What changed in this filing

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Item 1. Financial Statements

2024-11-13 compared with 2024-08-12 · 214 added, 153 removed, 517 unchanged (42% of the section changed)

3 unchanged sentences

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

September 30,

Current assets:

11 unchanged sentences

Total current liabilities

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

Convertible notes at fair value, including related party amount of $ 15,170 and $ 0 , at September 30, 2024 and December 31, 2023, respectively

Operating lease liability

6 unchanged sentences

Class A common stock, $ 0.0001 par value;

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

500,000,000 shares authorized at September 30, 2024 and December 31, 2023, and 39,587,630 and 37,159,600 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

5 unchanged sentences

AEON BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

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

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating expenses:

1 unchanged sentence

Research and development

Acquired in-process research and development

Change in fair value of contingent consideration

Total operating costs and expenses

Income (loss) from operations

Other income (loss):

(Loss) income from operations

Other (loss) income:

Change in fair value of convertible notes

Change in fair value of warrants

Loss on embedded forward purchase agreements and derivative liabilities, net

Income (loss) on embedded forward purchase agreements and derivative liabilities, net

Other income, net

Total other income (loss), net

Income (loss) before taxes

Net income (loss) and comprehensive income (loss)

Basic and diluted net income (loss) per share

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

Total other loss, net

(Loss) income before taxes

Net (loss) income

Basic net (loss) income per share

Diluted net (loss) income per share

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

Weighted average shares of common stock outstanding used to compute 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

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(in thousands, except share data) (Unaudited)

2 unchanged sentences

Stockholders'

Balance as of April 1, 2024 (Successor)

Issuance of shares related to cashless warrant exercises

Balance as of July 1, 2024 (Successor)

Issuance of shares related to at-the-market offering, net

Issuance of common stock

Stock-based compensation expense

Balance as of June 30, 2024 (Successor)

Balance as of April 1, 2023 (Predecessor)

Balance as of September 30, 2024 (Successor)

Balance as of July 22, 2023 (Successor)

Stock-based compensation expense

Debt extinguishment due to warrant modification

Balance as of June 30, 2023 (Predecessor)

Balance as of September 30, 2023 (Successor)

Balance as of July 1, 2023 (Predecessor)

Stock-based compensation expense

Balance as of July 21, 2023 (Predecessor)

AEON BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

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

Preferred Stock

4 unchanged sentences

Issuance of shares related to cashless warrant exercises

Issuance of shares related to at-the-market offering, net

Issuance of common stock

Stock-based compensation expense

Balance as of June 30, 2024 (Successor)

Balance as of September 30, 2024 (Successor)

Balance as of July 22, 2023 (Successor)

Stock-based compensation expense

Balance as of September 30, 2023 (Successor)

Balance as of January 1, 2023 (Predecessor)

1 unchanged sentence

Debt extinguishment due to warrant modification

Balance as of June 30, 2023 (Predecessor)

Balance as of July 21, 2023 (Predecessor)

See accompanying notes to the consolidated financial statements

2 unchanged sentences

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

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

2 unchanged sentences

Stock-based compensation expense

Write-off of acquired in-process research and development

Change in fair value of convertible notes

Change in fair value of warrants

Loss on embedded forward purchase agreements and derivative liabilities

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

Change in fair value of contingent consideration

5 unchanged sentences

Net cash used in operating activities

Cash flows from investing activities:

Net cash used in investing activities

1 unchanged sentence

Proceeds from issuance of convertible notes

Proceeds from issuance of at-the-market shares

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Net decrease in cash

Cash and cash equivalents at beginning of period

21 unchanged sentences

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

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

As of September 30, 2024, the Company reported cash and cash equivalents of $ 0.5 million and an accumulated deficit of $ 433.7 million.

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

2 unchanged sentences

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

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

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

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

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

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

The Company held an initial meeting with the FDA in the third quarter of 2024 during which it aligned with the FDA on next steps to develop a Botox biosimilar.

The Company anticipates commencing comparative analytic studies in the fourth quarter of 2024 and preparing for a potential Biosimilar Biological Product Development (“BPD”) meeting with the FDA in 2025 to review the results from the studies.

On August 14, 2024, the Company entered into an “at-the-market” sales agreement with Leerink Partners LLC (“Leerink Partners”) relating to an at-the-market offering program (the “ATM”), pursuant to which the Company may offer and sell, from time to time at its sole discretion, shares of common stock, registered pursuant to a shelf registration statement on Form S-3 that the Securities and Exchange Commission (the “SEC”) declared effective on August 21, 2024, having aggregate gross proceeds of up to

$ 50.0 million through Leerink Partners as sales agent.

As of September 30, 2024, the Company issued 65,392 shares under the ATM for net proceeds of $ 50 thousand and approximately $ 49.9 million of common stock remained available to be sold under the ATM.

See Note 8 Common Stock for additional information.

The commencement of studies, preparation for the potential BPD meeting and any further development of ABP-450 would require additional funding in the form of equity financings or debt.

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

Furthermore, the use of

equity as a source of financing would dilute existing shareholders.

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

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

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

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

The accompanying financial statements include Predecessor periods from January 1, 2023 to July 21, 2023 and July 1, 2023 to July 21, 2023, and Successor periods for the period from July 22, 2023 to September 30, 2023, and the three and nine months ended September 30, 2024.

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

Unaudited Interim Financial Information

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

The accompanying interim condensed consolidated balance sheets as of September 30, 2024 (Successor), the condensed consolidated statements of operations and comprehensive (loss) income and stockholders’ deficit for the three and nine months ended September 30, 2024 (Successor) and the periods from January 1, 2023 to July 21, 2023 (Predecessor), July 1, 2023 to July 21, 2023

(Predecessor) and July 22, 2023 to September 30, 2023 (Successor), and the condensed consolidated statements of cash flows for the nine months ended September 30, 2024 (Successor) and the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor) and the related note disclosures are unaudited.

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

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

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

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

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, 2024 (Successor) and its results of operations and comprehensive (loss) income and cash flows for the three and nine months ended September 30, 2024 (Successor) and the periods from January 1, 2023 to July 21, 2023 (Predecessor), July 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor).

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

Use of Estimates

6 unchanged sentences

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

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

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

Risk and Uncertainties

10 unchanged sentences

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

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

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

September 30,

Furniture and fixtures

5 unchanged sentences

Other accrued expenses were as follows (in thousands):

September 30,

Legal expenses

6 unchanged sentences

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

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

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

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

2 unchanged sentences

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

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

Forward Purchase Agreements (Successor)

Based on the applicable guidance in ASC 480, ASC 815, Equity (“ASC 505”) and Staff Accounting Bulletin Topic 4.E, Receivables from Sale of Stock (“SAB 4E”), the Company had 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 has recorded the derivatives as liabilities and measured them at fair value each reporting period.

Based on the applicable guidance in ASC 480, ASC 815, Equity (“ASC 505”) and Staff Accounting Bulletin Topic 4.E, Receivables from Sale of Stock (“SAB 4E”), the Company had 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 were bifurcated and accounted for separately as derivative instruments.

The Company recorded the derivatives as liabilities and measured them at fair value each reporting period.

For more information, see Note 3 Forward Merger .

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

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

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

Warrants (Successor)

2 unchanged sentences

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

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

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

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

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

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 as a liability and measured at their fair value on the date of issuance, and each balance sheet date thereafter until settlement.

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

Convertible Preferred Stock (Predecessor)

17 unchanged sentences

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.

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.

5 unchanged sentences

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 at the Closing was written off to the Successor’s consolidated income statement for the period ended December 31, 2023.

The acquired IPR&D at the Closing was written off to the Successor’s consolidated income statement for the period ended September 30, 2023.

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.

1 unchanged sentence

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

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

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

Stock-Based Compensation

4 unchanged sentences

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

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

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

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

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

2 unchanged sentences

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

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

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

8 unchanged sentences

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

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

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

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

Three months ended June 30, 2023 (Predecessor)

Weighted average common shares outstanding, basic and diluted

Since the Company was in a loss position for the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 1, 2023 to July 21, 2023 (Predecessor), July 22, 2023 to September 30, 2023 (Successor), and the three months ended September 30, 2024, basic net loss per share is the same as diluted net loss per share as the inclusion of all potentially dilutive shares of common stock was anti-dilutive.

For the nine months ended September 30, 2024 (Successor), dilutive options of 1,924,428 and restrict stock units of 848,521 were included in the calculation for diluted net income per share.

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

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

Weighted average shares of common stock outstanding, basic and diluted

Net loss per share, basic and diluted

Six months ended June 30, 2023 (Predecessor)

Weighted average common shares outstanding, basic and diluted

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

Weighted average shares of common stock outstanding, basic and diluted

Net loss per share, basic and diluted

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

Three months ended June 30, 2024 (Successor)

Weighted average common shares outstanding, basic and diluted

Net income per share, basic and diluted

Six months ended June 30, 2024 (Successor)

Weighted average common shares outstanding, basic and diluted

Net income per share, basic and diluted

Basic and diluted net (loss) income per share for the Successor periods from July 22, 2023 to September 30, 2023, and the three and nine months ended September 30, 2024 were calculated as follows (in thousands, except share and per share amounts) (unaudited):

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

Weighted average shares of common stock outstanding, basic and diluted

Net loss per share, basic and diluted

Three months ended September 30, 2024 (Successor)

Weighted average shares of common stock outstanding, basic and diluted

Net loss per share, basic and diluted

Nine months ended September 30, 2024 (Successor)

Weighted average shares of common stock outstanding, basic

Net income per share, basic

Weighted average shares of common stock outstanding, diluted

Net income per share, 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):

Three Months Ended

Nine Months Ended

September 30,

July 1 to July 21

Contingent consideration

Contingent founder shares

Convertible preferred stock outstanding

Common stock options and restricted stock units

15 unchanged sentences

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

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

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

Forward Merger

4 unchanged sentences

to AEON Biopharma, Inc.

At the effective time of the Merger (the “Effective Time”), each outstanding share of Old AEON common stock (on an as-converted basis after taking into effect the conversion of the outstanding warrants of Old AEON exercisable for shares of Old AEON preferred stock, the conversion of the shares of Old AEON preferred stock into Old AEON common stock in accordance with the governing documents of Old AEON as of the Effective Time, the conversion of the outstanding convertible notes of Old AEON into

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

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 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 shares of common stock (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 (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.

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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.

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.

1 unchanged sentence

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 acquired IPR&D of $ 348.0 million at the Closing was written off to the Successor’s consolidated statement of operations for the year ended December 31, 2023.

The acquired IPR&D of $ 348.0 million at the Closing was written off to the Successor’s consolidated statement of operations for the period ended September 30, 2023.

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

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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

Shares of common stock

Common stock amount

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2019 Debt Financings

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

During the periods from July 1, 2023 to July 21, 2023 (Predecessor) and January 1, 2023 to July 21, 2023 (Predecessor), the Predecessor recognized $ 0.9 million and $ 1.6 million, respectively, of expense related to the increase in the fair value of the 2019 Convertible Notes.

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

SCH Convertible Note

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

During the periods from July 1, 2023 to July 21, 2023 (Predecessor) and January 1, 2023 to July 21, 2023 (Predecessor), the Predecessor recognized $ 2.1 million and $ 4.2 million, respectively, of expense related to the increase in the fair value of the SCH Convertible Note.

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

A1 Convertible Notes

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

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

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

During the periods from July 1, 2023 to July 21, 2023 (Predecessor) and January 1, 2023 to July 21, 2023 (Predecessor), the Predecessor recognized $ 1.8 million and $ 3.0 million, respectively, of expense related to the increase in the fair value of the 2021 A1 Convertible Notes;

$ 2.5 million and $ 4.2 million, respectively, of expense related to the increase in the fair value of the 2022 A1 Convertible Notes;

$ 10.2 million and $ 10.1 million, respectively, of expense related to the increase in the fair value of the March 2023 A1 Convertible Notes.

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

Daewoong Convertible Notes

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

During the periods from July 1, 2023 to July 21, 2023 (Predecessor) and January 1, 2023 to July 21, 2023 (Predecessor), the Predecessor recognized $ 1.4 million and $ 3.7 million, respectively, of income related to the decrease in the fair value of the Daewoong Convertible Notes.

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

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

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

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

During the three and nine months ended September 30, 2024 (Successor), the Company recognized $ 1.9 million and $ 0.2 million, respectively, of expense related to the increase in the fair value of the 2024 Daewoong Convertible Note.

As of September 30, 2024, the principal amount outstanding under the 2024 Daewoong Convertible Note was $ 15.0 million, with an estimated fair value of $ 15.2 million.

Fair Value Measurements

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

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

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

During the three and nine months ended September 30, 2024 (Successor) and the periods from January 1, 2023 to July 21, 2023 (Predecessor), July 1, 2023 to July 21, 2023 (Predecessor), the Company recognized $ 1.9 million, $ 0.2 million, $ 19.4 million and $ 13.2 million, respectively, of expense related to the increase in the fair value of the convertible notes.

As of September 30, 2024 (Successor) and December 31, 2023 (Successor), the principal amount outstanding under the convertible notes was $ 15.0 million and

$ 0 , respectively, with an estimated fair value of $ 15.2 million and $ 0 , respectively.

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

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

The significant unobservable input assumptions that can significantly change the fair value included (i) the weighted average cost of capital, (ii) the timing of payments, (iii) the discount for lack of marketability, (iv) the probability of certain corporate scenarios, and (v) the long-term pretax operating margin.

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

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

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, and (iv) the probability of certain corporate scenarios.

During the three and nine months ended September 30, 2024 (Successor), and the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 1, 2023 to July 21, 2023 (Predecessor), the Company utilized discount rates ranging from 15 % to 60 %, respectively, reflecting changes in the Successor’s and Predecessor’s risk profile, time-to-maturity probability, and key terms when modified to the convertible notes.

As of the Closing, the fair value of the Predecessor 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.

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.

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

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

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

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

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 3 Forward Merger ).

For the period from July 22, 2023 to September 30, 2023 (Successor), the Company recorded expense of $ 15.5 million related to the increase in fair value of the derivatives to the Successor’s condensed consolidated statement of operations and comprehensive (loss) income.

The Company utilized the Monte-Carlo valuation model using expected volatility of 67.0 % and risk-free rate of 5.11 % and expected life of 1.81 years.

As of December 31, 2023 (Successor), the fair value of the FPA was $ 40.3 million, which was included within embedded forward purchase agreements and derivative liabilities on the condensed consolidated balance sheet.

Termination of Forward Purchase Agreements

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

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

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

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

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

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

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

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

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

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

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

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

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

New Money PIPE Subscription Agreements and Letter Agreements

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

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

As of September 30, 2024 (Successor) and December 31, 2023 (Successor), the make-whole provision derivative liability was $ 0.3 million and $ 0.7 million, respectively, included in the embedded forward purchase agreements and derivative liabilities on the Successor’s condensed consolidated balance sheets.

For the three and nine months ended September 30, 2024 (Successor), and for the period from July 22, 2023 to September 30, 2023 (Successor), the Company recorded income (expense) related to the change in fair value of the make-whole provision derivative liability of $ 0.1 million, $ 0.4 million and $( 0.3 ) million, respectively.

Contingent Consideration and Contingent Founder Shares (Successor)

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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.

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.

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

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

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

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

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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”);

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.

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

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

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

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

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

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

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

For the three and nine months ended September 30, 2024 (Successor), and the period from July 22, 2023 to September 30, 2023 (Successor), the Company recognized income related to the change in fair value of contingent consideration of $ 0 , $ 97.5 million and $ 75.9 million, respectively, on the Successor’s condensed consolidated statements of operations and comprehensive (loss) income, and relates to the change in probabilities of achieving certain scenarios following the clinical results released in the second quarter of 2024 and changes in the Company’s stock price during the period.

Warrants (Successor)

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

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

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”).

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

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

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

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

During the three and nine months ended September 30, 2024 (Successor), an aggregate of 0 warrants and 10,283,637 warrants, respectively, were exercised on a cashless basis for 0 shares and 1,962,638 shares of common stock, respectively, with an impact to additional paid in capital of $ 0 and $ 15.0 million, respectively.

Additionally, the Company paid $ 21 thousand in April 2024 related to the cancellation of the remaining 207,410 public warrants on the redemption date.

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

Issued and Outstanding, January 1, 2024

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Number of warrants cancelled

Issued and Outstanding, June 30, 2024

Issued and Outstanding, September 30, 2024

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

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

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

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

The fair value of the warrant liability was $ 1.8 million and $ 1.4 million as of September 30, 2024 (Successor) and December 31, 2023 (Successor), respectively.

For the three and nine months ended September 30, 2024 (Successor) and the period from July 22, 2023 to September 30, 2023 (Successor), the expense (income) from the change in fair value of warrants was $ 0.4 million, $ 15.4 million and $( 1.6 ) million, respectively.

Medytox Top-off Right

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Termination of forward purchase agreements

Balance, June 30, 2024

Balance, September 30, 2024

Commitments and Contingencies

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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 June 30, 2024 (in thousands, unaudited):

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

Minimum lease payments by fiscal year

2024 (remaining)

Total future minimum lease payments

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Discount rate

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

The following table summarizes supplemental disclosures of operating cost and cash flow information related to operating leases for the three and nine months ended September 30, 2024 (Successor) and the periods from January 1, 2023 to July 21, 2023 (Predecessor), July 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor) (in thousands) (unaudited).

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

July 1 to July 21

Cost of operating leases

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

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

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

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

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

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

As of September 30, 2024 (Successor), 39,587,630 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 June 30, 2024 (Successor), no cash dividend has been declared to date.

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

Each share of common stock is entitled to one vote.

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Common Stock Reserved

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

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

September 30,

Stock options issued and outstanding

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Total common stock reserved

ATM Offering of Common Stock

Under the ATM, the Leerink Partners is entitled to commission at a rate equal to 3.0 % of the gross proceeds from sales of shares of common stock under the ATM.

The Company may cancel its at-the-market program at any time upon prior notice, pursuant to its terms.

2023 Employee Stock Purchase Plan (“ESPP”)

The 2023 Employee Stock Purchase Plan assists eligible employees in acquiring a stock ownership interest of the Company’s common stock in consideration of the participating employees’ continued services.

Eligible employers will be entitled to purchase, by means of payroll deductions, limited amounts of the Company’s common stock at a discount during periodic offering periods.

There were 488,146 shares initially reserved for issuance under the 2023 ESPP, which shall automatically increase on January 1 of each calendar year beginning and including January 1, 2024 and ending on and including January 1, 2033, by an amount equal to the lesser of (i) 1.0 % of the total number of shares of common stock issued and outstanding on January 1 of the year in which such increase is to occur, or (ii) such smaller number of shares of common stock as may be established by the Board of Directors.

As of September 30, 2024, there were 908,342 shares available for issuance.

There have been no shares issued under the 2023 ESPP.

Share-based Compensation

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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.

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 (“RSU”), restricted stock and stock appreciation rights to its employees, members of the Board of Directors and non-employee consultants.

The 2019 Incentive Award 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.

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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.

At the Closing, ABP 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 had accelerated vesting concurrently with the Merger.

As such, the Company included an additional $ 1.8 million in purchase consideration (see Note 3 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 6 Fair Value Measurements for additional information).

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

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

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

As of September 30, 2023, milestones 1 and 2 were determined to be probable, and the Company began expensing the proportionate RSUs over the vesting term, calculated as the period from the date the milestone was determined to be probable and the expected achievement date of the milestone.

For the three and nine months ended September 30, 2024 (Successor), and the period from July 22, 2023 to September 30, 2023 (Successor), the Company recognized $ 0.1 million, $ 0.5 million and $ 0.2 million, respectively, of such RSU with earnout vesting criteria, $ 0.1 million, $ 0.5 million and $ 0.2 million, respectively, in selling, general and administrative expenses and a de minimus amount in research and development expenses associated with such performance-based RSUs in the Successor’s condensed consolidated statement of operations.

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

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Options forfeited

Outstanding, June 30, 2024

Exercisable, June 30, 2024

Outstanding, September 30, 2024

Exercisable, September 30, 2024

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

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

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

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

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

As of September 30, 2024 (Successor) and December 31, 2023 (Successor), the weighted average remaining contractual life of options outstanding and options exercisable was 6.3 years and 7.1 years, respectively.

During the three and nine months ended September 30, 2024 (Successor), and the periods from January 1, 2023 to July 21, 2023 (Predecessor), July 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor), the Company recognized $ 0.7 million, $ 2.3 million, $ 2.7 million, $ 0.2 million and $ 1.6 million, respectively, of share-based compensation expense related to stock options granted.

As of September 30, 2024 (Successor) and December 31, 2023 (Successor), total unrecognized compensation expense related to nonvested stock options was $ 2.5 million and $ 4.9 million, respectively, which is expected to be recognized over the weighted-average remaining requisite service period of 5 months and 10 months , respectively.

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

Outstanding, January 1, 2024

Outstanding, June 30, 2024

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

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

Outstanding, September 30, 2024

During the three and nine months ended September 30, 2024 (Successor), and the periods from January 1, 2023 to July 21, 2023 (Predecessor), July 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor), the Company recognized $ 0.5 million, $ 1.6 million, $ 0.5 million, $ 0.1 million and $ 0.4 million, respectively, of share-based compensation expense related to restricted stock units granted.

As of September 30, 2024 (Successor), total unrecognized compensation expense related to nonvested restricted stock units was $ 7.4 million, of which $ 4.1 million was related to the earnout vesting criteria, and the remaining $ 3.3 million is expected to be recognized over the weighted-average remaining requisite service period of 24 months .

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

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

The 2023 Plan will remain in

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

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

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

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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.

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

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

purchased on the open market.

As of September 30, 2024, there were 950,433 shares of common stock available for issuance under the 2023 Plan.

The following table summarizes stock options activity under the 2023 Incentive Award Plan (unaudited):

Outstanding, January 1, 2024

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Options forfeited

Outstanding, June 30, 2024

Exercisable, June 30, 2024

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

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

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

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

Outstanding, September 30, 2024

Exercisable, September 30, 2024

The weighted average fair value of options granted as of September 30, 2024 (Successor) and December 31, 2023 (Successor) was $ 2.00 and $ 3.18 , respectively.

The weighted average remaining contractual life of options outstanding and options exercisable as of September 30, 2024 (Successor) and December 31, 2023 (Successor) was 9.7 years and 9.6 years, respectively.

During the three and nine months ended September 30, 2024 (Successor), and the period from July 22, 2023 to September 30, 2023 (Successor), the Company recognized $ 0.5 million, $ 1.0 million and $ 0.1 million, respectively, of share-based compensation expense related to stock options granted.

As of September 30, 2024 (Successor) and December 31, 2023 (Successor), total unrecognized compensation expense related to nonvested stock options was $ 5.9 million and $ 0.9 million, respectively, which is expected to be recognized over the weighted-average remaining requisite service period of 22 months and 35 months , respectively.

The following table summarizes restricted stock units activity under the 2023 Incentive Award Plan (unaudited):

Outstanding, January 1, 2024

Outstanding, September 30, 2024

During the three and nine months ended September 30, 2024 (Successor), the Company recognized $ 36 thousand of share-based compensation expense related to restricted stock units granted.

As of September 30, 2024 (Successor), total unrecognized compensation expense related to nonvested restricted stock units was $ 0.8 million, which is expected to be recognized over the weighted-average remaining requisite service period of 23 months .

Share-based Compensation Expense and Valuation Information

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

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

During the three and nine months ended September 30, 2024 (Successor), and the periods from January 1, 2023 to July 21, 2023 (Predecessor), July 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor), the Company recognized $ 1.6 million, $ 4.9 million, $ 3.2 million, $ 0.7 million, and $ 2.2 million, respectively, of share-based compensation expense,

of which $ 1.2 million, $ 3.7 million, $ 2.8 million, $ 0.6 million, and $ 1.8 million, respectively, were in selling, general and administrative expenses, and $ 0.4 million, $ 1.3 million, $ 0.4 million, $ 0.1 million and $ 0.4 million, respectively, were in research and development expenses in the accompanying condensed consolidated statements of operations and comprehensive (loss) income.

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

Six Months Ended

Nine Months Ended

September 30,

Expected volatility

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Subsequent Events

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

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

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

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

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

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

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

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

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

What changed 10-Q

Item 1. Financial Statements