Stockholders’ Equity (Deficit)

On February 12, 2018, the Company completed its IPO of 5,047,514 shares of common stock, which included the exercise by the underwriters of their option to purchase 47,514 additional shares of common stock, for net proceeds of $56.3 million, after deducting underwriting discounts and commissions, excluding other offering costs.

In July 2018, the Company completed the Follow-On Offering in which the Company sold 3,600,000 shares of its common stock, which included the exercise in full by the underwriters of their option to purchase an additional 600,000 shares of common stock in August 2018, at a price to the public of $20.00 per share. The Company received net proceeds of approximately $67.7 million from the Follow-On Offering, after deducting underwriting discounts and commissions, and excluding other offering expenses.

Convertible Series A Preferred Stock

At December 31, 2017, the Company had 2,500,000 shares of Series A preferred stock authorized, of which 1,250,000 were issued or outstanding. ALPHAEON, as the previous sole holder of Series A preferred stock prior to the IPO, had certain dividends, conversion, redemption, voting, protective, and liquidation preferences. The number of shares of common stock to which a preferred stockholder was entitled was the product obtained by multiplying the Series A preferred stock conversion rate by the number of shares of preferred stock being converted, subject to adjustments as provided in the amended and restated certificate of incorporation.

In connection with the IPO, all shares of Series A preferred stock were converted into 2,065,875 shares of common stock. In addition, the Company also amended and restated its certificate of incorporation. As a result, shares of Series A convertible preferred stock were canceled, with none authorized, issued or outstanding as of September 30, 2018.

Preferred Stock

In connection with the completion of its IPO, the Company also amended and restated its certificate of incorporation to provide for 10,000,000 authorized shares of preferred stock with a par value of $0.00001 per share. At September 30, 2018, the Company had 10,000,000 shares of preferred stock authorized, of which none were issued and outstanding.

Common Stock

In connection with the completion of its IPO, the Company also amended and restated its certificate of incorporation to provide for 100,000,000 authorized shares of common stock with a par value of $0.00001 per share. At September 30, 2018, the Company had 100,000,000 shares of common stock authorized, of which 27,274,991 were issued and outstanding.

Equity Related Transactions

As of February 12, 2018, the Company assumed from ALPHAEON the revised payment obligations under the Amended Purchase Agreement of $56.7 million (comprised of $40.6 million related to the contingent royalty obligation and $16.1 million related to the contingent promissory note at that date). See Note 6, Fair Value Measurements for more information. Pursuant to the Amended Purchase Agreement, ALPHAEON agreed to offset and reduce the amount of related party borrowings by the estimated value of the revised payment obligations on a dollar-for-dollar basis and pursuant to the Services Agreement. Additionally, the Company paid $5.0 million to ALPHAEON in satisfaction of a portion of the outstanding related party borrowings (see Note 4, Related Party Transactions). The remaining balance of related party borrowings of $13.2 million was recharacterized as a capital contribution from ALPHAEON pursuant to the Services Agreement.

2017 Omnibus Incentive Plan and Stock-based Compensation Allocation

On November 21, 2017, the board of directors and the then-sole stockholder of the Company approved the Company’s 2017 Omnibus Incentive Plan (the “Plan”). The Plan provides for the grant of incentive options to employees of the Company, and for the grant of nonstatutory options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards and other forms of stock compensation to the Company’s employees, including officers, directors, consultants and employees of the Company. 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% 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 January 6, 2018, the Company granted to certain of its employees and non-employee directors 1,496,005 options to purchase shares of its common stock (“Stock Options”), with an exercise price of $9.98 per share. In addition, on January 6, 2018, the Company granted restricted stock units for 230,516 shares of its common stock with a per share fair value of $9.98. The January 6, 2018 Stock Options were valued using the IPO price of the Company’s common stock of $12.00. On February 19, 2018, the Company granted to certain of its employees 102,835 options to purchase shares of its common stock with an exercise price of $11.70 per share.

During the three months ended June 30, 2018, pursuant to the Plan, the Company granted 1,570,145 options to purchase shares of its common stock with a weighted average exercise price of $10.85. In addition, during the three months ended June 30, 2018, pursuant to the Plan, the Company granted restricted stock units for 80,000 shares of its common stock with a weighted average per share value of $26.22.

During the three months ended September 30, 2018, pursuant to the Plan, the Company granted 349,240 options to purchase shares of its common stock with a weighted average exercise price of $20.55. In addition, during the three months ended September 30, 2018, pursuant to the Plan, the Company granted restricted stock units for 11,000 shares of its common stock with a weighted average per share value of $21.21.

The following table summarizes stock-based compensation expense (in thousands) amounts recorded by Evolus pursuant to the above Plan and allocated to Evolus by ALPHAEON:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
General and administrative	$	1,160	$	215	$	4,083	$	447
Research and development	322		11		1,028		25
	$	1,482	$	226	$	5,111	$	472

Separation of Service with the Former President and Chief Executive Officer

In May 2018, the Company entered into a separation agreement (the “Separation Agreement”) with its then President and Chief Executive Officer, Murthy Simhambhatla, Ph.D. Pursuant to the Separation Agreement, the Company modified previously granted stock options resulting in an incremental vesting of 100,424 stock options and related stock-based compensation expense of $0.4 million. As part of the Separation Agreement, the Company issued 50,112 shares of common stock and an additional 50,112 shares of common stock were immediately vested and will be issued in February 2020. Stock-based compensation expense relating to the issuance of common stock and accelerated vesting was approximately $1.0 million. The aforementioned non-cash charges are reflected in general and administrative on the condensed statements of operations and comprehensive loss for the nine months ended September 30, 2018.