SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
☐ oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Alpha Healthcare Acquisition Corp.
(Exact name of registrant as specified in its charter)
Delaware | 85-1763759 | ||||||||||
(State or other jurisdiction of | ( | ||||||||||
2525 East North Carolina Highway 54 | |||||||||||
Durham, | NC | 27713 | |||||||||
(Address of principal executive offices) | (Zip code) |
1177 Avenue of the Americas, 5th Floor
New York, New York 10036
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (646) 494-3296
Not Applicable
(Former name, or former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
The Nasdaq Stock Market LLC | ||||||||||||||
Redeemable Warrants, each whole warrant exercisable for one share of | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐x No ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒x No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | o | Accelerated filer | o | |||||||||||
Non-accelerated filer | x | Smaller reporting company | x | |||||||||||
Emerging growth company | x |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒o No ☐
As of August 16, 2021, 10,355,000 Class A common stock, par value $0.0001, and 2,500,000 Class B5, 2022, 103,006,803 shares of common stock, par value $0.0001, were issued and outstanding.
Table of Contents
PART I – FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
ALPHA HEALTHCARE ACQUISITION CORP.
CONDENSED BALANCE SHEETS
June 30, 2021 (Unaudited) | December 31, 2020 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 383,400 | $ | 1,094,761 | ||||
Prepaid expenses | 79,381 | 148,977 | ||||||
Total current assets | $ | 462,781 | $ | 1,243,738 | ||||
Prepaid expenses, non-current | 15,397 | - | ||||||
Marketable Securities Held in Trust account | 100,031,414 | 100,016,161 | ||||||
Total assets | 100,509,592 | 101,259,899 | ||||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 6,364 | $ | 5,000 | ||||
Franchise tax payable | 213,475 | 113,475 | ||||||
Due to related party | - | 34,334 | ||||||
Promissory Note – Related Party | - | 95,136 | ||||||
Total current liabilities | 219,839 | 247,945 | ||||||
Warrant Liabilities | 14,465,458 | 6,038,351 | ||||||
Deferred underwriters’ discount | 2,122,723 | 1,959,758 | ||||||
Total liabilities | 16,808,020 | 8,246,054 | ||||||
Commitments | ||||||||
Class A common stock subject to possible redemption, 7,870,157 and 8,801,384 shares at redemption value | 78,701,570 | 88,013,840 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | - | - | ||||||
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 2,484,843 shares and 1,553,616 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively (excluding 7,870,157 and 8,801,384 shares subject to possible redemption, respectively) | 250 | 156 | ||||||
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 2,500,000 shares issued and outstanding at June 30, 2021 and December 31, 2020 | 250 | 250 | ||||||
Additional paid-in capital | 12,729,166 | 3,579,954 | ||||||
Accumulated earnings (deficit) | (7,729,664 | ) | 1,419,645 | |||||
Total stockholders’ equity | 5,000,002 | 5,000,005 | ||||||
Total liabilities and stockholders’ equity | $ | 100,509,592 | $ | 101,259,899 |
June 30, 2022 | December 31, 2021 | ||||||||||
ASSETS | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 181,035 | $ | 217,502 | |||||||
Short-term investments | 8,000 | 8,000 | |||||||||
Accounts receivable | 1,301 | 176 | |||||||||
Prepaid expenses and other current assets | 2,694 | 3,662 | |||||||||
Total current assets | 193,030 | 229,340 | |||||||||
Finance lease right-of-use assets, net | 20,403 | 21,432 | |||||||||
Operating lease right-of-use assets, net | 705 | 727 | |||||||||
Property and equipment, net | 32,227 | 35,034 | |||||||||
Total assets | $ | 246,365 | $ | 286,533 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities | |||||||||||
Accounts payable | $ | 2,537 | $ | 2,094 | |||||||
Accrued expenses | 6,186 | 6,757 | |||||||||
Finance lease obligation, current portion | 2,115 | 1,981 | |||||||||
Deferred payroll tax, current portion | 173 | 173 | |||||||||
Operating lease obligation, current portion | 47 | 45 | |||||||||
Total current liabilities | 11,058 | 11,050 | |||||||||
Contingent earnout liability | 44,049 | 103,660 | |||||||||
SVB loan payable | 28,132 | 27,361 | |||||||||
Finance lease obligation, net of current portion | 20,018 | 21,109 | |||||||||
Operating lease obligation, net of current portion | 658 | 682 | |||||||||
Common stock warrant liabilities | 190 | 497 | |||||||||
Total liabilities | 104,105 | 164,359 | |||||||||
Commitments and contingencies (Note 11) | 0 | 0 | |||||||||
Stockholders’ equity | |||||||||||
Preferred stock, $0.0001 par value; 20,000,000 shares designated as of June 30, 2022 and December 31, 2021; 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021 | — | — | |||||||||
Common stock, $0.0001 par value; 250,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 103,006,803 and 103,003,646 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | 10 | 10 | |||||||||
Additional paid-in capital | 539,787 | 536,737 | |||||||||
Accumulated deficit | (397,537) | (414,573) | |||||||||
Total stockholders' equity | 142,260 | 122,174 | |||||||||
Total liabilities and stockholders’ equity | $ | 246,365 | $ | 286,533 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Grant revenue | $ | 1,301 | $ | 690 | $ | 1,534 | $ | 845 | |||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Research and development | 14,652 | 14,568 | 30,966 | 29,705 | |||||||||||||||||||
General and administrative | 5,180 | 5,391 | 10,862 | 10,178 | |||||||||||||||||||
Total operating expenses | 19,832 | 19,959 | 41,828 | 39,883 | |||||||||||||||||||
Loss from operations | (18,531) | (19,269) | (40,294) | (39,038) | |||||||||||||||||||
Other income (expense), net: | |||||||||||||||||||||||
Interest income | 301 | 2 | 332 | 3 | |||||||||||||||||||
Change in fair value of contingent earnout liability | 56,353 | — | 59,611 | — | |||||||||||||||||||
Change in fair value of common stock warrant liabilities | 233 | — | 307 | — | |||||||||||||||||||
Gain on PPP loan forgiveness | — | 3,284 | — | 3,284 | |||||||||||||||||||
Interest expense | (1,488) | (1,215) | (2,920) | (1,748) | |||||||||||||||||||
Total other income, net | 55,399 | 2,071 | 57,330 | 1,539 | |||||||||||||||||||
Net income (loss) and comprehensive income ( loss) | $ | 36,868 | $ | (17,198) | $ | 17,036 | $ | (37,499) | |||||||||||||||
Net income (loss) per share attributable to common stockholders, basic | $ | 0.36 | $ | (2.89) | $ | 0.17 | $ | (6.35) | |||||||||||||||
Weighted-average shares outstanding used in computing net income (loss) per share attributable to common stockholders, basic | 103,005,651 | 5,941,675 | 103,004,874 | 5,908,372 | |||||||||||||||||||
Net income (loss) per share attributable to common stockholders, diluted | $ | 0.35 | $ | (2.89) | $ | 0.16 | $ | (6.35) | |||||||||||||||
Weighted-average shares outstanding used in computing net income (loss) per share attributable to common stockholders, diluted | 103,908,440 | 5,941,675 | 103,923,138 | 5,908,372 |
Redeemable Convertible Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||
Shares | Amount | 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 | — | — | 926 | — | 1 | — | 1 | |||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 1,547 | — | 1,547 | |||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | (19,832) | (19,832) | |||||||||||||||||||||||||||||||||||||
Balance as of March 31, 2022 | — | $ | — | 103,004,572 | $ | 10 | $ | 538,285 | $ | (434,405) | $ | 103,890 | ||||||||||||||||||||||||||||||||
Proceeds from the exercise of stock options | — | — | 2,231 | — | 11 | — | 11 | |||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 1,491 | — | 1,491 | |||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 36,868 | 36,868 | |||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2022 | — | $ | — | 103,006,803 | $ | 10 | $ | 539,787 | $ | (397,537) | $ | 142,260 | ||||||||||||||||||||||||||||||||
Redeemable Convertible Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' (Deficit) Equity | ||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2020 | 69,613,562 | $ | 420,989 | 5,822,396 | $ | 1 | $ | 37,778 | $ | (388,096) | $ | (350,317) | ||||||||||||||||||||||||||||||||
Proceeds from the exercise of stock options | — | — | 116,149 | — | 206 | — | 206 | |||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 2,528 | — | 2,528 | |||||||||||||||||||||||||||||||||||||
Issuance of warrants in conjunction with debt | — | — | — | — | 2,360 | — | 2,360 | |||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | (20,301) | (20,301) | |||||||||||||||||||||||||||||||||||||
Balance as of March 31, 2021 | 69,613,562 | $ | 420,989 | 5,938,545 | $ | 1 | $ | 42,872 | $ | (408,397) | $ | (365,524) | ||||||||||||||||||||||||||||||||
Proceeds from the exercise of stock options | — | — | 5,204 | — | 30 | — | 30 | |||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 2,930 | — | 2,930 | |||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | (17,198) | (17,198) | |||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2021 | 69,613,562 | $ | 420,989 | 5,943,749 | $ | 1 | $ | 45,832 | $ | (425,595) | $ | (379,762) | ||||||||||||||||||||||||||||||||
For the Six Months Ended June 30, 2022, | |||||||||||
2022 | 2021 | ||||||||||
Cash flows from operating activities | |||||||||||
Net income (loss) | $ | 17,036 | $ | (37,499) | |||||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||||||
Depreciation expense | 3,032 | 3,106 | |||||||||
Stock-based compensation expense | 3,038 | 5,458 | |||||||||
Change in fair value of contingent earnout liability | (59,611) | — | |||||||||
Change in fair value of common stock warrant liabilities | (307) | — | |||||||||
Amortization expense | 1,029 | 1,030 | |||||||||
Non-cash operating lease costs | 22 | 21 | |||||||||
Amortization of SVB debt discount | 771 | 313 | |||||||||
Accrued interest on PPP loan obligation | — | 11 | |||||||||
Gain on PPP loan forgiveness | — | (3,284) | |||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | (1,125) | (576) | |||||||||
Prepaid expenses and other current assets | 968 | (75) | |||||||||
Accounts payable | 374 | 769 | |||||||||
Accrued expenses | (571) | 1,524 | |||||||||
Operating lease obligation | (22) | (21) | |||||||||
Net cash used in operating activities | (35,366) | (29,223) | |||||||||
Cash flows from investing activities | |||||||||||
Purchase of short-term investments (certificates of deposit) | (8,000) | — | |||||||||
Proceeds from maturity of short-term investments (certificates of deposit) | 8,000 | — | |||||||||
Purchase of property and equipment | (156) | (92) | |||||||||
Net cash used in investing activities | (156) | (92) | |||||||||
Cash flows from financing activities | |||||||||||
Proceeds from the exercise of stock options | 12 | 236 | |||||||||
Payment of finance lease principal | (957) | (834) | |||||||||
Proceeds from SVB loan | — | 19,659 | |||||||||
Payment of deferred offering costs | — | (706) | |||||||||
Net cash (used in) provided by financing activities | (945) | 18,355 | |||||||||
Net decrease in cash and cash equivalents | (36,467) | (10,960) | |||||||||
Cash and cash equivalents at the beginning of the period | 217,502 | 39,929 | |||||||||
Cash and cash equivalents at the end of the period | $ | 181,035 | $ | 28,969 | |||||||
Supplemental disclosure | |||||||||||
Cash paid for interest on SVB loan | $ | 1,165 | $ | 258 | |||||||
Supplemental disclosure of noncash activities: | |||||||||||
Purchase of property and equipment in accounts payable | $ | 90 | $ | — | |||||||
Issuance of warrants in conjunction with debt | $ | — | $ | 2,360 | |||||||
Unpaid deferred offering costs | $ | — | $ | 2,536 | |||||||
ALPHA HEALTHCARE ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
(Unaudited)
For the | For the | |||||||
three months ended | six months ended | |||||||
June 30, 2021 | June 30, 2021 | |||||||
Formation and operating costs | $ | 243,668 | $ | 737,486 | ||||
Loss from operations | (243,668 | ) | (737,486 | ) | ||||
Other income (loss) | ||||||||
Interest income | 12 | 31 | ||||||
Change in fair value of warrant liabilities | 528,317 | (8,427,107 | ) | |||||
Interest income on marketable securities held in Trust account | 1,562 | 15,253 | ||||||
Total other income (loss) | 529,891 | (8,411,823 | ) | |||||
Net income (loss) | $ | 286,223 | $ | (9,149,309 | ) | |||
Weighted average shares outstanding, Class A common stock subject to possible redemption | 7,841,024 | 8,315,869 | ||||||
Basic and diluted net income per share, Class A common stock subject to possible redemption | $ | - | $ | - | ||||
Weighted average shares outstanding, Non-redeemable common stock | 4,984,843 | 4,539,131 | ||||||
Basic and diluted net loss per share, Non-redeemable | $ | 0.06 | $ | (2.02 | ) |
See accompanying notes to the financial statements.
ALPHA HEALTHCARE ACQUISITION CORP.
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
(Unaudited)
Common Stock | Additional | Accumulated | Total | |||||||||||||||||||||||||
Class A | Class B | Paid-In | Earnings | Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | (Deficit) | Equity | ||||||||||||||||||||||
Balance as of December 31, 2020 | 1,553,616 | $ | 156 | 2,500,000 | $ | 250 | $ | 3,579,954 | $ | 1,419,645 | $ | 5,000,005 | ||||||||||||||||
Change in deferred underwriter discount | - | - | - | - | (168,063 | ) | - | (168,063 | ) | |||||||||||||||||||
Change in Class A common stock subject to possible redemption | 960,360 | 96 | - | - | 9,603,504 | - | 9,603,600 | |||||||||||||||||||||
Net loss | - | - | - | - | - | (9,435,532 | ) | (9,435,532 | ) | |||||||||||||||||||
Balance as of March 31, 2021 | 2,513,976 | $ | 252 | 2,500,000 | $ | 250 | $ | 13,015,395 | $ | (8,015,887 | ) | $ | 5,000,010 | |||||||||||||||
Balance as of March 31, 2021 | 2,513,976 | $ | 252 | 2,500,000 | $ | 250 | $ | 13,015,395 | $ | (8,015,887 | ) | $ | 5,000,010 | |||||||||||||||
Change in deferred underwriter discount | - | - | - | - | 5,099 | - | 5,099 | |||||||||||||||||||||
Change in Class A common stock subject to possible redemption | (29,133 | ) | (2 | ) | - | - | (291,328 | ) | - | (291,330 | ) | |||||||||||||||||
Net loss | - | - | - | - | - | 286,223 | 286,223 | |||||||||||||||||||||
Balance as of June 30, 2021 | 2,484,843 | $ | 250 | 2,500,000 | $ | 250 | $ | 12,729,166 | $ | (7,729,664 | ) | $ | 5,000,002 |
See accompanying notes to the financial statements.
ALPHA HEALTHCARE ACQUISITION CORP.
CONDENSED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2021
(Unaudited)
For the six months ended, June 30, 2021 | ||||
Cash Flows from Operating Activities: | ||||
Net loss | $ | (9,149,309 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | ||||
Change in fair value of warrant liabilities | 8,427,107 | |||
Income on trust account | (15,253 | ) | ||
Changes in current assets and current liabilities: | ||||
Prepaid assets | 54,199 | |||
Accounts payable | 1,365 | |||
Franchise tax payable | 100,000 | |||
Due to related party | (34,334 | ) | ||
Net cash used in operating activities | (616,225 | ) | ||
Cash Flows from Financing Activities: | ||||
Proceeds from issuance of promissory note to related party | 52,627 | |||
Repayment of promissory note to related party | (147,763 | ) | ||
Net cash used in financing activities | (95,136 | ) | ||
Net Change in Cash | (711,361 | ) | ||
Cash - Beginning | 1,094,761 | |||
Cash - Ending | $ | 383,400 | ||
Supplemental Disclosure of Non-cash Financing Activities: | ||||
Change in value of Class A common stock subject to possible redemption | $ | 9,312,270 | ||
Change in deferred underwriter discount payable charged to additional paid in capital | $ | 162,964 | ||
See accompanying notes to the financial statements
ALPHA HEALTHCARE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
Note 1 —1. Organization and Description of Business Operations
Organization
On August 26, 2021 (the “Closing Date”), Alpha Healthcare Acquisition Corp. (the “Company”(“AHAC”) was incorporated as a Delaware corporation on July 1, 2020. The Company was incorporated for the purpose of effectingconsummated a merger capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company has not selected any specific business combination target and the Company has not, nor has anyone on its behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. The Company has selected December 31pursuant to a Business Combination Agreement, dated as its fiscal year end.
Onof February 17, 2021 the Company entered into a business combination agreement (the “Business Combination“Merger Agreement”), by and among the Company, Hunter Merger Sub, Inc., a Delaware corporation (“Merger Sub”), and Humacyte, Inc., a Delaware corporationCorporation (“Legacy Humacyte”). The Business Combination Agreement provides, among other things, that on the terms, AHAC and subject to the conditions set forth therein,Hunter Merger Sub, will mergeInc. (“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 surviving as a wholly-owned subsidiary of the Company (the “Business Combination”). Upon the closing of the Business Combination (the “Closing”), it is anticipated that the Company will change its name to “Humacyte, Inc.”
As of June 30, 2021, the Company had not yet commenced any operations. All activity through June 30, 2021, relates to the Company’s formation and the Initial Public Offering (“IPO”) described below. The Company will not generate any operating revenues until after the completion of its initial business combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO.
Financing
The registration statement for the Company’s IPO was declared effective on September 17, 2020 (the “Effective Date”). On September 22, 2020, the Company consummated the IPO of 10,000,000 units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $100,000,000, which is described in Note 3.
Simultaneously with the closing of the IPO, the Company consummated the sale of 355,000 Units (the “Private Placement Units”) the Sponsor, Oppenheimer & Co. Inc. (“Oppenheimer”) and Northland Securities, Inc. (“Northland”) at a purchase price of $10.00 per Private Placement Unit, generating gross proceeds to the Company of $3,550,000, which is described in Note 4.
Transaction costs amounted to $4,197,388 consisting of $2,000,000 of underwriting fee, $1,959,758 of deferred underwriting fee and $329,713 of other offering costs. Of the total transaction cost $317,023 was expensed as non-operating expenses in that statement of operations with the rest of the offering cost charged to stockholders’ equity. The transaction costs were allocated based on the relative fair value basis, compared to the total offering proceeds, between the fair value of the public warrant liabilities and the Class A common stock.
Trust Account
Following the closing of the IPO on September 22, 2020, an amount of $100,000,000 from the net proceeds of the sale of the Units in the IPO and the sale of the Private Placement Units was placed in a trust account (“Trust Account”) which will be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company. Except with respect to interest earned on the funds held in the trust account that may be released to the Company to pay its tax obligations, the proceeds from the IPO and the sale of the private placement units will not be released from the trust account until the earliest of (a) the completion of the Company’s initial business combination, (b) the redemption of any public shares properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation, and (c) the redemption of the Company’s public shares if the Company is unable to complete the initial business combination within 24 months from the closing of the IPO, subject to applicable law. The proceeds deposited in the trust account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s public stockholders.
Initial Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO, although substantially all of the net proceeds are intended to be generally applied toward consummating a business combination.
The Company’s business combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (as defined below) (net of taxes payable) at the time of the signing an agreement to enter into a business combination. However, the Company will only complete a business combination if the post-business combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a business combination.
The Company will provide its public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial business combination either (i) in connection with a stockholder meeting called to approve the initial business combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a proposed initial business combination or conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their shares for a pro rata portion of the amount then on deposit in the Trust Account (initially $10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).
The shares of common stock subject to redemption is recorded at a redemption value and classified as temporary equity upon the completion of the IPO, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a business combination if the Company has net tangible assets of at least $5,000,001 either immediately prior to or upon consummation of a business combination and, if the Company seeks stockholder approval, a majority of the issued and outstanding shares voted are voted in favor of the business combination.
The Company will have 24 months from the closing of the IPO (with the ability to extend with stockholder approval) to consummate a business combination (the “Combination Period”). However, if the Company is unable to complete a business combination within the Combination Period, the Company will redeem 100% of the outstanding public shares for a pro rata portion of the funds held in the Trust Account, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to the Company, divided by the number of then outstanding public shares, subject to applicable law and as further described in the registration statement, and then seek to dissolve and liquidate.
The Company’s sponsor, officers and directors have agreed to (i) waive their redemption rights with respect to their founder shares, private placement shares and public shares in connection with the completion of the initial business combination, (ii) waive their redemption rights with respect to their founder shares and public shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation, and (iii) waive their rights to liquidating distributions from the trust account with respect to their founder shares and private placement shares if the Company fails to complete the initial business combination within the Combination Period.
The Company’s sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. However, the Company has not asked its sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether its sponsor has sufficient funds to satisfy its indemnity obligations and believe that the Company’s sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure that its sponsor would be able to satisfy those obligations.
Proposed Business Combination with Humacyte
Business Combination Agreement
If the Business Combination Agreement is approved and adopted and the business combination is subsequently completed, Merger Sub will merge with and into Humacyte, with Humacytecontinuing as the surviving company in the mergercorporation and after giving effect to such merger, Humacyte shall beas a wholly owned subsidiary of AHAC.
UnderAHAC (such transactions, the terms of the Business Combination Agreement, at the effective time of the Business Combination (the “Effective Time”), (i) each outstanding share of Humacyte common stock will be cancelled“Merger,” and, converted into the right to receive a number of shares of common stock of New Humacyte (the “New Humacyte common stock”) equal to the Exchange Ratio (as defined in this proxy statement/prospectus); (ii) each outstanding share of Humacyte preferred stock will be cancelled and converted into the right to receive a number of shares of New Humacyte common stock equal to (A) the aggregate number of shares of Humacyte common stock that would be issued upon conversion of the shares of Humacyte preferred stock based on the applicable conversion ratio immediately prior to the Effective Time, multiplied by (B) the Exchange Ratio; and (iii) each outstanding Humacyte option or warrant will be converted into an option or warrant, as applicable, to purchase a number of shares of New Humacyte common stock equal to (A) the number of shares of Humacyte common stock subject to such option or warrant multiplied by (B) the Exchange Ratio at an exercise price per share equal to the current exercise price per share for such option or warrant divided by the Exchange Ratio; in each case, rounded down to the nearest whole share. Holders of shares of Humacyte common stock and Humacyte preferred stock also will be eligible to receive up to an aggregate of 15,000,000 shares of New Humacyte common stock based on the share price performance of the New Humacyte common stock. The Exchange Ratio is approximately 0.26260.
Sponsor Support Agreement
In connectioncollectively with the execution of the Business Combination Agreement, Sponsor and the other holders (the “Company Supporting Stockholders”) of the Class B Common Stock entered into a support agreement with AHAC and Humacyte (the “Sponsor Support Agreement”). Under the Sponsor Support Agreement, each Company Supporting Stockholder agreed to vote, at any meeting of the stockholders of AHAC and in any action by written consent of the stockholders of AHAC, all of such Company Supporting Stockholder’s Class A Common Stock and Class B Common Stock (i) in favor of (a) the Business Combination Agreement and the transactions contemplated thereby and (b) the other proposals that AHAC and Humacyte agreeddescribed in the Business CombinationMerger Agreement, shall be submitted at such meeting for approval by AHAC’s stockholders together with the proposal“Reverse Recapitalization”). On the Closing Date, AHAC changed its name to obtain the Company Stockholder Approval (the “Required Transaction Proposals”Humacyte, Inc. (“New Humacyte”) and (ii) against any proposal that conflicts or materially impedes or interferes with any Required Transaction Proposals or that would adversely affect or delay the Business Combination.Legacy Humacyte changed its name to Humacyte Global, Inc. The Sponsor Support Agreement also prohibits each Company Supporting Stockholder from, among other things and subject to certain exceptions, selling, assigning or transferring any Class A Common Stock or Class B Common Stock held by such Company Supporting Stockholder or taking any action that would have the effect of preventing or materially delaying such Company Supporting Stockholder from performing his, her or its obligations under the Sponsor Support Agreement. In addition, in the Sponsor Support Agreement, each Company Supporting Stockholder agreed to waive, and not to assert or perfect, among other things, any rights to adjustment or other anti-dilution protections with respect to the rate at which the shares of Class B Common Stock held by the Company Supporting Stockholders convert into shares of Class A Common Stock in connection with the transactions contemplated by the Business Combination Agreement.
Humacyte Support Agreement
In connection with the execution of the Business Combination Agreement, certain Humacyte stockholders (the “Humacyte Supporting Stockholders”) entered into a support agreement with AHAC (the “Humacyte Support Agreement”). Under the Humacyte Support Agreement, each Humacyte Supporting Stockholder agreed, within two business days following the date that AHAC delivers the proxy statement/prospectus to AHAC’s stockholders (following the date that the proxy statement/prospectus becomes effective), to execute and deliver a written consent with respect to all outstanding shares of Humacyte common stock and preferred stock held by such Humacyte Supporting Stockholder (the “Subject Humacyte Shares”) approving the Business Combination Agreement and the transactions contemplated thereby. In addition to the foregoing, each Humacyte Supporting Stockholder agreed that, at any meeting of the holders of Humacyte capital stock, each such Humacyte Supporting Stockholder will appear at the meeting, in person or by proxy, and cause its Subject Humacyte Shares to be voted (i) to approve and adopt the Business Combination Agreement, the transactions contemplated thereby, and any other matters necessary or reasonably requested by HumacyteMerger is accounted for consummation of the Business Combination; and (ii) against any proposal that conflicts or materially impedes or interferes with, or would adversely affect or delay, the consummation of the transactions contemplated by the Business Combination Agreement.
The Humacyte Support Agreement also prohibits the Humacyte Supporting Stockholders from, among other things, (i) transferring any of the Subject Humacyte Shares; (ii) entering into (a) any option, commitment or other arrangement that would require the Humacyte Support Stockholders to transfer the Subject Humacyte Shares, or (b) any voting trust, proxy or other contract with respect to the voting or transfer of the Subject Humacyte Shares; or (iii) taking any action in furtherance of the foregoing. In addition, under the Humacyte Support Agreement, each Humacyte Supporting Stockholder agreed (i) not to exercise any rights of appraisal or dissenter’s rights relating to the Business Combination Agreement and the transactions contemplated thereby; and (ii) to irrevocably waive, on behalf of itself and each other holder of Humacyte preferred stock, any right to certain payments upon liquidation of Humacyte pursuant to its certificate of incorporation.
PIPE Subscription Agreements
In connection with the Business Combination, the Company entered into subscription agreements with certain investors (the “Subscription Agreements”), pursuant to which, among other things, certain investors (the “PIPE Investors”) have subscribed to purchase an aggregate of 17,500,000 shares of Class A Common Stock (together, the “PIPE Investment”) for a purchase price of $10.00 per share, or an aggregate purchase price of $175,000,000, which shares are to be issued at the Closing. The obligations of each party to consummate the PIPE Investment are conditioned upon, among other things, customary closing conditions and the consummation of the transactions contemplated by the Business Combination Agreement.
The closing of the PIPE Investment will occur on the date of and immediately prior to the consummation of the Business Combination and is conditioned thereon and on other customary closing conditions. The Class A Common Stock to be issued pursuant to the Subscription Agreements has not been registered under the Securities Act, and will be issued in reliance upon the exemption provided under Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder. The Subscription Agreements will terminate and be void and of no further force or effect upon the earliest to occur of: (a) such date and time as the Business Combination Agreement is terminated in accordance with its terms, (b) the mutual written consent of each of the parties to each such Subscription Agreement, (c) AHAC’s notification to the PIPE Investors in writing that it has abandoned its plans to move forward with the Business Combination and/or has terminated a PIPE Investor’s obligations, (d) the conditions to closing set forth in the Subscription Agreement not having been satisfied or waived on or prior to the date of the Closing and, as a result thereof, the transactions contemplated by the Subscription Agreement are not consummated at the Closing, or (e) the Termination Date, if the Closing has not occurred on or prior to such date.
Investor Rights and Lock-up Agreement
At the Effective Time, AHAC and certain of the Humacyte stockholders and AHAC stockholders will enter into the Investor Rights and Lock-up Agreement, pursuant to which, among other things, (a) such stockholders (i) will agree not to effect any sale or distribution of any shares held by any of them during the one-year lock-up period described therein, (ii) will be granted certain registration rights with respect to certain shares of securities held by them, and (iii) provides for certain provisions related to the New Humacyte Board, in each case, on the terms and subject to the conditions therein. Pursuant to the Investor Rights and Lock-up Agreement, the Sponsor and Messrs. Carlson, Robertson, Springer and Xie, directors of AHAC, will have the right to designate, and the New Humacyte Board will nominate, one individual for election to the New Humacyte Board for so long as the designating stockholders collectively own at least 5.0% of New Humacyte common stock.
If the volume weighted average price (“VWAP”) of New Humacyte common stock on Nasdaq, or any other national securities exchange on which New Humacyte common stock is then traded, is greater than or equal to $15.00 over any 20 trading days within any 30 trading day period following the Closing, then, commencing at least 180 days after the Closing, the lock-up period shall be deemed to have expired with respect to 50% of the shares of New Humacyte common stock held by each party subject to the Investor Rights and Lock-up Agreement. The lock-up period shall not apply to any shares purchased in the PIPE Investment by parties to the Investor Rights and Lock-up Agreement.
Lock-up Agreement
At the Effective Time, certain Humacyte stockholders who do not enter into the Investor Rights and Lock-up Agreement will enter into a lock-up agreement (the “Lock-up Agreement”) restricting their ability to transfer. The Lock-up Agreement has substantially the same terms as the Investor Rights and Lock-up Agreement, described above in “— Investor Rights and Lock-up Agreement” (with the exception of the right to designate a member of the New Humacyte Board).
The above description of the proposed Business Combination should be read in conjunction with the disclosures contained in the Form S-4 originally filed by the Company with the SEC on March 23, 2021 and declared effective by the SEC on August 4, 2021.
Liquidity
As of June 30, 2021, the Company had cash outside the Trust Account of $383,400 available for working capital needs. All remaining cash held in the Trust Account are generally unavailable for the Company’s use, prior to an initial business combination, and is restricted for use either in a Business Combination or to redeem common stock. As of June 30, 2021 and December 31, 2020, none of the amount in the Trust Account was available to be withdrawn as described above.
Through June 30, 2021, the Company’s liquidity needs were satisfied through receipt of $25,000 from the sale of the founder shares, advances from the Sponsor in an aggregate amount of $147,763 and the remaining net proceeds from the IPO and the sale of Private Placement Units.
The Company anticipates that the $383,400 outside of the Trust Account as of June 30, 2021, will be sufficient to allow the Company to operate for at least the next 12 months from the issuance of the financial statements, assuming that a Business Combination is not consummated during that time. Until consummation of its Business Combination, the Company will be using the funds not held in the Trust Account, and any additional Working Capital Loans (as defined in Note 5) from the initial stockholders, the Company’s officers and directors, or their respective affiliates (which is described in Note 5), for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the Business Combination.
The Company does not believe it will need to raise additional funds in order to meet the expenditures required for operating its business. However, if the Company’s estimates of the costs of undertaking in-depth due diligence and negotiating business combination is less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to the business combination. Moreover, the Company will need to raise additional capital through loans from its Sponsor, officers, directors, or third parties. None of the Sponsor, officers or directors are under any obligation to advance funds to, or to invest in, the Company. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business plan, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
Risks and Uncertainties
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s financial position will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s financial position may be materially adversely affected. Additionally, the Company’s ability to complete an initial business combination may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit the Company’s ability to have meetings with potential investors or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial business combination in a timely manner. The Company’s ability to consummate an initial business combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting market downturn.
Note 2 — Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been preparedreverse recapitalization in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and under this method of accounting, AHAC is treated as the acquired company for interim financial informationreporting purposes and in accordance withLegacy Humacyte is treated as the instructionsacquirer. Operations prior to Form 10-Q and Article 8the Merger are those of Regulation S-XLegacy Humacyte.
Company has financed its operations primarily through the sale of equity securities and convertible debt, proceeds from the Reverse Recapitalization, borrowings under loan facilities and, to a lesser extent, through governmental and other grants. At June 30, 2022 and December 31, 2021, the Company had an accumulated deficit of $397.5 million and $414.6 million, respectively. The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K/A filed with the SEC on May 14, 2021, as well as the Company’s Current Reports on Form 8-K. The interim resultsCompany
Emerging GrowthAs of June 30, 2022, the Company Status
had cash and cash equivalents and short-term investments of $189.0 million. The Company is an “emerging growth company,” as defined in Section 2(a)believes its combined cash and cash equivalents and short-term investments on hand will be sufficient to fund operations, including clinical trial expenses and capital expenditure requirements, for at least 12 months from the issuance date of these interim financial statements.
Further, Section 102(b)(1)related economic impact of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a classpandemic.
Use of Estimates
The preparation of financial statements in conformity with USU.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, fair value of common stock warrants, redeemable convertible preferred stock 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.
Cash
Marketable Securities Held in Trust Account
At June 30, 2021, the Trust Account had $100,031,414 held in marketable securities. During period January 1, 2021 to June 30, 2021, the Company did not withdraw any of interest income from the Trust Account to pay its tax obligations.
Concentration of Credit Risk
Financial instruments thatwhich potentially subject the Company to concentrations of credit risk consist principally of a cash account in a financial institution, which, at times, may exceedand cash equivalents and short-term investments consisting of certificates of deposit (“CDs”). Total cash balances exceeded insured balances by the Federal DepositoryDeposit Insurance Coverage of $250,000. At June 30, 2021 and December 31, 2020, the Company has not experienced losses on this account.
Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, common stock are classified as stockholders’ equity. The Company’s common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly,Corporation (“FDIC”) as of June 30, 2021, 7,870,157 shares of Class A common stock subject to possible redemption2022 and December 31, 2021. The Company has cash equivalents that are presented at redemption value as temporary equity, outsideinvested in highly rated money market funds invested only in obligations of the stockholders’ equity sectionU.S. government and its agencies.
Net LossIncome (Loss) per Share Attributable to Common Stock
Net lossBasic net income (loss) per share attributable to common sharestockholders is computed by dividing net lossincome (loss) attributable to common stockholders by the weighted averageweighted-average number of common shares outstanding forduring the period. The Company appliesperiod without consideration of potentially dilutive common stock. Diluted net income (loss) per share attributable to common stockholders reflects the two-class methodpotential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in calculating earnings per share. Sharesthe issuance of common stock subjectthat then shared in the earnings of the Company unless inclusion of such shares would be anti-dilutive.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
($ in thousands, except share and per share amounts) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
Numerator: | ||||||||||||||||||||||||||
Net income (loss) attributable to common shareholders | $ | 36,868 | $ | (17,198) | $ | 17,036 | $ | (37,499) | ||||||||||||||||||
Denominator: | ||||||||||||||||||||||||||
Weighted-average common shares outstanding - basic | 103,005,651 | 5,941,675 | 103,004,874 | 5,908,372 | ||||||||||||||||||||||
Dilutive effect of assumed conversion of options to purchase common stock | 902,789 | — | 918,264 | — | ||||||||||||||||||||||
Weighted-average common shares outstanding - diluted | 103,908,440 | 5,941,675 | 103,923,138 | 5,908,372 | ||||||||||||||||||||||
Net income (loss) attributable to common shareholders - basic | $ | 0.36 | $ | (2.89) | $ | 0.17 | $ | (6.35) | ||||||||||||||||||
Net income (loss) attributable to common shareholders - diluted | $ | 0.35 | $ | (2.89) | $ | 0.16 | $ | (6.35) |
Three and Six Months Ended June 30, | ||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||
Shares issuable upon conversion of Series A redeemable convertible preferred stock | — | 18,421,897 | ||||||||||||||||||
Shares issuable upon conversion of Series B redeemable convertible preferred stock | — | 24,137,647 | ||||||||||||||||||
Shares issuable upon conversion of Series C redeemable convertible preferred stock | — | 11,241,283 | ||||||||||||||||||
Shares issuable upon conversion of Series D redeemable convertible preferred stock | — | 15,812,735 | ||||||||||||||||||
Exercise of options under stock plan | 5,347,250 | 6,520,690 | ||||||||||||||||||
Warrants to purchase common stock | 5,588,506 | 287,704 |
Below is a reconciliationCompany
For the three months ended | For the six months ended, | |||||||
June 30, 2021 | June 30, 2021 | |||||||
Numerator Earnings allocable to Class A common stock | ||||||||
Interest income on Trust account | $ | 1,187 | $ | 11,592 | ||||
Class A common stock net earnings | $ | 1,187 | $ | 11,592 | ||||
Denominator: Weighted average Class A shares | ||||||||
Class A Common stock, basic and diluted | 7,841,024 | 8,315,869 | ||||||
Earnings/basic and diluted per share Class A common stock | $ | 0.00 | $ | 0.00 | ||||
Numerator: Net income (loss) minus Earnings allocable to Class A common stock | ||||||||
Net income (loss) | $ | 286,223 | $ | (9,149,309 | ) | |||
Less : Earnings allocable to Class A common stock | (1,187 | ) | (11,592 | ) | ||||
Class B net income (loss) | $ | 285,036 | $ | (9,160,901 | ) | |||
Denominator: weighted average Class B common stock | ||||||||
Class B common stock, basic and diluted | 4,984,843 | 4,539,131 | ||||||
Income/Basic and diluted per share Class B common stock | $ | 0.06 | $ | (2.02 | ) |
Offering Costs
TheHAVs, 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 complies
Fair Value
The fair value
Derivative warrant liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market,Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or foreign currency risks. The Company evaluates allExchanges of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The Company accounts for its 5,177,500 common stock warrants issued in connection with its Initial Public Offering (5,000,000) and Private Placement (152,500) as derivative warrant liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. The fair value of warrants issued by the Company in connection with the Public Offering and Private Placement has been estimated using Monte-Carlo simulations at each measurement date.
Income Taxes
The Company accounts for income taxes under ASC 740 Income TaxesFreestanding Equity-Classified Written Call Options” (“ASC 740”ASU 2021-04”). ASC 740 requires the recognition of deferred tax assetsThe FASB issued this update to clarify and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies thereduce diversity in an issuer’s accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement processmodifications or exchanges of freestanding equity classified written call options (for example, warrants) that remain equity classified after modification or exchange. ASU 2021-04 is effective for financial statement recognition and measurement of a tax position takenall entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only “major” tax jurisdiction.
The Company may be subject to potential examination by federal and state taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Recent Accounting Standards
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
Note 3 — Initial Public Offering
Pursuant to the IPO on September 22, 2020, the Company sold 10,000,000 Units, at a purchase price of $10.00 per Unit. Each unit that the Company is offering has a price of $10.00 and consists of one share of Class A common stock and one-half of one redeemable warrant. Only whole warrants are exercisable. Each whole warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share (see Note 8).
Note 4 — Private Placement
Simultaneously with the closing of the IPO, the Company consummated the Private Placement with the Company’s Sponsor, AHAC Sponsor LLC, Oppenheimer, the representative of the underwriters, who is referred to as the representative, and Northland purchased an aggregate of 355,000 placement units at a price of $10.00 per unit, for an aggregate purchase price of $3,550,000. Each placement unit is identical to the units sold in the IPO.
The private placement warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the sponsor, the representative, Northland or their permitted transferees. If the private placement warrants are held by holders other than the sponsor, the representative, Northland or their permitted transferees, the private placement warrants will be redeemable by the Company and exercisable by the holders on the same basis as the warrants included in the units being sold in the IPO. In addition, for as long as the private placement warrants are held by the representative, Northland or their designees or affiliates, they may not be exercisedexchanges occurring after five years from the effective date of the registration statement.
The Company’s sponsor,On August 26, 2021, Merger Sub, a wholly-owned subsidiary of AHAC, merged with Legacy Humacyte, with Legacy Humacyte surviving as a wholly-owned subsidiary of AHAC. At the representative and Northland have agreed to (i) waive their redemption rights with respect to their private placement shares in connection with the completioneffective time of the Company’s initial business combination, (ii) waive their redemption rights with respect to their private placement shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificateMerger:
Note 5 — Related Party Transactions
Founder Shares
On July 20, 2020, the Company issued 2,875,000Legacy Humacyte common stock was converted into approximately 0.26260 shares of Class BNew Humacyte’s common stock, to its initial stockholder, AHAC Sponsor, LLC for $25,000, or approximately $0.01 per share. The founder shares include anpar value $0.0001 (“Common Stock”);
Promissory Note — Related Party
On July 1, 2020, the Company issued an unsecured promissory note to the sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $300,000 to be used for a portion of the expenses of the IPO. This loan is non-interest bearing, unsecured, and due on the earlier of (a) June 30, 2021 or (b) the date on which the Company completes the IPO. The loan was paid off on June 30, 2021.
Administrative Service Fee
The Company has agreed, commencing on the effective date of the prospectus, to pay an affiliate of the Company’s sponsor a monthly fee of an aggregate of $10,000 for general and administrative services including office space, utilities and secretarial and administrative support. This arrangement will terminate upon completion of a business combination or the liquidation of the Company. For the six months ended June 30, 2021, the Company incurred $60,000 in administrative service fee.
Related Party Loans
In addition, in order to finance transactions costs in connection with a business combination, the sponsor, or certain of the Company’s officers, directors, or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a business combination, the Companythat would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a business combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a business combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be converted into units of the post business combination entity at a price of $10.00 per unit.
Note 6 — Commitments & Contingencies
Registration Rights
The holders of the founder shares, placement units (including securities contained therein) and units (including securities contained therein) that may be issued upon conversion of working capital loans, and any shares of Class A common stock issuable upon the exercise of the placement warrants and any shares of Class A common stock and warrants (and underlying Class A common stock) that may be issued upon conversion of the units issued as partshares of Legacy Humacyte preferred stock based on the working capital loansapplicable conversion ratio immediately prior to the effective time, multiplied by approximately 0.26260; and Class A
Underwriters Agreement
On September 22, 2020, the underwriters were paid an underwriting discount of two percent (2.0%) of the gross proceeds of the IPO, or $2,000,000.
In addition, the underwriters are entitled to a deferred underwriting fee of three and a half percent (3.5%) of the gross proceeds of the IPO upon the completion of the Company’s initial business combination. The underwriters have agreed that up to 1% of the deferred underwriting fee may be re-directed to other Financial Industry Regulatory Authority (FINRA) member firms that have provided services in connection with the identification and consummation of a business combination, in the sole discretion of the Company; provided, that all such payments to other FINRA member firms may only be made if permitted under applicable law.
The Company may reduce the deferred underwriting fee by up to 50% based on stockholders redeeming their shares for their pro-rata amount of the proceeds in the Trust Account; provided, however, that (a) the underwriters’ maximum deferred underwriting fee reduction based on stockholder redemptions will be 50% regardless of whether stockholder redemptions exceed 50%; and (b) any sums paid to other advisors as discussed above, will be credited against the reduction of and added back to the deferred underwriting fee payable to the underwriters; and (c) under no circumstance will the deferred underwriting fee be less than 1.75% of the gross proceeds of the IPO. As June 30, 2021, the Company accrued a deferred underwriting fee of $2,122,723.
Legal Matters
The Company has engaged a law firm to assist the Company with its legal matters in identifying, negotiating, and consummating a Business Combination, as well as assisting with other legal matters. In the event of a successful Business Combination, the amount of fees to be paid will be agreed upon between the Company and the law firm in light of all the facts and circumstances at that point in time. If a Business Combination does not occur, the Company will not be required to pay this contingent fee. Management is unable to determine the amount of the legal fees to be paid at this time. There can be no assurance that the Company will complete a Business Combination.
Note 7 — Stockholder’s Equity
Preferred Stock — The Company is authorized to issue a total of 1,000,000 shares of preferred stock at par value of $0.0001 each. At June 30, 2021 and December 31, 2020, there were no shares of preferred stock issued or outstanding.
Class A Common Stock — The Company is authorized to issue a total of 100,000,000 shares of Class ANew Humacyte’s common stock at par value of $0.0001 each. At June 30, 2021 and December 31, 2020, there were 2,484,843 and 1,553,616 shares issued and outstanding (excluding 7,870,157 and 8,801,384 shares subjectequal to possible redemption)
Class B Common Stock — The Company is authorized to issue a total of 10,000,000 shares of Class B common stock at par value of $0.0001 each. At June 30, 2021 and December 31, 2020, there were 2,500,000 shares of Class B common stock issued or outstanding.
Both Class A and B stockholders vote together as a single class on all matters submitted to a vote of the Company stockholders, with each share of common stock entitling the holder to one vote.
Class B shares are identical to the Class A shares except that Class B shares (founder shares) automatically convert into shares of Class A common stock at the time of the consummation of our initial business combination, on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in this prospectus and related to the closing of the initial business combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class ALegacy Humacyte common stock issuablesubject to such option or warrant multiplied by approximately 0.26260, at an exercise price per share equal to the current exercise price per share for such option or warrant divided by approximately 0.26260;
The holders of the founder shares have agreed not to transfer, assign or sell any of their founder shares until the earlier to occur of: (A) one year after the completion of our initial business combination and (B) subsequent to our initial business combination, (x)per tranche if the reported lastvolume-weighted average closing sale price of our Class A common stock equalsthe Common Stock is greater than or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizationsequal to $15.00 and the like)$20.00, respectively, for any 20 trading days within any 30-trading30 consecutive trading day period commencing at least 150 days after our initial business combination, or (y)period. At the dateClosing on whichAugust 26, 2021, the Company completesrecorded a liquidation, merger,liability (“Contingent Earnout Liability”) of $159.4 million, based on the estimated fair value of the 15,000,000 Contingent Earnout Shares with a corresponding reduction of additional paid-in capital stock exchange or other similar transaction that results in allthe equity section of our stockholders having the rightCompany’s condensed consolidated balance sheet.
Note 8 — Warrants
Each whole warrant entitles the registered holder to purchase one share of Class A common stockCommon Stock (the “PIPE Shares”) in a private placement at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing on the later of 12 months from the closing of the IPO and 30 days after the completion of our initial business combination and will expire five years after the completion of the Company’s initial business combination, or earlier upon redemption or liquidation.
The Company may redeem outstanding warrants (excluding the warrants contained in the private units) at a price of $0.01 per warrant i) at any time while the warrants are exercisable; ii) upon a minimum of 30 days prior written notice of redemption; iii) if, and only if, the reported last sale price of the common stock equals or exceeds $18.00$10.00 per share for any 20 trading days within a 30 trading day period commencing oncean aggregate purchase price of $175 million (the “PIPE Financing”). The PIPE Financing was consummated in connection with the warrants become exercisable and ending on the third business day prior to the notice of redemption to warrant holders and iv) if, and only if, there is a current registration statement in effect with respect to the shares of Class A common stock underlying such warrants at the time of redemption and for the entire 30-day trading period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act.
If the Company calls the warrants for redemption as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” our management will consider, among other factors, our cash position, the number of warrants that are outstanding and the dilutive effect on our stockholders of issuing the maximumThe number of shares of Class A common stock issuable uponCommon Stock outstanding immediately following the exerciseconsummation of our warrants. In such event, each holder would pay the exercise price by surrendering the warrants for that number ofMerger was:
Shares | ||||||||
Common stock of AHAC, outstanding prior to Merger | 10,355,000 | |||||||
Less redemption of AHAC shares | (3,008,551) | |||||||
Common stock of AHAC | 7,346,449 | |||||||
AHAC Founder Shares | 2,500,000 | |||||||
New Humacyte shares issued to PIPE Investors | 17,500,000 | |||||||
Issuance of common stock upon reverse recapitalization and PIPE Financing | 27,346,449 | |||||||
New Humacyte shares issued in Merger to Legacy Humacyte stockholders | 75,656,935 | (1) | ||||||
Total shares of Common Stock immediately after Merger | 103,003,384 |
The exercise price and number of shares of common stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or the Company’s recapitalization, reorganization, merger or consolidation. If the Company (x) issues additional shares of Class A common stock or equity-linked securities for capital raising purposes inIn connection with the closingMerger, the Company received $242.4 million in proceeds from the Merger and related PIPE Financing. The Company incurred $3.9 million of our initial business combination at an issue price or effective issue pricetransaction costs, consisting of banking, legal, and other professional fees, of which $3.9 million was recorded as a reduction of proceeds to additional paid-in capital, and less than $9.20 per share of Class A common stock (with such issue price or effective issue price$0.1 million related to be determined in good faith by our board of directors and,the Private Placement Warrants, which are classified as liabilities in the casecondensed consolidated balance sheets, was expensed in the condensed consolidated statements of any such issuance to our sponsor or its affiliates, without taking into account any founder shares held by our sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds,operations and interest thereon, available for the funding of our initial business combination on the date of the consummation of our initial business combination (net of redemptions), and (z) the volume weighted average trading price of our Class A common stockcomprehensive income (loss) during the 20 trading day period starting onthree months ended September 30, 2021. All transaction costs were paid as of December 31, 2021. Legacy Humacyte assumed $15.2 million of liabilities, including PIPE Financing fees and legal fees, and $0.1 million of assets from AHAC. Of the trading day prior$15.2 million of liabilities assumed from AHAC, $0.1 million was included in accrued expenses as of December 31, 2021, and there were no unpaid liabilities as of June 30, 2022.
Note 9 —4. Fair Value Measurements
Fair value is defined as the price that would be received for sale ofto sell an asset or paid forto transfer of a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date. GAAPAccounting Standards Codification (“ASC”) 820, Fair Value Measurement and Disclosures, establishes a three-tier fair value hierarchy which prioritizes thewhereby inputs to valuation techniques used in measuring fair value. Thevalue are prioritized, or the fair value hierarchy. There are three levels to the fair value hierarchy gives the highest priority tobased on reliability of inputs, as follows:
The Company’s Private Placement Warrant liabilityassets and liabilities that were measured at June 30, 2021 and December 31, 2020 and Public Warrant liability at December 31, 2020 is basedfair value on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could resultrecurring basis were as follows:
($ in thousands) | Fair Value Measured as of June 30, 2022 | |||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||
Cash equivalents (money market funds) | $ | 176,446 | $ | — | $ | — | $ | 176,446 | ||||||||||||||||||
Cash equivalents (certificates of deposit) | — | 2,005 | — | 2,005 | ||||||||||||||||||||||
Short-term investments (certificates of deposit) | — | 8,000 | — | 8,000 | ||||||||||||||||||||||
Total financial assets | $ | 176,446 | $ | 10,005 | $ | — | $ | 186,451 | ||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||
Contingent Earnout Liability | $ | — | $ | — | $ | 44,049 | $ | 44,049 | ||||||||||||||||||
Private Placement Warrants liability | — | — | 190 | 190 | ||||||||||||||||||||||
Total financial liabilities | $ | — | $ | — | $ | 44,239 | $ | 44,239 |
($ in thousands) | Fair Value Measured as of December 31, 2021 | |||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||
Cash equivalents (money market funds) | $ | 208,821 | $ | — | $ | — | $ | 208,821 | ||||||||||||||||||
Cash equivalents (certificates of deposit) | — | 2,000 | — | 2,000 | ||||||||||||||||||||||
Short-term investments (certificates of deposit) | — | 8,000 | — | 8,000 | ||||||||||||||||||||||
Total financial assets | $ | 208,821 | $ | 10,000 | $ | — | $ | 218,821 | ||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||
Contingent Earnout Liability | $ | — | $ | — | $ | 103,660 | $ | 103,660 | ||||||||||||||||||
Private Placement Warrants liability | — | — | 497 | 497 | ||||||||||||||||||||||
Total financial liabilities | $ | — | $ | — | $ | 104,157 | $ | 104,157 |
($ in thousands) | Contingent Earnout Liability | |||||||||||||
Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | |||||||||||||
Fair value as of beginning of period | $ | (100,402) | $ | (103,660) | ||||||||||
Change in fair value included in other income, net | 56,353 | 59,611 | ||||||||||||
Fair value as of end of period | $ | (44,049) | $ | (44,049) |
Private Placement Warrants | ||||||||||||||
($ in thousands) | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | ||||||||||||
Fair value as of beginning of period | $ | (423) | $ | (497) | ||||||||||
Change in fair value included in other income, net | 233 | 307 | ||||||||||||
Fair value as of end of period | $ | (190) | $ | (190) |
The following tables presents fair value informationreceivables, accounts payable and accrued expenses as of June 30, 20212022 and December 31, 20202021 approximated their fair values due to the short-term nature of these items.
($ in thousands) | June 30, 2022 | December 31, 2021 | ||||||||||||
Scientific equipment(1) | $ | 27,789 | $ | 27,641 | ||||||||||
Computer equipment | 232 | 155 | ||||||||||||
Software | 335 | 335 | ||||||||||||
Furniture and fixtures | 988 | 988 | ||||||||||||
Leasehold improvements | 26,355 | 26,355 | ||||||||||||
55,699 | 55,474 | |||||||||||||
Accumulated depreciation | (23,472) | (20,440) | ||||||||||||
Property and equipment, net | $ | 32,227 | $ | 35,034 |
($ in thousands) | June 30, 2022 | December 31, 2021 | ||||||||||||
Accrued external research, development and manufacturing costs | $ | 2,203 | $ | 2,520 | ||||||||||
Accrued employee compensation and benefits | 3,589 | 3,943 | ||||||||||||
Accrued professional fees | 394 | 294 | ||||||||||||
Total | $ | 6,186 | $ | 6,757 |
($ in thousands) | June 30, 2022 | |||||||
Principal amount of SVB loan payable | $ | 30,000 | ||||||
Final payment amount of SVB loan payable | 1,500 | |||||||
Net premium associated with accretion of final payment and other debt issuance costs | (3,368) | |||||||
SVB loan payable, current and noncurrent | 28,132 | |||||||
Less SVB loan payable, current portion | — | |||||||
SVB loan payable, noncurrent portion | $ | 28,132 |
Year ending December 31: | ($ in thousands) | |||||||
2022 (remainder) | $ | — | ||||||
2023 | 8,571 | |||||||
2024 | 17,143 | |||||||
2025 | 4,286 | |||||||
Total future payments | $ | 30,000 |
June 30, 2022 | |||||
Common stock reserved for Contingent Earnout Shares | 15,000,000 | ||||
Exercise of options under stock plans | 6,899,995 | ||||
Issuance of options under stock plans | 7,226,977 | ||||
Shares available for grant under ESPP | 1,030,033 | ||||
Warrants to purchase Common Stock | 5,588,506 | ||||
35,745,511 |
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 |
The following table presents information about the Company’s assets that are measured ata fair value on a recurring basis atof $0.2 million as of June 30, 20212022 resulted in a non-cash gain of $0.2 million and indicates$0.3 million for the three and six months ended June 30, 2022, respectively, classified within Change in fair value hierarchy of common stock warrant liabilities in the valuation inputscondensed consolidated statements of operations and comprehensive income (loss).
Quoted | Significant | Significant | ||||||||||||||
Prices In | Other | Other | ||||||||||||||
Active | Observable | Unobservable | ||||||||||||||
June 30, | Markets | Inputs | Inputs | |||||||||||||
2021 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Description | ||||||||||||||||
Assets: | ||||||||||||||||
Mutual Funds held in Trust Account | 100,031,414 | 100,031,414 | - | - | ||||||||||||
$ | 100,031,414 | $ | 100,031,414 | $ | - | $ | - | |||||||||
Liabilities | ||||||||||||||||
Warrant liabilities - Public Warrants | 14,000,000 | 14,000,000 | - | - | ||||||||||||
Warrant liabilities – Private Warrants | 465,458 | - | - | 465,458 | ||||||||||||
$ | 14,465,458 | $ | 14,000,000 | $ | - | $ | 465,458 |
Quoted | Significant | Significant | ||||||||||||||
Prices In | Other | Other | ||||||||||||||
Active | Observable | Unobservable | ||||||||||||||
December 31, | Markets | Inputs | Inputs | |||||||||||||
2020 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Description | ||||||||||||||||
Assets: | ||||||||||||||||
Mutual Funds held in Trust Account | 29,851 | 29,851 | - | - | ||||||||||||
U.S. Treasury Securities | 99,983,000 | 99,983,000 | ||||||||||||||
$ | 100,012,851 | $ | 100,012,851 | $ | - | $ | - | |||||||||
Liabilities | ||||||||||||||||
Warrant liabilities - Public Warrants | 5,750,000 | - | - | 5,750,000 | ||||||||||||
Warrant liabilities – Private Warrants | 288,351 | - | - | 288,351 | ||||||||||||
$ | 6,038,351 | $ | - | $ | - | $ | 6,038,351 |
The Company utilizes afollowing assumptions under the Monte Carlo simulation modelvalue model:
June 30, 2022 | December 31, 2021 | ||||||||||
Market price of public stock | $ | 3.21 | $ | 7.25 | |||||||
Exercise price | $ | 11.50 | $ | 11.50 | |||||||
Expected term (years) | 4.16 | 4.65 | |||||||||
Expected share price volatility | 79.0 | % | 61.0 | % | |||||||
Risk-free interest rate | 3.00 | % | 1.21 | % | |||||||
Estimated dividend yield | 0 | % | 0 | % |
The aforementioned warrant liabilities are not subject to qualified hedge accounting.
The following table provides quantitative information regarding Level 3 fair value measurements:
At | At | |||||||
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
Stock price | $ | 10.83 | $ | 10.17 | ||||
Strike price | $ | 11.5 | $ | 11.5 | ||||
Term (in years) | 5.12 | 5.13 | ||||||
Volatility | 36.0 | % | 24.4 | % | ||||
Risk-free rate | 0.74 | % | 0.38 | % | ||||
Dividend yield | 0.0 | % | 0.0 | % |
The following table presents the changeschange in the fair value of warrant liabilities:
June 30, 2022 | December 31, 2021 | ||||||||||
Current stock price | $ | 3.21 | $ | 7.25 | |||||||
Expected share price volatility | 89.2 | % | 85.8 | % | |||||||
Risk-free interest rate | 2.98 | % | 1.52 | % | |||||||
Estimated dividend yield | 0.0 | % | 0 | % | |||||||
Expected term (years) | 10.00 | 10.00 |
Public | Private Placement | Warrant Liabilities | ||||||||||
Fair value as of December 31, 2020 | 5,750,000 | 288,351 | 6,038,351 | |||||||||
Change in valuation inputs or other assumptions | 8,250,000 | 177,107 | 8,427,107 | |||||||||
Fair value as of June 30, 2021 | $ | 14,000,000 | $ | 465,458 | $ | 14,465,458 |
Note 10 — Investment Held in Trust Account
At Closing, the 2021 Long-Term Incentive Plan, (the “2021 Plan”), and the 2021 Employee Stock Purchase Plan, (the “ESPP”), became effective. As of June 30, 2022, 7,226,977 and 1,030,033 shares of Common Stock were available under the 2021 Plan and ESPP, respectively. The 2021 Plan and ESPP provide that on January 1 of each year commencing January 1, 2022, the 2021 Plan and the ESPP reserve will automatically increase in an amount equal to the lesser of (a) 5% and 1%, respectively, of the number of shares of the Company’s Common Stock outstanding on December 31 of the preceding year and (b) a number of shares of Common Stock determined by the Company’s board of directors. In December 2021, the Company’s Trust Account consistedboard of Mutual Funds solely.
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Estimated dividend yield | 0 | % | 0 | % | 0 | % | 0 | % | |||||||||||||||
Expected share price volatility (weighted average and range, if applicable) | 93.9% (89.0% to 99.8%) | 91.0 | % | 95.5% (89.0% to 100.0%) | 91.4% (91.0% to 92.1%) | ||||||||||||||||||
Risk-free interest rate (weighted average and range, if applicable) | 2.86% (2.53% to 3.23%) | 0.99% (0.98% to 1.02%) | 2.61% (1.89% to 3.23%) | 0.68% (0.62% to 1.02%) | |||||||||||||||||||
Expected term of options (in years) | 6.25 | 6.00 | 6.25 | 6.00 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
($ in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
Research and development | $ | 185 | $ | 715 | $ | 466 | $ | 1,351 | ||||||||||||||||||
General and administrative | 1,306 | 2,215 | 2,572 | 4,107 | ||||||||||||||||||||||
Total | $ | 1,491 | $ | 2,930 | $ | 3,038 | $ | 5,458 |
($ in thousands) | June 30, 2022 | December 31, 2021 | ||||||||||||
Unrecognized share-based compensation cost | $ | 10,974 | $ | 13,346 | ||||||||||
Expected weighted average period compensation costs to be recognized (years) | 2.1 | 2.3 |
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, 2021 | 6,711,192 | $ | 7.48 | 5.3 | $ | 8,276 | |||||||||||||||||
Granted | 432,577 | $ | 5.56 | ||||||||||||||||||||
Exercised | (3,157) | $ | 3.67 | ||||||||||||||||||||
Forfeited | (240,617) | $ | 9.34 | ||||||||||||||||||||
Options outstanding at June 30, 2022 | 6,899,995 | $ | 7.29 | 5.0 | $ | 1,471 | |||||||||||||||||
Vested and exercisable, June 30, 2022 | 4,754,151 | $ | 6.39 | 3.2 | $ | 1,471 | |||||||||||||||||
Vested and expected to vest, June 30, 2022 | 6,899,995 | $ | 7.29 | 5.0 | $ | 1,471 |
Carrying Value as of December 31, 2020 | Gross Unrealized Losses | Fair Value as of December 31, 2020 | ||||||||||
Mutual Funds | $ | 29,851 | $ | - | $ | 29,851 | ||||||
U.S. Treasury Securities | 99,986,310 | (3,310 | ) | 99,983,000 | ||||||||
$ | 100,016,161 | $ | (3,310 | ) | $ | 100,012,851 |
Note 11 — Subsequent Events
The2021, the Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date that the financial statements were issued. Based upon this review, other thanwas a party to license agreements with Yale University as described above, the Company did not identify any subsequent events that would have required adjustment or disclosurein Note 11
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
($ in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
License expenses | $ | — | $ | 35 | $ | 50 | $ | 85 | |||||||||||||||
Other | 6 | 46 | 8 | 81 | |||||||||||||||||||
Total | 6 | 81 | 58 | 166 |
References to the “Company,” “our,” “us” or “we” refer to Alpha Healthcare Acquisition Corp. The following discussion and analysis of the Company’sour financial condition and results of operations should be read in conjunction with theour unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) and with our audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021 (“Annual Report”), filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2022. In addition, you should read the “Risk Factors” and “Information Regarding Forward-Looking Statements” sections of this Quarterly Report and our Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report for additional information regarding this assessment.
Overview
We are a blank check company incorporated as, a Delaware corporation and formed forwholly owned subsidiary of AHAC. As contemplated by the purposeMerger Agreement, Merger Sub merged with and into Legacy Humacyte, with Legacy Humacyte continuing as the surviving corporation and as a wholly owned subsidiary of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. While our effortsAHAC (the “Merger”). On the Closing Date, AHAC changed its name to identify a target business may span many industriesHumacyte, Inc. and regions worldwide, we intendLegacy Humacyte changed its name to focus our search for prospects withinHumacyte Global, Inc. Operations prior to the healthcare industryMerger included in this Quarterly Report are those of Legacy Humacyte.
On September 22, 2020, we consummated our initial public offering (the “IPO”) of 10,000,000 units (the “Units”). Each Unit consists of one share of Class ACompany’s common stock, par value $0.0001 per share (“Class A Common Stock”), and one-half of one redeemable warrant (each whole warrant, a “Warrant”), with(2) each whole Warrant entitling the holder thereof to purchase oneoutstanding share of Class Apreferred stock of Legacy Humacyte (“Legacy Humacyte preferred stock”) was cancelled and converted into the aggregate number of shares of Common Stock for $11.50 per share. The Units were sold at a pricethat would be issued upon conversion of $10.00 per Unit, generating gross proceedsthe shares of Legacy Humacyte preferred stock based on the applicable conversion ratio immediately prior to us of $100,000,000. We granted the underwritersEffective Time, multiplied by approximately 0.26260, resulting in the IPO,issuance of a 45-day optiontotal of 75,656,935 shares of Common Stock. Prior holders of shares of Legacy Humacyte common stock and Legacy Humacyte preferred stock also received the contingent right to purchase upreceive certain Contingent Earnout Shares (as defined below), for each share owned by each such Legacy Humacyte stockholder that was outstanding immediately prior to 1,500,000 additional Units solely to cover over-allotments, if any. Oppenheimer & Co. Inc. acted as the sole book running manager and Northland Securities, Inc. acted as the co-managerclosing of the IPO. The securities sold in the IPO were registered under the Securities Act on registration statements on Form S-1 No. 333-240374. The SEC declared the registration statement effective on September 17, 2020.
On September 22, 2020, simultaneously with the consummation of the IPO, we completed the private saleMerger (the “Private Placement”“Closing”) of. In addition, certain investors purchased an aggregate of 355,000 Units17,500,000 shares of Common Stock (such investors, the “PIPE Investors”) in a private placement that closed concurrently with the Closing for an aggregate purchase price of $175 million (the “Private Placement Units”“PIPE Financing”). Additionally, at the Closing, 2,500,000 shares of AHAC’s Class B common stock (“Founder Shares”) automatically converted into shares of Common Stock on a one-for-one basis.
A total of $100,000,000, comprised of $98,000,000 of the proceeds from the IPO and $2,000,000 of the proceeds of the sale of the (“Private Placement Units, was placed in a U.S.-based trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee.
The issuance of additional sharesWarrants”), which we assumed in connection with an initial business combinationthe Merger, and which are subject to remeasurement to fair value at each balance sheet date resulting in a non-cash gain or loss, and (v) a non-cash gain on PPP loan forgiveness during the ownersthree months ended June 30, 2021.
Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
As indicated in the accompanying financial statements, as ofThree Months Ended June 30, 2021, we had $383,400 in cash. Further, we expect to incur significant costs in the pursuit of our initial Business Combination. We cannot assure you that our plans to raise capital or to complete our initial Business Combination will be successful.
Proposed Business Combination
On February 17, 2021, the Company entered into a business combination agreement (the “Business Combination Agreement”) by2022 and among the Company, Hunter Merger Sub, Inc., a Delaware corporation (“Merger Sub”), and Humacyte, Inc., a Delaware corporation (“Humacyte”). The Business Combination Agreement provides, among other things, that on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into Humacyte, with Humacyte surviving as a wholly-owned subsidiary of the Company (the “Business Combination”). Upon the closing of the Business Combination (the “Closing”), it is anticipated that the Company will change its name to “Humacyte, Inc.” For additional information about the Business Combination Agreement and the ancillary documents executed or to be executed in connection therewith, see Note 1 to the “Notes to Unaudited Condensed Financial Statements” included in this Report.
Three Months Ended June 30, | Change | ||||||||||||||||||||||
($ in thousands) | 2022 | 2021 | $ | % | |||||||||||||||||||
Revenue | $ | 1,301 | $ | 690 | $ | 611 | 89 | % | |||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Research and development | 14,652 | 14,568 | 84 | 1 | % | ||||||||||||||||||
General and administrative | 5,180 | 5,391 | (211) | (4) | % | ||||||||||||||||||
Total operating expenses | 19,832 | 19,959 | (127) | (1) | % | ||||||||||||||||||
Loss from operations | (18,531) | (19,269) | 738 | (4) | % | ||||||||||||||||||
Other income (expense), net | |||||||||||||||||||||||
Change in fair value of contingent earnout liability | 56,353 | — | 56,353 | 100 | % | ||||||||||||||||||
Interest expense | (1,488) | (1,215) | (273) | 22 | % | ||||||||||||||||||
Gain on PPP loan forgiveness | — | 3,284 | (3,284) | (100) | |||||||||||||||||||
Other income | 534 | 2 | 532 | * | |||||||||||||||||||
Total other income, net | 55,399 | 2,071 | 53,328 | * | |||||||||||||||||||
Net income (loss) | $ | 36,868 | $ | (17,198) | $ | 54,066 | (314) | % |
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities, those necessary to prepare for our Initial Public Offering and identifying a target company for our initial Business Combination. We do not expect to generate any operating revenues until after completion of our initial Business Combination. We generate non-operating income in the form of interest income on cash and cash equivalents held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as expenses as we conduct due diligence on prospective Business Combination candidates.
For the three months ended June 30, 2022 and 2021, revenue was approximately $1.3 million and $0.7 million, respectively, and related to our grant from DoD. The increase in revenue of $0.6 million, or 89%, relates to the timing of reimbursement of certain allowable costs related to our grant from DoD.
Three Months Ended June 30, | Change | ||||||||||||||||||||||
($ in thousands) | 2022 | 2021 | $ | % | |||||||||||||||||||
External services | $ | 3,810 | $ | 3,881 | $ | (71) | (2) | % | |||||||||||||||
Materials and supplies | 1,838 | 1,993 | (155) | (8) | % | ||||||||||||||||||
Payroll and personnel expenses | 5,911 | 5,907 | 4 | — | % | ||||||||||||||||||
Other research and development expenses | 3,093 | 2,787 | 306 | 11 | % | ||||||||||||||||||
$ | 14,652 | $ | 14,568 | $ | 84 | 1 | % |
Six Months Ended June 30, | Change | ||||||||||||||||||||||
($ in thousands) | 2022 | 2021 | $ | % | |||||||||||||||||||
Revenue | $ | 1,534 | $ | 845 | 689 | 82 | % | ||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Research and development | 30,966 | 29,705 | 1,261 | 4 | % | ||||||||||||||||||
General and administrative | 10,862 | 10,178 | 684 | 7 | % | ||||||||||||||||||
Total operating expenses | 41,828 | 39,883 | 1,945 | 5 | % | ||||||||||||||||||
Loss from operations | (40,294) | (39,038) | (1,256) | 3 | % | ||||||||||||||||||
Other income (expense), net: | |||||||||||||||||||||||
Change in fair value of contingent earnout liability | 59,611 | — | 59,611 | 100 | % | ||||||||||||||||||
Interest expense | (2,920) | (1,748) | (1,172) | 67 | % | ||||||||||||||||||
Gain on PPP loan forgiveness | — | 3,284 | (3,284) | (100) | % | ||||||||||||||||||
Other income, net | 639 | 3 | 636 | * | |||||||||||||||||||
Total other income, net | 57,330 | 1,539 | 55,791 | * | |||||||||||||||||||
Net income (loss) | $ | 17,036 | $ | (37,499) | $ | 54,535 | (145) | % |
Liquidity and Capital Resources
As of June 30, 2021, the Company had cash outside the Trust Account of $383,400 available for working capital needs. All remaining cash held in the Trust Account are generally unavailabledevelopment expenses for the Company’s use, prior to an initial business combination,periods indicated:
Six Months Ended June 30, | Change | ||||||||||||||||||||||
($ in thousands) | 2022 | 2021 | $ | % | |||||||||||||||||||
External services | $ | 7,660 | $ | 7,733 | $ | (73) | (1) | % | |||||||||||||||
Materials and supplies | 5,575 | 5,194 | 381 | 7 | % | ||||||||||||||||||
Payroll and personnel expenses | 11,552 | 11,228 | 324 | 3 | % | ||||||||||||||||||
Other research and development expenses | 6,179 | 5,550 | 629 | 11 | % | ||||||||||||||||||
$ | 30,966 | $ | 29,705 | $ | 1,261 | 4 | % |
Through June 30, 2021, the Company’s liquidity needs were satisfied through receipt of $25,000 from the sale of the founder shares, advances from the Sponsor in an aggregate amount of $147,763 and the remaining net proceeds from the IPO and the sale of Private Placement Units.
The Company anticipates that the $383,400 outside of the Trust Account as of June 30, 2021, will be sufficient to allow the Company to operate for at least the next 12 months from the issuance of the financial statements, assuming that a Business Combination is not consummated during that time. Until consummation of its Business Combination, the Company will be using the funds not held in the Trust Account, and any additional Working Capital Loans (as defined in Note 5) from the initial stockholders, the Company’s officers and directors, or their respective affiliates (which is described in Note 5), for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the Business Combination.
The Company does not believe it will need to raise additional funds in order to meet the expenditures required for operating its business. However, if the Company’s estimates of the costs of undertaking in-depth due diligence and negotiating business combination is less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to the business combination. Moreover, the Company will need to raise additional capital through loans from its Sponsor, officers, directors, or third parties. None of the Sponsor, officers or directors are under any obligation to advance funds to, or to invest in, the Company. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business plan, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
Related Party Transactions
Founder Shares
On July 20, 2020, we issued 2,875,000 shares of Class B common stock to our initial stockholder, AHAC Sponsor, LLC for $25,000, or approximately $0.01 per share. The founder shares include an aggregate of up to 375,000 shares subject to forfeiture if the over-allotment option is not exercised by the underwriters in full. The over-allotment option was not exercised by the underwriters during the 45-day option period; thus, these shares were forfeited accordingly as of November 1, 2020.
Promissory Note — Related Party
On July 1, 2020, we issued an unsecured promissory note to the sponsor, pursuant to which we may borrow up to an aggregate principal amount of $300,000 to be used for a portion of the expenses of the IPO. This loan is non-interest bearing, unsecured, and due on the earlier of (a) June 30, 2021 or (b) the date on which we complete the IPO. The loan was paid off on June 30, 2021.
Administrative Service Fee
We have agreed to pay an affiliate of our sponsor a monthly fee of an aggregate of $10,000 for general and administrative services including office space, utilities and secretarial and administrative support. This arrangement will terminate upon completion of a business combination or the liquidation of the Company. For the six months ended June 30, 2021 to $31.0 million for the Company incurred $60,000six months ended June 30, 2022. The increase of $1.3 million, or 4%, was primarily driven by (i) increased salaries and benefits of $1.2 million to support our expanding research and development initiatives, (ii) a $0.4 million increase in the purchase of materials and supplies, and (iii) a $0.6 million increase in other research and development expenses, partially offset by a $0.9 million decrease in non-cash stock compensation expense.
Related Party Loans
In addition,expenses were $10.9 million and $10.2 million for the six months ended June 30, 2022 and 2021, respectively. The increase in ordergeneral and administrative expenses during this period of $0.7 million, or 7%, was primarily driven by expenses associated with the transition to finance transactionspublic company status, including (i) a $0.9 million increase in salaries and benefits and recruiting costs primarily due to higher headcount, (ii) increased professional fees of $0.6 million primarily related to increased legal and audit fees, and (iii) a $0.5 million increase in insurance costs, partially offset by a $1.5 million decrease in non-cash stock compensation expense due to higher costs in connection with a business combination, the sponsor, or certain2021 resulting from restructuring of the Company’s officers, directors, or their affiliates may, but are not obligatedmanagement team to loanaccommodate the Company funds as may be required (“Working Capital Loans”). Iftransition to being a public company.
Sponsor Support Agreement
In connection with the execution of the Business Combination Agreement, AHAC Sponsor LLC (“Sponsor”) and the other holders (the “Company Supporting Stockholders”) of the Company’s Class B common stock, par value $0.0001 per share (the “Class B Common Stock”) entered into a support agreement with the Company and Humacyte (the “Sponsor Support Agreement”). Under the Sponsor Support Agreement, each Company Supporting Stockholder agreed to vote, at any meeting of the stockholders of the Company and in any action by written consent of the stockholders of the Company, all of such Company Supporting Stockholder’s Class A Common Stock and Class B Common Stock (i) in favor of (a) the Business Combination Agreement and the transactions contemplated thereby and (b) the other proposals that the Company and Humacyte agreed in the Business Combination Agreement shall be submitted at such meeting for approval by the Company’s stockholders together with the proposal to obtain the Company Stockholder Approval (the “Required Transaction Proposals”) and (ii) against any proposal that conflicts or materially impedes or interferes with any Required Transaction Proposals or that would adversely affect or delay the Business Combination. The Sponsor Support Agreement also prohibits each Company Supporting Stockholder from, among other things and subject to certain exceptions, selling, assigning or transferring any Class A Common Stock or Class B Common Stock held by such Company Supporting Stockholder or taking any action that would have the effect of preventing or materially delaying such Company Supporting Stockholder from performing his, her or its obligations under the Sponsor Support Agreement. In addition, in the Sponsor Support Agreement, each Company Supporting Stockholder agreed to waive, and not to assert or perfect, among other things, any rights to adjustment or other anti-dilution protections with respect to the rate at which the shares of Class B Common Stock held by the Company Supporting Stockholders convert into shares of Class A Common Stock in connection with the transactions contemplated by the Business Combination Agreement.
Commitments and Contingencies
Registration Rights
The holders of the founder shares, placement units (including securities contained therein) and units (including securities contained therein) that may be issued upon conversion of working capital loans, and any shares of Class A common stock issuable upon the exercise of the placement warrants and any shares of Class A common stock and warrants (and underlying Class A common stock) that may be issued upon conversion of the units issued as part of the working capital loans and Class A common stock issuable upon conversion of the founder shares, will be entitled to registration rights pursuant to the registration rights agreement requiring us to register such securities for resale (in the case of the founder shares, only after conversion to our Class A common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of an initial business combination and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering our securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
On September 22, 2020, the underwriters were paid an underwriting discount of two percent (2.0%) of the gross proceeds of the IPO, or $2,000,000. In addition, the underwriters are entitled to a deferred underwriting fee of three and a half percent (3.5%) of the gross proceeds of the IPO upon the completion of the Company’s initial business combination. The underwriters have agreed that up to 1% of the deferred underwriting fee may be re-directed to other FINRA member firms that have provided services in connection with the identification and consummation of a business combination, in the sole discretion of the Company; provided, that all such payments to other FINRA member firms may only be made if permitted under applicable law.
The Company may reduce the deferred underwriting fee by up to 50% based on stockholders redeeming their shares for their pro-rata amount of the proceeds in the Trust Account; provided, however, that (a) the underwriters’ maximum deferred underwriting fee reduction based on stockholder redemptions will be 50% regardless of whether stockholder redemptions exceed 50%; and (b) any sums paid to other advisors as discussed above, will be credited against the reduction of and added back to the deferred underwriting fee payable to the underwriters; and (c) under no circumstance will the deferred underwriting fee be less than 1.75% of the gross proceeds of the IPO. Assix months ended June 30, 2021 the Company accruedand (ii) a deferred underwriting fee$1.2 million increase in interest expense related to our loan facility with Silicon Valley Bank, which commenced in March 2021.
Risks and Uncertainties
Management is continuing to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus couldTo date, we have a negative effect on the our financial position, results offinanced our operations and/or search for a target company,primarily through the specific impact is not readily determinable assale of the date of these financial statements. The financial statements do not include any adjustments that might resultequity securities and convertible debt, proceeds from the outcome of this uncertainty.
Off-Balance Sheet Arrangements
Merger and related PIPE Financing, borrowings under loan facilities and, to a lesser extent, through grants from governmental and other agencies. Since our inception, we have incurred significant operating losses and negative cash flows. As of June 30, 2022 and December 31, 2021, we had an accumulated deficit of $397.5 million and $414.6 million, respectively.
($ in thousands) | Total | Less than 1 year | 1 – 3 years | 3 – 5 years | More than 5 years | ||||||||||||||||||||||||
Finance leases | $ | 31,080 | $ | 3,916 | $ | 8,130 | $ | 7,938 | $ | 11,096 | |||||||||||||||||||
Operating leases | 1,047 | 105 | 211 | 211 | 520 |
Six Months Ended June 30, | |||||||||||||||||
($ in thousands) | 2022 | 2021 | |||||||||||||||
Net income (loss) | $ | 17,036 | $ | (37,499) | |||||||||||||
Non-cash adjustments to reconcile net loss to net cash used in operating activities(1): | (52,026) | 6,655 | |||||||||||||||
Changes in operating assets and liabilities: | (376) | 1,621 | |||||||||||||||
Net cash used in operating activities | (35,366) | (29,223) | |||||||||||||||
Net cash used in investing activities | (156) | (92) | |||||||||||||||
Net cash (used in) provided by financing activities | (945) | 18,355 | |||||||||||||||
Net decrease in cash and cash equivalents | $ | (36,467) | $ | (10,960) | |||||||||||||
Cash and cash equivalents at the beginning of the period | $ | 217,502 | $ | 39,929 | |||||||||||||
Cash and cash equivalents at the end of the period | $ | 181,035 | $ | 28,969 |
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than the underwriters are entitled to a deferred fee of $2,127,821prepared in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
accordance with U.S. generally accepted accounting principles. The preparation of our unaudited condensed consolidated financial statements in accordance with GAAP requires managementus to make estimates, assumptions and assumptionsjudgments that affect the reported amounts reportedof assets, liabilities, revenues, and expenses, and disclosure of contingent liabilities. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates based on different assumptions, judgments, or conditions.
Warrant Derivative Liability
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all ofyears ended December 31, 2021 and 2020, included in our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
We issued 5,152,500 warrants in connection with our initial public offering (5,000,000) and private placement (152,500) which are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. The initial fair value of warrants issued in connection with the initial public offering and private placement has been estimated using Monte-Carlo simulations at each measurement date.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify asare an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”), and undermay take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies until it is no longer an emerging growth company. Section 107 of the JOBS Act will be allowed to comply with new or revised accounting pronouncements based onprovides that an emerging growth company can take advantage of the effective dateextended transition period afforded by the JOBS Act for private (not publicly traded) companies. We are electing to delay the adoptionimplementation of new or revised accounting standards,standards. We expect to use the extended transition period and, as a result,therefore, while we mayare an emerging growth company we will not comply withbe subject to new or revised accounting standards onat the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparablesame time that they become applicable to other public companies that comply withare not emerging growth companies, unless we choose to early adopt a new or revised accounting pronouncements asstandard. This may make it difficult or impossible to compare our financial results with the financial results of another public company effective dates.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K under the processExchange Act (“Regulation S-K”). Smaller reporting companies may take advantage of evaluating the benefits of relying on the othercertain reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to,disclosure obligations, including, among other things, (i) provide an auditor’s attestation report on our systemproviding only two years of internal controls overaudited financial statements. We will remain a smaller reporting pursuant to Section 404, (ii) provide allcompany if (1) the market value of Common Stock held by non-affiliates is less than $250 million as of the compensation disclosure that may be requiredlast business day of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted bysecond fiscal quarter, or (2) our annual revenues in its most recent fiscal year completed before the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the auditlast business day of its second fiscal quarter are less than $100 million and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items suchmarket value of Common Stock held by non-affiliates is less than $700 million as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a periodlast business day of five years following the completion of our initial public offering or until we are no longer an “emerging growth company,” whichever is earlier.
As
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controlsforms and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is(ii) accumulated and communicated to our management, including our Chief Executive Officer (who serves as our principal executive officer) and Chief Financial Officer (who serves as our principal financial and accounting officer), to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer, carried out an evaluationto allow timely decisions regarding required disclosure.
Restatement of Previously Issued Financial Statements
On May 14, 2021, we revised our prior position on accounting for warrants and restated our December 31, 2020 financial statements to reclassify the Company’s warrant. These non-cash adjustments to the financial statements do not impact the amounts previously reported for our cash and cash equivalents or total assets.
Changes in Internal Control overOver Financial Reporting
There waswere no changechanges in our internal control over financial reporting that occurred(as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter endingthree months ended June 30, 20212022 that hashave materially affected, or is reasonableare reasonably likely to materially affect, our internal control over financial reporting as the circumstances that led to the restatementreporting.
None.
Factors that could cause our actual results to differ materially from thoseOur risk factors are disclosed in this Quarterly Report are any of the risks described in the Risk Factors sectionPart I, Item 1A of our annual report on Form 10-K/A filed withAnnual Report. There have been no material changes during the SEC on May 14, 2021. Any of these factors could result in a significantsix months ended June 30, 2022 from or material adverse effect on our results of operations or financial condition. Additionalupdates to the risk factors not presently known to us or that we currently deem immaterial may also impairdiscussed in Part I, Item 1A, Risk Factors of our business or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities
On September 22, 2020, we consummated our initial public offering (the “IPO”) of 10,000,000 units (the “Units”). Each Unit consists of one share of Class A common stock, par value $0.0001 per share (“Class A Common Stock”) and one-half of one redeemable warrant (each whole warrant, a “Warrant”), with each whole Warrant entitling the holder thereof to purchase one share of Class A Common Stock for $11.50 per share. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to us of $100,000,000. We granted the underwriters in the IPO, a 45-day option to purchase up to 1,500,000 additional Units solely to cover over-allotments, if any. Oppenheimer & Co. Inc. acted as the sole book running manager and Northland Securities, Inc. acted as the co-manager of the IPO. The securities sold in the IPO were registered under the Securities Act on registration statements on Form S-1 No. 333-240374. The SEC declared the registration statement effective on September 17, 2020.
On September 22, 2020, simultaneously with the consummation of the IPO, we completed the private sale (the “Private Placement”) of an aggregate of 355,000 Units (the “Private Placement Units”) to AHAC Sponsor LLC, Oppenheimer & Co. Inc. and Northland Securities, Inc., generating gross proceeds to us of $3,550,000. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
A total of $100,000,000, comprised of $98,000,000 of the proceeds from the IPO and $2,000,000 of the proceeds of the sale of the Private Placement Units, was placed in a U.S.-based trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee.
We paid a total of $4,197,388 of transaction costs consisting of $2,000,000 of underwriting fee, $1,959,758 of deferred underwriting fee and $329,713 of other offering costs. Of the total transaction cost $317,023 was expensed as non-operating expenses in that statement of operations with the rest of the offering cost charged to stockholders’ equity. The transaction costs were allocated based on the relative fair value basis, compared to the total offering proceeds, between the fair value of the public warrant liabilities and the Class A common stock.
For a description of the use of the proceeds generated in our IPO, see Part I, Item 2 of this Form 10-Q.
None.
Not applicable.
None.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
Number | ||||||||
Exhibit Number | Description | |||||||
Certification of Chief Executive Officer | ||||||||
The following materials from Humacyte, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in Inline XBRL | ||||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized on this 16th12th day of August, 2021.
Date: August 12, 2022 | By: | ||||||||||
Name: | |||||||||||
Title: | President and Chief Executive Officer |
By: | |||||||||||
Name: | |||||||||||
Title: | Chief Financial Officer, Chief Corporate Development Officer and Treasurer |
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