Humacyte, Inc. 10-K

Item 8. Financial Statements and Supplementary Data. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS HUMACYTE, INC. Page Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 108 Consolidated Balance Sheets as of December 31, 2023 and 2022 109 Consolidated Statements of Operations and Comprehensive Loss for the Years ended December 31, 202 3 and 202 2 110 Consolidated Statements of Changes in Stockholders’ Equity for the Years ended December 31, 2023 and 2022 111 Consolidated Statements of Cash Flows for the Years ended December 31, 202 3 and 202 2 112 Notes to Consolidated Financial Statements 113 107 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Humacyte, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Humacyte, Inc. 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. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Raleigh, North Carolina March 28, 2024 We have served as the Company’s auditor since 2013. 108 Table of Contents HUMACYTE, INC. CONSOLIDATED BALANCE SHEETS (in thousands except for share and per share amounts) As of December 31, 2023 2022 ASSETS Current assets Cash and cash equivalents $ 80,448 $ 149,772 Prepaid expenses and other current assets 2,830 2,298 Short-term investments — 2,107 Accounts receivable — 31 Total current assets 83,278 154,208 Property and equipment, net 26,791 30,039 Finance lease right-of-use assets, net 17,313 19,373 Other long-term assets 841 682 Total assets $ 128,223 $ 204,302 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 6,490 $ 1,595 Accrued expenses 9,340 7,108 Finance lease obligation, current portion 2,560 2,256 Operating lease obligation, current portion 53 50 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 Finance lease obligation, net of current portion 16,293 18,853 Contingent derivative liability 2,636 — Other long-term liabilities 789 712 SVB loan payable, net of current portion — 20,336 Total liabilities 114,677 87,374 Commitments and contingencies (Note 13) Stockholders’ equity Preferred stock, $ 0.0001 par value; 20,000,000 shares designated as of December 31, 2023 and 2022; 0 shares issued and outstanding as of December 31, 2023 and 2022 — — Common stock, $ 0.0001 par value; 250,000,000 shares authorized as of December 31, 2023 and 2022; 103,673,728 and 103,229,013 shares issued and outstanding as of December 31, 2023 and 2022, respectively 10 10 Additional paid-in capital 550,850 543,456 Accumulated deficit ( 537,314 ) ( 426,538 ) Total stockholders’ equity 13,546 116,928 Total liabilities and stockholders’ equity $ 128,223 $ 204,302 The accompanying notes are an integral part of these financial statements. 109 Table of Contents HUMACYTE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands except for share and per share amounts) Year Ended December 31, 2023 2022 Grant revenue $ — $ 1,565 Operating expenses: Research and development 76,550 63,260 General and administrative 23,497 22,883 Total operating expenses 100,047 86,143 Loss from operations ( 100,047 ) ( 84,578 ) Other income (expense), net Interest income 5,467 2,629 Change in fair value of Contingent Earnout Liability ( 10,023 ) 75,767 Employee retention credit 3,107 — Loss on extinguishment of debt ( 2,421 ) — Interest expense ( 6,599 ) ( 6,200 ) Change in fair value of derivative liabilities ( 260 ) 417 Total other income (expense), net ( 10,729 ) 72,613 Net loss and comprehensive loss $ ( 110,776 ) $ ( 11,965 ) Net loss per share attributable to common stockholders, basic and diluted $ ( 1.07 ) $ ( 0.12 ) Weighted-average shares outstanding used in computing net loss per share attributable to common stockholders, basic and diluted 103,420,238 103,051,366 The accompanying notes are an integral part of these financial statements. 110 Table of Contents HUMACYTE, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in thousands except for share amounts) Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity Shares Amount Balance as of December 31, 2021 103,003,646 $ 10 $ 536,737 $ ( 414,573 ) $ 122,174 Proceeds from the exercise of stock options 225,367 — 535 — 535 Stock-based compensation — — 6,184 — 6,184 Net loss — — — ( 11,965 ) ( 11,965 ) Balance as of December 31, 2022 103,229,013 $ 10 $ 543,456 $ ( 426,538 ) $ 116,928 Proceeds from the exercise of stock options 444,715 — 566 — 566 Stock-based compensation — — 6,828 — 6,828 Net loss — — — ( 110,776 ) ( 110,776 ) Balance as of December 31, 2023 103,673,728 $ 10 $ 550,850 $ ( 537,314 ) $ 13,546 The accompanying notes are an integral part of these financial statements. 111 Table of Contents HUMACYTE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2023 2022 Cash flows from operating activities Net loss $ ( 110,776 ) $ ( 11,965 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 5,659 6,151 Stock-based compensation expense 6,828 6,184 Change in fair value of Contingent Earnout Liability 10,023 ( 75,767 ) 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 Amortization expense 2,060 2,059 Non-cash operating lease costs 50 45 Amortization of SVB debt discount 482 1,546 Changes in operating assets and liabilities: Accounts receivable 31 145 Prepaid expenses and other current assets ( 388 ) 1,364 Accounts payable 4,811 ( 509 ) Accrued expenses 2,167 247 Operating lease obligation ( 50 ) ( 45 ) Deferred payroll taxes — ( 173 ) Net cash used in operating activities ( 73,305 ) ( 71,129 ) Cash flows from investing activities 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 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: Cash paid for interest on SVB loan $ 1,613 $ 2,668 Supplemental disclosure of noncash activities: Purchase of property and equipment in accounts payable and accrued expenses $ 284 $ 135 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. 112 Table of Contents HUMACYTE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Description of Business Organization Humacyte, Inc. 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. On August 26, 2021 (the “Closing Date”), Alpha Healthcare Acquisition Corp. (“AHAC”) consummated a merger pursuant to a Business Combination Agreement, dated as of February 17, 2021 (the “Merger Agreement”), by and among Humacyte, Inc., a Delaware Corporation (“Legacy Humacyte”), AHAC and Hunter Merger Sub, Inc. (“Merger Sub”), a Delaware corporation and wholly owned subsidiary of AHAC. As contemplated by the Merger Agreement, Merger Sub merged with and into Legacy Humacyte, with Legacy Humacyte continuing as the surviving corporation and as a wholly-owned subsidiary of AHAC (such transactions, the “Merger,” and, collectively with the other transactions described in the Merger Agreement, the “Reverse Recapitalization”). On the Closing Date, AHAC changed its name to Humacyte, Inc. and Legacy Humacyte changed its name to Humacyte Global, Inc. (“Global”). 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. 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, 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. The Company’s operating losses were $ 100.0 million and $ 84.6 million for the years ended December 31, 2023 and 2022, respectively. Net cash flows used in operating activities were $ 73.3 million and $ 71.1 million during the years ended December 31, 2023 and 2022, respectively. Substantially all of the Company’s operating losses resulted from costs incurred in connection with the Company’s research and development programs and from general and administrative costs associated with the Company’s operations. 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, 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. 113 Table of Contents HUMACYTE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Summary of Significant Accounting Policies Basis of Presentation The Company has prepared the accompanying financial statements in conformity with U.S. GAAP. 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. Use of Estimates The preparation of financial statements in conformity with U.S. 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, 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. Segments The Company operates and manages its business as one reportable and operating segment. The Company is developing proprietary, bioengineered, acellular human tissues, advanced tissue constructs and organ systems that are designed to be used in the treatment of diseases and conditions across a range of anatomic locations in multiple therapeutic areas. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of evaluating financial performance and allocating resources. Comprehensive Loss Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. There was no difference between net loss and comprehensive loss for the years ended December 31, 2023 and 2022. Cash and Cash Equivalents 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 U.S. Cash deposits typically exceed federally insured limits. 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 . 114 Table of Contents 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 The Company classifies its certificates of deposit as cash and cash equivalents or short-term investments and reassesses the appropriateness of the classification of its investments at the end of each reporting period. Certificates of deposit held for investment with an original maturity greater than three months are carried at amortized cost and reported as short-term investments on the consolidated balance sheets. 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, 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. 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. 115 Table of Contents 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. JDRF Award 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 The Company’s revenues generally consist of grant revenues, including revenues generated under government and other awarded grants. Grant Revenue The Company generates revenue primarily from government and other awarded grants that reimburse the Company for certain allowable costs related to research and development efforts. In August 2017, the Department of Defense (“DoD”) granted the Company a cash award for work to support human tissue engineered blood vessels for vascular reconstruction in the injured warfighter. The final amount awarded to the Company totaled $ 6.8 million and the program ended in November 2022. 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 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. 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. 116 Table of Contents 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. The Company recognizes revenue only after the qualifying expenses related to the grants have been incurred and it is reasonably assured that the expenses will be reimbursed and the revenue will be collectible. The related costs incurred are included in research and development expense in the Company’s consolidated statements of operations and comprehensive loss. Revenue from Customers Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. ASC 606 also impacts certain other areas, such as the accounting for costs to obtain or fulfill a contract. In addition, ASC 606 requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. 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. Concentration of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and short-term investments consisting of CDs. Total cash balances exceeded insured balances by the FDIC as of December 31, 2023 and 2022. The Company has cash equivalents that are invested in highly rated money market funds that are invested only in obligations of the U.S. government and its agencies. 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 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. Diluted net loss per share attributable to common stockholders reflects the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock or resulted in the issuance of Common Stock that then shared in the earnings of the Company unless inclusion of such shares would be anti-dilutive. 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 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, 2023 2022 Exercise of options under stock plan 11,919,421 7,203,874 Warrants to purchase common stock 5,588,506 5,588,506 117 Table of Contents 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 Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date. ASC 820, Fair Value Measurement and Disclosures , establishes a hierarchy whereby inputs to valuation techniques used in measuring fair value are prioritized, or the fair value hierarchy. There are three levels to the fair value hierarchy based on reliability of inputs, as follows: • Level 1 — Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets. • 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. • Level 3 — Unobservable inputs in which little or no market data exists, therefore requiring the Company to develop its own assumptions. The Company evaluates assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them for each reporting period, utilizing valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The determination requires significant judgments to be made by the Company. Property and Equipment, Net Property and equipment, net are recorded at cost less accumulated depreciation. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheet accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets. The estimated useful lives for significant asset categories are as follows: Property and equipment Estimated Useful Lives (Years) Scientific equipment 5 – 7 Computer equipment 5 Software 3 Furniture and fixtures 5 – 7 Leasehold improvements Lesser of useful life or life of lease Construction in progress N/A 118 Table of Contents HUMACYTE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Impairment of Long-Lived Assets The Company reviews the carrying value of property and equipment for indicators of possible impairment whenever events and circumstances indicate that the carrying value of an asset or asset group may not be recoverable from the estimated future net undiscounted cash flows expected to result from its use and eventual disposition. In cases where estimated future net undiscounted cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of the asset or asset group. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors. Based on this assessment, during the years ended December 31, 2023 and 2022, respectively, the Company concluded there were no such events or changes in circumstances requiring review of the carrying amount of the Company’s long-lived assets and there was no impairment during the years ended December 31, 2023 and 2022. Income Taxes Income taxes are computed using the asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements. In estimating future tax consequences, the Company considers all expected future events other than enactment of changes in tax laws or rates. A valuation allowance is recorded, if necessary, to reduce net deferred tax assets to their realizable values if management does not believe it is more likely than not that the net deferred tax assets will be realized. As of December 31, 2023 and 2022, the Company has recorded a full valuation allowance against its deferred tax assets. 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, 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. The Company recognizes the benefit of an income tax position only if it is more likely than not (greater than 50%) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. Otherwise, no benefit can be recognized. Assessing an uncertain tax position begins with the initial determination of the sustainability of the position and is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed. Additionally, the Company must accrue interest and related penalties, if applicable, on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. The Company has analyzed its filing positions in all significant Federal and state jurisdictions where it is required to file income tax returns, as well as open tax years in these jurisdictions. As of December 31, 2023 and 2022, the Company has determined that no uncertain tax positions would have a material impact on the financials statements of the Company. The Company is no longer subject to Federal, state, and local tax examinations by tax authorities for years before 2020 although carry-forward attributes that were generated prior to 2020 may still be adjusted upon examination by the taxing authorities if they either have been or will be used in a future period. No income tax returns are currently under examination by taxing authorities. As of December 31, 2023 and 2022, the Company had no t recorded any amounts for unrecognized tax benefits. The Company’s policy is to recognize interest and penalties related to uncertain tax positions in the provision for income taxes. As of December 31, 2023 and 2022, the Company had no accrued interest or penalties related to uncertain tax positions, and no amounts had been recognized in the Company’s statements of operations and comprehensive loss. Intellectual Property The Company seeks to protect its intellectual property by filing patent applications in the United States and abroad related to novel technologies and product candidates that it views as important to its business. The patent positions of biotechnology companies generally, including the Company’s patent positions, is highly uncertain and involves complex legal and factual questions for which legal principles remain unresolved. Patent costs have been expensed as incurred as general and administrative expense. 119 Table of Contents HUMACYTE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Research and Development The Company expenses research and development costs as operating expenses as incurred. Research and development expenses consist primarily of: • salaries and related overhead expenses for personnel in research and development functions, including stock-based compensation and benefits; • fees paid to consultants and CROs, including in connection with clinical trials, and other related clinical trial fees, such as for investigator grants, patient screening, laboratory work and statistical compilation and analysis; allocation of facility lease and maintenance costs; • depreciation of leasehold improvements, laboratory equipment and computers; • costs related to purchasing raw materials for and producing product candidates for clinical trials; • costs related to compliance with regulatory requirements; • costs related to the manufacturing scale-out initiative; and • license fees related to in-licensed technologies. Accrued Research and Development 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. The estimated costs of research and development provided, but not yet invoiced, are included in accrued expenses on the balance sheet. If the actual timing of the performance of services or the level of effort varies from the original estimates, the Company will adjust the accrual accordingly. 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. Stock-Based Compensation The Company accounts for stock-based compensation for employees and non-employees measured at grant date, based on the fair value of the award. The Company measures the fair value of awards granted using the Black-Scholes option pricing model and recognizes the expense over the requisite service period using the straight-line method. Option valuation models, including the Black-Scholes option-pricing model, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the grant-date fair value of an award. These assumptions include the risk-free rate of interest, expected dividend yield, expected volatility, the expected term of the award, and the fair value of the underlying Common Stock on the date of grant. Forfeitures are accounted for as they occur. 120 Table of Contents HUMACYTE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Common Stock Warrants In connection with the Merger, the Company assumed 5,000,000 publicly-traded warrants (“Public Warrants”) and 177,500 private placement warrants issued to AHAC Sponsor LLC (the “Sponsor”), Oppenheimer & Co. Inc. 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, 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. The Private Placement Warrants are non-redeemable for cash so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants are redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. The Company evaluated the Common Stock Warrants to determine the appropriate financial statement classification upon the consummation of the Merger. The Common Stock Warrants are not mandatorily redeemable and are considered to be freestanding instruments as they are separately exercisable into common shares. As such, the Common Stock Warrants were not classified as liabilities under FASB ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”). The Company then evaluated the Common Stock Warrants under FASB ASC Topic 815, Derivatives and Hedging . The agreement governing the Common Stock Warrants includes a provision (“Replacement of Securities Upon Reorganization”), the application of which could result in a different settlement value for the Private Placement Warrants depending on their holder. Because the holder of an instrument is not an input into the pricing of a fixed-for-fixed option on the Company’s ordinary shares, the Private Placement Warrants are not considered to be “indexed to the Company’s own stock” and therefore are not classified in stockholders’ equity. As the Private Placement Warrants meet the definition of a derivative, the Company recorded these warrants as liabilities on the consolidated balance sheet at fair value, with subsequent changes in their respective fair values recognized in the consolidated statements of operations and comprehensive loss at each reporting date. The Public Warrants are considered to be “indexed to the Company’s own stock”. 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 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 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. 121 Table of Contents 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. Contingent earnout payments involve certain assumptions requiring significant judgment and actual results can differ from assumed and estimated amounts. Leases The Company accounts for its leases under ASC 842, Leases . 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 “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. Under this guidance, arrangements meeting the definition of a lease are classified as operating or finance leases, and are recorded on the balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease right-of-use assets and lease obligations are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Operating lease right-of-use assets are adjusted for (i) payments made at or before the commencement date, (ii) initial direct costs incurred, and (iii) tenant incentives under the lease. As the implicit rate for the operating leases were not determinable, the Company used an incremental borrowing rate based on the information available at the respective lease commencement dates in determining the present value of future payments. The incremental borrowing rate represents the interest rate the Company would expect to incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company determined the incremental borrowing rate by considering various factors, such as its credit rating, interest rates of similar debt instruments of entities with comparable credit ratings, the lease term and the currency in which the lease was denominated. The Company considers a lease term to be the noncancelable period that it has the right to use the underlying asset, including any periods where it is reasonably certain the Company will exercise any option to extend the contract. Lease expenses for minimum lease payments for operating leases are recognized on a straight-line basis over the lease term. Amortization expense of the right-of-use asset for finance leases is recognized on a straight-line basis over the lease term and interest expense for finance leases is recognized based on the incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. 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. The Company excludes short-term leases, if any, having initial terms of 12 months or less from the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over the lease term. 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 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. 122 Table of Contents 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 to sell, market and distribute its 6 millimeter HAV for certain specified indications outside the United States. Recently Adopted Accounting Pronouncements 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. 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. 3. Fair Value Measurements The Company’s assets and liabilities that were measured at fair value on a recurring basis were as follows: Fair Value Measured as of December 31, 2023 ($ in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents (money market funds) $ 78,995 $ — $ — $ 78,995 Total financial assets $ 78,995 $ — $ — $ 78,995 Liabilities: 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 $ 40,693 123 Table of Contents HUMACYTE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fair Value Measured as of December 31, 2022 ($ in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents (money market funds) $ 141,159 $ — $ — $ 141,159 Cash equivalents (certificates of deposit) — 8,000 — 8,000 Short-term investments (certificates of deposit) — 2,107 — 2,107 Total financial assets $ 141,159 $ 10,107 $ — $ 151,266 Liabilities: Contingent Earnout Liability $ — $ — $ 27,893 $ 27,893 Private Placement Warrants liability — — 80 80 Total financial liabilities $ — $ — $ 27,973 $ 27,973 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, ($ in thousands) 2023 2022 Fair value as of beginning of period $ ( 27,893 ) $ ( 103,660 ) 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. 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 (see Note 9 — Stockholders’ Equity). Contingent earnout payments involve certain assumptions requiring significant judgment and actual results can differ from assumed and estimated amounts. 124 Table of Contents 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 Year Ended December 31, ($ in thousands) 2023 2022 Fair value as of beginning of period $ ( 80 ) $ ( 497 ) Change in fair value included in other income (expense), net 2 417 Fair value as of end of period $ ( 78 ) $ ( 80 ) 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). 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 ) 125 Table of Contents HUMACYTE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. Property and Equipment, Net Property and equipment, net consist of the following: As of December 31, ($ in thousands) 2023 2022 Scientific and manufacturing equipment $ 28,400 $ 27,821 Computer equipment 125 167 Software 682 209 Furniture and fixtures 1,066 988 Leasehold improvements 27,844 26,355 Construction in progress — 680 58,117 56,220 Accumulated depreciation ( 31,326 ) ( 26,181 ) Property and equipment, net $ 26,791 $ 30,039 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. 5. Accrued Expenses Accrued expenses consisted of the following: As of December 31, ($ in thousands) 2023 2022 Accrued external research, development and manufacturing costs $ 3,845 $ 2,437 Accrued employee compensation and benefits 5,238 4,227 Accrued professional fees 257 444 Total $ 9,340 $ 7,108 6. Revenue Interest Purchase Agreement 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. 126 Table of Contents HUMACYTE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. 127 Table of Contents 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. 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. 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 $ 38,600 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. 128 Table of Contents 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. 7. Debt 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 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. At issuance, the Company initially determined that the funding of an additional tranche was not probable, and therefore no value was ascribed to the remaining 123,302 warrants that were only exercisable upon the funding of the first additional tranche. 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 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. 8. Leases 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. 129 Table of Contents HUMACYTE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company’s leases do not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. Certain of the Company’s leases include renewal options and escalation clauses; renewal options have been included in the calculation of the lease liabilities and right of use assets as the Company is reasonably certain to exercise the options due to the specialized nature of the leased building. Variable expenses generally represent the Company’s share of the landlord’s operating expenses. The Company does not act as a lessor in any lease arrangements. The following summarizes quantitative information about the Company’s leases: Year Ended December 31, ($ in thousands) 2023 2022 Finance lease cost Amortization of right-of-use assets $ 2,060 $ 2,059 Interest on lease liabilities 1,709 1,887 Total finance lease cost 3,769 3,946 Operating lease cost 105 105 Total lease cost $ 3,874 $ 4,051 Year Ended December 31, 2023 Year Ended December 31, 2022 ($ in thousands) Finance Leases Operating Leases Finance Leases Operating Leases Operating cash flows from leases $ ( 1,709 ) $ ( 105 ) $ ( 1,887 ) $ ( 105 ) Financing cash flows from leases $ ( 2,256 ) $ — $ ( 1,981 ) $ — Weighted-average remaining lease term 4.13 4.74 4.57 5.24 Weighted-average discount rate 8.50 % 8.50 % 8.50 % 8.50 % As of December 31, 2023, the maturities of the Company’s lease liabilities were as follows: ($ in thousands) Finance Leases Operating Leases 2024 $ 4,065 $ 105 2025 4,167 105 2026 4,237 105 2027 2,673 105 2028 2,145 105 Thereafter 7,881 364 Total 25,168 889 Less: present value discount ( 6,315 ) ( 257 ) Lease liabilities $ 18,853 $ 632 9. Stockholders’ Equity Common Stock 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. The Company incurred $ 3.9 million of transaction costs, consisting of banking, legal, and other professional fees. Legacy Humacyte assumed $ 15.2 million of liabilities, including PIPE Financing fees and legal fees, and $ 0.1 million of assets from AHAC. Immediately following the Merger, there were 103,003,384 shares of Common Stock outstanding with a par value of $ 0.0001 per share. 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 in interest of the Common Stock. 130 Table of Contents 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. Through December 31, 2023, no dividends have been declared. 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 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: December 31, 2023 2022 Common stock reserved for Contingent Earnout Shares 15,000,000 15,000,000 Common stock reserved for Option Agreement 1,333,334 (1) — Exercise of options outstanding under stock plans 11,919,421 7,203,874 Options available for issuance under stock plans 1,492,057 6,700,888 Shares available for grant under ESPP 1,030,033 1,030,033 Warrants to purchase Common Stock 5,588,506 5,588,506 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 The Company’s Second Amended and Restated Certificate of Incorporation provides the Company’s board of directors with the authority to issue preferred stock, par value $ 0.0001 per share, in one more series and to establish from time to time the number of shares to be included in each such series, by adopting a resolution and filing a certification of designations. Voting powers, designations, powers, preferences and relative, participating, optional, special and other rights shall be stated and expressed in such resolutions. There were 20,000,000 shares designated as preferred stock and none were outstanding as of December 31, 2023 and 2022. Warrants The Company had the following Common Stock warrants outstanding as of December 31, 2023 and 2022: Common Stock Warrants Outstanding Legacy Humacyte Common Stock Warrants 411,006 Private Placement Warrants 177,500 Public Warrants 5,000,000 Total Common Stock Warrants 5,588,506 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 . 131 Table of Contents HUMACYTE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Private Placement Warrants The Private Placement Warrants were initially recognized as a liability on the Closing Date at a fair value of $ 0.6 million, and the liability was remeasured to an estimated fair value of $ 0.1 million as of December 31, 2022. 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, 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: As of December 31, 2023 2022 Market price of public stock $ 2.84 $ 2.11 Exercise price $ 11.50 $ 11.50 Expected term (years) 2.65 3.65 Expected share price volatility 75.0 % 78.3 % Risk-free interest rate 4.09 % 4.14 % Estimated dividend yield 0 % 0 % Public Warrants The Public Warrants may only be exercised for a whole number of shares and will expire five years after the completion of the Merger. The Public Warrants became exercisable 30 days after the completion of the Merger. The Public Warrants were initially recognized as equity on the Closing Date at a fair value of $ 2.80 per share. Contingent Earnout Liability 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. Upon the Closing, the contingent obligation to issue Contingent Earnout Shares was accounted for as a liability because the triggering events that determine the number of Contingent Earnout Shares required to be issued include events that are not solely indexed to the Common Stock. 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. 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 $ 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. 132 Table of Contents HUMACYTE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Assumptions used in the valuations are described below: As of December 31, 2023 2022 Current stock price $ 2.84 $ 2.11 Expected share price volatility 86.7 % 89.0 % Risk-free interest rate 3.88 % 3.88 % Estimated dividend yield 0 % 0 % Expected term (years) 10.00 10.00 10. 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. 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 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. 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”). As a result of the Merger, no further awards may be granted under either the 2015 Plan or the 2005 Plan. All awards previously granted and outstanding as of the effective date of the Merger were adjusted to reflect the impact of the Merger as set forth in the Merger Agreement, but otherwise remain in effect pursuant to their original terms. 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, 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. The Company’s board of directors or compensation committee determines the specific terms of equity incentive grants, including the exercise price per share and vesting period for option awards. Option awards are granted with an exercise price equal to the fair market value of the Company’s Common Stock at the date of grant. The Company has granted options that include either a service-based or performance-based vesting condition, or both, and a 10-year contractual term. The service-based vesting condition for the plans is generally satisfied over 36 to 48 months from the date of grant. The performance-based vesting conditions are satisfied upon the attainment of certain product development milestones. The Company recognizes stock-based compensation expense based on the grant date fair value of the awards measured using the Black-Scholes option pricing model. Compensation expense related to awards with service-based vesting conditions is recognized on a straight-line basis over the requisite service period. 133 Table of Contents 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. The Company does not recognize compensation expense related to awards with performance-based vesting conditions until it is probable that the performance-based vesting condition will be achieved. Forfeitures are accounted for as they occur. Option awards under the Company’s option plans generally provide for accelerated vesting of the unvested portions of any option award in the event of an involuntary termination, as such term is defined in the relevant stock option agreement, of a grantee’s employment during the period that commences 30 days prior to the effective date of a corporate transaction and that ends 12 months following the effective date of such transaction. 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. 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: Year Ended December 31, 2023 2022 Estimated dividend yield 0 % 0 % Expected share price volatility (weighted average and range, if applicable) 88.6 % ( 88.5 % to 89.8 %) 88.8 % ( 87.4 % to 100.0 %) Risk-free interest rate (weighted average and range, if applicable) 4.22 % ( 3.58 % to 4.39 %) 3.50 % ( 1.89 % to 3.69 %) Expected term of options (in years) 6.25 6.25 • Fair Value of Common Stock. The fair value of the Common Stock has been determined based on the closing price of the shares on Nasdaq. • Expected Term. The expected term represents the period that stock options are expected to be outstanding. The Company calculated the expected term using the simplified method for options, which is available where there is insufficient historical data about exercise patterns and post-vesting employment termination behavior. The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the maximum contractual expiration date is used as the expected term under this method. For awards with multiple vesting-tranches, the times from grant until the mid-points for each of the tranches may be averaged to provide an overall expected term. • Expected Volatility. The expected volatility was determined based on a blended approach using the historical share volatility of the Company’s Common Stock and that of several publicly traded peer companies over a period of time equal to the expected term of the options, as the Company has a limited trading history. For purposes of identifying these peer companies, the Company considered the industry, stage of development, size and financial leverage of potential comparable companies. • Risk-Free Interest Rate. The risk-free interest rate was based on the yields of U.S. Treasury zero-coupon securities with maturities similar in duration to the expected term of the options. • Expected Dividend Yield. The Company has not paid dividends on its Common Stock nor does it expect to pay dividends in the foreseeable future. Accordingly, the Company has estimated the dividend yield to be zero . 134 Table of Contents 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: Year Ended December 31, ($ in thousands) 2023 2022 Research and development $ 1,716 $ 1,034 General and administrative 5,112 5,150 Total $ 6,828 $ 6,184 A summary of option activity under the Company’s stock option plans during the year ended December 31, 2023 is presented below: Number of Shares Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value (in thousands) Options outstanding at December 31, 2022 7,203,874 $ 5.90 7.5 $ 429 Granted 5,750,912 2.86 Exercised ( 444,715 ) 1.27 Forfeited ( 590,650 ) 5.18 Options outstanding at December 31, 2023 11,919,421 $ 4.64 8.3 $ 383 Vested and exercisable, December 31, 2023 4,200,305 $ 7.24 6.0 $ 134 Vested and expected to vest, December 31, 2023 11,919,421 $ 4.64 8.3 $ 383 The weighted-average grant-date fair value per share of options granted during the years ended December 31, 2023 and 2022 was $ 2.20 and $ 2.70 , respectively. The total intrinsic value of options exercised during the years ended December 31, 2023 and 2022 was $ 0.8 million and $ 0.3 million, respectively. 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. 135 Table of Contents HUMACYTE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. Income Taxes The Company did not record any income tax expense or benefit during the years ended December 31, 2023 and 2022. The Company has a net operating loss and has provided a valuation allowance against net deferred tax assets due to uncertainties regarding the Company’s ability to realize these assets. All losses before income taxes arose in the U.S. 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. Significant components of the Company’s deferred tax assets and deferred tax liabilities, including valuation allowances, are as follows: As of December 31, ($ in thousands) 2023 2022 Deferred tax assets: Net operating loss $ 80,785 $ 67,879 Capitalized research and development 50,968 43,818 Research credits 20,099 18,054 Stock-based compensation 1,140 3,047 Right of use lease liability 133 144 Accrued expenses 69 65 Other 1 1 Total deferred tax asset 153,195 133,008 Less: valuation allowance ( 151,677 ) ( 131,151 ) Total net deferred tax asset 1,518 1,857 Deferred tax liabilities: Basis difference in fixed assets ( 1,385 ) ( 1,713 ) Right of use lease assets ( 133 ) ( 144 ) Total deferred tax liability ( 1,518 ) ( 1,857 ) Total net deferred tax asset/(liability) $ — $ — A valuation allowance is provided for deferred tax assets where the recoverability of the assets is uncertain. The determination to provide a valuation allowance is dependent upon the assessment of whether it is more likely than not that sufficient future taxable income will be generated to utilize the deferred tax assets. Based on the weight of the available evidence, which includes the Company’s historical operating losses, lack of taxable income and the accumulated deficit, the Company provided a full valuation allowance against the deferred tax assets resulting from the tax loss and credits carried forward as of December 31, 2023 and December 31, 2022. On November 18, 2021, North Carolina enacted the 2021 Appropriations Act, which included a gradual corporate income tax rate decrease from the current 2.5% to 0% by 2030. The Company is in a cumulative loss position and does not have significant deferred tax liabilities that can be utilized as a source of taxable income in the future. 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 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. 136 Table of Contents HUMACYTE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The reasons for the difference between the actual income tax benefit for the years ended December 31, 2023 and 2022, and the amount computed by applying the statutory Federal income tax rate to losses before income taxes are as follows: December 31, 2023 2022 ($ in thousands) Amount Rate Amount Rate Income tax benefit at statutory rate $ ( 23,263 ) 21.0 % $ ( 2,512 ) 21.0 % State income taxes, net of federal benefit ( 2,066 ) 1.9 % ( 1,767 ) 14.8 % Tax credits ( 1,917 ) 1.7 % ( 2,325 ) 19.4 % Other nondeductible expenses 1,759 ( 1.6 ) % ( 15,735 ) 131.5 % Deferred rate changes 2,100 ( 1.9 ) % 1,698 ( 14.2 ) % Deferred tax true-up (1) 2,860 ( 2.6 ) % 1,065 ( 8.9 ) % Change in valuation allowance 20,527 ( 18.5 ) % 19,576 ( 163.6 ) % Provision for income taxes $ — 0.0 % $ — 0.0 % ___________________________ (1) The deferred tax true-up for 2023 and 2022 primarily relates to executive compensation subject to IRC Section 162(m) limitations and t he 2021 research and development and net operating loss carryforwards were adjusted due to application of the employee retention credit determined in 2022. As of December 31, 2023 the Company had approximately $ 384.0 million and $ 383.0 million of Federal and state net operating losses, respectively. Of this amount, $ 222.7 million of Federal net operating losses are subject to an 80 % limitation on taxable income, do not expire and will carry forward indefinitely, while the remaining amount begins to expire in 2025. Some of these state net operating losses included in these amounts follow the Federal Tax Cuts and Jobs Act and are carried over indefinitely. The Company’s state net operating losses began to expire in 2020 and will expire completely in 2043. The state operating loss carryforwards are inclusive of North Carolina net operating losses, which are recorded at a zero benefit. As of December 31, 2023 and 2022, the Company had Federal and state research tax credit carryforwards of $ 20.1 million and $ 18.1 million, respectively. 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 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. Subsequent ownership changes may further affect the limitation in future years. The Company has not determined whether there have been any cumulative ownership changes or the impact on the utilization of the loss carryforwards if such changes have occurred. A section 382 study will be performed at a time when forthcoming profitability is reasonably anticipated. 12. Retirement Plan 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 401(k) plan by the Company totaled $ 1.0 million and $ 0.7 million for the years ended December 31, 2023 and 2022, respectively. 137 Table of Contents HUMACYTE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. Commitments and Contingencies Patent License Agreements 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 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. The relevant licensed patent on decellularization of tissue expired in 2021. The Company has agreed to use commercially reasonable efforts to develop, register, market and sell products utilizing the patent rights, referred to as the licensed products. Any services provided to a third party utilizing licensed products are referred to as licensed services. The Company has also agreed to meet certain benchmarks in its development efforts, including as to development events, clinical trials, regulatory submissions and marketing approval, within specified timeframes. 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 Common Stock. Under the license agreement, the Company also agreed to pay Duke: • a low single-digit percentage royalty on eligible sales of licensed products and licensed services, plus a low double-digit percentage of any sublicensing revenue; • an annual minimum royalty beginning in 2012, which increases in the calendar year immediately following the first commercial sale of licensed products or licensed services (whichever occurs first); and • an additional amount in license fees, as certain milestones are met. The license agreement remains effective until the later of (i) the last of the patent rights expires or (ii) four years after the Company’s first commercial sale, unless terminated earlier. Either party may terminate the agreement for fraud, willful misconduct or illegal conduct, or uncured material breach. Duke may terminate the agreement if the Company becomes insolvent. Duke may also terminate the license, convert the license into a non-exclusive license or seek assignment of any sublicense if the Company fails to reach diligence milestones within the applicable time period. If the Company abandons any claim, patent or patent application, its rights under the license with respect to such patent rights will be terminated in the territory in which the Company abandons such rights. The Company may terminate the license agreement unilaterally upon three months ’ prior notice to Duke. The Company agrees to indemnify Duke against certain third-party claims. 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 “Small Diameter Vessel License Agreement”). 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 138 Table of Contents HUMACYTE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. The Company is also obligated to provide Yale periodically an updated and revised copy of its plan for each license, which must indicate progress of its development and commercialization. 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 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 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 ; • a low single-digit percentage royalty on worldwide net sales, subject to reductions for third-party license fees; and • a low double-digit percentage of sublicensing income. 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 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 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, 139 Table of Contents HUMACYTE, INC. 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. 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 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; and • 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 The Company currently is not aware of any legal proceedings or claims that management believes will have, individually or in the aggregate, a material adverse effect on the Company’s business, financial condition, results of operations, or cash flows. Indemnification To the extent permitted under Delaware law, the Company has agreed to indemnify its directors and officers for certain events or occurrences while the director or officer is, or was serving, at the Company’s request in such capacity. The indemnification period covers all pertinent events and occurrences during the director’s or officer’s service. The maximum potential amount of future payments the Company could be required to make under these indemnification arrangements is not specified in such arrangements; however, the Company has director and officer insurance coverage that is intended to reduce its exposure and enable the Company to recover a portion of any potential future amounts the Company could be required to make. 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. 140 Table of Contents HUMACYTE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. 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 converted into 15,812,735 shares of 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 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. The Company is responsible for developing and seeking regulatory approval for the distribution product in the field in the United States. For countries outside the United States, the parties agreed to use commercially reasonable efforts to satisfy certain agreed minimum market entry criteria for the distribution product in the field in such country. For the EU, once such criteria have been satisfied for the applicable country, or if the parties otherwise mutually agree to obtain regulatory approval for the distribution product in the field in the applicable country, the Company agreed to use commercially reasonable efforts to obtain such regulatory approval (other than pricing approval), and Fresenius Medical Care agreed to use commercially reasonable efforts to obtain the corresponding pricing approval. For the rest of the world (i.e., outside the United States and the EU), once such criteria have been satisfied for the applicable country, or if the parties otherwise mutually agree to obtain regulatory and pricing approval for the distribution product in the field in the applicable country, Fresenius Medical Care agreed to use commercially reasonable efforts to obtain such approvals, and the Company agreed to use commercially reasonable efforts to support Fresenius Medical Care in its efforts. Under the distribution agreement, the Company grants an exclusive, sublicensable license to Fresenius Medical Care under the patents, know-how and regulatory materials controlled by the Company during the term to commercialize the distribution product in the field outside the United States, subject to the Company’s retained rights to carry out its obligations under the distribution agreement. 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. 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. Ownership of all other know-how, patents, materials and other intellectual property created, conceived or developed during the performance of activities under the distribution agreement will be determined in accordance with U.S. patent laws for determining inventorship. The Company is obligated to make payments to Fresenius Medical Care based on a share of aggregate net sales by or on behalf of the Company of the distribution product in the United States in the field. Such revenue-share payments will be a percentage of net sales in the low double digits, without regard to the calendar year in which such net sales are attributable, until such time that the Company has paid to Fresenius Medical Care a certain total amount, at which time the revenue-share will decrease to a percentage of net sales in the mid-single digits. 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- 141 Table of Contents HUMACYTE, INC. 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. The distribution agreement will generally continue on a country-by-country basis until the later of (a) the tenth anniversary of the launch date of the distribution product in the relevant country or (b) the expiration of the last-to-expire valid claim of specified patents in such country. Each party is permitted to terminate the distribution agreement for insolvency of, or, under certain circumstances, including various cure periods, material breach by the other party. Subject to a cure period, Fresenius Medical Care may also terminate the distribution agreement in its entirety or on a country-by-country basis (i) for certain withdrawals of regulatory approval or (ii) for termination or expiration of any of our in-licenses that is necessary for the exercise of Fresenius Medical Care’s rights, or the satisfaction of its obligations, under the distribution agreement. In addition, Fresenius Medical Care may terminate the distribution agreement for convenience on a country-by-country basis upon not less than 12 months’ written notice to the Company, although Fresenius Medical Care is not permitted to give such notice prior to the end of the second year following launch of the distribution product in such country. 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 Dr. Niklason serves as an Adjunct Professor in Anesthesia at Yale University. 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 pertaining to Yale University included in the statements of operations and comprehensive loss for the years ended December 31, 2023 and 2022: Year Ended December 31, ($ in thousands) 2023 2022 License expenses 55 100 Other 25 19 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, and there was an insignificant amount payable to Yale as of December 31, 2023 . 142 Table of Contents HUMACYTE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. 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. 143 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.