Description of Business and Basis of Presentation

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business and Basis of Presentation

1. Description of Business and Basis of Presentation

Description of Business

Histogen Inc. (the “Company,” “Histogen,” “we,” or the “combined company”), formerly known as Conatus Pharmaceuticals Inc. (“Conatus”), was incorporated in the state of Delaware on July 13, 2005. The Company is a clinical-stage therapeutics company focused on developing potential first-in-class clinical and preclinical small molecule pan-caspase and caspase selective inhibitors that protect the body’s natural process to restore immune function.

On January 28, 2020, the Company, then operating as Conatus, entered into an Agreement and Plan of Merger and Reorganization, as amended (the “Merger Agreement”), with privately-held Histogen, Inc. (“Private Histogen”) and Chinook Merger Sub, Inc., a wholly-owned subsidiary of the Company (“Merger Sub”). Under the Merger Agreement, Merger Sub merged with and into Private Histogen, with Private Histogen surviving as a wholly-owned subsidiary of the Company (the “Merger”). On May 26, 2020, the Merger was completed. Conatus changed its name to Histogen Inc., and Private Histogen, which remains as a wholly-owned subsidiary of the Company, changed its name to Histogen Therapeutics Inc. On May 27, 2020, the combined company’s common stock began trading on The Nasdaq Capital Market under the ticker symbol “HSTO”.

Recent Developments

On July 5, 2023, the Company announced that it had completed a review of its business, including the status of programs, resources and capabilities, and initiated a process to explore strategic alternatives with the intent to enhance shareholder value. The Company has paused its product development activities and taken other steps to reduce operating costs in order to preserve cash as it explores these strategic alternatives and has engaged Roth Capital Partners, LLC, to act as its strategic advisor. Potential strategic alternatives that may be explored or evaluated as part of this process include an acquisition, merger, reverse merger, other business combination, sale of assets, financing alternatives, licensing, or other strategic transactions involving the Company. The Company’s Board of Directors has not set a timetable for the conclusion of this review, nor has it made any definitive decisions related to taking any further actions or potential strategic options at this time or at all. Despite the undertaking of this process, the Company may not be successful in completing a transaction, and even if a transaction is completed, it may not ultimately deliver the anticipated benefits of enhanced shareholder value.

On August 7, 2023, the Company entered into a Lease Termination Agreement (the “Lease Termination Agreement”) for its headquarters and laboratory operating lease, pursuant to which the Company and the landlord mutually agreed to accelerate the termination date to August 31, 2023, subject to a termination fee paid by the Company of approximately $1.0 million. The Company entered into the Lease Termination Agreement primarily for the purpose of reducing the overall cash commitment and long-term liabilities related to the lease as part of the Company’s efforts to pursue potential strategic alternatives. The lease termination will eliminate the Company’s right-of-use assets and operating lease liabilities balance during the third quarter of 2023 and result in the cancellation of the letter of credit during the fourth quarter of 2023, which will reclass $0.3 million of restricted cash to cash and cash equivalents on the accompanying condensed consolidated balance sheets.

Reverse Stock Split

On June 2, 2022, the Company’s Board of Directors approved a one-for-twenty reverse stock split of its then outstanding common stock (the “Reverse Stock Split”) with any fractional shares resulting from the Reserve Stock Split rounded down to the next whole share of common stock. The par value and the authorized shares of the common stock were not adjusted as a result of the Reverse Stock Split. All references to share and per share amounts for all periods presented in the condensed consolidated financial statements have been retrospectively restated to reflect this Reverse Stock Split. Additionally, all rights to receive shares of common stock under outstanding warrants, options, and restricted stock units (“RSUs”) were adjusted to give effect of the reverse stock split. Furthermore, remaining shares of common stock available for future issuance under stock-based payment award plans and employee stock purchase plans were adjusted to give effect to the Reverse Stock Split.

Liquidity and Going Concern

The Company has incurred operating losses and negative cash flows from operations and had an accumulated deficit of $93.8 million as of June 30, 2023. The Company expects operating losses and negative cash flows from operations to continue for the foreseeable

future. As of June 30, 2023, the Company had $7.3 million in cash and cash equivalents, which will not be sufficient to sustain its operations for at least twelve months following the date these condensed consolidated financial statements are issued.

On June 5, 2023, the Company received a letter from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) indicating that, for the last thirty consecutive business days, the bid price for our common stock had closed below the minimum $1.00 per share requirement for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). The Company has been provided an initial period of 180 calendar days, or until December 4, 2023, to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).

The Company has not yet established ongoing sources of revenues sufficient to cover its operating costs and will need to continue to raise additional capital to support its future operating activities, including progression of its development programs, preparation for potential commercialization, and other operating costs. The Company's plans with regard to these matters include their primary focus of evaluation of strategic alternatives which may include an acquisition, merger, reverse merger, other business combination, sale of assets, financing alternatives, licensing, or other strategic transactions involving the company. The Company’s Board of Directors has not set a timetable for the conclusion of this review, nor has it made any definitive decisions related to taking any further actions or potential strategic options at this time or at all. Despite the undertaking of this process, the Company may not be successful in completing a transaction, and their Board of Directors may decide to pursue a dissolution and liquidation of the Company. Even if a transaction is completed, it may not ultimately provide sufficient capital to continue operations or deliver the anticipated benefits of enhanced shareholder value. The aforementioned factors raise substantial doubt about the Company's ability to continue as a going concern.

The condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Based on the current business plan to pursue strategic alternatives paths and related operating budget, there is substantial doubt about the Company’s ability to continue as a going concern within one year from the date the condensed consolidated financial statements are issued. The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Basis of Presentation and Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its controlled subsidiaries, including Histogen Therapeutics, Inc., and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). All intercompany balances and transactions have been eliminated upon consolidation.

The Company acquired Centro De Investigacion de Medicina Regenerativa, S.A. de C.V. (“CIMRESA”), a company in Mexico, during 2018 to facilitate a potential clinical development program for HST-001, or hair stimulating complex (“HSC”). This was a wholly-owned subsidiary intended to pursue registration with the COFEPRIS (Mexico equivalent to Food and Drug Administration). Since the Company acquired CIMRESA in 2018, there have been no financial or operational activities. On January 17, 2023, the Company sold the wholly-owned subsidiary, CIMRESA, and deconsolidated the former subsidiary, resulting in a gain during the three and six months ended June 30, 2023.

The Company holds a majority interest in Adaptive Biologix, Inc. (“AB”, formerly Histogen Oncology, LLC). AB was formed to develop and market applications for the treatment of cancer. The Company consolidates AB into its condensed consolidated financial statements (refer to Note 2 for further information).

Unaudited Interim Financial Information

The unaudited condensed consolidated financial statements for the three and six months ended June 30, 2023 and 2022 have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and GAAP. Accordingly, these condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of Management, these unaudited interim condensed consolidated financial statements contain all adjustments necessary, all of which are of a normal and recurring nature, to present fairly the Company’s financial position, results of operations, and cash flows. Interim results are not necessarily indicative of results for a full year or future periods. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes thereto for the year ended December 31, 2022 included in the Annual Report on Form 10-K that the Company filed with the SEC on March 9, 2023.