Stockholders' Equity (Deficit)

6 Months Ended

Jun. 30, 2024

Equity [Abstract]

Stockholders' Equity (Deficit)

NOTE 11 — STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock

As of June 30, 2024 and December 31, 2023, the Company was authorized to issue 250,000,000 shares of Common Stock and had 20,905,407 and 23,090,585, respectively, shares issued and outstanding. In conjunction with the AxoBio Disposition on March 26, 2024, 3,845,337 shares of Common Stock were returned to the Company and retired.

On April 4, 2024, the Company entered into a securities purchase agreement with certain investors for the sale of an aggregate of 1,331,452 shares of Common Stock for gross proceeds of $3,001,235 (the “Private Placement”). In conjunction with the Private Placement, the Company issued a warrant for 89,787 shares of Common Stock to the placement agent on April 11, 2024. This warrant has an exercise price of $2.81, a term of 5 years, a fair value of $129,495, and becomes exercisable six months after issuance. In conjunction with the Private Placement, the Company owed $212,212 in fees and $25,000 in legal costs to the placement agent, which were recorded as a reduction of the gross proceeds received. There were no payables to the placement agent as of June 30, 2024. The placement agent is a related party, as a member of the Board is a managing partner of the placement agent.

Series A Voting Convertible Preferred Stock

In connection with the AxoBio Acquisition, the Company issued 4,243 shares of Series A Preferred Stock to former stockholders of AxoBio. In conjunction with the AxoBio Disposition on March 26, 2024, such shares were returned to the Company and were retired.

Convertible Preferred Stock

Immediately prior to the Business Combination, Legacy Carmell had outstanding Series A convertible preferred stock (“Legacy Series A Preferred Stock”), Series B convertible preferred stock (“Legacy Series B Preferred Stock”), Series C-1 convertible preferred stock (“Legacy Series C-1 Preferred Stock”) and Series C-2 convertible preferred stock (“Legacy Series C-2 Preferred Stock”), which are collectively referred to herein as “Legacy Preferred Stock.”

Legacy Series A Preferred Stock, Legacy Series C-1 Preferred Stock, and Legacy 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 accrued on each share of Legacy Preferred Stock commencing on the date of issuance.

In connection with the Business Combination, all previously issued and outstanding shares of Legacy Preferred Stock were converted into an equivalent number of shares of Common Stock on a one-for-one basis, then multiplied by the Exchange Ratio pursuant to the Business Combination Agreement.

2023 Long-Term Incentive Plan

In July 2023, the stockholders 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 year-end and (b) such smaller number of shares as determined by the Board or the compensation committee of the Board, and (iii) the shares of Common Stock subject to 2009 Plan awards, to the extent those shares are added into the 2023 Plan by operation of the recycling provisions described below.

The initial maximum number of shares of Common Stock that may be issued under the 2023 Plan through incentive stock options was 1,046,385, provided that this limit automatically increases on January 1 of each year, for a period of not more than ten 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 the 2009 Plan or 2023 Plan;

•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 valuation prior to the Business Combination and market price for all options and warrants granted thereafter.

Warrants Outstanding

A summary of the Common Stock warrant activity during the six months ended June 30, 2024 is as follows:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Outstanding, December 31, 2023		4,638,454		$	10.20		4.62	$	1,382,919
Issued		89,787			2.81
Expired		(80,019	)		6.75
Outstanding, June 30, 2024		4,648,222		$	10.11		4.11	$	362,887
Exercisable, June 30, 2024		4,558,435		$	10.25		4.10	$	362,887

Option Activity and Summary

A summary of the option activity during the six months ended June 30, 2024 is as follows:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Life in Years		Aggregate Intrinsic Value
Outstanding, December 31, 2023		1,689,765		$	2.72		9.00	$	1,850,397
Granted		112,981			3.05
Expired/Cancelled		(559,505	)		2.75
Outstanding, June 30, 2024		1,243,241		$	2.74		8.35	$	—
Vested/Exercisable, June 30, 2024		278,182		$	2.21		5.53	$	—

The weighted average fair value of the options granted during the six months ended June 30, 2024 was based on a Black Scholes option pricing model using the following assumptions:

Expected volatility	70.0%
Expected term of option	6.0 - 7.0
Range of risk-free interest rate	3.8% -4.6%
Dividend yield	0%

The Company recorded stock-based compensation expense related to its options of $163,700 and $187,030 for the three months ended June 30, 2024 and 2023, respectively, and $375,169 and $367,539 for the six months ended June 30, 2024 and 2023, respectively. As

of June 30, 2024, there was $1,662,811 of unrecognized compensation expense related to unvested stock options, which will be recognized over the weighted average remaining vesting period of 2.46 years.