Stockholders' Equity | 7. Stockholders’ Equity Common Stock January 2021 Offering of Common Stock In January 2021, the Company completed an S-1 offering (the “January 2021 Offering”) of an aggregate of 580,000 shares of common stock, pre-funded warrants to purchase up to 120,000 shares of its common stock, and common stock warrants to purchase up to an aggregate of 700,000 shares of common stock. To the extent that an investor determines, at their sole discretion, that they would beneficially own in excess of the Beneficial Ownership Limitations (or as such investor may otherwise choose), in lieu of purchasing shares of Common Stock and Common Warrants, such investor could have elected to purchase Pre-Funded Warrants and Common Warrants at the Pre-Funded Purchase Price in lieu of the shares of Common Stock and Common Warrants in such a manner to result in the same aggregate purchase price being paid by such investor to the Company. The combined purchase price of one share of common stock and the accompanying common stock warrant was $20.00, and the combined purchase price of one pre-funded warrant and accompanying common stock warrant was $19.998. The common stock warrants are exercisable for five (5) years at an exercise price of $20.00 per share. The pre-funded warrants are immediately exercisable at an exercise price of $0.002 per share and may be exercised at any time until all of the pre-funded warrants are exercised in full. Placement agent warrants were issued to purchase up to 35,000 shares of common stock, are immediately exercisable for an exercise price of $25.00 per share, and are exercisable for five (5) years following the date of issuance. The Company received gross proceeds of $14.0 million and incurred placement agent’s fees and other offering expenses of approximately $1.9 million. The warrants and placement agent warrants were valued at $7.2 million and $0.3 million, respectively, using the Black-Scholes option pricing model based on the following assumptions: expected volatility 80.08%, risk-free interest rate 0.38%, expected dividend yield 0%, and an expected term of 5.0 years. As of June 30, 2022 a total of 336,060 warrants issued in the January 2021 Offering to purchase shares of common stock have been exercised and the Company issued 336,060 shares of its common stock. The Company received gross proceeds of approximately $6.8 million. As of June 30, 2022, the Company had 387,565 shares and 11,375 shares of common stock reserved for issuance pursuant to the warrants and placement agent’s warrants, respectively, issued by the Company in the January 2021 Offering, at an exercise price of $20.00 per share and $25.00 per share, respectively. June 2021 Offering of Common Stock In June 2021, the Company completed a registered direct offering (the “June 2021 Offering”) of an aggregate of 298,865 shares of common stock, together with accompanying warrants to purchase up to an aggregate of 239,093 shares of common stock, at a public offering price of $22.00 per share. The accompanying warrants permit the investor to purchase additional shares equal to 80% of the number of shares of the Company’s common stock purchased by the investor. The warrants have an exercise price of $20.00 per share, are immediately exercisable, and expire five and a half (5.5) years following the date of issuance. In addition, the Company’s placement agent was issued compensatory warrants equal to 5.0%, or 14,946 shares, of the aggregate number of common stock sold in the offering, which are immediately exercisable for an exercise price of $27.50 and expire five (5) years following the date of issuance on June 7, 2026. The Company received gross proceeds of $6.6 million and incurred cash-based placement agent fees and other offering expenses of approximately $0.9 million. The warrants and placement agent warrants were valued at $3.0 million and $0.2 million, respectively, using a Black-Scholes option pricing model with the following assumptions: expected volatility 81.44% and 80.15%, risk-free interest rate 0.88% and 0.77%, expected dividend yield 0% and 0%, and an expected term of 5.5 years or 5.0 years, respectively. As of June 30, 2022 , warrants associated with the June 2021 Offering have been exercised. As of June 30, 2022 , the Company had 239,093 shares and 14,946 shares of common stock reserved for issuance pursuant to the warrants and placement agent’s warrants, respectively, issued by the Company in the June 2021 Offering, at an exercise price of $20.00 per share and $27.50 per share December 2021 Offering In December 2021, the Company completed a registered direct offering (the “December 2021 Offering”) of an aggregate of 411,764 shares of common stock and 411,766 warrants to purchase up to 411,766 shares of common stock, at a public offering price of $8.50 per share. The accompanying warrants permit the investor to purchase additional shares equal to the same number of shares of the Company’s common stock purchased by the investor. The warrants have an exercise price of $8.50 per share, may be exercised any time on or after 6 months and one (1) day after the issuance date, and expire five and a half (5.5) years following the date of issuance. In addition, the Company’s placement agent was issued compensatory warrants equal to 5.0%, or 20,590 shares, of the aggregate number of shares of common stock sold in the offering, which are immediately exercisable for an exercise price of $10.626 and expire five and a half (5.5) years following the date of issuance on June 21, 2027. The Company received gross proceeds of $3.5 million and incurred cash-based placement agent fees and other offering expenses of approximately $0.5 million. The placement agent warrants, which are recorded as a component of stockholders’ equity, were valued at an aggregate $0.1 million using the Black-Scholes option pricing model based on the following assumptions: expected volatility of 79.81%, risk-free interest rate of 1.21%, expected dividend yield of 0% and an expected term of 5.5 years. As of June 30, 2022 , no warrants associated with the December 2021 Offering have been exercised. As of June 30, 2022 , the Company had 411,766 shares and 20,590 shares of common stock reserved for issuance pursuant to the warrants and placement agent’s warrants, respectively, issued by the Company in the December 2021 Offering, at an exercise price of $8.50 per share and $10.626 per share, respectively. Common Stock Purchase Agreement with Lincoln Park In July 2020, the Company entered into a common stock purchase agreement (the “2020 Purchase Agreement”) with Lincoln Park which provided that, upon the terms and subject to the conditions and limitations in the 2020 Purchase Agreement, Lincoln Park is committed to purchase up to an aggregate of $10.0 million of shares of the Company’s common stock at the Company’s request from time to time during a 24 month period that began in July 2020 and at prices based on the market price of the Company’s common stock at the time of each sale. Upon execution of the 2020 Purchase Agreement, the Company sold 16,425 shares of common stock at $60.88 per share to Lincoln Park for gross proceeds of $1.0 million. During the year ended December 31, 2020, the Company sold an additional 15,000 shares of common stock to Lincoln Park for gross proceeds of approximately $0.5 million. In addition, in consideration for entering into the 2020 Purchase Agreement and concurrently with the execution of the 2020 Purchase Agreement, the Company issued 3,348 shares of its common stock to Lincoln Park. During the three and six months ended June 30, 2022 the Company did not sell any shares of common stock to Lincoln Park. The 2020 Purchase Agreement expired automatically pursuant to its term on August 1, 2022, and the Company did not sell any additional shares of common stock to Lincoln Park through the date of expiration of the 2020 Purchase Agreement. Common Stock Warrants In 2016, Private Histogen issued warrants to purchase common stock as consideration for settlement of prior liability claims. The warrants for the purchase of up to 180 common shares at an exercise price of $461.60 per share expired on July 31, 2021. In addition, at June 30, 2022, warrants to purchase 68 shares of common stock with an exercise price of $1,486.00 per share remain outstanding that were issued by Conatus in connection with obtaining financing in 2016. These warrants expire on July 3, 2023. See warrant discussion above in connection with the January 2021 Offering, the June 2021 Offering, and the December 2021 Offering. Stock-Based Compensation Equity Incentive Plans On December 18, 2017, Private Histogen established the Histogen Inc. 2017 Stock Plan (the “2017 Plan”). Under the 2017 Plan, Private Histogen was authorized to issue a maximum aggregate of 41,861 shares of common stock with adjustments for unissued or forfeited shares under the predecessor plan (the Histogen Inc. 2007 Stock Plan). In April 2019, Private Histogen amended the 2017 Plan, which increased the number of common stock available for grants by 16,336 shares. The 2017 Plan permitted the issuance of incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), and Stock Purchase Rights. NSOs could be granted to employees, directors, or consultants, while ISOs could be granted only to employees. Options granted vest over a maximum period of four years and expire ten years from the date of grant. In connection with the closing of the Merger, no further awards will be made under the 2017 Plan. In May 2020, in connection with the closing of the Merger, the Company’s stockholders approved the Company’s 2020 Incentive Award Plan (the “2020 Plan”). The maximum number of shares of the Company’s common stock available for issuance under the 2020 Plan equals the sum of (a) 42,500 shares; (b) any shares of common stock of the Company which are subject to awards under the Conatus 2013 Equity Incentive Plan (the “Conatus 2013 Plan”) as of the effective date of the 2020 Plan which become available for issuance under the 2020 Plan after such date in accordance with its terms; and (c) an annual increase on the first day of each calendar year beginning with the January 1 of the calendar year following the effectiveness of the 2020 Plan and ending with the last January 1 during the initial ten-year Additionally, in connection with the closing of the Merger, no further awards will be made under the Conatus 2013 Plan. As of June 30, 2022, 4,896 fully vested options remain outstanding under the Conatus 2013 Plan with a weighted average exercise price of $858.05 per share. The following summarizes the activity related to the Company’s stock options under the 2017 Plan and the 2020 Plan for the six months ended June 30, 2022: Options Outstanding Weighted- average Exercise Price Weighted- average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2021 111,418 $ 37.62 6.78 $ — Granted 67,300 4.54 Cancelled / Forfeited (50,357 ) 38.71 Outstanding at June 30, 2022 128,361 $ 19.84 7.29 $ — Vested and exercisable at June 30, 2022 34,412 $ 42.58 6.61 $ — Prior Chief Executive Officer Stock Options On January 24, 2019, the Company issued 22,909 stock options to its then newly appointed Chief Executive Officer. In accordance with the original award agreement, 40% of the options would vest immediately upon an initial public offering or 45 days following a change in control, as defined in the award agreement, while the remaining 60% are subject to vesting, of which 25% vest on the first anniversary of the grant date and then ratably over the remaining 36 months. On January 28, 2020, the award agreement was amended, which became effective upon the close of the Merger in May 2020, whereby the 40% of stock options (“Liquidity Option Shares”) subject to vesting upon an initial public offering or 45 days following a change in control will now vest immediately upon meeting certain performance and market condition-based criteria. The vesting of the Liquidity Option Shares is divided into four separate tranches, each vesting 25% of the Liquidity Option Shares, upon: (1) the closing of the proposed merger with Conatus; (2) the date that the market capitalization of the Company exceeds $200.0 million; (3) the date that the market capitalization of the Company exceeds $275.0 million, and; (4) the date that the market capitalization of the Company exceeds $300.0 million. Each vesting tranche represents a unique derived service period and therefore stock-based compensation expense for each vesting tranche is recognized on a straight-line basis over its respective derived service period. Additionally, in the event that the Chief Executive Officer’s employment with the Company is terminated without cause or he resigns for good reason, an additional portion of the stock options award will vest equal to the number of such options which would have vested in the 12 months following the date of such termination. On May 26, 2020, in connection with the closing of the Merger, 2,426 options of the Liquidity Option Shares became fully vested as the performance condition was achieved. In November 2021, the Company’s then President and Chief Executive Officer voluntarily resigned. No further stock-based compensation expense related to the market-based options will be recognized. As of June 30, 2022, the vested option awards expired unexercised. Board of Directors and Employee Stock Options In March 2021, in conjunction with a former Board Member’s voluntary resignation, the Company modified share-based payment awards by accelerating the vesting of all awards that were unvested at the time of his voluntary resignation and by extending the exercise period through December 31, 2021. As a result of the modification, the Company recorded an immaterial amount of additional stock-based compensation expense during the year ended December 31, 2021. As of December 31, 2021, the awards expired unexercised. In June 2021, in conjunction with a former employees’ voluntary resignation, the Company modified share-based payment awards by accelerating the vesting of all awards that were unvested at the time of the voluntary resignation and by extending the exercise period through August 29, 2023. Valuation of Stock Option Awards The following weighted-average assumptions were used to calculate the fair value of awards granted to employees, non-employees, and directors: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Expected volatility 79.5 % 79.82 % 79.0 % 78.28 % Risk-free interest rate 2.96 % 1.13 % 2.14 % 0.78 % Expected option life (in years) 5.84 6.08 6.02 6.08 Expected dividend yield — % — % — % — % Restricted Stock Units On November 8, 2021, the Company granted 23,423 restricted stock units to the Company’s Interim Chief Executive Officer, Chief Financial Officer, and Senior Vice President of Technical Operations. The fair value of the RSUs was $14.58 per share, which was the closing market price of the Company’s common stock on the date of grant. The RSUs vest in full upon the earlier of (1) 12 months following the grant date and (2) a change of control of the Company, as defined in the Company’s 2020 Plan, subject to continued service to the Company. In addition, the RSUs awarded to the Company’s Interim Chief Executive Officer are further accelerated in full upon the hiring of a permanent Chief Executive Officer. As of June 30, 2022, 18,279 restricted stock units remain outstanding. The compensation cost that has been included in the accompanying condensed consolidated statements of operations for all stock-based compensation arrangements is detailed as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 General and administrative $ 133 $ 148 $ 267 $ 327 Research and development (19 ) 141 13 172 Total $ 114 $ 289 $ 280 $ 499 As of June 30, 2022, total unrecognized compensation cost related to unvested options and RSUs was approximately $0.8 million which is expected to be recognized over a weighted-average period of 2.4 years. Common Stock Reserved for Future Issuance Common stock reserved for future issuance is as follows: As of June 30, 2022 2021 Common stock warrants 1,203,819 754,133 Common stock options issued and outstanding 133,257 136,043 Common stock available for issuance under stock plans 90,560 10,571 Total 1,427,636 900,747 |