NVUS 2018 Annual Report

applicable to these outstanding options were adjusted in connection with the one for nine reverse stock-split. As of December 31, 2018, there were 84,612 options outstanding under the 2007 plan. Options granted under the 2007 and 2014 Plans generally expire ten years from the date of grant. The Company intends for the 2014 Plan to be its primary stock compensation plan in the future. 3ODQ WKH ³3ODQV´ to reduce the share reserves under the Plans. These reductions were made to equitably adjust the share reserves in accordance with the terms of the Plans. As a result of these equitable adjustments: (1) the number of shares of common stock authorized for issuance under the 2014 Plan (excluding shares underlying outstanding awards as of August 1, 2018) was reduced to 766,500 shares and the maximum number of shares that can be added to the 2014 Plan under evergreen provision set forth in Section 4(a)(1)(C) of the 2014 Plan was reduced to 550,000 shares annually; and (2) the number of shares of common stock authorized for future issuance under the ESPP was reduced to 209,500 shares (excluding shares previously issued under the ESPP prior to August 1, 2018) and the maximum number of shares that can be added to the ESPP under the evergreen provision set forth in the ESPP was reduced to 135,000 shares annually. The 2014 Plan and ESPP were amended and restated as of August 1, 2018 to reflect these equitable adjustments. Because Otic is considered to be the acquirer for accounting purposes, the pre-Reverse Merger vested stock options granted by Tokai under the 2007 Plan and the 2014 Plan are deemed to have been exchanged for equity awards of the Company and as such the portion of the acquisition date fair value of these equity awards attributable to pre-Reverse Merger service to Tokai were accounted for as a component of the consideration transferred. The exchange of Otic stock options to purchase Tokai common stock, as renamed Novus, was accounted for as a modification of the awards because the legal exchange of the awards is considered a modification of Otic stock options. The modification of the stock options did not result in any incremental compensation expense as the modification did not increase the fair value of the stock options. (IIHFWLYH DV RI $XJXVW WKH %RDUG RI 'LUHFWRUV DPHQGHG WKH &RPSDQ\¶V 6WRFN ,QFHQWLYH 3ODQ WKH ³ 3ODQ´ DQG WKH &RPSDQ\¶V (PSOR\HH 6WRFN 3XUFKDVH 3ODQ WKH ³(633´ DQG WRJHWKHU ZLWK WKH

Stock Option Activity As of December 31, 2018, a total of 764,966 options were available for grant under the 2014 Plan. The following table shows the stock option activity, as follows:

Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (In years) (In thousands)

Weighted Average Exercise Price

Shares Issuable Under Options

Outstanding as of January 1, 2017

59,777 $

18.45

8.8 $

4.3

Granted

595,800 137,139

5.45

Options assumed in the Reverse Merger

50.25

Exercised

Ͷ

Ͷ

Forfeited / Canceled

(10,376) 782,340 267,950 (15,120) (60,353)

6.85

Outstanding as of December 31, 2017

14.28

8.8 $

8.5

Granted Exercised

5.02 4.74 7.31

Forfeited / Canceled

Outstanding as of December 31, 2018 Options vested and expected to vest as of December 31, 2018 Options exercisable as of December 31, 2018

Ͷ

974,817 $

12.31

8.2 $

Ͷ Ͷ

974,817 $ 548,328 $

12.31 17.57

8.2 $ 7.6 $

As of December 31, 2018, the range of exercise prices was between $3.32 and $119.25 for options outstanding. Intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of the common stock for the options that had exercise prices that were lower than the fair value per share of the common stock

F-21