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Common Stock Warrants

9 Months Ended

Sep. 30, 2024

Note 10. Common Stock Warrants

The following table sets forth the common stock warrants outstanding as of September 30, 2024 and December 31, 2023 (in thousands, except exercise price per warrant):


		Exercise Price per Share —		Exercise Price per Share —		September 30,		December 31,
Type	Classification	Investor		Management		2024		2023
2024 Pre-Funded Warrants	Liability	$	0.0001	N/A			40		—
2024 PIPE Warrants – Series A	Liability		15.50	$	16.96		1,132		—
2024 PIPE Warrants – Series B	Liability		14.25		15.71		1,231		—
2024 PIPE Warrants – Series C	Liability		16.00		16.00		4,386		—
2024 PIPE Warrants – Series D	Liability		16.00		16.00		4,386		—
2021 Public Warrants	Liability		172.50	N/A			4,883		2,733
2021 PIPE Warrants	Liability		172.50	N/A			1,024		3,174
Total							17,082		5,907

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 for five 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 the fifth 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 as defined 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 as defined 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.

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 September 30, 2024, the Company’s outstanding 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 2021 Public Warrants on transfer pursuant to the terms of the PIPE Warrant Agreement. As of September 30, 2024, 2.1 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 income, net within the unaudited condensed consolidated statements of operations and comprehensive loss. See Note 3 for discussion of warrant valuations.