Longevity Health Holdings, Inc.

NOTE 1 – NATURE OF THE ORGANIZATION AND BUSINESS

Unless the context requires otherwise, references to the “Company” prior to the closing of the Business Combination (as defined below) are intended to refer to Carmell Regen Med Corporation (formerly Carmell Therapeutics Corporation), a Delaware corporation, (“Legacy Carmell”) and, after the closing of the Business Combination, are intended to refer to Longevity Health Holdings, Inc. (formerly Carmell Corporation), a Delaware corporation, and its consolidated subsidiaries.

The Company is a bio-aesthetics company focused on developing, manufacturing, and marketing cosmetic skincare and haircare products. The Company’s product pipeline also includes innovative bone and tissue healing products on which further research and development has been paused. The Company’s operations are headquartered in Pittsburgh, Pennsylvania. 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”), the Company consummated a 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 Healthcare Acquisition Corp. III, a Delaware corporation and the predecessor of the Company (“Alpha”), Candy Merger Sub, Inc., a Delaware corporation (“Merger Sub”) and Legacy Carmell, pursuant to which Merger Sub merged with and into Legacy Carmell, with Legacy Carmell as the surviving company of the Business Combination. After giving effect to the Business Combination, Legacy Carmell became a wholly-owned subsidiary of the Company.

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 the Company's common stock, par value $0.0001 per share (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, par value $0.0001 per share (“Class A Common Stock”) and each share of Alpha Class B common stock, par value $0.0001 per share (“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 Alpha’s stockholders to approve the Business Combination (the “Special Meeting”), there were (i)15,444,103 shares of Class A Common Stock issued and outstanding and (ii)3,861,026 shares of Class B Common Stock issued and outstanding. Prior to the Special Meeting, holders of 12,586,223 shares of Alpha Class A Common Stock exercised their right to redeem such shares for cash at a price of approximately $10.28 per share (net of withholding for federal and franchise tax liabilities). The per share redemption price was paid out of Alpha’s trust account, which, after taking into account the redemptions, but before any transaction expense, had a balance of $29,376,282 at the Closing Date.

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

Axolotl Biologix Acquisition

On August 9, 2023 (“Merger Closing Date”), the Company completed the acquisition of Axolotl Biologix, Inc. (“AxoBio”) pursuant to an Agreement and Plan of Merger, dated July 26, 2023 (the “AxoBio Acquisition”). On the Merger Closing Date, each issued and outstanding share of AxoBio’s common stock was canceled and converted into the right to receive a pro rata share of:

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$8,000,000 in cash (the “Closing Cash Consideration”), payable upon delivery of AxoBio’s audited financial statements;

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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”) issued upon the Merger Closing Date (the “Closing Share Consideration”); and

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up to $9,000,000 in cash and up to $66,000,000 in shares of Common Stock that, in each case, were subject to the achievement of certain revenue targets and research and development milestones (the “Earnout”).

Axolotl Biologix Disposition

On March 20, 2024, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with the former stockholders of AxoBio (the “Buyers”), providing for the sale by the Company of all of its equity interests in AxoBio to the Buyers (the “AxoBio Disposition”). The consideration for the AxoBio Disposition consisted of (i) the Closing Share Consideration, initially issued as consideration to the Buyers, (ii) cancellation of the notes payable by the Company to the Buyers in an aggregate principal amount of $8,000,000 as the Closing Cash Consideration and (iii) termination of the Company’s obligations with respect to the Earnout. The AxoBio Disposition closed on March 26, 2024 (see Note 16).

Risks and Uncertainties

Disruption of global financial markets and a recession or market correction, including the ongoing military conflicts between Russia-Ukraine war and the related sanctions imposed against Russia, the Israel-Hamas war, geopolitical tensions between the United States and China, proposed tariffs and other trade restrictions by the U.S. government and foreign governments and other global macroeconomic factors such as inflation and high 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 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”). 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.

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 of 2002, 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 Securities Exchange Act of 1934, as amended) 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 that 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 consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. If the underlying estimates and assumptions upon which the consolidated financial statements are based change in the future, actual amounts may differ from those included in the accompanying consolidated financial statements.

AxoBio Acquisition

The Company allocated the fair value of the purchase consideration of the AxoBio Acquisition 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 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.

Discontinued Operations

On March 26, 2024, the Company completed the AxoBio Disposition as described in Note 1 above. In accordance with Financial Accounting Standards Board (the "FASB") Accounting Standards Codification (“ASC”) 205, Presentation of Financial Statements, Discontinued Operations, Other Presentation Matters(“ASC 205”), the assets and liabilities of AxoBio are classified as available for sale on the accompanying consolidated balance sheets, and the results of its operations are reported as discontinued operations in the accompanying consolidated statements of operations.

Segment Reporting

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. Ourchief executive officer, who is our chief operating decision maker, views the Company’s operations and manages its business inone operating segment, which is principally the business of development and commercialization of bio-aesthetic products.

Cash and Cash Equivalents

Cash includes cash on hand and demand deposit accounts, and cash equivalents include highly liquid instruments with maturities of three months or less. 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 years ended December 31, 2024 and 2023, the Company has experienced no losses related to its cash and cash equivalents that exceed federally insured deposit limits, and as of December 31, 2024, the Company hadno cash balances in excess of such limits. As of December 31, 2024 and 2023, the Company had cash equivalents of $25,374 and $30,000, respectively. Cash equivalents as of December 31, 2023 are classified as a component of assets available for sale in the accompanying consolidated balance sheets.

Inventory

The Company’s inventory consists of raw materials, work-in-process, and finished goods and is stated at the lower of cost or net realizable value. Cost is calculated by applying the average cost method. 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, the competitiveness of product offerings, market conditions, and product life cycles when determining excess and obsolescence and net realizable value adjustments. The Company hadno reserve for obsolescence as of December 31, 2024 and 2023.

At the Merger Closing Date, AxoBio’s inventory was adjusted to fair value less selling costs, as specified by ASC 805, Business Combinations. In conjunction with the Company’s 2023 year-end evaluation for impairment, it was determined that AxoBio’s inventory was impaired based (i) no sales of products since October 2023 and (ii) no future sales of these products were expected. Accordingly, the AxoBio inventory was written down to historical cost, which approximated its realizable value. This loss of $4,754,357 is included as a component of discontinued operations in the accompanying consolidated statements of operations. All of the Company’s inventory at December 31, 2023 was related to AxoBio and is classified as a component of assets available for sale in the accompanying consolidated balance sheets.

Deferred Offering Costs

The Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin 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. As of December 31, 2024, the Company capitalized deferred offering costs of $86,314 related to the 2025 Private Placement as detailed in Note 17.

Accounts Receivable

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 December 31, 2024 and 2023. As of December 31, 2023, all of the Company’s trade receivables were related to AxoBio and are classified as a component of assets available for sale in the accompanying consolidated balance sheets.

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 “FPA”) providing for an over-the-counter prepaid equity forward transaction relating to the Common Stock. Pursuant to the terms of the FPA, at the closing of the Business Combination, the Sellers purchased directly from the stockholders of Alpha 1,705,959 shares of Class A Common Stock (the “Recycled Shares”) at a price of $10.28 per share (the “Initial Price”), which is the price equal to the redemption price at which holders of Class A Common Stock were permitted to redeem their shares in connection with the Business Combination.

In accordance with the terms of the FPA, at the Closing Date, the Company paid to the Sellers an aggregate cash amount of $17,535,632, which was equal to the product of (a) the Recycled Shares and (b) the Initial Price. The settlement date was to be the earliest to occur of (a) the first anniversary of the Closing Date and (b) after the occurrence of (i) a Delisting Event (as defined in the FPA) or (ii) a Registration Failure (as defined in the FPA), upon the date specified by Meteora in a written notice delivered to the Company at Meteora’s discretion. Any Recycled Shares not sold in accordance with the early termination provisions described below would have incurred a $0.50 per share termination fee payable by the Company to Meteora at settlement. The FPA was recorded at fair value, with changes in fair value recognized in the consolidated statements of operations.

In August 2024, the Company and Meteora amended the settlement method provision of the FPA from physical settlement to cash settlement (the FPA as amended, the “2024 FPA” and the amendment to the FPA, the “FPA Amendment”). At the end of the Valuation Period (as defined in the 2024 FPA), a cash amount payable to the Company would equal the number of unsold Recycled Shares multiplied by the volume-weighted daily volume-weighted price over the Valuation Period a settlement adjustment equal to the number of unsold recycled shares multiplied by $0.75. If the net settlement amount was negative, no amounts were due to or from the Company. Due to the nature of the changes in the terms of the FPA, the FPA Amendment was deemed to be a new contract. As such, the Company recognized a loss of $254,664 on the termination of the FPA in 2024, which is included in loss on forward purchase agreement in the consolidated statements of operations. No Recycled Shares were sold pursuant to the 2024 FPA, and the Valuation Period terminated in October 2024 with no amounts due to or from the Company.

Property and Equipment

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

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Equipment –5-7 years

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

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Furniture and fixtures –7 years

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.

All of the Company’s goodwill as of December 31, 2024 was related to the AxoBio Acquisition and is classified as a component of assets available for sale in the accompanying consolidated balance sheets. The following table presents information related to goodwill for the year ended December 31, 2024.

Finite-lived intangible assets are carried at cost and amortized based on an economic benefit period, which isseven totwenty 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 license fees and expensed as incurred. Intangible assets related to AxoBio are classified as a component of assets available for sale in the accompanying consolidated balance sheets.

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

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Customer contracts –20 years

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Trade name –7 years

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Intellectual property –7 years

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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 hasnot recognized any goodwill or intangible asset impairment in the years ended December 31, 2024 and 2023.

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 AxoBio stockholders. 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 Stock should be classified as permanent equity.

Earnout Liability

In connection with the AxoBio Acquisition, the former stockholders of AxoBio were entitled to receive the Earnout, consisting of performance-based earnouts 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 included in the purchase price of AxoBio at the Merger Closing Date and subsequently remeasured at each reporting date with changes in fair value recorded as a component of other (expense) income in the consolidated statements of operations. As of December 31, 2023, the Company determined that the performance-based targets would not be met and that the Earnout would not be payable. The Company recognized other income of $13,482,292 in 2023 related to the change in the fair value of the earnout liability, which is included as a component of discontinued operations in the accompanying consolidated statements of operations.

Revenue Recognition

The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), 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:

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Identification of the contract with a customer

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Identification of the performance obligations in the contract

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Determination of the transaction price

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

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

The Company primarily sells its products to customers within the United States. Revenues from these product sales are recognized when the customer obtains control of the product, which occurs at a point in time, typically upon shipment or, in the case of AxoBio’s products, on delivery to the customer’s warehouse or designated location, at a standard transaction price for the specific product sold. All of the Company’s revenue in 2023 was attributable to AxoBio and is reported as a component of discontinued operations in the accompanying consolidated statements of operations.

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 the Company transfers 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 30-120 days. The Company had no material contract assets, contract liabilities, or deferred contract costs recorded as of December 31, 2024 and 2023. The Company expenses costs to obtain a contract as incurred when the amortization period is less than one year.

For the year ended December 31, 2023, all of the Company’s revenue was attributable to AxoBio and is included as a component of discontinued operations in the accompanying consolidated statements of operations. AxoBio sold its products principally to a specialty distributor. AxoBio entered into service arrangements with this customer to provide distinct services due to AxoBio's limited workforce. Such services include distribution, credit risk, and marketing and sales services. The Company has assessed the consideration payable to this customer as it relates to these service arrangements in accordance with ASC 606 and has concluded that the services being provided by this customer are distinct, with the exception of the credit risk service fee, which was deemed 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 this customer are at fair value. As such, in accordance with ASC 606, the distribution and marketing services are accounted for consistent with other services 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 recorded as a reduction of the transaction price. The credit risk fee totaled approximately $440,784 from the date of the AxoBio Acquisition through December 31, 2023.

Cost of Sales

Cost of sales is comprised of all costs to manufacture or purchase 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. All of the Company’s 2023 cost of revenues was attributable to AxoBio and is reported as a component of discontinued operations in the accompanying consolidated statements of operations.

Selling and Marketing Expenses

Selling and marketing expenses are recognized as incurred and consist primarily of advertising costs, commissions, and freight expenses, and the distribution and marketing costs described in the revenue recognition policies above. For the year ended December 31, 2024, sales and marketing expenses totaled $189,323. For the year ended December 31, 2023, sales and marketing expenses of $6,829,520 were solely related to AxoBio and are reported as a component of discontinued operations in the accompanying consolidated statements of operations.

Research and Development Expenses

Research and development expenses are expensed as incurred and consist principally of internal and external costs, including personnel costs, laboratory supplies and consumables, and external testing services.

Restructuring Charges

In the second half of 2023, the Company refocused its research and development efforts on cosmetic skincare products that have near-term commercial potential, reprioritized further research and development, and ceased clinical studies of product candidates that will take more than a year to commercialize. Restructuring charges related to this strategic realignment of the Company’s operations consist of severance from the termination of employees in non-core areas or overlapping business functions. As of December 31, 2023, $452,579 of such severance was unpaid (see Note 8).

Income Taxes

The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”). Under ASC 740, 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.

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 wereno unrecognized tax benefits andno amounts accrued for interest and penalties as of December 31, 2024 and 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals, or material deviation from its position.

Net Loss Per Share

The Company computes net loss per share in accordance with ASC 260, Earnings per Share. 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 December 31, 2024 and 2023, consist of the following (in common stock equivalents):

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 consolidated statements of operations.

For stock options issued to employees and members of the Company’s 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 process for valuing employee stock options noted above.

Leases

The Company accounts for leases in accordance with ASC 842, Leases(“ASC 842”). 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. Lease expense is recognized on a straight-line basis over the lease term.

Concentrations

As of and for the year ended December 31, 2023, one customer accounted for 100% of AxoBio’s accounts receivable and revenues. AxoBio’s human amnion allograft product made up 100% of revenue for the year ended December 31, 2023. For the year ended December 31, 2023,100% of AxoBio’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).

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.

The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, deferred consideration payable, related party loans payable approximate fair value because of the short-term maturity of such instruments. Under the fair value hierarchy, cash and cash equivalents are classified as Level 1. Other financial assets and liabilities as of December 31, 2024 and 2023 are categorized based on a hierarchy of inputs as follows:

Changes in the fair value of Level 3 financial assets and liabilities for the year ended December 31, 2024 are as follows:

The FPA 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 FPA 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 ofone year. As of December 31, 2023, the assumptions incorporated into the valuation model included the share price of $3.81, the termination fee of $0.50 per share, the debt rate of 12.95%, and the term of 0.54 years. As of the effective date of the FPA Amendment, the assumptions incorporated into the valuation model for the FPA included the share price of $1.10, the termination fee of $0.50 per share, and the debt rate of 14.7%. On the effective date of the FPA Amendment, the 2024 FPA was valued using a Monte Carlo model. The assumptions incorporated in this model included the share price of $1.10, the expected term of 4.06 years, the volatility factor of 85.9%, and the debt rate of 7.33%.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments(“ASU 2016-13”). 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. The Company adopted this standard on January 1, 2023, which hadno material impact on the Company’s consolidated financial statements

In August 2020, the FASB issued ASU No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, (“ASU 2020-06”). ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock, resulting in fewer instruments with embedded conversion features being separately recognized from the host contract compared to prior standards. Those instruments that do not have a separately recognized embedded conversion feature will no longer recognize a debt issuance discount related to such a conversion feature and will recognize less interest expense on a periodic basis. Additionally, the ASU amends the calculation of the share dilution impact related to a conversion feature and eliminates the treasury method as an option. The Company adopted ASU 2020-06 as of January 1, 2024, which hadno material impact on the Company’s consolidated financial statements.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures ("ASU 2023-07"), which requires an enhanced disclosure of segments on an annual and interim basis, including the title of the chief operating decision maker, significant segment expenses, and the composition of other segment items for each segment's reported profit. The Company adopted ASU 2023-07 as of January 1, 2024, which hadno material impact on the Company’s consolidated financial statements.

NOTE 3 – BUSINESS COMBINATIONS

AxoBio Acquisition

The AxoBio Acquisition is reflected in the 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 AxoBio Acquisition. It was determined that AxoBio was a variable interest entity, as AxoBio’s total equity at risk was not sufficient to permit AxoBio to finance its activities without additional subordinated financial support, with the Company being the primary beneficiary. In accordance with ASC 805, the Company recorded AxoBio’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 consolidated financial statements, 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 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 AxoBio Acquisition was as follows:

The fair value of the Series A Preferred Stock was estimated at $2,447 per share, using the put option model, based on the market value of the Common Stock at the Merger Closing Date, conversion rate, projected conversion term, and estimated discount for lack of marketability. Deferred consideration is related to the Closing Cash Consideration of $8,000,000, which was payable upon delivery of the AxoBio 2022 audited financial statements. The 2022 audited financial statements were delivered in October 2023, and, as such, the Closing Cash Consideration was payable at December 31, 2023.

In connection with the AxoBio Acquisition, the former stockholders of AxoBio were entitled to receive payment of the Earnout consisting 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 Merger Closing Date and was subsequently remeasured at each reporting date with changes in fair value recorded as a component of discontinued operations in the consolidated statements of operations.

The fair value of the Earnout was estimated as of the Merger 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 AxoBio 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 consolidated statements of operations.

The allocation of the purchase price is as follows:

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 approximately $8,200,000 at the Merger Closing Date. The fair value step-up is amortized over the expected realization term of one year from the Merger Closing Date.

The acquired SBA Loan (as described in Note 9) was adjusted down to its fair value by $502,000 due to its more favorable than the market interest rate. This fair value step-down is amortized over the term of the 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 AxoBio Acquisition are not deductible for U.S. tax purposes.

The Company determined that the AxoBio Acquisition was deemed significant to the Company in accordance with Rule 3-05 of Regulation S-X. As required by ASC 805, Business Combinations, the following unaudited pro forma statements of operations for the year ended December 31, 2023 give effect to the AxoBio Acquisition as if it had been completed on January 1, 2023. 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 AxoBio 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 AxoBio.

(1)

An adjustment to reflect additional amortization of $1,700,000 for the period from January 1, 2023 through the Merger Closing Date that would have been charged assuming the fair value adjustments to intangible assets had been applied on January 1, 2023.

NOTE 4 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS

The Company had negative net working capital of $4,921,151 as of December 31, 2024 and positive working capital of $951,495 as of December 31, 2023, excluding assets and liabilities available for sale. The Company’s liquidity needs up to December 31, 2024 have been satisfied through debt and equity financing.

The Company had a net loss from continuing operations of $10,650,464 and $16,205,252 for the years ended December 31, 2024 and 2023, respectively. The Company had negative cash flows from operations of $4,388,948 and $8,348,208 for the years ended December 31, 2024 and 2023, respectively, and an accumulated deficit of $68,871,662 and $58,503,401 as of December 31, 2024 and 2023, respectively.

Due to its current 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 any 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.

As more fully described in Note 17, the Company closed an offering of Common Stock and Common Stock warrants on January 2, 2025, resulting in gross proceeds to the Company of $1,851,849. The Common Stock warrants, if exercised for cash, will result in up to $1,851,849 in additional gross proceeds to the Company. In addition, the Company closed on the acquisition of the operating assets of Elevai Skincare on January 16, 2025, as more fully described in Note 17. Elevai Skincare’s skincare and haircare products generated revenue of approximately $2,500,000 in 2024.

In addition, the Company has refocused its research and development efforts on cosmetic skincare products that have near-term commercial potential, reprioritized research and development, and ceased clinical studies of product candidates that will take more than a year to commercialize. The Company is also exploring the out-licensing of certain research and development programs to enhance its liquidity. In the third quarter of 2023 and the first quarter of 2024, 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 business functions. In addition, the company terminated a lease on redundant facility space in August 2024.

NOTE 5 – INVENTORY

Inventory as of December 31, 2024 was comprised of the following:

All of the Company's inventory as of December 31, 2023, totaling $3,038,179, was related to AxoBio and is classified as a component of assets available for sale in the accompanying consolidated balance sheets.

NOTE 6 – PROPERTY AND EQUIPMENT

Property and equipment included in continuing operations consist of the following:

Depreciation expense included in continuing operations was $78,940 and $92,598 for the years ended December 31, 2024 and 2023, respectively. Depreciation expense included in discontinued operations was $10,828 and $18,462 in 2024 and 2023, respectively.

NOTE 7 – GOODWILL AND INTANGIBLE ASSETS

The Company’s goodwill relates to the AxoBio 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. For the year ended December 31, 2023, the Company recognized $19,188,278 in goodwill from the AxoBio Acquisition, which is classified as a component of assets available for sale in the accompanying consolidated balance sheets.

The Company’s intangible assets primarily relate to the AxoBio Acquisition (see Note 3). Intangible assets acquired in connection with the AxoBio Acquisition were initially recorded at their estimated fair value as of the acquisition date. Intangible assets that have finite lives are amortized over their economic useful life. Amortization of intangibles related to AxoBio is included as a component of discontinued operations in the accompanying consolidated statements of operations.

Additionally, the Company capitalizes legal costs directly associated with the submission of Company patent applications. Gross patent costs of $70,746 as of December 31, 2024 and 2023 are amortized on a straight-line basis over the patent term.

Intangible assets and the related accumulated amortization consist of the following at December 31, 2024:

Intangible assets and the related accumulated amortization consist of the following at December 31, 2023:

Amortization expense included in loss from continuing operation in the accompanying consolidated statements of operations was approximately $4,546 and $4,515 for the years ended December 31, 2024 and 2023, respectively. Amortization expense included in income from discontinued operation in the accompanying consolidated statements of operations was $625,621 and $997,432 for the years ended December 31, 2024 and 2023, respectively.

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

NOTE 8 – ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following amounts:

Accrued compensation as of December 31, 2023 was a non-interest-bearing liability for unpaid employee payroll, including compensation earned during the years 2019 to 2023.

NOTE 9 – DEBT

U.S. Small Business Administration (SBA) Loan

As of the Merger Closing Date, AxoBio had an outstanding loan with the SBA with total principal and accrued interest outstanding of $2,000,000 and $113,476, respectively (the “SBA Loan”). The SBA Loan was transferred to the Buyers in conjunction with the AxoBio Disposition. Interest under the SBA Loan accrued 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 began in December 2023. As of December 31, 2023, there was outstanding principal and accrued interest of $2,000,000 and $134,961, respectively. As of December 31, 2023, there was unamortized debt discount of $494,930. In connection with the AxoBio Acquisition, the SBA Loan was adjusted to fair value, which, excluding accrued interest, was determined to be $1,498,000. The difference in the outstanding principal and fair value of $502,000 was recorded as debt discount and was accreted over the remaining term of the loan using the effective interest method. For the years ended December 31, 2024 and 2023, the Company incurred interest expense of $17,571 and $32,221, respectively, and amortization of debt discount of $4,242 and $7,070, respectively. The SBA Loan and related accrued interest are classified as a component of assets available for sale in the accompanying consolidated balance sheets, and the related interest expense is classified as a component of discontinued operations in the accompanying consolidated statements of operations.

Related Party Loans

As of the Merger Closing Date, AxoBio had several promissory notes outstanding (the “Burns Notes”) to Burns Ventures, LLC (“Burns Ventures”)with total principal outstanding of $5,610,000. The owner of Burns Ventures was a former stockholder of AxoBio. The Burns Notes were transferred to the Buyers in conjunction with the AxoBio Disposition. Interest on the Burns Notes was payable quarterly at a fixed interest rate of 7.00%. The Burns Notes requiredno monthly payments and were due in full on its maturity date, December 31, 2024. As of December 31, 2023, the Burns Notes had outstanding principal and accrued interest of $5,610,000 and $98,982, respectively, and interest expense totaled $89,448 and $164,611 for the years ended December 31, 2024 and 2023, respectively. As of the closing date of the AxoBio Disposition, there was unpaid interest on the Burns Notes of $89,448. The Burns Notes and related accrued interest are classified as a component of assets available for sale in the accompanying consolidated balance sheets, and the related interest expense is classified as a component of discontinued operations in the accompanying consolidated statements of operations.

2023 Promissory Notes

During the year ended December 31, 2023, the Company received proceeds of $848,500 from 26 zero coupon Promissory Notes (the “2023 Promissory Notes”). The 2023 Promissory Notes had a maturity date ofone year from the date of issuance. The principal of the 2023 Promissory Notes was due in full at maturity. There were 16,489 Common Stock warrants issued in connection with these 2023 Promissory Notes with a fair value of $55,062. The warrants vested immediately and have a term of 5 years and exercise prices ranging from $11.50 to $14.30. The fair value of the warrants was recorded as debt discount and was amortized over the term of the loans using the effective interest method. As of December 31, 2023, there was $19,549 of unamortized debt discount. Debt discount amortization during the years ended December 31, 2024 and 2023 was $19,549 and $33,513, respectively. Pursuant to the terms of the 2023 Promissory Notes, the Board elected to repay all maturities of the 2023 Promissory Notes in shares of Common Stock. During the year ended December 31, 2024, the Company issued 328,707 shares of Common Stock to repay the $848,500 of the aggregate principal of the 2023 Promissory Notes.

Insurance Premium Financing

In July 2024, the Company entered into an agreement with a third party to finance a $464,154 premium on an insurance policy. This financing agreement has a monthly payment of $40,467, accrues interest at a rate of 9.99%, and matures in June 2025. As of December 31, 2024, there was $235,884 of principal outstanding under this financing agreement.

In April 2024, the Company entered into a separate agreement with a third party to finance a $31,538 premium on an insurance policy. This financing agreement has a monthly payment amount of $2,670, accrues interest in the amount of 9.99% and matures in February 2025. As of December 31, 2024, there was $5,274 of principal outstanding under this financing agreement.

In August 2023, the Company entered into an agreement with a third party to finance a $1,011,480 premium on an insurance policy. This financing agreement had a monthly payment amount of $117,072, accrued interest at a rate of 8.99%, and matured in April 2024. As of December 31, 2024 and 2023, there was $0 and $459,647, respectively, of principal outstanding under this financing agreement.

Interest expense on these financing agreements totaled $29,446 and $33,527 for the years ended December 31, 2024 and 2023, respectively.

Convertible Notes

On January 19, 2022, the Company issued two senior secured convertible notes (the “Convertible Notes”) of $1,111,111 each to two investors (“Holders”), due on January 19, 2023. The Convertible Notes bore interest at 10% (18% upon default). The Company 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 Convertible Notes were collateralized by all assets (including current and future intellectual property) of Legacy Carmell. The Convertible 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 Common Stock (the “Convertible Note Warrants”). Each Convertible Note Warrant was exercisable at a price of $0.16 per warrant share, vested immediately, and had a term offive years. The fair value of the Convertible Note Warrants at the time of issuance was $409,483, which was recorded as debt discount. The Convertible Notes were 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 defined in the Convertible Notes) (as adjusted, the “Conversion Price”). In the event units consisting of Common Stock and warrants were issued in a Qualified Offering, the Convertible Notes were convertible into Common Stock and warrants. If, at any time while the Convertible Notes were outstanding, the Company sold or granted any option to purchase or sell or grant any right to reprice, or otherwise dispose of or issue (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 was lower than the then Conversion Price (such lower price, the “Base Conversion Price”), then the Conversion Price would be reduced to equal the Base Conversion Price. Such adjustments were to be made whenever such Common Stock or Common Stock equivalents were issued. Multiple events triggered the down-round feature of the Base Conversion Price. As of December 31, 2022, the Base Conversion Price was $1.79.

The conversion feature within the Convertible Notes met 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 consolidated statements of operations.

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

On July 19, 2022, Legacy Carmell defaulted on the Convertible Notes. Under the terms of the Convertible Notes, 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 consolidated statements of operations. For the year ended December 31, 2023, interest expense on the Convertible Notes, as calculated under GAAP, totaled $570,220, 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 it of an Event of Default. Legacy Carmell and Alpha entered into an agreement with Puritan Partners LLC, one of the Holders (“Puritan”), in connection with the Notice of Acceleration on December 19, 2022. Pursuant to this agreement, Alpha and Legacy Carmell each represented and warranted to Puritan that (i) it intended to enter into the Business Combination, (ii) there would 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 were 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 would 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 was $150,000,000, and (vi) such Business Combination Agreement would not place any restrictions on Puritan's ability to transfer any of its securities, including, without limitation, the shares underlying its Convertible Note Warrants. Legacy Carmell agreed it would not pay any other debtholder on account of interest or principal during the forbearance period.

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 Common Stock (not subject to lock-up or any other restrictions on transfer) at a price of $10.00 per 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 would 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, the Company repaid $2,649,874 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 on the Closing with a fair value of $250,000 (see Note 11 for additional details).

Future Maturities of Debt

All of the Company’s outstanding debt as of December 31, 2024 matures and is payable in 2025.

NOTE 10 – LEASES

The Company was a party totwo office leases, which were scheduled to expire on December 31, 2028. In August 2024, the Company entered into an agreement toterminateone of these leases. In conjunction with this lease termination, the Company recognized a loss of $44,577 for the year ended December 31, 2024. The remaining term of the other lease isfour years as of December 31, 2024. The Company has elected to not recognize ROU assets and lease liabilities arising from short-term leases (leases with initial terms of twelve months or less, which are deemed immaterial) on its consolidated balance sheets.

When measuring lease liabilities for leases that are classified as operating leases, the Company discounted lease payments using its estimated incremental borrowing rate at the later of lease inception or January 1, 2020, the date of adoption of ASC 842. The weighted average incremental borrowing rate applied was 8%.

The following table presents net lease cost and other supplemental lease information:

As of December 31, 2024, the estimated future minimum lease payments, excluding non-lease components, are as follows:

NOTE 11 – COMMITMENTS AND CONTINGENCIES

Exclusive License Agreement

On January 30, 2008, the Company and Carnegie Mellon University (“CMU”) entered into a License Agreement, as amended (the “License Agreement”). The 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 License 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.

The License 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 License Agreement. Failure to perform in accordance with the agreed-upon milestones is grounds for CMU to terminate the License 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, the Company issued a warrant in 2008, which was exercised in full in 2011 for 98,938 sharesof 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 ownershipin the Company. The Business Combination did not qualify as a qualified initial public offering or qualified sale under the License Agreement.

Royalties payable by the Company to CMU are 2.07% of net sales, as defined in the License Agreement. The Company is also required to 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 60 days after the end of each fiscal quarter. All overdue payments bear interest at a rate equal to the Prime Rate (as defined in the License Agreement) in effect at the date such amounts are due plus 4%. No royalties were accrued or paid during the years ended December 31, 2024 and 2023.

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; and (3) for international patents, from the start of expenses for patenting outside of the U.S. There wereno reimbursed expenses andno owed related to reimbursable expenses for the years ended December 31, 2024 and 2023.

In conjunction with the Company's restructuring in 2023, as described in Note 2, it ceased clinical studies of product candidates utilizing the technology licensed from CMU and has paused further research and development on these product candidates.

Convertible Notes

As discussed in Note 9, following the Closing, 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 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. 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 stockholders. Puritan’s total claims, inclusive of the amounts paid at the 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. The Company has conveyed its position to the Holders. As described in further detail below, Puritan has filed a complaint against the Company related to these allegations. There can be no assurance that these or similar matters will not result in further arbitration, litigation, or other dispute resolution, which may not be resolved in our favor and may adversely impact our financial condition.

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), naming the Company as a defendant. In the complaint, Puritan asserts that the Company breached its obligations under the Convertible Notes and the Convertible Note Warrants. Puritan also asserts that the Company did not comply with its obligations to provide Puritan with 25,000 freely tradeable shares of Common Stock in a timely manner. 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 $2,725,000 through November 1, 2023, additional fees and interest thereafter, costs and attorney’s fees, an order of foreclosure on its security interest, and other declaratory relief. The Company carried an accrual for interest payable of $1,175,845 as of December 31, 2024 and 2023 related to the Convertible Notes. The Company moved to dismiss the complaint, and in July 2024, the Court dismissed four of the eight claims in the complaint without prejudice. The case is currently in the discovery phase with respect to the remaining claims, which is expected to last through June 2025. While the Company intends to defend itself vigorously against this litigation, there can be no assurance that this matter will be resolved in the Company’s favor, and an adverse outcome could have a material adverse effect on the Company’s financial condition.

NOTE 12 – PROFIT-SHARING PLAN

The Company has a 401(k) profit-sharing plan 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 401(k) profit-sharing plan during the years ended December 31, 2024 and 2023.

NOTE 13 – STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock

As of December 31, 2024 and 2023, the Company was authorized to issue 250,000,000 shares of Common Stock and had shares issued and outstanding of 20,905,407 and 23,090,585, respectively.

In conjunction with the AxoBio Disposition, the Closing Share Consideration, including 3,845,337 shares of Common Stock issued for the AxoBio Acquisition, were returned to the Company and retired.

In April 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 $3,000,950 (the “2024 Private Placement”). On the closing date of the 2024 Private Placement, the Company issued a warrant for 89,787 shares of Common Stock to the placement agent (the “Placement Agent”). This warrant has an exercise price of $2.81, a term offive years, a fair value of $129,495, and became exercisable on October 11, 2024. In conjunction with the Private Placement, the Company paid $212,212 in fees and $39,276 in legal costs to the Placement Agent. A total of $313,725 of costs were recorded as a reduction of the gross proceeds received.

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

As of January 1, 2023 and immediately prior to the Business Combination, Legacy Carmell had outstanding Series A convertible preferred stock (“Series A Preferred Stock”), Series B convertible preferred stock (“Series B Preferred Stock”), Series C-1 convertible preferred stock (“Series C-1 Preferred Stock”) and Series C-2 Preferred Stock, which are collectively referred to herein as “Preferred Stock.”

Legacy Carmell 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”). Such dividends accrue on each share of Preferred Stock commencing on the date of issuance.

In connection with the Business Combination, all previously issued and outstanding Preferred Stock was 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 afour-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 compensation committee, 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:

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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;

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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;

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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

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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

The following table presents information related to Common Stock warrants for the year ended December 31, 2024.

Option Outstanding

A summary of option activity during the year ended December 31, 2024 is presented below:

The weighted average fair value of the options granted during the year ended December 31, 2024 was based on a Black Scholes option pricing model using the following assumptions:

The Company recorded stock-based compensation expense for options of $827,043 and $667,682 for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, there was approximately $2,682,648 of total unrecognized compensation expense related to unvested stock options, which will be recognized over the weighted average remaining vesting period of 3.33 years.

NOTE 14 – RELATED PARTY TRANSACTIONS

In conjunction with the 2024 Private Placement and the 2025 Private Placement (as defined in Note 17), the Company engaged the Placement Agent, of which a Board member is a managing partner. The Company paid the Placement Agent a placement fee of $212,212 and legal fees of $39,726 related to the 2024 Private Placement. In addition, on the closing date of the 2024 Private Placement, the Company issued a warrant exercisable for up to 89,787 shares of Common stock at an exercise price of $2.81 to the Placement Agent as detailed in Note 13. In conjunction with the 2025 Private Placement, the Company incurred $60,000 in legal fees payable to the Placement Agent in 2024. As of December 31, 2024, $35,000 of these fees were unpaid and are included in accrued expenses and other liabilities in the accompanying consolidated balance sheets. The Company's Chief Executive Officer invested $25,000 in the 2024 Private Placement, purchasing 8,680 shares of Common Stock at a price of $2.88 per share, which was the market price on the closing date of the 2024 Private Placement.

During the year ended December 31, 2023, entities affiliated with a partnership in which a Board member is a general partner purchased $50,000 of the 2023 Promissory Notes as detailed in Note 9. Upon maturity of these notes in 2024, the principal was repaid with the issuance of 19,000 shares of Common Stock with a fair value of $50,000.

As of the Merger Closing Date, the Burns Notes had total principal outstanding of $5,610,000. The owner of Burns Ventures was a former stockholder of AxoBio. Interest on the Burns Notes was payable quarterly at a fixed interest rate of 7.00%. The Burns Notes requiredno monthly payments and were due in full on its maturity date, December 31, 2024. As of December 31, 2023, the Burns Notes had outstanding principal and accrued interest of $5,610,000 and $98,982, respectively. During the period ended March 26, 2024, the Company incurred interest expense of $89,448 on these notes prior to disposal. As of the closing date of the AxoBio Disposition, there was $5,610,000 and $89,448 of principal and accrued interest outstanding, respectively, related to the Burns Notes.

AxoBio used OrthoEx for 3PL services. The former Chief Executive Officer of AxoBio, who served as an advisor to the Company from the Merger Closing Date until the closing date of the AxoBio Disposition, has an equity interest in OrthoEx and has a seat on OrthoEx’s Board of Directors. The Company incurred $26,700 and $41,752 of expense related to the services provided by OrthoEx for the years ended December 31, 2024 and 2023, respectively. As of the closing of the AxoBio Disposition and December 31, 2023, the Company had a payable to this related party of $7,830 and $8,650, respectively. The Company used Ortho Spine Companies, LLC (“Ortho Spine”) for various consulting and marketing services. Ortho Spine is owned by one of the former advisors to the Company. The Company incurred $0 and $79,167 of expense for services provided by Ortho Spine for the year ended December 31, 2024 and 2023, respectively. As of the closing of the AxoBio Disposition and December 31, 2023, the Company had no payables to Ortho Spine.

NOTE 15 – INCOME TAXES

The Company accounts for income taxes under ASC 740, which provides for an asset and liability approach of accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributed to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes. The Company’s state tax jurisdictions are Delaware,

Pennsylvania, and Florida.

The components of the Company’s provision for income taxes for the years ended December 31, 2024 and 2023 are as follows:

The components of the Company’s income tax rate for the years ended December 31, 2024 and 2023 are as follows:

Significant components of the Company's deferred tax assets as of December 31, 2024 and 2023 are summarized below.

As of December 31, 2024, the Company had approximately $29.5 million of federal and $43.3 million of state net operating loss carryforwards. Federal and state net operating loss carryforwards were approximately $31.3 million and $30.9 million, respectively, for the year ended December 31, 2023. The Company’s federal net operating loss carryforwards consist of approximately $7.3 million of pre-2018 netoperating loss carryforwards, which expire after twenty years and begin to expire starting in 2028. The Company had approximately $22.2 million of post-2017 net operating losses that carry forward indefinitely. Future utilization of the net operating loss carryforwards is subject to certain limitations under Section 382 of the Internal Revenue Code. In addition, the Company has approximately $57,000 offederal research and development credit carryovers, which expire after twenty years and begin to expire starting in 2041. The Company utilized approximatelynone of such credits for tax year 2024. Future realization of the credit carryforwards is subject to certain limitations under Section 383 of the Internal Revenue Code. The Company has not undertaken any formal research and development credit study to calculate its credits.

The Company provides for a valuation allowance when it is more likely than not that it will not realize a portion of the deferred tax assets. The Company has established a valuation allowance against the net deferred tax asset due to the uncertainty that enough taxable income will be generated in those taxing jurisdictions to utilize the assets. Therefore, the Company has not reflected any benefit of such deferredtax assets in the accompanying consolidated financial statements. Our net deferred tax asset and valuation allowance increased by approximately $4,341,000 and $2,198,000 for the years ended December 31, 2024 and 2023, respectively.

The Company is subject to U.S. federal income tax examinations by tax authorities for all tax years since inception due to unexpired net operating loss carryforwards originating in and after that year. The Company may be subject to income tax examinations for the various state taxing authorities which vary by jurisdiction.

The Company has evaluated its income tax positions and has determined that it does not have any uncertain tax positions. The Company will recognize interest and penalties related to any uncertain tax positions through its income tax expense.

NOTE 16 – Discontinued Operations

On March 20, 2024, the Company entered into the Purchase Agreement to sell AxoBio and closed on such sale on March 26, 2024, as detailed in Note 1. As of December 31, 2023, the assets and liabilities of AxoBio are classified as available for sale in the accompanying consolidated balance sheets. The assets and liabilities of AxoBio as of the closing of the AxoBio Disposition and December 31, 2023 are as follows:

The significant components of discontinued operations in the accompanying consolidated statements of income are as follows:

NOTE 17 – Subsequent Events

2025 Private Placement

On December 23, 2024, the Company entered into a securities purchase agreement with certain investors for the sale of 8,065,210 shares of Common Stock and warrants to purchase up to 8,065,210 shares of Common Stock at an exercise price of $0.23 per share (the “Common Stock Warrants”) for gross proceeds of $1,851,849 (the “2025 Private Placement”). The closing of the 2025 Private Placement occurred on January 2, 2025. Upon the closing of the 2025 Private Placement, the Company issued a warrant to purchase up to 556,195 shares of Common Stock to the Placement Agent. This warrant has an exercise price of $0.23, a term offive years, and becomes exercisable on the six-month anniversary of its issuance. In conjunction with the 2025 Private Placement, the Company paid the Placement Agent $127,925 in fees and $60,000 in legal costs.

On December 31, 2024, the Company entered into an asset purchase agreement dated as of December 31, 2024 (the “Asset Purchase Agreement”), by and among the Company, a wholly owned subsidiary of the Company formed in connection with the transaction (“Buyer”), Parent and Seller to acquire substantially all of the assets (the “Purchased Assets”) and assume certain of the liabilities (the “Assumed Liabilities”) of PMGC Holdings, Inc. (formerly known as Elevai Labs Inc.) (“Parent”) and PMGC Impasse Corp. (formerly known as Elevai Skincare Inc.), a wholly owned subsidiary of Parent (the “Seller”), related to Seller’s skincare and haircare business (the “Elevai Acquisition”) for a purchase price consisting of: (i) shares of Common Stock having an aggregate Market Value (as defined in the Asset Purchase Agreement) of $1,075,463 (the “APA Shares”), of which $100,000 will be withheld by the Company for 12 months after the closing of the Elevai Acquisition on January 16, 2025 (the “APA Closing Date”) to secure the indemnification obligations of the Seller and Parent under the Asset Purchase Agreement; (ii) Buyer’s assumption of the Assumed Liabilities; and (iii) $56,525 in cash to be paid within 60 days following the sale by Buyer of certain finished goods inventory (as specified in the Asset Purchase Agreement) included in the Purchased Assets as of the APA Closing Date.

Following the APA Closing Date, the Company will pay the following additional earnout consideration for the Purchased Assets, if and when payable: (a) for each year ending on the anniversary of the APA Closing Date during thefive-year period following the APA Closing Date, an amount, if any, equal to 5% of the Net Sales calculated as the aggregate gross sales minus (i) trade discounts, credits or allowances offered to customers and (ii) credits or allowances additionally granted upon returns, rejections or recalls) generated during such year from the Seller’s existing products as of the APA Closing Date; and (b) a one-time payment of $500,000 if Buyer achieves $500,000 in net revenue from sales of the Seller’s existing haircare products as of the APA Closing Date on or before the 24-month anniversary of the APA Closing Date.

Chief Executive Officer Transition

Effective January 20, 2025, the Company and Kendra Bracken-Ferguson mutually agreed that Ms. Bracken-Ferguson would no longer serve as the Chief Executive Officer of the Company. In connection with Ms. Bracken-Ferguson’s separation from the Company, she and the Company entered into a separation and release of claims agreement, dated January 24, 2025, pursuant to which Ms. Bracken-Ferguson will receive cash payments in the aggregate amount of $150,000 to be paid in equal installments over the subsequent six months. Effective as of January 24, 2025, the Board appointed Rajiv Shukla, the Company’s then-current Executive Chairman, as its Chief Executive Officer.

Nasdaq Delisting Notice

On August 30, 2024, the Company received a letter from the Listing Qualifications Department (the “Department”) of The Nasdaq Stock Market LLC (“Nasdaq”), notifying it that its Market Value of Listed Securities (the “MVLS”) was below the minimum of $35 million required for continued listing on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(2) (the “MVLS Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), Nasdaq provided the Company with 180 calendar days, or until February 26, 2025 (the “Compliance Date”), to regain compliance with the MVLS Requirement.

On March 4, 2025, the Company received written notice from the Department notifying it that the Company had failed to regain compliance with the MVLS Requirement by the Compliance Date and that Nasdaq would delist the Company’s securities from the Nasdaq Capital Market by March 11, 2025. On March 10, 2025, the Company requested an appeal of Nasdaq’s delisting determination to the Nasdaq Hearings Panel (the “Panel”), which will stay the delisting pending Nasdaq’s decision after the hearing scheduled for April 15, 2025. The Company believes it has a path to regaining compliance with Nasdaq's listing requirements, but no guarantee can be provided that it will be successful in doing so. Additionally, there can be no assurance that the Panel will provide a decision in the Company’s favor after the hearing or that the Company will be able to remain in compliance with the applicable Nasdaq listing requirements on an ongoing basis.