NVUS 2018 Annual Report

2018 and December 31, 2017, the Company also has state net operating loss carryforwards of $0.9 million. Both the federal and California net operating loss carryforwards incurred before 2018 begin expiring in 2034 if not utilized. The 2018 federal net operating loss of $12.5 million carryforward does not expire. As of December 31, 2018, and December 31, 2017, the Company had Israeli net operating losses of $8.2 million and $8.4 million, respectively, which carryforward indefinitely. As of December 31, 2018 and 2017, the Company has federal research and development tax credit carryforwards of approximately $420,000 and $132,000, respectively. If not utilized, the carryforwards will begin expiring in 2025. As of December 31, 2018 and 2017, the Company has state research and development credit carryforwards or approximately $161,000 and $67,000, respectively, which do not expire. Pursuant to Internal Revenue Code (IRC) Sections 38 DQG DQQXDO XVH RI WKH &RPSDQ\¶V QHW RSHUDWLQJ ORVV DQG research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has not completed an IRC Section 382/383 analysis regarding the limitation of net operating loss and research and development credit carryforwards. Due to the existence of the valuation DOORZDQFH IXWXUH FKDQJHV LQ WKH &RPSDQ\¶V XQUHFRJQL]HG WD[ EHQHILWV ZLOO QRW LPSDFW WKH &RPSDQ\¶V HIIHFWLYH WD[ UDWH 7KH &RPSDQ\¶V DELOLW\ WR XVH LWV UHPDLQLQJ QHW RSHUDWLQJ ORVV DQG WD[ FUHGLW FDUU\IRUZDUGV PD\ EH IXUWKHU OLPLWHG LI WKH Company experiences a Section 382 ownership change in connection with future changes in WKH &RPSDQ\¶V stock ownership. In the U.S., the Company files income tax returns in the U.S. Federal jurisdiction DQG &DOLIRUQLD 7KH &RPSDQ\¶V WD[ years for 2015 and forward are subject to examination by the Federal and California tax authorities due to the carryforward of unutilized net operating losses and research and development credits. 7KH &RPSDQ\¶V SROLF\ LV to recognize interest expense and penalties related to income tax matters as a component of income tax expense. There was no accrued interest and penalties associated with uncertain tax positions as of December 31, 2018 and 2017. The Company has not recorded any interest or penalties in 2018 or 2017. Note 9 6WRFNKROGHUV¶ (TXLW\ Warrants During 2017, the following transactions represented WKH H[HUFLVH RI DOO RXWVWDQGLQJ ZDUUDQWV IRU WKH &RPSDQ\¶V preferred stock, for total proceeds of approximately $3.1 million: x In March 2017, OrbiMed Israel Partners Limited Partnership, a related party, exercised a warrant to purchase 978,561 shares of Preferred B shares of the Company at $0.41 per share for an aggregate amount of approximately $400,000. x In May 2017, OrbiMed Israel Partners Limited Partnership, a related party, exercised warrants to purchase 6,458,628 shares of Preferred B shares of the Company at a price of $0.41 per share for an aggregate amount of approximately $2.6 million. Additionally, 51,477 shares of common stock were issued in a cashless exercise of warrants. x In May 2017, Peregrine Management II Ltd., a related party, exercised warrants to purchase 192,454 shares of Preferred B shares at $0.41 per share for an aggregate amount of approximately $79,000. Additionally, in a 10,299

shares of common stock were issued in a cashless exercise of warrants. x In May 2017, Pontifax, in a cashless exercise of its warrants, purchased 9

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stock.

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preferred stock. As of December 31, 2018 and 2017, no warrants were issued and outstanding.

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