☒ xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Registrant’s telephone number, including area ~~code:~~ ~~(646) 494-3296~~

(Former name, or former address and former fiscal year, if changed since last report)

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.

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 B~~5, 2022, 103,006,803 shares of common stock, par value $0.0001, were issued and outstanding.

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements that involve substantial risks and uncertainties. “Forward-looking statements,” as that term is defined in the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) are statements that are not historical facts and involve a number of risks and uncertainties. These statements include, without limitation, statements regarding the financial position, business strategy and the plans and objectives of management for future operations. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used therein, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strive,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Such statements are based on the beliefs of, as well as assumptions made by and information currently available to, our management.

Forward-looking statements may include, for example, statements about:

•our plans and ability to execute product development, process development and preclinical development efforts successfully and on our anticipated timelines;

•our plans and ability to obtain marketing approval from the U.S. Food and Drug Administration (“FDA”) and other regulatory authorities, including the European Medicines Agency (“EMA”), for our bioengineered human acellular vessels (“HAVs”) and other product candidates;

•our ability to design, initiate and successfully complete clinical trials and other studies for our product candidates and our plans and expectations regarding our ongoing or planned clinical trials, including for our ongoing V005 Phase II/III clinical trial and V007 Phase III clinical trial;

•the outcome of our ongoing discussions with the FDA concerning the design of our ongoing V005 Phase II/III clinical trial, including determination of trial size;

•our anticipated growth rate and market opportunities;

•the potential liquidity and trading of our securities;

•our ability to raise additional capital in the future;

•our ability to use our proprietary scientific technology platform to build a pipeline of additional product candidates;

•the characteristics and performance of our bioengineered human, acellular vessels (“HAVs”);

•our plans and ability to commercialize our HAVs and other product candidates, if approved by regulatory authorities;

•the expected size of the target populations for our product candidates;

•the anticipated benefits of our HAVs relative to existing alternatives;

•our assessment of the competitive landscape;

•the degree of market acceptance of HAVs, if approved, and the availability of third-party coverage and reimbursement;

•our ability to manufacture HAVs and other product candidates in sufficient quantities to satisfy our clinical trial and commercial needs;

•our expectations regarding our strategic partnership with Fresenius Medical Care Holdings, Inc. (“Fresenius Medical Care”) to sell, market and distribute our 6 millimeter HAV for certain specified indications and in specified markets;

•the performance of other third parties on which we rely, including our third-party manufacturers, our licensors, our suppliers and the organizations conducting our clinical trials;

•our ability to obtain and maintain intellectual property protection for our product candidates as well as our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property rights of others;

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•our ability to maintain the confidentiality of our trade secrets, particularly with respect to our manufacturing process;

•our compliance with applicable laws and regulatory requirements, including FDA regulations, healthcare laws and regulations, and anti-corruption laws;

•our ability to attract, retain and motivate qualified personnel and to manage our growth effectively;

•our future financial performance and capital requirements;

•our ability to implement and maintain effective internal controls; and

•the impact of the COVID-19 pandemic on our business, including our manufacturing efforts, and our preclinical studies and clinical trials.

We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. Any forward-looking statement is based on information current as of the date of this Quarterly Report and speaks only as of the date on which such statement is made. Actual events or results may differ materially from the results, plans, intentions or expectations anticipated in these forward-looking statements as a result of a variety of factors, many of which are beyond our control. More information on factors that could cause actual results to differ materially from those anticipated is included from time to time in our reports filed with the Securities and Exchange Commission (the “SEC”), including, but not limited to, those described in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2021, which we filed with the SEC on March 29, 2022. We disclaim any obligation, except as specifically required by law, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

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PART I – FINANCIAL INFORMATION

Item 1. ~~Condensed~~ Financial Statements

Humacyte, Inc.

ALPHA HEALTHCARE ACQUISITION CORP.
CONDENSED BALANCE SHEETS

Condensed Consolidated Balance Sheets

(unaudited)

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

(in thousands except for share and per share amounts)


	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

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

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Humacyte, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(unaudited)

(in thousands except for share and per share amounts)


	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

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

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Humacyte, Inc.

Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(unaudited)

(in thousands except for share amounts)


	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)

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

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Humacyte, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)


	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

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

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Humacyte, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

~~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

~~Organization~~

Humacyte, Inc. and ~~General~~

subsidiary (the “Company”) is pioneering the development and manufacture of off-the-shelf, universally implantable, bioengineered human tissues, complex tissue systems, and organs designed to improve the lives of patients and transform the practice of medicine. The Company is leveraging its technology platform to develop proprietary, bioengineered, acellular human tissues, complex tissue systems, and organs for use in the treatment of diseases and conditions across a range of anatomic locations in multiple therapeutic areas.

On August 26, 2021 (the “Closing Date”), Alpha Healthcare Acquisition Corp. ~~(the “Company”~~(“AHAC”) ~~was incorporated as a Delaware corporation on July 1, 2020. The Company was incorporated for the purpose of effecting~~consummated 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 ~~corporation~~Corporation (“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 merge~~Inc. (“Merger Sub”), a Delaware corporation and wholly owned subsidiary of AHAC. As contemplated by the Merger Agreement, Merger Sub merged with and into Legacy Humacyte, with Legacy Humacyte 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 Humacyte~~continuing as the surviving ~~company in the merger~~corporation and ~~after giving effect to such merger, Humacyte shall be~~as a wholly owned subsidiary of ~~AHAC.~~

~~Under~~AHAC (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 connection~~collectively 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 agreed~~described in the ~~Business Combination~~Merger 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 prepared~~reverse recapitalization in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and under this method of accounting, AHAC is treated as the acquired company for ~~interim~~ financial ~~information~~reporting purposes and ~~in accordance with~~Legacy Humacyte is treated as the ~~instructions~~acquirer. Operations prior to ~~Form 10-Q and Article 8~~the Merger are those of ~~Regulation S-X~~Legacy Humacyte.

Refer to Note 3 — Reverse Recapitalization for further details of the ~~U.S. Securities~~Merger.

Liquidity and ~~Exchange Commission (“SEC”). Certain information or footnote disclosures normally included~~Going Concern

Since its inception in ~~financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to~~2004, the ~~rules~~Company has generated no product revenue and ~~regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information~~has incurred operating losses and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results andnegative cash flows ~~for~~from operations in each year. To date, the ~~periods presented.~~

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’s operating losses were $40.3 million and $39.0 million for the six months ended June 30, 2022 and 2021, ~~are not necessarily indicative~~respectively. Net cash flows used in operating activities were $35.4 million and $29.2 million during the six months ended June 30, 2022 and 2021, respectively. Substantially all of the ~~results~~Company’s operating losses resulted from costs incurred in connection with the Company’s research and development programs and from general and administrative costs associated with the Company’s operations. The Company expects to ~~be expected~~incur substantial operating losses and negative cash flows from operations for the ~~year ending December 31, 2021 or for any~~foreseeable future ~~interim periods.~~

as the Company advances its product candidates.

~~Emerging Growth~~As 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.

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Humacyte, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Impact of COVID-19

The COVID-19 pandemic has caused many governments to implement measures to slow the spread of the ~~Securities Act of 1933, as amended, (the “Securities Act”), as modified by~~outbreak, including shelter-in-place orders and the ~~Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage~~mandatory shutdown of certain ~~exemptions from various reporting requirements~~businesses. The outbreak and government measures taken in response have had a significant impact, both direct and indirect, on the Company’s business, as supply chains have been disrupted, and facilities and production have been suspended. The future progression of the pandemic and its effects on the Company’s business and operations are uncertain. The COVID-19 pandemic may affect the Company’s ability to initiate and complete preclinical studies, delay its clinical trials or future clinical trials, disrupt regulatory activities, or have other adverse effects on its business and operations. The pandemic has already caused significant disruptions in the financial markets, and may continue to cause such disruptions, which could impact the Company’s ability to raise additional funds to support its operations. Moreover, the pandemic has significantly impacted economies worldwide and could result in adverse effects on the Company’s business and operations.

To date, there have been no material financial impacts or impairment losses in the carrying values of the Company’s assets as a result of the pandemic and the Company is not aware of any specific related event or circumstance that would require it to revise the estimates reflected in these financial statements. The extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including current and future clinical trials and research and development costs, will depend on future developments that are ~~applicable~~highly uncertain, including as a result of new information that may emerge concerning COVID-19, the actions taken to ~~other public companies that are not emerging growth companies including, but not limited to, not being required to comply with~~contain or treat it, the ~~auditor attestation requirements~~emergence of ~~Section 404~~new virus variants, and the duration and intensity of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

~~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.

2. Summary of ~~securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out~~Significant Accounting Policies

Basis of ~~the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable.~~ Presentation

The Company has ~~elected not to opt out~~prepared the accompanying financial statements in conformity with U.S. GAAP. The Company’s condensed consolidated financial statements reflect the operations of ~~such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies,~~ the Company ~~as an emerging growth company, can adopt~~and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Unless otherwise noted, the ~~new or revised standard at~~Company has retroactively adjusted all common and preferred share and related price information to give effect to the ~~time private companies adopt~~exchange ratio established in the ~~new or revised standard. This may make comparison~~Merger Agreement. Operations prior to the Merger are those of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Legacy Humacyte.

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.

Unaudited Interim Condensed Consolidated Financial Statements

~~Cash~~

The accompanying interim condensed consolidated financial statements and ~~Cash Equivalents~~

the related footnote disclosures are unaudited. These unaudited interim financial statements have been prepared on the same basis as the audited financial statements and, in management’s opinion, include all adjustments, consisting of only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2022 and its results of operations for the three and six months ended June 30, 2022 and 2021, and cash flows for the six months ended June 30, 2022 and 2021. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ended December 31, 2022 or any other period. The December 31, 2021 year-end condensed consolidated balance sheet was derived from audited annual financial statements but does not include all disclosures from the annual financial statements.

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Humacyte, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021 and the related notes included in the Company’s Annual Report on Form 10-K, filed with the SEC on March 29, 2022 (the “Annual Report”), which provides a more complete discussion of the Company’s accounting policies and certain other information. There have been no significant changes to the significant accounting policies disclosed in Note 2 of the audited consolidated financial statements as of and for the years ended December 31, 2021 and 2020 included in the Company’s Annual Report.

Segments

The Company ~~considers all short-term investments with an original maturity of three months or less when purchased~~operates and manages its business as 1 reportable and operating segment. The Company is developing proprietary, bioengineered, acellular human tissues, complex tissue systems, and organs that are designed to be ~~cash equivalents.~~

used in the treatment of diseases and conditions across a range of anatomic locations in multiple therapeutic areas. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of evaluating financial performance and allocating resources.

~~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 ~~that~~which potentially subject the Company to concentrations of credit risk consist principally of a cash ~~account in a financial institution, which, at times, may exceed~~and cash equivalents and short-term investments consisting of certificates of deposit (“CDs”). Total cash balances exceeded insured balances by the Federal ~~Depository~~Deposit 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 redemption~~2022 and December 31, 2021. The Company has cash equivalents that are ~~presented at redemption value as temporary equity, outside~~invested in highly rated money market funds invested only in obligations of the ~~stockholders’ equity section~~U.S. government and its agencies.

As of both June 30, 2022 and December 31, 2021, the Company had approximately $10.0 million in CDs. These cash deposits are deposited at a bank that is a member of the Certificate of Deposit Account Registry Service (“CDARS”), in which large deposits are divided into smaller amounts and placed with other FDIC insured banks which are also members of the CDARS network. Those members issue CDs in amounts under $250,000, so that the entire deposit balance is eligible for FDIC insurance. As of both June 30, 2022 and December 31, 2021, the Company classified $2.0 million of its certificates of deposit as cash and cash equivalents and $8.0 million of its certificates of deposit as short-term investments on its condensed consolidated balance sheets.

During the three and six months ended June 30, 2022 and 2021, 100% of the Company’s ~~balance sheet.~~

total revenue relates to an award it received from the Department of Defense (“DoD”) in August 2017. As of June 30, 2022 and December 31, 2021, 100% of the Company’s accounts receivable relates to the DoD grant.

Net ~~Loss~~Income (Loss) per Share Attributable to Common ~~Stock~~

Stockholders

~~Net loss~~Basic net income (loss) per share attributable to common ~~share~~stockholders is computed by dividing net ~~loss~~income (loss) attributable to common stockholders by the ~~weighted average~~weighted-average number of common shares outstanding ~~for~~during the ~~period. The Company applies~~period without consideration of potentially dilutive common stock. Diluted net income (loss) per share attributable to common stockholders reflects the ~~two-class method~~potential 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. Shares~~the issuance of common stock ~~subject~~that then shared in the earnings of the Company unless inclusion of such shares would be anti-dilutive.

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Humacyte, Inc.

Notes to ~~possible redemption at June 30, 2021, which are not currently redeemable and are not redeemable at fair value, have been excluded from~~Condensed Consolidated Financial Statements

(unaudited)

The following table presents the calculation of basic and diluted net ~~loss~~income (loss) per ~~common~~ share ~~since such shares, if redeemed, only participate in their pro rata share of~~for the ~~Trust Account earnings.~~ periods presented:


	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)

The ~~Company has not considered the effect of warrants sold in the Initial Public Offering and the private placement to purchase an aggregate 5,177,500~~potential shares of common stock inthat were excluded from the ~~calculation~~computation of diluted ~~loss~~net income (loss) per share ~~since~~for each period because including them would have had an antidilutive effect were as follows:


	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

The 15,000,000 Contingent Earnout Shares, as defined in Note 3, are excluded from the ~~exercise~~anti-dilutive table for the three and six months ended June 30, 2022 as such shares are contingently issuable until the share price of the ~~warrants into shares of common stock is contingent~~Company exceeds specified thresholds that have not yet been achieved, or upon the occurrence of ~~future events. As~~ a ~~result, diluted net loss per~~change in control.

Other Risks and Uncertainties

The Company is subject to risks and uncertainties common ~~share is~~to early-stage companies in the ~~same as basic net loss per common share~~biotechnology industry, including, but not limited to, successful discovery and development of its product candidates, the success of clinical trials and other studies for its product candidates, including for its ongoing V005 Phase II/III clinical trial and V007 Phase III clinical trial, the regulatory approval and commercialization of its HAVs and other product candidates,the expected size of the target populations for the ~~period presented.~~

~~Below is a reconciliation~~Company’s product candidates, the degree of market acceptance of the ~~net income per common share:~~

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~~

~~The~~HAVs, if approved, the availability of third-party coverage and reimbursement, development by competitors of new technological innovations, the ability to manufacture HAVs and other product candidates in sufficient quantities, expectations regarding the Company ~~complies~~’s strategic partnerships, dependence on third parties, key personnel and the ability to attract and retain qualified employees, protection of proprietary technology and confidentiality of trade secrets, compliance with governmental regulations, the ~~requirements~~impact of the ~~ASC 340-10-S99-1~~COVID-19 pandemic, the Company’s implementation and ~~SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses~~maintenance of Offering”. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Public Offering and that were charged to stockholders’ equity upon the completion of the IPO. Accordingly, on September 22, 2020, offering costs totaling $4,289,471 have been charged to stockholders’ equity (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 liabilitieseffective internal controls, and the ~~Class A common stock.~~

ability to secure additional capital to fund operations and commercial success of its product candidates.

~~Fair Value~~

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Humacyte, Inc.

Notes to Condensed Consolidated Financial ~~Instruments~~

Statements

(unaudited)

~~The fair value~~

Product candidates currently under development will require extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel, and infrastructure and extensive compliance-reporting capabilities. Even if the ~~Company’s assets~~Company’s commercialization efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales, and ~~liabilities, which qualify as financial instruments under~~the Company may depend on certain strategic relationships to distribute its products, including the Company’s strategic partnership with Fresenius Medical Care, to sell, market and distribute its 6 millimeter HAV for certain specified indications outside the United States.

Recently Adopted Accounting Pronouncements

In May 2021, the Financial Accounting Standards Board ~~(“FASB”~~(the “FASB”) ~~ASC 820, “Fair Value Measurements~~issued Accounting Standards Update (“ASU”) No. 2021-04, “Earnings Per Share (Topic 260), Debt-Modifications and ~~Disclosures,” approximates the carrying amounts represented~~Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in ~~the balance sheet.~~

~~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 all~~Exchanges 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 Taxes~~Freestanding Equity-Classified Written Call Options” (“~~ASC 740”~~ASU 2021-04”). ~~ASC 740 requires the recognition of deferred tax assets~~The 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 the~~reduce 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 process~~modifications or exchanges of freestanding equity classified written call options (for example, warrants) that remain equity classified after modification or exchange. ASU 2021-04 is effective for ~~financial statement recognition and measurement of a tax position taken~~all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or 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.~~

amendments. The Company adopted ASU 2021-04 as of January 1, 2022. The adoption of this ASU had no impact on the Company’s financial statements and related disclosures.

In November 2021, the FASB issued ASU No. 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance” (“ASU 2021-10”) to improve financial reporting by requiring annual disclosures that increase the transparency of transactions with a government accounted for by applying a grant or contribution model by analogy, including (i) the types of transactions, (ii) an entity’s accounting for those transactions, and (iii) the effect of those transactions on an entity’s financial statements. ASU 2021-10 is effective for all entities within their scope for financial statements issued for annual periods beginning after December 15, 2021, and an entity can elect to apply the amendments in this guidance prospectively or retrospectively. The Company adopted ASU 2021-10 effective January 1, 2022, and does not expect a material impact to its annual consolidated financial statement disclosures.

3. Reverse Recapitalization

~~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 completion~~effective 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:

•each outstanding share of incorporation (A) to modify the substance or timing of the Company’s obligation to redeem 100% of its public shares if the Company does not complete its initial business combination within 24 months from the closing of the IPO or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity and (iii) waive their rights to liquidating distributions from the trust account with respect to their private placement shares if the Company fails to complete its initial business combination within 24 months from the closing of the IPO. In addition, the Company’s Sponsor, officers and directors have agreed to vote any founder shares or private placement shares held by them in favor of the Company’s initial business combination.

~~Note 5 — Related Party Transactions~~

~~Founder Shares~~

~~On July 20, 2020, the Company issued 2,875,000~~Legacy Humacyte common stock was converted into approximately 0.26260 shares of ~~Class B~~New Humacyte’s common stock, ~~to its initial stockholder, AHAC Sponsor, LLC for $25,000, or approximately $0.01 per share. The founder shares include an~~par value $0.0001 (“Common Stock”);

•each outstanding share of preferred stock of Legacy Humacyte was cancelled and converted into the aggregate number 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, 375,000 shares were forfeited accordingly as of November 1, 2020. As of June 30, 2021 and December 31, 2020, 2,500,000 shares of New Humacyte’s common stock ~~(the “Founder Shares”) are issued and outstanding.~~

~~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~~

•each outstanding option or warrant to purchase Legacy Humacyte common stock ~~issuable upon conversion~~was converted into an option or warrant, as applicable, to purchase a number of the founder shares, will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to September 22, 2020 the effective date of the IPO, 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. Notwithstanding the foregoing, the representative and Northland may not exercise their demand and “piggyback” registration rights after five (5) and seven (7) years after the effective date of the registration statement and may not exercise their demand rights on more than one occasion. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

~~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 A~~New 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 subject~~equal 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 A~~Legacy Humacyte common stock ~~issuable~~subject to such option or warrant multiplied by approximately 0.26260, at an exercise price per share equal to the current exercise price per share for such option or warrant divided by approximately 0.26260;

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

In addition, upon ~~conversion~~the closing of ~~all~~the merger (the “Closing”), 2,500,000 Class B shares of ~~Class B~~AHAC (the “Founder Shares”) automatically converted into shares of Common Stock on a 1-for-1 basis.

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Humacyte, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Former holders of the Legacy Humacyte common stock ~~will equal,~~and Legacy Humacyte preferred stock are eligible to receive up to an aggregate of 15,000,000 additional shares of Common Stock (the “Contingent Earnout Shares”) in the aggregate, ~~on an as-converted basis, 20%~~comprised of ~~the sum~~2 equal tranches of ~~the total number of all~~7,500,000 shares of common stock outstanding upon the completion of the IPO (excluding the placement units and underlying securities) plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial business combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial business combination or any private placement-equivalent units and their underlying securities issued to our sponsor or its affiliates upon conversion of loans made to us). The term “equity-linked securities” refers to any debt or equity securities that are convertible, exercisable or exchangeable for shares of Class A common stock issued in a financing transaction in connection with our initial business combination, including but not limited to a private placement of equity or debt. Securities could be “deemed issued” for purposes of the conversion rate adjustment if such shares are issuable upon the conversion or exercise of convertible securities, warrants or similar securities.

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 last~~volume-weighted average closing sale price of ~~our Class A common stock equals~~the Common Stock is greater than or ~~exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations~~equal to $15.00 and ~~the like)~~$20.00, respectively, for any 20 trading days within any ~~30-trading~~30 consecutive trading day ~~period commencing at least 150 days after our initial business combination, or (y)~~period. At the ~~date~~Closing on ~~which~~August 26, 2021, the Company ~~completes~~recorded 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 ~~all~~the equity section of ~~our stockholders having~~ the ~~right~~Company’s condensed consolidated balance sheet.

Concurrently with the execution of the Merger Agreement, AHAC entered into subscription agreements (the “Subscription Agreements”) with certain investors (the “PIPE Investors”). Pursuant to ~~exchange their~~the Subscription Agreements, the PIPE Investors purchased an aggregate of 17,500,000 shares of ~~common stock for cash, securities or other. Any permitted transferees will be subject to the same restrictions and other agreements of our initial stockholders with respect to any founder shares.~~

~~Note 8 — Warrants~~

~~Each whole warrant entitles the registered holder to purchase one share of Class A common stock~~Common 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 once~~an 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.

Closing.

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 upon~~Common Stock outstanding immediately following the ~~exercise~~consummation of ~~our warrants. In such event, each holder would pay~~ the ~~exercise price by surrendering the warrants for that number of~~Merger 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

________________

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

The Merger is accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, AHAC is treated as the acquired company for financial reporting purposes and Legacy Humacyte is treated as the acquirer. This determination is primarily based on the fact that subsequent to the ~~quotient obtained by dividing (x)~~Merger, the ~~product~~Legacy Humacyte stockholders hold a majority of the ~~number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price~~voting rights of the ~~warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” for this purpose shall mean the average reported last sale price~~combined company, Legacy Humacyte comprises all of the ~~Class A common stock~~ongoing operations of the combined company, Legacy Humacyte comprises a majority of the carryover governing body of the combined company, and Legacy Humacyte’s senior management comprises all of the senior management of the combined company. Accordingly, for accounting purposes, the Merger was treated as the equivalent of Legacy Humacyte issuing shares for the ~~10 trading days ending on the third trading day~~net assets of AHAC, accompanied by a recapitalization. The net assets of AHAC were stated at historical costs. No goodwill or other intangible assets were recorded. Operations prior to the ~~date on which the notice~~Merger are those of ~~redemption is sent to the holders of warrants.~~

Legacy Humacyte.

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 ~~closing~~Merger, 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 price~~transaction costs, consisting of banking, legal, and other professional fees, of which $3.9 million was recorded as a reduction of proceeds to additional paid-in capital, and less than ~~$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 ~~case~~condensed 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 on~~three 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.

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Humacyte, Inc.

Notes to the day on which we consummate our initial business combination (such price, the “Market Value”) is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below under “Redemption of warrants” will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market Value and the Newly Issued Price.

Condensed Consolidated Financial Statements

(unaudited)

~~Note 9 —~~4. Fair Value Measurements

Fair value is defined as the price that would be received ~~for sale of~~to sell an asset or paid ~~for~~to transfer of a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date. ~~GAAP~~Accounting Standards Codification (“ASC”) 820, Fair Value Measurement and Disclosures, establishes a ~~three-tier fair value~~ hierarchy ~~which prioritizes the~~whereby inputs to valuation techniques used in measuring fair ~~value. The~~value are prioritized, or the fair value hierarchy. There are three levels to the fair value hierarchy ~~gives the highest priority to~~based on reliability of inputs, as follows:

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

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

•Level 3 — Unobservable inputs in which little or no market data exists, therefore requiring the Company to develop its own assumptions.

The Company evaluates assets and liabilities subject to fair value measurements on a recurring basis to determine the ~~lowest priority~~appropriate level at which to classify them for each reporting period, utilizing valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs ~~(Level 3 measurements). These tiers include:~~

to the extent possible. The determination requires significant judgments to be made by the Company.

●

~~Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;~~

●

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

●

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The Company’s ~~Private Placement Warrant liability~~assets and liabilities that were measured at ~~June 30, 2021 and December 31, 2020 and Public Warrant liability at December 31, 2020 is based~~fair 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

Table of Contents

Humacyte, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The following tables present a summary of the changes in ~~a material change in~~the fair ~~value. The~~value of the Company’s ~~warrant liability for the Public Warrants at June 30, 2021 is based on quoted prices (unadjusted) with less volume and transaction frequency than active markets.~~ Level 3 financial instruments:


($ 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 fair value of the ~~Public Warrant~~Contingent Earnout Liability and Private Placement Warrants (as defined in Note 8 — Stockholders’ Equity (Deficit)) liability isare based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy.

In determining the fair value of the Contingent Earnout Liability, the Company used the Monte Carlo simulation value model using a distribution of potential outcomes on a monthly basis over a 10-year period prioritizing the most reliable information available. The assumptions utilized in the calculation were based on the achievement of certain stock price milestones, including the current Common Stock price, expected volatility, risk-free rate, expected term and expected dividend yield (see Note 8 — Stockholders’ Equity (Deficit)). Contingent earnout payments involve certain assumptions requiring significant judgment and actual results can differ from assumed and estimated amounts.

In determining the fair value of the Private Placement Warrants liability, the Company used the Monte Carlo simulation valuation model to estimate the fair value utilizing assumption including the current Company stock price, expected volatility, risk-free rate, expected term and expected dividend yield (see Note 8 — Stockholders’ Equity (Deficit)).

The Company’s money market funds are classified within Level 1 of the fair value ~~hierarchy. For~~hierarchy because they are valued using quoted market prices. Certificates of deposit are carried at amortized cost in the ~~period ended December 31, 2020 there were no reclassifications into Level 1,~~Company’s condensed consolidated balance sheets, which approximates their fair value based on Level 2 ~~or Level 3. For the period ending March 31, 2021 the Public Warrants were reclassified from a Level 3 to a Level 1 classification. No~~inputs. The carrying values of other ~~reclassifications occurred during the period ending June 30, 2021.~~

~~The following tables presents fair value information~~receivables, accounts payable and accrued expenses as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 approximated their fair values due to the short-term nature of these items.

Table of Contents

Humacyte, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

5. Property and Equipment, Net

Property and equipment, net consist of the following:


($ 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

___________________________

(1)Includes $3.6 million as of both June 30, 2022 and December 31, 2021 related to scientific equipment not placed into service and therefore not being depreciated.

Depreciation expense totaled $1.5 million and $3.0 million for the three and six months ended June 30, 2022 and $1.6 million and $3.1 million for the three and six months ended June 30, 2021, respectively. All long-lived assets are maintained in the UnitedStates.

6. Accrued Expenses

Accrued expenses consisted of the following:


($ 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

7. Debt

On March 30, 2021, the Company entered into a term loan agreement with Silicon Valley Bank and SVB Innovation Credit Fund VIII, L.P., as amended in June 2021 and September 2021 (the “Loan Agreement”), which provides a term loan facility of up to $50.0 million with a maturity date of March 1, 2025. The Company’s obligations under the Loan Agreement are secured by substantially all of its assets except for its intellectual property. The Loan Agreement contains certain customary covenants, including, but not limited to, those relating to additional indebtedness, liens, asset divestitures, and affiliate transactions. If a minimum liquidity amount is not maintained, 50% of the outstanding principal and interest will become cash collateralized. As of June 30, 2022, the Company was in compliance with all covenants. The Company may use the proceeds of borrowings under the Loan Agreement as working capital and to fund its general business requirements.

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Humacyte, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The Loan Agreement provides that the term loans will be distributed in tranches. The initial term loan tranche of $20.0 million was drawn on March 31, 2021, and on October 13, 2021, the Company borrowed an additional $10.0 million under the Loan Agreement. Borrowings under the Loan Agreement are accounted for net of issuance costs which are being accreted to interest expense over the term of the loan using the effective interest method. As of June 30, 2022, 2 subsequent $10.0 million term loan tranches will be eligible to be drawn at the request of the Company during specified draw periods prior to March 31, 2023, subject to the achievement of certain business milestones and other requirements by the dates specified in the Loan Agreement. Borrowings bear interest at the greater of 7.5% or the Wall Street Journal Prime Rate plus 4.25% (9.00% as of June 30, 2022). Interest only payments on the principal amount outstanding are due monthly beginning in the first month after the loan is dispersed. Repayment of principal may begin as soon as July 1, 2023 under the level of borrowing outstanding at June 30, 2022, and no later than April 1, 2024 if the remaining 2 loan tranches are drawn. The term loans may only be prepaid in full, and such prepayment requires 30 days’ advance notice and was subject initially to a prepayment fee of 3.00% that was decreased to 2.00% after March 30, 2022 (with a further decrease to 1.00% after March 30, 2023). The Company is not obligated to pay a prepayment fee if the Company makes a prepayment after March 30, 2024.

In connection with the Loan Agreement, the Company granted warrants to the lenders to purchase shares of Common Stock at an exercise price of $10.28 per share, of which 287,704 warrants were immediately exercisable. The warrants are classified within stockholders’ equity as the settlement of the warrants is indexed to the Company’s own stock. The Company recognized the fair value of the warrants immediately exercisable within stockholders’ equity using a Black-Scholes valuation model at issuance.

At issuance, the Company initially determined that the funding of an additional tranche was not probable, and therefore no value was ascribed to the remaining 123,302 warrants that were only exercisable upon the funding of the additional tranche. As a result of the Company’s ~~financial~~additional $10.0 million borrowings under the Loan Agreement on October 13, 2021, the warrants to purchase the additional 123,302 shares of Common Stock became exercisable at an exercise price of $10.28 per share and the value of the warrants was recorded as of that date. The additional warrants are classified within stockholders’ equity using a Black-Scholes valuation model, as the settlement of the warrants is indexed to the Company’s own stock.

As of June 30, 2022, the fair value of warrants ($3.3 million), a 5% final payment fee ($1.5 million) and debt issuance costs ($0.3 million) are being accreted to interest expense over the term of the loan using the effective interest method.

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


($ in thousands)	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

Future minimum payments of principal on the Company’s outstanding variable rate borrowings as of June 30, 2022 are as follows:


Year ending December 31:	($ in thousands)
2022 (remainder)	$	—
2023	8,571
2024	17,143
2025	4,286

Total future payments	$	30,000

Table of Contents

Humacyte, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

On April 30, 2020, the Company received loan proceeds in the amount of approximately $3.3 million under the Paycheck Protection Program (“PPP”) established under the Coronavirus Aid, Relief, and Economic Security Act. All or a portion of this loan and any accrued interest was eligible to be forgiven after a twenty-four week period as long as the borrower used the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintained its payroll levels. On May 25, 2021, the PPP loan was forgiven and the Company recognized a gain from loan extinguishment in the amount of $3.3 million during the three months ended June 30, 2021.

8. Stockholders’ Equity (Deficit)

Redeemable Convertible Preferred Stock

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

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

Common Stock

On August 26, 2021, the Merger and related PIPE Financing was consummated and the Company issued 27,346,449 shares of common stock for proceeds of $242.4 million. The Company incurred $3.9 million of transaction costs, consisting of banking, legal, and other professional fees. Legacy Humacyte assumed $15.2 million of liabilities, including PIPE Financing fees and legal fees, and $0.1 million of assets from AHAC. Immediately following the Merger, there were 103,003,384 shares of Common Stock outstanding with a par value of $0.0001.

As of June 30, 2022, the Company’s Second Amended and ~~liabilities~~Restated Certificate of Incorporation authorized the Company to issue 250,000,000 shares of Common Stock. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding or reserved for issuance) by the affirmative vote of the holders of a majority of the capital stock of the Company entitled to vote and may require a separate class vote of the Common Stock.

The holders of Common Stock are entitled to receive dividends from time to time as may be declared by the Company’s board of directors. Through June 30, 2022, no dividends have been declared.

The holders of Common Stock are entitled to 1 vote for each share held with respect to all matters voted on by the common stockholders of the Company.

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

As of June 30, 2022, the Company had reserved Common Stock for future issuances as follows:


			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

Table of Contents

Humacyte, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Preferred Stock

The Company’s Second Amended and Restated Certificate of Incorporation provides the Company’s board of directors with the authority to issue $0.0001 par value preferred stock in one more series and to establish from time to time the number of shares to be included in each such series, by adopting a resolution and filing a certification of designations. Voting powers, designations, powers, preferences and relative, participating, optional, special and other rights shall be stated and expressed in such resolutions. There were 20,000,000 shares designated as preferred stock and none were outstanding as of June 30, 2022 and December 31, 2021.

Warrants

The Company had the following common stock warrants outstanding as of June 30, 2022 and December 31, 2021:


			Common Stock Warrants Outstanding

Legacy Humacyte Common Stock Warrants			411,006
Private Placement Warrants			177,500
Public Warrants			5,000,000
Total Common Stock Warrants			5,588,506

See Note 7 — Debt for a discussion of common stock warrants issued in conjunction with the Company’s Loan Agreement in 2021 (such warrants, “Legacy Humacyte Common Stock Warrants”). There were no issuances, exercises or expirations of warrants during the six months ended June 30, 2022. During the six months ended June 30, 2021 there were 32,961 of warrants exercised that were ~~accounted~~issued in conjunction with a long-term debt agreement repaid in a prior reporting period. There were no expirations of warrants during the six months ended June 30, 2021.

In connection with the Merger, the Company assumed 5,000,000 publicly-traded warrants (“Public Warrants”) and 177,500 private placement warrants issued to AHAC Sponsor LLC (the “Sponsor”), Oppenheimer & Co. Inc. and Northland Securities, Inc, in connection with AHAC’s initial public offering (“Private Placement Warrants” and, together with the Public Warrants, the “Common Stock Warrants”). The Common Stock Warrants entitle the holder to purchase one share of Common Stock at an exercise price of $11.50 per share. The Company evaluated the Common Stock Warrants to determine the appropriate financial statement classification upon the consummation of the Merger. The Common Stock Warrants are not mandatorily redeemable and are considered to be freestanding instruments as they are separately exercisable into common shares. As such, the Common Stock Warrants were not classified as liabilities under FASB ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”). The Company then evaluated the Common Stock Warrants under FASB ASC Topic 815, Derivatives and Hedging.

Public Warrants

The Public Warrants are publicly traded and are exercisable for cash unless certain conditions occur, such as the failure to have an effective registration statement related to the shares issuable upon exercise or redemption by the Company under certain conditions, at which time the warrants may be eligible for a cashless exercise. The Public Warrants may only be exercised for a whole number of shares and will expire five years after the completion of the Merger. The Public Warrants became exercisable 30 days after the completion of the Merger.

Table of Contents

Humacyte, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The Public Warrants are considered to be “indexed to the Company’s own stock”. The agreement provides that in the event of a tender or exchange offer made to and accepted by holders of more than 50% of the outstanding shares of the Company’s Common Stock, all holders of the Common Stock Warrants (both the Public Warrants and the Private Placement Warrants) would be entitled to receive cash for all of their Common Stock Warrants. As the Company has a single class of Common Stock, a qualifying cash tender offer of more than 50% of the Company’s Common Stock will always result in a change in control and would not preclude permanent equity classification of the Public Warrants. Based on this evaluation, the Company concluded that the Public Warrants meet the criteria to be classified within stockholders’ equity. The Public Warrants were initially recognized as equity on the Closing Date at a fair value of $2.80 per share.

Private Placement Warrants

The Private Placement Warrants are non-redeemable for cash so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants are redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

The agreement governing the Common Stock Warrants includes a provision, the application of which could result in a different settlement value for the Private Placement Warrants depending on their holder. Because the holder of an instrument is not an input into the pricing of a fixed-for-fixed option on the Company’s ordinary shares, the Private Placement Warrants are not considered to be “indexed to the Company’s own stock” and therefore are not classified in stockholders’ equity. As the Private Placement Warrants meet the definition of a derivative, the Company recorded these warrants as liabilities on the condensed consolidated balance sheet at fair value, with subsequent changes in their respective fair values recognized in the condensed consolidated statements of operations and comprehensive income (loss) at each reporting date.

The Private Placement Warrants were initially recognized as a liability on the Closing Date, at a ~~recurring basis~~fair value of $0.6 million, and ~~indicates~~the liability was remeasured to an estimated fair value of $0.5 million as of December 31, 2021. See Note 4 — Fair Value Measurements for a summary of the change in the fair value ~~hierarchy~~ of the ~~valuation techniques~~Private Placement Warrants during the ~~Company utilized~~three and six months ended June 30, 2022. The remeasurement of the Private Placement Warrant liability to ~~determine such fair value.~~

~~The following table presents information about the Company’s assets that are measured at~~a fair value ~~on a recurring basis at~~of $0.2 million as of June 30, ~~2021~~2022 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 inputs~~condensed consolidated statements of operations and comprehensive income (loss).

The Private Placement Warrants were valued using the ~~Company utilized to determine such fair value:~~

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 a~~following assumptions under the Monte Carlo simulation ~~model~~value 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		%

Contingent Earnout Liability

Following the Closing, former holders of Legacy Humacyte common and preferred shares may receive up to ~~value~~15,000,000 additional shares of Common Stock in the ~~Private Warrants~~aggregate, in 2 equal tranches of 7,500,000 shares of Common Stock per tranche. The first and second tranches are issuable if the closing volume weighted average price (“VWAP”) per share of Common Stock quoted on Nasdaq (or the exchange on which the shares of Common Stock are then listed) is greater or equal to $15.00 and $20.00, respectively, over any 20 trading days within any 30 consecutive trading day period.

Table of Contents

Humacyte, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Upon the Closing, the contingent obligation to issue Contingent Earnout Shares was accounted for as a liability because the triggering events that determine the number of Contingent Earnout Shares required to be issued include events that are not solely indexed to the Common Stock. The Contingent Earnout Shares are subsequently remeasured at each reporting ~~period,~~date with changes in fair value ~~recognized~~recorded as a component of other (expense) income, net in the ~~statement~~condensed consolidated statements of ~~operations.~~operations and comprehensive income (loss). The estimated fair value of the warrant liability is determined using Level 3 inputs. Inherent in a binomial options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimatestotal Contingent Earnout Shares at the ~~volatility of its ordinary shares~~Closing on August 26, 2021 was $159.4 million based on ~~historical volatility that matches~~a Monte Carlo simulation valuation model using a distribution of potential outcomes on a monthly basis over a 10-year period using the ~~expected remaining life~~most reliable information available. The estimated fair value of the ~~warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date~~total Contingent Earnout Shares at December 31, 2021 was $103.7 million.

See Note 4 — Fair Value Measurements for a ~~maturity similar to the expected remaining life~~summary of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.

~~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 changes~~change in the fair value of ~~warrant liabilities:~~

the Contingent Earnout Liability during the three and six months ended June 30, 2022. The remeasurement of the Contingent Earnout Liability to a fair value of $44.0 million as of June 30, 2022 resulted in a non-cash gain of $56.4 million and $59.6 million for the three and six months ended June 30, 2022, respectively, classified within Change in fair value of contingent earnout liability in the condensed consolidated statements of operations and comprehensive income (loss). The assumptions utilized in the calculations of fair value were based on the achievement of certain stock price milestones, including the current Common Stock price, expected volatility, risk-free rate, expected term and expected dividend yield.

Assumptions used in the valuations are described below:


	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~~

9. Stock-based Compensation

At Closing, the 2021 Long-Term Incentive Plan, (the “2021 Plan”), and the 2021 Employee Stock Purchase Plan, (the “ESPP”), became effective. As of 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 consisted~~board of ~~Mutual Funds solely.~~

directors determined that there would be no automatic increase in the number of shares reserved under the 2021 Plan or the ESPP on January 1, 2022.

Under the 2021 Plan, the Company can grant non-statutory stock options (“NSOs”), incentive stock options (“ISOs), stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, performance awards and other forms of awards. Under the ESPP, when and if implemented, eligible employees will be permitted to purchase shares of the Company’s Common Stock at the lower of 85% of the closing trading price per share of the Company’s Common Stock on the first day of the offering or 85% of the closing trading price per share on the exercise date, which will occur on the last day of each offering.

Prior to the Closing, Legacy Humacyte had 2 equity incentive plans, the 2015 Omnibus Incentive Plan, as amended (the “2015 Plan”), and the 2005 Stock Option Plan (the “2005 Plan”). As a result of the Merger, no further awards may be granted under either the 2015 Plan or the 2005 Plan. All awards previously granted and outstanding as of the effective date of the Merger, were adjusted to reflect the impact of the Merger as set forth in the Merger Agreement, but otherwise remain in effect pursuant to their original terms. The shares underlying any award granted under the 2021 Plan or the 2015 Plan that are forfeited, cancelled or reacquired by the Company prior to vesting, that expire or that are paid out in cash rather than shares will become available for grant and issuance under the 2021 Plan. As of June 30, 2022, 5,640,354 and 517,506 shares of Common Stock remain reserved for outstanding options issued under the 2015 Plan and 2005 Plan, respectively.

Table of Contents

Humacyte, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The Company’s stock option plans allow for the grant of awards that the Company believes aid in aligning the interests of award recipients with those of its stockholders. The Company’s board of directors or compensation committee determines the specific terms of equity incentive grants, including the exercise price per share and vesting period for option awards. Option awards are granted with an exercise price equal to the fair market value of the Company’s Common Stock at the date of grant.

The Company has granted options that include either a service-based or performance-based vesting condition, or both, and a 10-year contractual term. The service-based vesting condition for the plans is generally satisfied over 36 to 48 months from the date of grant. The performance-based vesting conditions are satisfied upon the attainment of certain product development milestones. The Company recognizes stock-based compensation expense based on the grant date fair value of the awards measured using the Black-Scholes option pricing model. Compensation expense related to awards with service-based vesting conditions is recognized on a straight-line basis over the requisite service period. Option valuation models, including the Black-Scholes option-pricing model, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the grant-date fair value of an award. These assumptions include the risk-free rate of interest, expected dividend yield, expected volatility, the expected term of the award, and the fair value of the underlying Common Stock on the date of grant. Forfeitures are accounted for as they occur.

Compensation expense related to awards with performance-based vesting conditions is recognized over the requisite service period using the accelerated attribution method to the extent achievement of the performance-based condition is probable. The Company does not recognize compensation expense related to awards with performance-based vesting conditions until it is probable that the performance-based vesting condition will be achieved. Forfeitures are accounted for as they occur.

Option awards under the Company’s option plans generally provide for accelerated vesting of the unvested portions of any option award in the event of an involuntary termination, as such term is defined in the relevant stock option agreement, of a grantee’s employment during the period that commences 30 days prior to the effective date of a corporate transaction and that ends 12 months following the effective date of such transaction. Additionally, the Company’s board of directors may, in its sole discretion, accelerate the vesting of any unvested stock options in the event of a corporate transaction.

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


	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

•Fair Value of Common Stock.Prior to the Merger, as the Company’s common stock was not publicly traded, the fair value of the shares of its common stock underlying the options was determined by the Company’s board of directors with input from management, after considering independent third-party valuation reports. Subsequent to the Merger, the fair value of the Common Stock has been determined based on the closing price of the shares on the Nasdaq market.

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Humacyte, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

•Expected Term.The expected term represents the period that stock options are expected to be outstanding. The Company calculated the expected term using the simplified method for options, which is available where there is insufficient historical data about exercise patterns and post-vesting employment termination behavior. The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the maximum contractual expiration date is used as the expected term under this method. For awards with multiple vesting-tranches, the times from grant until the mid-points for each of the tranches may be averaged to provide an overall expected term.

•Expected Volatility.The expected volatility was based on the historical share volatility of several publicly traded peer companies over a period of time equal to the expected term of the options, as the Company has a limited trading history to use the volatility of its Common Stock. For purposes of identifying these peer companies, the Company considered the industry, stage of development, size and financial leverage of potential comparable companies.

•Risk-Free Interest Rate.The risk-free interest rate was based on the yields of U.S. Treasury zero-coupon securities with maturities similar in duration to the expected term of the options.

•Expected Dividend Yield.The Company has not paid dividends on its Common Stock nor does it expect to pay dividends in the foreseeable future. Accordingly, the Company has estimated the dividend yield to be zero.

At June 30, 2022, there were 7,226,977 options remaining available for grant under the 2021 Plan. The Company has sufficient authorized and unissued shares to make all issuances currently available under the 2021 Plan.

The following tables show a summary of stock-based compensation expense included in the condensed consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2022 and 2021, and remaining unrecognized cost as of June 30, 2022 and December 31, ~~2020, investment~~2021:


	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

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Humacyte, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

A summary of option activity under the Company’s stock option plans during the six months ended June 30, 2022 is presented below:


	Number of Shares	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Options outstanding at December 31, 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

10. Income Taxes

The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of the annual effective tax rate and, if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period. No such adjustment was made as of June 30, 2022. The Company’s effective federal tax rate for the three and six months ended June 30, 2022 and 2021 was 0%, primarily as a result of estimated tax losses for the fiscal year to date offset by the increase in the ~~Company’s Trust Account consisted of $29,851~~valuation allowance in ~~Mutual Funds and $99,986,310 in U.S. Treasury Securities.~~ the net operating loss carryforwards.

The Company ~~classifies~~did not record any income tax expense or benefit during the three and six months ended June 30, 2022 and 2021. The Company has a net operating loss and has provided a valuation allowance against net deferred tax assets due to uncertainties regarding the Company’s ability to realize these assets. All losses before income taxes arose in the United States.

11. Commitments and Contingencies

Patent License Agreements

Duke University

In March2006, the Company entered into a license agreement with Duke University (“Duke”), which was subsequently amended in 2011, 2014, 2015, 2018, 2019 and January 2022. Under this license agreement, Duke granted the Company a worldwide, exclusive, sublicensable license to certain patents related to decellularized tissue engineering, referred to as the patent rights, as well as a non-exclusive license to use and practice certain know-how related to the patent rights. The relevant licensed patent on decellularization of tissue expired in 2021. The Company has agreed to use commercially reasonable efforts to develop, register, market and sell products utilizing the patent rights, referred to as the licensed products. Any services provided to a third party utilizing licensed products are referred to as licensed services. The Company has also agreed to meet certain benchmarks in its ~~United States Treasury securities~~development efforts, including as ~~held-to-maturity~~to development events, clinical trials, regulatory submissions and marketing approval, within specified timeframes. Under the license agreement, Duke retains the right to use the patent rights for its own educational and research purposes, and to provide the patent rights to other non-profit, governmental or higher-learning institutions for non-commercial purposes without paying royalties or other fees.

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

•a low single-digit percentage royalty on eligible sales of licensed products and licensed services, plus a low double-digit percentage of any sublicensing revenue;

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Humacyte, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

•an annual minimum royalty beginning in 2012, which increases in the calendar year immediately following the first commercial sale of licensed products or licensed services (whichever occurs first); and

•an additional amount in license fees, as certain milestones are met.

The license agreement remains effective until the later of (i) the last of the patent rights expires or (ii) four years after the Company’s first commercial sale, unless terminated earlier. Either party may terminate the agreement for fraud, willful misconduct or illegal conduct, or uncured material breach. Duke may terminate the agreement if the Company becomes insolvent. Duke may also terminate the license, convert the license into a non-exclusive license or seek assignment of any sublicense if the Company fails to reach diligence milestones within the applicable time period. If the Company abandons any claim, patent or patent application, its rights under the license with respect to such patent rights will be terminated in the territory in which the Company abandons such rights. The Company may terminate the license agreement unilaterally upon three months’ prior notice to Duke. The Company agrees to indemnify Duke against certain third-party claims. Payments to Duke under the license agreement were immaterial during the periods presented.

Yale University

In February 2014, the Company entered into a license agreement with Yale University (“Yale”) that granted the Company a worldwide license to the patents related to coatings for small-diameter vessels to inhibit clotting. The license granted under the agreement is exclusive in the field of engineered vascular tissues and tissues and extracellular matrix-based implants used for vascular repair, reconstruction and replacement (provided that all uses are vascular tissues within the range of 1 – 12mm in diameter), except that it is subject to Yale’s non-exclusive right, on behalf of itself and all other non-profit academic institutions, to use the licensed products for research, teaching, and other non-commercial purposes. The Company has agreed to pay to Yale an annual maintenance fee, increasing between the first and fourth anniversaries of the agreement up to a maximum of less than $0.1 million per year for this license.

In August 2019, the Company entered into a license agreement with Yale, that granted the Company a worldwide license to the patents related to Bioartificial Vascular Pancreas (“BVP”). The license granted under the agreement is exclusive in the field of engineered vascular tissues that deliver pancreatic islet cells to patients, except that it is subject to Yale’s non-exclusive right, on behalf of itself and all other non-profit academic institutions, to use the licensed products for research, teaching, and other non-commercial purposes. The Company has agreed to pay to Yale an annual maintenance fee, increasing between the first and fourth anniversaries of the agreement up to a maximum of less than $0.1 million per year for this license.

In August 2019, the Company entered into a license agreement with Yale that granted the Company a worldwide license to the patents related to tubular prostheses. The license granted under the agreement is exclusive in the field of engineered urinary conduits, engineered tracheas/airways, and engineered esophagi, except that it is subject to Yale’s non-exclusive right, on behalf of itself and all other non-profit academic institutions, to use the licensed products for research, teaching, and other non-commercial purposes. The Company has agreed to pay to Yale an annual maintenance fee, increasing between the first and fourth anniversaries of the agreement up to a maximum of less than $0.1 million per year for this license.

The Company has agreed to use reasonable commercial efforts to develop and commercialize the licensed patents and any licensed products and methods, and to use reasonable efforts to make the licensed products available to patients in low and low-middle income countries. The Company is also obligated to provide Yale periodically an updated and revised copy of its plan for each license, which must indicate progress of its development and commercialization. The Company may also sublicense the Company’s rights without Yale’s prior written consent, but such sublicense is subject to certain conditions.

In connection with its entry into the license agreement, the Company paid Yale upfront cash fees. The Company has also agreed to pay Yale:

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

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Humacyte, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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

•a low single-digit percentage royalty on worldwide net sales, subject to reductions for third-party license fees; and

•a low double-digit percentage of sublicensing income.

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

The agreements expire on a country-by-country basis on the date on which the last of the patents in such country expires, lapses or is declared invalid. Yale may terminate the agreements if the Company fails to (i)provide written diligence reports, (ii)provide commercially reasonable diligence plans, (iii)implement the plans in accordance with ~~FASB ASC 320 “Investments — Debt~~the obligations under the agreements, or (iv)reach certain research and ~~Equity Securities”. Held-to-maturity treasury securities are recorded at amortized cost and adjusted~~development milestones within the scheduled timeframe set forth in the agreements; however, any such termination right would be limited in scope to the country to which such failure relates. Yale may also terminate for the ~~amortization~~Company’s non-payment, uncured material breach, failure to obtain adequate insurance, bringing or ~~accretion~~assisting in bringing of ~~premiums~~a patent challenge against Yale, abandonment of the research and development of the Company’s products or ~~discounts.~~insolvency. The Company ~~considers~~may terminate the license agreements (i)on 90 days’ prior written notice to Yale, provided the Company is not in breach of the license agreements and has made all required payments to Yale thereunder and (ii)on written notice to Yale following an uncured material breach. With respect to the license agreements related to small-diameter vessels and BVP, the Company’s rights under the license agreements will also terminate automatically with respect to a patent application or patent within the licensed patents in a specified country if, upon receipt of written notice from Yale, the Company does not agree to pay the patent filing, prosecution and maintenance fees incurred by Yale for such patent applications or patents in the specified country. Under certain circumstances, Yale may, at its option, convert the exclusive licenses to non-exclusive licenses if the Company declines to initiate certain infringement or interference proceedings with respect to the licensed patents. The Company has agreed to indemnify Yale against certain third-party claims. Payments to Yale under the license agreement were immaterial during the periods presented.

Legal Matters

The Company currently is not aware of any legal proceedings or claims that management believes will have, individually or in the aggregate, a material adverse effect on the Company’s business, financial condition, results of operations, or cash flows.

Indemnification

To the extent permitted under Delaware law, the Company has agreed to indemnify its directors and officers for certain events or occurrences while the director or officer is, or was serving, at the Company’s request in such capacity. The indemnification period covers all pertinent events and occurrences during the director’s or officer’s service. The maximum potential amount of future payments the Company could be required to make under these indemnification arrangements is not specified in such arrangements; however, the Company has director and officer insurance coverage that is intended to reduce its exposure and enable the Company to recover a portion of any potential future amounts the Company could be required to make. To date, the Company has not incurred any costs as a result of such obligations and has not accrued any liabilities related to such obligations in the condensed consolidated financial statements.

12. Related Party Transactions

Fresenius Medical Care investments and distribution agreement

In June 2018, the Company completed a $150 million financing transaction pursuant to which Fresenius Medical Care purchased shares of series D redeemable convertible preferred stock that at the Closing of the Merger converted into 15,812,735 shares of the Company’s common stock. In August 2021, Fresenius Medical Care invested $25 million as part of the PIPE Financing and received an additional 2.5 million shares of the Company’s common stock.

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Humacyte, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

In addition, the Company entered into a distribution agreement with ~~original maturities~~Fresenius Medical Care in June 2018 which, as amended as of February 16, 2021, granted Fresenius Medical Care and its affiliates exclusive rights to develop outside the United States and European Union (the “EU”) and commercialize outside of the United States the Company’s 6 millimeter x 42 centimeter HAV and all improvements thereto, and modifications and derivatives thereof (including any changes to the length, diameter or configuration of the foregoing), for use in vascular creation, repair, replacement or construction, including renal replacement therapy for dialysis access, the treatment of peripheral arterial disease, and the treatment of vascular trauma, but excluding coronary artery bypass graft, pediatric heart surgery, or adhering pancreatic islet cells onto the outer surface of the distribution product for use in diabetic patients. Within the United States, Fresenius Medical Care will collaborate with the Company in its commercialization of the product in the field, including adoption of the distribution product as a standard of care in patients for which such use is supported by clinical results and health economic analyses.

The Company is responsible for developing and seeking regulatory approval for the distribution product in the field in the United States. For countries outside the United States, the parties agreed to use commercially reasonable efforts to satisfy certain agreed minimum market entry criteria for the distribution product in the field in such country. For the EU, once such criteria have been satisfied for the applicable country, or if the parties otherwise mutually agree to obtain regulatory approval for the distribution product in the field in the applicable country, the Company agreed to use commercially reasonable efforts to obtain such regulatory approval (other than pricing approval), and Fresenius Medical Care agreed to use commercially reasonable efforts to obtain the corresponding pricing approval. For the rest of the world (i.e., outside the United States and the EU), once such criteria have been satisfied for the applicable country, or if the parties otherwise mutually agree to obtain regulatory and pricing approval for the distribution product in the field in the applicable country, Fresenius Medical Care agreed to use commercially reasonable efforts to obtain such approvals, and the Company agreed to use commercially reasonable efforts to support Fresenius Medical Care in its efforts.

Under the distribution agreement, the Company grants an exclusive, sublicensable license to Fresenius Medical Care under the patents, know-how and regulatory materials controlled by the Company during the term to commercialize the distribution product in the field outside the United States, subject to the Company’s retained rights to carry out its obligations under the distribution agreement. The Company also grants a non-exclusive, sublicensable license to Fresenius Medical Care under the patents, know-how and regulatory materials controlled by the Company during the term to develop the distribution product in accordance with the terms of the distribution agreement. In addition, the Company grants to Fresenius Medical Care, among other things, a perpetual, irrevocable, non-exclusive sublicensable license under the patents and know-how that primarily relate to the distribution product or its manufacture and that were created, conceived or developed solely or jointly by or on behalf of Fresenius Medical Care in the performance of its activities under the distribution agreement.

The distribution agreement provides that the Company will own all know-how and patents that primarily relate to the distribution product or its manufacture that are created, conceived or developed by or on behalf of either party in the performance of activities under the distribution agreement. Ownership of all other know-how, patents, materials and other intellectual property created, conceived or developed during the performance of activities under the distribution agreement will be determined in accordance with U.S. patent laws for determining inventorship.

The Company is obligated to make payments to Fresenius Medical Care based on a share of aggregate net sales by or on behalf of the Company of the distribution product in the United States in the field. Such revenue-share payments will be a percentage of net sales in the low double digits, without regard to the calendar year in which such net sales are attributable, until such time that the Company has paid to Fresenius Medical Care a certain total amount, at which time the revenue-share will decrease to a percentage of net sales in the mid-single digits. The amounts that Fresenius Medical Care will be obligated to pay the Company under the distribution agreement for sales of the distribution product in the field outside of the United States will vary. Fresenius Medical Care agreed to pay the Company initially, on a country-by-country basis for sales outside of the United States, the amount equal to the average cost of manufacturing the Company’s distribution product plus a fixed dollar amount per unit. Following a specified period, on a country-by-country basis outside of the United States, Fresenius Medical Care will pay the Company a fixed percentage of net sales for each unit sold in such country, such that the Company will receive more than ~~three months but~~half of such net sales.

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Humacyte, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The distribution agreement will generally continue on a country-by-country basis until the later of (a) the tenth anniversary of the launch date of the distribution product in the relevant country or (b) the expiration of the last-to-expire valid claim of specified patents in such country. Each party is permitted to terminate the distribution agreement for insolvency of, or, under certain circumstances, including various cure periods, material breach by the other party. Subject to a cure period, Fresenius Medical Care may also terminate the distribution agreement in its entirety or on a country-by-country basis (i) for certain withdrawals of regulatory approval or (ii) for termination or expiration of any of our in-licenses that is necessary for the exercise of Fresenius Medical Care’s rights, or the satisfaction of its obligations, under the distribution agreement. In addition, Fresenius Medical Care may terminate the distribution agreement for convenience on a country-by-country basis upon not less than 12 months’ written notice to the Company, although Fresenius Medical Care is not permitted to give such notice prior to the end of the second year following launch of the distribution product in such country. Each party is required to indemnify one ~~year to be short-term investments.~~ another for certain third-party claims.

Arrangements with Yale University

The ~~carrying value approximates the fair value due to its short-term maturity. The carrying value, excluding gross unrealized losses~~Company’s President and ~~fair value~~Chief Executive Officer, Laura Niklason M.D., PhD., serves as an Adjunct Professor in Anesthesia at Yale University. As of ~~held to maturity securities on~~June 30, 2022 and December 31, ~~2020 are as follows:~~

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~~

~~The~~2021, 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 than~~was 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 disclosure~~in Note 11 — Commitments and Contingencies, above.

The following table shows a summary of related party expenses included in the ~~financial statements.~~

statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2022 and 2021:


	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

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~References to the “Company,” “our,” “us” or “we” refer to Alpha Healthcare Acquisition Corp.~~ The following discussion and analysis of ~~the Company’s~~our financial condition and results of operations should be read in conjunction with ~~the~~our 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.

Unless the context indicates otherwise, references in this Quarterly Report to the “Company,” “Humacyte,” “we,” “us,” “our” and similar terms refer to Humacyte, Inc. (formerly known as Alpha Healthcare Acquisition Corp.) and its consolidated subsidiaries (including Humacyte Global, Inc.) following the Merger (defined below); references to “Legacy Humacyte” refer to Humacyte, Inc. prior to the Merger; and references to “AHAC” refer to Alpha Healthcare Acquisition Corp. prior to the Merger.

Overview

We are pioneering the development and manufacture of off-the-shelf, universally implantable, bioengineered human tissues, complex tissue systems, and organs with the goal of improving the lives of patients and transforming the practice of medicine. We believe our technology has the potential to overcome limitations in existing standards of care and address the lack of significant innovation in products that support tissue repair, reconstruction and replacement. We are leveraging our novel, scalable technology platform to develop proprietary, bioengineered, acellular human tissues, complex tissue systems, and organs for use in the treatment of diseases and conditions across a range of anatomic locations in multiple therapeutic areas.

We are initially using our proprietary, scientific technology platform to engineer and manufacture human, acellular vessels (“HAVs”). Our investigational HAVs are designed to be easily implanted into any patient without inducing a foreign body response or leading to immune rejection. We are developing a portfolio, or “cabinet”, of HAVs with varying diameters and lengths. The HAV cabinet would initially target the vascular repair, reconstruction and replacement market, including use in vascular trauma; arteriovenous (“AV”) access for hemodialysis, peripheral arterial disease (“PAD”); and coronary artery bypass grafting (“CABG”). In addition, we are developing our HAVs for pediatric heart surgery and the delivery of cellular therapies, including pancreatic islet cell transplantation to treat Type 1 diabetes (our biovascular pancreas). We will continue to explore the application of our technology across a broad range of markets and indications, including the development of urinary conduit, trachea, esophagus and other novel cell delivery systems.

We believe there is substantial clinical demand for safe and effective vascular conduits to replace and repair blood vessels throughout the body. Vascular injuries resulting from trauma are common in civilian and military populations, frequently resulting in the loss of either life or limb. Existing treatment options in the vascular repair, reconstruction and replacement market include the use of autologous vessels and synthetic grafts, which we believe suffer from significant limitations. For example, the use of autologous veins to repair traumatic vascular injuries can lead to significant morbidity associated with the surgical wounds created for vein harvest and prolonged times to restore blood flow to injured limbs leading to an increased risk of amputation and infection. Synthetic grafts are often contraindicated in the setting of vascular trauma due to higher infection risk that can lead to prolonged hospitalization and limb loss. Given the competitive advantages our HAVs are designed to have over existing vascular substitutes, we believe that HAVs have the potential to become the standard of care and lead to improved patient outcomes and lower healthcare costs.

We have generated no product revenue and incurred operating losses and negative cash flows from operations in each year since our inception in 2004. As of June 30, 2022 and December 31, 2021, we had an accumulated deficit of $397.5 million and $414.6 million, respectively, and working capital of $182.0 million and $218.3 million, respectively. Our operating losses were approximately $18.5 million and $40.3 million for the three and six months ended June 30, 2022, respectively, and $19.3 million and $39.0 million for the three and six months ended June 30, 2021, respectively. Net cash flows used in operating activities were $35.4 million and $29.2 million during the six months ended June 30, 2022 and 2021, respectively. Substantially all of our operating losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We expect to incur substantial operating losses and negative cash flows from operations for the foreseeable future as we advance our product candidates.

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As of June 30, 2022, we had cash and cash equivalents and short-term investments of $189.0 million. We believe our 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 date of this Quarterly Report. See Note 1 — Organization and Description of Business in the notes to our unaudited condensed consolidated financial statements included elsewhere in this ~~report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.~~

~~Cautionary Note Regarding Forward-Looking Statements~~

~~This~~ Quarterly Report for additional information regarding this assessment.

Our need for additional capital will depend in part on ~~Form 10-Q~~the scope and costs of our development and commercial manufacturing activities. To date, we have not generated any revenue from the sale of commercialized products. Our ability to generate product revenue will depend on the successful development and eventual commercialization of one or more of our product candidates. Until such time, if ever, we expect to finance our operations through the use of existing cash and cash equivalents and short-term investments, the sale of equity or debt, borrowings under credit facilities, or through potential collaborations, other strategic transactions or government and other grants. Adequate capital may not be available to us when needed or on acceptable terms. If we are unable to raise capital, we could be forced to delay, reduce, suspend or cease our research and development programs or any future commercialization efforts, which would have a negative impact on our business, prospects, operating results and financial condition. See “Risk Factors” for additional information.

We expect to continue to incur significant expenses and to increase operating losses for at least the next several years. We anticipate that our expenses will increase substantially as we seek to:

•obtain marketing approval for our 6 millimeter HAV for vascular repair, reconstruction and replacement, including for vascular trauma and AV access for hemodialysis;

•commercialize the HAV via U.S. market launches in vascular trauma and hemodialysis AV access;

•scale out our manufacturing facility to the extent required to satisfy potential demand following any receipt of marketing approval;

•continue our preclinical and clinical development efforts;

•maintain, expand and protect our intellectual property portfolio;

•add operational, financial and management information systems and personnel to support, among other things, our product development and commercialization efforts and operations; and

•continue operating as a public company, which includes ~~forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”),~~higher costs associated with hiring additional personnel, director and ~~Section 21E of~~officer insurance premiums, audit and legal fees, and expenses for compliance with public company reporting requirements under the Securities Exchange Act of 1934 ~~as amended~~ (the “Exchange Act”)~~. We have based these forward-looking statements on our current expectations~~ and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or impliedrules implemented by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those set forth in the Risk Factors section of the Company’s Annual Report on Form 10-K/A filed with the SEC ~~on May 14,~~and The Nasdaq Stock Market LLC (“Nasdaq”).

Merger and Public Company Costs

On August 26, 2021 (the “Closing Date”), Legacy Humacyte and AHAC consummated a merger pursuant to that certain Business Combination Agreement, dated as ~~described in our other Securities~~of February 17, 2021 (the “Merger Agreement”), by and ~~Exchange Commission~~among Legacy Humacyte, AHAC and Hunter Merger Sub, Inc. (“~~SEC”~~Merger Sub”) ~~filings.~~

~~Overview~~

~~We are a blank check company incorporated as~~, a Delaware corporation and ~~formed for~~wholly owned subsidiary of AHAC. As contemplated by the ~~purpose~~Merger Agreement, Merger Sub merged with and into Legacy Humacyte, with Legacy Humacyte continuing as the surviving corporation and as a wholly owned subsidiary of ~~effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. While our efforts~~AHAC (the “Merger”). On the Closing Date, AHAC changed its name to ~~identify a target business may span many industries~~Humacyte, Inc. and ~~regions worldwide, we intend~~Legacy Humacyte changed its name to ~~focus our search for prospects within~~Humacyte Global, Inc. Operations prior to the ~~healthcare industry~~Merger included in this Quarterly Report are those of Legacy Humacyte.

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Pursuant to the United States. We have not selected any specific business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. We intend to effectuate our initial business combination using cash from the proceeds of our IPO and the saleterms of the ~~private placement units,~~Merger Agreement, at the ~~proceeds~~effective time of the ~~sale~~Merger (the “Effective Time”), (1) each outstanding share of ~~our~~common stock of Legacy Humacyte (“Legacy Humacyte common stock”) was cancelled and converted into the right to receive approximately 0.26260 shares ~~in connection with our initial business combination (including pursuant to backstop agreements we may enter into), shares issued to the owners~~ of the ~~target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.~~

~~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~~Company’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 one~~outstanding share of ~~Class A~~preferred 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 price~~that would be issued upon conversion of ~~$10.00 per Unit, generating gross proceeds~~the shares of Legacy Humacyte preferred stock based on the applicable conversion ratio immediately prior to ~~us of $100,000,000. We granted~~ the ~~underwriters~~Effective Time, multiplied by approximately 0.26260, resulting in the ~~IPO,~~issuance of a ~~45-day option~~total 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 up~~receive 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-manager~~closing 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~~Merger (the ~~“Private Placement”~~“Closing”) of. In addition, certain investors purchased an aggregate of ~~355,000 Units~~17,500,000 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.

Following the Closing Date, former holders of Legacy Humacyte common stock and Legacy Humacyte preferred stock may receive up to 15,000,000 additional shares of Common Stock (“Contingent Earnout Shares”) in the aggregate in two equal tranches if the volume-weighted average closing sale price of our Common Stock is greater than or equal to $15.00 and $20.00, respectively, for any 20 trading days within any 30 consecutive trading day period.

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

Impact of COVID-19

The COVID-19 pandemic, which began in December 2019 and has spread worldwide, has caused many governments to implement measures to slow the spread of the outbreak, including shelter-in-place orders and the mandatory shutdown of certain businesses. The outbreak and government measures taken in response have had a significant impact, both direct and indirect, on our business, as supply chains have been disrupted, and facilities and production have been suspended. The future progression of the COVID-19 pandemic, including any existing or potential variants of the virus which causes COVID-19, and its effects on our business and operations are uncertain. The COVID-19 pandemic may affect our ability to initiate and complete preclinical studies, delay our clinical trials or future clinical trials, disrupt regulatory activities, or have other adverse effects on our business and operations. The pandemic has already caused significant disruptions in the financial markets, and may continue to cause such disruptions, which could impact our ability to raise additional funds to support our operations. Moreover, the pandemic has significantly impacted economies worldwide and could result in adverse effects on our business and operations.

To date, the COVID-19 pandemic has not resulted in material financial impacts or impairment losses in the carrying values of our assets and we are not aware of any specific related event or circumstance that would require us to revise the estimates reflected in our financial statements. The extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including current and future clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19, the actions taken to contain or treat it, the emergence of new virus variants, and the duration and intensity of the related economic impact of the COVID-19 pandemic.

Components of Results of Operations

Revenue

To date, we have not generated revenue from the sale of any products. All of our revenue has been derived from government and other grants. Since inception we have been awarded grants from the California Institute of Regenerative Medicine (“CIRM”), the National Institutes of Health (“NIH”), and the Department of Defense (“DoD”), to support our development, production scaling and clinical trials of our product candidates. We may generate revenue in the future from government and other grants, payments from future license or collaboration agreements and, if any of our product candidates receive marketing approval, from product sales. We expect that any revenue we generate will fluctuate from quarter to quarter. If we fail to complete the development of, or obtain marketing approval for, our product candidates in a timely manner, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.

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Research and Development Expenses

Since our inception, we have focused our resources on our research and development activities, including conducting preclinical studies and clinical trials, developing our manufacturing process and activities related to regulatory filings for our product candidates. We recognize research and development expenses as they are incurred. Our research and development expenses consist primarily of:

•salaries and related overhead expenses for personnel in research and development functions, including stock-based compensation and benefits;

•fees paid to consultants and clinical research organizations (“CROs”), including in connection with our clinical trials, and other related clinical trial fees, such as for investigator grants, patient screening, laboratory work and statistical compilation and analysis;

•allocation of facility lease and maintenance costs;

•depreciation of leasehold improvements, laboratory equipment and computers;

•costs related to purchasing raw materials and producing our product candidates for clinical trials;

•costs related to compliance with regulatory requirements;

•costs related to our manufacturing development and expanded-capabilities initiatives; and

•license fees related to in-licensed technologies.

The majority of our research and development resources are currently focused on our Phase III clinical trials for our 6 millimeter HAV and other work needed to obtain marketing approval for our 6 millimeter HAV for use for vascular repair, reconstruction and replacement, including vascular trauma and AV access in hemodialysis in the United States. We have incurred and expect to continue to incur significant expenses in connection with these and our other clinical development efforts, including expenses related to regulatory filings, trial enrollment and conduct, data analysis, patient follow up and study report generation for our Phase II and Phase III clinical trials. We do not allocate all of our costs by each research and development program for which we are developing our cabinet of HAVs, as a significant amount of our development activities broadly support multiple programs that use our technology platform. We plan to further increase our research and development expenses for the foreseeable future as we continue the development of our proprietary scientific technology platform and our novel manufacturing paradigm.

The successful development of our preclinical and clinical product candidates is highly uncertain. At this time, we cannot estimate with any reasonable certainty the nature, timing or costs of the efforts that will be necessary to complete the remainder of the development of any of our preclinical or clinical product candidates or the period, if any, in which material net cash inflows from these product candidates may commence. This is due to the numerous risks and uncertainties associated with the development of our product candidates, including:

•the scope, rate of progress, expense and results of our preclinical development activities, our ongoing clinical trials and any additional clinical trials that we may conduct, and other research and development activities;

•successful patient enrollment in and the initiation and completion of clinical trials;

•the timing, receipt and terms of any marketing approvals from applicable regulatory authorities including the U.S. Food and Drug Administration (“FDA”) and non-U.S. regulators;

•the extent of any required post-marketing approval commitments to applicable regulatory authorities;

•development of clinical and commercial manufacturing capabilities or making arrangements with third-party manufacturers in order to ensure that it or its third-party manufacturers are able to successfully manufacture our product;

•obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;

•significant and changing government regulations;

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•launching commercial sales of our product candidates, if approved, whether alone or in collaboration with others;

•the degree of market acceptance of any product candidates that obtain marketing approval; and

•maintaining a continued acceptable safety profile following approval, if any, of our product candidates.

A change in the outcome of any of these variables could lead to significant changes in the costs and timing associated with the development of our product candidates. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate being required to conduct in order to complete the clinical development of any of our product candidates, or if we experience significant delays in the enrollment or the conduct of any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs for employees in executive, finance, human resources, commercialization, and administrative support functions, which also include stock-based compensation expenses and benefits for such employees. Other significant general and administrative expenses include facilities costs, professional fees for accounting and legal services and expenses associated with obtaining and maintaining patents.

We expect our general and administrative expenses will continue to increase for the foreseeable future to support our expanded infrastructure and increased costs of operating as a public company and as we prepare for our anticipated commercial launch of the HAV. These increases are expected to include increased employee-related expenses, increased sales and marketing expenses, and increased director and officer insurance premiums, audit and legal fees, and expenses for compliance with public company reporting requirements under the Exchange Act and rules implemented by the SEC, as well as Nasdaq rules.

Other Income (Expense), Net

Total other income (expense), net consists of (i) the change in fair value of the contingent earnout liability that was accounted for as a liability as of the date of the Merger, and is remeasured to fair value at each reporting period, resulting in a non-cash gain or loss, (ii) interest income earned on our cash and cash equivalents and short-term investments, (iii) interest expense incurred on our term loan agreement with Silicon Valley Bank and SVB Innovation Credit Fund VIII, L.P. (the “Loan Agreement”), finance leases, and our Paycheck Protection Program (“PPP”) loan during the periods each were outstanding, (iv) a change in fair value of private placement common stock warrant liabilities related to private placement warrants originally issued in a private placement to AHAC Sponsor LLC (our “Sponsor”), 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.~~

~~The issuance of additional shares~~Warrants”), which we assumed in connection with ~~an initial business combination~~the 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 ~~owners~~three months ended June 30, 2021.

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Results of Operations

Comparison of the ~~target or other investors:~~

●

may significantly dilute the equity interest of investors, which dilution would increase if the anti-dilution provisions in the Class B common stock resulted in the issuance of Class A shares on a greater than one-to-one basis upon conversion of the Class B common stock;

●

~~may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock;~~

●

could cause a change in control if a substantial number of shares of our common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;

●

~~may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and~~

●

~~may adversely affect prevailing market prices for our Class A common stock and/or warrants.~~

~~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:~~

●

~~default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations;~~

●

acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;

●

~~our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand;~~

●

~~our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding;~~

●

~~our inability to pay dividends on our common stock;~~

●

using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes;

●

~~limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;~~

●

~~increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;~~

●

~~limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and~~

●

~~other purposes and other disadvantages compared to our competitors who have less debt.~~

~~As indicated in the accompanying financial statements, as of~~Three 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”) by~~2022 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.

2021


	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)	%

* Not meaningful

~~Results of Operations and Known Trends or Future Events~~

Grant Revenue

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.

Research and Development Expenses

The following table discloses the breakdown of research and development expenses:


	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	%

Research and development expenses increased by $0.1 million, or 1%, from $14.6 million for the three months ended June 30, 2021 to $14.7 million for the three months ended June 30, 2022. The increase was primarily driven by (i) increased salaries and benefits of $0.5 million to support our expanding research and development initiatives, (ii) a $0.3 million increase in other research and development expenses, partially offset by (i) a $0.5 million decrease in non-cash stock compensation expense, and (ii) a $0.2 million decrease in the purchase of materials and supplies.

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General and Administrative Expenses

General and administrative expenses were $5.2 million and $5.4 million for the three months ended June 30, 2022 and 2021, respectively. The decrease in general and administrative expenses during this period of $0.2 million, or 4%, was primarily driven by a $0.9 million decrease in non-cash stock compensation expense due to higher costs in 2021 resulting from restructuring of the management team to accommodate the transition to being a public company, partially offset by (i) a $0.3 million increase in insurance costs, and (ii) a $0.4 million increase in salaries and benefits and recruiting costs due to higher headcount.

Total Other Income, net

Total other income was $55.4 million and $2.1 million for the three months ended June 30, 2022 and 2021, respectively. The increase of $53.3 million in income resulted from a $56.4 million non-cash gain primarily related to the remeasurement of the contingent earnout liability as of June 30, 2022, partially offset by a non-cash $3.3 million gain on PPP loan forgiveness we ~~had a net income~~recognized during the three months ended June 30, 2021.

Comparison of ~~$286,223, which consists of formation~~the Six Months Ended June 30, 2022 and ~~operating costs of $243,668 and investment income of $1,574 and change in fair value in warrant liabilities of $528,317.~~

2021


	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)	%

* Not meaningful

Grant Revenue

For the six months ended June 30, 2022 and 2021, ~~we had a net loss~~revenue was approximately $1.5 million and $0.8 million, respectively, and related to our grant from DoD. The increase in revenue of ~~$9,149,309, which consists~~$0.7 million, or 82%, relates to the timing of ~~formation~~reimbursement of certain allowable costs related to our grant from DoD.

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Research and ~~operating costs~~Development Expenses

The following table discloses the breakdown of ~~$737,486~~research and ~~investment income of $15,284 and change in fair value in warrant liabilities of $8,427,107.~~

~~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 unavailable~~development 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	%

Research and ~~is restricted~~development expenses increased from $29.7 million 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.~~

~~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 $60,000~~six 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.

General and Administrative Expenses

General and administrative ~~service fee.~~

~~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 ~~order~~general and administrative expenses during this period of $0.7 million, or 7%, was primarily driven by expenses associated with the transition to ~~finance transactions~~public 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 certain~~2021 resulting from restructuring of the ~~Company’s officers, directors, or their affiliates may, but are not obligated~~management team to ~~loan~~accommodate the ~~Company funds as may be required (“Working Capital Loans”). If~~transition to being a public company.

Total Other Income, net

Total other income was $57.3 million and $1.5 million for the ~~Company completes~~six months ended June 30, 2022 and 2021, respectively. The increase of $55.8 million in income resulted from (i) a ~~business combination,~~$59.6 million non-cash gain related to the ~~Company would repay the Working Capital Loans out~~remeasurement of the ~~proceeds~~contingent earnout liability as of ~~the Trust Account released~~June 30, 2022, (ii) a $0.3 million increase in interest income, and a $0.3 million non-cash gain related to the ~~Company. Otherwise,~~remeasurement of our private placement warrant liability, partially offset by (i) a $3.3 million gain on PPP loan forgiveness we recognized during 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.

~~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 accrued~~and (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.

Liquidity and Capital Resources

Sources of ~~$2,122,723.~~

Liquidity

~~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 could~~To date, we have ~~a negative effect on the our financial position, results of~~financed our operations ~~and/or search for a target company,~~primarily through the ~~specific impact is not readily determinable as~~sale of ~~the date of these financial statements. The financial statements do not include any adjustments that might result~~equity 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.

As of June 30, 2022 and December 31, 2021, we had cash and cash equivalents and short-term investments of $189.0 million and $225.5 million, respectively. We believe our cash and cash equivalents and short-term investments will be sufficient to fund operations, including clinical trial expenses and capital expenditure requirements for at least 12 months from the date of this Quarterly Report. See Note 1 — Organization and Description of Business to our accompanying unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for additional information regarding our assessment. We believe that our longer-term working capital, planned research and development, capital expenditures and other general corporate funding requirements will be satisfied through the sale of equity, debt, borrowings under credit facilities or through potential collaborations with other companies, other strategic transactions or government or other grants. Our liquidity plans are subject to a number of risks and uncertainties, including those described in the sections entitled “Forward-Looking Statements” and “Risk Factors” in this Quarterly Report and our Annual Report.

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As of June 30, 2022 and December 31, 2021, we had working capital of $182.0 million and $218.3 million, respectively. As of June 30, 2022, we had $30.0 million outstanding principal and $20.0 million of contingent borrowing capacity under our Loan Agreement. We do not currently have any committed external source of funds beyond the Loan Agreement.

Material Cash Requirements

Our known material cash requirements include: (1) the purchase of supplies and services that are primarily for research and development; (2) debt repayments (for additional information, see below and Note 7 — Debt to our accompanying unaudited condensed consolidated financial statements contained elsewhere in this Quarterly Report); (3) employee wages, benefits, and incentives; and (4) financing and operating lease payments (for additional information see below). We have also entered into contracts with CROs primarily for clinical trials. These contracts generally provide for termination upon limited notice, and therefore we believe that our non-cancellable obligations under these agreements are not material. Moreover, we may be subject to additional material cash requirements that are contingent upon the occurrence of certain events, for example, legal contingencies, uncertain tax positions, and other matters.

As of June 30, 2022, we had non-cancellable purchase commitments of $16.1 million for supplies and services that are primarily for research and development. We have existing license agreements with Duke University and Yale University and have a distribution agreement with Fresenius Medical Care Holdings, Inc. The amount and timing of any potential milestone payments, license fee payments, royalties and other payments that we may be required to make under these agreements are unknown or uncertain at June 30, 2022. For additional information regarding our agreement with Fresenius Medical Care, and our agreements with Duke University and Yale University, see Note 12 — Related Party Transactions and Note 11 — Commitments and Contingencies, respectively, to our accompanying unaudited condensed consolidated financial statements contained elsewhere in this Quarterly Report.

Debt

In March 2021, we entered into the Loan Agreement with Silicon Valley Bank and SVB Innovation Credit Fund VIII, L.P., as amended in June and September 2021, which provides a term loan facility of up to $50.0 million, with a maturity date of March 1, 2025. The initial term loan tranche of $20.0 million was funded upon the closing of the Loan Agreement, and on October 13, 2021, we borrowed an additional $10.0 million under the Loan Agreement. The additional $20.0 million becomes accessible in two tranches of $10.0 million each contingent on the achievement of certain business and clinical development milestones. As a result of the additional borrowing in October 2021, the commencement of repayment of principal was deferred until no earlier than July 2023 and potentially later if the remaining tranches are drawn. As of June 30, 2022, principal of $30.0 million was outstanding under the Loan Agreement and we were in compliance with all covenants in all material respects. Assuming no additional borrowings under the Loan Agreement, we expect to make interest payments of approximately $5.2 million under the Loan Agreement from July 1, 2022 through March 1, 2025, approximately $2.7 million of which we expect to pay within one year of June 30, 2022.

Our obligations under the Loan Agreement are secured by substantially all of our assets, except for our intellectual property. The Loan Agreement contains certain customary covenants, including, but not limited to, those relating to additional indebtedness, liens, asset divestitures, and affiliate transactions. We may use the proceeds of borrowings under the Loan Agreement as working capital and to fund our general business requirements.

Borrowings under the Loan Agreement bear interest at a rate of 7.5% or the sum of the Wall Street Journal Prime Rate plus 4.25%, whichever is greater. In addition, the lenders were granted warrants to purchase common stock. Interest-only payments on the principal amount outstanding are due monthly beginning in the first month after the loan is dispersed. We are required to repay principal beginning on July 1, 2023, unless we draw the remaining two loan tranches, in which case repayment of the outstanding principal amount will begin no later than April 1, 2024. Additionally, we are obligated to pay to the lenders a final payment fee of $1.5 million upon the maturity of the loan.

Our contractual obligations under the Loan Agreement as of June 30, 2022 include no cash payments related to principal within one year and $30.0 million of principal payments within one to three years.

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In April 2020, we received loan proceeds in the amount of approximately $3.3 million under the PPP. The loan and accrued interest were forgivable after a 24-week period as long as we used the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintained its payroll levels. On May 25, 2021, the Small Business Administration approved the forgiveness of the outstanding amount of the PPP loan and we recognized a gain from loan extinguishment in the amount of $3.3 million during the three months ended June 30, 2021.

Leases

Our finance lease relates to our headquarters facility containing our manufacturing, research and development and general and administrative functions, which was substantially completed in June 2018 and leased through May 2033, and our operating lease relates to the land lease associated with our headquarters. Our future contractual obligations under our lease agreements as of June 30, 2022 are as follows:


($ 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

Future Funding Requirements

We expect to incur significant expenses in connection with our ongoing activities as we seek to (i) continue clinical development of our 6 millimeter HAV for use in vascular trauma and hemodialysis AV access and submit biologics license applications for FDA approval, (ii) if marketing approval is obtained, to launch and commercialize our HAVs for hemodialysis AV access and vascular repair in the U.S. market, including subsequent launches in key international markets, (iii) advance our pipeline in major markets, including PAD Phase III trials and continue preclinical development and advance to planned clinical studies in CABG and biovascular pancreas for diabetes, and (iv) scale out our manufacturing facility as required to satisfy potential demand if our HAVs receive marketing approval. We will need additional funding in connection with these activities.

Our future funding requirements, both short-term and long-term, will depend on many factors, including:

•the progress and results of our clinical trials and interpretation of those results by the FDA and other regulatory authorities;

•the cost, timing and outcome of regulatory review of our product candidates, particularly for marketing approval of our HAVs in the United States;

•the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for our additional product candidates;

•the cost and timing of our future commercialization activities, including product manufacturing, marketing and distribution for our HAVs if approved by the FDA, and any other product candidate for which we receive marketing approval in the future;

•the amount and timing of revenues, if any, that we receive from commercial sales of any product candidates for which we receive marketing approval;

•the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; and

•the costs of operating as a public company, including hiring additional personnel as well as increased director and officer insurance premiums, audit and legal fees, and expenses for compliance with public company reporting requirements under the Exchange Act and rules implemented by the SEC and Nasdaq.

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Until such time, if ever, as we are able to successfully develop and commercialize one or more of our product candidates, we expect to continue financing our operations through the sale of equity, debt, borrowings under credit facilities or through potential collaborations with other companies, other strategic transactions or government or other grants. Adequate capital may not be available to us when needed or on acceptable terms. We do not currently have any committed external source of funds beyond the Loan Agreement. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures. Debt financing would also result in fixed payment obligations. If we are unable to raise capital, we could be forced to delay, reduce, suspend or cease our research and development programs or any future commercialization efforts, which would have a negative impact on our business, prospects, operating results and financial condition.

Our principal use of cash in recent periods has been primarily to fund our operations, including the clinical and preclinical development of our product candidates. Our future capital requirements, both short-term and long-term, will depend on many factors, including the progress and results of our clinical trials and preclinical development, timing and extent of spending to support development efforts, cost and timing of future commercialization activities, and the amount and timing of revenues, if any, that we receive from commercial sales.

See the section of this Quarterly Report entitled “Risk Factors” for additional risks associated with our substantial capital requirements.

Cash Flows

The following table shows a summary of our cash flows for each of the periods shown below:


	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

___________________________

(1) Includes depreciation, amortization related to our leases and our debt discount, stock-based compensation expense, in 2022 includes the change in fair value of our contingent earnout liability and our common stock warrant liabilities, and in 2021 includes a gain on PPP loan forgiveness.

Cash Flow from Operating Activities

The increase in net cash used in operating activities from the six months ended June 30, 2021 to the six months ended June 30, 2022 was primarily due toincreased spending on pre-clinical, clinical and pre-commercial activities as well as payroll and personnel expenses.

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Cash Flow from Investing Activities

Net cash used in investing activities for each of the six months ended June 30, 2022 and 2021 consisted of the purchases of laboratory equipment.

Cash Flow from Financing Activities

The decrease in net cash provided by financing activities for the six months ended June 30, 2022 was primarily due to $19.7 million of net proceeds in connection with draws under our loan facility with Silicon Valley Bank in March 2021.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in ~~Item 303(a)(4)(ii)~~SEC rules and regulations.

Critical Accounting Estimates

Our discussion and analysis of ~~Regulation S-K. We do not participate in transactions that create relationships with unconsolidated entities or~~our financial ~~partnerships, often referred to as variable interest entities,~~condition and results of operations are based upon our unaudited condensed consolidated financial statements, which ~~would~~ have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

~~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 $2,127,821~~prepared 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 ~~management~~us to make estimates, assumptions and ~~assumptions~~judgments that affect the reported amounts ~~reported~~of 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.

An accounting estimate or assumption is considered critical if both (a) the nature of the estimate or assumption involves a significant level of estimation uncertainty, and (b) the impact within a reasonable range of outcomes of the estimate and assumption is material to our financial condition. There have been no material changes to our critical accounting policies and estimates as compared to those disclosed in ~~the unaudited~~our audited consolidated financial statements as of and ~~accompanying notes. Actual results could differ from those estimates. The Company has identified~~for the ~~following as its critical accounting policies:~~

~~Warrant Derivative Liability~~

~~We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of~~years 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.~~

Annual Report.

Emerging Growth Company and Smaller Reporting Company Status

~~JOBS Act~~

~~The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies.~~ We ~~qualify as~~are an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”), and ~~under~~may 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 on~~provides that an emerging growth company can take advantage of the ~~effective date~~extended transition period afforded by the JOBS Act for ~~private (not publicly traded) companies. We are electing to delay~~ the ~~adoption~~implementation of new or revised accounting ~~standards,~~standards. We expect to use the extended transition period and, ~~as a result,~~therefore, while we ~~may~~are an emerging growth company we will not ~~comply with~~be 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 comparable~~same time that they become applicable to other public companies that ~~comply with~~are not emerging growth companies, unless we choose to early adopt a new or revised accounting ~~pronouncements as~~standard. This may make it difficult or impossible to compare our financial results with the financial results of another public company ~~effective dates.~~

because of the potential differences in accounting standards used.

Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K under the ~~process~~Exchange Act (“Regulation S-K”). Smaller reporting companies may take advantage of ~~evaluating the benefits of relying on the other~~certain 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 system~~providing only two years of ~~internal controls over~~audited financial statements. We will remain a smaller reporting ~~pursuant to Section 404, (ii) provide all~~company 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 required~~last 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 by~~second 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 audit~~last 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 such~~market 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 period~~last 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.~~

second fiscal quarter.

Item 3. Quantitative and Qualitative Disclosures ~~about~~About Market ~~Risk.~~

Risk

We qualify as a smaller reporting company, as defined by Item 10 of Regulation S-K and, thus, are not required to provide the information required by this Item.

Table of June 30, 2021, we were not subject to any market or interest rate risk. Following the consummation of our Initial Public Offering, the net proceeds of our Initial Public Offering and the sale of the Private Placement Units are held in the Trust Account and will be invested in U.S. government treasury bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.

Contents

Item 4. Controls and ~~Procedures.~~

Procedures

Evaluation of Disclosure Controls and Procedures

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 controls~~forms 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 evaluation~~to allow timely decisions regarding required disclosure.

As of June 30, 2022, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness ~~of the design and operation~~ of our disclosure controls and procedures ~~as of June 30, 2021.~~(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based ~~upon their~~on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures ~~(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)~~ were ~~ineffective due to a material weakness in evaluating complex accounting issues which resulted in a restatement~~effective as of ~~our December 31, 2020 financial statements.~~

June 30, 2022.

~~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 ~~over~~Over Financial Reporting

There ~~was~~were no ~~change~~changes 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 ending~~three months ended June 30, ~~2021~~2022 that ~~has~~have materially affected, or ~~is reasonable~~are reasonably likely to materially affect, our internal control over financial ~~reporting as the circumstances that led to the restatement~~reporting.

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.~~


Delaware				~~001-39532~~	85-1763759
(State or other jurisdiction of ~~of incorporation)~~incorporation or organization)			(~~Commission File Number)~~		~~(IRS~~I.R.S. Employer Identification No.)

2525 East North Carolina Highway 54
Durham,	NC	27713
(Address of principal executive offices)		(Zip code)


				Page No.
			PART I – FINANCIAL INFORMATION
			~~PART I. FINANCIAL INFORMATION~~
Item 1.			Financial Statements	5
~~Item 1.~~			~~Unaudited Condensed Financial Statements~~	1
			Condensed Consolidated Balance Sheets (unaudited)	5
			~~Condensed Balance Sheets as of June 30, 2021 (Unaudited) and December 31, 2020~~	1

	~~Unaudited~~ Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited)	26

			~~Unaudited~~ Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (unaudited)	37

			~~Unaudited~~ Condensed ~~Statement~~Consolidated Statements of Cash Flows (unaudited)	48

			Notes to ~~Unaudited~~ Condensed Consolidated Financial Statements (unaudited)	59

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations	2030

Item 3.			Quantitative and Qualitative Disclosures About Market Risk	2641

Item 4.			Controls and Procedures	2642

			PART ~~II.~~II – OTHER INFORMATION

Item 1.			Legal Proceedings	2743

Item 1A.			Risk Factors	2743

Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds ~~from Registered Securities~~	2743

Item 3.			Defaults Upon Senior Securities	2743

Item 4.			Mine Safety Disclosures	2743

Item 5.			Other Information	2743

Item 6.			Exhibits	2844

SIGNATURES				2945

Exhibit Number
Exhibit Number		Description











~~2.1~~31.1*		~~Business Combination Agreement, dated as of February 17, 2021, by and among Alpha Healthcare Acquisition Corp., Hunter Merger Sub, Inc. and Humacyte, Inc. (1)~~

~~10.1~~	~~Form of Subscription Agreement. (1)~~

~~31.1~~	Certification of Chief Executive Officer ~~Pursuant~~pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as ~~Adopted Pursuant~~adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~31.2~~31.2*		Certification of Chief Financial Officer ~~Pursuant~~pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as ~~Adopted Pursuant~~adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~32.1~~32.1**		Certification of Chief Executive Officer ~~Pursuant~~pursuant to 18 U.S.C. Section 1350, as ~~Adopted Pursuant~~adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~32.2~~32.2**		Certification of Chief Financial Officer ~~Pursuant~~pursuant to 18 U.S.C. Section 1350, as ~~Adopted Pursuant~~adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~101.INS~~101*		The following materials from Humacyte, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in Inline XBRL ~~Instance Document.~~(Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets (unaudited), (ii) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited), (iii) Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (unaudited), (iv) Condensed Consolidated Statements of Cash Flows (unaudited), (v) Notes to Condensed Consolidated Financial Statements (unaudited), and (vi) Cover Page.

~~101.SCH~~	~~Inline XBRL Taxonomy Extension Schema Document.~~

~~101.CAL~~	~~Inline XBRL Taxonomy Extension Calculation Linkbase Document.~~

~~101.DEF~~	~~Inline XBRL Taxonomy Extension Definition Linkbase Document.~~

~~101.LAB~~	~~Inline XBRL Taxonomy Extension Label Linkbase Document.~~

~~101.PRE~~	~~Inline XBRL Taxonomy Extension Presentation Linkbase Document.~~

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


		~~ALPHA HEALTHCARE ACQUISITION CORP.~~HUMACYTE, INC.

Date: August 12, 2022	By:		~~/s/ Rajiv Shukla~~ /s/ Laura E. Niklason, M.D., Ph.D.
				Name:	~~Rajiv Shukla~~ Laura E. Niklason, M.D., Ph.D.
				Title:	President and Chief Executive Officer

	~~ALPHA HEALTHCARE ACQUISITION CORP.~~

By:		~~/s/ Patrick~~ /s/ Dale A. ~~Sturgeon~~Sander
			Name:	~~Patrick~~ Dale A. ~~Sturgeon~~Sander
			Title:	Chief Financial Officer, Chief Corporate Development Officer and Treasurer

	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

	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	)

	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

	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

	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	)

			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

	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	%

	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

	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