What changed in this filing

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Item 1. Financial Statements

2024-08-12 compared with 2024-05-14 · 177 added, 140 removed, 493 unchanged (39% of the section changed)

14 unchanged sentences

Accrued compensation

Forward purchase agreements liquidated damages

Other accrued expenses

Total current liabilities

Convertible notes at fair value, including related party amount of $ 5,087 and $ 0 , at March 31, 2024 and December 31, 2023, respectively

Convertible notes at fair value, including related party amount of $ 13,292 and $ 0 , at June 30, 2024 and December 31, 2023, respectively

Operating lease liability

Warrant liability

5 unchanged sentences

Class A common stock, $ 0.0001 par value;

500,000,000 shares authorized at March 31, 2024 and December 31, 2023, and 38,120,288 and 37,159,600 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

500,000,000 shares authorized at June 30, 2024 and December 31, 2023, and 39,122,238 and 37,159,600 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

5 unchanged sentences

AEON BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except share and per share data) (Unaudited)

Three Months Ended

Six Months Ended

Operating expenses:

3 unchanged sentences

Total operating costs and expenses

Loss from operations

Other (loss) income:

Income (loss) from operations

Other income (loss):

Change in fair value of convertible notes

2 unchanged sentences

Other income, net

Total other loss, net

Loss before taxes

Net loss and comprehensive loss

Basic and diluted net loss per share

Weighted average shares of common stock outstanding used to compute basic and diluted net loss per share

Total other income (loss), net

Income (loss) before taxes

Net income (loss) and comprehensive income (loss)

Basic and diluted net income (loss) per share

Weighted average shares of common stock outstanding used to compute basic and diluted net income (loss) per share

See accompanying notes to the consolidated financial statements

5 unchanged sentences

Stockholders'

Balance as of April 1, 2024 (Successor)

Issuance of shares related to cashless warrant exercises

Stock-based compensation expense

Balance as of June 30, 2024 (Successor)

Balance as of April 1, 2023 (Predecessor)

Stock-based compensation expense

Debt extinguishment due to warrant modification

Balance as of June 30, 2023 (Predecessor)

Preferred Stock

Treasury Stock

Stockholders'

Balance as of January 1, 2024 (Successor)

2 unchanged sentences

Stock-based compensation expense

Balance as of March 31, 2024 (Successor)

Balance as of June 30, 2024 (Successor)

Balance as of January 1, 2023 (Predecessor)

Stock-based compensation expense

Balance as of March 31, 2023 (Predecessor)

Debt extinguishment due to warrant modification

Balance as of June 30, 2023 (Predecessor)

See accompanying notes to the consolidated financial statements

2 unchanged sentences

(in thousands, except per share data) (Unaudited)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Stock-based compensation expense

38 unchanged sentences

The Company has experienced recurring losses from operations and has a net capital deficiency and negative cash flows from operations since its inception.

As of March 31, 2024, the Successor reported cash and cash equivalents of $ 1.6 million and an accumulated deficit of $ 591.6 million.

As of June 30, 2024, the Company reported cash and cash equivalents of $ 3.4 million and an accumulated deficit of $ 427.5 million.

The Company expects to incur losses and use cash in its operations for the foreseeable future.

On May 3, 2024, the Company announced preliminary top-line results from its planned interim analysis of the Phase 2 trial with ABP-450 in the preventative treatment of chronic migraine, which did not meet the primary or secondary endpoints.

The Company will continue to evaluate the complete dataset and determine the next steps in the development of ABP-450.

Additionally, the Company has immediately commenced cash preservation measures and will review all strategic options, including seeking additional funding in the form of equity financings or debt.

However, there can be no assurance that such efforts will be successful or that, in the event that they are successful, the terms and conditions of such financing will be commercially acceptable.

Furthermore, the use of equity as a source of financing would dilute existing shareholders.

Any further development of ABP-450 for any indication, including the completion of the Phase 2 open-label extension study in migraine, any Phase 3 trials for migraine, and any additional studies in cervical dystonia, will require additional funding, which may not be available to us on reasonable terms, or at all.

The Company originally intended to pursue submission of an Original BLA seeking one or more potential therapeutic indications for ABP-450.

However, in May 2024, the Company announced the discontinuation of its Phase 2 clinical trials for episodic and chronic migraine in order to implement certain cash preservation measures.

As a result, on July 9, 2024, the Company announced a strategic reprioritization to pursue a Section 351(k) biosimilar regulatory pathway for ABP-450, using AbbVie Inc.’s product Botox as a proposed reference product.

The Company also announced its proposed plans to initiate, subject to raising additional capital, a single pivotal clinical study evaluating ABP-450 in patients with cervical dystonia, with the goal of using the biosimilar pathway, which the Company plans to discuss during a meeting with the FDA that is currently scheduled for the third quarter of 2024.

The Company believes a successful Phase 3 comparative study in cervical dystonia could provide the necessary clinical data to support submission of a Section 351(k) BLA, and ultimately a determination that ABP-450 is biosimilar to the proposed reference product with respect to certain therapeutic indications.

However, the commencement of such study and any further development of ABP-450 would require additional funding in the form of equity financings or debt.

There can be no assurance that such efforts will be successful or that, in the event that they are successful, the terms and conditions of such financing will be commercially acceptable.

Furthermore, the use of

equity as a source of financing would dilute existing shareholders.

The Company is actively attempting to secure additional capital to fund its operations.

However, there can be no assurance that the Company will be able to raise additional capital on commercially reasonable terms or at all.

As a result of these conditions, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern and to meet its obligations as they become due within one year after the date that these condensed consolidated financial statements are issued.

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prior to the Merger and (ii) the combined results of the Company, including AEON Biopharma Sub, Inc., following the Closing.

The accompanying financial statements include a Predecessor period for the three months ended March 31, 2023, and a Successor period for the three months ended March 31, 2024.

The accompanying financial statements include Predecessor periods for the three and six months ended June 30, 2023, and Successor periods for the three and six months ended June 30, 2024.

A black line between the Successor and Predecessor periods has been placed in the condensed consolidated financial statements and in the tables to the notes to the condensed consolidated financial statements to highlight the lack of comparability between these two periods.

Unaudited Interim Financial Information

The accompanying interim condensed consolidated balance sheets as of March 31, 2024 (Successor), the condensed consolidated statements of operations and comprehensive loss and convertible preferred stock and stockholders’ deficit for the three months ended March 31, 2024 (Successor) and March 31, 2023 (Predecessor), and the condensed consolidated statements of cash flows for the three months ended March 31, 2024 (Successor) and March 31, 2023 (Predecessor) and the related note disclosures are unaudited.

The accompanying interim condensed consolidated balance sheets as of June 30, 2024 (Successor), the condensed consolidated statements of operations and comprehensive income (loss) and convertible preferred stock and stockholders’ deficit for the three and six months ended June 30, 2024 (Successor) and June 30, 2023 (Predecessor), and the condensed consolidated statements of cash flows for the six months ended June 30, 2024 (Successor) and June 30, 2023 (Predecessor) and the related note disclosures are unaudited.

The balance sheet information as of December 31, 2023 (Successor) is derived from the Successor’s audited financial statements.

These unaudited interim financial statements have been prepared in accordance with U.S.

GAAP and, in management’s opinion, on a basis consistent with the audited financial statements and reflect all adjustments which only include normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of March 31, 2024 (Successor) and its results of operations and comprehensive loss and cash flows for the three months ended March 31, 2024 (Successor) and March 31, 2023 (Predecessor).

The results for the three months ended March 31, 2024 (Successor) are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or any other interim period.

GAAP and, in management’s opinion, on a basis consistent with the audited financial statements and reflect all adjustments which only include normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of June 30, 2024 (Successor) and its results of operations and comprehensive income (loss) and cash flows for the three and six months ended June 30, 2024 (Successor) and June 30, 2023 (Predecessor).

The results for the three and six months ended June 30, 2024 (Successor) are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or any other interim period.

Use of Estimates

1 unchanged sentence

GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and disclosures made in the accompanying notes.

The Company’s most significant estimates relate to the research and development accruals, valuation of common stock and related stock-

based compensation, and the fair values of the contingent consideration, forward purchase agreements, in-process research and development, warrant liabilities, convertible notes, among others.

The Company’s most significant estimates relate to the research and development accruals, valuation of common stock and related stock-based compensation, and the fair values of the contingent consideration, forward purchase agreements, in-process research and development, warrant liabilities and convertible notes.

Although the Company bases estimates on historical experience, knowledge of current events and actions it may undertake in the future, and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments over the carrying values of assets and liabilities, this process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements.

2 unchanged sentences

The Company provides segment financial information and results for its segments based on the segregation of revenues and expenses that its chief operating decision makers review for purposes of allocating resources and evaluating its financial performance.

As of March 31, 2024 and December 31, 2023, the Company operates and manages its business as one operating and reportable segment.

As of June 30, 2024 and December 31, 2023, the Company operates and manages its business as one operating and reportable segment.

Risk and Uncertainties

10 unchanged sentences

Leasehold improvements are amortized over the lesser of the estimated useful life of the asset or the related lease term.

Property and equipment, net, as of December 31, 2023 and March 31, 2024 (unaudited) are as follows (in thousands):

Property and equipment, net, as of June 30, 2024 and December 31, 2023 (unaudited) are as follows (in thousands):

Furniture and fixtures

13 unchanged sentences

The Company elected to account for its convertible promissory notes at fair value at inception and at each subsequent reporting date.

Subsequent changes in fair value are recorded as a component of non-operating loss in the condensed consolidated statements of operations and comprehensive loss or as a component of other comprehensive loss for changes related to instrument-specific credit risk.

Subsequent changes in fair value are recorded as a component of non-operating income (loss) in the condensed consolidated statements of operations and comprehensive income (loss) or as a component of other comprehensive income (loss) for changes related to instrument-specific credit risk.

As a result of electing the fair value option, direct costs and fees related to the convertible promissory notes are expensed as incurred.

2 unchanged sentences

The Company accounts for its contingent consideration as either equity-classified or liability-classified instruments based on an assessment of the Contingent Consideration Shares specific terms (as further defined in Note 6 Fair Value Measurements ) and applicable authoritative guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and Derivatives and Hedging (“ASC 815”).

The Contingent Consideration Shares are classified as a liability on the Successor’s condensed consolidated balance sheets and remeasured at each reporting period with changes to fair value recorded to the Successor’s condensed consolidated statements of operations and comprehensive loss.

Forward Purchase Agreements (Successor)

2 unchanged sentences

For more information, see Note 3 Forward Merger .

Subsequent changes in the bifurcated derivatives are recorded in the Successor’s condensed consolidated statements of operations and comprehensive loss.

The forward purchase agreements were terminated in March 2024, and the loss related to the termination was recorded to the condensed consolidated statement of operations and comprehensive loss.

Subsequent changes in the bifurcated derivatives are recorded in the Successor’s condensed consolidated statements of operations and comprehensive income (loss).

The forward purchase agreements were terminated in March 2024, and the loss related to the termination was recorded to the condensed consolidated statement of operations and comprehensive income (loss).

Warrants (Successor)

2 unchanged sentences

This assessment is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance.

For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter until settlement.

Changes in the estimated fair value of the warrants are recognized in the Successor’s condensed consolidated statements of operations and comprehensive loss.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be

recorded as a component of additional paid-in capital at the time of issuance.

For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their fair value on the date of issuance, and each balance sheet date thereafter until settlement.

Changes in the estimated fair value of the warrants are recognized in the Successor’s condensed consolidated statements of operations and comprehensive income (loss).

Convertible Preferred Stock (Predecessor)

2 unchanged sentences

Although the convertible preferred stock was not redeemable at the holder’s option, upon certain change in control events that are outside of the Company’s control, including liquidation, sale or transfer of control of the Company, holders of the convertible preferred stock may have had the right to receive their liquidation preference to any distribution of the proceeds under the terms of the Company’s amended and restated certificate of incorporation.

The Company did not

adjust the carrying values of the convertible preferred stock to the liquidation preferences of such shares since it is uncertain whether or when a redemption event will occur.

The Company did not adjust the carrying values of the convertible preferred stock to the liquidation preferences of such shares since it is uncertain whether or when a redemption event will occur.

Subsequent adjustments to increase the carrying values to the redemption values will be made only when it becomes probable that such redemption will occur.

22 unchanged sentences

The Company accrues the expenses for its clinical trial activities performed by third parties, including clinical research organizations and other service providers, based upon estimates of the work completed over the life of the individual study in accordance with associated agreements.

organizations and other service providers and the agreed-upon fee to be paid for such services.

The Company determines these estimates through discussion with internal personnel and outside service providers as to progress or stage of completion of trials or services pursuant to contracts with clinical research organizations and other service providers and the agreed-upon fee to be paid for such services.

Payments made to outside service providers in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered.

There have been no material adjustments to the Company’s estimates for clinical trial expenses through December 31, 2023 (Successor) and March 31, 2024 (Successor).

There have been no material adjustments to the Company’s estimates for clinical trial expenses through December 31, 2023 (Successor) and June 30, 2024 (Successor).

Stock-Based Compensation

4 unchanged sentences

The fair value of equity awards that are expected to vest is amortized on a straight-line basis over the requisite service period.

Stock-based compensation expense is recognized net of actual forfeitures when they occur, as an increase to additional paid-in capital or noncontrolling interest in the condensed consolidated balance sheets and in selling, general and administrative or research and development expenses in the condensed consolidated statements of operations and comprehensive loss.

All stock-based compensation costs are recorded in the condensed consolidated statements of operations and comprehensive loss based upon the underlying employee’s role within the Company.

All stock-based compensation costs are recorded in the condensed consolidated statements of operations and comprehensive income (loss) based upon the underlying employee’s role within the Company.

The Company accounts for income taxes under the asset and liability method, which requires, among other things, that deferred income taxes be provided for temporary differences between the tax basis of the Company’s assets and liabilities and their financial statement reported amounts.

2 unchanged sentences

The Company records uncertain tax positions on the basis of a two-step process whereby (i) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, it recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying condensed consolidated statements of operations and comprehensive loss.

Any accrued interest and penalties related to uncertain tax positions will be reflected as a liability in the condensed consolidated balance sheets.

Net Loss Per Share

Prior to the Merger, the Predecessor calculated basic and diluted net loss per share to common stockholders in conformity with the two-class method required for companies with participating securities.

Net income (loss) Per Share

Prior to the Merger, the Predecessor calculated basic and diluted net income (loss) per share to common stockholders in conformity with the two-class method required for companies with participating securities.

The Company considered all series of convertible preferred stock to be participating securities as they participate in any dividends declared by the Company.

Under the two-class method, undistributed earnings allocated to these participating stockholders were subtracted from net income in determining net loss attributable to common stockholders.

Net loss was not allocated to convertible preferred stock as the holders of convertible preferred stock did not have a contractual obligation to share in losses.

Under the two-class method, undistributed earnings allocated to these participating stockholders were subtracted from net income in determining net income (loss) attributable to common stockholders.

Net income (loss) was not allocated to convertible preferred stock as the holders of convertible preferred stock did not have a contractual obligation to share in losses.

Subsequent to the Merger, the Company only has one class of shares.

Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period, without consideration for potentially dilutive shares of common stock in Predecessor periods.

For Predecessor periods, diluted net loss per share was computed by dividing the net loss by the weighted average number of shares of common stock and potentially dilutive securities outstanding for the period using the “treasury stock,” “if converted” or “two-class” method unless their inclusion would have been anti-dilutive.

For purposes of the diluted net loss per share calculation, convertible preferred stock, warrants, convertible notes and common stock options were considered as potentially dilutive securities.

Since the Company was in a loss position for the three months ended March 31, 2024 (Successor) and March 31, 2023 (Predecessor), basic net loss per share is the same as diluted net loss per share as the inclusion of all potentially dilutive common shares was anti-dilutive.

Basic and diluted net loss per share for the three months ended March 31, 2023 (Predecessor) was calculated as follows (in thousands, except share and per share amounts) (unaudited):

Three months ended March 31, 2023 (Predecessor)

Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during the period, without consideration for potentially dilutive shares of common stock in Predecessor periods.

For Predecessor periods, diluted net income (loss) per share was computed by dividing the net income (loss) by the weighted average number of shares of common stock and potentially dilutive securities outstanding for the period using the “treasury stock,” “if converted” or “two-class” method unless their inclusion would have been anti-dilutive.

For purposes of the diluted net income (loss) per share calculation, convertible preferred stock, warrants, convertible notes and common stock options were considered as potentially dilutive securities.

Since the Company was in a loss position for the three and six months ended June 30, 2023 (Predecessor), basic net income (loss) per share is the same as diluted net income (loss) per share as the inclusion of all potentially dilutive common shares was anti-dilutive.

For the three and six months ended June 30, 2024 (Successor), the impact of the options and non-vested RSU’s were anti-dilutive, and as such, there was no difference between the weighted-average number of shares used to calculate basic and diluted earnings per share for the periods presented.

Basic and diluted net loss per share for the three and six months ended June 30, 2023 (Predecessor) were calculated as follows (in thousands, except share and per share amounts) (unaudited):

Three months ended June 30, 2023 (Predecessor)

Weighted average common shares outstanding, basic and diluted

Net loss per share, basic and diluted

Basic and diluted net loss per share for the three months ended March 31, 2024 (Successor) were calculated as follows (in thousands, except share and per share amounts) (unaudited):

Three months ended March 31, 2024 (Successor)

Six months ended June 30, 2023 (Predecessor)

Weighted average common shares outstanding, basic and diluted

Net loss per share, basic and diluted

Basic and diluted net income per share for the three and six months ended June 30, 2024 (Successor) were calculated as follows (in thousands, except share and per share amounts) (unaudited):

Three months ended June 30, 2024 (Successor)

Weighted average common shares outstanding, basic and diluted

Net income per share, basic and diluted

Six months ended June 30, 2024 (Successor)

Weighted average common shares outstanding, basic and diluted

Net income per share, basic and diluted

The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted average shares outstanding because such securities have an anti-dilutive impact (unaudited):

2 unchanged sentences

Convertible preferred stock outstanding

Convertible preferred stock warrants outstanding

Common stock options and restricted stock units

5 unchanged sentences

In the cases where the Company believes that a reasonably possible loss exists, the Company discloses the facts and circumstances of the litigation, including an estimable range, if possible.

Recently Adopted Accounting Standards

Recent accounting pronouncements issued by the FASB, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission (the “SEC”) did not, or are not believed by management to, have a material impact on the Company’s financial position, results of operations or cash flows.

Recent Accounting Standards

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures .

This update requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures .

This update requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis.

Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280, on an interim and annual basis.

ASU 2023-07 is effective for fiscal years beginning after December 31, 2023, and for interim periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

Other recent accounting pronouncements issued by the FASB, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission (the “SEC”) did not, or are not believed by management to, have a material impact on the Company’s financial position, results of operations or cash flows.

Forward Merger

4 unchanged sentences

to AEON Biopharma, Inc.

At the effective time of the Merger (the “Effective Time”), each outstanding share of Old AEON common stock (on an as-converted basis after taking into effect the conversion of the outstanding warrants of Old AEON exercisable for shares of Old AEON preferred stock, the conversion of the shares of Old AEON preferred stock into Old AEON common stock in accordance with the governing documents of Old AEON as of the Effective Time, the conversion of the outstanding convertible notes of Old AEON into Old AEON common stock in accordance with the terms of such convertible notes and after giving effect to the issuance of Old AEON common stock in connection with the merger of ABP Sub, Inc.

Old AEON common stock in accordance with the terms of such convertible notes and after giving effect to the issuance of Old AEON common stock in connection with the merger of ABP Sub, Inc.

with and into Old AEON) issued and outstanding immediately prior to the Effective Time converted into the right to receive approximately 2.328 shares of the Company’s common stock and the right to receive a pro-rata portion of the contingent consideration.

12 unchanged sentences

Additionally, the Successor assumed the Predecessor’s 2019 Incentive Award Plan, and as such, the fair value of the replacement awards of $ 13.3 million were included in purchase consideration, $ 11.5 million related to stock options and $ 1.8 million related to restricted stock units.

See Note 9 Stock-based Compensation for additional information.

See Note 9 Share-based Compensation for additional information.

Asset Acquisition Method of Accounting

6 unchanged sentences

Also, Priveterra retained the obligation to absorb the losses and/or receive the benefits of Old AEON that could have potentially been significant to Old AEON.

The Merger was accounted for as an asset acquisition as

substantially all of the fair value was concentrated in IPR&D, an intangible asset.

The Merger was accounted for as an asset acquisition as substantially all of the fair value was concentrated in IPR&D, an intangible asset.

Old AEON’s assets (except for cash) and liabilities were measured at fair value as of the transaction date.

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2019 Debt Financings

During the three months ended March 31, 2023 (Predecessor), the Predecessor recognized $ 0.6 million of expense related to the increase in the fair value of the 2019 Convertible Notes.

As of December 31, 2022 (Predecessor), the principal amount outstanding under the 2019 Convertible Notes was $ 6.0 million, with an estimated fair value of $ 16.2 million.

During the three and six months ended June 30, 2023 (Predecessor), the Predecessor recognized $ 0.1 million and $ 0.7 million, respectively, of expense related to the increase in the fair value of the 2019 Convertible Notes.

The 2019 Convertible Notes were converted into shares of the Successor’s common stock at the Closing and were recorded “on the line” as part of the shares issued as consideration in the Merger (see Note 3 Forward Merger ).

SCH Convertible Note

During the three months ended March 31, 2023 (Predecessor), the Predecessor recognized $ 1.5 million of expense related to the increase in the fair value of the SCH Convertible Note.

As of December 31, 2022, the principal amount outstanding under the SCH Convertible Note was $ 17.5 million, with an estimated fair value of $ 25.1 million.

During the three and six months ended June 30, 2023 (Predecessor), the Predecessor recognized $ 0.6 million and $ 2.1 million, respectively, of expense related to the increase in the fair value of the SCH Convertible Note.

The SCH Convertible Note was converted into shares of the Successor’s common stock at the Closing and was recorded “on the line” as part of the shares issued as consideration in the Merger (see Note 3 Forward Merger ).

A1 Convertible Notes

During the three months ended March 31, 2023 (Predecessor), the Predecessor recognized $ 0.5 million, $ 0.7 million and $ 1.9 million of expense related to the increase in the fair value of the 2021 A1 Convertible Notes, 2022 A1 Convertible Notes and March 2023 A1 Convertible Notes, respectively.

As of December 31, 2022, the principal amount outstanding under the 2021 A1 Convertible Notes and 2022 A1 Convertible Notes were $ 10 million and $ 14.5 million, respectively, with an estimated fair value of $ 8.7 million and $ 12.2 million, respectively.

The 2021 A1 Convertible Notes and 2022 A1 Convertible Notes were converted into shares of the Successor’s common stock at the Closing.

The March 2023 A1 Convertible Notes were converted into shares of the Successor’s common stock at the Closing and was recorded “on the line” as part of the shares issued as consideration in the Merger (see Note 3 Forward Merger ).

During the three and six months ended June 30, 2023 (Predecessor), the Predecessor recognized $ 0.7 million and $ 1.2 million, respectively, of expense related to the increase in the fair value of the 2021 A1 Convertible Notes;

$ 1.0 million and $( 1.7 ) million, respectively, of expense (income) related to the increase (decrease) in the fair value of the 2022 A1 Convertible Notes;

$( 1.9 ) million and $ 0.1 million, respectively, of (income) expense related to the (decrease) increase in the fair value of the March 2023 A1 Convertible Notes.

All of the A1 Convertible Notes were converted into shares of the Successor’s common stock and was recorded “on the line” at the Closing (see Note 3 Forward Merger ).

Daewoong Convertible Notes

During the three months ended March 31, 2023 (Predecessor), the Predecessor recognized $ 0.5 million of income related to the decrease in the fair value of the Daewoong Convertible Notes.

As of December 31, 2022, the principal amount outstanding (excluding the PIK Principal) under the Daewoong Convertible Notes was $ 60 million, with an estimated fair value of $ 53.5 million.

During the three and six months ended June 30, 2023 (Predecessor), the Predecessor recognized $ 0.9 million and $ 0.4 million, respectively, of expense related to the increase in the fair value of the Daewoong Convertible Notes.

The Daewoong Convertible Notes were converted into shares of the Successor’s common stock at the Closing.

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The Termination Purchase Right will terminate and expire upon Daewoong’s sale of 50 % of its common stock, including common stock held by its affiliates and common stock that would be issued upon an Automatic Conversion or Optional Conversion (as defined in the Convertible Notes).

During the three months ended March 31, 2024 (Successor), the Company recognized $ 0.1 million of expense related to the increase in the fair value of the 2024 Daewoong Convertible Note.

As of March 31, 2024, the principal amount outstanding under the 2023 Daewoong Convertible Note was $ 5 million, with an estimated fair value of $ 5.1 million.

During the three and six months ended June 30, 2024 (Successor), the Company recognized $ 1.8 million and $ 1.7 million of income related to the decrease in the fair value of the 2024 Daewoong Convertible Note.

As of June 30, 2024, the principal amount outstanding under the 2023 Daewoong Convertible Note was $ 15 million, with an estimated fair value of $ 13.3 million.

Fair Value Measurements

1 unchanged sentence

The carrying value of cash and cash equivalents, accounts payable, accrued liabilities and convertible notes approximate fair value because of the short-term nature of those instruments.

There were no convertible notes outstanding at March 31, 2024.

The following are other financial assets and liabilities that are measured at fair value on a recurring basis.

1 unchanged sentence

Due to certain embedded features within the convertible notes, the Company elected the fair value option to account for its convertible notes, including any paid-in-kind principal and interest, and the embedded features.

During the three months ended March 31, 2024 (Successor) and March 31, 2023 (Predecessor), the Company recognized $ 0.1 million and $ 4.7 million, respectively, of expense related to the increase in the fair value of the convertible notes.

As of March 31, 2024 (Successor) and December 31, 2023 (Successor), the principal amount outstanding under the convertible notes was $ 5.0 million and $ 0 , respectively, with an estimated fair value of $ 5.1 million and $ 0 , respectively.

During the three and six months ended June 30, 2024 (Successor) and June 30, 2023 (Predecessor), the Company recognized $ 1.8 million, $ 1.7 million, $( 1.5 ) million and $( 6.1 ) million, respectively, of income (expense) related to the decrease (increase) in the fair value of the convertible notes.

As of June 30, 2024 (Successor) and December 31, 2023 (Successor), the principal amount outstanding under the convertible notes was $ 15.0 million and $ 0 , respectively, with an estimated fair value of $ 13.3 million and $ 0 , respectively.

The convertible notes outstanding prior to the Closing were converted into shares of the Successor’s common stock at the Closing.

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The fair value of the convertible notes was determined based on Level 3 inputs using a scenario-based analysis that estimated the fair value of the convertible notes based on the probability-weighted present value of expected future investment returns, considering each of the possible outcomes available to the noteholders, including various qualified financings, corporate transaction and dissolution scenarios.

The significant unobservable input assumptions that can significantly change the fair value included (i) the weighted average cost of capital, (ii) the timing of payments, (iii) the discount for lack of marketability, (iv) the probability of certain

corporate scenarios, and (v) the long-term pretax operating margin.

During the three months ended March 31, 2024 (Successor) March 31, 2023 (Predecessor), the Company utilized discount rates ranging from 20 % to 60 %, respectively, reflecting changes in the Successor’s and Predecessor’s risk profile, time-to-maturity probability, and key terms when modified to the convertible notes.

During the three and six months ended June 30, 2024 (Successor) June 30, 2023 (Predecessor), the Company utilized discount rates ranging from 15 % to 60 %, respectively, reflecting changes in the Successor’s and Predecessor’s risk profile, time-to-maturity probability, and key terms when modified to the convertible notes.

As of the Closing, the fair value of the convertible notes immediately prior to their conversion was based on the fair value of the Company’s shares to be received by the holders using the market price of the shares at Closing.

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On June 29, 2023, Priveterra and Old AEON entered into the Forward Purchase Agreements with each of (i) ACM ARRT J LLC (“ACM”) and (ii) Polar Multi-Strategy Fund (“Polar”) (each of ACM and Polar, individually, a “Seller”, and together, the “Sellers”) for OTC Equity Prepaid Forward Transactions.

For purposes of each Forward Purchase Agreement, Priveterra is referred to as the “Company” prior to the consummation of the Merger, while AEON is referred to as the “Company” after the consummation of the Merger.

For purposes of each Forward Purchase Agreement, Priveterra is referred to as the

“Company” prior to the consummation of the Merger, while AEON is referred to as the “Company” after the consummation of the Merger.

As described below, the Forward Purchase Agreements were terminated on March 18, 2024.

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Therefore, the aggregate Prepayment Amount of $ 66.7 million was netted against the proceeds paid from the purchase of the Additional Shares in the aggregate by the Sellers pursuant to the FPA Funding Amount PIPE Subscription Agreements.

We did not have access to the Prepayment Amount immediately following the Closing and, pursuant to the termination of the Forward Purchase Agreements as described below related to the FPA termination, the Sellers will retain the Prepayment Amount in full, which may adversely affect our liquidity and capital needs.

The Company did not have access to the Prepayment Amount immediately following the Closing and, pursuant to the termination of the Forward Purchase Agreements as described below related to the FPA termination, the Sellers will retain the Prepayment Amount in full, which may adversely affect our liquidity and capital needs.

The Prepayment Amount of $ 66.7 million was recorded at its present value of $ 60.7 million as Subscription Receivables, which reduced stockholders’ deficit on the Successor’s condensed consolidated balance sheet at December 31, 2023.

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The ACM Termination Agreement provides that (i) ACM will retain 3,100,000 previously issued shares of common stock held by ACM pursuant to the ACM FPA and its respective subscription agreement (the “ACM Retained Shares”) and (ii) the Company will be subject to up to $ 1,500,000 in liquidated damages if it fails to meet certain registration requirements for the ACM Retained Shares, subject to certain conditions set forth in the ACM Termination Agreement.

The Company has recorded the potential $ 1.5 million as a liability to the condensed consolidated balance sheet as of March 31, 2024.

In the first quarter of 2024, the Company recorded the potential $ 1.5 million as a liability to the condensed consolidated balance sheet.

However, since ACM elected to remove its respective shares from the registration statement, the Company released the liability from the condensed consolidated balance sheet as of June 30, 2024.

ACM did not pay any cash to the Company for the ACM Retained Shares and retained all portions of the Prepayment Amount associated with the ACM Retained Shares.

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The Polar Termination Agreement provides that (i) Polar will retain 3,175,000 previously issued shares of common stock held by Polar pursuant to the Polar FPA and its respective subscription agreement (the “Polar Retained Shares”) and (ii) the Company will be subject to up to $ 1,500,000 in liquidated damages if it fails to meet certain registration requirements for the Polar Retained Shares, subject to certain conditions set forth in the Polar Termination Agreement.

The Company has recorded the potential $ 1.5 million as a liability to the condensed consolidated balance sheet as of March 31, 2024.

In the first quarter of 2024, the Company recorded the potential $ 1.5 million as a liability to the condensed consolidated balance sheet.

However, since Polar elected to remove its respective shares from the registration statement, the Company released the liability from the condensed consolidated balance sheet as of June 30, 2024.

Polar did not pay any cash to the Company for the Polar Retained Shares and retained all portions of the Prepayment Amount associated with the Polar Retained Shares.

As a result of the ACM Termination Agreement and Polar Termination Agreement, the Company recorded a charge to the condensed consolidated statement of operations of $ 20.3 million during the three months ended March 31, 2024 to reverse the related subscription receivable and derivative liability on the accompanying condensed consolidated balance sheet.

As a result of the ACM Termination Agreement and Polar Termination Agreement, the Company recorded a charge to the condensed consolidated statement of operations of $ 0 and $ 20.3 million during the three and six months ended June 30, 2024, respectively, to reverse the related subscription receivable and derivative liability on the accompanying condensed consolidated balance sheet.

New Money PIPE Subscription Agreements and Letter Agreements

As of March 31, 2024 (Successor), the make-whole provision derivative liability was $ 0.3 million, included in the embedded forward purchase agreements and derivative liabilities on the Successor’s condensed consolidated balance sheets.

For the three months ended March 31, 2024 (Successor), the Company recorded a gain related to the change in fair value of the make-whole provision derivative liability of $ 0.4 million.

As of June 30, 2024 (Successor), the make-whole provision derivative liability was $ 0.3 million, included in the embedded forward purchase agreements and derivative liabilities on the Successor’s condensed consolidated balance sheets.

For the three and six months ended June 30, 2024 (Successor), the Company recorded an expense (gain) related to the change in fair value of the make-whole provision derivative liability of $ 0.1 million and $( 0.3 ) million, respectively.

Contingent Consideration and Contingent Founder Shares (Successor)

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Following the Closing, in addition to the consideration received at the Closing and as part of the overall consideration paid in connection with the Merger, certain holders of common stock in Old AEON (the “Participating AEON Stockholders”) will be issued a portion of up to 16,000,000 additional shares of common stock, as follows:

● 1,000,000 shares of common stock, in the aggregate, if, on or before June 30, 2025 (as it may be extended, the “Migraine Phase 3 Outside Date”), the Company shall have commenced a Phase 3 clinical study for the treatment of chronic migraine or episodic migraine, which Phase 3 clinical study will have been deemed to commence upon the first subject having received a dose of any product candidate that is being researched, tested, developed or manufactured by or on behalf of the Company or any of its subsidiaries (any such product candidate, a “Company Product”) in connection with such Phase 3 clinical study (such 1,000,000 shares of common stock, the “Migraine Phase 3 Contingent Consideration Shares”);

Product”) in connection with such Phase 3 clinical study (such 1,000,000 shares of common stock, the “Migraine Phase 3 Contingent Consideration Shares”);

● 4,000,000 shares of common stock, in the aggregate, if, on or before November 30, 2026 (as it may be extended, the “CD BLA Outside Date”), the Company shall have received from the FDA acceptance for review of the BLA submitted by the Company for the treatment of cervical dystonia (such 4,000,000 shares of common stock, the “CD BLA Contingent Consideration Shares”);

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market (a “Qualifying License”) prior to the satisfaction of (x) the conditions for the issuance of the Episodic Migraine Contingent Consideration Shares and (y) the conditions for the issuance of the Chronic Migraine Contingent Consideration Shares, then upon the entry of AEON into such Qualifying License, 2,000,000 shares of common stock shall become due and payable to Participating Stockholders and the number of Episodic Migraine Contingent Consideration Shares and (A) the number of Episodic Migraine Contingent Consideration Shares shall be reduced by 1,000,000 or by 2,000,000 and (B) the number of Chronic Migraine Contingent Consideration Shares shall be reduced by 1,000,000 , but not below zero .

The Company classifies the Contingent Consideration Shares as a liability on the Successor’s condensed consolidated balance sheets and remeasured at each reporting period with changes to fair value recorded to the Successor’s condensed consolidated statements of operations and comprehensive loss.

The Company utilized the Probability-Weighted Expected Return Method (PWERM) model to value the contingent consideration based on earnout milestones, probability of forfeiture and success scenarios.

As of March 31, 2024 (Successor), the contingent consideration liability was $ 168.1 million.

For the three months ended March 31, 2024 (Successor), the expense related to the change in fair value of contingent consideration was $63.8 million on the Successor’s condensed consolidated statements of operations and comprehensive loss.

As of June 30, 2024 (Successor) and December 31, 2023 (Successor), the contingent consideration liability was $ 6.9 million and $ 104.4 million, respectively.

For the three and six months ended June 30, 2024 (Successor), the gain related to the change in fair value of contingent consideration was $ 161.2 million and $ 97.5 million, respectively, on the Successor’s condensed consolidated statements of operations and comprehensive income (loss), and relates to the change in probabilities of achieving certain scenarios following the clinical results released on May 3, 2024 and a reduction in the Company’s stock price during the period.

Warrants (Successor)

Upon the Closing, 14,479,999 warrants, initially issued by Priveterra in February 2021, consisting of 9,200,000 public warrants sold in the IPO and 5,279,999 warrants issued in a concurrent private placement, were outstanding.

Upon the Closing, 14,479,999 warrants, initially issued by Priveterra in February 2021, consisting of 9,200,000 public warrants sold in its initial public offering and 5,279,999 warrants issued in a concurrent private placement, were outstanding.

The terms of the warrants are governed by a Warrant Agreement dated February 8, 2021 between the Company (then known as Priveterra Acquisition Corp.) and Continental Stock Transfer & Trust Company (the “Warrant Agreement”).

The warrants are accounted for as a liability at the Closing with changes in the fair value recorded to the Successor’s condensed consolidated statement of operations.

The Company utilized the publicly reported market price of the public warrants to value the warrant liability at $ 12.0 million and $ 1.4 million as of March 31, 2024 (Successor) and December 31, 2023 (Successor), respectively.

For the three months ended March 31, 2024 (Successor), the expense from the change in fair value of warrants was $ 20.9 million.

Warrant exercises

During the three months ended March 31, 2024 (Successor), an aggregate of 6,203,847 warrants were exercised on a cashless basis for 960,688 shares of common stock with an impact to additional paid in capital of $ 10.3 million.

On March 29, 2024, the Company delivered notice of redemptions to warrant holders with a redemption date of April 29, 2024 for a cashless redemption of the Company’s outstanding public warrants.

The number of shares of common stock that each exercising warrant holder will receive by virtue of the cashless exercise (instead of paying the $ 11.50 per Public Warrant cash exercise price) will be calculated in accordance with the terms of the Warrant Agreement.

A summary of activity of the Company’s issued and outstanding public warrants for the three months ended March 31, 2024 (Successor) is as follows (unaudited):

The number of shares of common stock that each exercising warrant holder received by virtue of the cashless exercise (instead of paying the $ 11.50 per Public Warrant cash exercise price) was calculated in accordance with the terms of the Warrant Agreement.

Any remaining unexercised public warrants on the redemption date were cancelled and the public warrant holders received the redemption price of $ 0.10 for each public warrant.

During the three and six months ended June 30, 2024 (Successor), an aggregate of 4,079,790 warrants and 10,283,637 warrants, respectively, were exercised on a cashless basis for 1,001,950 shares and 1,962,638 shares of common stock, respectively, with an impact to additional paid in capital of $ 4.6 million and $ 15.0 million, respectively.

Additionally, the Company paid $ 21 thousand related to the cancellation of the remaining 207,410 public warrants on the redemption date.

A summary of activity of the Company’s issued and outstanding public warrants for the six months ended June 30, 2024 (Successor) is as follows (unaudited):

Issued and Outstanding, January 1, 2024

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( 10,283,637 )

Issued and Outstanding, March 31, 2024

Number of warrants cancelled

Issued and Outstanding, June 30, 2024

The warrants are accounted for as a liability at the Closing with changes in the fair value recorded to the Successor’s condensed consolidated statement of operations.

The Company utilized the Black-Scholes option pricing model, which requires the input of subjective assumptions, including the Company’s stock price, expected volatility of the Company’s common stock, expected risk-free interest rate, and the option’s expected remaining life.

The fair value of the warrant liability was $ 1.5 million and $ 1.4 million as of June 30, 2024 (Successor) and December 31, 2023 (Successor), respectively.

For the three and six months ended June 30, 2024 (Successor), the (income) expense from the change in fair value of warrants was $( 5.9 ) million and $ 15.0 million.

Medytox Top-off Right

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The Settlement Agreement stated that in the event the shares of Old AEON common stock the Predecessor issued to Medytox represent less than 10 % of the Predecessor’s total outstanding shares immediately prior to the consummation of the Merger (the “Target Ownership”), the Company will issue additional shares of Old AEON common stock to Medytox sufficient to cause Medytox to achieve the Target Ownership (the “Top-off Right”).

stock (the “Top-off Shares”) to Medytox sufficient to cause Medytox to achieve the Target Ownership immediately prior to the Merger to the Top-off Right.

Because the shares of Old AEON common stock due to be issued to Medytox represented less than 10 % of the Predecessor’s total outstanding shares immediately prior to consummation of the Merger, the Predecessor issued additional shares of Old AEON common stock (the “Top-off Shares”) to Medytox sufficient to cause Medytox to achieve the Target Ownership immediately prior to the Merger to the Top-off Right.

Based on the terms of the Settlement Agreement, the Top-off Right is a freestanding financial instrument, and is accounted for as a derivative liability pursuant to ASC 815.

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Termination of forward purchase agreements

Balance, June 30, 2024

Commitments and Contingencies

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The lease does not include variable or contingent lease payments.

An operating lease asset and liability are recognized based on the present value of the remaining lease payments discounted using the Predecessor’s incremental borrowing rate.

On March 29, 2024, the Company entered into an amendment to extend the lease for an additional five years .

An operating lease asset and liability are recognized based on the present value of the remaining lease payments discounted using the Company’s incremental borrowing rate.

Lease expense is recognized on a straight-line basis over the lease term.

The following table summarizes supplemental balance sheet information related to the operating lease as of March 31, 2024 (in thousands, unaudited):

The following table summarizes supplemental balance sheet information related to the operating lease as of June 30, 2024 (in thousands, unaudited):

Minimum lease payments by fiscal year

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Discount rate

The following table summarizes supplemental disclosures of operating cost and cash flow information related to operating leases for the three months ended March 31, 2024 (Successor) and March 31, 2023 (Predecessor) (in thousands) (unaudited).

The following table summarizes supplemental disclosures of operating cost and cash flow information related to operating leases for the three and six months ended June 30, 2024 (Successor) and June 30, 2023 (Predecessor) (in thousands) (unaudited).

Three Months Ended

Six Months Ended

Cost of operating leases

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Odeon seeks monetary damages for the full amount of its claimed underwriting fee, punitive damages, attorneys’ fees and other amounts.

The Company has yet to file a response to Odeon’s complaint.

On November 16, 2023, the Company filed a motion to dismiss certain claims included in Odeon’s complaint.

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications.

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See Note 2 Summary of Significant Accounting Policies for additional information.

As of March 31, 2024 (Successor), the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue up to 500,000,000 shares of common stock at a par value of $ 0.0001 per share.

As of March 31, 2024 (Successor), 38,120,288 shares were issued and outstanding .

The Successor’s certificate of incorporation, as amended and restated, authorized the Company to issue up to 500,000,000 shares of common stock at a par value of $ 0.0001 per share.

As of June 30, 2024 (Successor), 39,122,238 shares were issued and outstanding .

The holders of common stock are entitled to receive dividends whenever funds are legally available, when and if declared by the Company’s Board of Directors.

As of March 31, 2024 (Successor), no cash dividend has been declared to date.

As of June 30, 2024 (Successor), no cash dividend has been declared to date.

Each share of common stock is entitled to one vote.

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Common Stock Reserved

The table below summarizes the Company’s reserved common stock for further issuance as of March 31, 2024 (Successor) and December 31, 2023 (Successor):

The table below summarizes the Company’s reserved common stock for further issuance as of June 30, 2024 (Successor) and December 31, 2023 (Successor):

Stock options issued and outstanding

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Total common stock reserved

Share-based Compensation Stock Incentive Plans

Share-based Compensation

Stock Incentive Plans

2019 Incentive Award Plan

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Additionally, of such RSU awards, 466,468 RSU’s contained performance-based vesting criteria based on the achievement of the same milestones as the contingent consideration (see Note 6 Fair Value Measurements for additional information).

As of March 31, 2024, milestones 1 and 2 were determined to be probable, and the Company began expensing the proportionate RSU’s over the vesting term, calculated as the period from the date the milestone was determined to be probable and the expected achievement date of the milestone.

For the three months ended March 31, 2024 (Successor), the Company has recognized $ 0.2 million

of such RSU with earnout vesting criteria, $ 0.2 million in selling, general and administrative expenses and a de minimus amount in research and development expenses associated with such performance-based RSU’s in the Successor’s condensed consolidated statement of operations.

As of June 30, 2024, milestones 1 and 2 were determined to be probable, and the Company began expensing the proportionate RSU’s over the vesting term, calculated as the period from the date the milestone was determined to be probable and the expected achievement date of the milestone.

For the three and six months ended June 30, 2024 (Successor), the Company has recognized $ 0.2 million and $ 0.4 million, respectively, of such RSU with earnout vesting criteria, $ 0.2 million and $ 0.4 million, respectively, in selling, general and administrative expenses and a de minimus amount in research and development expenses associated with such performance-based RSU’s in the Successor’s condensed consolidated statement of operations.

The following table summarizes stock option activity under 2019 Incentive Award Plan (unaudited):

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Options forfeited

Outstanding, March 31, 2024

Exercisable, March 31, 2024

Outstanding, June 30, 2024

Exercisable, June 30, 2024

There were no options granted in the 2019 Incentive Plan during 2023, and no options will be granted from this plan after the Closing.

As of March 31, 2024 (Successor) and December 31, 2023 (Successor), the weighted average remaining contractual life of options outstanding and options exercisable was 6.8 years and 7.1 years, respectively.

During the three months ended March 31, 2024 (Successor) and March 31, 2023 (Predecessor), the Company recognized $ 0.8 million and $ 1.4 million, respectively, of share-based compensation expense related to stock options granted.

As of March 31, 2024 (Successor) and December 31, 2023 (Successor), total unrecognized compensation expense related to nonvested stock options was $ 4.1 million and $ 4.9 million, respectively, which is expected to be recognized over the weighted-average remaining requisite service period of 9 months and 10 months , respectively.

As of June 30, 2024 (Successor) and December 31, 2023 (Successor), the weighted average remaining contractual life of options outstanding and options exercisable was 6.6 years and 7.1 years, respectively.

During the three and six months ended June 30, 2024 (Successor) and June 30, 2023 (Predecessor), the Company recognized $ 0.8 million, $ 1.6 million, $ 1.1 million and $ 2.5 million, respectively, of share-based compensation expense related to stock options granted.

As of June 30, 2024 (Successor) and December 31, 2023 (Successor), total unrecognized compensation expense related to nonvested stock options was $ 3.1 million and $ 4.9 million, respectively, which is expected to be recognized over the weighted-average remaining requisite service period of 7 months and 10 months , respectively.

The following table summarizes restricted stock units activity under the 2019 Incentive Award Plan:

Outstanding, January 1, 2024

Outstanding, March 31, 2024

During the three months ended March 31, 2024 (Successor), the Company recognized $ 0.7 million of share-based compensation expense related to restricted stock units granted, including $ 0.2 million with earnout vesting criteria.

As of March 31, 2024 (Successor), total unrecognized compensation expense related to nonvested restricted stock units was $ 8.5 million, of which $ 4.4 million was related to the earnout vesting criteria, and the remaining $ 4.1 million is expected to be recognized over the weighted-average remaining requisite service period of 28 months .

Outstanding, June 30, 2024

During the three and six months ended June 30, 2024 (Successor), the Company recognized $ 0.5 million and $ 1.2 million of share-based compensation expense related to restricted stock units granted, including $ 0.4 million with earnout vesting criteria.

As of June 30, 2024 (Successor), total unrecognized compensation expense related to nonvested restricted stock units was $ 7.9 million, of which $ 4.3 million was related to the earnout vesting criteria, and the remaining $ 3.6 million is expected to be recognized over the weighted-average remaining requisite service period of 26 months .

The unrecognized compensation expense with the earnout criteria will be recognized when the milestones are determined to be probable over the RSU’s vesting term, calculated as the period from the date the milestone was determined to be probable and the expected achievement date of the milestone.

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In connection with the Merger, the Company’s Board adopted, and its stockholders approved, the 2023 Plan, which became effective upon the consummation of the Merger, that provides for the granting of nonqualified stock options, restricted stock and stock appreciation rights to employees, members of the Board of Directors and non-employee consultants.

The 2023 Plan will remain in effect until July 3, 2033, the tenth anniversary of the date the Company’s stockholders approved the 2023 Plan, unless earlier terminated.

The 2023 Plan will remain in

effect until July 3, 2033, the tenth anniversary of the date the Company’s stockholders approved the 2023 Plan, unless earlier terminated.

Stock options granted generally expire ten years after their original date of grant and generally vest between three years to four years with equal installments vesting on each anniversary of the grant date, subject to continued service through the applicable vesting date.

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Any shares issued pursuant to the 2023 Plan may consist, in whole or in part, of authorized and unissued common stock, treasury common stock or common stock purchased on the open market.

As of March 31, 2024, there were 2,859,778 shares of common stock available for issuance under the 2023 Plan.

As of June 30, 2024, there were 4,703,788 shares of common stock available for issuance under the 2023 Plan.

Outstanding, January 1, 2024

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Options forfeited

Outstanding, March 31, 2024

Exercisable, March 31, 2024

The weighted average fair value of options granted as of March 31, 2024 (Successor) and December 31, 2023 (Successor) was $ 5.70 and $ 3.18 , respectively.

The weighted average remaining contractual life of options outstanding and options exercisable as of March 31, 2024 (Successor) and December 31, 2023 (Successor) was 9.8 years and 9.6 years, respectively.

During the three months ended March 31, 2024 (Successor), the Company recognized $ 0.1 million of share-based compensation expense related to stock options granted.

As of March 31, 2024 (Successor) and December 31, 2023 (Successor), total unrecognized compensation expense related to nonvested stock options was $ 5.6 million and $ 0.9 million, respectively, which is expected to be recognized over the weighted-average remaining requisite service period of 42 months and 35 months , respectively.

Outstanding, June 30, 2024

Exercisable, June 30, 2024

The weighted average fair value of options granted as of June 30, 2024 (Successor) and December 31, 2023 (Successor) was $ 6.89 and $ 3.18 , respectively.

The weighted average remaining contractual life of options outstanding and options exercisable as of June 30, 2024 (Successor) and December 31, 2023 (Successor) was 9.5 years and 9.6 years, respectively.

During the three and six months ended June 30, 2024 (Successor), the Company recognized $ 0.4 million and $ 0.5 million, respectively, of share-based compensation expense related to stock options granted.

As of June 30, 2024 (Successor) and December 31, 2023 (Successor), total unrecognized compensation expense related to nonvested stock options was $ 5.2 million and $ 0.9 million, respectively, which is expected to be recognized over the weighted-average remaining requisite service period of 38 months and 35 months , respectively.

Share-based Compensation Expense and Valuation Information

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The Company records share-based compensation expense net of actual forfeitures.

During the three months ended March 31, 2024 (Successor) and March 31, 2023 (Predecessor), the Company recognized $ 1.2 million and $ 1.2 million, respectively, of share-based compensation expense in selling, general and administrative expenses, respectively, and $ 0.4 million and $ 0.2 million, respectively, in research and development expenses in the accompanying condensed consolidated statements of operations and comprehensive loss.

During the three and six months ended June 30, 2024 (Successor) and June 30, 2023 (Predecessor), the Company recognized $ 1.7 million, $ 3.3 million, $ 1.1 million and $ 2.5 million, respectively, of share-based compensation expense, of which $ 1.3 million, $ 2.5 million, $ 1.0 million and $ 2.2 million, respectively, were in selling, general and administrative expenses, and $ 0.4 million, $ 0.8 million, $ 0.1 million and $ 0.3 million, respectively, were in research and development expenses in the accompanying condensed consolidated statements of operations and comprehensive income (loss).

The fair value of stock options under the 2019 and 2023 Stock Incentive Award Plan was estimated using the following assumptions:

Three Months Ended

Six Months Ended

Expected volatility

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Subsequent Events

The Company has further evaluated subsequent events for recognition and remeasurement purposes as of and for the three months ended March 31, 2024.

The Company has further evaluated subsequent events for recognition and remeasurement purposes as of and for the three and six months ended June 30, 2024.

After review and evaluation, management has concluded that there were no material subsequent events as of the date that the financial statements were available to be issued, except as described below.

Pursuant to the terms of the Subscription Agreement with Daewoong relating to the sale and issuance by the Company of senior secured convertible notes in the principal amount of up to $ 15.0 million, on April 12, 2024, the Company issued and sold to Daewoong an additional Convertible Note for the remaining principal amount of $ 10.0 million (see Note 5 Daewoong Convertible Notes for more information).

On May 2, 2024, the Company paid approximately $ 21 thousand to redeem the remaining public warrants.

For more information, refer to the Warrants section in Note 6 Fair Value Measurements .

The Company will continue to evaluate the complete dataset and determine the next steps in the development of ABP-450.

Additionally, the Company has immediately commenced cash preservation measures and will review all strategic options.

On July 9, 2024, the Company announced a strategic reprioritization to pursue a 351(k) biosimilar regulatory pathway for its lead candidate, ABP-450, using AbbVie Inc.’s product BOTOX as the reference product, and plans to advance a single pivotal clinical development study in cervical dystonia for ABP-450 using this pathway.

The Company will discuss the proposed biosimilar pathway with the FDA during a Biosimilar Initial Advisory Meeting scheduled for the third quarter of 2024.

In connection with the negotiation of the Forward Purchase Agreements (and FPA Termination Agreements) and related subscription agreements, J.V.B.

Financial Group, LLC, acting through its Cohen & Company Capital Markets division (“CCM”), provided certain consulting services, initially to Priveterra and subsequently to AEON, pursuant to an engagement letter, by and between the Company and CCM, dated July 27, 2023 and amended July 1, 2024 (the “CCM Engagement Letter”).

On July 5, 2024, pursuant to the CCM Engagement Letter, the Company issued 400,000 shares of the Company’s common stock to CCM.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements