Evolus Inc

Previous wording

We are a global performance beauty company with a customer-centric approach to delivering breakthrough products in the cash-pay aesthetic market. Our first product, Jeuveau® (prabotulinumtoxinA-xvfs), is currently sold in the United States, Canada and certain European countries. We have commercial launch plans in additional countries where we have regulatory approval that we expect to implement in the next few years. We are also actively pursuing regulatory approval of Evolysse™, a line of hyaluronic acid dermal fillers, and anticipate obtaining regulatory approval of the Evolysse™ line of products in Europe in the second half of 2024 and in the United States beginning in 2025. Regulatory approval has already been received for the Evolysse™ nasolabial fold product in Europe.

Current wording

We are a global performance beauty company with a customer-centric approach to delivering breakthrough products in the cash-pay aesthetic market. Our first product, Jeuveau® (prabotulinumtoxinA-xvfs), is currently sold in the United States, Canada, certain European countries and Australia. We have commercial launch plans in additional countries which we expect to implement in the next few years. We are also actively pursuing the commercialization and further regulatory approvals of Evolysse™, a collection of injectable hyaluronic acid gels that includes mid face, nasolabial folds, lips and eyes. In October 2024, regulatory approval was received in the European Union for four products in the Evolysse™ line: Evolysse™ Form, Evolysse™ Smooth, Evolysse™ Sculpt and Evolysse™ Lips. In February 2025, we received approval from the U.S. Food and Drug Administration, or the FDA, for Evolysse™ Form and Evolysse™ Smooth injectable hyaluronic acid gels for wrinkles and folds, such as nasolabial folds. We anticipate launching Evolysse™ Form and Evolysse™ Smooth in the United States in the second quarter of 2025. We also anticipate launching all four approved Evolysse™ products in Europe in the second half of 2025.

Previous wording

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. Evolysse™, a line of dermal fillers, is a first-generation cold technology hyaluronic acid line for products including mid face, nasolabial folds, lips and eyes. Our primary market is the cash-pay aesthetic market, which consists of medical products that consumers pay for directly out of pocket. Our customers are aesthetic practitioners who are properly licensed to deliver our products. By avoiding the regulatory burdens that accompany reimbursed products and pursuing an aesthetic-only non-reimbursed product strategy, we create flexibility to deliver a unique value proposition to our customers. We utilize this flexibility to drive customer adoption through programs such as our consumer loyalty program, co-branded marketing programs, promotional events and pricing strategies.

Current wording

Our primary market is the cash-pay aesthetic market, which consists of medical products that consumers pay for directly out of pocket. Our customers are aesthetic practitioners who are properly licensed to deliver our products. By avoiding the regulatory burdens that accompany reimbursed products and pursuing an aesthetic-only non-reimbursed product strategy, we create flexibility to deliver a unique value proposition to our customers. We utilize this flexibility to drive customer adoption through programs such as our consumer loyalty program, co-branded marketing programs, promotional events and pricing strategies.

Previous wording

The global economy, including the financial and credit markets, has recently experienced extreme volatility and disruptions, including uncertainty regarding the stability of certain financial institutions, increases in inflation rates, rising interest rates, severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, and uncertainty about economic stability. We expect elevated levels of cost inflation to continue, potentially impacting consumer discretionary spending for aesthetic medical procedures. Markets experiencing uncertainty could have substantial high rates of inflation. We cannot reasonably estimate the financial impact of increased inflation on our financial condition, results of operations or cash flows in the future.

Current wording

The global economy, including the financial and credit markets, has recently experienced volatility and disruptions, increases in inflation rates, rising interest rates, new and threatened tariffs, severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, and uncertainty about economic stability. We expect elevated levels of cost inflation to continue, potentially impacting consumer discretionary spending for aesthetic medical procedures. Markets experiencing uncertainty could have substantial high rates of inflation. We cannot reasonably estimate the financial impact of increased inflation on our financial condition, results of operations or cash flows in the future.

Previous wording

Net revenues of Jeuveau® sales increased by $53.5 million, or 36.0%, to $202.1 million for the year ended December 31, 2023 from $148.6 million for the year ended December 31, 2022, primarily due to higher sales volumes. Net revenues during the year ended December 31, 2023 and 2022 consisted of $2.4 million and $2.0 million of service revenue, respectively, from the sale of Jeuveau® through a distribution partner in Canada. We anticipate our continued sales growth will depend on our ability to grow our customer base and increase purchases by our current customers in the competitive aesthetic market as well as on regulatory approval for the Evolysse TM dermal filler product line in the United States and Europe by Symatese.

Current wording

Net revenues of Jeuveau® sales increased by $53.5 million, or 36%, to $202.1 million for the year ended December 31, 2023 from $148.6 million for the year ended December 31, 2022, primarily due to higher sales volumes. Net revenues during the years ended December 31, 2023 and 2022 consisted of $2.4 million and $2.0 million of service revenue, respectively, from the sale of Jeuveau® through a distribution partner in Canada. We anticipate our continued sales growth will depend on our ability to grow our customer base and increase purchases by our current customers in the competitive aesthetic market as well as on regulatory approval for the Evolysse TM hyaluronic acid gel product line in the United States and Europe by Symatese.

Previous wording

Product cost of sales, excluding amortization of intangible assets, primarily consisted of the cost of inventory purchased from Daewoong. In addition, during the period from December 2020 to September 2022, product cost of sales, excluding amortization of intangible assets, also included certain royalties on the sale of Jeuveau® payable to Medytox and Allergan pursuant to the Medytox/Allergan Settlement Agreements, partially offset by reimbursement receivable from Daewoong pursuant to the Daewoong Arrangement with respect to such royalties. Our royalty obligations to Allergan concluded on September 16, 2022, and beginning on September 17, 2022, our royalty obligations to Medytox were reduced to a mid-single digit percentage of net revenue through the expiration of our Medytox royalty obligation in September 2032.

Current wording

Cost of goods sold, primarily consisted of the cost of inventory purchased from Daewoong and amortization of intangible asset distribution right. In addition, during the period from December 2020 to September 2022, cost of goods sold also included certain royalties on the sale of Jeuveau® payable to Medytox and Allergan pursuant to the Medytox Settlement Agreements, partially offset by reimbursement receivable from Daewoong pursuant to the Daewoong Arrangement with respect to such royalties. Our royalty obligations to Allergan concluded on September 16, 2022, and beginning on September 17, 2022, our royalty obligations to Medytox were reduced to a mid-single digit percentage of net revenue through the expiration of our Medytox royalty obligation in September 2032.

Previous wording

Product cost of sales, excluding amortization of intangible assets, increased by$5.7 million, or 10.1%, to$61.6 million for the year ended December 31, 2023 from$55.9 million from theyear ended December 31, 2022 primarily due to higher sales volume, offset by reduced royalty obligations to Medytox. We anticipate that our product cost of sales will fluctuate in line with changes in revenues until the expiration of our Medytox royalty obligation in September 2032.

Current wording

Cost of goods sold, increased by$5.7 million, or 10%, to$64.5 million for theyear ended December 31, 2023 from$58.8 million from theyear ended December 31, 2022 primarily due to higher sales volume, offset by reduced royalty obligations to Medytox. We anticipate that our cost of goods sold will fluctuate in line with changes in revenues until the expiration of our Medytox royalty obligation in September 2032.

Previous wording

Our gross profit margin was 68.1% and 60.4% for the years ended December 31, 2023 and 2022, respectively. Our gross profit margin was impacted negatively and materially through September 2022, by our payments under the Medytox/Allergan Settlement Agreements. Our gross profit margin has been and will continue to be negatively impacted to a lesser extent from September 2022 to September 2032 as we pay royalty obligations to Medytox at a mid-single digit percentage of net revenue. We also anticipate our gross profit margin will fluctuate as we implement various marketing programs that may affect the average selling price for Jeuveau® and as we expand internationally.

Current wording

Our gross profit margin was 68% and 60% for the years ended December 31, 2023 and 2022, respectively. Our gross profit margin was impacted negatively and materially through September 2022, by our payments under the Medytox Settlement Agreements. Our gross profit margin has been and will continue to be negatively impacted to a lesser extent from September 2022 to September 2032 as we pay royalty obligations to Medytox at a mid-single digit percentage of net revenue. We also anticipate our gross profit margin will fluctuate as we implement various marketing programs that may affect the average selling price for Jeuveau® and as we expand internationally.

Previous wording

Selling, general and administrative expenses increased by $23.1 million, or 16.3%, to $164.9 million for the year ended December 31, 2023 from $141.8 million for the year ended December 31, 2022, primarily resulting from increasing personnel costs and related to our commercial activities. Selling, general and administrative expenses may fluctuate in the future primarily due to potential changes in marketing strategies and international launches.

Current wording

Selling, general and administrative expenses increased by $23.1 million, or 16%, to $164.9 million for the year ended December 31, 2023 from $141.8 million for the year ended December 31, 2022, primarily resulting from increasing personnel costs and related to our commercial activities. Selling, general and administrative expenses may fluctuate in the future primarily due to potential changes in marketing strategies and international launches.

Previous wording

Research and development expenses increased by $1.8 million, or 38.3%, to $6.6 million for the year ended December 31, 2023 from $4.7 million for the year ended December 31, 2022. The increase was primarily attributable to increasing our clinical operations and research and development expenses related to the Phase II “extra-strength” clinical trial. We expect our research and development expenses to continue to increase if and when we develop further product candidates and as we pursue regulatory approvals in other jurisdictions.

Current wording

Research and development expenses increased by $1.9 million, or 40%, to $6.6 million for the year ended December 31, 2023 from $4.7 million for the year ended December 31, 2022. The increase was primarily attributable to increasing our clinical operations and research and development expenses related to Evolysse TM. We expect our research and development expenses to continue to increase if and when we develop further product candidates and as we pursue regulatory approvals in other jurisdictions.

Previous wording

In-process research and development increased by $6.9 million, or 343.5%, to $8.9 million for the year ended December 31, 2023 from $2.0 million for the year ended December 31, 2022. In 2022, we recorded an upfront payment of $2.0 million in connection with the License and Research Collaboration Agreement (the “Collaboration Agreement”) we entered into with a 3D printing company with biomaterial capabilities. In 2023, we recorded the upfront payment of $4.4 million and the issuance of shares of $4.4 million in connection with the Symatese U.S. Agreement and Symatese Europe Agreement, respectively. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies for additional information.

Current wording

In-process research and development increased by $6.9 million, or 345%, to $8.9 million for the year ended December 31, 2023 from $2.0 million for the year ended December 31, 2022. In 2022, we recorded an upfront payment of $2.0 million in connection with the License and Research Collaboration Agreement (the “Collaboration Agreement”) we entered into with a 3D printing company with biomaterial capabilities. In 2023, we recorded the upfront payment of $4.4 million and the issuance of shares of $4.4 million in connection with the Symatese U.S. Agreement and Symatese Europe Agreement, respectively. See Note 2. Basis of Presentation and Summary of Significant Accounting Policiesin the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

Previous wording

Depreciation and amortization increased by $1.4 million, or 37.9%, to $5.1 million for the year ended December 31, 2023 from $3.7 million for the year ended December 31, 2022, primarily due to an increase in amortization of internal-use software and leasehold improvements.

Current wording

Depreciation and amortization increased by $1.4 million, or 175%, to $2.2 million for the year ended December 31, 2023 from $0.8 million for the year ended December 31, 2022, primarily due to an increase in amortization of internal-use software and leasehold improvements.

Previous wording

Non-operating expense, net, increased by $3.3 million, or 36.6%, to $12.3 million for the year ended December 31, 2023 from $9.0 million for the year ended December 31, 2022, primarily due the advancement of the $50.0 million second tranche of the Pharmakon Term Loans in 2023. Interest on the Pharmakon Term Loans is based on a variable interest rate, which we expect will continue to fluctuate with the market.

Current wording

Non-operating expense, net, increased by $3.3 million, or 37%, to $12.3 million for the year ended December 31, 2023 from $9.0 million for the year ended December 31, 2022, primarily due the advancement of the $50.0 million second tranche of the Pharmakon Term Loans in 2023. Interest on the Pharmakon Term Loans is based on a variable interest rate, which we expect will continue to fluctuate with the market.

Previous wording

As of December 31, 2023, we had cash and cash equivalents of $62.8 million, positive working capital of $64.1 million and stockholders’ deficit of $20.7 million.

Current wording

As of December 31, 2024, we had cash and cash equivalents of $87.0 million, positive working capital of $88.4 million and stockholders’ equity of $5.5 million.

Previous wording

We began selling Jeuveau® in May 2019 and have a relatively limited history of generating revenues. Since inception, we have incurred recurring net operating losses and have an accumulated deficit of $559.0 million as of December 31, 2023 as a result of ongoing efforts to develop and commercialize Jeuveau®, including providing selling, general and administrative support for our operations. We had net loss of $61.7 million and $74.4 million in the years ended December 31, 2023 and 2022, respectively. We had a net loss from operations of $49.2 million and $65.3 million in the years ended December 31, 2023 and 2022, respectively. We used net cash of $34.0 million and $84.9 million in operating activities for the twelve months ended December 31, 2023 and 2022, respectively. We expect to continue to incur significant expenses for the foreseeable future as we increase marketing efforts for Jeuveau® in the U.S., Europe, and Australia, pursue regulatory approvals in other jurisdictions and ready for commercial launch of the Evolysse™ Lift, Smooth, Sculpt and Eye dermal filler product line.

Current wording

We began selling Jeuveau® in May 2019 and have a relatively limited history of generating revenues. Since inception, we have incurred recurring net operating losses and have an accumulated deficit of $609.4 million as of December 31, 2024 as a result of ongoing efforts to develop and commercialize Jeuveau®, including providing selling, general and administrative support for our operations. We had net loss of $50.4 million and $61.7 million in the years ended December 31, 2024 and 2023, respectively. We had a loss from operations of $34.4 million and $49.2 million in the years ended December 31, 2024 and 2023, respectively. We used net cash of $18.0 million and $34.0 million in operating activities for the years ended December 31, 2024 and 2023, respectively. We expect to continue to incur significant expenses for the foreseeable future as we increase marketing efforts for Jeuveau® in the U.S., Europe, and Australia, pursue regulatory approvals in other jurisdictions and ready for commercial launch of the Evolysse™ Form, Smooth, Sculpt and Eye hyaluronic acid gel product line.

Previous wording

On December 14, 2021, we entered into a loan agreement with Pharmakon. Pursuant to the terms of the agreement, Pharmakon agreed to make term loans to us in two tranches. The first tranche of $75.0 million was funded on December 29, 2021. We received net proceeds of approximately $68.7 million from Pharmakon, after issuance costs and debt discounts. On December 5, 2022, we entered into a Second Amendment to the loan agreement to extend our option to draw down the second tranche of $50.0 million until December 31, 2023. On May 9, 2023, we entered into a Third Amendment to the loan agreement, which provided for the advancement of the second tranche of $50.0 million in two installments: (i) $25.0 million advanced on May 31, 2023 and (ii) $25.0 million advanced on December 15, 2023, which amounts were advanced on such dates subject to the terms and conditions of the Pharmakon Term Loans. We are required to pay interest only under the loan agreement until March 2026, after which we make seven equal quarterly payments, each in an amount equal to 1/12th of the outstanding principal amount of the loan. We pay the remaining principal of the loan on the maturity date. The Pharmakon Term Loans will mature on the sixth year anniversary of the closing date of the first tranche. The term loan bears an annual interest rate equal to the 3-month secured overnight financing rate (“SOFR”) (subject to a SOFR rate floor of 1.0%) plus 8.5% per annum. The proceeds of the Pharmakon Term Loans are used to fund our general corporate and working capital requirements.

Current wording

We received net proceeds of approximately $68.7 million from Pharmakon, after issuance costs and debt discounts. On December 5, 2022, we entered into a Second Amendment to the loan agreement to extend our option to draw down the second tranche of $50.0 million until December 31, 2023. On May 9, 2023, we entered into a Third Amendment to the loan agreement, which provided for the advancement of the second tranche of $50.0 million in two installments: (i) $25.0 million advanced on May 31, 2023 and (ii) $25.0 million advanced on December 15, 2023, which amounts were advanced on such dates subject to the terms and conditions of the Pharmakon Term Loans. We are required to pay interest only under the loan agreement until March 2026, after which we make seven equal quarterly payments, each in an amount equal to 1/12th of the outstanding principal amount of the loan. We pay the remaining principal of the loan on the maturity date. The Pharmakon Term Loans will mature on the sixth year anniversary of the closing date of the first tranche. The term loan bears an annual interest rate equal to the 3-month secured overnight financing rate (“SOFR”) (subject to a SOFR rate floor of 1.0%) plus 8.5% per annum. The proceeds of the Pharmakon Term Loans are used to fund our general corporate and working capital requirements.

Previous wording

As of December 31, 2023 and 2022, we recorded an aggregate balance of $45.0 million and $46.3 million, respectively, on our consolidated balance sheet for the future royalty payment obligation to Evolus Founders.

Current wording

As of December 31, 2024 and 2023, we recorded an aggregate balance of $44.8 million and $45.0 million, respectively, on our consolidated balance sheet for the future royalty payment obligation to Evolus Founders.

Previous wording

As described in “—Overview—Impact of Settlement Agreements,” on February 18, 2021, upon entering into the Medytox/Allergan Settlement Agreements, we agreed to pay to Allergan and Medytox $35.0 million in multiple payments over two years, of which we paid the first payment of $15.0 million in the third quarter of 2021, the second payment of $15.0 million in the first quarter of 2022, and the final payment of $5.0 million in the first quarter of 2023. We also issued 6,762,652 shares of common stock to Medytox. In addition, during the period from December 16, 2020 through September 16, 2022, we agreed to pay to Allergan and Medytox royalties 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. During the period from September 17, 2022 to September 16, 2032, we agreed to pay to Medytox a mid-single digit royalty percentage on all net sales of Jeuveau®. The royalty payments are made quarterly.

Current wording

On February 18, 2021, upon entering into the Medytox Settlement Agreements, we agreed to pay to Allergan and Medytox $35.0 million in multiple payments over two years, of which we paid the first payment of$15.0 million in the third quarter of 2021, the second payment of$15.0 million in the first quarter of 2022, and the final payment of $5.0 million in the first quarter of 2023. We also issued 6,762,652 shares of common stock to Medytox. In addition, during the period from December 16, 2020 through September 16, 2022, we agreed to pay to Allergan and Medytox royalties 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. During the period from September 17, 2022 to September 16, 2032, we agreed to pay to Medytox a mid-single digit royalty percentage on all net sales of Jeuveau®. The royalty payments are made quarterly.

Previous wording

Our corporate headquarters in Newport Beach, California is under a non-cancelable operating lease, which expires on January 31, 2030 with an option to extend the term for an additional 60 months. Lease payments increase based on an annual rent escalation clause that occurs on each February 1 anniversary.

Current wording

Our corporate headquarters in Newport Beach, California is under a non-cancelable operating lease, which expires on January 31, 2030 with an option to extend the term for an additional 60 months. Lease payments increase based on an annual rent escalation clause that occurs on each February 1 anniversary. On October 16, 2024, the Company entered into the Second Amendment to the Lease Agreement (the “Second Lease Amendment”) to lease additional office space for its corporate headquarters and the lease is expected to commence on or around the second half of 2025.

Previous wording

We have based our projections of capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources, which consist of cash and cash equivalents and cash generated from operations, sooner than we expect. Our cash requirements depend on numerous factors, including but not limited to, the impact of any potential disruptions to our supply chain, inflation or other economic conditions, uncertainty regarding the stability of certain financial institutions, and other long-term commitments and contingencies. Because of the numerous risks and uncertainties associated with research, development and commercialization of our products, we are unable to estimate the exact amount of our operating capital requirements. In such case, we may be required to raise additional capital to fund future operations through the incurrence of debt, the entry into licensing or collaboration agreements with partners, sale of equity securities, grants or other sources of financing. However, there can be no assurance such financing or other alternatives will be available to us on acceptable terms, or at all. The global economy, including the financial and credit markets, has recently experienced significant volatility and disruptions, including severely diminished liquidity and credit availability and rising interest rates. These conditions may adversely impact our ability to raise additional capital on acceptable terms, or at all.

Current wording

We have based our projections of capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources, which consist of cash and cash equivalents and cash generated from operations, sooner than we expect. Our cash requirements depend on numerous factors, including but not limited to, the impact of any potential disruptions to our supply chain, inflation or other economic conditions, uncertainty regarding the stability of certain financial institutions, and other long-term commitments and contingencies. Because of the numerous risks and uncertainties associated with research, development and commercialization of our products, we are unable to estimate the exact amount of our operating capital requirements, including our requirements beyond the next twelve months. In such case, we may be required to raise additional capital to fund future operations through the incurrence of debt, the entry into licensing or collaboration agreements with partners, sale of equity securities, grants or other sources of financing. However, there can be no assurance such financing or other alternatives will be available to us on acceptable terms, or at all. The global economy, including the financial and credit markets, has recently experienced significant volatility and disruptions, including severely diminished liquidity and credit availability and rising interest rates. These conditions may adversely impact our ability to raise additional capital on acceptable terms, or at all.

Previous wording

•the rate of revenue growth for Jeuveau® in the United States and success of planned international launches;

Current wording

•the rate of revenue growth for Jeuveau® and Evolysse™ in the markets in which they are launched;

Previous wording

•the timing of regulatory approval for the Evolysse™ dermal filler product line in the United States and Europe by Symatese and our ability to successfully commercialize these products;

Current wording

•the timing of regulatory approval for the additional Evolysse™ products in the United States and Europe by Symatese and our ability to successfully commercialize these products;

Previous wording

•the timing and amounts of the royalty and other payments payable in connection with the Medytox Settlement Agreement;

Current wording

•the timing and amounts of the royalty and other payments payable in connection with the Medytox Settlement Agreements;

Previous wording

•the cost of commercialization activities for Jeuveau®, the Evolysse™ dermal filler product line or any future product candidates that are approved or cleared for sale, including marketing, sales and distribution costs;

Current wording

•the cost of commercialization activities for Jeuveau®, the Evolysse™ hyaluronic acid gel product line or any future product candidates that are approved or cleared for sale, including marketing, sales and distribution costs;

Previous wording

For the year ended December 31, 2023, operating activities used $34.0 million of cash, which primarily resulted from our net loss of $61.7 million. Net operating assets and liabilities changed by $5.9 million, primarily driven by improved collections from customers, payments to vendors, the timing of inventory purchases from our supplier, and the final cash litigation settlement payment of $5.0 million to Medytox and Allergan. Operating activities also includes adjustments for certain non-cash charges including $16.5 million of stock-based compensation expense, $1.4 million of provision of allowance for doubtful accounts, $1.1 million of amortization of debt discount and issuance costs, $5.1 million of depreciation and amortization, $4.3 million in revaluation of our contingent royalty obligation and $4.4 million of in-process research and development expense.

Current wording

For the year ended December 31, 2023, operating activities used $34.0 million of cash, which primarily resulted from our net loss of $61.7 million. Net operating assets and liabilities changed by $5.9 million, primarily driven by timing of receipts from customers and payments to vendors and the second cash litigation settlement payment of $5.0 million to Medytox and Allergan. Operating activities also includes adjustments for certain non-cash charges including $16.5 million of stock-based compensation expense, $4.3 million in revaluation of our contingent royalty obligation, $1.4 million of provision of allowance for doubtful accounts, $1.1 million of amortization of debt discount and issuance costs and $5.1 million of depreciation and amortization and $4.4 million of in-process research and development expense.

Previous wording

For the year ended December 31, 2022, operating activities used $84.9 million of cash, which primarily resulted from our net loss of $74.4 million. Net operating assets and liabilities changed by $34.3 million, primarily driven by timing of receipts from customers and payments to vendors and the second cash litigation settlement payment of $15.0 million to Medytox and Allergan. Operating activities also includes adjustments for certain non-cash charges including $10.8 million of stock-based compensation expense, $5.8 million in revaluation of our contingent royalty obligation, $1.6 million of provision of allowance for doubtful accounts, $1.1 million of amortization of debt discount and issuance costs and $3.7 million of depreciation and amortization.

Current wording

For the year ended December 31, 2022, operating activities used $84.9 million of cash, which primarily resulted from our net loss of $74.4 million. Net operating assets and liabilities changed by $34.3 million, primarily driven by timing of receipts from customers and payments to vendors and second cash litigation settlement payment of $15.0 million to Medytox and Allergan. Operating activities also includes adjustments for certain non-cash charges including $10.8 million of stock-based compensation expense, $5.8 million in revaluation of our contingent royalty obligation, $1.6 million of provision of allowance for doubtful accounts, $1.1 million of amortization of debt discount and issuance costs and $3.7 million of depreciation and amortization.

Previous wording

Cash used in investing activities was $1.6 million for the year ended December 31, 2023, compared to $2.9 million for the year ended December 31, 2022.

Current wording

Cash used in investing activities was $1.6 million for the year ended December 31, 2023, compared to $2.9 million for the year ended December 31, 2022. For the year ended December 31, 2023, cash used in investing activities driven by the purchase of property, plant, and equipment and additions to capitalized software.

Previous wording

Cash provided by financing activities was $44.6 million for the year ended December 31, 2023, compared to $4.1 million of cash used in financing activities for the year ended December 31, 2022. For the year ended December 31, 2023, cash provided by financing activities resulted from $50.0 million net proceeds from drawing on the second tranche of the Pharmakon Term Loans as described above.

Current wording

Cash provided by financing activities was $44.6 million for the year ended December 31, 2023, compared to $4.1 million of cash used in financing activities for the year ended December 31, 2022. For the year ended December 31, 2023, cash provided by financing activities primarily resulted from $50.0 million net proceeds from drawing on the second tranche of the Pharmakon Term Loans as described above.

Previous wording

See “—Liquidity and Capital Resources” for a description of our Pharmakon Term Loans.

Current wording

See “—Liquidity and Capital Resources—The Pharmakon Term Loans” for a description of our Pharmakon Term Loans.

Previous wording

Our material cash requirements from known contractual and other obligations, including commitments for capital expenditures, primarily consist of (i) principal and interest payments related to our Pharmakon Term Loans (future interest payments on our outstanding Pharmakon Term Loans total approximately $60.9 million, with $17.9 million due within twelve months), (ii) quarterly royalty payments to the Evolus Founders of a low single digit percentage of net sales of Jeuveau® (these obligations terminate in the quarter after the 10-year anniversary of the first commercial sale of Jeuveau® in the United States), (iii) quarterly royalty payments to Medytox of a low-double digit royalty on net sales of Jeuveau®sold in the United States and other Evolus territories (during the period from September 17, 2022 to September 16, 2032), (iv) minimum purchase obligations under the Daewoong Agreement, (v) €12.1 milestone payments under the Symatese U.S. Agreement consisting of €1.6 million in June 2025, €4.1 million in June 2026, €3.2 million in June 2027, and €3.2 million in June 2028, in each case subject to three of the dermal filler products gaining approval prior to that date, (vi) €3.1 million of milestone payments under the Symatese Europe Agreement consisting of : €1.2 million on the second anniversary of certain regulatory approvals and €1.9 million on the earlier of the third anniversary of certain regulatory approvals or following a year in which we achieves €25 million in revenue in Europe for the dermal filler products, and (vii) obligations under operating leases related to our office space which are described in more detail in Item 8. Consolidated Financial Statements and Supplementary Data - Note 7. Operating Leases.

Current wording

Our material cash requirements from known contractual and other obligations, including commitments for capital expenditures, primarily consist of (i) principal and interest payments related to our Pharmakon Term Loans (future interest payments on our outstanding Pharmakon Term Loans total approximately $40.6 million, with $16.8 million due within twelve months), (ii) quarterly royalty payments to the Evolus Founders of a low single digit percentage of net sales of Jeuveau® (these obligations terminate in the quarter after the 10-year anniversary of the first commercial sale of Jeuveau® in the United States), (iii) quarterly royalty payments to Medytox of a low-double digit royalty on net sales of Jeuveau®sold in the United States and other Evolus territories (during the period from September 17, 2022 to September 16, 2032), (iv) minimum purchase obligations under the Daewoong Agreement, (v) €12.1 milestone payments under the Symatese U.S. Agreement consisting of €1.6 million in June 2025, €4.1 million in June 2026, €3.2 million in June 2027, and €3.2 million in June 2028, in each case subject to three of the hyaluronic acid gel products gaining approval prior to that date, (vi) €3.1 million of milestone payments under the Symatese Europe Agreement consisting of: €1.2 million on the second anniversary of certain regulatory approvals and €1.9 million on the earlier of the third anniversary of certain regulatory approvals or following a year in which we achieves €25 million in revenue in Europe for the hyaluronic acid gel products, and (vii) obligations under operating leases related to our office space which are described in more detail in Note 8. Operating Leasesin the Notes to Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K.

Previous wording

While our significant accounting policies are more fully described in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies to be most critical for fully understanding and evaluating our financial condition and results of operations, as these policies relate to the more significant areas involving management’s judgments and estimates.

Current wording

While our significant accounting policies are more fully described in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K, we believe the following accounting policies to be most critical for fully understanding and evaluating our financial condition and results of operations, as these policies relate to the more significant areas involving management’s judgments and estimates.

Previous wording

We generate 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, we recognize revenue when control of Jeuveau® is transferred to a customer upon receipt. For service revenue, we are determined to be the agent in the distribution of Jeuveau®in Canada and record the sale as service revenue on a net basis.

Current wording

We generate product revenue from the sale of Jeuveau® in the United States, Europe, and Australia and service revenue from the sale of Jeuveau® through a distribution partner in Canada. For product revenue, we recognize revenue when control of Jeuveau® is transferred to a customer upon receipt. For service revenue, we are determined to be the agent in the distribution of Jeuveau®in Canada and record the sale as service revenue on a net basis.

Previous wording

Jeuveau® product is sold to customers, the invoice price is allocated between the product sold and the estimated material right reward, or Reward, that the customer might redeem in the future. 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. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to establish the liability for the Reward. However, if the actual customer and consumer participation rates and number of qualifying treatments in any future periods materially differ from the estimates, we may be exposed to adjustments that could be material. The portion of invoice price allocated to the Reward is initially recorded as deferred revenue, and when customers redeem the Reward and the related product is delivered, the deferred revenue is reversed and included in net revenues.

Current wording

The consumer loyalty program allows participating customers to earn rewards for qualifying treatments to their patients (i.e. consumers) using Jeuveau® and redeem the rewards for Jeuveau® in the future at no additional cost. The loyalty program represents a customer option that provides a material right and, accordingly, is a performance obligation. At the time Jeuveau® product is sold to customers, the invoice price is allocated between the product sold and the estimated material right reward, or Reward, that the customer might redeem in the future. 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. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to establish the liability for the Reward. However, if the actual customer and consumer participation rates and number of qualifying treatments in any future periods materially differ from the estimates, we may be exposed to adjustments that could be material. The portion of invoice price allocated to the Reward is initially recorded as deferred revenue, and when customers redeem the Reward and the related product is delivered, the deferred revenue is reversed and included in net revenues.

Previous wording

We determine the fair value of the contingent royalty obligation payable to the Evolus Founders under the Amended Purchase Agreement based on significant unobservable inputs using a discounted cash flows method. Changes in the fair value of this contingent royalty obligation are determined each period end and recorded in operating expenses in the consolidated statements of operations and comprehensive loss and in the current and non-current liabilities in the consolidated balance sheets. The significant unobservable input assumptions that can significantly change the fair value includes (i) projected net revenues during the payment period, (ii) the discount rate and (iii) the timing of payments. 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.

Current wording

We determine the fair value of the contingent royalty obligation payable to the Evolus Founders based on significant unobservable inputs using a discounted cash flows method. Changes in the fair value of this contingent royalty obligation are determined each period end and recorded in operating expenses in the consolidated statements of operations and comprehensive loss and in the current and non-current liabilities in the consolidated balance sheets. The significant unobservable input assumptions that can significantly change the fair value includes (i) projected net revenues during the payment period, (ii) the discount rate and (iii) the timing of payments. 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.

Previous wording

We describe the recently issued accounting pronouncements that apply to us in Item 8. Consolidated Financial Statements and Supplementary Data - Note 2. Basis of Presentation and Summary of Significant Accounting Policies-Recent Accounting Pronouncements.

Current wording

We describe the recently issued accounting pronouncements that apply to us in Note 2. Basis of Presentation and Summary of Significant Accounting Policies—Recent Accounting Pronouncementsin Part II, Item 8 of this Annual Report on Form 10-K.