1.	NATURE OF BUSINESS

Organization

Histogenics Corporation (the “Company”) was incorporated under the laws of the Commonwealth of Massachusetts on June 28, 2000 and has its principal operations in Waltham, Massachusetts. In 2006, the Company’s board of directors approved a corporate reorganization pursuant to which the Company incorporated as a Delaware corporation. The Company is a regenerative medicine company engaged in developing and commercializing products in the musculoskeletal segment of the marketplace. The Company combines cell therapy and tissue engineering technologies to develop products for tissue repair and regeneration and is initially focused on patients suffering from cartilage-derived pain and immobility. The Company’s most advanced product, NeoCart, is currently in a Phase 3 clinical trial in the United States (the “U.S.”) under a special protocol assessment with the U.S. Food and Drug Administration (“FDA”) for the treatment of knee cartilage damage.

On May 13, 2011, the Company completed the acquisition of ProChon Biotech Ltd. (“ProChon”), a privately-held biotechnology company focused on modulating the fibroblast growth factor system for consideration of $2.2 million to enable it to create more effective solutions for tissue regeneration. ProChon’s products combine cell regeneration technologies with proprietary growth factors and biocompatible scaffolds to restore injured or chronically damaged tissues. The acquisition of ProChon provided the Company with access to a significant portfolio of intellectual property, including proprietary cell growth factors, in addition to furthering opportunities for the use of biomaterials to create more effective solutions for regenerating human tissue. The acquisition led to the initial recognition of goodwill, which was subsequently written off in 2011, and intangible assets including IPR&D and a licensing agreement which have been impaired as discussed in Note 2.

On December 18, 2014, the Company formed a wholly owned subsidiary, Histogenics Securities Corporation, under the laws of the Commonwealth of Massachusetts.

On September 29, 2016, the Company closed a private placement of common stock, preferred stock and warrants, contemplated by a securities purchase agreement dated September 15, 2016, with certain institutional and accredited investors. The net proceeds after deducting placement agent fees and other transaction-related expenses was $27.6 million. See Note 8, Capital Stock, for further discussion of the private placement.

Since its inception, the Company has devoted substantially all of its efforts to product development, recruiting management and technical staff, raising capital, starting up production and building infrastructure and has not yet generated revenues from its planned principal operations. Expenses have primarily been for research and development and related administrative costs.

The Company is subject to a number of risks. The developmental nature of its activities is such that significant inherent risks exist in the Company’s operations. Principal among these risks are the successful development of therapeutics, successfully enrolling patients in its clinical trials in a timely manner, obtaining regulatory approval for any of its product candidates in any jurisdiction, compliance with government regulations, ability to obtain adequate financing, protection of proprietary therapeutics, fluctuations in operating results, dependence on key personnel and collaborative partners, adoption of the Company’s products by the physician community, rapid technological changes inherent in the markets targeted, and substitute products and competition from larger companies.

The consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company has incurred losses and cash flow deficits from operations for the years ended December 31, 2016 and 2015. The Company has financed operations to date primarily through private placements of equity securities, including the sale of common stock and preferred stock, and the related issuance of warrants in September 2016, the issuance of common stock in the initial public offering completed in December 2014, and borrowings under debt agreements. The Company has incurred losses and negative cash flows from operations since inception resulting in an accumulated deficit at December 31, 2016 of $181.8 million. The Company anticipates that it will continue to incur net losses for the next several years. The Company believes that its existing cash and cash equivalents will be sufficient to fund its projected cash needs into the middle of 2018, and it has the ability to reduce or defer operating expenses as may be needed to fund its operations into the middle of the third quarter of 2018. The Company will require additional capital to complete the filing of a biologics license application with the FDA and commercialize NeoCart, if approved, and for the future development of its existing product candidates. However, the terms of such financing may not be on favorable terms or available to the Company.

Initial public offering

On December 3, 2014, the Company completed its initial public offering (“IPO”) whereby the Company sold 5,909,091 shares of common stock at a price of $11.00 per share. The shares began trading on the Nasdaq Global Market on December 3, 2014. Gross proceeds from the offering were $65 million. In January 2015, the underwriters exercised a portion of their overallotment option and purchased an additional 465,000 shares of the Company’s common stock at $11.00 per share, resulting in an additional $5.1 million in gross proceeds. After giving effect to underwriting discounts and commissions and offering expenses payable by the Company, net proceeds were $61.3 million.