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Item 1. Financial Statements

2024-03-29 compared with 2022-03-03 · 1061 added, 374 removed, 37 unchanged (97% of the section changed)

Financial Statements

PRIVETERRA ACQUISITION CORP.

CONDENSED BALANCE SHEETS

AEON BIOPHARMA, INC.

CONDENSED CONSOLIDATED BALANCE SHEET S

(in thousands, except share data and par value amounts)

September 30,

December 31, 2020

(As restated)

Current assets:

Deferred offering costs

Prepaid assets

Prepaid expenses and other current assets

Total current assets

Prepaid assets – non-current

Investments held in Trust Account

Liabilities and Stockholders’ Equity (Deficit)

Property and equipment, net

Operating lease right-of-use asset

LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT

Current liabilities:

Accounts payable and accrued expenses

Franchise tax payable

Due to related party

Promissory note – related party

Accounts payable

Accrued clinical trials expenses

Accrued compensation

Excise tax payable

Other accrued expenses

Current portion of convertible notes at fair value, including related party amount of $ 0 and $ 38,834 at September 30, 2023 and December 31, 2022, respectively

Total current liabilities

Convertible notes at fair value, including related party amount of $ 0 and $ 23,132 , at September 30, 2023 and December 31, 2022, respectively

Operating lease liability

Warrant liability

Deferred underwriters’ discount

Contingent consideration liability

Embedded forward purchase agreements and derivative liabilities

Total liabilities

Commitments and contingencies

Common stock subject to possible redemption, 27,600,000 and 0 shares as of September 30, 2021 and December 31, 2020, at redemption value of $ 10.00 , respectively

Stockholders’ Equity (Deficit):

Preferred stock, $ 0.0001 par value;

1,000,000 shares authorized;

none issued or outstanding

Convertible preferred stock issuable in series, $ 0.0001 par value;

44,666,035 shares authorized as of December 31, 2022;

21,257,708 shares issued and outstanding at December 31, 2022;

liquidation preference of $ 141,920 at December 31, 2022

Stockholders’ Deficit:

AEON Biopharma, Inc.

stockholders’ deficit:

Class A common stock, $ 0.0001 par value;

280,000,000 shares authorized;

0 shares issued and outstanding (excluding 27,600,000 and 0 shares subject to possible redemption) as of September 30, 2021 and December 31, 2020, respectively

Class B common stock, $ 0.0001 par value;

20,000,000 shares authorized;

6,900,000 shares issued and outstanding

500,000,000 and 207,450,050 shares authorized, 37,159,600 and 138,848,177 shares issued and 37,159,600 and 138,825,356 shares outstanding at September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

Retained earnings (accumulated deficit)

( 17,210,419 )

Total stockholders’ equity (deficit)

( 17,177,729 )

Total Liabilities and Stockholders’ Equity (Deficit)

The accompanying notes are an integral part of the unaudited condensed financial statements.

PRIVETERRA ACQUISITION CORP.

CONDENSED STATEMENTS OF OPERATIONS

Subscription receivables

Accumulated deficit

Treasury stock, at cost, 0 and 22,821 shares at September 30, 2023 and December 31, 2022, respectively

Total AEON Biopharma, Inc.

stockholders’ deficit

Non-controlling interest

Total stockholders' deficit

Total liabilities, convertible preferred stock and stockholders' deficit

See accompanying notes to the consolidated financial statements

AEON BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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

Three Months Ended

2 unchanged sentences

September 30,

Formation and operating costs

Loss from operations

( 1,050,199 )

Other income/(expense)

Unrealized gain on change in fair value of warrants

Offering costs

Interest income

Total other income/(expense)

Basic weighted average shares outstanding, Class A common stock subject to possible redemption

Basic net income per share, Class A common stock subject to possible redemption

Diluted weighted average shares outstanding, Class A common stock

Diluted net income per share, Class A common stock

Basic weighted average shares outstanding, Class B common stock

Basic net income per share, Class B common stock

Diluted weighted average shares outstanding, Class B common stock

Diluted net income per share, Class B common stock

The accompanying notes are an integral part of the unaudited condensed financial statements.

PRIVETERRA ACQUISITION CORP.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021

July 22 to September 30

July 1 to September 30

July 22 to September 30

January 1 to September 30

(As restated)

Operating expenses:

Selling, general and administrative

Research and development

Change in fair value of contingent consideration

Total operating costs and expenses

(Loss) income from operations

Other (loss) income:

Change in fair value of convertible notes

Change in fair value of warrants

Change in fair value of embedded forward purchase agreements and derivative liabilities

Other income, net

Total other (loss) income, net

(Loss) income before taxes

(Loss) Income and comprehensive (loss) income

Basic and diluted net (loss) income per share

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

See accompanying notes to the consolidated financial statements

AEON BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

(in thousands, except share data) (Unaudited)

Preferred Stock

Treasury Stock

Stockholders'

Accumulated Deficit

Equity (Deficit)

Balance—December 31, 2020

Excess cash over fair value for Private Placement Warrants

Accretion of Class A common stock to redemption value

( 1,223,377 )

( 25,159,789 )

( 26,383,166 )

Balance as of March 31, 2021 (as restated)

( 18,844,167 )

( 18,843,477 )

( 4,025,194 )

Excess cash received over the fair value of the converted working capital loan

Balance as of June 30, 2021 (as restated)

( 22,869,361 )

( 22,836,671 )

Balance as of September 30, 2021

( 17,210,419 )

( 17,177,729 )

The accompanying notes are an integral part of the unaudited condensed financial statements.

PRIVETERRA ACQUISITION CORP.

CONDENSED STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021

Balance as of June 30, 2023 (Predecessor)

Net loss (as restated)

Stock-based compensation expense

Balance as of July 21, 2023 (Predecessor) (As restated)

Balance as of July 22, 2023 (Successor) (As restated)

Net income (as restated)

Stock-based compensation expense (as restated)

Balance as of September 30, 2023 (Successor) (As restated)

Balance as of June 30, 2022 (Predecessor)

Stock-based compensation expense

Balance as of September 30, 2022 (Predecessor)

AEON BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

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

Preferred Stock

Treasury Stock

Stockholders'

Balance as of January 1, 2023 (Predecessor)

Net loss (as restated)

Stock-based compensation expense

Debt extinguishment due to warrant modification

Balance as of July 21, 2023 (Predecessor) (As restated)

Balance as of July 22, 2023 (Successor) (As restated)

Net income (as restated)

Stock-based compensation expense (as restated)

Balance as of September 30, 2023 (Successor) (As restated)

Balance as of January 1, 2022 (Predecessor)

Stock-based compensation expense

Balance as of September 30, 2022 (Predecessor)

See accompanying notes to the consolidated financial statements

AEON BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

Nine Months Ended

September 30,

July 22 to September 30

January 1 to September 30

(As restated)

Cash flows from operating activities:

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

Interest earned on investments held in Trust Account

Unrealized gain on change in fair value of warrants

( 9,599,733 )

Offering costs

Net (loss) income

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

Write-off of deferred offering costs

Stock-based compensation expense

Change in fair value of convertible notes

Change in fair value of warrants

Change in fair value of embedded forward purchase agreements and derivative liabilities

Change in fair value of contingent consideration

Changes in operating assets and liabilities:

Prepaid assets

Franchise tax payable

Accounts payable and accrued expenses

Prepaid expenses and other current assets

Accounts payable

Accrued expenses and other liabilities

Other assets and liabilities

Net cash used in operating activities

( 1,332,155 )

Cash flows from investing activities:

Principal invested into Trust account

( 276,000,000 )

Purchases of property and equipment

Net cash used in investing activities

( 276,000,000 )

Cash flows from financing activities:

Due to related party

Proceeds from sale of Units, net of underwriter fee

Offering costs

Proceeds from issuance of Private Placement Warrants

Borrowing from promissory note

Repayment of promissory note

Proceeds from issuance of convertible notes

Net cash provided by financing activities

Net Change in Cash

Cash, beginning of the period

Cash, end of period

Supplemental Disclosure of Non-cash Financing Activities :

Deferred underwriters’ discount payable charged to additional paid in capital

Conversion of Working Capital Loans to Private Placement Warrants

The accompanying notes are an integral part of the unaudited condensed financial statements.

PRIVETERRA ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

Note 1 — Organization and Business Operation

Organization and General

Priveterra Acquisition Corp.

(the “Company”) is a blank check company incorporated in Delaware on November 17, 2020.

The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (“Business Combination”).

The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

As of September 30, 2021, the Company had not commenced any operations.

All activity for the period from November 17, 2020, the Company’s inception, through September 30, 2021, relates to the Company’s formation and the initial public offering (“IPO”) described below.

The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest.

The Company will generate non-operating income in the form of interest income from the proceeds derived from the IPO and unrealized gains and losses on the change in fair value of it warrants.

The Company has selected December 31 as its fiscal year end.

The Company’s sponsor is Priveterra Sponsor, LLC, a Delaware limited liability company (the “Sponsor”).

The registration statement for the Company’s IPO was declared effective on February 8, 2021 (the “Effective Date”).

On February 11, 2021, the Company consummated an IPO of 27,600,000 units at $ 10.00 per unit (the “Units”), which includes the full exercise by the underwriters of the over-allotment option to purchase an additional 3,600,000 Units, at $ 10.00 per Unit, generating gross proceeds of $ 276,000,000 , which is discussed in Note 3.

Simultaneously with the closing of the IPO, the Company consummated the sale of 5,213,333 warrants (the “Private Placement Warrants”), at a price of $ 1.50 per warrant, which is discussed in Note 4.

Each warrant entitles the holder to purchase one share of common stock at a price of $ 11.50 per share, generating gross proceeds of $ 7,820,000 .

Transaction costs of the IPO amounted to $ 15,630,212 consisting of $ 5,520,000 of underwriting fees, $ 9,660,000 of deferred underwriting fees, and $ 450,212 of other offering costs.

Of the transaction costs, $ 655,046 is included in offering costs on the condensed statements of operations and $ 14,975,166 is included in equity.

Trust Account

Following the closing of the IPO on February 11, 2021, $ 276,000,000 ($ 10.00 per Unit) from the net offering proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”), located in the United States with Continental Stock Transfer & Trust Company acting as trustee and will be invested in U.S.

government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company.

Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its franchise and income tax obligations, if any, the proceeds from the Company’s IPO and the sale of the Private Placement Warrants will not be released from the Trust Account until the earliest of (i) the completion of initial Business Combination, (ii) the redemption of the Company’s public shares if the Company does not complete an initial Business Combination within 24 months from the closing of the IPO, subject to applicable law, or (iii) the redemption of the Company’s public shares properly submitted in connection with a stockholder vote to amend its amended and restated certificate of incorporation to modify the substance or timing of the Company’s obligation to redeem 100 % of its public shares if the Company has not consummated an initial business combination within 24 months from the closing of the IPO or with respect to any other material provisions relating to stockholders’ rights or pre-initial Business Combination activity.

The proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s public stockholders.

Initial Business Combination

The Company will provide its public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial Business Combination either (i) in connection with a stockholder meeting called to approve the initial Business Combination or (ii) by means of a tender offer.

The decision as to whether the Company will seek stockholder approval of a proposed initial Business Combination or conduct a tender offer will be made by the Company, solely in its discretion.

The stockholders will be entitled to redeem their shares for a pro rata portion of the amount then on deposit in the Trust Account (initially approximately $ 10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).

The shares of common stock subject to redemption are recorded at a redemption value and classified as temporary equity upon the IPO, in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $ 5,000,001 upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the issued and outstanding shares voted are voted in favor of the Business Combination.

The Sponsor, officers and directors have agreed to (i) waive their redemption rights with respect to their founder shares and public shares in connection with the completion of the initial Business Combination, (ii) waive their redemption rights with respect to their founder shares and public shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation, and (iii) waive their rights to liquidating distributions from the Trust Account with respect to their founder shares if the Company fails to complete the initial Business Combination within the Combination Period.

The Company will have 24 months from the closing of the IPO to complete the initial Business Combination (the “Combination Period”).

However, if the Company is unable to complete the initial Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes (less up to $ 100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, liquidate and dissolve, subject, in each case, to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

The Company’s Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $ 10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $ 10.10 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the Company’s IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”).

However, the Company has not asked its Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether its Sponsor has sufficient funds to satisfy its indemnity obligations and believe that the Company’s Sponsor’s only assets are securities of the Company.

Therefore, the Company cannot assure that its Sponsor would be able to satisfy those obligations.

Liquidity and Capital Resources

The Company’s liquidity needs up to February 11, 2021, the date of the IPO, had been satisfied through a capital contribution from the Sponsor of $ 25,000 (see Note 5) for the founder shares and the loans under an unsecured promissory note from the Sponsor of $ 73,295 (see Note 5).

In order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans (see Note 5).

The Company’s IPO was on February 11, 2021.

As of September 30, 2021, the Company had $ 663,540 in its operating bank account, and working capital of $ 954,716 (excluding taxes payable which is funded by earnings from the Trust Account).

Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing.

Over this time period, the Company will be using the working capital for identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.

Note 2 — Significant Accounting Policies

Net (decrease) increase in cash

Cash at beginning of period

Cash at end of period

See accompanying notes to the consolidated financial statements

AEON BIOPHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Description of Business

AEON Biopharma, Inc.

(formerly known as Priveterra Acquisition Corp.;

“AEON” or the “Company”) is a biopharmaceutical company focused on developing its proprietary botulinum toxin complex, ABP-450 (prabotulinumtoxinA) injection (“ABP-450”), for debilitating medical conditions.

The Company is headquartered in Irvine, California.

On July 21, 2023 (the “Closing Date”), the Company completed the acquisition of AEON Biopharma Sub, Inc.

(formerly known as AEON Biopharma, Inc.) (“Old AEON”) pursuant to the definitive agreement dated December 12, 2022 (the “Business Combination Agreement”), as amended April 27, 2023, by and among Priveterra Acquisition Corp.

(“Priveterra”), Priveterra’s wholly-owned subsidiary, Priveterra Merger Sub, Inc., and Old AEON.

Old AEON was incorporated in Delaware in February 2012 under the name Alphaeon Corporation as a wholly-owned subsidiary of Strathspey Crown Holdings Group, LLC (“SCH”).

On December 18, 2019, the Company changed its name to “AEON Biopharma, Inc.” On the Closing Date, Old AEON merged with Priveterra Merger Sub, Inc., with Old AEON surviving the merger as a wholly-owned subsidiary of the Company.

Also on the Closing Date, the Company changed its name from “Priveterra Acquisition Corp.” to “AEON Biopharma, Inc.” and is referred to herein as “AEON,” or the “Company.” Unless the context otherwise requires, references to “Priveterra” herein refer to the Company prior to the Closing Date.

Under the Business Combination Agreement, the Company agreed to acquire all outstanding equity interests of Old AEON for approximately 16,500,000 shares of Class A common stock, par value $ 0.0001 per share (“common stock”), which Old AEON’s stockholders received in the form of shares of common stock of the Company (the consummation of the Merger and the other transactions contemplated by the Business Combination Agreement, collectively, the “Merger”).

In addition, following the closing of the Merger (the “Closing”), certain AEON stockholders will be issued up to 16,000,000 additional shares of common stock to the extent certain milestones are achieved.

Prior to the Closing, Priveterra shares were listed on Nasdaq as “PMGM.” The post-Merger Company common stock and warrants commenced trading on the NYSE American under the symbols “AEON” and “AEON WS,” respectively, on July 24, 2023.

See Note 4 Forward Merger for additional details.

Liquidity and Going Concern

The accompanying condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern.

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 September 30, 2023, the Successor reported cash of $ 16.2 million and an accumulated deficit of $ 447.4 million.

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

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.

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.

The Company expects to seek 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.

The preparation of these condensed consolidated financial statements does not include any adjustments that may result from the outcome of this uncertainty.

This basis of accounting contemplates the recovery of the Company ’ s assets and the satisfaction of the Company ’ s liabilities and commitments in the normal course of business and does not include any adjustments to reflect the possible future effects of the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

If the Company is unable to obtain adequate capital, it could be forced to cease operations.

The Company’s future operations are highly dependent on a combination of factors, including (1) the success of its research and development programs;

(2) the timely and successful completion of any additional financing;

(3) the development of competitive therapies by other biotechnology and pharmaceutical companies;

(4) the Company’s ability to manage growth of the organization;

(5) the Company’s ability to protect its technology and products;

and, ultimately (6) regulatory approval and successful commercialization and market acceptance of its product candidates.

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC.

Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting.

Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows.

In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Form 10-K for the year ended December 31, 2020 as filed with the SEC on March 31, 2021 , which contains the audited financial statements and notes thereto.

The interim results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future interim periods.

Emerging Growth Company Status

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding

executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.

The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable.

The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

This may make comparison of the Company’s condensed financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.

The condensed consolidated financial statements include the accounts of the Company and its controlled subsidiaries.

On July 21, 2023, AEON completed the Merger with Old AEON, with Old AEON surviving the merger as a wholly-owned subsidiary of the Company, the accounting acquirer.

The transaction was accounted for as a forward merger asset acquisition.

Unless the context otherwise requires, the “Company,” for periods prior to the Closing, refers to Old AEON, AEON Biopharma Sub, Inc.

(“Predecessor”), and for the periods after the Closing, refers to AEON Biopharma, Inc., including AEON Biopharma Sub, Inc.

(“Successor”).

As a result of the Merger, the results of operations, financial position and cash flows of the Predecessor and Successor are not directly comparable.

AEON Biopharma Sub, Inc.

was deemed to be the predecessor entity.

Accordingly, the historical financial statements of AEON Biopharma Sub, Inc.

became the historical financial statements of the combined Company, upon the consummation of the Merger.

As a result, the financial statements included in this report reflect (i) the historical operating results of AEON Biopharma Sub, Inc.

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, which includes the period through July 21, 2023 concurrent with the Merger, and a Successor period from July 22, 2023 through September 30, 2023.

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 September 30, 2023 (Successor), the condensed consolidated statements of operations and comprehensive loss and convertible preferred stock and stockholders’ deficit for the periods from July 1, 2023 to July 21, 2023 (Predecessor), July 22, 2023 to September 30, 2023 (Successor), January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor) and the three and nine months ended September 30, 2022 (Predecessor), and the condensed consolidated statements of cash flows for the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor) and the nine months ended September 30, 2022 and the related note disclosures are unaudited.

The balance sheet information as of December 31, 2022 (Predecessor) is derived from the Predecessor’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 September 30, 2023 (Successor) and its results of operations and comprehensive loss and cash flows for the periods from July 1, 2023 to July 21, 2023 (Predecessor), July 22, 2023 to September 30, 2023 (Successor), January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor) and the three and nine months ended September 30, 2022 (Predecessor).

The results for the periods from July 1, 2023 to July 21, 2023 (Predecessor), July 22, 2023 to September 30, 2023 (Successor), January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor) are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or any other interim period.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period.

Making estimates requires management to exercise significant judgment.

It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events.

One of the more significant accounting estimates included in these condensed financial statements is the determination of the fair value of the warrant liability.

Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.

The Company had approximately $ 663,540 in cash and did not have any cash equivalents as of September 30, 2021.

At December 31, 2020 the Company had no cash or cash equivalents.

Marketable Securities Held in Trust Account

The Company’s portfolio of investments held in the Trust Account is comprised of U.S.

government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S.

government securities, or a combination thereof.

The Company’s investments held in the Trust Account are classified as trading securities.

Trading securities are presented on the balance sheets at fair value at the end of each reporting period.

Gains and losses resulting from the change in fair value of these securities is included in income from investments held in Trust Account in the accompanying unaudited condensed statements of operations.

The estimated fair values of investments held in the Trust Account are determined using available market information

Offering Costs associated with the Initial Public Offering

The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A—“Expenses of Offering”.

Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Public Offering.

Offering costs are charged to temporary equity or the statement of operations based on the relative value of the Public Warrants to the proceeds received from the Units sold upon the completion of the IPO.

Accordingly, as of September 30, 2021, offering costs totaling $ 15,630,212 (consisting of $ 5,220,000 of underwriting discount, $ 9,660,000 of deferred underwriting discount, and $ 450,212 of other offering costs) were recognized with $ 655,046 which was allocated to the Public Warrants and Private Warrants, included in the statement of operations and $ 14,975,166 included in temporary equity.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $ 250,000 .

The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

Class A Common Stock Subject to Possible Redemption

The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value.

Conditionally redeemable Class A common stock (including Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity.

At all other times, Class A common stock is classified as stockholders’ equity.

The Company’s Class A common stock feature certain redemption rights that is considered to be outside of the Company’s control and subject to the occurrence of uncertain future events.

Accordingly, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheet.

The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period.

Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit.

As of September 30, 2021, the common stock reflected on the balance sheet are reconciled in the following table:

Gross proceeds from IPO

Proceeds allocated to Public Warrants

( 11,408,000 )

Common stock issuance costs

( 14,975,166 )

Accretion of carrying value to redemption value

Contingently redeemable common stock

Net Income Per Common Share

The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”.

Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common stock outstanding for the period.

The Company has two classes of common shares, which are referred to as Class A common stock and Class B common stock.

Earnings and losses are shared pro rata between the two classes of stock.

Private and public warrants to purchase 14,480,000 Class A common stock at $ 11.50 per share were issued on February 8, 2021.

No warrants were exercised during the three or nine months ended September 30, 2021.

The calculation of diluted income per common share does not consider the effect of the warrants issued in connection with the (i) IPO, (ii) exercise of over-allotment, and (iii) Private Placement since the exercise of the warrants are contingent upon the occurrence of future events.

As of September 30, 2021, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company As a result, diluted net income per common share is the same as basic net income per common share for the periods.

Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.

Below is a reconciliation of the net income per share of common stock:

For the three months ended

For the nine months ended

The preparation of financial statements in conformity with U.S.

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.

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.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance.

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 September 30, 2023 and December 31, 2022, the Company operates and manages its business as one operating and reportable segment.

Risk and Uncertainties

The Company is subject to risks common to early-stage companies in the pharmaceutical industry including, but not limited to, dependency on the clinical and commercial success of its current and any future product candidates, ability to obtain regulatory approval of its current and any future product candidates, the need for substantial additional financing to achieve its goals, uncertainty of broad adoption of its approved products, if any, by physicians and patients and significant competition.

The Company relies on Daewoong Pharmaceutical Co., Ltd.

(“Daewoong”), a South Korean pharmaceutical manufacturer, as an exclusive and sole supplier to manufacture the Company’s source material for product candidates.

Any termination or loss of significant rights, including exclusivity, under the Company’s license and supply agreement with Daewoong (the “Daewoong Agreement”) would materially and adversely affect the Company’s commercialization of its products.

See Note 8 Commitments and Contingencies for a discussion of the Daewoong Agreement.

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation and amortization.

The cost of property and equipment is depreciated over the estimated useful lives of the respective assets.

The Company’s furniture and fixtures are depreciated on a straight-line basis over a period of seven years .

Equipment is depreciated over a useful life of five years .

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, 2022 and September 30, 2023 (unaudited) are as follows (in thousands):

September 30,

Furniture and fixtures

Leasehold improvements

Property and equipment

Accumulated depreciation

Property and equipment, net

Other Accrued Expenses

Other accrued expenses were as follows (in thousands):

September 30,

Basic and diluted net income per share

Allocation of net income

Weighted-average shares outstanding

Basic and diluted net income per share

Legal expenses

Operating lease liability - short term portion

Daewoong vial usage

Remaining other accrued expenses

Total other accrued expenses

Convertible Notes (Predecessor)

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

Subsequent changes in fair value were recorded as a component of non-operating loss in the Predecessor’s condensed consolidated statements of operations and comprehensive loss or as a component of other comprehensive 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.

The convertible promissory notes were converted into shares of the Company’s common stock at the Closing.

Contingent Consideration (Successor)

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 7 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 ASC 815, Derivatives and Hedging (“ASC 815”).

Based on the appropriate guidance, the Company determined that the Contingent Consideration Shares would be 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)

Based on the applicable guidance in ASC 480, ASC 815, ASC 505, Equity (“ASC 505”) and Staff Accounting Bulletin Topic 4.E, Receivables from Sale of Stock (“SAB 4E”), the Company has determined that each of its forward purchase agreements entered in connection with the Merger is a freestanding hybrid financial instrument comprising a subscription receivable and embedded features, which have been bifurcated and accounted for separately as derivative instruments.

The Company has recorded the derivatives as liabilities and measured them at fair value with the initial value of the derivative recorded as a loss “on the line” in the Successor’s opening accumulated deficit.

On the line describes those transactions triggered by the consummation of the Merger that are not recognized in the consolidated financial statements of the Predecessor or the Successor as they are not directly attributable to either period but instead were contingent on the Merger.

For more information, see Note 4 Forward Merger.

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

Warrants (Successor)

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC 815.

The assessment considers whether the warrants are freestanding financial instruments and meet all of the requirements for equity classification, including whether the warrants are indexed to the Company’s own shares of common stock, among other conditions for equity classification.

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.

Convertible Preferred Stock (Predecessor)

The Company recorded its Predecessor convertible preferred stock at their respective issuance price, less issuance costs on the dates of issuance.

The convertible preferred stock is classified outside of permanent equity as temporary equity in the accompanying Predecessor’s condensed consolidated balance sheets.

Although the convertible preferred stock is 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 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 has not adjusted 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.

As part of the Merger, each share of Old AEON common stock issued with respect to the Old AEON convertible preferred stock was converted into approximately 2.328 shares of common stock and the right to receive a pro-rata portion of the contingent consideration.

Fair Value of Financial Instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed balance sheet, primarily due to its short-term nature, other than the derivative warrant liability.

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”.

Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the condensed statements of operations.

Derivative assets and liabilities are classified in the condensed balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the condensed balance sheet date.

The Company has determined the warrants are a derivative instrument.

Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Fair value measurements are based on a three-tiered valuation hierarchy, which is classified and disclosed by the Company in one of the three categories as follows:

Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets;

quoted prices in markets that are not active;

or other inputs that are observable, either directly or indirectly, or can be corroborated by observable market data for substantially the full term of the asset or liability;

Level 3 — Prices or valuation techniques that require unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company determines whether a contract is, or contains, a lease at inception.

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term using the Company’s incremental borrowing rate applicable to the underlying asset unless the implicit rate is readily determinable.

The Company determines the lease term as the noncancellable period of the lease, and may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Leases with a term of 12 months or less are not recognized on the balance sheets.

Research and Development Expenses

Research and development costs are expensed as incurred.

Research and development expenses consist primarily of costs associated with clinical studies including clinical trial design, clinical site reimbursement, data management, travel expenses and the cost of products used for clinical trials and internal and external costs associated with the Company’s regulatory compliance and

quality assurance functions, including the costs of outside consultants and contractors that assist in the process of submitting and maintaining regulatory filings, and overhead costs.

Additionally, research and development expenses include employee compensation, including stock-based compensation, supplies, consulting, prototyping, testing, materials, travel expenses and an allocation of facility overhead expenses.

Costs incurred in obtaining technology licenses are charged to acquired in-process research and development (“IPR&D”) if the technology licensed has not reached technological feasibility and has no alternative future use.

The acquired IPR&D recorded at the Closing was recorded “on the line” in the Successor’s opening accumulated deficit.

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.

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, 2022 (Predecessor) and September 30, 2023 (Successor).

Stock-Based Compensation

The Company recognizes compensation expense for all share-based awards.

The Company accounts for stock-based compensation as measured at grant date, based on the fair value of the award.

The Company measures the fair value of awards granted using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including the estimated fair value of common stock, the expected volatility of the Company’s common stock, expected risk-free interest rate, and the option’s expected life.

The Company also evaluates the impact of modifications made to the original terms of equity awards when they occur.

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.

Noncontrolling Interest (Predecessor)

ABP Sub Inc., the Predecessor’s wholly owned subsidiary, granted stock options to certain employees and nonemployee consultants of ABP Sub Inc.

The Company accounts for stock-based compensation expense recognized by ABP Sub Inc.

as an increase in noncontrolling interest in the accompanying condensed consolidated financial statements.

At the Closing, all such shares were either canceled or converted into AEON shares.

See Note 12 Share-based Compensation for more information.

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.

In addition, deferred tax assets are recorded for the future benefit of utilizing net operating losses and research and development credit carryforwards and are measured using the enacted tax rates and laws that will be in effect when such items are expected to reverse.

A valuation allowance is provided against deferred tax assets unless it is more likely than not that they will be realized.

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) Income Per Share Attributable to Common Stockholders

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.

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 income attributable to common stockholders.

Net loss attributable to common stockholders 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 attributable to common stockholders 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 attributable to common stockholders 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 periods from July 1, 2023 to July 21, 2023 (Predecessor), January 1, 2023 to July 21, 2023 (Predecessor) and for the three and nine months ended September 30, 2022, 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.

For the period from July 22, 2023 to September 30, 2023 (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 nine months ended September 30, 2022 was calculated as follows (in thousands, except share and per share amounts) (unaudited):

Nine months ended September 30, 2022 (Predecessor)

Net loss available to common stockholders

Weighted average common shares outstanding, basic and diluted

Net loss per share attributable to common stockholders, basic and diluted

Basic and diluted net loss per share for the three months ended September 30, 2022 was calculated as follows (in thousands, except share and per share amounts) (unaudited):

Three months ended September 30, 2022 (Predecessor)

Net loss available to common stockholders

Weighted average common shares outstanding, basic and diluted

Net loss per share attributable to common stockholders, basic and diluted

Basic and diluted net (loss) income per share for the periods from January 1, 2023 to July 21, 2023 (Predecessor) (As restated) and July 22, 2023 to September 30, 2023 (Successor) (As restated) were calculated as follows (in thousands, except share and per share amounts) (unaudited):

Period from January 1, 2023 to July 21, 2023 (Predecessor) (As restated)

Net loss available to common stockholders

Weighted average common shares outstanding, basic and diluted

Net loss per share attributable to common stockholders, basic and diluted

Period from July 22, 2023 to September 30, 2023 (Successor) (As restated)

Net income available to common stockholders

Weighted average common shares outstanding, basic and diluted

Net income per share attributable to common stockholders, basic and diluted

Basic and diluted net (loss) income per share for the periods from July 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor) were calculated as follows (in thousands, except share and per share amounts) (unaudited):

Period from July 1, 2023 to July 21, 2023 (Predecessor) (As restated)

Net loss available to common stockholders

Weighted average common shares outstanding, basic and diluted

Net loss per share attributable to common stockholders, basic and diluted

Period from July 22, 2023 to September 30, 2023 (Successor) (As restated)

Net income available to common stockholders

Weighted average common shares outstanding, basic and diluted

Net income per share attributable to common stockholders, 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):

September 30,

Contingent consideration

Contingent founder shares

Convertible preferred stock outstanding

Convertible preferred stock warrants outstanding

Common stock options and restricted stock units

Contingencies

The Company may be, from time to time, a party to various disputes and claims arising from normal business activities.

The Company continually assesses litigation to determine if an unfavorable outcome would lead to a probable loss or reasonably possible loss which could be estimated.

The Company accrues for all contingencies at the earliest date at which the Company deems it probable that a liability has been incurred and the amount of such liability can be reasonably estimated.

If the estimate of a probable loss is a range and no amount within the range is more likely than another, the Company accrues the minimum of the range.

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

In June 2016, the FASB issued an accounting standards update (ASU 2016-13) that amended the guidance on the measurement of credit losses on financial instruments.

The guidance amended the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain financial instruments.

In November 2019, the FASB issued an update to the guidance to defer the effective date for all entities except SEC filers that are not smaller reporting companies to fiscal years beginning after December 15, 2022, including interim periods within those years.

The Predecessor adopted this standard in the first quarter of 2023.

The adoption of this standard did not have an impact on the Company’s condensed consolidated financial statements or related disclosures.

In August 2020, the FASB issued an accounting standards update that simplified the accounting for certain financial instruments with characteristics of liabilities and equity by reducing the number of accounting models for convertible debt and convertible preferred stock instruments.

It also amended the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions.

In addition, the new guidance modified how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation.

The guidance will be effective for the Company for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted for fiscal years beginning after December 15, 2020 but only if the adoption is as of the beginning of a fiscal year.

The Predecessor adopted this standard on January 1, 2023.

The adoption of this standard did not have an impact on the Company’s condensed consolidated financial statements or related disclosures.

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.

Restatement of Previously Issued Financial Statements

The Company has restated its condensed consolidated balance sheet as of September 30, 2023 (Successor), condensed consolidated statements of operations and comprehensive loss for the periods from July 1, 2023 to July 21, 2023 (Predecessor) and January 1, 2023 to July 21, 2023 (Predecessor), condensed consolidated statements of operations and comprehensive loss for the period from July 22, 2023 to September 30, 2023 (Successor), condensed consolidated statements of convertible preferred stock and stockholders’ deficit for the periods from July 1, 2023 to July 21, 2023 (Predecessor), January 1, 2023 to July 21, 2023 (Predecessor), and July 22, 2023 to September 30, 2023 (Successor), condensed consolidated statement of cash flows for the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor), along with certain related notes to such restated condensed consolidated financial statements.

The errors that caused the Company to conclude its financial statements should be restated are the result of incorrectly calculating certain valuation estimates related to the fair value of the contingent consideration liability, convertible notes, stock-based compensation expense, and derivative liabilities.

Additionally, certain errors related to items associated with the Merger resulted in the reclassification of amounts between additional paid-in capital and accumulated deficit in the Successor’s condensed consolidated balance sheet in connection with the preparation of our condensed consolidated financial statements as of and for the quarter ended September 30, 2023.

The nature and impact of these adjustments are described below and detailed in the tables below.

Contingent Consideration Liability – An error was identified in the fair value measurement of the contingent consideration liability related to contingent founders shares due to the use of incorrect assumptions and inputs.

This correction resulted in an increase to the contingent consideration liability of $ 6.7 million as of September 30, 2023, an increase in the change in fair value of contingent consideration liability of $ 6.2 million for the period from July 22, 2023 to September 30, 2023 (Successor), and a decrease to additional paid-in capital of $ 12.9 million as of September 30, 2023.

Refer to reference (a) below.

Derivative liabilities – An error was identified in the fair value measurement of the derivative liability related to the Medytox Top-Off Right due to the use of an incorrect input.

This correction resulted in an increase to the change in fair value of embedded forward purchase agreements and derivative liabilities of $ 6.8 million for the periods from July 1, 2023 to July 21, 2023 (Predecessor) and January 1, 2023 to July 21, 2023 (Predecessor).

Refer to reference (b) below.

Convertible notes – An error was identified in the fair value measurement of the convertible notes during the period from July 1, 2023 to July 21, 2023 (Predecessor).

As the convertible notes were converted to common shares at Closing, the Company’s fair value measurement did not consider the fair value of the shares received using the Company’s market price as of July 21, 2023.

This correction resulted in a decrease to the Change in fair value of convertible notes by $ 15.8 million for the periods from July 1, 2023 to July 21, 2023 (Predecessor) and January 1, 2023 to July 21, 2023 (Predecessor).

Refer to reference (c) below.

Stock-based compensation – An error was identified in the fair value measurement of stock options replaced in the Merger, a portion of which was reflected as purchase consideration in the determination of the asset acquisition purchase price.

Due to the use of an incorrect volatility assumption, the asset acquisition purchase price was understated by $ 2.7 million, and stock-based compensation expense was overstated by $ 0.2 million for the period from July 22, 2023 to September 30, 2023 (Successor).

Additionally, an error was identified in the stock-based compensation recorded for the Founders Shares resulting in an understatement of stock-based compensation reflected “on the line” of $ 34.6 million.

The combination of these errors resulted in an increase to accumulated deficit and an increase to additional paid-in capital as of September 30, 2023 and a decrease in stock-based compensation expense for the period from July 22, 2023 to September 30, 2023 (Successor).

Refer to reference (d) below.

Asset acquisition purchase price – An error was identified in the calculation of the asset acquisition purchase price in connection with the Merger.

Specifically, certain convertible notes of the Predecessor that were settled with common shares at Closing and valued at $ 24.1 million were not included in the calculation of the purchase price.

This combined with the error in stock options replaced in the Merger discussed above resulted in an aggregate increase to purchase price of $ 26.8 million at Closing.

Due to the change in purchase price, the fair value measurement of the IPR&D was increased by $ 24.0 million resulting in a net increase in the loss on consolidation of the VIE of $ 2.8 million reflected “on the line” in the Successor’s opening accumulated deficit.

Refer to reference (e) below.

Other errors – The Company also identified errors related to the Merger that were incorrectly calculated and included in both accumulated deficit and additional paid-in capital.

Refer to reference (f) below.

In addition to the restatement of the condensed consolidated financial statements, the Company has also restated the following notes for the three- and nine-month period ended September 30, 2023, to reflect the error corrections noted above.

• Note 2 – Summary of Significant Accounting Policies – Refer to references (a), (b), (c) and (d) below.

• Note 4 – Forward Merger – Refer to references (d), (e) and (f) below.

• Note 5 – Related Party Transactions (Predecessor) – Refer to reference (c) below.

• Note 6 – Daewoong Convertible Notes (Predecessor) – Refer to reference (c).

• Note 7 – Fair Value Measurements – Refer to references (a), (b), (c) and (f) below.

• Note 12 – Share-based Compensation Stock Incentive Plans – Refer to reference (d) below.

The Company’s updated accounting does not have any effect on the Company’s previously reported or future cash flows or cash.

The following tables summarize the effect of the restatement on each financial statement line item as of the dates, and for the periods, indicated (in thousands):

Condensed Consolidated Balance Sheet as of September 30, 2023 (Successor) (Unaudited)

Contingent consideration liability

Total liabilities

Additional paid-in capital

(a) (d) (e) (f)

Accumulated deficit

(a) (b) (c) (d) (e) (f)

Total AEON Biopharma, Inc.

stockholders’ deficit

Total stockholders' deficit

Condensed Consolidated Statement of Operations and Comprehensive loss for the period from July 22, 2023 to September 30, 2023 (Successor) (Unaudited)

Selling, general and administrative

Research and development

Change in fair value of contingent consideration

Total operating costs and expenses

(Loss) income from operations

(Loss) income before taxes

(Loss) income and comprehensive (loss) income

Basic and diluted net (loss) income per share

Condensed Consolidated Statement of Operations and Comprehensive loss for the period from July 1, 2023 to July 21, 2023 (Predecessor) (Unaudited)

Change in fair value of convertible notes

Change in fair value of embedded forward purchase agreements and derivative liabilities

Total other (loss) income, net

(Loss) income before taxes

(Loss) income and comprehensive (loss) income

Basic and diluted net (loss) income per share

Condensed Consolidated Statement of Operations and Comprehensive loss for the period from January 1, 2023 to July 21, 2023 (Predecessor) (Unaudited)

Change in fair value of convertible notes

Change in fair value of embedded forward purchase agreements and derivative liabilities

Total other (loss) income, net

(Loss) income before taxes

(Loss) income and comprehensive (loss) income

Basic and diluted net (loss) income per share

Condensed Consolidated Statement of Convertible Preferred Stock and Stockholders' Deficit for the period from July 1, 2023 to July 21, 2023 (Predecessor) (Unaudited)

Balance as of July 21, 2023 (Predecessor)

Condensed Consolidated Statement of Convertible Preferred Stock and Stockholders' Deficit for the period from January 1, 2023 to July 21, 2023 (Predecessor) (Unaudited)

Balance as of July 21, 2023 (Predecessor)

Condensed Consolidated Statement of Convertible Preferred Stock and Stockholders' Deficit for the period from July 22, 2023 to September 30, 2023 (Successor) (Unaudited)

Balance as of July 22, 2023 (Successor)

Stock-based compensation expense

Balance as of September 30, 2023 (Successor)

Forward Merger

On December 12, 2022, Old AEON and Priveterra entered into a Business Combination Agreement.

On July 3, 2023, Priveterra held the special meeting of stockholders, at which the Priveterra stockholders considered and adopted, among other matters, a

proposal to approve the transactions contemplated by the Business Combination Agreement, including the Merger.

On July 21, 2023, the parties consummated the Merger.

In connection with the Closing, Priveterra changed its name from Priveterra Acquisition Corp.

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.

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.

In addition, each share of Priveterra Class B common stock (“Founder Shares”), par value $ 0.0001 per share, issued and outstanding immediately prior to the Effective Time converted into one share of common stock totaling 6,900,000 common shares (of which 3,450,000 Founder Shares are subject to certain vesting and forfeiture conditions).

In connection with the Merger, on January 6, 2023, Priveterra and Old AEON entered into separate subscription agreements for convertible notes with each of Alphaeon 1 LLC (“A1”) and Daewoong Pharmaceuticals Co., Ltd.

(“Daewoong”) (collectively, the “Original Committed Financing Agreements”), pursuant to which A1 and Daewoong agreed to purchase, and Priveterra and Old AEON agreed to sell to each of them, up to $ 15 million and $ 5 million, respectively, aggregate of principal of interim convertible notes or equity.

Further, on June 8, 2023, Old AEON and Priveterra entered into a committed financing agreement with A1 (the “Additional Committed Financing Agreement”), pursuant to which A1 agreed to purchase, and Priveterra and Old AEON agreed to sell to A1, up to an additional $ 20 million aggregate principal of interim convertible notes or equity.

Pursuant to such agreement, Old AEON issued $ 14 million of interim convertible notes to A1 in the first and second quarters of 2023.

The notes were subsequently measured at fair value under a fair value option election, with changes in fair value reported in earnings of the Predecessor (Old AEON).

Conversion of the notes was contingent and automatically convertible on the Merger, and 2,226,182 shares of Priveterra Class A common stock were issued on the Closing Date in settlement of their conversion.

The proceeds from the interim convertible notes were used to fund Old AEON’s operations through the consummation of the Merger.

Additionally, approximately $ 25 million was received on the Closing Date in exchange for an aggregate of 3,571,429 shares of Priveterra Class A common stock at $ 7.00 per share that were issued under the Original Committed Financing Agreements and Additional Committed Financing Agreements, and reflected “on the line” in the Successor’s opening accumulated deficit.

On April 27, 2023, Priveterra and AEON amended the Business Combination Agreement.

Concurrently with the amendment to the Business Combination Agreement, Priveterra amended the Sponsor Support Agreement to include restriction and forfeiture provisions related to the Founder Shares.

See Note 7 Fair Value Measurements for additional information.

The fair value of the contingent consideration at the Closing was valued to be $ 125.7 million, and is included in the purchase price.

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 12 Stock-Based Compensation for additional information.

Asset Acquisition Method of Accounting

The Merger was accounted for using the asset acquisition method in accordance with U.S.

Under this method of accounting, Priveterra was considered to be the accounting acquirer based on the terms of the Merger.

Upon consummation of the Merger, the cash on hand resulted in the equity at risk being considered insufficient for Old AEON to finance its activities without additional subordinated financial support.

Therefore, Old AEON was considered a Variable Interest Entity (“VIE”) and the primary beneficiary of Old AEON was treated as the accounting acquirer.

Priveterra held a variable interest in Old AEON and owned 100 % of Old AEON’s equity.

Priveterra was considered the primary beneficiary as it has the decision-making rights that gives it the power to direct the most significant activities.

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.

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

Consistent with authoritative guidance on the consolidation of a VIE that is not considered a business, differences in the total purchase price and fair value of assets and liabilities are recorded as a gain or loss to the condensed consolidated statement of operations.

The loss on the consolidation of the VIE is reflected “on the line” in the Successor’s opening accumulated deficit.

Costs incurred in obtaining technology licenses are charged to research and development expense as IPR&D if the technology licensed has not reached technological feasibility and has no alternative future use.

The IPR&D recorded at the Closing of $ 348.0 million is reflected “on the line” in the Successor’s opening accumulated deficit.

To estimate the value of the acquired IPR&D, the Company used a Multi-Period Excess Earnings Method under the Income Approach.

The determination of the fair value requires management to make significant estimates including, but not limited to, the discount rate used, the total addressable market for each potential drug, market penetration assumptions, and the estimated timing of commercialization of the drugs.

Changes in these assumptions could have a significant impact on the fair value of the IPR&D.

The significant assumptions used in determining IPR&D was the discount rate of 25 %, implied internal rate of return of 24.8 % and long-term growth rate of 4 %.

The following is a summary of the purchase price calculation (unaudited, in thousands except share and per share data) .

Number of shares issued as consideration in the Merger

Shares issued for interim convertible notes related to Committed Financing

Total number of shares of common stock of the combined company

Multiplied by the Priveterra share price, as of the Closing

Fair value of contingent consideration

Replacement of share-based payment awards

Assumed liabilities

Total purchase price

The allocation of the purchase price was as follows (unaudited, in thousands).

Net working capital (excluding cash)

Other assets and liabilities

Acquired in-process research and development

Net assets acquired

Loss on consolidation of VIE

Total purchase price

In connection with the Merger, the transactions that occurred concurrently with the closing date of the Merger were reflected “on the line”.

“On the line” describes those transactions triggered by the consummation of the Merger that are not recognized in the consolidated financial statements of the Predecessor nor the Successor as they are not directly attributable to either period but instead were contingent on the Merger.

The opening cash balance in the Successor’s condensed consolidated statement of cash flow of $31.2 million consists of cash from Priveterra of $ 29.2 million and Old AEON $ 2.0 million.

The number of shares of common stock issued and amounts recorded on the line within stockholders’ deficit are reflected below to arrive at the opening consolidated balance sheet of the Successor.

Common shares

Common stock amount

Subscription Receivable

Accumulated Deficit

Priveterra closing equity as of July 21, 2023

Shares issued as Consideration in the Merger

Merger Consideration - Shares issued for Interim Convertible Notes related to Committed Financing

Stock-Compensation for Class B Founder Shares

Forward Purchase Agreements

Issuance of Make-Whole derivative

Shares issued in New Money PIPE Subscription Agreements

Shares issued for Committed Financing

Contingent Founder Shares

Acquired IPR&D and Loss on Consolidation of VIE

Other Miscellaneous

The Sponsor, in connection with Priveterra’s IPO, purchased 6,900,000 shares of Class B common stock (the “Founder Shares”) for $ 25,000 (approximately $ 0.004 per share).

These shares had no value until Priveterra effected the Merger.

Upon the Merger, the Founder Shares automatically converted to shares of common stock.

This conversion was solely contingent upon the completion of the Merger, a performance condition, and did not include any future service requirements.

As such, the grant date fair value of the 6,900,000 shares was expensed in the amount of $ 69.0 million and is presented “on the line.” Pursuant to the terms of the Sponsor Support Agreement, as amended, effective at the Closing, 50 % of the Founder Shares (i.e., 3,450,000 Founder Shares) (the “Contingent Founder Shares”) were unvested and subject to the restrictions and forfeiture provisions set forth in this Sponsor Support Agreement.

As such, the fair value at Closing of the remaining 3,450,000 shares with vesting conditions in the amount of $ 31.4 million was reclassified from additional paid-in capital to contingent consideration liability on the accompanying consolidated balance sheet.

Related Party Transactions (Predecessor)

2019 Debt Financings

In June 2019, the Predecessor entered into a senior unsecured note purchase agreement (the “Original 2019 Note Purchase Agreement”), with Dental Innovations, pursuant to which the Predecessor issued Dental Innovations a promissory note (the “Original 2019 Note”) with a principal amount of $ 5.0 million.

Pursuant to the terms of the Original 2019 Note, the Predecessor was required to repay a total of $ 8.75 million, representing all principal and interest owed, upon the earliest to occur of (i) June 19, 2022, (ii) Dental Innovations’ demand for repayment following the Predecessor’s completion of an initial public offering and (iii) the Predecessor’s election to repay the Original 2019 Note in full.

Under the Original 2019 Note Purchase Agreement, Dental Innovations committed to purchase from the Predecessor an additional promissory note with a principal amount of $ 5.0 million, subject to the Predecessor issuing and selling an additional promissory note with a principal amount of $ 5.0 million to a lender not affiliated with Dental Innovations.

Any such additional promissory notes were to have the same payment terms as the Original 2019 Notes.

In December 2019, the Predecessor entered into an amendment to the Original 2019 Note Purchase Agreement that provided for the exchange of the Original 2019 Note for a convertible promissory note with a principal amount of $ 5.0 million.

In addition, Dental Innovations was no longer committed to purchase from the Predecessor an additional promissory note with a principal amount of $ 5.0 million subject to the Predecessor issuing and selling an additional promissory note with a principal amount of $ 5.0 million to a lender not affiliated with Dental Innovations.

In December 2019, the Predecessor issued and sold five additional convertible promissory notes, each with a principal amount of $ 1.0 million , including one to SCH and one to a member of the Predecessor’s board of directors (all such convertible promissory notes, the “2019 Convertible Notes”).

The Predecessor’s payment and performance under the 2019 Convertible Notes were guaranteed by ABP Sub Inc., the Predecessor’s wholly owned subsidiary prior to the Merger.

Pursuant to the terms of the 2019 Convertible Notes, the Predecessor was required to repay 175 % of the principal amount to the holders on the third anniversary of the issuance of the 2019 Convertible Notes.

In the event of an underwritten public offering of the Predecessor’s common stock, the 2019 Convertible Notes would have automatically converted into a number of shares of the Predecessor’s common stock equal to 175 % of the principal amount of the 2019 Convertible Notes, divided by the per share price at which shares were offered to the public in such offering.

Due to certain embedded features within the 2019 Convertible Notes, the Predecessor elected to account for the 2019 Convertible Notes and all their embedded features at fair value at inception.

Subsequent changes in fair value were recorded as a component of other (loss) income in the Predecessor’s condensed consolidated statements of operations and comprehensive loss or as a component of other comprehensive income (loss) for changes to instrument-specific credit risk.

As a result of electing the fair value option, direct costs and fees related to the 2019 Convertible Notes were expensed as incurred.

In January 2020, in connection with the distribution of the units of A1 to the Predecessor’s stockholders, each of the holders of the Predecessor’s 2019 Convertible Notes were granted contingent warrants by A1 to purchase shares of Evolus, Inc.

(“Evolus”) from A1.

The contingent warrants were exercisable at the option of the holders only prior to the Predecessor’s first underwritten public offering of common stock under the Securities Act of 1933, as amended (the “Securities Act”), or upon an event of default under the 2019 Convertible Notes.

The 2019 Convertible Notes were concurrently amended to provide the noteholders the option, prior to the notes’ conversion, to cancel a portion of the indebtedness represented by such noteholder’s 2019 Convertible Note and receive a number of shares of Evolus from A1 having a market value equal to the value of such cancelled indebtedness, in lieu of automatic conversion of all of the noteholder’s 2019 Convertible Note into shares of the Predecessor’s common stock.

The amount of cancelled indebtedness that could be so applied in exercise of the contingent warrant was capped as the ratio that the value of Evolus shares held by A1 bore to the combined value of (i) the Evolus shares held by A1 and (ii) the Predecessor immediately prior to consummation of the Predecessor’s first underwritten public offering of common stock under the Securities Act.

In September 2020, in connection with the distribution of the units of Alphaeon Credit Holdco LLC (“AC HoldCo”) and Zelegent HoldCo LLC (“Z HoldCo”) to the Predecessor’s stockholders, each of the holders of the Predecessor’s 2019 Convertible Notes were granted contingent warrants by AC HoldCo and Z HoldCo to purchase shares of Alphaeon Credit, Inc.

(“Alphaeon Credit”) and Zelegent from AC HoldCo and Z HoldCo.

The contingent warrants were exercisable at the option of the holders only prior to the Predecessor’s first underwritten public offering of common stock under the Securities Act, or upon an event of default under the 2019 Convertible Notes.

The 2019 Convertible Notes were concurrently amended to provide the noteholders the option, prior to the notes’ conversion, to cancel a portion of the indebtedness represented by such noteholder’s 2019 Convertible Note and receive a number of shares of Alphaeon Credit and/or Zelegent from AC HoldCo and Z HoldCo having a market value equal to the value of such cancelled indebtedness, in lieu of automatic conversion of all of the applicable noteholder’s 2019 Convertible Note into shares of the Predecessor’s common stock.

The amount of cancelled indebtedness that can be so applied in exercise of the contingent warrant was capped as the ratio of aggregate indebtedness held by the convertible note holder as a proportion of the value of Alphaeon Credit or Zelegent to the value of the Predecessor.

Additionally, on July 22, 2022, the 2019 debt was amended.

The Dental Innovations note’s maturity date was extended from June 19, 2022 to December 29, 2023.

The original note had a principal of $ 5.0 million.

Upon the original maturity date, the total due was 175 % of principal, which equals $ 8.7 million (which such amount included an additional amount of $ 3.7 million).

Interest was increased from 0.0 % to 15.79 % on the total payable of $ 8.7 million from the original maturity date of June 19, 2022 to the new maturity date of December 29, 2023.

On July 22, 2022, the maturity dates for four of the $ 1.0 million convertible promissory notes were extended from November 1, 2022, December 12, 2022, December 12, 2022 and December 18, 2022, respectively, to December 29, 2023.

Each of the four notes had a principal of $ 1.0 million .

Upon the original maturity date, the total due on each of the four notes was 175 % of principal , which equals $ 1.7 million (which such amount included an additional amount of $ 0.7 million ).

At the original maturity dates, the principal sum of $ 1.0 million was paid back to each of the note holders.

The remaining $ 0.7 million was to be due at the extended maturity date of December 29, 2023.

The interest rate was increased from 0.0 % to 10.0 % interest on the remaining $ 0.7 million from the original maturity date to the new maturity date.

The 2019 SCH Note’s maturity date was extended from December 18, 2022 to December 29, 2023.

The original Note had a principal of $ 1.0 million.

Upon the original maturity date, the total due was 175 % of principal, which equals $ 1.7 million.

The interest rate was increased from 0.0 % to 15.79 % on the total of $ 1.7 million from the original maturity date to the new maturity date.

In April 2023, the contingent warrants were amended to include the merger between AEON and Old AEON as a qualifying listing under the warrant agreement, which stated that the holders of the contingent warrants would exercise the warrants, and that the holders would receive 85 % of the shares the holders would have been entitled to receive via the previous warrant agreement.

The contingent warrants were exercised into Evolus shares held by A1 and Alphaeon Credit at the same time the convertible notes were converted to shares of the Company’s stock.

The Company determined that the contingent warrants amendment modified the settlement provision in the 2019 Convertible Notes.

The Company determined that the amendment should be accounted for as a debt extinguishment.

Since the noteholders were both shareholders of Old AEON, Evolus and Alphaeon Credit, the debt extinguishment was accounted for as a capital transaction on the April 2023 modification date.

As such, due to the warrant modification, the Predecessor recognized a $ 17.0 million reduction to the underlying fair value of the convertible notes and a corresponding increase of $ 17.0 million to additional paid in capital during the period from January 1, 2023 to July 21, 2023 (Predecessor), of which $ 5.2 million was attributable to 2019 Debt Financing contingent warrants.

During the periods from July 1, 2023 to July 21, 2023 (Predecessor) and January 1, 2023 to July 21, 2023 (Predecessor), and the three and nine months ended September 30, 2022, the Predecessor recognized $ 0.9 million, $ 1.6 million, $ 0.5 million and $ 0.6 million, respectively, 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.

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 4 Forward Merger).

SCH Convertible Note

The Predecessor issued a convertible promissory note to SCH (the “SCH Convertible Note”).

Prior to the Merger, the Predecessor’s payment and performance under the SCH Convertible Note were guaranteed by ABP Sub Inc.

Pursuant to the terms of the SCH Convertible Note, the Predecessor was required to repay 175 % of the principal amount to SCH on the third anniversary of its issuance.

In the event of an underwritten public offering of the Predecessor’s common stock, the SCH Convertible Note would have automatically converted into a number of shares of the Predecessor’s common stock equal to 175 % of the principal amount of the SCH Convertible Note, divided by the per share price at which shares were offered to the public in such offering.

Due to certain embedded features within the SCH Convertible Note, the Predecessor elected to account for the SCH Convertible Note and the embedded features at fair value at inception.

As a result of electing the fair value option, any direct costs and fees related to the SCH Convertible Note were expensed as incurred.

Additionally, the 2020 Strathspey Crown note’s maturity date was extended from January 2, 2023 to December 29, 2023.

The original note had a principal of $ 17.5 million.

Upon the original maturity date, the total due was $ 30.6 million.

The interest rate was increased from 0.0 % to 15.79 % on the total of $ 30.6 million from the original maturity date to the new maturity date.

During the periods from July 1, 2023 to July 21, 2023 (Predecessor) and January 1, 2023 to July 21, 2023 (Predecessor), and the three and nine months ended September 30, 2022, the Predecessor recognized $( 2.1 ) million, $( 4.2 ) million, $( 1.3 ) million and $ 0.4 million, respectively, of (expense) income related to the (increase) decrease 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.

The Company determined that the contingent warrants amendment modified the settlement provision in the 2019 Convertible Notes.

The Company determined that the amendment should be accounted for as a debt extinguishment.

Since Evolus and Alphaeon Credit are related parties of AEON, the debt extinguishment was accounted for as a capital transaction on the April 2023 modification date.

As such, due to the warrant modification, the Predecessor recognized a $ 17.0 million reduction to the underlying fair value of the convertible notes and a corresponding increase of $ 17.0 million to additional paid in capital during the period from January 1, 2023 to July 21, 2023 (Predecessor), of which $ 11.8 million was attributable to SCH contingent warrants.

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 4 Forward Merger).

A1 Convertible Notes

In December 2021, the Predecessor entered into an agreement with A1 (the “A1 Purchase Agreement”), pursuant to which the Predecessor could issue subordinated convertible promissory notes to A1 with an aggregate principal amount of up to $ 25.0 million.

On December 8 and 15, 2021, the Predecessor issued two convertible notes (collectively, the “2021 A1 Convertible Notes”), each with a principal amount of $ 5.0 million, and totaling $ 10.0 million, that matured on the third anniversary of their issuance.

The A1 Convertible Notes were unsecured and subordinated to the Predecessor’s other convertible notes.

The 2021 A1 Convertible Notes bore interest, compounded daily, at the lesser of 10 % per annum or the maximum rate permissible by law.

Interest was paid in-kind by adding the accrued amount thereof to the principal amount on a monthly basis on the last day of each calendar month for so long as any principal amount was outstanding (such paid in-kind interest, in the aggregate at any time, the “PIK Principal”).

Immediately prior to an initial public offering, all of the then outstanding principal amount and accrued and unpaid interest under the 2021 A1 Convertible Notes was to automatically convert into shares of the Predecessor’s common stock.

The number of shares of common stock issuable upon conversion of the 2021 A1 Convertible Notes would have been equal to (i) the outstanding loan amount (including the PIK Interest) divided by (ii) the product of (a) the price per share of such common stock issued to the public in the initial public offering multiplied by (b) the applicable discount rate.

The discount rate was to be determined for each note based on the number of days elapsed between the date the applicable note was executed and the date on which a conversion event was formally announced and was to be equal to (x) 10 % if between zero and 90 days, (y) 15 % if between 91 and 180 days, or (z) 20 % if greater than 180 days.

Due to certain embedded features within the 2021 A1 Convertible Notes, the Predecessor elected to account for the 2021 A1 Convertible Notes and the embedded features at fair value at inception.

Subsequent changes in fair value were recorded as a component of other (loss) income in the accompanying Predecessor’s condensed consolidated statements of operations and comprehensive loss or as a component of other comprehensive income (loss) for changes to instrument-specific credit risk.

During the periods from July 1, 2023 to July 21, 2023 (Predecessor) and January 1, 2023 to July 21, 2023 (Predecessor), and the three and nine months ended September 30, 2022, the Predecessor recognized $( 1.8 ) million, $( 3.0 ) million, $ 0 million and $ 1.6 million, respectively, of (expense) income related to the (increase) decrease in the fair value of the 2021 A1 Convertible Notes.

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

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

During the year ended December 31, 2022, the Predecessor issued five additional tranches of subordinated convertible promissory notes to A1 on February 18, 2022, March 9, 2022, April 14, 2022, June 3, 2022 and July 1, 2022 (collectively, the “2022 A1 Convertible Notes”), the first four with a principal amount of $ 3.0 million each and the fifth issued July 1, 2022, for a principal amount of $ 2.5 million and totaling $ 14.5 million.

The terms of the 2022 A1 Convertible Notes were similar to those of the 2021 A1 Convertible Notes.

During the periods from July 1, 2023 to July 21, 2023 (Predecessor) and January 1, 2023 to July 21, 2023 (Predecessor), and the three and nine months ended September 30, 2022, the Predecessor recognized $( 2.5 ) million, $( 4.2 ) million, $ 0.5 million and $ 2.3 million, respectively, of (expense) income related to the (increase) decrease in the fair value of the 2022 A1 Convertible Notes.

As of December 31, 2022, the principal balance was $ 14.5 million, with an estimated fair value of $ 12.2 million.

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

Additionally, on March 30, 2022, the Predecessor amended the 2021 A1 Convertible Notes and the convertible notes issued on February 18, 2022 and March 9, 2022 to remove the discount rate associated with the automatic conversion of any outstanding convertible notes into shares of common stock in connection with an initial public offering.

On March 6, 2023, the Predecessor entered into an agreement with A1, pursuant to which the Predecessor issued subordinated convertible promissory notes to A1 with an aggregate principal amount of $ 6.0 million (“March 2023 A1 Convertible Notes”) that matured on the earlier of (x) the date of the consummation of the Merger and (y) December 29, 2023.

The March 2023 A1 Convertible Notes bore interest at 15.79 %, based on simple interest daily, unless issued at least five days prior to maturity date.

The March 2023 A1 Convertible Notes had similar terms to the 2021 A1 Convertible Notes and 2022 A1 Convertible Notes and were unsecured and

subordinated to the Predecessor’s other convertible notes.

During the periods from July 1, 2023 to July 21, 2023 (Predecessor) and January 1, 2023 to July 21, 2023 (Predecessor), the Predecessor recognized $ 10.2 million and $ 10.1 million, respectively, of loss related to the increase in the fair value of the March 2023 A1 Convertible Notes.

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 4 Forward Merger).

Daewoong Convertible Notes (Predecessor)

In August 2020, the Predecessor entered into a Convertible Promissory Note Purchase Agreement with Daewoong (the “Daewoong Purchase Agreement”), pursuant to which the Predecessor issued Daewoong two subordinated convertible promissory notes (collectively, the “2020 Daewoong Convertible Notes”) with an aggregate principal amount of $ 25.0 million.

The 2020 Daewoong Convertible Notes had similar terms, of which one was issued on August 27, 2020 with a principal amount of $ 10.0 million and the other was issued on September 18, 2020 with a principal amount of $ 15.0 million.

The 2020 Daewoong Convertible Notes were unsecured and subordinated to the Predecessor’s 2019 Convertible Notes.

The Predecessor’s payment and performance under the 2020 Daewoong Convertible Notes was guaranteed by ABP Sub Inc., the Predecessor’s wholly owned subsidiary prior to the Merger.

The 2020 Daewoong Convertible Notes bore interest daily at 3 % per annum with semiannual compounding.

Interest is paid in-kind by adding the accrued amount thereof to the principal amount on a semi-annual basis on June 30th and December 31st of each calendar year for so long as any principal amount remained outstanding (such paid in-kind interest, in the aggregate at any time, the “PIK Principal”).

The 2020 Daewoong Convertible Notes had a maturity date of September 18, 2025.

Pursuant to the 2020 Daewoong Convertible Notes’ terms, Daewoong could have elected to convert all of the then outstanding principal amount and all accrued and unpaid interest into the Predecessor’s common stock at any time following the date that was 12 months after September 18, 2020, provided, that such election must have been made at the same time with respect to all notes issued to Daewoong.

The number of shares issuable upon any conversion would have been equal to (i) the outstanding principal amount (excluding PIK Principal) divided by $ 25.0 million and (ii) multiplied by 9.99 % of the aggregate of all of the shares of the Predecessor’s common stock then outstanding, the Predecessor’s common stock issuable upon conversion or exercise of all of the outstanding convertible or exercisable securities, all outstanding vested or unvested options or warrants to purchase the Predecessor’s capital stock, but excluding all out-of-the-money options, and all shares of common stock issuable upon conversion of any convertible debt (whether or not such debt would have been convertible at such time).

Immediately prior to an initial public offering (“IPO”), all of the then outstanding principal amount and accrued and unpaid interest under the 2020 Daewoong Convertible Notes would have automatically converted into shares of the Predecessor’s common stock.

The number of shares of common stock issuable upon conversion of the 2020 Daewoong Convertible Notes was equal to (i) the outstanding principal amount (excluding PIK Principal) divided by $ 25.0 million and (ii) multiplied by the greater of (A) 9.99 % of the pre-IPO shares of the Predecessor, and (B) that number of shares having an aggregate value of $ 20.0 million immediately prior to the IPO based upon a price per share of such common stock issued to the public in the IPO;

provided, however, that in no event was Daewoong’s ownership to exceed 15 % of the pre-IPO shares of the Predecessor after taking into account conversion of the 2020 Daewoong Convertible Notes.

In the event, and only in the event, that shares of the Predecessor were sold in the IPO whereby the pre-money valuation of the Predecessor was $ 200.0 million or greater, within five business days of the conversion of the 2020 Daewoong Convertible Notes, the Predecessor would have been required pay to Daewoong the PIK Principal plus all accrued and unpaid interest either in cash or by the issuance of additional shares of common stock at the price per share in the IPO, which payment method would have been be at the Predecessor’s sole election.

In May 2021, the Daewoong Purchase Agreement was amended to provide for the issuance of an additional subordinated convertible promissory note by the Predecessor to Daewoong at an initial principal amount of $ 5.0 million.

The subordinated convertible promissory note was issued with terms similar to the two subordinated convertible promissory notes issued in 2020 and had a maturity date of May 12, 2026 (all such convertible promissory notes, the “Daewoong Convertible Notes”).

Pursuant to the terms of the amended Daewoong Purchase Agreement, Daewoong could have elected to convert all of the then outstanding principal amount and all accrued and unpaid interest into the Predecessor’s common stock at any time following the date that was 12 months after September 18, 2020, provided, that such election must have been made at the same time with respect to all notes issued to Daewoong.

The number of shares of common stock issuable upon conversion would have been equal to (i) the outstanding principal amount (excluding PIK Principal) divided by $ 30.0 million and (ii) multiplied by 11.99 % of the aggregate of all of the shares of the Predecessor’s common stock then outstanding, the Predecessor’s common stock issuable upon conversion or

exercise of all of the outstanding convertible or exercisable securities, all outstanding vested or unvested options or warrants to purchase the Predecessor’s capital stock, but excluding all out-of-the-money options, and all shares of common stock issuable upon conversion of any convertible debt (whether or not such debt would have been convertible at such time).

In addition, immediately prior to an initial public offering, all of the then outstanding principal amount and accrued and unpaid interest under the convertible notes would have automatically converted into shares of the Predecessor’s common stock.

The number of shares of common stock issuable upon conversion of the convertible notes was equal to (i) the outstanding principal amount (excluding PIK Principal) divided by $ 30.0 million and (ii) multiplied by the greater of (A) 11.99 % of the pre-IPO shares of the Predecessor, and (B) that number of shares having an aggregate value of $ 24.0 million immediately prior to the IPO based upon a price per share of such common stock issued to the public in the IPO;

provided, however, that in no event was Daewoong’s ownership to exceed 18 % of the pre-IPO shares of the Predecessor after taking into account conversion of the Daewoong Convertible Notes.

Due to certain embedded features within the Daewoong Convertible Notes, the Predecessor elected to account for the Daewoong Convertible Notes, including the paid-in-kind principal and interest, and the embedded features at fair value at inception.

As a result of electing the fair value option, any direct costs and fees related to the Daewoong Convertible Notes were expensed as incurred.

On July 29, 2022, the Predecessor entered into a Convertible Promissory Note Purchase Agreement (the “Agreement”) between the Predecessor and Daewoong Co., LTD.

and received $ 30 million.

The related note had a stated interest rate of 15.79 % per annum.

Such note was scheduled to mature on December 29, 2023 and had similar conversion terms to the Daewoong Convertible Notes.

Such note could have been prepaid, in whole, without premium or penalty at any time prior to the maturity date.

During the periods from July 1, 2023 to July 21, 2023 (Predecessor) and January 1, 2023 to July 21, 2023 (Predecessor), and the three and nine months ended September 30, 2022, the Predecessor recognized $ 4.1 million, $ 3.7 million, $ 0.7 million and $ 11.5 million, respectively, 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.

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

Fair Value Measurements

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date.

GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

These tiers consist of:

● Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;

● Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active;

● Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The Company accounts for income taxes under FASB ASC 740, “Income Taxes” (“ASC 740”).

ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the condensed financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards.

ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.

The deferred taxes were de minimums as of September 30, 2021 and December 31, 2020.

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in the Company’s condensed financial statements and prescribes a recognition threshold and measurement process for financial statements recognition and measurement of a tax position

taken or expected to be taken in a tax return.

For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.

ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.

There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2021 and December 31, 2020.

The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

The Company has identified the United States as its only significant tax jurisdiction.

The Company may be subject to potential examination by federal and state taxing authorities in the areas of income taxes.

These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws.

The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

Risks and Uncertainties

Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these condensed financial statements.

The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Recent Accounting Pronouncements

In August 2020, the FASB issued Accounting Standards Update (“ASU”) No.

2020-06, Debt --Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging --Contracts in Entity’ Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’ Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP.

The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas.

The Company adopted ASU 2020-06 on January 1, 2021.

Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.

The Company’s management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements.

Note 3 — Initial Public Offering

On February 11, 2021, the Company sold 27,600,000 Units, at a purchase price of $ 10.00 per Unit, which includes the full exercise by the underwriters of their option to purchase an additional 3,600,000 Units at $ 10.00 per Unit.

Each Unit was sold at $10.00 and consisted of one share of Class A common stock, and one -third warrant to purchase one share of Class A common stock (“Public Warrant”).

Each whole Public Warrant entitles the holder thereof to purchase one share of common stock at a price of $ 11.50 per share, subject to adjustment.

Each warrant will become exercisable on the later of 30 days after the completion of the initial Business Combination or 12 months after the closing of the Company’s IPO on February 11, 2021 and will expire five years after the completion of the initial Business Combination, or earlier upon redemption or liquidation.

(see Note 7).

The Company paid underwriting fees at the closing of the IPO of $ 5,520,000 .

As of February 11, 2021 an additional fee of $ 9,660,000 (see Note 6) was deferred and will become payable upon the Company’s completion of an initial Business Combination.

The deferred portion of the fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completes its initial Business Combination.

Warrants — Each whole warrant entitles the holder to purchase one Class A common stock at a price of $ 11.50 per share, subject to adjustment as discussed herein.

In addition, if (x) the Company issue additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $ 9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good

faith by the Company’s board of directors and, in the case of any such issuance to the initial stockholders or their affiliates, without taking into account any founder shares held by the initial stockholders or such affiliates, as applicable, prior to such issuance), (the “Newly Issued Price”) (y) the aggregate gross proceeds from such issuances represent more than 60 % of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A common stock during the 20 trading day period starting on the trading day after the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $ 9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115 % of the higher of the Market Value and the Newly Issued Price, and the $ 18.00 per share redemption trigger price described under “— Redemption of warrants” will be adjusted (to the nearest cent) to be equal to 180 % of the higher of the Market Value and the Newly Issued Price.

The warrants will become exercisable on the later of 12 months from the closing of the IPO or 30 days after the completion of its initial Business Combination, and will expire five years after the completion of the Company’s initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

The Company has agreed that as soon as practicable, but in no event later than fifteen ( 15 ) business days after the closing of the initial Business Combination, it will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A common stock issuable upon exercise of the warrants.

The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration or redemption of the warrants in accordance with the provisions of the warrant agreement.

If a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effective by the sixtieth ( 60 th) business day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.

Notwithstanding the above, if the Company’s Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elect, it will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.

Once the warrants become exercisable, the Company may call the warrants for redemption for cash:

The Company measures fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The carrying value of cash, 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 September 30, 2023.

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

Convertible Notes at Fair Value (Predecessor)

Due to certain embedded features within the convertible notes, the Predecessor 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 periods from July 1, 2023 to July 21, 2023 (Predecessor) and January 1, 2023 to July 21, 2023 (Predecessor), and the three and nine months ended September 30, 2022, the Predecessor recognized $( 13.2 ) million, $( 19.4 ) million, $( 0.7 ) million and $ 29.3 million, respectively, of (expense) income related to the (increase) decrease in the fair value of the convertible notes.

As of December 31, 2022, the principal amount outstanding under the convertible notes was $ 111 million, with an estimated fair value of $ 131.3 million.

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

See Note 5 Related Party Transactions (Predecessor) and Note 6 Daewoong Convertible Notes (Predecessor) for more information on the convertible notes.

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 initial public offering, settlement, equity financing, 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 periods from July 1, 2023 to July 21, 2023 (Predecessor) and January 1, 2023 to July 21, 2023 (Predecessor), the Predecessor utilized discount rates ranging from 15 % to 40 % and 15 % to 45 %, respectively, reflecting changes in the 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.

Preferred Stock Warrant Liability (Predecessor)

In 2016, in connection with an earlier debt issuance that has been subsequently settled, the Predecessor issued to one of its investors, Longitude Venture Partners II, L.P.

(“Longitude”), warrants to purchase 342,011 shares of the Predecessor’s Series B convertible preferred stock at an exercise price of $ 7.3097 per share.

The Predecessor accounted for the warrants as a liability, which were initially recorded at their fair value of $ 0.8 million on the date of issuance and are subject to remeasurement at each subsequent balance sheet date.

Any change in fair value of the warrants as a result of the remeasurement was recognized as a component of other (loss) income, net in the accompanying Predecessor’s condensed consolidated statements of operations and comprehensive loss.

The fair value of the warrant liability is determined based on Level 3 inputs using the Black-Scholes option-pricing model, which includes expected volatility, risk-free interest rate, expected life and expected dividend yield.

The warrant liability was not material as of December 31, 2022 (Predecessor) and there were no material changes in fair value for the periods from July 1, 2023 to July 21, 2023 (Predecessor) and January 1, 2023 to July 21, 2023 (Predecessor), and the three and nine months ended September 30, 2022 (Predecessor).

The preferred stock warrants expired prior to the Closing.

Forward Purchase Agreements (Successor)

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.

As described below in Note 13 Subsequent Events, the Forward Purchase Agreements were terminated on March 18, 2024.

Pursuant to the terms of the Forward Purchase Agreements, the Sellers intended, but were not obligated, to purchase up to 7,500,000 shares of Priveterra Class A Common Stock in the aggregate concurrently with the Closing pursuant to each Seller’s respective FPA Funding Amount PIPE Subscription Agreement.

No Seller would be required to purchase an amount of shares of Priveterra Class A Common Stock that would result in that Seller owning more than 9.9 % of the total shares of Priveterra Class A Common Stock outstanding immediately after giving effect to such purchase, unless such Seller, at its sole discretion, waived such 9.9 % ownership limitation.

The Number of Shares subject to a Forward Purchase Agreement was subject to reduction following a termination of the Forward Purchase Agreements with respect to such shares as described under “Optional Early Termination” (“OET”) in the respective Forward Purchase Agreements.

Each Forward Purchase Agreement provided that a Seller would be paid directly the Prepayment Amount which was equal to an aggregate of $ 66.7 million based on the product of (i) 6,275,000 shares of Priveterra Class A Common Stock (the “Additional Shares”) and (ii) the redemption price per share of $ 10.63 .

On July 21, 2023, the Company was obligated to pay each Seller separately the Prepayment Amount required under its respective Forward Purchase Agreement, except that since the Prepayment Amount payable to a Seller was to be paid from the purchase of the Additional Shares by such Seller pursuant to the terms of its respective FPA Funding Amount PIPE Subscription Agreement, such amount was netted against such proceeds, with such Seller being able to reduce the purchase price for the Additional Shares by the Prepayment Amount.

For the avoidance of doubt, any Additional Shares purchased by a Seller were to be included in the Number of Shares for its respective Forward Purchase Agreement for all purposes, including for determining the Prepayment Amount.

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 in Note 13 Subsequent Events, 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 sheets.

The $ 6 million difference between the subscription receivables and the present value of the subscription receivables at Closing was recorded as a loss “on the line” in the Successor’s opening accumulated deficit (see Note 4 Forward Merger).

Prior to the termination of the Forward Purchase Agreements as described below in Note 13 Subsequent Events, the redemption price per share in the Forward Purchase Agreements was subject to a reset price (the "Reset Price").

The Reset Price was initially the redemption price per share of $ 10.63 per share.

Beginning 90 days after the Closing, the Reset Price became subject to monthly resets, to be the lowest of (a) the then-current Reset Price, (b) $ 10.63 and (c) the 30-day volume-weighted average price of the Company’s Common Stock immediately preceding such monthly reset.

The monthly resets of the Reset Price were subject to a floor of $ 7.00 per share (the “Reset Price Floor”);

however, if during the term of the Forward Purchase Agreements, the Company were to sell or issue any shares of common stock or securities convertible or exercisable for shares of common stock at an effective price of less than the Reset Price (a “Dilutive Offering”), then the Reset Price would have immediately reset to the effective price of such offering and the Reset Price Floor would be eliminated.

Additionally, in the event of a Dilutive Offering, the maximum number of shares available under the Forward Purchase Agreements could have been increased if the Dilutive Offering occurred at a price below $ 10.00 per shares.

The maximum number of shares would have been reset to equal 7,500,000 divided by a number equal to the offering price in the Dilutive Offering divided by $ 10.00 .

The Company did not have access to the Prepayment Amount immediately following the Closing and, depending on the manner of settlement for the transactions covered by the Forward Purchase Agreements, may have had limited or no access to the Prepayment Amount during the terms of the Forward Purchase Agreements, particularly if the Company’s common stock continues to trade below the prevailing Reset Price.

Further, prior to the termination of the Forward Purchase Agreements in March 2024, the Company would have been required to make cash payments to the counterparties in respect of settlement amounts under the Forward Purchase Agreements, such as in the case of a failure to maintain the listing of the Company’s common stock on a national securities exchange.

From time to time and on any date following the Merger (any such date, an “OET Date”), any Seller had the option, in its absolute discretion, to terminate its Forward Purchase Agreement in whole or in part by providing written notice to the Company (the “OET Notice”), no later than the next Payment Date following the OET Date (which would have specified the quantity by which the Number of Shares was to be reduced (such quantity, the “Terminated Shares”)).

The effect of an OET Notice would have been 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, the Company would have been entitled to an amount from the Seller, and the Seller would have been obligated to pay to the Company an amount, equal to the product of (x) the number of Terminated Shares and (y) the Reset Price in respect of such OET Date.

Pursuant to the terms of the Forward Purchase Agreements, the “Valuation Date” would have been the earlier to occur of (a) the date that is two years after the Closing Date pursuant to the Business Combination Agreement;

(b) the date specified by Seller in a written notice to be delivered to AEON at such Seller’s discretion (which Valuation Date would not be earlier than the day such notice is effective) after the occurrence of any of (w) a VWAP Trigger Event, (x) a Delisting Event, or (y) a Registration Failure (defined terms in each of clauses (b)(w) through (b)(y), as described in further detail below) and (c) 90 days after delivery by AEON of a written notice in the event that for any 20 trading days during a 30 consecutive trading day-period that occurred at least 6 months after the Closing Date, the VWAP Price was less than the current Reset Price Floor of $ 7.00 per share;

provided, however, that the Reset Price would have been reduced immediately to any lower price at which the Company would have sold, issued or granted any shares or securities convertible or exchangeable into shares (other than, among other things, grants or issuances under the Company’s equity compensation plans, any securities issued in connection with the Merger or any securities issued in connection with the FPA Funding Amount PIPE Subscription Agreements), subject to certain exceptions, in which case the Reset Price Floor would be eliminated.

On the Cash Settlement Payment Date, which would have been the tenth local business day following the last day of the valuation period commencing on the Valuation Date, a Seller was obligated to pay the Company a cash amount equal to (1) (A) a maximum of up to 7,500,000 shares of common stock (the “Number of Shares”) as of the Valuation Date less the number of Unregistered Shares, multiplied by (B) the volume-weighted daily VWAP Price over the Valuation Period less (2) if the Settlement Amount Adjustment was less than the cash amount to be paid, the Settlement Amount Adjustment.

The Settlement Amount Adjustment was equal to (1) the Number of Shares as of the Valuation Date multiplied by (2) $ 2.00 per share, and the Settlement Amount Adjustment will be automatically netted from the Settlement Amount.

Based on the applicable guidance in ASC 480, ASC 815, ASC 505 and SAB 4E, the Company has determined that each of its Forward Purchase Agreements entered in connection with the Merger was a freestanding hybrid financial instrument comprising a

subscription receivable and embedded features, which have been bifurcated and accounted for separately as derivative instruments.

The Company recorded the derivatives as liabilities and measured them at fair value with the initial value of the derivative of $ 32.3 million and the loss on issuance of $ 6.0 million recorded as a loss “on the line” in the Successor’s opening accumulated deficit (see Note 4 Forward Merger).

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

For the period from July 22, 2023 to September 30, 2023 (Successor), the Company recorded a loss related to the change in fair value of derivatives of $ 15.5 million.

The Company utilized the Monte-Carlo valuation model to value the forward purchase agreements at Closing date and as of September 30, 2023.

The following table summarizes the significant inputs as of the valuation dates:

September 30,

Expected volatility

Risk-free interest rate

Expected life (in years)

Expected dividend yield

New Money PIPE Subscription Agreements and Letter Agreements

On June 29, 2023, Priveterra entered into separate subscription agreements (the “New Money PIPE Subscription Agreements”) with each of ACM ASOF VIII Secondary-C LP (“ACM Investor”), the Polar Affiliate and certain other investors (collectively, the “New Money PIPE Investors”).

Pursuant to the New Money PIPE Subscription Agreements, the New Money PIPE Investors subscribed for and purchased, and Priveterra issued and sold to the New Money PIPE Investors, on the Closing Date, an aggregate of 1,001,000 shares of Priveterra Class A common stock for a purchase price of $ 7.00 per share, for aggregate gross proceeds of $ 7.0 million (the “New Money PIPE Investment”).

Certain affiliates of ACM Investor purchased 236,236 shares from third parties through a broker in the open market prior to the Closing, for which all redemption rights were irrevocably waived.

Such redeemed shares were freely tradeable shares prior to the Closing, and the proceeds to the Company provided by such redeemed shares were netted against the $ 3.5 million that ACM Investor was otherwise obligated to pay the Company under its New Money PIPE Subscription Agreement.

Accordingly, Priveterra received $ 3.5 million from Polar and $ 0.9 million from ACM Investor (net of redeemed shares and fees) in connection with the New Money PIPE Subscription Agreements for the issuance of 1,001,000 shares.

The Company recorded a loss of $ 6.4 million on the line in the Successor’s opening accumulated deficit related to issuance of common shares underlying the New Money PIPE Subscription Agreement equal to the market price of the stock on the Closing Date less the purchase price of $ 7.00 per share.

On June 29, 2023, the Sponsor entered into separate letter agreements (each, “Letter Agreement” and collectively, the “Letter Agreements”) with each of ACM Investor and Polar.

Pursuant to the Letter Agreements, in the event that the average price per share at which shares of common stock purchased pursuant to the New Money PIPE Subscription Agreements that are transferred during the period ending on the earliest of (A) June 21, 2025, (B) the date on which the applicable Forward Purchase Agreement terminates and (C) the date on which all such shares are sold (such price, the “Transfer VWAP”, and such period, the “Measurement Period”) is less than $ 7.00 per share, then (i) ACM Investor and Polar shall be entitled to receive from Sponsor a number of additional shares of common stock that have been registered for resale by us under an effective resale registration statement pursuant to the Securities Act, under which ACM Investor and Polar may sell or transfer such shares of common stock in an amount that is equal to the lesser of (A) a number of shares of common stock equal to the Make-Whole Amount divided by the VWAP (measured as of the date the additional shares are transferred to ACM Investor or Polar, as applicable) and (B) an aggregate of 400,000 shares of common stock (the “Additional Founder Shares”) and (ii) Sponsor shall promptly (but in any event within fifteen (15) business days) after the Measurement Date, transfer the Additional Founder Shares to ACM Investor or Polar, as applicable.

“Make-Whole Amount” means an amount equal to the product of (A) $ 7.00 minus the Transfer VWAP multiplied by (B) the number of Transferred PIPE Shares.

“VWAP” means the per share volume weighted average price of the common stock in respect of the five consecutive trading days ending on the trading day immediately prior to the Measurement Date.

“Measurement Date” means the last day of the Measurement Period.

Based on the terms of the Letter Agreements, and applicable guidance in ASC 815 and SAB 5.T, “Accounting for Expenses or Liabilities Paid by Principal Stockholder(s)”, the Company has determined that the make-whole provision in the Letter Agreements is a freestanding financial instrument and a derivative instrument.

The Company has recorded the derivative liability and measured it at

fair value with the initial value of the derivative ($ 0.4 million) recorded as a loss “on the line” in the Successor’s opening accumulated deficit (see Note 4 Forward Merger).

Subsequent changes in fair value of the make-whole provision are recorded in the Successor’s condensed consolidated statements of operations and comprehensive loss.

As of September 30, 2023 (Successor), the make-whole provision derivative liability was $ 0.7 million, included in the embedded forward purchase agreements and derivative liabilities on the Successor’s condensed consolidated balance sheets.

For the period from July 22, 2023 to September 30, 2023 (Successor), the Company recorded a loss related to the change in fair value of the make-whole provision derivative liability of $ 0.3 million.

Committed Financing

Pursuant to such agreement, the Company issued $ 14 million of interim convertible notes to A1 in the first and second quarters of 2023.

The notes were subsequently measured at fair value under a fair value option election, with changes in fair value reported in earnings of the Predecessor (Old AEON).

The proceeds from the interim convertible notes were used to fund Old AEON’s operations through the consummation of the Merger.

Additionally, approximately $ 25 million was received on the Closing Date in exchange for an aggregate of 3,571,429 shares of Priveterra Class A common stock at $ 7.00 per share that were issued under a committed financing agreement between Priveterra, Old AEON, and each of two investors, A1 and Daewoong.

The Company recorded a loss of $ 13.7 million on the line in the Successor’s opening accumulated deficit related to issuance of common shares underlying the Committed Financing Agreements equal to the market price of the stock on the Closing Date less the purchase price of $ 7.00 per share.

Contingent Consideration and Contingent Founder Shares (Successor)

As part of the Merger, certain Founder Shares and Participating Stockholders shares (together, “Contingent Consideration Shares”), as further discussed below, contain certain contingent provisions.

On April 27, 2023, Priveterra and Old AEON amended the Business Combination Agreement.

Concurrently with the amendment to the Business Combination Agreement, Priveterra amended the Sponsor Support Agreement to include restriction and forfeiture provisions related to the Founder Shares.

In addition following the Closing, certain AEON Stockholders will be issued up to 16,000,000 additional shares of common stock.

Pursuant to the terms of the Sponsor Support Agreement, as amended, effective immediately after the Closing, 50 % of the Founder Shares (i.e., 3,450,000 Founder Shares) (the “Contingent Founder Shares”) were unvested and subject to the restrictions and forfeiture provisions set forth in this Sponsor Support Agreement.

The remaining 50 % of the Founder Shares and 100 % of the Private Placement Warrants are not subject to such restrictions and forfeiture provisions.

The Contingent Founder Shares shall vest, and shall become free of the provisions as follows:

● 1,000,000 of the Contingent Founder Shares (the “Migraine Phase 3 Contingent Founder Shares”) shall vest upon the achievement of the conditions for the issuance of the Migraine Phase 3 Contingent Consideration Shares on or prior to the Migraine Phase 3 Outside Date;

● 1,000,000 of the Contingent Founder Shares (the “CD BLA Contingent Founder Shares”) shall vest upon the achievement of the conditions for the issuance of the CD BLA Contingent Consideration Shares on or prior to the CD BLA Outside Date;

● 1,450,000 of the Contingent Founder Shares (the “Episodic/Chronic Migraine Contingent Founder Shares”) shall vest upon the earlier of (x) the achievement of the conditions for the issuance of the Episodic Migraine Contingent Consideration Shares on or before the Episodic Migraine Outside Date and (y) the achievement of the

conditions for the issuance of the Chronic Migraine Contingent Consideration Shares on or before the Chronic Migraine Outside Date.

The Sponsor has agreed not to vote the Contingent Founder Shares during any period of time that such Contingent Founder Shares are subject to vesting.

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”);

● 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”);

● 4,000,000 shares of common stock, in the aggregate, if, on or before June 30, 2029 (as it may be extended, the “Episodic Migraine Outside Date”), the Company shall have received from the FDA acceptance for review of the BLA submitted by the Company for the treatment of episodic migraine (such 4,000,000 shares of common stock, the “Episodic Migraine Contingent Consideration Shares”);

provided that in the event the satisfaction of the conditions for the issuance of the Episodic Migraine Contingent Consideration Shares occurs prior to the satisfaction of the conditions for the issuance of the Chronic Migraine Contingent Consideration Shares, then the number of Episodic Migraine Contingent Consideration Shares shall be increased to 11,000,000 shares of common stock;

● 7,000,000 shares of common stock, in the aggregate, if, on or before June 30, 2028 (as it may be extended, the “Chronic Migraine Outside Date”, and together with the Migraine Phase 3 Outside Date, the CD BLA Outside Date and the Episodic Migraine Outside Date, the “Outside Dates”), the Company shall have received from the FDA acceptance for review of the BLA submitted by AEON for the treatment of chronic migraine (such 7,000,000 shares of common stock, the “Chronic Migraine Contingent Consideration Shares”);

provided that in the event that the number of Episodic Migraine Contingent Consideration Shares is increased to 11,000,000 , then the number of Chronic Migraine Contingent Consideration Shares shall be decreased to zero and no Contingent Consideration Shares will be issued in connection with the satisfaction of the conditions to the issuance of the Chronic Migraine Contingent Consideration Shares.

● In the event that the Company licenses any of its products (except in connection with migraine or cervical dystonia indications) to a third-party licensor for distribution in the U.S.

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 accounts for the Contingent Consideration Shares as either equity-classified or liability-classified instruments based on an assessment of the Contingent Consideration Shares specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”).

Based on the appropriate guidance, the Company determined that the Contingent Consideration Shares would be 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, while the founder shares not subject to restrictions and forfeiture provisions were recorded to equity.

As of September 30, 2023 (Successor), the contingent consideration liability was $ 81.2 million.

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.

For the successor period July 22, 2023 to September 30, 2023 (Successor), the Company recognized $ 75.9 million in income related to the change in fair value of contingent consideration on the Successor’s condensed consolidated statements of operations and comprehensive loss.

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.

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 through September 30, 2023 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 $ 2.2 million as of September 30, 2023 (Successor).

For the Successor period from July 22, 2023 to September 30, 2023, the income from the change in fair value of warrants was $ 1.6 million.

Public warrants

Each whole public warrant entitles the holder to purchase one share of the Company’s common stock at a price of $ 11.50 per share.

The public warrants became exercisable 30 days after the completion of the Merger, and will expire at 5:00 p.m., New York City time, on July 21, 2028, the five-year anniversary of the completion of the Merger, or earlier upon redemption or liquidation.

Warrant holders may, until such time as there is an effective registration statement and during any period when the Company has failed to maintain an effective registration statement covering the shares of the Company’s common stock issuable upon exercise of the warrants, exercise warrants on a “cashless” basis” in accordance with Section 3(a)(9) of the Securities Act or another exception.

When exercised on a cashless basis, the number of shares received per warrant is capped at 0.361 .

The Company may call the public warrants for redemption for cash:

● in whole and not in part;

1 unchanged sentence

● upon not less than 30 days ’ prior written notice of redemption to each warrant holder (the “ 30-day redemption period ” );

● if, and only if, the closing price of the common stock equals or exceeds $ 18.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like and for certain issuances of Class A common stock and equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination as described elsewhere in the IPO) for any 20 trading days within a 30 -trading day period ending three business days before the Company sends to the notice of redemption to the warrant holders;

● if the last sale price of our Class A common stock is less than $ 18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like), the Private Placement Warrants must also be concurrently called for redemption on the same terms (except as described above with respect to a holder’s ability to cashless exercise its warrants) as the outstanding public warrants, as described above.

Note 4 — Private Placement

Simultaneously with the closing of the IPO, the Sponsor purchased an aggregate of 5,213,333 Private Placement Warrants, at a price of $ 1.50 per Private Placement Warrant, for an aggregate purchase price of $ 7,820,000 .

Each Private Placement Warrant was identical to the Public Warrants sold in the IPO, except that the Private Placement Warrants, so long as they are held by the Sponsor or its permitted transferees, (i) will not be redeemable by the Company, (ii) may not (including the Class A common stock issuable upon exercise of these warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of the Company’s initial Business Combination, and (iii) may be exercised by the

holders on a cashless basis.

The Company’s Sponsor has agreed to (i) waive its redemption rights with respect to its founder shares and public shares in connection with the completion of the Company’s initial Business Combination, (ii) waive its redemption rights with respect to its founder shares and public shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation (A) to modify the substance or timing of the Company’s obligation to redeem 100 % of its public shares if the Company does not complete its initial Business Combination within 18 months (or up to 24 months if the Company extends the period of time) from the closing of the Company’s IPO on February 11, 2021 or (B) with respect to any other provision relating to stockholders’ rights or pre-initial Business Combination activity and (iii) waive its rights to liquidating distributions from the Trust Account with respect to its founder shares if the Company fails to complete its initial Business Combination within 18 months (or up to 24 months if the Company extends the period of time) from the closing of the Company’s IPO on February 11, 2021.

In addition, the Company’s Sponsor has agreed to vote any founder shares held by them and any public shares purchased during or after the Company’s IPO (including in open market and privately negotiated transactions) in favor of the Company’s initial Business Combination.

Note 5 — Related Party Transactions

Founder Shares

On December 17, 2020, the Sponsor paid $ 25,000 , or approximately $ 0.004 per share, to cover certain offering costs in consideration for 5,750,000 Class B common stock, par value $ 0.0001 (the “Founder Shares).

On February 8, 2021, as part of an upsizing of the IPO, the Company effected a stock split in which each issued share of Class B Common Stock that was outstanding was converted into one and two tenths shares of Class B common stock, resulting in an aggregate of 6,900,000 shares of Class B common stock issued and outstanding .

All shares and associated amounts have been retroactively restated to reflect the surrender of these shares.

The founder shares included an aggregate of up to 900,000 shares subject to forfeiture if the over-allotment option was not exercised by the underwriters in full.

As a result of the underwriters’ election to fully exercise of their over-allotment option, the 900,000 shares were no longer subject to forfeiture.

The initial stockholders have agreed not to transfer, assign or sell any of their Founder Shares and any Class A common stock issuable upon conversion thereof until the earlier to occur of:

(A) one year after the completion of the initial Business Combination and (B) the date following the completion of the initial Business Combination on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of its stockholders having the right to exchange their common stock for cash, securities or other property (the “lock-up”).

Notwithstanding the foregoing, if the closing price of the Company’s Class A common stock equals or exceeds $ 12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 -trading day period commencing at least 180 days after the initial Business Combination, the founder shares will be released from the lockup.

Promissory Note – Related Party

On December 17, 2020, the Sponsor agreed to loan the Company up to $ 75,000 to be used for a portion of the expenses of the IPO.

On January 13, 2021, the Sponsor agreed to loan the Company up to an additional $ 50,000 to be used for a portion of the expenses of the IPO.

These loans are non-interest bearing, unsecured and were due at the earlier of March 31, 2021 or the closing of the IPO.

The loan was repaid upon the closing of the IPO out of the offering proceeds.

As of September 30, 2021 and December 31, 2020, the Company had $ 0 and $ 38,588 borrowings under the promissory note.

Additionally, this note is no longer available to the Company.

Working Capital Loans

The Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”).

If the Company completes the initial Business Combination, the Company would repay the Working Capital Loans.

In the event that the initial Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans.

Up to $ 1,500,000 of such Working Capital Loans may be convertible into Private Placement Warrants at a price of $ 1.50 per warrant at the option of the lender (the “Working Capital Warrants”).

Such warrants would be identical to the Private Placement Warrants.

In June 2021 the Company had $ 100,000 of Working Capital Loans outstanding which were converted into 66,667 Working Capital Warrants.

As of September 30, 2021 and December 31, 2020, the Company had no borrowings under the Working Capital Loans.

Administrative Service Fee

The Company has agreed, commencing on February 8, 2021, to pay up to $ 25,000 per month for administrative and other services, of which $ 10,000 per month will be paid to the Sponsor for office space and administrative services provided to members of the management team and up to $ 15,000 will be used to compensate the Company’s Chief Operating Officer and Chief Financial Officer and Chief Legal Officer and Secretary for a portion of their time spent on the Company’s affairs.

Upon completion of the Company’s Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees.

For the nine months ended September 30, 2021 $ 191,964 was recognized in the condensed statements of operations and has been paid.

Due to Related Party

The Sponsor or an affiliate of the sponsor occasionally incurs expenses on behalf of the Company.

The liability is non-interest bearing, due on demand, and as of September 30, 2021, an aggregate of $ 3,495 remains payable.

Note 6 — Commitments and Contingencies

Underwriters Agreement

The underwriters are entitled to a deferred fee of $ 0.35 per Unit, or $ 9,660,000 in the aggregate.

The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.

Registration Rights

The holders of the founder shares, Private Placement Warrants, and warrants that may be issued upon conversion of Working Capital Loans will have registration rights to require the Company to register a sale of any of its securities held by them pursuant to a registration rights agreement to be signed in connection with the Company’s IPO.

These holders will be entitled to make up to three demands, excluding short form registration demands, that the Company registers such securities for sale under the Securities Act.

In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by the Company.

Note 7 — Stockholders’ Deficit

Preferred Stock — The Company is authorized to issue a total of 1,000,000 preferred shares at par value of $ 0.0001 each.

At September 30, 2021 and December 31, 2020, there were no shares of preferred stock issued or outstanding.

Class A Common Stock —The Company is authorized to issue 280,000,000 shares of Class A common stock with a par value of $ 0.0001 per share.

As of September 30, 2021 and December 31, 2020, there were no shares of Class A common stock issued or outstanding (excluding 27,600,000 and 0 shares subject to redemption), respectively.

Class B Common Stock — The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $ 0.0001 per share.

Holders are entitled to one vote for each share of Class B common stock.

At September 30, 2021 and December 31, 2020, there were 6,900,000 shares of Class B common stock issued and outstanding.

Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders except as required by law.

Unless specified in the Company’s amended and restated certificate of incorporation, or as required by applicable provisions of the Delaware state law or applicable stock exchange rules, the affirmative vote of a majority of the Company’s shares of common stock that are voted is required to approve any such matter voted on by its stockholders.

The Class B common stock will automatically convert into Class A common stock concurrently with or immediately following the consummation of the initial Business Combination on a one -for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein.

In the case that additional shares of Class A common stock or equity-linked securities are issued or deemed issued in connection with the initial Business Combination, the number of Class A common stock issuable upon conversion of all founder shares will equal, in the aggregate, on an as-converted basis,

20 % of the total number of Class A common stock outstanding after such conversion (after giving effect to any redemptions of Class A common stock by public stockholders), including the total number of Class A common stock issued, or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination, excluding any Class A common stock or equity-linked securities exercisable for or convertible into Class A common stock issued, or to be issued, to any seller in the initial Business Combination and any Private Placement Warrants issued to the Sponsor, officers or directors upon conversion of Working Capital Loans;

provided that such conversion of founder shares will never occur on a less than one-for-one basis.

Note 8 —Recurring Fair Value Measurements

At September 30, 2021, the Company’s warrant liability was valued at $ 8,497,200 .

Under the guidance in ASC 815-40 the Warrants do not meet the criteria for equity treatment.

As such, the Warrants must be recorded on the condensed balance sheet at fair value.

This valuation is subject to re-measurement at each balance sheet date.

With each re-measurement, the warrant valuation will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations.

The Company’s warrant liability for the Private Placement Warrants is based on a valuation model utilizing inputs from observable and unobservable markets with less volume and transaction frequency than active markets.

The fair value of the Private Warrant liability classified within Level 3 of the fair value hierarchy.

The Company’s warrant liability for the Public Warrants is based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

The fair value of the Public Warrant liability is classified within Level 1 of the fair value hierarchy.

Substantially all of the Company’s trust assets on the condensed balance sheet consist of U.

Treasury Securities which are classified as cash equivalents.

Fair values of these investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets.

The following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2021, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

Investments held in Trust Account – U.S.

Treasury Securities

● if, and only if, there is an effective registration statement under the Securities Act of 1933 covering the issuance of the shares of common stock issuable upon exercise of the warrants, and a current prospectus relating thereto, available through the 30-day redemption period;

● if, and only if, the closing price of the Company's common stock equals or exceeds $ 18.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 -trading day period ending three business days before the Company sends to the notice of redemption to the warrant holders.

The Company may also call the public warrants for redemption:

● in whole and not in part;

● at $ 0.10 per warrant upon a minimum of 30 days ’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares to be determined by reference to a table in the Warrant Agreement, based on the redemption date and the “ fair market value ” (as defined in the Warrant Agreement ) of common stock except as otherwise described below;

● if, and only if, the closing price of the Company’s common stock equals or exceeds $ 10.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 -

trading day period ending three business days before the Company sends to the notice of redemption to the warrant holders.

Private placement warrants

Public Warrants

The Company established the initial fair value for the Warrants on February 11, 2021, the date of the consummation of the Company’s IPO.

On September 30, 2021 the fair value was remeasured.

At September 30, 2021, the Company used a modified Black-Scholes model to value the Private Placement Warrants.

The Private Placement Warrants were classified within Level 3 of the fair value hierarchy at the measurement date due to the use of unobservable inputs.

The Company’s Private Placement Warrant liability is based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets.

Significant deviations from these estimates and inputs could result in a material change in fair value.

In April 2021, the Public Warrants began trading in the open market and were reclassified to Level 1.

The key inputs into the modified Black-Scholes model were as follows at September 30, 2021:

Each private placement warrant was identical to the public warrants initially sold by Priveterra in the IPO, except that the private placement warrants, so long as they are held by the Sponsor or its permitted transferees, (i) will not be redeemable by the Company and (ii) may be exercised by the holders on a cashless basis.

Medytox Top-off Right

The Predecessor entered into a settlement agreement with Medytox, Inc.

(“Medytox”) (the “Settlement Agreement”), effective as of June 21, 2021, as amended on May 5, 2022.

Pursuant to the Settlement Agreement, among other things, the Predecessor agreed to enter into a share issuance agreement with Medytox pursuant to which the Predecessor issued 26,680,511 shares of Old AEON common stock, par value $ 0.0001 per share, to Medytox.

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”).

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.

Accordingly, the Company recognized a loss of $ 11.8 million in the Predecessor period, reflecting the change in fair value through the Closing Date.

At the Closing, the derivative liability was derecognized, and the issuance of the Top-off Shares was recognized as purchase consideration in the Successor’s opening additional paid-in capital (see Note 4 Forward Merger).

Summary of Recurring Fair Value Measurements

The following details the Company’s recurring measurements for assets and liabilities at fair value (in thousands, unaudited):

Convertible Notes

Warrant Liabilities

Contingent Consideration

Embedded Forward Purchase Agreement and Make Whole Derivative

Balance, December 31, 2022

Issuance of convertible notes

Change in fair value

Conversion to common shares

Balance, July 21, 2023

Balance, July 22, 2023

Change in fair value

Balance, September 30, 2023

Commitments and Contingencies

Operating Leases

In December 2021, the Predecessor entered into a three-year non-cancellable lease for office space.

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.

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 September 30, 2023 (in thousands) (unaudited):

Minimum lease payments by fiscal year

Total future minimum lease payments

Imputed interest

Present value of lease payments

Current portion (included in other accrued expenses)

Noncurrent operating lease liability

Operating lease right-of-use asset

Remaining lease term in years

Discount rate

The following table summarizes supplemental disclosures of operating cost and cash flow information related to operating leases for the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor), and the nine months ended September 30, 2022 (Predecessor) (in thousands) (Unaudited).

Three Months Ended

Nine Months Ended

September 30,

Risk-free interest rate

Expected term (years)

September 30,

July 1, 2023 to July 21, 2023

July 22, 2023 to September 30, 2023

January 1, 2023 to July 21, 2023

July 22, 2023 to September 30, 2023

Cost of operating leases

Cash paid for operating leases

Daewoong License and Supply Agreement

On December 20, 2019, the Predecessor entered the Daewoong Agreement, pursuant to which Daewoong agreed to manufacture and supply ABP-450 and grant the Company an exclusive license for therapeutic indications to import, distribute, promote, market, develop, offer for sale and otherwise commercialize and exploit ABP-450 in the United States, the European Union, the United Kingdom, Canada, Australia, Russia, the Commonwealth of Independent States and South Africa (collectively the “covered territories”).

Daewoong supplies the Company with ABP-450 at an agreed-upon transfer price, with no milestone or royalty payments and no minimum purchase requirements.

Daewoong is responsible for all costs related to the manufacturing of ABP-450, including costs related to the operation and upkeep of its manufacturing facility, and the Company is responsible for all costs related to obtaining regulatory approval, including clinical expenses, and commercialization of ABP-450.

The Company’s exclusivity is subject to its exercise of commercially reasonable efforts to:

(i) achieve all regulatory approvals necessary for ABP-450 to be marketed in the territory for therapeutic indications and (ii) commercialize ABP-450 in the territory for therapeutic indications.

During the term of the Daewoong Agreement, the Company cannot purchase, sell or distribute any competing products in a covered territory or sell ABP-450 outside a covered territory.

The initial term of the Daewoong Agreement is from December 20, 2019 to the later of (i) the fifth anniversary of approval from the relevant governmental authority necessary to market and sell ABP-450 or (ii) December 20, 2029, and automatically renews for unlimited additional three-year terms, provided the Daewoong Agreement is not earlier terminated.

The Daewoong Agreement will terminate upon written notice by either the Company or Daewoong upon a continuing default that remains uncured within 90 days (or 30 days for a payment default) by the other party, or without notice upon the bankruptcy or insolvency of the Company.

The Company has accrued $ 0.2 million and $ 0.1 million for ABP-450 supplies as of December 31, 2022 (Predecessor) and September 30, 2023 (Successor), respectively.

Legal Proceedings

The Company, from time to time, is involved in various litigation matters or regulatory encounters arising in the ordinary course of business that could result in unasserted or asserted claims or litigation.

Other than as described below, the Company is not subject to any currently pending legal matters or claims that would have a material adverse effect on its accompanying financial position, results of operations or cash flows.

On September 18, 2023, Odeon Capital Group LLC (“Odeon”) filed a lawsuit against the Company in the Supreme Court of the State of New York, alleging that the Company failed to pay Odeon’s deferred underwriting fee of $ 1.25 million.

Odeon claims that it served as the underwriter for Priveterra Acquisition Corp., the special purpose acquisition company with which Old AEON merged with and into in July 2023.

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.

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.

The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made.

The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

See Note 2 for additional information.

The Company’s loss before income taxes was entirely generated from its U.S.

As a result of its continuing losses, the Company had no provision for income taxes in the periods from July 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor) and January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor), and the three and nine months ended September 30, 2022 (Predecessor).

Convertible Preferred Stock (Predecessor)

As of December 31, 2022 (Predecessor), the Predecessor’s certificate of incorporation, as amended and restated, authorized the Predecessor to issue up to 44,666,035 shares of preferred stock at a par value of $ 0.0001 per share.

The Predecessor’s convertible preferred stock was converted and exchanged into shares of the Company’s common stock at the Closing.

The Predecessor had the following convertible preferred stock issued and outstanding at December 31, 2022:

Carrying Value,

Net of Issuance

Shares Issued

and Outstanding

(in thousands)

The holders of the convertible preferred stock had various rights and preferences as follows:

Voting Rights

The holders of each share of convertible preferred stock, prior to the conversion of the preferred stock in connection with the Closing, previously had the right to one vote for each share of common stock into which such preferred stock could be converted, and with respect to such vote, such holder had full voting rights and powers equal to the voting rights and powers of the holders of common stock.

Prior to the conversion of the preferred stock in connection with the Closing, each holder of the convertible preferred stock is entitled to vote, together with holders of common stock, with respect to any question upon which holders of common stock had the right to vote.

Election of Directors

The holders of Series A and Series A-2 convertible preferred stock, voting together as a single class were entitled to elect one director of the Company.

The holders of Series B and Series B-2 convertible preferred stock, voting together as a single class, were entitled to together elect one director of the Company.

The holders of the convertible preferred stock and common stock (voting together as a single class and not as separate series, and with the preferred stock voting on an as-converted basis using then-effective conversion prices) were entitled to elect any remaining directors of the Company.

The holders of shares of Series B, Series B-1 and Series B-2 convertible preferred stock were entitled to non-cumulative dividends, out of any assets legally available therefore, on a pari passu basis and prior and in preference to any declaration or payment of any dividend on the Series A, Series A-1 and Series A-2 convertible preferred stock, or common stock of the Company, at the rate of $ 0.5847768 per calendar year for each share of Series B, Series B -1 and Series B -2 convertible preferred stock, payable when, as and if declared by the Board of Directors.

The holders of shares of Series A, Series A-1 and Series A-2 convertible preferred stock were entitled to non-cumulative dividends, out of any assets legally available therefore, on a pari passu basis and prior and in preference to any declaration or payment of any dividend on the common stock of the Company, at the rate of $ 0.4382 per calendar year for each share of Series A, Series A -1 and Series A -2 preferred stock, payable when, as and if declared by the Board of Directors.

Declared but unpaid dividends with respect to a share of preferred stock shall, upon conversion of such share to common stock, be paid to the extent assets are legally available therefore in cash.

There were no cash dividend declared through the Closing.

In the event of any liquidation event, the holders of Series B-2 convertible preferred stock would be entitled to receive, on a pari passu basis and prior and in preference to any distribution of the proceeds of such liquidation event (“Proceeds”) to the holders of Series A-2 convertible preferred stock, Series B convertible preferred stock, Series B-1 convertible preferred stock, Series A convertible preferred stock, Series A-1 convertible preferred stock and common stock, an amount per share equal to the Series B original issue price of $ 7.3097 per share, plus declared but unpaid dividends on each such share (the “Series B-2 Liquidation Preference”).

Subject to the payments set forth above, in the event of any liquidation event, the holders of Series A-2 convertible preferred stock would be entitled to receive, on a pari passu basis and prior and in preference to any distribution of the Proceeds of such liquidation event to the holders of Series B convertible preferred stock, Series B-1 convertible preferred stock, Series A convertible preferred stock, Series A-1 convertible preferred stock and common stock, an amount per share equal to the Series A original issue price of $ 5.4779 per share, plus declared but unpaid dividends on each such share (the “Series A-2 Liquidation Preference”).

Subject to the payments set forth above, in the event of any liquidation event, the holders of Series B convertible preferred stock and Series B-1 convertible preferred stock would be entitled to receive, on a pari passu basis and prior and in preference to any distribution of the Proceeds of such liquidation event to the holders of Series A convertible preferred stock, Series A-1 convertible preferred stock and common stock, an amount per share equal to the Series B original issue price of $ 7.3097 per share, plus declared but unpaid dividends on each such share (the “Series B Liquidation Preference”).

Subject to the payments set forth above, the holders of Series A convertible preferred stock and Series A-1 convertible preferred stock would be entitled to receive, on a pari passu basis and prior and in preference to any distribution of the Proceeds of such Liquidation Event to the holders of common stock, an amount per share equal to the Series A issue price of $ 5.4779 , plus declared but unpaid dividends on each such share (the “Series A Liquidation Preference”).

Upon the completion of the distributions above, the remaining Proceeds available for distribution to stockholders, if any, would be distributed ratably among the holders of convertible preferred stock and common stock in proportion to the number of shares of common stock that would be held by each such holder if all shares of convertible preferred stock were converted into common stock at the then effective conversion price.

Each share of convertible preferred stock can be converted, at the option of the holder thereof, at any time after the date of issuance of such share into such number of fully paid and non-assessable shares of common stock.

The conversion rate is 1 :1 initially.

Each share of convertible preferred stock would automatically convert into shares of common stock based on the applicable conversion rate at the time in effect upon the earlier of (A) immediately prior to the closing, and conditioned upon such closing, of the sale of the Company’s common stock in an underwritten public offering at a public offering price per share of not less than (w) $ 7.3097 minus the sum of (x) the fair market value of the per unit membership interest of A1, as determined by the Board of Directors of the Company in good faith (the “A-1 Per Unit Price”) plus (y) the fair market value of the per unit membership interest of AC HoldCo, as determined by the Board of Directors of the Company in good faith (the “AC Per Unit Price”) plus (z) the fair market value of the per unit membership interest of Z HoldCo, as determined by the Board of Directors of the Company in good faith (together with the A-1 Per Unit Price and the AC Per Unit Price, the “Aggregate Spin-Out Value”), and yielding net proceeds (after discounts and commissions) to the Company of at least $ 50 million, or (B) on the date specified by affirmative vote at a meeting or by written consent from the holders of at least two-thirds of the convertible preferred stock then outstanding, voting as a single class on an as-converted-to-common stock basis (the “Preferred Supermajority”).

In the event that the Preferred Supermajority enacts a conversion of the Series A Preferred Stock in conjunction with the consummation of an initial public offering of the common stock in which the public offering price per share of the common stock (the “IPO Per Share Price”) is less than 71.4286 % of the then effective per share Series A-2 Liquidation Preference (the “Adjusted Series A-2 Preference Amount”), then the number of shares of common stock issuable with respect to each share of Series A convertible preferred stock, each share of Series A-1 convertible Preferred Stock and each share of Series A-2 convertible preferred stock will be equal to the greater of (A) the quotient obtained by dividing (x) the Adjusted Series A-2 Preference Amount by (y) the IPO Per Share Price, or (B) the quotient obtained by dividing the Series A original issue price of $ 5.4779 per share by the applicable conversion price for such series of the Series A Preferred Stock, each as in effect on the date of effective conversion.

In the event of an automatic conversion in conjunction with the consummation of an initial public offering of the common stock in which the IPO Per Share Price is less than the Series B original issue price of $ 7.3097 per share, then the applicable conversion price for the Series B convertible preferred stock, the Series B-1 convertible preferred stock and the Series B-2 convertible preferred stock for purposes of the approved conversion will be the IPO Per Share Price, rounded to the nearest whole cent with one-half cent rounded up.

The convertible preferred stock was not mandatorily redeemable.

The Company has classified the convertible preferred stock as temporary equity on the accompanying Predecessor’s condensed consolidated balance sheets as these shares could be redeemed upon the occurrence of certain change in control events that are outside of the Company’s control.

Convertible Preferred Stock Warrants

Pursuant to the terms of the Company’s Bridge Note, in 2016 the Company issued Longitude warrants to purchase 342,011 shares of the Company’s Series B convertible preferred stock at an exercise price of $ 7.3097 per share.

The warrants are exercisable, in whole or in part, from the date of issuance and expired on May 31, 2023.

As of December 31, 2022 (Predecessor), the Predecessor’s certificate of incorporation, as amended and restated, authorized the Predecessor to issue up to 207,450,050 shares of common stock at a par value of $ 0.0001 per share.

As of December 31, 2022 (Predecessor), 138,848,177 shares were issued and 138,825,356 shares were outstanding.

The holders of common stock were entitled to receive dividends whenever funds are legally available, when and if declared by the Predecessor’s Board of Directors, subject to the prior rights of the holders of the Predecessor’s convertible preferred stock.

As of December 31, 2022 (Predecessor), no cash dividend had been declared to date.

Each share of common stock was entitled to one vote.

The number of authorized shares of common stock could be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of shares of preferred stock and common stock, voting together as a single class.

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.

In addition, each share of Priveterra Class B common stock (“Founder Shares”), par value $ 0.0001 per share, issued and outstanding immediately prior to the Effective Time converted into one share of common stock (of which 3,450,000 Founder Shares are subject to certain vesting and forfeiture conditions).

As of September 30, 2023 (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 September 30, 2023 (Successor), 37,159,600 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 September 30, 2023 (Successor), no cash dividend has been declared to date.

Each share of common stock is entitled to one vote.

Refer to Note 4 Forward Merger for more information on the number of shares of common stock outstanding immediately following the Merger.

Common Stock Reserved

The table below summarizes the Company’s reserved common stock for further issuance as of September 30, 2023 (Successor) and December 31, 2022 (Predecessor):

September 30,

Conversion of convertible preferred stock

Stock options issued and outstanding

Restricted stock units (unvested)

Shares available for future issuance under the stock incentive plan

Contingent consideration

Convertible preferred stock warrants outstanding

Total common stock reserved

Share-based Compensation Stock Incentive Plans

AEON 2013 Stock Incentive Plan (Predecessor)

In 2013, the Predecessor established its 2013 Stock Incentive Plan (the “2013 Stock Incentive Plan”) as amended from time to time, 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 2013 Stock Incentive Plan provides for stock options to be granted with exercise prices not less than the estimated fair value of the Predecessor’s common stock, and incentive options to be granted to individuals owning more than 10 % of the total combined voting power of all classes of stock of the Predecessor with exercise prices not less than 110 % of the estimated fair value of the Predecessor’s common stock on the date of grant.

Stock options granted generally expire ten years after their original date of grant and generally vest between three years to four years with 25 % vesting on the first anniversary of the date of grant and then monthly vesting after that.

Stock options granted to a 10 % stockholder are exercisable up to five years from the date of grant.

Restricted stock awards granted generally become fully vested between one to three years .

As of December 31, 2022 (Predecessor), the aggregate number of shares available for future grant under the 2013 Stock Incentive Plan was 27,884,000 shares.

Upon the Closing, the 2013 Stock Incentive Plan was terminated and the stock options were cancelled.

The following table summarizes stock option activity under the Predecessor’s 2013 Stock Incentive Plan (unaudited):

Outstanding, January 1, 2022

Options granted

Options forfeited

Outstanding, December 31, 2022

Exercisable, December 31, 2022

Outstanding, January 1, 2023

Options granted

Options forfeited

Options cancelled in connection with Merger

( 9,694,890 )

Outstanding, July 21, 2023

Exercisable, July 21, 2023

As of December 31, 2022 (Predecessor), the weighted average remaining contractual life of options outstanding and options exercisable were 2.5 years.

The aggregate intrinsic value of options outstanding and options exercisable at December 31, 2022 (Predecessor) was $ 0.3 million.

The aggregate intrinsic value was calculated as the difference between the exercise price of the underlying options and the estimated fair value of the Predecessor’s common stock at December 31, 2022 (Predecessor).

All awards were vested prior to 2022.

As such during the periods from July 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor) and January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor), and the three and nine months ended September 30, 2022, the Company did not recognize share-based compensation expense related to stock options granted under the 2013 Stock Incentive Plan.

As of December 31, 2022 and September 30, 2023, there was no unrecognized compensation expense related to non-vested stock options.

2019 Incentive Award Plan

In June 2019, ABP Sub Inc., the Predecessor’s wholly owned subsidiary, established its 2019 Incentive Award Plan (the “2019 Incentive Award Plan”), as amended from time to time, that provides for the granting of incentive and nonqualified stock options, restricted stock units, restricted stock and stock appreciation rights to its employees, members of the Board of Directors and non-employee consultants.

The 2019 Incentive Award Plan has similar grant terms as the Company’s 2013 Stock Incentive Plan.

In connection with the Merger, the Successor assumed the 2019 Incentive Award Plan and all options and RSU awards that were outstanding immediately prior to the Merger were converted into substantially similar awards covering shares of the Successor’s common stock based on a conversion ratio of approximately 77.65 to 1 share.

Additionally, the exercise price for the awards were repriced to $ 10.00 for all options.

The fair value of the replacement awards that were vested, based on the value immediately prior to the Merger, of $ 13.3 million were included as purchase consideration (see Note 4 Forward Merger for additional information).

The remaining value of the replacement awards will be recognized in the successor period as compensation expense over the remaining vesting period, which includes stock-based compensation expense of $ 1.0 million recorded in the successor period for the impact of the stock option repricing.

Prior to the consummation of the Merger, a total of 237,500 shares of ABP Sub Inc.

common stock were available for issuance under the 2019 Incentive Award Plan.

Following the effective date of the 2023 Plan, in the event that an outstanding award expires or is cancelled for any reason, the shares allocable to the unexercised or cancelled portion of such award from the 2019 Incentive Award Plan will be added back to the shares of common stock available for issuance under the 2023 Incentive Award Plan.

At the Closing, ABP had granted options to purchase a total of 45,130 ABP Sub options which converted into options to purchase 3,515,219 shares of the Company’s common stock, and a total of 15,059 RSU awards, which converted into RSU awards covering 1,169,366 shares of the Company’s common stock.

Of such RSU awards, 127,801 RSUs accelerated vesting concurrently with the Merger.

As such, the Company included an additional $ 1.8 million in purchase consideration (see Note 4 Forward Merger for additional information).

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 7 Fair Value Measurements for additional information).

As of September 30, 2023, the 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 period from July 22, 2023 to September 30, 2023 (Successor), the Company has recognized $ 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.

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

Outstanding, January 1, 2022

Options granted

Options forfeited

Outstanding, December 31, 2022

Exercisable, December 31, 2022

Outstanding, January 1, 2023

Options granted

Options forfeited

Outstanding, July 21, 2023

Exercisable, July 21, 2023

Outstanding, July 22, 2023 (converted)

Options granted

Options forfeited

Outstanding, September 30, 2023

Exercisable, September 30, 2023

There were no options granted in the 2019 Incentive Plan during 2023.

The weighted average fair value of options granted during the year ended December 31, 2022 was $ 488.02 .

There were no options granted in 2023.

As of December 31, 2022 and September 30, 2023, the weighted average remaining contractual life of options outstanding and options exercisable was 8.1 years and 7.3 years.

As of December 31, 2022 and September 30, 2023, total unrecognized compensation expense related to nonvested stock options was $ 12.3 million and $ 5.7 million, respectively, which is expected to be recognized over the weighted-average remaining requisite service period of 24 months and 12 months , respectively.

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

Outstanding, July 22, 2023

Outstanding, September 30, 2023

Vested, September 30, 2023

During the periods from July 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor) and January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor), the Company recognized $ 0.1 million, $ 0.4 million, $ 0.5 million, and $ 0.4 million, respectively, of share-based compensation expense related to restricted stock units granted.

As of September 30, 2023, total unrecognized compensation expense related to nonvested restricted stock units was $ 10.5 million, which is expected to be recognized over the weighted-average remaining requisite service period of 33 months .

AEON Biopharma Inc 2023 Incentive Award Plan

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, 2023, 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.

The initial aggregate number of shares of the Company’s common stock available for issuance under the 2023 Plan is equal to (a) 3,839,892 shares of common stock and (b) any shares which, as of the effective date of the 2023 Plan, are subject to an award outstanding under the ABP 2019 Plan (each, a “Prior Plan Award”), and which, on or following the effective date of the 2023 Plan, become available for issuance under the 2023 Plan as provided in the 2023 Plan.

In addition, the number of shares of common stock available for issuance under the 2023 Plan will be annually increased on January 1 of each calendar year beginning in 2024 and ending in 2033 by an amount equal to the lesser of (i) 4 % of the number of fully-diluted number of shares outstanding on the final day of the immediately preceding calendar year or (ii) such other number of shares as is determined by the Board.

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.

Outstanding, July 22, 2023

Options granted

Options forfeited

Outstanding, September 30, 2023

Exercisable, September 30, 2023

The weighted average fair value of options granted in 2023 was $ 3.18 .

The weighted average remaining contractual life of options outstanding and options exercisable was 9.9 years.

During the periods from July 22, 2023 to September 30, 2023 (Successor), the Company recognized $ 0.1 million of share-based compensation expense related to stock options granted.

As of September 30, 2023, total unrecognized compensation expense related to nonvested stock options was $ 1.0 million, which is expected to be recognized over the weighted-average remaining requisite service period of 38 months .

Share-based Compensation Expense and Valuation Information

The Company accounts for the measurement and recognition of compensation expense for all share-based awards based on the estimated fair value of the awards.

The fair value of share-based awards is amortized on a straight-line basis over the requisite service period.

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

During the periods from July 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor) and January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor), and the three and nine months ended September 30, 2022 (Predecessor), the Company recognized $ 0.6 million, $ 1.8 million, $ 2.8 million, $ 1.8 million, $ 1.0 million and $ 3.7 million, respectively, of share-based compensation expense in selling, general and administrative expenses, respectively, and $ 0.1 million, $ 0.4 million, $ 0.4 million, $ 0.4 million, $ 0.1 million and $ 0.6 million, respectively, in research and development expenses in the accompanying condensed consolidated statements of operations and comprehensive loss.

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

Nine Months Ended

September 30,

Expected volatility

Dividend rate

Exercise price

The following table provides a reconciliation of changes in fair value of the beginning and ending balances for our assets and liabilities classified as level 3 for the period ended September 30, 2021.

Fair value at issuance February 11, 2021

Public Warrants reclassified to level 1 (1)

Risk-free interest rate

4.1 % – 4.4 %

Issuance of Private Placement Warrants upon conversion of Working Capital Loans

Change in fair value

1.87 % – 3.92 %

Fair Value at September 30, 2021

(1) Assumes the Public Warrants were reclassified on June 30, 2021.

Note 9 — Subsequent Events

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statement were issued.

Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.

Expected life (in years)

Expected dividend yield

Fair Value of the Underlying Common Stock.

For Predecessor periods, since the Predecessor’s common stock was not traded in a public stock market exchange, the Board of Directors considered numerous factors including new business and economic developments affecting the Predecessor and independent appraisals, when appropriate, to determine the fair value of the Predecessor’s common stock.

Independent appraisal reports were prepared using valuation techniques, such as discounted cash flow analyses, from which a discount factor for lack of marketability was applied.

This determination of the fair value of the common stock was performed on a contemporaneous basis.

The Board of Directors determined the Company’s common stock fair value on an as needed basis.

For Successor periods, the fair value of the stock price is the closing price for the Company’s common stock as reported on the NYSE American.

Expected Life .

The expected life is calculated using the simplified method as the Company does not have sufficient historical information to provide a basis for the estimate.

The simplified method is based on the average of the vesting tranches and the contractual life of each grant.

Expected Volatility .

The expected volatility is estimated based on a study of selected publicly traded peer companies as the Company does not have any trading history for its common stock.

The Company selected the peer group based on similarities in

industry, stage of development, size and financial leverage with the Company’s principal business operations.

For each grant, the Company measured historical volatility over a period equivalent to the expected life.

Risk-free Interest Rate .

The risk-free interest rate is based on the yield available on U.S.

Treasury zero-coupon issues whose term is similar in duration to the expected life of the respective stock option.

Expected Dividend Yield .

The Company has not paid and does not anticipate paying any dividends on its common stock in the foreseeable future.

Accordingly, the Company has estimated the dividend yield to be zero.

Subsequent Events

The Company has further evaluated subsequent events for recognition and remeasurement purposes as of and for the nine months ended September 30, 2023.

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.

Termination of Forward Purchase Agreements

On March 18, 2024, the Company and ACM ARRT J LLC (“ACM”) entered into a termination agreement (the “ACM Termination Agreement”) terminating that certain Forward Purchase Agreement, dated June 29, 2023, by and among the Company and ACM (the “ACM FPA”).

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.

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.

On March 18, 2024, the Company and Polar entered into a termination agreement (the “Polar Termination Agreement”) terminating that certain Forward Purchase Agreement, dated June 29, 2023, by and among the Company and Polar (the “Polar FPA”).

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.

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 expects to record a charge to the consolidated statement of operations of approximately $ 20.3 million during the quarter ended March 31, 2024 to reverse the related subscription receivable and derivative liability on the accompanying consolidated balance sheet.

Convertible Note Subscription and License Agreement Amendment

On March 19, 2024, the Company entered into a subscription agreement with Daewoong (the “Subscription Agreement”) relating to the sale and issuance by the Company of senior secured convertible notes (each, a “Convertible Note” and together, the “Convertible Notes”) in the principal amount of up to $ 15.0 million, which are convertible into shares of the Company’s common stock, subject to certain conditions and limitations set forth in each Convertible Note.

Each Convertible Note will contain customary events of default, will accrue interest at an annual rate of 15.79 % and will have a maturity date that is three years from the funding date, unless earlier repurchased, converted or redeemed in accordance with its terms prior to such date.

The Company will use the net proceeds from each Convertible Note to support the late-stage clinical development of its lead product candidate ABP-450 and for general working capital purposes.

Pursuant to the terms of the Subscription Agreement, on March 24, 2024, the Company issued and sold to Daewoong one Convertible Note in the principal amount of $ 5.0 million.

The Subscription Agreement further provides that the Company will issue and sell to Daewoong a second Convertible Note in the principal amount of $ 10.0 million no later than thirty (30) days following the Company’s compliance with certain conditions set forth in the Subscription Agreement, including the Company’s execution of an amendment to that certain License and Supply Agreement, by and between the Company and Daewoong, dated December 20, 2019, as amended on July 29, 2022, January 8, 2023 and April 24, 2023 (the “License Agreement”).

On March 19, 2024, the Company entered into a Fourth Amendment to the License Agreement (the “License Agreement Amendment”) with Daewoong, which amends the License Agreement.

Pursuant to the terms of the License Agreement Amendment, the License Agreement will terminate if, over any six month period, (a) the Company ceases to commercialize ABP-450 in certain territories specified in the License Agreement and (b) the Company ceases to advance any clinical studies of ABP-450 in such territories.

The License Agreement Amendment also provides that, in the event that the License Agreement is terminated for the foregoing reasons, Daewoong will have the right to purchase all Know-How (as defined in the License Agreement) related to ABP-450 for a price of $ 1.00 (the “Termination Purchase Right”).

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).

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/A

Item 1. Financial Statements