over the offering period. Forfeitures are accounted for as they occur.

The Company has elected to calculate the fair value of awards using the Black-Scholes option pricing model, or the Black-Scholes Model. The Black-Scholes Model requires the use of various assumptions including common stock valuation, expected option life and expected stock price volatility. The Company estimates the expected term for stock options using the simplified method as the midpoint between the vesting date and the contractual expiration date of the award as the Company has limited historical exercise information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants. Due to the limited trading history of the Company’s stock, the Company estimates the volatility using volatilities of a group of public companies in a comparable industry, stage of life cycle, and size. The interest rate is derived from the U.S. Treasury instruments with maturities similar to the expected term of the options. The Company has not declared nor expects to declare dividends. Therefore, there is no dividend impact on the valuation of options.

Comprehensive Income

The Company’s comprehensive income consists of unrealized gains on marketable securities.

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. Diluted net loss per share is calculated using the more dilutive of the two-class method or treasury method. The Company’s 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):

Income Taxes

The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates expected to be in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized.

The Company assesses all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is more likely than not of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and the Company will determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of the recognized tax benefit is still appropriate. The recognition and measurement of tax benefits require significant judgment. Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.

The Company’s policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit. To date, there have been no interest or penalties charged in relation to unrecognized tax benefits.

Emerging Growth Company Status

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Recent Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board, or FASB, issued Accounting Standards update 2024-03, Income Statement Reporting—Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses. The standard improves the disclosures about a public business entity’s expenses and requires more detailed disclosures about specified categories of expenses (including employee compensation, depreciation, and amortization) included in expense captions presented on the statement of operations. The guidance will be effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The standard is to be applied either prospectively or retrospectively. The Company is evaluating the impact of adopting this standard on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued Accounting Standards Update 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The standard requires entities to disclose additional categories about federal, state and foreign income taxes in the effective tax rate reconciliation as well as provide annual income taxes paid disaggregated by federal, state and foreign taxes. The standard is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is evaluating the impact of adopting this standard on its consolidated financial statements and related disclosures.

In November 2023, the FASB issued Accounting Standards Update 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The standard improves reportable segment disclosure requirements through enhanced disclosures about significant segment expenses and information used to assess segment performance. All disclosure requirements of the update are required for entities with a single reportable segment. The standard is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and requires retrospective application to all prior periods presented in the financial statements. The Company adopted this standard effective in 2024. There was no material impact on the Company’s reportable segments and the required disclosures have been included in Note 16.

In August 2020, the FASB issued Accounting Standards Update 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40). This standard eliminates the beneficial conversion and cash conversion accounting models for convertible instruments, amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions, and modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted earnings per share calculation. The standard is effective for annual periods beginning after December 15, 2023 for smaller reporting companies, and interim periods within those reporting periods. The Company adopted this standard effective January 1, 2024, using a modified retrospective method. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Note 3. Fair Value Measurement

The Company records its financial assets and liabilities at fair value. The carrying amount of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, restricted cash, accounts payable, and accrued and other liabilities, approximate their fair value due to their short-term maturities. The accounting guidance for fair value establishes a framework for measuring fair value and a fair value hierarchy that prioritizes the inputs used in valuation techniques. The fair value hierarchy is based on three levels of inputs that may be used to measure fair value as follows:

Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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

(1)

Included in cash and cash equivalents on the consolidated balance sheets as of December 31, 2024 and 2023.

(2)

See Note 11, Common Stock Warrants.

There wereno changes to the valuation methods utilized on existing financial instruments, and there wereno transfers of financial instruments between Level 1, Level 2, and Level 3 for the years ended December 31, 2024 and 2023.

The 2021 Public Warrants (as defined in Note 11 below) are classified as Level 1 due to the use of an observable market quote in an active market. The 2021 PIPE Warrants (as defined in Note 11 below) are classified as Level 2 due to the use of observable market data for identical or similar liabilities. The fair value of each 2021 PIPE Warrant is determined to be consistent with that of a 2021 Public Warrant because the 2021 PIPE Warrants are also subject to the make-whole redemption feature, which allows the Company to redeem both types of warrants on similar terms.

The 2024 Pre-Funded Warrants (as defined in Note 11 below) are classified as Level 2 due to the use of observable market data for similar instruments. The fair value of the 2024 Pre-Funded Warrants is determined to be consistent with the fair value of the Company’s common stock due to the nominal exercise price. The 2024 PIPE Warrants (as defined in Note 11 below) are classified as Level 3 because the fair value was measured based on significant inputs that are unobservable in the market. The 2024 PIPE Warrants were initially recorded at fair value and subsequently remeasured at each reporting period using the Black-Scholes option-pricing model. The significant unobservable inputs used in the fair value measurement of the warrants include the timing and probability of achieving the milestones and the expected volatility. The expected volatility was implied from a peer analysis. The expected term was estimated based on the timing of when the milestone is expected to be achieved, and the risk-free interest rate was based on the implied yield available on U.S. Treasury Securities with a maturity equivalent to the expected term. The dividend rate is based on the historical rate, which the Company anticipated remaining at zero.

The fair value of the 2024 PIPE Warrants may change significantly as additional data is obtained, impacting the Company’s assumptions to estimate the fair value of the liabilities. In evaluating this information, considerable judgment is required to interpret the data used to develop the assumptions and estimates. Accordingly, the use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value amounts, and such changes could materially impact the Company’s results of operations in future periods. Particularly, in March 2025, the Company announced its discontinuation of the development of SZN-043 in severe alcohol associated hepatitis. Additionally, in connection with the Company’s private placement in March 2025, boththe exercise prices ofthe Company’s outstanding Series A and Series B common stock warrants were reduced to $11.54 per share, except that the exercise prices per warrant for such warrants held by members of management were reduced to $12.45 per share. In addition, the Company’s outstanding Series C and Series D common stock warrants were cancelled and nofurther obligations or rights exist with respect to the Series C and Series D common stock warrants. Please see Note 17 for information regarding the private placement in March 2025.

The key inputs into the fair value measurement of the 2024 PIPE Warrants were as follows at the initial measurement and December 31, 2024:

(1) Included in other (expense) income, net on the consolidated statement of operations.

Assets that are Measured at Fair Value on a Nonrecurring Basis

Equity investment

The Company received a warrant pursuant to a strategic research collaboration as discussed in Note 10. To determine the value of the warrant at contract inception, the Company utilized the Option Pricing Method, or OPM, based analysis, primarily the OPM backsolve methodology. Within the OPM framework, the backsolve method, for inferring the total equity value implied by a recent financing transaction, involves the construction of an allocation model that takes into account the Company’s capital structure and the rights, preferences and privileges of each class of stock, then assumes reasonable inputs for the other OPM variables. The fair value of the warrant at contract inception was determined to be $2.6 million on October 31, 2024. The key assumptions used in the OPM included a probability of contract in effect, an expected holding period of five years, an estimated volatility of 102%, a risk free interest rate of 4.11% andzero dividend yield. These represent a Level 3 nonrecurring fair value measurement.

As the warrant asset does not have a readily determinable fair value, the Company elected to use a measurement alternative for all subsequent measurements. Under such measurement alternative, the warrant is remeasured at fair value when observable transactions involving the underlying security or impairment of the warrant asset occurred. The Company is not aware of any events or changes in circumstances that would have a significant effect on the fair value of the warrant as of December 31, 2024.

Long-lived assets

The Company’s long-lived assets such as property and equipment and operating lease right-of-use assets, are adjusted to fair value on a nonrecurring basis when an impairment has occurred. As of December 31, 2023, the Company identified an indicator of impairment of its long-lived assets due to a sustained decline in the trading price of the Company’s common stock over the preceding year, resulting in the Company’s market capitalization being below its net asset value. As a result of the sustained decline in the Company’s stock price, the Company determined an impairment indicator was present. The Company determined all of its long-lived assets represent a single asset group for the purpose of the long-lived asset impairment assessment. The Company concluded that the carrying value of the single asset group was not recoverable as it exceeded the future net undiscounted cash flows that are expected to be generated from the use and eventual disposition of the assets within the asset group. The implied allocated impairment loss to any individual asset within the long-lived asset group shall not reduce the carrying amount of that asset below its fair value.

Todetermine the fair value of the individual assets within the asset group, the Company utilized the discounted cash flow method of the income approach based on market participant assumptions with Level 3 inputs. These represent a Level 3 nonrecurring fair value measurement. Calculating the fair value of the assets involves significant estimates and assumptions. These estimates and assumptions include, among others, projected future cash flows, risk-adjusted discount rates and market conditions. Changes in the factors and assumptions used could materially affect the amount of impairment loss recognized in the period the asset was considered impaired. For the year ended December 31, 2023, the Company recognized an impairment loss of $0.2 million, consisting of $0.1 million on the operating lease right-of-use asset and $0.1 million on the leasehold improvements, which is included in research and development expenses and general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss.

The Company is not aware of any identified events or changes in circumstances that would have a significant adverse effect on the carrying value of its long-lived assets for the year ended December 31, 2024.

Note 4. Balance Sheet Components

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

Property and Equipment, Net

Property and equipment, net consists of the following (in thousands):

Depreciation expenses for the years ended December 31, 2024 and 2023 was $1.4 million and $1.9 million, respectively. For the year ended December 31, 2023, the Company recorded an asset impairment charge of $0.1 million on its leasehold improvements. Refer to Note 3, Fair Value Measurementfor more information.

Accrued and Other Liabilities

Accrued and other liabilities consist of the following (in thousands):

Note 5. Leases

In August 2016, the Company entered into a lease agreement for office and lab space, which consists of approximately 32,813 square feet of rental space in South San Francisco, California. The office space lease is classified as an operating lease. The initial lease term commenced in May 2017 and ends in April 2025, with rent payments escalating each year. In October 2024, the Company amended its existing lease agreement to extend the lease term from April 2025 to April 2029. The Company has an option to extend the lease for an additional four-year period and a one-time option to early terminate the lease effective as of April 30, 2026, subject to a termination fee of $0.4 million. The future exercise of either option is not reasonably certain. The total future lease payments under the amendment are approximately $9.8 million.

In connection with the lease, the Company maintains a letter of credit for the benefit of the landlord in the amount of $0.4 million, which is recorded as restricted cash in the consolidated balance sheets.

The operating lease expense for the years ended December 31, 2024 and 2023 was $1.8 million and $1.6 million, respectively. For the year ended December 31, 2023, the Company recorded an asset impairment charge of $0.1 million on its right-of-use assets. Refer to Note 3, Fair Value Measurementfor more information.

Aggregate future minimum rental payments under the operating leases as of December 31, 2024, were as follows (in thousands):

The following represents supplemental information related to the Company’s operating leases:

Note 6. Collaboration and License Agreements

Collaboration and License Agreement with Boehringer Ingelheim International GmbH

In October 2022, the Company executed the CLA with BI to research, develop and commercialize Frizzled 4, or Fzd4, bi-specific antibodies designed using the Company’s SWAP technology, including SZN-413. The Company and BI are conducting partnership research focused on SZN-413 during a 1.5-year period. The Company granted BI an exclusive, royalty-bearing, worldwide, sublicensable license, under the applicable patents and know-how, to develop, manufacture and commercialize, for all uses, one lead and two back-up Fzd4 bi-specific antibodies selected by BI. After an initial period of joint research, BI shall be responsible for all further research, preclinical and clinical development, manufacturing, regulatory approvals, and commercialization of licensed products at its expense. Unless terminated earlier, the CLA will remain effective, on a country-by-country and product-by-product basis, until the expiration of BI's royalty obligations. BI has the right to terminate the CLA for any reason after a specified notice period. Each party has the right to terminate the CLA on account of the other party’s bankruptcy or material, uncured breach.

Under the terms of the CLA, BI agreed to pay a non-refundable upfront payment of $12.5 million less any applicable withholding tax, success-based milestone payments up to a total of $587.0 million and mid-single digit to low-double digit royalties on net sales of the licensed products should any reach commercialization. The royalty payments will be subject to reduction due to patent expiration, generic competition and payments made under certain licenses for third-party intellectual property. The Company received $10.5 million of the upfront payment from BI in November 2022. The associated withholding tax of $2.0 million is expected to be refunded to the Company in 2025 and recognized as accounts receivable. In September 2024, a milestone was achieved as BI decided to move forward with the development of SZN-413, and the Company received a $10.0 million non-refundable and non-creditable payment from BI pursuant to the terms of the CLA. The milestone payment of $10.0 million was recognized ascollaboration and license revenue for the year ended December 31, 2024.

The Company determined that the CLA is within the scope of ASC 606. The Company evaluated the promised goods and services and determined that the license to 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 $12.5 million at the inception, which is the non-refundable upfront payment. Variable consideration related to future milestones is fully constrained because the Company 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. For sales-based royalties, the Company determined that the license is the predominant item to which the royalties relate to. Accordingly, the Company will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all the royalty has been allocated has been satisfied (or partially satisfied). The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

Note 7. License Agreements

Stanford License Agreements

In March 2016, the Company entered into a license agreement with Stanford University, or the Stanford Agreement, which was amended in July 2016, October 2016 and January 2021, pursuant to which the Company obtained from Stanford a worldwide, exclusive, sublicensable license under certain patents, rights, or licensed patents and technology related to its engineered Wnt surrogate molecules to make, use, import, offer to sell and sell products that are claimed by the licensed patents or that use or incorporate such technology, or licensed products, for the treatment, diagnosis and prevention of human and veterinary diseases. The Company agreed to pay Stanford (i) nominal annual license maintenance fees which are creditable against earned royalties owed to Stanford for the same year, (ii) an aggregate of up to $0.9 million for the achievement of specified development and regulatory milestones, and (iii) an aggregate of up to $5.0 million for achievement of specified sales milestones. Stanford is also entitled to receive royalties from the Company equal to a very low single digit percentage of the Company’s and its sublicensees’ net sales of licensed products that are covered by a valid claim of a licensed patent. Additionally, the Company agreed to pay Stanford a sub-teen double digit percentage of certain consideration the Company receives as a result of granting sublicenses to the licensed patents. However, the Companyand Stanford may be able to negotiate a lower non-royalty sublicense percentage based on then-current value of the licensed patents for each sublicense product. If the Company is acquired, it agreed to pay a one-time change of control fee in the low six figures. Stanford retains the right under the Stanford Agreement, on behalf of itself, Stanford Hospital and Clinics, the University of Washington and all other non-profit research institutions, to practice the licensed patents and technology for any non-profit purpose. The licensed patents and technology are additionally subject to a non-exclusive, irrevocable, worldwide license held by the Howard Hughes Medical Institute to practice the licensed patents and technology for its research purposes, but with no right to assign or sublicense.

For the years ended December 31, 2024 and 2023, the Company incurred research and development expenses of appro ximately $0.1 million, respectively, under the Stanford Agreement. No milestones have been achieved as of December 31, 2024.

Note 8. Restructuring

In January 2023, the Company implemented a restructuring plan approved by the board of directors to prioritize and focus its resources on key clinical and discovery programs. The plan included a reduction of the Company’s overall workforce by approximately 25% in the first quarter of 2023. In connection with the workforce reduction, the Company incurred one-time restructuring charges, including employee severance and other termination benefits, of approximately $1.2 million in the first quarter of 2023.

In July 2023, the Company implemented a restructuring plan approved by the board of directors to further reduce its overall workforce by approximately 38% to better align its workforce with the business needs and focus more of its capital resources on its clinical stage programs. The Company completed the workforce reduction in 2023 and incurred one-time restructuring charges, including employee severance and other termination benefits, of approximately $1.5 million recognized ratably over the requisite service period from July 2023 through March 2024.

The outstanding restructuring liabilities are included in accrued and other liabilities on the consolidated balance sheet. The following table summarizes activity during the years ended December 31, 2024 and 2023 (in thousands):

Note 9. Stockholders’ Equity

2024 Private Placement

In April 2024, the Company entered into a securities purchase agreement with certain institutional investors, or the Investors, and certain members of management whereby the Company issued and sold in a private placement, or the Private Placement: (i)1.1 million shares of common stock, (ii) pre-funded warrants to purchase up to 40,000 shares of common stock, and (iii) warrants to purchase up to 11.1 million shares of common stock for aggregate gross proceeds of approximately $17.5 million. The purchase price of common stock and pre-funded warrants to the Investors was$15.50 per share and $15.4999 per share, respectively. The pre-funded warrants and warrants were issued with an initial fair value of $37.9 million, which was greater than the aggregate gross proceeds in the private placement. The excess of $20.4 million was recorded as loss on issuance of common stock, pre-funded warrants and warrants on the consolidated statements of operations and comprehensive loss. The Company incurred transaction costs of $1.5 million, consisting of placement agent fees and other expenses, all of which were allocated to the warrant liabilities associated with the pre-funded warrants and warrants issued, and recognized the allocated transaction costs as other expenses when incurred. See Note 11 for more information regarding the warrants issued and sold to the Investors in the Private Placement and Note 10 for more information regarding the shares of the Company’s common stock and the warrants issued and sold to management in the Private Placement.

Note 10. Related Party Transactions

Research Collaboration Agreement with TCGFB, Inc.

In October 2024, the Company entered into a strategic research collaboration with a privately-held company, TCGFB, Inc., or TCGFB, to discover antibody therapeutics targeting transforming growth factor beta, or TGF-β, for the potential treatment of patients with idiopathic pulmonary fibrosis, or TCGFB Collaboration. TCGFB will own all TGF-β product related intellectual property. Under the terms of the agreement, the Company provides antibody discovery services for a period of up to two years and delivers a non-exclusive license as necessary for continued research. TCGFB may terminate this agreement at any time upon prior written notice. Upon termination, TCGFB shall pay to the Company all sums owed for services completed up to the effective termination date. In exchange for the Company’s research services, TCGFB pays a fixed monthly service fee up to $6.0 million in the aggregate, plus any third-party costs, and issued the Company a warrant exercisablefor up to 3.4 million shares of TCGFB common stock at an exercise price of $0.0001 per share.2.4 million shares of the warrant vest monthly over 2 years,0.5 million shares vest on the 18-month anniversary, and 0.5 million shares vest on the 24-month anniversary. TCGFB was founded and is controlled by entities affiliated with The Column Group. The agreement constitutes a related party transaction because entities affiliated with The Column Group hold more than 5% of the Company’s common stock and Dr. Kutzkey, a member of the Company’s board of directors, serves as Managing Partner of The Column Group.

While TCGFB is not a customer and the service being provided is consistent with the Company's ordinary activities, the Company determined that the TCGFB Collaboration is in the scope of ASC 606 by analogy. The Company evaluated the promised goods and services and determined that the service to TCGFB and the potential grant of the non-exclusive license represented one combined performance obligation for discovery antibody therapeutics targeting TGF-β. The transaction price was determined to be the fixed monthly service fee plus variable consideration related to the warrant. Revenue is recognized over time for the combined performance obligation using the input method.

The warrant received does not meet the definition of a derivative and account for as an equity investment under ASC 321. Please refer to Note 3 for the fair value measurement of the warrant. The warrant is recognized as warrant asset once the vesting restrictions are lifted.

During the year ended December 31, 2024, the Company recognized $0.7 million as research service revenue – related party for the services rendered, consisting of the fixed cash consideration of $0.5 million as accounts receivable – related party and the variable noncash consideration of $0.2 million as warrant asset on the consolidated balance sheet.

2024 Private Placement

As described in Note 9, the Company entered into a securities purchase agreement with Investors and certain members of management in April 2024, wherebythe Company issued and sold to members of management 2,948 shares of common stock, at a purchase price of $16.96 per share for aggregate gross proceeds of $0.1 million. The purchase price per share of common stock includes $1.25 for the following 2024 PIPE Warrants:

•

Series A common stock warrants to purchase up to 2,948 shares of common stock with an exercise price of $16.96 per share.

•

Series B common stock warrants to purchase up to 3,206 shares of common stock with an exercise price of $15.71 per share.

•

Series C common stock warrants to purchase up to 11,424 shares of common stock with an exercise purchase price of $16.00 per share.

•

Series D common stock warrants to purchase up to 11,424 shares of common stock with an exercise price of $16.00 per share.

The terms of the 2024 PIPE Warrants held by management are the same as those held by the Investors. See Note 11 for the terms of the 2024 PIPE Warrants.

Sublease

In April 2024, the Company entered into a related party transaction with Nura Bio, Inc., or Nura Bio, to sublease approximately 6,102 square feetof the Company’s office and laboratory space. The sublease term is on amonth-to-month basis and the monthly base rent is approximately $35,000, escalating at 3% per annum. Nura Bio is also responsible for its share of real estate taxes, utilities and other operating expenses applicable to the subleased space. During the year ended December 31, 2024, the Company recognized sublease income of $0.4 million as reductions to operating expenses. Tim Kutzkey, Ph.D., a member of the Company’s board of directors, serves as the chairman of the board of directors of Nura Bio. Dr. Kutzkey also serves as Managing Partner of The Column Group, LLC, which is the general partner of certain limited partnerships which are significant stockholders of Nura Bio. The Column Group holds more than 5% of the Company’s common stock. Therefore, the agreement constitutes a related party transaction.

Note 11. Common Stock Warrants

The following table sets forth the common stock warrants outstanding as of December 31,2024 and 2023 (in thousands, except exercise price per warrant):

2024 Pre-Funded Warrants and 2024 PIPE Warrants

As described in Note 9, in April 2024, the Company entered into a securities purchase agreement with Investors and certain members of management whereby the Company issued and sold in a private placement: (i) common stock, (ii) pre-funded warrants to purchase common stock, or the 2024 Pre-Funded Warrants, and (iii) warrants to purchase common stock, or the 2024 PIPE Warrants. The purchase price per share of common stock and per Pre-Funded Warrant includes $1.25 for the following accompanying common stock warrants issued to the Investors:

•

Series A common stock warrants to purchase up to 1.1 million shares of common stock with an exercise price of $15.50 per share, for aggregate gross proceeds of up to approximately $17.5 million, exercisable immediately upon issuance forfive years.

•

Series B common stock warrants to purchase up to 1.2 million shares of common stock with an exercise price of $14.25 per share, for aggregate gross proceeds of up to approximately $17.5 million, exercisable immediately upon issuance until thefifth trading day following the Company’s announcement that (i) it has completed the enrollment of at least 15 patients with a 30-day mortality rate less than 30% in the Company’s SZN-043 Phase 1b clinical trial for the treatment of severe alcohol-associated hepatitis, with no recommended changes by the safety review committee to the study design, including changes related to dose or schedule, and (ii) safety review committee approval for the Company to advance to a higher dose cohort.

•

Series C common stock warrants to purchase up to 4.4 million shares of common stock with an exercise price of $16.00 per share, for aggregate gross proceeds of up to approximately $70 million, exercisable for 30 days following the Company’s announcement of final data from the SZN-043 phase 1b clinical trial for the treatment of severe alcohol-associated hepatitis. The Series C common stock warrants will also become exercisable in the event of a fundamental transaction asdefined in the warrants.

•

Series D common stock warrants to purchase up to 4.4 million shares of common stock with an exercise price of $16.00 per share, for aggregate gross proceeds of up to approximately $70 million, exercisable for 30 days following the Company’s announcement of the enrollment of at least 50 patients in the SZN-043 Phase 2/3 clinical trial for the treatment of severe alcohol-associated hepatitis. The Series D common stock warrants will also become exercisable in the event of a fundamental transaction asdefined in the warrants.

The holders of the 2024 Pre-Funded Warrants and the 2024 PIPE Warrants are entitled to receive dividends if the Company declares or makes a dividend to holders of shares of common stock while such warrants are outstanding. If a purchaser fails to exercise such purchaser’s Series B common stock warrants in full, then all warrants issued to such purchaser are subject to mandatory transfer and to the extent not transferred shall automatically be cancelled and cease to be exercisable. If a purchaser fails to exercise such purchaser’s Series C common stock warrants in full, then the Series D common stock warrants issued to such purchaser shall automatically be cancelled and cease to be exercisable.

In connection with the private placement in March 2025, both the exercise prices of the Company’s outstanding Series A and Series B common stock warrants were reduced to $11.54 per share, except that the exercise prices per warrant for such warrants held by members of management were reduced to $12.45 per share, and the Company’s outstanding Series C and Series D common stock warrants were cancelled. Please see Note 17 for information regarding the private placement in March 2025.

2021 Public Warrants

Given the effect of the Reverse Stock Split as described in Note 1, every 15 shares of common stock that may be purchased pursuant to the Company’s outstanding public warrants, or the 2021 Public Warrants, immediately prior to the Reverse Stock Split represents 1 share of common stock that may be purchased pursuant to such warrants immediately following the Reverse Stock Split at a price of $172.50 per share, at any time commencing on November 23, 2021 and terminating at the earlier of August 12, 2026 or upon redemption or liquidation. The exercise price and number of shares issuable upon exercise of the 2021 Public Warrants may be adjusted in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. The Company would not be obligated to deliver any shares of common stock pursuant to the exercise of a 2021 Public Warrant and would have no obligation to settle such 2021 Public Warrant exercise unless a registration statement under the Securities Act with respect to the common stock underlying the 2021 Public Warrants is then effective. If the Company fails to have maintained an effective registration statement, the 2021 Public Warrant holders have the right to exercise the 2021 Public Warrants on a cashless basis until such time as there is an effective registration statement.

The Company may redeem the outstanding 2021 Public Warrants at a price of$0.01 per warrant if the closing price of common stock equals or exceeds $270.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and similar transactions). Additionally, the Company may redeem the outstanding 2021 Public Warrants at a price of $0.10 per warrant if the closing price of common stock equals or exceeds $150.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and similar transactions). Notice of redemption shall be mailed to the 2021 Public Warrant holders no less than 30 days prior to the redemption date, or the Redemption Period. If the closing price of common stock equals or exceeds $150.00 per share and is less than $270.00 per share, during the Redemption Period, the 2021 Public Warrant holders may elect to exercise their 2021 Public Warrants on a cashless basis based on a make-whole table.

2021 PIPE Warrants

At December 31, 2024, the Company’s warrants that were issued in connection with a private placement occurring in 2021, or the 2021 PIPE Warrants, are the same in all respects as the 2021 Public Warrants. On March 31, 2023, the Company entered into an amended and restated warrant agreement with Continental Stock Transfer & Trust Company as warrant agent, or the PIPE Warrant Agreement. The 2021 PIPE Warrants may be converted into Public Warrants on transfer pursuant to the terms of the PIPE Warrant Agreement. As of December 31, 2024,2.4 million 2021 PIPE Warrants had been converted into 2021 Public Warrants.

Classification

In no event will the Company be required to net cash settle outstanding warrants. The holders of all of the Company’s warrants do not have the rights or privileges of common stockholders and any voting rights until they exercise warrants and receive common stock. All of the Company’s outstanding warrants are classified as liabilities and recorded at fair value with subsequent change in their respective fair value recognized in other (expense) income, net within the consolidated statements of operations and comprehensive loss. See Note 3 for discussion of warrant valuations.

Note 12. Stock-Based Compensation Plans

The Company maintains the 2021 Equity Incentive Plan, or the 2021 Plan, which provides for the granting of stock awards to employees, directors and consultants. Options granted under the 2021 Plan may be either incentive stock options or nonqualified stock options. Options granted under the 2021 Plan expire no later than 10 years from the date of grant. Options and restricted stock awards, or RSAs, under the 2021 Plan generally vest over four years. Restricted stock units, or RSUs, granted under the 2021 Plan generally vest in two years. As of December 31, 2024, there were 0.1 million shares of common stock available for issuance under the 2021 Plan.

The Company maintains the 2021 Employee Stock Purchase Plan, or the ESPP, which allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to plan limitations. An offering period under the ESPP consists of four six-month purchase periods, unless otherwise determined by the Company. The eligible employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the purchase day. As of December 31, 2024, there were approximately 20,000 shares of common stock available for issuance under the ESPP.

Stock Options

A summary of stock option activity is set forth below (shares in thousands):

The aggregate intrinsic value of options outstanding and exercisable are the difference between the exercise price of the options and the fair value of the Company’s common stock at December 31, 2024.

The intrinsic value of options exercised during the years ended December 31, 2024 and 2023 was de minimis in both periods.

During the years ended December 31, 2024 and 2023, the Company granted options with a weighted-average grant-date fair value of$7.45 per share and $9.47 pershare, respectively.

Fair Value of Options

The fair value of options is estimated at the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions:

Restricted Stock Units

The following table summarizes the Company’s RSUs activity (shares in thousands):

The fair value of RSUs vested during the years ended December 31, 2024 and 2023 was $0.7 million andzero, respectively.

Stock-Based Compensation

Total stock-based compensation expense recorded in the consolidated statements of operations and comprehensive loss was as follows (in thousands):

As of December 31, 2024, there was approximately $3.4 million of stock-based compensation expense to be recognized over a weighted-average period of approximately 2.04 years.

Note 13. Income Taxes

No provision for income taxes was recorded for the years ended December 31, 2024 and 2023. The Company has incurred net operating losses for all the periods presented. The Company accounts for income taxes in accordance with the asset and liability method, which requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is not likely to be realized and, accordingly, has provided a full valuation allowance.

Significant components of the Company’s net deferred tax assets consist of the following (in thousands):

The net valuation allowance decreasedby $2.1 million and increased by $8.6 million for the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2024, the Company had net operating loss, or NOL, carryforwards of approximately $160.5 million and $5.0 million available to reduce future taxable income, if any, for federal and California state income tax purposes, respectively. NOL carryforwards generated after 2018 for federal tax reporting purposes of $156.8 million have an indefinite carryforward period. The remaining federal and state net operating loss carryforwards begin expiring in 2036.

As of December 31, 2024, the Company had research and development credit carryforwards of approximately zero and $3.8 million available to reduce future taxable income, if any, for federal and California state income tax purposes, respectively. The state credits carry forward indefinitely.

Federal and state laws impose substantial restrictions on the utilization of net operating loss and tax credit carryforwards in the event of an ownership change for tax purposes, as defined in Section 382 of the Internal Revenue Code. As a result of such ownership changes, the Company’s ability to realize the potential future benefit of tax losses and tax credits that existed at the time of the ownership change may be limited and may expire unutilized. Such impairment of tax losses and tax credits would reduce the deferred tax asset and corresponding valuation allowance, as a result of the limitation. The Company completed an assessment of the available NOLs under Section 382 and determined that the Company underwent an ownership change in September 2020 and April 2024. As a result of the annual limitations caused by the ownership change, it was estimated the approximately $2.6 million of federal tax credit, $8.8 million offederal NOL and $76.5 million of California NOL will expire unrealized for income tax purposes, and such amounts are excluded from the carryforward balances as of December 31, 2024.

The Company recognizes uncertain income tax positions at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. The unrecognized tax benefits, if recognized, would not have an impact on the Company’s effective tax rate assuming the Company continues to maintain a full valuation allowance position. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.

A reconciliation of the Company’s unrecognized tax benefits is as follows (in thousands):

The Company files income tax returns in the U.S. federal and California tax jurisdictions. As of the date these financial statements were issued, the Company is not under examination by any income tax authority. The federal and state income tax returns from December 31, 2016 to December 31, 2024 remain subject to examination.

A reconciliation of the statutory U.S. federal tax rate to the Company’s effective tax rate is as follows:

Note 14. Commitments and Contingencies

Indemnification

From time to time, the Company enters into certain types of contracts that contingently require the Company to indemnify various parties against claims from third parties. These contracts primarily relate to (i) the Company’s bylaws, under which the Company must indemnify directors and executive officers, and may indemnify other officers and employees, for liabilities arising out of their relationship with the Company, (ii) contracts under which the Company must indemnify directors and certain officers for liabilities arising out of their relationship with the Company, (iii) contracts under which the Company may be required to indemnify customers or partners against certain claims, including claims from third parties asserting, among other things, infringement of their intellectual property rights and (iv) procurement, consulting, or license agreements under which the Company may be required to indemnify vendors, consultants or licensors for certain claims, including claims that may be brought against them arising from acts or omissions with respect to the supplied products, technology or services. From time to time, the Company may receive indemnification claims under these contracts in the normal course of business. In addition, under these contracts the Company may have to modify the accused infringing intellectual property and/or refund amounts received.

In the event that one or more of these matters were to result in a claim against the Company, an adverse outcome, including a judgment or settlement, may cause a material adverse effect on the Company’s future business, operating results or financial condition. It is not possible to determine the maximum potential amount under these contracts due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement.

The Company maintains director and officer insurance, which may cover certain liabilities arising from the Company’s obligation to indemnify its directors and certain officers.

To the date of the consolidated financial statements were issued, the Company has not incurred any material costs or accrued any liabilities related to indemnification obligations.

Litigation

The Company’s industry is characterized by frequent claims and litigation, including claims regarding intellectual property. As a result, the Company may be subject to various legal proceedings from time to time. The results of any future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. Management is not aware of any pending or threatened litigation.

Note 15. 401(k) Plan

The Company adopted a 401(k) retirement savings plan, or the 401(k) Plan for all eligible employees. Each participant may contribute pre- or post-tax compensation, up to annual statutory limits. The 401(k) Plan also permits the Company to make discretionary and matching contributions, subject to established limits and a vesting schedule. Each year, the Company may, at its sole discretion, make contributions to the plan. For the years ended December 31, 2024 and 2023, the Company’s contributions were $0.1 million in both periods.

Note 16. Segment Reporting

The Company hasone reportable segment relating to the research and development of drug candidates to selectively modulate the Wnt pathway for tissue repair and regeneration. The segment derives its revenue from licensing and research collaborations.

The Company’s Chief Executive Officer and the Chief Financial Officer/Chief Operating Officer are together considered the Company's Chief Operating Decision Maker, or CODM, on a consolidated basis. The CODM uses consolidated operating expenses by function to evaluate financial performance, monitor budget versus actual results, and manage the Company’s operations for the purposes of allocating resources and establishing business strategies. The measure of segment assets is not reported as it is not regularly provided or reviewed by the Company’s CODM.

The table below is a summary of the segment profit or loss, including significant segment expenses (in thousands):

(1) Other information not reported to CODM includes loss on issuance of common stock, pre-funded warrants and warrants, interest income, and gain/loss on change in fair value of warrant liabilities, which are reported as other expense (income), net on the consolidated statements of operations and comprehensive loss.

(2)Other segment items primarily consist of lab expenses, professional services and information technology costs.

For the year ended December 31, 2024, collaboration and license revenue of $10.0 million is attributed to BI, which is domiciled in Germany; research service revenue – related party of $0.7 million was generated in the United States. As of December 31, 2024 and 2023, all long-lived assets of the Company reside in the United States.

Note 17. Subsequent Events

2025 Private Placement

In March 2025, the Company entered into a securities purchase agreement with certain institutional and accredited investors to issue and sell an aggregate of 15.1 million units in a two-tranche private placement at a purchase price of $11.60 per share unit and $11.5999 per pre-funded warrant unit, for gross proceeds of approximately $175.0 million to fund multiple ophthalmology programs through initial Phase 1 safety, tolerability and efficacy studies. Each unit consists of one share of common stock, or pre-funded warrant in lieu thereof, and an accompanying one half of a Series E common stock warrant. The purchase price per unit includes $0.0625 for the accompanying one half of a Series E common stock warrant. Each pre-funded warrant has an exercise price of $0.0001 per share, is exercisable immediately and will not expire until exercised in full. Each Series E common stock warrant has an exercise price of $11.54 per share, is exercisable immediately and expires five years from the date of issuance.

At the closing of the first tranche on March 26, 2025, (i)5.2 million shares of common stock, (ii) pre-funded warrants to purchase up to 1.4 million shares of common stock, and (iii) Series E common stock warrants to purchase up to 3.3 million shares of common stock were issued and sold for aggregate gross proceeds of approximately $76.4 million, before deducting placement agent fees and other expenses. None of the warrants issued in the private placement have been exercised as of the filing of this Annual Report. In the second tranche of the private placement, which is contingent upon the public announcement of the receipt of clearance from the U.S. Food and Drug Administration on or prior to October 31, 2026 of the Company’s Investigation New Drug Application for SZN-8141, or the second closing milestone, the Company expects to issue a (i)6.0 million shares of common stock, (ii) pre-funded warrants to purchase up to 2.5 million shares of common stock, and (iii) Series E common stock warrants to purchase up to 4.2 million shares of common stock for aggregate gross proceeds of approximately $98.6 million; provided that the second tranche may not occur prior to September 27, 2026. If the Company terminates its SZN-8141 program prior to October 31, 2026, then it will provide written notice to each purchaser, and each purchaser will have the right, but not the obligation, for 30 calendar days following the receipt of such notice, upon written notice to the Company, to purchase the additional shares of common stock, pre-funded warrants, and Series E common stock warrants subscribed for by such purchaser in the second closing. In addition, at any time prior to October 31, 2026 or the date of the Termination Notice (if earlier), in lieu of the requirement to purchase units in the second closing, each purchaser has the right, but not the obligation, upon five trading days’ prior written notice to the Company to purchase all (but not a portion) of the units subscribed for by such purchaser in the second closing, referred to as an optional closing. If a purchaser fails to purchase in full its subscribed for units after the achievement of the second closing milestone in the second closing, or previously at the first closing or an optional closing, then the Series E common stock warrants issued to such purchaser shall automatically be cancelled and cease to be exercisable.

In connection with the private placement, both the exercise prices of the Company’s outstanding 2024 Series A and Series B common stock warrants were reduced to $11.54 per share, except that the exercise prices per warrant for such warrants held by members of management were reduced to $12.45 per share, and the Company’s outstanding Series C and Series D common stock warrants were cancelled.