NVUS 2018 Annual Report

Our primary uses of capital are, and we expect will continue to be, funding research efforts and the development of our product candidates, compensation and related expenses, hiring additional staff (including clinical, scientific, operational, financial, and management personnel) and costs associated with operating as a public company. We expect to incur substantial expenditures in the foreseeable future for the development and potential commercialization of our product candidates. As a result of these conditions, we have concluded that substantial doubt about our ability to continue as a going concern exists as conditions and events, considered in the aggregate, indicate that it is probable that we will be unable to meet our obligations as they become due within one year after the date that our consolidated financial statements were issued without raising additional capital. The financial information and consolidated financial statements included in this Annual Report have been prepared on a basis that assumes that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. This financial information and these financial statements do not include any adjustments that may result from an unfavorable outcome of this uncertainty. Our ability to continue as a going concern is dependent upon our ability to successfully secure sources of financing and ultimately achieve profitable operations. Cash Flows The following table provides a summary of our net cash flow activity for the years ended December 31, 2018 and 2017 (in thousands):

Year Ended December 31,

2018

2017

Net cash used in operating activities Net cash provided by investing activities Net cash provided by financing activities

$ (11,893) $ (14,941)

Ͷ

23,258 7,869

7,562

Net increase (decrease) in cash, cash equivalents, and restricted cash

$

(4,331) $ 16,186

Comparison of the Years Ended December 31, 2018 and 2017 Net cash used in operating activities for the year ended December 31, 2018 consisted primarily of our net loss of $14.1 million, partially offset by non-cash items consisting primarily of depreciation and stock-based compensation totaling $1.6 million. Additionally, cash used in operating expenses for the year ended December 31, 2018 reflected a net increase in cash from changes in operating assets and liabilities of $618,000, primarily due to an increase in our accounts payable and accrued liabilities. Net cash used in operating activities for the year ended December 31, 2017 consisted primarily of our net loss of $13.1 million, partially offset by non-cash items consisting primarily of depreciation, stock-based compensation, and loss on disposal of fixed assets totaling $650,000. Additionally, cash used in operating expenses for the year ended December 31, 2017 reflected a net decrease in cash from changes in operating assets and liabilities of $2.5 million, primarily due to an increase in our prepaid expenses and the payment of accounts payable and accrued liabilities assumed in the Reverse Merger. There was no cash provided by or used in investing activities for the year ended December 31, 2018. Net cash provided by investing activities for the year ended December 31, 2017 consisted primarily of cash received from the Reverse Merger of $23.3 million. Net cash provided by financing activities for the year ended December 31, 2018 was comprised of net proceeds of $7.5 million from the issuance of approximately 2.3 million shares of common stock under the Equity Distribution Agreement, and proceeds from the exercise of stock options in the amount of $71,000. Net cash provided by significant financing activities in the year ended December 31, 2017 was comprised of $4.0 million in proceeds from the Stock Purchase Agreement for the purchase of 400,400 shares of Novus common stock, net proceeds of $750,000 for the issuance of approximately 167,000 shares of common stock under the Equity Distribution Agreement, and proceeds from the exercise of warrants in the amount of $3.1 million.

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