NVUS 2018 Annual Report

x the extent to which we enter into additional collaboration arrangements regarding product discovery or development, or acquire or in-license products or technologies; x our ability to establish additional collaborations with favorable terms, if at all; x the costs, timing and outcome of regulatory review of our product candidates; x the costs of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval; x revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval; and x the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims. Identifying potential product candidates and conducting formulation development, nonclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for several years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings and debt financings. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. We cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts. Future sales of shares by existing stockholders could cause the Company’s stock price to decline. ,I H[LVWLQJ VWRFNKROGHUV RI WKH &RPSDQ\ VHOO RU LQGLFDWH DQ LQWHQWLRQ WR VHOO VXEVWDQWLDO DPRXQWV RI WKH &RPSDQ\¶V common stock in the public market the trading price of the common stock of the combined company could decline. At December 31, 2018, the Company had approximately 9.4 million shares outstanding. The Share Purchase Agreement by and among Tokai, Otic, and stockholders of Otic contained a lock-up covenant from the Otic stockholders, which expired on November 5, 2017. The lock-up covenant prevented any Otic stockholder from offering, selling, or otherwise disposing of, directly or indirectly, any securities of the Company, or otherwise enter into a transaction that would have similar effect for 180 days following the closing of the Reverse Merger. Concurrent with the Reverse Merger, the Company completed the Private Placement. A registration statement covering the resale of the shares of Company common stock issuable in connection with the Private Placement is in effect, allowing up to 400,400 shares of common stock to be sold in the public market. Further, as of November 5, 2017, shares held by directors, executive officers of the Company and other affiliates are eligible for sale in the public market, subject to volume limitations under Rule 144 under the Securities Act.

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