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 June 30, 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 and six months ended June 30, 2026, the Company recognized $0.2 million and $0.3 million of expense related to the increase in the fair value of the new Convertible Note. As of June 30, 2026, the principal amount outstanding under the new Convertible Note was $1.5 million, with an estimated fair value of $1.8 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:

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:

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 and six months ended June 30, 2026 and three months ended June 30, 2025, the Company recognized de minimis income related to the change in fair value of contingent consideration. For the six months ended June 30, 2025, the Company recognized $3.5 million of income related to the change in fair value of contingent consideration on the condensed consolidated statements of operations and comprehensive (loss) income, and primarily relates to the changes in the Company’s stock price during the period. As of June 30, 2026 and December 31, 2025, the contingent consideration liability was approximately $27,000 and $42,000, respectively.

Warrants

Private Placement Warrants related to the Closing

As of June 30, 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 and six months ended June 30, 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 June 30, 2026 and December 31, 2025 was de minimis. For the three and six months ended June 30, 2026 and 2025, the change in fair value of the SPAC Warrants was de minimis.

Series A Warrants and Series B Warrants

The measurement of fair value for the Series A Warrants and Series B Warrants was 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:

​

​

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 and six months ended June 30, 2026 and 2025, the Company recognized $0.9 million, $1.2 million, $(0.5) million and $18.8 million of income (expense) related to the change in fair value of the outstanding Series A Warrants, respectively, and

$50,000, $71,000 and $(5.6) million, $2.3 million of income (expense) 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 six months ended June 30, 2026 and 2025 are as follows:

​

​

​

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 June 30, 2026, there were 125,000 Odeon Warrants outstanding with a fair value of $0.1 million. There were no exercises during the three and six months ended June 30, 2026. During the three and six months ended June 30, 2026, the Company recognized de minimis and approximately $39,000 of income 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 June 30, 2026, there were 6.5 million PIPE Warrants and 8.0 million Daewoong Warrants outstanding. There were no exercises during the three and six months ended June 30, 2026. During the three and six months ended June 30, 2026, the Company recognized a gain of $1.8 million and $3.1 million related to the decrease in the fair value of the PIPE Warrants. During the three and six months ended June 30, 2026, the Company recognized a gain of $2.2 million and $5.2 million, related to the decrease in the fair value of the Daewoong Warrants.

The table below summarizes the significant assumptions as of June 30, 2026 and respective issuance dates of the warrants:

​

​

Summary of Recurring Fair Value Measurements

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

​

​

​