Item 4.02. Non-Reliance on Previously Issued Financial Statements and Completed Interim Review.
Restatement of Historical Financial Results
On February 14, 2024, the Audit Committee of the Board of Directors (the “Audit Committee”) of AEON Biopharma, Inc. (the “Company”), based on the recommendation of, and after consultation with, the Company’s management, concluded that the Company’s previously issued financial statements as of and for the three and nine months ended September 30, 2023, included in the Company’s Quarterly Report on Form 10-Q filed on November 13, 2023 (the “Form 10-Q”) and its Registration Statement on Form S-1 (File No. 333-274094) filed on November 24, 2023 (as amended, the “Registration Statement”), should no longer be relied upon due to certain errors identified. Similarly, any previously furnished or filed reports, related earnings releases, investor presentations or similar communications describing the Company’s financial results for the quarter ended September 30, 2023 should no longer be relied upon. The Company's management and the Audit Committee have discussed the matters described herein with KPMG LLP, the Company's independent registered public accounting firm. The identified errors had no impact on the Company’s cash balances or operating cash flows for the quarter ended September 30, 2023. Capitalized terms used but not defined in this Current Report on Form 8-K (this “Form 8-K”) have the meanings set forth in the Form 10-Q.
The following summarizes the nature and effect of the identified errors:
| ● | Certain valuation estimates related to the fair value of the contingent consideration liability, convertible notes, stock-based compensation expense, and derivative liabilities were incorrectly calculated. These errors resulted in non-cash corrections to increase the loss reported on the Company’s condensed consolidated statements of operations and comprehensive loss for the Predecessor Period (July 1, 2023 to July 21, 2023) and the Predecessor Period (January 1, 2023 to July 21, 2023) by approximately $22.7 million; and an increase to the income reported on the Company’s condensed consolidated statements of operations and comprehensive loss for the Successor Period (July 22, 2023 to September 30, 2023) by approximately $6.4 million. The impact to correct these items on the Company’s condensed consolidated balance sheet at September 30, 2023 is expected to increase the contingent consideration liability by approximately $6.7 million. |
| ● | Certain errors related to items associated with the Merger that resulted in the reclassification of amounts between additional paid-in capital and accumulated deficit in the Successor’s condensed consolidated balance sheet. |
The Company is still evaluating certain other non-cash items associated with the Merger and further revisions may be required. The Company expects to report one or more material weaknesses as a result of the errors identified, which would be in addition to the previously identified material weakness related to Priveterra’s ineffective internal controls as disclosed in the Form 10-Q. Any material weaknesses and the errors identified will be described in an Explanatory Note to an amendment to the Form 10-Q (the “Form 10-Q Amendment”). The Company intends to file restated unaudited interim financial statements in the Form 10-Q Amendment with the above stated corrections as soon as practicable.
Additionally, in accordance with ASC 205-40, Presentation of Financial Statements–Going Concern, the Company is required to make an assessment as of the date the restated financial statements are issued, regarding whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for the twelve months from the date of amended filings. The Company expects to continue to report that there is substantial doubt about its ability to continue as a going concern as of the date of the respective amended filings. Based upon currently available information, the Company also anticipates that it will be disclosing that the Company’s liquidity condition raises substantial doubt about the Company’s ability to continue as a going concern for at least twelve months from the expected issuance date of the Form 10-K for the fiscal year ended December 31, 2023.
Cautionary Note Regarding Forward-Looking Statements.
Certain statements in this Form 8-K may be considered forward-looking statements. Forward-looking statements generally relate to future events or the Company’s future financial or operating performance and include, for example, statements regarding the effects of the restatement of the Company’s past financial statements. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "could", "might", "plan", "possible", "project", "strive", "budget", "forecast", "expect", "intend", "will", "estimate", "anticipate", "believe", "predict", "potential" or "continue", or the negatives of these terms or variations of them or similar terminology. Such forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements.
These forward-looking statements are based upon estimates and assumptions that, while considered reasonable by the Company and its management at the time such statements are made, are inherently uncertain. Factors that may cause actual results to differ materially from current expectations include, but are not limited to: (i) the outcome of any legal proceedings that may be instituted against the Company or others; (ii) the Company’s ability to continue to meet continued stock exchange listing standards; (iii) costs related to being a public company; and (iv) other risks and uncertainties set forth in the sections entitled “Risk Factors” and
