On July 23, 2018, the Company filed a prospectus and prospectus supplement (the “2018 Prospectus”) under which the Company may offer and sell, from time to time, pursuant to an equity distribution agreement with Piper Jaffray & Co., up to $9.8 million in shares of its common stock. As of December 31, 2019 and September 30, 2020, 1,401 shares have been sold under the 2018 Prospectus for gross proceeds of approximately $110,000.

On April 30, 2019, the Company entered into a securities purchase agreement with certain investors pursuant to which the Company agreed to sell, in a registered direct offering, an aggregate 191,617 shares of its common stock for gross proceeds of approximately $10.7 million under its effective shelf registration statement on Form S-3 (File No. 333-226286), which became effective on July 31, 2018. In a concurrent private placement, the Company also agreed, pursuant to the securities purchase agreement, to issue to such investors Series A warrants to purchase up to 191,617 shares of its common stock at an exercise price of $72.00 with a term of eighteen months (the “Series A Warrants”) and Series B warrants to purchase up 191,617 shares of its common stock at an exercise price of $724.00 with a term of five years (the “Series B Warrants”). The Series B Warrants become exercisable only upon the exercise of the Series A Warrants. In addition, the Company agreed to issue to the placement agent warrants to purchase up to 9,580 shares of common stock representing 5.0% of the aggregate number of shares of common stock sold in this offering. The placement agent warrants have substantially the same terms as the Series A Warrants issued to the investors in the concurrent private placement, except that the placement agent warrants have an exercise price equal to $69.66 or 125% of the offering price per share and will expire on April 30, 2024. The registered direct offering and the concurrent private placement are referred to collectively herein as the “2019 Equity Offering.”

All the warrants issued in connection with the 2019 Equity Offering contained put options that allow the holders of the warrants the right to receive, for each warrant share that would have been issuable upon an exercise immediately prior to the occurrence of an effective change in control event defined as a fundamental transaction, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration receivable as a result of such fundamental transaction by a holder of the number of shares of common stock for which this warrant is exercisable immediately prior to such fundamental transaction. The Company evaluated the embedded put option contained in the warrants under the guidance of Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging, and concluded that the requirements for contingent exercise provisions as well as the settlement provision for scope exception in ASC 815-10-15-74 has been met. Accordingly, the put options contained in the warrants were not bi-furcated and accounted for as freestanding derivative instruments.

On January 10, 2020 and January 15, 2020, the Company entered into warrant exercise agreements (the “Exercise Agreements”) with the holders (the “Holders”) of its Series A Warrants and Series B Warrants (collectively, the “Warrants”), issued in the 2019 Equity Offering, pursuant to which the Holders agreed to exercise in cash their Warrants to purchase an aggregate of 383,234 shares of the Company’s common stock at a reduced exercise price of $12.87 per share, plus an additional $2.25 per share for the issuance of the private placement warrants for gross proceeds (before placement agent fees and expenses) to the Company of approximately $5.8 million (the “Exercise Transaction”).

Under the Exercise Agreements, the Company also agreed to issue to the Holders new warrants to purchase up to 383,234 shares of the Company’s common stock at an exercise price of $12.96 per share, with an exercise period of five and a half years (the “Private Placement Warrants”). The Private Placement Warrants transaction subsequently closed and the Private Placement Warrants were issued on January 14, 2020 with respect to the Warrants exercised on January 10, 2020 and on or about January 17, 2020, with respect to the Warrants exercised on January 15, 2020. In addition, the Company agreed to issue to the placement agent warrants to purchase up to 19,161 shares of common stock, representing 5.0% of the aggregate number of shares of common stock issued in the Exercise Transaction. The placement agent warrants have substantially the same terms as the Private Placement Warrants issued to the Holders, except that the placement agent warrants have an exercise price equal to $18.90. A warrant inducement expense of $4.8 million was recorded which was determined using the Black-Scholes option pricing model and was calculated as the difference between the fair value of the Warrants prior to, and immediately after, the reduction in the exercise price on the date of repricing in addition to the fair value of the Private Placement Warrants issued.

On September 15, 2020, the Holders exercised approximately 44,643 warrants in a cashless transaction in exchange for 20,834 shares of the Company’s common stock.

As of September 30, 2020, 367,335 warrants were exercisable into common stock. The shares of common stock underlying the registered direct and private placement warrants are registered for offer and sale under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the Company’s effective registration statements on Forms S-1.

	Rollforward of Warrant Activity
	Registered direct warrants, Series A			Registered direct warrants, Series B			Registered direct warrants, placement agent		Private placement warrants			Private placement warrants, placement agent		Total
Balance as of December 31, 2019		191,617			191,617			9,581		—			—		392,815
Issued		—			—			—		383,235			19,162		402,397
Exercised		(191,617	)		(191,617	)		—		(44,643	)		—		(427,877	)
Cancelled/Expired		—			—			—		—			—		—
Balance as of September 30, 2020		—			—			9,581		338,592			19,162		367,335

On September 14, 2020, the Company acquired Anelixis, after which Anelixis became a wholly-owned subsidiary of the Company. Under the terms of the acquisition, the Company issued to the stockholders of Anelixis 175,488 shares of Novus common stock and 140,026 shares of Series X¹ Preferred Stock. In addition to the common stock and preferred stock issued in connection with the acquisition of Anelixis, certain outstanding warrants issued by Anelixis were not settled upon completion of the acquisition, and instead were assumed and then replaced with Novus warrants. As part of the acquisition, the Company assumed and replaced options for the purchase of 1,346,398 shares of common stock with an estimated total fair value of approximately $6.1 million and 55,583.875 warrants for Series X¹ Preferred Stock with an estimated fair value of approximately $12.9 million. The estimated fair value of the assumed and replaced options and warrants attributed to pre-merger services were approximately $3.3 million and $12.9 million, respectively, and is included in other consideration amounts transferred and added to goodwill (see Note 8).

As of September 30, 2020, 55,583.875 warrants were exercisable into Series X¹ Preferred Stock. The shares of Series X¹ Preferred Stock underlying the assumed and replaced warrants in connection with the Anelixis acquisition are expected to be converted into shares of Novus common stock upon shareholder approval.

	Rollforward of Warrant Activity
		Warrants assumed and replaced in acquisition		Total
Balance as of December 31, 2019			—		—
Assumed and replaced			55,583.875		55,583.875
Exercised			—		—
Cancelled/Expired			—		—
Balance as of September 30, 2020			55,583.875		55,583.875

On February 13, 2020, the Company entered into an exchange agreement (the “Exchange Agreement”) with Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P. and Biotechnology Value Trading Fund OS, L.P. (the “Exchanging Stockholders”), pursuant to which the Exchanging Stockholders exchanged (the “Exchange”) 210,888 shares of the Company’s common stock for 3,796 shares of newly designated Series X Convertible Preferred Stock (the “Series X Preferred Stock”). The Company agreed to reimburse the Exchanging Stockholders for their expenses in connection with the Exchange up to a total of $25,000, which was recorded as operating expense in the Company’s condensed consolidated statements of operations and comprehensive loss. The Exchange was completed on February 19, 2020.

On February 13, 2020, in connection with the Exchange, the Company filed a Certificate of Designation setting forth the preferences, rights and limitations of the Series X Preferred Stock with the Secretary of State of the State of Delaware. The number of shares so designated shall be 10,000 and Series X Preferred Stock shall have a par value of $0.001 per share. Each share of Series X Preferred Stock will be convertible into 55.5556 shares of common stock at the option of the holder at any time; subject to certain limitations, including, that the holder will be prohibited from converting Series X Preferred Stock into common stock if, as a result of such conversion, the holder, together with its affiliates, would beneficially own a number of shares of common stock above a conversion blocker, which is initially set at 9.99% of the total common stock then issued and outstanding immediately following the conversion of such shares of Series X Preferred Stock. In the event of the Company’s liquidation, dissolution or winding up, holders of Series X Preferred Stock will participate pari passu with any distribution of proceeds to holders of common stock. Holders of Series X Preferred Stock are entitled to receive dividends on shares of Series X Preferred Stock equal (on an as-if-converted-to-common stock basis) to and in the same form as dividends actually paid on the common stock or other junior securities of the Company. Shares of Series X Preferred Stock will generally have no voting rights, except as required by law and except that the consent of a majority of the holders of the outstanding Series X Preferred Stock will be required to amend the terms of the Series X Preferred Stock.

SEC Accounting Series Release No. 268, Presentation in Financial Statements of “Redeemable Preferred Stocks” (“ASR 268”) requires equity instruments with redemption features that are not solely within the control of the issuer to be classified outside of permanent equity, often referred to as classification in “temporary equity”).The Company evaluated Series X Preferred Stock redemption features and concluded that there are no redemption features with the Series X Preferred Stock that are not solely within the control of the Company and permanent equity classification was appropriate.

Series X Preferred Stock has two (2) separate and distinct embedded features. They are: (1) optional conversion by holder and (2) redemption put feature upon fundamental transaction.

Each share of Series X Preferred Stock shall be convertible into 55.5556 shares of common stock, at the option of the holder, at any time after the date of issuance. The Company evaluated the embedded optional conversion feature in accordance with the guidance under ASC 815, Derivatives and Hedging, and determined it is exempt from derivative accounting as the embedded feature is deemed to be indexed to the Company’s own stock and classified in stockholder’s equity if freestanding. Further, because the conversion ratio is fixed and equal to the ratio of the original exchange of 55.5556 common stock to each share of Series X Preferred Stock, the Company concluded that there is no intrinsic value to the beneficial conversion feature.

Each share of Series X Preferred Stock contains redemption put features that allow the holders of the Series X Preferred Stock the right to receive, in lieu of the right to receive conversion shares, for each conversion share that would have been issuable upon such conversion immediately prior to the occurrence of an effective change in control (“Fundamental Transaction”), the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of common stock. The Company evaluated the redemption put feature contained in each Series X Preferred Stock under the guidance of ASC 815, Derivatives and Hedging, and concluded that the embedded redemption put feature do not meet the definition of a derivative, if freestanding, under ASC 815 as net settlement could not be achieved. Accordingly, the redemption put features contained in the Series X Preferred Stock were not bi-furcated and accounted for as freestanding derivative instruments.

On June 1, 2020 and June 10, 2020, the Exchanging Stockholders converted a total of 3,285 shares of Series X Preferred Stock into 182,500 shares of common stock. As of September 30, 2020, 511 shares of Series X Preferred Stock remain outstanding.

On September 14, 2020, Novus entered into the Purchase Agreement with the Investors. Pursuant to the Purchase Agreement, Novus agreed to sell an aggregate of approximately 199,112 shares of Series X¹ Preferred Stock for an aggregate purchase price of approximately $99.1 million, or net proceeds of approximately $95.2 million after deducting offering costs, in the Financing. Novus has commitments for an additional $9 million in equity financing that is contingent upon the satisfaction of certain incremental closing conditions, including stockholders approval of the issuance of the Company’s common stock upon the conversion of the Company’s X¹Preferred Stock and the effective registration of its common stock. Subject to stockholder approval, each share of Series X¹ Preferred Stock is convertible into 55.5556 shares of Common Stock, as described below. The preferences, rights and limitations applicable to the Series X¹ Preferred Stock are set forth in the Certificate of Designation, as filed with the SEC. The Financing is exempt from registration pursuant to Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder, as a transaction by an issuer not involving a public offering. The Investors have acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends have been affixed to the securities issued in this transaction.

The Company records shares of preferred stock at their respective fair values on the dates of issuance, net of issuance costs. Holders of Series X¹ Preferred Stock do not have voting rights and are entitled to receive dividends on shares of X¹ Preferred Stock on an as-if converted to common stock basis equal to dividends actually paid on shares of common stock. The shares of Series X¹ Preferred Stock shall automatically be converted into shares of common stock equal to the conversion ratio of 55.5556 upon stockholder approval of the conversion of the Series X¹ Preferred Stock into shares of common stock in accordance with the listing rules of the Nasdaq Stock Market.

The Company has applied the guidance in ASC 480-10-S99-3A, SEC Staff Announcement: Classification and Measurement of Redeemable Securities, and has therefore classified the Series X¹ Preferred Stock outside of stockholders’ equity because, if conversion to common stock is not approved by the stockholders, the Series X¹ Preferred Stock will be redeemable at the option of the holders for cash equal to the closing price of the common stock on the last trading day prior to the holder’s redemption request. If, in the unlikely event that, the conversion to common stock is not approved by the stockholders and majority of the Series X¹ Preferred Stock holders elect to exercise their redemption rights to receive cash equal to the closing price of the common stock the on last trading day prior to the holder’s redemption request, such event would result in a material deterioration of the Company’s liquidity and will raise substantial doubt about the Company’s ability to continue as a going concern. However, the Company believes stockholders’ approval for the conversion to common stock is probable to mitigate the risk of raising substantial doubt for the Company to continue as a going concern.

The Company analyzed the conversion provision related to the Series X¹ Preferred Stock and determined there was not a contingent beneficial conversion feature (“BCF”) that would be recognized when the contingency of stockholder approval is resolved.

Total stock-based compensation expense was recognized in our condensed consolidated statements of operations and comprehensive loss as follows (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Research and development	$	336	$	57	$	539	$	278
General and administrative		542		170		973		787
Total stock-based compensation	$	878	$	227	$	1,512	$	1,065

During the nine months ended September 30, 2020, PRSUs awarded to employees totaling 3,055 shares vested and resulted in the recognition of $204,765 in stock-based compensation expense.

During the three and nine months ended September 30, 2020, the Company incurred the following types of share-based compensation expenses:

Amortization of outstanding stock-based compensation expenses for outstanding equity-based awards through September 30, 2020 was noted to be approximately $92,940 and $726,455 for the three and nine months ended September 30, 2020, respectively. During the same periods, the Company modified the terms of equity-based awards to former employees whereby the unvested portions of these awards became fully vested on an accelerated basis at their termination date and/or at September 30, 2020. Further, the Company amended the periods in which specific individuals of the Company’s former board of directors may exercise their vested equity-based awards up to 18 months subsequent to their termination date in lieu of the standard 90 days. These modifications were individually evaluated under ASC 718, Compensation – Stock Compensation resulting in the Company recognizing additional compensation expenses of approximately $0.5 million for the three months ended September 30, 2020. As part of the merger with Anelixis, the Company assumed and replaced 1,346,398 shares of equity-based options. The pre-merger merger related service cost of these assumed and replaced options was allocated as additional purchase consideration and included in goodwill, whereas post-merger related services costs for the options will be amortized to stock-based compensation prospectively from the merger effective date of September 14, 2020. Lastly, the Company granted to certain directors and employees preferred equity-based awards where each preferred option award when exercised into its preferred stock may be converted to 55.5556 shares of the Company’s common stock.

Below is the summary of the stock-based compensation expenses the Company incurred for three and nine months ended September 30, 2020:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Amortization of outstanding equity-based awards	$	93	$	227	$	727	$	1,065
Modifications of terms related to grants previously issued to employees and board of directors		471		—		471		—
Amortization of equity-based awards assumed from the merger with Anelixis and replaced		38		—		38		—
New grants of preferred equity-based awards to directors and employees		276		—		276		—
Total stock-based compensation expense	$	878	$	227	$	1,512	$	1,065