
						Accounting for convertible preferred stock
Description of the Matter						As discussed in Note 9 of the consolidated financial statements, the Company issued Series B convertible preferred stock ("convertible preferred stock") in March 2021 to Bharat Biotech as an advance payment for the supply of COVAXIN. The Company accounts for convertible preferred stock as a liability or as an equity instrument depending on the specific terms of the preferred stock purchase agreement. The Company accounted for the convertible preferred stock as an equity instrument within stockholder's equity at its fair value and recognized a corresponding short-term asset for the advance payment. Auditing the accounting conclusions for the convertible preferred stock was complex and required significant auditor judgement to evaluate the classification of the preferred stock on the balance sheet. In particular, the accounting for convertible preferred stock involved an assessment of its terms, including the settlement provisions, to determine if the convertible preferred stock should be classified as an equity instrument or liability.
How We Addressed the Matter in Our Audit						To test the accounting for convertible preferred stock, our audit procedures included, among others, inspecting the preferred stock purchase agreement, including the form of preferred stock, settlement provisions, and testing the Company's technical accounting analysis of the preferred stock purchase agreement and application of the relevant accounting guidance. This also included the involvement of subject matter resources to assist in evaluating management's conclusion on the interpretation and application of the relevant accounting literature.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2018.

Philadelphia, Pennsylvania

~~March 27, 2020~~February 28, 2022

F-3

~~F-2~~

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Ocugen, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Ocugen, Inc.’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Ocugen, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated February 28, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect material misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania

February 28, 2022

F-4

OCUGEN, INC.

CONSOLIDATED BALANCE SHEETS

December 31,
2019 December 31,
2018
Assets
Current assets
Cash and cash equivalents $ 7,444,052 $ 1,628,136
Prepaid expenses and other current assets 1,322,167 313,499
Asset held for sale 7,000,000 —
Total current assets 15,766,219 1,941,635
Property and equipment, net 222,464 245,788
Restricted cash 151,016 150,477
Other assets 667,747 116,333
Total assets $ 16,807,446 $ 2,454,233
Liabilities and stockholders’ equity (deficit)
Current liabilities
Accounts payable $ 1,895,613 $ 3,277,525
Accrued expenses 2,270,045 1,402,750
Short-term debt, net — 7,483,847
Derivative liabilities — 1,741,222
Operating lease obligation 172,310 —
Other current liabilities 205,991 204,242
Total current liabilities 4,543,959 14,109,586
Non-current liabilities
Operating lease obligation, less current portion 163,198 —
Long term debt, net 1,072,123 1,016,727
Other non-current liabilities 9,755 37,459
Total non-current liabilities 1,245,076 1,054,186
Total liabilities 5,789,035 15,163,772
Commitments and contingencies (Note 9)
Stockholders’ equity (deficit)
Convertible preferred stock, $0.01 par value, 10,000,000 shares authorized, 7 and 0 issued and outstanding, respectively — —
Common stock, $0.01 par value, 200,000,000 authorized, 52,746,728 and 4,960,552 shares issued, respectively; 52,625,228 and 4,960,552 shares outstanding, respectively 527,467 49,606
Treasury Stock, at cost 121,500 and 0 shares, respectively (47,864) —
Accumulated other comprehensive income — 451
Additional paid-in capital 62,018,632 18,477,598
Accumulated deficit (51,479,824) (31,237,194)
Total stockholders’ equity (deficit) 11,018,411 (12,709,539)
Total liabilities and stockholders’ equity (deficit) $ 16,807,446 $ 2,454,233
(in thousands, except share and per share amounts)


	As of December 31,
	2021		2020
Assets
Current assets
Cash and cash equivalents	$	94,958	$	24,039
Advance for COVAXIN supply	4,988		—
Prepaid expenses and other current assets	2,700		1,839
Total current assets	102,646		25,878
Property and equipment, net	1,164		633
Restricted cash	151		151
Other assets	1,800		714
Total assets	$	105,761	$	27,376
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	2,312	$	395
Accrued expenses and other current liabilities	4,325		2,941
Short-term debt, net	—		234
Operating lease obligations	363		44
Total current liabilities	7,000		3,614
Non-current liabilities
Operating lease obligations, less current portion	1,231		389
Long term debt, net	1,712		1,823
Total non-current liabilities	2,943		2,212
Total liabilities	9,943		5,826
Commitments and contingencies (Note 14)	0		0
Stockholders’ equity
Convertible preferred stock; $0.01 par value; 10,000,000 shares authorized at December 31, 2021 and 2020
Series A; 7 issued and outstanding at December 31, 2021 and 2020	—		—
Series B; 54,745 and 0 issued and outstanding at December 31, 2021 and 2020, respectively	1		—
Common stock; $0.01 par value; 295,000,000 and 200,000,000 authorized; 199,502,183 and 184,133,384 shares issued, and 199,380,683 and 184,011,884 shares outstanding at December 31, 2021 and 2020, respectively	1,995		1,841
Treasury Stock, at cost, 121,500 shares at December 31, 2021 and 2020	(48)		(48)
Additional paid-in capital	225,537		93,059
Accumulated deficit	(131,667)		(73,302)
Total stockholders’ equity	95,818		21,550
Total liabilities and stockholders’ equity	$	105,761	$	27,376

See accompanying notes to consolidated financial statements.

~~F-3~~F-5

OCUGEN, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Year ended December 31,
2019 2018
Operating expenses:
Research and development $ 8,085,522 $ 10,321,397
General and administrative 6,077,097 5,819,111
Total operating expenses 14,162,619 16,140,508
Loss from operations (14,162,619) (16,140,508)
Other income (expense)
Change in fair value of derivative liabilities (3,187,380) 1,664,689
Loss on debt conversion (341,136) —
Interest income 1,214 19,213
Interest expense (1,767,836) (3,750,630)
Other income (expense) (784,873) (12,428)
Total other income (expense) (6,080,011) (2,079,156)
Net loss $ (20,242,630) $ (18,219,664)
Other comprehensive income (loss)
Foreign currency translation adjustment (451) 451
Comprehensive loss $ (20,243,081) $ (18,219,213)
Net loss per share of common stock—basic and diluted $ (1.46) $ (3.67)
Weighted average common shares outstanding—basic and diluted 13,893,819 4,960,552
(in thousands, except share and per share amounts)


	Year ended December 31,
	2021		2020		2019
Revenues
Collaboration revenue	$	—	$	43	$	—
Total revenues	—		43		—
Operating expenses
Research and development	35,108		6,354		8,086
In-process research and development	—		7,000		—
General and administrative	22,920		7,974		6,077
Total operating expenses	58,028		21,328		14,163
Loss from operations	(58,028)		(21,285)		(14,163)
Other income (expense)
Change in fair value of derivative liabilities	—		—		(3,187)
Loss on debt conversion	—		—		(341)
Interest expense	(79)		(721)		(1,768)
Other income (expense)	(310)		184		(784)
Total other income (expense)	(389)		(537)		(6,080)
Loss before income taxes	(58,417)		(21,822)		(20,243)
Income tax benefit	(52)		—		—
Net loss and comprehensive income	$	(58,365)	$	(21,822)	$	(20,243)
Deemed dividend related to Warrant Exchange	—		(12,546)		—
Net loss to common stockholders	$	(58,365)	$	(34,368)	$	(20,243)

Shares used in calculating net loss per share attributable to common stockholders — basic and diluted	195,013,043		112,236,110		13,893,819
Net loss per share attributable to common stockholders — basic and diluted	$	(0.30)	$	(0.31)	$	(1.46)

See accompanying notes to consolidated financial statements.

~~F-4~~F-6

OCUGEN, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock Treasury Stock Additional
Paid-in
Capital Accumulated
Other
Comprehensive
Income Accumulated
Deficit Total
Shares Amount
Balance at December 31, 2017 4,960,552 $ 49,606 $ — $ 17,402,911 $ — $ (13,017,530) $ 4,434,987
Foreign currency translation adjustment — — — — 451 — 451
Stock-based compensation expense — — — 1,074,687 — — 1,074,687
Net loss — — — — — (18,219,664) (18,219,664)
Balance at December 31, 2018 4,960,552 $ 49,606 $ — $ 18,477,598 $ 451 $ (31,237,194) $ (12,709,539)
Issuance of common stock for Subscription Agreement 80,569 806 — 999,194 — — 1,000,000
Conversion of debt 1,125,673 11,256 — 13,968,532 — — 13,979,788
Issuance of common stock and warrants for Pre-Merger Financing 4,385,964 43,860 — 13,106,596 — — 13,150,456
Issuance of stock for reverse asset acquisition, net of $2.6 million of costs 1,651,748 16,517 — 3,549,271 — — 3,565,788
Reclassification of Series B Warrants from liability to equity — — — 11,255,740 — — 11,255,740
Issuance of common stock for warrant exercises, net 40,542,222 405,422 — (222,388) — — 183,034
Repurchase of treasury stock — — (47,864) — — — (47,864)
Foreign currency translation — — — — (451) — (451)
Stock-based compensation expense — — — 884,089 — — 884,089
Net loss — — — — — (20,242,630) (20,242,630)
Balance at December 31, 2019 52,746,728 $ 527,467 $ (47,864) $ 62,018,632 $ — $ (51,479,824) $ 11,018,411
(in thousands, except share amounts)


	Series A Convertible Preferred Stock			Series B Convertible Preferred Stock			Common Stock			Treasury Stock		Additional Paid in Capital		Accumulated Deficit		Total
	Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2018	—	$	—	—	$	—	4,960,552	$	50	$	—	$	18,478	$	(31,237)	$	(12,709)
Stock-based compensation expense	—	—		—	—		—	—		—		884		—		884
Issuance of common stock for subscription agreement	—	—		—	—		80,569	1		—		999		—		1,000
Conversion of debt	—	—		—	—		1,125,673	11		—		13,969		—		13,980
Issuance of common stock and warrants for Pre-Merger Financing	—	—		—	—		4,385,964	44		—		13,106		—		13,150
Issuance of stock for reverse asset acquisition, net	7	—		—	—		1,651,748	17		—		3,549		—		3,566
Reclassification of Series B Warrants from liability to equity	—	—		—	—		—	—		—		11,256		—		11,256
Issuance of common stock for warrant exercises, net	—	—		—	—		40,542,222	405		—		(222)		—		183
Repurchase of treasury stock	—	—		—	—		—	—		(48)		—		—		(48)
Net loss	—	—		—	—		—	—		—		—		(20,243)		(20,243)
Balance at December 31, 2019	7	$	—	—	$	—	52,746,728	$	528	$	(48)	$	62,019	$	(51,480)	$	11,019
Stock-based compensation expense	—	—		—	—		—	—		—		660		—		660
Warrant Exchange	—	—		—	—		21,920,820	219		—		(5,197)		—		(4,978)
Issuance of common stock for subscription agreements and warrant exercises	—	—		—	—		1,328,405	13		—		319		—		332
At-the-market common stock issuance, net	—	—		—	—		108,137,431	1,081		—		35,258		—		36,339
Net loss	—	—		—	—		—	—		—		—		(21,822)		(21,822)
Balance at December 31, 2020	7	$	—	—	$	—	184,133,384	$	1,841	$	(48)	$	93,059	$	(73,302)	$	21,550

See accompanying notes to consolidated financial statements.

~~F-5~~

F-7

OCUGEN, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)

(in thousands, except share amounts)


	Series A Convertible Preferred Stock			Series B Convertible Preferred Stock			Common Stock			Treasury Stock		Additional Paid in Capital		Accumulated Deficit		Total
	Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2020	7	$	—	—	$	—	184,133,384	$	1,841	$	(48)	$	93,059	$	(73,302)	$	21,550
Stock-based compensation expense	—	—		—	—		—	—		—		6,958		—		6,958
Issuance of common stock for option and warrant exercises	—	—		—	—		1,381,799	14		—		1,248		—		1,262
At-the-market common stock issuance, net	—	—		—	—		987,000	10		—		4,839		—		4,849
Registered direct offering common stock issuance, net	—	—		—	—		13,000,000	130		—		114,480		—		114,610
Series B Convertible Preferred Stock issuance, net	—	—		54,745	1		—	—		—		4,953		—		4,954
Net loss	—	—		—	—		—	—		—		—		(58,365)		(58,365)
Balance at December 31, 2021	7	$	—	54,745	$	1	199,502,183	$	1,995	$	(48)	$	225,537	$	(131,667)	$	95,818

See accompanying notes to consolidated financial statements.

F-8

OCUGEN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended December 31,
2019 2018
Cash flows from operating activities
Net loss $ (20,242,630) $ (18,219,664)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense 60,608 49,623
Non-cash interest expense 1,733,521 3,750,630
Non-cash lease expense 250,361 —
Change in fair value of derivative liability 3,187,380 (1,664,689)
Stock-based compensation expense 884,089 1,074,687
Conversion of convertible notes 341,136 —
Other non-cash 4,803 —
Changes in assets and liabilities:
Prepaid expenses and other current assets (1,007,367) (201,861)
Accounts payable and accrued expenses (1,628,621) 3,633,394
Deferred rent — 1,540
Other assets (227,172) (54,203)
Lease obligations (249,389) —
Net cash used in operating activities (16,893,281) (11,630,543)
Cash flows from investing activities
Purchase of property, plant and equipment (29,446) (77,414)
Payment of asset acquisition costs (2,327,273) —
Net cash used in investing activities (2,356,719) (77,414)
Cash flows from financing activities
Proceeds from sale of common stock for pre-merger financing 22,546,353 —
Proceeds from stock subscription 1,000,000 —
Purchases of treasury stock (47,864) —
Issuance of common stock for warrant exercises 183,034 —
Repayments of debt (5,290,000) —
Proceeds from issuance of debt 6,800,000 7,300,400
Payment of debt issuance costs (99,202) (103,925)
Payments on financing leases (25,866) (11,928)
Net cash provided by financing activities 25,066,455 7,184,547
Effect of changes in exchange rate on cash — 451
Net increase (decrease) in cash, cash equivalents and restricted cash 5,816,455 (4,522,959)
Cash, cash equivalents and restricted cash at beginning of period 1,778,613 6,301,572
Cash, cash equivalents and restricted cash at end of period $ 7,595,068 $ 1,778,613
Supplemental disclosure of non-cash investing and financing transactions:
Purchase of fixed assets by entering into capital lease (Note 9) $ — $ 63,817
Conversion of convertible notes (Note 7) $ 13,979,788 $ —
Equity issuance costs (Note 3) $ 1,150,000 $ —
Right-of-use asset related to operating leases $ 470,356 $ —
Reverse asset acquisition costs (Note 3) $ 2,252,795 $ —
(in thousands)


	Year ended December 31,
	2021		2020		2019
Cash flows from operating activities
Net loss	$	(58,365)	$	(21,822)	$	(20,243)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	229		102		61
Non-cash interest expense	78		721		1,734
Non-cash lease expense	360		189		250
In-process research and development expense	—		7,000		—
Change in fair value of derivative liability	—		—		3,187
Stock-based compensation expense	6,958		660		884
Loss on debt conversion	—		—		341
Income tax benefit	(52)		—		—
Gain on forgiveness of PPP Note	(426)		—		—
Impairment on note receivable	761		—		—
Other non-cash	26		(349)		5
Changes in assets and liabilities:
Prepaid expenses and other current assets	(742)		(370)		(1,007)
Accounts payable and accrued expenses	3,498		(541)		(1,629)
Other assets	100		(104)		(227)
Lease obligations	(366)		(195)		(249)
Net cash used in operating activities	(47,941)		(14,709)		(16,893)
Cash flows from investing activities
Purchase of property and equipment	(939)		(307)		(30)
Payments for asset acquisitions	(127)		—		(2,327)
Issuance of note receivable	(750)		—		—
Net cash used in investing activities	(1,816)		(307)		(2,357)
Cash flows from financing activities
Proceeds from issuance of common stock	129,211		37,822		1,183
Payment of equity issuance costs	(8,525)		(1,477)		—
Purchases of treasury stock	—		—		(48)
Proceeds from Pre-Merger Financing	—		—		22,546
Proceeds from issuance of debt	—		921		6,800
Payments of debt issuance costs	—		(6)		(99)
Repayments of debt	—		(5,625)		(5,290)
Financing lease principal payments	(10)		(24)		(26)
Net cash provided by financing activities	120,676		31,611		25,066
Net increase in cash, cash equivalents, and restricted cash	70,919		16,595		5,816
Cash, cash equivalents, and restricted cash at beginning of period	24,190		7,595		1,779
Cash, cash equivalents, and restricted cash at end of period	$	95,109	$	24,190	$	7,595

See accompanying notes to consolidated financial statements.

~~F-6~~

F-9

OCUGEN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(in thousands)


	Year ended December 31,
	2021		2020		2019
Supplemental disclosure of non-cash investing and financing transactions:
Exercise of warrants	$	603	$	—	$	—
Series B Convertible Preferred Stock issuance	$	4,988	$	—	$	—
Forgiveness of PPP Note	$	426	$	—	$	—
Purchase of property and equipment	$	16	$	214	$	—
Right-of-use assets related to operating leases	$	1,226	$	180	$	470
Issuance of Warrant Exchange Promissory Notes	$	—	$	5,625	$	—
Obligation settled with common stock	$	—	$	331	$	—
Conversion of convertible notes	$	—	$	—	$	13,980
Equity issuance costs	$	—	$	4	$	1,150
Reverse asset acquisition costs	$	—	$	—	$	2,253

See accompanying notes to consolidated financial statements.

F-10

OCUGEN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Business

Ocugen, Inc. ~~(formerly known as Histogenics Corporation)~~, together with its wholly owned subsidiaries (“Ocugen” or the “Company”), is a clinical-stage biopharmaceutical company focused on ~~discovering,~~ developing ~~and commercializing transformative~~gene therapies to ~~treat the whole eye.~~cure blindness diseases and developing a vaccine to save lives from COVID-19. The Company is ~~located~~headquartered in Malvern, ~~Pennsylvania.~~Pennsylvania, and manages its business as 1 operating segment.

~~Ocugen has~~COVID-19 Vaccine Candidate

In February 2021, the Company entered into a ~~late-stage, Phase 3 program, OCU300,~~Co-Development, Supply and Commercialization Agreement with Bharat Biotech International Limited ("Bharat Biotech"), pursuant to which ~~has received Orphan Drug Designation~~the Company obtained an exclusive right and license under certain of Bharat Biotech’s intellectual property rights, with the right to grant sublicenses, to develop, manufacture, and commercialize COVAXIN for the prevention of COVID-19 caused by SARS-CoV-2 in the United States, its territories, and possessions. In June 2021, the Company entered into an amendment to the Co-Development, Supply and Commercialization Agreement (as so amended, the "Covaxin Agreement") pursuant to which the parties agreed to expand the Company's rights to develop, manufacture, and commercialize COVAXIN to include Canada in addition to the United States, its territories, and possessions (the "Ocugen Covaxin Territory").

COVAXIN is a whole-virion inactivated COVID-19 vaccine candidate and is formulated with the inactivated SARS-CoV-2 virus, an antigen, and an adjuvant. COVAXIN requires a 2-dose vaccination regimen given 28 days apart and is stored in standard vaccine storage conditions (2-8°C). COVAXIN was granted an Emergency Use Listing by the World Health Organization in November 2021. Over 295 million doses globally have been administered to date.

The Company is pursuing Biologics License Application ("~~ODD"~~BLA") ~~from~~approval for COVAXIN in the United States based upon the recommendation of the U.S. Food and Drug Administration ("FDA"). ~~OCU300~~In October 2021, the Company submitted an Investigational New Drug ("IND") application to the FDA to initiate a Phase 2/3 immuno-bridging and broadening clinical trial evaluating COVAXIN for adults ages 18 years and older. The clinical trial is designed to evaluate whether the immune response experienced in participants in a ~~small molecule therapeutic currently in~~completed Phase 3 clinical ~~development~~trial in India is similar to a demographically representative, adult population in the United States. In November 2021, the Company was notified that the FDA issued a clinical hold on its IND application. In December 2021, the FDA sent the Company a letter setting forth the reasons for ~~patients with ocular redness~~the clinical hold and ~~discomfort stemming from ocular graft-versus-host disease (“oGVHD”). Ocugen~~specific guidance on steps that must be taken to have the clinical hold lifted. The Company provided the FDA responses to their comments and the FDA lifted its clinical hold in February 2022. The Company plans to initiate the Phase 2/3 immuno-bridging and broadening clinical trial for COVAXIN as soon as the Company is able to. The Company also plans to initiate a safety-bridging clinical trial in the first half of 2022, subject to discussions with the FDA. Subject to the foregoing, the Company anticipates submitting a BLA with the FDA near the end of 2022. In November 2021, the Company also submitted a request to the FDA for Emergency Use Authorization ("EUA") for COVAXIN for pediatric use in ages two to 18 years in the United States. The EUA submission was based on the results of a Phase 2/3 immuno-bridging pediatric clinical trial conducted by Bharat Biotech in India. The Company's EUA submission is currently under review by the FDA. In February 2022, Delta and ~~only company~~Omicron neutralization results along with a safety database of more than 36 million teenagers who had been vaccinated with COVAXIN were submitted to ~~receive ODD~~the FDA to support the Company's EUA submission.

The Company is also pursuing approval for COVAXIN in Canada. In July 2021, the Company completed its rolling submission to Health Canada for COVAXIN. The rolling submission process, which permits companies to submit safety and efficacy data and information as they become available, was recommended and accepted under the Minister of Health’s Interim Order Respecting the Importation, Sale and Advertising of Drugs for Use in Relation to COVID-19 and transitioned to a New Drug Submission ("NDS") for COVID-19. The submission was conducted through the Company's Canadian subsidiary, Vaccigen Ltd. The Company is in discussions with Health Canada regarding its NDS submission for COVAXIN. In December 2021, the Company was provided with a Notice of Deficiency ("NOD") from Health Canada regarding its NDS submission. Health Canada requested further analyses of the COVAXIN preclinical and clinical data, as well as additional information regarding chemistry, manufacturing, and controls ("CMC"). The Company has responded to and provided proposed resolutions for the ~~treatment~~deficiencies included in the NOD. The Company's responses are currently under review by Health Canada.

The Company is evaluating its commercialization strategy for COVAXIN in the United States and Canada, if authorized or approved in either jurisdiction. In June 2021, the Company selected Jubilant HollisterStier as its manufacturing partner for COVAXIN to prepare for the potential commercial manufacturing for the Ocugen Covaxin Territory. The Company expects to

F-11

Table of ~~symptoms associated~~Content s

enter into a master services agreement with ~~oGVHD~~Jubilant HollisterStier for the commercial manufacture of COVAXIN. The technology transfer process from Bharat Biotech to Jubilant HollisterStier for drug product manufacturing has been initiated.

In September 2021, the Company entered into a Development and isCommercial Supply Agreement (the “Supply Agreement”) with Bharat Biotech, pursuant to which Bharat Biotech will supply the ~~only company conducting Phase 3 studies in this patient population. OCU300 is formulated using~~Company with clinical trial materials and commercial supplies of COVAXIN finished drug product prior to the ~~Company’s proprietary nanoemulsion~~completion of a technology ~~OcuNanoE—Ocugen’s ONE Platform™ (“OcuNanoE™”).~~transfer. Following the completion of a technology transfer, Bharat Biotech will supply COVAXIN drug product components and continue to supply finished drug product as necessary for the commercial manufacture and supply of COVAXIN subsequent to a regulatory authorization or approval.

~~Ocugen~~Modifier Gene Therapy Platform

The Company is developing a modifier gene therapy platform ~~for~~designed to fulfill unmet medical needs in the area of retinal diseases, including inherited retinal diseases ~~(“IRDs”~~("IRDs"), such as retinitis pigmentosa ("RP") and Leber congenital amaurosis ("LCA"), and dry age-related macular degeneration ("AMD"). ~~Ocugen’s~~The Company's modifier gene therapy platform is ~~novel in that it targets nuclear hormone receptors (“NHRs”~~based on Nuclear Hormone Receptors ("NHRs"), which have the potential to restore homeostasis, to the ~~retina and may target multiple genes that are associated with a range of IRDs. Unlike single-gene replacement therapies, which only target one genetic mutation,~~basic biological processes in the ~~Company believes that its~~retina. The modifier gene therapy platform, through its ~~targeting~~use of NHRs, ~~may impact~~represents a novel approach that has the potential to address multiple retinal diseases caused by mutations in multiple genes with one product; and potentially address complex diseases, such as dry AMD, that are ~~associated~~potentially caused by imbalances in multiple gene networks.

The Company believes that OCU400, its first product candidate being developed with its modifier gene therapy platform, has the potential to be broadly effective in restoring retinal integrity and function across a range of ~~genetically diverse diseases. Ocugen’s first gene therapy candidate,~~IRDs, including RP and LCA. OCU400 has received ~~ODD~~4 Orphan Drug Designations from the FDA for the treatment of certain disease genotypes: nuclear receptor subfamily 2 group E member 3 ("~~NR2E3~~(")NR2E3"~~mutation-associated retinal diseases and~~), centrosomal protein 290 ("~~CEP290~~("CEP290"), rhodopsin ("RHO"), and phosphodiesterase 6B ("PDE6ß") mutation-associated inherited retinal ~~diseases. Ocugen’s~~degenerations. In November 2021, the Company submitted an IND application to the FDA for OCU400 for the treatment of the NR2E3 and RHO disease genotypes. The Company's IND application was accepted by the FDA in December 2021. The Company has initiated a Phase 1/2 clinical trial in the United States for the treatment of these disease genotypes and the first patient is expected to be dosed in the first half of 2022. This Phase 1/2 clinical trial is a multicenter, open-label, dose ranging study to assess the safety of unilateral subretinal administration of OCU400 in subjects with NR2E3-related RP. OCU400 has additionally received Orphan Medicinal Product Designation from the European Commission, based on the recommendation of the European Medicines Agency, for RP and LCA. The Company believes OCU400 has the potential for broad spectrum applications to treat many IRDs. The Company is currently evaluating options to initiate OCU400 clinical trials in Europe.

The Company's second gene therapy ~~product~~ candidate, OCU410, is ~~targeted~~being developed to utilize the nuclear receptor genes RAR-related orphan receptor A ("RORA") for the treatment of dry ~~age-related macular degeneration (“AMD”) and~~AMD. The Company is currently ~~in preclinical development. Currently, there are no FDA-approved therapies~~executing pre-IND studies consistent with FDA discussions to ~~treat this disease.~~support a Phase 1/2 clinical trial. The Company has engaged CanSino Biologics, Inc. ("CanSinoBIO") to manufacture clinical supplies and be responsible for the CMC development for OCU400 and OCU410. See Note 3 for additional information about the Company's collaboration with CanSinoBIO.

~~Ocugen is~~Novel Biologic Therapy for Retinal Diseases

The Company's pipeline also ~~developing~~includes a biologic product candidate, OCU200, a novel fusion protein ~~for the treatment of wet AMD, diabetic retinopathy (“DR”) and~~designed to treat severely sight-threatening diseases such as diabetic macular edema, ~~(“DME”), which~~diabetic retinopathy, and wet AMD. The Company is ~~in preclinical development. Ocugen expects~~currently establishing a current Good Manufacturing Practice process for the production of clinical trial materials and executing pre-IND studies consistent with FDA discussions to ~~initiate~~support a Phase 1/22a clinical ~~trial for~~trial. The Company has completed the technology transfer of manufacturing processes to its contract development and manufacturing organization that will manufacture OCU200 within the next two years. Ocugen plans to expand the therapeutic applications of OCU200 beyond DME, DR and wet AMD to potentially include macular edema following retinal vein occlusion (“RVO”) and myopic choroidal neovascularization (“mCNV”).

~~Merger with Histogenics~~

On September 27, 2019, the Company completed its reverse merger with Ocugen, OpCo Inc. (formerly known as Ocugen, Inc. (“Former Ocugen”)) in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of April 5, 2019, by and among Histogenics, Former Ocugen and Restore Merger Sub, Inc., a wholly owned subsidiary of Histogenics (“Merger Sub”), as amended (the “Merger Agreement”), pursuant to which Merger Sub merged with and into Former Ocugen, with Former Ocugen surviving as a wholly owned subsidiary of Histogenics (the “Merger”). Immediately after completion of the Merger, Histogenics changed its name to Ocugen, Inc. and the business conducted by Ocugen, Inc. became the business conducted by Former Ocugen. Former Ocugen is deemed to be the accounting acquirer. Accordingly, the historical financial statements of Former Ocugen became the Company’s historical financial statements, including the comparative prior periods. See Note 3 for additional information.

~~Reverse Stock Split~~

In connection with, and immediately prior to the completion of the Merger, Histogenics effected a reverse stock split of the common stock, at a ratio of 1-for-60 (the ‘‘Reverse Stock Split’’). Under the terms of the Merger Agreement, the Company issued common stock to Former Ocugen’s stockholders at an exchange rate of 0.4794 shares of common stock, after taking into account the Reverse Stock Split, for each share of Former Ocugen’s common stock outstanding immediately prior to the Merger.

The capital structure, including the number of shares of common stock issued appearing in the consolidated balance sheets for the periods presented, reflects that of Ocugen. All references in the consolidated financial statements to the number of shares and per-share amounts of common stock have been retroactively restated to reflect the exchange rate.

~~F-7~~

clinical supplies.

Going Concern

The Company has incurred recurring net losses ~~and negative cash flows from operations~~ since inception and has funded its ~~operating losses~~operations to date through the sale of common stock, warrants to purchase common stock, the issuance of convertible notes, debt, and ~~debt.~~grant proceeds. The Company incurred net losses of approximately ~~$20.2~~$58.4 million, $21.8 million, and ~~$18.2~~$20.2 million for the ~~year~~years ended December 31, 2021, 2020, and 2019, ~~and 2018, respectively, and~~respectively. As of December 31, 2021, the Company had an accumulated deficit of ~~$51.5~~$131.7 million ~~as of December 31, 2019. As of December 31, 2019, the Company had~~and cash, cash equivalents, and restricted cash totaling ~~$7.6~~$95.1 million.

The Company ~~has a limited operating history and its prospects are~~is subject to risks, expenses, and uncertainties frequently encountered by companies in its industry. The Company intends to continue its research, development, and ~~development~~commercialization efforts for its product candidates, which will

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require significant additional funding. If the Company is unable to obtain additional financing in the future or its research, development, and ~~development~~commercialization efforts require higher than anticipated capital, there may be a negative impact on the financial viability of the Company. The Company plans to increase working capital ~~by raising additional capital~~ through public and private placements of equity and/or debt, payments from potential strategic research and development arrangements, ~~sale~~sales of assets, ~~and~~government grants, licensing and/or collaboration arrangements with pharmaceutical companies or other ~~institutions.~~institutions, or other funding from the government or other third parties. Such financing may not be available at all, or on terms that are favorable to the Company. While management of the Company believes that it has a plan to fund ongoing operations, its plan may not be successfully implemented. Failure to generate sufficient cash flows from operations, raise additional capital, ~~through one or more financings,~~ or appropriately manage certain discretionary spending could have a material adverse effect on the Company’s ability to achieve its intended business objectives.

As a result of these factors, together with the anticipated increase in spending that will be necessary to continue to research, develop, and commercialize the Company’s ~~products,~~product candidates and the uncertainty of futures revenues associated with COVAXIN, there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these ~~audited~~ consolidated financial statements are issued. The ~~audited~~ consolidated financial statements do not contain any adjustments that might result from the resolution of any of the above uncertainties.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying consolidated financial statements included herein have been prepared in conformity with accounting principles generally accepted in the United States ~~(“GAAP”~~("GAAP") and under the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). The consolidated financial statements include the accounts of Ocugen ~~Inc.~~ and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform with current year presentation.

~~Foreign Currency Translation and Transactions~~

The assets and liabilities of the Company’s foreign subsidiary are translated into U.S. dollars based on exchange rates in effect at the end of each period. Revenues and expenses are translated at average exchange rates during the periods. Currency transaction gains or losses are included in other expenses. Gains or losses from balance sheet translation are included in accumulated other comprehensive income.

Use of Estimates

In preparing the consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of expenses during the reporting period. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. On an ongoing basis, the Company evaluates its estimates and assumptions. These estimates and assumptions include those used in the ~~estimation of~~accounting for research and development contracts, including clinical trial accruals, debt and equity instruments (including derivative liabilities), asset held for sale, and the ~~valuation~~collectibility of ~~share-based payment arrangements, warrants,~~the note receivable.

Segment Information

As of December 31, 2021, the Company viewed its operations and ~~embedded conversion features~~managed its business as 1 operating segment consistent with how the Company's chief operating decision-maker, the Company's Chief Executive Officer, makes decisions regarding resource allocation and assessing performance. As of December 31, 2021, substantially all of the Company's assets were located in the United States.

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid investments that have maturities of three months or less when acquired to be cash equivalents. Cash equivalents may include bank demand deposits, marketable securities with maturities of three months or less at purchase, and money market funds that invest primarily in certificates of deposit, commercial paper, and U.S. government and U.S. government agency obligations. The Company’s restricted cash balance consists of cash held to collateralize a corporate credit card account.

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The following table provides a reconciliation of cash, cash equivalents, and restricted cash in the consolidated balance sheets to the total amount shown in the consolidated statements of cash flows (in thousands):


	As of December 31,
	2021		2020
Cash and cash equivalents	$	94,958	$	24,039
Restricted cash	151		151
Total cash, cash equivalents, and restricted cash	$	95,109	$	24,190

Collaboration Arrangements

The Company assesses whether collaboration agreements are subject to Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 808, Collaborative Arrangements ("ASC 808"), based on whether they involve joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards. To the extent that the arrangement falls within the scope of ASC 808, the Company assesses whether the payments between the Company and the collaboration partner are subject to other accounting literature. If payments from the collaboration partner represent consideration from a customer, the Company accounts for those payments within the scope of FASB ASC Topic 606, Revenue from Contracts with Customers. However, if the Company concludes that its collaboration partner is not a customer, the Company will record royalty payments received as collaboration revenue in the period in which the underlying sale occurs and record expenses and expense reimbursements as either research and development expense or general and administrative expense, or a reduction thereof, based on the ~~convertible notes.~~underlying nature of the expense or expense reimbursement. During the year ended December 31, 2020, the Company recorded collaboration revenue from an agreement accounted for as a collaborative arrangement within the scope of ASC 808. No collaboration revenue was recorded during the years ended December 31, 2021 and 2019.

Asset Held for Sale

~~An asset is considered to be held for sale when all of~~During 2019, the following criteria are met: (i) management commits to a plan to sell the asset; (ii) it is unlikely that the disposal plan will be significantly modified or discontinued; (iii) the asset is available for immediate sale in its present condition; (iv) actions required to complete the sale of the asset have been initiated; (v) sale of the asset is probable and the completed sale is expected to occur within one year; and (vi) the asset is actively being marketed for sale at a price that is reasonable given its current market value.

~~F-8~~

A long-lived asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. If the long-lived asset is newly acquired, the carrying amount of the long-lived asset is established based on its fair value less cost to sell at the acquisition date. A long-lived asset is not depreciated or amortized while it is classified as held for sale, and an impairment loss would be recognized to the extent the carrying amount exceeds the asset's fair value less cost to sell.

~~As of December 31, 2019, Ocugen~~Company had an intangible asset held for sale ~~acquired from Histogenics with a~~that was carried at its original fair value less cost to sell of $7.0 million. ~~See Note 3~~The Company concluded during the year ended December 31, 2020 that a sale of the intangible asset was no longer probable to be completed within one year from the date the intangible asset was initially recorded as held for sale. As such, the carrying value of the intangible asset was reduced to zero with the corresponding charge of $7.0 million recognized as in-process research and development expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020 as the in-process research and development did not have an alternative future use.

Property and Equipment, Net

The Company's property and equipment currently includes furniture and fixtures, machinery and equipment, leasehold improvements, and construction in progress. Property and equipment is recorded at historical cost. Significant additions or improvements are capitalized, and expenditures for repairs and maintenance are charged to expense as incurred. Gains and losses on disposal of assets are included in the consolidated statements of operations and comprehensive loss. Depreciation is calculated using the straight-line method and is recognized over the expected useful life of the underlying asset. Construction in progress is not depreciated until such time that the asset is completed and placed into service. Once placed into service, the asset is depreciated over its expected useful life.

Expected useful lives by major asset category are as follows:


Furniture and fixtures			3 to 7 years
Machinery and equipment			5 to 7 years
Leasehold improvements			Lower of the expected useful life or remaining lease term

Leases

The Company determines if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the Company the right to control the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The

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Company's current and historical lease agreements include lease and non-lease components, which the Company has elected not to account for separately for all classes of underlying assets. Lease expense for variable lease components is recognized when the obligation is probable.

Operating leases are included in other assets and operating lease obligations in the Company’s consolidated balance sheets. Operating lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Operating lease payments are recognized as lease expense on a straight-line basis over the lease term and recognized as research and development expense or general and administrative expense based on the underlying nature of the expense. The Company currently leases real estate classified as operating leases. FASB ASC Topic 842, Leases ("ASC 842") requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. The implicit interest rate was not readily determinable in the Company’s current and historical operating leases. As such, the incremental borrowing rate was used based on the information available at the commencement date in determining the present value of lease payments.

The lease term for the Company’s leases includes the non-cancellable period of the lease plus any additional ~~information.~~periods covered by either an option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor.

Lease payments included in the measurement of the lease liability are comprised of fixed payments, variable payments that depend on index or rate, and amounts probable to be payable under the exercise of an option to purchase the underlying asset if reasonably certain.

Variable payments not dependent on an index or rate associated with the Company’s leases are recognized when the event, activity, or circumstance is probable. Variable payments include the Company's proportionate share of certain utilities and other operating expenses and are presented as operating expenses in the Company’s consolidated statements of operations and comprehensive loss in the same line item as expense arising from fixed lease payments.

Exit and Disposal Activities

The Company records liabilities for one-time termination benefits in accordance with FASB ASC Topic 420, Exit and Disposal Cost Obligations ("ASC 420"). In accordance with ASC 420, an arrangement for one-time termination benefits exists at the date the plan of the termination meets the following criteria: (i) management commits to a plan of termination; (ii) the plan identifies the impacted employees and expected completion date; (iii) the plan identifies the terms of the benefits arrangement; (iv) it is unlikely significant changes to the plan will be made or the plan will be withdrawn; and (v) the plan has been communicated to employees. Costs for one-time termination benefits in which the employee is required to render service until termination in order to receive the benefits, are recognized ratably over the future service period.

The Company records liabilities for employee termination benefits covered by ongoing benefit arrangements in accordance with FASB ASC Topic 712, Compensation—Nonretirement Postemployment Benefits ("ASC 712"). In accordance with ASC 712, costs for termination benefits under ongoing benefits arrangements are recognized when management has committed to a plan of termination and the costs are probable and estimable.

Severance-related charges, once incurred, are recognized as either research and development expense or general and administrative expense within the consolidated statements of operations and comprehensive loss depending on the job function of the former employee.

Fair Value Measurements

The ~~company~~Company follows the provisions of ~~the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”)~~FASB ASC Topic 820, Fair Value Measurements (“("ASC ~~820”~~820"), which ~~defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair measurements.~~

The estimated fair value of certain financial instruments, cash and cash equivalents, accounts payable, and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. As of December 31, 2019 and 2018, the Company believes the fair value of the EB-5 note approximates its carrying value.

~~ASC 820~~ defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

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Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

The ~~company had derivative~~carrying value of certain financial instruments, including cash and cash equivalents, accounts payable, and accrued expenses approximate their fair values due to the short-term nature of these instruments. As of December 31, 2021, the Company has concluded that ~~were~~the fair ~~valued on a recurring basis~~value of the borrowings under the EB-5 Loan Agreement (as defined in Note 8), using Level ~~3 inputs.~~2 inputs, approximate their carrying value. See Note 8 for additional information.

Financial Instruments ~~Indexed to~~ and ~~Potentially Settled in Common Stock~~Derivatives

The Company ~~accounts for~~does not have derivative hedging instruments used to mitigate risk. The Company evaluates all financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with FASB ASC Topic 815, Derivatives and Hedging ("ASC 815"). Additionally, the Company assesses warrants to purchase common stock to determine liability versus stockholders' equity classification in accordance with ASC 815 and FASB ASC Topic ~~815-40,~~480, ~~Derivatives and Hedging — Contracts in Entity’s Own~~Distinguishing Liabilities from Equity ~~(“ASC 815-40”), which is the authoritative guidance on accounting~~. For derivative instruments that are accounted for derivative financial instruments indexed to and potentially settled in a company’s own stock. To determine whether a contract is considered indexed to the issuer’s own equity, the Company performs a two-step analysis:

~~Step 1: Evaluate whether the contract contains any exercise contingencies and, if so, whether they disqualify the contract from being classified~~ as ~~equity, and~~

~~Step 2: Assess whether the settlement terms are consistent with equity classification.~~

~~The Company classifies the~~liabilities, including liability-designated warrants, onthe derivative instrument is initially recorded at its ~~consolidated balance sheets~~fair value as a derivative liability ~~which~~and is ~~recognized at fair value~~then revalued at each reporting ~~period subsequent to the initial issuance. Changes~~date, with changes in the fair value ~~of derivatives are recognized~~reported as other income (expense) in the consolidated statements of operations and comprehensive loss. The classification of derivative instruments, including whether such instrument should be recorded as a liability or as stockholders' equity, is evaluated at the end of each reporting period.

~~Cash, Cash Equivalents~~In 2018 and ~~Restricted Cash~~

~~The~~2019, the Company considers all highly liquid investments that have maturities of three months or less when acquired to be cash equivalents. Cash and cash equivalents include bank demand deposits, marketable securities with maturities of three months or less at purchase, and money market funds that invest primarily in certificates of deposit, commercial paper and United States government and United States government agency obligations. The Company’s restricted cash balance consists of cash held to collateralize a corporate credit card account.

~~F-9~~

~~The following table provides a reconciliation of cash, cash equivalents, and restricted cash~~issued convertible notes in the ~~consolidated balance sheets to~~aggregate principal amount of $8.8 million (the "Convertible Notes"). During the ~~total amount shown in the consolidated statements of cash flows:~~

As of December 31,
2019 2018
Cash, cash equivalents and restricted cash reconciliation:
Cash and cash equivalents $ 7,444,052 $ 1,628,136
Restricted cash 151,016 150,477
Total cash, cash equivalents and restricted cash $ 7,595,068 $ 1,778,613

~~Property and Equipment, Net~~

Property and equipment is recorded at cost. Significant additions or improvements are capitalized, and expenditures for repairs and maintenance are charged to expense as incurred. Gains and losses on disposal of assets are included in the consolidated statements of operations and comprehensive loss. Depreciation is calculated using the straight-line method and is recognized over an expected useful life of 5 years for equipment and 7 years for furniture. The total accumulated depreciation and amortization for equipment and furniture as ofyear ended December 31, 2019, ~~and 2018 was $0.1~~the Company issued 1.1 million shares of common stock at $8.69 per share to extinguish the Convertible Notes, resulting in a loss of $0.3 million and ~~$0.1~~an increase of $13.0 million ~~respectively.~~

~~Leases~~

in additional paid-in capital. The Convertible Notes contained embedded conversion and change-in-control features, which were recorded at fair value as derivative liabilities and revalued at each reporting date. The Company ~~determines if an arrangement is a lease~~additionally had Series B Warrants (as defined in Note 10) that were classified as derivative liabilities at ~~inception. This determination generally depends on whether~~issuance and revalued each reporting period until they met the ~~arrangement conveys~~derivative scope exception allowing for stockholders' equity classification. The change in fair value of derivative liabilities related to the ~~Company~~Convertible Notes and the ~~right to control~~Series B Warrants was $3.2 million during the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The Company has lease agreements which include lease and non-lease components, which the Company has elected to account for as a single lease component for all classes of underlying assets. Lease expense for variable lease components are recognized when the obligation is probable.

Operating leases are included in other assets and lease obligations on the Company’s consolidated balance sheets. Operating lease right-of-use ("ROU") assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease payments are recognized as lease expenseyear ended December 31, 2019. There were no derivative instruments revalued on a ~~straight-line~~recurring basis ~~over~~during the ~~lease term.~~ years ended December 31, 2021 and 2020.

Stock-Based Compensation

The Company primarily leases buildings (real estate) which are classified as operating leases. ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. As an implicit interest rate is not readily determinable in the Company’s leases, the incremental borrowing rate is used based on the information available at commencement date in determining the present value of lease payments.

The lease term for all of the Company’s leases includes the non-cancellable period of the lease plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. Options for lease renewals have been excluded from the lease term (and lease liability) for the majority of the Company’s leases as the reasonably certain threshold is not met.

Lease payments included in the measurement of the lease liability are comprised of fixed payments, variable payments that depend on index or rate, and amounts probable to be payable under the exercise of the Company option to purchase the underlying asset if reasonably certain.

Variable lease payments not dependent on a rate or index associated with the Company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed as probable. Variable lease payments include the Company's proportionate share of utilities and other operating expenses and are presented as operating expenses in the Company’s income statement in the same line item as expense arising from fixed lease payments.

~~Stock-based compensation~~

~~Ocugen~~ accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (“("ASC ~~718”~~718"). The Company has issued stock-based compensation awards including stock options and restricted stock units ("RSUs"), and also accounts for certain issuances of preferred stock and warrants in accordance with ASC 718. ASC 718 requires all stock-based payments, ~~to employees,~~ including grants of ~~employee~~ stock options and ~~restricted stock units and modifications to existing agreements,~~RSUs, to be recognized in the consolidated statements of operations

~~F-10~~

and comprehensive loss based on their grant date fair values. ~~Ocugen~~The Company uses the Black-Scholes option-pricing model to determine the fair value of options granted. ~~Ocugen recognized~~For RSUs, the fair value of the RSUs is determined by the market price of a share of the Company's common stock on the grant date. The Company recognizes forfeitures as they occur.

~~Ocugen’s stock-based awards are subject to service-based vesting conditions.~~ Compensation expense related to stock-based compensation awards ~~to employees and directors~~granted with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is generally the vesting term. Stock-based compensation awards generally vest over a one to three year requisite service period and have a contractual term of 10 years. To the extent a stock-based compensation award is subject to performance-based vesting conditions, the amount of compensation expense recorded reflects an assessment of the probability of achieving the performance conditions. Compensation expense for stock-based compensation awards with performance-based vesting conditions is only recognized when the performance-based vesting condition is deemed probable to occur. Shares issued upon stock option exercise and RSU vesting are newly issued shares of common stock.

Estimating the fair value of stock options requires the input of subjective assumptions, including the expected ~~life~~term of the stock option, stock price volatility, the risk-free interest rate, and expected dividends. The assumptions used in ~~Ocugen’s~~the Company’s Black-Scholes option-pricing model represent management’s best estimates and involve a number of variables, uncertainties, ~~and~~ assumptions, and the application of management’s judgment, as they are inherently subjective. If any assumptions change, ~~Ocugen’s~~the Company’s stock-based compensation expense could be materially different in the future.

~~These~~The assumptions used in Ocugen’s Black-Scholes option-pricing model for stock options are as follows:

Expected Term. Due to the historical lack of a public market for the trading of Ocugen common stock and the lack of sufficient company-specific historical data, the expected term of employee stock options subject to service-based vesting conditions is

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determined using the “simplified” method, as prescribed in ~~Securities and Exchange Commission’s~~SEC’s Staff Accounting Bulletin No. 107, ~~(“SAB No. 107”),~~ whereby the expected ~~life~~term equals the arithmetic average of the vesting term and the original contractual term of the stock option. ~~The expected term of non-employee options is equal to the contractual term.~~

Expected Volatility. The expected volatility is based on historical volatilities of Ocugen and similar entities within Ocugen’s industry for periods commensurate with the expected term assumption.

Risk-Free Interest Rate. The risk-free interest rate is based on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected term.

Expected Dividends. The expected dividend yield is 0% because Ocugen has not historically paid, and does not expect for the foreseeable future to pay, a dividend on its common stock.

Income Taxes

The Company ~~is a Delaware C-Corporation. The Company recognizes~~accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for ~~temporary~~the expected future tax consequences of events that have been recognized in the financial statements or the Company’s tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the consolidated financial ~~reporting basis~~statements and ~~the~~ tax basis of ~~its~~ assets and liabilities ~~and the expected benefits of net operating loss carryforwards. The impact of changes in~~using enacted tax rates ~~and laws on deferred taxes, if any, is applied during~~in effect for the ~~years~~year in which ~~temporary~~the differences are expected to ~~be settled and is reflected~~reverse. Changes in ~~the financial statements in the period of enactment. The measurement of~~ deferred tax assets ~~is reduced, if necessary, if,~~and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based onupon the weight of ~~the~~available evidence, that it is more likely than not that ~~some,~~all or ~~all,~~a portion of the deferred tax assets will not be ~~realized.~~ realized, a valuation allowance is established.

The ~~Company’s policy is~~Company accounts for uncertain tax positions recognized in the consolidated financial statements by prescribing a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to ~~recognize interest and penalties accrued on~~be taken in a tax return. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, ~~as a component of income tax expense. No interest or penalty expense was recognized during the periods presented.~~

~~The Company has assessed and concluded~~ that ~~there~~ are uncertain tax positions giving rise to the unrecognized tax benefits as of December 31, 2019. The Company’s conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analysis of tax laws, regulations and interpretations thereof,considered appropriate as well as ~~other factors. Generally, federal, state,~~the related net interest and ~~local authorities may examine the Company’s tax returns for three years from the date of the filing and the current and prior three years remain subject to examination as of December 31, 2019.~~

~~Segment Information~~

The Company views its operations and manages its business as 1 operating segment, which is the development of innovative therapies to address the whole eye. As of December 31, 2019, substantially all of the Company’s assets were located in the United States.penalties.

Recently Adopted Accounting Standards

In ~~February 2016,~~December 2019, the FASB issued Accounting Standards Update ~~(“ASU”~~("ASU") No. ~~2016-02,~~2019-12, ~~Leases~~Income Taxes (Topic ~~842)~~ ~~(“ASC 842”). In July 2018,~~740): Simplifying the ~~FASB issued ASU No. 2018-10,~~ ~~Codification Improvements to Topic 842, Leases~~ ~~(“ASU 2018-10”), which provides narrow amendments to clarify how to apply certain aspects of the new lease standard, and ASU No. 2018-11,~~ ~~Leases~~

~~F-11~~

~~(Topic 842)—Targeted Improvements~~ (“ASU 2018-11”), which addressed implementation issues related to the new lease standard. These and certain other lease-related ASUs have generally been codified in ASC 842. ASC 842 supersedes the lease accounting requirements in ASC Topic 840, ~~Leases~~ ~~(“ASC 840”). ASC 842 establishes a right-of-use model that requires a lessee to record a right-of-use (“ROU”) asset and a lease liability on the balance sheet~~Accounting for all leases. Under ASC 842, leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The standard also requires disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases.

The Company adopted ASC 842 on January 1, 2019 using the effective date transition method. Prior period results continue to be presented under ASC 840 based on the accounting standards originally in effect for such periods. The Company has elected certain practical expedients permitted under the transition guidance within ASC 842 to leases that commenced before January 1, 2019, including the package of practical expedients. The election of the package of practical expedients resulted in the Company not reassessing prior conclusions under ASC 840 related to lease identification, lease classification and initial direct costs for expired and existing leases prior to January 1, 2019. The adoption of ASU 2016-02 did not have a significant impact on the Company’s consolidated results of operations or cash flows. Upon adoption, the Company recognized an ROU asset and lease liability of $0.4 million and $0.4 million, respectively. See Note 9 for additional information.

~~Recent Accounting Pronouncements~~

~~In August 2018, the FASB issued ASU No. 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement~~Income Taxes. This standard ~~modifies~~removes certain ~~disclosure requirements on fair value measurements~~exceptions for recognizing deferred taxes for investments, performing intraperiod allocations, and calculating income taxes in interim periods. This standard also adds guidance to reduce complexity in certain areas, including recognizing franchise tax, recognizing deferred taxes for tax basis of goodwill, allocating taxes to the members of a consolidated group, and recognizing the effect of enacted changes in tax laws or rates during an interim period. This standard was effective for the Company on January 1, ~~2020.~~2021. The adoption of this standard ~~will~~did not have a material impact on the Company's ~~disclosures.~~consolidated financial statements.

Recent Accounting Pronouncements

In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. This standard has an effective and transition date of January 1, 2022. This standard increases the transparency of transactions with the government that are accounted for by applying a grant or contribution accounting model, and aims to reduce diversity that currently exists in the recognition, measurement, presentation, and disclosure of government assistance received by business entities due to the lack of specific authoritative guidance in GAAP. This standard requires an entity to provide information regarding the nature of the transaction with a government and the related accounting policy used to account for this transaction, the line item on the consolidated balance sheet and consolidated statement of operations and comprehensive loss that are affected by the transaction and the amounts applicable to each financial statement line item, and the significant terms and conditions of the transaction, including commitments and contingencies. The Company does not currently expect the adoption of this standard to have a material impact on the Company's consolidated financial statements.

In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40). This standard will have an effective and transition date of January 1, 2022. This standard clarifies and reduces diversity in an issuer's accounting for modifications or exchanges of freestanding equity-classified written call options, including warrants, that remain equity-classified after modification or exchange. The standard requires an entity to treat a modification or an exchange of a freestanding equity-classified written call option that remains equity-classified after the modification or exchange as an exchange of the original instrument for a new instrument. The standard additionally provides guidance on measuring and recognizing the effect of a modification or an exchange. The

F-17

Company does not currently expect the adoption of this standard to have a material impact on the Company's consolidated financial statements.

In August 2020, the FASB issued ASU No. 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity's Own Equity (Subtopic 815-40). This standard will have an effective and transition date of January 1, 2024. Early adoption is currently permitted. This standard simplifies an issuer's accounting for convertible instruments by eliminating two of the three models that require separate accounting for embedded conversion features as well as simplifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification. This standard also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of potential share settlement (if the effect is more dilutive) for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. The standard requires new disclosures about events that occur during the reporting period and cause conversion contingencies to be met and about the fair value of a public business entity's convertible debt at the instrument level, among other things. The Company does not currently expect the adoption of this standard to have a material impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial ~~Instruments—~~Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The FASB subsequently issued amendments to ASU No. 2016-13, which have the same effective date and transition date of January 1, 2023. ~~These standards require~~ASU No. 2016-13, as amended, requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, these standards now require allowances to be recorded instead of reducing the amortized cost of the investment. These standards limit the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. The Company does not currently expect the adoption of ~~these standards~~this standard to have a material impact on ~~its~~the Company's consolidated financial statements.

3.~~Merger~~ License and ~~Pre-Merger Financing~~Development Agreements

~~Pre-Merger Financing~~

~~In June 2019, Former Ocugen~~Co-Development, Supply and ~~Histogenics entered into a Securities Purchase~~Commercialization Agreement ~~(as amended, the “Financing SPA”)~~ with certain accredited investors (the “Investors”). Pursuant to the Financing SPA, among other things, (i) immediately prior to the Merger, Former Ocugen issued 4.6 million shares of common stock to the Investors (the “Initial Shares” and, as converted pursuant to the exchange rate in the Merger into the right to receive approximately 2.2 million shares the Company’s common stock, the “Converted Initial Shares”), (ii) immediately prior to the Merger, Former Ocugen issued and deposited 4.6 million shares of common stock into escrow on behalf of the Investors (the “Additional Shares” and, as converted pursuant to the exchange rate in the Merger, into the right to receive approximately 2.2 million shares of the Company’s common stock, the “Converted Additional Shares”) and (iii) the Company agreed to issue, on the fifth trading day following the consummation of the Merger, three series of warrants to purchase shares of the Company’s common stock (the “Series A Warrants,” the “Series B Warrants” and the “Series C Warrants” and collectively, the “Pre-Merger Financing Warrants”) in exchange for an aggregate purchase price of $25.0 million (“Pre-Merger Financing”). See Note 10 for additional information on the Pre-Merger Financing Warrants.

On October 4, 2019, the Converted Additional Shares were released from escrow to the investors because, as determined at the close of business on October 2, 2019, 80% of the volume-weighted average trading price of a share of Ocugen’s common stock as quoted on Nasdaq for the first ~~three~~ ~~trading days immediately following the closing date of the Pre-Merger Financing was lower than the price paid by the Investors for the Initial Shares.~~

Approximately $2.5 million of the $25.0 million Pre-Merger Financing was utilized to pay transaction costs related to the Merger and the Pre-Merger Financing in the form of equity. In addition, the Company utilized $5.3 million of the Pre-Merger

~~F-12~~

~~Financing for the repayment of the Senior Secured Notes, as defined in Note 7. As a result, the Company received total net proceeds of $17.2 million from the Pre-Merger Financing.~~Bharat Biotech

The Company ~~incurred $1.9~~entered into the Covaxin Agreement with Bharat Biotech to co-develop COVAXIN for the Ocugen Covaxin Territory. The Covaxin Agreement was originally entered into in February 2021 with respect to the U.S. market and was subsequently amended in June 2021 to add rights to the Canadian market. In consideration of the expansion of the Ocugen Covaxin Territory to include Canada, the Company paid Bharat Biotech a non-refundable, upfront payment of $15.0 million in ~~equity issuance costs related to the Pre-Merger Financing, of~~June 2021, which ~~$0.7 million~~ was ~~paid~~recognized as research and development expense in cash and $1.2 million was paid with equity as of December 31, 2019. Approximately $1.1 million of equity issuance costs was allocated to the Series A Warrants and Series C Warrants and is included in additional paid-in capital. Approximately $0.8 million of issuance costs allocated to the Series B Warrant liability was expensed and is reflected in other income (expense) on the consolidated statements of operations and comprehensive loss ~~for~~during the year ended December 31, ~~2019.~~2021. The Company additionally agreed to pay Bharat Biotech $10.0 million within 30 days after the first commercial sale of COVAXIN in Canada. The Covaxin Agreement is a collaboration arrangement within the scope of ASC 808.

~~Merger with Histogenics~~

~~On September 27, 2019,~~Pursuant to the Covaxin Agreement, the Company ~~completed the Merger in accordance~~obtained an exclusive right and license under certain of Bharat Biotech’s intellectual property rights, with the terms of the Merger Agreement. The Merger was structured as a stock-for-stock transaction whereby all of Former Ocugen’s outstanding shares of common stock and securities convertible into or exercisable for Former Ocugen’s common stock were converted into the right to ~~receive Histogenics’ common stock~~grant sublicenses, to develop, manufacture, and ~~securities convertible into or exercisable for Histogenics’ common stock. Immediately following~~commercialize COVAXIN in the ~~Merger, the former equity holders of Former~~ Ocugen ~~owned 84.25%~~Covaxin Territory. In consideration of the ~~outstanding capital stock~~license and other rights granted to the Company by Bharat Biotech, the parties agreed to share any Operating Profits (as defined in the Covaxin Agreement) generated from the commercialization of COVAXIN in the Ocugen Covaxin Territory, with the Company retaining 45% of such profits, and Bharat Biotech receiving the balance of such Operating Profits.

Under the Covaxin Agreement, the Company is collaborating with Bharat Biotech to develop COVAXIN for their respective territories. Except with respect to manufacturing rights under certain circumstances subsequently described, the Company has the exclusive right and is solely responsible for researching, developing, manufacturing, and commercializing COVAXIN for the Ocugen Covaxin Territory. Bharat Biotech is responsible for researching, developing, manufacturing, and commercializing COVAXIN outside of the ~~Company, and the equity holders of~~Ocugen Covaxin Territory.

Bharat Biotech has agreed to provide to the Company ~~immediately before the Merger owned 15.75% of the outstanding capital stock of~~preclinical and clinical data, and to transfer to the Company ~~including~~certain proprietary technology owned or controlled by Bharat Biotech, that is necessary for the ~~Initial Shares but excluding~~successful commercial manufacture and supply of COVAXIN to support commercial sale in the ~~Additional Shares and the Pre-Merger Financing Warrants pursuant to the Financing SPA.~~Ocugen Covaxin Territory, if authorized or approved.

In ~~accordance with ASC Topic 805,~~ ~~Business Combinations~~ ~~(“ASC 805”)~~,September 2021, the Company concluded that, while Histogenics is the legal acquirer, Former Ocugen is the accounting acquirer due to the fact that (i) Former Ocugen’s shareholders have the majority of the voting rights in Ocugen, (ii) Former Ocugen holds all of the board seats of the combined company and (iii) Former Ocugen management holds all key positions in the management of the combined company. The Company has further concluded that Histogenics does not meet the definition of a business under ASC 805 due to the fact that substantially all of the fair value of the gross assets disposed of is concentrated in a single identifiable asset or a group of similar identifiable assets. Therefore, the Merger was accounted for as a reverse asset acquisition. The Company incurred $4.9 million in transaction costs related to the Merger, of which $2.6 million was paid in cash and $2.3 million was paid with equity.

~~Assets and liabilities of Histogenics on September 27, 2019 were as follows (in thousands):~~


	~~September 27,~~ ~~2019~~
~~Cash and cash equivalents~~	$	~~302~~
~~Asset held for sale~~	~~7,000~~
~~Accounts payable~~	~~(1,106)~~
~~Net assets acquired~~	$	~~6,196~~

~~Asset Held for Sale~~

~~In connection with the Merger, on May 8, 2019, Histogenics~~ entered into ~~an asset purchase agreement (the “Asset Purchase Agreement”)~~the Supply Agreement with ~~Medavate Corp., a Colorado corporation (“Medavate”),~~Bharat Biotech, pursuant to which ~~Histogenics agreed to sell substantially all of its assets relating to its NeoCart~~^® ~~program, including, without limitation, intellectual property, business and license agreements and~~Bharat Biotech will supply the Company with clinical trial ~~data (the “Assets”) in return for a cash payment~~materials and commercial supplies of ~~$6.5 million. On September 26, 2019, the parties entered into an amendment~~COVAXIN finished drug product prior to the ~~Asset Purchase Agreement whereby~~completion of a technology transfer. Following the ~~closing date was amended to October 4, 2019. On October 4, 2019, the parties entered into~~completion of a second amendment (the “Second Amendment”) to the Asset Purchase Agreement whereby the purchase price was increased to $7.0 million under the Asset Purchase Agreement and the closing date of the Asset Purchase Agreement was revised from October 4, 2019 to two business days after Medavate obtains financing in an amount no less than the purchase price (the “Closing Date”). The Second Amendment further provides that if the Closing Date does not occur on or prior to October 31, 2019, Ocugen may choose to terminate the Asset Purchase Agreement without recourse and, if Ocugen does not terminate the Asset Purchase Agreement, the purchase price shall increase 10% per month (or any portion thereof) between October 31, 2019 and the Closing Date. The Closing Date did not occur as of December 31, 2019, Ocugen has not terminated the Asset Purchase Agreement and as of December 31, 2019, the purchase price has increased to $8.5 million.

~~The NeoCart~~^® asset qualified as held for sale as of the date of the reverse asset acquisition and is carried at its original fair value less cost to sell on the consolidated balance sheet as of December 31, 2019. The NeoCart^® ~~asset held for sale was valued at the~~technology transfer, Bharat Biotech will supply COVAXIN

~~F-13~~F-18

~~acquisition date based on~~drug product components and continue to supply finished drug product as necessary for commercial manufacture and supply of COVAXIN subsequent to a ~~quoted price~~regulatory authorization or approval. The technology transfer process from Bharat Biotech to Jubilant HollisterStier for drug product manufacturing has been initiated. In March 2021, the Company issued shares of ~~$7.0 million, which is~~Series B Convertible Preferred Stock (as defined in Note 9) as an ~~observable Level 2 fair value input. Subsequent increases~~advance payment for the supply of COVAXIN to be provided by Bharat Biotech under the Supply Agreement. See Note 9 for additional information about the Series B Convertible Preferred Stock issuance to Bharat Biotech.

The Covaxin Agreement continues in ~~fair value are not recognized beyond~~effect for the ~~initial value at~~commercial life of COVAXIN, subject to the ~~time~~earlier termination of the ~~asset was classified as held for sale.~~Covaxin Agreement in accordance with its terms. The Covaxin Agreement also contains customary representations and warranties made by both parties and customary provisions relating to indemnification, limitation of liability, confidentiality, information and data sharing, and other matters. The Supply Agreement expires upon expiration of the Covaxin Agreement and may be earlier terminated by either party in the event of an uncured material breach or bankruptcy of the other party.

~~MEDINET~~License Agreement with The Schepens Eye Research Institute, Inc.

In December 2017, ~~Histogenics~~the Company entered into an exclusive license agreement with The Schepens Eye Research Institute ("SERI"), which was amended in January 2021 (as so amended, the ~~License~~"SERI Agreement"). The SERI Agreement gives the Company an exclusive, worldwide, sublicensable license to patent rights, biological materials, and ~~Commercialization~~technical information for NHR genes Nuclear Receptor Subfamily 1 Group D Member 1 ("NR1D1"), NR2E3 (OCU400), RORA (OCU410), Nuclear Protein 1, Transcriptional Regulator ("NUPR1"), and Nuclear Receptor Subfamily 2 Group C Member 1 ("NR2C1"). The January 2021 amendment to the SERI Agreement ~~(the “License Agreement”) with MEDINET Co., Ltd. (“MEDINET”)~~additionally granted the Company rights in co-owned intellectual property pursuant to ~~grant MEDINET a license under~~ certain ~~patents,~~ patent applications ~~know-how,~~ and ~~technology~~provisional patent applications at the time of the amendment. Under the SERI Agreement, the Company may make, have made, use, offer to ~~develop~~sell, sell, and ~~commercialize certain therapeutic~~import licensed products, and must use commercially reasonable efforts to bring one or more licensed products to market as soon as reasonably practicable.

SERI maintains control of patent preparation, filing, prosecution, and maintenance. The Company is responsible for SERI’s out-of-pocket expenses related to the ~~NeoCart~~^® ~~program. As consideration for the granting~~filing, prosecution, and maintenance of the ~~license, MEDINET agreed~~licensed patent rights. In the event that SERI decides to discontinue the prosecution or maintenance of the licensed patent rights, the Company has the right, but not the obligation, to file for, or continue to prosecute, maintain, or enforce such licensed patent rights. The Company has assumed prosecution of certain licensed patent rights under the SERI Agreement.

The SERI Agreement is a collaborative arrangement within the scope of ASC 808. The SERI Agreement requires the Company to pay ~~Histogenics a non-refundable upfront cash~~licensing fees for patent rights granted, an annual license maintenance fee, payment of ~~$10.0~~certain regulatory and commercial milestones in the aggregate amount of $16.1 million, ~~which was received in January 2018. Based~~and low single-digit percentage royalties on annual net sales of products that fall under the licensed patent rights. The Company has made no milestone or royalty payments to date pursuant to the SERI Agreement.

The SERI Agreement will expire on the ~~results~~expiration date of the ~~NeoCart~~^® ~~research, Histogenics suspended~~last to expire licensed patent rights, subject to the ~~NeoCart~~^® ~~program. Subsequently, since MEDINET relied~~earlier termination of the SERI Agreement in accordance with its terms. The Company may terminate the license upon 180 days’ prior written notice. SERI may immediately terminate the SERI Agreement if the Company ceases to carry on its business with respect to the ~~NeoCart~~^® ~~product~~licensed patent rights, fails to ~~supply clinical trial patients, MEDINET suspended the development~~make payments within thirty days of receiving a written notice of missed payment, fails to comply with its diligence obligations, defaults on its obligation to procure and maintain insurance, one of its ~~clinical trial. As~~officers is convicted of ~~December 31, 2019, the contract with MEDINET was wholly unperformed. As~~ a ~~result of the expected sale of the NeoCart~~^® ~~asset, the Company does not expect to retain any future obligations~~felony related to the ~~MEDINET agreement.~~

~~4. Net Loss Per Share~~licensed products, the Company breaches any material obligation of ~~Common Stock~~

~~The following table sets forth~~ the ~~computation of basic~~agreement and ~~diluted earnings per share for~~does not cure such breach within 90 days, or if the ~~years ended December 31, 2019 and 2018:~~

Year ended December 31,
2019 2018
Net loss—basic and diluted $ (20,242,630) $ (18,219,664)
Shares used in calculating net loss per common share—basic and diluted 13,893,819 4,960,552
Net loss per common share—basic and diluted $ (1.46) $ (3.67)

~~The following potentially dilutive securities have been excluded from the computation of diluted weighted average shares outstanding, as their inclusion would have been antidilutive:~~

Year ended December 31,
2019 2018
Options to purchase common stock 731,189 632,752
Warrants 870,020 870,020
Series A Warrants 8,771,928 —
Series B Warrants 1,000 —
Series C Warrants 1,000 —
Total 10,375,137 1,502,772

~~5. License and Collaboration Agreements~~Company becomes bankrupt or insolvent.

Co-Development and Commercialization Agreement with ~~CanSino Biologics~~CanSinoBIO

~~On September 27, 2019, Ocugen~~The Company entered into a co-development and commercialization agreement ~~(the “CanSinoBIO Agreement”)~~ with ~~CanSino Biologics Inc. (“CanSinoBIO”)~~CanSinoBIO with respect to the development and commercialization of the Company's modifier gene therapy product ~~candidate, OCU400.~~candidates, OCU400 and OCU410. The co-development and commercialization agreement was originally entered into in September 2019 with regards to OCU400, and was subsequently amended in September 2021 (as so amended, the "CanSinoBIO Agreement"), to include OCU410 to the Company's existing collaboration with CanSinoBIO.

Pursuant to the CanSinoBIO Agreement, the Company and CanSinoBIO will collaborate on the development of OCU400 and OCU410. CanSinoBIO will be responsible for ~~all~~ the ~~costs for chemistry, manufacturing and control~~CMC development and manufacture of clinical supplies of ~~OCU400 for all territories. CanSinoBIO will~~such products and be ~~solely~~ responsible for ~~all~~the costs associated with such activities. CanSinoBIO has an exclusive license to develop, manufacture, and ~~expenses of its development activities~~commercialize OCU400 and OCU410 in and for China, Hong Kong, Macau, and Taiwan (the "CanSinoBIO Territory"), and ~~Ocugen will be responsible for all costs~~the Company maintains exclusive development, manufacturing, and ~~expenses of its development activities for any global location~~commercialization rights with respect to OCU400 and OCU410 outside the CanSinoBIO Territory (the ~~"Ocugen~~"Company Territory").

F-19

CanSinoBIO will pay to ~~Ocugen~~the Company an annual royalty between ~~mid to~~mid- and high-single digits based on ~~net sales of products~~Net Sales (as defined in the CanSinoBIO ~~Territory,~~Agreement) of OCU400 and ~~Ocugen~~OCU410 in the CanSinoBIO Territory. The Company will pay to CanSinoBIO an annual royalty between ~~low to~~low- and mid-single digits based on ~~net sales~~Net Sales of ~~products~~OCU400 and OCU410 in the ~~Ocugen~~Company Territory.

~~F-14~~

Unless earlier terminated ~~earlier,~~in accordance with its terms, the CanSinoBIO Agreement will continue in force on a country-by-country and product-by-product basis until the later of (a) the expiration of the last valid claim of the Company's patent rights ~~of Ocugen~~ covering ~~such product~~OCU400 and OCU410 and (b) the tenth ~~(10~~^th)(10th) anniversary of the first commercial sale of ~~such product~~OCU410 in such country. The CanSinoBIO Agreement will also terminate contemporaneously upon the termination of the ~~Exclusive License~~SERI Agreement, ~~dated December 19, 2017, between Ocugen and Schepens Eye Research Institute, Inc.~~provided that CanSinoBIO is not in breach or default of the CanSinoBIO Agreement. The CanSinoBIO Agreement may be terminated by either party in its entirety upon (a) a material or persistent breach of the CanSinoBIO Agreement by the other party, (b) a challenge by the other party or any of its affiliates of any intellectual property controlled by the terminating party, or (c) bankruptcy or insolvency of the other party. Within forty-five (45) days after such termination, CanSinoBIO shall provide Ocugen with a statement of the CanSinoBIO development costs and, within one (1) year after receipt of such report, Ocugen shall reimburse CanSinoBIO all such CanSinoBIO development costs.

~~License Agreement with the Schepens Eye Research Institute~~

In 2017, the Company entered into a license agreement with The Schepens Eye Research Institute (“SERI”), which granted the Company an exclusive license to develop, commercialize, and continue to secure patents for OCU400 and OCU410. This agreement is accounted for as a collaborative arrangement. In connection with acquiring the license, the Company was required to pay a license fee of $0.1 million, which was recognized in 2017. The Company will also be required to reimburse SERI for all future patent costs related to this licensed technology.

The Company is obligated to pay SERI up to $6.0 million upon the achievement of certain development and regulatory milestones. The Company is also obligated to pay SERI up to $10.1 million upon the achievement of certain commercial milestones. The Company will also pay SERI royalties in the low single digits based on net sales. NaN milestones or royalties were paid or incurred through December 31, 2019, as the Company has not achieved any milestones, net sales or sublicensing under this agreement. The Company may cancel the license agreement at any time with 180 days’ written notice.

In 2017, the Company also entered into a Sponsored Research Agreement with SERI under which the Company recognized approximately $0.6 million and $0.5 million as research and development expense for the year ended December 31, 2019 and 2018, respectively, for work performed under this agreement.

~~License Agreement with the University of Illinois~~

In 2016, the Company entered into a license agreement with the University of Illinois at Chicago (“UIC”), which granted the Company an exclusive license to develop, commercialize and continue to secure patents for OCU300 and OCU310. In connection with acquiring the license for OCU300 and OCU310, the Company was required to pay a signing fee of $15,000.

The Company is required to pay royalties in the low single digits to low teens to UIC based on net sales and sublicense revenues generated by OCU300 and OCU310. The Company is also required to pay minimum annual royalties to UIC, beginning with an annual payment of $20,000 on the third anniversary of the effective date of the agreement, and increasing gradually to $50,000 by the sixth anniversary and continuing through the term of the agreement. The Company is also obligated to pay UIC up to $1.3 million upon the achievement of certain development and regulatory milestones.

During 2018, the Company incurred $0.3 million in milestone payments due to achieving a milestone associated with dosing the first patient in a Phase 3 clinical trial. The Company has not achieved any other milestones, net sales or sublicensing for OCU300 or OCU310. The Company may cancel the license agreement at any time with 90 days’ written notice.

License Agreement with the University of Colorado

In March 2014, the Company entered into ~~a patent~~an exclusive license agreement with ~~the~~ University of Colorado ~~(“CU”~~("CU"), which ~~granted~~was amended in January 2017 and clarified by a letter of understanding in November 2017 (as so amended and clarified, the "CU Agreement"). The CU Agreement gives the Company an exclusive, worldwide, sublicensable license to ~~develop and commercialize, and continue to secure~~ patents for OCU200 ~~including~~to make, have made, use, import, offer to sell, sell, have sold, and practice the ~~ability to enforce any rights against infringement.~~licensed products in all therapeutic applications. Under the ~~agreement,~~CU Agreement, the Company must use commercially reasonable efforts to develop, manufacture, sublicense, market, and sell the licensed products, and has assumed primary responsibility for preparing, filing, and prosecuting broad patent claims for OCU200 for CU's benefit. Further, the Company assumed primary responsibility for all patent activities, including all costs associated with the perfection and maintenance of the patents for OCU200.

~~Pursuant to~~The CU Agreement requires the ~~terms~~payment of the agreement, in exchange for the licensed patents, the Company issued CU 0.1 million shares of the Company’s common stock. The agreement with CU, as amended in January 2017, obligates the Company to pay certain ~~development and~~ regulatory ~~milestone fees of up~~milestones aggregating to $1.5 million, ~~royalties in~~an annual minimum payment that began the third year after the effective date, low ~~single digits~~single-digit percentage earned royalties on net sales, and royalties in the mid-teens on sublicense income of OCU200. The Company has made no milestone or royalty payments to date pursuant to the CU Agreement.

The ~~agreement with~~ CU ~~calls for minimum annual royalty payments of $20,000, starting~~Agreement will expire on the ~~third anniversary~~later of the expiration date of the last to expire licensed patent or the end of any relevant statutory or regulatory exclusivity period. The Company may terminate the CU Agreement upon 60 days’ prior written notice. CU may terminate the CU Agreement upon 60 days’ notice if the Company fails to make payments within 60 days of such payment’s due date, breach and do not cure any diligence obligation, provide any materially false report, or otherwise materially breach and do not cure any material provision of the CU Agreement.

4. Notes Receivable

On April 13, 2021, the Company received a promissory note in the principal amount of $0.8 million from a company in connection with a potential collaboration. The promissory note bore interest at a rate per annum of 5% and the outstanding principal balance of the promissory note plus any accrued and unpaid interest thereon was payable in full on April 13, 2022 (the "Maturity Date"). Effective July 2021, the Company accepted an amended and restated promissory note (as so amended and restated, the "Promissory Note") pursuant to which the parties agreed to extend the Maturity Date of the Promissory Note to June 30, 2022 and increase the interest rate per annum to 9% with quarterly interest payments. The Promissory Note may be prepaid in whole or in part at any time, together with accrued and unpaid interest. The Promissory Note contains customary covenants and events of default, including, among others, failure to make payment, breach of agreement, and ~~on each annual anniversary thereafter,~~bankruptcy.

The Company evaluated the probability of collecting the full principal and ~~after sales commence, increasing to~~accrued interest balance under the terms of the Promissory Note and determined that collection was not probable. During the year ended December 31, 2021, the Company wrote off the full principal and accrued interest balance of the Promissory Note and recorded the write-off as a ~~percentage rate in~~loss within other income (expense) within the ~~mid-~~consolidated statements of operations and comprehensive loss.

~~F-15~~F-20

5. Property and Equipment

The following table provides a summary of the major components of property and equipment as reflected on the consolidated balance sheets (in thousands):


	As of December 31,
	2021		2020
Furniture and fixtures	$	284	$	166
Machinery and equipment	855		452
Leasehold improvements	167		177
Construction in progress	232		—
Financing lease right-of-use asset	—		64
Total property and equipment	1,538		859
Less: accumulated depreciation	(374)		(226)
Total property and equipment, net	$	1,164	$	633

The Company recognized depreciation expense of $0.2 million, $0.1 million, and $0.1 million during the years ended December 31, 2021, 2020, and 2019, respectively.

6. Operating Leases

The Company has commitments under operating leases for its current headquarters as well as for additional office space. The Company's operating lease for its current headquarters includes the use of laboratory, office, and storage space located in Malvern, Pennsylvania (the "Lease Agreement"). The Lease Agreement was determined to have two lease components per ASC 842 with commencement dates in December 2020 and January 2021. The Lease Agreement has an initial term of seven years and the Company has the option to extend the Lease Agreement for 1 additional five-year term. The option for extension has been excluded from the lease term (and lease liability) for the Lease Agreement as it is not reasonably certain that the Company will exercise such option. The Company had a lease agreement for its former headquarters, which was terminated in January 2021 without penalty pursuant to the terms of the Lease Agreement. The termination was accounted for as a modification per ASC 842 as the contractual lease term of the former lease agreement was shortened. The Company also had a lease agreement for a former laboratory space, which was terminated in December 2020.

The components of lease expense were as follows (in thousands):


	Year ended December 31,
	2021		2020		2019
Operating lease cost	$	360	$	189	$	250
Variable lease cost	105		85		80
Total lease cost	$	465	$	274	$	330

Supplemental balance sheet information related to leases was as follows (in thousands):


	As of December 31,
	2021		2020
Right-of-use assets, net	$	1,587	$	434

Current lease obligations	$	363	$	44
Non-current lease obligations	1,231		389
Total lease liabilities	$	1,594	$	433

F-21

~~twenties~~Supplemental information related to leases was as follows:


	Year ended December 31,
	2021		2020		2019
Weighted-average remaining lease terms — operating leases (years)	5.3		6.9		2.0
Weighted-average discount rate — operating leases	4.1	%	4.6	%	7.6	%

Future minimum operating lease base rent payments are approximately as follows (in thousands):


For the years ending December 31,	Amount
2022	$	440
2023	261
2024	269
2025	277
2026	285
Thereafter	293
Total	$	1,825
Less: present value adjustment	(231)
Present value of minimum lease payments	$	1,594

In October 2021, the Company entered into a lease agreement for additional office space located in Malvern, Pennsylvania. The lease has an expected commencement date in the first half of 2022 and has an initial term of seven years. The aggregate estimated base rent payments due over the initial seven-year term is $3.8 million, which is excluded from the future minimum operating base rent payments above as the lease agreement has not yet commenced per ASC 842. Additionally, the Company will be responsible for the operating expenses and utilities associated with the leased premises. The Company has the option to extend the lease agreement for 2 additional five-year terms, provided the Company is not under an event of default pursuant to the terms of the ~~previous year’s royalty payment paid~~lease agreement.

7. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities are as follows (in thousands):


	As of December 31,
	2021		2020
Research and development	$	866	$	512
Clinical	703		117
Professional fees	747		405
Employee-related	1,716		963
Severance-related (1)	—		712
Other	293		232
Total accrued expenses and other current liabilities	$	4,325	$	2,941

(1) In June 2020, the Company communicated notice to ~~CU, through the term~~5 employees of the ~~agreement. Future annual royalties will be recognized~~termination of their employment as a result of the discontinuation of a product candidate. This reduction represented one-third of the Company’s workforce at the time of communication. All terminations were “without cause” and each employee received termination benefits upon departure. The termination dates varied for each employee and ranged from June 30, 2020 to December 31, 2020.

F-22

The following table provides a summary of the severance-related charges and severance payments during the years ended December 31, 2021 and 2020 related to the June 2020 reduction in workforce (in thousands):


	Amount
Accrued Severance at December 31, 2019	$	—
Severance-related charges	1,116
Severance-related payments	404
Accrued Severance at December 31, 2020	$	712
Severance-related charges	—
Severance-related payments	712
Accrued Severance at December 31, 2021	$	—

As of December 31, 2021, the Company has satisfied its commitments under the separation agreements with the 5 former employees.

8. Debt

The following table provides a summary of the carrying values for the components of debt as reflected on the consolidated balance sheets (in thousands):


	As of December 31,
	2021		2020
PPP Note	$	—	$	421
EB-5 Loan Agreement	1,712		1,636
Total carrying value of debt, net	$	1,712	$	2,057

PPP Note

In April 2020, the Company was granted a loan from Silicon Valley Bank ("SVB"), in the ~~years they are earned,~~amount of $0.4 million, pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief and Economic Security Act of 2020 (the “CARES Act”). Under the PPP, the loan was eligible for forgiveness to the extent the funds received were used for qualifying expenses as described by the CARES Act. The loan was in the form of a promissory note dated April 30, 2020 in favor of SVB (the "PPP Note"). The PPP Note had a maturity date of April 30, 2022 and bore interest at a rate of 1.0% per ~~the license agreement.~~annum. The Company ~~may cancel~~did not provide any collateral or guarantees for the ~~license agreement at~~loan, nor did the Company pay any ~~time with 60 days’ written notice.~~

6.~~Accrued Expenses~~

~~Accrued Expenses are as follows:~~

As of December 31,
2019 2018
Accrued expenses:
Research and development $ 271,322 $ 705,436
Clinical 421,788 469,473
Consulting 98,245 86,619
Employee-related 624,420 123,372
Legal 819,323 15,400
Other 34,947 2,450
Total accrued expenses $ 2,270,045 $ 1,402,750

7.~~Debt~~facility charge to obtain the loan. The PPP Note provided for customary events of default, including, among others, failure to make payment, bankruptcy, breaches of representations, and material adverse events. In May 2021, the Company received notice from the Small Business Administration that the PPP Note was forgiven in its entirety, including both principal and accrued interest. The Company recognized a $0.4 million gain on loan extinguishment within other income (expense) for the forgiveness of the PPP Note within the consolidated statements of operations and comprehensive loss for the year ended December 31, 2021.

EB-5 Loan Agreement

In September 2016, pursuant to the U.S. government’s Immigrant Investor Program, commonly known as the EB-5 program, ~~(the “EB-5 Program”),~~ the Company entered into an arrangement (the “EB-5 Loan Agreement”) to borrow up to $10.0 million from EB5 Life Sciences, L.P. ~~(the “Lender”~~("EB-5 Life Sciences") in $0.5 million increments. ~~Borrowing~~Borrowings may be limited by the amount of funds raised by the ~~Lender~~EB-5 Life Sciences and are subject to certain job creation requirements by the Company. Borrowings are at a fixed interest rate of 4.0% per annum and are to be utilized in the clinical development, manufacturing, and commercialization of the Company’s ~~products~~product candidates and for the general working capital needs of the Company. Outstanding borrowings pursuant to the EB-5 ~~Program,~~Loan Agreement, including accrued interest, become due upon the seventh anniversary of the final disbursement. Amounts repaid cannot be re-borrowed. The EB-5 ~~note is~~Loan Agreement borrowings are secured by substantially all assets of the Company, except for any patents, patent applications, pending patents, patent license, patent sublicense, trademarks, and other intellectual property rights.

~~In 2016,~~

F-23

Under the terms and conditions of the EB-5 Loan Agreement, the Company borrowed $1.0 million ~~was borrowed by the Company.~~in 2016 and an additional $0.5 million in March 2020. Issuance costs ~~for these borrowings totaled $0.1 million, which was~~were recognized as a reduction to the loan balance and isare amortized to interest expense over the term of the loan. ~~See Note 12~~

The carrying values of the EB-5 Loan Agreement borrowings as of December 31, 2021 and 2020 are summarized below (in thousands):


	As of December 31,
	2021		2020
Principal outstanding	$	1,500	$	1,500
Plus: accrued interest	241		181
Less: unamortized debt issuance costs	(29)		(45)
Carrying value	$	1,712	$	1,636

9. Equity

COVAXIN Preferred Stock Purchase Agreement

On March 1, 2021, the Company entered into a preferred stock purchase agreement, pursuant to which the Company agreed to issue and sell 0.1 million shares of the Company’s Series B Convertible Preferred Stock, par value $0.01 per share (the "Series B Convertible Preferred Stock"), at a price per share equal to $109.60, to Bharat Biotech. On March 18, 2021, the Company issued the Series B Convertible Preferred Stock as an advance payment for ~~information regarding events subsequent~~the supply of COVAXIN to be provided by Bharat Biotech pursuant to the Supply Agreement. Subsequent to December 31, ~~2019.~~2021, the Company entered into supply commitments related to COVAXIN, which the advanced payment will be applied to.

As of December 31,
2019 2018
Principal outstanding $ 1,000,000 $ 1,000,000
Plus: accrued interest 127,777 87,222
Less: unamortized debt issuance costs (55,654) (70,495)
Carrying value of debt $ 1,072,123 $ 1,016,727
Each share of Series B Convertible Preferred Stock is convertible, at the option of Bharat Biotech, into 10 shares of the Company’s common stock (the "Conversion Ratio") only after (i) the Company received stockholder approval to increase the number of authorized shares of common stock under its Sixth Amended and Restated Certificate of Incorporation and (ii) the Company’s receipt of shipments by Bharat Biotech of the first 10.0 million doses of COVAXIN manufactured by Bharat Biotech pursuant to the Supply Agreement, and further on the terms and subject to the conditions set forth in the Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (the "Certificate of Designation"). In April 2021, the Company's stockholders approved an increase in the number of the Company's authorized shares of common stock from 200.0 million to 295.0 million. As of December 31, 2021, the conversion condition relating to the delivery of the first 10.0 million doses of COVAXIN had not been met. The conversion rate of the Series B Convertible Preferred Stock is subject to adjustment in the event of a stock dividend, stock split, reclassification, or similar event with respect to the Company’s common stock.

Bharat Biotech is entitled to receive dividends on the Series B Convertible ~~Notes~~Preferred Stock equal (on an as-converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock, when and if such dividends are paid. Except as provided by law and certain protective provisions set forth in the Certificate of Designation, the Series B Convertible Preferred Stock has no voting rights. Upon a liquidation or dissolution of the Company, holders of Series B Convertible Preferred Stock would be entitled to receive the same amount that a holder of common stock would receive if the Series B Convertible Preferred Stock were fully converted to common stock.

~~During~~The Company accounted for the ~~years~~issuance of the Series B Convertible Preferred Stock in accordance with ASC 718 and recorded its grant date fair value of $5.0 million within stockholders' equity during the year ended December 31, 2021, with a corresponding short-term asset for the advanced payment for the doses of COVAXIN. The Company utilized the traded common stock price, adjusted by the Conversion Ratio, to value the Series B Convertible Preferred Stock and the Finnerty model to estimate a 15% discount rate for the lack of marketability of the instrument. The valuation incorporates Level 3 inputs in the fair value hierarchy, including the estimated time until the instrument's liquidity and estimated volatility of the Company's common stock as of the grant date.

Registered Direct Offerings

On April 23, 2021, the Company entered into a securities purchase agreement with certain institutional investors pursuant to which the Company agreed to issue and sell in a registered direct offering (the "April 2021 Registered Direct Offering") an aggregate of 10.0 million shares of the Company's common stock at an offering price of $10.00 per share. The closing of the

F-24

April 2021 Registered Direct Offering occurred on April 27, 2021, and the Company received net proceeds of $93.4 million, after deducting equity issuance costs of $6.6 million.

On February 7, 2021, the Company entered into a securities purchase agreement with certain institutional investors pursuant to which the Company agreed to issue and sell in a registered direct offering (the "February 2021 Registered Direct Offering") an aggregate of 3.0 million shares of the Company's common stock at an offering price of $7.65 per share. The closing of the February 2021 Registered Direct Offering occurred on February 10, 2021, and the Company received net proceeds of $21.2 million, after, deducting equity issuance costs of $1.7 million.

At-the-Market Offerings

The Company commenced 3 separate at-the-market offerings ("ATMs") in May 2020, June 2020, and August 2020 (the "August 2020 ATM"). During the year ended December 31, 2021, the Company sold 1.0 million shares of common stock under the August 2020 ATM and received net proceeds of $4.8 million, after deducting equity issuance costs of $0.1 million. During the year ended December 31, 2020, the Company sold an aggregate of 108.1 million shares of common stock under the ATMs and received net proceeds of $36.3 million, after deducting equity issuance costs of $1.5 million.

Pre-Merger Financing

On September 27, 2019, the Company, which was formerly known as Histogenics Corporation ("Histogenics"), completed a reverse merger (the "Merger") with Ocugen OpCo, Inc. ("OpCo") in accordance with the terms of the Agreement and ~~2018,~~Plan of Merger and Reorganization, dated as of April 5, 2019, in which OpCo was deemed to be the accounting acquirer. In June 2019 prior to the Merger, OpCo and Histogenics entered into a Securities Purchase Agreement (as amended, the "Financing SPA") with certain accredited investors (the "Investors"). Pursuant to the Financing SPA, among other things, (i) immediately prior to the Merger, OpCo issued 2.2 million shares of common stock to the Investors, (ii) on October 4, 2019, the Company issued 2.2 million shares of the Company's common stock to the Investors and (iii) on October 4, 2019, the Company issued three series of warrants to purchase shares of the Company’s common stock (the “Series A Warrants,” the “Series B Warrants” and the “Series C Warrants” and collectively, the “SPA Warrants”) in exchange for an aggregate purchase price of $25.0 million (the "Pre-Merger Financing"). See Note 10 for additional information. In 2019, prior to the Pre-Merger Financing, the Company issued two senior secured convertible notes (the ~~“Notes”~~"Senior Secured Convertible Notes") ~~to new and existing stockholders in the Company, including Notes~~ in the aggregate principal amount of ~~$3.5 million to members of the Board of Directors. As of December 31, 2019, all Notes had been converted and were 0 longer outstanding.~~

~~F-16~~

~~At issuance, the following amounts were recorded:~~

Note Issuance Date Note
Principal
Amount Fair Value of
Embedded Derivatives Debt
Issuance
Costs Carrying Value upon Issuance
January 2018 $ 5,000,000 $ (2,657,711) $ (35,969) $ 2,306,320
June 2018 1,000,000 (724,216) (3,000) 272,784
November 2018 1,150,400 (21,127) (50,646) 1,078,627
December 2018 150,000 (2,857) (14,310) 132,833
January 2019 450,000 (182,882) (29,358) 237,760
February 2019 1,000,000 (302,379) (55,875) 641,746
Total $ 8,750,400 $ (3,891,172) $ (189,158) $ 4,670,070

All Notes accrued interest at a rate of 5% per annum and had scheduled maturity dates on the eighteen month anniversary of the date of the issuance of the Notes (the “Maturity Date”). If prior to the Maturity Date, there was a consummation of the sale of all or substantially all of the assets of the Company, change in control or event of default, the Notes would become due and payable at an amount equal to 1.5 times the principal amount of the Notes together with all accrued interest (the “Change in Control Feature”).

If the Company received equity financing from the issuance of stock of the Company from an investor or group of investors in a transaction or series of related transactions above a certain amount of gross proceeds, the principal amount and all interest accrued but not paid through the closing date of the qualified equity financing was to automatically convert into the same class of equity securities as those issued in the qualified equity financing ("conversion feature").$5.3 million. The ~~price per share varied among the Notes ranging from a 0% to 30% discount to the lowest price per share being paid by investors in the qualified equity financing.~~

The Company bifurcated the Conversion Feature for the January 2018, June 2018, January 2019, and February 2019 notes and classified it as a derivative liability because the Conversion Feature does not have a fixed conversion price and conversion will be settled in a variable number of shares of common stock. There was no bifurcated Conversion Feature for the November 2018 and December 2018 notes as there is no discount to the lowest equity price triggering conversion. The Company also bifurcated the Change in Control Feature for all of the Notes because it was determined to be a redemption feature not clearly and closely related to the debt host.

The fair value of both of the embedded features was accounted for as a derivative liability and was recorded as a discount on the Notes. Inputs used in valuation were unobservable and therefore considered Level 3 in the fair value hierarchy. The debt discount is accreted into interest expense over the expected time until conversion of the Notes. The accretion amounted to $0.6 million and $3.4 million, for the year ended December 31, 2019 and 2018, respectively.

The fair value of the embedded features was classified as a liability in the Company’s consolidated balance sheets at issuance, with subsequent changes in fair value during the year ended December 31, 2019 and 2018 recorded on the Company’s consolidated statements of operations and comprehensive loss as a change in fair value of derivative liabilities.


	~~Amount~~
~~Balance at January 1, 2018~~	$	—
~~Fair value of embedded derivatives at issuance~~	~~3,405,911~~
~~Change in fair value of embedded derivatives~~	~~(1,664,689)~~
~~Balance at December 31, 2018~~	$	~~1,741,222~~
~~Fair value of embedded derivatives at issuance~~	~~567,661~~
~~Change in fair value of embedded derivatives~~	~~1,319,400~~
~~Conversion and extinguishment of debt~~	~~(3,628,283)~~
~~Balance at December 31, 2019~~	$	—

~~F-17~~

The Company considered several possible outcomes in the likelihood and timing of a qualified equity financing and/or a change in control occurring that would trigger conversion or redemption and believes the amounts disclosed above based on inputs utilized in the valuation were the best estimates at each valuation date.

On April 5, 2019, Former Ocugen entered into a Stock Subscription Agreement (“Subscription Agreement”) with existing investors for the sale of 0.1 million shares of common stock for $1.0 million, or $12.41 per share including the sale of 40,286 shares of common stock for $0.5 million to a member of the Board of Directors. This capital raise triggered the conversion features on the convertible debt described above. The Notes were modified to change the discount percentage from the 0% discount per the terms of the November 2018 and December 2018 Notes and the 15% discount per the terms of the January 2019 and February 2019 Notes to 30% at the time of conversion. The Company issued 1.1 million shares of common stock at $8.69 per share on the date of conversion to extinguish the debt, which resulted in a loss of $0.3 million. This non-cash conversion also resulted in an increase of $13.0 million in additional paid-in capital, which was based on the principal balance outstanding and the unpaid interest upon conversion.

~~Convertible Promissory Notes~~

On April 4, 2019, the Company issued the convertible promissory note (the “Promissory Note”) to an existing stockholder for $0.9 million at an interest rate of 5% per annum. On May 16, 2019, the Promissory Note was converted into equity. Former Ocugen issued 0.1 million shares of common stock at the conversion date to extinguish the debt at $12.41 per share. This non-cash transaction resulted in an increase of $0.9 million in additional paid-in capital, which was based on the principal balance outstanding and the unpaid interest upon conversion.

~~Senior Secured Convertible Notes~~

On May 21, 2019, the Company issued senior secured convertible notes to certain investors for $2.4 million at an original issue discount of $0.5 million, and on June 28, 2019, the Company entered into an agreement to issue additional senior secured convertible notes to the investors for $2.9 million with an original issue discount of $0.4 million (together “Senior Secured Notes”). Immediately prior to the Merger completed on September 27, 2019, the investorsInvestors offset $5.3 million from the amount to be received under the Pre-Merger Financing and the Senior Secured Convertible Notes were deemed to have been repaid and cancelled. ~~The accretion~~

10.Warrants

Canada Warrants

On July 15, 2021, the Company entered into a consulting agreement with an individual to provide services to the Company with regard to the Company's Canadian operations (the "Canada Consulting Agreement"). Compensation under the Canada Consulting Agreement includes, among other forms of compensation, the issuance of warrants to purchase up to 0.2 million shares of the ~~original issue discount~~Company's common stock (the "Canada Warrants") and cash payments of up to ~~interest expense amounted~~$3.0 million upon the achievement of certain milestones related to ~~$0.8~~COVAXIN. The Canada Consulting Agreement terminates on July 15, 2023, unless earlier terminated in accordance with its terms.

The Canada Warrants were issued on July 15, 2021 in a private placement transaction. The warrantholder has the right to exercise the Canada Warrants to purchase up to 0.2 million ~~during~~shares of the Company's common stock at an exercise price of $6.36 per share upon the achievement of certain milestones related to COVAXIN. The Canada Warrants terminate on July 15, 2031, unless earlier terminated in accordance with their terms. As of December 31, 2021, all of the Canada Warrants were outstanding and unvested. The Canada Warrants are accounted for in accordance with ASC 718.

SPA Warrants

On October 4, 2019, the Company issued the SPA Warrants as a component of the Pre-Merger Financing. During the year ended December 31, ~~2019.~~2019, the Company issued 8.8 million Series A Warrants, 20.6 million Series B Warrants, and 20.0 million Series C Warrants. During the year ended December 31, 2019, 20.6 million Series B Warrants and 20.0 million Series C Warrants were exercised.

The Series A Warrants and the Series C Warrants were classified as stockholders' equity at issuance. The Series B Warrants were classified as a liability as they did not meet the derivative scope exception to be accounted for within stockholders' equity.

F-25

The Series B Warrants were initially measured at fair value and marked to market each reporting period until November 2019 when the Series B Warrants were reassessed and determined to meet the derivative scope exception allowing for stockholders' equity classification. The Series B Warrants were marked to market a final time and the remaining liability balance was reclassified to equity. The change in derivative liability related to the Series B Warrants for the year ended December 31, 2019 was $1.9 million.

On April 22, 2020, the Company entered into a subscription agreement with an accredited investor for the sale of 1,000 shares of the Company's common stock in a private placement for an aggregate offering price of $395 (the "April 2020 Subscription Agreement"), which represented a dilutive issuance per the terms of the Series A Warrants as the sale price of the Company's common stock under the April 2020 Subscription Agreement was lower than the exercise price ("Dilutive Issuance"). The Dilutive Issuance resulted in adjustments to the number of issuable Series A Warrants and the exercise price of the Series A Warrants. Immediately prior to the Company entering into the April 2020 Subscription Agreement, 8.8 million Series A Warrants, 1,000 Series B Warrants, and 1,000 Series C Warrants were outstanding.

Contemporaneously with the April 2020 Subscription Agreement, the Company and OpCo entered into Amendment and Exchange Agreements (each an "Exchange Agreement" and collectively, the "Exchange Agreements") with the Investors. Pursuant to the Exchange Agreements, the Company, OpCo, and the Investors agreed, among other things, after giving effect to the dilutive issuance, to amend the Series A Warrants to provide for an adjustment to the number of common stock issuable upon the exercise of the Series A Warrants. Concurrently with such amendments, the Investors exchanged the Series A Warrants for (i) an aggregate of 21.9 million shares of common stock and (ii) a promissory notes of $5.6 million (the "Warrant Exchange Promissory Notes" and collectively with the common stock issued, the "Warrant Exchange"). The Warrant Exchange Promissory Notes were recorded at a fair value of $5.0 million. During the year ended December 31, 2020, the Company made payments to the Warrant Exchange Promissory Note holders of $5.6 million, causing the Warrant Exchange Promissory Notes to be repaid in full and no longer outstanding. Immediately following the consummation of the Warrant Exchange and the concurrent exercise of the remaining Series B Warrants and Series C Warrants, there were no SPA Warrants outstanding.

The Company accounted for the Warrant Exchange by recognizing the fair value of the consideration transferred in excess of the carrying value of the Series A Warrants as a reduction of additional paid-in capital. The fair value of the Series A Warrants immediately prior to the Warrant Exchange was $1.1 million, which was estimated using a Black-Scholes valuation model utilizing Level 3 inputs. The fair value of the consideration transferred to settle the Series A Warrants was approximately $13.6 million, comprised of $8.6 million in shares of common stock and the fair value of the Warrant Exchange Promissory Notes of $5.0 million. The fair value of consideration transferred to settle the Series A Warrants was in excess of the fair value of the Series A Warrants immediately prior to the Warrant Exchange by approximately $12.5 million. The excess consideration was accounted for as a deemed dividend to the Series A Warrant holders and was reflected as an additional net loss to common stockholders in the calculation of basic and diluted net loss per common share for the year ended December 31, 2020.

OpCo Warrants

Beginning in 2016, OpCo issued warrants to purchase the Company's common stock (the "OpCo Warrants"). As of December 31, 2021 and 2020, 0.6 million and 0.9 million OpCo Warrants were outstanding, respectively. As of December 31, 2021, the outstanding OpCo Warrants had a weighted-average exercise price of $6.23. The outstanding OpCo Warrants expire between 2026 and 2027.

8.11. Stock-Based Compensation

Stock-based compensation expense for stock options ~~granted are~~and RSUs is reflected in the consolidated statements of operations and comprehensive loss as ~~follows:~~

Year Ended
December 31,
2019 2018
General and administrative $ 362,833 $ 515,160
Research and development 521,256 559,527
Total $ 884,089 $ 1,074,687
follows (in thousands):


	Year ended December 31,
	2021		2020		2019
General and administrative	$	4,909	$	349	$	363
Research and development	2,049		311		521
Total	$	6,958	$	660	$	884

Stock-based compensation expense during the year ended December 31, 2021 included $2.1 million of expense related to stock options with performance-based vesting conditions. There were no stock options with performance-based vesting conditions granted prior to 2021.

F-26

As of December 31, ~~2019,~~2021, the Company had ~~$0.9~~$12.6 million of unrecognized stock-based compensation expense related to stock options ~~outstanding under its equity plans.~~and RSUs outstanding. This expense is expected to be recognized over a weighted average period of ~~1.7~~2.1 years as of December 31, ~~2019~~.2021.

Equity Plans

The Company maintains 2 equity compensation plans, the 2014 Ocugen OpCo, Inc. Stock Option Plan (the ~~“2014 Plan”~~"2014 Plan") and the Ocugen, Inc. 2019 Equity Incentive Plan (the ~~“2019 Plan”~~"2019 Plan", collectively with the 2014 Plan, the "Plans")~~, which replaced the Histogenics Corporation 2013 Equity Incentive Plan (the "2013 Plan")~~.

On December 18, 2019, Ocugen’s stockholders approved the adoption of the 2019 Plan and the 2013 Plan was frozen. No additional awards have been or will be made under the 2013 Plan and any remaining authorized shares under the 2013 Plan will be recycled into the 2019 Plan. The 2019 Plan provides for the granting of up to 2.1 million equity awards in respect of

~~F-18~~

~~Ocugen’s common stock, inclusive of equity awards that were previously available for issuance under the 2013 Plan, as of December 31, 2019. Additionally, on~~ the first business day of each fiscal year, ~~commencing on January 1, 2020,~~ pursuant to the "Evergreen" provision of the 2019 Plan, the aggregate number of shares that may be issued under the 2019 Plan ~~shall~~will automatically increase by a number equal to the lesser of ~~4.0%~~4% of the total number of shares of Company common stock outstanding on December 31^st31st of the prior year, or a number of shares ~~of Company common stock~~ determined by the ~~Board.~~

Board of Directors. As of December 31, ~~2019, an aggregate of 0.6 million and 0.1 million shares of Company common stock were issuable upon the exercise of outstanding stock options under~~2021, the 2014 Plan and the 2019 Plan authorize for the granting of up to 0.8 million and 11.5 million equity awards in respect to the Company's common stock, respectively. In addition to options and RSUs granted under the Plans, the Company has granted certain options and RSUs as material inducements to employment in accordance with Nasdaq Listing Rule 5635 (c)(4), which were granted outside of the Plans.

Stock Options to Purchase Common Stock

~~Weighted average~~The assumptions utilized in the fair value calculation for stock options ~~to purchase common stock~~ as of December 31, 2021, 2020, and 2019 ~~and 2018 are~~were as follows:

Year Ended
December 31,
2019 2018
Weighted average common stock price $1.04 $9.72
Expected option term (years) 6.0 6.0 – 10.0
Weighted average expected stock price volatility 109% 85%
Risk-free interest rate 1.5% – 2.4% 2.3% – 3.0%
Expected dividend rate —% —%


	Year ended December 31,
	2021	2020	2019
Weighted average expected option term (years)	6.0	6.0	6.0
Range of expected stock price volatility	109% – 116%	110% – 117%	89% – 110%
Weighted average expected stock price volatility	111%	112%	109%
Range of risk-free interest rate	0.4% – 1.4%	0.3% – 1.7%	1.5% – 2.4%
Expected dividend rate	0%	0%	0%

The following table summarizes the stock option activity:


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (In Thousands)
Options outstanding at December 31, 2020	4,224,433	$	0.84	8.9	$	5,496
Granted	7,728,260	3.45			—
Exercised	(1,208,631)	0.70			11,144
Forfeited	(657,895)	4.79			1,277
Options outstanding at December 31, 2021	10,086,167	$	2.59	8.8	$	24,664
Options exercisable at December 31, 2021	1,281,244	$	2.92	8.1	$	2,990

The stock option activity ~~under~~above includes 1.5 million of stock options with performance-based vesting conditions granted during the ~~Plans:~~

Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value
Options outstanding at December 31, 2018 632,752 $ 5.93 7.9 $ 4,801,696
Granted 238,761 $ 1.04
Cancelled (140,324) $ 4.58
Options outstanding at December 31, 2019 731,189 $ 4.59 8.0 $ 24,028
Options exercisable at December 31, 2019 385,841 $ 5.15 6.8 $ 3,049

year ended December 31, 2021, of which 0.9 million are not yet vested and exercisable as of December 31, 2021. The weighted average grant date fair value of stock options granted during the ~~year~~years ended December 31, 2021, 2020, and 2019 were $2.87, $0.34, and ~~2018 was~~ $0.84, ~~and $7.97, respectively~~. respectively. The total fair value of stock options vested during the years ended December 31, 2021, 2020, and 2019 were $2.6 million, $0.5 million, and $1.0 million, respectively. During the year ended December 31, ~~2019 was $1.0 million.~~

9.~~Commitments~~

~~Operating Leases~~

~~The~~2021, the Company ~~has commitments under operating leases for certain facilities used in its operations. The Company’s leases have initial lease terms ranging~~received $0.9 million of cash proceeds from ~~one~~the exercises of stock options. There were no stock option exercises prior to ~~five years. Certain lease agreements contain provisions for future rent increases.~~

~~The components of lease expense were as follows:~~


	Year Ended December 31, 2019
~~Operating lease cost~~	$	~~250,361~~
~~Variable lease cost~~	~~79,700~~
~~Total lease cost~~	$	~~330,061~~

2021.

~~F-19~~F-27

~~Supplemental balance sheet information related to leases was as follows:~~


	~~December 31, 2019~~
~~Right-of-use assets, net~~	$	~~344,574~~

~~Current lease obligations~~	~~172,310~~
~~Non-current lease obligations~~	~~163,198~~
~~Total lease liabilities~~	$	~~335,508~~

~~Supplemental information related to leases was as follows:~~


	Year Ended December 31, 2019
~~Weighted-average remaining lease terms—operating leases (years)~~	~~2.0~~
~~Weighted-average discount rate—operating leases~~	~~7.6~~	%

~~Future minimum operating minimum lease payments for all leases, exclusive of taxes and other carrying charges, are approximately as follows:~~

For the Years Ending December 31, Amount
2020 $ 191,890
2021 160,909
2022 11,354
Total $ 364,153
Less: present value adjustment (28,645)
Present value of minimum lease payments $ 335,508

~~The Company does not have any leases that have not yet commenced which are significant.~~

~~Financing Leases~~

In June 2018, the Company leased specialized research equipment under a lease classified as a financing lease. The leased equipment is included in property and equipment, net and is amortized on a straight-line basis over five years. Financing lease liabilities are included in other liabilities on the Company's consolidated balance sheets. The interest rate related to the lease obligation is 7.6% and the maturity date is July 2021.

~~Future minimum lease payments for all financing leases, exclusive of taxes and other carrying charges, are approximately as follows:~~

For the Years Ending December 31, Amount
2020 $ 23,856
2021 9,941
Total $ 33,797
Less: present value adjustment (1,851)
Present value of minimum lease payments $ 31,946
RSUs

10.~~Warrants~~

~~Pre-Merger Financing Warrants~~

On September 27, 2019, Ocugen completed the Merger with Former Ocugen. Immediately prior to the Merger, Ocugen and Former Ocugen completed a previously announced private placement transaction with certain Investors pursuant to the Financing SPA, whereby, among other things, (i) Former Ocugen issued to the Investors shares of Former Ocugen’s common stock, (ii) Former Ocugen issued and deposited additional shares of Former Ocugen’s common stock into escrow, and (iii) the

~~F-20~~

~~Company agreed to issue on the fifth trading day following the consummation of the Merger, Series A Warrants, Series B Warrants, and Series C Warrants.~~

The Pre-Merger Financing Warrants are subject to blocker provisions which restrict the exercise of the Pre-Merger Financing Warrants if, as a result of such exercise, the holder, together with its affiliates would beneficially own in excess of 4.99% or 9.99% of the outstanding common stock, including the common shares issuable upon such exercise, as such percentage ownership is determined in accordance with the terms of the Pre-Merger Financing Warrants.

If Ocugen fails to issue to a holder of the Pre-Merger Financing Warrants the number of shares of common stock to which such holder is entitled upon such holder’s exercise of the such warrants, then Ocugen shall be obligated to pay the holder on each day while such failure is continuing an amount equal to 2.0% of the market value of the undelivered shares determined using any trading price of the common stock selected by the holder as in effect at any time during the period from delivery of the exercise notice until the applicable share delivery date, and if the holder purchases shares of common stock in connection with such failure, then Ocugen must, at the holder’s discretion, reimburse the holder for the cost of such shares or deliver the owed shares and reimburse the holder for the difference between the price such holder paid for such shares and the closing market price for shares of common stock on the date of exercise.

On November 5, 2019, the Company entered into an agreement with each Investor that amends the terms of each of the Pre-Merger Financing Warrants held by each such Investor (collectively, the “Warrant Amendments”). The terms of the Pre-Merger Financing Warrants and the Warrant Amendments are discussed below.

~~Series A Warrants~~

The Series A Warrants have an initial exercise price per share of $7.13, were exercisable upon issuance and have a term of 60 months from the date of issuance. The Series A Warrants are exercisable for up to 8.8 million shares of Ocugen common stock.

The Series A Warrants have an anti-dilution adjustment whereby if Ocugen issues or sells, enters into a definitive, binding agreement pursuant to which Ocugen is required to issue or sell or is deemed, pursuant to the provisions of the Series A Warrants, to have issued or sold, any common stock for a price per share lower than the exercise price then in effect (a “Dilutive Issuance”), subject to certain limited exceptions, then (i) the exercise price of the Series A Warrants shall be reduced to such lower price per share and (ii) the number of shares issuable upon exercise of the Series A Warrants shall be increased to the number of shares of common stock determined by multiplying (a) the exercise price in effect immediately prior to such Dilutive Issuance by (b) the number of shares of common stock issuable upon exercise of the Series A Warrants immediately prior to such Dilutive Issuance (without giving effect to any limitation on exercise contained therein), and dividing the product thereof by the exercise price resulting from such Dilutive Issuance.

Each Series A Warrant was amended pursuant to the Warrant Amendments such that an equity financing involving a research or non-profit foundation or organization qualified under Section 501(c) of the Internal Revenue Code of 1986, as amended, in an amount of gross proceeds not to exceed $10.0 million and closing on or prior to May 31, 2020, will be excluded from the anti-dilution adjustment, as set forth in the Series A Warrant.

~~Series B Warrants~~

The Series B Warrants have an exercise price of $0.01, were exercisable after the completion of a 10 trading-day period following the effectiveness of a registration statement covering the resale of common stock into which such warrants were exercisable and will expire on the date on which the Series B Warrants have been exercised in full (without giving effect to any limitation on exercise contained therein) and no shares remain issuable thereunder. The Series B Warrants were initially exercisable by a holder for 8.0 million shares of common stock.

Additionally, each Series B Warrant included a Reset Period pursuant to which the number of shares issuable upon exercise of the Series B Warrants shall be increased during certain Reset Periods (as defined in the Series B Warrants) pursuant to a formula based on the greater of (i) 80% of the arithmetic average of the two lowest dollar volume-weighted average prices of a share of Ocugen common stock on Nasdaq during the applicable Reset Period immediately preceding the applicable Reset Date to date and (ii) $1.00 (the “Reset Price”). Among other things, the Reset Period was triggered by the effectiveness of the registration statement covering the resale of the shares of common stock underlying the warrants (the "Registration Statement') which became effective on November 5, 2019. The Warrant Amendments provided that Series B Warrants would not be exercisable and the effectiveness of the Registration Statement would not trigger the Reset Period until the completion of a 10 trading-day period following the SEC’s declaring it effective. The Reset Period commenced on November 20, 2019. As the dollar volume-weighted average prices of Ocugen’s common stock on Nasdaq was under $1.00 for the first two trading days of

~~F-21~~

the Reset Period, the Investors elected to advance the end of the Reset Period to November 21, 2019 and the number of shares issuable upon exercise of the Series B Warrants was increased based on a Reset Price of $1.00. This reset resulted in an aggregate of 12.6 million additional shares of common stock becoming issuable upon exercise of the Series B Warrants.

~~Series C Warrants~~

The Series C Warrants were exercisable upon issuance for up to 50.0 million shares of common stock at an initial exercise price of $7.13 per share. Each of the Series C Warrants was amended pursuant to the Warrant Amendments to permit the Investors, in lieu of making any cash payment otherwise contemplated to be made to the Company upon the exercise of the Series C Warrant, to elect instead to receive upon such exercise up to 20.0 million shares of common stock. Prior to the Warrant Amendments, the Series C Warrants had permitted the exercise without any cash payment of up to 50.0 million shares of common stock in the event that the volume weighted-average price of the common stock on Nasdaq was less than or equal to $1.20 per share on any ~~five~~ ~~trading days following the issuance of the Series C Warrants. The Series C Warrants will expire upon the 45~~^th trading day immediately following the earlier to occur of (i) the date the holder can sell all shares issuable upon exercise of the Series C Warrants pursuant to Rule 144 without restriction or limitation and without the requirement to be in compliance with Rule 144(c)(1) and (ii) October 4, 2020, provided that if such date falls on a day other than a business day or on which trading does not take place on Nasdaq (a “Holiday”), the next day that is not a Holiday.

The following table summarizes the ~~activity of~~RSU activity:


	Number of Shares	Weighted- Average Grant-Date Fair Value		Aggregate Intrinsic Value (In Thousands)
RSUs outstanding at December 31, 2020	—	$	—	$	—
Granted	204,901	6.87		1,483
Forfeited	(13,090)	8.05		108
RSUs outstanding at December 31, 2021	191,811	$	6.79	$	873

12. Income Taxes

For the ~~Pre-Merger Financing Warrants, including the effect of the Warrant Amendments:~~

Series A Warrants Series B Warrants Series C Warrants Total
Outstanding at January 1, 2019 — — — —
Issued 8,771,928 20,614,036 20,000,000 49,385,964
Exercised — (20,613,036) (19,999,000) (40,612,036)
Outstanding at December 31, 2019 8,771,928 $ 1,000 1,000 8,773,928
Exercise price $ 7.13 $ 0.01 $ 0.00

~~Accounting for the Pre-Merger Financing Warrants~~

Although the Pre-Merger Financing Warrants were issued on October 4, 2019, the agreement for issuance of the Pre-Merger Financing Warrants was a firm commitment reached between Ocugen and the Investors as part of the Financing SPA upon the closing of the Merger. Therefore, for accounting purposes the issuance date was determined to be the date of the Merger. As of the date of the Merger, the Series A Warrants and Series C Warrants were classified as equity and the Series B Warrants were classified as a liability on the consolidated balance sheet.

The Series B Warrants were classified as a liability as they did not meet the derivative scope exception related to equity indexation because the Reset Date was triggered on the effective date of a Registration Statement and the timing of when a Registration Statement for the underlying shares is available is not an input in an option pricing model. Series B Warrants were classified as a derivative liability in the consolidated balance sheet measured at fair value on September 27, 2019 and marked to market at September 30, 2019. Upon the completion of the Reset Period, the Series B Warrants were reassessed and determined to meet the derivative scope exception allowing for equity classification. The Series B Warrants were marked to market a final time as a change in the fair value of a derivative liability and the remaining liability balance was reclassified to equity. Subsequent to the Reset Period, almost all of the Series B Warrants were exercised for shares of common stock.

~~The following table provides a roll-forward of the Series B Warrant liability:~~


	~~Amount~~
~~Balance at January 1, 2019~~	$	—
~~Fair value at issuance (September 27, 2019)~~	~~9,387,760~~
~~Change in fair value of embedded derivatives~~	~~1,867,980~~
~~Amount reclassified to equity~~	~~(11,255,740)~~
~~Balance at December 31, 2019~~	$	—

~~F-22~~

The fair value of the Series B Warrants upon issuance was calculated using a Monte Carlo simulation while estimating the stock price during the 45-day Reset Period, based on the terms described within the Financing SPA. Key fair value inputs included the starting stock price, expected stock volatility during the 45-day Reset Period, and additional shares issued from escrow. The methodology for measuring fair value was sensitive to the expected stock volatility assumption input mentioned above. The volatility used in the fair value estimate at issuance was 96.0%. Inputs used in the valuation are unobservable and are therefore classified as Level 3 fair value inputs. The fair value of the Series B Warrants upon the end of the Reset Period was based on a Black-Scholes valuation model, which is classified as Level 3 in the fair value hierarchy.

~~Accounting for the Warrant Amendments~~

The Company accounted for the Warrant Amendments as a modification by assessing whether the modification resulted in an incremental fair value of the warrants. An increase in fair value resulting from the modification may be recognized as expense in the consolidated statements of operations and comprehensive loss, whereas a decrease in fair value is not recognized. The Company determined that the modifications to the Series A Warrants and Series B Warrants were not substantive amendments that would result in an increase in fair value based on a qualitative assessment of the terms of the amendments. The Series C Warrants were determined to substantially modified. The Company estimated the fair value of the Series C Warrants immediately prior to and immediately after the modification and concluded that the fair value of the warrants decreased and therefore there was no incremental fair value to recognize resulting from the modification.

~~Former Ocugen Warrants~~

~~Prior to 2018, Former Ocugen issued warrants to investors of~~year ended December 31, 2021, the Company ~~pursuant~~recognized a deferred income tax benefit of $0.1 million due to a stockholders' agreement and to 2 employees of the Company pursuant to their respective employment agreements. As of December 31, 2019 and 2018, 0.9 million warrants to purchase common stock were outstanding and exercisable and had a weighted average exercise price of $5.67 per share. The warrants expire between 2025 and 2027.

~~11. Income Taxes~~

an asset acquisition. For the years ended December 31, ~~2019~~2020 and ~~2018,~~2019, the Company did not recognize any current or deferred income tax expense or ~~benefit due to the current and historical losses incurred by the Company.~~benefit. Losses before income taxes were ~~$20.2~~$58.4 million, $21.8 million, and ~~$18.2~~$20.2 million for the years ended December 31, ~~2019~~2021, 2020, and ~~2018,~~2019 respectively, substantially all of which were incurred in the United States.

~~F-23~~The reconciliation of federal statutory income tax to the Company's provision for income taxes is as follows:


	As of December 31,
	2021		2020		2019
Expected provision at statutory rate	21.0	%	21.0	%	21.0	%
State tax - net of federal benefit	7.9	%	7.5	%	5.3	%
Tax credits	3.2	%	2.8	%	3.2	%
Permanent differences	(0.1)	%	(1.0)	%	(8.1)	%
Other	—	%	1.1	%	2.9	%
Change in valuation allowance	(31.9)	%	(31.4)	%	(24.3)	%
Total provision for income taxes	0.1	%	—	%	—	%

Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of the Company’s deferred tax assets and liabilities as of December 31, 2021 and 2020 are comprised of the ~~following:~~following (in thousands):


	As of December 31,
	2021		2020
Deferred tax assets:
Net operating loss carryforwards	$	52,038	$	35,714
Capital loss carryforwards	7,298		7,298
Start-up costs	11,235		11,235
Accruals and reserves	448		398
Intellectual property amortization	1,960		2,285
Stock-based compensation expense	2,064		1,290
Tax credits	4,350		2,541
Lease liability	461		125
Total deferred tax assets	79,854		60,886
Valuation allowance	(79,395)		(60,761)
Deferred tax assets, net of allowance	$	459	$	125

Deferred tax liabilities:
Lease right-of-use assets	(459)		(125)
Net deferred tax assets	$	—	$	—

As of December 31,
2019 2018
Deferred tax assets:
Net operating loss carryforwards $ 31,575,288 $ 6,864,360
Capital loss carryforwards 7,298,052 —
Start-up costs 11,234,751 —
Accruals and reserves 166,611 35,645
Intellectual property amortization 555,352 121,694
Stock-based compensation expense 1,123,100 993,234
Convertible debt — 498,236
Tax credits 1,926,677 548,399
Lease liability 96,895 —
Total deferred tax assets 53,976,726 9,061,568
Valuation allowance (53,877,168) (9,061,568)
Deferred tax assets, net of allowance $ 99,558 $ —
Deferred tax liabilities:
Lease ROU asset (99,558) —
Net deferred tax assets $ — $ —

F-28

The Company has evaluated the positive and negative evidence bearing upon its ability to realize its deferred tax assets. Management has considered the Company’s history of cumulative net losses, estimated future taxable income, and prudent and feasible tax planning strategies and has concluded that it is more likely than not that the Company will not realize the benefits of its deferred tax assets. Accordingly, a full valuation allowance has been established against these net deferred tax assets as of December 31, 2021 and 2020, respectively. The Company’s valuation allowance increased during 2021 by approximately $18.6 million primarily due to the generation of net operating losses and research and development and orphan drug credit carryforwards.

As of December 31, ~~2019~~2021 and ~~2018,~~2020, the Company had U.S. federal net operating loss ("NOL") carryforwards of ~~$113.6~~$184.4 million and ~~$23.7~~$128.0 million, respectively, which may be available to offset future income tax liabilities. The Tax Cut and Jobs Act, which was enacted in December 2017, will generally allow federal losses generated after 2017 to be carried over indefinitely, but will generally limit the NOL deduction to the lesser of the NOL carryover or 80% of a corporation’s taxable ~~income.~~income (subject to Section 382 of the Internal Revenue Code of 1986, as amended ("IRC")). In addition, there will be no carryback for losses generated after 2017. Losses generated prior to 2018 will generally be deductible to the extent of the lesser of a corporation’s NOL carryover or 100% of a corporation’s taxable income and will be available for twenty years from the period the loss was generated. The Company has federal NOLs generated after 2017 of ~~$61.2~~$131.8 million, which do not expire. The federal NOLs generated prior to 2018 of ~~$52.4~~$52.6 million will expire at various dates through 2037. In addition, the Company has a capital loss carryforward of $26.7 million which may be available to offset future capital gains and does not expire until 2024.

As of December 31, ~~2019~~2021 and ~~2018,~~2020, the Company also had U.S. state NOL carryforwards of ~~$112.4~~$183.1 million and ~~$23.7~~$126.7 million, respectively, which may be available to offset future income tax liabilities and expire at various dates through ~~2039.~~2041.

As of December 31, ~~2019~~2021 and ~~2018,~~2020, the Company ~~has~~had federal tax credit carryforwards of approximately ~~$1.6~~$3.8 million and ~~$0.8~~$2.2 million, respectively, which are available to offset future federal tax liabilities which expire at various dates through ~~2039.~~2041. As of December 31, ~~2019~~2021 and ~~2018,~~2020, the Company ~~has~~had state tax credit carryforwards of approximately ~~$0.4~~$0.7 million and ~~$0.1~~$0.5 million, respectively, which are available to reduce future tax liabilities ~~which~~and expire at various dates through ~~2034.~~

The Company has recorded a full valuation allowance against its net deferred tax assets as of December 31, 2019 and 2018 because the Company has determined that is it more likely than not that these assets will not be fully realized due to the Company's history of operating losses and lack of available evidence supporting future taxable income. The Company experienced a net change in valuation allowance of $44.8 million during the year ended December 31, 2019, primarily related to the increase in NOL carryforwards. The increase in the federal and state NOL carryforwards during the year ended December 31, 2019 was primarily due to the acquired NOL carryforwards as a result of the Merger.

2036.

Under the provisions of the IRC, the NOL and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Utilization of U.S. federal and state ~~operating loss~~NOL and tax credit carryforwards may be subject to a substantial annual limitation under Section 382 and Section 383 of the ~~Internal Revenue Code of 1986, as amended,~~IRC, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of NOL and tax credit carryforwards that can be utilized annually to offset future taxable income and tax liabilities, respectively. The Company acquired a significant amount of federal and state NOL carryforwards and federal and state tax credit carryforwards as a result of the Merger.

The Company

~~F-24~~

has not yet conducted a comprehensive study to assess whether a change of ownership has occurred, or whether there have been multiple ownership changes since its formation. Any limitation may result in expiration of a portion of the NOL ~~carryforward~~carryforwards or tax credit carryforwards before utilization, which would be offset by a change in the Company's valuation allowance. Further, until a study is completed by the Company and any limitation is known, no amounts are being presented as an uncertain tax position.

The ~~reconciliation~~Company has not yet conducted a study of ~~federal statutory income~~ tax credit carryforwards. Such a study, once undertaken by the Company, may result in an adjustment to its tax credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company’s tax credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the ~~Company's provision for income taxes~~valuation allowance. Thus, there would be no impact to the consolidated balance sheets or consolidated statements of operations and comprehensive loss if an adjustment is ~~as follows:~~required.

As of December 31,
2019 2018
Expected provision at statutory rate 21.0 % 21.0 %
State tax - net of federal benefit 5.3 % 7.6 %
Research and development credits 3.2 % 2.1 %
Permanent differences (8.1) % (0.8) %
Other 2.9 % 0.0 %
Change in valuation allowance (24.3) % (29.9) %
Total provision for income taxes — % — %

F-29

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as ~~follows:~~


	~~Amount~~
~~Gross unrecognized tax benefits as of December 31, 2018~~	$	—
~~Additions for tax positions taken in a prior year~~	~~303,050~~
~~Additions for tax positions taken in the current year~~	—
~~Reductions for tax positions taken in the prior year due to settlement~~	—
~~Reductions for tax positions taken in the prior year due to statutes lapsing~~	—
~~Gross unrecognized tax benefits as of December 31, 2019~~	$	~~303,050~~

follows (in thousands):


	Year ended December 31,
	2021		2020		2019
Gross unrecognized tax benefits at beginning of year	$	303	$	303	$	—
Additions for tax positions taken in a prior year	—		—		303
Additions for tax positions taken in the current year	—		—		—
Reductions for tax positions taken in the prior year due to settlement	—		—		—
Reductions for tax positions taken in the prior year due to statutes lapsing	—		—		—
Gross unrecognized tax benefits at end of year	$	303	$	303	$	303

The uncertain tax positions giving rise to the unrecognized tax benefits of $0.3 million at December 31, ~~2019~~2021 relate to the timing of certain income and deductions for federal income tax purposes taken by Histogenics prior to the Merger. The reversal of unrecognized tax benefits would not have any impact on the effective tax rate in the future ~~periods~~ and is not expected to create cash ~~tax~~ liability.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In a normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. The Company’s tax years are still open under status from ~~2016~~2018 to present.

13. Net Loss per Share of Common Stock

~~12.~~The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31, 2021, 2020, and 2019 (in thousands):


	Year ended December 31,
	2021		2020		2019
Net loss — basic and diluted	$	(58,365)	$	(21,822)	$	(20,243)
Deemed dividend related to Warrant Exchange	—		(12,546)		—
Net loss to common stockholders	$	(58,365)	$	(34,368)	$	(20,243)
Shares used in calculating net loss per share attributable to common stockholders — basic and diluted	195,013,043		112,236,110		13,893,819
Net loss per share attributable to common stockholders — basic and diluted	$	(0.30)	$	(0.31)	$	(1.46)

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares outstanding, as their inclusion would have been antidilutive:


	Year ended December 31,
	2021	2020	2019
Options to purchase common stock	10,086,167	4,224,433	731,189
RSUs	191,811	—	—
Warrants	799,251	870,017	9,643,945
Series A Convertible Preferred Stock (as converted to common stock)	3,115	—	—
Series B Convertible Preferred Stock (as converted to common stock)	547,450	—	—
Total	11,627,794	5,094,450	10,375,134

F-30

14. ~~Subsequent Events~~Commitments and Contingencies

~~On March 26, 2020, the~~Commitments

The Company ~~borrowed an additional $0.5 million~~has commitments under ~~the terms~~certain license and ~~conditions of the EB-5 Loan Agreement. Outstanding borrowings pursuant to the EB-5 Program, including accrued interest, become due~~development agreements, lease agreements, debt agreements, and consulting agreements. Commitments under certain license and development agreements include annual payments, payments upon the ~~seventh anniversary~~achievement of certain milestones, and royalty payments based on net sales of licensed products (see Note 3). Commitments under lease agreements are future minimum lease payments (see Note 6). Commitments under debt agreements are the ~~final disbursement. Following this borrowing, total~~future payment of principal ~~outstanding~~and accrued interest under the EB-5 Loan Agreement (see Note 8). Commitments under consulting agreements include payments upon the achievement of certain milestones related to COVAXIN (see Note 10). Additionally, subsequent to December 31, 2021, the Company entered into supply commitments related to COVAXIN. See Note 15 for additional information.

Contingencies

On June 17, 2021, a securities class action lawsuit was filed against the Company and certain of its officers and directors in the U.S. District Court for the Eastern District of Pennsylvania (Case No. 2:21-cv-02725) that purported to state a claim for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 promulgated thereunder, based on statements made by the Company concerning the announcement of the Company's decision to pursue the submission of a BLA for COVAXIN for adults ages 18 years and older rather than pursuing EUA for the vaccine candidate. On July 16, 2021, a second securities class action was filed against the Company and certain of its officers and directors in the U.S. District Court for the Eastern District of Pennsylvania (Case No. 2:21-cv-03182) that also purported to state a claim for alleged violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, based on the same statements as the first complaint. The complaints seek unspecified damages, interest, attorneys’ fees, and other costs.

On August 30, 2021, a stockholder derivative lawsuit was filed derivatively on behalf of the Company against certain of its officers and directors and the nominal defendant Ocugen in the U.S. District Court for the Eastern District of Pennsylvania (Case No. 2:21-cv-03876) that purported to state a claim for breach of fiduciary duty and contribution for violations of Sections 10(b) and 21(d) of the Exchange Act, based on facts and circumstances relating to the securities class action lawsuits and seeking contribution and indemnification in connection with claims asserted in the securities class action lawsuits. On September 22, 2021, a second stockholder derivative lawsuit was filed derivatively on behalf of the Company against certain of its officers and directors and the nominal defendant Ocugen in the U.S. District Court for the Eastern District of Pennsylvania (Case No. 2:21-cv-04169) that purported to state a claim for breach of fiduciary duties, unjust enrichment, abuse of control, waste of corporate assets, and contribution for violations of Sections 10(b) and 21(d) of the Exchange Act, based on the same allegations as the first complaint. The parties to both stockholder derivative lawsuits have stipulated to the consolidation of the two stockholder derivative lawsuits and also have submitted to the court in each action a proposed order requesting a stay of the litigation pending a decision on any motion to dismiss filed in the securities class action lawsuits, which remains pending before each court, and this status could change.

The Company believes that the lawsuits are without merit and intends to vigorously defend against them. At this time, no assessment can be made as to their likely outcome or whether the outcome will be material to the Company. No information is ~~$1.5 million.~~available to indicate that it is probable that a loss has been incurred and can be reasonably estimated as of the date of the consolidated financial statements and, as such, no accrual for the loss has been recorded within the consolidated financial statements.

15. Subsequent Events

Non-Binding Letter of Intent with Liminal Biosciences Inc.

On January 24, 2022, the Company entered into a non-binding letter of intent ("LOI") with Liminal Biosciences Inc. ("Liminal") for the acquisition of Liminal's manufacturing site in Belleville, Ontario for a combination of cash and warrants to purchase the Company's common stock. As consideration for entering into the LOI, the Company issued warrants to purchase 2.3 million shares of the Company's common stock at an exercise price of $3.76, subject to certain adjustments. The Liminal Warrants vest and become exercisable upon closing of the transactions contemplated by the LOI and terminate on the tenth

~~F-25~~F-31