What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2024-03-07 compared with 2023-03-08 · 314 added, 299 removed, 731 unchanged (46% of the section changed)

Quantitative and Qualitative Disclosure About Market Risk.

Not applicable.

We are exposed to market risk in the ordinary course of our business.

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.

Our market risk exposure is primarily a result of fluctuations in interest rates and foreign currency exchange rates.

Interest Rate and Market Risk

We are exposed to market risks in the ordinary course of our business.

Our cash and cash equivalents include cash in readily available checking and money market accounts.

These securities are not dependent on interest rate fluctuations that could cause the principal amount of these assets to fluctuate and thus do not pose any interest rate risk to us.

While we believe our cash and cash equivalents do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value.

We are exposed to risks related to fluctuations in interest rates on our outstanding variable rate for the Pharmakon Term Loans.

As of December 31, 2023, we had $120.4 million outstanding on the term loan.

We estimate that a 1% increase or decrease in underlying interest rates as of December 31, 2023 would increase or decrease annual interest expenses by $1.3 million.

Foreign Exchange

Our operations are primarily conducted in the U.S.

Exchange rate fluctuations may affect the costs that we incur in our operations.

We conduct operations in foreign countries and are mainly exposed to fluctuations in the British pound and the EU euro.

Transactional exposure arises when transactions occur in currencies other than the U.S.

Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the date of the transaction with the resulting liabilities being translated into the U.S.

dollar at exchange rates prevailing at the balance sheet date.

The resulting gains and losses, which were insignificant for the years ended December 31, 2023, and 2022, are included in other expenses in the consolidated statement of operations and comprehensive loss.

Consolidated Financial Statements and Supplementary Data.

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generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 7, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Valuation of fair value of contingent royalty obligation

Description of the Matter

As discussed in Note 2 of the consolidated financial statements, the Company records payment obligations to its founders which consists of quarterly royalty payments of a low single digit percentage of net sales of Jeuveau ® .

The obligations terminate in the second quarter of 2029, which is the 10-year anniversary of the first commercial sale of Jeuveau ® in the United States.

The Company determines the fair value of the contingent royalty obligation at each reporting period end based on significant unobservable inputs using a discounted cash flows method.

Auditing the Company’s contingent royalty obligation was challenging due to the effort required to evaluate the appropriateness of the significant unobservable inputs used in the fair value calculation, specifically the US projected net revenues of Jeuveau ® during the payment period.

How We Addressed the Matter in Our Audit

To test the estimated fair value of the contingent royalty obligation, we performed audit procedures that included, among others, assessing the terms of the arrangement, evaluating the methodology used, and testing the US projected net revenues of Jeuveau ® used by the Company in its analysis.

We also compared the US projected net revenues to current industry, market and economic trends and performed sensitivity analyses of other assumptions to evaluate the changes in the contingent royalty obligation that would result from changes in the assumptions.

We also assessed the historical accuracy of management’s forecasts of US net revenues used in developing the estimate to assist in evaluating the reliability of the US projected net revenues of Jeuveau ® utilized in the estimate.

/s/ Ernst & Young LLP

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Total assets $ 188,998 $ 177,983

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current Liabilities

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Total current liabilities 48,291 46,509

Accrued litigation settlement — 5,000

Operating lease liabilities 4,810 1,224

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Commitments and contingencies (Note 8)

Stockholders’ equity

Stockholders’ equity (deficit)

Preferred Stock, $ 0.00001 par value;

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Accumulated deficit ( 558,979 ) ( 497,294 )

Total stockholders’ equity 18,499 81,876

Total liabilities and stockholders’ equity $ 177,983 $ 257,483

Total stockholders’ equity (deficit) ( 20,689 ) 18,499

Total liabilities and stockholders’ equity (deficit) $ 188,998 $ 177,983

See accompanying notes to consolidated financial statements.

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Product cost of sales (excludes amortization of intangible assets) 61,559 55,887

Settlement payment from Daewoong — ( 25,500 )

Selling, general and administrative 164,944 141,840

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Interest expense ( 13,832 ) ( 9,097 )

Loss from extinguishment of debts, net — ( 968 )

Other expense, net ( 9 ) —

Other income (expense), net 696 ( 9 )

Loss before income taxes:

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Balance at December 31, 2021 55,576,988 $ 1 $ 504,757 $ — $ ( 422,882 ) $ 81,876

Issuance of common stock in connection with litigation settlement 6,762,652 — 48,421 — — 48,421

Issuance of common stock for conversion of convertible note 3,136,869 — 39,808 — — 39,808

Issuance of common stock upon follow-on offering, net of issuance costs 10,350,000 — 92,212 — — 92,212

Issuance of common stock under “at-the-market” (ATM) program 934,367 — 10,910 — — 10,910

Issuance of common stock in connection with the incentive equity plan 683,582 — 539 — — 539

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Net loss — — — — ( 74,412 ) ( 74,412 )

Other comprehensive loss — — — ( 337 ) — ( 337 )

Balance at December 31, 2022 56,260,570 $ 1 $ 516,129 $ ( 337 ) $ ( 497,294 ) $ 18,499

Issuance of common stock in connection with the incentive equity plan 950,051 — 224 — — 224

Stock-based compensation expense — — 10,833 — — 10,833

Issuance of common stock in connection with Symatese Europe Agreement 610,000 — 5,905 — — 5,905

Stock-based compensation — — 16,458 — — 16,458

Net loss — — — — ( 61,685 ) ( 61,685 )

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Provision for bad debts 1,440 1,598

Amortization of discount on short-term investments — 272

Amortization of operating lease right-of-use assets 734 775

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Revaluation of contingent royalty obligation to Evolus Founders 4,257 5,755

Loss from extinguishment of debts — 968

Non-cash in-process research and development expense 4,429 —

Changes in assets and liabilities:

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Prepaid expenses ( 1,798 ) 1,180

Other current assets 4,854 ( 7,010 )

Other assets ( 864 ) 4,854

Accounts payable ( 1,017 ) 968

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Additions to capitalized software ( 1,154 ) ( 1,321 )

Maturities of short-term investments — 5,000

Net cash (used in) provided by investing activities ( 2,939 ) 4,030

Net cash used in investing activities ( 1,627 ) ( 2,939 )

Cash flows from financing activities

Repayment of long term debt — ( 76,323 )

Repayment of promissory note payable to Evolus Founders — ( 20,000 )

Payment of contingent royalty obligation to Evolus Founders ( 5,537 ) ( 4,185 )

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Payments for debt issuance costs ( 46 ) ( 500 )

Proceeds from follow-on offering, net of underwriting fees — 92,426

Payments for offering costs — ( 214 )

Issuance of common stock in connection with incentive equity plan 224 539

Proceeds from ATM sales of shares — 10,910

Net cash (used in) provided by financing activities ( 4,146 ) 73,052

Net cash provided by (used in) financing activities 44,641 ( 4,146 )

Effect of exchange rates on cash ( 90 ) ( 337 )

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Non-cash investing and financing information

Conversion of convertible note to equity $ — $ 39,808

Issuance of common stock in exchange for litigation settlement expense $ — $ 48,421

Capitalized software recorded in accounts payable and accrued expenses $ — $ 10

Operating lease right-of-use assets obtained in exchange for operating lease liabilities 4,550 —

Issuance of common stock in connection with Symatese Europe Agreement 1,476 —

See accompanying notes to consolidated financial statements.

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Description of Business

Evolus, Inc., (“Evolus” or the “Company”) is a performance beauty company focused on delivering products in the self-pay aesthetic market.

Evolus, Inc., (“Evolus” or the “Company”) is a global performance beauty company focused on delivering products in the cash-pay aesthetic market.

The Company received the approval of its first product Jeuveau ® (prabotulinumtoxinA-xvfs) from the U.S.

Food and Drug Administration (the “FDA”) in February 2019.

The product was also approved by Health Canada in August 2018, the European Commission (“EC”) in September 2019, and the Australian Therapeutics Good Administration (“TGA”) in January 2023.

The product was also approved by Health Canada in August 2018, the European Commission (“EC”) in September 2019, the Australian Therapeutics Good Administration (“TGA”) in January 2023, and Swissmedic in November 2023.

Jeuveau ® is a proprietary 900 kDa purified botulinum toxin type A formulation indicated for the temporary improvement in the appearance of moderate to severe glabellar lines, also known as “frown lines,” in adults.

The Company commercially launched Jeuveau ® in the United States in May 2019, in Canada through a distribution partner in October 2019, in Great Britain in September 2022, and in Germany and Austria in February 2023.

The Company commercially launched Jeuveau ® in the United States in May 2019, in Canada through a distribution partner in October 2019, and began its launch in Europe in September 2022.

In 2023, the Company entered into an agreement to be the exclusive distributor of Evolysse™, a line of dermal fillers currently in late-stage development in the U.S.

Regulatory approval has been received for the Evolysse™ nasolabial fold product in Europe and the remaining three products are anticipated to be approved in late 2024.

regulatory approval and commercial launch remains on track to begin in 2025 for the first two products with subsequent product launches for the remaining products in 2026 and 2027.

The Company currently generates all of its net revenues from Jeuveau ® .

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Liquidity and Financial Condition

The accompanying consolidated financial statements have been prepared on a basis that assumes that the Company will continue as a going concern, and do not include any adjustments that may result from the outcome of this uncertainty.

The accompanying consolidated financial statements have been prepared on a basis that assumes that the Company will continue as a going concern.

This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of the Company’s liabilities and commitments in the normal course of business and does not include any adjustments to reflect the possible future effects of the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Since inception, the Company has incurred recurring net operating losses and negative cash flows from operating activities and management expects operating losses and negative cash flows to continue for at least the next 12 months.

The Company recorded net loss of $ 74,412 for the twelve months ended December 31, 2022.

The Company used cash of $ 84,912 from operations during the twelve months ended December 31, 2022, which included a lump sum settlement payment of $ 15,000 to Medytox and Allergan.

As of December 31, 2022, the Company had $ 53,922 in cash and cash equivalents as well as $ 50,000 available under its debt agreement with Pharmakon, and an accumulated deficit of $ 497,294 .

In December 2021, the Company entered into a $ 125,000 Term Loan agreement with BPCR Limited Partnership, BioPharma Credit Investments V (Master) LP, and Biopharma Credit PLC (collectively, “Pharmakon”).

The first tranche of $ 75,000 was funded on December 29, 2021.

The Company received net proceeds of $ 68,695 from Pharmakon, after issuance costs and debt discounts in December 2021.

On December 5, 2022, the Company entered into a Second Amendment to the loan agreement to extend its option to draw down the second tranche of $ 50,000 until December 31, 2023.

In exchange for the extension, the Company paid an amendment fee of $ 500 to Pharmakon.

The second tranche of $ 50,000 may be drawn at the Company’s election no later than December 31, 2023, subject to the terms and conditions of the loan agreement.

As of March 8, 2023, the Company has not drawn the second tranche.

The Pharmakon Term Loans will mature on the six-year anniversary of the closing date of the first tranche.

Term Loans for additional information.

The Company believes that its current capital resources, which consist of cash and cash equivalents, will be sufficient to fund operations through at least the next twelve months from the date the accompanying consolidated financial statements are issued based on its expected cash needs.

The Company may need to raise additional capital to fund future operations through entering into licensing or collaboration agreements with partners, grants or other sources of financing.

The Company recorded net loss from operations of $ 49,233 and a total net loss of $ 61,685 for the twelve months ended December 31, 2023.

The Company used cash of $ 34,008 from operations during the twelve months ended December 31, 2023, which included the final lump sum settlement payment of $ 5,000 to Medytox and Allergan, Inc.

and Allergan Limited (together, “Allergan”) and an upfront payment of $ 4,441 to Symatese S.A.S.

(“Symatese”).

As of December 31, 2023, the Company had $ 62,838 in cash and cash equivalents and an accumulated deficit of $ 558,979 .

On March 8, 2023, the Company entered into an “at-the-market” sales agreement (the “ATM Sales Agreement”) and filed a shelf registration statement on Form S-3 and corresponding prospectus with the SEC to permit sales under the ATM Sales Agreement, which registration statement became effective on June 8, 2023.

The Company has not sold any shares under the ATM Sales Agreement.

Stockholders’ Equity for additional information.

The Company believes that its current capital resources, which consist of cash and cash equivalents, will be sufficient to fund its operations through at least the next twelve months from the date the accompanying consolidated financial statements are issued based on its expected cash needs.

The Company may need to raise additional capital to fund future operations or execute corporate development activities through entering into licensing or collaboration agreements with partners, grants or other sources of financing.

Sufficient funds may not be available to the Company at all or on attractive terms when needed from equity or debt financings.

If the Company is unable to obtain additional funding from these or other sources when needed, or to the extent needed, it may be necessary to significantly reduce its scope of operations to reduce the current rate of spending through actions such as reductions in staff and delaying, scaling back, or suspending certain research and development, sales and marketing programs and other operational goals.

If the Company is unable to obtain additional funding from these or other sources when needed, or to the extent needed, it may be necessary to reduce its scope of operations to reduce the current rate of spending through actions such as reductions in staff and delaying, scaling back, or suspending certain research and development, sales and marketing programs and other operational goals.

Basis of Presentation and Summary of Significant Accounting Policies

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The Company is party to an agreement (the “Daewoong Agreement”) with Daewoong Pharmaceutical Co.

(“Daewoong”), pursuant to which the Company received an exclusive distribution license to Jeuveau ® from Daewoong for aesthetic indications in the United States, European Union, United Kingdom, members of the European Economic Area, Switzerland, Canada, Australia, certain members of the Commonwealth of Independent States, and South Africa, as well as co-exclusive distribution rights with Daewoong in Japan.

(“Daewoong”), pursuant to which the Company received an exclusive distribution license to Jeuveau ® from Daewoong for aesthetic indications in the United States, European Union, United Kingdom, members of the European Economic Area, Switzerland, Canada, Australia, New Zealand, and South Africa, as well as co-exclusive distribution rights with Daewoong in Japan.

Jeuveau ® is manufactured by Daewoong in a facility in South Korea.

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Medytox/Allergan Settlement Agreements and Daewoong Arrangement for additional information.

The Company commercially launched Jeuveau ® in the United States in May 2019, in Canada through its distribution partner in October 2019, in Great Britain in September 2022, and in Germany and Austria in February 2023 and, as such, has a limited history of sales.

If any previously granted approval is retracted or the Company is denied approval or approval is delayed by any other regulators, it may have a material adverse impact on the Company’s business and its consolidated financial statements.

The Company is also subject to risks common to companies in the pharmaceutical industry including, but not limited to, dependency on the commercial success of Jeuveau ® , the Company’s sole commercial product, significant competition within the medical aesthetics industry, its ability to maintain regulatory approval of Jeuveau ® , third party litigation and challenges to its intellectual property, uncertainty of broad adoption of its product by physicians and patients, its ability to in-license, acquire or develop additional product candidates and to obtain the necessary approvals for those product candidates, and the need to scale manufacturing capabilities over time.

Any disruption and volatility in the global capital markets caused by other events, such as public health crises, increased inflation and rising interest rates and the military conflict between Russia and Ukraine, may increase the Company’s cost of capital and adversely affect its ability to access financing when and on terms that the Company desires.

The Company commercially launched Jeuveau ® in the United States in May 2019 and in Canada through its distribution partner in October 2019.

The Company also began commercially launching Jeuveau ® in Europe in September 2022 and, as such, has a limited history of sales in those markets.

If any previously granted approval to market and sell Jeuveau ® is retracted or the Company is denied approval or approval is delayed by regulators in any other jurisdictions, it may have a material adverse impact on the Company’s business and its consolidated financial statements.

The Company is also subject to risks common to companies in the pharmaceutical industry including, but not limited to, dependency on the commercial success of Jeuveau ® , the Company’s sole commercial product, significant competition within the medical aesthetics industry, its ability to maintain regulatory approval of Jeuveau ® , third party litigation and challenges to its intellectual property, uncertainty of broad adoption of its product by aesthetic practitioners and patients, its ability to in-license, acquire or develop additional product candidates and to obtain the necessary approvals for those product candidates, and the need to scale manufacturing capabilities over time.

Any disruption and volatility in the global capital markets, including caused by other events, such as public health crises, increased inflation and rising interest rates, and geopolitical conflicts, including the military conflict between Russia and Ukraine and the ongoing conflict in the Middle East, may increase the Company’s cost of capital and adversely affect its ability to access financing when and on terms that the Company desires.

Any of these events could have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.

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The Company has determined that it operates in a single operating and reportable segment.

The Company’s chief operating decision maker is its Chief Executive Officer who manages operations and reviews the financial information as a single operating segment for purposes of allocating resources and evaluating its financial performance.

The Company’s chief operating decision maker is its Chief Executive Officer who manages operations and reviews the financial information as a single operating segment for the purposes of allocating resources and evaluating its financial performance.

Notes to Consolidated Financial Statements

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Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents, short-term investments and accounts receivable.

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents and accounts receivable.

Substantially all of the Company’s cash is held by financial institutions that management believes are of high credit quality.

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Credit losses historically have not been material.

The Company continuously monitors customer payments and maintains an allowance for doubtful accounts based on its assessment of various factors including historical experience, age of the receivable balances, and other current economic conditions or other factors that may affect customers’ ability to pay.

The Company continuously monitors customer payments and maintains an allowance for credit losses based on its assessment of various factors including historical experience, age of the receivable balances, and other current economic conditions or other factors that may affect customers’ ability to pay.

Cash and Cash Equivalents

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Amounts receivable from credit card issuers are typically converted to cash within two to four days of the original sales transaction and are considered to be cash equivalents.

Short-Term Investments

Short-term investments consist of available-for-sale U.S.

Treasury securities with original maturities greater than three months and remaining maturities of less than twelve months.

These investments are recorded at fair value based on quoted prices in active markets, with unrealized gains and losses reported in other comprehensive loss in the Company’s consolidated statements of operations and comprehensive loss.

Purchase premiums and discounts are recognized in interest expense using the effective interest method over the terms of the securities.

Realized gains and losses and declines in fair value that are deemed to be other than temporary are reflected in the consolidated statements of operations and comprehensive loss using the specific-identification method.

The Company periodically reviews all available-for-sale securities for other than temporary declines in fair value below the cost basis whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The Company also evaluates whether it has plans or is required to sell short-term investments before recovery of their amortized cost bases.

To date, the Company has not identified any other than temporary declines in fair value of its short-term investments.

Inventories consist of finished goods held for sale and distribution.

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Adverse changes in assumptions utilized in the Company’s inventory reserve calculations could result in an increase to its inventory valuation reserves.

Product cost of sales, excluding amortization of intangible assets, consisted of the inventory cost, and, for periods on or after December 16, 2020, included certain royalties on the sale of Jeuveau ® payable to Medytox and Allergan pursuant to the Medytox/Allergan Settlement Agreements (as such term is defined in Note 11.

Medytox/Allergan Settlement Agreements and Daewoong Arrangement ), as partially offset by reimbursement receivable from Daewoong pursuant to the Daewoong

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

Settlement Agreement with respect to such royalties.

In the year ended December 31, 2021, the Company recorded a one-time settlement payment of $ 25,500 from Daewoong in connection with the Daewoong Settlement Agreement as part of cost of sales.

Product cost of sales, excluding amortization of intangible assets, consisted of the inventory cost and certain royalties on the sale of Jeuveau ® payable to Medytox and Allergan pursuant to the Medytox/Allergan Settlement Agreements (as such term is defined in Note 10.

Medytox/Allergan Settlement Agreements and Daewoong Arrangement ).

Fair Value of Financial Instruments

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or other inputs that are observable, either directly or indirectly, or can be corroborated by observable market data for substantially the full term of the asset or liability;

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

• Level 3—Prices or valuation techniques that require inputs that are unobservable that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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Property and equipment are stated at cost.

Depreciation and amortization are provided using the straight-line method over the estimated useful lives of approximately five years .

Depreciation and amortization are provided using the straight-line method over the estimated useful lives of approximately three to five years .

Leasehold improvements are amortized over the shorter of the estimated useful lives of the improvements or the term of the related lease.

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If events or circumstances do not indicate that the fair value of a reporting unit is below its carrying amount, then goodwill is not considered to be impaired and no further testing is required.

If further testing is required, the Company performs a two-step process.

The first step involves comparing the fair value of the Company’s reporting unit to its carrying value, including goodwill.

If the carrying value of the reporting unit exceeds its fair value, the second step of the test is performed by comparing the carrying value of the goodwill in the reporting unit to its implied fair value.

An impairment charge is recognized for the excess of the carrying value of goodwill over its implied fair value.

For the purpose of impairment testing, the Company has determined that it has one reporting unit.

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As a result, the distribution right intangible asset is being amortized on a straight-line basis over the estimated useful life of 20 years.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

A portion of the Symatese Europe Agreement represents the license and distribution right to Evolysse TM in Europe.

The definite-lived distribution right intangible asset related to the Evolysse TM nasolabial fold product approved in Europe is amortized on a straight-line basis over the estimated useful life of 15 years.

The Company capitalizes certain internal-use software costs associated with the development of its mobile and web-based customer platforms.

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If both criteria are met, upon lease commencement, the Company records a lease liability which represents the Company’s obligation to make lease payments arising from the lease, and a corresponding right-of-use (“ROU”) asset which represents the Company’s right to use an underlying asset during the lease term.

Operating lease assets and liabilities are included in ROU assets, current portion of operating lease liabilities and noncurrent operating lease liabilities in the accompanying consolidated balance sheets.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

lease assets and liabilities are included in ROU assets, current portion of operating lease liabilities and noncurrent operating lease liabilities in the accompanying consolidated balance sheets.

Operating lease ROU assets and lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease term at commencement date calculated using the Company’s incremental borrowing rate applicable to the underlying asset unless the implicit rate is readily determinable.

The incremental borrowing rate, the ROU asset and the lease liability are reevaluated upon a lease modification.

Operating lease ROU assets also include any lease payments made at or before lease commencement and exclude any lease incentives received, if any.

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Payment obligations to the Evolus Founders consist of quarterly royalty payments of a low single digit percentage of net sales of Jeuveau ® .

The obligations terminate in the quarter following the 10 -year anniversary of the first commercial sale of Jeuveau ® in the United States.

The obligations terminate in the second quarter of 2029, which is the 10-year anniversary of the first commercial sale of Jeuveau ® in the United States.

Under the Amended Stock Purchase Agreement, the Company recorded the fair value of all revised payment obligations owed to the Evolus Founders.

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Changes in the fair value of the contingent royalty obligation payable are determined at each reporting period end and recorded in operating expenses in the accompanying consolidated statements of operations and comprehensive loss and as a liability in the accompanying consolidated balance sheets.

In November 2021, the Company paid $ 20,000 to satisfy in full a promissory note that matured in November 2021.

Promissory Note Payable to the Evolus Founders

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

On February 12, 2018, the Company recognized a promissory note payable at present value using a discount rate for similar rated debt securities.

Discount amortization related to the promissory note is recorded in interest expense in the accompanying consolidated statements of operations and comprehensive loss with a corresponding increase to the liabilities in the accompanying consolidated balance sheets.

Long-Term Debt

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In order to achieve that core principle, a five-step approach is applied:

(1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue allocated to each performance obligation when the Company satisfies the performance obligation.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

Company satisfies the performance obligation.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition.

The Company generates product revenue from the sale of Jeuveau ® in the United States and Great Britain and service revenue from the sale of Jeuveau ® through a distribution partner in Canada.

The Company generates product revenue from the sale of Jeuveau ® in the United States and Europe, and service revenue from the sale of Jeuveau ® through a distribution partner in Canada.

For product revenue, the Company recognizes revenue when control of the promised goods under a contract is transferred to a customer, in an amount that reflects the consideration the Company expects to receive in exchange for those goods as specified in the customer contract.

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Revenue from services is recognized in the period the service is performed for the amount of consideration expected to be received.

For the years ended December 31, 2022 and 2021, the Company recognized $ 2,024 and $ 702 , respectively, of revenues related to service revenues.

Disaggregation of Revenue

The Company’s disaggregation of revenue is consistent with its operating segment as disclosed above.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

Gross-to-Net Revenue Adjustments

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At the time Jeuveau ® product is sold to customers, the invoice price is allocated between the product sold and the estimated material right reward (“Reward”) that the customer might redeem in the future.

The standalone selling price of the Reward is measured based on historical sales data, estimated average selling price of Jeuveau ® at the time of redemption, expected customer and consumer participation rates in the loyalty program, and estimated number of qualifying treatments to be performed by customers.

The standalone selling price of the Reward is measured based on estimated average selling price of Jeuveau ® at the time of redemption and the expected redemption rate by customers based on historical sales data.

The portion of invoice price allocated to the Reward is initially recorded as deferred revenue.

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Subsequently, when the advertisement airs, the deferred revenue is recognized in net revenues at that time.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

Contract Balances

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As of December 31, 2023 and 2022, the accrued revenue contract liabilities, primarily related to volume-based rebates, consumer loyalty program and co-branded marketing programs, were $ 11,033 and $ 9,011 , respectively, which were recorded in accrued expenses in the accompanying consolidated balance sheets.

For the years ended December 31, 2022 and 2021, provisions for rebate, consumer loyalty programs and co-branded marketing programs were $ 22,759 and $ 16,139 , respectively, which were offset by related payments, redemptions and adjustments of $ 21,682 and $ 11,286 , respectively.

For the years ended December 31, 2023 and 2022, provisions for rebate, consumer loyalty programs and co-branded marketing programs were $ 32,511 and $ 22,759 , respectively, which were offset by related payments, redemptions and adjustments of $ 30,489 and $ 21,682 , respectively, which were recorded as adjustments to gross revenues in the accompanying consolidated statement of operations.

During the years ended December 31, 2023 and 2022, the Company recognized $ 7,868 and $ 7,566 , respectively, of revenue related to amounts included in contract liabilities at the beginning of the period and did not recognize any revenue related to changes in transaction prices regarding its contracts with customers from previous periods.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

Collectability

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The Company assesses the probability that the Company will collect the entitled consideration in exchange for the goods sold, by considering the customer’s ability and intention to pay when consideration is due.

On a recurring basis, the Company estimates the amount of receivables considered uncollectable to reflect an allowance for doubtful accounts.

The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and periodic evaluation of customers’ receivables balances using relevant available information, from internal and external sources, relating to past events, current conditions and forecasts.

Historical credit loss experience provides the basis for estimation of expected credit losses and are adjusted as necessary using the relevant information available.

The Company writes off accounts receivable balances when it is determined that there is no possibility of collection.

As of December 31, 2022 and 2021, allowance for doubtful accounts was $ 2,050 and $ 2,385 , respectively.

As of December 31, 2023 and 2022, allowance for credit losses was $ 1,490 and $ 2,050 , respectively.

For the years ended December 31, 2023 and 2022, provision for bad debts was $ 1,440 and $ 1,598 , respectively, and the write-off amount was $ 2,000 and $ 1,933 , respectively.

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Research and development costs are expensed as incurred.

Research and development expenses include personnel-related costs, costs associated with pre-clinical and clinical development activities, costs associated with and costs for prototype products that are manufactured prior to market approval for that prototype product, internal and external costs associated with the Company’s regulatory compliance and quality assurance functions, including the costs of outside consultants and contractors that assist in the process of submitting and maintaining regulatory filings, and overhead costs, including allocated facility related expenses.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

with the Company’s regulatory compliance and quality assurance functions, including the costs of outside consultants and contractors that assist in the process of submitting and maintaining regulatory filings, and overhead costs, including allocated facility related expenses.

In-process Research and Development

Intangible assets acquired that are used for research and development and have no future alternative use are expensed as in-process research and development.

Intangible assets acquired that are used for research and development, do not yet have regulatory approval for commercialization, and have no future alternative use are expensed as in-process research and development.

Collaboration Agreement

In June 2022, the Company entered into a License and Research Collaboration Agreement (the “Collaboration Agreement”) with a 3D printing company with biomaterial capabilities (the “Licensor”).

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The upfront payment of $ 2,000 was recorded as in-process research and development expense.

Symatese U.S.

On May 9, 2023, the Company and Symatese, entered into a License, Supply and Distribution Agreement (the “Symatese U.S.

Agreement”), pursuant to which Symatese granted to the Company an exclusive right to commercialize and distribute its five dermal filler product candidates, including the products referred to as:

(iii) Sculpt;

and (v) Eye (collectively, the “Products”) in the United States for use in the aesthetics and dermatological field of use.

The Company also has the right of first negotiation to obtain a license from Symatese to commercialize and distribute any new products developed using the same technology as the Evolysse ™ line of dermal fillers.

As consideration for the rights granted under the Symatese U.S.

Agreement, the Company is required to make up to € 16,200 in milestone payments to Symatese, including an initial payment of € 4,100 within 30 days of execution of the Symatese U.S.

Agreement, and additional annual payments of € 1,600 in June 2025, € 4,100 in June 2026, € 3,200 in June 2027, and € 3,200 in June 2028, in each case subject to three of the Products gaining approval prior to that date.

In June 2023, the Company paid $ 4,441 as an upfront payment upon the signing of the Symatese U.S.

Agreement and has developmental costs, ongoing milestone and royalty payment obligations.

The Symatese U.S.

Agreement is also subject to minimum purchase requirements and failure to meet such requirements may result in a reduction or termination of the Company’s exclusive rights, subject to certain exceptions.

Additionally, the Company agreed to a specified cost-sharing agreement with Symatese related to the registration of the Lips and Eye Products with the FDA.

The initial term of the Symatese U.S.

Agreement is fifteen ( 15 ) years from the first FDA approval of a Product, with automatic renewals for successive five ( 5 )-year terms subject to the terms of the Symatese U.S.

The upfront payment of $ 4,441 was recorded as in-process research and development expense in the twelve months ended December 31, 2023.

Symatese Europe Agreement

On December 20, 2023, the Company entered into a License, Supply and Distribution Agreement (the “Symatese Europe Agreement”), pursuant to which Symatese granted to us an exclusive right to commercialize and distribute four dermal filler product candidates, which are referred to as:

(iii) Sculpt and (iv) Lips in 50 countries in Europe for use in the aesthetics and dermatological fields.

In exchange for the rights granted under the Symatese Europe Agreement, the Company issued 610,000 shares of common stock and is required to pay two milestone payments:

(i) € 1,200 on the second anniversary of certain regulatory approvals, and (ii) € 1,900 on the earlier of the third anniversary of certain regulatory approvals or following a year in which the Company achieves € 25,000 in revenue in Europe.

The Symatese Europe Agreement is also subject to minimum purchase requirements and failure to meet such requirements may result in a reduction or termination of the Company’s exclusive rights, subject to certain exceptions.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

The initial agreement is for a term of fifteen ( 15 ) years, with automatic year renewal provisions.

Upon the receiving of regulatory approval for the Evolysse TM nasolabial fold product in Europe, the Company recorded $ 4,429 in in-process research and development expense and $ 1,476 in intangible assets in the twelve months ended December 31, 2023 for the stock issuance of 610,000 shares.

The intangible assets of $ 1,476 represents the value of the approved nasolabial fold product in Europe and is amortized over its estimated useful life.

Litigation Settlement

In February 2021, upon entering into certain agreements to settle intellectual property disputes relating to Jeuveau ® , the Company agreed to pay to Allergan and Medytox $ 35,000 in multiple payments over two years , of which the Company paid $ 15,000 in the third quarter of 2021, $ 15,000 in the first quarter of 2022, and $ 5,000 in the first quarter of 2023, and issued 6,762,652 shares of its common stock to Medytox.

In February 2021, upon entering into certain agreements to settle intellectual property disputes relating to Jeuveau ® , the Company agreed to pay to Allergan and Medytox $ 35,000 in multiple payments over two years , of which $ 15,000 was paid in the third quarter of 2021, $ 15,000 was paid in the first quarter of 2022, and $ 5,000 was paid in the first quarter of 2023, and issued 6,762,652 shares of its common stock to Medytox.

In addition, for the period from December 16, 2020 through September 16, 2022 (the “Restricted Period”), the Company agreed to pay to Allergan and Medytox a royalty on the sale of Jeuveau ® , based on a certain dollar amount per vial sold in the United States and a low-double digit royalty on net sales of Jeuveau ® sold in other Evolus territories.

Royalties for sales during the Restricted Period ended in the third quarter of 2022.

For the period from September 17, 2022 to September 16, 2032, the Company agreed to pay to Medytox a mid-single digit royalty percentage on all net sales of Jeuveau ® .

The royalty payments are made quarterly and recorded as product cost of sales on the accompanying consolidated statements of operations and comprehensive loss in the periods the royalties are incurred.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

Separately, in March 2021, Daewoong and the Company entered into certain agreements, pursuant to which Daewoong agreed to pay the Company an amount equal to $ 25,500 , which was recorded as a settlement payment from Daewoong and included as part of cost of sales on the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2021.

For the period from December 16, 2020 to September 16, 2022, Daewoong reimbursed the Company certain amounts with respect to the royalties payable to Medytox and Allergan.

For the period from December 16, 2020 to September 16, 2022, Daewoong agreed to reimburse the Company certain amounts with respect to the royalties payable to Medytox and Allergan.

This reimbursement was received quarterly and recorded as an offset to the related royalties to Medytox and Allergan in the product cost of sales on the accompanying consolidated statements of operations and comprehensive loss.

For the period from September 17, 2022 to September 16, 2032, the Company agreed to pay Medytox a mid-single digit royalty percentage on all net sales of Jeuveau ® .

As of December 31, 2023, there were no liabilities recorded in the accompanying consolidated balance sheets related to the litigation settlement with Allergan and Medytox.

As of December 31, 2022, a current liability of $ 5,000 was recorded in the accompanying consolidated balance sheets related to the litigation settlement with Allergan and Medytox.

Medytox/Allergan Settlement Agreements and Daewoong Arrangement for the details of all litigation settlement agreements.

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The Company also evaluates the impact of modifications made to the original terms of equity awards when they occur.

The fair value of equity awards that are expected to vest is amortized on a straight-line basis over the requisite service period.

The Company uses a Monte Carlo simulation model to determine the fair value of performance units with market conditions at the grant date.

The Monte Carlo simulation model involves the generation of a large number of possible stock price outcomes for the Company’s stock which is assumed to follow a Geometric Brownian Motion.

The use of the Monte Carlo simulation model requires the input of a number of assumptions including expected volatility of the Company’s stock price, which is based on the historical volatility of its stock;

risk-free interest rate, which is based on the treasury zero-coupon yield commensurate with the term of the performance unit as of the grant date;

and expected dividends as applicable, which is zero, as the Company has never paid any cash dividends.

The fair value of stock options and RSUs with service conditions that are expected to vest is amortized on a straight-line basis over the requisite service period.

Stock-based compensation for RSUs with performance or market conditions is recorded over the requisite service period using the accelerated attribution method.

Stock-based compensation expense is recognized net of actual forfeitures when they occur, as an increase to additional paid-in capital in the consolidated balance sheets and in the selling, general and administrative or research and development expenses in the consolidated statements of operations and comprehensive loss.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

Advertising Costs

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The preparation of these income tax returns requires the Company to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax paid by the Company.

An amount is accrued for the estimate of additional tax liability, including interest and penalties, for any uncertain tax positions taken or expected to be taken in an

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

income tax return.

An amount is accrued for the estimate of additional tax liability, including interest and penalties, for any uncertain tax positions taken or expected to be taken in an income tax return.

The Company reviews and updates the accrual for uncertain tax positions as more definitive information becomes available.

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The Company monitors changes to the tax laws in the states it conducts business and files corporate income tax returns.

The Company does not expect that changes to state tax laws through December 31, 2022 to materially impact its consolidated financial statements.

The Company does not expect changes to state tax laws through December 31, 2023 to materially impact its consolidated financial statements.

Net Loss Per Share

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Diluted earnings per share is based on the treasury stock method and includes the effect from potential issuance of ordinary shares, such as shares issuable pursuant to the exercise of stock options and the vesting of restricted stock units.

The dilutive effect of stock options and restricted stock units is computed under the treasury stock method.

The dilutive effect of the Daewoong Convertible Note is computed under the if-converted method.

Potentially dilutive securities are excluded from the computations of diluted net loss per share if their effect would be antidilutive.

For the years ended December 31, 2022 and 2021, excluded from the dilutive net loss per share computation were stock options of 4,769,521 and 3,922,286 , respectively, and non-vested RSUs of 2,663,320 and 1,926,467 , respectively.

Because the impact of the options and non-vested RSUs are anti-dilutive during periods of net loss, there was no difference between the weighted-average number of shares used to calculate

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

basic and diluted net loss per common share for the periods presented.

Excluded from the dilutive net loss per share computation for the twelve months ended December 31, 2023 and 2022, were stock options of 5,753,466 and 4,769,521 , respectively, and non-vested RSUs of 3,281,045 and 2,663,320 , respectively.

Although these securities were anti-dilutive for these periods, they could be dilutive in future periods.

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Recently Adopted Pronouncements

In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance.

This update will increase transparency of government assistance received by most business entities by requiring the disclosure of:

(1) the types of transactions;

(2) the accounting for the transactions;

and, (3) the effect of the transactions on a business entity’s consolidated financial statements.

2021-10 is effective for consolidated financial statements issued for annual periods beginning after December 15, 2021, with early application permitted.

The Company adopted this guidance effective January 1, 2022.

There is no material impact to the consolidated financial statements as a result of this adoption.

If, at any point in time, such amounts are deemed to be material, the Company will present the required disclosures as applicable.

Recent Accounting Pronouncements Issued But Not Adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting and in January 2021, the FASB issued ASU No.

2021-01, Reference Rate Reform (Topic 848):

Scope (“ASU 2021-01”) .

2020-04 and ASU No.

2021-01 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform.

2020-04 and ASU No.

2021-01 are effective upon issuance for contract modifications and hedging relationships, and the Company is allowed to elect to apply the amendments prospectively through December 31, 2022.

In December 2022, the FASB issued ASU No.

2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 , which extends the temporary accounting rules under Topic 848 to December 31, 2024.

The Company transitioned to SOFR from LIBOR on May 9, 2023.

There are no material impacts to the consolidated financial statements.

In January 2017, the FASB issued ASU No.

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The impairment charge will be limited to the amount of goodwill allocated to that reporting unit.

As amended by ASU No.

2019-10, the updated guidance is effective for the Company as a smaller reporting company beginning January 1, 2023.

The standard requires prospective application.

Early adoption is permitted.

The Company does not expect the adoption of this guidance to result in a material impact on its consolidated financial statements.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

The Company adopted this guidance on the effective date of January 1, 2023.

There are no material impacts to the consolidated financial statements as a result of this adoption.

In June 2016, the FASB issued ASU No.

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Subsequent to the issuance of ASU No.

2016-13, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses .

2016-13, the FASB issued ASU No.

2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses .

This ASU does not change the core principle of the guidance in ASU No.

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2016-13 but clarified that expected recoveries of amounts previously written off and expected to be written off should be included in the valuation account and should not exceed amounts previously written off and expected to be written off.

As amended by ASU No.

2019-10, the updated guidance is effective for the Company as a smaller reporting company beginning January 1, 2023.

The Company adopted this guidance effective January 1, 2023.

The adoption of the standard did not result in a material impact to its consolidated financial statements.

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting and in January 2021, the FASB issued ASU No.

2021-01, Reference Rate Reform (Topic 848):

Scope (“ASU 2021-01”).

2020-04 and ASU No.

2021-01 are effective upon issuance for contract modifications and hedging relationships, and the Company is allowed to elect to apply the amendments prospectively through December 31, 2022.

The Company prospectively adopted this guidance on the effective date of January 1, 2023 and the adoption did not have a material impact to the consolidated financial statements and resulted in no adjustment to the Company’s prior year earnings.

Recent Accounting Pronouncements Issued But Not Adopted

In December 2023, the FASB issued ASU No.

2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 , which extends the temporary accounting rules under Topic 848 to December 31, 2024.

The Company does not expect adoption of this guidance will have a material impact on its consolidated financial statements.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

This update requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

This update requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis.

Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

requirements in ASC 280, on an interim and annual basis.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and for interim periods beginning after December 15, 2024, with early adoptions permitted.

The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future financial position, results of operations or cash flows.

Fair Value Measurements and Short-Term Investments

Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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The Company determines the fair value of the contingent royalty obligation payable to Evolus Founders based on Level 3 inputs using a discounted cash flows method.

The significant unobservable input assumptions that can significantly change

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

the fair value include (i) projected amount and timing of net revenues during the payment period, which terminates at the end of the second quarter of 2029, (ii) the discount rate, and (iii) the timing of payments.

The significant unobservable input assumptions that can significantly change the fair value include (i) projected amount and timing of net revenues during the payment period, which terminates at the end of the second quarter of 2029, (ii) the discount rate, and (iii) the timing of payments.

During the years ended December 31, 2023 and 2022, the Company utilized discount rates between 13.0 % and 15.0 %, reflecting changes in the Company’s risk profile.

Net revenue projections are also updated to reflect changes in the timing of expected sales.

Significant increases (decreases) in the discount rate would result in a significantly lower (higher) fair value measurement, which could materially impact the fair value reported on the consolidated balance sheet.

Significant increases (decreases) in the discount rate and to the projected net revenues would result in a significantly lower (higher) fair value measurement, which could materially impact their fair value reported on the consolidated balance sheet.

The following table shows a reconciliation of the beginning and ending fair value measurements of the contingent royalty obligation payable:

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The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, lease liabilities, and long-term debt.

The carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximates their fair value because of the short-term maturity of such instruments.

The Company estimates the fair value of long-term debt and operating lease liabilities using the discounted cash flow analysis based on the interest rates for similar rated debt securities (Level 2).

As of December 31, 2022 and 2021, the fair value of the long-term debt was $ 75,232 and $ 75,448 , respectively.

The fair value of operating lease liabilities as of December 31, 2022 and 2021 approximated their carrying value.

The carrying amount of cash and cash equivalents, accounts

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

receivable, accounts payable and accrued expenses approximates their fair value because of the short-term maturity of such instruments.

The Company estimates the fair value of long-term debt and operating lease liabilities using the discounted cash flow analysis based on the interest rates for similar rated debt securities (Level 2).

As of December 31, 2023 and 2022, the fair value of long-term debt was $ 140,241 and $ 75,232 , respectively.

The fair value of operating lease liabilities as of December 31, 2023 and 2022 approximated their carrying value.

Goodwill and Intangible Assets

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Definite-lived intangible assets

Distribution right 20 $ 59,076 $ ( 11,545 ) $ 47,531

Distribution rights

20 $ 60,552 $ ( 14,500 ) $ 46,052

Capitalized software 2 9,804 ( 8,746 ) 1,058

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Thereafter 30,783

Distribution right represents the license and associated distribution right to develop Jeuveau ® , the initial term of which expires in September 2023 and is automatically extended for unlimited additional three-year terms provided that the Company meets certain performance requirements.

Additionally, upon FDA approval of Jeuveau ® on February 1, 2019, the IPR&D project was completed and reclassified as a definite-lived distribution right intangible asset, which is amortized on a straight-line basis over the estimated useful life of 20 years.

Distribution rights represent the license and associated distribution rights to Jeuveau ® and Evolysse TM .

For the year ended December 31, 2023, the Company capitalized $ 1,476 related to the license and distribution right to Evolysse TM nasolabial fold product in Europe, which is amortized on a straight-line basis over the estimated useful life of 15 years.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

For the years ended December 31, 2023 and 2022, the Company capitalized $ 1,168 and $ 1,322 , respectively, related to costs of computer software developed for internal use.

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For the years ended December 31, 2023 and 2022, total intangible assets amortization expense of $ 4,072 and $ 3,350 , respectively, was recorded within depreciation and amortization on the accompanying consolidated statements of operations and comprehensive loss.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

Accrued Expenses

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Year Ended December 31,

Accrued royalties under the Medytox/Allergan Settlement Agreements $ 2,618 $ 12,447

Accrued royalties under the Medytox Settlement Agreement $ 3,657 $ 2,618

Accrued payroll and related benefits 13,433 7,454

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On December 14, 2021, the Company entered into a loan agreement with Pharmakon.

Pursuant to the terms of the agreement, Pharmakon agreed to make term loans to the Company in two tranches (“Pharmakon Term Loans”).

Pursuant to the terms of the agreement, Pharmakon agreed to make term loans to the Company in two tranches (the “Pharmakon Term Loans”).

The first tranche of $ 75,000 was funded on December 29, 2021.

On December 5, 2022, the Company entered into a Second Amendment to the loan agreement to extend the Company’s option to draw down the second tranche of $ 50,000 until December 31, 2023, and paid an amendment fee of $ 500 to Pharmakon.

As of December 31, 2022, the Company has not drawn the second tranche.

The Pharmakon Term Loans will mature on the sixth year anniversary of the closing date of the first tranche (“Maturity Date”).

The Pharmakon Term Loans accrue interest at a per annum rate equal to the 3-month U.S.

The Pharmakon Term Loans will mature on the sixth year anniversary of the closing date of the first tranche (the “Maturity Date”).

On May 9, 2023, the Company entered into the Third Amendment to the loan agreement.

Under the Third Amendment, Pharmakon agreed to advance the second tranche of $ 50,000 to the Company in two installments:

(i) $ 25,000 advanced on May 31, 2023 and (ii) $ 25,000 advanced on December 15, 2023.

The Third Amendment amended the principal payment terms to seven quarterly payments, each in an amount equal to 1/12 th of the outstanding principal amount of the Pharmakon Term Loans following the 51 st-month anniversary of the closing date of the first tranche and the remaining principal balance of the Pharmakon Term Loans on the Maturity Date.

The Third Amendment replaced the interest rates based on LIBOR with interest rates based on the Secured Overnight Financing Rate (“SOFR”) throughout the remaining term of the Pharmakon Term Loans.

Initially, the Pharmakon Term Loans accrued interest at a per annum rate equal to the 3-month U.S.

Dollar LIBOR rate (subject to a LIBOR rate floor of 1.0 %) plus 8.5 % per annum.

provided that, upon a public statement or publication of information in certain circumstances that LIBOR has ceased or will cease to be provided or be representative or the occurrence of an early opt-in determination by the collateral agent, the Pharmakon Term Loans will be amended to provide for an alternative to the 3-month U.S.

Dollar LIBOR rate established by the lenders holding a majority of the outstanding Pharmakon Term Loans, giving due consideration to the selection or recommendation of a replacement rate or mechanism for determining such rate by any applicable governmental authority or the then-prevailing market conventions.

The Company agreed to make 12 equal quarterly payments of principal on the outstanding Pharmakon Term Loans commencing on or immediately following the 39 th-month anniversary of the funding date of the first tranche continuing through the Maturity Date.

Beginning May 2023, the Pharmakon Term Loans accrue interest at a per annum rate equal to the 3-month SOFR rate (subject to a SOFR rate floor of 1.0 %) plus 8.5 % per annum.

The Company may elect to prepay all amounts, not less than $ 20,000 , owed prior to the Maturity Date.

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If the Pharmakon Term Loans are accelerated following the occurrence of an event of default, including a material adverse change, the Company is required to immediately pay Pharmakon an amount equal to the sum of all outstanding principal, unpaid interest, and applicable make whole and prepayment premiums.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

The Pharmakon Term Loans are secured by substantially all of the Company’s assets.

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The restrictive covenants include, among others, incurring certain additional indebtedness, consummating certain change in control transactions, or incurring any non- permitted lien or other encumbrance on the Company’s assets, without Pharmakon’s prior written consent.

The Pharmakon Term Loans do not contain covenants requiring the Company to

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

maintain a minimum cash threshold or minimum revenues or earnings.

The Pharmakon Term Loans do not contain covenants requiring the Company to maintain a minimum cash threshold or minimum revenues or earnings.

As of December 31, 2023, the Company was in compliance with its debt covenants.

1 unchanged sentence

Debt discounts and issuance costs related to the entire Pharmakon Term Loans have been allocated pro rata between the funded and unfunded portions.

Debt discounts and issuance costs allocated to the first tranche of $ 75,000 have been presented as a deduction to the debt balance and are amortized into interest expense using the effective interest method.

Debt discounts and issuance costs allocated to the first tranche of $ 75,000 have been presented as a deduction to the debt balance and amortized into interest expense using the effective interest method.

Debt discounts and issuance costs associated with the unfunded second tranche are deferred as assets until the tranche is drawn and are amortized into interest expense using the straight-line method over the term of the debt.

Upon the first draw of the second tranche in May 2023, debt discounts and issuance costs associated with the second tranche were reclassified from assets to debt as a deduction to the debt balance.

As of December 31, 2023, the borrowings outstanding under the Pharmakon Term Loans were classified as long-term debt in the accompanying consolidated balance sheets.

Debt discounts and issuance costs associated with the unfunded tranche are deferred as assets until the tranche is drawn and are amortized into interest expense using the straight-line method over the term of the debt.

The overall effective interest rate was approximately 13.71 % as of December 31, 2022.

The overall effective interest rate was approximately 15.33 % and 14.01 % for the first and second tranche, respectively, as of December 31, 2023.

As of December 31, 2023, the principal amounts of long-term debt maturities for each of the next five fiscal years are as follows:

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Long term debt, net of discounts and issuance costs $ 120,359

Oxford Term Loan

On March 15, 2019, the Company entered into a Loan and Security Agreement with Oxford (the “Loan Agreement”), providing for a credit facility of up to $ 100,000 .

Pursuant to the terms of the credit facility, the lender extended term loans (the “Oxford Term Loan”), available in two advances, to the Company.

The first tranche of $ 75,000 was funded on the closing date.

The second tranche of $ 25,000 was not drawn.

The credit facility bore an annual interest rate equal to the greater of 9.5 %, or the 30-day U.S.

Dollar LIBOR rate plus 7.0 %.

The Company agreed to pay interest-only for the first 36 months until May 2022, followed by a 23 months amortization period.

At the closing date, the Company incurred $ 1,094 and $ 2,205 in debt discounts and issuance costs related to the Oxford Term Loan, respectively.

Debt discounts and issuance costs related to the entire Oxford Term Loan have been allocated pro rata between the funded and unfunded portions.

Debt discounts and issuance costs related to the Oxford Term Loan have been presented as a deduction to the debt balance and are amortized into interest expense using the effective interest method.

The overall effective interest rate was approximately 11.6 % as of December 31, 2020.

Upon the earliest to occur of the maturity date, the acceleration of the Oxford Term Loan, or the prepayment of the Oxford Term Loan, the Company was required to pay to Oxford a final payment of 5.5 % of the full principal amount of the Oxford Term Loan funded (“Final Payment”).

The Company could elect to prepay all amounts owed prior to the maturity date, provided that a prepayment fee was also paid, which would be equal to 2.0 % of the amount prepaid if the prepayment occurred after March 15, 2020 and on or prior to March 15, 2021, or 1.0 % of the amount prepaid if the prepayment occurred thereafter (“Prepayment Fee”).

On January 4, 2021, the Company and Oxford entered into an agreement (“Payoff Letter”), pursuant to which (i) the Company paid Oxford $ 76,447 to discharge in full all outstanding obligations, including accrued interest by and between Oxford, in its capacity as collateral agent and lender, and the Company, and (ii) effective upon such repayment, the Loan Agreement, and all unfunded commitments thereunder, guarantees and other security interests granted to Oxford in

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

connection with the Loan Agreement and all other obligations of and restrictions on the Company under the Loan Agreement, terminated.

As a condition to entering into the Payoff Letter, Oxford agreed to waive a total of $ 4,300 of fees comprised of (i) $ 2,800 of the Final Payment and (ii) the Prepayment Fee of $ 1,500 .

The Company recorded a loss of $ 1,939 in extinguishment of debts, net on the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2021.

Daewoong Convertible Note

On July 6, 2020, the Company entered into a Convertible Promissory Note Purchase Agreement with Daewoong for the principal amount of $ 40,000 (the “Daewoong Convertible Note”), which was funded on July 30, 2020.

Additionally, on July 6, 2020, the Company, Daewoong and Oxford entered into a Subordination Agreement pursuant to which the Daewoong Convertible Note was subordinated to the Company’s obligations under the Loan Agreement.

The Daewoong Convertible Note bore interest at a rate of 3.0 % payable semi-annually in arrears on June 30th and December 31st of each year and was to mature on July 30, 2025, subject to earlier conversion as provided below.

Interest was initially paid in kind by adding the accrued amount thereof to the outstanding principal amount on a semi-annual basis on June 30th and December 31st of each calendar year for so long as any principal amount under the Oxford Term Loan remained outstanding and the Subordination Agreement was not terminated.

Interest became payable in cash after the Oxford Term Loan was repaid in full, and the Subordination Agreement was terminated on January 4, 2021.

On March 23, 2021, the outstanding principal balance including all accrued and unpaid interest thereon, of $ 40,779 was converted, at the conversion price of $ 13.00 per share, into 3,136,869 shares of the Company’s common stock under the Conversion Agreement (as defined in Note 11.) .

The conversion was accounted for as an extinguishment of debt resulting in a gain of $ 971 , which is recorded in loss from extinguishment of debts, net on the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2021.

The Daewoong Convertible Note was not registered, and the shares of the Company’s common stock issued upon conversion of the Daewoong Convertible Note have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Medytox/Allergan Settlement Agreements and Daewoong Arrangement for the details of the Conversion Agreement.

Operating Leases

The Company’s corporate headquarters in Newport Beach, California is leased under a five-year non-cancelable operating lease, which expires on January 31, 2025.

On May 15, 2019, the Company entered into a five-year non-cancelable operating lease (the “Lease Agreement”), which was set to expire January 31, 2025, for its corporate headquarters in Newport Beach, California.

Lease payments increase each year on February 1 based on an annual rent escalation clause.

The Company may, under certain circumstances, terminate the lease on the 36 -month anniversary of the lease commencement date by providing a written notice 12 months prior to such anniversary and paying a termination fee equal to six months basic rent plus certain other expenses.

The Company has an option to extend the term of the lease for an additional 60 months, which is not recognized as part of its ROU assets and lease liabilities.

The Company has an option to extend the term of the lease for an additional 60 months, which was not recognized as part of its ROU assets and lease liabilities.

On July 27, 2023, the Company entered into the First Amendment to the Lease Agreement (the “Lease Amendment”) for its corporate headquarters.

The Lease Amendment includes a lease extension to January 31, 2030 with a three-month rent abatement period and additional office space.

On July 27, 2023, the effective date of the Lease Amendment, the Company recognized additional ROU assets and lease liabilities in the amount of $ 4,550 .

The Company’s lease agreement does not contain any residual value guarantees or material restrictive covenants.

1 unchanged sentence

The Company considers the timing of the renewal period and other economic factors such as the financial implications of a decision to extend or not to extend a lease in determining if the renewal option is reasonably certain to be exercised.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

The components of operating lease expense are as follows:

4 unchanged sentences

The weighted-average remaining lease term and discount rate are as follows:

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

As of December 31,

4 unchanged sentences

The following table presents the future minimum payments under the operating lease agreements with non-cancelable terms as of December 31, 2023:

Thereafter 1,744

Total operating lease payments 8,682

4 unchanged sentences

As of December 31, 2023, the Company has entered into commitments to purchase services and products for an aggregate amount of approximately $ 2,044 .

Certain minimum purchase commitments related to the purchase of Jeuveau ® are described below.

Certain minimum purchase commitments related to the purchase of Jeuveau ® and Evolysse TM are described below.

License and Supply Agreement

2 unchanged sentences

These potential minimum purchase obligations are contingent upon the occurrence of future events, including receipt of governmental approvals and the Company’s future market share in various jurisdictions.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

Symatese U.S.

Agreement and Symatese Europe Agreement

The Symatese U.S.

Agreement and the Symatese Europe Agreement include certain minimum purchase requirements, and failure to meet such requirements may result in a reduction or termination of the Company’s exclusive rights, subject to certain exceptions.

Legal Proceedings

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications.

The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

No amounts were accrued as of December 31, 2022 and 2021.

Securities Class Action Lawsuit

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The complaints assert a putative class period of February 1, 2019 to July 6, 2020.

The court consolidated the actions on November 13, 2020, under the caption

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

In re Evolus Inc.

The court consolidated the actions on November 13, 2020, under the caption In re Evolus Inc.

Securities Litigation , No.

26 unchanged sentences

The outcome of this matter is uncertain at this point.

Based on information available to the Company at present, management cannot reasonably estimate a range of loss with respect to this matter.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

information available to the Company at present, management cannot reasonably estimate a range of loss with respect to this matter.

Other Legal Matters

7 unchanged sentences

No amounts were accrued as of December 31, 2023.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

Stockholders’ Equity

4 unchanged sentences

As of December 31, 2023, 57,820,621 shares of its common stock were issued and outstanding.

On February 28, 2021, the Company issued 6,762,652 shares of its common stock to Medytox pursuant to the Share Issuance Agreement.

Medytox/Allergan Settlement Agreements and Daewoong Arrangement for additional information.

On March 25, 2021, the Company issued 3,136,869 shares of its common stock to Daewoong in connection with the conversion of Daewoong Convertible Note.

Daewoong Convertible Note for additional information.

In April 2021, the Company completed a follow-on public offering and issued 10,350,000 shares of its common stock, which included the exercise in full by the underwriters of their option to purchase an additional 1,350,000 shares of common stock, at a price to the public of $ 9.50 per share.

The Company received net proceeds of approximately $ 92,426 from the offering, after deducting underwriting discounts and commissions, excluding other offering expenses.

“At-the-market” Offerings of Common Stock

On March 26, 2021, the Company entered into an “at-the-market” sales agreement with SVB Leerink LLC (the “Sales Agent”) pursuant to which shares of the Company’s common stock could be sold from time to time for aggregate gross proceeds of up to $ 75,000 (the “ATM Program”).

The Sales Agent was entitled to compensation, at a commission rate equal to 3.0 % of the gross proceeds from sales of the Company’s common shares under the ATM Program.

Since August 2021, the Company has not sold any shares under the ATM Program, and the Company terminated the ATM Program in May 2022.

For the year ended December 31, 2021, the Company sold a total of 934,367 shares of its common stock pursuant to the ATM Program at the prevailing market prices for total net proceeds of $ 10,910 and paid total commissions of $ 337 to the Sales Agent.

On March 8, 2023, the Company entered into the ATM Sales Agreement with Leerink Partners LLC (formerly known as SVB Securities LLC) (the “Sales Agent”) pursuant to which shares of the Company’s common stock can be sold from time to time for aggregate gross proceeds of up to $ 50,000 (the “ATM Program”).

Under the ATM Sales Agreement, the Sales Agent is entitled to compensation, at a commission rate equal to 3.0 % of the gross proceeds from sales of the Company’s common shares under the ATM Program.

The Company has not sold any shares under the ATM Sales Agreement.

2017 Omnibus Incentive Plan and Stock-based Compensation Allocation

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The maximum number of shares of common stock that may be issued under the Plan is 4,361,291 shares, plus an annual increase on each anniversary of November 21, 2017 equal to 4.0 % of the total issued and outstanding shares of the Company’s common stock as of such anniversary (or such lesser number of shares as may be determined by the Company’s Board of Directors).

On November 21, 2022 and 2021, an additional 2,249,863 shares and 2,223,080 shares, respectively, were reserved under the evergreen provision of the Plan.

On November 21, 2023 and 2022, an additional 2,287,649 and 2,249,863 , shares, respectively, were reserved under the evergreen provision of the Plan.

As of December 31, 2023, the Company had an aggregate of 2,919,942 shares of its common stock available for future issuance under the Plan.

2023 Inducement Incentive Plan

In September 2023, the Company’s Board of Directors adopted the Company’s 2023 Inducement Incentive Plan (the “Inducement Plan”) in accordance with Nasdaq Listing Rule 5635(c)(4).

The Company’s Inducement Plan provides for the grant of equity awards to selected individuals in connection with their commencing employment with the Company as an

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

inducement material to their accepting such employment.

The Board of Directors reserved 1,000,000 shares of common stock for issuance under the Inducement Plan.

As of December 31, 2023, the Company had an aggregate of 718,060 shares of its common stock available for future issuance under the Inducement Plan.

Inducement Grants

From time to time, the Company has granted equity awards to its newly hired employees, including executives, in accordance with Nasdaq Listing Rule 5635(c)(4) and outside of the Company’s Plan.

From time to time, the Company has granted equity awards to its newly hired employees, including executives, in accordance with Nasdaq Listing Rule 5635(c)(4) and outside of the Company’s Plan and Inducement Plan.

Such grants were made pursuant to a stand-alone nonstatutory stock option agreement and a stand-alone RSU agreement, which were approved by the Compensation Committee of the Board of Directors.

Any shares underlying the inducement grants are not, upon forfeiture, cancellation or expiration, returned to a pool of shares reserved for future issuance.

In February 2022, the Company granted options to purchase 171,103 shares of common stock and 39,012 RSUs as a material inducement for the employment of the Senior Vice President of Corporate Development.

In September 2022, the Company

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

granted options to purchase 169,158 shares of common stock and 36,443 RSUs as a material inducement for the employment of the Chief Financial Officer.

As of December 31, 2022, stock options to purchase 169,158 shares of common stock and 36,443 RSUs remained outstanding outside of the Plan.

Stock-Based Award Activity and Balances

Options are granted at exercise prices based on the Company’s common stock price on the date of grant.

The options and RSU grants generally vest over a one -to four-year period.

There have been no awards granted with performance conditions or market conditions for the periods presented.

Stock Options

Options to purchase the Company’s stock are granted at exercise prices based on the Company’s common stock price on the date of grant.

The option grants generally vest over a one -to four-year period.

The options have a contractual term of ten years .

1 unchanged sentence

The change of any of these inputs could significantly impact the determination of the fair value of the Company’s options as well as significantly impact its results of operations.

The fair value of RSU grants is determined at the grant date based on the common share price.

The Company records stock-based compensation expense net of actual forfeitures when they occur.

1 unchanged sentence

• Expected Volatility.

The Company has limited data regarding company‑specific historical or implied volatility of its share price.

Consequently, the Company estimates its volatility based on the average historical volatility of the stock price from a set of peer companies and its own stock performance, since our shares do not have sufficient trading history.

Management considers factors such as stage of life cycle, competitors, size, market capitalization and financial leverage in the selection of similar entities.

The expected volatility of common stock is estimated based on the historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected term of the stock options.

• Expected Term.

8 unchanged sentences

Consequently, the Company uses an expected dividend yield rate of zero .

The weighted-averages for assumptions used in determining the fair value of stock options granted were as follows:

The assumptions used in determining the fair value of stock options granted were as follows:

Year Ended December 31,

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1,773,043 6.82

( 53,098 ) 10.08

Cancelled/forfeited

1 unchanged sentence

Outstanding as of December 31, 2022 4,769,521 $ 9.24 7.02 $ 2,911

1,773,043 6.82

( 53,098 ) 10.08

Granted 1,406,922 10.54

Exercised ( 39,823 ) 5.59

Cancelled/forfeited ( 383,154 ) 11.14

( 872,710 ) 13.19

Outstanding as of December 31, 2023 5,753,466 $ 9.46 6.69 $ 11,111

Exercisable as of December 31, 2023 3,370,875 $ 9.79 5.32 $ 6,815

Vested and expected to vest as of December 31, 2022 4,769,521 $ 9.24 7.02 $ 2,911

The aggregate intrinsic value of outstanding and exercisable options represents the excess of the fair market value of the Company’s common stock over the exercise price of underlying options as of December 31, 2023 and 2022.

The total intrinsic value of options exercised was $ 55 and $ 200 during the year ended December 31, 2022 and 2021, respectively.

During the years ended December 31, 2022 and 2021, the Company recorded expenses related to stock options of $ 4,631 and $ 5,302 , respectively.

As of December 31, 2022, there was $ 6,821 of total unrecognized compensation cost, net of actual forfeitures, related to stock option-based compensation arrangements granted under the Plan.

The cost is expected to be recognized over a weighted-average period of 2.58 years.

A summary of RSU activity under the Plan for the year ended December 31, 2022 and 2021, is presented below:

Restricted Stock Units

RSU grants generally vest over a one - to four-year period.

The fair value of RSU grants is determined at the grant date based on the common share price.

A summary of RSU activity for the year ended December 31, 2023 and 2022, is presented below:

Restricted Average

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Outstanding as of December 31, 2022 2,696,457 $ 7.48

1,890,533 7.00

( 630,484 ) 8.02

( 490,059 ) 7.21

Granted 1,746,415 10.27

Vested ( 851,759 ) 7.33

Forfeited ( 310,068 ) 8.79

Outstanding as of December 31, 2023 3,281,045 $ 8.88

During the years ended December 31, 2022 and 2021, the Company recorded expenses related to restricted stock units of $ 6,202 and $ 4,274 , respectively.

Total fair value of RSUs vested during the years ended December 31, 2022 and 2021 was

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

$ 6,008 and $ 5,892 , respectively.

As of December 31, 2022, there was $ 15,509 of total unrecognized compensation cost, net of actual forfeitures, related to RSU-based compensation arrangements granted under the Plan.

The cost is expected to be recognized over a weighted-average period of 2.67 years.

The following table summarizes stock-based compensation expense arising from the above Plan:

Performance Restricted Stock Units

In January 2023, the Company’s Board of Directors granted 292,349 shares of performance restricted stock units (“PRSUs”) to certain executive officers under the Plan.

The PRSU awards function in the same manner as restricted stock units except that vesting terms are based on achievement of certain pre-established performance measures.

A summary of PRSU activity for the year ended December 31, 2023 and 2022, is presented below:

Restricted Average

Stock Grant Date

Units Fair Value

Outstanding as of December 31, 2022 — $ —

Granted 292,349 10.25

Vested ( 58,469 ) 10.25

Forfeited — —

Outstanding as of December 31, 2023 233,880 $ 10.25

CEO Performance Award

For RSUs granted to employees that vest based on market conditions, such as the trading price of the Company’s common stock exceeding certain price targets, the Company uses a Monte Carlo Simulation in estimating the fair value at grant date and recognizes compensation cost over the requisite service period.

On May 8, 2023, the Company granted the Company’s Chief Executive Officer (“CEO”) an award of 560,000 PRSUs under the Plan.

The stock units subject to the award are subject to both performance- and time-based vesting requirements.

40 % of the stock units subject to the award are eligible to vest if the average of the closing prices for a share of the Company’s common stock over a period of 20 consecutive trading days is $ 30 or more and an additional 60 % of the stock units subject to the award are eligible to vest if the average of the closing prices for a share of the Company’s common stock over a period of 20 consecutive trading days is $ 50 or more, in each case within five years after the grant of the award and while the CEO is employed by the Company (or, in certain circumstances, within 20 days following a termination of his employment).

Any stock units that become eligible to vest based on stock price will vest, subject to the CEO’s continued service, over the four-year period after the grant date.

The Company used a Monte Carlo simulation to determine that the grant date fair value of the awards was $ 3,774 .

Compensation expense is recorded if the service condition is met regardless of whether the market condition is satisfied.

The following table summarizes stock-based compensation expense:

Year Ended December 31,

5 unchanged sentences

Settlement Agreement

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

Effective February 18, 2021, the Company, Allergan and Medytox entered into a Settlement and License Agreement (the “U.S.

19 unchanged sentences

Share Issuance Agreement

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

In connection with the execution of the ROW Settlement Agreement, the Company and Medytox entered into a Share Issuance Agreement effective February 18, 2021 (the “Share Issuance Agreement”).

Pursuant to the Share Issuance Agreement and subject to the terms and conditions set forth therein, among other things, the Company issued to Medytox the Settlement Shares to enter into the ROW Settlement Agreement and in consideration for Medytox’s representations, warranties, and other agreements set forth in the Share Issuance Agreement.

The Settlement Shares are subject to contractual restrictions on transfer that, subject to certain limited exceptions such as transfers to affiliates, prevented Medytox from transferring any shares of common stock prior to February 16, 2022 and, thereafter, prohibit Medytox from transferring more than 25 % of the shares it holds prior to September 16, 2023, more than 50 % of the shares it holds prior to September 16, 2024 and more than 75 % of the shares it holds prior to September 16, 2025, with such contractual restrictions terminating on September 16, 2025.

The Settlement Shares are subject to contractual restrictions on transfer that, subject to certain limited exceptions such as transfers to affiliates, prevented Medytox from transferring any shares of common stock prior to February 16, 2022 or more than 25 % of the shares it held prior to September 16, 2023 and, thereafter, prohibit Medytox from transferring more than 50 % of the shares it holds prior to September 16, 2024 and more than 75 % of the shares it holds prior to September 16, 2025, with such contractual restrictions terminating on September 16, 2025.

Registration Rights Agreement

In connection with the execution of the ROW Settlement Agreement, the Company and Medytox also entered into a Registration Rights Agreement effective February 18, 2021 (the “Registration Rights Agreement”).

Pursuant to the Registration Rights Agreement, among other things, the Company agreed, after March 31, 2022, (i) to comply with certain requests by Medytox to register for sale, under the Securities Act, the Settlement Shares, and (ii) to include the Settlement Shares in certain registrations by the Company of its securities for sale under the Securities Act, to the extent requested by Medytox, in each case subject to certain customary conditions, exceptions and limitations as set forth in the Registration Rights Agreement.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

Medytox, in each case subject to certain customary conditions, exceptions and limitations as set forth in the Registration Rights Agreement.

In addition, Medytox’s registration rights under the Registration Rights Agreement will terminate at such time that Medytox is able to sell all of the Settlement Shares over a three-month period, or less, pursuant to an exemption to registration under the Securities Act.

As of December 31, 2022, the Company accrued $ 2,618 for royalties under the Medytox/Allergan Settlement Agreements and $ 5,000 of accrued litigation settlement expense.

As of September 30, 2023, Medytox’s registration rights under the Registration Rights Agreement have terminated.

As of December 31, 2023, the Company accrued $ 3,657 for royalties under the Medytox/Allergan Settlement Agreements.

As of December 31, 2022, the Company accrued $ 2,618 for royalties under the Medytox/Allergan Settlement Agreements and $ 5,000 of accrued litigation settlement expense.

Daewoong Settlement Agreement

Daewoong Arrangement

Daewoong Settlement Agreement

On March 23, 2021, the Company and Daewoong entered into a Confidential Settlement and Release Agreement (the “Daewoong Settlement Agreement”), pursuant to which, among other things:

2 unchanged sentences

and (ii) the Company agreed to (a) release, on behalf of itself and certain of its affiliates and representatives, certain claims they may have against Daewoong related to the allegations made in or the subject matter of the Medytox/Allergan Actions, or any orders, remedies and losses resulting from the Medytox/Allergan Actions, and (b) coordinate with Daewoong on certain matters related to the Medytox/Allergan Actions.

Conversion Agreement

In connection with the execution of the Daewoong Settlement Agreement, the Company and Daewoong also entered into a Convertible Promissory Note Conversion Agreement (the “Conversion Agreement”), pursuant to which, among other things, (i) the principal balance under the Daewoong Convertible Note, together with all accrued and unpaid interest thereon, in the amount of $ 40,779 was converted into 3,136,869 shares of Common Stock at the conversion price of $ 13.00 per share (the “Conversion Shares”);

and (ii) the Daewoong Convertible Note was deemed cancelled and satisfied in full in connection with such conversion.

After the conversion, shares owned by Daewoong, together with its affiliates and attribution parties, did not exceed 9.99 % of the Company’s then outstanding common shares immediately following such issuance, as required under the terms of the Daewoong Convertible Note.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

Daewoong Agreement Amendment

3 unchanged sentences

(iv) adjust the minimum purchase requirements and reduce the transfer price per vial of Jeuveau ® applicable to various territories, (v) require that any Jeuveau ® supplied by Daewoong match certain shelf-life thresholds, and (vi) prohibit the Company from sharing certain confidential information of Daewoong with Medytox or its affiliates or representatives.

As of December 31, 2022, the Company did not have a reimbursement receivable form Daewoong.

As of December 31, 2021, the Company had $ 5,657 in reimbursement receivable from Daewoong in other current assets in the accompanying consolidated balance sheets.

Total inventory payments to Daewoong were $ 50,770 and $ 50,685 for the years ended December 31, 2023 and 2022, respectively.

2 unchanged sentences

Matching contributions totaled $ 1,582 and $ 773 for the years ended December 31, 2023 and 2022, respectively.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

The Company’s loss before income taxes was generated from its U.S.

8 unchanged sentences

Federal $ — $ —

State 138 113

Total current provision $ 171 $ 113

5 unchanged sentences

As of December 31, 2023, the Company has federal net operating loss (“NOL”) carryforwards of $ 317,668 , of which $ 72,579 will begin to expire in 2034.

The federal NOLs generated in 2018 and in the subsequent years in the amount of $ 246,240

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

have an indefinite carryforward period.

The federal NOLs generated in 2018 and in the subsequent years in the amount of $ 245,089 have an indefinite carryforward period.

As of December 31, 2023, the Company has state NOL carryforwards of $ 227,347 , which will begin to expire in 2024.

10 unchanged sentences

Additionally, future ownership changes under Section 382 and 383 may also limit the Company's ability to fully utilize any remaining tax benefits.

The Company’s net deferred income tax assets have been offset by a valuation allowance.

The Company’s net deferred income tax

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

assets have been offset by a valuation allowance.

Therefore, any resulting reduction to the Company’s NOL and R&D credit carryforwards once the analysis is complete will be offset by a corresponding reduction of the valuation allowance and there would be no impact on the Company’s consolidated balance sheet, statement of operations, or cash flows.

9 unchanged sentences

R&E Capitalization 3,415 1,100

Fixed asset depreciation 183 —

Other, net 5,126 2,135

7 unchanged sentences

Net deferred income taxes $ ( 27 ) $ ( 22 )

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

A reconciliation of the difference between the provision (benefit) for income taxes and income taxes at the statutory U.S.

9 unchanged sentences

Stock compensation 449 299

Promissory note - debt discount — 120

Other, net ( 449 ) ( 391 )

1 unchanged sentence

Income tax provision (benefit) $ 176 $ 95

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

1 unchanged sentence

Beginning balance $ 2,924 $ 2,924

Increases to prior year tax positions — —

Increases to current year tax positions — —

9 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk