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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Defined terms included below have the same meaning as terms defined and included elsewhere in the Current Report, unless defined below. As
used in this unaudited pro forma condensed combined financial information, Carmell refers to Carmell Therapeutics Corporation prior to the Business Combination.
The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X and presents the combination of the historical financial information of ALPA and Carmell, adjusted to give effect to the Business Combination and the other events contemplated by the
Business Combination Agreement. Unless otherwise indicated or the context otherwise requires, references to the Combined Company refer to New Carmell and its consolidated subsidiaries after giving effect to the Business Combination.
The unaudited pro forma condensed combined balance sheet as of March 31, 2023, combines the historical balance sheet of ALPA as of
March 31, 2023, and the historical balance sheet of Carmell as of March 31, 2023, on a pro forma basis as if the Business Combination and the other events contemplated by the Business Combination Agreement had been consummated on
March 31, 2023. The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2023, combines the historical statements of operations of ALPA for the three months ended March 31, 2023, and the
historical statements of operations of Carmell for the three months ended March 31, 2023 on a pro forma basis as if the Business Combination, the other events contemplated by the Business Combination Agreement had been consummated on
January 1, 2022, the beginning of the earliest period presented. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2022, combines the historical statements of operations of ALPA for the year
ended December 31, 2022, and the historical statements of operations of Carmell for the year ended December 31, 2022 on a pro forma basis as if the Business Combination and the other events contemplated by the Business Combination
Agreement had been consummated on January 1, 2022, the beginning of the earliest period presented.
The unaudited pro forma condensed
combined financial information and accompanying notes have been derived from and should be read in conjunction with:
The unaudited pro forma condensed combined
financial information should also be read together with the sections of the ALPA 10-K/A and the ALPA 10-Q entitled Management s Discussion and Analysis of
Financial Condition and Results of Operations and the section of this Current Report entitled Management s Discussion and Analysis of Financial Condition and Results of Operations, as well as other financial information
included elsewhere in this Current Report.
Description of the Business Combination
On July 14, 2023 ( Closing Date ), ALPA, Merger Sub and Carmell consummated the Business Combination pursuant to which Merger
Sub merged with and into Carmell, with Carmell surviving the Business Combination. Carmell became a wholly owned subsidiary of ALPA and ALPA was renamed Carmell Therapeutics Corporation . Each outstanding share of ALPA Class A Common
Stock and each share of ALPA Class B Common Stock was converted into one share of Common Stock. Upon the consummation of the Business Combination, the consideration for the Business Combination was distributed as follows (in each case, rounded
down to the nearest whole share):
Other Related Transactions in Connection with the Business Combination
On July 9, 2023, ALPA and each of Meteora Special Opportunity Fund I, LP ( MSOF ), Meteora Capital Partners, LP
( MCP ) and Meteora Select Trading Opportunities Master, LP ( MSTO ) (with MCP, MSOF, and MSTO collectively as Seller or Meteora ) entered into a forward purchase agreement (the Forward Purchase
Agreement ) for an OTC Equity Prepaid Forward Transaction. The primary purpose of entering into the Forward Purchase Agreement is to help ensure the Business Combination will be consummated. For purposes of the Forward Purchase Agreement,
ALPA and the Combined Company are referred to as the Counterparty prior to and after the Business Combination, respectively.
Pursuant to the terms of the Forward Purchase Agreement, at the closing of the Business Combination, the Sellers purchased directly from the
redeeming shareholders of ALPA 1,705,959 shares of the common stock of ALPA ( Recycled Shares ) at $10.279 which is the price equal to the redemption price at which holders of ALPA Common Stock were permitted to redeem their shares in
connection with the Business Combination pursuant to Section 9.2(a) of ALPA s Second Amended and Restated Certificate of Incorporation (the Charter ) (such price, the Initial Price ).
In accordance with the terms of the Forward Purchase Agreement, the Sellers were paid directly an aggregate cash amount (the Prepayment
Amount ) equal to (x) the product of (i) the Recycled Shares and (ii) the Initial Price, or $17,535,632.
settlement date will be the earliest to occur of (a) the first anniversary of the Closing Date, (b) after the occurrence of (x) a Delisting Event or (y) a Registration Failure, upon the date specified by Seller in a written
notice delivered to Counterparty at Seller s discretion (which settlement date shall not be earlier than the date of such notice). The transaction will be settled via physical settlement. Any Shares not sold in accordance with the early
termination provisions described below will incur a $0.50 per share termination fee payable by the Combined Company to the Seller at settlement.
From time to time and on any date following the Business Combination (any such date, an
OET Date ) and subject to the terms and conditions below, Seller may, in its absolute discretion, and so long as the daily volume-weighted average price ( VWAP Price ) of the Shares is equal to or exceeds the Reset Price,
terminate the transaction in whole or in part by providing written notice (an OET Notice ) in accordance with the terms of the Forward Purchase Agreement. The effect of an OET Notice given shall be to reduce the Number of Shares by the
number of Terminated Shares specified in such OET Notice with effect as of the related OET Date. As of each OET Date, Counterparty shall be entitled to an amount from Seller, and the Seller shall pay to Counterparty an amount, equal to the product
of (x) the number of Terminated Shares multiplied by (y) the Initial Price in respect of such OET Date (an Early Termination Obligation ).
The Reset Price is initially $11.50 and subject to a $11.50 floor (the Reset Price Floor ). The Reset Price shall be adjusted on
the first scheduled trading day of every week commencing with the first week following the seventh day after the closing of the Business Combination to be the lowest of (a) the then-current Reset Price, and (b) the VWAP Price of the shares
of the Counterparty s common stock of the prior week; provided that the Reset Price shall be no lower than $11.50.
2023, in connection with the forward purchase agreement, the Seller entered into a Non-Redemption Agreement with Alpha pursuant to which the Seller agreed not to exercise redemption rights under the
Charter with respect to an aggregate of 100,000 Shares.
Accounting for the Business Combination
Notwithstanding the legal form of the Business Combination pursuant to the Business Combination Agreement, the Business Combination is
accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, ALPA is treated as the acquired company and Carmell is treated as the acquirer for financial reporting purposes. Accordingly, for accounting
purposes, the financial statements of New Carmell represent a continuation of the financial statements of Carmell, with the Business Combination treated as the equivalent of Carmell issuing stock for the net assets of ALPA, accompanied by a
recapitalization. The net assets of ALPA are stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of Carmell. Carmell has been determined to be the accounting
acquirer based on an evaluation of the following facts and circumstances:
Basis of Pro Forma Presentation
The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X. The adjustments in the unaudited pro forma condensed combined financial information have been identified and presented to provide relevant information necessary for an illustrative understanding of New Carmell
upon consummation of the Business Combination and the other events contemplated by the Business Combination Agreement in accordance with GAAP.
Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the unaudited pro forma condensed combined financial
information are described in the accompanying notes. The unaudited pro forma condensed combined financial information has been presented for illustrative purposes only and is not necessarily indicative of the operating results and financial position
that would have been achieved had the Business Combination occurred on the dates indicated, and does not reflect adjustments for any anticipated synergies, operating efficiencies,
tax savings or cost savings. Any cash proceeds remaining after the consummation of the Business Combination are expected to be used for general corporate purposes. Further, the unaudited pro
forma condensed combined financial information does not purport to project the future operating results or financial position of New Carmell following the consummation of the Business Combination. The unaudited pro forma adjustments represent
management s estimates based on information available as of the date of these unaudited pro forma condensed combined financial information and are subject to change as additional information becomes available and analyses are performed. ALPA
and Carmell have not had any historical relationship prior to the transactions discussed in this Current Report. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
The following summarizes the pro forma shares of New Carmell Common Stock issued and outstanding immediately after the Business Combination:
| Number of Shares | % Ownership | |||||||
| New Carmell shares | 3,321,762 | 17.3 | % | |||||
| Founder Shares (1) | 3,861,026 | 20.1 | % | |||||
| New Carmell shares issued in merger to Carmell shareholders | 12,053,517 | 62.6 | % | |||||
| Shares outstanding | 19,236,305 | 100.0 | % |
The pro forma table above excludes New Carmell shares reserved for the future issuance of Carmell s vested options and warrants, and ALPA
Public and Private Warrants.
The following table summarizes the total New Carmell shares issuable to Carmell stockholders in connection
with the Business Combination.
| New Carmell shares issued in merger to Carmell shareholders | 12,053,517 | |||
| Additional New Carmell shares reserved for the future exercise of Carmell stock options | 2,285,456 | |||
| Additional New Carmell shares reserved for the future exercise of Carmell warrants | 660,859 | |||
| Total New Carmell shares issuable to Carmell stockholders | 14,999,832 |
If the actual facts are different than these assumptions, then the amounts and shares outstanding in the
unaudited pro forma condensed combined financial information will be different and those changes could be material.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2023
| ALPA (Historical) | Carmell (Historical) | Transaction Accounting Adjustments | Pro Forma Combined | |||||||||||||
| ASSETS | ||||||||||||||||
| Current assets: | ||||||||||||||||
| Cash | $ | 16 | 27 | $ | 11,812 | (1) | $ | 6,983 | ||||||||
| 1,188 | (2) | |||||||||||||||
| (2,542 | ) (4) | |||||||||||||||
| (3,518 | ) (9) | |||||||||||||||
| Deferred offering costs | 1,055 | (1,055 | ) (4) | |||||||||||||
| Prepaid expenses | 11l | 7 | 118 | |||||||||||||
| Other current assets | 17 | 17 | ||||||||||||||
| Total current assets | 127 | 1,106 | 5,885 | 7,118 | ||||||||||||
| Marketable securities held in trust account | 158,369 | (29,306 | ) (1) | |||||||||||||
| (129,063 | ) (2) | |||||||||||||||
| Operating lease right-of- use assets, net | 823 | 823 | ||||||||||||||
| Intangible assets, net of accumulated amortization | 28 | 28 | ||||||||||||||
| Property and equipment net | 232 | 232 | ||||||||||||||
| Forward purchase agreement asset | 16,538 | (1) | 16,538 | |||||||||||||
| Total assets | $ | 158,496 | $ | 2,189 | $ | (135,946 | ) | $ | 24,739 | |||||||
| LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS (DEFICIT) EQUITY | ||||||||||||||||
| Current liabilities: | ||||||||||||||||
| Accounts payable | $ | $ | 2,958 | $ | $ | 2,958 | ||||||||||
| Note payable | ||||||||||||||||
| Accrued expenses | 1,817 | 1,282 | 3,099 | |||||||||||||
| Due to related party | 71 | 71 | ||||||||||||||
| Income taxes payable | 735 | 735 | ||||||||||||||
| Accrued interest-non-related parties | 740 | (740 | ) (9) | |||||||||||||
| Promissory notes, net of debt discount | 370 | 370 | ||||||||||||||
| Convertible notes payable, current | 2,778 | (2,778 | ) (9) | |||||||||||||
| Derivative liabilities | 1,152 | (l,152 | ) (9) | |||||||||||||
| Lease liability, current | 132 | 132 | ||||||||||||||
| Total current liabilities | 2,623 | 9,412 | (4,670 | ) | 7,365 | |||||||||||
| Lease liability, net of current portion | 794 | 794 | ||||||||||||||
| Total liabilities | 2,623 | 10,206 | (4,670 | ) | 8,159 | |||||||||||
| Commitments and contingencies | ||||||||||||||||
| Class A common stock subject to possible redemption | 157,181 | (29,306 | ) (1) | |||||||||||||
| (127,875 | ) (2) | |||||||||||||||
| Redeemable Convertible Preferred stock | ||||||||||||||||
| Series A Preferred stock | 7,789 | (7,789 | ) (3) | |||||||||||||
| Series B Preferred stock | 7,025 | (7,025 | ) (3) | |||||||||||||
| Series C-l Preferred stock | 791 | (791 | ) (3) | |||||||||||||
| Series C-2 Preferred stock | 16,122 | (16,122 | ) (3) | |||||||||||||
| Total redeemable convertible preferred stock | 31,727 | (31,727 | ) | |||||||||||||
| Stockholders (deficit) equity | ||||||||||||||||
| Common stock | 1 | (3) | 2 | |||||||||||||
| 1 | (6) | |||||||||||||||
| Class B common stock | 1 | (1 | ) (6) | |||||||||||||
| Common stock | 15 | (15 | ) (7) | |||||||||||||
| Additional paid-in-capital | 4,764 | 29,306 | (l) | 61,155 | ||||||||||||
| 31,726 | (3) | |||||||||||||||
| (1,347 | ) (4) | |||||||||||||||
| 3,563 | (5) | |||||||||||||||
| 15 | (7) | |||||||||||||||
| (7,122 | ) (8) | |||||||||||||||
| 250 | (9) | |||||||||||||||
| Accumulated (deficit) equity | (1,309 | ) | (44,523 | ) | (2,250 | ) (4) | (44,577 | ) | ||||||||
| (3,563 | ) (5) | |||||||||||||||
| 7,122 | (8) | |||||||||||||||
| 902 | (9) | |||||||||||||||
| (956 | ) (l) | |||||||||||||||
| Total stockholders (deficit) equity | (1,308 | ) | (39,744) | 57,632 | 16,580 | |||||||||||
| Total liabilities, redeemable convertible preferred stock and stockholders (deficit) equity | $ | 158,496 | $ | 2,189 | $ | (135,946 | ) | $ | 24,739 |
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2023
(in thousands, except share and per share data)
| ALPA (Historical) | Carmell (Historical) | Transaction Accounting Adjustments | Pro Forma Combined | |||||||||||||
| Operating expenses | ||||||||||||||||
| General and administrative | 756 | 510 | 1,266 | |||||||||||||
| Research and development | 741 | 741 | ||||||||||||||
| Depreciation and amortization | 24 | 24 | ||||||||||||||
| Total operating expenses | 756 | 1,275 | 2,031 | |||||||||||||
| Loss from operations | (756 | ) | (1,275 | ) | (2,031 | ) | ||||||||||
| Other income (expense) | ||||||||||||||||
| Dividend and interest income | 1,675 | (1,675 | ) (1) | |||||||||||||
| Other income | 35 | 35 | ||||||||||||||
| Change in fair value of derivative liabilities | (325 | ) | (325 | ) | ||||||||||||
| Interest expense, non-related party | (263 | ) | 263 | (2) | ||||||||||||
| Amortization of debt discount | (1 | ) | (1 | ) | ||||||||||||
| Net income (loss) before income taxes | 919 | (1,829 | ) | (1,412 | ) | (2,322 | ) | |||||||||
| Income tax provision | (343 | ) | (343 | ) | ||||||||||||
| Net income (loss) | $ | 576 | $ | (1,829 | ) | $ | (1,412 | ) | $ | (2,665 | ) | |||||
| Weighted average shares outstanding of Carmell common stock basic and diluted | 18,303,103 | |||||||||||||||
| Basic and diluted net loss per share Carmell common stock | $ | (0.12 | ) | |||||||||||||
| Weighted average shares outstanding of Class A common stock subject to possible redemption basic and diluted | 15,444,103 | |||||||||||||||
| Basic and diluted net loss per share Class A common stock subject to possible redemption | $ | 0.03 | ||||||||||||||
| Weighted average shares outstanding of Class B common stock basic and diluted | 3,861,026 | |||||||||||||||
| Basic and diluted net loss per share Class B common stock | $ | 0.03 | ||||||||||||||
| Weighted average shares outstanding of Class A common stock basic and diluted | 463,882 | 19,236,305 | ||||||||||||||
| Basic and diluted net loss per share Class A common stock | $ | 0.03 | $ | (0.14 | ) |
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2022
(in thousands, except share and per share data)
| ALPA (Historical) | Carmell (Historical) | Transaction Accounting Adjustments | Pro Forma Combined | |||||||||||||
| Operating expenses | ||||||||||||||||
| General and administrative | 1,651 | 3,218 | 394 | (3) | 5,263 | |||||||||||
| Research and development | 2,196 | 2,196 | ||||||||||||||
| Depreciation and amortization | 94 | 94 | ||||||||||||||
| Transaction costs | 2,250 | (2) | 5,419 | |||||||||||||
| 3,169 | (3) | |||||||||||||||
| Total operating expenses | 1,651 | 5,508 | 5,813 | 12,972 | ||||||||||||
| Loss from operations | (1,651 | ) | (5,508 | ) | (5,813 | ) | (12,972 | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Dividend and interest income | 2,247 | (2,247 | ) (1) | |||||||||||||
| Other income | 11 | 11 | ||||||||||||||
| Change in fair value of derivative liabilities | 1,259 | 1,259 | ||||||||||||||
| Loss on debt extinguishment | (1,065 | ) | (1,065 | ) | ||||||||||||
| Interest expense, related party | (52 | ) | (52 | ) | ||||||||||||
| Interest expense, non-related party | (1,652 | ) | (1,652 | ) | ||||||||||||
| Amortization of debt discount | (2,044 | ) | (2,044 | ) | ||||||||||||
| Gain on the settlement of the Convertible Notes | 902 | (4) | 902 | |||||||||||||
| Loss on Forward Purchase Agreement | (956 | ) (5) | (956 | ) | ||||||||||||
| Net income (loss) before income taxes | 596 | (9,051 | ) | (8,114 | ) | (16,569 | ) | |||||||||
| Income tax provision | (391 | ) | (391 | ) | ||||||||||||
| Net income (loss) | $ | 205 | $ | (9,051 | ) | $ | (8,114 | ) | $ | (16,960 | ) | |||||
| Weighted average shares outstanding of Carmell common stock basic and diluted | 28,546,036 | |||||||||||||||
| Basic and diluted net loss per share Carmell common stock | $ | (0.34 | ) | |||||||||||||
| Weighted average shares outstanding of Class A common stock subject to possible redemption basic and diluted | 15,444,103 | |||||||||||||||
| Basic and diluted net loss per share Class A common stock subject to possible redemption | $ | 0.01 | ||||||||||||||
| Weighted average shares outstanding of Class B common stock basic and diluted | 3,861,026 | |||||||||||||||
| Basic and diluted net loss per share Class B common stock | $ | 0.01 | ||||||||||||||
| Weighted average shares outstanding of Class A common stock basic and diluted | 463,882 | 19,236,305 | ||||||||||||||
| Basic and diluted net loss per share Class A common stock | $ | 0.01 | $ | (0.88 | ) |
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
1. Basis of Presentation
Combination was accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, ALPA was treated as the acquired company for financial reporting purposes. Accordingly, for accounting purposes, the
financial statements of New Carmell represent a continuation of the financial statements of Carmell, and the Business Combination was treated as the equivalent of Carmell issuing stock for the net assets of ALPA, accompanied by a recapitalization.
The net assets of ALPA are stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of Carmell.
The unaudited pro forma condensed combined balance sheet as of March 31, 2023 gives pro forma effect to the Business Combination and the
other events contemplated by the Business Combination Agreement as if they had been consummated on March 31, 2023. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2022 and the three months
ended March 31, 2023, gives pro forma effect to the Business Combination, the other events contemplated by the Business Combination Agreement and the related transaction as if they had been consummated on January 1, 2022.
The unaudited pro forma condensed combined financial information and accompanying notes have been derived from and should be read in
The unaudited pro forma condensed combined
financial information should also be read together with the sections of the ALPA 10-K/A and the ALPA 10-Q entitled Management s Discussion and Analysis of
Financial Condition and Results of Operations and the section of this Current Report entitled Management s Discussion and Analysis of Financial Condition and Results of Operations, as well as other financial information
included elsewhere in this Current Report.
Management has made significant estimates and assumptions in its determination of the pro
forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.
The pro forma adjustments reflecting the consummation of the Business Combination are based on information available as of the date of this
Current Report and certain assumptions and methodologies that management believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in these notes, may be revised as additional information
becomes available and is evaluated. Therefore, the actual adjustments may materially differ from the pro forma adjustments that appear in this Current Report. Management considers this basis of presentation to be reasonable under the circumstances.