Surrozen, Inc./DE

Note 1. Organization 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 Amsterdam, Netherlands, as a wholly-owned subsidiary of the Company.

Liquidity

The Company has incurred operating losses since inception. During the three and six months ended June 30, 2025, the Company had net income of $39.7 million and $12.8 million, respectively, including noncash gains of $47.6 million and $104.6 million, respectively, on changes in fair value of tranche liability and warrant liabilities during the period. During thethree and six months ended June 30, 2024, the Company incurred a net loss of $25.3 million and $34.1 million, respectively. For the six months ended June 30, 2025 and 2024, the Company used $15.4 million and$14.4 million of cash in operations, respectively. As of June 30, 2025, the Company had cash and cash equivalents of $90.4 million and an accumulated deficit of approximately $272.5 million. The Company expects operating expenses to continue to be significant in connection with its ongoing pre-clinical studies and preparation for 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 and cash equivalents are sufficient for the Company to continue operating activities for at least the next 12 months from the date of issuance of its unaudited condensed consolidated financial statements. However, if the Company’s 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 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. As permitted under those rules, certain notes or other financial information that are normally required by U.S. GAAP have been condensed or omitted and accordingly, the consolidated balance sheet as of December 31, 2024 has been derived from the Company’s audited consolidated financial statements at that date but does not include all of the information required by U.S. 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 of a normal, recurring nature that are necessary for a fair presentation of the Company’s consolidated financial statements. The results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of the results to be expected for the year ended December 31, 2025 or for any other interim period or future year.

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

The accompanying unaudited 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, 2024 included in the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2025.

Use of Estimates

The preparation of unaudited condensed 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 unaudited condensed consolidated financial statements and the reported amounts of revenue and 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, tranche liability and fair value of warrant liabilities. 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, 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 unaudited condensed 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.

Equity Investment

The Company received a warrant pursuant to a strategic research collaboration as discussed in Note 9. 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 occur. 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 June 30, 2025.

Tranche Liability

The Company executed a private placement on March 24, 2025, or the 2025 PIPE, which includes a right provided to the investors to purchase the Company’ssecurities in two tranches. Each tranche was determined to be a freestanding instrument and accounted for as tranche liability within the unaudited condensed consolidated balance sheets. The tranche liability was recorded at its fair value on issuance and is subsequently remeasured at each reporting period with changes in fair value recorded in the unaudited condensed consolidated statements of operations until settlement.

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 income, net within the unaudited condensed consolidated statements of operations. 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, cancellation 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. 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.

Net Income (Loss) Per Share

Basic net income (loss) per share is calculated by dividing the net income (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 income (loss) per share is calculated using the more dilutive of the two-class method or treasury method.

The Company computed the basic and diluted net income (loss) per share under the two-class method, which is an allocation of earnings between common stock and participating securities. The outstanding pre-funded warrants and certain warrants are considered participating securities for purposes of computing net income (loss) per share pursuant to the two-class method. The two-class method is not applicable during periods with a net loss as the holders of the participating securities have no contractual obligation to share in losses. The following table includes the computation of basic and diluted net income (loss) per share available to (attributable to) common stockholders (in thousands, except per share amounts):

The following table presents the potential shares of common stock outstanding that were excluded from the computation of diluted net income (loss) per share of common stock as of the periods presented because including them would have been antidilutive (in thousands):

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 unaudited consolidated condensed 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.

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):

(1)

Included in cash and cash equivalents on the condensed consolidated balance sheets.

(2)

See Note 8.

(3)

See Note 10.

There wereno changes to the valuation methods utilized and there wereno transfers of financial instruments between Level 1, Level 2, and Level 3 during the three and six months ended June 30, 2025.

The 2021 Public Warrants (as defined in Note 10 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 10 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 and 2025 Pre-Funded Warrants (as defined in Note 10 below) are classified as Level 2 due to the use of observable market data for similar instruments. The fair value of all 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 tranche liability (see Note 8), 2024 PIPE Warrants and 2025 PIPE Warrants (as defined in Note 10 below) are classified as Level 3 because the fair value was measured based on significant inputs that are unobservable in the market. They were initially recorded at fair value and subsequently remeasured at each reporting period using the Black-Scholes option-pricing model with the following assumptions: expected term, expected volatility, risk-free interest rate and dividend yield. The significant unobservable inputs used in the fair value measurement of the tranche liability at inception and June 30, 2025 and the fair value measurement of the 2024 PIPE Warrants at December 31, 2024 also included the timing and probability of achieving the milestones. The expected volatility was based on historical volatility of the Company’s stock price with a risk adjustment. The expected term was estimated based on expiration date or the timing of when the milestone is expected to be achieved. 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 Level 3 liabilities may change significantly as additional data is obtained. 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.

The key inputs into the fair value measurement of the Level 3 liabilities at inception and the end of period were as follows:

Warrant Amendment and Cancellation

As described in Note 10, the 2024 PIPE Warrants included Series A, Series B, Series C and Series D common stock warrants. Due to the discontinuation of clinical development of SZN-043 in the first quarter of 2025, the fair value of the Series C and Series D common stock warrant liabilities became zero as they would not be exercisable. Additionally, in connection with the 2025 PIPE completed in March 2025 as described in Note 8, 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. The 2024 PIPE Warrants were revalued using the Black-Scholes option pricing model immediately before and after the modification and cancellation using the following assumptions: (a) fair value of common stock of $12.00 per share, (b) expected volatility of 55%, (c) dividend yield ofzero, (d) risk-free interest rate of 4.01%, and (e) expected term of 4.0 years. The increase in the fair value of the 2024 PIPE Warrants resulted from the amendment and cancellation of warrants was recorded as a loss of $2.1 million in the unaudited consolidated statements of operations.

Activity of Level 3 liabilities is summarized in the following table (in thousands):

(1) Change in fair value of tranche liability is on the unaudited consolidated statements of operations. Change in fair value of warrant liabilities is included in other income, net on the unaudited consolidated statements of operations.

Note 4. Balance Sheet Components

Accrued and Other Liabilities

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

Note 5. Collaboration and License Agreements

Collaboration and License Agreement with Boehringer Ingelheim International GmbH

In October 2022, the Company executed a Collaboration and License Agreement, or the CLA, with Boehringer Ingelheim International GmbH, or 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 conducted 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 $2.3 million is expected to be refunded to the Company in 2025 and is recognized as accounts receivableon the unaudited condensed consolidated balance sheets.

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 the non-refundable upfront payment at the inception. 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. 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 6. License Agreements

Stanford License Agreement

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 millionfor achievement of specified sales milestones. Stanford is also entitled to receive royalties from the Company equal to a verylow 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 Company and 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 three and six months ended June 30, 2025 and 2024, the Company incurred de minimis research and development expenses under the Stanford Agreement. No milestones have been achieved as of June 30, 2025.

Note 7. Commitments and Contingencies

Lease Agreement

The Company has an operating lease for its office and laboratory space of approximately 32,813 square feet in South San Francisco, California. The lease term ends in April 2029, with rent payments escalating each year. The Company has an option to extend the lease for an additional four-year period andaone-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. 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 included in restricted cash within the unaudited condensed consolidated balance sheets.

The operating lease expense for each of the three and six months ended June 30, 2025 and 2024 was $0.6 million, $1.2 million, $0.4 million and $0.8 million, respectively.

Aggregate future minimum rental payments under the operating leases as of June 30, 2025, were as follows (in thousands):

Note 8. Stockholders’ Equity

2025 Private Placement

On March 24, 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 (the 2025 PIPE) 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 net proceeds of approximately $71.2 million, after deducting placement agent fees and other expenses. In the second tranche of the 2025 PIPE, 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, 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, or the Termination Notice, and each purchaser will have the right, but not the obligation 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 to purchase all (but not a portion) of the units subscribed for by such purchaser in the second tranche, referred to as an optional closing. If a purchaser fails to purchase in full its subscribed for units in the second tranche, then the Series E common stock warrants issued to such purchaser shall automatically be cancelled and cease to be exercisable.

The securities purchase agreement contains a right provided to the investors to purchase units in two tranches. Each tranche was determined to be a freestanding instrument and accounted for as tranche liability with an initial fair value of $91.5 million and $49.6 million for the first tranche and the second tranche, respectively, at the contract execution date on March 24, 2025. The total tranche liability in excess of proceeds from the first tranche resulted in a loss of $71.1 million upon execution. At the closing of the first tranche on March 26, 2025, a portion of the tranche liability was remeasured and settled in relation to the issuance of common stock, pre-funded warrants and Series E common stock warrants. The difference in the fair value of the tranche liability immediately prior to the settlement and the fair value of the issued units in excess of proceeds resulted in a gain of $1.1 million on settlement of tranche liability. At the end of each reporting period, any change in fair value of the remaining second tranche liability during the period is recognized in the unaudited condensed consolidated statements of operations. Please see Note 3 for discussion of tranche liability valuation.

The pre-funded warrants and Series E common stock warrants issued in the first closing are classified as warrant liabilities with an initial fair value of $14.6 million and $17.4 million, respectively. Atthe end of each reporting period, any change in fair value of warrant liabilities during the period is recognized in other income, net within the unaudited condensed consolidated statements of operations. Please see Note 3 for discussion of warrant liabilities valuation. The Company incurred transaction costs of $5.2 million, consisting of placement agent fees and other expenses, $2.8 million of which was allocated to tranche liability and warrant liabilities, and recognized as other expenses when incurred. The remaining $2.4 million was allocated to the issued shares of common stock and recognized as a reduction in equity. Please see Note 10 for more information regarding the Series E common stock warrants.

2024 Private Placement

In April 2024, the Company entered into a securities purchase agreement with certain institutional investors, and certain members of management whereby the Company issued and sold in a private placement, or the 2024 PIPE: (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 2024 PIPE. The excess of $20.4 million was recorded as loss on issuance of common stock, pre-funded warrants and warrants on the unaudited consolidated statements of operations during the three and six months ended June 30, 2024. 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. Please see Note 10 for more information regarding the warrants issued and sold to the investors and Note 9 for more information regarding the shares of the Company’s common stock and the warrants issued and sold to management.

Note 9. 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 the 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 is accounted for as an equity investment under ASC 321. The fair value of the warrant at inception was determined to be $2.6 million in October 2024. The warrant is recognized as warrant asset once the vesting restrictions are lifted. During thethree and six months ended June 30, 2025, the Company recognized $1.0 million and $2.0 million as research service revenue – related party for the services rendered, consisting of the fixed cash consideration of $0.8 million and $1.5 millionand the variable noncash consideration of $0.2 million and $0.5 million, respectively.

2024 Private Placement

As described in Note 8, 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. The exercise price per share of these warrants was reduced to $12.45 per share in March 2025. Please see Note 3.

•

Series B common stock warrants to purchase up to 3,206 shares of common stock with an exercise price of $15.71 per share. The exercise price per share of these warrants was reduced to $12.45 per share in March 2025. Please see Note 3.

•

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. These warrants were cancelled in March 2025. Please see Note 3.

•

Series D common stock warrants to purchase up to 11,424 shares of common stock with an exercise price of $16.00 per share. These warrants were cancelled in March 2025. Please see Note 3.

The terms of the warrants held by management are the same as those held by the investors, except for the purchase price and exercise price of warrants. Please see Note 10 for the terms of the 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 thethree and six months ended June 30, 2025, the Company recognized sublease income of $0.2 million and $0.3 million, respectively, 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 10. Common Stock Warrants

The following table sets forth the common stock warrants outstanding (in thousands):

2025 Pre-Funded Warrants and 2025 PIPE Warrants

As described in Note 8, 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 the 2025 PIPE. 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 in March 2025, (i)5.2 million shares of common stock, (ii) pre-funded warrants to purchase up to 1.4 million shares of common stock, or the 2025 Pre-Funded Warrants, and (iii) Series E common stock warrants to purchase up to 3.3 million shares of common stock, or the 2025 PIPE Warrants, were issued and sold. As of June 30, 2025,68,000 shares of the 2025 Pre-Funded Warrants had been exercised and none of the 2025 PIPE Warrants had been exercised.

2024 Pre-Funded Warrants and 2024 PIPE Warrants

As described in Note 8, 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 the 2024 PIPE: (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 exercisable immediately upon issuance forfive years. The exercise price per share of these warrants was reduced to $11.54 per share in March 2025, except that the exercise price per share of common stock for such warrants held by members of management was reduced to $12.45 per share. Please see Note 3.

•

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 exercisable immediately forfive years. The exercise price per share of these warrants was reduced to $11.54 per share in March 2025, except that the exercise price per share of common stock for such warrants held by members of management was reduced to $12.45 per share. Please see Note 3.

•

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. These warrants were cancelled in March 2025. Please see Note 3.

•

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. These warrants were cancelled in March 2025. Please see Note 3.

None of the 2024 Pre-Funded Warrants and 2024 PIPE Warrants have been exercised as of June 30, 2025.

2021 Public Warrants

Every 15 outstanding public warrants, or 2021 Public Warrants, entitles the holders thereof to receive one share of common stock that may be purchased 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. None of the 2021 Public Warrants have been exercised as of June 30, 2025.

2021 PIPE Warrants

At June 30, 2025, 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. None of the 2021 Public Warrants have been exercised as of June 30, 2025.

Participating Securities

The holders of the 2025 Pre-Funded Warrants, 2025 PIPE Warrants, 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. However, they do not have a contractual obligation to share in losses. These warrants are considered participating securities and included in computing basic and diluted net income (loss) per share under the two-class method.

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 income, net within the unaudited condensed consolidated statements of operations. Please see Note 3 for discussion of warrant valuations.

Note 11. 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. As of June 30, 2025, 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. As of June 30, 2025, there were approximately 0.1 million 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 June 30, 2025.

During the six months ended June 30, 2025 and 2024, the Company granted options with a weighted-average grant-date fair value of $8.97 per share and$7.45 per share.

No options were exercised during the six months ended June 30, 2025 and 2024.

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 activity of restricted stock units, or RSUs (shares in thousands):

The fair value of RSUs vested during the six months ended June 30, 2025 and 2024 was $0.3 million and $0.4 million, respectively.

Stock-Based Compensation

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

As of June 30, 2025, there was approximately$9.0 million of stock-based compensation expense to be recognized over a weighted-average period of approximately 2.97 years.

Note 12. 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 execution of the 2025 PIPE, loss on amendment and cancellation of warrants, interest income, gain/loss on change in fair value of tranche liability, and gain/loss on change in fair value of warrant liabilities, which are reported as other income, net on the unaudited consolidated statements of operations.

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

For the three and six months ended June 30, 2025, research service revenue – related party of $1.0 million and $2.0 million was generated in the United States. As of June 30, 2025 and December 31, 2024, all long-lived assets of the Company reside in the United States.

Note 13. Subsequent Event

2025 Equity Inducement Plan

On August 7, 2025, the board of directors adopted the 2025 Equity Inducement Plan, or the Inducement Plan, and reserved 250,000 shares of the Company’s common stock for issuance pursuant to equity awards granted under the Inducement Plan. The Inducement Plan was adopted in order to grant share-based awards to newly hired employees as an inducement to such individuals’ entry into employment with the Company in accordance with Nasdaq Listing Rule 5635(c)(4). As of the date of the filing of this Quarterly Report on Form 10-Q, no awards had been granted under the Inducement Plan.