NVUS 2018 Annual Report

GLYLGHQG DVVXPSWLRQ ZDV EDVHG RQ WKH &RPSDQ\¶V KLVWRU\ DQG H[SHFWDWLRQ RI GLYLGHQG SD\RXWV 7KH &RPSDQ\ KDV not paid and does not expect to pay dividends at any time in the foreseeable future. The Company recognizes forfeitures on an actual basis and as such did not estimate forfeitures to calculate stock-based compensation. Stock-based compensation expense related to stock options granted to non-employees is recognized based on the fair value of the stock options, determined using the Black-Scholes option pricing model, as they are earned. The awards generally vest over the period the Company expects to receive services from the non-employee. Stock options granted to non- employees are subject to periodic revaluation over their vesting terms. consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Tax law and rate changes are reflected in income in the period such changes are enacted. The likelihood of realizing the tax benefits related to a potential deferred tax asset is evaluated, and a valuation allowance is recognized to reduce that deferred tax asset if it is more likely than not that all or some portion of the deferred tax asset will not be realized. Deferred tax assets and liabilities are calculated at the beginning and end of the year; the change in the sum of the deferred tax asset, valuation allowance and deferred tax liability during the year generally is recognized as a deferred tax expense or benefit. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. 6LJQLILFDQW MXGJPHQW LV UHTXLUHG LQ GHWHUPLQLQJ WKH &RPSDQ\¶V SURYLVLRQ IRU LQFRPH WD[HV GHIHUUHG WD[ DVVHWV DQG liabilities and the valuation allowance recorded against net deferred tax assets. We assess the likelihood that deferred tax assets will be recovered as deductions from future taxable income. The evaluation of the need for a valuation allowance is performed on a jurisdiction-by-jurisdiction basis and includes a review of all available positive and negative evidence. Factors reviewed include projections of pre-tax book income for the foreseeable future, determination of cumulative pre-tax book income after permanent differences, earnings history, and reliability of forecasting. We have provided a full valuation allowance on our deferred tax assets as of December 31, 2018 and 2017 because we believe it is more likely than not that our deferred tax assets will not be realized as of those dates. On December 22, 2017, President Trump signed U.S. tax reform legislation, commonly referred to as the Tax Cuts and -REV $FW WKH ³7D[ $FW´ ZKLFK EHFDPH HIIHFWLYH -DQXDU\ 7KH 7D[ $FW VLJQLILFDQWO\ FKDQJHG WKH IXQGDPHQWDOV RI U.S. corporate income taxation by, among many other things, reducing the U.S. federal corporate income tax rate from 35% to 21%, converting to a territorial tax system, and creating various income inclusion and expense limitation provisions. We have performed a review of the Tax Act, and recorded amounts related to the revaluation of our deferred taxes and the realization of certain tax credit carryforwards. However, as the Company records a valuation allowance for its entire deferred income tax asset, there was no impact to the reported amounts in the accompanying consolidated financial statements as a result of the Tax Act. The Company evaluates the accounting for uncertainty in income tax recognized in its consolidated financial statements and determines whether it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit is recorded in its consolidated financial statements. For those tax SRVLWLRQV ZKHUH LW LV ³QRW PRUH OLNHO\ WKDQ QRW´ that a tax benefit will be sustained, no tax benefit is recognized. Where applicable, associated interest and penalties are also recorded. The Company has not accrued any liabilities for any such uncertain tax positions as of December 31, 2018 or 2017. The Company is subject to U.S. federal and state tax authority examinations for all the years since inception due to net operating loss and tax credit carryforwards. The net operating losses and tax credits are subject to adjustment until the statute closes on the year the attributes are ultimately utilized. 7KH &RPSDQ\¶V LQFRPH WD[ UHWXUQV DUH EDVHG RQ FDOFXODWLRQV DQG DVVXPSWLRQV WKDW DUH VXEMHFW WR H[DPLQDWLRQ E\ WKH Internal Revenue Service and other tax authorities. In addition, the calculation of the Com SDQ\¶V WD[ OLDELOLWLHV LQYROYHV dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcomes of examinations by tax authorities in determining the adequacy of its provision for income taxes. The Company continually assesses the likelihood and amount of potential revisions and adjusts the income tax provision, income taxes payable and deferred taxes in the period in which Income Taxes The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax

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