Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of financial condition and results of operations should be read together with the condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Report. Some of the information contained in this discussion and analysis contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth in the sections of this Report captioned “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements,” actual results may differ materially from those anticipated in these forward-looking statements. Unless the context otherwise requires, references to “we,” “us,” “our,” “AEON” and “the Company” refer to the business and operations of AEON Biopharma, Inc. and its consolidated subsidiaries.
Company Overview
We are a biopharmaceutical company focused on developing ABP-450 as a biosimilar to BOTOX® (onabotulinumtoxinA) for therapeutic indications. Our strategy is to pursue biosimilarity across all clinically relevant dimensions of the reference product, including label breadth, dosing and dilution, clinical performance and physician workflow, in order to minimize switching friction for prescribers and payers, and to initially pursue regulatory approval in the United States through Section 351(k). We hold exclusive development and commercialization rights for ABP-450 in therapeutic indications across the United States, Canada, the European Union, the United Kingdom, and certain other international territories.
Building on this strategy, we are advancing ABP-450 through the 351(k) biosimilar pathway toward a potential BLA in the United States, targeting the therapeutic botulinum toxin market, which we estimate to be approximately $3.5 billion in 2026 and projected to grow at an annual growth rate of approximately 8%, according to Clarivate Therapeutic Botulinum Toxin Market Insights 2025. This large and continually growing market has historically been dominated by a single branded product, BOTOX®. We believe this market has remained highly concentrated in part due to the reference product’s broad label covering all twelve FDA- approved therapeutic indications, which has limited the adoption of competing products with narrower labels. Based on qualitative interviews conducted by a third-party market research firm with a small number of neurologists and payers, physicians reported operational complexity and economic constraints associated with existing therapeutic neurotoxins, including limited flexibility under buy-and-bill reimbursement dynamics and challenges associated with managing products with differing dosing, dilution and labeling requirements. These interviewees indicated that, despite these challenges, BOTOX® remains the predominant product due to its comprehensive label and established clinical workflows. We believe these dynamics may contribute to continued reliance on a single product and highlight the importance of a biosimilar approach designed for full-label alignment and workflow compatibility.
ABP-450 is the same botulinum toxin complex that is currently approved as a biosimilar in Mexico, India and the Philippines and, in the U.S., is approved to provide temporary improvement in the appearance of moderate to severe glabellar lines for certain adult patients and marketed by Evolus, Inc. under the name Jeuveau® in the U.S. and Nuceiva® in Canada and the European Union. We have established a highly experienced management team with specific experience in biopharmaceutical and botulinum toxin development and commercialization.
ABP-450 is manufactured by Daewoong Pharmaceutical Co., Ltd. (“Daewoong”) pursuant to a license and supply agreement under which we hold exclusive development and commercialization rights to ABP-450 for therapeutic indications in the United States, Canada, the European Union, the United Kingdom, and certain other international territories. ABP-450 is manufactured by Daewoong in a facility designed to be compliant with current Good Manufacturing Practice (“cGMP”) that has manufactured products approved by the U.S. Food and Drug Administration, Health Canada, and the European Commission. These facilities have been inspected by global regulatory authorities, including the FDA and EMA. The same botulinum toxin complex is commercially available in multiple international markets and is approved in the United States for aesthetic use under the brand name Jeuveau®. Our development program is focused exclusively on therapeutic indications, where we believe the biosimilar pathway may enable efficient development and broad label access, subject to regulatory review.
We believe the U.S. therapeutic neurotoxin market is characterized by a concentrated prescriber and payer base, which may enable an efficient commercialization approach. Based on third-party claims data analyses, a relatively small number of high-volume neurologists account for a significant portion of therapeutic neurotoxin utilization, and a limited number of payers cover a majority of treated patients. We believe this concentration may allow for targeted engagement strategies focused on key prescribers and payers.
We held an initial meeting with the FDA in the third quarter of 2024 during which we obtained feedback from the FDA on the next steps to develop a BOTOX® biosimilar. We commenced analytical studies in the fourth quarter of 2024 to prepare for a BPD
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Type 2a meeting with the FDA that was held in January 2026. During the meeting, the FDA reviewed the Company’s proposed analytical similarity strategy under the 351(k) biosimilar pathway. The FDA acknowledged the scientific challenges associated with characterizing a 900 kDa botulinum neurotoxin complex, provided constructive feedback on our proposed development approach and analytical assessment plan, and noted that our analytical methodologies appeared reasonable to support advancement of the program toward a comprehensive analytical similarity package. We believe this feedback provides a clear framework for the remaining analytical components of our biosimilar development program and plan to complete the majority of our analytical comparability program in 2026. We anticipate receiving written feedback from a BPD Type 2b meeting with the FDA in the second half of 2026 regarding the next phase of the development program to support approval of ABP-450 as a biosimilar to BOTOX® across all approved therapeutic indications.
The initial results from our analytical studies indicate a 100% amino acid sequence match confirmed between ABP-450 and BOTOX®, based on sequence coverage of 93% to 99% for the five proteins that comprise the 900 kDa botulinum toxin type A complex, using liquid chromatography/mass spectrometry (“LC/MS”) analysis of more than 3,400 amino acids across multiple lots of ABP-450 and BOTOX®, without any sequence deviations observed. Additionally, ABP-450 also demonstrated highly similar potency across two distinct assays (LD50 — an in vivo biological activity assay and CBPA — a cell-based potency assay) to support clinical dose predictability, comparable vial-to-vial active ingredient composition using ELISA — further supporting dose similarity and reliability, and functional cleavage of SNAP-25, consistent with the mechanism of action. These results contribute to our assessment of analytical similarity by characterizing key structural attributes of ABP-450 relative to the reference product and are intended to reduce residual uncertainty and potentially limit the need for further clinical assessments. Additional analytical and functional studies are ongoing as part of our broader analytical similarity assessment.
ABP-450 has been previously evaluated in multiple clinical and preclinical programs, including Phase 2 studies in cervical dystonia and migraine and preclinical work in gastroparesis and neuropsychiatric models. The Phase 2 cervical dystonia program met its primary and key secondary endpoints and, together with its open-label safety extension, provides human clinical data supporting the potential safety and efficacy of ABP-450. We are not currently pursuing additional 351(a) indication-specific development programs, but we retain related intellectual property and know-how that could support future collaborations or lifecycle opportunities.
Prior to licensing the botulinum toxin complex to Evolus, Daewoong conducted a broad preclinical development program for ABP-450 and has received approval from over 69 regulatory authorities. Subsequently, Evolus completed a comprehensive clinical development program of the same botulinum toxin complex and has received approval in the United States, the European Union and Canada to market and sell Jeuveau® in the United States and Nuceiva® in Canada and the European Union for the temporary improvement in the appearance of moderate to severe glabellar, or frown lines in adults. Over 2,100 adult subjects with moderate to severe glabellar lines at maximum frown participated in Evolus’ clinical development program, and each of Evolus’ Phase 3 clinical studies successfully met their respective primary safety and efficacy endpoints. While none of these preclinical or clinical programs specifically contemplated any therapeutic use of ABP-450, given that the FDA’s regulatory requirements are generally the same for the cosmetic or therapeutic use of a toxin, we believe that the positive data derived from these preclinical and clinical studies will support the clinical development and potential future safety labeling of ABP-450 for our 351(k) biosimilar program, across all labeled dose ranges.
We plan to pursue approval of ABP-450 by submitting a Section 351(k) BLA that exclusively contemplates therapeutic indications for ABP-450, which we believe could improve provider reimbursement for ABP-450, if approved. Existing botulinum toxins, including BOTOX®, are approved under a single BLA for both therapeutic and cosmetic indications. As a result of this and other factors, other botulinum toxins are required to include the sales prices of both therapeutic and cosmetic botulinum toxin sales when calculating the average selling price, or ASP, that is used to determine the reimbursement amount physicians receive for therapeutic usage. The inclusion of a lower cosmetic sales price in the calculation of ASP can, in some cases, cause physicians that inject for therapeutic applications to lose money on the products they use when treating patients with existing botulinum toxins and also creates a deterrent to providing payors and/or providers with rebates or other financial incentives. If we are successful in obtaining approval of a Section 351(k) BLA for therapeutic indications of ABP-450, we believe this could facilitate more consistent reimbursement economics for providers administering ABP-450 in therapeutic settings while also providing greater flexibility to support contracting strategies with payors. Subject to pricing, reimbursement and formulary decisions, these characteristics may create greater alignment between provider reimbursement incentives and payor objectives to manage treatment costs. We believe such alignment, if achieved, could support adoption of ABP-450 in therapeutic indications. This pricing approach would be unique within the current therapeutic neurotoxin market and, we believe, could provide flexibility to offer competitive net pricing to payers while maintaining favorable reimbursement dynamics for providers. In addition, under the Medicare Part B buy-and-bill framework, biosimilars are generally reimbursed at the biosimilar’s own ASP plus an add-on payment equal to 6% of the reference product’s ASP,
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which, because the reference product typically has a higher ASP than the biosimilar, can result in a larger per-unit margin for providers administering the biosimilar relative to the reference product. However, our expected pricing model has not been finalized and may differ from current expectations.
We have never been profitable from operations and, as of June 30, 2026, we had an accumulated deficit of $483.8 million. We have never generated revenue from ABP-450. We have concluded that we do not have sufficient cash to fund our operations for 12 months from the date of our financial statements without additional financing, and as a result, there is substantial doubt about our ability to continue as a going concern. As of the date of this Report, we expect to have sufficient cash to fund our operating plan into the first quarter of 2027, including net proceeds of $13.6 million from the 2026 Offering and Over-Allotment that were received in July 2026. Any further development of ABP-450 for any indication, including the biosimilar pathway and any additional studies, will require additional funding, which may not be available to us on reasonable terms, or at all.
We do not expect to receive any revenue from ABP-450 or any future product candidates that we develop unless and until we obtain regulatory approval and commercialize ABP-450 or any future product candidates. We expect to continue to incur significant expenses and increasing net operating losses for the foreseeable future as we seek regulatory approval, prepare for and, if approved, proceed to commercialization of ABP-450.
Liquidity and Capital Resources and Going Concern
As disclosed further below in the section titled “ Liquidity and Capital Resources , ” we have incurred operating losses and negative cash flows from operating activities since inception and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of June 30, 2026, we had reported cash and cash equivalents of $3.4 million and an accumulated deficit of $483.8 million. In July 2026, we received aggregate net proceeds of approximately $13.6 million from the 2026 Offering and the subsequent over-allotment closing, subject to final closing-cost reconciliation. Based on our current operating plan, which does not assume any proceeds from future warrant exercises, additional ATM sales or other financings, we expect our existing cash and cash equivalents to fund operations into the first quarter of 2027. This estimate is subject to significant uncertainty, including the timing and cost of analytical studies, regulatory activities, clinical-startup work, payments to vendors and Daewoong, and other operating expenses. We will require additional capital before completing our planned development program, and there can be no assurance that financing will be available on acceptable terms or at all. As a result of these conditions, management has concluded that substantial doubt about our ability to continue as a going concern exists as conditions and events, considered in the aggregate, indicate that it is probable that we will be unable to meet our obligations as they become due within one year after the date that the financial statements included in this Report are issued. Our ability to continue as a going concern is dependent upon our ability to successfully accomplish our business plans and secure sources of financing and ultimately attain profitable operations.
Notice of Noncompliance
On February 3, 2025, the Company received a notice from NYSE American that it was not in compliance with Section 1003(a)(i) of the NYSE American Company Guide due to a stockholders’ deficit of $32.1 million as of September 30, 2024 and losses in two of its three most recent fiscal years. The Company subsequently submitted a plan to regain compliance, which NYSE American accepted on April 22, 2025, granting the Company until August 3, 2026 to regain compliance (the “Plan Period”). During the Plan Period, the Company remained subject to periodic review by NYSE American and its Class A common stock continued to trade on NYSE American under the symbol “AEON.”
On March 31, 2026, the Company received an additional notice that it was not in compliance with Section 1003(a)(ii) of the Company Guide due to a stockholders’ deficit of approximately $55 million as of December 31, 2025 and losses in three of its four most recent fiscal years. The additional notice did not affect the Company’s listing status, Plan Period, or previously accepted compliance plan.
On August 3, 2026, following completion of the July 2026 offering and related over-allotment exercise, the Company received notification from NYSE American that it had regained compliance with the continued listing standards, including the deficiencies previously identified under Sections 1003(a)(i) and 1003(a)(ii) of the Company Guide. The Company remains subject to NYSE American’s ongoing continued listing monitoring procedures.
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2025 Public Offering
On January 6, 2025, we entered into an 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 “2025 Offering”) 555,571 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 Warrant”) 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 Warrant”). Additionally, the Company granted Aegis a 45-day option to purchase additional shares of Common Stock and/or Series A Warrants and Series B 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 unit (less $0.01 allocated to each full Series A Warrant or Series B Warrant), less the underwriting discount. The purchase price per additional Series A Warrant or Series B 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 2025 Offering occurred on January 7, 2025. The Company received net proceeds of approximately $18.3 million from the 2025 Offering, after deducting the offering expenses payable by the Company, including the Underwriter’s fees and expenses.
PIPE Financing
On November 12, 2025, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain investors (the “Investors”) whereby the Company agreed to issue and sell to the Investors in a private placement (the “PIPE Financing”): (i) shares (the “PIPE Shares”) of its common stock, par value $0.0001 per share, (ii) pre-funded warrants (the “PIPE Pre-Funded Warrants”) to purchase shares of common stock, (iii) warrants (the “PIPE Warrants”) to purchase shares of common stock, and (iv) True-Up Warrants (as defined below) to purchase shares of common stock. The purchase price paid by the Investors was $0.9116 per Share (or $0.9115 per pre-funded warrant in lieu of shares), the closing price of the Company’s stock on November 12, 2025.
The first closing of the PIPE Financing occurred on November 18, 2025 (the “First Closing”). At the First Closing, we issued 1,964,905 PIPE Pre-Funded Warrants and received gross proceeds of $1.8 million. Following the approval of the PIPE Financing at the special stockholder meeting on January 21, 2026, and the consummation of the Exchange (as defined below), the second closing of the PIPE Financing occurred on January 27, 2026 (the “Second Closing”). Upon the Second Closing and the consummation of the Exchange, the Company issued to each Investor pursuant to the Securities Purchase Agreement, a warrant (the “True-Up Warrant”) to purchase the number of shares of common stock necessary for the Investor’s Post-Exchange Investment Percentage (as defined in the Securities Purchase Agreement) following the issuance of the Exchange Shares (as defined below) to be equal to the Investor’s Pre-Exchange Investment Percentage (as defined in the Securities Purchase Agreement) (rounded down to the nearest whole share of common stock), provided, however, that in no event shall the number of shares of common stock issuable under an Investor’s True-Up Warrant exceed the total number of PIPE Shares or PIPE Pre-Funded Warrant Shares issued or issuable to an Investor pursuant to the Securities Purchase Agreement. At the Second Closing, we issued 4,616,924 PIPE Pre-Funded Warrants, 6,581,829 PIPE Warrants and 6,581,829 True-Up Warrants to the Investors, and the Company received gross proceeds of $4.2 million.
Subject to the terms and conditions therein, the Securities Purchase Agreement also granted to the Investors, until such time as the earlier of (i) the date that no PIPE Warrants remain outstanding and (ii) the 18-month anniversary of the Second Closing, a right to participate in any financing not registered under the Securities Act and involving the issuance by the Company of common stock or common stock equivalents for cash.
Terms of the PIPE Pre-Funded Warrants, PIPE Warrants and True-Up Warrants
The PIPE Pre-Funded Warrants were offered in lieu of shares of common stock and each PIPE Pre-Funded Warrant is exercisable for one share of common stock at an exercise price of $0.0001 per share. The PIPE Pre-Funded Warrants are immediately exercisable after issuance and may be exercised at any time until all the PIPE Pre-Funded Warrants are exercised in full.
Each PIPE Warrant is exercisable for the number of PIPE Shares, or pre-funded warrants in lieu of shares, purchased by each Investor under the Securities Purchase Agreement (but excluding any shares issuable upon the exercise of the True-Up Warrants), at
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an exercise price of $1.09392 per share and may only be exercised for cash. The PIPE Warrants are immediately exercisable after issuance and may be exercised at any time until the five-year anniversary of the Second Closing.
Each True-Up Warrant is exercisable for one share of common stock at an exercise price of $0.0001 per share. The True-Up Warrants are immediately exercisable after issuance and may be exercised at any time until all the True-Up Warrants are exercised in full.
The exercise prices and the number of shares issuable upon exercise of the PIPE Pre-Funded Warrants, PIPE Warrants and True-Up Warrants are subject to customary adjustments in the case of stock dividends, stock splits, pro rata distributions, and similar events in respect of the common stock. In addition, the number of shares of the common stock underlying, and the exercise price of, the PIPE Warrants is subject to full ratchet antidilution protection and standard adjustments in the event of a share split, reverse share split, share dividend, share combination recapitalization or other similar transaction involving the common stock; provided, however, that in no event will the exercise price of the PIPE Warrants equal less than $0.30387 per share of common stock.
Convertible Note Subscription
In March 2024, we entered into a subscription agreement with Daewoong (the “Subscription Agreement”) relating to our sale and issuance of the convertible notes (the “Convertible Note”) in the principal amount of up to $15.0 million, which are convertible into shares of 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 (the “Existing Maturity Date”), unless earlier repurchased, converted or redeemed in accordance with its terms prior to such date. Pursuant to the terms of the Subscription Agreement, we issued and sold to Daewoong convertible notes in the principal amount of $5.0 million and $10.0 million in March 2024 and April 2024, respectively (the “Existing Notes”).
On November 12, 2025, we entered into a binding term sheet (the “Term Sheet”) with Daewoong relating to the exchange (the “Exchange”) of the Existing Notes. On December 15, 2025, we entered into an Exchange Agreement (the “Exchange Agreement”) with Daewoong consistent with the terms of the Term Sheet pursuant to which the Existing Notes held by Daewoong were exchanged for (i) newly issued shares of common stock of the Company equal to (x) the principal and accrued interest of the Existing Notes as of the closing of the Exchange less (y) the principal amount of the New Convertible Note (as defined below), divided by $1.00, and then multiplied by 1.3 (and rounded down to the nearest whole share of common stock) and/or pre-funded warrants to purchase shares of common stock (the “Daewoong Pre-Funded Warrants”) in lieu of any shares of common stock that would result in Daewoong’s beneficial ownership of common stock exceeding 49.99% (the “Exchange Shares”), (ii) a new senior secured convertible note for $1.5 million (the “New Convertible Note”), and (iii) warrants to purchase up to 8.0 million shares of common stock at an exercise price of $1.09392 per share (the “Daewoong Warrants”).
The Daewoong Warrants, which are on the same terms as the PIPE Warrants, are exercisable at an exercise price of $1.09392 per share and may only be exercised for cash. The Daewoong Warrants are immediately exercisable after issuance and may be exercised at any time until the five-year anniversary of the Second Closing. The Exchange Agreement provides that the Company nominate one designee of Daewoong to the Company’s board of directors to serve as a Class III director at the 2026 annual meeting of stockholders, of which the director designee is currently Seongsoo Park. Mr. Park currently serves on the Company’s board of directors. The Exchange was approved at the special meeting of stockholders on January 21, 2026.
New Convertible Note
The New Convertible Note contains customary events of default, accrues interest at an annual rate of 15.79% payable in cash at maturity and has a maturity date of April 12, 2030 (the “Maturity Date”), unless earlier converted or redeemed in accordance with its terms prior to such date. The Company may not prepay the New Convertible Note or accrued interest prior to the New Maturity Date.
If, prior to the New Maturity Date, the Company consummates a bona-fide third-party financing after the issuance of the New Convertible Note in the form of common stock or any securities convertible into, or exchangeable or exercisable for, common stock (subject to certain exceptions as described in the New Convertible Note), in one or more transactions or a series of related and substantially similar and simultaneous transactions at the same purchase price from third parties unaffiliated with Daewoong and its affiliates, for aggregate gross cash proceeds to the Company of at least $30.0 million (a “Qualified Financing”), then, upon written notice thereof to Daewoong by the Company, on the closing date of such Qualified Financing, the New Convertible Note will automatically convert in whole, without any further action by Daewoong, into a number of shares of common stock or pre-funded
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warrants equal to: (i) one and three tenths (1.3) multiplied by (ii) the quotient of (a) the principal amount of the New Convertible Note and all accrued and unpaid interest to be converted divided by (b) the per share price of the common stock sold in the Qualified Financing.
If, prior to the New Maturity Date, the Company provides (i) written notice to Daewoong that it has publicly announced the submission of a BLA filing for ABP-450 as a biosimilar to BOTOX® (onabotulinumtoxinA) or (ii) a written notice that the Company has consummated a Change of Control (as defined in the New Convertible Note), Daewoong will have the right for thirty (30) days following receipt of either such notice, at Daewoong’s option (the “Optional Conversion”), to convert all (but not less than all) of the remaining outstanding portion of the New Convertible Note (subject to any limitations under the rules of NYSE American) into an amount of shares of common stock or pre-funded warrants equal to: (i) one and three tenths (1.3) multiplied by (ii) the quotient of (a) the principal amount of the New Convertible Note and all accrued and unpaid interest to be converted divided by (b) the volume-weighted average trading per share price of common stock over the five (5) trading days prior to the Company’s receipt of Daewoong’s written notice of exercise of the Optional Conversion.
The New Convertible Note included a covenant that restricts the Company’s and AEON Biopharma Sub Inc.’s (the “AEON Sub”) ability to issue debt securities senior or pari passu to such New Convertible Note without Daewoong’s prior written consent. The New Convertible Note also included a covenant that restricts the Company and AEON Sub’s ability to issue debt securities junior to such New Convertible Note except as expressly permitted under a security agreement to be entered into between the Company, AEON Sub and Daewoong in connection with Closing.
In connection with issuing the New Convertible Note, the Company and AEON Sub granted a first-priority security interest on substantially all of their respective assets, other than certain permitted liens described in the New Convertible Note. Upon the occurrence and continuation of an event of default, Daewoong will be entitled to, among other things, foreclose on the assets that are the subject of the security interest.
The Daewoong Pre-Funded Warrants and Daewoong Warrants
Under the Exchange Agreement and the New Convertible Note, Daewoong Pre-Funded Warrants may be issued in lieu of shares of common stock and each Daewoong Pre-Funded Warrant is exercisable for one share of common stock at an exercise price of $0.0001 per share. The Daewoong Pre-Funded Warrants are immediately exercisable after issuance and may be exercised at any time until all of the Daewoong Pre-Funded Warrants are exercised in full.
The Daewoong Warrants are substantially identical to the PIPE Warrants, which are exercisable at an exercise price of $1.09392 per share and may only be exercised for cash. The Daewoong Warrants are immediately exercisable after issuance and may be exercised at any time until the five-year anniversary of issuance.
The exercise prices and the number of shares issuable upon exercise of the Daewoong Pre-Funded Warrants and the Daewoong Warrants are subject to customary adjustments in the case of stock dividends, stock splits, pro rata distributions, and similar events in respect of the common stock. In addition, the number of shares of the common stock underlying, and the exercise price of, the Daewoong Warrants are subject to full ratchet antidilution protection and standard adjustments in the event of a share split, reverse share split, share dividend, share combination recapitalization or other similar transaction involving the common stock.
Amendment to License Agreement
In connection with the Exchange, on January 21, 2026, the Company entered into a Fifth Amendment to the License and Supply Agreement (the “License Agreement Amendment”) with Daewoong, which amends the Daewoong Agreement, by and between the Company and Daewoong, dated December 20, 2019, as amended on July 29, 2022, January 8, 2023, April 24, 2023 and March 19, 2024. Pursuant to the terms of the License Agreement Amendment, the definition of “Notes” reflects the Exchange and the Termination Purchase Right (as defined in the License Agreement Amendment) 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 conversion of the New Convertible Note. The License Agreement, as amended from time to time, also provides that the License Agreement will terminate if, over any six-month period, (a) we cease to commercialize ABP-450 in certain territories specified in the License Agreement and (b) we cease to advance any clinical studies of ABP-450 in such territories. Additionally, the License Agreement 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.
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2026 Public Offering
On July 13, 2026, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Lake Street Capital Markets, LLC, as representative of the several underwriters named therein (the “Representative”), relating to the Company's underwritten public offering (the “2026 Offering”) of (i) 17,851,599 shares (the “Shares”) of the Company's Class A common stock, par value $0.0001 per share (the “Common Stock”), and (ii) pre-funded warrants to purchase 24,837,008 shares of Common Stock (the “Pre-Funded Warrants”). Each share of Common Stock and each Pre-Funded Warrant was accompanied with (i) one two-year milestone warrant to purchase shares of Common Stock (the “Two-Year Milestone Warrant”) and (ii) one five-year milestone warrant to purchase shares of Common Stock (the “Five-Year Milestone Warrant”, collectively with the Two-Year Milestone Warrant, the “Milestone Warrants,” and together with the Pre-Funded Warrants, the “Warrants”). The combined public offering price was $0.3221 per share of Common Stock and accompanying Milestone Warrants and $0.3220 per Pre-Funded Warrant and accompanying Milestone Warrants. Pursuant to the Underwriting Agreement, the Company also granted the Representative a 30-day option to purchase up to 6,403,291 additional shares of Common Stock or Pre-Funded Warrants to purchase up to 6,403,291 shares of Common Stock in lieu thereof (or any combination thereof), accompanied by corresponding Milestone Warrants, solely to cover over-allotments, if any (the “Over-Allotment”). The 2026 Offering closed on July 15, 2026. The Company received net proceeds of approximately $12.2 million from the 2026 Offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.
On July 14, 2026, the Representative partially exercised the Over-Allotment to purchase Two-Year Milestone Warrants to purchase 6,403,290 shares of Common Stock and Five-Year Milestone Warrants to purchase 6,403,290 shares of Common Stock. On July 23, 2026, the Company issued and sold to the Underwriters pursuant to the Representative’s partial exercise of the Over-Allotment, 4,696,102 shares of the Company's Common Stock, for additional net proceeds of approximately $1.4 million, after deducting underwriting discounts and commissions.
The Company intends to use the net proceeds of the 2026 Offering and Over-Allotment for working capital and general corporate purposes, including conducting comparative analytical testing on ABP-450 to support biosimilarity to BOTOX®.
ATM Offering of Common Stock
For the six months ended June 30, 2026, the Company issued 2,282,929 shares under the ATM for net proceeds of $2.6 million. Although the ATM agreement provides for aggregate gross sales of up to $50.0 million, the Company’s ability to make additional sales under the ATM is subject to applicable Form S-3 limitations, the continued availability of an effective registration statement, contractual restrictions, market conditions and other factors. Accordingly, the remaining nominal program amount should not be viewed as committed or currently available financing. The Company may cancel its at-the-market program at any time upon prior notice, pursuant to its terms.
Components of Our Results of Operations
Revenue
We have generated no revenue from the sale of products and do not anticipate deriving any product revenue unless and until we receive regulatory approval for, and are able to successfully commercialize, ABP-450.
Operating Expenses
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses consist primarily of compensation for personnel, including stock-based compensation, in management, finance, legal, and regulatory functions. Other SG&A expenses include travel expenses, market research and analysis, conferences and trade shows, professional services fees, including legal, audit and tax fees, insurance costs, general corporate expenses, and allocated facilities-related expenses. Additionally, we anticipate continued costs associated with being a public company, including expenses related to services associated with maintaining compliance with the requirements of NYSE American and the SEC, insurance, and investor relations costs. We expect to incur increased costs associated with establishing sales, marketing, and commercialization functions in advance of potential future regulatory approvals and commercialization of our product
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candidates. If ABP-450 obtains United States regulatory approval for any indication, we expect that we would incur significantly increased expenses associated with building a sales and marketing team and funding commercial activities.
Research and Development Expenses
Our R&D expenses are primarily attributed to the development of ABP-450 as a biosimilar product in the United States through a Section 351(k) BLA, using AbbVie Inc.’s product BOTOX ® as a proposed reference product for all of the indications for which BOTOX ® is approved, other than the cosmetic uses for which we do not hold development or commercialization rights, which may include initiating a comparability study of ABP-450 in one or more of the indications currently approved for use by the proposed reference product. Due to the stage of our development and our ability to use resources across all of our programs, most of our R&D costs are not recorded on a program-specific basis. We expect our R&D expenses to increase as we develop and seek regulatory approval of ABP-450 . R&D expenses associated with these activities may include third-party costs such as expenses incurred under agreements with clinical research organizations, the cost of consultants who assist with the development of ABP-450 on a program-specific basis, investigator grants, sponsored research, product costs in connection with acquiring ABP-450 from Daewoong and BOTOX ® for use in conducting preclinical and clinical studies, and other third-party expenses attributable to the development of our product candidates.
R&D activities will be critical to achieving our business strategy. The biosimilar pathway will require significant costs in order to design, execute and complete the primary structural analysis and all supportive comparability analyses. Any clinical studies, such as a comparability study in any of the indications currently approved for use by the proposed reference product , will generally incur greater development costs than those programs incurred in the earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical studies. We expect our R&D expenses to be significant over the next years as we pursue the development of ABP-450 as a biosimilar and seek regulatory approval using BOTOX ® as the reference product. As a result, we are unable to determine the duration and completion costs of our programs or when and to what extent we will generate revenue from commercialization and sale of any of our product candidates. Our R&D activities may be subject to change from time to time as we evaluate our strategic plan, priorities and available resources.
Change in Fair Value of Contingent Consideration
The Company determined that the Contingent Consideration would be classified as a liability on the condensed consolidated balance sheets and remeasured at each reporting period with changes to fair value recorded to the condensed consolidated statements of operations and comprehensive (loss) income.
The Company recognized de minimis change in fair value of contingent consideration for the three months ended June 30, 2026 and 2025 and six months ended June 30, 2026. For the six months ended June 30, 2025, the Company recognized a gain of $3.5 million, related to the change in the fair value of the contingent consideration related to certain contingent provisions, restrictions and forfeiture provisions for Founder Shares and certain Participating Stockholders shares. The gain was primarily due to decreases in the Company’s stock price, resulting in decrease in fair value of the contingent consideration as of the reporting period.
Other (Loss) Income, Net
Other (loss) income, net primarily consists of gains and losses resulting from the remeasurement of the fair value of our convertible notes, warrant liabilities, issuance of warrants, loss on derivative liability, each described below, at each balance sheet date.
Change in fair value of convertible notes – The Company elected the fair value option to account for its convertible notes, with the subsequent changes in fair value recorded in the condensed consolidated statement of operations and comprehensive (loss) income. 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.
Change in fair value of warrants – Changes in the estimated fair value of our warrant liabilities are recognized as a non-cash gain or loss on the condensed consolidated statements of operations and comprehensive (loss) income. The significant unobservable input
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assumptions that can significantly change the fair value included (i) stock price, (ii) risk-free rate, (iii) volatility and (iv) term of warrant.
Loss on issuance of warrants – the Company’s issued Series A Warrants and Series B Warrants in the first quarter of 2025 had grant date fair values of $94.0 million on January 7, 2025 and was recorded as a liability as of the grant date. Proceeds were allocated to the warrant liability based on the fair value as of grant date of the Series A Warrants and Series B Warrants of $94.0 million. As the fair value of the warrants issued was greater than the proceeds received, the Company recognized a loss on issuance of warrants of $75.6 million.
Loss on derivative liability – In connection with the First Closing of the PIPE Financing occurring in the fourth quarter of 2025, the Company determined that the PIPE Financing included derivative liabilities to issue a variable number of warrants at a future date, and as such, recorded derivative liability for the tranche right obligation, PIPE Warrants and True-Up Warrants on the condensed consolidated balance sheets in the fourth quarter of 2025. For the First Closing, proceeds were allocated to the derivative liability based on the fair value as of the grant date of $12.4 million. As the fair value of the derivatives issued are greater than the proceeds received, the Company recognized a loss on derivative liability issued of $10.6 million in the fourth quarter of 2025. Additionally, the subsequent changes in fair value of the derivative liability was a loss of $2.5 million and was recorded in the condensed consolidated statement of operations and comprehensive (loss) income for the year ended December 31, 2025. For the six months ended June 30, 2026, the Company recognized change in fair value of derivative liability of $1.7 million. Upon the Second Closing, the Company satisfied the obligations underlying the derivative, and the derivative liability was derecognized from the condensed consolidated balance sheet. In connection with the Second Closing, the Company satisfied the obligations underlying the derivative liability, and the fair value of the derivative liability upon the Second Closing of $16.6 million plus the proceeds of $4.2 million received in the Second Closing were allocated to the PIPE Warrants at grant date fair value of $7.4 million, and the residual value of $13.4 million was allocated between the PIPE Pre-Funded Warrants and the True-Up Warrants based on relative fair value to additional paid in capital on the condensed consolidated balance sheets.
Results of Operations
The following table summarizes our results of operations for the periods indicated (in thousands):
Three Months Ended
Six Months Ended
June 30,
June 30,
2026
2025
2026
2025
Operating expenses:
Selling, general and administrative
$
2,991
$
3,258
$
6,893
$
6,383
Research and development
2,938
1,064
4,973
1,889
Change in fair value of contingent consideration
(10)
16
(15)
(3,472)
Total operating costs and expenses
5,919
4,338
11,851
4,800
Loss from operations
(5,919)
(4,338)
(11,851)
(4,800)
Other (loss) income:
Change in fair value of convertible notes
(213)
(1,854)
(8,940)
(3,485)
Change in fair value of warrants
4,941
(542)
9,597
86,187
Loss on issuance of warrants
—
—
—
(75,644)
Loss on extinguishment of debt
—
—
(76)
—
Loss on derivative liability
—
—
(1,743)
—
Other income, net
36
92
65
195
Total other (loss) income, net
4,764
(2,304)
(1,097)
7,253
(Loss) income before taxes
(1,155)
(6,642)
(12,948)
2,453
Income taxes
—
—
—
—
Net (loss) income
$
(1,155)
$
(6,642)
$
(12,948)
$
2,453
Basic net (loss) income per share
$
(0.02)
$
(0.60)
$
(0.28)
$
0.32
Diluted net (loss) income per share
$
(0.02)
$
(0.60)
$
(0.28)
$
0.31
Weighted average shares of common stock outstanding used to compute basic net (loss) income per share
50,530,946
11,090,809
45,599,911
7,557,472
Weighted average shares of common stock outstanding used to compute diluted net (loss) income per share
50,530,946
11,090,809
45,599,911
7,848,566
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Comparison of the three and six months ended June 30, 2026 and 2025
Operating Expenses
Selling, General and Administrative (SG&A) Expenses
SG&A expenses were $3.0 million for the three months ended June 30, 2026, resulting in a decrease of $0.3 million, or 9%, compared to $3.3 million during the three months ended June 30, 2025. The decrease in SG&A expenses was primarily attributable to a decrease in professional and legal fees in the second quarter of 2026 compared to the second quarter of 2025, slightly offset by increases in payroll-related expenses including accrued compensation expense in the current year compared to prior year and an increase in headcount in 2026 compared to the prior year.
SG&A expenses were $6.9 million for the six months ended June 30, 2026, resulting in an increase of $0.5 million, or 8%, compared to $6.4 million during the six months ended June 30, 2025. The increase in SG&A expenses was primarily attributable to stock-based compensation related to RSU’s issued in the first quarter of 2026, payroll-related expenses including accrued compensation expense in the current year compared to prior year, and an increase in professional fees.
Research and Development (R&D) Expenses
R&D expenses were $2.9 million for the three months ended June 30, 2026, an increase of $1.8 million, or 164%, compared to $1.1 million for the three months ended June 30, 2025. The increase was primarily attributable to increases in biosimilar R&D consulting expense and slight increase in compensation from new employees hired after second quarter of 2025.
R&D expenses were $5.0 million for the six months ended June 30, 2026, an increase of $3.1 million, or 163%, compared to $1.9 million for the six months ended June 30, 2025. The increase was primarily attributable to biosimilar R&D consulting expenses and payroll-related expenses including bonuses achieved in the current year compared to prior year and stock-based compensation related to RSUs issued in the first quarter of 2026.
Change in Fair Value of Contingent Consideration
The change in fair value of contingent consideration for the three months ended June 30, 2026 and 2025 and six months ended June 30, 2026 were de minimis. For the six months ended June 30, 2025, the Company recognized a gain of $3.5 million, related to the change in the fair value of the contingent consideration related to certain contingent provisions, restrictions and forfeiture provisions for Founder Shares and certain Participating Stockholders shares. The gain was primarily due to decreases in the Company’s stock price, resulting in decrease in fair value of the contingent consideration as of the reporting period.
Other (Loss) Income, Net
Other (loss) income, net primarily consist of gains and losses resulting from the remeasurement of the fair value of our convertible notes and warrant liabilities, issuance of warrants, loss on extinguishment of debt and loss on derivative liability, each described below.
Change in fair value of convertible notes – The Company elected the fair value option to account for its convertible notes, with the subsequent changes in fair value recorded in the condensed consolidated statement of operations and comprehensive (loss) income. The Company recognized losses of $8.9 million and $3.5 million for the six months ended June 30, 2026 and 2025, respectively, primarily due to changes in conversion probabilities of the Daewoong convertible notes and changes in the Company’s stock price. On January 21, 2026, the Exchange Agreement resulted in the extinguishment of debt of $76,000.
Change in fair value of warrants – Changes in the estimated fair value of our warrant liabilities are recognized as a non-cash gain or loss on the condensed consolidated statements of operations and comprehensive (loss) income. For the six months ended June 30, 2026 the Company recognized gain of $9.6 million primarily related to change in fair value of the Daewoong warrants and PIPE Warrants, compared to a gain of $86.2 million for the six months ended June 30, 2025 primarily due to fair value of the Series A Warrants and Series B Warrants issued and due to fluctuations in stock price and decrease in warrants outstanding due to cashless exercise of Series B Warrants in the first quarter of 2025.
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Loss on issuance of warrants – The Company issued Series A Warrants and Series B Warrants in the first quarter of 2025 related to the 2025 Offering that had grant date fair values of $94.0 million on January 7, 2025 and was recorded as a liability as of grant date. Proceeds were allocated to the warrant liabilities based on the fair value as of grant date of the Series A Warrants and Series B Warrants of $94.0 million. As the fair value of the Series A Warrants and Series B Warrants issued were greater than the proceeds received, the Company recognized a loss on issuance of warrants of $75.6 million.
Loss on derivative liability – In connection with the First Closing of the PIPE Financing occurring in the fourth quarter of 2025, the Company determined that the PIPE Financing included derivative liabilities to issue a variable number of warrants at a future date, and as such, recorded derivative liability for the tranche right obligation, PIPE Warrants and True-Up Warrants on the condensed consolidated balance sheets in the fourth quarter of 2025. For the First Closing, proceeds were allocated to the derivative liability based on the fair value as of grant date of $12.4 million. As the fair value of the derivatives issued are greater than the proceeds received, the Company recognized a loss on derivative liability issued of $10.6 million in the fourth quarter of 2025. Additionally, the subsequent changes in fair value of the derivative liability was a loss of $2.5 million and was recorded in the condensed consolidated statement of operations and comprehensive (loss) income for the year ended December 31, 2025. For the six months ended June 30, 2026, the Company recognized change in fair value of derivative liability of $1.7 million. Upon the Second Closing, the Company satisfied the obligations underlying the derivative, and the derivative liability was derecognized from the condensed consolidated balance sheet.
Liquidity and Capital Resources
Our primary sources of capital have been debt and equity financing. We have experienced recurring losses from operations and have a net capital deficiency and negative cash flows from operations since our inception. As of June 30, 2026, we had reported cash and cash equivalents of $3.4 million and an accumulated deficit of $483.8 million.
On January 6, 2025, we entered into the Underwriting Agreement with Aegis pursuant to which the Company agreed to sell and issue shares of common stock and certain Series A Warrants and Series B Warrants. The closing of the 2025 Offering occurred on January 7, 2025, and the Company received net proceeds of approximately $18.3 million from the 2025 Offering.
On November 12, 2025, we entered into the Securities Purchase Agreement with certain Investors whereby the Company issued and sold to the Investors certain PIPE Shares, PIPE Pre-Funded Warrants, PIPE Warrants and True-up Warrants for total gross proceeds of $6.0 million. The Company received gross proceeds of $1.8 million and $4.2 million upon the First Closing on November 18, 2025 and the Second Closing on January 27, 2026, respectively.
On November 12, 2025, we entered into the Term Sheet with Daewoong relating to the Exchange of the Subscription Agreement with Daewoong relating to the Existing Notes of $5.0 million and $10.0 million in principal with maturity dates of March 2027 and April 2027, respectively.
On December 15, 2025, we entered into the Exchange Agreement with Daewoong consistent with the terms of the Term Sheet pursuant to which the Existing Notes held by Daewoong would be exchanged for (i) newly issued shares of common stock of the Company equal to (x) the principal and accrued interest of the Existing Notes as of the closing of the Exchange less (y) the principal amount of the New Convertible Note, divided by $1.00, and then multiplied by 1.3 (and rounded down to the nearest whole share of common stock) and/or Daewoong Pre-Funded Warrants in lieu of any shares of common stock that would result in Daewoong’s beneficial ownership of common stock exceeding 49.99% (the “Exchange Shares”), (ii) a new senior secured convertible note for $1.5 million (the “New Convertible Note”), and (iii) warrants to purchase up to 8.0 million shares of common stock at an exercise price of $1.09392 per share (the “Daewoong Warrants”). The Daewoong Warrants, which contain the same terms as the PIPE Warrants, are exercisable at an exercise price of $1.09392 per share and may only be exercised for cash. The Daewoong Warrants are immediately exercisable after issuance and may be exercised at any time until the five-year anniversary of the Second Closing.
In July 2026, we received aggregate net proceeds of approximately $13.6 million from the 2026 Offering and the subsequent over-allotment closing, subject to final closing-cost reconciliation.
We are a biopharmaceutical company seeking accelerated and full-label U.S. market entry by developing our ABP-450 as a biosimilar through submission of a BLA under Section 351(k), using AbbVie Inc.’s product BOTOX® as a proposed reference product for all of the indications for which BOTOX® is approved, other than the cosmetic uses for which we do not hold development or commercialization rights. We held an initial meeting with the FDA in the third quarter of 2024 during which we obtained feedback
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from the FDA on next steps to develop a BOTOX® biosimilar. We commenced analytical studies in the fourth quarter of 2024 to prepare for a BPD Type 2a meeting with the FDA that was held on January 21, 2026. During the meeting, the FDA reviewed the Company’s proposed analytical similarity strategy under the 351(k) biosimilar pathway. The FDA acknowledged the scientific challenges associated with characterizing a 900 kDa botulinum neurotoxin complex, provided constructive feedback on our proposed development approach and analytical assessment plan, and noted that our analytical methodologies appeared reasonable to support advancement of the program toward a comprehensive analytical similarity package. We believe this feedback provides a clear framework for the remaining analytical components of our biosimilar development program and plan to complete the majority of our analytical comparability program in 2026. We anticipate receiving written FDA feedback from a BPD Type 2b meeting in the second half of 2026 regarding the next phase of the development program to support approval of ABP-450 as a biosimilar to BOTOX® across all approved therapeutic indications. However, the commencement of additional 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.
We have incurred operating losses and negative cash flows from operating activities since inception and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable. Our primary use of cash is to fund operating expenses, which consist of R&D expenditures, including development and execution of our analytical plan, possible clinical trials, as well as SG&A expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay or prepay these expenses. We expect to continue to incur substantial costs in order to conduct R&D activities necessary to develop and commercialize our product candidates. Until such time, if ever, as we can generate substantial product revenue from sales of ABP-450, we will need additional capital to undertake these activities and commercialization efforts, and, therefore, we intend to raise such capital through the issuance of additional equity, borrowings, and potentially strategic alliances with other companies. However, if such financing is not available at adequate levels or on acceptable terms, we could be required to reduce the scope of or eliminate some of our development programs or commercialization efforts, out-license intellectual property rights to our product candidates or sell unsecured assets, or a combination of the above, any of which may have a material adverse effect on our business, results of operations, financial condition and/or our ability to fund our scheduled obligations on a timely basis or at all. Our ability to continue as a going concern is dependent upon our ability to successfully accomplish these plans and secure sources of financing and ultimately attain profitable operations.
We may also seek to raise additional capital through the sale of public or private equity or convertible debt securities. If we incur additional debt, the debt holders would have rights senior to holders of common stock to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends to holders of our common stock. If we undertake discretionary financing by issuing equity securities or convertible debt securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at a price per share that is less than the price per share paid by current public stockholders. If we sell common stock, convertible securities, or other equity securities in more than one transaction, stockholders may be further diluted by subsequent sales. Additionally, future equity financings may result in new investors receiving rights superior to our existing stockholders. Because our decision to issue securities in the future will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuances of debt or equity securities. As a result, our stockholders bear the risk of future issuances of debt or equity securities reducing the value of our common stock and diluting their interests.
We may receive additional capital from the cash exercise of the SPAC Warrants, Series A Warrants, Series B Warrants, Odeon Warrants, PIPE Warrants, Daewoong Warrants, Two-Year Milestone Warrants and Five-Year Milestone Warrants. However, the exercise prices of such warrants range from $0.3221 to $828.00 per warrant and the last reported sales price of our common stock on August 6, 2026 was $0.2825. The likelihood that holders of the warrants will exercise their respective warrants, and therefore the likelihood of any amount of cash proceeds that we may receive, is dependent upon the trading price of our common stock after effectiveness of the registration statement related thereto registering the issuance of common stock underlying such warrants. If the trading price for our common stock does not maintain a price above the exercise price per share, we do not expect holders to exercise their respective warrants for cash. We will have broad discretion over the use of any proceeds from the exercise of such securities. Any proceeds from the exercise of such securities would increase our liquidity, but we are not currently budgeting for any cash proceeds from the exercise of such warrants when planning for our operational funding needs. Additionally, the SPAC Warrants and Series B Warrants may be exercised on a cashless basis at any time and we will not receive any proceeds from such exercise, even if such warrants are in-the-money.
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To the extent that we raise additional capital through marketing and distribution arrangements or other collaborations, royalty agreements, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams, research programs or product licenses on terms that may not be favorable to us. If these sources are insufficient to satisfy our liquidity requirements, we will seek to raise additional funds through future equity or debt financings. If we raise additional funds by issuing equity securities, our stockholders would experience dilution. Additional debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. There can be no assurance that our efforts to procure additional financing will be successful or that, if they are successful, the terms and conditions of such financing will be favorable to us or our stockholders. If we are unable to raise additional financing when needed, we may be required to delay, reduce, or terminate the development, commercialization and marketing of our products and scale back our business and operations.
As a result of these conditions, management has concluded that substantial doubt about our ability to continue as a going concern exists as conditions and events, considered in the aggregate, indicate that it is probable that we will be unable to meet our obligations as they become due within one year after the date that the financial statements included in this Report are issued. Our financial information throughout this Report and our financial statements included elsewhere in this Report have been prepared on a basis that assumes that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. This financial information and our condensed consolidated financial statements do not include any adjustments that may result from an unfavorable outcome of this uncertainty. Our ability to continue as a going concern is dependent upon our ability to successfully accomplish our business plans and secure sources of financing and ultimately attain profitable operations.
As of the date of this Report, we expect to have sufficient cash to fund our operating plan into the first quarter of 2027, including net proceeds of $13.6 million from the 2026 Offering and Over-Allotment received in July 2026. This estimate does not assume any proceeds from future warrant exercises, additional ATM sales or other financings, and is subject to significant uncertainty, including the timing and cost of analytical studies, regulatory activities, clinical-startup work, payments to vendors and Daewoong, and other operating expenses. We will require additional capital before completing our planned development program, and there can be no assurance that financing will be available on acceptable terms or at all.
Net Cash Used in Operating Activities
Net cash used in operating activities for the six months ended June 30, 2026 was $6.3 million, consisting primarily of a net loss of $12.9 million, non-cash gain of $4.8 million and changes in operating assets and liabilities of $1.8 million. Non-cash gain primarily consists of $8.9 million related to a loss on the fair value of convertible notes, $3.6 million related to stock-based compensation expense for our executives and directors, $1.7 million loss on derivative liability related to the Second Closing of the PIPE Financing, offset by $9.6 million related to decreases in the fair value of warrants. The change in operating assets and liabilities is primarily due to timing of payments to R&D service providers in accounts payable.
Net cash used in operating activities for the six months ended June 30, 2025 was $10.0 million, consisting primarily of a net income of $2.5 million and non-cash charges of $7.2 million and changes in operating assets and liabilities of $5.3 million, consisting primarily of $86.2 million related to change in the fair value of warrants and $3.5 million decrease related to change in the fair value of contingent consideration, offset by $75.6 million loss on issuance of warrants, $3.3 million non-cash expenses related to stock-based compensation for our executives and directors and $3.5 million related to and a change in the fair value of the convertible notes. The change in operating assets and liabilities is primarily due to $1.7 million from timing of clinical trial payments and $3.6 million for working capital and general corporate purposes.
Cash Flows from Investing Activities
Net cash used in investing activities for the six months ended June 30, 2026 and 2025 were zero and a de minimis amount, respectively, related to the purchase of property and equipment in 2025.
Cash Flows from Financing Activities
Net cash provided by financing activities for the six months ended June 30, 2026 was $6.8 million, primarily from proceeds from the PIPE Financing and ATM, compared to $18.4 million for the six months ended June 30, 2025, primarily related to the 2025 Offering in the first quarter of fiscal 2025.
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Critical Accounting Policies and Estimates
Management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities, revenue and expenses at the date of the financial statements as well as the expenses incurred during the reporting period. Generally, we base our estimates on historical experience and on various other assumptions in accordance with GAAP that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions and such differences could be material to the financial position and results of operations. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts and experience. As of June 30, 2026, there have been no changes to our critical accounting policies from those reported on our Annual Report on Form 10-K.
JOBS Act; Smaller Reporting Company
We are an emerging growth company, as defined in the Securities Act, as modified by the JOBS Act. For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and any golden parachute payments not previously approved. In particular, in this Report, we have provided only two years of interim financial statements that would be required if we were not an emerging growth company. Section 102(b)(2) of the JOBS Act allows us to delay adoption of the new or revised accounting standards until those standards apply to non-public business entities. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of Priveterra’s initial public offering (December 31, 2026), (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
We are also a “smaller reporting company,” as such term is defined in Rule 12b-2 of the Exchange Act, meaning that the market value of our common stock held by non-affiliates is less than $700 million and our annual revenue is less than $100 million during the most recently completed fiscal year. We will continue to be a smaller reporting company if either (i) the market value of our common stock held by non-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our common stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.
Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation. Investors could find our common stock less attractive to the extent we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and the trading price may be more volatile .
Recently Issued and Adopted Accounting Pronouncements
We describe the recently issued accounting pronouncements that apply to us in Note 2 Summary of Significant Accounting Policies of the condensed consolidated financial statements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this Item.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.