ROC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2023

OR

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

Commission File Number: 001-40228

CARMELL CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Delaware	86-1645738
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2403 Sidney Street, Suite 300 Pittsburgh, Pennsylvania	15203
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (919) 313-9633

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	CTCX	The Nasdaq Stock Market LLC
Redeemable Warrants, each whole warrant exercisable for one share of Common Stock at an exercise price of $11.50	CTCXW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ 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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

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 ☐ No ☒

As of November 14, 2023, the registrant had 23,081,642 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Unaudited Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statement of Stockholders' Deficit	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
PART II.	OTHER INFORMATION	34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3.	Defaults Upon Senior Securities	66
Item 4.	Mine Safety Disclosures	66
Item 5.	Other Information	66
Item 6.	Exhibits	66
Signatures		68

i

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

CARMELL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2023			2022
	(Unaudited)
ASSETS
Current Assets:
Cash	$	7,968,502		$	128,149
Accounts receivable, net		14,404,800			—
Prepaid expenses		1,311,593			55,069
Inventories		9,808,235			—
Forward purchase agreement		5,376,139			—
Deferred offering costs		—			394,147
Other current assets		—			28,175
Total Current Assets		38,869,269			605,540
Property and equipment, net of accumulated depreciation of $772,028 and $530,116, respectively		289,800			254,974
Operating lease right of use asset		865,006			859,331
Intangible assets, net of accumulated amortization of $444,403 and $42,044, respectively		22,886,343			28,702
Goodwill		19,313,527			—
Total Assets	$	82,223,945		$	1,748,547
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Accounts payable	$	17,790,349		$	2,138,732
Accrued interest		1,308,641			477,720
Accrued interest - related parties		98,982			—
Accrued expenses and other liabilities		2,307,797			944,573
Loans payable		1,720,766			—
Loans payable, related party		5,610,000			—
Operating lease liability		140,825			129,502
Deferred consideration payable		8,000,000			—
Income taxes payable		732,567			—
Convertible notes payable		—			2,777,778
Derivative liabilities		—			826,980
Total Current Liabilities		37,709,927			7,295,285
Long-term Liabilities:
Loans payable, net of current portion		1,498,000
Operating lease liability, net of current portion		741,186			827,728
Earnout liabilities		13,520,385
Deferred tax liabilities		7,836,876
Total Liabilities		61,306,374			8,123,013
Commitments and Contingencies (see Note 9)
Mezzanine Equity
Series C-1 Preferred Stock, $0.001 par value; -0- and 3,436,863 shares authorized; -0- and 426,732 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		—			772,028
Series C-2 Preferred Stock, $0.001 par value; -0- and 6,011,960 shares authorized; -0- and 5,857,512 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		—			15,904,275
Series B Preferred stock, $0.001 par value; -0- and 2,893,515 shares authorized; -0- and 2,824,881 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		—			7,025,434
Series A Preferred stock, $0.001 par value; -0- and 2,010,728 shares authorized, issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		—			7,714,336
Stockholders’ Equity (Deficit):
Series A convertible voting preferred stock, $0.001 par value; 4,243 and -0- shares authorized, issued and outstanding at September 30, 2023, and December 31, 2022, respectively	1			0
Common stock, $0.0001 and $.001 par value, 250,000,000 and 240,000,000 shares authorized, and 23,081,642, and 894,318 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		2,308			894
Additional paid-in capital		82,576,012			4,590,858
Accumulated deficit		(61,660,750	)		(42,382,291	)
Total Stockholders’ Equity (Deficit)		20,917,571			(37,790,539	)
Total Liabilities, Mezzanine Equity and Stockholders’ Equity (Deficit)	$	82,223,945		$	1,748,547

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

1

CARMELL CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2023			2022			2023			2022
Revenue	$	3,728,816		$	—		$	3,728,816		$	—
Cost of revenue		1,543,826			—			1,543,826			—
Gross profit		2,184,990			—			2,184,990			—
Operating expenses:
Research and development		1,671,906			570,935			3,235,888			1,554,602
Selling and marketing		3,069,520			—			3,069,520			—
General and administrative		1,425,180			257,369			2,573,082			1,094,399
Depreciation and amortization of intangible assets		429,477			23,619			479,848			70,638
Restructuring charges		726,280			—			726,280			—
Total operating expenses		7,322,363			851,923			10,084,618			2,719,639
Loss from operations		(5,137,373	)		(851,923	)		(7,899,628	)		(2,719,639	)
Other income (expense):
Other income		3,683			9			37,763			10,883
Interest expense, related party		(65,629	)		(52,471	)		(65,629	)		(52,471	)
Interest expense		(317,874	)		(833,477	)		(848,908	)		(1,325,241	)
Amortization of debt discount		(14,179	)		(606,420	)		(22,479	)		(2,044,241	)
Loss on forward purchase agreement		(10,592,442	)		—			(10,592,442	)		—
Change in fair value of earnout liability		(38,093	)		—			(38,093	)		—
Change in fair value of derivative liabilities		4,697,138			(2,658,328	)		826,980			1,259,287
Loss on debt extinguishment		—			(1,064,692	)		—			(1,064,692	)
Total other income (expense)		(6,327,396	)		(5,215,379	)		(10,702,808	)		(3,216,475	)
Loss before provision for income taxes		(11,464,769	)		(6,067,302	)		(18,602,436	)		(5,936,114	)
Provision for income taxes		—			—			—			—
Net loss		(11,464,769	)		(6,067,302	)		(18,602,436	)		(5,936,114	)
Dividends on Series A, Series C-1, and C-2 preferred stock		(49,378	)		(94,190	)		(676,023	)		(248,152	)
Net loss attributable to common stockholders	$	(11,514,147	)	$	(6,161,492	)	$	(19,278,459	)	$	(6,184,266	)
Net loss per common share - basic and diluted	$	(0.62	)	$	(6.74	)	$	(2.81	)	$	(3.74	)
Weighted average of common shares outstanding - basic and diluted		18,629,730			913,655			6,871,258			1,651,593

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

2

CARMELL CORPORATION

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the Three and Nine Months Ended September 30, 2023 and 2022

(Unaudited)

	Series A Preferred Stock				Common Stock						Treasury Stock						Additional Paid-in			Accumulated
	Shares		Amount		Shares			Amount			Shares			Amount			Capital			Deficit			Total
Balance at June 30, 2023		—	$	—		908,795		$	908			—		$	—		$	5,039,314		$	(50,146,603	)	$	(45,106,381	)
Accrued Series A preferred stock dividend		—		—		—			—			—			—			—			(12,655	)		(12,655	)
Accrued Series C-1 preferred stock dividend		—		—		—			—			—			—			—			(2,912	)		(2,912	)
Accrued Series C-2 preferred stock dividend		—		—		—			—			—			—			—			(33,811	)		(33,811	)
Exercise of common stock options		—		—		8,943			—			—			—			15,195			—			15,195
Stock-based compensation expense		—		—		—			—			—			—			237,760			—			237,760
Common stock issued to convertible noteholder at the Merger		—		—		25,000			3			—			—			249,997			—			250,000
Business Combination with Alpha, net of transaction costs		—		—		18,302,510			1,013			—			—			55,381,342						55,382,355
Common and Series A Preferred stock issued in conjunction with the AxBio Acquisition		4,243		1		3,845,337			385			—			—			21,652,404			—			21,652,790
Net loss		—		—		—			—			—			—			—			(11,464,769	)		(11,464,769	)
Balance at September 30, 2023		4,243		1		23,090,585			2,308			—			—			82,576,012			(61,660,750	)		20,917,571
Balance at June 30, 2022		—	$	—		1,803,045		$	1,803			—		$	—		$	3,973,650		$	(32,797,230	)	$	(28,821,777	)
Accrued Series A preferred stock dividend		—		—		—			—			—			—			—			(76,980	)		(76,980	)
Accrued Series C-1 preferred stock dividend		—		—		—			—			—			—			—			(304	)		(304	)
Accrued Series C-2 preferred stock dividend		—		—		—			—			—			—			—			(16,906	)		(16,906	)
Exercise of common stock warrants		—		—		9,321			9			—			—			16,650			—			16,659
Warrants issued in connection with Series C-1 preferred stock		—		—		—			—			—			—			92,055			—			92,055
Repurchase of common stock		—		—		—			—			930,225			(1,511	)		—			—			(1,511	)
Cancellation of common stock		—		—		(930,225	)		(930	)		(930,225	)		1,511			(581	)		—			—
Stock-based compensation expense		—		—		—			—			—			—			106,951			—			106,951
Net loss		—		—		—			—			—			—			—			(6,067,302	)		(6,067,302	)
Balance at September 30, 2022		—		—		882,141			882			—			—			4,188,725			(38,958,722	)		(34,769,115	)
Balance at January 1, 2023		—	$	—		894,318		$	894			—		$	—		$	4,590,858		$	(42,382,291	)	$	(37,790,539	)
Accrued Series A preferred stock dividend		—		—		—			—			—			—			—			(164,510	)		(164,510	)
Accrued Series C-1 preferred stock dividend		—		—		—			—			—			—			—			(40,551	)		(40,551	)
Accrued Series C-2 preferred stock dividend		—		—		—			—			—			—			—			(470,962	)		(470,962	)
Exercise of common stock options		—		—		23,420			14			—			—			41,050			—			41,064
Warrants issued in connection with notes		—		—		—			—			—			—			55,062			—			55,062
Common stock issued to convertible noteholder at the Merger		—		—		25,000			3			—			—			249,997			—			250,000
Business Combination with Alpha, net of transaction costs		—		—		18,302,510			1,013			—			—			55,381,342			—			55,382,355
Common and Series A Preferred stock issued in conjunction with the AxBio Acquisition		4,243		1		3,845,337			385			—			—			21,652,404			—			21,652,790
Stock-based compensation expense		—		—		—			—			—			—			605,299			—			605,299
Net loss		—		—		—			—			—			—			—			(18,602,436	)		(18,602,436	)
Balance at September 30, 2023		4,243		1		23,090,585			2,308			—			—			82,576,012			(61,660,750	)		20,917,571
Balance at January 1, 2022		—	$	—		2,272,111		$	2,272			—		$	—		$	3,195,138		$	(32,774,456	)	$	(29,577,046	)
Accrued Series A preferred stock dividend		—		—		—			—			—			—			—			(230,942	)		(230,942	)
Accrued Series C-1 preferred stock dividend		—		—		—			—			—			—			—			(304	)		(304	)
Accrued Series C-2 preferred stock dividend		—		—		—			—			—			—			—			(16,906	)		(16,906	)
Issuance of common stock for service		—		—		12,534			13			—			—			26,464			—			26,477
Exercise of common stock purchase warrants		—		—		9,321			9			—			—			16,650			—			16,659
Warrants issued in connection with notes		—		—		—			—			—			—			409,483			—			409,483
Warrants issued in connection with Series C-1 Preferred Stock		—		—		—			—			—			—			92,055			—			92,055
Repurchase of common stock		—		—		—			—			1,411,825			(2,294	)		—			—			(2,294	)
Cancellation of common stock		—		—		(1,411,825	)		(1,412	)		(1,411,825	)		2,294			(882	)		—			—
Stock-based compensation expense		—		—		—			—			—			—			449,817			—			449,817
Net loss		—		—		—			—			—			—			—			(5,936,114	)		(5,936,114	)
Balance at September 30, 2022		—		—		882,141			882			—			—			4,188,725			(38,958,722	)		(34,769,115	)

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

3

CARMELL CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended September 30,
	2023			2022
Cash flows from operating activities:
Net loss	$	(18,602,436	)	$	(5,936,114	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		605,299			476,294
Depreciation and amortization of intangible assets		479,848			70,638
Amortization of right of use assets		(5,675	)		112,331
Amortization of debt discount		22,479			2,044,241
Change in fair value of forward purchase agreement		10,592,442			—
Change in fair value of earnout liability		38,093			—
Change in fair value of derivative liabilities		(826,980	)		(1,259,287	)
Non-cash interest expense		250,000			—
Loss on extinguishment of debt		—			1,064,692
Interest recognized upon default		—			555,556
Changes in operating assets and liabilities:
Accounts receivable		3,891,200			—
Prepaid expenses		(1,039,646	)		(11,888	)
Inventories		1,606,890			—
Other current assets		28,184			(18,175	)
Accounts payable		(1,464,049	)		957,688
Accrued expenses and other liabilities		(2,111,480	)		729,592
Lease liability		(75,219	)		(94,045	)
Accrued interest - related and third-party		1,831,014			178,938
Income tax payable		(423,754	)		—
Net cash used in operating activities		(5,203,790	)		(1,129,539	)
Cash flows from investing activities:
Purchases of property and equipment		(30,470	)		(3,579	)
Cash acquired in AxBio Acquisition		662,997			—
Net cash provided by (used in) investing activities		632,527			(3,579	)
Cash flows from financing activities:
Gross proceeds from Business Combination		31,050,882			—
Transaction costs paid in connection with the Business Combination		(248,174	)		—
Cash transferred in connection with Forward Purchase Agreement		(17,535,632	)		—
Proceeds from common stock option exercises		41,064			—
Proceeds from issuance of loans and related warrants		2,197,140			—
Payment of loans		(443,791	)		—
Payment of convertible notes		(2,649,873	)		—
Proceeds from convertible notes		—			2,745,974
Issuance of Series C-1 preferred stock		—			226,817
Repurchase of common stock		—			(2,294	)
Payment of debt financing fee		—			(382,222	)
Payment of offering costs		—			(1,561,285	)
Proceeds from warrant exercise		—			104,641
Net cash provided by financing activities		12,411,616			1,131,631
Net increase (decrease) in cash		7,840,353			(1,487	)
Cash - beginning of the period		128,149			12,362
Cash - end of the period	$	7,968,502		$	10,875
Supplemental cash flow information:
Interest paid	$	11,367		$	92,593
Income tax paid	$	423,754		$	—
Non-cash financing activity:
Net assets acquired in AxBio Acquisition	$	42,472,084		$	—
Earnout liability and deferred consideration payable in connection with AxBio Acquisition	$	21,482,292		$	—
Issuance of Series A preferred stock and common stock in connection with AxBio Acquisition	$	21,652,789		$	—
Accrued Series A preferred stock dividends	$	164,510		$	230,943
Accrued Series C-1 preferred stock dividends	$	40,551		$	304
Accrued Series C-2 preferred stock dividends	$	470,962		$	16,906
Debt discount recorded in connection with loans payable	$	55,062		$	—
Unpaid transaction costs incurred in connection with the business combination	$	1,186,219		$	—
Unpaid liabilities assumed in connection with Business Combination	$	6,179,562		$	—
Conversion of common stock and preferred stock in connection with the Business Combination	$	32,093,004		$	—
Conversion of convertible notes and accrued notes to Series C-2 preferred stock	$	—		$	15,665,172
Warrants issued in connection with convertible notes	$	—		$	409,483
Warrants issued in connection with Series C-1 preferred stock	$	—		$	92,055
Initial recognition of derivative liabilities	$	—		$	1,321,860

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

4

CARMELL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — NATURE OF THE ORGANIZATION AND BUSINESS

Carmell Corporation (“Carmell” or the “Company”) is a commercial-stage regenerative care company with a focus on using human biomaterials for aesthetic and medical care and has operations in Pittsburgh, Pennsylvania and Flagstaff, Arizona. The Company’s commercial product is a human amnion allograft that can be used as a structural barrier for diabetic foot ulcers, venous ulcers, recovery from MOHS surgery, and dental, endodontic, oral maxillofacial, and periodontal procedures. The Company's research and development pipeline includes several innovative aesthetic, epithelial and bone products under development. The Company operates as a single segment, and all of its operations are located in the United States.

Business Combination

On July 14, 2023 (the “Closing Date”), Alpha Healthcare Acquisition Corp. III, a Delaware corporation and the predecessor company (“Alpha”), consummated the business combination (the “Business Combination”) pursuant to the terms of the Business Combination Agreement, dated as of January 4, 2023 (the “Business Combination Agreement”), by and among Alpha, Candy Merger Sub, Inc., a Delaware corporation (“Merger Sub”) and Carmell Therapeutics Corporation, a Delaware corporation (“Legacy Carmell”). Pursuant to the Business Combination Agreement, on the Closing Date, (i) Alpha changed its name to “Carmell Therapeutics Corporation” and Legacy Carmell changed its name to “Carmell Regen Med Corporation”, and (ii) Merger Sub merged with and into Legacy Carmell, with Legacy Carmell as the surviving company in the Business Combination. After giving effect to the Business Combination, Legacy Carmell became a wholly owned subsidiary of the Company. Subsequently, on August 1, 2023, the Company filed an amendment to its Certificate of Incorporation with the Delaware Secretary of State to change its name to “Carmell Corporation.”

Pursuant to the Business Combination Agreement, at the effective time of the Business Combination (the “Effective Time”), (i) each outstanding share of common stock of Legacy Carmell (the “Legacy Carmell common stock”) was converted into the right to receive a number of shares of common stock, par value $0.0001 per share, of the Company (the “Common Stock”) equal to the applicable Exchange Ratio (as defined below); (ii) each outstanding share of preferred stock of Legacy Carmell was converted into the right to receive the aggregate number of shares of Common Stock that would be issued upon conversion of the underlying Legacy Carmell common stock, multiplied by the applicable Exchange Ratio; (iii) each outstanding option and warrant to purchase Legacy Carmell common stock was converted into an option or warrant, as applicable, to purchase a number of shares of Common Stock equal to the number of shares of Legacy Carmell common stock subject to such option or warrant multiplied by the applicable Exchange Ratio; and (iv) each outstanding share of Alpha Class A common stock and each share of Alpha Class B common stock was converted into one share of Common Stock. As of the Closing Date, the Exchange Ratio with respect to Legacy Carmell common stock was 0.06154 and the Exchange Ratio with respect to each other outstanding derivative equity security of Legacy Carmell was between 0.06684 and 0.10070.

On July 11, 2023, the record date for the Special Meeting of stockholders to approve the Business Combination (the “Special Meeting”), there were 19,305,129 shares of Alpha’s common stock, par value $0.0001 per share, issued and outstanding, consisting of (i) 15,444,103 public shares of Class A common stock and (ii) 3,861,026 shares of Class B common stock held by the Sponsor. In addition, on the closing date of Alpha’s initial public offering (“IPO”), Alpha had issued 455,000 warrants to purchase Class A common stock to AHAC Sponsor III LLC, its sponsor (the “Sponsor”), in a private placement (the “Private Placement Warrants”). Prior to the Special Meeting, holders of 12,586,223 shares of Alpha Class A common stock included in the units issued in Alpha’s IPO (excluding 1,705,959 shares of the common stock purchased by Meteora (as defined below) directly from the redeeming stockholders under the Forward Purchase Agreement (as defined below)) exercised their right to redeem those shares for cash at a price of approximately $10.28 per share (net of the withholding for federal and franchise tax liabilities), for an aggregate of approximately $29,374,372. The per share redemption price was paid out of Alpha’s trust account (the “Trust Account”), which, after taking into account the redemptions, but before any transaction expense, had a balance at the Closing Date of $29,376,282.

On July 17, 2023, the common stock and warrants of the Company commenced trading on the Nasdaq Capital Market under the ticker symbols “CTCX” and “CTCXW”, respectively.

In connection with the consummation of the Business Combination, nine new directors were elected to the Company’s board of directors.

The Business Combination was accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the Unites States ("GAAP"), and under this method of accounting, Alpha was treated as the acquired company for financial reporting

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purposes and Legacy Carmell was treated as the accounting acquirer. Operations prior to the Business Combination are those of Legacy Carmell. Unless otherwise noted, the Company has retroactively adjusted all common and preferred share and related share price information to give effect to the Exchange Ratio established in the Business Combination Agreement.

Forward Purchase Agreement

On July 9, 2023, Alpha and each of Meteora Special Opportunity Fund I, LP (“MSOF”), Meteora Capital Partners, LP (“MCP”) and Meteora Select Trading Opportunities Master, LP (“MSTO”) (with MCP, MSOF, and MSTO collectively as the “Sellers” or “Meteora”) entered into a forward purchase agreement (the “Forward Purchase Agreement”) for an OTC Equity Prepaid Forward Transaction. The primary purpose of entering into the Forward Purchase Agreement was to help ensure the Business Combination would be consummated.

Pursuant to the terms of the Forward Purchase Agreement, at the closing of the Business Combination, the Sellers purchased directly from the redeeming shareholders of Alpha 1,705,959 shares of Alpha’s common stock (the “Recycled Shares”) at a price of $10.28 per share, which is the price equal to the redemption price at which holders of Alpha’s common stock were permitted to redeem their shares in connection with the Business Combination pursuant to Section 9.2(a) of Alpha’s Second Amended and Restated Certificate of Incorporation, as amended (the “Charter”) (such price, the “Initial Price”).

In accordance with the terms of the Forward Purchase Agreement, at the Closing Date, the Company paid directly an aggregate cash amount equal to (x) the product of (i) the Recycled Shares and (ii) the Initial Price, or $17,535,632.

The settlement date will be the earliest to occur of (a) the first anniversary of the Closing Date, (b) after the occurrence of (x) a Delisting Event or (y) a Registration Failure, upon the date specified by Meteora in a written notice delivered to the Company at Meteora’s discretion (which settlement date shall not be earlier than the date of such notice). The transaction will be settled via physical settlement. Any Recycled Shares not sold in accordance with the early termination provisions described below will incur a $0.50 per share termination fee payable by the Company to Meteora at settlement.

From time to time and on any date following the Business Combination (any such date, an “OET Date”) and subject to the terms and conditions below, Meteora may, in its absolute discretion, and so long as the daily volume-weighted average price (“VWAP Price”) of the Recycled Shares is equal to or exceeds the Reset Price (as defined in the Forward Purchase Agreement), terminate the transaction in whole or in part by providing written notice (an “OET Notice”) in accordance with the terms of the Forward Purchase Agreement. The effect of an OET Notice given shall be to reduce the number of shares by the number of Terminated Shares specified in such OET Notice with effect as of the related OET Date. As of each OET Date, the Company shall be entitled to an amount from Meteora, and Meteora shall pay to the Company an amount equal to the product of (x) the number of Terminated Shares multiplied by (y) the Initial Price in respect of such OET Date.

The Reset Price is initially $11.50 and subject to a $11.50 floor (the “Reset Price Floor”). The Reset Price shall be adjusted on the first scheduled trading day of every week commencing with the first week following the seventh day after the closing of the Business Combination to be the lowest of (a) the then-current Reset Price, and (b) the VWAP Price of the shares of the Company’s common stock of the prior week; provided that the Reset Price shall be no lower than the Reset Price Floor. On July 9, 2023, in connection with the Forward Purchase Agreement, the Sellers entered into a Non-Redemption Agreement with the Company pursuant to which the Sellers agreed not to exercise redemption rights under the Charter with respect to an aggregate of 100,000 Shares.

Axolotl Acquisition

On August 9, 2023 (“AxBio Closing Date”), the Company completed the acquisition of Axolotl Biologix, Inc. (“AxBio”). The acquisition of AxBio is referred to as the “AxBio Acquisition”. In connection with the closing of the AxBio Acquisition, the Company issued 3,845,337 shares of common stock, and 4,243 shares of a newly designated series of Series A Convertible Voting Preferred Stock (the “Series A Preferred Stock”), in exchange for all the issued and outstanding shares of AxBio. In addition to the shares of Common Stock and the Series A Preferred Stock described above, the consideration includes cash consideration of $8,000,000, that was payable upon delivery of the 2022 audited financial statements of AxBio. The sellers of AxBio are also eligible to receive up to $9,000,000 in cash and up to $66,000,000 in shares of Common Stock upon the achievement of certain revenue targets and research and development milestones (the “Earnout”). (see Note 3)

On August 10, 2023, the Company entered into that certain First Amendment to Agreement and Plan of Merger (the “Amendment”) which amended certain terms of the merger agreement. The Amendment changed the structure of the AxBio Acquisition to provide that, following the merger of Axolotl with and into Merger Sub, with Axolotl surviving, Axolotl shall merge with and into Axolotl Biologix, LLC (“Second Merger Sub”), with Second Merger Sub being the surviving corporation of the merger and a direct, wholly owned subsidiary of the Company, and waived the condition requiring Axolotl to deliver its audited financial statements upon closing in

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exchange for the $8,000,000 of cash consideration otherwise payable upon closing pursuant to the Merger Agreement becoming payable and contingent upon receipt of such audited financial statements.

Risks and Uncertainties

Disruption of global financial markets and a recession or market correction, including the ongoing military conflicts between Russia and Ukraine and the related sanctions imposed against Russia as well as the conflict between Israel and Hamas, the ongoing effects of the COVID-19 pandemic, and other global macroeconomic factors such as inflation and rising interest rates, could reduce the Company’s ability to access capital, which could in the future negatively affect the Company’s liquidity and could materially affect the Company’s business and the value of its common stock.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and the applicable rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. The Company’s consolidated financial statements reflect the operations of the Company and its wholly owned subsidiaries, and all intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements include all adjustments of a normal recurring nature and necessary for the fair presentation of the results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for the full year.

Emerging Growth Company Status

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 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 shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) 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 class 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 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. The Company has elected not to opt out 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 the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison 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.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates in these financial statements include those related to the forward purchase asset, earnout liabilities, derivative liabilities, long-term assets and goodwill impairment. the provision or benefit for income taxes and the corresponding valuation allowance on deferred tax assets and contingent liabilities. If the underlying estimates and assumptions upon which the financial statements are based change in the future, actual amounts may differ from those included in the accompanying financial statements.

Business Combinations

The Company allocates the fair value of the purchase consideration of its acquisitions to the tangible assets, liabilities, and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses are expensed as incurred and included in general and administrative expenses.

The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets acquired

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and liabilities assumed, especially with respect to intangible assets. These estimates are based on information obtained from management of the acquired companies and historical experience. These estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, and the cost savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable, and if different estimates were used, the purchase price for the acquisition could be allocated to the acquired assets and liabilities differently from the allocation that the Company has made.

Segment Reporting

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 280, Segment Reporting (“ASC 280”), establishes standards for the way that public business enterprises report information about operating segments in their annual consolidated financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. ASC 280 also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company’s business segments are based on the organization structure used by the chief operating decision maker for making operating and investment decisions and for assessing performance. Our chief executive officer, who is our chief operating decision maker (“CODM”), views the Company’s operations and manages its business in one operating segment, which is principally the business of development and commercialization of regenerative care products.

Cash

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. As of September 30, 2023 and December 31, 2022, the Company had cash equivalents of $7,968,502 and $30,000, respectively. Cash and cash equivalents are held by financial institutions and are federally insured up to certain limits. At times, the Company’s cash and cash equivalents balance exceeds the federally insured limits, which potentially subject the Company to concentrations of credit risk. For the three and nine months ended September 30, 2023 and 2022, the Company has not experienced any losses related to its cash and cash equivalents that exceed federally insured deposit limits.

Accounts Receivables, net

Accounts receivable are recorded at the original invoice amount. Receivables are considered past due based on the contractual payment terms. The Company reserves a percentage of its trade receivable balance based on collection history and current economic trends that it expects will impact the level of credit losses over the life of the Company’s receivables. These reserves are re-evaluated on a regular basis and adjusted, as needed. Once a receivable is deemed to be uncollectible, such balance is charged against the reserve. The Company had no reserve related to the potential likelihood of not collecting its receivables as of September 30, 2023.

Inventories

The Company’s inventory of biological products consists of finished goods and are stated at the lower of cost or net realizable value. Cost is calculated by applying the first-in-first-out method (FIFO). The Company regularly reviews inventory quantities on hand and writes down to its net realizable value any inventory that it believes to be impaired. Management considers forecast demand in relation to the inventory on hand, competitiveness of product offerings, market conditions and product life cycles when determining excess and obsolescence and net realizable value adjustments. These write-downs are charged to Cost of Revenue in the accompanying Statements of Operations. The Company had no reserve for obsolescence as of September 30, 2023.

Offering Costs Associated with a Public Offering

The Company complies with the requirements of FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses of Offering.” ASC 340-10-S99-1 states that specific incremental costs directly attributable to a proposed or actual offering of equity securities incurred prior to the effective date of the offering may be deferred and charged against the gross proceeds of the offering when the offering occurs. The costs of an aborted offering may not be deferred and charged against the proceeds of a subsequent offering. In October 2022, the Company aborted an IPO Offering and began pursuing an acquisition by Alpha. In October 2022, the Company wrote off capitalized costs of $1,278,062 relating to the aborted IPO. As of December 31, 2022, the Company had capitalized deferred offering costs relating to the Business Combination of $1,317,369. Contemporaneously with the closing of the Business Combination, the Company recorded $1,581,070 of transaction costs as a reduction of proceeds in additional paid-in capital.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Maintenance and repair charges are expensed as incurred. The assets are depreciated using the straight-line method using the following estimated useful lives:

•Equipment – 5-7 years

•Leasehold improvements – The lesser of 10 years or the remaining life of the lease

•Furniture and fixtures – 7 years

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Goodwill and Intangible Assets

Goodwill is not amortized but tested for impairment on an annual basis in the fourth quarter, and more frequently if events or changes in circumstances indicate that the asset may be impaired. The Company’s impairment tests are based on a single reporting unit structure. The carrying value and ultimate realization of these assets is dependent upon estimates of future earnings and benefits that the Company expects to generate from their use. If the expectations of future results and cash flows are significantly diminished, intangible assets and goodwill may be impaired and the resulting charge to operations may be material. First, the Company assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. If, after assessing qualitative factors, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. If deemed necessary, a two-step test is used to identify the potential impairment and to measure the amount of goodwill impairment, if any. The first step is to compare the fair value of the reporting unit with its carrying amount, including goodwill. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. However, the impairment loss recognized should not exceed the total amount of goodwill allocated to that single reporting unit.

Finite-lived intangible assets are carried at cost and amortized based on an economic benefit period, which is seven to twenty years. The Company evaluates finite lived intangible assets for impairment by assessing the recoverability of these assets whenever adverse events or changes in circumstances or business climate indicate that expected undiscounted future cash flows related to such intangible assets may not be sufficient to support the net book value of such assets. An impairment charge is recognized in the period of identification to the extent the carrying amount of an asset exceeds the fair value of such asset. Costs billed to the Company as reimbursement for third parties’ patent submissions are considered as license fees and expensed as incurred.

The finite-lived intangible assets are amortized using the straight-line method using the following useful lives:

•Customer contracts – 20 years

•Trade name – 7 years

•Intellectual property – 7 years

•Patents – 16 years

Significant judgments required in assessing the impairment of goodwill and intangible assets include the assumption the Company only has a single reporting unit, identifying whether events or changes in circumstances require an impairment assessment, estimating future cash flows, determining appropriate discount and growth rates and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value as to whether an impairment exists and, if so, the amount of that impairment. The Company has not recognized any goodwill or intangible asset impairment charges through September 30, 2023.

Earnout Liability

In connection with the AxBio Acquisition, the historical equity holders of AxBio are entitled to receive performance-based earn-outs of up to $9,000,000 in cash and up to $66,000,000 in shares of Common Stock, based on the achievement of certain revenue targets and research and development milestones. In accordance with ASC 805, Business Combinations ("ASC 805"), the Earnout iincluded in the purchase price of AxBio at the AxBio Acquisition Closing Date and subsequently remeasured at each reporting date with changes in fair value recorded as a component of other (expense) income in the unaudited condensed consolidated statements of operations.

Series A Voting Convertible Preferred Stock

In connection with the AxBio Acquisition, the Company issued 4,243 shares of a newly designated series of Series A Convertible Voting Preferred Stock to former AxBio shareholders. Based on the limited exception under ASC 480-10-S99-3A(3)(f) for equity instruments that are subject to a deemed liquidation provision if all of the holders of equally and more subordinated equity instruments of the entity would always be entitled to also receive the same form of consideration (for example, cash or shares) upon the occurrence of the event that gives rise to the redemption (that is, all subordinate classes would also be entitled to redeem), the Company determined that the Series A Preferred should be classified as permanent equity.

Revenue Recognition

The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers ("ASC 606"), on January 1, 2021, using the modified retrospective adoption method. Under ASC 606, revenues are recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or services. Revenue is recognized based on the following five-step model:

• Identification of the contract with a customer

• Identification of the performance obligations in the contract

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• Determination of the transaction price

• Allocation of the transaction price to the performance obligations in the contract

• Recognition of revenue when, or as, the Company satisfies a performance obligation

The Company sells its products principally to specialty distributors (collectively, our “Customers”) within the United States. These Customers subsequently resell our products to healthcare providers throughout the United States. Revenues from product sales are recognized when the Customer obtains control of our product, which occurs at a point in time, typically upon delivery to the Customer’s respective warehouse or designated location at a standard transaction price for the specific product sold.

The Company has entered into service arrangements with one of its customers to provide distinct services for the Company due to the Company having a limited workforce. Such services include distribution, credit risk, and marketing and sales services. The Company has assessed the consideration payable to its customers as it relates to these service arrangements in accordance with ASC 606 and has concluded that the services being provided by the Company’s customer are distinct, with the exception of the credit risk service fee, which was concluded to be a price concession. For those services that are deemed to be distinct, the Company has separately determined that the transaction price for the distribution and marketing services being provided by our customer are at fair value. As such, in accordance with ASC 606, the distribution and marketing services are accounted for consistent with other services being provided by the Company’s vendors and have not been recorded as an offset to the Company’s revenues. The credit risk service fee is accounted for as consideration payable and as a reduction of the transaction price. The total amount of services accounted for as consideration payable and a reduction of transaction price totaled approximately $368,784 for the three and nine months ended September 30, 2023. There were no such services received by the Company in 2022.

The Company has elected to apply the significant financing practical expedient, as allowed under ASC 606. As a result, the Company does not adjust the promised amount of consideration in a customer contract for the effects of a significant financing component when the period of time between when we transfer a promised good or service to a customer and when the customer pays for the good or service will be one year or less. The Company has standard payment terms that generally require payment within approximately 60-120 days. The Company had no material contract assets, contract liabilities, or deferred contract costs recorded in its balance sheets as of September 30, 2023 and December 31, 2022. The Company expenses costs to obtain a contract as incurred when the amortization period is less than one year.

Cost of Revenues

Cost of revenues is comprised of purchase costs of our products, third-party logistics and distribution costs, including packaging, freight, transportation, shipping and handling costs, and inventory adjustments due to expiring products, if any.

Selling and Marketing Expenses

Selling and marketing expenses consist primarily of advertising expenses, commissions and freight expenses, and the distribution and marketing expenses described previously in the revenue recognition policies. Advertising expenses are expensed as incurred and were $211,085 and $1,250 for the three months ended September 30, 2023 and 2022, respectively, and $211,356 and $3,552 for the nine months ended September 30, and 2023 and 2022, respectively.

Research and Development Expenses

Research and development expenses are expensed as incurred and consist principally of internal and external costs, which include the cost of patent licenses, contract research services, laboratory supplies and development and manufacture of preclinical compounds and consumables for clinical trials and preclinical testing.

Restructuring Charges

Restructuring charges are related to the post-acquisition integration of AxBio and consists primarily of accrued severance from the termination of employees in non-core areas or overlapping business functions.

Income Taxes

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

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ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken 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. 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 September 30, 2023 and December 31, 2022. 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 is subject to income tax examinations by major taxing authorities for tax years ended 2019 to 2022.

Net Loss Per Share

Under ASC 260, Earningsngs per Share, the Company is required to apply the two-class method to compute earnings per share (“EPS”). Under the two-class method both basic and diluted EPS are calculated for each class of common stock and participating security considering both dividends declared (or accumulated) and participation rights in undistributed earnings. The two-class method results in an allocation of all undistributed earnings as if all those earnings were distributed. Considering the Company has generated losses in each reporting period since its inception through September 30, 2023, the Company also considered the guidance related to the allocation of the undistributed losses under the two-class method. The contractual rights and obligations of the preferred stock shares and the warrants were evaluated to determine if they have an obligation to share in the losses of the Company. As there is no obligation for the preferred stock shareholders or the holders of the warrants to fund the losses of the Company nor is the contractual principal or redemption amount of the preferred stock shares or the warrants reduced as a result of losses incurred by the Company, under the two-class method, the undistributed losses are allocated entirely to the common stock securities. Earnings per share information is retrospectively adjusted to reflect the Business Combination ratio applied to Legacy Carmell’s historical number of shares outstanding. Shares of Alpha are considered issued for EPS purposes as of the date of the Business Combination.

The Company computes basic loss per share by dividing the loss attributable to holders of common stock for the period by the weighted average number of shares of common stock outstanding during the period. The Company’s warrants, options, preferred stock, and convertible notes could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. However, these convertible instruments, warrants, and options were excluded when calculating diluted loss per share because such inclusion would be anti-dilutive for the periods presented. As a result, diluted loss per share is the same as basic loss per share for the periods presented. Potentially dilutive securities, which are not included in diluted weighted average shares outstanding for the periods ended September 30, 2023 and 2022, consist of the following (in common stock equivalents):

	At September 30,
	2023		2022
Series A Preferred Stock (if converted)		4,243,000		—
Stock Options		1,551,886		2,051,243
Common Stock Warrants		4,638,444		3,870,524
Series A Preferred Stock (if converted)		—		2,010,728
Series B Preferred Stock (if converted)		—		2,817,886
Series C-1 Preferred Stock (if converted)		—		89,264
Series C-2 Preferred Stock (if converted)		—		5,857,512
Preferred Stock Warrants		—		164,894
Convertible Notes (if converted)		—		777,062
Total		10,433,330		17,639,113

Stock-Based Compensation

The Company applies the provisions of ASC 718, Compensation-Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all stock-based awards made to employees, including employee stock options, in the statements of operations.

For stock options issued to employees and members of the Board of Directors (the “Board) for their services, the Company estimates each option’s grant-date fair value using the Black-Scholes option pricing model. The use of the Black-Scholes option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates, and expected dividend yields of the common stock. For awards subject to service-based vesting conditions, including those with a graded vesting schedule, the Company recognizes stock-based compensation expense equal to the grant date fair value of stock options on a straight-line basis over the requisite service period, generally the vesting term. Forfeitures are recorded as incurred instead of estimated at the time of grant and revised.

Under Accounting Standards Update (“ASU”) 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Non-Employee Share-Based Payment Accounting, the Company accounts for stock options issued to non-employees for their services in accordance with ASC 718. The Company uses valuation methods and assumptions to value the stock options that are in line with the

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process for valuing employee stock options noted above.

Leases

The Company adopted ASC 842, Leases, as amended, on January 1, 2020 ("ASC 842"). The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company not to separate non-lease components from lease components and instead to account for each separate lease component and the non-lease components associated with that lease component as a single lease.

The Company’s leases consist of leaseholds on office space. The Company determines if an arrangement contains a lease at inception as defined by ASC 842. To meet the definition of a lease under ASC 842, the contractual arrangement must convey to the Company the right to control the use of an identifiable asset for a period of time in exchange for consideration. Right of Use (“ROU”) assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

Concentrations

For the nine months ended September 30, 2023, one customer accounted for 100% of revenues. In addition, this customer accounted for 100% of accounts receivable at September 30, 2023. The Company's human amnion allograft product made up 100% of the Company's revenue for the nine months ended September 30, 2023. For the nine months ended September 30, 2023, 100% of the Company's human amnion allograft product was purchased from Pinnacle Transplant Technologies, LLC.

Fair Value Measurements and Fair Value of Financial Instruments

The Company categorizes its assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy in accordance with GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3). The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, deferred consideration payable and related party loans payable approximate fair value because of the short-term maturity of such instruments.

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3 - Inputs are unobservable inputs that reflect the reporting entity’s assumptions on the assumptions the market participants would use to price the asset or liability based on the best available information.

Other financial assets and liabilities as of September 30, 2023 and December 31, 2022 are categorized based on a hierarchy of inputs as follows:

	September 30, 2023				December 31, 2022				Fair Value
	Carrying		Estimated		Carrying		Estimated		Input
	Value		Fair Value		Value		Fair Value		Hierarchy
Forward purchase agreement	$	5,376,139	$	5,376,139	$	—	$	—	Level 3
SBA Loan		1,498,000		1,498,000		—		—	Level 2
Earnout liabilities		13,520,385		13,520,385		—		—	Level 3
Derivative liabilities		—		—		826,980		826,980	Level 3

Changes in the fair value of Level 3 financial assets and liabilities for the nine months ended September 30, 2023 are as follows:

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	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
For the Nine Months Ended September 30, 2023	Forward Purchase Agreement			Derivative Liabilities			Earnout Liabilities
Balance, beginning of year	$	—		$	826,980		$	—
Initial recognition		15,968,581			—			13,482,292
Change in fair value		(10,592,442	)		(826,980	)		38,093
Balance, end of period	$	5,376,139		$	—		$	13,520,385

The Forward Purchase Agreement was accounted for at fair value as a financial instrument in the scope of ASC 480, Distinguishing Liabilities from Equity, and resulted in an asset at the Closing Date. The fair value of the Company’s position under the Forward Purchase Agreement was calculated using the Call/Put Option Pricing Model. The assumptions incorporated into the valuation model as of the Closing Date of the Business Combination included the termination fee of $0.50 per share, the debt rate of 14.35% and the term of one year. As of September 30, 2023, the assumptions incorporated into the valuation model included the share price of 3.60, the termination fee of $0.50 per share, the debt rate of 13.92% and the term of 0.79.

The fair value of the Earnout was estimated based on the future consideration amounts adjusted for the probabilities of success and estimated dates of milestone achievements in relation to the research and development milestones and probability-adjusted revenue scenarios in relation to the revenue targets. The Earnout liability is categorized as a Level 3 fair value measurement because the Company estimated projections utilizing unobservable inputs. Contingent earnout payments involve certain assumptions requiring significant judgment and actual results can differ from assumed and estimated amounts.

The fair value of the embedded derivatives in the convertible notes as of September 30, 2023 and December 31, 2022 was valued using a Monte-Carlo model and was based upon the following management assumptions:

	September 30, 2023		December 31, 2022
Stock price	$	—	$	2.60
Expected term (years)		—		0.04
Volatility		—		55.1	%
Risk-free interest rate		—		4.38	%
Probability of Qualified Financing or IPO		—		50.00	%
Probability of a Change in Control Event		—		10.00	%

The December 31, 2022 stock price was derived from a 409A valuation. Volatility was determined from the historical volatility of comparable public companies over the expected terms. The term was based on the maturity date of the note. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued. The probability of a Qualified Financing or IPO and a Change of Control Event were based on the Company’s assessment of such an event occurring.

Recently Adopted Accounting Guidance

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires measurement and recognition of expected credit losses for financial assets. In April 2019, the FASB issued clarification to ASU 2016-13 within ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, or ASU 2016-13. The guidance is effective for fiscal years beginning after December 15, 2022. The Company adopted this standard on January 1, 2023, which had no material impact on the Company’s condensed consolidated financial statements.

Recent Accounting Pronouncements

On September 30, 2022, the FASB issued ASU 2022-03, which (1) clarifies the guidance in ASC 820 on the fair value measurement of an equity security that is subject to a contractual sale restriction and (2) requires specific disclosures related to such equity security. The amendments in ASU 2022-03 are consistent with the principles of fair value measurement under which an entity is required to consider characteristics of an asset or liability if other market participants would also consider those characteristics when pricing the asset or liability. Specifically, the ASU clarifies that an entity should apply these fair value measurement principles to equity securities subject to contractual sale restrictions. The Company does not believe that, if adopted, ASU 2022-03 would have a material effect on the Company’s financial statements.

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NOTE 3 — BUSINESS COMBINATIONS

AxBio Biologix Acquisition

The AxBio Acquisition is reflected in the unaudited condensed consolidated financial statements under the acquisition method of accounting in accordance with ASC 805, with the Company treated as the accounting and legal acquirer in the AxBio Acquisition. It was determined that AxBio is a variable interest entity, or VIE, as AxBio’s total equity at risk is not sufficient to permit AxBio to finance its activities without additional subordinated financial support, with the Company being the primary beneficiary. In accordance with ASC 805 the Company recorded AxBio’s assets and liabilities at fair value. For purposes of estimating the fair value, where applicable, of the assets acquired and liabilities assumed as reflected in the unaudited consolidated financial information, the Company has applied the guidance in ASC 820, Fair Value Measurements and Disclosures (‘‘ASC 820’’), which establishes a framework for measuring fair value in each of their respective acquisitions. In accordance with ASC 820, fair value is an exit price and is defined as ‘‘the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.’’ Under ASC 805, acquisition-related transaction costs are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred. The fair value of the purchase consideration transferred in the AxBio Acquisition was as follows:

Common Stock - 3,845,337 shares	$	11,270,683
Series A Convertible Voting Preferred Stock - 4,234 shares		10,382,106
Earnout		13,482,292
Deferred Consideration		8,000,000
Total estimated value of consideration transferred	$	43,135,081

The fair value of the Series A Convertible Voting Preferred stock was estimated at $2,452 per share, using the put option model, based on the market value of the common stock at the AxBio Closing Date, conversion rate, projected conversion term and estimated discount for lack of marketability. Deferred consideration is related to the cash consideration of $8,000,000, that was payable upon delivery of the AxBio 2022 audited financial statements. The 2022 audited financial statements were delivered after September 30, 2023 and as such, the cash consideration is payable after September 30, 2023.

In connection with the AxBio Acquisition the historical equity holders of AxBio are entitled to receive performance based earn-outs of up to $9,000,000 in cash and up to $66,000,000 in shares of Common Stock, subject to the achievement of certain revenue targets and research and development milestones. In accordance with ASC 815-40, as the earnout was not indexed to the common stock, it was accounted for as a liability at the AxBio Closing Date and is subsequently remeasured at each reporting date with changes in fair value recorded as a component of other (expense) income, net in the condensed consolidated statements of operations.

The fair value of the Earnout was estimated as of the AxBio Closing Date using (1) the probabilities of success and estimated dates of milestone achievements in relation to the research and development milestones, and (2) probability-adjusted revenue scenarios in relation to the revenue targets.

The Earnout liability is categorized as a Level 3 fair value measurement (see Fair Value Measurements accounting policy described in Note 2) because the Company estimated projections utilizing unobservable inputs. Contingent earnout payments involve certain assumptions requiring significant judgment and actual results can differ from assumed and estimated amounts.

The total purchase consideration transferred in the AxBio Acquisition has been allocated to the net assets acquired and liabilities assumed based on their fair values at the acquisition date. The transaction costs related to this acquisition of approximately $1,300,000 were expensed and included in the transaction related expenses on the condensed consolidated statement of operations for the three and nine months ended September 30, 2023.

The allocation of the purchase price, which is deemed to be a preliminary allocation, is as follows:

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Total estimated value of consideration transferred	$	43,135,081
Cash and cash equivalents		662,997
Accounts receivable		18,296,000
Prepaid expenses		170,603
Inventories		10,600,000
Property and equipment		81,846
Intangible assets		23,260,000
Total assets		53,071,446
Accounts payable		12,767,909
Accrued interest		146,829
Other accrued expenses		1,390,278
Loan payable		1,498,000
Related party loans		5,610,000
Deferred tax liabilities		7,836,876
Net assets to be acquired		23,821,554
Goodwill	$	19,313,527

The Company estimated the fair value of the acquired inventories based on the selling price less costs to sell and recorded the fair value step-up of $8,200,000 at the AxBio Acquisition Closing Date. The fair value step-up is amortized over the expected realization term of one year from the AxBio Acquisition Closing Date.

The acquired Loan payable was adjusted down to its fair value by $500,000 due to the more favorable than the market interest rate. This fair value step down was amortized over the term of loan payable as a credit to the interest expense.

The intangible assets include trade names, customer contracts and intellectual property. The intangible assets were valued using a discounted cash flow model. The estimated fair value of the customer contracts as of the acquisition date was determined based on the projected future profits from the contracts, discounted to present value, and the likelihood of contract renewals at the end of each contract term. The estimated fair value of the intellectual property as of the acquisition date was determined based on the estimated license royalty rates, the present value of future cash flows from the intellectual property, and the expected useful life of 7 years. The estimated fair value of the trade name was determined based on the estimated royalty rates for the use of the trade name, the projected revenues attributable to the trade name discounted to present value and the expected useful life of 7 years. The goodwill and other intangible assets associated with the AxBio Acquisition are not deductible for U.S. tax purposes.

The Company determined that the AxBio Acquisition was deemed significant to the Company in accordance with S-X Rule 3-05. As required by ASC 805, Business Combinations, the following unaudited pro forma statements of operations for the nine months ended September 30, 2023 and 2022 give effect to the AxBio Acquisition as if it had been completed on January 1, 2022. The unaudited pro forma financial information below is presented for illustrative purposes only and is not necessarily indicative of what the operating results actually would have been during the periods presented had the AxBio Acquisition been completed during the periods presented. In addition, the unaudited pro forma financial information does not purport to project future operating results. The pro forma statements of operations do not fully reflect: (i) any anticipated synergies (or costs to achieve synergies) or (ii) the impact of non-recurring items directly related to the acquisition of AxBio.

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	Nine months ended September 30,
	2023			2022
Revenue from the Condensed Consolidated Statements of Operations	$	3,728,816		$	-
Add: Axolotl revenue not reflected in the Condensed Consolidated Statements
of Operations		26,020,319			27,617,362
Unaudited pro forma revenue	$	29,749,135		$	27,617,362
	Nine months ended September 30,
	2023			2022
Net loss from Condensed Consolidated Statements of Operations	$	(18,602,436	)	$	(5,936,114	)
Add: Axolotl net income (loss) not reflected in the Consolidated Statements
Operations, less pro forma adjustments described below (1)		1,069,186			(7,625,276	)
Unaudited pro forma net loss	$	(17,533,250	)	$	(13,561,390	)

(1)An adjustment to reflect additional amortization of $1,500,000 and $1,900,000 for the period from January 1, 2023 through the Axolotl Acquisition Closing Date and the nine months ended September 30, 2022, respectively, that would have been charged assuming the fair value adjustments to intangible assets had been applied on January 1, 2022. The adjustment also reflects additional costs of goods sold of $0 and $8,200,000 for the nine months ended September 30, 2023 and 2022, respectively, that would have been charged assuming the fair value step up to inventories had been applied on January 1, 2022.

NOTE 4 — GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS

As of September 30, 2023 and December 31, 2022, the Company had cash of $7,968,046 and $128,149, respectively. The Company’s liquidity needs up to September 30, 2023 have been satisfied through debt and equity financing.

The Company had a loss from operations of $5,137,373 and $851,923 for the three months ended September 30, 2023 and 2022, respectively, and $7,899,628 and $2,719,639 for the nine months ended September 30, 2023 and 2022, respectively. The Company had negative cash flows from operations of $5,203,790 and $1,129,539 for the nine months ended September 30, 2023 and 2022, respectively, and an accumulated deficit of $61,660,750 and $42,382,291 as of September 30, 2023 and December 31, 2022.

Due to its current liabilities and other potential liabilities, the cash available to the Company may not be sufficient to allow the Company to operate for at least 12 months from the date these financial statements are available for issuance. The Company may need to raise additional capital through equity or debt issuances. 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 and reducing payroll expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

In conjunction with the post-acquisition integration activities related to the AxBio Acquisition during the third quarter of 2023, the Company has significantly reduced its operating expenses going forward by terminating certain executives serving as part-time consultants and full-time employees in non-core areas or overlapping functions. This workforce reduction is expected to result in $2,000,000 to $3,000,000 in annual savings. In addition, we have refocused our research and development efforts on aesthetic products that have near-term commercial potential and has delayed clinical development of products that will take more than a year to commercialize. The Company is also exploring out-licensing of certain research and development programs to generate non-dilutive liquidity. Management anticipates that these cost savings will assist the Company in extending its cash runway.

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NOTE 5 — PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

	September 30, 2023	December 31, 2022
Lab equipment	$928,496	$666,178
Leasehold improvements	115,333	115,333
Furniture and fixtures	17,999	3,579
	1,061,828	785,090
Less: accumulated depreciation	(772,028)	(530,116)
Property and equipment, net	$289,800	$254,974

Depreciation expense was $$48,118 and $44,780 for the nine months ended September 30, 2023 and 2022, respectively.

NOTE 6 —GOODWILL AND INTANGIBLE ASSETS

The Company’s goodwill relates to the AxBio Acquisition. Goodwill represents the excess of the purchase price of the acquired business over the fair value of the underlying net tangible and intangible assets. The Company may record goodwill adjustments pursuant to changes in the preliminary valuations acquired during the measurement period, which is up to one year from the date of acquisition. The Company has determined, based on its organizational structure, that it had one reporting unit as of September 30, 2023. For each of the three and nine month periods ended September 30, 2023, the Company recognized approximately $19,313,527 in goodwill from the AxBio Acquisition. The carrying amount of goodwill was $19,313,527 at September 30, 2023.

The Company’s intangible assets primarily relate to the AxBio Acquisition (see Note 3). Intangible assets acquired in connection with the AxBio acquisition were initially recorded at their estimated fair value as of the acquisition date. Intangible assets that have a finite life are amortized over the economic useful life. Additionally, the Company capitalizes legal costs directly associated with the submission of Company patent applications. Gross patent costs of $70,746 as of September 30, 2023 and December 31, 2022 are amortized on a straight-line basis over the patent term. Intangible assets and the related amortization expense consist of the following at September 30, 2023:

	Amortization	Gross		Accumulated		Net Book
	Period	Carrying Value		Amortization		Value
Customer contracts	20 years	$	12,170,000	$	134,925	$	12,035,075
Trade name	7 years		2,220,000		52,857		2,167,143
Intellectual property	7 years		8,870,000		211,190		8,658,810
Patents	16 years		70,746		45,431		25,315
Total intangible assets		$	23,330,746	$	444,403	$	22,886,343

The Company had $28,702 in capitalized patent costs included in intangible assets as of December 31, 2022.

Amortization expense was approximately $402,000 during each of the three and nine months ended September 30, 2023 and zero for the three and nine months ended September 30, 2022.

Amortization expense related to the Company’s intangible assets for future years is as follows:

Years ending December 31,
2023 (remaining)	$	601,846
2024		2,657,948
2025		2,693,124
2026		2,729,451
2027		2,703,997
Thereafter		11,499,977
	$	22,886,343

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NOTE 7— ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following amounts:

	September 30, 2023		December 31, 2022
Accrued compensation	$	1,328,813	$	916,934
Accrued severance		703,947		—
Other accrued expenses		275,037		27,639
Accrued expenses and other liabilities	$	2,307,797	$	944,573

Accrued compensation is a non-interest bearing liability for employee payroll outstanding on September 30, 2023 and December 31, 2022. This includes compensation earned during the years 2019 to 2023.

NOTE 8 —DEBT

Small Business Administration (SBA) Loan

On acquisition, AxBio had an outstanding loan with the SBA with total principal outstanding of $2,000,000 as of September 30, 2023 (the "SBA Loan"). Interest under this loan accrues at a simple interest rate of 3.75% annually on funds outstanding as of the anniversary date of the initial borrowing. A monthly payment in the amount of $9,953 will be made beginning in December 2023 and continues for a total of 30 years. The interest accrued for SBA loans as of September 30, 2023 was $126,010 and total interest expense incurred on SBA Loan for the nine months ended September 30, 2023 was $56,096. The fair value of the SBA Loan was $1,498,000 at the AxBio Acquisition Closing Date due to the more favorable that the market interest rate. The fair value step down is accreted over the term of the loan using the effective interest rate. The carrying value of the SBA Loan was $1,461,141 as of September 30, 2023.

Related Party Loans

On acquisition, AxBio had several promissory notes outstanding to Burns Ventures, LLC with total principal outstanding of $5,610,000 as of September 30, 2023. The owner of Burns Ventures LLC was the former owner of AxBio. Interest on the notes is payable quarterly at a fixed interest rate of 7.00%. The notes require no monthly payments and are due in full at maturity date on December 31, 2024. Accrued interest for the related party loans as of September 31, 2023 was $98,982, and interest expense incurred totaled $65,629 for the nine ended September 30, 2023.

2023 Promissory Notes

During the nine months ended September 30, 2023, the Company received proceeds of $848,500 from 26 zero coupon Promissory Notes (the "Notes"). Four of the Notes were from related parties and represented $100,000 of the borrowings. The Notes have a 12-month maturity date with a balloon payment and provide for the issuance of 16,500 common stock warrants with an exercise price ranging from $11.50 to $14.30 and a term of 5 years. The warrants became fully vested on the issuance date. The stock price for warrants issued during the three months ended March 31, 2023 was $2.60 and was determined based on a 409a valuation as, at the time, there was still some uncertainty about the Business Combination. As discussed in Note 3, during the three months ended September 30, 2023, the probability of the Business Combination was determined to be 100%, and the stock price for those warrants was $0.62, based on the conversion ratio of Legacy Carmell shares into Alpha shares in connection with the Business Combination and the market price of the shares of Alpha, the acquiring public company.

Proceeds from the sales of the Notes with stock purchase warrants were allocated to the two elements based on the relative fair value of the notes without the warrants and of the warrants themselves at time of issuance. The total amounts allocated to warrants were $56,000 and accounted for as paid-in capital. The discount amount was calculated by determining the aggregate fair value of the warrants using the Black-Scholes Option Pricing Model. As of September 30, 2023, there was $33,508 of unamortized debt discount, and amortization of debt discount was $22,479 for the nine months then ended.

Premium Financing

In July 2023, the Company entered into an agreement with a third-party, whereby the Company financed $1,011,480 of premiums on certain of its insurance policies. This financing agreement accrues interest at 8.99% and has a monthly payment of $117,072, with the last payment due in April 2024. Principal outstanding on this loan was $905,774 as of September 30, 2023 and interest totaled $18,152 for the nine months ended September 30, 2023.

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Series 1 Convertible Notes

The Series 1 Convertible Notes were issued between July 9, 2018 and September 13, 2019, with an amended maturity date of July 9, 2023. The notes bear interest at 8%, have no monthly payments, and are due in full with a balloon payment on the maturity date. The notes contain an embedded conversion feature whereby the outstanding principal and accrued and unpaid interest are automatically convertible upon a qualified financing. The conversion feature of the notes meets the definition of a derivative and was valued using the Monte Carlo model, with the fair value of the derivative recorded as a derivative liability (see Note 2) and debt discount at the time of issuance. On September 23, 2022, a qualified financing occurred, at which point all outstanding principal and accrued and unpaid interest were converted to Preferred Series C-2 Shares. The principal and interest converted was $6,109,560 and $1,829,865, respectively, which converted into 2,196,158 and 657,768 shares, respectively, at a ratio of $2.78 per share. The fair value of the shares issued was $15,595,283. The fair value of the derivative upon conversion was $1,938,481. The Company incurred interest expense of $242,373 and amortization of debt discount expense of $0 during the nine months ended September 30, 2022. Certain of these notes are with related parties (see Note 11).

Series 2 Convertible Notes

The Series 2 Convertible Notes were issued between September 25, 2019 and December 31, 2021 all with a maturity date of September 24, 2022. The notes bear interest at 8%, have no monthly payments, and are due in full with a balloon payment on the maturity date. The notes contain an embedded conversion feature whereby the outstanding principal and accrued and unpaid interest are convertible upon a qualified financing. The conversion feature of the notes meets the definition of a derivative and was valued using the Monte Carlo model, with the fair value of the derivative recorded as a derivative liability (see Note 2) and debt discount at the time of issuance. On September 23, 2022, a qualified financing occurred, at which point all outstanding principal and accrued and unpaid interest was converted into Preferred Series C-2 Shares. The principal and interest converted was $3,965,455 and $629,920, respectively, which converted into 1,425,433 and 226,433 shares, respectively, at a ratio of $2.78 per share. The fair value of the shares issued was $5,717,377. The fair value of the derivative upon conversion was $1,122,002. The Company incurred interest expense of $149,303 and amortization of debt discount expense of $684,890 during the nine months ended September 30, 2022.

Other Convertible Note

The Company issued a convertible note to an economic development fund for $50,000 on September 24, 2020. The note is non-interest bearing, has no monthly payments, and is due in full with a balloon payment on June 23, 2025. The note contains an embedded conversion feature whereby the note holder can convert the shares at a discount in the event of a Qualified Financing or a change in control event. This conversion feature meets the definition of a derivative and was valued using the Monte Carlo model, with the fair value of the derivative being recorded as a derivative liability (see Note 2) and debt discount at the time of issuance. On September 23, 2022, a Qualified Financing occurred, at which point all outstanding principal was converted to Preferred Series C-2 Shares. The principal converted was $50,000, which converted into 21,118 shares at a ratio of $2.37 per share. The fair value of the shares issued was $73,092. The fair value of the derivative upon conversion was $23,092. The debt discount at the time of conversion was $47,872, which was written off as a loss on debt extinguishment. During the nine months ended September 30, 2022, there was $706 of amortization of debt discount.

January 2022 Convertible Notes

On January 19, 2022, Legacy Carmell issued two senior secured convertible notes (the “Convertible Notes”) of $1,111,111 each to two investors (“Holders”), due on January 19, 2023. The notes bear interest at 10% (18% upon default). Legacy Carmell was required to make monthly interest payments for the interest incurred and required monthly principal payments of $158,730 beginning on July 19, 2022. The notes are collateralized by all assets (including current and future intellectual property) of Legacy Carmell. These notes were issued with a 10% discount and were subject to an 8% commission due to the underwriter. These fees were recorded as debt discount. In addition, each of the Holders received warrants to subscribe for and purchase up to 155,412 shares of the Company’s common stock (the "Convertible Note Warrants"). Each warrant is exercisable at a price of $0.16 per warrant share and vested immediately upon closing and has a term of 5 years. The fair value of the Convertible Note Warrants at the time of issuance was $409,483, which was recorded as debt discount. The senior secured convertible notes are convertible at the option of the Holders into shares of common stock at a fixed conversion price equal to the lesser of $3.57 per share and a 25% discount to the price of the common stock in a Qualified Offering (as adjusted, the “Conversion Price”). In the event units consisting of common stock and warrants are issued in a Qualified Offering, the senior secured convertible notes are convertible into common stock and warrants. If, at any time while the Convertible Note is outstanding, the Company sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any common stock or common stock equivalents entitling any person to acquire shares of common stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price”), then the Conversion Price shall be reduced to equal the Base Conversion Price. Such adjustment are to be made whenever such common stock or common stock equivalents are issued. Multiple events have triggered the down-round feature of the base conversion price. As of December 31, 2022, the Base Conversion Price was $1.79.

19

The conversion feature within the Convertible Notes meets the requirements to be treated as a derivative. Accordingly, the Company estimated the fair value of the convertible notes derivative using the Monte Carlo Method as of the date of issuance. The fair value of the derivative was determined to be $1,110,459 at the time of issuance and was recorded as a liability with an offsetting amount recorded as a debt discount. The derivative is revalued at the end of each reporting period, and any change in fair value is recorded as a gain or loss in the statement of operations.

Proceeds from the sales of the Convertible Notes with stock purchase warrants were allocated to the two elements based on the relative fair value of the notes without the warrants and the warrants themselves at the time of issuance. The total amount allocated to the Convertible Note Warrants was $409,483 and accounted for as paid-in capital. The discount amount was calculated by determining the aggregate fair value of the warrants using the Black-Scholes Option Pricing Model.

On July 19, 2022, Legacy Company defaulted on the debt. Under the terms of the note, upon an event of default, there would be a 25% increase to the outstanding principal, in addition to the interest rate increasing from 10% to 18%. Upon the event of default, the unamortized debt discount of $958,899 was accelerated and expensed, and the 25% increase in outstanding principal of $555,556 was recorded as interest expense in the statement of operations. For the nine months ended September 30, 2022, interest expense on the Convertible Notes, excluding the 25% increase in the outstanding principal, was $243,056. For the nine months ended September 30, 2023, interest expense on the Convertible Notes, as calculated under GAAP, totaled $570,220 and not accounting for the management of the Company’s belief that no additional payments are due to the Holders.

An Agreement Subsequent to the Notice of Acceleration

On November 2, 2022, Legacy Carmell received a letter (“Notice of Acceleration”) from one of the Holders, notifying an Event of Default. Legacy Carmell and Alpha entered into an agreement with one of the Holders (“Puritan”) in connection with the Notice of Acceleration on December 19, 2022. Pursuant to the agreement, Alpha and Legacy Carmell each represented and warranted to Puritan that (i) it intends to enter into the Business Combination, (ii) there will be no conditions to closing relating to Alpha or its affiliates delivering a certain amount of cash to the Company at closing of the Business Combination (the “Closing”), (iii) the only conditions to Closing of the Business Combination are as set forth in Sections 6.1 through Section 6.3 of the Business Combination Agreement, (iv) upon entering into such Business Combination Agreement, such parties shall have a commitment letter from a third party to provide capital in an amount sufficient to the surviving company to the Business Combination to, among other things, repay all amounts due and owing at such time to Puritan at the Closing, (v) the equity valuation ascribed to Legacy Carmell in the Business Combination Agreement is $150,000,000, and (vi) such Business Combination Agreement shall not place any restrictions on Puritan’s ability to transfer any of its securities, including, without limitation, the shares underlying the Puritan Convertible Note Warrants. Legacy Carmell agreed it would not pay any other debtholder on account of interest or principal during the forbearance period hereunder.

Based on the representations and warranties, and agreements above and in consideration of Legacy Carmell's agreement to pay Puritan at the Closing (i) the outstanding principal amount, plus accrued interest, late fees and all other amounts then owed as specified in the Convertible Notes and (ii) 25,000 freely tradeable shares of Alpha (not subject to lock-up or any other restrictions on transfer) at a price of $10.00 per common share (i.e., the price per share of common stock to the equity holders of Legacy Carmell in the Business Combination), Puritan withdrew and rescinded the Notice of Acceleration, and such Notice of Acceleration was deemed null and void and had no further force or effect. Puritan further agreed that, based on the representations and warranties, and agreements contained in such agreement, it shall not issue any further notices of acceleration or default notices under the Convertible Notes, seek repayment of any amounts due under the Convertible Notes, or seek to exercise any other remedies contained in the Convertible Notes and other related agreements in regard to non-payment of the notes from the Effective Date until the June 30, 2023.

On the closing of the Business Combination, the Company repaid $2,649,873 to the Holders, which represented the original principal amount of the Convertible Notes plus accrued interest at a rate of 25%, which the Company believes is the maximum rate permissible under New York State usury laws. In addition, the Company issued Puritan 25,000 shares freely of tradeable common stock. Following the closing of the Business Combination, both Holders have provided notice to the Company demanding additional payment of principal and interest on the Convertible Notes in an approximate amount of $600,000 per each Holder at the closing of the Business Combination with additional interest thereon. In the case of Puritan, following the Business Combination, Puritan alleged that the Business Combination constituted a “Fundamental Transaction” under the terms of the Convertible Note Warrants, resulting in a purported right for Puritan to require the Company to repurchase such Convertible Note Warrants at a purchase price equal to the Black-Scholes Value of the unexercised portion of such Convertible Note Warrants as of the closing of the Business Combination. Puritan calculated the cash amount of such repurchase to be $1,914,123. The Company believes that this calculation is inaccurate. In the case of the other holder, that Holder demanded to be provided its share of the Convertible Note Warrants. Puritan has also asserted damages in connection with the timing of the issuance to it of 25,000 shares of freely tradeable common stock. The Company believes that it provided freely tradeable shares to Puritan at the same time as other Legacy Carmell shareholders. Puritan’s total claims inclusive of the amounts paid at Closing Date exceed $4,050,000 in connection with a loan for which the Company received $1,000,000. Management of the Company believes that its obligations under the Convertible Notes and Convertible Note Warrants have been satisfied and that no additional payments are due to the Holders, and the Company has conveyed its position to the Holders. There can be no assurance that these or similar matters

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will not result in expensive arbitration, litigation or other dispute resolution, which may not be resolved in our favor and may adversely impact our financial condition (see Note 9).

Future Maturities on all Debt

Future debt maturities are as follows:

Year ending December 31,	Amount
2023	$	446,127
2024		6,918,147
2025		13,168
2026		45,713
2027		47,457
Thereafter		1,893,662
Total	$	9,364,274

NOTE 9 — COMMITMENTS AND CONTINGENCIES

Exclusive License Agreement

On January 30, 2008, the Company and Carnegie Mellon University (“CMU”) entered into a License Agreement, as amended by that certain Amendment No. 1 to the Amended Exclusive License Agreement, dated as of July 19, 2011, as further amended by that certain Amendment No. 2 to the Amended Exclusive License Agreement, dated as of February 8, 2016, as further amended by that certain Amendment No. 3 to the Amended Exclusive License Agreement, dated as of February 27, 2020 and as further amended by that certain Amendment No. 4 to the Amended Exclusive License Agreement, dated November 23, 2021 (collectively, the “Amended Exclusive License Agreement”). This License Agreement provides the Company an exclusive, worldwide right to use certain technology of CMU relating to biocompatible plasma-based plastics to make, have made, use, and otherwise dispose of licensed products and to create derivatives for the field of use. The Company is required to use its best efforts to effect the introduction of the licensed technology into the commercial market as soon as possible and meet certain milestones as stipulated within the agreement. CMU retains the right to use any derivative technology developed by the Company due to its use of this technology and retains the intellectual property rights to the licensed technology, including patents, copyrights, and trademarks.

This agreement is effective until January 30, 2028, or until the expiration of the last-to-expire patent relating to this technology, whichever comes later, unless otherwise terminated under another provision within the agreement. Failure to perform in accordance with the agreed-upon milestones is grounds for CMU to terminate the agreement prior to the expiration date. As a partial royalty for the license rights, the Company issued 66,913 shares of the Company’s common stock to CMU. In addition, in 2008, the Company issued a warrant in 2008 for common stock to be exercised upon the earlier of (a) the Company’s cumulative capital funding and/or receipt of cumulative revenues collectively equals the sum of $2,000,000 or (b) thirty (30) days prior to any change in control event that provides for the issuance of shares that, when added to the number of shares then held by CMU, results in an amount equal to 8.2% of the outstanding shares of the Company. In 2011, CMU exercised the warrant in full, and the Company issued 98,938 shares of Common Stock. Prior to a qualified initial public offering or a qualified sale, CMU has the right to subscribe for additional equity securities to maintain its then percentage of ownership in the Company.

Royalties payable by the Company to CMU are 2.07% of net sales, as defined in the License Agreement. No royalties are due or payable for three (3) years following the effective date or until the closing of a change in control event, whichever occurs sooner. The Company shall also pay CMU 25% of any sublicense fees received, due, and payable upon receipt of the sublicense fees by the Company. All payments due to CMU are due within sixty (60) days after the end of each fiscal quarter. All overdue payments bear interest at a rate equal to the Prime rate in effect at the date such amounts are due plus 4%. No royalties were accrued or paid during the three and nine months ended September 30, 2023 and 2022.

The Company is obligated to reimburse CMU for all patent expenses and fees incurred to date by CMU for the licensed technology at the earlier of (1) three years from the effective date; (2) the closing date of a change in control event; (3) for international patents, from the start of expenses for patenting outside of the United States of America. There were no reimbursed expenses and no owed related to reimbursable expenses for the three and nine months ended September 30, 2023 and 2022, respectively.

Convertible Notes

On the closing of the Business Combination, the Company repaid $2,649,873 to the Holders, which represented the original principal amount of the Convertible Notes plus accrued interest at a rate of 25%, which the Company believes is the maximum rate permissible

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under New York State usury laws. In addition, the Company issued Puritan 25,000 shares freely of tradeable common stock. Following the closing of the Business Combination, both Holders have provided notice to the Company demanding additional payment of principal and interest on the Convertible Notes in an approximate amount of $600,000 per each Holder at the closing of the Business Combination with additional interest thereon. In the case of Puritan, following the Business Combination, Puritan alleged that the Business Combination constituted a “Fundamental Transaction” under the terms of the Convertible Note Warrants, resulting in a purported right for Puritan to require the Company to repurchase such Convertible Note Warrants at a purchase price equal to the Black-Scholes Value of the unexercised portion of such Convertible Note Warrants as of the closing of the Business Combination. Puritan calculated the cash amount of such repurchase to be $1,914,123. The Company believes that this calculation is inaccurate. In the case of the other holder, that Holder demanded to be provided its share of the Convertible Note Warrants. Puritan has also asserted damages in connection with the timing of the issuance to it of 25,000 shares of freely tradeable common stock. The Company believes that it provided freely tradeable shares to Puritan at the same time as other Legacy Carmell shareholders. Puritan’s total claims inclusive of the amounts paid at Closing Date exceed $4,050,000 in connection with a loan for which the Company received $1,000,000. Management of the Company believes that its obligations under the Convertible Notes and Convertible Note Warrants have been satisfied and that no additional payments are due to the Holders, and the Company has conveyed its position to the Holders. There can be no assurance that these or similar matters will not result in expensive arbitration, litigation or other dispute resolution, which may not be resolved in our favor and may adversely impact our financial condition

NOTE 10 — PROFIT-SHARING PLAN

The Company has 401(k) profit-sharing plans covering substantially all employees. The Company’s discretionary profit-sharing contributions are determined annually by the Board. No discretionary profit-sharing contributions were made to the plans during the nine months ended September 30, 2023 and 2022.

NOTE 11 — STOCKHOLDERS’ EQUITY (DEFICIT)

Convertible Preferred Stock

As of December 31, 2022 and immediately prior to the Business Combination, Legacy Carmell had outstanding Series A convertible preferred stock, Series B convertible preferred stock, Series C-1 convertible preferred stock and Series C-2 convertible preferred stock, which are collectively referred to as “Convertible Preferred Stock.”

As of December 31, 2022, redeemable convertible preferred stock consisted of the following:

	Authorized		Issued and Outstanding		Carrying Value		Liquidation Preference		Issuance Price
Series A convertible preferred stock		2,010,728		2,010,728	$	7,714,336	$	7,714,336	$	2.19
Series B convertible preferred stock		2,893,515		2,824,881		7,025,434		7,025,434		2.49
Series C-1 convertible preferred stock		3,436,863		426,732		772,028		772,028		2.54
Series C-2 convertible preferred stock		6,011,960		5,857,512		15,904,275		15,904,275		2.15

Series A Preferred Stock, Series C-1 Preferred Stock, and Series C-2 Preferred Stock accrued cumulative dividends at a per annum rate of 7% calculated on the original issue price (the “Original Issue Price”), respectively. Such dividends accrue on each share of preferred stock commencing on the date of issuance. The Company accrued dividends of $164,510, $40,551, and $470,962 for Series A Preferred Stock, Series C-1 Preferred Stock, and Series C-2 Preferred Stock for the period from January 1, 2023 to July 13, 2023. As of December 31, 2022, the Company has accrued dividends of $3,254,803, $9,470, and $239,104 for Series A Preferred Stock, Series C-1 Preferred Stock, and Series C-2 Preferred Stock, respectively.

In connection with the Business Combination, all previously issued and outstanding 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 Business Combination Agreement.

Common Stock

On July 14, 2023, the Business Combination was consummated and the Company issued 12,053,517 shares of common stock to Legacy Carmell shareholders. Immediately following the Business Combination, there were 19,236,305 shares of common stock outstanding with a par value of $0.0001. As of September 30, 2023, the Company’s Third Amended and Restated Certificate of Incorporation, as amended at the Closing Date, authorized the Company to issue 250,000,000 shares of common stock at a par value of $0.0001 per share.

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Series A Voting Convertible Preferred Stock

As of September 30, 2023, the Company’s Third Amended and Restated Certificate of Incorporation as amended at the Closing Date, authorized the Company to issue 20,000,000 shares of preferred stock at a par value of $0.0001 per share. In connection with the AxBio Acquisition, the Company issued 4,243 shares of a newly designated series of Series A Convertible Voting Preferred Stock (the “Series A Preferred Stock”) to former AxBio shareholders.

Automatic Conversion: The Series A Preferred Stock will be automatically converted into shares of Common Stock at a conversion rate of 1,000 common shares for one share of Series A Preferred Stock on the tenth trading day following the announcement of the approval by Company's shareholder of the issuance of common stock upon conversion of the Series A Preferred Stock ("Requisite Approval"). If the Company’s stockholders do not approve such conversion at the first meeting in which it is voted on by stockholders, the Company will submit for the approval of the Company’s stockholders at least semi-annually until such approval is obtained. As of September 30,2023 the Requisite Approval has not been obtained.

Voting: Series A Preferred Stock has the same voting rights as common stockholders in any such vote. The holders of the Series A Preferred Stock shall be entitled to a number of votes equal to the number of shares of common stock into which the Series A Preferred Stock is convertible. Unless and until the Company has obtained the Requisite Approval, the number of shares of common stock that shall be deemed issued upon conversion of the Series A Preferred Stock (for purposes of calculating the number of aggregate votes, the holders of Series A Preferred Stock are entitled to on an as-converted basis) will be equal to that number of shares equal to the Cap, which is the number of shares equal to 19.9% of the Company’s outstanding common stock as of the issuance date of the Series A Preferred Stock.

Dividends: If and when declared by the Board of Directors, if the dividend is declared on common stock, the holders will receive that dividend or distribution, on an as-if-converted basis, in the same form as dividends paid on shares of common stock.

Liquidation: Prior to the Requisite Approval, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, including a change of control transaction, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, the amount per share if such holders converted all of the Series A Preferred Stock into common stock.

2023 Long-Term Incentive Plan

In July 2023, the shareholders of the Company approved the 2023 Long-Term Incentive Plan (the "2023 Plan"), which replaced the Amended and Restated 2009 Stock Incentive Plan of Legacy Carmell (the “2009 Plan”). No new awards are being made under the 2009 Plan. Under the 2023 Plan, the Board may grant awards of stock options, stock appreciation rights, restricted stock, restricted stock units or other stock-based awards to employees and other recipients as determined by the Board. The exercise price per share for an option granted to employees owning stock representing more than 10% of the Company at the time of the grant cannot be less than 110% of the fair market value. Incentive and non-qualified stock options granted to all persons shall be granted at a price no less than 100% of the fair market value and any price determined by the Board. Options expire no more than ten years after the date of the grant. Incentive stock options to employees owning more than 10% of the Company expire no more than five years after the date of grant. The vesting of stock options is determined by the Board. Generally, the options vest over a four-year period at a rate of 25% one year following the date of grant, with the remaining shares vesting equally on a monthly basis over the subsequent thirty-six months.

The maximum number of shares that may be issued under the 2023 Plan is the sum of: (i) 1,046,408, (ii) an annual increase on January 1, 2024 and each anniversary of such date prior to the termination of the 2023 Plan, equal to the lesser of (A) 4% of the outstanding shares of our common stock determined on a fully diluted basis as of the immediately preceding December 31 and (B) such smaller number of shares as determined by our Board or compensation committee, and (iii) the shares of common stock subject to 2009 Plan awards, to the extent those shares are added into this plan by operation of the recycling provisions described below.

The maximum number of shares of the Company's common stock that may be issued under the 2023 Plan through incentive stock options is 1,046,408, provided that this limit will automatically increase on January 1 of each year, for a period of not more than ten (10) years, commencing on January 1, 2024 and ending on (and including) January 1, 2032, by an amount equal to the lesser of 1,500,000 shares or the number of shares added to the share pool as of such January 1, as described in clause (ii) of the preceding sentence. The following shares will be added (or added back) to the shares available for issuance under the 2023 Plan:

•Shares subject to 2009 Plan or 2023 Plan awards that expire, terminate or are canceled or forfeited for any reason after the effectiveness of the 2023 Plan;

•Shares that after the effectiveness of the 2023 Plan are withheld to satisfy the exercise price of an option issued under our 2009 Plan or 2023 Plan;

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•Shares that after the effectiveness of the 2023 Plan are withheld to satisfy tax withholding obligations related to any award under the 2009 Plan or 2023 Plan; and

•Shares that after the effectiveness of the 2023 Plan are subject to a stock appreciation right that are not delivered on exercise or settlement. However, the total number of shares underlying 2009 Plan awards that may be recycled into the 2023 Plan pursuant to the above-described rules will not exceed the number of shares underlying 2009 Plan awards as of the effective date of the 2023 Plan (as adjusted to reflect the Business Combination). Shares of common stock issued through the assumption or substitution of awards in connection with a future acquisition of another entity will not reduce the shares available for issuance under the 2023 Plan.

Warrant and Option Valuation

The Company computes the fair value of warrants and options granted using the Black-Scholes option pricing model. The expected term used for warrants and options issued to non-employees is the contractual life, and the expected term used for options issued to employees and directors is the estimated period that options granted are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected term of “plain vanilla” grants for stock options. The Company utilizes an expected volatility figure based on a review of the historical volatilities over a period equivalent to the expected life of the instrument valued by similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued. The Company’s stock price was derived from a 409A valuations prior to the Business Combination and market price for all options and warrants granted thereafter.

Warrants Outstanding

As of September 30, 2023, the Company had 4,638,444 common stock warrants outstanding with a weighted average exercise price of $10.20 and a weighted average remaining contractual life of 4.77 years. During the nine months ended September 30, 2023, the Company issued 258,953 warrants, which expire between February and June of 2028, unless exercised.

Option Activity and Summary

A summary of the option activity during the nine months ended September 30, 2023 is presented below:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Life in Years		Aggregate Intrinsic Value
Outstanding, December 31, 2022		2,235,313		$	2.22		8.07	$	1,083,492
Granted		344,631		$	2.91
Exercised		(23,420	)	$	1.75
Expired/Cancelled		(1,004,638	)	$	2.33
Outstanding, September 30, 2023		1,551,886		$	2.15		7.19	$	2,252,300
Vested/Exercisable, September 30, 2023		1,224,773		$	2.05		6.72	$	1,904,182

The weighted average fair value of the options granted during the nine months ended September 30, 2023 was $3.00 per share, based on a Black Scholes option pricing model using the following assumptions:

Expected volatility	70% - 82%
Expected term of option	6.0 - 6.1
Range of risk-free interest rate	3.55% -3.75%
Dividend yield	0%

The Company recorded stock-based compensation expense for options of $223,560 and $277,634 for the three months ended September 30, 2023 and 2022, respectively, and $591,102 and $449,817 for the nine months ended September 30, 2023 and 2002, respectively. As of September 30, 2023, there was approximately $1,769,600 of total unrecognized compensation expense related to unvested stock options, which will be recognized over the weighted average remaining vesting period of 6.6 years.

NOTE 12 – OTHER RELATED PARTY TRANSACTIONS

A former member of the Board holds investments in the Company through various venture capital firms. In addition, certain family members of the former chief executive officer invested in Series C-2 Preferred Stock, which was converted to Common Stock as of the

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Merger Date. The following table summarizes the related party transactions/balances for these individuals at September 30, 2023 and December 31, 2022:

	September 30, 2023				December 31, 2022
	Dollars		Common Shares		Dollars		Preferred Shares
Series A Preferred Stock and Dividends
Former Board Member	$	877,054		425,165	$	877,054		4,222,223
Cumulative Dividends Earned		712,800				678,694
	$	1,589,854			$	1,555,748
Series B Preferred Stock
Former Board Member	$	887,049		425,766	$	887,049		5,094,537
Immediate Family Member 1		103,244		65,268		103,244		780,967
	$	990,293			$	990,293		5,875,504
Series C-1 Preferred Stock
Immediate Family Member 1	$	50,000		19,677	$	50,000		234,742
Cumulative Dividends Earned		1,879			10
	$	51,879			$	50,010
Series C-2 Preferred Stock
Former Board Member	$	1,049,381		488,088	$	1,049,381		6,129,561
Immediate Family Member 1		129,260		60,120		129,260		755,024
	$	1,178,641			$	1,178,641		6,884,585
Series C-2 Cumulative Dividends Earned
Former Board Member	$	59,168			$	19,924
Immediate Family Member 1		7,288				2,454
	$	66,456			$	22,378

The Company uses OrthoEx for 3PL services. The former chief executive officer of AxBio currently serving as an advisor to our chief executive officer has an equity interest in OrthoEx and has a seat on OrthoEx’s Board of Directors. The Company incurred $22,335 of expenses from OrthoEx during the nine months ended September 30, 2023. As of September 30, 2023, the Company had a payable to this related party of $11,670. The Company uses Ortho Spine Companies, LLC for various consulting and marketing services. Ortho Spine Companies, LLC (“Ortho Spine”) is owned by one of the advisors to our chief executive officer. The Company incurred $3,500 of expenses from Ortho Spine for the nine months ended September 30, 2023. As of September 30, 2023, the Company had no payables to this related party.

NOTE 13 – INCOME TAXES

The Company did not record any income tax provision or benefit for the three and nine months ended September 30, 2023 and 2022. The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception and its history of gross losses and has concluded that it is not more likely than not that the Company will realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the deferred tax assets as of September 30, 2023 and December 31, 2022. Management reevaluates the positive and negative evidence at each reporting period.

The deferred tax liability of $7,836,876 as of September 30, 2023 is related to the fair value adjustments made to inventory, customer relationship, intellectual property and tradename acquired in the AxBio acquisition. Considering that the realization of taxable income in future periods is highly uncertain, it was assumed that the deferred tax liabilities would not relieve the valuation allowance recorded against the deferred tax assets.

NOTE 14 – SUBSEQUENT EVENTS

Puritan Litigation

On November 8, 2023, Puritan filed a complaint captioned Puritan Partners LLC v. Carmell Regen Med Corporation et al., No. 655566/2023 (New York Supreme Court, New York County). In the complaint, Puritan asserts that the Company breached its obligations under the Convertible Notes and the Convertible Note Warrants. Puritan also asserts the Company did not timely comply with its obligations to provide Puritan with 25,000 freely tradeable shares. Puritan asserts claims for declaratory judgment, breach of contract, conversion, foreclosure of its security interest, replevin, unjust enrichment, and indemnification, and seeks remedies including damages totaling $2,725,484 through November 1, 2023, additional fees and interest thereafter, costs and attorney’s fees, an order of foreclosure

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on its security interest, and other declaratory relief. The Company rejects the claims in the complaint and intends to defend vigorously against this litigation.

Separation Agreement

Effective as of August 31, 2023, Randolph W. Hubbell resigned as the Company’s Chief Executive Officer and President and as a member of the Board. On October 25, 2023, the Company and Mr. Hubbell entered into a separation agreement with respect to his compensation, providing for a lump sum cash payment of $450,000, less applicable tax withholding and monthly cash severance payments equal to an aggregate of $410,000 payable over a 12-month period. The separation agreement contains customary covenants and a release of claims and an acknowledgment by the Company and Mr. Hubbell as to the number of his vested stock options and the deadline for the exercise thereof. The deadline for such exercise has passed without the exercise of any such options.

Arbitration Demands

In October 2023, the Company received demands to arbitrate claims from several former executives and other former employees or consultants of the Company for alleged unpaid compensation relating to periods prior to the termination of their relationships with the Company. Such claims seek aggregate compensation of approximately $800,000.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CARMELL THERAPEUTICS CORP.

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. You should read this discussion and analysis in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”), as well as our audited consolidated financial statements and notes thereto included in the final prospectus dated June 23, 2023 and filed with the Securities and Exchange Commission (“SEC”). Certain amounts may not foot due to rounding. Certain information in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q contains forward-looking statements that involve numerous risks and uncertainties, including, but not limited to, those described under the sections entitled “Cautionary Statement Regarding Forward-Looking Statements” and Item II, Part 1A. “Risk Factors” included in this Quarterly Report on Form 10-Q. We assume no obligation to update any of these forward-looking statements. Actual results may differ materially from those contained in any forward-looking statements.

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of 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 implied by such forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions, but the absence of these words does not mean that a statement is not forward-looking. Such statements include, but are not limited to, statements and expectations regarding the ability to maintain the listing of our common stock and warrants on Nasdaq, our ability to raise financing in the future, our success in retaining or recruiting officers, key employees or directors following the completion of the Business Combination, the benefits of and our expectations related to the AxBio Acquisition, factors relating to our business, operations and financial performance, including: the success of our development efforts with respect to our product candidate, our commercialization efforts with respect to our approved products, the results of preclinical studies and clinical trials, our ability to maintain and obtain regulatory approval for our products and product candidate and future product candidates, market acceptance of our product candidate, regulatory developments, our industry and the competition we face, our need to grow the size of our organization in the future and the management of such growth, as well as all other statements other than statements of historical fact included in this Quarterly Report. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. Any public statements or disclosures by us following this Quarterly Report that modify or impact any of the forward-looking statements contained in this Quarterly Report will be deemed to modify or supersede such statements in this Quarterly Report.

Overview

We are a commercial-stage regenerative care company with a focus on using human biomaterials for aesthetic and medical care. Our commercial product is a human amnion allograft that can be used as a structural barrier for diabetic foot ulcers, venous ulcers, recovery from MOHS surgery, and dental, endodontic, oral maxillofacial, and periodontal procedures. Our research and development pipeline includes several innovative epithelial and bone products under development.

Recent Developments

Business Combination

On July 14, 2023 (the “Closing Date”), we consummated a business combination pursuant to the terms of the Business Combination Agreement, dated as of January 4, 2023 (the “Business Combination Agreement”), by and among Legacy Carmell, Alpha Healthcare Acquisition Corp. III a Delaware corporation (“Alpha”), and Candy Merger Sub, Inc., a Delaware corporation (“Merger Sub”). Pursuant to the Business Combination Agreement, on the Closing Date, (i) Alpha changed its name to “Carmell Therapeutics Corporation, also referred to as the "Company," and Legacy Carmell changed its name to “Carmell Regen Med Corporation,” and (ii) Merger Sub merged with and into Legacy Carmell, with the Company as the surviving company in the Business Combination. After giving effect to the Business Combination, Legacy Carmell became a wholly owned subsidiary of the Company.

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Axolotl Biologix Acquisition

On July 26, 2023, we entered into an Agreement and Plan of Merger (the “AxBio Merger Agreement”), by and among us, Aztec Merger Sub, Inc. and Axolotl Biologix, Inc. (“AxBio”), which provides for, among other things, the merger of AxBio with and into Aztec Merger Sub, Inc., with AxBio being the surviving corporation of the merger and a direct, wholly owned subsidiary of the Company (the “AxBio Acquisition”). Pursuant to the terms of the AxBio Merger Agreement, all of the issued and outstanding shares of AxBio (other than the Dissenting Shares (as defined in the AxBio Merger Agreement) and the shares held in treasury) were cancelled in exchange for aggregate consideration of (i) up to approximately $8,000,000 in cash (the “Closing Cash Consideration”), (ii) a number of shares of our common stock equal to (1) $57,000,000 divided by (2) the value weighted average price of our common stock (the “VWAP”) for the 30 consecutive trading days immediately preceding the closing of the AxBio Acquisition (such consideration, the “Closing Share Consideration”), and (iii) up to $9,000,000 in cash and up to $66,000,000 in shares of common stock that are subject to a performance based earn-out, subject to customary adjustments at closing for cash, working capital, transaction expenses and indebtedness, and amounts held back us.

On August 9, 2023, the Company entered into that certain First Amendment to the AxBio Merger Agreement (the “Amendment”) which amended certain terms of the AxBio Merger Agreement. The Amendment changed the structure of the AxBio Acquisition to provide that, following the merger of AxBio with and into Aztec Merger Sub, Inc., with AxBio surviving, AxBio would merge with and into AxBio Biologix, LLC, with AxBio Biologix, LLC being the surviving corporation of the merger and a direct, wholly owned subsidiary of the Company, and waived the condition requiring AxBio to deliver its audited financial statements upon closing in exchange for the $8,000,000 of Closing Cash Consideration otherwise payable upon closing pursuant to the AxBio Merger Agreement becoming payable and contingent upon receipt of such audited financial statements.

On August 9, 2023 (“AxBio Closing Date”), the Company completed the AxBio Acquisition. In connection with the closing of the AxBio Acquisition, the Company issued 3,845,337 shares of its common stock and 4,243 shares of a newly designated series of Series A Convertible Voting Series A Preferred Stock, $0.0001 par value per share (the “Series A Preferred Stock”), in exchange for all the issued and outstanding shares of AxBio as part of the consideration paid in connection with the AxBio Acquisition. The Closing Share Consideration was calculated using a 30-day average of daily VWAP of $7.05 per share. In addition to the shares of common stock and the Series A Preferred Stock, the consideration included the Closing Cash Consideration, payable upon delivery of AxBio’s audited financial statements, as well as the Future Consideration. The number of shares of common stock issued at the closing of the AxBio Acquisition is limited to 19.99% of the total number of shares of the Company’s common stock issued and outstanding immediately prior to the closing. Pursuant to the Certificate of Designation of Preferences, Rights and Limitations of the Series A Preferred Stock, which was filed by the Company with the Secretary of State of Delaware on the closing date of the AxBio Acquisition in accordance with Section 151(a) of the Delaware General Corporation Law, each share of Series A Preferred Stock will automatically convert into 1,000 shares of common stock upon stockholder approval of the issuance of the shares of common stock issuable upon such conversion and shall cease to have any rights other than with respect to conversion.

Name Change

On August 1, 2023, our board of directors approved and adopted an amendment to our existing amended and restated certificate of incorporation to change the name of the Company from “Carmell Therapeutics Corporation” to “Carmell Corporation.”

Departure of Directors

Effective as of August 31, 2023 (the “Resignation Date”), William Newlin, Steve Bariahtaris, Jaime Garza and Randolph W. Hubbell (collectively, the “Former Directors”) each resigned from their respective position as a director of the Company. The Former Directors’ resignations were not the result of any disagreement with the Company or the Board or any matter relating to the Company’s operations, policies, or practices.

Departure of Executive Officers

As of the Resignation Date, the following executive officers of the Company voluntarily resigned from their positions with the Company (collectively, the “Former Officers”).

Name	Position
Randolph W. Hubbell	Chief Executive Officer and President
James Hart, M.D.	Chief Medical Officer
Donna Godward	Chief Quality Officer
Janet Vargo, Ph.D.	Vice President Clinical Services

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The resignations follow a strategic realignment of the Company’s operations and post-acquisition integration efforts in connection with the AxBio Acquisition.

As of the Resignation Date, Rajiv Shukla, the Company’s Executive Chairman as of immediately prior thereto, became the Chief Executive Officer of the Company.

Products and Product Candidates

The Company’s commercial product is a human amnion allograft distributed under Axolotl Graft™ and Axolotl DualGraft™ brands. These products are indicated as a wound covering and structural barrier. AxBio graft products are processed through minimal manipulation techniques, retaining the native qualities of the amniotic membrane to function as a wound covering and as a structural barrier. Axolotl Graft™ and Axolotl DualGraft™ are dehydrated human amnion membrane allografts derived from the amniotic lining of the placenta. The donor tissue is recovered and processed under sterile conditions, in accordance with all FDA guidelines and quality assurance standards in a controlled environment. Our allograft tissue products are terminally irradiated in the final package.

The Company has developed and is planning to begin the commercial launch a line of skin care products in the first quarter of 2024.

Impact of Macroeconomic Events

Economic uncertainty in various global markets caused by political instability and conflicts, such as the ongoing conflicts in the Ukraine, and Israel, and economic challenges have led to market disruptions, including significant volatility in commodity prices, credit and capital market instability and supply chain interruptions, which have caused record inflation globally. Our business, financial condition, and results of operations could be materially and adversely affected by further negative impacts on the global economy and capital markets resulting from these global economic conditions, particularly if such conditions are prolonged or worsen. Although, to date, our results of operations has not been materially impacted by these global economic and geopolitical conditions, it is impossible to predict the extent to which our operations may be impacted in the short and long term. The extent and duration of these market disruptions, whether as a result of the military conflict between Russia and Ukraine, the effects of the Russian sanctions, the conflict between Israel and Hamas, geopolitical tensions, record inflation, or otherwise, are impossible to predict. Any such disruptions may also magnify the impact of other risks described or incorporated by reference in this Quarterly Report.

Critical Accounting Policies and Estimates

This discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in thee United States ("GAAP"). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported revenue expenses and net loss incurred during the reporting periods. Our estimates are based on our historical experience and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Going Concern and Management Plan

The financial statements included elsewhere herein for the three and nine months ended September 30, 2023, were prepared under the assumption that we would continue our operations as a going concern, which contemplates the realization of assets and the satisfaction of liabilities during the normal course of business. However, as of September 30, 2023, we had cash and cash equivalents of approximately $7,900,000, an accumulated deficit of approximately $61,171,378, and liabilities of approximately $61,800,000. We have incurred substantial recurring losses from continuing operations, have used, rather than provided, cash in our continuing operations, and are dependent on additional financing to fund operations. These conditions raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued. The financial statements included elsewhere herein do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. In conjunction with the post-acquisition integration activities related to the AxBio Acquisition during the third quarter of 2023, the Company significantly reduced its operating expenses going forward by terminating certain executives serving as part-time consultants and full-time employees in non-core areas or overlapping businesses. This workforce reduction is expected to result in $2,000,000 to $3,000,000 in annual savings. In addition, we have refocused our research and development efforts on aesthetic products that have near-term commercial potential and delayed clinical development of products that will take more than a year to commercialize. The Company is also exploring out-licensing certain research

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and development programs to generate non-dilutive liquidity. Management anticipates that these cost savings will assist the Company in extending its cash runway.

Results of Operations for the Three Months Ended September 30, 2023 and 2022

The following is a comparative discussion of our results of operations for the three months Ended September 30, 2023 and 2022:

	For the Three Months Ended September 30,
	2023			2022			Change
	(unaudited)
Revenue	$	3,728,816		$	—		$	3,728,816
Gross Profit		2,184,990			—			2,184,990
Operating expenses:
Research and development		1,671,906			570,935			1,100,971
Selling and marketing		3,069,520			—			3,069,520
General and administrative		1,425,180			257,369			1,167,811
Depreciation and amortization of intangibles		429,477			23,619			405,858
Restructuring charges		726,280			—			726,280
Total operating expenses		7,322,363			851,923			6,470,440
Loss from Operations		(5,137,373	)		(851,923	)		(4,285,450	)
Other (expenses) income, net		(6,327,396	)		(5,215,379	)		(1,112,017	)
Net loss income before taxes	$	(11,464,769	)	$	(6,067,302	)	$	(5,397,467	)

Revenue and Gross Profit

Revenue and gross profit in the 2023 period reflect the commercial activities of AxBio's amnion allograft products acquired in conjunction with the AxBio Acquisition in August 2023. Reported revenue is net of the credit risk service fee paid to its distributor. This expense totaled $368,784 for the three months ended September 30, 2023 and, in accordance with c, was recorded as a reduction of gross sales to arrive at revenue for the period.

Quarterly sales of AxBio's amnion allograft product, decreased by 25% from the average quarterly sales for the first half of 2023. This decrease is being driven by uncertainty relating to Medicare reimbursement for numerous wound healing products, including AxBio’s amnion allograft products. Medicare reimbursements currently make up the majority of the Company's current revenue stream. Management expects continued revenue erosion in the fourth quarter of 2023 due to uncertainty about Medicare reimbursements.

Operating Expenses

Total operating expenses were $7,322,363 and $851,923 for the three months ended September 30, 2023 and 2022, respectively. The increase between periods reflects the inclusion of AxBio's operating expenses of $3,970,179 for the periods subsequent to the close of the AxBio Acquisition. In addition, the higher level of expenses in the 2023 period were a direct result of executing our strategic plan to commercialize our technologies.

Research and developments expenses were $1,671,906 and $570,935 for the three months ended September 30, 2023 and 2022, respectively. This increase of $1,100,971 was principally due to the increase in research and development expenses, including clinical expenses and salaries and benefits of research and development personnel, related to Legacy Carmell’s Bone Healing Accelerant (BHA) product.

Selling and marketing expenses were $3,069,520 and zero for the three months ended September 30, 2023 and 2022, respectively and solely reflect the inclusion of AxBio from August 9, 2023 to period end. The primary costs included in selling and marketing expenses are the fees related to the distribution and marketing services of AxBio's amnion allograft products.

General and administrative expenses were $1,425,180 and $257,399 for the three months ended September 30, 2023 and 2022, respectively. This increase of $1,015,329 was primarily driven by the inclusion of $819,619 of AxBio's general and administrative expenses for periods subsequent to the close of the AxBio Acquisition.

Depreciation and amortization of intangible assets expense was $429,477 for the three months ended September 30, 2023 as compared to $23,619 during the comparable period of 2022. This increase was principally due to the amortization of intangible assets in the 2023 period related to the AxBio Acquisition.

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Restructuring charges of $726,280 for the three months ended September 30, 2023 were related to the post-acquisition integration of AxBio and consists primarily of accrued severance from the termination of employees in non-core areas or overlapping business functions (see Restructuring below).

Other Income (Expenses), Net

Other income (expenses), net were ($6,327,396) for the three months ended September 30, 2023 as compared to ($5,215,379) for the comparable period of 2022. The increase between periods was primarily due to a loss on the Forward Purchase Agreement of $10,592,442) since the Closing Date, partially offset by a decrease in the fair value of derivative liabilities of $4,697,138 and a decrease in interest expense and the amortization of debt discount of $1,094,686, reflecting a lower level of average debt outstanding in the 2023 period. In addition, the 2022 period includes a loss on debt extinguishment of $1,064,692.

Results of Operations for the Nine Months Ended September 30, 2023 and 2022

The following is a comparative discussion of our results of operations for the nine months Ended September 30, 2023 and 2022:

	For the Nine Months Ended September 30,
	2023			2022			Change
	(unaudited)
Revenue	$	3,728,816		$	—		$	3,728,816
Gross Profit		2,184,990			—			2,184,990
Operating expenses:								—
Research and development		3,235,888			1,554,602			1,681,286
Selling and marketing		3,069,520			—			3,069,520
General and administrative		2,573,082			1,094,399			1,478,683
Depreciation and amortization of intangibles		479,848			70,638			409,210
Restructuring charges		726,280			—			726,280
Total operating expenses		10,084,618			2,719,639			7,364,979
Loss from Operations		(7,899,628	)		(2,719,639	)		(5,179,989	)
Other (expenses) income, net		(10,702,808	)		(3,216,475	)		(7,486,333	)
Net loss income before taxes	$	(18,602,436	)	$	(5,936,114	)	$	(12,666,322	)

Revenue and Gross Profit

Revenue and gross profit in the 2023 period reflect the commercial activities of AxBio's amnion allograft products acquired in conjunction with the AxBio Acquisition in August 2023. Reported revenue is net of the credit risk service fee paid to its distributor. This expense totaled $368,784 for the three months ended September 30, 2023 and, in accordance with GAAP, was recorded as a reduction of gross sales to arrive at revenue for the period.

Quarterly sales of AxBio's amnion allograft product, decreased by 25% from the average quarterly sales for the first half of 2023. This decrease is being driven by uncertainty relating to Medicare reimbursement for numerous wound healing products, including AxBio’s amnion allograft products. Medicare reimbursements currently make up the majority of the Company's current revenue stream. Management expects continued revenue erosion in the fourth quarter of 2023 due to uncertainty about Medicare reimbursements.

Operating Expenses

Total operating expenses were $10,084,618 and $2,719,639 for the nine months ended September 30, 2023 and 2022, respectively. The increase between periods reflects the inclusion of AxBio's operating expenses of $3,970,179 for the periods subsequent to the close of the AxBio Acquisition. In addition, the higher level of expenses in the 2023 period were direct result of executing our strategic plan to commercialize our technologies.

Research and developments expenses were $3,235,888 and $1,554,602 for the nine months ended September 30, 2023 and 2022, respectively. This increase was principally due a $1,200,000 increase in clinical expenses and salaries and benefits of research and development personnel, related to Legacy Carmell’s BHA product.

Selling and marketing expenses were $3,069,520 and zero for the nine months ended September 30, 2023 and 2022, respectively and solely reflect the inclusion of AxBio from August 9, 2023 to period end. The primary costs included in selling and marketing expenses are the fees paid by AxBio for distribution and marketing services for is amnion allograft products.

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General and administrative expenses were $2,468,152 and $1,094,399 for the nine months ended September 30, 2023 and 2022, respectively. This increase was primarily driven by the inclusion of $1,300,000 of AxBio's general and administrative expenses for the periods subsequent to the close of the AxBio Acquisition.

Depreciation and amortization of intangible assets expense was $479,852 for the three months ended September 30, 2023 as compared to $70,638 during the comparable period of 2022. This increase was principally due to the amortization of intangible assets in the 2023 period related to the AxBio Acquisition.

Restructuring charges of $726,280 for the nine months ended September 30, 2023 were related to the post-acquisition integration of AxBio and consists primarily of accrued severance from the termination of employees in non-core areas or overlapping business functions (see Restructuring below).

Other Income (Expenses), Net

Other income (expenses), net were ($10,702,808) for the nine months ended September 30, 2023 as compared to ($3,216,475) for the comparable period of 2022. The increase between periods was primarily due to the loss on the Forward Purchase Agreement of ($10,592,442) since the Closing Date, partially offset by a decrease of $418,585 in interest expense and the amortization of debt discount, reflecting a lower level of average debt outstanding in the 2023 period. In addition, the 2022 period includes a loss on debt extinguishment of $1,064,692.

Liquidity, Capital Resources, and Going Concern

As of September 30, 2023, and December 31, 2022 we had cash of $7,968,502 and $128,149 and a working capital deficit of $3,922,004 and $6,689,745, respectively. Since inception and through September 30, 2023, we have financed operations principally through public and private issuances of common stock, preferred stock and warrants and through debt financing. We received $13,530,445 in proceeds from the Business Combination, net of $17,535,632 remitted to Meteora under the Forward Purchase Agreement and net of tax obligations assumed. The Company incurred $1,500,000 of transaction costs, consisting of banking, legal, and other professional fees, which were recorded as a reduction of proceeds to additional paid-in capital.

Due to its current liabilities and other potential liabilities, the cash available to the Company may not be sufficient to allow it to operate for the next 12 months. The Company may need to raise additional capital through equity or debt issuances. 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 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. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Quarterly sales of AxBio's amnion allograft product, decreased by 25% from the average quarterly sales for the first half of 2023. This decrease is being driven by uncertainty relating to Medicare reimbursement for numerous wound healing products, including AxBio’s amnion allograft products. Medicare reimbursements currently make up the majority of the Company's current revenue stream. Management expects continued revenue erosion in the fourth quarter of 2023 due to uncertainty about Medicare reimbursements.

In addition to the restructuring described below, we are actively expanding our distribution channels into hospital systems and national hospital group purchasing organizations. We also plan to launch a line of skin care products in the first quarter of 2024 based on the technologies we have developed through research and development activities.

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with GAAP, which contemplates the continuation of the Company as a going concern, the realization of assets, and the satisfaction of liabilities in the ordinary course of business. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty or that may be necessary should we be unable to continue as a going concern.

As of September 30, 2023, we have had no income from continuing operations, and, before the AxBio Acquisition, we did not have a commercial product or service. The Company has historically relied on raising capital to fund the Company’s operations. While the Company completed the Business Combination and the AxBio Acquisition in July 2023 and August 2023, respectively (see Note 3 to the unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q), we expect to require additional funding in the future by issuing equity securities or obtaining debt financing. There can be no assurance that any required future funding can be successfully completed on a timely basis or terms acceptable to the Company.

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Restructuring

In conjunction with the post-acquisition integration activities related to the AxBio Acquisition during the third quarter of 2023, we have significantly reduced our operating expenses going forward by terminating certain executives serving as part-time consultants and full-time employees in non-core areas or overlapping business. This workforce reduction is expected to result in $2,000,000 to $3,000,000 in annual savings. In addition, we have refocused our research and development efforts on products that have near-term commercial potential and postponed high-cost clinical trial activities on products that have a significantly longer time to commercialize. Management anticipates that these cost savings will assist the Company in extending its cash runway.

Debt

As for September 30, 2023, the Company had outstanding indebtedness with principal totaling $9,364,274 as of September 30, 2023 (Note 9 to the unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q. Holders of the Convertible Notes have demanded additional payment of principal and interest on the Convertible Notes and certain payments with respect to the Convertible Note Warrants, as more fully described in such Note 9 to the unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q. Management of the Company believes that its obligations under the Convertible Notes have been satisfied and that no additional payments are due to the Holders, and the Company has conveyed its position to the Holders. Nevertheless, the Company may be required to make additional payments to such Holders and may incur substantial expenditures in defending against such claims, regardless of whether such claims are successful.

Cash Flows

The following table summarizes our cash flows for the nine months ended September 30, 2023, and 2022:

	Nine Months Ended September 30,
	2023			2022			Change
Net cash used in operating activities	$	(5,203,790	)	$	(1,129,539	)	$	(4,074,251	)
Net cash provided by (used in) investing activities	$	632,527		$	(3,579	)		636,106
Net cash provided by financing activities	$	12,411,616		$	1,131,631			11,279,985

Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2023 increased by $4,074,260 as compared to the same period of 2022. The increase was primarily driven by a higher net loss, an increase in prepaid expenses, and decreases in accounts payable and accrued expenses and other liabilities. These changes were partially offset by decreases in accounts receivable and inventory during the 2023 period.

Investing Activities

Net cash provided by investing activities was $632,527 for the nine months ended September 30, 2023 as compared to and cash used in investing activities of $3,579 for the nine months ended September 30, 2023. In the 2023 period, cash used in investing activities was driven by the $662,997 of cash acquired in the AxBio Acquisition. Purchases of property and equipment was $30,470 during the nine months ended September 30, 2023 as compared to $3,579 in the prior period.

Financing Activities

Net cash provided by financing activities was $12,411,625 for the nine months ended September 30, 2023 as compared to $1,131,631 for the nine months ended September 30, 2022. The increase was primarily due to the proceeds of $31,050,882 from the Business Combination and $2,197,140 in proceeds from the issuance of debt and warrants in the 2023 period, partially offset by the cash transferred in connection with the forward purchase agreement of $17,535,632.

Contingencies

On November 8, 2023, Puritan filed a complaint captioned Puritan Partners LLC v. Carmell Regen Med Corporation et al., No. 655566/2023 (New York Supreme Court, New York County). In the complaint, Puritan asserts that the Company breached its obligations under the Convertible Notes and the Convertible Note Warrants. Puritan also asserts the Company did not timely comply with its obligations to provide Puritan with 25,000 freely tradeable shares. Puritan asserts claims for declaratory judgment, breach of contract, conversion, foreclosure of its security interest, replevin, unjust enrichment, and indemnification, and seeks remedies including damages totaling $2,725,484 through November 1, 2023, additional fees and interest thereafter, costs and attorney’s fees, an order of foreclosure

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on its security interest, and other declaratory relief. The Company rejects the claims in the complaint and intends to defend vigorously against this litigation.

Off-Balance Sheet Arrangements

As of September 30, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Exchange Act.

Contractual Obligations and Commitments

In addition to financing obligations under our debt agreements, our contractual and commercial commitments include expenditures for operating leases and royalty payments. For further information on our license agreement, see Note 8 to the unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.

Emerging Growth Company and Smaller Reporting Company Status

The Jumpstart Our Business Startups Act of 2012 permits an “emerging growth company” to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. Although we qualify as an emerging growth company, we have elected to not “opt out” of this provision and, as a result, we will adopt new or revised accounting standards at the time private companies adopt the new or revised accounting standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.

We are also a “smaller reporting company” meaning that the market value of our stock held by non- affiliates plus the proposed aggregate amount of gross proceeds to us as a result of this offering is expected to be less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company after this offering if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time that we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not required.

Item 4. 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 Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (the “SEC”) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

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 of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2023. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that during the period covered by this report, our disclosure controls and procedures were not effective due to material weaknesses in internal controls over financial reporting related to the accounting for complex financial instruments and completeness of unrecorded liabilities.

Remediation Efforts to Address a Previously Identified Material Weakness in Internal Control over Financial Reporting

As described in Item 9.A Controls and Procedures of our Annual Report on Form 10-K for the year ended December 31, 2022 and in Item 4 Controls and Procedures of the amendment to our Quarterly Report on Form 10-Q/A for the quarter ended September 30, 2021,

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management identified errors in our historical financial statements related to the accounting for the Class A common stock subject to redemption. Because the Class A common stock issued in the IPO can be redeemed or become redeemable subject to the occurrence of future events considered outside of the Company’s control, we should have classified all of these redeemable shares in temporary equity.

Management also identified errors related to the completeness and accuracy of financial data, relating to unrecorded liabilities and deferred offering costs incurred as of the consummation of our IPO.

In addition, errors were identified related to the overallotment liability, which was not recorded in the three months ended September 30, 2021, or in the audited balance sheet as of July 29, 2021, and was corrected in the financial statements as of December 31, 2021 included in our Annual Report on Form 10-K filed with the SEC on April 15, 2022 and in the amendment to our Quarterly Report on Form 10-Q/A for the quarterly period ended September 30, 2021 filed on September 13, 2022.

To address this material weakness, management has devoted, and plans to continue to devote, significant effort and resources to the remediation and improvement of its internal control over financial reporting and to enhance controls and improve internal communications within the Company and its financial reporting advisors. While we have processes to identify and appropriately apply applicable accounting requirements, we enhanced these processes to better evaluate our research and understanding of the nuances of the complex accounting standards that apply to our financial reporting requirements by utilizing the expertise of outside financial reporting advisors to support the Company in evaluating these transactions.

With respect to the material weakness surrounding the completeness and accuracy of liabilities, we implemented additional review procedures to enable the Company to effectively search for and identify material unrecorded liabilities on a timely basis.

We can offer no assurance that these initiatives will ultimately have the intended effects.

Changes in Internal Control Over Financial Reporting

Other than changes that have resulted from the material weakness remediation activities noted above, there has been no change in our internal control over financial reporting, during the most recently completed fiscal quarter, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

Except as disclosed in Note 9 – Debt and Note 14 – Subsequent Events in the Notes to the unaudited condensed consolidated financial statements of the Company, to the knowledge of our management, there is no other litigation currently pending, threatened or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.

Item 1A. Risk Factors.

A description of the risks and uncertainties associated with our business and industry is set forth below. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q, including our unaudited consolidated financial statements and notes thereto and the “Management’s discussion and analysis of financial condition and results of operations” section of this Quarterly Report on Form 10-Q before deciding whether to purchase shares of our common stock. If any of the following risks are realized, our business, financial condition, operating results and prospects could be materially and adversely affected. In that event, the price of our common stock could decline, perhaps significantly. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operation. The following risks and uncertainties include risks related to our business following the completion of the Business Combination.

Summary of Risk Factors

The following is a summary of principal risk to which our business, operations and financial performance are subject. Each of these risks is more fully described in the individual risk factors immediately following this summary.

•We have limited experience as a commercial company and we may not be successful in commercializing our marketed products, our current product candidates or any future product candidates, if and when approved, and we may be unable to generate meaningful product revenue.

•Our commercial success depends upon attaining and maintaining significant market acceptance of our current products, product candidates and future product candidates, if approved, among physicians, patients, healthcare payors and treatment centers.

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•Certain of the products we process are derived from human tissue and therefore have the potential for disease transmission.

•If we cannot successfully address quality issues that may arise with our products, our brand reputation could suffer, and our business, financial condition, and results of operations could be adversely impacted.

•Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.

•We contract with and are dependent upon independent sales agents and distributors.

•Our product candidates are at an early stage of development and may not be successfully developed or commercialized.

•The results of preclinical studies or earlier clinical trials are not necessarily predictive of future results. Our research and development products, including those in clinical trials and those that may advance into clinical trials, may not have favorable results in later clinical trials or receive regulatory approval.

•If the FDA or any other regulatory authorities outside of the United States change the classification of a product candidate, we may be subject to additional regulations or requirements.

•Additional time may be required to obtain regulatory approval for our research and development products because of their status as combination products.

•We have conducted and may in the future conduct clinical trials for current or future product candidates outside the U.S., and the FDA and comparable foreign regulatory authorities may not accept data from such trials.

•We rely on patents and patent applications and various regulatory exclusivities to protect some of our product candidates, and our ability to compete may be limited or eliminated if we are not able to protect our products.

•We cannot be certain we will be able to obtain patent protection to protect our product candidates and technology.

•If we fail to comply with our obligations in the agreements under which we may license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose rights that are important to our business.

•Our intellectual property may not be sufficient to protect our products from competition, which may negatively affect our business as well as limit our partnership or acquisition appeal.

•Our future success is dependent, in part, on the performance and continued service of our officers and directors.

•We may require additional capital to support our growth plans, and such capital may not be available on terms acceptable to us, if at all. This could hamper our growth and adversely affect our business.

•Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.

•We may become involved in litigation that may materially adversely affect us.

•We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

•The current economic downturn may harm our business and results of operations.

•We will need to grow the size of our organization in the future, and we may experience difficulties in managing this growth.

•We expect the price of our common stock may be volatile and may fluctuate substantially.

Risks Related to Commercializing of our Marketed Products, Current Product Candidate and Future Product Candidates, if Approved

We have limited experience as a commercial company and we may not be successful in commercializing our marketed products, our current product candidates or any future product candidates, if and when approved, and we may be unable to generate meaningful product revenue.

We only recently acquired AxBio and in order to successfully commercialize the products we acquired in the AxBio Acquisition, or any of our current product candidates or any future product candidates that may be approved, we must build on our marketing, sales, distribution, managerial and other capabilities or make arrangements with third parties to perform these services, and we may not be successful in doing so.

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Factors that may inhibit our efforts to commercialize our products, our current product candidates or any future product candidates, if approved, include:

•the inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;

•the inability to supply the market with our products, including manufacturing or distribution challenges we may face;

•the availability of adequate coverage by and reimbursement from government and third-party payors; and

•unforeseen costs and expenses associated with creating an independent sales and marketing organization.

If we are unable to successfully market our products, our current product candidates or any future product candidates, if approved, we will not be able to generate operating revenues from such products.

Our commercial success depends upon attaining and maintaining significant market acceptance of our current products, product candidates and future product candidates, if approved, among physicians, patients, healthcare payors and treatment centers.

Our commercial success depends upon maintaining market acceptance of our marketed products and, even if we obtain regulatory approval for our current product candidates or any future product candidates, our products may not gain or maintain market acceptance among physicians, healthcare payors, patients or the medical community, including treatment centers. Market acceptance of any of our current products or product candidates for which we receive approval depends on a number of factors, including:

•efficacy and safety of such products and product candidates as demonstrated in clinical trials;

•the clinical indications and patient populations for which the product or product candidates is approved;

•acceptance by physicians, major treatment centers and patients of the product and product candidates as a safe and effective treatment;

•the potential and perceived advantages of product or product candidates over alternative treatments;

•any restrictions on use together with other medications;

•the prevalence and severity of any side effects;

•unfavorable product labeling or limitations of use by the FDA or comparable regulatory authorities;

•the timing of market introduction of our product or product candidates, if approved, as well as competitive products;

•the development of manufacturing and distribution processes for commercial scale manufacturing for our current products, product candidates and any future product candidates, if approved;

•the cost of treatment in relation to alternative treatments;

•the availability of coverage and adequate reimbursement from third-party payors and government authorities;

•relative convenience and ease of administration; and

•the effectiveness of sales and marketing efforts for our products and product candidates which are granted regulatory approval.

If we do not maintain market acceptance of our marketed products or if our current product candidates and any future product candidates are approved but fail to achieve market acceptance among physicians, patients, healthcare payors or surgery centers, we will not be able to generate operating revenues, which would compromise our ability to become profitable.

Acceptance of our formulations or products in the marketplace is uncertain and failure to achieve market acceptance will prevent or delay our ability to generate revenues.

Our future financial performance will depend, at least in part, upon the introduction and customer acceptance of our products. Even if approved for marketing by the necessary regulatory authorities, our formulations or products may not achieve market acceptance. The degree of market acceptance will depend upon a number of factors, including:

•receipt of regulatory approval of marketing claims for the uses that we are developing;

•establishment and demonstration of the advantages, safety and efficacy of our formulations, products and technologies;

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•pricing and reimbursement policies of government and third-party payers such as insurance companies, health maintenance organizations and other health plan administrators;

•Our ability to attract corporate partners, including medical device, biotechnology and pharmaceutical companies, to assist in commercializing our proposed products; and

•Our ability to market our products and product candidates, if approved.

Physicians, patients, payers or the medical community in general may be unwilling to accept, utilize or recommend any of our products, proposed formulations or product candidates, if approved. If we are unable to obtain regulatory approval, commercialize and market our proposed formulations or product candidates when planned, we may not achieve any market acceptance or generate revenue.

Our products and product candidates, if approved, may become subject to unfavorable pricing regulations or third-party coverage and reimbursement policies, which would harm our business.

In the United States and in other countries, patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. We believe our success depends on obtaining and maintaining coverage and adequate reimbursement for our products and product candidates, if approved, and the extent to which patients will be willing to pay out-of-pocket for such products. For further discussion on coverage and reimbursement, see the section titled “Business Overview - Government Regulation - Coverage and Reimbursement” in our proxy statement/prospectus filed with the SEC on June 23, 2023.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products and coverage may be more limited than the purposes for which the medicine is approved by the FDA or comparable foreign regulatory authorities. In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services (“CMS”), an agency within the U.S. Department of Health and Human Services. CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare and private payors tend to follow CMS to a substantial degree. Factors payors consider in determining reimbursement are based on whether the product is:

•a covered benefit under its health plan;

•safe, effective and medically necessary;

•appropriate for the specific patient;

•cost-effective; and neither experimental nor investigational.

There can be no assurance that any of our products or product candidates, if approved for sale in the United States or in other countries, will be considered medically reasonable and necessary and/or cost-effective by third-party payors, that coverage or an adequate level of reimbursement will be available or that reimbursement policies and practices in the United States and in foreign countries where our products are sold will not adversely affect our ability to sell our products or product candidates profitably, even if they are approved for sale.

We are unable to predict what changes will be made to the reimbursement methodologies used by third-party payers in the future. As a result of the continuing evaluation and assessment of these expected payments, our estimates for expected payments could change. We cannot be sure that reimbursement will be available for any product that we commercialize and, if reimbursement is available, the level of such reimbursement. Reimbursement may impact the demand for, or the price of, any product or product candidates for which we obtain marketing approval. Adequate third-party reimbursement might not be available to enable us to maintain price levels sufficient to realize an appropriate return on investment in our products and future product development. If reimbursement is not available or is available only at limited levels, our ability to successfully commercialize any product or product candidates for which we obtain marketing approval may be adversely affected.

In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the European Union provides options for its Member States to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost effectiveness of a particular product candidate to currently available therapies. A Member State may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our product candidates. Historically, products launched in the European Union do not follow price structures of the U.S. and generally prices tend to be significantly lower.

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Tissue-based products are regulated differently in different countries. These requirements may be costly and result in delay or otherwise preclude the distribution of our products in some foreign countries, any of which would adversely affect our ability to generate operating revenues.

Tissue-based products are regulated differently in different countries. Many foreign jurisdictions have a different, and potentially more difficult, regulatory pathway for human tissue-based products, which may prohibit the distribution of these products until the applicable regulatory agencies grant marketing approval, or licensure. The process of obtaining regulatory approval is lengthy, expensive and uncertain, and we may never seek such approvals, or if we do, we may never gain those approvals. Furthermore, any adverse events in our clinical trials could negatively impact our products and product candidates.

Certain of the products we process are derived from human tissue and therefore have the potential for disease transmission.

The utilization of human tissue creates the potential for transmission of communicable disease, including, without limitation, human immunodeficiency virus, viral hepatitis, syphilis and other viral, fungal or bacterial pathogens. We are required to comply with federal and state regulations intended to prevent communicable disease transmission.

We maintain strict quality controls designed in accordance with cGTP to ensure the safe procurement and processing of our tissue, including terminal sterilization of our products. These controls are intended to prevent the transmission of communicable disease. However, risks exist with any human tissue implantation. In addition, negative publicity concerning disease transmission from other companies’ improperly processed donated tissue could have a negative impact on the demand for our products and adversely affect our business, financial condition and results of operations.

If we cannot successfully address quality issues that may arise with our products, our brand reputation could suffer, and our business, financial condition, and results of operations could be adversely impacted.

In the course of conducting our business, we must adequately address quality issues that may arise with our products, as well as defects in third-party components included in our products, as any quality issues or defects may negatively impact physician use of our products. Although we have established internal procedures to minimize risks that may arise from quality issues, we may not be able to eliminate or mitigate occurrences of these issues and associated liabilities. If the quality of our products does not meet the expectations of physicians or patients, then our brand reputation could suffer and our business could be adversely impacted. We must also ensure any promotional claims made for our products comport with government regulations.

We may implement a product recall or voluntary market withdrawal, which could significantly increase our costs, damage our reputation, disrupt our business and adversely affect our business, results of operations and financial condition.

The processing and marketing of our tissue products involves an inherent risk that our tissue products or processes may not meet applicable quality standards and requirements. In the event that one or more of our products experiences a failure to meet such standards and requirements, we may voluntarily implement a recall or market withdrawal or may be required to do so by a regulatory authority.

A recall or market withdrawal of one of our products could be costly and may divert management resources. A recall or withdrawal of one of our products, or a similar product processed by another entity, also could impair sales of our products as a result of confusion concerning the scope of the recall or withdrawal, or as a result of the damage to our reputation for quality and safety.

Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.

We face an inherent risk of product liability exposure related to the testing of our current product candidates or future product candidates in human clinical trials and will face an even greater risk if we commercially sell any product candidates that we may develop and for which we receive approval. Product liability claims may be brought against us by subjects enrolled in our clinical trials, patients, healthcare providers or others using, administering or selling our product. If we cannot successfully defend ourselves against claims that our product candidates or product caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

•decreased demand for any product candidates that we may develop and for which we receive approval;

•termination of clinical trial sites or entire clinical trial programs;

•injury to our reputation and significant negative media attention;

•withdrawal of clinical trial participants;

•significant costs to defend the related litigation;

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•substantial monetary awards to trial subjects or patients;

•loss of revenue;

•diversion of management and scientific resources from our business operations; and

•the inability to commercialize any product candidates that we may develop and for which we receive approval.

Prior to engaging in future clinical trials, we intend to obtain product liability insurance coverage at a level that we believe is customary for similarly situated companies and adequate to provide us with insurance coverage for foreseeable risks; however, we may be unable to obtain such coverage at a reasonable cost, if at all. If we are able to obtain product liability insurance, we may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise and such insurance may not be adequate to cover all liabilities that we may incur. Furthermore, we intend to expand our insurance coverage for products to include the sale of commercial products if we obtain regulatory approval for our product candidates in development, but we may be unable to obtain commercially reasonable product liability insurance for any products that receive regulatory approval. Large judgments have been awarded in class action lawsuits based on devices that had unanticipated side effects. A successful product liability claim or series of claims brought against us, particularly if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.

In addition, our business exposes us to the risk of product liability claims that are inherent in the manufacturing, processing and marketing of human tissue products. We may be subject to such claims if our products cause, or appear to have caused, an injury. Claims may be made by patients, healthcare providers or others selling our products. Product liability claims can be expensive to defend (regardless of merit), divert our management’s attention, result in substantial damage awards against us, harm our reputation, and generate adverse publicity, which could result in the withdrawal of, or reduced acceptance of, our products in the market.

To be commercially successful, we must educate physicians, where appropriate, how and when our products are proper alternatives to existing treatments and that our products should be used in their procedures.

We believe physicians will only use our products if they determine, based on their independent medical judgment and experience, clinical data, and published peer reviewed journal articles, that the use of our products in a particular procedure is a favorable alternative to other treatments. Physicians may be hesitant to change their existing medical treatment practices for the following reasons, among others:

•their lack of experience with advanced therapeutics, such as our products;

•lack of evidence supporting additional patient benefits of advanced therapeutics, such as our products, over conventional methods in certain therapeutic applications;

•perceived liability risks generally associated with the use of new products and procedures;

•limited availability of reimbursement from third-party payers;

•more favorable reimbursement for other market-available products; and

•the time that must be dedicated to physician training in the use of our products.

If we do not manage inventory in an effective and efficient manner, it could adversely affect our results of operations.

Many factors affect the efficient use and planning of inventory of certain components and other materials used in our manufacturing processes to manufacture our marketed products, such as effectiveness of predicting demand, effectiveness of preparing manufacturing to meet demand, efficiently meeting product demand requirements and expiration of materials in inventory. We may be unable to manage our inventory efficiently, keep inventory within expected budget goals, keep inventory on hand or manage it efficiently, control expired inventory or keep sufficient inventory of materials to meet product demand due to our dependence on third-party suppliers. Finally, we cannot provide assurances that we can keep inventory costs within our target levels. Failure to do so may harm our long-term growth prospects.

The price and sale of any of our products may be limited by health insurance coverage and government regulation.

Maintaining and growing sales of our products will depend in large part on the availability of adequate coverage and the extent to which third-party payers, including health insurance companies, health maintenance organizations, and government health administration authorities such as the military, Medicare and Medicaid, private insurance plans and managed care programs will pay for the cost of the products and related treatment.

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Many private payers in the U.S. use coverage decisions and payment amounts determined by the CMS, as guidelines in setting their coverage and reimbursement policies. Future action by CMS or other government agencies, including the imposition of coverage and reimbursement limitations, may diminish payments to physicians, outpatient centers and/or hospitals for covered services. Additionally, payers may require us to conduct post-marketing studies in order to demonstrate the cost-effectiveness of our products and current and future product candidates to such payers’ satisfaction. Such studies might require us to commit a significant amount of management time and financial and other resources. Our products and future products might not ultimately be considered cost-effective. As a result, we cannot be certain that the procedures performed with our products will be reimbursed at a cost-effective level or reimbursed at all. Furthermore, the healthcare industry in the U.S. has experienced a trend toward cost containment as government and private insurers seek to control healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Increasingly, third-party payers have attempted to control costs by challenging the prices charged for medical products. Therefore, we cannot be certain that our products will be reimbursed at a cost-effective level. Nor can we be certain that third-party payers using a methodology that sets amounts based on the type of procedure performed, such as those utilized in many privately managed care systems and by Medicare, will view the cost of our products as justified so as to incorporate such costs into the overall cost of the procedure.

We contract with and are dependent upon independent sales agents and distributors.

We contract with independent sales agents and distributors for the sale and distribution of our products. If our relationships with our independent sales agents were terminated for any reason, it could materially and adversely affect our revenues and profits. Because the independent agent often controls the customer relationships within its territory, there is a risk that if our relationship with the agent ends, our relationship with the customer will be lost.

Because our agents and distributors are not employees, there is a risk we will be unable to ensure that our sales processes, compliance safeguards, and related policies will be adhered to despite our communication and training of agents and distributors regarding these requirements. Furthermore, if we fail to maintain relationships with our key independent agents, or fail to ensure that our independent agents adhere to our sales processes, compliance safeguards and related policies, there could be an adverse effect on our business, results of operations, and financial condition.

We may obtain the assistance of additional distributors and independent sales representatives to sell products in certain sales channels, particularly in territories and fields where agents are commonly used. Our success is partially dependent upon our ability to train, retain and motivate our independent sales agencies, distributors, and their representatives to appropriately and compliantly sell our products in certain territories or fields. They may not be successful in implementing our marketing plans or compliance safeguards. Some of our independent sales agencies and distributors do not sell our products exclusively and may offer similar products from other companies. Our independent sales agencies and distributors may terminate their contracts with us, may devote insufficient sales efforts to our products or may focus their sales efforts on other products that produce greater commissions for them, which could have an adverse effect on our business, results of operations and financial condition. We also may not be able to find additional independent sales agencies and distributors who will agree to appropriately and compliantly market or distribute our products on commercially reasonable terms, if at all. If we are unable to establish new independent sales representative and distribution relationships or renew current sales agency and distribution agreements on commercially acceptable terms, our business, financial condition, and results of operations could be materially and adversely affected.

Inadequate funding for the FDA, the SEC and other government agencies, including from government shut downs, or other disruptions to these agencies’ operations, could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, the ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities, is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new product candidates to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

We will need substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

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We expect to devote substantial financial resources to our ongoing and planned activities, particularly in our research and development pipeline as we continue research and development on new and existing products, initiate additional clinical trials of, and seek regulatory approval for, these and other product candidates, as applicable. We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance our preclinical activities and clinical trials. In addition, if we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. Given current uncertainty in the capital markets and other factors, such funding may not be available on terms favorable to us or at all. If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.

Disputes may also arise between us and our investors or lenders. Such disputes may result in expensive arbitration, litigation or other dispute resolution, which may not be resolved in our favor and may adversely impact our financial condition. For example, on the closing of the Business Combination, the Company repaid $2,649,873 to the Holders, which represented the original principal amount of the Convertible Notes plus accrued interest at a rate of 25%, which the Company believes is the maximum rate permissible under New York State usury laws. In addition, the Company issued Puritan 25,000 shares of freely tradeable common stock. Following the closing of the Business Combination, both Holders have provided notice to the Company demanding additional payment of principal and interest on the Convertible Notes, in approximate amount of $600,000 per each Holder at the closing of the Business Combination with additional interest thereon. In the case of Puritan, following the Business Combination, Puritan alleged that the Business Combination constituted a “Fundamental Transaction” under the terms of the Convertible Note Warrants, resulting in a purported right for Puritan to require the Company to repurchase such Convertible Note Warrants at a purchase price equal to the Black-Scholes Value of the unexercised portion of such Convertible Note Warrants as of the closing of the Business Combination. Puritan calculated the cash amount of such repurchase to be $1,914,123. The Company believes that this calculation is inaccurate. In the case of the other Holder, that Holder demanded to be provided its share of the Convertible Note Warrants. Puritan has also asserted damages in connection with the timing of the issuance to it of 25,000 shares of freely tradeable common stock. The Company believes that it provided freely tradeable shares to Puritan at the same time as other public shareholders. Puritan’s total claims inclusive of the amounts paid at Closing Date exceed $4,050,000 in connection with a loan for which the Company received $1,000,000. Management of the Company believes that its obligations under the Convertible Notes and Convertible Note Warrants have been satisfied and that no additional payments are due to the Holders, and the Company has conveyed its position to the Holders. There can be no assurance that these or similar matters will not result in expensive arbitration, litigation or other dispute resolution, including but not limited to in the litigation filed by Puritan, which may not be resolved in our favor and may adversely impact our financial condition.

Risks Related to the Development and Regulatory Approval of our Product Candidates

Our product candidates are at an early stage of development and may not be successfully developed or commercialized.

Our product candidates are in the early stage of development and will require substantial further capital expenditures, development, testing and regulatory approval prior to commercialization. The development and regulatory approval process takes many years, and it is not likely that our product candidates, technologies or processes, even if successfully developed and approved by the FDA, would be commercially available for five or more years. Of the large number of product candidates in development, only a small percentage successfully complete the FDA regulatory approval process and are commercialized. Accordingly, even if we are able to obtain the requisite financing to fund our development programs, we cannot assure you that our product candidates will be successfully developed or commercialized, if approved. Our failure to develop, manufacture or receive regulatory approval for or successfully commercialize any of our product candidates, could result in the failure of our business and a loss of all of your investment in our company.

Any product candidates advanced into clinical development are subject to extensive regulation, which can be costly and time consuming, cause unanticipated delays or prevent the receipt of the required approvals to commercialize such product candidates, if approved.

The clinical development, manufacturing, labeling, storage, record-keeping, advertising, promotion, import, export, marketing and distribution of our product candidates and commercialization, if approved, are subject to extensive regulation by the FDA in the U.S. and by comparable health authorities in foreign markets. In the U.S., we may not market our product candidates until we receive approval of our Biologics License Application (“BLA”) from the FDA. The process of obtaining regulatory approval is expensive, often takes many years and can vary substantially based upon the type, complexity and novelty of the product candidate involved. In addition to the significant clinical testing requirements, our ability to obtain marketing approval for these product candidates depends on obtaining the final results of required non-clinical testing, including characterization of the manufactured components of our product candidates and validation of our manufacturing processes. The FDA may determine that our product manufacturing processes, testing procedures or facilities are insufficient to justify approval. Approval policies or regulations may change and the FDA has substantial discretion in the approval process, including the ability to delay, limit or deny approval of a product candidate for many reasons. Despite the time and expense invested in clinical development of product candidates, regulatory approval is never guaranteed.

•The FDA or comparable foreign regulatory authorities may disagree with the design or implementation of clinical trials;

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•we may be unable to demonstrate to the satisfaction of the FDA that a product candidate is safe and effective for any indication;

•the FDA may not accept clinical data from trials which are conducted by individual investigators or in countries where the standard of care is potentially different from the U.S.;

•the results of clinical trials may not meet the level of statistical significance required by the FDA for approval;

•we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;

•the FDA may disagree with our interpretation of data from preclinical studies or clinical trials;

•the FDA may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we or our collaborators contract for clinical and commercial supplies; or

•the approval policies or regulations of the FDA may significantly change in a manner rendering our preclinical studies or clinical data insufficient for approval.

With respect to foreign markets, approval procedures vary among countries and, in addition to the aforementioned risks, can involve additional product testing, administrative review periods and agreements with pricing authorities. Any delay in obtaining, or inability to obtain, applicable regulatory approvals could prevent us from commercializing our product candidates. Specifically, Carmell plans to submit for a CE Mark approval in the European Union, which may or may not be successful. The new Medical Devices Regulation (Regulation (EU) 2017/745) in the European Union (“EU MDR”) became applicable in the European Union on May 26, 2021 and may make approval times longer and standards more difficult to pass, given the new Regulation imposes more stringent requirements in respect of device safety and clinical evaluation. Any delay in obtaining, or inability to obtain, applicable regulatory approvals could prevent us from commercializing our product candidates, if approved. In addition, our Notified Body is experiencing significant EU MDR-related delays, which has significantly limited our ability to interact and work with our Notified Body. It is not known when these delays will be resolved, and this could significantly delay any potential EU CE Mark approvals.

Delays in the commencement of clinical trials could result in increased costs and delay our ability to pursue regulatory approval.

The commencement of clinical trials can be delayed for a variety of reasons, including delays in:

•obtaining regulatory clearance to commence a clinical trial;

•identifying, recruiting and training suitable clinical investigators;

•reaching agreement on acceptable terms with prospective clinical research organizations, and trial sites, the terms of which can be subject to extensive negotiation, may be subject to modification from time to time and may vary significantly among different clinical research organizations and trial sites;

•obtaining sufficient quantities of a product candidate for use in clinical trials;

•obtaining an IRB or ethics committee approval to conduct a clinical trial at a prospective site; and

•identifying, recruiting and enrolling patients to participate in a clinical trial; retaining patients who have initiated a clinical trial but may withdraw due to adverse events from the therapy, insufficient efficacy, fatigue with the clinical trial process or other issues.

Any delays in the commencement of clinical trials will delay our ability to pursue regulatory approval for our product candidates. In addition, many of the factors that cause, or lead to, a delay in the commencement of clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate.

Suspensions or delays in the completion of clinical testing could result in increased costs to us and delay or prevent our ability to complete development of that product candidate or generate product revenues from commercialization if approved.

Once a clinical trial has begun, patient recruitment and enrollment may be slower than we anticipate. Clinical trials may also be delayed as a result of ambiguous or negative interim results or difficulties in obtaining sufficient quantities of product manufactured in accordance with regulatory requirements. Further, a clinical trial may be modified, suspended or terminated by us, an IRB, an ethics committee or a data safety monitoring committee overseeing the clinical trial, any clinical trial site with respect to that site, or the FDA or other regulatory authorities due to a number of factors, including:

•failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;

•inspection of the clinical trial operations or clinical trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;

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•stopping rules contained in the protocol;

•unforeseen safety issues or any determination that the clinical trial presents unacceptable health risks;

•lack of adequate funding to continue the clinical trial;

•changes in regulatory requirements; and/or

•advances in medicine and science.

In addition, FDA may not agree that information submitted to our IND is sufficient to support our planned clinical development and may impose a clinical hold. The FDA may require us to conduct additional preclinical studies or make other changes, which could delay development of our product candidates. For example, for our Bone Healing Accelerant (“BHA”) program, FDA has indicated that we must resolve certain chemistry, manufacturing, and controls (“CMC”) comments from the FDA prior to submitting protocols to initiate clinical studies intended to provide the primary evidence of effectiveness to support a marketing authorization. Our inability to resolve these comments from the FDA, or to provide the information needed to support initiation of pivotal trials, could impact our ability to advance our lead candidate through the regulatory approval process. Additionally, changes in the current regulatory requirements and guidance also may occur, and we may need to amend clinical trial protocols to reflect these changes. Amendments may require us to resubmit clinical trial protocols to IRBs for re-examination, which may impact the costs, timing and the likelihood of a successful completion of a clinical trial. If we experience delays in the completion of, or if we must suspend or terminate, any clinical trial of any product candidate, our ability to obtain regulatory approval for that product candidate will be delayed and the commercial prospects, if any, for the product candidate may suffer as a result. In addition, many of these factors may also ultimately lead to the denial of regulatory approval of a product candidate.

We may expend our limited resources to pursue a particular product candidate or multiple product candidates and indications and fail to capitalize on product candidates or indications for which there may be a greater likelihood of success.

We are pursuing multiple programs in aesthetics in addition to our BHA and Tissue Healing Accelerant (“THA”) research and development products, for which we have not yet initiated any clinical studies. As a result, we may forego or delay pursuit of opportunities with other product candidates or, for other indications for which there may be a greater likelihood of success or may prove to have greater commercial potential. Notwithstanding our investment to date and anticipated future expenditures, we may never successfully develop, any marketed treatments using these products. Research programs to identify new product candidates or pursue alternative indications for current product candidates require substantial technical, financial and administrative support.

Also, pursuing more than one program at a time, may cause the company to deplete the necessary resources to finalize the necessary work on the lead program, BHA, for severe tibia fractures. As all of the programs that we envision pursuing are costly, time consuming and have inherent regulatory risks, pursing more than one program at any time may dilute our resources, both human and financial.

Our research and development activities could be affected or delayed as a result of possible restrictions on animal testing.

Certain laws and regulations require us to test our product candidates on animals before initiating clinical trials involving humans. Animal testing activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals have attempted to stop animal testing activities by pressing for legislation and regulation in these areas and by disrupting these activities through protests and other means. To the extent the activities of these groups are successful, our research and development activities may be interrupted, delayed or become more expensive.

We may find it difficult to enroll patients in our clinical trials which could delay or prevent the start of clinical trials for our product candidates.

Identifying and qualifying patients to participate in clinical trials of BHA, is key to our success. The timing of our clinical trials depends in part on the rate at which we can recruit patients to participate in clinical trials of our product candidates, and we may experience delays in our clinical trials if we encounter difficulties in enrollment. If we experience delays in our clinical trials, the timeline for obtaining regulatory approval of our product candidates will most likely be delayed.

Many factors may affect our ability to identify, enroll and maintain qualified patients, including the following:

•eligibility criteria of our ongoing and planned clinical trials with specific characteristics appropriate for inclusion in our clinical trials;

•design of the clinical trial;

•size and nature of the patient population;

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•patients’ perceptions as to risks and benefits of the product candidates under study and the participation in a clinical trial generally in relation to other available therapies;

•the availability and efficacy of competing therapies and clinical trials;

•pendency of other trials underway in the same patient population;

•willingness of physicians to participate in our planned clinical trials;

•severity of the disease or intended use under investigation;

•proximity of patients to clinical sites;

•patients who do not complete the trials for personal reasons; and

•issues with Contract Research Organizations (“CROs”), clinical trial investigators, IRBs, and/or with other vendors that may be involved in our clinical trials.

We may not be able to initiate or continue to support clinical trials of our product candidates, for one or more applications, or any future product candidates if we are unable to locate and enroll a sufficient number of eligible participants in these trials as required by the FDA or other regulatory authorities. For example, we plan to pursue a clinical study of BHA in different anatomical locations, evaluating different fractures and fusion sites (such as foot/ankle fusion), as we anticipate that it may be difficult to locate and enroll patients with tibial fractures, who are the target patient population of our planned HEAL II study. Even if we are able to enroll a sufficient number of patients in our clinical trials, if the pace of enrollment is slower than we expect, the development costs for our product candidates may increase and the completion of our trials may be delayed or our trials could become too expensive to complete.

If we experience delays in the completion of, or termination of, any clinical trials of our product candidates, the commercial prospects of our product candidates could be harmed, and our ability to generate product revenue from any of our product candidates, if approved, could be delayed or prevented. In addition, any delays in completing our clinical trials would likely increase our overall costs, impair product candidates development and jeopardize our ability to obtain regulatory approval relative to our current plans. Any of these occurrences may harm our business, financial condition, and prospects significantly.

The results of preclinical studies or earlier clinical trials are not necessarily predictive of future results. Our research and development candidates in clinical trials, and any other product candidates that may advance into clinical trials, may not have favorable results in later clinical trials or receive regulatory approval.

Success in preclinical studies and early clinical trials does not ensure that later clinical trials will generate adequate data to demonstrate the efficacy and safety of a product candidate. A number of companies in the pharmaceutical and biotechnology industries, including those with greater resources and experience than us, have suffered significant setbacks in clinical trials, even after seeing promising results in earlier preclinical studies or clinical trials.

Despite the results reported in earlier preclinical studies or clinical trials for our product candidates, we do not know whether the clinical trials we may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market our product candidates for a particular indication, in any particular jurisdiction. Efficacy data from prospectively designed trials may differ significantly from those obtained from retrospective subgroup analyses. We have only conducted one early-stage clinical trial with our BHA candidate, which was not powered for statistical significance. In order for the results of a clinical trial to be reliable, the clinical trial must be sufficiently powered to detect valid statistical differences. If later-stage appropriately powered clinical trials do not produce favorable results, our ability to achieve regulatory approval for our product candidates may be adversely impacted. Even if we believe that we have adequate data to support an application for regulatory approval to market our current product candidates or any future product candidates, the FDA or other regulatory authorities may not agree and may require that we conduct additional preclinical testing or clinical trials.

Our product candidates or future product candidates may cause undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval, limit their commercial potential, or result in significant negative consequences.

Adverse events or other undesirable side effects caused by our product candidates or future product candidates could cause us or regulatory authorities to interrupt, delay, or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by regulatory authorities. Side effects related to a drug or biologic could affect patient recruitment, the ability of enrolled patients to complete the study, and/or result in potential product liability claims. Moreover, even though we believe our product candidates may have a favorable tolerability profile when compared to currently approved products, regulatory authorities may not agree. For example, in the single clinical trial we have completed with BHA, we reported a lower rate of infections among patients in the treatment group than in the control group. However, FDA noted that the rates of infection in the control group observed during our

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trial were much higher than what has been observed in clinical practice and published literature, and we will need to closely monitor infection rates during our planned clinical trials of BHA.

Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects or adverse events caused by such products or the severity and prevalence is greater than anticipated, a number of potentially significant negative consequences could result.

Regulatory authorities may withdraw approvals of such products or impose restrictions on distribution. They may require additional warnings or contraindications on the product label that could diminish the usage or otherwise limit the commercial success of the product. We may be required to change the way the product is administered, conduct additional clinical trials or post-approval studies. We may be forced to suspend marketing of the product or required to create a Risk Evaluation and Mitigation Strategy (“REMS”). In addition, our reputation may suffer. Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations, and prospects.

Fast track designation by the FDA or any future designations may not lead to a faster development, regulatory review or approval process and it does not increase the likelihood that any of our product candidates will receive marketing approval.

We have received fast track designation for BHA to accelerate bone healing when used as an adjunct for treating acute Gustilo-Anderson Type IIIA or IIIB open tibia fractures that have been stabilized with mechanical fixation after appropriate wound management. We may, in the future, apply for additional fast track designations or other expedited programs from the FDA (such as breakthrough therapy or accelerated approval). Designation for these programs is within the discretion of the FDA. Accordingly, even if we believe a product candidate meets the criteria for such designation, the FDA may disagree. In any event, the receipt of a designation may not result in a faster development process, review or approval compared to products considered for approval under conventional FDA procedures and, in any event, does not assure ultimate approval by the FDA. In addition, even though our BHA product candidate has received fast track designation, the FDA may later decide that it no longer meets the criteria for designation and revoke it. If we apply for designation to additional accelerated programs or fast track designation for future product candidates, the FDA might not grant the designation. Any of the above could adversely affect our business, financial condition and results of operations.

If the FDA or any other regulatory authorities outside of the United States change the classification of a product candidate, we may be subject to additional regulations or requirements.

BHA has been classified by the FDA as a biologic/device combination product, containing the Company’s core technology of PBM plus ß Tri-Calcium Phosphate (“ß-TCP”). BHA has been assigned to the Center for Biologics Evaluation and Research (“CBER”) as the lead agency center for review and regulation, and we plan to complete studies to support a BLA as the basis for marketing authorization. If the FDA determines that BHA or another product candidate should be classified as a different type of product, we may be subject to additional regulations and requirements.

In the European Union, we intend to pursue a CE Mark for BHA under the EU MDR with an anticipated label as a bone void filler. We have not sought or received advice from the EMA on whether the BHA is classified as a medical device or biological product. If the EMA determines that BHA should be classified as a biological product, we may be subject to the more stringent European Union pharmaceutical regulations and requirements.

Additional time may be required to obtain regulatory approval for our research and development product candidates because of their status as combination products.

BHA is a biologic-device combination product that requires coordination within the FDA and comparable foreign regulatory authorities for review of its device and biologic components, and our future product candidates may similarly be regulated as combination products. Although the FDA and comparable foreign regulatory authorities have systems in place for the review and approval of combination products such as ours, we may experience delays in the development and commercialization of our product candidates due to regulatory timing constraints and uncertainties in the product development and approval process. Of note, prior clearance or approval of one component of a combination product does not increase the likelihood that FDA will approve a later product combining the previously cleared product or approved active ingredient with a novel active ingredient.

Risks associated with operating in foreign countries could materially adversely affect our product development.

We have previously conducted a clinical study outside the U.S. and may conduct future studies in countries outside of the U.S. Consequently, we may be subject to risks related to operating in foreign countries. Risks associated with conducting operations in foreign countries include:

•differing regulatory requirements for conducting clinical trials and obtaining regulatory approvals;

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•more stringent privacy requirements for data to be supplied to our operations in the U.S., (e.g., General Data Protection Regulation in the European Union);

•unexpected changes in tariffs, trade barriers and regulatory requirements;

•economic weakness, including inflation, or political instability in particular foreign economies and markets;

•compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

•foreign taxes, including withholding of payroll taxes;

•differing payor reimbursement regimes, governmental payors or patient self-pay systems and price controls;

•foreign currency fluctuations, which could result in increased operating expenses or reduced revenues, and other obligations incident to doing business or operating in another country;

•workforce uncertainty in countries where labor unrest is more common than in the U.S.;

•production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

•business interruptions resulting from geopolitical actions, including war and terrorism, and as a result of the ongoing COVID-19 pandemic and the efforts to mitigate it.

We have conducted and may in the future conduct clinical trials for current or future product candidates outside the U.S., and the FDA and comparable foreign regulatory authorities may not accept data from such trials.

Our only clinical study completed to date was conducted outside the U.S., in South Africa, and while we plan to conduct our next clinical trial primarily in the U.S., we may also conduct future clinical trials outside the U.S. The acceptance of study data from clinical trials conducted outside the U.S. or another jurisdiction by the FDA or comparable foreign regulatory authority may be subject to certain conditions or may not be accepted at all. In cases where data from foreign clinical trials are intended to serve as the sole basis for marketing approval in the U.S., the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the U.S. population and U.S. medical practice; (ii) the trials were performed by clinical investigators of recognized competence and pursuant to Good Clinical Practice (“GCP”) regulations; and (iii) the data may be considered valid without the need for an on-site inspection by the FDA, or if the FDA considers such inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means. In addition, even where the foreign study data are not intended to serve as the sole basis for approval, the FDA will not accept the data as support for an application for marketing approval unless the study is well-designed and well-conducted in accordance with GCP and the FDA is able to validate the data from the study through an onsite inspection if deemed necessary. Many foreign regulatory authorities have similar approval requirements. In addition, such foreign trials would be subject to the applicable local laws of the foreign jurisdictions where the trials are conducted. There can be no assurance that the FDA or any comparable foreign regulatory authority will accept data from trials conducted outside of the U.S. or the applicable jurisdiction. If the FDA or any comparable foreign regulatory authority does not accept such data, it would result in the need for additional trials, which could be costly and time-consuming, and which may result in current or future product candidates that we may develop not receiving approval for commercialization in the applicable jurisdiction.

Failure to obtain regulatory approval in international jurisdictions would prevent our product candidates from being marketed abroad.

In addition to regulations in the U.S., to market and sell our product candidates in the European Union, United Kingdom, many Asian countries and other jurisdictions, we must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the U.S. does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. The regulatory approval process outside the U.S. generally includes all of the risks associated with obtaining FDA approval as well as risks attributable to the satisfaction of local regulations in foreign jurisdictions. The approval procedure varies among countries and can involve additional testing, and regulatory authorities outside the U.S. may not agree with the FDA’s determination of the primary mode of action and regulatory classification of our product candidates, which may result in additional clinical trials, or additional work on our part to comply with other regulatory standards. The time required to obtain approval outside the U.S. may differ substantially from that required to obtain FDA approval. We may not be able to obtain approvals from regulatory authorities outside the U.S. on a timely basis, if at all. Clinical trials accepted in one country may not be accepted by regulatory authorities in other countries. In addition, many countries outside the U.S. require that a product be approved for reimbursement before it can be approved for sale in that country. A product candidate that has been approved for sale in a particular country may not receive reimbursement approval in that country.

We may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our product candidates in any market. If we are unable to obtain approval of any of our current product candidates or any future product candidates we may pursue by regulatory authorities in the European Union, United Kingdom, Asia or elsewhere, the commercial prospects of that product

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candidate may be significantly diminished, our business prospects could decline and this could materially adversely affect our business, results of operations and financial condition.

Even if our current product candidates received regulatory approval, they may still face future development and regulatory difficulties.

Even if we obtain regulatory approval for our product candidates, that approval would be subject to ongoing requirements by the FDA and comparable foreign regulatory authorities governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, adverse event reporting, safety surveillance, import, export, advertising, promotion, recordkeeping and reporting of safety and other post-marketing information. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance by us and/or our Contract Manufacturing Organizations (“CMOs”), and CROs or clinical trial investigators for any post-approval clinical trials that we may conduct. The safety profile of any product candidate, if approved, will continue to be closely monitored by the FDA and comparable foreign regulatory authorities after approval. If the FDA or comparable foreign regulatory authorities become aware of new safety information after approval of our product candidates, they may require labeling changes or establishment of a REMS, impose significant restrictions on such product’s indicated uses or marketing or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance.

In addition, manufacturers of drugs, biologics, devices and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with Current Good Manufacturing Practice (“cGMPs”), GCP, and other regulations. If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. If we fail to comply with applicable regulatory requirements, a regulatory agency may:

•issue Form FDA 483s, warning letters or untitled letters;

•mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners and payors;

•require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance;

•seek an injunction or impose civil or criminal penalties or monetary fines;

•suspend or withdraw regulatory approval;

•suspend any ongoing clinical trials;

•refuse to approve pending applications or supplements to applications filed by us;

•suspend or impose restrictions on operations, including costly new manufacturing requirements; or

•seize or detain products, refuse to permit the import or export of products, or require us to initiate a product recall.

The occurrence of any event or penalty described above may inhibit our ability to successfully commercialize our product candidates, if approved, and generate revenues.

Advertising and promotion of any product candidate that obtains approval in the U.S. is heavily scrutinized by the FDA, the Department of Justice, the Office of Inspector General of Health and Human Services, state attorneys general, members of Congress and the public. A company can make only those claims relating to safety and efficacy, purity and potency that are consistent with the FDA approved label. Additionally, advertising and promotion of any product candidate that obtains approval outside of the U.S. is heavily scrutinized by comparable foreign regulatory authorities.

Violations, including actual or alleged promotion of our product for unapproved or off-label uses, are subject to enforcement letters, inquiries and investigations, and civil and criminal sanctions by the FDA, as well as prosecution under various healthcare laws, including the federal False Claims Act. Any actual or alleged failure to comply with labeling and promotion requirements may have a negative impact on our business.

We may fail to retain or recruit necessary personnel, and we may be unable to secure the services of consultants.

As of the date of this filing, we have fourteen full-time employees and one part-time employee. We also have engaged and plan to continue to engage regulatory consultants to advise us on our dealings with the FDA and other foreign regulatory authorities and have been and will be required to retain additional consultants and employees.

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Certain of our directors, officers, scientific advisors, and consultants serve as officers, directors, scientific advisors, or consultants of other healthcare and life science companies or institutes that might be developing competitive products. None of our directors are obligated under any agreement or understanding with us to make any additional products or technologies available to us. Similarly, we can give no assurances, and we do not expect and investors should not expect, that any biomedical or pharmaceutical product or technology identified by any of our directors or affiliates in the future would be made available to us other than corporate opportunities. We can give no assurances that any such other companies will not have interests that are in conflict with its interests.

Losing key personnel or failing to recruit necessary additional personnel would impede our ability to attain our development objectives. There is intense competition for qualified personnel in the biomedical-development field, and we may not be able to attract and retain the qualified personnel we need to develop our business. We rely on independent organizations, advisors and consultants to perform certain services for us, including handling substantially all aspects of seeking regulatory approval, conduct of our preclinical studies and clinical trials, manufacturing, and expect to rely on organizations and individuals for the marketing, and sales of our product candidates, if approved. We expect that this will continue to be the case. Such services may not always be available to us on a timely basis.

We rely on third parties to supply our raw materials, and if certain manufacturing-related services do not timely supply these products and services, it may delay or impair our ability to develop, manufacture and market our product candidates, if approved.

We rely on suppliers for raw materials and other third parties for certain manufacturing-related services to produce material that meets appropriate content, quality and stability standards and to use in clinical trials of our product candidates. To succeed, clinical trials require adequate supplies of such materials, which may be difficult or uneconomical to procure or manufacture. We and our suppliers and vendors may not be able to (i) produce our product candidates to appropriate standards for use in clinical studies, (ii) perform under any definitive manufacturing, supply or service agreements or (iii) remain in business for a sufficient time to successfully produce and market our product candidates, if approved. If we do not maintain important manufacturing and service relationships, we may fail to find a replacement supplier or required vendor or develop our own manufacturing capabilities which could delay or impair our ability to obtain regulatory approval for our product candidates and substantially increase our costs or deplete profit margins, if any. If we do find replacement providers, we may not be able to enter into agreements with suppliers on favorable terms and conditions, or there could be a substantial delay before a new third party could be qualified and registered with the FDA and foreign regulatory authorities as a provider.

We rely on third parties to conduct our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties or do not meet regulatory requirements or expected deadlines, we may not be able to obtain timely regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

We depend upon third-party investigators and scientific collaborators, such as universities and medical institutions and CROs, to monitor and manage clinical trials and collect data during our preclinical studies and clinical programs. We plan to rely on these parties for execution of our preclinical studies and clinical trials, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that their conduct meets regulatory requirements and that each of our studies and trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on CROs does not relieve us of our regulatory responsibilities. Thus, we and our CROs are required to comply with GCPs, which are regulations and guidelines promulgated by the FDA and comparable foreign regulatory authorities for all of our product candidates in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may not accept the data or may require us to perform additional clinical trials before considering our filing for regulatory approval or approving our marketing application. We cannot assure you that upon inspection by a regulatory authority, such regulatory authority will determine that any of our clinical trials complies with GCPs. While we have agreements governing activities of our CROs, we may have limited influence over their actual performance and the qualifications of their personnel conducting work on our behalf. Failure to comply with applicable regulations in the conduct of the clinical studies for our product candidates may require us to repeat clinical trials, which would delay the regulatory approval process.

We may be subject to claims that our consultants or independent contractors have wrongfully used or disclosed alleged trade secrets of their other clients or former employers to us.

As is common in the biologix, pharmaceutical and medical device industry, we engage the services of consultants to assist in the development of our product candidates. Many of these consultants were previously employed at, or may have previously been or are currently providing consulting services to, other healthcare and life science companies, including our competitors or potential competitors.

Business interruptions could adversely affect future operations and financial conditions, and may increase our costs and expenses.

Our operations, and those of our directors, employees, advisors, contractors, consultants, CROs, and collaborators, could be adversely affected by earthquakes, floods, hurricanes, typhoons, extreme weather conditions, fires, water shortages, power failures, business

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systems failures, medical epidemics, including the ongoing COVID-19 pandemic, and other natural and man-made disaster or business interruptions. Our phones, electronic devices and computer systems and those of our directors, employees, advisors, contractors, consultants, CROs, and collaborators are vulnerable to damages, theft and accidental loss, negligence, unauthorized access, terrorism, war, electronic and telecommunications failures, and other natural and man- made disasters. Operating as a virtual company, our employees conduct business outside of our headquarters and leased or owned facilities. These locations may be subject to additional security and other risk factors due to the limited control of our employees. If such an event as described above were to occur in the future, it may cause interruptions in our operations, delay research and development programs, clinical trials, regulatory activities, manufacturing and quality assurance activities, sales and marketing activities, hiring, training of employees and persons within associated third parties, and other business activities. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

Likewise, we rely and will continue to rely on third parties to manufacture our products and product candidates and conduct clinical trials, and similar events as those described in the prior paragraph relating to their business systems, equipment and facilities could also have a material adverse effect on our business. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of our product candidates, if approved, could be delayed or altogether terminated.

Our employees or others acting on our behalf may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could cause significant liability for us and harm our reputation.

We may be exposed to the risk of fraud or other misconduct by employees or others acting on our behalf, including intentional failures to comply with FDA regulations or similar regulations of comparable foreign regulatory authorities, provide accurate information to the FDA or comparable foreign regulatory authorities, comply with manufacturing standards we have established, comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities, report financial information or data accurately or disclose unauthorized activities to us. Misconduct by employees or others acting on our behalf could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter such misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions or investigations are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions or investigations could have a significant impact on our business, results of operations and reputation including the imposition of significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and integrity oversight and reporting obligations.

Risks Related to our Intellectual Property

We rely on patents and patent applications and various regulatory exclusivities to protect some of our product candidates, and our ability to compete may be limited or eliminated if we are not able to protect our products.

The patent positions of medical device and biologix companies are uncertain and involve complex legal and factual questions. We may incur significant expenses in protecting our intellectual property and defending or assessing claims with respect to intellectual property owned by others. Any patent or other infringement litigation by or against us could cause us to incur significant expenses and divert the attention of our management.

Others may file patent applications or obtain patents on similar technologies that compete with our products. We cannot predict how broad the claims in any such patents or applications will be and whether they will be allowed. Once claims have been issued, we cannot predict how they will be construed or enforced. We may infringe upon intellectual property rights of others without being aware of it. If another party claims we are infringing their technology, we could have to defend an expensive and time consuming lawsuit, pay a large sum if we are found to be infringing, or be prohibited from selling or licensing our products unless we obtain a license or redesign our products, which may not be possible.

We also rely on trade secrets and proprietary know-how to develop and maintain our competitive position. Some of our current or former employees, consultants, scientific advisors, contractors, current or prospective corporate collaborators, may unintentionally or willfully disclose our confidential information to competitors or use our proprietary technology for their own benefits. Furthermore, enforcing a claim alleging the infringement of our trade secrets would be expensive and difficult to prove, making the outcome uncertain. Our competitors may also independently develop similar knowledge, methods, and know-how or gain access to our proprietary information through some other means.

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We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights, as well as costs associated with lawsuits.

If any other person filed patent applications, or is issued patents, claiming technology also claimed by us, we may be required to participate in interference or derivation proceedings in the U.S. Patent and Trademark Office to determine priority and/or ownership of the invention. Our licensors or we may also need to participate in interference proceedings involving issued patents and pending applications of another entity.

The intellectual property environment in our industry is particularly complex, constantly evolving and highly fragmented. Other companies and institutions have issued patents and have filed or will file patent applications that may issue into patents that cover or attempt to cover products, processes or technologies similar to us. We have not conducted freedom-to-use patent searches on all aspects of our product candidates or potential product candidates, and may be unaware of relevant patents and patent applications of third parties. In addition, the freedom-to-use patent searches that have been conducted may not have identified all relevant issued patents or pending patent applications. We cannot provide assurance that our proposed products in this area will not ultimately be held to infringe one or more valid claims owned by third parties which may exist or come to exist in the future or that in such case we will be able to obtain a license from such parties on acceptable terms.

We cannot guarantee that our technologies will not conflict with the rights of others. In some foreign jurisdictions, we could become involved in opposition proceedings, either by opposing the validity of others’ foreign patents or by persons opposing the validity of our foreign patents.

We may also face frivolous litigation or lawsuits from various competitors or from litigious securities attorneys. The cost of any litigation or other proceeding relating to these areas, even if deemed frivolous or resolved in our favor, could be substantial and could distract management from its business. Uncertainties resulting from initiation and continuation of any litigation could have a material adverse effect on our ability to continue our operations.

If we infringe the rights of others, we could be prevented from selling products or forced to pay damages.

If our products, methods, processes, and other technologies are found to infringe the rights of other parties, we could be required to pay damages, or may be required to cease using the technology or to license rights from the prevailing party. Any prevailing party may be unwilling to offer us a license on commercially acceptable terms.

We cannot be certain we will be able to obtain patent protection to protect our product candidates and technology.

We cannot be certain that all patents applied for will be issued. If a third party has also filed a patent application relating to an invention claimed by us or one or more of our licensors, we may be required to participate in an interference or derivation proceeding declared or instituted by the United States Patent and Trademark Office, which could result in substantial uncertainties and cost for us, even if the eventual outcome is favorable to us. The degree of future patent protection for our product candidates and technology is uncertain. For example:

•we or our licensors might not have been the first to make the inventions covered by our issued patents, or pending or future patent applications;

•we or our licensors might not have been the first to file patent applications for the inventions;

•others may independently develop duplicative, similar or alternative technologies;

•it is possible that our patent applications will not result in an issued patent or patents, or that the scope of protection granted by any patents arising from our patent applications will be significantly narrower than expected;

•any patents under which we hold ultimate rights may not provide us with a basis for commercially- viable products, may not provide us with any competitive advantages or may be challenged by third parties as not infringed, invalid, or unenforceable under United States or foreign laws;

•any patent issued to us in the future or under which we hold rights may not be valid or enforceable; or

•we may develop additional technologies that are not patentable and which may not be adequately protected through trade secrets; for example, if a competitor independently develops duplicative, similar, or alternative technologies.

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If we fail to comply with our obligations in the agreements under which we may license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose rights that are important to our business.

We have entered and may be required to enter into intellectual property license agreements that are important to our business, including our license agreements with CMU. These license agreements have imposed various diligence, milestone payment, royalty and other obligations on us. For example, we may enter into exclusive license agreements with various third parties (for example, universities and research institutions), we may be required to use commercially reasonable efforts to engage in various development and commercialization activities with respect to licensed products, and may need to satisfy specified milestones and royalty payment obligations. If we fail to comply with any obligations under our agreements with any of these licensors, we may be subject to termination of the license agreements in whole or in part; increased financial obligations to our licensors or loss of exclusivity in a particular field or territory, in which case our ability to develop or commercialize products covered by the license agreements will be impaired.

In addition, disputes may arise regarding intellectual property subject to a license agreement, including:

•the scope of rights granted under the license agreement and other interpretation-related issues;

•the extent to which our technology, products, methods and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

•our diligence obligations under the license agreement and what activities satisfy those obligations;

•if a third party expresses interest in an area under a license that we are not pursuing, under the certain terms of our license agreement, we may be required to sublicense rights in that area to the third party, and that sublicense could harm our business; and

•the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us.

If disputes over the intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.

We may need to obtain licenses from third parties to advance our research to allow commercialization of our product candidates. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize one or more of our product candidates, which could harm our business significantly.

Under the license agreement with CMU, we have exclusive rights to develop and commercialize plasma-based bioactive material, also known as “Biocompatible Plasma-Based Plastics” for all fields of use and all worldwide geographies. We are required to use our best efforts to effect introduction of the licensed technology into the commercial market as soon as possible and meet certain milestones as stipulated within the agreement. CMU retains the right to use any derivative technology developed by us as a result of the use of this technology and retains the intellectual property rights to the licensed technology under the agreement including patents, copyrights, and trademarks. We may establish all proprietary rights for the Company in the intellectual property developed by us which includes, or is based in whole or in part on, the licensed technology under the agreement, which may also include Carmell-created modifications, enhancements or other technology, whether in the nature of trade secrets, copyrights, patents or other rights. CMU has the right to use such intellectual property developed by us solely for research, education, academic and/or administrative purposes. In addition, we own all right, title and interest (including patents, copyrights, and trademarks) in and to the results of collaboration that are developed solely by us while CMU owns all of the right, title and interest (including patents, copyrights and trademarks) in and to the results of collaboration that are developed solely by CMU. Our rights to use these patents and employ the inventions claimed in these licensed patents, as well as the exploitation of licensed technology and know-how, are subject to the continuation of, and our compliance with, the terms of our license agreement with CMU. If our license agreement with CMU is terminated, we may not be able to develop, manufacture, market or sell the product candidates covered by our agreement and those being tested or approved in combination with such product. Such an occurrence could materially adversely affect the value of the product candidates being developed under any such agreement.

We may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and stop us from commercializing or increase the costs of commercializing our products or product candidates.

Our success will depend in part on our ability to operate without infringing the proprietary rights of third parties. We cannot guarantee that our products or product candidates, or manufacture or use of our products or product candidates, will not infringe third-party patents. Furthermore, a third party may claim that we are using inventions covered by the third party’s patent rights and may go to court to stop us from engaging in our normal operations and activities, including making or selling our product candidates or products. These lawsuits are costly and could affect our results of operations and divert the attention of managerial and scientific personnel. Some of these third

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parties may be better capitalized and have more resources than us. There is a risk that a court would decide that we are infringing the third party’s patents and would order us to stop the activities covered by the patents. In that event, we may not have a viable way to get around the patent and may need to halt commercialization of the relevant product candidate(s) or product(s). In addition, there is a risk that a court will order us to pay the other party damages for having violated the other party’s patents. In addition, we may be obligated to indemnify our licensors and collaborators against certain intellectual property infringement claims brought by third parties, which could require us to expend additional resources. The pharmaceutical, medical device and biotechnology industries have produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover various types of products or methods. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform.

If we are sued for patent infringement, we would need to demonstrate that our products or methods either do not infringe the claims of the relevant patent or that the patent claims are invalid or unenforceable, and we may not be able to do this. Proving invalidity is difficult. For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs and divert management’s time and attention in pursuing these proceedings, which could have a material adverse effect on us. If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, which may not be available, and then we will have to defend an infringement action or challenge the validity of the patent in court. Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, if we do not obtain a license, fail to develop or obtain non-infringing technology, fail to defend an infringement action successfully or have infringed patents declared invalid or unenforceable, we may incur substantial monetary damages, encounter significant delays in bringing our product candidates to market and be precluded from manufacturing or selling our product candidates.

We cannot be certain that others have not filed patent applications for technology covered by our pending applications, or that we were the first to invent the technology, because:

•some patent applications in the United States may be maintained in secrecy until the patents are issued;

•patent applications in the United States are typically not published until 18 months after the priority date; and

•publications in the scientific literature often lag behind actual discoveries.

Our competitors may have filed, and may in the future file, patent applications covering technology similar to ours. Any such patent applications may have priority over our patent applications, which could further require us to obtain rights to issued patents covering such technologies. If another party has filed US patent applications on inventions similar to ours that claims priority to any applications filed prior to the priority dates of our applications, we may have to participate in an interference proceeding declared or a derivation proceed instituted by the USPTO to determine priority of invention in the United States. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful if, unbeknownst to us, the other party had independently arrived at the same or similar inventions prior to our own inventions, resulting in a loss of our U.S. patent position with respect to such inventions. Other countries have similar laws that permit secrecy of patent applications, and thus the third party’s patent or patent application may be entitled to priority over our applications in such jurisdictions.

Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations.

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed alleged trade secrets.

As is common in the medical device, biotechnology and pharmaceutical industries, we employ, and may employ in the future, individuals who were previously employed at other medical device, biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we could lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

Our intellectual property may not be sufficient to protect our products from competition, which may negatively affect our business as well as limit our partnership or acquisition appeal.

We may be subject to competition despite the existence of intellectual property we license or own. We can give no assurances that our intellectual property will be sufficient to prevent third parties from designing around the patents we own or license and developing and commercializing competitive products. The existence of competitive products that avoid our intellectual property could materially

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adversely affect our operating results and financial condition. Furthermore, limitations, or perceived limitations, in our intellectual property may limit the interest of third parties to partner, collaborate or otherwise transact with us, if third parties perceive a higher than acceptable risk to commercialization of our products or future products.

Our approach involves filing patent applications covering new methods of use and/or new formulations of previously known, studied and/or marketed devices. Although the protection afforded by patents issued from our patent applications may be significant, when looking at our patents’ ability to block competition, the protection offered by our patents may be, to some extent, more limited than the protection provided by patents claiming the composition of matter previously unknown. If a competitor were able to successfully design around any method of use and formulation patents we may have in the future, our business and competitive advantage could be significantly affected.

We may elect to sue a third party, or otherwise make a claim, alleging infringement or other violation of patents, trademarks, trade dress, copyrights, trade secrets, domain names or other intellectual property rights that we either own or license. If we do not prevail in enforcing our intellectual property rights in this type of litigation, we may be subject to:

•paying monetary damages related to the legal expenses of the third party;

•facing additional competition that may have a significant adverse effect on our product pricing, market share, business operations, financial condition, and the commercial viability of our products; and

•restructuring our company or delaying or terminating select business opportunities, including, but not limited to, research and development, clinical trials, and commercialization activities, due to a potential deterioration of our financial condition or market competitiveness.

A third party may also challenge the validity, enforceability or scope of the intellectual property rights that we license or own; and, the result of these challenges may narrow the claim scope of or invalidate patents that are integral to our product candidates in the future. There can be no assurance that we will be able to successfully defend patents we own or licensed in an action against third parties due to the unpredictability of litigation and the high costs associated with intellectual property litigation among other factors.

The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws or rules and regulations in the United States and Europe, and many companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in other jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated, rendered unenforceable or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license. Furthermore, while we intend to protect our intellectual property rights in our expected significant markets, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our products or product candidates. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate, which may have an adverse effect on our ability to successfully commercialize our product candidates in all of our expected significant foreign markets. If we or our licensors encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished, and we may face additional competition from others in those jurisdictions.

Changes to patent law, for example the Leahy-Smith America Invests Act, AIA or Leahy-Smith Act, of 2011 and the Patent Reform Act of 2009 and other future article of legislation in the U.S., may substantially change the regulations and procedures surrounding patent applications, issuance of patents, prosecution of patents, challenges to patent validity, and patent enforcement. We can give no assurances that our patents and those of our licensor(s) can be defended or will protect us against future intellectual property challenges, particularly as they pertain to changes in patent law and future patent law interpretations.

In addition, enforcing and maintaining our intellectual property protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by the U.S. Patent and Trademark Office and courts, and foreign government patent agencies and courts, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

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If we are not able to protect and control our unpatented trade secrets, know-how and other technological innovation, we may suffer competitive harm.

We also rely on proprietary trade secrets and unpatented know-how to protect our research and development activities, particularly when we do not believe that patent protection is appropriate or available. However, trade secrets are difficult to protect. We will attempt to protect our trade secrets and unpatented know-how by requiring our employees, consultants, collaborators, and advisors to execute a confidentiality and non-use agreement. We cannot guarantee that these agreements will provide meaningful protection, that these agreements will not be breached, that we will have an adequate remedy for any such breach, or that our trade secrets will not otherwise become known or independently developed by a third party. Our trade secrets, and those of our present or future collaborators that we utilize by agreement, may become known or may be independently discovered by others, which could adversely affect the competitive position of our product candidates.

We may incur substantial costs enforcing our patents, defending against third-party patents, invalidating third-party patents or licensing third-party intellectual property, as a result of litigation or other proceedings relating to patent and other intellectual property rights.

We may be unaware of or unfamiliar with prior art and/or interpretations of prior art that could potentially impact the validity or scope of our patents, pending patent applications, or patent applications that we will file. We may have elected, or elect now or in the future, not to maintain or pursue intellectual property rights that, at some point in time, may be considered relevant to or enforceable against a competitor.

We take efforts and enter into agreements with employees, consultants, collaborators, and advisors to confirm ownership and chain of title in intellectual property rights. However, an inventorship or ownership dispute could arise that may permit one or more third parties to practice or enforce our intellectual property rights, including possible efforts to enforce rights against us.

We may not have rights under some patents or patent applications that may cover technologies that we use in our research, product candidates and particular uses thereof that we seek to develop and commercialize, as well as synthesis of our product candidates. Third parties may own or control these patents and patent applications in the United States and elsewhere. These third parties could bring claims against us or our collaborators that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against us or our collaborators, we or they could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit. We or our collaborators therefore may choose to seek, or be required to seek, a license from the third-party and would most likely be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we or our collaborators were able to obtain a license, the rights may be nonexclusive, which would give our competitors access to the same intellectual property. Ultimately, we could be prevented from commercializing a product or product candidate, or forced to cease some aspect of our business operations, as a result of patent infringement claims, which could harm our business.

There has been substantial litigation and other legal proceedings regarding patent and other intellectual property rights in the pharmaceutical, medical device and biotechnology industries. Although we are not currently a party to any patent litigation or any other adversarial proceeding, including any interference or derivation proceeding declared or instituted before the United States Patent and Trademark Office, regarding intellectual property rights with respect to our products, product candidates and technology, it is possible that we may become so in the future. We are not currently aware of any actual or potential third-party infringement claim involving our product candidates. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. The outcome of patent litigation is subject to uncertainties that cannot be adequately quantified in advance, including the demeanor and credibility of witnesses and the identity of the adverse party, especially in pharmaceutical, medical device and biotechnology related patent cases that may turn on the testimony of experts as to technical facts upon which experts may reasonably disagree. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. If a patent or other proceeding is resolved against us, we may be enjoined from researching, developing, manufacturing or commercializing our products or product candidates without a license from the other party and we may be held liable for significant damages. We may not be able to obtain any required license on commercially acceptable terms or at all.

Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could harm our ability to compete in the marketplace. Patent litigation and other proceedings may also absorb significant management time.

If we are unable to protect our intellectual property rights, our competitors may develop and market products with similar features that may reduce demand for our potential products.

The following factors are important to our success:

•receiving patent protection for our product candidates;

•preventing others from infringing our intellectual property rights; and

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•maintaining our patent rights and trade secrets.

We will be able to protect our intellectual property rights in patents and trade secrets from unauthorized use by third parties only to the extent that such intellectual property rights are covered by valid and enforceable patents or are effectively maintained as trade secrets. Because issues of patentability involve complex legal and factual questions, the issuance, scope and enforceability of patents cannot be predicted with certainty. Patents may be challenged, invalidated, found unenforceable, or circumvented. United States patents and patent applications may be subject to interference and derivation proceedings, United States patents may also be subject to post grant proceedings, including re-examination, derivation, Inter Partes Review and Post Grant Review, in the United States Patent and Trademark Office and foreign patents may be subject to opposition or comparable proceedings in corresponding foreign patent offices, which could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such interference, derivation, post grant and opposition proceedings may be costly. Thus, any patents that we own or license from others may not provide any protection against competitors. Furthermore, an adverse decision in an interference or derivation proceeding can result in a third-party receiving the patent rights sought by us, which in turn could affect our ability to market a potential product to which that patent filing was directed. Our pending patent applications, those that we may file in the future, or those that we may license from third parties may not result in patents being issued. If issued, they may not provide us with proprietary protection or competitive advantages against competitors with similar technology.

Furthermore, others may independently develop similar technologies or duplicate any technology that we have developed. Many countries, including certain countries in Europe, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. For example, compulsory licenses may be required in cases where the patent owner has failed to “work” the invention in that country, or the third-party has patented improvements. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of our patents. Moreover, the legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, which makes it difficult to stop infringement.

In addition, our ability to enforce our patent rights depends on our ability to detect infringement. It is difficult to detect infringers who do not advertise or otherwise promote the compositions that are used in their products. Any litigation to enforce or defend our patent rights, even if we prevail, could be costly and time-consuming and would divert the attention of management and key personnel from business operations.

We will also rely on trade secrets, know-how and technology, which are not protected by patents, to maintain our competitive position. We will seek to protect this information by entering into confidentiality agreements with parties that have access to it, such as strategic partners, collaborators, employees, contractors and consultants. Any of these parties may breach these agreements and disclose our confidential information or our competitors might learn of the information in some other way. If any trade secret, know-how or other technology not protected by a patent were disclosed to, or independently developed by, a competitor, our business, financial condition and results of operations could be materially adversely affected.

Risks Related to Our Business Operations

Our future success is dependent, in part, on the performance and continued service of our officers and directors.

We are presently dependent largely upon the experience, abilities and continued services of the our Senior Leadership including, our Chief Executive Officer, Rajiv Shukla. The loss of services of Mr. Shukla could have a material adverse effect on our business, financial condition or results of operation. In addition, other key executives are important to the ongoing capability of the company to advance the programs through the clinical and regulatory pathway. The competition of executive talent may make it difficult to replace any of these key positions in a timely manner.

We may require additional capital to support our growth plans, and such capital may not be available on terms acceptable to us, if at all. This could hamper our growth and adversely affect our business.

We intend to continue to make significant investments to support our business growth and may require additional funds to respond to business challenges, improve our operating infrastructure or acquire complementary businesses, personnel and technologies. Accordingly, we may need to engage in equity, equity-linked or debt financings to secure additional funds, including for possible use in acquisitions. If we raise additional funds through future issuances of equity, equity-linked or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.

Any additional debt financing that we secure in the future could involve offering additional security interests and undertaking restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Additionally, if we seek to access

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additional capital or increase our borrowing, there can be no assurance that debt or equity financing may be available to us on favorable terms, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business, results of operations and financial condition may be harmed.

Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.

As of September 30, 2023 and December 31, 2022 we had cash on hand of $7,968,502 and $128,149, respectively and a working capital deficit of $3,922,004 and $6,689,745.

The accompanying unaudited financial statements have been prepared on the basis that the Company will continue as a going concern, which assumes the realization of assets and the satisfaction of liabilities in the normal course of business. As of September 30, 2023, we have had no income from continuing operations, and, before the AxBio Acquisition, we did not have a commercial product or service. The Company has historically relied on raising capital to fund the Company’s operations. Based on our cash balance as of the date of filing these financial statements and projected cash needs for the next twelve months, management estimates that it will need to raise additional capital to cover operating and capital requirements. Management will need to raise the additional funds through issuing additional shares of common stock or other equity securities or obtaining debt financing. There can be no assurance that any required future financing can be successfully completed on a timely basis, or on terms acceptable to the Company. Based on these circumstances, management has determined that these conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The financial statements do not include any adjustments that may be necessary should we be unable to continue as a going concern.

We may become involved in litigation that may materially adversely affect us.

From time to time, we may become involved in various legal proceedings relating to matters incidental to the ordinary course of our business, including intellectual property, commercial, product liability, employment, class action, whistleblower, shareholder derivative suits and other litigation and claims, and governmental and other regulatory investigations and proceedings. The Holders of the Convertible Notes have alleged that the Company owes additional principal and interest thereon and is required to repurchase the Convertible Note Warrants. Puritan has filed suit seeking to recover such amounts allegedly owed. Management of the Company believes that its obligations under the Convertible Notes have been satisfied and that no additional payments are due to the Holders, and the Company has conveyed its position to the Holders. Nevertheless, we cannot assure you that we will prevail. In addition, in October 2023, the Company received demands to arbitrate claims from several former executives and other former employees or consultants of the Company for alleged unpaid compensation relating to periods prior to the termination of their relationships with the Company. Such claims seek aggregate compensation of approximately $800,000. Such matters can be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liability or require us to change our business practices. Because of the potential risks, expenses and uncertainties of litigation, we may, from time to time, settle disputes, even where we believe that we have meritorious claims or defenses. Because litigation is inherently unpredictable, we cannot assure you that the results of any of these actions will not have a material adverse effect on our business.

We have identified a material weakness in our internal control over financial reporting, and the failure to remediate this material weakness may adversely affect our business, investor confidence in our company, our financial results and the market value of our common stock.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As described in Item 9.A Controls and Procedures of our Annual Report on Form 10-K for the year ended December 31, 2022 and in Item 4 Controls and Procedures of the amendment to our Quarterly Report on Form 10-Q/A for the quarter ended September 30, 2021, management identified errors in our historical financial statements related to the accounting for the Class A common stock subject to redemption. Management also identified errors related to the completeness and accuracy of financial data relating to unrecorded liabilities and deferred underwriting costs incurred as of the consummation of our IPO, and errors related to the overallotment liability, which was not recorded in the three months ended September 30, 2021, or in the audited balance sheet as of July 29, 2021.

To address this material weakness, management has devoted, and plans to continue to devote, significant effort and resources to the remediation and improvement of its internal control over financial reporting and to enhance controls and improve internal communications within the Company and its financial reporting advisors. While we believe the remedial efforts we are taking and will take will improve our internal controls and address the underlying causes of the material weakness, we cannot be certain that these steps will be sufficient to remediate the control deficiencies that led to our material weakness in our internal controls over financial reporting or prevent future material weaknesses or control deficiencies from occurring.

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If we fail to effectively remediate the material weakness in our internal controls over financial reporting described above, we may be unable to accurately or timely report our financial condition or results of operations. Such failure may adversely affect our business, investor confidence in our company, our financial condition and the market value of our common stock.

We have generated very little product revenue and have incurred significant losses to date. We expect to continue to incur losses for the foreseeable future and may never generate product revenue or be profitable.

Since inception, and prior to the AxBio Acquisition, we generated no product revenue, and after the AxBio Acquisition we have generated only a small amount of revenue. For the nine months ended September 30, 2023 and 2022, we had a loss from operations of $7,899,628 and $2,719,639, respectively, and negative cash flows from operations of $5,203,795 and $1,129,539, respectively. To date, we have financed our operations primarily through the sale of equity securities and convertible debt. We have devoted substantially all of our financial resources and efforts to research and development, including preclinical studies and clinical trials, and we anticipate that our expenses will continue to increase over the next several years as we continue these activities. Accordingly, we expect to continue to incur substantial operating losses for the foreseeable future, which may fluctuate significantly from quarter-to-quarter and year-to-year.

To become and remain profitable, we must succeed in realizing the benefits of the AxBio Acquisition and obtaining marketing approval for our product candidates, and in developing and commercializing additional product candidates that generate operating revenue. We may never succeed in these activities and, even if we do, may never generate revenue that is sufficient to achieve profitability.

Even if we do achieve profitability, we may not be able to sustain or increase profitability. Our failure to become and remain profitable would depress the value of our Company and could impair our ability to maintain our research and development efforts, expand our business, diversify our product offerings or even continue our operations. A decline in the value of the Company could also cause you to lose all or part of your investment.

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

We will face competition from numerous medical device, pharmaceutical and biotechnology enterprises, as well as from academic institutions, government agencies and private and public research institutions for our current products and product candidates. We cannot provide any assurances that any other company will not obtain FDA approval for similar products that might adversely affect our ability to develop and market our products, if approved, in the U.S. We are aware that other companies have intellectual property protection and have conducted clinical trials. Our commercial opportunities will be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer side effects or are less expensive than any product or product candidates that we may develop and for which we receive approval. Competition could result in reduced sales and pricing pressure on our current product or product candidates, if approved, which in turn would reduce our ability to generate meaningful revenues and have a negative impact on our results of operations. In addition, significant delays in the development of our product candidates could allow our competitors to bring products to market before we do and impair our ability to commercialize our product candidates, if approved. The biotechnology industry is intensely competitive and involves a high degree of risk. We compete with other companies that have far greater experience and financial, research and technical resources than us. Potential competitors in the U.S. and worldwide are numerous and include medical device, pharmaceutical and biotechnology companies, educational institutions and research foundations, many of which have substantially greater capital resources, marketing experience, research and development staffs and facilities than ours. Some of our competitors may develop and commercialize products that compete directly with those incorporating our technology or may introduce products to market earlier than our product candidates, if approved, or on a more cost-effective basis. Our competitors compete with us in recruiting and retaining qualified scientific and management personnel as well as in acquiring technologies complementary to our technology. We may face competition with respect to potential efficacy and safety, ease of use and adaptability to various modes of administration, acceptance by physicians, the timing and scope of regulatory approvals, availability of resources, reimbursement coverage, price and patent position, including the potentially dominant patent positions of others. An inability to successfully complete our product development or commercializing our product candidates, if approved, could result in our having limited prospects for establishing market share or generating revenue.

Many of our competitors or potential competitors have significantly greater established presence in the market, financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do, and as a result may have a competitive advantage over us. Mergers and acquisitions in the medical device, pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies and technology licenses complementary to our programs or potentially advantageous to our business.

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As a result of these factors, these competitors may obtain regulatory approval of their products before we are able to obtain patent protection or other intellectual property rights, which will limit our ability to develop or commercialize our current product candidates, if approved. Our competitors may also develop products that are safer, more effective, more widely used and cheaper than ours, and may also be more successful than us in manufacturing and marketing their products. These appreciable advantages could render our product candidates, if approved, obsolete or non-competitive before we can recover the expenses of development and commercialization. In addition, we may not be successful in establishing license agreements with strategic distributors necessary for commercializing in each of the therapeutic areas and therefore would need to try to commercialize with a direct sales and marketing organization. Under this approach, the expense to commercialize new products is high and there are no guarantees that we will be able to raise the necessary capital to commercialize our technology independently.

The current economic downturn may harm our business and results of operations.

Our overall performance depends, in part, on worldwide economic conditions. In recent months, we have observed increased economic uncertainty in the United States and abroad. Impacts of such economic weakness include:

•falling overall demand for goods and services, leading to reduced profitability;

•reduced credit availability;

•higher borrowing costs;

•reduced liquidity;

•volatility in credit, equity and foreign exchange markets; and

•bankruptcies.

These developments could lead to supply chain disruption, inflation, higher interest rates, and uncertainty about business continuity, which may adversely affected our business and our results of operations.

Recent increases in interest rates may increase our borrowing costs, and may also affect our ability to obtain working capital through borrowings such as bank credit lines and public or private sales of debt securities, which may result in lower liquidity, reduced working capital and other adverse impacts on our business.

Continued increases in interest rates will increase the cost of new indebtedness/servicing our outstanding indebtedness/refinancing our outstanding indebtedness, and could materially and adversely affect our results of operations, financial condition, liquidity and cash flows.

Hostilities in Ukraine and Israel could have a material adverse effect, including the availability and cost of services that we rely upon for our business operations, which could have a material adverse impact on our business operations.

Russia’s invasion of Ukraine, which has persisted for months, and the global response, including the imposition of sanctions by the United States and other countries, could create or exacerbate risks facing our business. In addition, recent hostilities in Israel could also create or exacerbate risks facing our business. Given the continuing conflicts, our supply chain could be disrupted due to the demise of commercial activity in impacted regions and due to the severity of sanctions on the businesses that we and our suppliers rely on. Further, state-sponsored cyberattacks could expand as part of the conflict, which could adversely affect our and our suppliers’ ability to maintain or enhance key cyber security and data protection measures.

Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect the Company’s current and projected business operations and its financial condition and results of operations.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership. Although a statement by the Department of the Treasury, the Federal Reserve and the FDIC indicated that all depositors of SVB would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts, borrowers under credit agreements, letters of credit and certain other financial instruments with SVB, Signature Bank or any other financial institution that is placed into receivership by the FDIC may be unable to access undrawn amounts thereunder. Although we are not a borrower or party to any such instruments with SVB, Signature or any other financial institution currently in receivership, if any of our lenders or counterparties to any such instruments were to be placed into receivership, we may be unable to access such funds. In addition, if any of our customers, suppliers or other

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parties with whom we conduct business are unable to access funds pursuant to such instruments or lending arrangements with such a financial institution, such parties’ ability to pay their obligations to us or to enter into new commercial arrangements requiring additional payments to us could be adversely affected. In this regard, counterparties to SVB credit agreements and arrangements, and third parties such as beneficiaries of letters of credit (among others), may experience direct impacts from the closure of SVB and uncertainty remains over liquidity concerns in the broader financial services industry. Similar impacts have occurred in the past, such as during the 2008-2010 financial crisis.

Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates. Although the U.S. Department of Treasury, FDIC and Federal Reserve Board have announced a program to provide up to $25 billion of loans to financial institutions secured by certain of such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediately liquidity may exceed the capacity of such program. Additionally, there is no guarantee that the U.S. Department of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they would do so in a timely fashion.

Although we assess our banking and customer relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect the Company, the financial institutions with which the Company has credit agreements or arrangements directly, or the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could involve financial institutions or financial services industry companies with which the Company has financial or business relationships, but could also include factors involving financial markets or the financial services industry generally.

The results of events or concerns that involve one or more of these factors could include a variety of material and adverse impacts on our current and projected business operations and our financial condition and results of operations. These could include, but may not be limited to, the following:

•Delayed access to deposits or other financial assets or the uninsured loss of deposits or other financial assets;

•Delayed or lost access to, or reductions in borrowings available under revolving existing credit facilities or other working capital sources and/or delays, inability or reductions in the company’s ability to refund, roll over or extend the maturity of, or enter into new credit facilities or other working capital resources;

•Potential or actual breach of contractual obligations that require the Company to maintain letters of credit or other credit support arrangements;

•Potential or actual breach of financial covenants in our credit agreements or credit arrangements;

•Potential or actual cross-defaults in other credit agreements, credit arrangements or operating or financing agreements; or

•Termination of cash management arrangements and/or delays in accessing or actual loss of funds subject to cash management arrangements.

In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations, result in breaches of our financial and/or contractual obligations or result in violations of federal or state wage and hour laws. Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our current and/or projected business operations and financial condition and results of operations.

In addition, any further deterioration in the macroeconomic economy or financial services industry could lead to losses or defaults by our customers or suppliers, which in turn, could have a material adverse effect on our current and/or projected business operations and results of operations and financial condition. For example, a customer may fail to make payments when due, default under their agreements with us, become insolvent or declare bankruptcy, or a supplier may determine that it will no longer deal with us as a customer. In addition, a customer or supplier could be adversely affected by any of the liquidity or other risks that are described above as factors that could result in material adverse impacts on the Company, including but not limited to delayed access or loss of access to uninsured deposits or loss of the ability to draw on existing credit facilities involving a troubled or failed financial institution. Any customer or

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supplier bankruptcy or insolvency, or the failure of any customer to make payments when due, or any breach or default by a customer or supplier, or the loss of any significant supplier relationships, could result in material losses to the Company and may have a material adverse impact on our business.

Significant disruptions of information technology systems, computer system failures or breaches of information security could adversely affect our business.

We rely to a large extent upon sophisticated information technology systems to operate our business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information (including, but not limited to, personal information and intellectual property). The size and complexity of our information technology and information security systems, and those of our third-party vendors with whom we may contract, make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees or vendors, or from malicious attacks by third parties. Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives (including, but not limited to, industrial espionage and market manipulation) and expertise. While we intend to invest in the protection of data and information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches.

Our internal computer systems, and those of our CROs, our CMOs, and other business vendors on which we may rely, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, fire, terrorism, war and telecommunication and electrical failures. We exercise little or no control over these third parties, which increases our vulnerability to problems with their systems. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs. Any interruption or breach in our systems could adversely affect our business operations or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to us or allow third parties to gain material, inside information that they use to trade in our securities. For example, the loss of clinical trial data from completed or ongoing clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, the further development of our current and future product candidates could be delayed and our business could be otherwise adversely affected.

We will need to grow the size of our organization in the future, and we may experience difficulties in managing this growth.

As of September 30, 2023, we had fourteen full-time employees and one part-time employee. We will need to grow the size of our organization in order to support our continued development and commercialization of our products and potential commercialization of our product candidates. As our development and commercialization plans and strategies continue to develop, our need for additional managerial, operational, manufacturing, sales, marketing, financial and other resources may increase. Our management, personnel and systems currently in place may not be adequate to support this future growth. Future growth would impose significant added responsibilities on members of management, including:

•managing our clinical trials effectively;

•identifying, recruiting, maintaining, motivating and integrating additional employees;

•managing our internal development efforts effectively while complying with our contractual obligations to licensors, licensees, contractors and other third parties;

•improving our managerial, development, operational, information technology, and finance systems; and expanding our facilities.

If our operations expand, we will also need to manage additional relationships with various strategic partners, suppliers and other third parties. Our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively, as well as our ability to develop a sales and marketing force when appropriate for our company. To that end, we must be able to manage our development efforts and preclinical studies and clinical trials effectively and hire, train and integrate additional management, research and development, manufacturing, administrative and sales and marketing personnel. The failure to accomplish any of these tasks could prevent us from successfully growing our company.

We expect to continue to incur increased costs as a result of operating as a public company and our management will be required to devote substantial time to compliance initiatives and corporate governance practices.

As a public company, we incur and expect to continue to incur additional significant legal, accounting and other expenses in relation to our status as a public reporting company. We expect that these expenses will further increase after we are no longer an emerging growth company. We may need to hire additional accounting, finance and other personnel in connection with our continuing efforts to comply with the requirements of being a public company, and our management and other personnel will need to continue to devote a substantial amount of time towards maintaining compliance with these requirements. In addition, the Sarbanes-Oxley Act of 2002 and rules

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subsequently implemented by the SEC and Nasdaq have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404), we will be required to furnish a report by our management on our internal controls over financial reporting, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. If we identify one or more material weaknesses, this could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

Risks Related to Healthcare Compliance Regulations

Our relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings. If we or they are unable to comply with these provisions, we may become subject to civil and criminal investigations and proceedings that could have a material adverse effect on our business, financial condition and prospects.

Our current and future operations may be directly, or indirectly through our relationships with investigators, health care professionals, customers and third-party payors, subject to various U.S. federal and state healthcare laws and regulations. Healthcare providers, physicians and others play a primary role in the recommendation and prescription of any therapies for which we may obtain marketing approval. These laws impact, among other things, our research activities and proposed sales, marketing and education programs and constrain our business and financial arrangements and relationships with third-party payors, healthcare professionals who participate in our clinical research program, healthcare professionals and others who recommend, purchase, or provide our approved therapies, and other parties through which we market, sell and distribute our therapies for which we obtain marketing approval. In addition, we may be subject to patient data privacy and security regulation by both the U.S. federal government and the states in which we conduct our business, along with foreign regulators (including European data protection authorities). Finally, our current and future operations are subject to additional healthcare-related statutory and regulatory requirements and enforcement by foreign regulatory authorities in jurisdictions in which we conduct our business. For further discussion on healthcare laws and other compliance requirements, see the section titled “Business Overview – Government Regulation – Healthcare Laws and Regulations” in our proxy statement/prospectus filed with the SEC on June 23, 2023.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Even if precautions are taken, it is possible that governmental authorities will conclude that our business practices including compensation of physicians with stock or stock options, could, despite efforts to comply, be subject to challenge under current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion of drugs from government funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, reputational harm and the curtailment or restructuring of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, that person or entity may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Prohibitions or restrictions on sales or withdrawal of future marketed products could materially affect our business in an adverse way.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. The shifting compliance environment and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions with different compliance or reporting requirements increases the possibility that a healthcare company may run afoul of one or more of the requirements.

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Healthcare legislative measures aimed at reducing healthcare costs may have a material adverse effect on our business and results of operations.

The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system that could prevent or delay marketing approval of our product candidates or any future product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell a product for which we obtain marketing approval. Changes in applicable laws, rules, and regulations or the interpretation of existing laws, rules, and regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products; or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business. For further discussion on healthcare reform, see the section titled “Business Overview - Government Regulation - Healthcare Reform” in our proxy statement/prospectus filed with the SEC on June 23, 2023.

The Inflation Reduction Act of 2022 (“IRA”) includes several provisions that may impact our business to varying degrees, including provisions that reduce the out-of-pocket spending cap for Medicare Part D beneficiaries from $7,050 to $2,000 starting in 2025, thereby effectively eliminating the coverage gap; impose new manufacturer financial liability on certain drugs under Medicare Part D, allow the U.S. government to negotiate Medicare Part B and Part D price caps for certain high-cost drugs and biologics without generic or biosimilar competition; require companies to pay rebates to Medicare for certain drug prices that increase faster than inflation; and delay until January 1, 2032 the implementation of the HHS rebate rule that would have limited the fees that pharmacy benefit managers can charge. Further, under the IRA, orphan drugs are exempted from the Medicare drug price negotiation program, but only if they have one orphan designation and for which the only approved indication is for that disease or condition. If a product receives multiple orphan designations or has multiple approved indications, it may not qualify for the orphan drug exemption. The implementation of the IRA is currently subject to ongoing litigation challenging the constitutionality of the IRA’s Medicare drug price negotiation program. The effects of the IRA on our business and the healthcare industry in general is not yet known.

In addition, President Biden has issued multiple executive orders that have sought to reduce prescription drug costs. In February 2023, HHS also issued a proposal in response to an October 2022 executive order from President Biden that includes a proposed prescription drug pricing model that will test whether targeted Medicare payment adjustments will sufficiently incentivize manufacturers to complete confirmatory trials for drugs approved through FDA’s accelerated approval pathway. Although a number of these and other proposed measures may require authorization through additional legislation to become effective, and the Biden administration may reverse or otherwise change these measures, both the Biden administration and Congress have indicated that they will continue to seek new legislative measures to control drug costs.

We expect that these and other healthcare reform measures that may be adopted in the future may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product candidate. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our drugs, and could have a material adverse effect on our business, financial condition, and results of operations.

Risk Relating to our Common Stock

We expect the price of our common stock may be volatile and may fluctuate substantially.

The stock market in general and the market for biotechnology companies in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. The market price for our common stock may be influenced by many factors, including:

•commercialization and sales of our products;

•the results of our efforts to discover, develop, acquire or in-license product candidates or products, if any;

•failure or discontinuation of any of our research programs;

•actual or anticipated results from, and any delays in, any future clinical trials, as well as results of regulatory reviews relating to the approval of any product candidates we may choose to develop;

•the level of expenses related to any product candidates that we may choose to develop or clinical development programs we may choose to pursue;

•disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;

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•announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures and capital commitments;

•additions or departures of key scientific or management personnel;

•variations in our financial results or those of companies that are perceived to be similar to us;

•new products, product candidates or new uses for existing products introduced or announced by our competitors, and the timing of these introductions or announcements;

•results of clinical trials of product candidates of our competitors;

•general economic and market conditions and other factors that may be unrelated to our operating performance or the operating performance of our competitors, including changes in market valuations of similar companies;

•regulatory or legal developments in the United States and other countries;

•changes in the structure of healthcare payment systems;

•conditions or trends in the biotechnology and biopharmaceutical industries;

•actual or anticipated changes in earnings estimates, development timelines or recommendations by securities analysts;

•announcement or expectation of additional financing efforts;

•sales of common stock by us or our stockholders in the future, as well as the overall trading volume of our common stock; and

•the other factors described in this “Risk Factors” section.

In the past, following periods of volatility in companies’ stock prices, securities class-action litigation has often been instituted against such companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business and financial condition.

Future resales of common stock may cause the market price of our securities to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.

As restrictions on resale end and registration statements for the sale of the shares held by parties who have contractual registration rights are available for use, the sale or possibility of sale of these shares could have the effect of increasing the volatility in the market price of our common stock, or decreasing the market price itself. As a result of any such decreases in price of our common stock, purchasers who acquire shares of our common stock may lose some or all of their investment.

Any significant downward pressure on the price of our common stock as the selling stockholders sell the shares of our common stock, or the prospect of such shares could encourage short sales by the selling stockholders or others. Any such short sales could place further downward pressure on the price of our common stock.

We are required to register the issuance of the shares underlying the warrants issued in Alpha’s initial public offering. We may incur substantial costs in connection with such registration statement and the issuance of such shares may result in dilution to holders of our common stock and the issuance of any such shares upon a cashless exercise of the warrants would not result in the receipt by the Company of any cash proceeds thereof.

Pursuant to the Warrant Agreement entered into upon closing of Alpha’s initial public offering, Alpha agreed to file a registration statement with the SEC to register the issuance of the shares of common stock upon exercise of the warrants issued in Alpha’s initial public offering. The Company prepared and filed such registration statement on August 7, 2023. The registration statement was not declared effective by the 60th business day following the closing of the Business Combination. As a result, until such registration statement is declared effective by the SEC, such warrants may be exercised by the holders thereof on a cashless basis.

The Company has incurred substantial costs in connection with the filing of the registration statement. The Company will be required to amend the registration statement to include certain financial statements of AxBio and to update certain financial and other information with respect to the Company since the date of the original filing of the registration statement. The Company may incur substantial costs in connection with such amendment and completion of the SEC review process. In addition, for as long as the warrants remain exercisable on a cashless basis until the effectiveness of the registration statement, the Company would not be able to receive any cash proceeds from the exercise thereof, preventing such potential proceeds from improving the Company’s liquidity position. Any shares

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issuable upon exercise of the warrants, for cash or on a cashless basis, would also increase the number of shares outstanding and available for sale, which could result in downward pressure on the price of our common stock.

We are required to seek stockholder approval to issue shares upon conversion of the Series A Preferred Stock. The preparation of the proxy statement for such shareholder approval may be expensive and time consuming.

A portion of the merger consideration for the AxBio Acquisition consists of shares of Series A Preferred Stock, which may only be converted into shares of our common stock following receipt of stockholder approval. The remaining equity consideration paid by the Company for the AxBio Acquisition consisted of shares of our common stock, but the number of such shares was capped at 19.99% of the total number of shares of our common stock outstanding as of the AxBio Closing Date in accordance with Nasdaq rules. The merger agreement for the AxBio Acquisition requires us to seek to obtain stockholder approval of the issuance of the underlying shares of common stock issuable upon conversion of the Series A Preferred Stock. We will be required to file a proxy statement with the SEC for a stockholder meeting to approve such issuance. While we expect to seek such stockholder approval at our next annual meeting of stockholders in order to minimize legal, accounting and other costs in connection with the preparation and filing of such proxy statement, we are past the contractual deadline for filing the proxy statement. If the former stockholders of AxBio require us to seek stockholder approval at a special meeting of stockholders prior to our next annual meeting, we may incur substantial additional expenses in connection therewith.

Our issuance of additional capital stock in connection with financings, acquisitions, investments, the Equity Incentive Plan or otherwise will dilute all other stockholders.

We expect to issue additional capital stock in the future that will result in dilution to all other stockholders. We expect to grant equity awards to employees, directors and consultants under the Equity Incentive Plan. We may also raise capital through equity financings in the future. As part of our business strategy, we may acquire or make investments in complementary companies, products or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock may cause stockholders to experience significant dilution of their ownership interests and the per share value of our common stock to decline.

We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. For so long as we remain an emerging growth company, we will be permitted to and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:

•not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;

•not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

•reduced disclosure obligations regarding executive compensation; 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.

We may choose to take advantage of some, but not all, of the available exemptions. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and the price of our common stock price may be more volatile.

We do not anticipate paying any cash dividends on our capital stock in the foreseeable future; capital appreciation, if any, will be your sole source of gain as a holder of our common stock.

We have never declared or paid cash dividends on shares of our capital stock. We currently plan to retain all of our future earnings, if any, and any cash received as a result of future financings to finance the growth and development of our business. Accordingly, capital appreciation, if any, of our common stock will be the sole source of gain for our common stockholders for the foreseeable future.

If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our common stock, the price of our common stock could decline.

The trading market for our common stock relies in part on the research and reports that industry or financial analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts covering our business downgrade their evaluations of our common stock, the price of our common stock could decline. In addition, if one or more of these analysts cease

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coverage or fail to regularly publish reports on our business, we could lose visibility in the financial markets, which in turn could cause our common stock price or trading volume to decline.

If we were to be delisted from Nasdaq, it could reduce the visibility, liquidity and price of our common stock.

There are various quantitative listing requirements for a company to remain listed on The Nasdaq Capital Market, including maintaining a minimum bid price of $1.00 per share and Nasdaq equity standards. There is no guarantee that we will be able to continue complying with the minimum bid price rule, the minimum equity standard or other Nasdaq requirements.

Provisions in our amended and restated certificate of incorporation and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our common stock and could entrench management.

Our amended and restated certificate of incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These provisions include a staggered board of directors and the ability of the board of directors to designate the terms of and issue new series of preferred shares, which may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.

We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

Insider Trading Arrangements

During the three months ended September 30, 2023, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).

Item 6. Exhibits.

Furnish the exhibits required by Item 601 of Regulation S-K (§ 229.601 of this chapter).

Number	Description
10.1	First Amendment to Agreement and Plan of Merger, by and among Carmell Therapeutics Corporation, Aztec Merger Sub, Inc. and Axolotl Biologix, Inc., dated August 9, 2023 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on August 14, 2023)..
31.1*	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer Pursuant to Rules` 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

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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 (embedded within the Inline XBRL document)

104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Carmell Corporation
Date: November 14, 2023	By:	/s/ Rajiv Shukla
		Name: Rajiv Shukla
		Title: Chief Executive Officer and Executive Chairman
	Carmell Corporation
Date: November 14, 2023	By:	/s/ Bryan J. Cassaday
		Name: Bryan J. Cassaday
		Title: Chief Financial Officer

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