Fair Value Measurements

3 Months Ended

Mar. 31, 2026

Fair Value Measurements

Fair Value Measurements

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 and cash equivalents, 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.

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 multiple settlement scenarios and expected future investment returns, considering each of the possible outcomes available to the noteholders, including repayment at maturity, mandatory conversion upon future financing events, and optional conversion upon achievement of certain milestones or a change in control. The probabilities assigned to each scenario consider the timing and likelihood of potential triggering events as of the measurement date. 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. Although the convertible notes were issued to a related party, the Company estimated fair value using a market participant framework as required under ASC 820.

In determining the discount rate, management considered the note’s secured status, senior priority relative to other indebtedness, long contractual maturity, and the Company’s pre-revenue operating profile, and concluded that a discount rate in the range of 15.5% to 16.5% appropriately reflects market participant return requirements as of March 31, 2026.

On December 15, 2025, the Company entered into an Exchange Agreement with Daewoong pursuant to which the $15.0 million 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, (ii) a new senior secured convertible note for $1.5 million, and (iii) warrants to purchase up to 8.0 million shares of common stock. At the closing of the Exchange, the number of Exchange Shares issued was 11,918,380 shares of common stock and 11,236,631 Daewoong Pre-Funded Warrants. Upon the closing of the Exchange, the Existing Notes were immediately and automatically terminated. As of December 31, 2025, the principal amount outstanding under the Existing Notes was $15.0 million, with an estimated fair value of $34.6 million.

The New Convertible Note was recognized at its fair value of $1.5 million on January 21, 2026. During the three months ended March 31, 2026, the Company recognized $42 thousand of expense related to the increase in the fair value of the new Convertible Note. As of March 31, 2026, the principal amount outstanding under the new Convertible Note was $1.5 million, with an estimated fair value of $1.5 million. See Note 5 Daewoong Convertible Notes for more information.

Contingent Consideration and Contingent Founder Shares

As part of the Merger, each share of Priveterra Class B common stock (“Founder Shares”), par value of $0.0001 per share, issued and outstanding immediately prior to the Merger converted into one share of common stock totaling 95,842 common shares. In addition, certain holders of common stock in Old AEON (the “Participating Stockholders”) will be issued a portion of up to 222,653 additional shares of common stock. Therefore, the Contingent Founder Shares and Participating Stockholder shares (together, “Contingent Consideration Shares”) contain certain contingent provisions as further discussed below.

Pursuant to the terms of the amended Sponsor Support Agreement, 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, of which 13,980 of such Contingent Founder Shares were forfeited in the second quarter of 2025 as the result of a vesting event not occurring. The remaining 50% of the Founder Shares were not subject to such restrictions and forfeiture provisions. The remaining Contingent Founder Shares shall vest, and shall become free of the provisions as follows:

● 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 Priveterra Sponsor, LLC (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.

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:

● 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, 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 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 condensed consolidated balance sheets and remeasures at each reporting period with changes to fair value recorded to the condensed consolidated statements of operations and comprehensive (loss) income.

The Company utilized the Probability-Weighted Expected Return Method (PWERM) model to value the contingent consideration based on earnout milestones, probability of forfeiture and success scenarios. For the three months ended March 31, 2026 and 2025, the Company recognized a de minimis, and $3.5 million of income, respectively, related to the change in fair value of contingent consideration on the condensed consolidated statements of operations and comprehensive (loss) income, and relates to the changes in the Company’s stock price during the period. As of March 31, 2026 and December 31, 2025, the contingent consideration liability was $38 thousand and $42 thousand, respectively.

Warrants

Private Placement Warrants related to the Closing

As of March 31, 2026 and December 31, 2025, there were 55,403 private placement warrants outstanding related to the closing of the Merger (“SPAC Warrants”). There were no SPAC Warrants exercised during the three months ended March 31, 2026 and 2025.

The SPAC Warrants are accounted for as a liability with changes in the fair value recorded to the condensed consolidated statement of operations and comprehensive (loss) income. The Company utilized the Black-Scholes option pricing model (Level 3), which requires the input of subjective assumptions, including the Company’s stock price, expected volatility of the Company’s common stock, expected risk-free interest rate, and the option’s expected remaining life. The fair value of the SPAC Warrants as of March 31, 2026 and December 31, 2025 were de minimis. For the three months ended March 31, 2026 and 2025, the change in fair value of the SPAC Warrants were de minimis.

Series A Warrants and Series B Warrants

The measurement of fair value for the Series A Warrants and Series B warrants were determined utilizing a Black-Scholes model considering all relevant assumptions as of each reporting period. The fair value on grant date was recorded as a liability on the condensed consolidated balance sheets, and changes in fair value are recognized at each reporting period on the condensed consolidated statement of operations and comprehensive (loss) income.

The table below summarizes the significant assumptions as of each reporting period:

	March 31,				December 31,
	2026				2025
		Series A		Series B		Series A		Series B
		(Level 3)		(Level 3)		(Level 3)		(Level 3)
Stock Price	$	0.99	$	0.99	$	1.10	$	1.10
Exercise Price		8.06		-		8.06		8.06
Expected volatility		164.1%		198.3%		160.0%		200.0%
Risk-free interest rate		3.9%		3.7%		3.6%		3.5%
Expected life (in years)		3.91		1.27		4.02		1.52
Expected dividend yield		—		—		—		—

The grant date fair values for the Series A Warrants and Series B Warrants were $94.0 million, comprised of $20.7 million and $73.3 million for Series A Warrants and Series B Warrants, respectively, on January 7, 2025 and was recorded as a liability as of the grant date due to certain exercise price adjustment provisions occurring in connection with future events. Proceeds were allocated to the warrant liability based on the fair value as of grant date of the 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 common shares and the warrants of $75.6 million.

For the three months ended March 31, 2026 and 2025, the Company recognized $0.3 million and $19.4 million of income related to the change in fair value of the outstanding Series A Warrants, respectively, and $21 thousand and $7.9 million of income related to the change in fair value of the remaining outstanding Series B Warrants, respectively.

A summary of activity for the Company’s issued and outstanding Series A Warrants and Series B Warrants for the three months ended March 31, 2026 and 2025 are as follows:

	Series A	Series B
Issued and Outstanding, January 1, 2026	3,565,245	62,263
Number of warrants issued	—	—
Number of warrants exercised	—	—
Issued and Outstanding, March 31, 2026	3,565,245	62,263

	Series A	Series B
Issued and Outstanding, January 1, 2025	—	—
Number of warrants issued	3,565,245	3,565,245
Number of warrants exercised	—	(3,142,511)
Issued and Outstanding, March 31, 2025	3,565,245	422,734

Odeon Warrants

In October 2025, the Company entered into a settlement agreement with Odeon Capital Group LLC to settle a lawsuit filed against the Company in exchange for $1.0 million in cash, $0.3 million shares of common stock and 125,000 warrants (the “Odeon Warrants”) with exercise price of $2.00 and a three year term. The Company recorded a gain on settlement of $0.4 million to selling, general and administrative expenses on the condensed consolidated statement of operations and comprehensive (loss) income in the third quarter of 2025.

The Odeon Warrants were initially measured at fair value using a Black-Scholes calculation and recorded as a liability on the issuance date 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 utilized the Black-Scholes option pricing model (Level 3), which requires the input of subjective assumptions, including the Company’s stock price, expected volatility of the Company’s common stock, expected risk-free interest rate, and the option’s expected remaining life.

As of March 31, 2026, there were 125,000 Odeon Warrants outstanding with a fair value of $0.1 million. There were no exercises during the three months ended March 31, 2026. During the three months ended March 31, 2026, the Company recognized a de minimis gain related to the decrease in the fair value of the Odeon Warrants.

PIPE Warrants and Daewoong Warrants

The PIPE Warrants and Daewoong Warrants were initially measured at fair value using a Black-Scholes calculation and recorded as a liability on the issuance date, and remeasured at each reporting period with changes to fair value recorded to the condensed consolidated statements of operations and comprehensive (loss) income. The PIPE Warrants and Daewoong Warrants had a grant date fair value of $7.4 million and $10.3 million, respectively

As of March 31, 2026, there were 6.5 million PIPE Warrants and 8.0 million Daewoong Warrants outstanding. There were no exercises during the three months ended March 31, 2026. During the three months ended March 31, 2026, the Company recognized $1.4 million of gain related to the decrease in the fair value of the PIPE Warrants. During the three months ended March 31, 2026, the Company recognized $3.0 million of gain related to the decrease in the fair value of the Daewoong Warrants.

The table below summarizes the significant assumptions as of March 31, 2026 and respective issuance dates of the warrants:

	March 31,				January 27,		January 21,
	2026				2026		2026
		PIPE		Daewoong		PIPE		Daewoong
		(Level 3)		(Level 3)		(Level 3)		(Level 3)
Stock Price	$	0.99	$	0.99	$	1.20	$	1.36
Exercise Price		1.09		1.09		1.09		1.09
Expected volatility		164.1%		164.1%		160.0%		164.1%
Risk-free interest rate		3.9%		3.9%		3.6%		3.9%
Expected life (in years)		4.83		4.82		5.00		5.01
Expected dividend yield		—		—		—		—

Summary of Recurring Fair Value Measurements

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

		Convertible Notes		Warrant Liabilities		Contingent Consideration		Derivative Liability
		(Level 3)		(Level 3)		(Level 3)		(Level 3)
Balance, January 1, 2026	$	34,600	$	3,276	$	42	$	14,879
Issuance of warrants		—		17,688		—		—
Change in fair value		8,727		(4,656)		(4)		1,743
Exchange of convertible notes		(41,785)		—		—		—
Settlement of derivative liability		—		—		—		(16,622)
Balance, March 31, 2026	$	1,542	$	16,308	$	38	$	—

		Convertible Notes		Warrant Liabilities		Contingent Consideration
		(Level 3)		(Level 3)		(Level 3)
Balance, January 1, 2025	$	11,689	$	1,187	$	3,541
Issuance of warrants		—		93,986		—
Change in fair value		1,631		(86,729)		(3,488)
Warrant cashless exercise		—		(6,418)		—
Balance, March 31, 2025	$	13,320	$	2,026	$	53