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RISK FACTORS

Stockholders should carefully consider the following risk factors, together with all of the other information included in this proxy statement/prospectus, before they decide whether to vote or instruct their vote to be cast to approve the Proposals described in this proxy statement/prospectus. The value of your investment in New Carmell following consummation of the Business Combination will be subject to the significant risks affecting Carmell and inherent to the industry in which it operates. If any of the events described below occur, the post-acquisition business and financial results could be adversely affected in a material way. This could cause the trading price of the Combined Company’s common stock to decline, perhaps significantly, and you therefore may lose all or part of your investment. Unless the context otherwise requires, all references in this subsection to the “Company,” “we,” “us” or “our” refer to the business of Carmell prior to the consummation of the Business Combination, which will be the business of the Combined Company following the consummation of the Business Combination.

Summary of Risk Factors

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

Risks Related to the Business, Operations and Financial Performance of Carmell

 

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Carmell’s product candidates are at an early stage of development and may not be successfully developed or commercialized;

 

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The results of preclinical studies or earlier clinical trials are not necessarily predictive of future results. Carmell’s lead product candidate in clinical trials, and any other product candidates that may advance into clinical trials, may not have favorable results in later clinical trials or receive regulatory approval;

 

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

 

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Additional time may be required to obtain regulatory approval for Carmell’s lead product candidate and future product candidates because of their status as combination products;

 

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

 

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Carmell operates in a highly competitive environment.

 

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Carmell’s future success is dependent, in part, on the performance and continued service of its officers and directors.

 

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Acceptance of Carmell’s formulations or products in the marketplace, if approved, is uncertain and failure to achieve market acceptance will prevent or delay its ability to generate revenues.

 

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Carmell will need to grow the size of its organization in the future, and it may experience difficulties in managing this growth.

Risks Related to the Business Combination

 

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The opinion of Cabrillo, ALPA’s financial advisor, does not reflect changes in circumstances between January 3, 2023, the date the opinion was issued, and the Closing.

 

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•

The exercise of ALPA’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the Business Combination may result in a conflict of interest when determining whether such changes to the terms of the Business Combination or waivers of conditions are appropriate and in the best interests of ALPA’s stockholders.

 

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If ALPA is unable to complete the Business Combination with Carmell or another business combination by July 29, 2023 (or such later date as may be approved by ALPA’s stockholders), ALPA will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding Public Shares for cash and, subject to the approval of its remaining stockholders and its Board, dissolving and liquidating. In such event, third parties may bring claims against ALPA and, as a result, the proceeds held in the Trust Account could be reduced and the per-share liquidation price received by stockholders could be less than $10.00 per share.

 

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There is no guarantee that a Public Stockholder’s decision whether to redeem their Public Shares for a pro rata portion of the Trust Account will put the stockholder in a better future economic position.

 

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Subsequent to the Closing, New Carmell may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and stock price, which could cause you to lose some or all of your investment.

RISKS RELATED TO CARMELL’S BUSINESS AND INDUSTRY

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

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

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

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

The clinical development, manufacturing, labeling, storage, record-keeping, advertising, promotion, import, export, marketing and distribution of our product candidates and commercialization, if approved, are subject to extensive regulation by the FDA in the U.S. and by comparable health authorities in foreign markets. In the U.S., we may not market our product candidates until we receive approval of our Biologics License Application (“BLA”) from the FDA. The process of obtaining regulatory approval is expensive, often takes many years and can vary substantially based upon the type, complexity and novelty of the product candidate involved. In addition to the significant clinical testing requirements, our ability to obtain marketing approval for these product candidates depends on obtaining the final results of required non-clinical testing, including characterization of the manufactured components of our product candidates and validation of our manufacturing processes. The FDA may determine that our product manufacturing processes, testing procedures or facilities are insufficient to

 

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justify approval. Approval policies or regulations may change and the FDA has substantial discretion in the approval process, including the ability to delay, limit or deny approval of a product candidate for many reasons. Despite the time and expense invested in clinical development of product candidates, regulatory approval is never guaranteed.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

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

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

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

 

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obtaining regulatory clearance to commence a clinical trial;

 

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identifying, recruiting and training suitable clinical investigators;

 

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

 

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

 

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

 

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

 

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uncertainties or delays as a result of the ongoing COVID-19 pandemic and the efforts to mitigate it.

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

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

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

 

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

 

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

 

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stopping rules contained in the protocol;

 

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

 

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lack of adequate funding to continue the clinical trial;

 

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changes in regulatory requirements; and/or

 

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advances in medicine and science.

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

 

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

Because we have limited financial and managerial resources, we are primarily focused on one lead clinical stage program, our BHA candidate, and one additional candidate, our Tissue Healing Accelerant (“THA”), for which we have not yet initiated any clinical studies. As a result, we may forego or delay pursuit of opportunities with other product candidates or, for other indications for which there may be a greater likelihood of success or may prove to have greater commercial potential. Notwithstanding our investment to date and anticipated future expenditures, we may never successfully develop, any marketed treatments using these products. Research programs to identify new product candidates or pursue alternative indications for current product candidates require substantial technical, financial and administrative support.

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

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

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

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

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

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

 

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

 

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design of the clinical trial;

 

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size and nature of the patient population;

 

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

 

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the availability and efficacy of competing therapies and clinical trials;

 

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pendency of other trials underway in the same patient population;

 

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willingness of physicians to participate in our planned clinical trials;

 

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severity of the disease or intended use under investigation;

 

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proximity of patients to clinical sites;

 

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patients who do not complete the trials for personal reasons;

 

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

 

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difficulties as a result of the ongoing COVID-19 pandemic and the efforts to mitigate it.

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

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

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

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

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

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

Adverse events or other undesirable side effects caused by our product candidates or future product candidates could cause us or regulatory authorities to interrupt, delay, or halt clinical trials and could result in a more

 

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restrictive label or the delay or denial of regulatory approval by regulatory authorities. Side effects related to a drug or biologic could affect patient recruitment, the ability of enrolled patients to complete the study, and/or result in potential product liability claims. Moreover, even though we believe our product candidates may have a favorable tolerability profile when compared to currently approved products, regulatory authorities may not agree. For example, in the single clinical trial we have completed with BHA, we reported a lower rate of infections among patients in the treatment group than in the control group. However, FDA noted that the rates of infection in the control group observed during our trial were much higher than what has been observed in clinical practice and published literature, and we will need to closely monitor infection rates during our planned clinical trials of BHA.

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

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

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

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

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

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

In the European Union, we intend to pursue a CE Mark for BHA under the EU MDR with an anticipated label as a bone void filler. We have not sought or received advice from the EMA on whether the BHA is classified as a

 

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medical device or biological product. If the EMA determines that BHA should be classified as a biological product, we may be subject to the more stringent European Union pharmaceutical regulations and requirements.

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

Our lead product candidate, BHA, is a biologic-device combination product that requires coordination within the FDA and comparable foreign regulatory authorities for review of its device and biologic components, and our future product candidates may similarly be regulated as combination products. Although the FDA and comparable foreign regulatory authorities have systems in place for the review and approval of combination products such as ours, we may experience delays in the development and commercialization of our product candidates due to regulatory timing constraints and uncertainties in the product development and approval process.

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

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

 

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

 

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

 

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unexpected changes in tariffs, trade barriers and regulatory requirements;

 

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

 

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

 

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foreign taxes, including withholding of payroll taxes;

 

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

 

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

 

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

 

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

 

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

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

Our only clinical study completed to date was conducted outside the U.S., in South Africa, and while we plan to conduct our next clinical trial primarily in the U.S., we may also conduct future clinical trials outside the U.S. The acceptance of study data from clinical trials conducted outside the U.S. or another jurisdiction by the FDA or

 

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

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

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

We may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our product candidates in any market. If we are unable to obtain approval of any of our current product candidates or any future product candidates we may pursue by regulatory authorities in the European Union, United Kingdom, Asia or elsewhere, the commercial prospects of that product candidate may be significantly diminished, our business prospects could decline and this could materially adversely affect our business, results of operations and financial condition.

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

Even if we obtain regulatory approval for our product candidates, that approval would be subject to ongoing requirements by the FDA and comparable foreign regulatory authorities governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, adverse event reporting, safety surveillance, import, export, advertising, promotion, recordkeeping and reporting of safety and other post-

 

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

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

 

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

 

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

 

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

 

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

 

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suspend or withdraw regulatory approval;

 

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suspend any ongoing clinical trials;

 

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

 

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

 

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

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

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

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

 

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

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

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

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

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

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

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

We depend upon third-party investigators and scientific collaborators, such as universities and medical institutions and CROs, to monitor and manage clinical trials and collect data during our preclinical studies and clinical programs. We plan to rely on these parties for execution of our preclinical studies and clinical trials, and

 

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

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

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

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

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

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

 

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

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

Risks Related to our Intellectual Property

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

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

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

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

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

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

 

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

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

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

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

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

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

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

 

•

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

 

•

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

 

•

others may independently develop duplicative, similar or alternative technologies;

 

•

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

 

•

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

 

•

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

 

•

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

 

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

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

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

 

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

 

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

 

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

 

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

 

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

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

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

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

Our success will depend in part on our ability to operate without infringing the proprietary rights of third parties. We cannot guarantee that our products or product candidates, or manufacture or use of our products or product candidates, will not infringe third-party patents. Furthermore, a third party may claim that we are using inventions covered by the third party’s patent rights and may go to court to stop us from engaging in our normal operations and activities, including making or selling our product candidates or products. These lawsuits are costly and could affect our results of operations and divert the attention of managerial and scientific personnel. Some of these third parties may be better capitalized and have more resources than us. There is a risk that a court would decide that we are infringing the third party’s patents and would order us to stop the activities covered by the patents. In that event, we may not have a viable way to get around the patent and may need to halt commercialization of the relevant product candidate(s) or product(s). In addition, there is a risk that a court will order us to pay the other party damages for having violated the other party’s patents. In addition, we may be

 

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obligated to indemnify our licensors and collaborators against certain intellectual property infringement claims brought by third parties, which could require us to expend additional resources. The pharmaceutical, medical device and biotechnology industries have produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover various types of products or methods. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform.

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

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

 

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

 

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

 

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publications in the scientific literature often lag behind actual discoveries.

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

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

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

As is common in the medical device, biotechnology and pharmaceutical industries, we employ, and may employ in the future, individuals who were previously employed at other medical device, biotechnology or

 

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

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

We may be subject to competition despite the existence of intellectual property we license or own. We can give no assurances that our intellectual property will be sufficient to prevent third parties from designing around the patents we own or license and developing and commercializing competitive products. The existence of competitive products that avoid our intellectual property could materially adversely affect our operating results and financial condition. Furthermore, limitations, or perceived limitations, in our intellectual property may limit the interest of third parties to partner, collaborate or otherwise transact with us, if third parties perceive a higher than acceptable risk to commercialization of our products or future products.

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

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

 

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

 

•

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

 

•

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

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

The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws or rules and regulations in the United States and Europe, and many companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents or marketing of competing

 

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products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in other jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated, rendered unenforceable or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license. Furthermore, while we intend to protect our intellectual property rights in our expected significant markets, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our products or product candidates. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate, which may have an adverse effect on our ability to successfully commercialize our product candidates in all of our expected significant foreign markets. If we or our licensors encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished, and we may face additional competition from others in those jurisdictions.

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

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

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

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

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

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

We take efforts and enter into agreements with employees, consultants, collaborators, and advisors to confirm ownership and chain of title in intellectual property rights. However, an inventorship or ownership dispute could

 

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arise that may permit one or more third parties to practice or enforce our intellectual property rights, including possible efforts to enforce rights against us.

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

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

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

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

The following factors are important to our success:

 

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receiving patent protection for our product candidates;

 

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preventing others from infringing our intellectual property rights; and

 

•

maintaining our patent rights and trade secrets.

We will be able to protect our intellectual property rights in patents and trade secrets from unauthorized use by third parties only to the extent that such intellectual property rights are covered by valid and enforceable patents or are effectively maintained as trade secrets. Because issues of patentability involve complex legal and factual questions, the issuance, scope and enforceability of patents cannot be predicted with certainty. Patents may be

 

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challenged, invalidated, found unenforceable, or circumvented. United States patents and patent applications may be subject to interference and derivation proceedings, United States patents may also be subject to post grant proceedings, including re-examination, derivation, Inter Partes Review and Post Grant Review, in the United States Patent and Trademark Office and foreign patents may be subject to opposition or comparable proceedings in corresponding foreign patent offices, which could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such interference, derivation, post grant and opposition proceedings may be costly. Thus, any patents that we own or license from others may not provide any protection against competitors. Furthermore, an adverse decision in an interference or derivation proceeding can result in a third-party receiving the patent rights sought by us, which in turn could affect our ability to market a potential product to which that patent filing was directed. Our pending patent applications, those that we may file in the future, or those that we may license from third parties may not result in patents being issued. If issued, they may not provide us with proprietary protection or competitive advantages against competitors with similar technology.

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

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

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

Risks Relating to Commercializing of our Current Product Candidates and Future Product Candidates, if Approved

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

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

 

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

 

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the clinical indications and patient populations for which the product candidate is approved;

 

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

 

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

 

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any restrictions on use together with other medications;

 

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the prevalence and severity of any side effects;

 

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

 

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

 

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

 

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the cost of treatment in relation to alternative treatments;

 

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

 

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relative convenience and ease of administration; and

 

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

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

Even if we are able to commercialize our current product candidates or any future product candidates, if approved such product candidate may become subject to unfavorable pricing regulations or third-party coverage and reimbursement policies, which would harm our business.

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

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

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

The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system that could prevent or delay marketing approval of our product candidates or any future product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell a product for which we obtain marketing approval. Changes in applicable laws, rules, and regulations or the interpretation of existing laws, rules, and regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling;

 

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(iii) the recall or discontinuation of our products; or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business. For further discussion on healthcare reform, see the section titled “Business Overview – Government Regulation – Healthcare Reform” in this proxy statement/prospectus.

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

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

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

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

Risks Related to Our Business Operations

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

We are presently dependent largely upon the experience, abilities and continued services of the Carmell Senior Leadership including, our President and Chief Executive Officer, Randolph W Hubbell. The loss of services of Mr. Hubbell could have a material adverse effect on our business, financial condition or results of operation. In addition, other key executives are important to the ongoing capability of the company to advance the programs through the clinical and regulatory pathway. These executives include Dr. James Hart, Chief Medical Officer, Dr. Janet Vargo, VP of Clinical Sciences, Donna Godward, Chief Quality Officer, Sean Buckley, Chief Financial Officer & Executive Vice-President of Operations. The competition of executive talent may make it difficult to replace any of these key positions in a timely manner.

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

At September 30, 2022 and December 31, 2021, we had cash of $[●] and $12,362 respectively, and an accumulated deficit of $[●] and $28, 382,005, respectively. Our liquidity needs up to September 30, 2022 have been satisfied through debt and equity financings. For the nine months ended September 30, 2022 and the year

 

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ended December 31, 2021, we had a loss from operations of $[●] and $1,858,343, respectively, and negative cash flows from operations of $[●] and $1,176,828, respectively. Our operating activities consume the majority of our cash resources, and management anticipates that the Company will continue to incur operating losses as it executes its plans for the foreseeable future. In addition, the Company has had and expects to have negative cash flows from operations, at least into the near future.

Our recurring losses from operations, accumulated deficit and lack of revenues raise substantial doubt about our ability to continue as a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements with respect to this uncertainty. Based on our cash balance as of December 31, 2021 and projected cash needs for 2022 and subsequent fiscal periods, management estimates that it will need to raise additional capital to cover operating and capital requirements. While we believe that the net proceeds from the Business Combination, together with our existing cash and cash equivalents, will be sufficient for us to fund our operating expenses and capital expenditures requirements through at least the next twelve (12) months from the date of this filing, we have based these estimates on assumptions that may prove to be wrong, and we may need to raise additional funds in the next twelve months to fund continuing development. Although management has been successful to date in raising necessary funding, there is no assurance we will be successful in obtaining such additional financing on terms acceptable to us, if at all, and we may not be able to enter into other arrangements. If we are unable to obtain funding, we could be forced to delay, reduce or eliminate our research and development programs, expansion or commercialization efforts, which could adversely affect our business prospects and ability to continue operations. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness we identified related to the design of internal control around the Company’s preparation of financial statements in accordance with generally accepted accounting principles, including the appropriate accounting treatment for complex financial instruments that require management to apply complex accounting principles, which could adversely affect the Company’s ability to record, process, summarize, and report financial data. This material weakness did not result in a material misstatement to the financial statements. We are in the process of implementing measures designed to improve internal control over financial reporting to remediate the control deficiencies that led to our material weakness.

While we believe the remedial efforts we are taking and will take will improve our internal controls and address the underlying causes of the material weakness, we cannot be certain that these steps will be sufficient to remediate the control deficiencies that led to our material weakness in our internal controls over financial reporting or prevent future material weaknesses or control deficiencies from occurring.

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

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

Since inception, we have generated no product revenue, and prior to receipt of marketing approval from regulatory authorities, we will be unable to do so. For the nine months ended September 30, 2022 and the year

 

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ended December 31, 2021, we had a loss from operations of $[●] and $1,858,343 respectively, and negative cash flows from operations of $[●] and $1,176,828, respectively. At September 30, 2022 and December 31, 2021, we had an accumulated deficit of $[●] and $28,382,005, respectively. To date, we have financed our operations primarily through the sale of equity securities and convertible debt. We have devoted substantially all of our financial resources and efforts to research and development, including preclinical studies and clinical trials, and we anticipate that our expenses will continue to increase over the next several years as we continue these activities. Accordingly, we expect to continue to incur substantial operating losses for the foreseeable future, which may fluctuate significantly from quarter-to-quarter and year-to-year.

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

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

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

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

 

•

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

 

•

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

 

•

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

 

•

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

 

•

Our ability to market our product candidates, if approved.

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

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

We will face competition from numerous medical device, pharmaceutical and biotechnology enterprises, as well as from academic institutions, government agencies and private and public research institutions for our current product candidates. We cannot provide any assurances that any other company will not obtain FDA approval for similar products that might adversely affect our ability to develop and market our products, if approved, in the U.S. We are aware that other companies have intellectual property protection and have conducted clinical trials. Our commercial opportunities will be reduced or eliminated if our competitors develop and commercialize

 

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products that are safer, more effective, have fewer side effects or are less expensive than any product candidates that we may develop and for which we receive approval. Competition could result in reduced sales and pricing pressure on our current product candidates, if approved, which in turn would reduce our ability to generate meaningful revenues and have a negative impact on our results of operations. In addition, significant delays in the development of our product candidates could allow our competitors to bring products to market before we do and impair our ability to commercialize our product candidates, if approved. The biotechnology industry is intensely competitive and involves a high degree of risk. We compete with other companies that have far greater experience and financial, research and technical resources than us. Potential competitors in the U.S. and worldwide are numerous and include medical device, pharmaceutical and biotechnology companies, educational institutions and research foundations, many of which have substantially greater capital resources, marketing experience, research and development staffs and facilities than ours. Some of our competitors may develop and commercialize products that compete directly with those incorporating our technology or may introduce products to market earlier than our product candidates, if approved, or on a more cost-effective basis. Our competitors compete with us in recruiting and retaining qualified scientific and management personnel as well as in acquiring technologies complementary to our technology. We may face competition with respect to potential efficacy and safety, ease of use and adaptability to various modes of administration, acceptance by physicians, the timing and scope of regulatory approvals, availability of resources, reimbursement coverage, price and patent position, including the potentially dominant patent positions of others. An inability to successfully complete our product development or commercializing our product candidate, if approved, could result in our having limited prospects for establishing market share or generating revenue.

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

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

Our business may be adversely affected by the ongoing COVID-19 pandemic.

The outbreak of the novel coronavirus (“COVID-19”) in 2020 evolved into a global pandemic, and this pandemic continues to have varying impacts on the global economy and the ability of biotechnology companies to develop their product candidates, including on their ability to conduct trials, source materials, and manufacture product candidates as planned. The extent to which COVID-19 impacts our business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and the actions to contain the spread of the virus or treat its impact, among others.

 

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As a result of the continued spread of COVID-19, our business operations could be delayed or interrupted. For instance, our clinical trials may be affected by the pandemic. Site initiation, participant recruitment and enrollment, and study monitoring and data analysis may be paused or delayed due to changes in hospital or university policies, federal, state or local regulations, prioritization of hospital resources toward pandemic efforts, or other reasons related to the pandemic. Some participants and clinical investigators may not be able to comply with clinical trial protocols. For example, quarantines or other travel limitations (whether voluntary or required) may impede participant movement, affect sponsor access to study sites, or interrupt healthcare services, and we may be unable to conduct our clinical trials. Further, if the spread of COVID-19 continues and our operations are adversely impacted, we risk a delay, default and/or non-performance under existing agreements which may increase our costs. These cost increases may not be fully recoverable or adequately covered by insurance.

Infections and deaths related to the pandemic may disrupt the United States’ healthcare and healthcare regulatory systems. Such disruptions could divert healthcare resources away from, or materially delay FDA review and/or approval with respect to, our product candidates. It is unknown how long these disruptions could continue, were they to occur. Any elongation or de-prioritization of our clinical trials or delay in regulatory review resulting from such disruptions could materially affect the development and study of our product candidates.

We currently utilize third parties to, among other things, manufacture raw materials. If either any third-party parties in the supply chain for materials used in the production of our product candidates are adversely impacted by restrictions resulting from the COVID-19 outbreak, our supply chain may be disrupted, limiting our ability to manufacture our product candidates for our clinical trials and research and development operations.

As a result of the shelter-in-place order and other mandated local travel restrictions, our employees conducting research and development or manufacturing activities may not be able to access their laboratory or manufacturing space which may result in our core activities being significantly limited or curtailed, possibly for an extended period of time.

The spread of COVID-19, which has caused a broad impact globally, including restrictions on travel and quarantine policies put into place by businesses and governments, may have a material economic effect on our business. While the potential economic impact brought by and the duration of the pandemic may be difficult to assess or predict, it has already caused, and is likely to result in further, significant disruption of global financial markets, which may reduce our ability to access capital either at all or on favorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the spread of COVID-19 could materially and adversely affect our business and the value of our common stock.

The ultimate impact of the current pandemic, or any other health epidemic, is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, our research programs, healthcare systems or the global economy as a whole. However, these effects could have a material impact on our operations, financial position and prospects and we will continue to monitor the situation closely.

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

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

 

•

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

 

•

reduced credit availability;

 

•

higher borrowing costs;

 

•

reduced liquidity;

 

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•

volatility in credit, equity and foreign exchange markets; and

 

•

bankruptcies.

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

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

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

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

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

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

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

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

 

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

As of December 31, 2022, we had ten full-time employees and six part-time employees, although upon closing of the Business Combination, we anticipate that we will have twelve full-time employees and seven part-time employees. We will need to grow the size of our organization in order to support our continued development and potential commercialization of our product candidates. As our development and commercialization plans and strategies continue to develop, our need for additional managerial, operational, manufacturing, sales, marketing, financial and other resources may increase. Our management, personnel and systems currently in place may not be adequate to support this future growth. Future growth would impose significant added responsibilities on members of management, including:

 

•

managing our clinical trials effectively;

 

•

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

 

•

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

 

•

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

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

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

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

 

•

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

 

•

termination of clinical trial sites or entire clinical trial programs;

 

•

injury to our reputation and significant negative media attention;

 

•

withdrawal of clinical trial participants;

 

•

significant costs to defend the related litigation;

 

•

substantial monetary awards to trial subjects or patients;

 

•

loss of revenue;

 

•

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

 

•

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

 

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

Risks Related to Healthcare Compliance Regulations

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

Although we do not currently have any products on the market, our current and future operations may be directly, or indirectly through our relationships with investigators, health care professionals, customers and third-party payors, subject to various U.S. federal and state healthcare laws and regulations. Healthcare providers, physicians and others play a primary role in the recommendation and prescription of any therapies for which we may obtain marketing approval. These laws impact, among other things, our research activities and proposed sales, marketing and education programs and constrain our business and financial arrangements and relationships with third-party payors, healthcare professionals who participate in our clinical research program, healthcare professionals and others who recommend, purchase, or provide our approved therapies, and other parties through which we market, sell and distribute our therapies for which we obtain marketing approval. In addition, we may be subject to patient data privacy and security regulation by both the U.S. federal government and the states in which we conduct our business, along with foreign regulators (including European data protection authorities). Finally, our current and future operations are subject to additional healthcare-related statutory and regulatory requirements and enforcement by foreign regulatory authorities in jurisdictions in which we conduct our business. For further discussion on healthcare laws and other compliance requirements, see the section titled “Business Overview – Government Regulation – Healthcare Laws and Regulations” in this proxy statement/prospectus.

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

 

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may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Prohibitions or restrictions on sales or withdrawal of future marketed products could materially affect our business in an adverse way.

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

RISKS RELATED TO NEW CARMELL AND THE NEW CARMELL COMMON STOCK FOLLOWING THE BUSINESS COMBINATION

The price of New Carmell common stock may be volatile.

The price of New Carmell common stock may fluctuate due to a variety of factors, including:

 

•

actual or anticipated fluctuations in its quarterly and annual results and those of other public companies in industry;

 

•

mergers and strategic alliances in the industry in which it operates;

 

•

market prices and conditions in the industry in which it operates;

 

•

changes in government regulation;

 

•

the impact of the COVID-19 pandemic on New Carmell’s business and operations;

 

•

potential or actual military conflicts or acts of terrorism;

 

•

announcements concerning New Carmell or its competitors; and

 

•

the general state of the securities markets.

These market and industry factors may materially reduce the market price of New Carmell common stock, regardless of New Carmell’s operating performance.

Reports published by analysts, including projections in those reports that differ from New Carmell’s actual results, could adversely affect the price and trading volume of New Carmell common stock.

ALPA currently expects that securities research analysts will establish and publish their own periodic projections for the business of New Carmell. These projections may vary widely and may not accurately predict the results New Carmell actually achieves. New Carmell’s stock price may decline if its actual results do not match the projections of these securities research analysts. Similarly, if one or more of the analysts who write reports on New Carmell downgrades its stock or publishes inaccurate or unfavorable research about its business, New Carmell’s stock price could decline. If one or more of these analysts ceases coverage of New Carmell or fails to publish reports on New Carmell regularly, its stock price or trading volume could decline. While ALPA expects research analyst coverage following the Business Combination, if no analysts commence coverage of New Carmell, the trading price and volume for New Carmell common stock could be adversely affected.

New Carmell may issue additional shares of common stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of New Carmell common stock.

Upon consummation of the Business Combination, New Carmell will have warrants outstanding to purchase up to an aggregate of shares of New Carmell common stock and former Carmell options and warrants outstanding to

 

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purchase up to our aggregate shares of New Carmell common stock, based on its outstanding options and warrants as of the Record Date. Under the 2023 Plan, New Carmell will also have the ability to issue a number of shares equal to 4% of the shares of New Carmell common stock issued and outstanding immediately after the Closing (assuming the 2023 Plan is approved by ALPA stockholders at the Special Meeting). In addition, such aggregate number of shares under the 2023 Plan will automatically increase on January 1 of each year commencing January 1, 2024, in an amount equal to 4%, of the number of shares of New Carmell’s capital stock outstanding on December 31 of the preceding year, unless the New Carmell Board acts prior to January 1 of a given year to provide that the increase for such year will be a lesser number. New Carmell may also issue additional shares of common stock or other equity securities of equal or senior rank in the future in connection with, among other things, future acquisitions or repayment of outstanding indebtedness, without stockholder approval, in a number of circumstances.

New Carmell’s issuance of additional shares of common stock or other equity securities of equal or senior rank would have the following effects:

 

•

ALPA’s existing stockholders’ proportionate ownership interest in New Carmell will decrease;

 

•

the amount of cash available per share, including for payment of dividends in the future, may decrease;

 

•

the relative voting strength of each previously outstanding share of common stock may be diminished; and

 

•

the market price of New Carmell’s shares of common stock may decline.

New Carmell’s actual financial position and results of operations may differ materially from the unaudited pro forma condensed combined financial information included in this proxy statement/prospectus, which may not be indicative of what New Carmell’s actual financial position or results of operations would have been.

The unaudited pro forma condensed combined financial information in this proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what New Carmell’s actual financial position or results of operations would have been had the Business Combination been completed on the dates indicated. See the section titled “Unaudited Pro Forma Condensed Combined Financial Information” for more information.

The obligations associated with being a public company will involve significant expenses and will require significant resources and management attention, which may divert from New Carmell’s business operations.

As a public company, New Carmell will become subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act. The Exchange Act requires the filing of annual, quarterly and current reports with respect to a public company’s business and financial condition. The Sarbanes-Oxley Act requires, among other things, that a public company establish and maintain effective internal control over financial reporting. As a result, New Carmell will incur significant legal, accounting and other expenses that Carmell did not previously incur. New Carmell’s entire management team and many of its other employees will need to devote substantial time to compliance, and may not effectively or efficiently manage its transition into a public company.

These rules and regulations will result in New Carmell incurring substantial legal and financial compliance costs and will make some activities more time-consuming and costly. For example, these rules and regulations will likely make it more difficult and more expensive for New Carmell to obtain director and officer liability insurance, and it may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be difficult for New Carmell to attract and retain qualified people to serve on its board of directors, its board committees or as executive officers.

 

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New Carmell will be an “emerging growth company” and it cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make the New Carmell common stock less attractive to investors and may make it more difficult to compare performance with other public companies.

New Carmell will be an emerging growth company as defined in the JOBS Act, and it intends to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Investors may find the New Carmell common stock less attractive because New Carmell will continue to rely on these exemptions. If some investors find the New Carmell common stock less attractive as a result, there may be a less active trading market for their common stock, and the stock price may be more volatile.

An emerging growth company may elect to delay the adoption of new or revised accounting standards. With ALPA making this election, Section 102(b)(2) of the JOBS Act allows New Carmell to delay adoption of new or revised accounting standards until those standards apply to non-public business entities. As a result, the financial statements contained in this proxy statement/prospectus and those that New Carmell will file in the future may not be comparable to companies that comply with public business entities revised accounting standards effective dates.

If New Carmell fails to maintain an effective system of internal control over financial reporting, it may not be able to accurately report its financial results or prevent fraud. As a result, stockholders could lose confidence in New Carmell’s financial and other public reporting, which would harm its business and the trading price of the New Carmell common stock.

Effective internal control over financial reporting is necessary for New Carmell to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause New Carmell to fail to meet its reporting obligations. In addition, any testing by New Carmell conducted in connection with Section 404 of the Sarbanes-Oxley Act, or any subsequent testing by New Carmell’s independent registered public accounting firm, may reveal deficiencies in New Carmell’s internal control over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to New Carmell’s financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in New Carmell’s reported financial information, which could have a negative effect on the trading price of the New Carmell common stock.

New Carmell will be required to disclose changes made in its internal controls and procedures on a quarterly basis and its management will be required to assess the effectiveness of these controls annually. However, for as long as New Carmell is an emerging growth company under the JOBS Act, its independent registered public accounting firm will not be required to attest to the effectiveness of its internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. New Carmell could be an emerging growth company for up to five years from the last day of the fiscal year of ALPA’s Initial Public Offering. An independent assessment of the effectiveness of New Carmell’s internal control over financial reporting could detect problems that New Carmell’s management’s assessment might not. Undetected material weaknesses in New Carmell’s internal control over financial reporting could lead to financial statement restatements and require New Carmell to incur the expense of remediation.

 

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The Proposed Charter will designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between HWH and its stockholders, and also provide that the federal district courts in Delaware will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act or the Exchange Act, each of which could limit the ability of HWH’s stockholders to choose the judicial forum for disputes with HWH or its directors, officers, or employees.

The Proposed Charter, which will become effective upon the Closing, will provide that, unless New Carmell consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of New Carmell, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, employees or agent of New Carmell to New Carmell or its stockholders, (iii) any action or proceeding asserting a claim against New Carmell arising pursuant to any provision of the DGCL, or the Proposed Charter or the Bylaws (iv) any action or proceeding asserting a claim as to which the DGCL confers jurisdiction upon the Court of Chancery of the State of Delaware or (v) any action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as defendants.

If a suit is brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel, subject to certain exceptions. This provision also does not apply for any claims made under the Securities Act and the rules and regulations issued thereunder, for which the U.S. federal courts will be the exclusive forum unless New Carmell agrees otherwise in writing.

This exclusive-forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with New Carmell or its directors, officers, or other employees, which may discourage lawsuits against New Carmell and its directors, officers, and other employees. If a court were to find the exclusive-forum provision to be inapplicable or unenforceable in an action, New Carmell may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm its results of operations.

RISKS RELATED TO ALPA, THE BUSINESS COMBINATION AND REDEMPTIONS

The opinion of Cabrillo, ALPA’s financial advisor, does not reflect changes in circumstances between January 3, 2023, the date the opinion was issued, and the Closing.

ALPA’s financial advisor, Cabrillo, rendered an opinion dated January 3, 2023, to the Board that, as of such date, and subject to and based on the considerations referred to in its opinion, (i) the consideration to be paid by ALPA in the Business Combination pursuant to the Business Combination Agreement was fair to ALPA, from a financial point of view, and (ii) the fair market value of Carmell implied by the various financial analyses Cabrillo conducted in connection with its opinion equaled or exceeded 80% of the amount held by ALPA in trust for the benefit of its Public Stockholders (excluding any deferred underwriters’ fees and taxes payable on the income earned on the Trust Account). The opinion was based on economic, market and other conditions in effect on, and the information made available to it as of, the date thereof.

Changes in the operations and prospects of Carmell, general market and economic conditions and other factors on which Cabrillo’s opinion was based, may significantly alter the value of Carmell at the time the Business Combination is completed. The opinion does not speak as of the time the Business Combination will be completed or as of any date other than the date of such opinion. For a description of the opinion issued by Cabrillo to the Board, please see “Proposal No. 1: The Business Combination Proposal —Opinion of ALPA’s Financial Advisor.”

ALPA and Carmell will incur significant transaction and transition costs in connection with the Business Combination.

ALPA and Carmell have both incurred and expect to incur significant, non-recurring costs in connection with consummating the Business Combination and operating as a public company following the consummation of the

 

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Business Combination. ALPA and Carmell may also incur additional costs to retain key employees. Certain transaction expenses incurred in connection with the Business Combination, including all legal, accounting, consulting, investment banking and other fees, expenses and costs, will be paid by New Carmell following the closing of the Business Combination.

ALPA will not have any right to make damage claims against Carmell or Carmell’s stockholders for the breach of any representation, warranty or covenant made by Carmell in the Business Combination Agreement.

The Business Combination Agreement provides that all of the representations, warranties and covenants of the parties contained therein shall not survive the Closing, except for those covenants that by their terms apply or are to be performed in whole or in part after the Closing, and then only with respect to breaches occurring after Closing. Accordingly, there are no remedies available to the parties with respect to any breach of the representations, warranties, covenants or agreements of the parties to the Business Combination Agreement after the Closing of the Business Combination, except for covenants to be performed in whole or in part after the Closing. As a result, ALPA will have no remedy available to it if the Business Combination is consummated and it is later revealed that there was a breach of any of the representations, warranties and covenants made by Carmell at the time of the Business Combination.

Subsequent to the Closing, New Carmell may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and stock price, which could cause you to lose some or all of your investment.

Although ALPA has conducted due diligence on Carmell, ALPA cannot assure you that this diligence revealed all material issues that may be present in Carmell’s business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of ALPA’s and Carmell’s control will not later arise. As a result, after the Closing, New Carmell may be forced to later write-down or write-off assets, restructure its operations, or incur impairment or other charges that could result in losses. Even if ALPA’s due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with ALPA’s preliminary risk analysis. Even though these charges may be non-cash items and may not have an immediate impact on New Carmell’s liquidity, the fact that New Carmell may charges of this nature could contribute to negative market perceptions about the Combined Company’s securities. In addition, charges of this nature may cause New Carmell to be unable to obtain future financing on favorable terms or at all. Accordingly, any ALPA stockholder who chooses to remain a stockholder of the Combined Company following the Business Combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by ALPA’s officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy solicitation relating to the Business Combination contained an actionable material misstatement or material omission.

The Sponsor and ALPA’s officers and directors own ALPA Common Stock and Warrants that will be worthless and have incurred reimbursable expenses that may not be reimbursed or repaid if the Business Combination is not approved. Such interests may have influenced their decision to approve the Business Combination with Carmell.

The Sponsor and ALPA’s officers and directors and/or their affiliates beneficially own or have a pecuniary interest in Founder Shares and additional securities that they purchased in the concurrent private placement. The holders have no redemption rights with respect to these securities in the event a business combination is not effected in the required time period. Therefore, if the Business Combination with Carmell or another business combination is not approved within the required time period, such securities held by such persons will be worthless. Such securities had an aggregate market value of $ million based upon the closing prices of the

 

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Class A Common Stock and Warrants on Nasdaq on the Record Date. Furthermore, the Sponsor and ALPA’s officers and directors and their affiliates are entitled to reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on ALPA’s behalf, such as identifying and investigating possible business targets and business combinations. Any such expenses will be repaid upon completion of the Business Combination with Carmell. As of [●], no such reimbursable expenses have been incurred. If any such expenses are incurred, however, if ALPA fails to consummate the Business Combination, they will not have any claim against the Trust Account for repayment or reimbursement. Accordingly, ALPA may not be able to repay or reimburse these amounts if the Business Combination is not completed. See the section titled “Proposal 1: The Business Combination Proposal —Interests of the Sponsor and ALPA’s Directors and Officers in the Business Combination.”

These financial interests may have influenced the decision of ALPA’s directors to approve the Business Combination with Carmell and to continue to pursue such Business Combination. In considering the recommendations of ALPA’s Board to vote for the Business Combination Proposal and other proposals, ALPA’s stockholders should consider these interests.

The Public Stockholders will experience immediate dilution as a consequence of the issuance of New Carmell common stock as consideration in the Business Combination.

In accordance with the terms and subject to the conditions of the Business Combination Agreement, at the Effective Time, (i) each outstanding share of Carmell common stock will be cancelled and converted into the right to receive a number of shares of New Carmell common stock equal to the Exchange Ratio; (ii) each outstanding share of Carmell preferred stock will be cancelled and converted into the right to receive a number of shares of New Carmell common stock equal to (A) the aggregate number of shares of Carmell common stock that would be issued upon conversion of the shares of Carmell preferred stock based on the applicable conversion ratio immediately prior to the Effective Time, multiplied by (B) the Exchange Ratio; and (iii) each outstanding Carmell option or warrant will be converted into an option or warrant, as applicable, to purchase a number of shares of New Carmell common stock equal to (A) the number of shares of Carmell common stock subject to such option or warrant multiplied by (B) the Exchange Ratio at an exercise price per share equal to the current exercise price per share for such option or warrant divided by the Exchange Ratio; in each case, rounded down to the nearest whole share. The issuance of additional New Carmell common stock will significantly dilute the equity interests of existing holders of ALPA securities, and may adversely affect prevailing market prices for the New Carmell common stock and/or New Carmell warrants.

Warrants will become exercisable for New Carmell common stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

If the Business Combination is completed, outstanding Warrants will become exercisable for an aggregate of [●] shares of New Carmell common stock in accordance with the terms of the warrant agreement governing those securities. These Warrants will become exercisable 30 days after the completion of the Business Combination. The exercise price of these Warrants will be $11.50 per share. To the extent such Warrants are exercised, additional shares of New Carmell common stock will be issued, which will result in dilution to the holders of New Carmell common stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such Warrants may be exercised could adversely affect the market price of New Carmell common stock. However, there is no guarantee that the Warrants will ever be in the money prior to their expiration, and as such, the Warrants may expire worthless. See “— Even if the Business Combination is consummated, the Public Warrants may never be in the money, and they may expire worthless, and the terms of the Public Warrants may be amended in a manner adverse to a holder if holders of at least 50% of the then outstanding Public Warrants approve of such amendment.”

 

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Even if the Business Combination is consummated, the Public Warrants may never be in the money, and they may expire worthless, and the terms of the Public Warrants may be amended in a manner adverse to a holder if holders of at least 50% of the then outstanding Public Warrants approve of such amendment.

The Warrants were issued in registered form under a warrant agreement between Continental, as warrant agent, and ALPA. The warrant agreement provides that the terms of the Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision or correct any mistake, but requires the approval by the holders of at least 50% of the then-outstanding Public Warrants (as defined herein) to make any change that adversely affects the interests of the registered holders of Public Warrants. Accordingly, ALPA may amend the terms of the Public Warrants in a manner adverse to a holder if holders of at least 50% of the then-outstanding Public Warrants approve of such amendment and, solely with respect to any amendment to the terms of the Warrants sold as part of the Units in the concurrent private placement (the “Private Placement Warrants”) or any provision of the warrant agreement with respect to the Private Placement Warrants, holders of at least 50% of the number of the then outstanding Private Placement Warrants. Although ALPA’s ability to amend the terms of the Public Warrants with the consent of at least 50% of the then-outstanding Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the Warrants, convert the Warrants into cash, shorten the exercise period or decrease the number of shares of New Carmell common stock purchasable upon exercise of a Warrant.

ALPA may redeem your unexpired Public Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your Public Warrants worthless.

ALPA has the ability to redeem outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per Warrant, provided that the last reported sales price of the New Carmell common stock equals or exceeds $18.00 per share (as adjusted for share subdivisions, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date ALPA sends the notice of redemption to the holders thereof. If and when the Public Warrants become redeemable by ALPA, ALPA may exercise its redemption right even if ALPA is unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding Public Warrants could force you to: (i) exercise your Public Warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so; (ii) sell your Public Warrants at the then-current market price when you might otherwise wish to hold your Public Warrants; or (iii) accept the nominal redemption price which, at the time the outstanding Public Warrants are called for redemption, is likely to be substantially less than the market value of your Public Warrants.

The value received upon exercise of the Public Warrants (1) may be less than the value the holders would have received if they had exercised their Public Warrants at a later time where the underlying share price is higher and (2) may not compensate the holders for the value of the Public Warrants.

The Private Placement Warrants are not subject to the same risk of redemption as the Public Warrants as the Private Placement Warrants are not redeemable so long as they are held by the Sponsor, the underwriters or their permitted transferees. If the Private Placement Warrants are held by holders other than the Sponsor, the underwriters or their permitted transferees, the Private Placement Warrants will be redeemable by ALPA.

The exercise of ALPA’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the Business Combination may result in a conflict of interest when determining whether such changes to the terms of the Business Combination or waivers of conditions are appropriate and in the best interests of ALPA’s stockholders.

In the period leading up to the Closing events may occur that, pursuant to the Business Combination Agreement, would require ALPA to agree to amend the Business Combination Agreement, to consent to certain actions taken by Carmell or to waive rights that ALPA is entitled to under the Business Combination Agreement. Such events

 

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could arise because of changes in the course of Carmell’s business, a request by Carmell to undertake actions that would otherwise be prohibited by the terms of the Business Combination Agreement or the occurrence of other events that would have a material adverse effect on Carmell’s business and would entitle ALPA to terminate the Business Combination Agreement. In any of such circumstances, it would be at ALPA’s discretion, acting through its Board, to grant its consent or waive those rights. The existence of the financial and personal interests of the directors described in the preceding risk factors may result in a conflict of interest on the part of one or more of the directors between what he, she or they may believe is best for ALPA and what he, she or they may believe is best for himself, herself or themselves in determining whether or not to take the requested action. As of the date of this proxy statement/prospectus, ALPA does not believe there will be any material changes or waivers that ALPA’s directors and officers would be likely to make after the mailing of this proxy statement/prospectus. ALPA will circulate a supplemental or amended proxy statement/prospectus if changes to the terms of the Business Combination that would have a material impact on its stockholders are required prior to the vote on the Business Combination Proposal.

If ALPA is unable to complete the Business Combination with Carmell or another business combination by July 29, 2023 (or such later date as may be approved by ALPA’s stockholders), ALPA will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding Public Shares for cash and, subject to the approval of its remaining stockholders and its Board, dissolving and liquidating. In such event, third parties may bring claims against ALPA and, as a result, the proceeds held in the Trust Account could be reduced and the per-share liquidation price received by stockholders could be less than $10.00 per share.

Under the terms of the Current Charter ALPA must complete the Business Combination with Carmell or another business combination by July 29, 2023 (or such later date as may be approved by ALPA stockholders in an amendment to its Current Charter), or ALPA must cease all operations except for the purpose of winding up, redeeming 100% of the outstanding Public Shares for cash and, subject to the approval of its remaining stockholders and its Board, dissolving and liquidating. In such event, third parties may bring claims against ALPA. Although ALPA seeks waiver agreements from certain vendors and service providers it has engaged and owes money to, and the prospective target businesses it has negotiated with, whereby such parties will waive any right, title, interest or claim of any kind they may have in or to any monies held in the Trust Account, there is no guarantee that vendors, regardless of whether they execute such waivers, will not seek recourse against the Trust Account notwithstanding such agreements. Furthermore, there is no guarantee that a court will uphold the validity of such agreements. Accordingly, the proceeds held in the Trust Account could be subject to claims which could take priority over those of the Public Stockholders. If ALPA is unable to complete a business combination within the required time period, the Sponsor has agreed that it will be liable under certain circumstances described herein to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by ALPA for services rendered or contracted for or products sold to ALPA. However, the Sponsor may not be able to meet such obligation as its only assets are securities of ALPA. Therefore, the per-share distribution from the Trust Account in such a situation may be less than $10.00 due to such claims.

Additionally, if ALPA is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it which is not dismissed, or if ALPA otherwise enters compulsory or court supervised liquidation, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in its bankruptcy estate and subject to the claims of third parties with priority over the claims of ALPA’s stockholders. To the extent any bankruptcy claims deplete the Trust Account, ALPA may not be able to return to its Public Stockholders at least $10.00 per share of ALPA Common Stock.

ALPA’s stockholders may be held liable for claims by third parties against ALPA to the extent of distributions received by them.

If ALPA is unable to complete the Business Combination with Carmell or another business combination within the required time period, ALPA will (i) cease all operations except for the purpose of winding up, (ii) as

 

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promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding Public Shares for cash, which redemption will completely extinguish the Public Stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of its remaining stockholders and its Board, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to its obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. ALPA cannot assure you that it will properly assess all claims that may potentially be brought against ALPA. As such, ALPA’s stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of its stockholders may extend well beyond the third anniversary of the date of distribution. Accordingly, ALPA cannot assure you that third parties will not seek to recover from its stockholders amounts owed to them by ALPA.

If ALPA is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it which is not dismissed, any distributions received by stockholders could be viewed under applicable debtor, creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by ALPA’s stockholders. Furthermore, because ALPA intends to distribute the proceeds held in the Trust Account to its Public Stockholders promptly after the expiration of the time period to complete a business combination, this may be viewed or interpreted as giving preference to its Public Stockholders over any potential creditors with respect to access to or distributions from its assets. Furthermore, ALPA’s Board may be viewed as having breached its fiduciary duties to its creditors and/or may have acted in bad faith, thereby exposing itself and Carmell to claims of punitive damages, by paying Public Stockholders from the Trust Account prior to addressing the claims of creditors. ALPA cannot assure you that claims will not be brought against it for these reasons.

Activities taken by existing ALPA stockholders to increase the likelihood of approval of the Business Combination Proposal and the other Proposals could have a depressive effect on ALPA Common Stock.

At any time prior to the Special Meeting, during a period when they are not then aware of any material nonpublic information regarding ALPA or its securities, the Sponsor, ALPA’s officers, directors and stockholders from prior to the Initial Public Offering, Carmell or Carmell’s stockholders and/or their respective affiliates may purchase shares from institutional and other investors who vote, or indicate an intention to vote, against the Business Combination Proposal, or execute agreements to purchase such shares from such investors in the future, or they may enter into transactions with such investors and others to provide them with incentives to acquire ALPA Common Stock or vote their shares in favor of the Business Combination Proposal. The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirements to consummate the Business Combination where it appears that such requirements would otherwise not be met. Entering into any such arrangements may have a depressive effect on ALPA Common Stock. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than market and may therefore be more likely to sell the shares he, she or it owns, either prior to or immediately after the Special Meeting.

If the Adjournment Proposal is not approved, and an insufficient number of votes have been obtained to authorize the consummation of the Business Combination, the Board will not have the ability to adjourn the Special Meeting to a later date in order to solicit further votes, and, therefore, the Business Combination will not be approved.

There is no guarantee that a stockholder’s decision whether to redeem their shares of ALPA Common Stock for a pro rata portion of the Trust Account will put the stockholder in a better future economic position.

ALPA can give no assurance as to the price at which a stockholder may be able to sell its Public Shares in the future following the completion of the Business Combination or any alternative business combination. Certain events following the consummation of any initial business combination, including the Business Combination,

 

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may cause an increase in ALPA’s share price, and may result in a lower value realized now than a stockholder of ALPA might realize in the future had the stockholder redeemed their shares. Similarly, if a stockholder does not redeem their shares, the stockholder will bear the risk of ownership of the Public Shares after the consummation of any initial business combination, including the Business Combination, and there can be no assurance that a stockholder can sell its shares in the future for a greater amount than the redemption price set forth in this proxy statement/prospectus. A stockholder should consult the stockholder’s tax and/or financial advisor for assistance on how this may affect his, her or its individual situation.

If ALPA stockholders fail to comply with the redemption requirements specified in this proxy statement/prospectus, they will not be entitled to redeem their Class A Common Stock for a pro rata portion of the funds held in the Trust Account.

In order to exercise their redemption rights, Public Stockholders are required to submit a request in writing and deliver their stock to ALPA’s transfer agent at least two business days prior to the Special Meeting. Stockholders electing to redeem their shares will receive their pro rata portion of the Trust Account less income taxes payable, calculated as of two business days prior to the anticipated consummation of the Business Combination. See the section titled “Special Meeting of ALPA Stockholders — Redemption Rights” for additional information on how to exercise your redemption rights.

Stockholders of ALPA who wish to redeem their shares for a pro rata portion of the Trust Account must comply with specific requirements for redemption that may make it more difficult for them to exercise their redemption rights prior to the deadline.

Public Stockholders who wish to redeem their shares for a pro rata portion of the Trust Account must, among other things, as fully described in the section titled “Special Meeting of ALPA Stockholders —Redemption Rights,” deliver their shares (either physically or electronically) to Continental (or through DTC to Continental) prior to 5:00 P.M., local time, on [●].

In addition, holders of outstanding ALPA Units must separate the underlying shares of Class A Common Stock and Warrants prior to exercising redemption rights with respect to the Public Shares.

If a broker, dealer, commercial bank, trust company or other nominee holds your Units, you must instruct such nominee to separate your Units. Your nominee must send written instructions by facsimile or email to Continental. Such written instructions must include the number of Units to be split and the nominee holding such Units. Your nominee must also initiate electronically, using DTCC’s DWAC (deposit/withdrawal at custodian) system, a withdrawal of the relevant Units and a deposit of an equal number of shares of Class A Common Stock and Warrants. This must be completed far enough in advance to permit your nominee to exercise your redemption rights upon the separation of the Public Shares from the Units. While this is typically done electronically on the same business day, you should allow at least one full business day to accomplish the separation. If you fail to cause your Public Shares to be separated in a timely manner, you will likely not be able to exercise your redemption rights.

If you or a “group” of stockholders of which you are a part are deemed to hold an aggregate of more than 20% of ALPA Common Stock issued in the Initial Public Offering, you (or, if a member of such a group, all of the members of such group in the aggregate) will lose the ability to redeem all such shares in excess of 20% of common stock issued in the Initial Public Offering.

A Public Stockholder, together with any of his, her or its affiliates or any other person with whom he, she or it is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in an amount in excess of 20% of the Class A Common Stock included in the Units sold in the Initial Public Offering. In order to determine whether a stockholder is acting in concert or as a group with another stockholder, ALPA will require

 

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each Public Stockholder seeking to exercise redemption rights to certify to ALPA whether such stockholder is acting in concert or as a group with any other stockholder. Such certifications, together with other public information relating to stock ownership available to ALPA at that time, such as Section 13D, Section 13G and Section 16 filings under the Exchange Act, will be the sole basis on which ALPA makes the above-referenced determination. Your inability to redeem any such excess shares will reduce your influence over ALPA’s ability to consummate the Business Combination and you could suffer a material loss on your investment in ALPA if you sell such excess shares in open market transactions. Additionally, you will not receive redemption distributions with respect to such excess shares if ALPA consummates the Business Combination. As a result, you will continue to hold that number of shares aggregating to more than 20% of the shares sold in the Initial Public Offering and, in order to dispose of such excess shares, would be required to sell your stock in open market transactions, potentially at a loss. ALPA cannot assure you that the value of such excess shares will appreciate over time following the Business Combination or that the market price of New Carmell common stock will exceed the per-share redemption price. Notwithstanding the foregoing, stockholders may challenge ALPA’s determination as to whether a stockholder is acting in concert or as a group with another stockholder in a court of competent jurisdiction.

However, ALPA’s stockholders’ ability to vote all of their shares (including such excess shares) for or against the Business Combination is not restricted by this limitation on redemption.

The Warrants are accounted for as liabilities and the changes in value of the Warrants could have a material effect on ALPA’s financial results.

On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the Warrants. As a result of the SEC Statement, ALPA reevaluated the accounting treatment of its Warrants and determined to classify the Warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.

As a result, included on ALPA’s balance sheet as of December 31, 2021 contained elsewhere in proxy statement/prospectus are derivative liabilities related to embedded features contained within the Warrants. Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”), provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, ALPA’s financial statements and results of operations may fluctuate quarterly, based on factors, which are outside of its control. Due to the recurring fair value measurement, ALPA expects that it will recognize non-cash gains or losses on the Warrants each reporting period and that the amount of such gains or losses could be material.

ALPA may be subject to the excise tax included in the Inflation Reduction Act of 2022 in connection with redemptions of ALPA Common Stock on or after January 1, 2023.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (H.R. 5376), which, among other things, imposes a 1% excise tax on certain domestic corporations that repurchase their stock on or after January 1, 2023 (the “Excise Tax”). The Excise Tax is imposed on the fair market value of the repurchased stock, with certain exceptions. The Excise Tax is expected to apply to any redemptions of ALPA Class A Common Stock occurring on or after January 1, 2023, including redemptions in connection with the Business Combination, unless an exemption is available. Issuances of securities in connection with the Business Combination (including the PIPE Investment at the time of the Business Combination) are expected to reduce the amount of the Excise Tax in connection with redemptions occurring in the same calendar year, but the fair

 

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market value of securities redeemed may exceed the fair market value of securities issued. In addition, ALPA may be required to use funds from sources other than the Trust Account to pay the Excise Tax, and such amounts could be material.

The per share value of New Carmell Common Stock is expected to be less than the per share value of the Trust Account.

Although the parties to the Business Combination have deemed the value of New Carmell common stock to be equal to $10.00 per share for determining the number of New Carmell common stock issuable to holders of Carmell common stock, the cash value per share of New Carmell common stock following the Business Combination is expected to be substantially less than $10.00 per share. See “Questions and Answers About the Proposals for Shareholders—What is the expected per share value of the cash consideration to be received by New Carmell in the Business Combination?” The cash held in the Trust Account as of the Record Date, was approximately $[●] per Public Share. Accordingly, Public Stockholders who do not exercise redemption rights will receive New Carmell common stock that is expected to have a value substantially less than the amount they would receive upon exercise of redemption rights. In addition, the shares of most companies that have recently completed business combinations between a special purpose acquisition company and an operating company have traded at prices substantially below $10.00 per share. Public Stockholders who do not exercise redemptions right may hold securities that never obtain a value equal to or exceeding the per share value of the Trust Account.

 

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SPECIAL MEETING OF ALPA STOCKHOLDERS

General

ALPA is furnishing this proxy statement/prospectus to its stockholders as part of the solicitation of proxies by the Board for use at the Special Meeting to be held on [●], 2023 and at any adjournment or postponement thereof. This proxy statement/prospectus provides ALPA’s stockholders with information they need to know to be able to vote or direct their vote to be cast at the Special Meeting.

Date, Time and Place

The Special Meeting will be held on [●], 2023, at, Eastern time, via live webcast at the following address:                . In light of the COVID-19 pandemic and to support the well-being of ALPA’s stockholders, directors and management, the Special Meeting will be completely virtual.

Voting Power; Record Date

You will be entitled to vote or direct votes to be cast at the Special Meeting if you owned shares of ALPA Common Stock at the close of business on [●], 2023, which is the Record Date. You are entitled to one vote for each share of ALPA Common Stock that you owned as of the close of business on the Record Date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. On the Record Date, there were [●] shares of ALPA Common Stock outstanding, of which [●] are Public Shares, and [●] shares are held by the Sponsor.

Vote of the Sponsor, Directors and Officers

In connection with the Initial Public Offering, ALPA entered into agreements with each of its Sponsor, directors and officers pursuant to which each agreed to vote any shares of ALPA Common Stock owned by it in favor of the Business Combination Proposal and for all other proposals presented at the Special Meeting. These agreements apply to the Sponsor as it relates to the Founder Shares and the requirement to vote such shares in favor of the Business Combination Proposal and for all other Proposals presented to ALPA stockholders in this proxy statement/prospectus.

ALPA’s Sponsor, directors and officers have waived any redemption rights, including with respect to shares of ALPA Common Stock issued or purchased in the Initial Public Offering or in the aftermarket, in connection with Business Combination.

Quorum and Required Vote for Proposals

A quorum of ALPA stockholders is necessary to hold a valid meeting. A quorum will be present at the Special Meeting if a majority of the voting power of all outstanding shares of ALPA Common Stock entitled to vote at the meeting are represented in person (which would include presence at a virtual meeting) or by proxy. As of [●], 2023, the Record Date, there were [●] shares of Class A Common Stock and [●] shares of Class B Common Stock outstanding; therefore, a total of [●] shares of ALPA Common Stock must be represented at the Special Meeting in order to constitute a quorum. Abstentions and withheld votes will count as present for the purposes of establishing a quorum, but will not count as votes cast at the Special Meeting for any of the Proposals. Because the Proposals are “non-discretionary” items, your broker will not be able to vote uninstructed shares for any of the Proposals. As a result, if you do not provide voting instructions, a broker “non-vote” will be deemed to have occurred for each of the Proposals. Broker “non-votes” will not be counted as present for purposes of determining whether a quorum is present. As of the Record Date, the Sponsor holds approximately [●]% of the outstanding ALPA Common Stock.

 

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The Proposals presented at the Special Meeting will require the following votes:

 

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The approval of the Business Combination Proposal, of the Advisory Charter Amendment Proposals, the Nasdaq Proposal, the Incentive Plan Proposal and the Adjournment Proposal each require the affirmative vote of the holders of a majority of the shares of ALPA Common Stock cast by the stockholders represented in person (which would include presence at a virtual meeting) or by proxy and entitled to vote thereon at the Special Meeting, voting together as a single class.

 

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The approval of the Charter Amendment Proposal requires the affirmative vote of a majority of the issued and outstanding shares of each of the ALPA Class A Common Stock and ALPA Class B Common Stock, voting separately.

 

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The approval of the Director Election Proposal requires a plurality vote of the ALPA Common Stock present (which would include presence at a virtual meeting) or represented by proxy and entitled to vote at the Special Meeting. “Plurality” means that the individuals who receive the largest number of votes cast “FOR” are elected as directors. Consequently, any shares not voted “FOR” a particular nominee (whether as a result of an abstention, a direction to withhold authority or a broker non-vote) will not be counted in the nominee’s favor.

Abstentions and Broker Non-Votes

At the Special Meeting, ALPA will count a properly executed proxy marked “ABSTAIN” with respect to a particular proposal as present for purposes of determining whether a quorum is present. Because the Proposals are “non-discretionary” items, your broker will not be able to vote uninstructed shares for any of the Proposals. As a result, if you do not provide voting instructions, a broker “non-vote” will be deemed to have occurred for each of the Proposals. Broker “non-votes” will not be counted as present for purposes of determining whether a quorum is present. The failure to vote, abstentions and broker non-votes will not be counted as votes cast and will have no effect on any of the Proposals presented at the Special Meeting.

Recommendation of the Board

The Board has unanimously determined that each of the Proposals is fair to and in the best interests of ALPA and its stockholders, and has unanimously approved such proposals. The Board unanimously recommends that stockholders:

 

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vote “FOR” the Business Combination Proposal;

 

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vote “FOR” the Charter Amendment Proposal;

 

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vote “FOR” each of the Advisory Charter Amendment Proposals;

 

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vote “FOR” the Nasdaq Proposal;

 

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vote “FOR” the Director Election Proposal;

 

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vote “FOR” the Incentive Plan Proposal; and

 

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vote “FOR” the Adjournment Proposal, if it is presented to the meeting.

When you consider the recommendation of the Board in favor of approval of the Proposals, you should keep in mind that the Sponsor, members of the Board and officers of ALPA have interests in the Business Combination that are different from or in addition to (or which may conflict with) your interests as a stockholder. See “Proposal 1: The Business Combination Proposal — Interests of the Sponsor and ALPA’s Directors and Officers in the Business Combination” for additional information on interests of ALPA’s Sponsor, directors and executive officers.

 

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Voting Your Shares

Each share of ALPA Common Stock that you own in your name entitles you to one vote. If you are a record owner of your shares, there are two ways to vote your shares of ALPA Common Stock at the Special Meeting:

 

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You Can Vote By Signing and Returning the Enclosed Proxy Card. If you vote by proxy card, your “proxy,” whose name is listed on the proxy card, will vote your shares as you instruct on the proxy card. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares will be voted as recommended by the Board “FOR” the Business Combination Proposal, the Charter Amendment Proposal, the Advisory Charter Amendment Proposals, the Nasdaq Proposal, the Director Election Proposal, the Incentive Plan Proposal and the Adjournment Proposal (if presented). Votes received after a matter has been voted upon at the Special Meeting will not be counted.

 

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You Can Attend the Special Meeting and Vote Through the Internet. You will be able to attend the Special Meeting online and vote during the meeting by visiting [●]and entering the control number included on your proxy card or on the instructions that accompanied your proxy materials, as applicable.

If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted. If you wish to attend the meeting and vote online and your shares are held in “street name,” you must obtain a legal proxy from your broker, bank or nominee. That is the only way ALPA can be sure that the broker, bank or nominee has not already voted your shares.

Revoking Your Proxy

If you are a record owner of your shares and you give a proxy, you may change or revoke it at any time before it is exercised by doing any one of the following:

 

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submit a new proxy card bearing a later date;

 

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give written notice of your revocation to ALPA’s Secretary, which notice must be received by ALPA’s Secretary prior to the vote at the Special Meeting; or

 

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vote electronically at the Special Meeting by visiting [●] and entering the control number found on your proxy card, voting instruction form or notice you previously received. Please note that your attendance at the Special Meeting will not alone serve to revoke your proxy.

If your shares are held in “street name” by your broker, bank or another nominee as of the close of business on the Record Date, you must follow the instructions of your broker, bank or other nominee to revoke or change your voting instructions.

Who Can Answer Your Questions About Voting Your Shares

If you are a stockholder and have any questions about how to vote or direct a vote in respect of your ALPA Common Stock, you may call contact Continental at (917) 262-2373 or by email at proxy@continentalstock.com.

No Additional Matters May Be Presented at the Special Meeting

The Special Meeting has been called only to consider the approval of the Business Combination Proposal, the Charter Amendment Proposal, the Advisory Charter Amendment Proposals, the Nasdaq Proposal, the Director Election Proposal, the Incentive Plan Proposal and the Adjournment Proposal. Under the Bylaws, other than procedural matters incident to the conduct of the Special Meeting, no other matters may be considered at the Special Meeting if they are not included in this proxy statement/prospectus, which serves as the notice of the Special Meeting.

 

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Redemption Rights

Pursuant to the Current Charter, any holders of Public Shares may demand that such shares be redeemed in exchange for a pro rata share of the aggregate amount on deposit in the Trust Account, less any owed but unpaid taxes on the funds in the Trust Account. If demand is properly made and the Business Combination is consummated, these shares, immediately prior to the Business Combination, will cease to be outstanding and will represent only the right to receive a pro rata share of the aggregate amount on deposit in the Trust Account which holds the proceeds of the Initial Public Offering (including interest earned on the funds held in the Trust Account and not previously released to it to pay the Company’s franchise and income taxes). For illustrative purposes, based on funds in the Trust Account of approximately $[●] on the Record Date, the estimated per share redemption price would have been approximately $[●].

In order to exercise your redemption rights, you must:

 

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check the box on the enclosed proxy card to elect redemption;

 

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provide, in the written request to redeem your Public Shares for cash to Continental, a “Stockholder Certification” if you are not acting in concert or as a “group” (as defined in Section 13d-3 of the Exchange Act) with any other stockholder with respect to shares of ALPA Common Stock;

 

•

prior to [●] (two business days before the Special Meeting), tender your shares physically or electronically and submit a request in writing that ALPA redeem your Public Shares for cash to Continental, ALPA’s transfer agent, at the following address:

Continental Stock Transfer & Trust Company

One State Street Plaza, 30^th Floor

New York, New York 10004

Attn: Mark Zimkind

E-mail: mzimkind@continentalstock.com; or

 

•

deliver your Public Shares either physically or electronically through DTC to Continental at least two business days before the Special Meeting. Public Stockholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from Continental and time to effect delivery. It is ALPA’s understanding that stockholders should generally allot at least two weeks to obtain physical certificates from Continental. However, ALPA does not have any control over this process and it may take longer than two weeks. Stockholders who hold their shares in street name will have to coordinate with their bank, broker or other nominee to have the shares certificated or delivered electronically. If you do not submit a written request and deliver your Public Shares as described above, your shares will not be redeemed.

Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests (and submitting shares to the transfer agent) and thereafter, with ALPA’s consent, until the closing of the Business Combination. If you delivered your shares for redemption to Continental and decide within the required timeframe not to exercise your redemption rights, you may request that Continental return the shares (physically or electronically). You may make such request by contacting Continental at (917) 262-2373, by email at proxy@continentalstock.com or by writing to the address listed above.

Prior to exercising redemption rights, stockholders should verify the market price of Class A Common Stock as they may receive higher proceeds from the sale of their Class A Common Stock in the public market than from exercising their redemption rights if the market price per share is higher than the redemption price. We cannot assure you that you will be able to sell your shares of Class A Common Stock in the open market, even if the market price per share is higher than the redemption price stated above, as there may not be sufficient liquidity in ALPA Common Stock when you wish to sell your shares.

If you exercise your redemption rights, your shares of Class A Common Stock will cease to be outstanding immediately prior to the Business Combination and will only represent the right to receive a pro rata share of the

 

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aggregate amount on deposit in the Trust Account. You will no longer own those shares and will have no right to participate in, or have any interest in, the future growth of the Combined Company, if any. You will be entitled to receive cash for these shares only if you properly and timely demand redemption.

If the Business Combination is not approved or completed for any reason, then Public Stockholders who elected to exercise their redemption rights will not be entitled to redeem their shares. In such case ALPA will promptly return any Public Shares previously delivered by the Public Stockholders.

Dissenter Rights

ALPA stockholders do not have dissenter rights in connection with the Business Combination or the other Proposals.

Potential Purchases of Shares

In connection with the stockholder vote to approve the proposed Business Combination, the Sponsor, directors, officers or advisors or their respective affiliates may privately negotiate transactions to purchase ALPA Common Stock from stockholders who would have otherwise elected to have their shares redeemed in conjunction with a proxy solicitation pursuant to the proxy rules for a per-share pro rata portion of the Trust Account. None of ALPA’s Sponsor, directors, officers or advisors or their respective affiliates will make any such purchases when they are in possession of any material non-public information not disclosed to the seller or during a restricted period under Regulation M under the Exchange Act. Such a purchase would include a contractual acknowledgement that such stockholder, although still the record holder of ALPA Common Stock, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights, and could include a contractual provision that directs such stockholder to vote such shares in a manner directed by the purchaser. In the event that the Sponsor, directors, officers or advisors or their affiliates purchase shares in privately negotiated transactions from Public Stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. Any such privately negotiated purchases may be effected at purchase prices that are below or in excess of the per-share pro rata portion of the Trust Account.

Proxy Solicitation

ALPA is soliciting proxies on behalf of the Board. This solicitation is being made by mail but also may be made by telephone or in person. ALPA and its directors, officers and employees may also solicit proxies in person. ALPA will file with the SEC all scripts and other electronic communications that constitute proxy soliciting materials. ALPA will bear the cost of the solicitation.

ALPA has hired Morrow Sodali to assist in the proxy solicitation process. ALPA has agreed to pay Morrow Sodali approximately $[●] for proxy solicitation services.

ALPA will ask banks, brokers and other institutions, nominees and fiduciaries to forward the proxy materials to their principals and to obtain their authority to execute proxies and voting instructions. ALPA will reimburse them for their reasonable expenses.

Assistance

If you need assistance in completing your proxy card or have questions regarding the Special Meeting, please contact ALPA at (646) 494-3296 or Morrow Sodali (individuals call toll-free (800) 662-5200; banks and brokers call (203) 658-9400), or Email:

 

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PROPOSAL 1: THE BUSINESS COMBINATION PROPOSAL

The discussion in this proxy statement/prospectus of the Business Combination and the principal terms of the Business Combination Agreement is subject to, and is qualified in its entirety by reference to, the Business Combination Agreement. A copy of the Business Combination Agreement is attached as Annex A to this proxy statement/prospectus. Unless the context otherwise requires, all references in this subsection to “we,” “us” or “our” refer to ALPA prior to the consummation of the Business Combination.

Headquarters; Trading Symbols

After completion of the transactions contemplated by the Business Combination Agreement:

 

•

the corporate headquarters and principal executive offices of New Carmell will be located at 2403 Sidney Street, Suite 300, Pittsburg, PA 15293; and

 

•

New Carmell common stock and New Carmell warrants are expected to be traded on Nasdaq under the symbols CTCX and CTCXW, respectively.

Background of the Business Combination

ALPA is a blank check company incorporated on January 21, 2021 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. In conducting a targeted search for a business combination target, as described in greater detail below, ALPA utilized the global network and investing, industry and sector and transaction experience of Sponsor, ALPA’s management and the ALPA Board. The terms of the Business Combination Agreement and the related ancillary documents are the result of extensive negotiations among ALPA, Carmell and their respective representatives and advisors. The following is a brief description of the background of these negotiations, the proposed Business Combination and related transactions.

On July 29, 2021, ALPA closed its Initial Public Offering of 15,000,000 units at a price of $10.00 per unit generating gross proceeds of $150,000,000 before transaction costs (including deferred underwriting expenses to be paid upon completion of ALPA’s initial business combination). Each unit consisted of one share of Class A common Stock and one-fourth of one redeemable warrant. Each whole warrant entitles the holder thereof to purchase one share of Class A common stock for $11.50 per share, subject to certain adjustments. Simultaneous with the closing of the Initial Public Offering, ALPA completed the private sale of 464,000 units in a private placement at a price of $10.00 per unit to Sponsor, BofA Securities and PJT Partners. In connection with the Initial Public Offering, ALPA also granted the underwriters a 45-day option to purchase an additional 2,250,000 units at a price of $10.00 per unit. On August 3, 2021, the underwriters exercised their option to purchase 444,103 additional units for the total amount of $4,441,030, received on August 6, 2021. On August 6, 2023, ALPA also issued 8,882 units in a private placement, generating additional $88,820 in gross proceeds. The units sold in the private placement are identical to the units sold in the Initial Public Offering except that the shares of Class A common stock issued in such units do not have associated redemption rights. Prior to the consummation of ALPA’s Initial Public Offering, neither ALPA, nor any authorized person on its behalf, initiated any substantive discussions, formal or otherwise, with respect to a business combination involving ALPA.

Following the completion of its Initial Public Offering, ALPA’s officers and directors commenced an active, targeted search for an initial set of business combination targets. ALPA considered a number of potential target businesses with the objective of consummating a business combination. Representatives of ALPA contacted, and were contacted by, a number of individuals and entities with respect to potential business combination opportunities, including financial advisors and companies in the life sciences and medical technology sectors. ALPA primarily considered businesses that it believed could benefit from the substantial expertise, experience and network of its management team, that ALPA determined have a scientific or other competitive advantage in the markets in which they operate and have attractive growth prospects. ALPA’s preliminary due diligence

 

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exercise included evaluations of various aspects of the potential target companies, including their product candidate pipelines and related scientific data, their market potential and financial information, in each case based on publicly available information and other market research available to the management team and its advisors.

In the process that led to identifying Carmell as an attractive business combination opportunity, ALPA’s management team evaluated a number of different potential business combination targets. In the period between the closing of the Initial Public Offering and the execution of the Business Combination Agreement on January 4, 2023, representatives of ALPA contacted and were contacted by representatives of 52 such potential combination targets to discuss the potential for a business combination transaction within the biotechnology and medical device sectors. In connection with such evaluation, ALPA’s management team compiled a list of high priority potential targets and updated and supplemented such list from time to time. ALPA considered businesses that it believed had attractive long-term growth potential, were well positioned within their industry and would benefit from the operational experience and network of ALPA’s management team. This pipeline was periodically discussed with the ALPA Board.

All of the potential business combination targets that were considered operate in the life sciences industry, with the majority being clinical or pre-clinical stage therapeutics, digital health and medical device companies. ALPA entered into nondisclosure agreements with 23 such potential business combination targets (including Carmell). The nondisclosure agreements that ALPA entered into with these potential business combination targets were mutual, relating to confidential information provided to ALPA before and after its execution, and contained, among other provisions, customary non-disclosure and non-use provisions and a customary trust account waiver pursuant to which the counterparty waived any right, title, interest or claim in ALPA’s Trust Account and agreed not to seek recourse against the Trust Account for any reason. None of these non-disclosure agreements had standstills or don’t ask don’t waive provisions. Following initial diligence, ALPA’s management discontinued discussions with 13 of the 16 business combination targets because ALPA’s management believed that pursuing a merger with these targets was not in the best interest of the ALPA’s stockholders for various reasons including early stage of research and development, quality of clinical data, size of potential market opportunity, and disagreement around merger terms including enterprise valuation.

One of the potential business combination targets (“Company A”), was a clinical stage cell and gene therapy company. Representatives of ALPA conducted an introductory teleconference meeting with representatives of Company A on September 20, 2021 and ALPA entered into a nondisclosure agreement with Company A on September 23, 2021. Following initial diligence on Company A and preliminary discussions on terms of a potential business combination, ALPA’s management determined that a business combination with Company A was not in the best interests of ALPA shareholders because of sub-optimal clinical data related to Company A’s lead R&D candidate, and on December 2, 2021 ALPA and Company A mutually terminated discussions.

Another of the potential business combination targets (“Company B”), was a clinical stage biopharmaceutical company developing vaccines for various indications including a lead R&D candidate for COVID-19. Representatives of ALPA first met with representatives of Company B on December 6, 2021 and ALPA entered into a nondisclosure agreement with Company B on December 7, 2021. Following initial diligence on Company B, ALPA’s management considered Company B for the business combination. ALPA’s management ultimately determined that a business combination with Company B was not in the best interests of ALPA shareholders because of sharply dropping COVID-19 infection rates and a drop in vaccine orders, and on June 28, 2022, ALPA and Company B mutually terminated discussions.

Negotiations with Carmell

On October 25, 2022, Randy Hubbell, CEO of Carmell emailed Mr. Shukla, CEO of ALPA. There had been no previous interactions between the two organizations or their employees and Directors and advisors. On October 26, 2022, Mr. Shukla and Mr. Sturgeon, the CFO of ALPA, on behalf of ALPA, and Mr. Hubbell on

 

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behalf of Carmell, met via video conference. Mr. Hubbell presented an investor presentation regarding Carmell and its business operations, including financial information, views on competitive and positioning and market opportunity, and background on the Carmell management team. At the meeting, the parties discussed Carmell’s business and strategic prospects, as well as how a potential business combination with ALPA could be structured and the potential benefits of a business combination involving ALPA and Carmell. Both the ALPA and Carmell representatives expressed interest in further exploring a potential business combination.

On October 26, 2022 representatives of ALPA and Carmell executed a mutual non-disclosure agreement, which contained, among other provisions, customary non-disclosure and non-use provisions and a customary trust account waiver pursuant to which Carmell waived any right, title, interest or claim in ALPA’s trust account and agreed not to seek recourse against ALPA’s trust account for any reason. None of these non-disclosure agreements had standstills or don’t ask don’t waive provisions. Pursuant to that mutual non-disclosure agreement, Carmell provided Goodwin Procter LLP (“Goodwin”), ALPA’s legal counsel, and DLA, ALPA’s financial advisors, with access to confidential data via a confidential online data room with legal, operational, regulatory and tax information, documents and data for purposes of conducting preliminary business and financial due diligence on Carmell.

On October 26, 2022, ALPA submitted to Carmell a non-binding term sheet setting forth certain proposed key terms with respect to a potential business combination between ALPA and Carmell (the “Term Sheet”), which was executed on October 27, 2022. The Term Sheet provided for, among other things, a binding exclusivity period through December 27, 2022 (subject to certain exceptions) to allow for due diligence and customary documentation. The term sheet indicated an implied Carmell equity valuation of $150,000,000 (without taking into account the funds held in the ALPA Trust Account to be utilized in the transaction), with no adjustment for Carmell’s cash or debt.

Pursuant to the non-binding term sheet, the parties agreed to proceed with due diligence on October 26, 2022, with respect to each other’s business position and outlook, which included research on Carmell’s platform technology, management team, R&D pipeline, pre-clinical and clinical data, commercial market outlook, and having conference calls and email exchanges with Randy Hubbell, and Sebby Borriello, Carmell’s Chief Business Officer, regarding the potential merits of a potential business combination involving ALPA and Carmell.

On October 28, 2022, representatives of each of ALPA and Carmell and Goodwin and Troutman Pepper Hamilton Sanders LLP (“Troutman”), legal counsel to Carmell, conducted a video conference meeting, where the parties discussed the potential timeline and steps to signing a definitive agreement for a business combination, and discussed and tentatively agreed to a work plan.

Between October 27, 2022 and December 29, 2022, representatives of ALPA conducted further business and financial due diligence with respect to Carmell and, over the same period of time, Goodwin Procter conducted legal and regulatory due diligence with respect to Carmell.

The due diligence process included the following:

 

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a comprehensive review of the materials, including legal, operational, financial, and regulatory documents (including a Draft Registration Statement filed with the SEC on September 1, 2022 and SEC comments received on September 30, 2022), provided in the confidential online data room;

 

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requests for follow-up data and information from Carmell regarding intellectual property portfolio, interactions with regulatory authorities, and Carmell’s existing outstanding convertible debt, including Carmell management responses to due diligence questions;

 

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in-person meeting with Randy Hubbell, videoconferences and calls with Carmell’s management team, including Randy Hubbell, Dr. James Hart, Carmell’s Chief Medical Officer, Sebby Borriello, Carmell’s

 

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Chief Business Officer, Donna Godward, Carmell’s Chief Quality Office, and Dr. Janet Vargo, Vice President, Clinical Research of Carmell. among others, regarding Carmell’s business and product candidates, operations, and technical diligence matters, as well as tax and legal matters, including those related to intellectual property and information technology matters, regulatory matters and clinical operations, corporate matters (including material contracts, capitalization and other customary corporate matters), labor and employment matters, environmental matters and international trade matters;

 

•

review of publicly available industry data including peer reviewed scientific publications;

 

•

diligence call on November 9, 2022 to discuss certain follow-up queries with specialist groups;

 

•

diligence calls with scientific experts in the fields of orthopedic surgery and dermatology – specifically, the former Vice Chairman and Professor of Orthopedic Surgery at the University of Pittsburgh Medical Center, the Chief of Orthopaedic Trauma Service and Associate Professor at the University of Pennsylvania Hospital and the author of the book, “PRP and Microneedling in Aesthetic Medicine” and Co-chair, “Regenerative Medicine in Aesthetics” at the 2022 American Society of Dermatologic Surgery Annual Meeting;

 

•

a summary by ALPA management to the ALPA Board with respect to their key findings with respect to their business, operational and financial due diligence, which summary included an overview of the legal due diligence findings by Goodwin; and

 

•

a fairness analysis, including review and analysis on certain financial information provided by Carmell, that was prepared by Cabrillo Advisors.

On November 3, 2022, representatives of Goodwin distributed to representatives of Carmell and Troutman, on behalf of ALPA, an initial draft of the Business Combination Agreement.

On November 14, 2022, representatives of Troutman and Goodwin held a meeting via teleconference, on behalf of their respective clients, to discuss the changes reflected in the draft Business Combination Agreement circulated by Goodwin.

From November 2, 2022 through December 30, 2022, representatives of Goodwin and Troutman, on behalf of their respective clients, continued to negotiate the terms of the Business Combination Agreement and ancillary transaction documents, including those regarding, among other things, Carmell’s obligations with respect to the operation of its business between signing and closing, including its agreement to avoid taking certain corporate actions without the prior written consent of ALPA.

On November 5, 2022, Mr. Sturgeon began engaging with several independent financial advisory firms to explore their ability deliver an independent fairness opinion related to the Carmell transaction. ALPA selected Cabrillo Advisors to deliver a fairness opinion to the ALPA Board in connection with the Business Combination and, on November 22, 2022 provided them with access to the Carmell data room under NDA. Pursuant to their engagement letter executed on December 19, 2022, ALPA made a payment of $120,000 on December 19, 2022 and a payment of $80,000 on January 3, 2023 to Cabrillo in advance of Cabrillo delivering their independent fairness opinion to the ALPA Board on January 3, 2023. Other than the delivery of such fairness opinion, Cabrillo Advisors has not performed any services for Carmell and has not received any compensation from ALPA, in each case, in the two-year period preceding the date that ALPA and Carmell entered into the Business Combination Agreement nor is due to receive any additional compensation on closing of the Carmell transaction or any other transaction by ALPA.

Between October 2022 and December 2022, representatives and advisors of ALPA and Carmell held various calls and meetings to discuss the Business Combination Agreement, the draft S-4 proxy filing and the investor management presentation, including the projections to be included, research analyst coverage and outstanding information requests for the investor management presentation.

 

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On November 22, 2022, representatives of Goodwin distributed to representatives of Carmell and Troutman, on behalf of ALPA, an initial draft of the registration statement/proxy.

On December 10, 2022, representatives of Goodwin distributed to representatives of Carmell and Troutman, on behalf of ALPA, following negotiation between Goodwin and Troutman, comments to the Business Combination Agreement and the disclosure schedules to the Business Combination Agreement.

On December 23, 2022, ALPA and Carmell mutually agreed to extend the exclusivity period by 3 weeks to enable the parties and their respective advisors to have sufficient time to complete diligence and negotiate the definitive transaction documents.

The final documentation, including with respect to mechanics relating to the treatment in the Business Combination of certain of Carmell’s outstanding securities (such as Carmell’s preferred stock, warrants, options and other equity-linked securities), restrictions on the conduct of ALPA’s and Carmell’s respective businesses between signing and closing, obligations of the parties with respect to delivery of required approvals and preparation and submission of required filings, certain conditions to closing and termination rights of the parties and certain other terms of conditions, the details of which were not fully addressed in the Term Sheet, required additional negotiation by the parties.

On the afternoon of January 3, 2023, the ALPA Board held a meeting via videoconference and representatives of Goodwin and Cabrillo Advisors joined the meeting. At the meeting, the senior management of ALPA provided an overview of the proposed business combination and Carmell as the proposed business combination target (including the rationale for the combined business) and updated the ALPA Board regarding the final negotiations of the terms of the proposed business combination. A representative of Goodwin gave a presentation to the ALPA board of directors on the directors’ fiduciary duties under Delaware law in this context and on the terms of the final proposed Business Combination Agreement. Also at this meeting, Cabrillo Advisors reviewed its financial analysis on Carmell and the Business Combination, and rendered to the ALPA Board an oral opinion, which was subsequently confirmed by delivery of a written opinion, which we refer to as the Opinion, as to (i) the fairness, from a financial point of view, to ALPA of the Merger Consideration to be payable by ALPA to the holders of Carmell Shares under the Business Combination Agreement and (ii) whether Hunter has a fair market value equal to at least 80 percent of the balance of funds in ALPA’s trust account (excluding deferred underwriting commissions and taxes payable). The ALPA Board, with the assistance of Goodwin and Cabrillo, discussed the proposed business combination, including Carmell as the proposed business combination target, the terms and conditions of the Business Combination Agreement and the key ancillary agreements (copies of all of which were provided to all of the members of the ALPA board of directors in advance of the meeting), the potential benefits of, and risks relating to the proposed business combination and the reasons for entering into the Business Combination Agreement and the proposed timeline for finalizing the definitive transaction agreements and announcing the proposed business combination. See “—ALPA Board of Directors’ Reasons for Approval of the Business Combination” for additional information related to the factors considered by the ALPA Board in approving the Business Combination. Following additional discussion on these and related matters, ALPA’s board of directors unanimously determined, among other things, that the Business Combination Proposal is in the best interests of ALPA and its shareholders and recommended that its shareholders vote “FOR” the proposal.

On January 4, 2023, ALPA, Carmell and Merger Sub executed the Business Combination Agreement. Concurrent with the execution of the Business Combination Agreement.

Also on January 4, 2023, ALPA and Carmell issued a joint press release announcing the execution of the Business Combination Agreement and ALPA filed a Current Report on Form 8-K with the investor presentation providing information on Carmell and used in connection with meetings with potential investors regarding Carmell, the Business Combination.

 

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The Board’s Reasons for Approval of the Business Combination

ALPA was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. ALPA sought to do this by utilizing the networks and industry experience of both its management team and the Board to identify, acquire and operate one or more businesses within or outside of the United States.

On January 3, 2023, the Board unanimously approved the Business Combination and the Business Combination Agreement. Prior to reaching the decision to approve the Business Combination and the Business Combination Agreement, the Board consulted with our management, as well as with our legal and financial advisors. In making its determination with respect to the transactions, the Board also considered the fairness analysis undertaken by Cabrillo Advisors, Inc, financial advisor to ALPA in connection with the Business Combination. Cabrillo Advisors, Inc. rendered to the Board an oral opinion, which was subsequently confirmed by delivery of a written opinion, which we refer to as the Opinion, as to (i) the fairness, from a financial point of view, to ALPA of the Business Combination Consideration payable by ALPA to the holders of Carmell securities under the Business Combination Agreement and (ii) whether Carmell has a fair market value equal to at least 80% of the balance of funds in Trust Account (excluding deferred underwriting commissions and taxes payable). See “— Opinion of ALPA’s Financial Advisor.”

In addition, the Board reviewed various industry and scientific data, including, but not limited to, Carmell’s existing business model, Carmell’s clinical trial progress and pipeline, and reviewed the results of management’s due diligence review of Carmell which took place over an approximately two-month period beginning October 26, 2022 of 2022 and continuing through the signing of the Business Combination Agreement on January 4, 2023, including extensive meetings and calls with Carmell’s management team, review of Carmell’s material contracts, intellectual property matters, labor matters, operations, financing and accounting due diligence, tax due diligence, engaging and consulting financial advisors including, but not limited to, DLA and Cabrillo Advisors, Inc. and other legal due diligence with assistance from our legal counsel before determining that the Business Combination was in the best interest of ALPA. The Board also determined, after a thorough review of other business combination opportunities reasonably available, that the Business Combination represents the best potential business combination based upon the process utilized to evaluate and assess other potential acquisition targets.

The Board considered a wide variety of factors in connection with its evaluation of the Business Combination. In light of the complexity of those factors, the Board as a whole did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific factors it took into account in reaching its decision. Individual members of the Board may have given different weight to different factors. This explanation of ALPA’s reasons for the Board’s approval of the Business Combination, and all other information presented in this section, is forward-looking in nature and, therefore, should be read in light of the factors discussed under the section titled “Forward-Looking Statements.”

In particular, the Board considered the following positive factors, although not weighted or in any order of significance:

 

•

Phase 2-stage biotechnology platform with multiple product candidates. The Board considered Carmell’s Phase 2-stage biotechnology platform with multiple product candidates designed to be: (a) allogeneic, with no need for (i) extraction of whole blood from patients, (ii) capital equipment to harvest biomaterials at the clinical care facility, (iii) staff training, (b) ready to use off-the-shelf including (i) assured levels of biomaterials, (ii) formulated to be available over weeks and months, providing sustained local tissue bioavailability of growth factors and other bioactive molecules important for healing, (c) eliminating waiting time for tissue processing, (d) eliminating the need to harvest tissue from a patient with existing morbidity.

 

•

Anticipated clinical applications. The Board considered anticipated clinical applications for Carmell’s products including: (a) orthopedic healing applications such as (i) tibia fractures, to treat open fractures

 

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of the shinbone that require intramedullary rodding, (ii) fusion hindfoot or ankle arthrodesis, to aid surgical fusion of foot/ankle joint in degenerative arthritis, (iii) spinal fusion, to aid surgical fusion of spinal vertebrae due to deformity, injury or degenerative disease, and (iv) dental bone graft, an alternative to bone grafting in dental restoration/implants. (b) Soft tissue healing applications such as (i) surgical/chronic wounds, to promote healing after surgical incisions or open wounds caused due to diseases such as diabetic foot ulcers, (ii) alopecia, to promote regrowth of hair in men and women, and (iii) cosmetic skin rejuvenation, to improve the appearance of damaged/aged skin.

 

•

Clinical proof of concept. The Board considered that Carmell’s previous Phase 2 trial (HEAL I) in open tibia fractures suggested that the product candidate may have the potential to accelerate bone healing and reduce rate of infections.

 

•

Regulatory considerations. The Board considered the potential regulatory pathways for Carmell’s product candidates, including that Carmell received Fast Track designation from the FDA for its tibia fracture (lead) indication.

 

•

Intellectual property protection. The Board considered Carmell’s intellectual property portfolio, including 21 patents, as well as proprietary biomanufacturing know-how and trade secrets.

 

•

In-house manufacturing. The Board considered Carmell’s in-house manufacturing with 11 release tests developed for lot-to-lot consistency and that Carmell is ISO 13485 certified.

 

•

Experienced management team. The Board believes that Carmell has a proven and experienced management team that will effectively lead the Combined Company after the Business Combination.

 

•

Opinion of Financial Advisor. The Board considered the oral opinion of Cabrillo Advisors, Inc. rendered to the Board, which was subsequently confirmed by delivery of a written opinion that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Cabrillo Advisors, Inc. in preparing its opinion, (i) the consideration to be paid by ALPA to Carmell equityholders in the Business Combination under the Business Combination Agreement is fair, from a financial point of view, to ALPA and (ii) Carmell has a fair market value equal to at least 80% of the balance of funds in Trust Account (excluding deferred underwriting commissions and taxes payable and subject to proportionate adjustments related to Nasdaq’s 80% test), as more fully described below under the heading titled “Proposal 1: The Business Combination Proposal — Opinion of ALPA’s Financial Advisor.”

 

•

Results of Due Diligence. The Board considered the scope of the due diligence investigation carried out by ALPA’s management team and outside advisors, and evaluated the results thereof and information available to it related to Carmell, including (i) virtual meetings and calls with Carmell’s management team regarding its operations, intellectual property, projections and the terms of the proposed transaction; (ii) review of financial and other business information made available by Carmell in its virtual data room, including financial statements, material contracts, benefit plans and employee compensation matters, corporate governance, intellectual property, information technology, privacy and data regulation, litigation information, regulatory and compliance matters, and other legal and business diligence; and (iii) the fair market value analyses prepared by the independent financial advisor, all of which supported the conclusion that Carmell was an attractive opportunity.

The Board also identified and considered the following factors and risks weighing negatively against pursuing the Business Combination, although not weighted or in any order of significance:

 

•

Clinical Risk. While Carmell has data from a past clinical trial, there is no assurance that ongoing clinical trials will succeed.

 

•

FDA Approval. While Carmell has received Fast Track designations, the Board considered risks associated with the failure to receive FDA approval for Carmell’s product candidates in late-stage clinical development in a timely matter, or at all, for the commercialization of its products.

 

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•

Manufacturing. While Carmell has an existing manufacturing facility, the Board considered the risks associated with scaling up production for commercial sales.

 

•

Commercialization. The Board considered the risk that Carmell will be unable to commercialize its product candidates in its pipeline, if approved and that Carmell is subject to competition from other regenerative medicine companies.

 

•

Reimbursement. The Board considered the risk that Carmell’s product candidates, if approved, do not become eligible for third-party coverage and/or approved for reimbursement.

 

•

Exclusivity. The fact that the Business Combination Agreement includes an exclusivity provision that prohibits ALPA from soliciting other business combination proposals, which restricts ALPA’s ability, so long as the Business Combination Agreement is in effect, to consider other potential business combinations.

 

•

Other risks. Various other risks associated with the Business Combination, the business of ALPA and the business of Carmell described in the section titled “Risk Factors.”

Based on its review of the forgoing considerations, the Board concluded that the potential risk factors associated with the Business Combination were outweighed by the potential benefits that it expects ALPA shareholders will receive as a result of the Business Combination. The Board noted that there can be no assurance about future results, including results considered or expected as disclosed in the foregoing reasons.

The preceding discussion of the information and factors considered by the Board is not intended to be exhaustive but includes the material factors considered by the Board. In view of the complexity and wide variety of factors considered by the Board in connection with its evaluation of the Business Combination, the Board did not consider it practical to, nor did it attempt to, quantify, rank or otherwise assign relative weights to the different factors that it considered in reaching its decision. In addition, in considering the factors described above, individual members of the Board may have given different weight to different factors. The Board considered this information as a whole and overall considered the information and factors to be favorable to, and in support of, its determinations and recommendations.

This explanation of the Board’s reasons for its approval of the Business Combination, and all other information presented in this section, is forward-looking in nature and, therefore, should be read in light of the factors discussed under the section titled “Forward-Looking Statements.”

Description of Fairness Opinion of Cabrillo

ALPA retained Cabrillo to provide to the board of directors a fairness opinion on January 3, 2023 (the “Opinion”) with respect to the acquisition of Carmell by means of a merger via Candy Merger Sub, Inc (“Merger Sub). On January 3, 2023, Cabrillo delivered its Opinion, dated January 3, 2023, to our board of directors that, as of the date of the Opinion and subject to and based on the assumptions made, procedures followed, matters considered, limitations of the review undertaken and qualifications contained in such Opinion, the Business Combination was fair, from a financial point of view, to ALPA.

In selecting Cabrillo, our board of directors considered, among other things, the fact that Cabrillo is a reputable valuation and investment banking firm with experience in providing strategic advisory services. Cabrillo is engaged in the valuation of businesses and their securities in connection with corporate and financial reporting purposes.

The full text of the Opinion is attached hereto as Annex B and is incorporated into this document by reference. The summary of the Opinion set forth herein is qualified in its entirety by reference to the full text of the Opinion. ALPA Stockholders are urged to read the Opinion carefully and in its entirety for a discussion of the procedures followed, assumptions made, other matters considered, and limitations of the review undertaken by

 

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Cabrillo in connection with such Opinion. Cabrillo’s Opinion was approved by its fairness committee. The Opinion was provided for the information of, and directed to, our board of directors for its information and assistance in connection with its consideration of the financial terms of the business combination.

In rendering its Opinion, Cabrillo, among other things:

 

1.

reviewed the Business Combination Agreement;

 

2.

reviewed the business information of ALPA provided by ALPA to us or otherwise also publicly available;

 

3.

reviewed the business and financial information of Carmell provided by Carmell to us or otherwise also publicly available;

 

4.

reviewed ALPA’s audited financial statements for the year ended December 31, 2021;

 

5.

reviewed Carmell’s audited financial statements for the years ended December 31, 2020 and December 31, 2021;

 

6.

reviewed Carmell’s interim unaudited financial statements for the year ended December 31, 2019 and the period ended November 30, 2022;

 

7.

reviewed certain business presentations regarding Carmell, prepared by the representatives of Carmell;

 

8.

discussed Carmell’s long-term business plans and short and long-term cash needs;

 

9.

reviewed the current economic conditions in general and for Carmell’s industry sector(s), based on discussions with Carmell, industry research and certain research provided to us by Carmell and ALPA;

 

10.

discussed the past and current operations and financial condition and prospects of Carmell with ALPA management and Carmell management;

11.

discussed the transaction process for the Business Combination with ALPA management and members of the Board;

 

12.

reviewed and relied upon a letter dated January 2, 2023, from the management of ALPA which made certain representations as to ALPA’s and Carmell’s financial results through a recent date, and which confirmed that there have been no material changes through the date of this letter;

 

13.

reviewed and relied upon a letter dated January 1, 2023, from the management of Carmell which made certain representations as to Carmell’s financial results through a recent date, and which confirmed that there have been no material changes through the date of this letter;

 

14.

conducted an analysis of ALPA’s organizational structure, financial and operating history, strategic and operational plans, and key management;

 

15.

conducted an analysis of Carmell’s organizational structure, financial and operating history, strategic and operational plans, key management, the nature of its business, and its industry and competitive position;

 

16.

reviewed certain other publicly available financial data and historical trading prices for certain companies that we believe to be similar to Carmell; and

 

17.

conducted such other studies, analyses and inquiries as we have deemed appropriate.

In rendering its Opinion, Cabrillo assumed and relied upon, but did not assume any responsibility to independently investigate or verify, the accuracy, completeness, and fair presentation of all of the financial and other information that was provided to Cabrillo by Carmell, ALPA or that was publicly available.

In rendering its Opinion, Cabrillo also assumed that in all respects material to its analysis that the final executed form of the draft Business Combination Agreement does not differ in any material respects from the draft provided to Cabrillo, that the representations and warranties of each party contained in the Business Combination

 

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Agreement are true and correct, that each party will perform all of the covenants and agreements required to be performed by it under the Business Combination Agreement, and that all conditions to the consummation of the Business Combination will be satisfied without waiver thereof, which would affect the amount or timing of the purchase. Cabrillo also assumed that there will not, as a result of the consummation of the transactions contemplated by the Business Combination Agreement, be any default, or event of default, under any indenture, credit agreement or other material agreement or instrument to which Carmell or any of its subsidiaries or affiliates is a party, and that all material assets and liabilities (contingent or otherwise, known or unknown) of Carmell were as set forth in the consolidated financial statements provided to Cabrillo by ALPA as of the respective dates of such financial statements.

Cabrillo did not provide advice concerning the structure, the specific amount of the consideration or any other aspects of the Business Combination or provide any services other than the delivery of the Opinion.

The Opinion was limited to whether, as of the date of the Opinion, the Business Combination was fair, from a financial point of view, to ALPA. The Opinion did not address tax, legal, or accounting matters, the relative merits of the transactions contemplated by the Business Combination Agreement as compared to any alternative transactions that might be available to ALPA, nor did it address the underlying business decision by ALPA to engage in the business combination or the terms of the Business Combination Agreement or the documents referred to therein. The Opinion did not constitute a recommendation as to how any holder of shares of Common Stock should vote or act on any matter relevant to the Business Combination Agreement.

Cabrillo is not a legal, tax or accounting advisor and relied upon ALPA and its legal, tax and accounting advisors to make its own assessment of all legal, tax and accounting matters related to ALPA and the business combination. Cabrillo did not take into account any tax consequences of the Business Combination to ALPA or its stockholders.

The summary set forth below does not purport to be a complete description of the analyses performed by Cabrillo, but describes, in summary form, the material elements of the presentation that Cabrillo made to our board of directors on January 3, 2023, in connection with Cabrillo’s Opinion.

Cabrillo employed generally accepted valuation methods and financial analyses in reaching its Opinion. The following is a summary of the material financial analyses performed by Cabrillo in arriving at its Opinion. These summaries of financial analyses alone do not constitute a complete description of the financial analyses Cabrillo employed in reaching its conclusions. None of the analyses performed by Cabrillo were assigned a greater significance by Cabrillo than any other, nor does the order of analyses described represent relative importance or weight given to those analyses by Cabrillo. The summary text describing each financial analysis does not constitute a complete description of Cabrillo’s financial analyses, including the methodologies and assumptions underlying the analyses, and if viewed in isolation could create a misleading or incomplete view of the financial analyses performed by Cabrillo. The summary text set forth below does not represent and should not be viewed by anyone as constituting conclusions reached by Cabrillo with respect to any of the analyses performed by it in connection with its Opinion. Rather, Cabrillo made its determination as to the fairness of the Business Combination, from a financial point of view, to ALPA, on the basis of its experience and professional judgment after considering the results of all of the analyses performed.

Except as otherwise noted, the information utilized by Cabrillo in its analyses, to the extent that it is based on market data, is based on market data as it existed on or before the date Cabrillo delivered its Opinion and is not necessarily indicative of current market conditions. The analyses described below do not purport to be indicative of actual future results, nor to reflect the prices at which any securities may trade in the public markets, which may vary depending upon various factors, including changes in interest rates, dividend rates, market conditions, economic conditions and other factors that influence the price of securities.

Selected Public Companies Analysis: Cabrillo reviewed, analyzed, and compared certain financial and operating information relating to Carmell to corresponding publicly available financial information for ten publicly traded

 

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companies that focus on regenerative bioactive technology and the orthopedics market segment. The publicly traded companies are primarily in clinical stages of development. AVITA Medical, Inc. (“AVITA”), Vericel Corporation (“Vericel”) and ProKidney Corp. (“ProKidney”) were excluded from the calculations, as AVITA’s and Vericel’s respective businesses include commercial products, and ProKidney’s lead drug candidates are further along in development. Cabrillo reviewed, among other things, the range of enterprise values of the selected publicly traded companies.

The following table sets forth the enterprise values for the selected publicly traded companies identified. Although none of the selected companies are directly comparable to Carmell , Cabrillo included these companies in its analysis given they maintain operations that may be considered similar to the operations of Carmell. Based on the below enterprise value ranges, Cabrillo determined an enterprise value indication of Carmell.

 

Guideline Public Companies ($ mm, except multiples)		Market Cap				Debt				Cash				Preferred Stock				Minority Interest				Total Enterprise Value
Comparable Public Companies (Clinical)
HCW Biologics Inc.		$	68.7			$	6.7			$	26.2			$	—			$	—			$	49.1
Frequency Therapeutics, Inc.			135.8				44.2				99.3				—				—				80.7
AVITA Medical, Inc.			167.9				1.1				84.2				—				—				84.8				(x	)
Humacyte, Inc.			217.6				50.9				171.7				—				—				96.7
Evelo Biosciences, Inc.			176.5				54.9				69.1				—				—				162.3
BioAtla, Inc.			390.7				4.3				178.1				—				—				216.9
Sangamo Therapeutics, Inc.			514.6				39.7				313.6				—				—				240.7
Rani Therapeutics Holdings, Inc.			291.2				15.4				98.2				—				44.4				252.9
Vericel Corporation			1,243.9				48.1				110.9				—				—				1,181.0				(x	)
ProKidney Corp.			1,596.7				2.1				506.3				—				1,616.9				2,709.4				(x	)
Minimum																						$	49.1
Lower Quartile																							88.7
Average																							157.0
Median																							162.3
Higher Quartile																							228.8
Maximum																							252.9

 

Data	provided by Capital IQ, a division of Standard & Poor’s.

An(x)

indicates that the item has been excluded from calculations.

 

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Cabrillo identified an additional 20 publicly traded companies, which have commercial products that focus on regenerative bioactive technology and the orthopedics market segment, as set forth in the following table. Cabrillo did not consider these publicly traded companies in its determination of an enterprise value indication of Carmell.

 

Guideline Public Companies ($ mm, except multiples)		Market Cap				Debt				Cash				Preferred Stock				Minority Interest				Total Enterprise Value
Comparable Public Companies (Commercial)
Exagen Inc.		$	39.2			$	35.5			$	68.7			$	—			$	—			$	5.9
Xtant Medical Holdings, Inc.			71.7				14.5				17.4				—				—				68.8
Protalix BioTherapeutics, Inc.			69.4				33.1				20.8				—				—				81.7
Aziyo Biologics, Inc.			68.5				20.0				8.1				—				—				80.4
Organogenesis Holdings Inc.			352.2				130.7				108.1				—				—				374.8
Precigen, Inc.			316.4				91.0				71.3				—				—				336.1
Anika Therapeutics, Inc.			432.4				31.1				87.8				—				—				375.8
Orthofix Medical Inc.			410.8				27.0				51.7				—				—				386.2
MiMedx Group, Inc.			315.5				55.9				73.2				92.5				—				390.7
AxoGen, Inc.			422.0				72.1				53.1				—				—				441.0
Bioventus Inc.			202.9				442.0				34.4				—				35.7				646.3
OrthoPediatrics Corp.			909.5				1.2				120.1				—				—				790.6
ADMA Biologics, Inc.			857.1				152.7				34.9				—				—				974.9
PTC Therapeutics, Inc.			2,786.1				415.0				288.4				—				—				2,912.6
NuVasive, Inc.			2,150.0				1,007.4				237.5				—				—				2,919.9
Integra LifeSciences Holdings Corporation			4,682.9				1,714.4				525.0				—				—				5,872.2
Globus Medical, Inc.			7,415.3				—				405.3				—				—				7,010.0
Zimmer Biomet Holdings, Inc.			26,756.2				5,896.5				568.2				—				6.4				32,090.9
Stryker Corporation			92,522.3				13,224.0				1,497.0				—				—				104,249.3
Medtronic plc			103,381.6				26,617.0				11,430.0				—				177.0				118,745.6
Minimum																						$	5.9
Lower Quartile																							365.1
Average																							13,937.7
Median																							543.6
Higher Quartile																							3,658.0
Maximum																							118,745.6

Data provided by Capital IQ, a division of Standard & Poor’s.

Cabrillo selected the companies used in this analysis on the basis of its professional judgment and experience and knowledge of companies in the industry and various factors, including the size of the companies and the similarity of their product pipelines and leading drug candidates to Carmell’s product pipeline and leading drug candidate, as well as the business models, product/service offerings, and the end-market exposure of such companies. Accordingly, these analyses are not purely mathematical, but also involve complex considerations and judgments concerning the differences in financial and operating characteristics of the selected companies and other factors.

Initial Public Offering Analysis: Cabrillo reviewed, analyzed, and compared certain financial and operating information relating to Carmell to corresponding publicly available financial information for 122 initial public offerings of biotechnology and pharmaceutical companies in pre-clinical and clinical stages of development, from 2013 to the date of the Opinion.

 

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The following tables set forth the enterprise values of the selected initial public offerings identified. Although none of the selected initial public offerings are directly comparable to Carmell, Cabrillo included these initial public offerings in its analysis given the underlying companies maintain operations that may be considered similar to the operations of Carmell. Based on the below enterprise value ranges, Cabrillo determined an enterprise value indication of Carmell.

 

Public Companies (in $ mm)

Offer Date

Phase at IPO

Disease Indication

Pre-IPO Enterprise Value

Lipella Pharmaceuticals Inc.

12/19/2022

Phase II

Cancer

$

25.9

Prime Medicine, Inc.

10/19/2022

Genetic therapies

1,702.3

bioAffinity Technologies, Inc.

9/1/2022

Cancer

22.8

MAIA Biotechnology, Inc.

7/27/2022

Phase II

Cancer

31.4

PepGen Inc.

5/5/2022

Phase I

Neurological Diseases

193.2

Blue Water Vaccines, Inc.

2/18/2022

Pre-clinical

Influenza

76.7

Arcellx, Inc.

2/3/2022

Phase I

Cancer

482.0

Hillstream BioPharma, Inc.

1/12/2022

Phase I

Cancer & Solid Tumor

32.0

Vaxxinity, Inc.

11/11/2021

Phase II

Neurology and Coronavirus

1,514.9

Aura Biosciences, Inc.

10/28/2021

Phase II

Tumor

446.5

Entrada Therapeutics, Inc.

10/28/2021

Pre-clinical

Neuromuscular

476.8

Xilio Therapeutics, Inc.

10/21/2021

Phase I

Cancer

432.3

IsoPlexis Corporation

10/7/2021

Curative & Personlised Medicines

574.1

Pasithea Therapeutics Corp.

9/14/2021

Psychiatric and neurological

23.8

SeqLL Inc.

8/26/2021

Genetic analysis

4.8

Dermata Therapeutics, Inc.

8/12/2021

Phase II

Aesthetic skin

16.9

Eliem Therapeutics, Inc.

8/9/2021

Phase II

Depressive disorder

281.9

IN8bio, Inc.

7/30/2021

Phase I

Cancer

169.2

Omega Therapeutics, Inc.

7/29/2021

Gene therapy

743.1

Tenaya Therapeutics, Inc.

7/29/2021

Cardiovascular disease

530.9

Absci Corporation

7/21/2021

Five Pre-Clinical, one Phase

Cell Therapy

1,371.6

Rapid Micro Biosystems, Inc.

7/14/2021

Phase III

Gene Therapy

662.6

Sera Prognostics, Inc.

7/14/2021

Pregnancy related conditions

520.7

Unicycive Therapeutics, Inc.

7/13/2021

Phase I

Kidney

28.3

Alpha Teknova, Inc.

6/24/2021

370.7

Miromatrix Medical Inc.

6/24/2021

Phase I

Organ transplantation

170.0

Ambrx Biopharma Inc.

6/17/2021

Cancer

165.8

Century Therapeutics, Inc.

6/17/2021

Phase I

Solid tumor and hematological

1,067.0

Cyteir Therapeutics, Inc.

6/17/2021

Phase II

Cancer and tumors

540.1

Singular Genomics Systems, Inc.

5/26/2021

Sequencing and Multiomics

1,372.4

Vera Therapeutics, Inc.

5/13/2021

Phase II

Immunoglobulin

263.3

Akoya Biosciences, Inc.

4/15/2021

Spatial biology solutions

670.5

Recursion Pharmaceuticals, Inc.

4/15/2021

Phase I

Brain disorders, cancer

2,510.7

Finch Therapeutics Group, Inc.

3/18/2021

Phase II

Colitis and Crohn’s disease

809.2

Gain Therapeutics, Inc.

3/17/2021

Genetic diseases and neurological

78.4

 

82

Public Companies (in $ mm)

Offer Date

Phase at IPO

Disease Indication

Pre-IPO Enterprise Value

Decibel Therapeutics, Inc.

2/11/2021

Phase I

Gene Therapies

$

442.8

Longeveron Inc.

2/12/2021

Phase II

Aging-related and life-threatening

6.3

NexImmune, Inc.

2/11/2021

Phase II

Cancer and life-threatening

318.6

Bolt Biotherapeutics, Inc.

2/4/2021

Phase I

Solid tumors

550.1

Vor Biopharma Inc.

2/5/2021

Pre-clinical

Cancer

526.9

Sana Biotechnology, Inc.

2/3/2021

Pre-clinical

Cell engineering platform

4,480.6

Virios Therapeutics, Inc.

12/16/2020

Phase II

Fibromyalgia

52.1

Seer, Inc.

12/3/2020

Therapeutic &Diagnostic research, and C lin ical t

853.8

Sigilon Therapeutics, Inc.

12/3/2020

Phase II

Hemophilia

501.2

Maravai LifeSciences Holdings, Inc.

11/19/2020

Pre-clinical

Gene therapy

1,112.0

Sotera Health Company

11/19/2020

Sterilization, and Lab testing and

8,117.8

SQZ Biotechnologies Company

10/29/2020

Phase I

Solid Tumor

392.1

Galecto, Inc.

10/28/2020

Phase II

Myelofibrosis

368.1

Shattuck Labs, Inc.

10/8/2020

Phase I

Cancer

495.9

Aziyo Biologics, Inc.

10/7/2020

Tissue repair

159.2

Prelude Therapeutics Incorporated

9/24/2020

Phase I

Solid tumors

715.2

Dyne Therapeutics, Inc.

9/16/2020

Phase II

Myotonic dystrophy type 1

588.1

Inhibrx, Inc.

8/18/2020

Phase I

Cancer

613.5

ALX Oncology Holdings Inc.

7/16/2020

Phase I

Cancer and tumors

583.1

Berkeley Lights, Inc.

7/16/2020

Digital Cell Biology

1,360.6

Relay Therapeutics, Inc.

7/15/2020

Phase I

Soli tumor

1,565.6

Aditxt, Inc.

6/29/2020

Pre-clinical

Autoimmune diseases

11.7

Biora Therapeutics, Inc.

6/19/2020

Bowel diseases

638.6

Vaxcyte, Inc.

6/11/2020

Phase II

Pneumococcal infections

640.2

Lantern Pharma Inc.

6/10/2020

Phase II

Cancer

66.4

Revolution Medicines, Inc.

2/12/2020

Clinical

Tumors

898.3

Beam Therapeutics Inc.

2/5/2020

Genetic Medicines

879.2

Black Diamond Therapeutics, Inc.

1/29/2020

Cancer

488.2

Galera Therapeutics, Inc.

11/6/2019

Phase III

Cancer

268.9

Cabaletta Bio, Inc.

10/24/2019

Phase I

Autoimmune diseases

155.6

Vir Biotechnology, Inc.

10/10/2019

Clinical Stage

Series Infectious Diseases

827.7

Frequency Therapeutics, Inc.

10/2/2019

Phase II

Degenerative diseases

284.4

Viela Bio, Inc.

10/2/2019

Clinical stage

Inflammation and autoimmune

308.5

IGM Biosciences, Inc.

9/17/2019

Completed Pre-Clinical

Cancer

210.7

10x Genomics, Inc.

9/11/2019

Biological systems

804.9

Castle Biosciences, Inc.

7/24/2019

Commercial stage

Cancers

441.5

Adaptive Biotechnologies Corporation

6/26/2019

Cancer

1,426.7

Akero Therapeutics, Inc.

6/19/2019

Phase I

Serious metabolic diseases

421.7

 

83