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Stockholders' Equity | 6 Months Ended
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Jun. 30, 2024
Stockholders' Equity Note [Abstract] |
Stockholders' Equity | Stockholders’ Equity Common Stock On February 29, 2024, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Cowen and Company, LLC and Cantor Fitzgerald & Co., as representatives of the several underwriters named therein (collectively, the “Underwriters”), relating to the issuance and sale in an underwritten offering (the “Offering”) of 15,410,000 shares of the Company’s Common Stock, which included a full exercise of the Underwriters’ option to purchase additional shares, at a price to the public of $3.00 per share. The net proceeds to the Company from the Offering were approximately $43.0 million after deducting underwriting discounts and commissions and Offering expenses. The Offering closed on March 5, 2024. As of June 30, 2024, the Company’s Second Amended and Restated Certificate of Incorporation authorized the Company to issue 250,000,000 shares of Common Stock. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares then outstanding or reserved for issuance) by the affirmative vote of the holders of a majority in interest of the Common Stock. 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, 2024, no dividends have been declared. The Purchase Agreement limits the Company’s ability to pay cash dividends to the holders of Common Stock. The holders of Common Stock are entitled to one vote for each share held with respect to all matters voted on by the common stockholders of the Company. In the event of a reorganization of the Company, after payment to any preferred stockholders of their liquidation preferences, holders of Common Stock are entitled to share ratably in all remaining assets of the Company. As of June 30, 2024, the Company had reserved Common Stock for future issuances as follows:
| June 30, 2024 |
Common stock reserved for Contingent Earnout Shares | 15,000,000 |  |
Common stock reserved for Option Agreement | 1,333,334 |  | (1)
Exercise of options outstanding under stock plans | 12,521,655 |  |
Options available for issuance under stock plans | 5,809,549 |  |
Shares available for grant under ESPP | 1,030,033 |  |
Warrants to purchase Common Stock | 5,588,506 |  |
| 41,283,077 |  |
___________________________ (1)Assumes the exercise of the entire Option as provided for in the Option Agreement at the minimum purchase price of $7.50 per share. Preferred Stock The Company’s Second Amended and Restated Certificate of Incorporation provides the Company’s board of directors with the authority to issue preferred stock, par value $0.0001 per share, in one more series and to establish from time to time the number of shares to be included in each such series, by adopting a resolution and filing a certificate 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, 2024 and December 31, 2023. Warrants The Company had the following Common Stock warrants outstanding as of June 30, 2024 and December 31, 2023:
| 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 |
In connection with the Company’s Loan Agreement, in 2021 the Company granted warrants to the lenders to purchase 411,006 shares of Common Stock at an exercise price of $10.28 per share (such warrants, “Legacy Humacyte Common Stock Warrants”). The Company recognized the fair value of the warrants within stockholders’ equity using a Black-Scholes valuation model, as the settlement of the warrants is indexed to the Common Stock. There were no issuances, exercises or expirations of warrants during the six months ended June 30, 2024 or June 30, 2023. 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 Stock. As such, the Common Stock Warrants were not classified as liabilities under FASB ASC Topic 480, Distinguishing Liabilities from Equity. 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 Public 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. 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 Common Stock, 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 loss at each reporting date. The Private Placement Warrants were initially recognized as a liability on the Closing Date, at a fair value of $0.6 million. See Note 3 — Fair Value Measurements for a summary of the change in the fair value of the Private Placement Warrants during the three and six months ended June 30, 2024 and 2023. The remeasurement of the Private Placement Warrant liability to a fair value of $0.3 million as of June 30, 2024 from $0.1 million as of December 31, 2023 resulted in non-cash losses of $0.2 million for each of the three and six months ended June 30, 2024, compared to non-cash losses of less than $0.1 million and $0.1 million for the three and six months ended June 30, 2023, respectively. The remeasurement of the Private Placement Warrant liability is classified within Change in fair value of derivative liabilities in the condensed consolidated statements of operations and comprehensive loss. The Private Placement Warrants were valued using the following assumptions under the Monte Carlo simulation value model:
| June 30, 2024 |  | December 31, 2023
Market price of public stock | $ | 4.80 |  | $ | 2.84
Exercise price | $ | 11.50 |  | $ | 11.50
Expected term (years) | 2.16 |  | 2.65
Expected share price volatility | 96.0 | % |  | 75.0 | %
Risk-free interest rate | 4.68 | % |  | 4.09 | %
Estimated dividend yield | 0 | % |  | 0 | %
Contingent Earnout Liability Following the closing of the Merger (the “Closing”), former holders of Legacy Humacyte common and preferred shares are eligible to receive up to 15,000,000 additional shares of Common Stock (the “Contingent Earnout Shares”) in the aggregate, in two equal tranches of 7,500,000 shares of Common Stock per tranche. The first and second tranches are issuable if the closing volume weighted average price (“VWAP”) per share of Common Stock quoted on The Nasdaq Stock Market LLC (“Nasdaq”) (or the exchange on which the shares of Common Stock are then listed), is greater or equal to $15.00 and $20.00, respectively, over any 20 trading days within any 30 consecutive trading day period. Upon the Closing, the contingent obligation to issue Contingent Earnout Shares was accounted for as a liability because the triggering events that determine the number of Contingent Earnout Shares required to be issued include events that are not solely indexed to the Common Stock. The Contingent Earnout Shares are subsequently remeasured at each reporting date with changes in fair value recorded as a component of other income (expense), net in the condensed consolidated statements of operations and comprehensive loss. The estimated fair value of the total Contingent Earnout Shares at the Closing on August 26, 2021 was $159.4 million based on a Monte Carlo simulation valuation model using a distribution of potential outcomes on a monthly basis over a 10-year period using the most reliable information available. See Note 3 — Fair Value Measurements for a summary of the change in the fair value of the Contingent Earnout Liability during the three and six months ended June 30, 2024 and 2023. The remeasurement of the Contingent Earnout Liability to a fair value of $68.1 million as of June 30, 2024 from a fair value of $37.9 million as of December 31, 2023, resulted in non-cash losses of $25.6 million and $30.2 million for the three and six months ended June 30, 2024, respectively, compared to a non-cash gain of $3.6 million and a non-cash loss of $10.6 million for the three and six months ended June 30, 2023, respectively, related to the remeasurement of the Contingent Earnout Liability. The remeasurement of the Contingent Earnout Liability is classified within Change in fair value of Contingent Earnout Liability in the condensed consolidated statements of operations and comprehensive 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, 2024 |  | December 31, 2023
Current stock price | $ | 4.80 |  | $ | 2.84
Expected share price volatility | 88.6 | % |  | 86.7 | %
Risk-free interest rate | 4.36 | % |  | 3.88 | %
Estimated dividend yield | 0 | % |  | 0 | %
Expected term (years) | 10.00 |  | 10.00

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