AEON Biopharma, Inc. 10-K

Item 8. Financial Statements and Supplementary Data ​ Index to Consolidated Financial Statements ​ ​ ​ ​ ​ ​ ​ Report of Independent Registered Public Accounting Firm (PCAOB ID Number 185 ) ​ 92 ​ ​ ​ Consolidated Balance Sheets as of December 31, 2024 (Successor) and December 31, 2023 (Successor) ​ 93 ​ ​ ​ Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2024 (Successor) and the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to December 31, 2023 (Successor ) ​ 94 ​ ​ ​ Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit for the year ended December 31, 2024 (Successor) and the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to December 31, 2023 (Successor) ​ 95 ​ ​ ​ Consolidated Statements of Cash Flows for the year ended December 31, 2024 (Successor) and the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to December 31, 2023 (Successor) ​ 96 ​ ​ ​ Notes to Consolidated Financial Statements ​ 97 ​ ​ ​ ​ ​ 91 Table of Contents ​ Report of Independent Registered Public Accounting Firm ​ To the Stockholders and Board of Directors of AEON Biopharma, Inc.: ​ Opinion on the Consolidated Financial Statements ​ We have audited the accompanying consolidated balance sheets of AEON Biopharma, Inc. and subsidiary (the Company) as of December 31, 2024 and 2023 (Successor), the related consolidated statements of operations and comprehensive income (loss), convertible preferred stock and stockholders’ deficit, and cash flows for the year ended December 31, 2024 (Successor) and for the periods from January 1, 2023 through July 21, 2023 (Predecessor), and July 22, 2023 through December 31, 2023 (Successor), and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023 (Successor), and the results of its operations and its cash flows for the year ended December 31, 2024 (Successor) and for the periods from January 1, 2023 through July 21, 2023 (Predecessor), and July 22, 2023 through December 31, 2023 (Successor), in conformity with U.S. generally accepted accounting principles. ​ Going Concern ​ The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has experienced recurring losses from operations and has a net capital deficiency and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. ​ Basis for Opinion ​ These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. ​ We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. ​ Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. ​ ​ /s/ KPMG LLP ​ We have served as the Company’s auditor since 2023. ​ San Diego, California March 24, 2025 ​ ​ 92 Table of Contents ​ ​ AEON BIOPHARMA, INC. CONSOLIDATED BALANCE SHEET S (in thousands, except share data and par value amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ December 31, ​ ​ 2024 2023 ​ ​ ​ ​ ​ ​ ASSETS ​ ​ ​ Current assets: ​ ​ ​ Cash and cash equivalents ​ $ 13 ​ ​ $ 5,158 Prepaid expenses and other current assets ​ 1,577 ​ ​ 1,064 Total current assets ​ 1,590 ​ ​ 6,222 Property and equipment, net ​ 235 ​ ​ 332 Operating lease right-of-use asset ​ 1,288 ​ ​ 262 Other assets ​ 29 ​ ​ 29 Total assets ​ $ 3,142 ​ ​ $ 6,845 LIABILITIES AND STOCKHOLDERS' DEFICIT ​ ​ ​ Current liabilities: ​ ​ ​ Accounts payable ​ $ 5,910 ​ ​ $ 3,388 Accrued clinical trials expenses ​ 3,571 ​ ​ 5,128 Accrued compensation ​ 1,068 ​ ​ 943 Other accrued expenses ​ 3,600 ​ ​ 3,590 Total current liabilities ​ 14,149 ​ ​ 13,049 Convertible notes at fair value, including related party amount of $ 11,689 and $ 0 , at December 31, 2024 and December 31, 2023, respectively ​ 11,689 ​ ​ — Operating lease liability ​ 1,145 ​ ​ — Warrant liability ​ ​ 1,187 ​ ​ ​ 1,447 Contingent consideration liability ​ ​ 3,541 ​ ​ ​ 104,350 Embedded forward purchase agreements and derivative liabilities ​ ​ — ​ ​ ​ 41,043 Total liabilities ​ 31,711 ​ ​ 159,889 Commitments and contingencies ​ ​ ​ Stockholders’ Deficit: ​ ​ ​ Class A common stock, $ 0.0001 par value; 500,000,000 shares authorized at December 31, 2024 and December 31, 2023, and 555,511 and 516,404 shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively ​ 4 ​ ​ 4 Additional paid-in capital ​ 403,024 ​ ​ 381,264 Subscription receivables ​ ​ — ​ ​ ​ ( 60,710 ) Accumulated deficit ​ ( 431,597 ) ​ ​ ( 473,602 ) Total stockholders' deficit ​ ( 28,569 ) ​ ​ ( 153,044 ) Total liabilities and stockholders' deficit ​ $ 3,142 ​ ​ $ 6,845 ​ See accompanying notes to the consolidated financial statements ​ 93 Table of Contents ​ ​ AEON BIOPHARMA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ December 31, ​ 2024 2023 ​ ​ 2023 ​ ​ Successor ​ ​ Successor July 22 to December 31 ​ ​ Predecessor January 1 to July 21 Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative $ 13,643 ​ $ 9,949 ​ ​ $ 9,841 Research and development 14,181 ​ 13,243 ​ ​ 19,803 Acquired in-process research and development ​ — ​ ​ 348,000 ​ ​ ​ — Change in fair value of contingent consideration ( 100,809 ) ​ ( 52,750 ) ​ ​ — Total operating costs and expenses ( 72,985 ) ​ 318,442 ​ ​ 29,644 Income (loss) from operations 72,985 ​ ( 318,442 ) ​ ​ ( 29,644 ) Other income (loss): ​ ​ ​ ​ Change in fair value of convertible notes 3,311 ​ — ​ ​ ( 19,359 ) Change in fair value of warrants ( 14,719 ) ​ 2,318 ​ ​ — Loss on embedded forward purchase agreements and derivative liabilities, net ​ ( 19,667 ) ​ ( 8,366 ) ​ ​ ( 11,789 ) Other income, net 95 ​ 536 ​ ​ 114 Total other loss, net ( 30,980 ) ​ ( 5,512 ) ​ ​ ( 31,034 ) Income (loss) before taxes 42,005 ​ ( 323,954 ) ​ ​ ( 60,678 ) Income taxes — ​ — ​ ​ — Net income (loss) $ 42,005 ​ $ ( 323,954 ) ​ ​ $ ( 60,678 ) Basic net income (loss) per share $ 77.74 ​ $ ( 627.33 ) ​ ​ $ ( 0.44 ) Diluted net income (loss) per share $ 72.93 ​ $ ( 627.33 ) ​ ​ $ ( 0.44 ) Weighted average shares of common stock outstanding used to compute basic net income (loss) per share ​ 540,360 ​ ​ 516,404 ​ ​ ​ 138,848,177 Weighted average shares of common stock outstanding used to compute diluted net income (loss) per share 575,945 ​ 516,404 ​ ​ 138,848,177 ​ ​ ​ See accompanying notes to the consolidated financial statements ​ ​ ​ ​ ​ 94 Table of Contents ​ AEON BIOPHARMA, INC. CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT (in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Convertible ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ ​ Non- Total ​ ​ Preferred Stock ​ ​ Common Stock ​ Paid-in ​ Subscription ​ Accumulated ​ ​ Treasury Stock ​ controlling ​ Stockholders' ​ ​ Shares Amount ​ ​ Shares ​ Amount ​ Capital ​ Receivables ​ Deficit ​ Shares ​ Amount ​ Interest ​ Deficit Balance as of January 1, 2024 (Successor) — ​ $ — ​ 516,404 ​ $ 4 ​ $ 381,264 ​ $ ( 60,710 ) ​ $ ( 473,602 ) ​ — ​ $ — ​ $ — ​ $ ( 153,044 ) Net income — ​ — ​ — ​ — ​ — ​ — ​ 42,005 ​ — ​ — ​ — ​ 42,005 Termination of Forward Purchase Agreements ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 60,710 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 60,710 Issuance of shares and reclassification of liability related to cashless warrant exercises — ​ — ​ 27,310 ​ — ​ 14,979 ​ — ​ — ​ — ​ — ​ — ​ 14,979 Issuance of shares related to at-the-market offering, net — ​ — ​ 2,241 ​ — ​ 147 ​ — ​ — ​ — ​ — ​ — ​ 147 Issuance of common stock ​ — ​ ​ — ​ ​ 5,556 ​ ​ — ​ ​ 384 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 384 Stock-based compensation expense ​ — ​ — ​ 4,000 ​ — ​ 6,250 ​ — ​ — ​ — ​ — ​ — ​ 6,250 Balance as of December 31, 2024 (Successor) — ​ $ — ​ 555,511 ​ $ 4 ​ $ 403,024 ​ $ — ​ $ ( 431,597 ) ​ — ​ $ — ​ $ = ​ $ ( 28,569 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of July 22, 2023 (Successor) — ​ $ — ​ ​ 516,404 ​ $ 4 ​ $ 377,498 ​ $ ( 60,710 ) ​ $ ( 149,648 ) ​ — ​ $ — ​ $ — ​ $ 167,144 Net loss ​ — ​ — ​ — ​ — ​ — ​ — ​ ( 323,954 ) ​ — ​ — ​ — ​ ​ ( 323,954 ) Stock-based compensation expense ​ — ​ — ​ — ​ — ​ 3,766 ​ — ​ — ​ — ​ — ​ — ​ ​ 3,766 Balance as of December 31, 2023 (Successor) — ​ $ — ​ 516,404 ​ $ 4 ​ $ 381,264 ​ $ ( 60,710 ) ​ $ ( 473,602 ) ​ — ​ $ — ​ $ — ​ $ ( 153,044 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of January 1, 2023 (Predecessor) 21,257,708 ​ $ 137,949 ​ 138,848,177 ​ $ 14 ​ $ 187,348 ​ $ — ​ $ ( 474,839 ) ​ ( 22,821 ) ​ $ ( 23 ) ​ $ 17,087 ​ $ ( 270,413 ) Net loss — ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 60,678 ) ​ — ​ ​ — ​ ​ — ​ ​ ( 60,678 ) Stock-based compensation expense — ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ 3,235 ​ ​ 3,235 Debt extinguishment due to warrant modification ​ — ​ — ​ — ​ ​ — ​ ​ 17,036 ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 17,036 Balance as of July 21, 2023 (Predecessor) 21,257,708 ​ $ 137,949 ​ 138,848,177 ​ $ 14 ​ $ 204,384 ​ $ — ​ $ ( 535,517 ) ​ ( 22,821 ) ​ $ ( 23 ) ​ $ 20,322 ​ $ ( 310,820 ) ​ ​ ​ ​ ​ See accompanying notes to the consolidated financial statements ​ 95 Table of Contents AEON BIOPHARMA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2024 ​ 2023 ​ ​ ​ Successor ​ ​ Successor July 22 to December 31 ​ ​ ​ Predecessor January 1 to July 21 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) ​ $ 42,005 ​ $ ( 323,954 ) ​ ​ $ ( 60,678 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: ​ ​ ​ ​ ​ ​ ​ Depreciation ​ 97 ​ 45 ​ ​ ​ 54 Stock-based compensation expense ​ ​ 6,250 ​ 3,766 ​ ​ ​ 3,235 Non-cash issuance of common stock ​ ​ 384 ​ — ​ ​ ​ — Write-off of acquired in-process research and development ​ — ​ 348,000 ​ ​ ​ — Change in fair value of convertible notes ​ ( 3,311 ) ​ — ​ ​ ​ 19,359 Change in fair value of warrants ​ ​ 14,719 ​ ( 2,318 ) ​ ​ ​ — Change in fair value of embedded forward purchase agreements and derivative liabilities ​ ​ 19,667 ​ 8,366 ​ ​ ​ 11,789 Change in fair value of contingent consideration ​ ​ ( 100,809 ) ​ ( 52,750 ) ​ ​ ​ — Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Prepaid expenses and other current assets ​ ( 513 ) ​ ( 693 ) ​ ​ ​ 36 Accounts payable ​ 2,522 ​ ( 4,342 ) ​ ​ ​ ( 248 ) Accrued expenses and other liabilities ​ ( 1,423 ) ​ ( 2,204 ) ​ ​ ​ 4,736 Other assets and liabilities ​ 120 ​ 4 ​ ​ ​ ( 28 ) Net cash used in operating activities ​ ( 20,292 ) ​ ( 26,080 ) ​ ​ ​ ( 21,745 ) Net cash used in investing activities ​ — ​ — ​ ​ ​ — Cash flows from financing activities: ​ ​ ​ ​ ​ ​ Proceeds from issuance of convertible notes ​ 15,000 ​ — ​ ​ ​ 14,000 Proceeds from issuance of at-the-market shares ​ 147 ​ — ​ ​ ​ — Net cash provided by financing activities ​ 15,147 ​ — ​ ​ ​ 14,000 Net decrease in cash ​ ( 5,145 ) ​ ( 26,080 ) ​ ​ ​ ( 7,745 ) Cash and cash equivalents at beginning of period ​ 5,158 ​ 31,238 ​ ​ ​ 9,746 Cash and cash equivalents at end of period ​ $ 13 ​ $ 5,158 ​ ​ $ 2,001 ​ ​ ​ ​ ​ See accompanying notes to the consolidated financial statements ​ 96 Table of Contents ​ AEON BIOPHARMA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Organization 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 229,167 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 222,653 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 3 Forward Merger for additional details. The outstanding public warrants were fully redeemed in April 2024, and as such, there are no public warrants outstanding as of December 31, 2024. Refer to Note 6 for additional information. Liquidity and Going Concern The accompanying 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 December 31, 2024, the Company reported cash of $ 13 thousand and an accumulated deficit of $ 431.6 million. The Company expects to incur losses and use cash in its operations for the foreseeable future. On May 3, 2024, the Company announced preliminary top-line results from its planned interim analysis of the Phase 2 trial with ABP-450 in the preventative treatment of chronic migraine, which did not meet the primary or secondary endpoints. The Company originally intended to pursue submission of an Original BLA seeking one or more potential therapeutic indications for ABP-450. However, in May 2024, the Company announced the discontinuation of its Phase 2 clinical trials for episodic and chronic migraine in order to implement certain cash preservation measures. 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 commenced analytical studies in the fourth quarter of 2024 to prepare for a potential Biosimilar Biological Product Development (“BPD”) Type 2a meeting with the FDA to review the results from the studies in the second half of 2025. 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 97 Table of Contents 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 December 31, 2024, the Company issued 2,241 shares under the ATM for net proceeds of $0.2 million and approximately $ 49.8 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. The Company is actively attempting to secure additional capital to fund its operations. However, there can be no assurance that the Company will be able to raise additional capital on commercially reasonable terms or at all. As a result of these conditions, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern and to meet its obligations as they become due within one year after the date that these consolidated financial statements are issued. The preparation of these 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. Note 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The 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 December 31, 2023. A black line between the Successor and Predecessor periods has been placed in the consolidated financial statements and in the tables to the notes to the consolidated financial statements to highlight the lack of comparability between these two periods. Use of Estimates 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- 98 Table of Contents based compensation, and the fair values of 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 The Company determined that it operates and manages its business as one operating segment, focused on the research and development of ABP-450. The Company’s chief operating decision maker (“CODM”) is the Company’s Chief Executive Officer, who reviews its consolidated operating results for the purpose of assessing liquidity needs, allocating resources and evaluating financial performance. Asset information, including monitoring of its cash and cash equivalents, provided to the CODM is consistent with those reported on the consolidated balance sheets. The key measure of the Company’s single segment profit and loss that the CODM uses to allocate resources and assess performance is the Company’s operating income (loss) as reported on the consolidated statement of operations and comprehensive income (loss). The table below shows a reconciliation of the Company’s net income (loss), including the significant expense categories regularly provided to and reviewed by the CODM, as computed under US GAAP to the Company’s total consolidated net income (loss) as reported in the consolidated statement of operations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ December 31, ​ 2024 2023 ​ ​ 2023 ​ ​ Successor ​ ​ Successor July 22 to December 31 ​ ​ Predecessor January 1 to July 21 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Segment operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Compensation and benefits $ 9,153 ​ $ 5,377 ​ ​ $ 5,548 Professional and legal fees 6,233 ​ 5,499 ​ ​ 5,641 Office and travel ​ 1,533 ​ ​ 886 ​ ​ ​ 470 Research and development 10,905 ​ 11,430 ​ ​ 17,985 Total selling, general and administrative, and research and development 27,824 ​ 23,192 ​ ​ 29,644 Acquired in-process research and development — ​ 348,000 ​ ​ — Change in fair value of contingent consideration ​ ( 100,809 ) ​ ​ ( 52,750 ) ​ ​ ​ — Total operating costs and expenses ​ ( 72,985 ) ​ ​ 318,442 ​ ​ ​ 29,644 Income (loss) from operations ​ 72,985 ​ ​ ( 318,442 ) ​ ​ ​ ( 29,644 ) Other segment items: ​ ​ ​ ​ Change in fair value of convertible notes 3,311 ​ — ​ ​ ( 19,359 ) Change in fair value of warrants ( 14,719 ) ​ 2,318 ​ ​ — Loss on embedded forward purchase agreements and derivative liabilities, net ​ ( 19,667 ) ​ ( 8,366 ) ​ ​ ( 11,789 ) Other income, net 95 ​ 536 ​ ​ 114 Total other segment items, net ( 30,980 ) ​ ( 5,512 ) ​ ​ ( 31,034 ) Income (loss) before taxes 42,005 ​ ( 323,954 ) ​ ​ ( 60,678 ) Income taxes — ​ — ​ ​ — Segment net income (loss) $ 42,005 ​ $ ( 323,954 ) ​ ​ $ ( 60,678 ) ​ 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 99 Table of Contents 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 7 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, 2024 and December 31, 2023 are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2024 2023 ​ ​ ​ ​ ​ ​ ​ Furniture and fixtures ​ $ 199 ​ $ 199 Equipment ​ 237 ​ 237 Leasehold improvements ​ 66 ​ 66 Property and equipment ​ 502 ​ 502 Accumulated depreciation ​ ( 267 ) ​ ( 170 ) Property and equipment, net ​ $ 235 ​ $ 332 ​ Other Accrued Expenses Other accrued expenses were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ 2024 2023 Legal expenses ​ ​ $ 2,455 ​ $ 1,867 Excise tax liability ​ ​ 569 ​ 569 Operating lease liability - short term portion ​ ​ 121 ​ 278 Daewoong vial usage ​ ​ — ​ 33 Remaining other accrued expenses ​ ​ 455 ​ 843 Total other accrued expenses ​ ​ $ 3,600 ​ $ 3,590 ​ Convertible Notes 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 consolidated statements of operations or as a component of other comprehensive income (loss) for changes related to instrument-specific credit risk. As a result of electing the fair value option, direct costs and fees related to the convertible promissory notes are expensed as incurred. The Predecessor 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 specific terms (as further defined in Note 6) 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 would be classified as a liability on the Successor’s 100 Table of Contents consolidated balance sheets and remeasured at each reporting period with changes to fair value recorded to the Successor’s 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 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 were recorded in the Successor’s 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 consolidated statement of operations and comprehensive income (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 consolidated statements of operations and comprehensive income (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. 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 0.0323 shares of common stock and the right to receive a pro-rata portion of the contingent consideration. Fair Value of Financial Instruments 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; and · 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. 101 Table of Contents 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. Leases 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 at the Closing was written off to the Successor’s consolidated income statement for the period ended December 31, 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. 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, 2024 (Successor) and December 31, 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 in the consolidated balance sheets and in selling, general and administrative or research and development expenses in the consolidated statements of operations and comprehensive income (loss). All stock-based compensation costs are recorded in the consolidated statements of operations and comprehensive income (loss) based upon the underlying employee’s role within the Company. Income Taxes 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 102 Table of Contents 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 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 consolidated balance sheets. Net Income (Loss) 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 income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during the period, without consideration for potentially dilutive shares of common stock. Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average shares of common stock and potentially dilutive securities outstanding during the period using the treasury stock and if-converted methods, 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. For the year ended December 31, 2024 (Successor), dilutive stock options of 24,245 and restricted stock units of 11,339 were included in the calculation of diluted net income per share. Since the Company was in a loss position for the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to December 31, 2023 (Successor), 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. Basic and diluted net income per share for the year ended December 31, 2024 was calculated as follows (in thousands, except share and per share amounts): ​ ​ ​ ​ ​ Year ended December 31, 2024 (Successor) ​ Net income ​ $ 42,005 Weighted average shares of common stock outstanding, basic ​ 540,360 Net income per share, basic ​ $ 77.74 Weighted average shares of common stock outstanding, diluted ​ 575,945 Net income per share, diluted ​ $ 72.93 ​ ​ 103 Table of Contents Basic and diluted net loss per share for the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to December 31, 2023 (Successor) were calculated as follows (in thousands, except share and per share amounts): ​ ​ ​ ​ ​ Period from January 1, 2023 to July 21, 2023 (Predecessor) ​ Net loss ​ $ ( 60,678 ) Weighted average shares of common stock outstanding, basic and diluted ​ 138,848,177 Net loss per share, basic and diluted ​ $ ( 0.44 ) ​ ​ ​ ​ ​ Period from July 22, 2023 to December 31, 2023 (Successor) ​ ​ Net loss ​ $ ( 323,954 ) Weighted average shares of common stock outstanding, basic and diluted ​ 516,404 Net loss per share, basic and diluted ​ $ ( 627.33 ) ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2024 ​ 2023 ​ Successor Successor July 22 to December 31 Predecessor January 1 to July 21 Warrants ​ 55,403 ​ 201,112 ​ ​ 14,479,999 Common stock options and restricted stock units ​ 88,999 ​ 67,927 ​ ​ 4,888,537 Convertible notes ​ 399,128 ​ — ​ ​ — ​ ​ 543,530 ​ 269,039 ​ ​ 19,368,536 ​ 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. Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures . This update requires public entities to disclose information about their reportable segments’ significant expenses that are regularly provided to the CODM and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280, on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 31, 2023, and for interim periods beginning after December 15, 2024, with early adoption permitted. The Company adopted this standard during its fiscal year ended December 31, 2024. For the purpose of the adoption of ASU 2023-07, the Company performed an evaluation of financial information regularly reviewed by the Company’s CODM for purposes of assessing liquidity needs, allocating resources and evaluating performance. See Note 2 Summary of Significant Accounting Policies - Segment Reporting for more information. Accounting Pronouncements Not Yet Adopted In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures . This update requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income 104 Table of Contents taxes paid. ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses , which is intended to improve financial reporting by requiring disaggregated disclosure of certain costs and expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted, and may be applied on either a prospective or retrospective basis. 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. ​ Note 3. Forward Merger ​ On December 12, 2022, Old AEON and Priveterra entered into a Business Combination Agreement. 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 0.0323 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 95,842 common shares (of which 47,921 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 30,920 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 49,604 shares of Priveterra Class A common stock at $ 504.00 per share that were issued under the Original Committed Financing Agreements and Additional Committed Financing Agreements, and was 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 6 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 10 Share-Based Compensation for additional information. 105 Table of Contents ​ Asset Acquisition Method of Accounting The Merger was accounted for using the asset acquisition method in accordance with U.S. GAAP. 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 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 was written off in the Successor’s consolidated statement of operations and comprehensive income (loss). 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 (in thousands except share and per share data) . ​ ​ ​ ​ Number of shares issued as consideration in the Merger ​ ​ 229,167 Shares issued for interim convertible notes related to Committed Financing ​ ​ 30,920 Total number of shares of common stock of the combined company ​ ​ 260,087 Multiplied by the Priveterra share price, as of the Closing ​ $ 780.48 Total ​ $ 202,992 Fair value of contingent consideration ​ ​ 125,699 Replacement of share-based payment awards ​ ​ 13,331 Assumed liabilities ​ ​ 125 Total purchase price ​ $ 342,147 ​ The allocation of the purchase price was as follows (in thousands). ​ ​ ​ ​ Cash and cash equivalents ​ $ 2,001 Net working capital (excluding cash and cash equivalents) ​ ​ ( 16,182 ) Other assets and liabilities ​ 775 Acquired in-process research and development ​ 348,000 Net assets acquired ​ ​ 334,594 Loss on consolidation of VIE ​ ​ 7,553 Total purchase price ​ $ 342,147 ​ 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 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. 106 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares of common stock Common stock amount Subscription Receivable APIC Accumulated Deficit ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Priveterra closing equity as of July 21, 2023 ​ 7,739 $ — $ — $ 5,937 $ ( 12,897 ) Shares issued as Consideration in the Merger Note 1 229,167 ​ 2 ​ — ​ 192,189 ​ — Merger Consideration - Shares issued for Interim Convertible Notes related to Committed Financing Note 5 30,920 ​ — ​ — ​ 24,132 ​ — Stock-Compensation for Class B Founder Shares Note 3 95,842 ​ 1 ​ — ​ 68,972 ​ ( 68,972 ) Forward Purchase Agreements Note 6 87,154 ​ 1 ​ ( 60,710 ) ​ 66,714 ​ ( 38,255 ) Issuance of Make-Whole derivative Note 6 — ​ — ​ — ​ — ​ ( 427 ) Shares issued in New Money PIPE Subscription Agreements Note 6 13,910 ​ — ​ — ​ 10,844 ​ ( 6,433 ) Shares issued for Committed Financing Note 6 49,604 ​ — ​ — ​ 38,714 ​ ( 13,714 ) Contingent Founder Shares Note 6 — ​ — ​ — ​ ( 31,401 ) ​ — Loss on Consolidation of VIE Note 3 — ​ — ​ — ​ — ​ ( 7,553 ) Other Miscellaneous ​ 2,068 ​ — ​ — ​ 1,397 ​ ( 1,397 ) Total ​ 516,404 $ 4 $ ( 60,710 ) $ 377,498 $ ( 149,648 ) ​ The Sponsor, in connection with Priveterra’s IPO, purchased 95,842 shares of Class B common stock (the “Founder Shares”) for $ 25,000 (approximately $ 0.288 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 95,842 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., 47,921 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 47,921 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 Successor’s consolidated balance sheet. ​ ​ ​ Note 4. 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”). 107 Table of Contents 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 income (loss) in the Predecessor’s consolidated statements of operations and comprehensive income (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. 108 Table of Contents 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 period from January 1, 2023 to July 21, 2023 (Predecessor), the Predecessor recognized $ 1.6 million of expense related to the increase in the fair value of the 2019 Convertible Notes. As of December 31, 2022 (Predecessor), the principal amount outstanding under the 2019 Convertible Notes was $ 6.0 million, with an estimated fair value of $ 16.2 million. 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 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. Subsequent changes in fair value were recorded as a component of other income (loss) in the Predecessor’s consolidated statements of operations and comprehensive income (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, 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 period from January 1, 2023 to July 21, 2023 (Predecessor), the Predecessor recognized $ 4.2 million of expense related to the increase in the fair value of the SCH Convertible Note. As of December 31, 2022, the principal amount outstanding under the SCH Convertible Note was $ 17.5 million, with an estimated fair value of $ 25.1 million. 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 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 3 Forward Merger ). 109 Table of Contents 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 income (loss) in the accompanying Predecessor’s consolidated statements of operations and comprehensive income (loss) or as a component of other comprehensive income (loss) for changes to instrument-specific credit risk. During the period from January 1, 2023 to July 21, 2023 (Predecessor), the Predecessor recognized $ 3.0 million of expense related to the increase 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 period from January 1, 2023 to July 21, 2023 (Predecessor), the Predecessor recognized $ 4.2 million of expense related to the increase 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 period from January 1, 2023 to July 21, 2023 (Predecessor), the Predecessor recognized $ 10.1 million of expense 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 3 Forward Merger ). 110 Table of Contents Note 5. Daewoong Convertible Notes 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). 111 Table of Contents 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. Subsequent changes in fair value were recorded as a component of other income (loss) in the Predecessor’s consolidated statements of operations and comprehensive income (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, 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 period from January 1, 2023 to July 21, 2023, the Predecessor recognized $ 3.7 million of income related to the decrease in the fair value of the Daewoong Convertible Notes. As of December 31, 2022, the principal amount outstanding (excluding the PIK Principal) under the Daewoong Convertible Notes was $ 60 million, with an estimated fair value of $ 53.5 million. The Daewoong Convertible Notes were converted into shares of the Successor’s common stock at the Closing. Daewoong Convertible Notes (Successor) 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 “2024 Convertible Note” and together, the “2024 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 contains customary events of default, accrues interest at an annual rate of 15.79 % and has 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, and on April 12, 2024, the Company issued and sold to Daewoong one Convertible Note in the principal amount of $ 10.0 million. ​ On March 19, 2024, the Company entered into a Fourth Amendment to the License Agreement (the “License Agreement Amendment”) with Daewoong, which amends that certain License and Supply Agreement, by and between the Company and Daewoong, dated December 20, 2019, as previously amended on July 29, 2022, January 8, 2023 and April 24, 2023 (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). ​ During the year ended December 31, 2024 (Successor), the Company recognized $ 3.3 million of income related to the decrease in the fair value of the 2024 Daewoong Convertible Note. As of December 31, 2024, the principal amount outstanding under the 2024 Daewoong Convertible Note was $ 15.0 million, with an estimated fair value of $ 11.7 million. ​ 112 Table of Contents Note 6. Fair Value Measurements 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 and accrued liabilities approximate fair value because of the short-term nature of those instruments. The following are other financial assets and liabilities that are measured at fair value on a recurring basis. Convertible Notes at Fair Value 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 year ended December 31, 2024 (Successor) and the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to December 31, 2023 (Successor), the Company recognized $ 3.3 million, $( 19.4 ) million and $ 0 of income (expense) related to the decrease (increase) in fair value of the convertible notes. As of December 31, 2024, the principal amount outstanding under the convertible notes was $ 15.0 million, with an estimated fair value of $ 11.7 million. The Predecessor convertible notes were converted into shares of the Successor’s common stock at the Closing. See Note 4 Related Party Transactions (Predecessor) and Note 5 Daewoong Convertible Notes for more information on those 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 qualified financings, corporate transaction and dissolution scenarios. The significant unobservable input assumptions that can significantly change the fair value included (i) the discount rates, (ii) the timing of payments, and (iii) the probability of certain settlement scenarios. During the year ended December 31, 2024 (Successor) and the period from January 1, 2023 to July 21, 2023 (Predecessor), the Company utilized discount rates ranging from 15 % to 60 %, reflecting changes in the Successor’s and Predecessor’s risk profile, time-to-maturity probability, and key terms 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. As described below, 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 104,167 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. 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) 87,154 shares of Priveterra Class A Common Stock (the “Additional Shares”) and (ii) the redemption price per share of $ 765.36 . 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. The Company did not have access 113 Table of Contents 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 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 December 31, 2023 (Successor), the Company recorded expense of $ 8.4 million related to the increase in fair value of the derivatives to the Successor’s consolidated statement of operations and comprehensive income (loss). The Company utilized the Monte-Carlo valuation model using expected volatility of 52.0 % and risk-free rate of 4.48 % and expected life of 1.56 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 consolidated balance sheet. As further discussed below, the FPA was terminated in March 2024. Prior to the termination of the Forward Purchase Agreements, 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 $ 765.36 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) $ 765.36 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 $ 504.00 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 $ 720.00 per shares. The maximum number of shares would have been reset to equal 104,167 divided by a number equal to the offering price in the Dilutive Offering divided by $ 720.00 . 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 $ 504.00 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 104,167 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) $ 144.00 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 3 Forward Merger ). Subsequent changes in the bifurcated derivatives are recorded in the Successor’s consolidated statements of operations and comprehensive income (loss). For the period from July 22, 2023 to December 31, 2023 (Successor), the Company 114 Table of Contents recorded a loss related to the change in fair value of derivatives of $ 8.4 million. The Company utilized the Monte-Carlo valuation model to value the forward purchase agreements at Closing date and as of December 31, 2023. The following table summarizes the significant inputs as of the valuation dates: ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ July 21, ​ ​ 2023 ​ 2023 ​ ​ ​ ​ ​ Stock Price $ 518.40 $ 780.48 Expected volatility 52.00 % 55.00 % Risk-free interest rate 4.48 % 4.82 % Expected life (in years) 1.56 2.00 Expected dividend yield — — ​ 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 ACM will retain 43,056 previously issued shares of common stock held by ACM pursuant to the ACM FPA and its respective subscription agreement (the “ACM Retained Shares”). 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 Polar will retain 44,098 previously issued shares of common stock held by Polar pursuant to the Polar FPA and its respective subscription agreement (the “Polar Retained Shares”). 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 consolidated statement of operations of $ 20.3 million during the year ended December 31, 2024 to reverse the related subscription receivable and derivative liability on the accompanying 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 5,556 shares of the Company’s common stock to CCM. 115 Table of Contents New Money PIPE Subscription 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 13,910 shares of Priveterra Class A Common Stock for a purchase price of $ 504.00 per share, for aggregate gross proceeds of $ 7.0 million (the “New Money PIPE Investment”). Certain affiliates of ACM Investor purchased 3,282 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 13,910 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 $ 504.00 per share. ​ Committed Financing ​ 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. 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. 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). Conversion of the notes was contingent and automatically convertible on the Merger, and 30,920 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 49,604 shares of Priveterra Class A common stock at $ 504.00 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 $ 504.00 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 222,653 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., 47,921 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: 116 Table of Contents ● 13,890 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; ● 13,890 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; and ● 20,141 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 222,653 additional shares of common stock, as follows: ● 13,996 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 13,996 shares of common stock, the “Migraine Phase 3 Contingent Consideration Shares”); and ● 55,659 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 55,659 shares of common stock, the “CD BLA Contingent Consideration Shares”); ● 55,659 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 55,659 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 152,998 shares of common stock; and ● 97,339 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 97,339 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 152,998 , 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 117 Table of Contents 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, 27,992 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 13,996 or by 27,992 and (B) the number of Chronic Migraine Contingent Consideration Shares shall be reduced by 13,996 , but not below zero . The Company classifies the Contingent Consideration as a liability on the Successor’s consolidated balance sheets and remeasures at each reporting period with changes to fair value recorded to the Successor’s consolidated statements of operations and comprehensive income (loss). The Company utilized the Probability-Weighted Expected Return Method (PWERM) model to value the contingent consideration based on earnout milestones, probability of forfeiture and success scenarios. For the year ended December 31, 2024 and the successor period July 22, 2023 to December 31, 2023, the Company recognized $100.8 million and $52.8 million, respectively, of income related to the change in fair value of contingent consideration on the Successor’s consolidated statements of operations and comprehensive income (loss), 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. As of December 31, 2024 (Successor), the contingent consideration liability was $ 3.5 million. Warrants (Successor) Upon the Closing, 201,112 warrants that were initially issued by Priveterra in February 2021, consisting of 127,788 public warrants sold in the IPO and 73,334 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 recorded to the Successor’s consolidated statement of operations. The Company utilized the Black-Scholes model (Level 3) to value the warrants at $ 1.2 million as of December 31, 2024. The Company utilized the publicly reported market price of the public warrants (Level 1) to value the warrant liability at $ 1.4 million as of December 31, 2023 (Successor). For the year ended December 31, 2024 and the Successor period from July 22, 2023 to December 31, 2023, the (expense) income from the change in fair value of warrants was $( 14.7 ) million and $ 2.3 million, respectively. The following table summarizes the significant inputs as of the valuation dates: ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ 2024 ​ 2023 ​ ​ (Level 3) ​ (Level 1) Stock Price $ 38.88 $ 518.40 Expected volatility 155.00 % — Risk-free interest rate 4.23 % — Expected life (in years) 0.56 — Expected dividend yield — — ​ Public warrants Each whole public warrant entitles the holder to purchase one share of the Company’s common stock at a price of $ 828.00 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 1.0 . 118 Table of Contents The Company may call the public warrants for redemption for cash: ● in whole and not in part; ● at a price of $ 0.72 per warrant; ● upon not less than 30 days ’ prior written notice of redemption to each warrant holder (the “ 30-day redemption period ” ); ● 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; and ● if, and only if, the closing price of the Company's common stock equals or exceeds $ 1,296.00 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 $ 7.20 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; and ● if, and only if, the closing price of the Company ’ s common stock equals or exceeds $ 720.00 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 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. Warrant exercises On March 29, 2024, the Company delivered notice of redemptions to warrant holders with a redemption date of April 29, 2024 for a cashless redemption of the Company’s outstanding public warrants. The number of shares of common stock that each exercising warrant holder received by virtue of the cashless exercise (instead of paying the $ 828.00 per Public Warrant cash exercise price) was calculated in accordance with the terms of the Warrant Agreement. Any remaining unexercised public warrants on the redemption date were cancelled and the public warrant holders received the redemption price of $ 7.20 for each public warrant. During the year ended December 31, 2024, an aggregate of 142,829 warrants were exercised on a cashless basis for 27,310 shares of common stock, with an impact to additional paid in capital of $ 15.0 million. Additionally, the Company paid $ 21 thousand in April 2024 related to the cancellation of the remaining 2,881 public warrants on the redemption date. A summary of activity of the Company’s issued and outstanding public warrants for the year ended December 31, 2024 (Successor) is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Public ​ Private ​ Total ​ ​ ​ ​ ​ ​ ​ Issued and Outstanding, January 1, 2024 ​ 127,778 ​ 73,334 ​ 201,112 Number of warrants exercised ​ ( 124,897 ) ​ ( 17,931 ) ​ ( 142,828 ) Number of warrants cancelled ​ ( 2,881 ) ​ - ​ ( 2,881 ) Issued and Outstanding, December 31, 2024 ​ - ​ 55,403 ​ 55,403 ​ ​ ​ ​ ​ 119 Table of Contents 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 3 Forward Merger ). ​ Summary of Recurring Fair Value Measurements The following details the Company’s recurring measurements for assets and liabilities at fair value on the consolidated balance sheets as of December 31, 2024 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Convertible Notes ​ ​ Warrant Liabilities ​ ​ Contingent Consideration ​ ​ Embedded Forward Purchase Agreement and Make Whole Derivative ​ ​ ​ (Level 3) ​ ​ (Level 3) ​ ​ (Level 3) ​ ​ (Level 3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Successor ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, January 1, 2024 ​ $ - ​ $ 1,447 ​ $ 104,350 ​ $ 41,043 Issuance of convertible notes ​ ​ 15,000 ​ ​ - ​ ​ - ​ ​ - Change in fair value ​ ​ ( 3,311 ) ​ ​ 14,719 ​ ​ ( 100,809 ) ​ ​ ( 663 ) Warrant cashless exercise ​ ​ - ​ ​ ( 14,979 ) ​ ​ - ​ ​ - Termination of forward purchase agreements ​ ​ - ​ ​ - ​ ​ - ​ ​ ( 40,380 ) Balance, December 31, 2024 ​ $ 11,689 ​ $ 1,187 ​ $ 3,541 ​ $ - 120 Table of Contents ​ The following details the Company’s recurring measurements for assets and liabilities at fair value on the consolidated balance sheets as of December 31, 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Convertible Notes ​ ​ Warrant Liabilities ​ ​ Contingent Consideration ​ ​ Embedded Forward Purchase Agreement and Make Whole Derivative ​ ​ ​ (Level 3) ​ ​ (Level 1) ​ ​ (Level 3) ​ ​ (Level 3) Predecessor ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, December 31, 2022 ​ $ 131,292 ​ $ - ​ $ - ​ $ - Issuance of convertible notes ​ ​ 14,000 ​ ​ - ​ ​ - ​ ​ - Change in fair value ​ ​ 19,359 ​ ​ - ​ ​ - ​ ​ - Conversion to common shares ​ ​ ( 164,651 ) ​ ​ - ​ ​ - ​ ​ - Balance, July 21, 2023 ​ ​ - ​ ​ - ​ ​ - ​ ​ - ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Successor ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, July 22, 2023 ​ ​ - ​ ​ 3,765 ​ ​ 157,100 ​ ​ 32,677 Additions ​ ​ - ​ ​ - ​ ​ - ​ ​ - Change in fair value ​ ​ - ​ ​ ( 2,318 ) ​ ​ ( 52,750 ) ​ ​ 8,366 Balance, December 31, 2023 ​ $ - ​ $ 1,447 ​ $ 104,350 ​ $ 41,043 ​ ​ ​ Note 7. Commitments and Contingencies Operating Leases In December 2021, the Predecessor entered into a three-year non-cancellable lease for office space. The lease was extended for an additional five years in March 2024 by the Successor. 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 Successor’s incremental borrowing rate. Lease expense is recognized on a straight-line basis over the lease term. 121 Table of Contents The following table summarizes supplemental balance sheet information related to the operating lease as of December 31, 2024 (in thousands): ​ ​ ​ ​ ​ Minimum lease payments by fiscal year ​ ​ 2025 ​ $ 175 ​ 2026 ​ 297 ​ 2027 ​ ​ 307 ​ 2028 ​ ​ 318 ​ 2029 ​ ​ 329 ​ Thereafter ​ ​ — ​ Total future minimum lease payments ​ 1,426 ​ Less: Imputed interest ​ ( 160 ) ​ Present value of lease payments ​ 1,266 ​ Less: Current portion (included in other accrued expenses) ​ ( 121 ) ​ Noncurrent operating lease liability ​ $ 1,145 ​ Operating lease right-of-use asset ​ $ 1,288 ​ Remaining lease term in years ​ 5.0 ​ Discount rate ​ 4.3 % ​ The following table summarizes supplemental disclosures of operating cost and cash flow information related to operating leases for the periods indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ ​ ​ 2024 ​ 2023 ​ ​ ​ Successor ​ Successor July 22 to December 31 ​ ​ Predecessor January 1 to July 22 ​ Cost of operating leases ​ $ 260 ​ $ 153 ​ ​ $ 122 ​ Cash paid for operating leases ​ ​ 319 ​ 180 ​ ​ ​ 129 ​ ​ ​ ​ 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. 122 Table of Contents The Company has recorded $ 0.2 million as a liability in accounts payable on the consolidated balance sheets as of December 31, 2024 (Successor) and accrued a de minimus amount for ABP-450 supplies in accrued expenses on the consolidated balance sheets as of December 31, 2023 (Successor). 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. In November 2023, the Company filed a motion to dismiss certain claims included in Odeon’s complaint. In April 2024, the Company successfully obtained a dismissal of Odeon’s non-breach of contract claims, including the tort claims, breach of covenant claim and associated punitive damages claim. Odeon’s breach of contract claim is proceeding, with each party filing a summary judgment motion in March 2025, which the court is expected to decide upon in the coming months. 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 Summary of Significant Accounting Policies for additional information. Note 8. Income Taxes The Company’s income (loss) before income taxes for the periods presented in the statement of operations was entirely generated from its U.S. operations. As a result of its continuing taxable losses, the Company had no provision for income taxes for the year ended December 31, 2024 and the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to December 31, 2023 (Successor). As of December 31, 2024 and 2023, the Company had federal net operating loss (“NOL”) carryforwards of $ 112.1 million and $ 87.3 million, respectively, which will begin to expire in 2036. The Company had state NOLs of $ 140.5 million and $ 116.2 million as of December 31, 2024 and 2023, respectively, which will begin to expire in 2034. As of December 31, 2024 and 2023, the Company has federal research and development (“R&D”) credit carryforwards of $ 6.9 million and $ 6.1 million, respectively, which will begin to expire in 2039. As of December 31, 2024 and 2023, the Company also has California R&D credit carryforwards of $ 5.0 million and $ 4.4 million, respectively, which have an indefinite carryforward period. ​ In general, if the Company experiences a greater than 50 percentage point aggregate change in ownership of certain significant stockholders over a three-year period (a “Section 382 ownership change”), utilization of its pre-change NOL carryforwards and the R&D credit carryforwards is subject to an annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and similar state laws. The annual limitation generally is determined by multiplying the value of the Company’s stock at the time of such ownership change, subject to certain adjustments, by the applicable long-term tax-exempt rate. Such limitations may result in expiration of a portion of the NOL carryforwards and R&D credit carryforwards before utilization and may be material. As of December 31, 2024, the Company has not determined to what extent a potential ownership change will impact the annual limitation that may be placed on the Company’s utilization of its NOL carryovers and R&D credit carryforwards. Due to the existence of the valuation allowance, limitations created by ownership changes, if any, will not impact the Company’s effective tax rate. ​ 123 Table of Contents The components of deferred tax assets and liabilities were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2024 ​ 2023 Deferred tax assets: ​ ​ ​ Accrued compensation ​ $ 283 ​ $ 271 Accrued other expense ​ 469 ​ — Stock compensation ​ 1,941 ​ 1,647 Start-up costs and other intangibles ​ 10,834 ​ 12,230 Net operating losses ​ 35,966 ​ 28,613 Lease liability ​ 378 ​ 83 Other deferred assets ​ ​ 24 ​ 23 Capitalized Research and Development Expenses ​ 11,090 ​ 11,264 ​ ​ 60,985 ​ 54,131 Less: valuation allowance ​ ( 59,560 ) ​ ( 53,978 ) Total deferred tax assets ​ 1,425 ​ 153 Deferred tax liabilities: ​ ​ Depreciation ​ ( 53 ) ​ ( 75 ) ROU Asset ​ ( 384 ) ​ ( 78 ) Convertible notes ​ ( 988 ) ​ — Total deferred tax liabilities ​ ( 1,425 ) ​ ( 153 ) Net deferred income taxes ​ $ — ​ $ — ​ ​ A reconciliation of the difference between the provision (benefit) for income taxes and income taxes at the statutory U.S. federal income tax rate is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ 2024 ​ 2023 Income tax at statutory rate ​ 21.0 % 21.0 % Convertible notes ​ — ​ ( 1.1 ) ​ Contingent consideration ​ ( 50.4 ) ​ 2.9 ​ Forward purchase agreements ​ 9.8 ​ ( 1.0 ) ​ Warrants ​ 7.4 ​ 0.1 ​ Stock compensation ​ 1.0 ​ ( 0.2 ) ​ Officers compensation ​ 1.4 ​ ( 0.5 ) ​ Transaction costs ​ 0.5 ​ ( 0.8 ) ​ IPR&D ​ — ​ ( 19.0 ) ​ Change in valuation allowance ​ 9.3 ​ ( 1.4 ) ​ Effective tax rate ​ 0.0 % 0.0 % ​ A reconciliation of unrecognized tax benefits at the beginning and end of 2024 and 2023 is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2024 ​ 2023 Balance, beginning of year ​ $ 14,670 ​ $ 11,061 Increases due to current year tax positions ​ 1,445 ​ 3,609 Decreases due to prior year tax positions ​ — ​ — Balance, end of year ​ $ 16,115 ​ $ 14,670 124 Table of Contents ​ The Company has considered the amounts and probabilities of the outcomes that can be realized upon ultimate settlement with the tax authorities and determined unrecognized tax benefits should be established of $ 16.1 million and $ 14.7 million as of December 31, 2024 and 2023, respectively. The Company’s effective income tax rate would not be impacted if the unrecognized tax benefits are recognized. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months. The Company’s policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense. There were no accrued interest and penalties associated with uncertain tax positions as of December 31, 2024. The Company’s tax returns for all years since inception are open for audit. The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. Note 9. Common 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 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. Successor 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. 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 December 31, 2024 (Successor), no cash dividend has been declared to date. Each share of common stock is entitled to one vote. See to Note 3 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 December 31, 2024 (Successor) and December 31, 2023 (Successor): ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2024 ​ 2023 ​ ​ ​ ​ ​ Stock options issued and outstanding ​ 98,971 53,455 Restricted stock units (unvested) ​ 25,613 14,075 Shares available for future issuance under the stock incentive plan ​ 25,818 ​ 49,118 Warrants ​ 55,403 ​ 201,112 Contingent consideration ​ 222,653 ​ 222,653 Convertible notes ​ 399,128 ​ — Total common stock reserved ​ 827,586 540,413 125 Table of Contents ​ ATM Offering of Common Stock 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. Under the ATM, 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. As of December 31, 2024, the Company issued 2,241 shares under the ATM for net proceeds of $ 147 thousand and approximately $ 49.8 million of common stock remained available to be sold 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 6,780 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 December 31, 2024, there were 12,619 shares available for issuance. There have been no shares issued under the 2023 ESPP. ​ Note 10. 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 . 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 prior to the Closing: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ Average ​ ​ ​ Number of ​ ​ Exercise ​ ​ ​ Shares ​ ​ Price ​ Predecessor ​ ​ ​ ​ ​ ​ Outstanding, January 1, 2023 ​ 9,694,890 ​ $ 1.53 ​ Options granted ​ — ​ ​ — ​ Options forfeited — ​ ​ — ​ Options cancelled in connection with Merger ​ ( 9,694,890 ) ​ $ 1.53 ​ Outstanding, July 21, 2023 — ​ ​ — ​ Exercisable, July 21, 2023 — ​ ​ — ​ ​ 126 Table of Contents All awards were fully vested prior to 2022. As such during the periods from January 1, 2023 to July 21, 2023 (Predecessor), the Predecessor did not recognize share-based compensation expense related to stock options granted under the 2013 Stock Incentive Plan. As of December 31, 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 (“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. 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 . 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 1.078 to 1 share. Additionally, the exercise price for the awards were repriced to $ 720.00 for all options. The options and RSU awards have lock-up provisions of one year from the Closing. 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 3 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 48,844 shares of the Company’s common stock, and a total of 15,059 RSU awards, which converted into RSU awards covering 16,250 shares of the Company’s common stock. Of such RSU awards, 1,778 RSUs 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, 6,481 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). Upon designation of a probable milestone, the Company expenses 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 year ended December 31, 2024 and the period from July 22, 2023 to December 31, 2023 (Successor), the Company has recognized $ 0.3 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 consolidated statement of operations. The following table summarizes stock option activity in 2024 under 2019 Incentive Award Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ Average ​ ​ ​ Number of ​ Exercise ​ ​ ​ Shares ​ Price ​ Successor ​ ​ ​ ​ ​ Outstanding, January 1, 2024 ​ 48,844 ​ $ 720.00 ​ Options granted — ​ ​ — ​ Options forfeited ( 889 ) ​ $ 720.00 ​ Outstanding, December 31, 2024 47,955 ​ $ 720.00 ​ Exercisable, December 31, 2024 39,302 ​ $ 720.00 ​ ​ 127 Table of Contents 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 December 31, 2024 and December 31, 2023, the weighted average remaining contractual life of options outstanding and options exercisable was 6.0 years and 7.1 years. During the year ended December 31, 2024 (Successor) and the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to December 31, 2023 (Successor), the Company recognized $ 2.9 million, $ 2.7 million and $ 2.4 million, respectively, of share-based compensation expense related to stock options granted. As of December 31, 2024 and December 31, 2023, total unrecognized compensation expense related to nonvested stock options was $ 1.8 million and $ 4.9 million, respectively, which is expected to be recognized over the weighted-average remaining requisite service period of 4 months and 10 months , respectively. The following table summarizes restricted stock units activity in 2024 under the 2019 Incentive Award Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ Average ​ ​ ​ Number of ​ Grant Date ​ ​ ​ Shares ​ Fair Value ​ Successor ​ ​ ​ ​ ​ ​ Outstanding, January 1, 2024 14,075 ​ $ 780.48 ​ Granted — ​ — ​ Vested ( 2,222 ) ​ $ 780.48 ​ Forfeited ​ ( 455 ) ​ $ 780.48 ​ Outstanding, December 31, 2024 11,398 ​ $ 780.48 ​ ​ During the year ended December 31, 2024 (Successor) and the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to December 31, 2023 (Successor), the Company recognized $ 1.3 million, $ 0.5 million and $ 0.8 million, respectively, of share-based compensation expense related to restricted stock units granted. As of December 31, 2024 and December 31, 2023, total unrecognized compensation expense related to nonvested restricted stock units was $ 7.3 million and $ 9.6 million, respectively, which is expected to be recognized over the weighted-average remaining requisite service period of 21 months and 31 months , respectively. The unrecognized compensation expense with the earnout criteria will be recognized when the milestones are determined to be probable over the RSUs vesting term, calculated as the period from the date the milestone was determined to be probable and the expected achievement date of the milestone. 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 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. 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) 53,332 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 128 Table of Contents purchased on the open market. As of December 31, 2024, there were 13,199 shares of common stock available for issuance under the 2023 Plan. The following table summarizes stock options activity in 2024 under the 2023 Incentive Award Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ Average ​ ​ ​ Number of ​ Exercise ​ ​ ​ Shares ​ Price ​ ​ ​ ​ ​ ​ ​ ​ Outstanding, January 1, 2024 4,611 ​ $ 393.84 ​ Options granted 47,634 ​ $ 242.14 ​ Options forfeited ( 1,229 ) ​ $ 811.13 ​ Outstanding, December 31, 2024 51,016 ​ $ 242.14 ​ Exercisable, December 31, 2024 9,847 ​ $ 108.16 ​ ​ The weighted average per share fair value of options granted in 2024 and 2023 was $ 135.50 and $ 229.29 , respectively. The weighted average remaining contractual life of options outstanding and options exercisable as of December 31, 2024 and December 31, 2023 was 9.5 years and 9.6 years, respectively. During the year ended December 31, 2024 (Successor) and the period from July 22, 2023 to December 31, 2023 (Successor), the Company recognized $ 1.6 million and $ 0.1 million, respectively, of share-based compensation expense related to stock options granted. As of December 31, 2024 and December 31, 2023, total unrecognized compensation expense related to nonvested stock options was $ 5.3 million and $ 0.9 million, respectively, which is expected to be recognized over the weighted-average remaining requisite service period of 19 months and 35 months , respectively. The following table summarizes restricted stock units activity in 2024 under the 2023 Incentive Award Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ Number of ​ Grant Date ​ ​ Shares ​ Fair Value ​ ​ ​ ​ ​ ​ Outstanding, January 1, 2024 — ​ ​ — Granted 14,215 ​ $ 60.05 Vested — ​ — Forfeited — ​ ​ — Outstanding, December 31, 2024 14,215 ​ $ 60.05 ​ During the year ended December 31, 2024 (Successor), the Company recognized $ 0.1 million of share-based compensation expense related to restricted stock units granted. As of December 31, 2024 (Successor), total unrecognized compensation expense related to nonvested restricted stock units was $ 0.7 million, which is expected to be recognized over the weighted-average remaining requisite service period of 20 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 year ended December 31, 2024 (Successor) and the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to December 31, 2023 (Successor), the Company recognized $ 4.7 million, $ 2.8 million and $ 3.1 million, respectively, of share-based compensation expense in selling, general and administrative expenses, respectively, and $ 1.5 million, $ 0.4 million and 129 Table of Contents $ 0.8 million, respectively, in research and development expenses in the accompanying consolidated statements of operations and comprehensive income (loss). The fair value of stock options under the 2019 Plan and 2023 Plan was estimated using the following assumptions: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ ​ ​ 2024 ​ 2023 ​ ​ ​ ​ ​ ​ ​ Expected volatility ​ 47 % – 87 % 39 % – 58 % ​ Risk-free interest rate ​ 3.7 % – 4.3 % 4.1 % – 4.4 % ​ Expected life (in years) ​ 5.27 – 6.25 3.00 – 6.25 ​ Expected dividend yield ​ — — ​ ​ Fair Value of the Underlying Common Stock. For the Predecessor period, since the Predecessor’s common stock was not traded in a public stock market exchange, the Board 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 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 sufficient 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. Note 11. Subsequent Events The Company has evaluated subsequent events for recognition and remeasurement purposes as of and for the twelve months ended December 31, 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 discussed below. Public Offering On January 6, 2025, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp. (“Aegis” or the “Underwriter”) pursuant to which the Company agreed to sell and issue, in an underwritten public offering (the “Offering”) 555,571 Common Units, each consisting of (i) one (1) share of Common Stock, (ii) one (1) Series A Registered Common Warrant to purchase one (1) share of Common Stock per warrant at an exercise price of $ 45.00 (the “Series A Warrants”) and (iii) one (1) Series B Registered Common Warrant to purchase one (1) share of Common Stock per warrant at an exercise price of $ 45.00 (the “Series B Warrants” and together with the Series A Warrants, the “Warrants”). Additionally, the Company granted Aegis a 45-day option to purchase additional shares of Common Stock and/or Warrants of (i) up to 15.0 % of the number of shares of Common Stock sold in the offering, (ii) up to 15.0 % of the number of Series A Warrants sold in the offering and (iii) up to 15.0 % of the number of Series B Warrants sold in the offering. The purchase price per additional share of Common Stock is equal to the public offering price of one Common Unit (less $0.01 allocated to each full Warrant), less the underwriting discount. The purchase price per additional 130 Table of Contents Warrant is $ 0.01 . On January 7, 2025, Aegis exercised its over-allotment option with respect to 83,334 Series A Warrants and 83,334 Series B Warrants. The closing of the Offering occurred on January 7, 2025. The Company received net proceeds of approximately $ 18.3 million from the Offering, after deducting the offering expenses payable by the Company, including the Underwriter’s fees and expenses. ​ ​ Special Meeting of Shareholders ​ On February 24, 2025, the following proposals were approved at a special meeting of shareholders: ● An amendment to the Company’s certificate of incorporation to increase the number of authorized shares of our common stock, par value $ 0.0001 (the “Common Stock”) from 500,000,000 to 1,040,000,000 ; ● Discretionary authority granted to the Company’s board of directors to (i) amend the Company’s certificate of incorporation to combine outstanding shares of the Company’s common stock into a lesser number of outstanding shares at a specific ratio within a range of one -for-five (1-for-5) to a maximum of a one -for-one hundred fifty (1-for-150), with the exact ratio to be determined by our board of directors in its sole discretion; and (ii) effect the reverse stock split, if at all, within one year of the date the proposal is approved by stockholders; ● Authorized shares of common stock underlying the warrants and certain provisions of the warrants issued in connection with a public offering that was consummated on January 7, 2025. ​ ​ Reverse Stock Split ​ On February 24, 2025, following the Special Meeting of Shareholders, the Board approved the filing of a Certificate of Amendment to the Certificate of Incorporation (the “Charter Amendment”) to effect a reverse stock split at a split ratio of 1 -for-72 (the “Reverse Stock Split”). ​ As a result of the Reverse Stock Split, each 72 pre-split shares of Common Stock outstanding will automatically combine into one new share of Common Stock without any action on the part of the holders. The Reverse Stock Split will affect all of the Company’s stockholders uniformly and will not affect any stockholder’s percentage ownership interests in the Company. No fractional shares will be issued in connection with the Reverse Stock Split. In lieu of fractional shares, any person who would otherwise be entitled to a fractional share of Common Stock as a result of the reclassification and combination following the effective time of the Reverse Stock Split (after taking into account all fractional shares of Common Stock otherwise issuable to such holder) shall instead receive a number of shares rounded up to the nearest whole share. Proportional adjustments will be made to the number of shares of Common Stock issuable upon exercise or conversion of the Company’s outstanding equity awards and warrants, as well as the applicable exercise price, except in cases where the applicable agreement provides otherwise. On February 26, 2025, the effective date of the Reverse Stock Split, the number of outstanding shares of Common Stock was reduced from approximately 79.9 million shares to approximately 1.1 million shares (subject to rounding of fractional shares, which will be rounded up to the nearest whole share). The capital stock accounts, all share data and earnings (loss) per share, restricted stock units and stock options and corresponding exercise price give effect to the reverse stock split, applied retrospectively, to all periods presented for Successor and on-the-line periods. However, share amounts and per share data for the Predecessor have not been adjusted to reflect our 1-for-72 reverse stock split because the capital structure of Predecessor is not comparable to the Successor. ​ ​ ​ ​ 131 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.