What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-28 compared with 2023-03-24 · 371 added, 303 removed, 692 unchanged (49% of the section changed)

5 unchanged sentences

Consolidated Statements of Operations and Comprehensive Loss for the Years ended December 31, 202 3 and 202 2

Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Years ended December 31, 2022 and 2021

Consolidated Statements of Changes in Stockholders’ Equity for the Years ended December 31, 2023 and 2022

Consolidated Statements of Cash Flows for the Years ended December 31, 202 3 and 202 2

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We have audited the accompanying consolidated balance sheets of Humacyte, Inc.

and its subsidiary (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, of changes in redeemable convertible preferred stock and stockholders’ equity (deficit) and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”).

and its subsidiary (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, of changes in stockholders’ equity and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

24 unchanged sentences

$ 80,448 $ 149,772

Prepaid expenses and other current assets

Short-term investments — 2,107

Accounts receivable

Prepaid expenses and other current assets

Total current assets

83,278 154,208

Finance lease right-of-use assets, net

19,373 21,432

Operating lease right-of-use assets, net

Property and equipment, net

26,791 30,039

Finance lease right-of-use assets, net

17,313 19,373

Other long-term assets

$ 128,223 $ 204,302

LIABILITIES AND STOCKHOLDERS’ EQUITY

3 unchanged sentences

Accrued expenses

SVB loan payable, current portion 8,571 —

Finance lease obligation, current portion

Operating lease obligation, current portion

Deferred payroll tax

SVB loan payable, current portion — 8,571

Total current liabilities

18,443 19,580

Revenue interest liability 38,600 —

Contingent Earnout Liability 37,916 27,893

SVB loan payable, net of current portion 20,336 27,361

Finance lease obligation, net of current portion

16,293 18,853

Operating lease obligation, net of current portion

Common stock warrant liabilities 80 497

Contingent derivative liability 2,636 —

Other long-term liabilities

SVB loan payable, net of current portion — 20,336

Total liabilities

22 unchanged sentences

Grant revenue

$ 1,565 $ 1,263

Operating expenses:

9 unchanged sentences

Change in fair value of Contingent Earnout Liability ( 10,023 ) 75,767

Change in fair value of common stock warrant liabilities 417 56

Gain on PPP loan forgiveness — 3,284

Employee retention credit 3,107 —

Loss on extinguishment of debt ( 2,421 ) —

Interest expense

( 6,599 ) ( 6,200 )

Transaction costs expensed — ( 49 )

Total other income, net

Change in fair value of derivative liabilities ( 260 ) 417

Total other income (expense), net

( 10,729 ) 72,613

7 unchanged sentences

HUMACYTE, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands except for share amounts)

Redeemable Convertible

Preferred Stock Common Stock Additional

Common Stock Additional

Capital Accumulated

1 unchanged sentence

Stockholders’

(Deficit) Equity

Shares Amount Shares Amount

Shares Amount

Balance as of December 31, 2021

103,003,646 $ 10 $ 536,737 $ ( 414,573 ) $ 122,174

Issuance of warrants in conjunction with debt — — — — 3,275 — 3,275

Conversion of redeemable convertible preferred stock into common stock in connection with the Merger and related PIPE financing ( 69,613,562 ) ( 420,989 ) 69,613,562 7 420,982 — 420,989

The Merger and related PIPE financing, net of transaction costs and acquired liabilities — — 27,346,449 2 209,478 — 209,480

Public warrants assumed upon the Merger, net of transaction costs — — — — 13,912 — 13,912

Contingent Earnout Liability recognized upon closing of the reverse recapitalization — — — — ( 159,432 ) — ( 159,432 )

Proceeds from the exercise of stock options 225,367 — 535 — 535

19 unchanged sentences

Change in fair value of Contingent Earnout Liability 10,023 ( 75,767 )

Change in fair value of common stock warrant liabilities ( 417 ) ( 56 )

Loss on extinguishment of debt 2,421 —

Non-cash interest expense 3,099 —

Change in fair value of derivative liabilities 260 ( 417 )

Loss on disposal of property and equipment 18 6

2 unchanged sentences

Amortization of SVB debt discount 482 1,546

Accrued interest on PPP loan obligation — 11

Gain on PPP loan forgiveness — ( 3,284 )

Payment of liabilities assumed in Merger — ( 14,461 )

Changes in operating assets and liabilities:

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Cash flows from investing activities

Purchase of short-term investments (certificates of deposit) ( 10,107 ) ( 8,000 )

Proceeds from maturity of short-term investments (certificates of deposit) 2,107 16,000

Purchase of property and equipment ( 2,280 ) ( 1,048 )

Purchase of short-term investments (certificates of deposit) — ( 10,107 )

Net cash provided by (used in) investing activities ( 173 ) 4,845

Cash flows from financing activities

Proceeds from revenue interest purchase agreement, net of issuance costs 39,377 —

Payments of transaction costs related to revenue interest purchase agreement ( 1,450 ) —

Principal payments on SVB loan ( 31,500 ) —

Payments for debt prepayment and extinguishment costs ( 310 ) —

Proceeds from the exercise of stock options 566 535

Payment of finance lease principal ( 1,981 ) ( 1,729 )

Proceeds from Merger and PIPE financing, net of offering costs paid — 242,400

Payment of transaction costs related to Merger — ( 3,945 )

Proceeds from SVB loan — 29,659

Net cash (used in) provided by financing activities ( 1,446 ) 266,983

Net (decrease) increase in cash and cash equivalents ( 67,730 ) 177,573

Cash and cash equivalents at the beginning of the period 217,502 39,929

Cash and cash equivalents at the end of the period 149,772 217,502

Proceeds from JDRF Agreement 80 —

Payments of finance lease principal ( 2,256 ) ( 1,981 )

Net cash provided by (used in) financing activities 4,507 ( 1,446 )

Net decrease in cash, cash equivalents and restricted cash ( 68,971 ) ( 67,730 )

Cash, cash equivalents and restricted cash at the beginning of the period 149,772 217,502

Cash, cash equivalents and restricted cash at the end of the period $ 80,801 $ 149,772

Supplemental disclosure:

2 unchanged sentences

Purchase of property and equipment in accounts payable and accrued expenses $ 284 $ 135

Issuance of warrants in conjunction with debt $ — $ 3,275

Unpaid liabilities assumed in connection with Merger $ — $ 130

Conversion of redeemable convertible preferred stock into common stock in connection with the reverse capitalization $ — $ 420,989

Contingent Earnout Liability recognized upon the closing of the reverse recapitalization $ — $ 159,432

Initial fair value of contingent derivative liability related to revenue interest liability $ 2,354 $ —

The accompanying notes are an integral part of these financial statements.

3 unchanged sentences

Humacyte, Inc.

and subsidiary (the “Company”), is pioneering the development and manufacture of off-the-shelf, universally implantable, bioengineered human tissues, advanced tissue constructs and organ systems designed to improve the lives of patients and transform the practice of medicine.

and subsidiary (unless the context indicates otherwise, collectively, the “Company”) is pioneering the development and manufacture of off-the-shelf, universally implantable, bioengineered human tissues, advanced tissue constructs and organ systems designed to improve the lives of patients and transform the practice of medicine.

The Company is leveraging its regenerative medicine technology platform to develop proprietary product candidates for use in the treatment of diseases and conditions across a range of anatomic locations in multiple therapeutic areas.

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On the Closing Date, AHAC changed its name to Humacyte, Inc.

(“New Humacyte”) and Legacy Humacyte changed its name to Humacyte Global, Inc.

The Merger is accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”), and under this method of accounting, AHAC is treated as the acquired company for financial reporting purposes and Legacy Humacyte is treated as the acquirer.

and Legacy Humacyte changed its name to Humacyte Global, Inc.

The Merger was accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”), and under this method of accounting, AHAC was treated as the acquired company for financial reporting purposes and Legacy Humacyte was treated as the acquirer.

Operations prior to the Merger are those of Legacy Humacyte.

Refer to Note 3 — Reverse Recapitalization for further details of the Merger.

Concurrently with the execution of the Merger Agreement, certain investors (the “PIPE Investors”) purchased an aggregate of 17,500,000 shares of the Company’s common stock, par value $ 0.0001 per share (“Common Stock” and such shares purchased by the PIPE Investors, the “PIPE Shares”), in a private placement for an aggregate purchase price of $ 175 million (the “PIPE Financing”).

The Company received $ 242.4 million in proceeds from the Merger and related PIPE Financing, and incurred $ 3.9 million of transaction costs, consisting of banking, legal, and other professional fees.

Liquidity and Going Concern

Since its inception in 2004, the Company has generated no product revenue and has incurred operating losses and negative cash flows from operations in each year.

To date, the Company has financed its operations primarily through the sale of equity securities and convertible debt, proceeds from the Reverse Recapitalization, borrowings under loan facilities and, to a lesser extent, through governmental and other grants.

To date, the Company has financed its operations primarily through the sale of equity securities and convertible debt, proceeds from the Reverse Recapitalization, borrowings under loan facilities, proceeds from a revenue interest purchase agreement and, to a lesser extent, through governmental and other grants.

At December 31, 2023 and December 31, 2022, the Company had an accumulated deficit of $ 537.3 million and $ 426.5 million, respectively.

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The Company expects to incur substantial operating losses and negative cash flows from operations for the foreseeable future as the Company advances its product candidates.

As of December 31, 2022, the Company had cash and cash equivalents and short-term investments of $ 151.9 million.

The Company believes its combined cash and cash equivalents and short-term investments on hand will be sufficient to fund operations, including clinical trial expenses and capital expenditure requirements, for at least 12 months from the issuance date of these financial statements.

Impact of COVID-19

The COVID-19 outbreak and government measures taken in response have had a significant impact, both direct and indirect, on the Company’s business, as supply chains have been disrupted and enrollment in clinical trials has been delayed.

To date, there have been no material financial impacts or impairment losses in the carrying values of the Company’s assets as a result of the pandemic and the Company is not aware of any specific related event or circumstance that would require it to revise the estimates reflected in these financial statements.

The extent to which the ongoing effects of the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including current and future clinical trials and research and development costs and timelines, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19, the emergence of new virus variants, and the duration and intensity of the related economic impact of the pandemic.

As of December 31, 2023, the Company had cash and cash equivalents of $ 80.4 million.

On March 5, 2024, the Company closed the Offering (defined below), raising net proceeds of approximately $ 43.1 million .

On March 11, 2024, the Company received an additional $ 20.0 million under the Purchase Agreement.

See Note 15 — Subsequent Events for further information.

The Company believes its cash and cash equivalents on hand will be sufficient to fund operations, including clinical trial expenses and capital expenditure requirements, for at least 12 months from the issuance date of these financial statements.

Adequate capital may not be available to the Company when needed or on acceptable terms.

If the Company is unable to raise capital, it could be forced to delay, reduce, suspend or cease its research and development programs or any future commercialization efforts, which would have a negative impact on its business, prospects, operating results and financial condition.

HUMACYTE, INC.

NOTES TO FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Summary of Significant Accounting Policies

1 unchanged sentence

The Company has prepared the accompanying financial statements in conformity with U.S.

The Company’s consolidated financial statements reflect the operations of the Company and its wholly owned subsidiaries.

The Company’s consolidated financial statements reflect the operations of the Company and its wholly owned subsidiary.

All intercompany accounts and transactions have been eliminated in consolidation.

Unless otherwise noted, the Company has retroactively adjusted all common and preferred share and related share price information to give effect to the exchange ratio established in the Merger Agreement.

Operations prior to the Merger are those of Legacy Humacyte.

Use of Estimates

1 unchanged sentence

GAAP requires management 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 and the reported amounts of revenues and expenses during the reporting period.

Significant estimates in the financial statements include stock-based compensation costs, right-of-use assets, accruals for research and development activities, contingent earnout liability, fair value of common stock warrants, redeemable convertible preferred stock and income taxes.

Significant estimates in the financial statements include stock-based compensation costs, right-of-use assets, accruals for research and development activities, contingent earnout liability, revenue interest liability, derivative liabilities, fair value of common stock warrants and income taxes.

The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate.

Actual results could differ from those estimates.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

None of these reclassifications had a material impact on the Company’s consolidated financial statements.

The Company operates and manages its business as one reportable and operating segment.

6 unchanged sentences

The Company considers all short-term, highly liquid investments, including certificates of deposit (“CDs”) purchased with an original maturity of three months or less at the date of purchase, to be cash equivalents.

Cash deposits are held with financial institutions with investment-grade ratings in the United States of America, or U.S.

Cash deposits are held with financial institutions with investment-grade ratings in the U.S.

Cash deposits typically exceed federally insured limits.

As of December 31, 2022 and 2021, cash and cash equivalents consisted of cash on deposit with banks denominated in U.S.

As of December 31, 2023, cash and cash equivalents consisted of cash on deposit with banks denominated in U.S.

dollars and investments in money market funds.

As of December 31, 2022, cash and cash equivalents consisted of cash on deposit with banks denominated in U.S.

dollars, investments in money market funds, and CDs maturing within three months of their purchase date.

Restricted Cash

The Company classifies as restricted cash all cash pledged as collateral to secure long-term obligations and all cash whose use is otherwise limited by contractual provisions.

As of December 31, 2023 , restricted cash consisted of $ 0.2 million in funds maintained in a separate deposit account to secure a letter of credit for the benefit of the lessor of the Company’s headquarters lease, and $ 0.1 million in cash balances held as collateral for the Company’s employee credit card program.

There was no restricted cash as of December 31, 2022 .

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets to the total of the amounts shown in the consolidated statements of cash flows as of December 31, 2023 and 2022 .

As of December 31,

($ in thousands) 2023 2022

Cash and cash equivalents $ 80,448 $ 149,772

Restricted cash included in prepaid expenses and other current assets 144 —

Restricted cash included in other long-term assets 209 —

Total cash, cash equivalents and restricted cash $ 80,801 $ 149,772

Short-term Investments

2 unchanged sentences

The type of certificates of deposit that the Company invests in are not considered debt securities under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 320, Investments - Debt Securities.

As of December 31, 2022 and 2021, the Company had approximately $ 10.1 million and $ 10.0 million, respectively, in CDs.

These cash deposits are deposited at a bank that is a member of the Certificate of Deposit Account Registry Service

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(“CDARS”), in which large deposits are divided into smaller amounts and placed with other Federal Deposit Insurance Corporation (“FDIC”) insured banks which are also members of the CDARS network.

As of December 31, 2022, the Company had approximately $ 10.1 million in CDs.

These cash deposits were deposited at a bank that is a member of the Certificate of Deposit Account Registry Service (“CDARS”), in which large deposits are divided into smaller amounts and placed with other Federal Deposit Insurance Corporation (“FDIC”) insured banks which are also members of the CDARS network.

Those members issue CDs in amounts under $250,000, so that the entire deposit balance is eligible for FDIC insurance.

As of December 31, 2022, the Company classified $ 8.0 million of its CDs as cash and cash equivalents and $ 2.1 million of its CDs as short-term investments on its consolidated balance sheets.

As of December 31, 2021, the Company classified $ 2.0 million of its CDs as cash and cash equivalents and $ 8.0 million of its CDs as short-term investments on its consolidated balance sheets.

The Company did not have any CDs as of December 31, 2023.

Employee Retention Credit

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provided refundable employee retention credits, which could be used to offset payroll tax liabilities.

Under the provisions of the extension of the CARES Act, the Company qualified for the employee retention credit for the first three quarters of 2021, and the Company applied for the credit in February 2023.

As there is no authoritative guidance under U.S.

GAAP for accounting for grants to for-profit business entities, the Company accounted for the grant by applying Accounting Standards Codification (“ASC”) 450, Contingencies .

The Company received an employee retention credit of $ 3.1 million in July 2023, and recognized the credit as income during the second quarter of 2023 after the Company received notices from the Internal Revenue Service, (the “IRS”), specifying the amount of the credit receivable, and all uncertainties were resolved regarding receipt of the credit.

The Company recognized the credit as a component of other income (expense), net on the consolidated statement of operations and comprehensive loss during the year ended December 31, 2023 .

Revenue Interest Liability

On May 12, 2023, Humacyte, Inc.

and Global entered into a Revenue Interest Purchase Agreement (the “Purchase Agreement”) with two purchasers, both affiliates of Oberland Capital Management LLC (the “Purchasers”), and another affiliate of Oberland, as agent for the Purchasers (the “Agent”).

The revenue interest liability associated with the Purchase Agreement is presented net of a debt discount comprised of issuance costs, transaction costs, the fair value of a freestanding option agreement related to the Purchase Agreement, and the fair value of embedded derivatives requiring bifurcation on the consolidated balance sheets.

The Company imputes interest expense associated with this liability using the effective interest rate method.

The effective interest rate is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement.

The interest rate on the liability may vary during the term of the agreement depending on a number of factors, including the level and expected timing of forecasted net sales.

If the level and timing of any forecasted net sales and related payments change, the Company will prospectively adjust the effective interest and the related amortization of the liability and related issuance costs on a quarterly basis.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contingent Derivative Liability

The Purchase Agreement contains certain features that meet the definition of embedded derivatives requiring bifurcation as a separate compound financial instrument apart from the Revenue Interest Liability.

The contingent derivative liability related to the Put Option, as defined in Note 6 — Revenue Interest Purchase Agreement, was initially measured at fair value upon issuance and is subject to remeasurement at each reporting period with changes in fair value recognized as other income (expense) in the consolidated statements of operations and comprehensive loss, classified in change in fair value of derivative liabilities.

On April 1, 2023, the Company entered into an Industry Discovery and Development Partnership Agreement with JDRF International (“JDRF,” and such agreement, the “JDRF Agreement”) to further develop and perform preclinical testing of the Company’s Biovascular Pancreas (“BVP”), a product candidate designed to deliver insulin-producing islets using the HAV as a means of treating patients with type 1 diabetes.

According to the terms of the JDRF Agreement, JDRF will provide funding up to $ 0.8 million (“JDRF Award”) based on the achievement of certain research and development milestones related to the BVP.

The JDRF Agreement refers to the total cumulative payments the Company has received from JDRF as of any point in time as the “Actual Award.”

The Company received the first milestone payment of $ 80 thousand in April 2023 upon execution of the JDRF Agreement.

The Company determined that the JDRF Actual Award payments are to be classified as long-term debt under ASC 470, Debt in the consolidated balance sheets.

The JDRF liability related to the Actual Award payments is reported at amortized cost, and as of December 31, 2023 the carrying value is $ 69 thousand and is included in other long-term liabilities in the consolidated balance sheet.

In the event of a license, sale or transfer of the Company’s rights to the product’s technology identified in the JDRF Agreement or a change of control transaction, the Company is obligated to pay JDRF a payment equal to 10 % of any license or purchase price payments received by the Company up to an amount equal to four times the Actual Award (the “Royalty Cap”), less any previous royalty payments paid towards the Royalty Cap (the “Disposition Payment”).

The derivative liability related to the Disposition Payment, was initially measured at fair value upon issuance and is subject to remeasurement at each reporting period with changes in fair value recognized as other income (expense) in the consolidated statements of operations and comprehensive loss, classified in change in fair value of derivative liabilities.

Revenue Recognition

5 unchanged sentences

Based on the terms of the research project award agreement associated with the DoD grant, allowable costs were reimbursed to the Company based on the percentage of completion of project milestones in accordance with milestone payment schedules set forth in the agreement.

During the years ended December 31, 2022 and 2021, the Company recognized revenue of $ 1.6 million and $ 1.3 million, respectively, for reimbursement of certain allowable costs related to this grant.

During the year ended December 31, 2022, the Company recognized revenue of $ 1.6 million, for reimbursement of certain allowable costs related to this grant.

Revenue related to the DoD grant is included in grant revenue in the Company’s consolidated statements of operations and comprehensive loss.

As of December 31, 2022 and 2021, there was $ 31 thousand and $ 176 thousand, respectively, of accounts receivable related to the DoD grant included in the Company’s consolidated balance sheets.

The Company has determined that the grant is not within the scope of ASC 606 as it does not meet the definition of a contract with a customer.

The Company has concluded that the grant meets the definition of a contribution and is a nonexchange transaction and has applied the contribution accounting model in Subtopic 958-605, Not-for-Profit-Entities-Revenue Recognition by analogy.

The Company has determined that the grant was not within the scope of ASC 606 as it did not meet the definition of a contract with a customer.

The Company concluded that the grant met the definition of a contribution and was a nonexchange transaction and applied the contribution accounting model in Subtopic 958-605, Not-for-Profit-Entities-Revenue Recognition by analogy.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recognizes funding received from grants as revenue, rather than as a reduction of research and development expenses, because the Company is the principal in conducting the research and development activities and these grants are central to the Company’s ongoing operations.

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For contracts where the period between when the Company transfers a promised good or service to the customer and when the customer pays is one year or less, the Company has elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Concentration of Credit Risk

3 unchanged sentences

government and its agencies.

During the years ended December 31, 2022 and 2021 , 100 % of the Company’s total revenue relates to the award it received from the DoD in August 2017.

As of December 31, 2022 and 2021 , 100 % of the Company’s accounts receivable relates to the DoD grant.

During the year ended December 31, 2022 , 100 % of the Company’s total revenue related to the award it received from the DoD in August 2017.

As of December 31, 2022 , 100 % of the Company’s accounts receivable related to the DoD grant.

Net Loss per Share Attributable to Common Stockholders

The Company follows the two-class method to compute basic and diluted net loss per share attributable to common stockholders when shares meet the definition of participating securities.

The two-class method determines net loss per common share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings.

The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to share in the earnings as if all income for the period had been distributed.

During periods of loss, there is no allocation required under the two-class method since the redeemable convertible preferred stock did not have a contractual obligation to share in the Company’s losses.

Basic net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period without consideration of potentially dilutive Common Stock.

1 unchanged sentence

As the Company has incurred losses for the years ended December 31, 2023 and 2022, basic and diluted net loss per share is the same for each period.

The potential shares of common stock that were excluded from the computation of diluted net loss per share for each period because including them would have had an antidilutive effect were as follows:

The following potential shares of Common Stock were excluded from the computation of diluted net loss per share for each period because including them would have had an antidilutive effect:

Year Ended December 31,

1 unchanged sentence

Warrants to purchase common stock 5,588,506 5,588,506

The 15,000,000 Contingent Earnout Shares, as defined in Note 3, are excluded from the anti-dilutive table for all periods presented, as such shares are contingently issuable until the share price of the Company exceeds specified thresholds that have not yet been achieved, or upon the occurrence of a change in control.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The 15,000,000 Contingent Earnout Shares (defined below) are excluded from the anti-dilutive table for all periods presented, as such shares are contingently issuable until the share price of the Company exceeds specified thresholds that have not yet been achieved, or upon the occurrence of a change in control.

The Option Agreement, as defined in Note 6 — Revenue Interest Purchase Agreement, is excluded from the anti-dilutive table for the year ended December 31, 2023 , based on the Company’s assumption that the Option Agreement will not be exercised unless the Company’s stock price exceeds $ 7.50 per share, the minimum purchase price under the Option Agreement.

Fair Value of Financial Instruments

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• Level 1 — Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• Level 2 — Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

15 unchanged sentences

Construction in progress N/A

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impairment of Long-Lived Assets

8 unchanged sentences

The Company applies the accounting guidance for uncertainties in income taxes, which prescribes a recognition threshold and measurement process for recording uncertain tax positions taken, or expected to be taken, in a tax return in the financial statements.

Additionally, the guidance also prescribes the treatment for derecognition, classification,

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

accounting in interim periods and disclosure requirements for uncertain tax positions.

Additionally, the guidance also prescribes the treatment for derecognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions.

The Company accrues for the estimated amount of taxes for uncertain tax positions if it is more likely than not that the Company would be required to pay such additional taxes.

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Patent costs have been expensed as incurred as general and administrative expense.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Research and Development

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• license fees related to in-licensed technologies.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accrued Research and Development

The Company has entered into various agreements with CROs and a CMO, which conduct preclinical studies and clinical trials and contract manufacturing activities.

The Company has entered into various agreements with CROs, which conduct preclinical studies and clinical trials.

The Company’s research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs.

2 unchanged sentences

Payments made under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered.

The Company terminated its agreement with its CMO on March 6, 2020.

The remaining HAV inventory at the CMO was fully depleted during the year ended December 31, 2021.

Stock-Based Compensation

4 unchanged sentences

Forfeitures are accounted for as they occur.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Common Stock Warrants

1 unchanged sentence

and Northland Securities, Inc, in connection with AHAC’s initial public offering (“Private Placement Warrants” and, together with the Public Warrants, the “Common Stock Warrants”).

The Common Stock Warrants entitle the holder to purchase one share of the Company’s Common stock, par value $ 0.0001 (“Common Stock”), at an exercise price of $ 11.50 per share.

The Common Stock Warrants entitle the holder to purchase one share of the Company’s Common Stock, at an exercise price of $ 11.50 per share.

The Public Warrants are publicly traded and are exercisable for cash unless certain conditions occur, such as the failure to have an effective registration statement related to the shares issuable upon exercise or redemption by the Company under certain conditions, at which time the warrants may be eligible for a cashless exercise.

10 unchanged sentences

The agreement provides that in the event of a tender or exchange offer made to and accepted by holders of more than 50 % of the outstanding shares of the Company’s common shares, all holders of the Common Stock Warrants (both the Public Warrants and the Private Placement Warrants) would be entitled to receive cash for all of their Common Stock Warrants.

As the Company has a single class of common stock, a qualifying cash tender offer of more than 50 % of the Company’s common stock will

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

always result in a change-in-control and would not preclude permanent equity classification of the Public Warrants.

As the Company has a single class of common stock, a qualifying cash tender offer of more than 50 % of the Company’s common stock will always result in a change-in-control and would not preclude permanent equity classification of the Public Warrants.

Based on this evaluation, the Company concluded that the Public Warrants meet the criteria to be classified within stockholders’ equity.

Contingent Earnout Liability

In connection with the Reverse Recapitalization and pursuant to the Merger Agreement, Legacy Humacyte equity holders are entitled to receive as additional merger consideration of up to 15,000,000 shares of the Company’s Common Stock (the “Contingent Earnout Shares”), comprised of two separate tranches of 7,500,000 shares per tranche, for no consideration upon the occurrence of certain triggering events, including a change of control event that is not solely indexed to the common stock.

In accordance with ASC 815-40, as the earnout shares were not indexed to the common stock, they were accounted for as a liability at the Reverse Recapitalization date and subsequently remeasured at each reporting date with changes in fair value recorded as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss.

The estimated fair value of the Contingent Earnout Shares was determined using a Monte Carlo simulation using a distribution of potential outcomes on a monthly basis over a 10 -year period prioritizing the most reliable information available.

The assumptions utilized in the calculation were based on the achievement of certain stock price milestones, including the current Company common stock price, expected volatility, risk-free rate, expected term and expected dividend yield.

Pursuant to the Merger Agreement, following the closing of the Merger (the “Closing”), Legacy Humacyte equity holders are entitled to receive additional merger consideration of up to 15,000,000 shares of the Company’s Common Stock (the “Contingent Earnout Shares”), comprised of two separate tranches of 7,500,000 shares per tranche, for no consideration upon the occurrence of certain triggering events, including a change of control event that is not solely indexed to the Common Stock.

In accordance with ASC 815-40, as the earnout shares were not indexed to the common stock, they were accounted for as a liability (“Contingent Earnout Liability”) at the Reverse Recapitalization date and subsequently remeasured at each reporting date with changes in fair value recorded as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss.

The estimated fair value of the Contingent Earnout Liability was determined using a Monte Carlo simulation using a distribution of potential outcomes on a monthly basis over a 10 -year period prioritizing the most reliable information available.

The assumptions utilized in the calculation were based on the achievement of certain stock price milestones, including the current Common Stock price, expected volatility, risk-free rate, expected term and expected dividend yield.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Contingent Earnout Shares are categorized as a Level 3 fair value measurement (see “Fair Value of Financial Instruments” accounting policy described above) because the Company estimated projections over a 10 -year period utilizing unobservable inputs.

2 unchanged sentences

The Company determines if an arrangement is or contains a lease and the classification of that lease at inception of a contract.

The Company’s operating lease assets are included in “operating lease right-of-use assets, net”, and the current and non-current portions of the operating lease liabilities are included in “operating lease obligation, current portion”, and “operating lease obligation, net of current portion”, respectively, on the balance sheets.

The Company’s operating lease assets are included in “other long-term assets”, and the current and non-current portions of the operating lease liabilities are included in “operating lease obligation, current portion”, and “other long-term liabilities”, respectively, on the balance sheets.

The Company’s finance lease assets are included in “finance lease right-of-use assets, net”, and the current and non-current portions of the finance lease liabilities are included in “finance lease obligation, current portion”, and “finance lease obligation, net of current portion”, respectively, on the consolidated balance sheets.

9 unchanged sentences

Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In calculating the right-of-use assets and lease liabilities, the Company has elected to combine lease and non-lease components for all asset classes.

1 unchanged sentence

Other Risks and Uncertainties

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, successful discovery and development of its product candidates, the success of clinical trials and other studies for its product candidates, including for its ongoing V005 Phase 2/3 clinical trial and V007 Phase 3 clinical trial, the regulatory approval and commercialization of its HAVs and other product candidates, the expected size of the target populations for the Company’s product candidates, the degree of market acceptance of the HAVs, if approved, the availability of third-party coverage and reimbursement, development by competitors of new technological innovations, the ability to manufacture HAVs and other product candidates in sufficient quantities, expectations regarding the Company’s strategic partnerships, dependence on third parties, key personnel and the ability to attract and retain qualified employees, protection of proprietary technology and confidentiality of trade secrets, compliance with governmental regulations, the impact of the COVID-19 pandemic, the Company’s implementation and maintenance of effective internal controls, and the ability to secure additional capital to fund operations and commercial success of its product candidates.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, successful discovery and development of its product candidates, the success of clinical trials and other studies for its product candidates, including its V005 Phase 2/3 clinical trial and ongoing V007 Phase 3 clinical trial, the regulatory approval and commercialization of its HAVs and other product candidates, the expected size of the target populations for the Company’s product candidates, the degree of market acceptance of the HAVs, if approved, the availability of third-party coverage and reimbursement, development by competitors of new technological innovations, the ability to manufacture HAVs and other product candidates in sufficient quantities, expectations regarding the Company’s strategic partnerships, dependence on third parties, key personnel and the ability to attract and retain qualified employees, protection of proprietary technology and confidentiality of trade secrets, compliance with governmental regulations, the Company’s implementation and maintenance of effective internal controls, and the ability to secure additional capital to fund operations and the commercial success of its product candidates.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Product candidates currently under development will require extensive preclinical and clinical testing and regulatory approval prior to commercialization.

These efforts require significant amounts of additional capital, adequate personnel, and infrastructure and extensive compliance-reporting capabilities.

Even if the Company’s commercialization efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales, and the Company may depend on certain strategic relationships to distribute its products, including the Company’s strategic partnership with Fresenius Medical Care Holdings, Inc., (“Fresenius Medical Care”) to sell, market and distribute its 6 millimeter HAV for certain specified indications outside the United States.

Even if the Company’s commercialization efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales, and the Company may depend on certain strategic relationships to distribute its products, including the Company’s strategic partnership with Fresenius Medical Care to sell, market and distribute its 6 millimeter HAV for certain specified indications outside the United States.

Recently Adopted Accounting Pronouncements

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):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” (“ASU 2021-04”).

The FASB issued this update to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity classified written call options (for example, warrants) that remain equity classified after modification or exchange.

ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

An entity should apply the amendments prospectively to modifications or exchanges occurring after the effective date of the amendments.

The Company adopted ASU 2021-04 as of January 1, 2022.

The adoption of this ASU had no impact on the Company’s consolidated financial statements and disclosures.

The Company did not adopt any new standards or updates issued by the FASB during the year ended December 31, 2023 that had a material impact on the Company’s consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU No.

2021-10, “Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance” (“ASU 2021-10”) to improve financial reporting by requiring disclosures that increase the transparency of transactions with a government accounted for by applying a grant or contribution model by analogy (for example, guidance on contributions for not-for-profit-entities in ASC 958-605).

For transactions within the scope, ASU 2021-10 requires the disclosure of (i) the types of transactions, (ii) an entity’s accounting for those transactions, and (iii) the effect of those transactions on an entity’s financial statements.

ASU 2021-10 is effective for all entities within their scope for financial statements issued for annual periods beginning after December 15, 2021.

The Company adopted ASU 2021-10 effective January 1, 2022 and elected to apply the amendments prospectively to all transactions within the scope of the amendment that are reflected in the financial statements at the date of adoption.

The adoption did not have a material impact to the Company’s consolidated financial statements or disclosures.

See the above section titled “Grant Revenue” for disclosure related to the Company’s government grants.

HUMACYTE, INC.

NOTES TO FINANCIAL STATEMENTS

Reverse Recapitalization

On August 26, 2021, Merger Sub, a wholly-owned subsidiary of AHAC, merged with Legacy Humacyte, with Legacy Humacyte surviving as a wholly-owned subsidiary of AHAC.

At the effective time of the Merger:

• each outstanding share of Legacy Humacyte common stock was converted into approximately 0.26260 shares of Common Stock;

• each outstanding share of preferred stock of Legacy Humacyte was cancelled and converted into the aggregate number of shares of Common Stock that would be issued upon conversion of the shares of Legacy Humacyte preferred stock based on the applicable conversion ratio immediately prior to the effective time, multiplied by approximately 0.26260 ;

• each outstanding option or warrant to purchase Legacy Humacyte common stock was converted into an option or warrant, as applicable, to purchase a number of shares of Common Stock equal to the number of shares of Legacy Humacyte common stock subject to such option or warrant multiplied by approximately 0.26260 , at an exercise price per share equal to the current exercise price per share for such option or warrant divided by approximately 0.26260 ;

in each case, rounded down to the nearest whole share.

In addition, upon the closing of the Merger (the “Closing”), 2,500,000 Class B shares of AHAC (the “Founder Shares”) automatically converted into shares of Common Stock, on a one -for- one basis.

Former holders of the Legacy Humacyte common stock and Legacy Humacyte preferred stock are eligible to receive up to an aggregate of 15,000,000 additional shares of Common Stock (the “Contingent Earnout Shares”) in the aggregate, comprised of two equal tranches of 7,500,000 shares per tranche if the volume-weighted average closing sale price of the Common Stock is greater than or equal to $ 15.00 and $ 20.00 , respectively, for any 20 trading days within any 30 consecutive trading day period.

At the Closing on August 26, 2021, the Company recorded a liability (“Contingent Earnout Liability”) of $ 159.4 million, based on the estimated fair value of the 15,000,000 Contingent Earnout Shares with a corresponding reduction of additional paid-in capital in the equity section of the Company’s consolidated balance sheet.

Concurrently with the execution of the Merger Agreement, AHAC entered into subscription agreements (the “Subscription Agreements”) with certain investors (the “PIPE Investors”).

Pursuant to the Subscription Agreements, the PIPE Investors purchased an aggregate of 17,500,000 shares of Common Stock (the “PIPE Shares”) in a private placement at a price of $ 10.00 per share for an aggregate purchase price of $ 175 million (the “PIPE Financing”).

The PIPE Financing was consummated in connection with the Closing.

The number of shares of Common Stock outstanding immediately following the consummation of the Merger was:

Common stock of AHAC, outstanding prior to Merger 10,355,000

Less redemption of AHAC shares ( 3,008,551 )

Common stock of AHAC 7,346,449

AHAC Founder Shares 2,500,000

New Humacyte shares issued to PIPE Investors 17,500,000

Issuance of common stock upon reverse recapitalization and PIPE Financing 27,346,449

New Humacyte shares issued in Merger to Legacy Humacyte stockholders 75,656,935 (1)

Total shares of Common Stock immediately after Merger 103,003,384

___________________________

(1) Includes 69,613,562 shares of Common Stock issued upon conversion of Legacy Humacyte’s redeemable convertible preferred stock.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Merger was accounted for as a reverse recapitalization in accordance with U.S.

Under this method of accounting, AHAC was treated as the acquired company for financial reporting purposes and Legacy Humacyte was treated as the acquirer.

This determination was primarily based on the fact that subsequent to the Merger, the Legacy Humacyte stockholders held a majority of the voting rights of the combined company, Legacy Humacyte comprised all of the ongoing operations of the combined company, Legacy Humacyte comprised a majority of the governing body of the combined company, and Legacy Humacyte’s senior management comprised all of the senior management of the combined company.

Accordingly, for accounting purposes, the Merger was treated as the equivalent of Legacy Humacyte issuing shares for the net assets of AHAC, accompanied by a recapitalization.

The net assets of AHAC were stated at historical costs.

No goodwill or other intangible assets were recorded.

Operations prior to the Merger are those of Legacy Humacyte.

In connection with the Merger, the Company received $ 242.4 million in proceeds from the Merger and related PIPE Financing.

The Company incurred $ 3.9 million of transaction costs, consisting of banking, legal, and other professional fees, of which $ 3.9 million was recorded as a reduction of proceeds to additional paid-in capital, and less than $ 0.1 million related to the Private Placement Warrants, which are classified as liabilities in the consolidated balance sheets, was expensed in the consolidated statements of operations and comprehensive loss.

All transaction costs were paid as of December 31, 2021.

Legacy Humacyte assumed $ 15.2 million of liabilities, including PIPE Financing fees and legal fees, and $ 0.1 million of assets from AHAC.

Of the $ 15.2 million of liabilities assumed from AHAC, $ 0.1 million was included in accrued expenses as of December 31, 2021, and there were no unpaid liabilities as of December 31, 2022.

2023-07, “Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures” (“ASU 2023-07”).

The FASB issued this update to improve the disclosures about an entity’s reportable segments, including providing more detailed information about a reportable segment’s expenses, enhancing interim disclosure requirements and providing new segment disclosure requirements for entities with a single reportable segment.

This standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

Entities should apply the amendments retrospectively to all prior periods presented in the financial statements.

This ASU is applicable to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and subsequent interim periods.

The Company is currently evaluating the impact of adopting ASU 2023-07 on its disclosures included in the notes to the consolidated financial statements.

In December 2023, the FASB issued ASU No.

2023-09, “Income Taxes (Topic 740), Improvements to Income Tax Disclosures” (“ASU 2023-09”).

The FASB issued this update to improve the transparency and comparability of income tax disclosures, including requiring consistent categories and greater disaggregation of information in the rate reconciliation and further disaggregation of income taxes paid by jurisdiction.

This standard is effective for fiscal years beginning after December 15, 2024, with early adoption is permitted.

Entities should apply the amendments prospectively, with retrospective application permitted.

This ASU is applicable to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

The Company is currently evaluating the impact of adopting ASU 2023-09 on its disclosures included in the notes to the consolidated financial statements.

Fair Value Measurements

3 unchanged sentences

Cash equivalents (money market funds) $ 78,995 $ — $ — $ 78,995

Cash equivalents (certificates of deposit) — 8,000 — 8,000

Short-term investments (certificates of deposit) — 2,107 — 2,107

Total financial assets $ 78,995 $ — $ — $ 78,995

Contingent Earnout Liability $ — $ — $ 37,916 $ 37,916

Contingent derivative liability — — 2,636 2,636

Private Placement Warrants liability — — 78 78

Option Agreement liability — — 35 35

JDRF Agreement derivative liability — — 28 28

Total financial liabilities $ — $ — $ 40,693 $ 40,693

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measured as of December 31, 2022

7 unchanged sentences

Total financial liabilities $ — $ — $ 27,973 $ 27,973

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables present a summary of the changes in the fair value of the Company’s Level 3 financial instruments:

The Company’s money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices.

Certificates of deposit were carried at amortized cost in the Company’s consolidated balance sheets, which approximated their fair value based on Level 2 inputs.

The carrying values of other receivables, accounts payable and accrued expenses as of December 31, 2023 and 2022 approximated their fair values due to the short-term nature of these items.

The fair value of the Contingent Earnout Liability, Private Placement Warrants liability, Contingent derivative liability related to the Put Option (as defined in Note 6 — Revenue Interest Purchase Agreement and discussed below), Option Agreement liability (as defined in Note 6 — Revenue Interest Purchase Agreement), and the derivative liability associated with the JDRF Agreement Disposition Payment are based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy.

The fair values of the Private Placement Warrants liability, the Option Agreement liability and the derivative liability associated with the JDRF Agreement Disposition Payment, are included in other long-term liabilities on the consolidated balance sheets.

Contingent Earnout Liability

The following table presents a summary of the changes in the fair value of the Contingent Earnout Liability:

Contingent Earnout Liability

Year Ended December 31,

1 unchanged sentence

Fair value as of beginning of period $ ( 27,893 ) $ ( 103,660 )

Contingent Earnout Liability recognized upon the closing of the reverse recapitalization — ( 159,432 )

Change in fair value included in other income, net 75,767 55,772

Change in fair value included in other income (expense), net ( 10,023 ) 75,767

Fair value as of end of period $ ( 37,916 ) $ ( 27,893 )

In determining the fair value of the Contingent Earnout Liability, the Company used the Monte Carlo simulation value model using a distribution of potential outcomes on a monthly basis over a 10 -year period prioritizing the most reliable information available.

Contingent earnout payments involve certain assumptions requiring significant judgment and actual results can differ from assumed and estimated amounts.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Private Placement Warrants Liability

The following table presents a summary of the changes in the fair value of the Private Placement Warrants liability:

Private Placement Warrants

2 unchanged sentences

Fair value as of beginning of period $ ( 80 ) $ ( 497 )

Private Placement Warrants liability acquired as part of the Merger — ( 553 )

Change in fair value included in other income, net 417 56

Change in fair value included in other income (expense), net 2 417

Fair value as of end of period $ ( 78 ) $ ( 80 )

The fair value of the Contingent Earnout Liability and Private Placement Warrants (as defined in Note 9 — Stockholders’ Equity (Deficit)) liability are based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy.

Contingent earnout payments involve certain assumptions requiring significant judgment and actual results can differ from assumed and estimated amounts.

In determining the fair value of the Private Placement Warrants liability, the Company used the Monte Carlo simulation valuation model to estimate the fair value utilizing assumptions including the current Company stock price, expected volatility, risk-free rate, expected term and expected dividend yield (see Note 9 — Stockholders’ Equity (Deficit)).

The Company’s money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices.

Certificates of deposit are carried at amortized cost in the Company’s consolidated balance sheets, which approximates their fair value based on Level 2 inputs.

The carrying values of other receivables, accounts payable and accrued expenses as of December 31, 2022 and 2021 approximated their fair values due to the short-term nature of these items.

Derivative liabilities

Contingent derivative liability

The debt pursuant to the Purchase Agreement contains an embedded derivative related to the Put Option, as defined in Note 6, requiring bifurcation as a single compound derivative instrument.

The Company estimated the fair value of the derivative liability using a “with-and-without” methodology.

The “with-and-without” methodology involves valuing the whole instrument on an as-is basis and then valuing the instrument without the individual embedded derivative.

The difference between the entire instrument with the embedded derivative compared to the instrument without the embedded derivative was the fair value of the derivative liability at May 12, 2023 and December 31, 2023 .

In determining the fair value of the contingent derivative liability, the Company used the Monte Carlo simulation value model using a distribution of potential outcomes on a monthly basis over a 10 -year period.

The estimated probability and timing of underlying events triggering the exercisability of the put option contained within the Purchase Agreement, forecasted cash flows and the discount rates are significant unobservable inputs used to determine the estimated fair value of the entire instrument with the embedded derivative.

As of May 12, 2023, the discount rates used to calculate the value of the contingent derivative liability were 12.7 % to calculate the present-value of the revenue forecast and 12.1 % to calculate the present-value of the payoff of the Put Option.

As of December 31, 2023 , the discount rates used to calculate the value of the contingent derivative liability were 14.5 % to calculate the present-value of the revenue forecast and 17.1 % to calculate the present-value of the payoff of the Put Option.

The following table presents a summary of the changes in the fair value of the contingent derivative liability, which is classified as a Level 3 financial instrument.

($ in thousands) Year Ended

December 31, 2023

Fair value as of beginning of period $ —

Initial fair value of contingent derivative liability ( 2,354 )

Change in fair value included in other income (expense), net ( 282 )

Fair value as of end of period $ ( 2,636 )

HUMACYTE, INC.

NOTES TO FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment, Net

2 unchanged sentences

($ in thousands)

Scientific equipment (1)

Scientific and manufacturing equipment

$ 28,400 $ 27,821

9 unchanged sentences

$ 26,791 $ 30,039

___________________________

(1) As of December 31, 2021, includes $ 3.6 million related to scientific equipment not depreciated until being placed into service during the third quarter of 2022.

Depreciation expense totaled $ 6.2 million for each of the years ended December 31, 2022 and 2021.

Depreciation expense totaled $ 5.7 million and $ 6.2 million for the years ended December 31, 2023 and 2022, respectively.

All long-lived assets are maintained in the United States.

8 unchanged sentences

$ 9,340 $ 7,108

On March 30, 2021, the Company entered into a term loan agreement with Silicon Valley Bank (“SVB”) and SVB Innovation Credit Fund VIII, L.P., as amended in June 2021 and September 2021 (the “Loan Agreement”), which provides a term loan facility of up to $ 50.0 million with a maturity date of March 1, 2025, or the Loan Agreement.

The Company’s obligations under the Loan Agreement are secured by substantially all of its assets except for its intellectual property.

The Loan Agreement contains certain customary covenants, including, but not limited to, those relating to additional indebtedness, liens, asset divestitures, and affiliate transactions.

If a minimum liquidity amount is not maintained, 50 % of the outstanding principal and interest will become cash collateralized.

As of December 31, 2022, the Company was in compliance with all covenants.

The Company may use the proceeds of borrowings under the Loan Agreement as working capital and to fund its general business requirements.

The Loan Agreement provides that the term loans will be distributed in tranches.

The initial term loan tranche of $ 20.0 million was drawn on March 31, 2021, and on October 13, 2021, the Company borrowed an additional $ 10.0 million under the Loan Agreement.

Borrowings under the Loan Agreement are accounted for net of issuance costs which are being accreted to interest expense over the term of the loan using the effective interest method.

As of December 31, 2022, two subsequent $ 10.0 million term loan tranches will be eligible to be drawn at the request of the Company during specified draw periods prior to May 15, 2023, the first tranche subject to submission by the Company of its first Biologics License

Revenue Interest Purchase Agreement

On May 12, 2023, Humacyte, Inc.

and Global entered into the Purchase Agreement with the Purchasers and another affiliate of Oberland, as agent for the Purchasers, to obtain financing with respect to the further development and commercialization of the Company’s HAV, to repay the Company’s credit facility with SVB, and for other general corporate purposes.

Pursuant to the Purchase Agreement, on May 12, 2023, the Purchasers purchased certain revenue interests (the “Revenue Interests”) from Global in exchange for an aggregate investment amount of up to $ 150.0 million (the “Investment Amount”).

On May 12, 2023, the Company received an initial payment of $ 40.0 million , less certain transaction expenses, which was used to repay in full the Company’s then-existing obligations under the Loan Agreement, as defined in Note 7 — Debt.

The Company will also be entitled to receive up to approximately $ 110.0 million in subsequent installments subject to the terms and conditions set forth in the Purchase Agreement, as follows:

(i) $ 20.0 million upon the Company’s BLA for an indication in vascular trauma being accepted on or prior to March 31, 2024, (ii) $ 40.0 million , at the Company’s option, upon the Company receiving FDA approval of the HAV for the vascular trauma indication on or prior to December 31, 2024 and (iii) $ 50.0 million , at the Company’s option, upon reaching $ 35.0 million trailing worldwide three-month net sales any time prior to December 31, 2025.

Each tranche is dependent on the satisfaction of the conditions and receipt of funds from the previous tranche.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Application (“BLA”) to the FDA for its HAV prior to March 31, 2023, and the second tranche subject to the first approval from the FDA of any BLA for the HAV prior to March 31, 2023 and the Company having borrowed the first remaining tranche.

Borrowings bear interest at the greater of 7.5 % or the Wall Street Journal Prime Rate plus 4.25 % ( 11.75 % as of December 31, 2022).

Interest only payments on the principal amount outstanding are due monthly beginning in the first month after the loan is dispersed.

Repayment of principal may begin as soon as July 1, 2023 under the level of borrowing outstanding at December 31, 2022, and no later than April 1, 2024 if the remaining two loan tranches are drawn.

The term loans may only be prepaid in full, and such prepayment requires 30 days’ advance notice and was subject initially to a prepayment fee of 3.00 % (that was decreased to 2.00 % after March 30, 2022 (with a further decrease to 1.00 % after March 30, 2023).

The Company is not obligated to pay a prepayment fee if the Company makes a prepayment after March 30, 2024.

Pursuant to the Purchase Agreement, the Revenue Interests entitle the Purchasers to receive a royalty initially equal to 7.5 % (the “Rate”) of global net sales of the Company’s products (subject to a lower rate for net sales by specified licensees outside the United States), to be paid on a calendar quarterly basis (the “Revenue Interest Payments”).

If the Purchasers do not receive cumulative Revenue Interest Payments equal to 100 % of the amount funded to date (the “Cumulative Purchaser Payments”) by the last business day of 2028 (the “Test Date”), the Rate will increase to a rate that, had such increased rate applied during the period from May 12, 2023 through the Test Date, would have provided the Purchasers with cumulative Revenue Interest Payments equal to the Cumulative Purchaser Payments as of the Test Date.

Additionally, Global will be required to pay the Purchasers an amount equal to 100 % of the Cumulative Purchaser Payments as of the Test Date less the total Revenue Interest Payments made by Global to the Purchasers under the Purchase Agreement as of the Test Date.

Global’s obligation to make Revenue Interest Payments terminates on the date on which the Purchasers have received Revenue Interest Payments of 150 % of the Cumulative Purchaser Payments unless the Purchase Agreement is terminated earlier due to the Purchaser’s exercise of a Put Option, the Company’s exercise of a call option, or by mutual consent.

However, if the Purchasers have not received such Revenue Interest Payments as of such date, the Purchase Agreement will instead terminate on the date on which the Purchasers receive Revenue Interest Payments of 195 % of the Cumulative Purchaser Payments.

Under the Purchase Agreement, Global has an option (the “Call Option”) to repurchase the Revenue Interests and terminate the Purchase Agreement at any time upon advance written notice.

Additionally, the Purchasers have an option (the “Put Option”) to terminate the Purchase Agreement and to require Global to repurchase the Revenue Interests upon enumerated events such as a bankruptcy event, an uncured material breach, a material adverse effect or a change of control.

If the Put Option is exercised prior to August 12, 2024 by the Purchasers (except pursuant to a change of control), the required repurchase price will be 125 % of the Cumulative Purchaser Payments (minus the aggregate Revenue Interest payments Global has made to the Purchasers as of such date).

If (i) the Put Option is exercised on or prior to August 12, 2024 by the Purchasers after the occurrence of a change of control, (ii) the Put Option is exercised after August 12, 2024 until May 12, 2026, or (iii) the Call Option is exercised on or prior to May 12, 2026, then in each case, the required repurchase price will be 175 % of the Cumulative Purchaser Payments (minus the aggregate Revenue Interest Payments Global has made to the Purchasers as of such date).

If a Put Option or Call Option is exercised after May 12, 2026, the required repurchase price will be 195 % of the Cumulative Purchaser Payments (minus the aggregate Revenue Interest Payments Global has made to the Purchasers as of such date).

The Purchase Agreement contains customary representations and warranties and affirmative covenants for transactions of this type, including, among others, the provision of financial and other information to the Purchaser, notice to the Purchaser upon the occurrence of certain material events, and compliance with applicable laws.

The Purchase Agreement also contains customary negative covenants, including certain restrictions on the ability to incur indebtedness and grant liens or security interests on assets.

On February 18, 2024, the Company agreed with the Purchasers and the Agent, to waive certain breaches related to, and extend the deadline for certain post-closing obligations under, the Purchase Agreement, including the requirement for a leasehold mortgage over the Company’s headquarters.

Giving effect to the extension and waiver, the Company is obligated to deliver by no later than April 30, 2024 (or such later date as the Agent may agree in its sole discretion), an executed leasehold mortgage (or alternative documentation satisfactory to the Agent in its sole discretion) over the Company’s headquarters.

Concurrently with such agreement, the Company delivered a request that the Purchasers fund the second payment under the Purchase Agreement in an aggregate amount equal to $ 20.0 million, which was funded on March 11, 2024.

The Company has provided a parent company guaranty to guarantee the payment in full of the obligations under the Purchase Agreement.

The Company’s obligations under the parent company guaranty and Global’s obligations under the Purchase Agreement and the Revenue Interests are secured by a perfected security interest on substantially all of the Company’s and Global’s assets.

The Purchase Agreement is considered a sale of future revenues and accounted for as long-term debt recorded at amortized cost using the effective interest rate method.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 , $ 38.6 million was recorded as a revenue interest liability on the accompanying consolidated balance sheets (net of transaction costs, the fair value allocated to the Option Agreement and the fair value of the bifurcated contingent derivative liability).

The revenue interest liability is based on the Company’s contractual repayment obligation to the Purchasers, based on the current estimates of future revenues, over the life of the Purchase Agreement.

The Company imputes interest expense associated with this liability using the effective interest rate method.

The effective interest rate is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement.

The interest rate on this liability may vary during the term of the agreement depending on a number of factors, including the level and expected timing of forecasted net sales.

The estimated effective annual interest rate as of December 31, 2023 was 14.1 %.

The Company evaluates the interest rate quarterly based on its current net sales forecasts.

The Company recorded $ 3.1 million in interest expense related to the Purchase Agreement for the year ended December 31, 2023 .

The Put Option under the Purchase Agreement that is exercisable by the Purchasers upon certain contingent events was determined to be an embedded derivative requiring bifurcation and separately accounted for as a single compound derivative instrument.

The Company recorded the initial fair value of the derivative liability of $ 2.4 million as a debt discount, which is being amortized to interest expense over the expected term of the debt using the effective interest method.

See Note 3 — Fair Value Measurements for a further discussion of the fair value of the contingent derivative liability associated with the Put Option.

For the year ended December 31, 2023 , the Company incurred and paid $ 2.1 million of issuance and transaction costs in connection with the Purchase Agreement.

The issuance and transaction costs were capitalized to debt discount and are being amortized to interest expense over the estimated term of the debt.

Revenue Interest Payments made as a result of the Company’s net product sales will reduce the revenue interest liability.

During the year ended December 31, 2023 , the Company did not record any product sales revenue.

The following table summarizes the revenue interest liability activity during the year ended December 31, 2023 :

($ in thousands)

Revenue interest liability at inception $ —

Proceeds from revenue interest purchase agreement, gross 40,000

Less issuance costs ( 623 )

Proceeds from revenue interest purchase agreement, net 39,377

Transaction costs paid ( 1,450 )

Debt discount from embedded contingent derivative liability ( 2,354 )

Debt discount from fair value of Option Agreement ( 55 )

Interest expense recognized 3,082

Revenue interest liability at December 31, 2023

Option Agreement

In connection with the Purchase Agreement, the Company also entered into an option agreement with TPC Investments III LP and TPC Investment Solutions LP (the “Option Agreement”), which gives TPC Investments III LP and TPC Investment Solutions LP (the “Holders”) the right to purchase, in the aggregate, up to $ 10.0 million worth of shares of common stock of the Company (the “Option”) at a purchase price per share equal to the greater of $ 7.50 , or the 15 day volume-weighted average price as of the exercise date, exercisable in cash only at any time prior to the earlier of (i) December 31, 2026 and (ii) the closing date of a corporate reorganization.

The Holders also received certain registration rights relating to the shares underlying the Option pursuant to the Option Agreement.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Option granted to the Holders represents a freestanding instrument separate from the purchaser commitments outlined in the Purchase Agreement.

The Option Agreement does not qualify for the equity contract scope exception under ASC 815-40 and the Company recorded the Option as a liability (“Option Agreement liability”) on the consolidated balance sheet at an initial fair value of $ 55 thousand, with subsequent changes in fair value recognized in the consolidated statements of operations and comprehensive loss at each reporting date.

The fair value of the Option Agreement liability as of December 31, 2023 was $ 35 thousand.

Pursuant to the Purchase Agreement, on May 12, 2023, $ 40.0 million , less certain transaction expenses, was funded to the Company, which was used to repay in full the Company’s existing obligations under its term loan agreement with SVB and SVB Innovation Credit Fund VIII, L.P., entered into on March 30, 2021, as amended in June 2021 and September 2021 (the “Loan Agreement”).

The Loan Agreement provided a term loan facility in tranches of up to $ 50.0 million with a maturity date of March 1, 2025.

The initial term loan tranche of $ 20.0 million was drawn on March 31, 2021, and on October 13, 2021, the Company borrowed an additional $ 10.0 million under the Loan Agreement.

In connection with the Loan Agreement, the Company granted warrants to the lenders to purchase shares of Common Stock at an exercise price of $ 10.28 per share, of which 287,704 warrants were immediately exercisable.

The warrants are classified within stockholders’ equity as the settlement of the warrants is indexed to the Common Stock.

The warrants were classified within stockholders’ equity, as the settlement of the warrants is indexed to the Common Stock.

The Company recognized the fair value of the warrants immediately exercisable within stockholders’ equity using a Black-Scholes valuation model at issuance.

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As a result of the Company’s additional $ 10.0 million borrowings under the Loan Agreement on October 13, 2021, the warrants to purchase the additional 123,302 shares of Common Stock became exercisable at an exercise price of $ 10.28 per share and the value of the warrants was recorded as of that date.

The additional warrants are classified within stockholders’ equity using a Black-Scholes valuation model, as the settlement of the warrants is indexed to the Common Stock.

As of December 31, 2022, the fair value of warrants ($ 3.3 million), a 5 % final payment fee ($ 1.5 million) and debt issuance costs ($ 0.3 million) are being accreted to interest expense over the term of the loan using the effective interest method.

SVB loan payable and net discount or premium balances are as follows:

($ in thousands) December 31,

Principal amount of SVB loan payable

Final payment amount of SVB loan payable

Net premium associated with accretion of final payment and other debt issuance costs

SVB loan payable, current and noncurrent

Less SVB loan payable, current portion

SVB loan payable, noncurrent portion

Future minimum payments of principal on the Company’s outstanding variable rate borrowings as of December 31, 2022 are as follows:

Year ending December 31:

($ in thousands)

Total future payments

The additional warrants were classified within stockholders’ equity using a Black-Scholes valuation model, as the settlement of the warrants is indexed to the Common Stock.

The fair value of warrants ($ 3.3 million), a 5 % final payment fee ($ 1.5 million) and debt issuance costs ($ 0.3 million) were being accreted to interest expense over the term of the loan using the effective interest method.

In connection with the termination of the Loan Agreement, the Company paid a prepayment premium of $ 0.3 million and recorded a loss on extinguishment of debt of $ 2.4 million during the year ended December 31, 2023 in other income (expense), net in the consolidated statements of operations and comprehensive loss.

The loss on extinguishment of debt consists of the prepayment premium, the unamortized debt discount and issuance costs and the unaccreted final payment fee.

The Company’s finance lease relates to its headquarters, which was substantially completed in June 2018 and is being leased through May 2033, and its operating lease relates to the land lease associated with its headquarters.

At December 31, 2023 and 2022, the Company had finance lease liabilities of $ 18.9 million and $ 21.1 million, respectively, and right-of-use assets of $ 17.3 million and $ 19.4 million, respectively, and operating lease liabilities of $ 0.6 million and $ 0.7 million, respectively, and right-of-use assets of $ 0.6 million and $ 0.7 million, respectively, all of which were included in the consolidated balance sheets.

As of December 31, 2023 and 2022, operating lease right-of-use assets are included in other long-term assets on the consolidated balance sheets.

As of both December 31, 2023 and 2022, approximately $ 0.6 million of the operating lease liabilities is included in other long-term liabilities on the consolidated balance sheets, and the remaining balance is classified in operating lease obligation, current portion on the consolidated balance sheets.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On April 30, 2020, the Company received loan proceeds in the amount of approximately $ 3.3 million under the Paycheck Protection Program (“PPP”).

The loan and accrued interest were forgivable after a 24-week period as long as the Company used the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintained its payroll levels.

On May 25, 2021, the PPP loan was forgiven and the Company recognized a gain from loan extinguishment in the amount of $ 3.3 million during the year ended December 31, 2021.

The Company’s finance lease relates to its headquarters, which was substantially completed in June 2018 and leased through May 2033, and its operating lease relates to the land lease associated with its headquarters.

At December 31, 2022 and 2021, the Company had finance lease liabilities of $ 21.1 million and $ 23.1 million, respectively, and right-of-use assets of $ 19.4 million and $ 21.4 million, respectively, and operating lease liabilities of $ 0.7 million and $ 0.7 million, respectively, and right-of-use assets of $ 0.7 million and $ 0.7 million, respectively, all of which were included in the consolidated balance sheets.

The Company’s leases do not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees.

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Weighted-average discount rate 8.50 % 8.50 % 8.50 % 8.50 %

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023, the maturities of the Company’s lease liabilities were as follows:

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$ 18,853 $ 632

Stockholders’ Equity (Deficit)

Redeemable Convertible Preferred Stock

Immediately prior to the Merger, Legacy Humacyte had outstanding series A redeemable convertible preferred stock, series B redeemable convertible preferred stock, series C redeemable convertible preferred stock and series D redeemable convertible preferred stock, which are collectively referred to as “redeemable convertible preferred stock.”

In connection with the Merger, all previously issued and outstanding redeemable convertible preferred stock was converted into an equivalent number of shares of Common Stock of the Company on a one-for-one basis, then multiplied by the exchange ratio pursuant to the Merger Agreement and the amounts were reclassified as additional paid-in capital.

Stockholders’ Equity

On August 26, 2021, the Merger and related PIPE Financing was consummated and the Company issued 27,346,449 shares of Common Stock for proceeds of $ 242.4 million.

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As of December 31, 2023, the Company’s Second Amended and Restated Certificate of Incorporation authorized the Company to issue 250,000,000 shares of Common Stock.

The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares then outstanding or reserved for issuance) by the affirmative vote of the holders of a majority of the capital stock of the Company entitled to vote and may require a separate class vote of the Common Stock.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The holders of Common Stock are entitled to receive dividends from time to time as may be declared by the Company’s board of directors.

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The holders of Common Stock are entitled to one vote for each share held with respect to all matters voted on by the common stockholders of the Company.

In the event of a reorganization of the Company, after payment to the preferred stockholders of their liquidation preferences, holders of Common Stock are entitled to share ratably in all remaining assets of the Company.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In the event of a reorganization of the Company, after payment to any preferred stockholders of their liquidation preferences, holders of Common Stock are entitled to share ratably in all remaining assets of the Company.

As of December 31, 2023 and 2022, the Company had reserved Common Stock for future issuances as follows:

Common stock reserved for Contingent Earnout Shares 15,000,000 15,000,000

Exercise of options under stock plans

Common stock reserved for Option Agreement 1,333,334 (1) —

Exercise of options outstanding under stock plans

11,919,421 7,203,874

Issuance of options under stock plans

Options available for issuance under stock plans

1,492,057 6,700,888

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36,363,351 35,523,301

___________________________

(1) Assumes the exercise of the entire Option as provided for in the Option Agreement at the minimum purchase price of $ 7.50 per share.

Preferred Stock

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Total Common Stock Warrants

See Note 7 — Debt for a discussion of common stock warrants issued in conjunction with the Company’s Loan Agreement in 2021 (such warrants, “Legacy Humacyte Common Stock Warrants”).

There were no issuances, exercises or expirations of warrants during the year ended December 31, 2022 .

During the year ended December 31, 2021, there were 32,961 warrants exercised that were issued in conjunction with a long-term debt agreement repaid in a prior reporting period.

There were no expirations of warrants during the year ended December 31, 2021 .

See Note 7 — Debt for a discussion of Common Stock warrants issued in conjunction with the Loan Agreement in 2021 (such warrants, “Legacy Humacyte Common Stock Warrants”).

There were no issuances, exercises or expirations of warrants during the years ended December 31, 2023 and 2022 .

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Private Placement Warrants

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See Note 3 — Fair Value Measurements for a summary of the change in the fair value of the Private Placement Warrants during the years ended December 31, 2023 and 2022.

The remeasurement of the Private Placement Warrant liability to a fair value of $ 0.1 million as of December 31, 2022 resulted in a non-cash gain of $ 0.4 million for the year ended December 31, 2022, compared to a non-cash gain of $ 0.1 million for the year ended December 31, 2021.

The remeasurement of the Private Placement Warrant liability is classified within Change in fair value of common stock warrant liabilities in the consolidated statements of operations and comprehensive loss.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The remeasurement of the Private Placement Warrant liability to a fair value of $ 0.1 million as of December 31, 2023 resulted in an insignificant non-cash gain for the year ended December 31, 2023, and a non-cash gain of $ 0.4 million for the year ended December 31, 2022.

The remeasurement of the Private Placement Warrant liability is classified within Change in fair value of derivative liabilities in the consolidated statements of operations and comprehensive loss.

The Private Placement Warrants were valued using the following assumptions under the Monte Carlo simulation value model:

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The Public Warrants were initially recognized as equity on the Closing Date at a fair value of $ 2.80 per share.

There were no exercises of the Public Warrants during the year ended December 31, 2022.

Contingent Earnout Liability

Following the Closing, former holders of Legacy Humacyte common and preferred shares may receive up to 15,000,000 additional shares of Common Stock in the aggregate, in two equal tranches of 7,500,000 shares of Common Stock per tranche.

Following the Closing, former holders of Legacy Humacyte common and preferred shares are eligible to receive up to 15,000,000 Contingent Earnout Shares in the aggregate, in two equal tranches of 7,500,000 shares of Common Stock per tranche.

The first and second tranches are issuable if the closing volume weighted average price (“VWAP”) per share of Common Stock quoted on Nasdaq (or the exchange on which the shares of Common Stock are then listed), is greater or equal to $ 15.00 and $ 20.00 , respectively, over any 20 trading days within any 30 consecutive trading day period.

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The estimated fair value of the total Contingent Earnout Shares at the Closing on August 26, 2021 was $ 159.4 million based on a Monte Carlo simulation valuation model using a distribution of potential outcomes on a monthly basis over a 10 -year period using the most reliable information available.

The estimated fair value of the total Contingent Earnout Shares at December 31, 2021 was $ 103.7 million.

See Note 3 — Fair Value Measurements for a summary of the change in the fair value of the Contingent Earnout Liability during the years ended December 31, 2023 and 2022.

The remeasurement of the Contingent Earnout Liability to a fair value of $ 27.9 million as of December 31, 2022, resulted in a non-cash gain of $ 75.8 million for the year ended December 31, 2022, compared to a non-cash gain of $ 55.8 million for the year ended December 31, 2021.

The remeasurement of the Contingent Earnout Liability to a fair value of $ 37.9 million at December 31, 2023 from a fair value of $ 27.9 million at December 31, 2022, resulted in a non-cash loss of $ 10.0 million for the year ended December 31, 2023, compared to a non-cash gain of $ 75.8 million for the year ended December 31, 2022 related to the remeasurement of the Contingent Earnout Liability.

The remeasurement of the Contingent Earnout Liability is classified within Change in fair value of Contingent Earnout Liability in the consolidated statements of operations and comprehensive loss.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Assumptions used in the valuations are described below:

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Expected term (years) 10.00 10.00

HUMACYTE, INC.

NOTES TO FINANCIAL STATEMENTS

Stock-based Compensation

At Closing, the 2021 Long-Term Incentive Plan, (the “2021 Plan”), and the 2021 Employee Stock Purchase Plan, (the “ESPP”), became effective.

As of December 31, 2022, 6,700,888 and 1,030,033 shares of Common Stock were available under the 2021 Plan and ESPP, respectively.

The 2021 Plan and ESPP provide that on January 1 of each year commencing January 1, 2022, the 2021 Plan and the ESPP reserve will automatically increase in an amount equal to the lesser of (a) 5 % and 1 %, respectively, of the number of shares of the Company’s Common Stock outstanding on December 31 of the preceding year and (b) a number of shares of Common Stock determined by the Company’s board of directors.

In both December 2021 and 2022, the Company’s board of directors determined that there would be no automatic increase in the number of shares reserved under the 2021 Plan or the ESPP on either January 1, 2022 or January 1, 2023.

Under the 2021 Plan, the Company can grant non-statutory stock options, (“NSOs”), incentive stock options, ISOs, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, performance awards and other forms of awards.

Under the 2021 Plan, the Company can grant non-statutory stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, performance awards and other forms of awards.

Under the ESPP, when and if implemented, eligible employees will be permitted to purchase shares of the Company’s Common Stock at the lower of 85 % of the closing trading price per share of the Company’s Common Stock on the first day of the offering or 85 % of the closing trading price per share on the exercise date, which will occur on the last day of each offering.

The Company’s board of directors determined there would be no automatic increase in the number of shares reserved under the 2021 Plan on either January 1, 2022 or January 1, 2023.

The 2021 Plan share reserve automatically increased on January 1, 2024 by 5 % of the number of shares of the Company’s Common Stock outstanding on December 31, 2023 .

Since the inception of the ESPP, the Company’s board of directors has determined that there would be no automatic increase in the number of shares reserved under the ESPP.

As of December 31, 2023, 1,492,057 and 1,030,033 shares of Common Stock were available under the 2021 Plan and ESPP, respectively.

Prior to the Closing, Legacy Humacyte had two equity incentive plans, the 2015 Omnibus Incentive Plan, as amended, (the “2015 Plan”), and the 2005 Stock Option Plan (the “2005 Plan”).

2 unchanged sentences

The shares underlying any award granted under the 2021 Plan or the 2015 Plan that are forfeited, cancelled or reacquired by the Company prior to vesting, that expire or that are paid out in cash rather than shares will become available for grant and issuance under the 2021 Plan.

As of December 31, 2022, 3,632,237 and 484,562 shares of Common Stock remain reserved for outstanding options issued under the 2015 Plan and 2005 Plan, respectively.

As of December 31, 2023, 8,493,808 , 3,407,550 and 18,063 shares of Common Stock remain reserved for outstanding options issued under the 2021 Plan, the 2015 Plan and the 2005 Plan, respectively.

The Company has sufficient authorized and unissued shares to issue Common Stock in satisfaction of any outstanding awards and any awards available for grant under the 2021 Plan.

The Company’s stock option plans allow for the grant of awards that the Company believes aid in aligning the interests of award recipients with those of its stockholders.

6 unchanged sentences

Compensation expense related to awards with service-based vesting conditions is recognized on a straight-line basis over the requisite service period.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Compensation expense related to awards with performance-based vesting conditions is recognized over the requisite service period using the accelerated attribution method to the extent achievement of the performance-based condition is probable.

3 unchanged sentences

Additionally, the Company’s board of directors may, in its sole discretion, accelerate the vesting of any unvested stock options in the event of a corporate transaction.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company estimated the fair value of the stock options on the date of grant using the following assumptions in the Black-Scholes option-pricing model:

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3.50 % ( 1.89 % to 3.69 %)

Expected term of options (in years) (weighted average and range, if applicable) 6.25

6.05 ( 6.00 to 6.25 )

Expected term of options (in years) 6.25

• Fair Value of Common Stock.

Prior to the Merger, as the Company’s common stock was not publicly traded, the fair value of the shares of its common stock underlying the options was determined by the Company’s board of directors with input from management, after considering independent third-party valuation reports.

Subsequent to the Merger, the fair value of the Common Stock has been determined based on the closing price of the shares on Nasdaq.

The fair value of the Common Stock has been determined based on the closing price of the shares on Nasdaq.

• Expected Term.

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Accordingly, the Company has estimated the dividend yield to be zero .

At December 31, 2022, there were 6,700,888 options remaining available for grant under the 2021 Plan.

The Company has sufficient authorized and unissued shares to issue Common Stock in satisfaction of any awards available for grant under the 2021 Plan.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table shows a summary of stock-based compensation expense included in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2023 and 2022:

4 unchanged sentences

$ 6,828 $ 6,184

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of option activity under the Company’s stock option plans during the year ended December 31, 2023 is presented below:

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As of December 31, 2023, unrecognized stock-based compensation cost for options was $ 17.9 million and is expected to be recognized over a weighted-average period of 3.1 years.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company did not record any income tax expense or benefit during the years ended December 31, 2023 and 2022.

1 unchanged sentence

All losses before income taxes arose in the U.S.

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

23 unchanged sentences

Therefore, the Company has reduced its North Carolina deferred tax assets, including the net operating losses, to zero , as no benefit is expected to be realized from these deferred tax assets prior to 2030 when there would be no income tax in North Carolina.

The reduction in the value of the deferred tax assets resulted in $ 6.9 million of tax expense in 2021, which was offset fully by the reduction in the corresponding valuation allowance.

The reduction in the value of the deferred tax assets are fully offset by a corresponding reduction in the valuation allowance.

If the Company becomes profitable prior to 2030, the Company will recognize an income tax benefit related to the portion of its North Carolina deferred tax assets utilized.

21 unchanged sentences

These credit carryforwards will begin to expire in 2025 and will expire completely in 2043.

Net operating loss carryforwards and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service, or IRS, and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders or groups over a three-year period in excess of 50% as defined under Sections 382 and 383 in the Internal Revenue Code, which could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities.

Net operating loss carryforwards and tax credit carryforwards are subject to review and possible adjustment by the IRS, and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders or groups over a three-year period in excess of 50% as defined under Sections 382 and 383 in the Internal Revenue Code, which could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities.

The amount of the annual limitation is determined based on the value immediately prior to the ownership change.

3 unchanged sentences

Retirement Plan

The Company maintains two defined contribution employee retirement plans, or 401(k) plans, for all employees upon their date of hire.

The 401(k) plans are intended to qualify as tax-qualified plans under Section 401(k) of the Internal Revenue Code of 1986, as amended.

The plans permit employees to contribute, on a pre-tax basis, a portion of their salary up to the Federally mandated limits.

The Company currently maintains a defined contribution employee retirement plan, or 401(k) plan, for all employees upon their date of hire.

The 401(k) plan is intended to qualify as tax-qualified plans under Section 401(k) of the Internal Revenue Code of 1986, as amended.

The plan permits employees to contribute, on a pre-tax basis, a portion of their salary up to the Federally mandated limits.

The Company matches an employee’s contribution up to 4 % of the employee’s compensation.

Contributions to the plans by the Company totaled $ 0.7 million and $ 0.6 million for the years ended December 31, 2022 and 2021, respectively.

Contributions to the 401(k) plan by the Company totaled $ 1.0 million and $ 0.7 million for the years ended December 31, 2023 and 2022, respectively.

HUMACYTE, INC.

NOTES TO FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Commitments and Contingencies

1 unchanged sentence

Duke University

In March 2006, the Company entered into a license agreement with Duke University (“Duke”), which was subsequently amended in 2011, 2014, 2015, 2018, 2019 and January 2022.

In March 2006, the Company entered into a license agreement with Duke University (“Duke”), which was subsequently amended in 2011, 2014, 2015, 2018, 2019 and 2022.

Under this license agreement, Duke granted the Company a worldwide, exclusive, sublicensable license to certain patents related to decellularized tissue engineering, referred to as the patent rights, as well as a non-exclusive license to use and practice certain know-how related to the patent rights.

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Under the license agreement, Duke retains the right to use the patent rights for its own educational and research purposes, and to provide the patent rights to other non-profit, governmental or higher-learning institutions for non-commercial purposes without paying royalties or other fees.

In connection with the Company’s entry into the license agreement, the Company granted equity consideration to Duke in the form of 52,693 shares of the Company’s common stock.

In connection with the Company’s entry into the license agreement, the Company granted equity consideration to Duke in the form of 52,693 shares of Common Stock.

Under the license agreement, the Company also agreed to pay Duke:

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The Company agrees to indemnify Duke against certain third-party claims.

Payments to Duke under the license agreement were immaterial during the periods presented.

In December 2023, the Company filed a BLA with the FDA for an indication in extremity vascular trauma.

Based on the achievement of this milestone under the Duke license agreement, the Company recorded license fee expense of $ 0.5 million during the fourth quarter of 2023 in research and development expense in its consolidated statements of operations and comprehensive loss .

As of December 31, 2023 there was $ 0.5 million of license expense payable to Duke included in accounts payable in the Company’s consolidated balance sheets.

Payments to Duke under the license agreement were immaterial during the year ended December 31, 2022.

Yale University

In February 2014, the Company entered into a license agreement with Yale University (“Yale”) that granted the Company a worldwide license to the patents related to coatings for small-diameter vessels to inhibit clotting.

The license granted under the agreement is exclusive in the field of engineered vascular tissues and tissues and extracellular matrix-based implants used for vascular repair, reconstruction and replacement (provided that all uses are vascular tissues within the range of 1 – 12mm in diameter), except that it is subject to Yale’s non-exclusive right, on behalf of itself and all other non-profit academic institutions, to use the licensed products for research, teaching, and other non-commercial purposes.

The Company has agreed to pay to Yale an annual maintenance fee, increasing between the first and fourth anniversaries of the agreement up to a maximum of less than $ 0.1 million per year for this license.

In December 2022, in accordance with the terms of the agreement, the Company provided Yale with 90 days written notice of termination, effective March 21, 2023.

In August 2019, the Company entered into a license agreement with Yale that granted the Company a worldwide license to the patents related to Bioartificial Vascular Pancreas (“BVP”).

The license granted under the agreement is exclusive in the field of engineered vascular tissues that deliver pancreatic islet cells to patients, except that it is subject to

The license granted under the Small Diameter Vessel License Agreement is exclusive in the field of engineered vascular tissues and extracellular matrix-based implants used for vascular repair, reconstruction and replacement (provided that all uses are vascular tissues within the range of 1 – 12mm in diameter), except that it was subject to Yale’s non-exclusive right, on behalf of itself and all other non-profit academic institutions, to use the licensed products for research, teaching, and other non-commercial purposes.

The Company agreed to pay to Yale an annual maintenance fee, increasing between the first and fourth anniversaries of the Small Diameter Vessel License Agreement up to a maximum of less than $ 0.1 million per year for this license.

In December 2022, in accordance with the

HUMACYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Yale’s non-exclusive right, on behalf of itself and all other non-profit academic institutions, to use the licensed products for research, teaching, and other non-commercial purposes.

In August 2019, the Company entered into a license agreement with Yale that granted the Company a worldwide license to the patents related to tubular prostheses.

The license granted under the agreement is exclusive in the field of engineered urinary conduits, engineered tracheas/airways, and engineered esophagi, except that it is subject to Yale’s non-exclusive right, on behalf of itself and all other non-profit academic institutions, to use the licensed products for research, teaching, and other non-commercial purposes.

terms of the Small Diameter Vessel License Agreement, the Company provided Yale with 90 days written notice of termination, effective March 21, 2023.

In August 2019, the Company entered into a license agreement with Yale that granted the Company a worldwide license to the patents related to the BVP (the “BVP License Agreement”).

The license granted under the BVP License Agreement is exclusive in the field of engineered vascular tissues that deliver pancreatic islet cells to patients, except that it is subject to Yale’s non-exclusive right, on behalf of itself and all other non-profit academic institutions, to use the licensed products for research, teaching, and other non-commercial purposes.

The Company has agreed to pay to Yale an annual maintenance fee, increasing between the first and fourth anniversaries of the BVP License Agreement up to a maximum of less than $ 0.1 million per year for this license.

In August 2019, the Company entered into a license agreement with Yale that granted the Company a worldwide license to the patents related to tubular prostheses (the “Tubular Prosthesis License Agreement”).

The license granted under the Tubular Prosthesis License Agreement is exclusive in the field of engineered urinary conduits, engineered tracheas/airways, and engineered esophagi, except that it is subject to Yale’s non-exclusive right, on behalf of itself and all other non-profit academic institutions, to use the licensed products for research, teaching, and other non-commercial purposes.

The Company has agreed to pay to Yale an annual maintenance fee, increasing between the first and fourth anniversaries of the Tubular Prosthesis License Agreement up to a maximum of less than $ 0.1 million per year for this license.

The Company has agreed to use reasonable commercial efforts to develop and commercialize the licensed patents and any licensed products and methods, and to use reasonable efforts to make the licensed products available to patients in low and low-middle income countries.

1 unchanged sentence

The Company may also sublicense the Company’s rights without Yale’s prior written consent, but such sublicense is subject to certain conditions.

In connection with its entry into the license agreement, the Company paid Yale upfront cash fees.

In connection with its entry into the Tubular Prosthesis License Agreement, the Company paid Yale upfront cash fees.

The Company has also agreed to pay Yale:

• annual maintenance fees, increasing between the first anniversary of the agreement until the fifth anniversary for the coating (see above) and BVP licenses and until the fourth anniversary for the tubular prostheses license up to a maximum of less than $ 0.1 million per year;

• annual maintenance fees, increasing between the first anniversary of the Tubular Prosthesis License Agreement until the fifth anniversary for the Small Diameter Vessel License Agreement (through the termination of the agreement on March 21, 2023) and the BVP License Agreement and until the fourth anniversary for the Tubular Prostheses License Agreement up to a maximum of less than $ 0.1 million per year;

• milestone payments upon achievement of certain regulatory and commercial milestones of $ 0.2 million and $ 0.6 million, respectively ;

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If the Company or any of its future sublicensees bring a patent challenge against Yale or assists another party in bringing a patent challenge against Yale, the license fees described above will be subject to certain increases and penalties.

The agreements expire on a country-by-country basis on the date on which the last of the patents in such country expires, lapses or is declared invalid.

Yale may terminate the agreements if the Company fails to (i) provide written diligence reports, (ii) provide commercially reasonable diligence plans, (iii) implement the plans in accordance with the obligations under the agreements, or (iv) reach certain research and development milestones within the scheduled timeframe set forth in the agreements;

The BVP License Agreement and Tubular Prosthesis License Agreement expire on a country-by-country basis on the date on which the last of the patents in such country expires, lapses or is declared invalid.

Yale may terminate the BVP License Agreement and Tubular Prosthesis License Agreement if the Company fails to (i) provide written diligence reports, (ii) provide commercially reasonable diligence plans, (iii) implement the plans in accordance with the obligations under the agreements, or (iv) reach certain research and development milestones within the scheduled timeframe set forth in the agreements;

however, any such termination right would be limited in scope to the country to which such failure relates.

Yale may also terminate for the Company’s non-payment, uncured material breach, failure to obtain adequate insurance, bringing or assisting in bringing of a patent challenge against Yale, abandonment of the research and development of the Company’s products or insolvency.

The Company may terminate the license agreements (i) on 90 days’ prior written notice to Yale, provided the Company is not in breach of the license agreements and has made all required payments to Yale thereunder and (ii) on written notice to Yale following an uncured material breach.

With respect to the license agreements related to small-diameter vessels and BVP, the Company’s rights under the license agreements will also terminate automatically with respect to a patent application or patent within the licensed patents in a specified country if, upon receipt of written notice from Yale, the Company does not agree to pay the patent filing, prosecution and maintenance fees incurred by Yale for such patent applications or patents in the specified country.

Under certain circumstances, Yale may, at its option, convert the exclusive licenses to non-exclusive licenses if the Company declines to initiate certain infringement or interference proceedings with respect to the licensed patents.

The Company has agreed to indemnify Yale against certain third-party claims.

Payments to Yale under the license agreement were immaterial during the periods presented.

The Company may terminate the BVP License Agreement and Tubular Prosthesis License Agreement (i) on 90 days’ prior written notice to Yale, provided the Company is not in breach of the license agreements and has made all required payments to Yale thereunder and (ii) on written notice to Yale following an uncured material breach.

With respect to the BVP License Agreement, the Company’s rights under the agreement will also terminate automatically with respect to a patent application or patent within the licensed patents in a specified country if,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

upon receipt of written notice from Yale, the Company does not agree to pay the patent filing, prosecution and maintenance fees incurred by Yale for such patent applications or patents in the specified country.

The Company has agreed to indemnify Yale against certain third-party claims.

Payments to Yale under the Small Diameter Vessel License Agreement, BVP License Agreement and Tubular Prosthesis License Agreement were immaterial during the periods presented.

JDRF Agreement

On April 1, 2023, the Company entered into the JDRF Agreement to further develop and perform preclinical testing of the BVP, as discussed in Note 2 — Summary of Significant Accounting Policies.

According to the terms of the JDRF Agreement, JDRF will provide funding up to $ 0.8 million based on the achievement of certain research and development milestones.

The Company received the first milestone payment of $ 80 thousand in April 2023 upon execution of the agreement.

In accordance with the JDRF Agreement, the Company has agreed to pay JDRF:

• a one-time royalty in an amount equal to four times the Actual Award, to be paid in three equal installments following the first commercial sale of any product containing the Company’s technology identified in the JDRF Agreement;

• an additional royalty equal to the Actual Award at a specified payment date after net sales exceed $ 250 million;

• in the event of a license, sale or transfer of the Company’s rights to the product’s technology identified in the JDRF Agreement or a change of control transaction, a payment equal to 10 % of any license or purchase price payments received by the Company up to the Royalty Cap, less any previous royalty payments paid towards the Royalty Cap.

The JDRF Agreement expires on the date on which the Company has paid all of the royalty payments described above.

Either party may terminate the JDRF Agreement for cause by providing the other party with written notice and allowing the other party 30 days to cure such breach.

JDRF may terminate the JDRF Agreement without cause by providing 90 days’ notice to the Company at any time after April 1, 2024.

Royalties on previously received milestone payments would remain due after a termination by JDRF without cause.

Legal Matters

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To date, the Company has not incurred any costs as a result of such obligations and has not accrued any liabilities related to such obligations in the consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Related Party Transactions

Fresenius Medical Care investments and distribution agreement

In June 2018, the Company completed a $ 150 million financing transaction pursuant to which Fresenius Medical Care purchased shares of series D redeemable convertible preferred stock that at the Closing of the Merger converted into 15,812,735 shares of the Company’s common stock.

In August 2021, Fresenius Medical Care invested $ 25 million as part of the PIPE Financing and received an additional 2.5 million shares of the Company’s common stock.

In addition, the Company entered into a distribution agreement with Fresenius Medical Care in June 2018 which, as amended as of February 16, 2021, granted Fresenius Medical Care and its affiliates exclusive rights to develop outside the United States and EU and commercialize outside of the United States the Company’s 6 millimeter x 42 centimeter HAV and all improvements thereto, and modifications and derivatives thereof (including any changes to the length, diameter or configuration of the foregoing), for use in vascular creation, repair, replacement or construction, including renal replacement therapy for dialysis access, the treatment of peripheral artery disease, and the treatment of vascular trauma, but excluding coronary artery bypass graft, pediatric heart surgery, or adhering pancreatic islet cells onto the outer surface of the distribution product for use in diabetic patients.

In August 2021, Fresenius Medical Care invested $ 25 million as part of the PIPE Financing and received an additional 2.5 million shares of Common Stock.

In addition, the Company entered into a distribution agreement with Fresenius Medical Care in June 2018 which, as amended as of February 16, 2021, granted Fresenius Medical Care and its affiliates exclusive rights to develop outside the United States and EU and commercialize outside of the United States the Company’s 6 millimeter x 42 centimeter HAV and all improvements thereto, and modifications and derivatives thereof (including any changes to the length, diameter or configuration of the foregoing), for use in vascular creation, repair, replacement or construction, including renal replacement therapy for dialysis access, the treatment of PAD, and the treatment of vascular trauma, but excluding coronary artery bypass graft, pediatric heart surgery, or adhering pancreatic islet cells onto the outer surface of the distribution product for use in diabetic patients.

Within the United States, Fresenius Medical Care will collaborate with the Company in its commercialization of the product in the field, including adoption of the distribution product as a standard of care in patients for which such use is supported by clinical results and health economic analyses.

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The Company also grants a non-exclusive, sublicensable license to Fresenius Medical Care under the patents, know-how and regulatory materials controlled by the Company during the term to develop the distribution product in accordance with the terms of the distribution agreement.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

developed solely or jointly by or on behalf of Fresenius Medical Care in the performance of its activities under the distribution agreement.

In addition, the Company grants to Fresenius Medical Care, among other things, a perpetual, irrevocable, non-exclusive sublicensable license under the patents and know-how that primarily relate to the distribution product or its manufacture and that were created, conceived or developed solely or jointly by or on behalf of Fresenius Medical Care in the performance of its activities under the distribution agreement.

The distribution agreement provides that the Company will own all know-how and patents that primarily relate to the distribution product or its manufacture that are created, conceived or developed by or on behalf of either party in the performance of activities under the distribution agreement.

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The amounts that Fresenius Medical Care will be obligated to pay the Company under the distribution agreement for sales of the distribution product in the field outside of the United States will vary.

Fresenius Medical Care agreed to pay the Company initially, on a country-by-country basis for sales outside of the United States, the amount equal to the average cost of manufacturing the Company’s distribution product plus a fixed dollar amount per unit.

Fresenius Medical Care agreed to pay the Company initially, on a country-by-

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

country basis for sales outside of the United States, the amount equal to the average cost of manufacturing the Company’s distribution product plus a fixed dollar amount per unit.

Following a specified period, on a country-by-country basis outside of the United States, Fresenius Medical Care will pay the Company a fixed percentage of net sales for each unit sold in such country, such that the Company will receive more than half of such net sales.

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Each party is required to indemnify one another for certain third-party claims.

The Company expensed approximately $ 0.2 million during each of the years ended December 31, 2023 and 2022 for clinical research services performed by Frenova Renal Research (“Frenova”), a subsidiary of Fresenius Medical Care.

There was $ 0.1 million payable to Frenova included in accounts payable on the Company’s consolidated balance sheets as of December 31, 2022, and there were no amounts payable to Frenova as of December 31, 2023.

Arrangements with Yale University

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As of December 31, 2023 and 2022, the Company was a party to license agreements with Yale University, as described in Note 13 — Commitments and Contingencies above.

The following table shows a summary of related party expenses included in the statements of operations and comprehensive loss for the years ended December 31, 2022 and 2021:

The following table shows a summary of related party expenses pertaining to Yale University included in the statements of operations and comprehensive loss for the years ended December 31, 2023 and 2022:

($ in thousands) 2023 2022

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Total $ 80 $ 119

T here was $ 50 thousand of license expenses payable to Yale University included in accounts payable on the Company’s consolidated balance sheets, as of December 31, 2022 .

T here was $ 50 thousand of license expenses payable to Yale University included in accounts payable on the Company’s consolidated balance sheets as of December 31, 2022, and there was an insignificant amount payable to Yale as of December 31, 2023 .

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Subsequent Events

On February 29, 2024, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Cowen and Company, LLC and Cantor Fitzgerald & Co.

as representatives of the several underwriters named therein (collectively, the “Underwriters”), relating to the issuance and sale in the Offering of 15,410,000 shares of the Company’s Common Stock, which included a full exercise of the Underwriters’ option to purchase additional shares, at a price to the public of $ 3.00 per share (the “Shares”).

The net proceeds to the Company from the Offering were approximately $ 43.1 million after deducting underwriting discounts and commissions and estimated Offering expenses.

The Offering closed on March 5, 2024.

In a separate transaction on March 11, 2024, the Company received an additional $ 20.0 million under the Purchase Agreement.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data