Filed with the Securities and Exchange
Commission on February 9, 2018
Registration
No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Auris Medical Holding AG
(Exact Name of Registrant as Specified
in Its Charter)
Not Applicable
(Translation of Registrant’s name into English)
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Switzerland
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2834
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Not Applicable
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(State or Other Jurisdiction of
Incorporation or Organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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Bahnhofstrasse 21
6300 Zug, Switzerland
+41 (0)41 729 71 94
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(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
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Cogency Global, Inc.
10 East 40th Street, 10th Floor
New York, NY 10016
(212) 947-7200
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(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)
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Copy to:
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Sophia Hudson
Richard D. Truesdell, Jr.
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017
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Approximate date of commencement of
proposed sale to the public
: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered
on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the
following box.
☐
If this form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering.
☐
__________
If this form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
☐
__________
If this form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
☐
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Indicate by check mark whether the registrant
is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
Emerging growth company
☒
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If an emerging growth company that prepares
its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B)
of the Securities Act.
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CALCULATION OF REGISTRATION FEE
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Title of Each
Class of Securities
to be Registered
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Amount to be Registered(1)
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Proposed Maximum Offering Price Per Share(2)
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Proposed Maximum Aggregate Offering Price
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Amount Of
Registration Fee
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Common shares, nominal value CHF 0.40 per share
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7,499,999
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$0.31
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$2,324,999.69
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$289.47
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(1)
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All of the common shares offered hereby are for the account of selling stockholders and consist of 7,499,999 shares issuable
upon the exercise of warrants (the “Warrants”). Pursuant to Rule 416 of the Securities Act of 1933, as amended (the
“Securities Act”), this registration statement also covers any additional common shares which become issuable by reason
of any share dividend, share split, recapitalization or any other similar transaction without receipt of consideration which results
in an increase in the number of common shares outstanding.
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(2)
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Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933.
Based on the average of the high and low sales prices of the registrant’s common shares ($0.31 per share) on the Nasdaq Capital
Market on February 6, 2018.
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The Registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment
which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission,
acting pursuant to such Section 8(a), may determine.
The information in this prospectus is not complete
and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission
is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED FEBRUARY
9, 2018
PRELIMINARY PROSPECTUS
7,499,999 Common Shares
Auris
Medical Holding AG
Common Shares
This prospectus relates to the resale of
up to 7,499,999 of our common shares issuable upon exercise of certain outstanding warrants.
These common shares will be resold from
time to time by the entities listed in the section titled “selling shareholders” beginning on page 22, which we refer
to as the selling shareholders. The common shares offered under this prospectus by the selling shareholders are issuable upon exercise
of warrants (the “warrants”) issued pursuant to the Securities Purchase Agreement by and among Auris Medical Holding
AG and the selling shareholders named therein, dated as of January 26, 2018 (the “Purchase Agreement”). We are not
selling any common shares under this prospectus and will not receive any of the proceeds from the sale of common shares by the
selling shareholders.
The selling shareholders may sell the common
shares described in this prospectus in a number of different ways and at varying prices. We provide more information about how
a selling shareholder may sell its common shares in the section titled “Plan of Distribution” on page 52. We will pay
the expenses incurred in registering the common shares to which this prospectus relates, including legal and accounting fees.
Currently, our common shares are traded
on the Nasdaq Capital Market under the symbol “EARS”. The closing price of our common shares on Nasdaq on February
7 was $0.31 per common share.
We are an “emerging growth company”
as defined under the federal securities laws and, as such, are subject to reduced public company reporting requirements. See “Prospectus
Summary—Implications of Being an “Emerging Growth Company and a Foreign Private Issuer.”
Investing in our common shares involves
a high degree of risk. See “Risk Factors” beginning on page 9.
Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy
of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2018.
TABLE OF CONTENTS
Page
Unless otherwise indicated or the context
otherwise requires, all references in this prospectus to “Auris Medical” or the “Company,” “we,”
“our,” “ours,” “us” or similar terms refer to Auris Medical Holding AG, together with its subsidiaries.
The trademarks, trade names and service marks appearing in this prospectus are property of their respective owners.
The terms “dollar,” “USD”
or “$” refer to U.S. dollars and the term “Swiss Franc” and “CHF” refer to the legal currency
of Switzerland.
We have not authorized anyone to provide
any information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or
to which we may have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other
information that others may give you. We have not authorized any other person to provide you with different or additional information.
We are not making an offer to sell the common shares in any jurisdiction where the offer or sale is not permitted. This offering
is being made in the United States and elsewhere solely on the basis of the information contained in this prospectus. You should
assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus,
regardless of the time of delivery of this prospectus or any sale of the common shares. Our business, financial condition, results
of operations and prospects may have changed since the date on the front cover of this prospectus.
Prospectus
Summary
This summary highlights information
contained elsewhere in this prospectus. This summary may not contain all the information that may be important to you, and we urge
you to read this entire prospectus carefully, including the “Risk Factors,” “Business” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” sections and our consolidated financial statements,
including the notes thereto, included elsewhere in this prospectus or incorporated by reference herein, before deciding to invest
in our common shares.
Our Business
We are a clinical-stage
biopharmaceutical company focused on the development of novel products for the treatment of inner ear disorders. Our most advanced
product candidates are in Phase 3 clinical development. Keyzilen® (AM-101) is being developed for the treatment of acute inner
ear tinnitus and has received fast track designation from the FDA. AM-111 is being developed for the treatment of acute inner ear
hearing loss and has been granted orphan drug status by the FDA and the EMA and has been granted fast track designation by the
FDA. AM-125 is being developed for the treatment of vestibular disorders. In addition, we are pursuing early stage projects for
the treatment of tinnitus and rhinology.
Recent Developments
HEALOS Trial Results
On November 28, 2017, we announced that
the HEALOS Phase 3 clinical trial that investigated AM-111 in the treatment of acute inner ear hearing loss did not meet the primary
efficacy endpoint of a statistically significant improvement in hearing from baseline to Day 28 compared to placebo for either
active treatment groups in the overall study population. However, a post-hoc analysis of the subpopulation with profound acute
hearing loss revealed a clinically and statistically significant improvement in the AM-111 0.4 mg/mL treatment group. On January
4, 2018, we announced that further analyses on the basis of the HEALOS full data set provided additional confirmation of and support
for AM-111's otoprotective effects in the profound acute hearing loss subpopulation. Patients treated with AM-111 0.4 mg/mL showed
a statistically significantly lower incidence of no hearing improvement (defined as less than 15 dB) compared to placebo by Day
91 (11.4 vs. 38.2%, risk ratio 0.30, p=0.012). They also had a lower incidence of no marked hearing improvement (defined as less
than 30 dB) (28.6 vs. 50.0%, risk ratio 0.57, p=0.087). In addition, the significant improvement in pure tone hearing in the AM-111
0.4 mg/mL group was coupled with superior improvement in speech discrimination as the score of correctly recognized words improved
by 49.2 percentage points to Day 91 compared to 30.4 percentage points in the placebo group (p=0.062). We plan to discuss the HEALOS
results and the regulatory pathway with health authorities.
TACTT3 Protocol Amendment
We have recently filed an amendment to the
TACTT3 study protocol with the aim of simplifying and streamlining the endpoint model for the study while it remains still fully
blinded. Instead of using both the change in subjective tinnitus loudness (TLQ) and the change in the Tinnitus Functional Index
(TFI) as alternate primary endpoints, we are planning to use only the latter as a single primary endpoint. As a result of the change,
the full alpha level of 5% will be applied to the testing of the TFI primary endpoint instead of 4% under the previous protocol.
The TFI questionnaire measures directly the clinically relevant tinnitus burden to the patient. A recently published study provided
further confirmation of the questionnaire’s good psychometric properties and validity, using for the first time data from
a European clinical population (UK; Fackrell et al., 2017). Under the amended protocol the change in TLQ will be tested as a secondary
efficacy endpoint.
In addition, we are limiting the confirmatory
testing of the primary efficacy endpoint to the overall study population and the subpopulation with otitis media related tinnitus.
Previously also the subpopulation of patients with severe-extreme tinnitus was planned to be included. Tinnitus etiology (otitis
media or traumatic) is a stratification factor for the TACTT3 trial, whereas tinnitus severity is not, which could have resulted
in imbalances in treatment allocations for the subpopulation with severe-extreme tinnitus and potentially impact the interpretation
of results. Under the amended protocol, type I error (false positive) control is provided across the two populations (i.e. overall
population and otitis media tinnitus subpopulation) by application of the Hochberg procedure. We expect to obtain all necessary
approvals for the protocol amendment from the relevant European health authorities and ethics committees during the first quarter
of 2018.
Nasdaq Listing Requirements
The quantitative listing standards of the
Nasdaq Capital Market require, among other things, that listed companies maintain a minimum closing bid price of $1.00 per share. Nasdaq
has informed us that if we do not regain compliance by March 26, 2018, the Nasdaq staff will provide written notice that our common
shares are subject to delisting. We are preparing to take corporate action to regain compliance with the minimum bid price requirement
in the event that our common shares do not or are not expected to trade above $1.00 per share for ten consecutive business days
prior to the end of the Nasdaq compliance period. Such corporate action may require shareholder approval, which may be subject
to a qualified quorum of two-thirds of the common shares present or represented at the applicable shareholders’ meeting.
In addition, on January 11, 2018, we received
a letter from Nasdaq indicating that we have been provided an initial period of 180 calendar days, or until July 10, 2018 to regain
compliance with Nasdaq’s market value of listed securities requirement. See “Risk Factors--
We have received
a delisting notice from Nasdaq. Our common shares may be involuntarily delisted from trading on The Nasdaq Capital Market if we
fail to regain compliance with the minimum closing bid price requirement of $1.00 per share and other continued listing requirements.
A delisting of our common shares is likely to reduce the liquidity of our common shares and may inhibit or preclude our ability
to raise additional financing.”
LPC Issuances
On October 10, 2017, we entered into a purchase
agreement (the “Commitment Purchase Agreement”) and a Registration Rights Agreement (the “Registration Rights
Agreement”) with Lincoln Park Capital Fund, LLC (“LPC”). Pursuant to the Commitment Purchase Agreement, LPC has
agreed to subscribe for up to $13,500,000 of our common shares over the 30-month term of the Commitment Purchase Agreement. Regular
purchases may be made from time to time under the Commitment Purchase Agreement subject to certain amount limitations. The purchase
price for regular purchases is equal to the lesser of (i) the lowest sale price of our common shares on the purchase date and (ii)
the average of the three (3) lowest closing sale prices of our common shares during the ten (10) business days prior to the purchase
date, as reported on the Nasdaq Capital Market. We also have the right, at our sole discretion, to require LPC to make additional
purchases, subject to certain amount limitations, at a purchase price equal to the lesser of (i) $1.50 per common share or (ii)
97% of the purchase price, provided that the closing price of the common shares is not below $0.70. Pursuant to the Registration
Rights Agreement, we have agreed to file registration statements with the SEC to register the resale of the common shares purchased
by LPC. As of January 24, 2018, we have issued an aggregate of 2,600,000 common shares to LPC pursuant to the Commitment Purchase
Agreement. Additionally, on October 16, 2017, we issued 1,744,186 of our common shares to LPC for an aggregate price of $1,500,000
pursuant to our effective shelf registration statement on Form F-3. In this prospectus, we refer to the aggregate of 4,344,186
common shares issued to LPC pursuant to the Commitment Purchase Agreement and our effective shelf registration statement on Form
F-3 as the “Recent LPC Issuances.”
Offering of Common Shares and Warrants
On January 26, 2018, we entered into the
Purchase Agreement with the selling shareholders providing for the issuance and sale by us of 12,499,999 of our common shares.
The common shares were offered pursuant to an effective shelf registration statement on Form F-3, which was initially filed with
the Securities and Exchange Commission on September 1, 2015 and declared effective on September 10, 2015 (File No. 333-206710).
We refer to such offering of common shares as the “January 2018 Registered Offering.”
In a concurrent private placement, we issued
to the selling shareholders warrants to purchase up to 7,499,999 of our common shares in the aggregate. The warrants became
exercisable immediately upon their issuance on January 30, 2018, at an exercise price of $0.50 per common share, and expire of
January 30, 2025. The common shares being offered by the selling shareholders hereby are the common shares issuable upon
exercise of the warrants.
Corporate Information
We are a stock corporation organized under
the laws of Switzerland. We began our current operations in 2003.
Our principal office is located at Bahnhofstrasse
21, 6300 Zug, Switzerland, telephone number +41 41 729 71 94. We maintain a website at www.aurismedical.com where general information
about us is available. Investors can obtain copies of our filings with the Securities and Exchange Commission, or SEC, from this
site free of charge, as well as from the SEC website at www.sec.gov. We are not incorporating the contents of our website into
this prospectus.
Implications of Being an “Emerging Growth Company”
and a Foreign Private Issuer
We qualify as an “emerging growth
company” as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take
advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions
include an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting
pursuant to the Sarbanes-Oxley Act of 2002.
We may take advantage of these provisions
for up to five years from our initial public offering in 2014 or such earlier time that we are no longer an emerging growth company.
We would cease to be an emerging growth company if we have more than $1.07 billion in annual revenue, have more than $700 million
in market value of our common shares held by non-affiliates or issue more than $1.0 billion of non-convertible debt over a three-year
period. We may choose to take advantage of some but not all of these reduced burdens.
We currently report under the Securities
Exchange Act of 1934, as amended, or the Exchange Act, as a non-U.S. company with foreign private issuer, or FPI, status. Even
after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange
Act we will continue to be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies,
including:
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the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security
registered under the Exchange Act;
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the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities
and liability for insiders who profit from trades made in a short period of time; and
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the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission, or SEC, of quarterly reports
on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence
of specified significant events.
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THE OFFERING
This summary highlights information
presented in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all the information
you should consider before investing in our common shares. You should carefully read this entire prospectus before investing in
our common shares including “Risk Factors,” our consolidated financial statements and the documents incorporated herein.
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Common Shares offered by the selling shareholders
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Up to 7,499,999 common shares issuable upon exercise of warrants issued pursuant to the Purchase Agreement (which warrants are exercisable at a price of $0.50 per share and expire on January 26, 2025).
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Common shares outstanding after this offering (assuming the
exercise of all warrants issued pursuant to the Purchase Agreement)
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68,673,889
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Nasdaq Capital Market symbol
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“EARS.”
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Use of proceeds
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We will not receive any of the proceeds from the sale of our common shares by the selling shareholders pursuant to this prospectus. We may receive up to approximately $3.7 million in aggregate gross proceeds from cash exercises of the warrants, based on the per share exercise price of the warrants. Any proceeds we receive from the exercise of the warrants will be used for working capital and general corporate purposes. See “Use of Proceeds.”
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Dividend policy
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We have never paid or declared any cash dividends on our shares, and we do not anticipate paying any cash dividends on our common shares in the foreseeable future. See “Dividend Policy.”
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Risk factors
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An investment in our common shares involves a high degree of risk. Please refer to “Risk Factors” in this prospectus and under “Item 3. Key Information—D. Risk factors” in our Annual Report on Form 20-F for the year ended December 31, 2016, incorporated by reference herein, and other information included or incorporated by reference in this prospectus for a discussion of factors you should carefully consider before investing in our common shares.
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The number of our common shares outstanding after this offering
is based on 61,173,889 common shares outstanding as of September 30, 2017, after giving effect to the Recent LPC Issuances, and
the January 2018 Registered Offering and excludes:
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6,500,000 of our common shares available for issuance pursuant to our conditional share capital for equity incentive plans
pursuant to our amended and restated articles of association, including 1,743,150 of our common shares issuable upon the exercise
of options outstanding as of September 30, 2017 at a weighted average exercise price of $2.11 per common share;
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5,305,815 common shares available for issuance for financing purposes pursuant to our amended and restated articles of association;
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156,726 common shares issuable upon the exercise of a warrant issued to Hercules Capital, Inc., or Hercules, at an exercise
price of $3.94 per common share; and
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7,945,000 common shares issuable upon exercise of warrants issued on February 21, 2017 in a public offering at an exercise
price of US$1.20 per common share.
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Risk Factors
Any investment in our common shares
involves a high degree of risk. You should carefully consider the risks described below and in “Item 3. Key Information—D.
Risk factors” in our Annual Report on Form 20-F for the year ended December 31, 2016, incorporated by reference herein and
all of the information included or incorporated by reference in this prospectus before deciding whether to purchase our common
shares. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties
not presently known to us or that we currently deem immaterial may also impair our business operations. If any of the events or
circumstances described in the following risk factors actually occur, our business, financial condition and results of operations
would suffer. In that event, the price of our common shares could decline, and you may lose all or part of your investment. The
risks discussed below also include forward-looking statements and our actual results may differ substantially from those discussed
in these forward-looking statements. See “Forward-Looking Statements.”
Risks Related to Our Common Shares
The price of our common shares may be
volatile and may fluctuate due to factors beyond our control.
The share price of publicly traded emerging
biopharmaceutical and drug discovery and development companies has been highly volatile and is likely to remain highly volatile
in the future. The market price of our common shares may fluctuate significantly due to a variety of factors, including:
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positive or negative results of testing and clinical trials by us, strategic partners, or competitors;
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delays in entering into strategic relationships with respect to development and/or commercialization of our product candidates
or entry into strategic relationships on terms that are not deemed to be favorable to us;
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technological innovations or commercial product introductions by us or competitors;
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changes in government regulations;
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developments concerning proprietary rights, including patents and litigation matters;
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public concern relating to the commercial value or safety of any of our product candidates;
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financing or other corporate transactions;
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publication of research reports or comments by securities or industry analysts;
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general market conditions in the pharmaceutical industry or in the economy as a whole; or
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other events and factors beyond our control.
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Additionally, these factors may affect
the liquidity of our common shares, which may hurt your ability to sell our common shares in the future. In addition, the stock
market in general has recently experienced extreme price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of individual companies. Broad market and industry factors may materially affect the market price
of companies’ stock, including ours, regardless of actual operating performance.
We have received a delisting notice from Nasdaq.
Our common shares may be involuntarily delisted from trading on The Nasdaq Capital Market if we fail to regain compliance with
the minimum closing bid price requirement of $1.00 per share and other continued listing requirements. A delisting of our common
shares is likely to reduce the liquidity of our common shares and may inhibit or preclude our ability to raise additional financing.
The quantitative listing standards of the
Nasdaq Capital Market require, among other things, that listed companies maintain a minimum closing bid price of $1.00 per share.
We failed to satisfy this threshold for 30 consecutive trading days and on March 30, 2017, we received a letter from Nasdaq indicating
that we have been provided an initial period of 180 calendar days, or until September 26, 2017, in which to regain compliance.
On September 27, 2017 we received an additional 180-day compliance period that will end on March 26, 2018. If we do
not regain compliance by March 26, 2018, the Nasdaq staff will
provide written notice that our common shares are subject to delisting.
We are preparing to take corporate action
to regain compliance with the minimum bid price requirement in the event that our common shares do not or are not expected to trade
above $1.00 per share for ten consecutive trading days prior to the end of the Nasdaq compliance period. Such corporate action
may require shareholder approval, which may be subject to a qualified quorum of two-thirds of the common shares present or represented
at the applicable shareholders’ meeting.
In addition to the minimum closing bid price
requirement, we are required to comply with certain other Nasdaq continued listing requirements, including a series of financial
tests relating to shareholder equity, market value of listed securities and number of market makers and shareholders. If we fail
to maintain compliance with any of those requirements, our common shares could be delisted from Nasdaq’s Capital Market.
On January 11, 2018, we received a letter from Nasdaq indicating that we have been provided an initial period of 180 calendar days,
or until July 10, 2018 to regain compliance with Nasdaq’s market value of listed securities requirement.
If, for any reason, Nasdaq should delist
our common shares from trading on its exchange and we are unable to obtain listing on another national securities exchange or take
action to restore our compliance with the Nasdaq continued listing requirements, a reduction in some or all of the following may
occur, each of which could have a material adverse effect on our shareholders:
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the liquidity of our common shares;
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the market price of our common shares;
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our ability to obtain financing for the continuation of our operations;
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the number of institutional and general investors that will consider investing in our common shares;
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the number of investors in general that will consider investing in our common shares;
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the number of market makers in our common shares;
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the availability of information concerning the trading prices and volume of our common shares; and
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the number of broker-dealers willing to execute trades in shares of our common shares.
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In the event that our common shares are
delisted from Nasdaq, U.S. broker-dealers may be discouraged from effecting transactions in shares of our common shares because
they may be considered penny stocks and thus be subject to the penny stock rules.
The SEC has adopted a number of rules to
regulate “penny stock” that restrict transactions involving stock which is deemed to be penny stock. Such rules include
Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange Act of 1934, as amended
(the “Exchange Act”). These rules may have the effect of reducing the liquidity of penny stocks. “Penny stocks”
generally are equity securities with a price of less than $5.00 per share (other than securities registered on certain national
securities exchanges or quoted on the Nasdaq Stock Market if current price and volume information with respect to transactions
in such securities is provided by the exchange or system). Our common shares have in the past constituted, and may again in the
future constitute, “penny stock” within the meaning of the rules. The additional sales practice and disclosure requirements
imposed upon U.S. broker-dealers may discourage such broker-dealers from effecting transactions in shares of our common shares,
which could severely limit the market liquidity of such common shares and impede their sale in the secondary market.
A U.S. broker-dealer selling penny stock
to anyone other than an established customer or “accredited investor” (generally, an individual with net worth in excess
of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse) must make a special suitability
determination for the purchaser and must receive the purchaser’s written consent to the transaction prior to sale, unless
the broker-dealer or the transaction is otherwise exempt. In addition, the “penny stock” regulations require the U.S.
broker-dealer to deliver, prior to any transaction involving a “penny stock”, a disclosure schedule prepared in accordance
with SEC standards relating to the “penny stock” market, unless the broker-dealer or the transaction is otherwise exempt.
A U.S. broker-dealer is also required to disclose commissions payable to the U.S. broker-dealer and the registered representative
and current quotations for the securities. Finally, a U.S. broker-dealer is required to submit monthly statements disclosing recent
price information with respect to the “penny stock” held in a customer’s account and information with respect
to the limited market in “penny stocks”.
Stockholders should be aware that, according
to the SEC, the market for “penny stocks” has suffered in recent years from patterns of fraud and abuse. Such patterns
include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
(ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii)
“boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales
persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping
of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, resulting in investor
losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect
to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive
within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.
Certain principal shareholders and members
of our executive team and board of directors own a majority of our common shares and as a result will be able to exercise significant
control over us, and your interests may conflict with the interests of such shareholders.
Certain principal shareholders and their
affiliated entities as well as members of our executive team and board of directors own approximately 40% of our common shares.
Depending on the level of attendance at our general meetings of shareholders, these shareholders may be in a position to determine
the outcome of decisions taken at any such general meeting. Any shareholder or group of shareholders controlling more than 50%
of the shares represented at our general meetings of shareholders may control any shareholder resolution requiring an absolute
majority of the shares represented, including the election of members to the board of directors of our company, certain decisions
relating to our capital structure, the approval of certain significant corporate transactions and certain amendments to our articles
of association. To the extent that the interests of these shareholders may differ from the interests of the Company’s other
shareholders, the latter may be disadvantaged by any action that these shareholders may seek to pursue. Among other consequences,
this concentration of ownership may have the effect of delaying or preventing a change in control and might therefore negatively
affect the market price of our common shares.
Future sales, or the possibility of future
sales, of a substantial number of our common shares could adversely affect the price of our common shares.
Future sales of a substantial number of
our common shares, or the perception that such sales will occur, could cause a decline in the market price of our common shares.
Approximately 40% of our common shares outstanding are held by affiliates immediately prior to this offering. If these shareholders
sell substantial amounts of common shares in the public market, or the market perceives that such sales may occur, the market price
of our common shares and our ability to raise capital through an issue of equity securities could be adversely affected. We have
also entered into a registration rights agreement pursuant to which we have agreed under certain circumstances to file a registration
statement to register the resale of common shares held by certain of our shareholders, as well as to cooperate in certain public
offerings of such common shares. We have also filed registration statements to register all common shares and other equity securities
that we have issued under our prior equity incentive plans or may issue under our new omnibus equity compensation plan. These common
shares may be freely sold in the public market upon issuance, subject to certain limitations applicable to affiliates. If a large
number of our common shares are sold in the public market, the sales could reduce the trading price of our common shares and impede
our ability to raise future capital.
We do not expect to pay dividends in
the foreseeable future.
We have not paid any dividends since our
incorporation. Even if future operations lead to significant levels of distributable profits, we currently intend that any earnings
will be reinvested in our business and that dividends will not be paid until we have an established revenue stream to support continuing
dividends. The proposal to pay future dividends to shareholders will in addition effectively be at the discretion of our board
of directors and shareholders after taking into account various factors including our business prospects, cash requirements, financial
performance and new product development. In addition, payment of future dividends is subject to certain limitation pursuant to
Swiss law or by our articles of association. Accordingly, investors cannot rely on dividend income from our common shares and any
returns on an investment in our common shares will likely depend entirely upon any future appreciation in the price of our common
shares.
We are a holding company with no material
direct operations.
We are a holding company with no material
direct operations. As a result, we would be dependent on dividends, other payments or loans from our subsidiaries in order to pay
a dividend. Our subsidiaries are subject to legal requirements of their respective jurisdictions of organization that may restrict
their paying dividends or other payments, or making loans, to us.
We are a Swiss corporation. The rights
of our shareholders may be different from the rights of shareholders in companies governed by the laws of U.S. jurisdictions.
We are a Swiss corporation. Our corporate
affairs are governed by our articles of association and by the laws governing companies incorporated in Switzerland. The rights
of our shareholders and the responsibilities of members of our board of directors may be different from the rights and obligations
of shareholders and directors of companies governed by the laws of U.S. jurisdictions. In the performance of its duties, our board
of directors is required by Swiss law to consider the interests of our company, our shareholders, our employees and other stakeholders,
in all cases with due observation of the principles of reasonableness and fairness. It is possible that some of these parties will
have interests that are different from, or in addition to, your interests as a shareholder. Swiss corporate law limits the ability
of our shareholders to challenge resolutions made or other actions taken by our board of directors in court. Our shareholders generally
are not permitted to file a suit to reverse a decision or an action taken by our board of directors but are instead only permitted
to seek damages for breaches of fiduciary duty. As a matter of Swiss law, shareholder claims against a member of our board of directors
for breach of fiduciary duty would have to be brought in Zug, Switzerland, or where the relevant member of our board of directors
is domiciled. In addition, under Swiss law, any claims by our shareholders against us must be brought exclusively in Zug, Switzerland.
Our common shares are issued under the
laws of Switzerland, which may not protect investors in a similar fashion afforded by incorporation in a U.S. state.
We are organized under the laws of Switzerland.
There can be no assurance that Swiss law will not change in the future or that it will serve to protect investors in a similar
fashion afforded under corporate law principles in the U.S., which could adversely affect the rights of investors.
U.S. shareholders may not be able to
obtain judgments or enforce civil liabilities against us or our executive officers or members of our board of directors.
We are organized under the laws of Switzerland
and our jurisdiction of incorporation is Zug, Switzerland. Moreover, a number of our directors and executive officers and a number
of directors of each of our subsidiaries are not residents of the United States, and all or a substantial portion of the assets
of such persons are located outside the United States. As a result, it may not be possible for investors to effect service of process
within the United States upon us or upon such persons or to enforce against them judgments obtained in U.S. courts, including judgments
in actions predicated upon the civil liability provisions of the federal securities laws of the United States. We have been advised
by our Swiss counsel that there is doubt as to the enforceability in Switzerland of original actions, or in actions for enforcement
of judgments of U.S. courts, of civil liabilities to the extent predicated upon the federal and state securities laws of the United
States. Original actions against persons in Switzerland based solely upon the U.S. federal or state securities laws are governed,
among other things, by the principles set forth in the Swiss Federal Act on International Private Law. This statute provides that
the application of provisions of non-Swiss law by the courts in Switzerland shall be precluded if the result is incompatible with
Swiss public policy. Also, mandatory provisions of Swiss law may be applicable regardless of any other law that would otherwise
apply.
Switzerland and the United States do not
have a treaty providing for reciprocal recognition and enforcement of judgments in civil and commercial matters. The recognition
and enforcement of a judgment of the courts of the United States in Switzerland is governed by the principles set forth in the
Swiss Federal Act on Private International Law. This statute provides in principle that a judgment rendered by a non-Swiss court
may be enforced in Switzerland only if:
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the non-Swiss court had jurisdiction pursuant to the Swiss Federal Act on Private International Law;
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the judgment of such non-Swiss court has become final and non-appealable;
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the judgment does not contravene Swiss public policy;
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the court procedures and the service of documents leading to the judgment were in accordance with the due process of law; and
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no proceeding involving the same position and the same subject matter was first brought in Switzerland, or adjudicated in Switzerland,
or was earlier adjudicated in a third state and this decision is recognizable in Switzerland.
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Our status as a Swiss corporation means
that our shareholders enjoy certain rights that may limit our flexibility to raise capital, issue dividends and otherwise manage
ongoing capital needs.
Swiss law reserves for approval by shareholders
certain corporate actions over which a board of directors would have authority in some other jurisdictions. For example, the payment
of dividends and cancellation of treasury shares must be approved by shareholders. Swiss law also requires that our shareholders
themselves resolve to, or authorize our board of directors to, increase our share capital. While our shareholders may authorize
share capital that can be issued by our board of directors without additional shareholder approval, Swiss law limits this authorization
to 50% of the issued share capital at the time of the shareholders’ authorization. The authorization, furthermore, has a
limited duration of up to two years and must be renewed by the shareholders from time to time thereafter in order to be available
for raising capital. Additionally, Swiss law grants pre-emptive rights to existing shareholders to subscribe for new issuances
of shares. In certain circumstances, including those explicitly described in our articles of association, our board of directors
may withdraw such pre-emptive rights. Shareholders who believe pre-emptive rights were improperly withdrawn may sue us for damages
or may attempt to block the registration of the issuance of new shares in the commercial register which may delay or exclude the
share issuance. Swiss law also does not provide as much flexibility in the various rights and regulations that can attach to different
categories of shares as do the laws of some other jurisdictions. These Swiss law requirements relating to our capital management
may limit our flexibility, and situations may arise where greater flexibility would have provided benefits to our shareholders.
We are a foreign private issuer and,
as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that, to some extent,
are more lenient and less frequent than those of a U.S. domestic public company.
We report under the Securities Exchange
Act of 1934, as amended, or the Exchange Act, as a non-U.S. company with foreign private issuer status. Because we qualify as a
foreign private issuer under the Exchange Act and although we are subject to Swiss laws and regulations with regard to such matters
and intend to furnish quarterly financial information to the SEC, we are exempt from certain provisions of the Exchange Act that
are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of
proxies, consents or authorizations in respect of a security registered under the Exchange Act; (ii) the sections of the Exchange
Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit
from trades made in a short period of time; and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly
reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence
of specified significant events. In addition, foreign private issuers are not required to file their annual report on Form 20-F
until four months after the end of each financial year, while U.S. domestic issuers that are accelerated filers are required to
file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt
from the Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As
a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private
issuers.
As a foreign private issuer and as permitted
by the listing requirements of Nasdaq, we follow certain home country governance practices rather than the corporate governance
requirements of Nasdaq.
We are a foreign private issuer. As a result,
in accordance with Nasdaq Listing Rule 5615(a)(3), we comply with home country governance requirements and certain exemptions thereunder
rather than complying with certain of the corporate governance requirements of Nasdaq.
Swiss law does not require that a majority
of our board of directors consists of independent directors. Our board of directors therefore may include fewer independent directors
than would be required if we were subject to Nasdaq Listing Rule 5605(b)(1). In addition, we are not subject to Nasdaq Listing
Rule 5605(b)(2), which requires that independent directors regularly have scheduled meetings at which only independent directors
are present.
Although Swiss law also requires that we
adopt a compensation committee, we follow home country requirements with respect to such committee. As a result, our practice varies
from the requirements of Nasdaq Listing Rule 5605(d), which sets forth certain requirements as to the responsibilities, composition
and independence of compensation committees. In addition, in accordance with Swiss law, we have opted not to implement a standalone
nominating committee. To this extent, our practice varies from the independent director oversight of director nominations requirements
of Nasdaq Listing Rule 5605(e).
Furthermore, in accordance with Swiss law
and generally accepted business practices, our articles of association do not provide quorum requirements generally applicable
to general meetings of shareholders. Our practice thus varies from the requirement of Nasdaq Listing Rule 5620(c), which requires
an issuer to provide in its bylaws for a generally applicable quorum, and that such quorum may not be less than one-third of the
outstanding voting stock. Our articles of association provide for an independent proxy holder elected by our shareholders, who
may represent our shareholders at a general meeting of shareholders, and we must provide shareholders with an agenda and other
relevant documents for the general meeting of shareholders. However, Swiss law does not have a regulatory regime for the solicitation
of proxies and company solicitation of proxies is prohibited for public companies in Switzerland, thus our practice varies from
the requirement of Nasdaq Listing Rule 5620(b), which sets forth certain requirements regarding the solicitation of proxies. In
addition, we have opted out of shareholder approval requirements for the issuance of securities in connection with certain events
such as the acquisition of stock or assets of another company, the establishment of or amendments to equity-based compensation
plans for employees, a change of control of us and certain private placements. To this extent, our practice varies from the requirements
of Nasdaq Listing Rule 5635, which generally requires an issuer to obtain shareholder approval for the issuance of securities in
connection with such events.
As a result of the above, you may not have
the same protections afforded to shareholders of companies that are not foreign private issuers.
We may lose our foreign private issuer
status, which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant
legal, accounting and other expenses.
We are a foreign private issuer and therefore
we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable
to U.S. domestic issuers. In order to maintain our current status as a foreign private issuer, either (a) a majority of our common
shares must be either directly or indirectly owned of record by non-residents of the United States or (b)(i) a majority of our
executive officers or directors may not be United States citizens or residents, (ii) more than 50 percent of our assets cannot
be located in the United States and (iii) our business must be administered principally outside the United States. These criteria
are tested on the last business day of our second fiscal quarter, each year. If we lost this status, we would be required to comply
with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive
than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices
in accordance with various SEC and stock exchange rules. The regulatory and compliance costs to us under U.S. securities laws if
we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than
the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would
increase our legal and financial compliance costs and would make some activities highly time-consuming and costly. We also expect
that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult
and expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur
substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract
and retain qualified members of our board of directors.
We are an “emerging growth company,”
and we cannot be certain if the reduced reporting requirements applicable to “emerging growth companies” will make
our common shares less attractive to investors.
We are an “emerging growth company,”
as defined in the JOBS Act. For as long as we continue to be an “emerging growth company,” we may take advantage of
exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth
companies,” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act of 2002, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval
of any golden parachute payments not previously approved. We could be an “emerging growth company” until 2019, although
circumstances could cause us to lose that status earlier, including if the market value of our common shares held by non-affiliates
exceeds $700 million as of any June 30 (the end of our second fiscal quarter) before that time, in which case we would no longer
be an “emerging growth company” as of the following December 31 (our fiscal year end). We cannot predict if investors
will find our common shares less attractive because we may rely on these exemptions. If some investors find our common shares less
attractive as a result, there may be a less active trading market for our common shares and the price of our common shares may
be more volatile.
We believe that we were a “passive
foreign investment company,” or PFIC, for U.S. federal income tax purposes for our 2017 taxable year, and we expect to be
a PFIC for our current year and for the foreseeable future.
We believe that we were a “passive
foreign investment company,” or PFIC, for U.S. federal income tax purposes for our 2017 taxable year, and we expect to be
a PFIC for our current year and for the foreseeable future. In addition, we may, directly or indirectly, hold equity interests
in other PFICs, or Lower-tier PFICs. Under the Internal Revenue Code of 1986, as amended, or the Code, we will be a PFIC for any
taxable year in which (i) 75% or more of our gross income consists of passive income or (ii) 50% or more of the average quarterly
value of our assets consists of assets that produce, or are held for the production of, passive income. For purposes of the above
calculations, a non-U.S. corporation that directly or indirectly owns at least 25% by value of the shares of another corporation
is treated as if it held its proportionate share of the assets of the other corporation and received directly its proportionate
share of the income of the other corporation. Passive income generally includes dividends, interest, rents, royalties and capital
gains.
If we are a PFIC for any taxable year during
which a U.S. investor holds our shares, the U.S. investor may be subject to adverse tax consequences, including (i) the treatment
of all or a portion of any gain on disposition as ordinary income, (ii) the application of a deferred interest charge on such gain
and the receipt of certain dividends and (iii) compliance with certain reporting requirements.
For further discussion of the adverse U.S.
federal income tax consequences of our classification as a PFIC, see “Taxation—Material U.S. Federal Income Tax Considerations
for U.S. Holders.”
If we fail to maintain an effective system
of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As
a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the
trading price of our common shares.
Effective internal controls over financial
reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures,
are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their
implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection
with Section 404 of the Sarbanes-Oxley Act of 2002, or any subsequent testing by our independent registered public accounting firm,
may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may
require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement.
Inferior internal controls could also subject us to regulatory scrutiny and sanctions, impair our ability to raise revenue and
cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price
of our common shares.
We will be required to disclose changes
made in our internal controls and procedures and our management will be required to assess the effectiveness of these controls
annually. However, for as long as we are an “emerging growth company” under the JOBS Act, our independent registered
public accounting firm will not be required to
attest to the effectiveness of our internal
controls over financial reporting pursuant to Section 404. We could be an “emerging growth company” until 2019. An
independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment
might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us
to incur the expense of remediation.
If securities or industry analysts do
not publish research, or publish inaccurate or unfavorable research, about our business, the price of our common shares and our
trading volume could decline.
The trading market for our common shares
depends in part on the research and reports that securities or industry analysts publish about us or our business. We do not have
any control over these analysts. We cannot assure you that analysts will cover us or provide favorable coverage. If one or more
of the analysts who cover us downgrade our common shares or publish inaccurate or unfavorable research about our business, the
price of our common shares would likely decline. If one or more of these analysts cease coverage of our company or fail to publish
reports on us regularly, demand for our common shares could decrease, which might cause the price of our common shares and trading
volume to decline.
Presentation
of Financial and Other Information
We report under IFRS in Swiss Francs. None
of the consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United
States.
The terms “dollar,” “USD”
or “$” refer to U.S. dollars, the term, “Swiss Francs” or “CHF” refers to the legal currency
of Switzerland and the terms “€” or “euro” are to the currency introduced at the start of the third
stage of European economic and monetary union pursuant to the treaty establishing the European Community, as amended. Unless otherwise
indicated, all references to currency amounts in this prospectus are in Swiss Francs.
We have made rounding adjustments to some
of the figures included in this prospectus. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic
aggregation of the figures that preceded them.
Market and
Industry Data
This prospectus and the documents incorporated
by reference herein contain industry, market and competitive position data that are based on industry publications and studies
conducted by third parties as well as our own internal estimates and research. These industry publications and third party studies
generally state that the information that they contain has been obtained from sources believed to be reliable, although they do
not guarantee the accuracy or completeness of such information.
Cautionary
Statement Regarding Forward-Looking Statements
This prospectus contains statements that
constitute forward-looking statements, including statements concerning our industry, our operations, our anticipated financial
performance and financial condition, and our business plans and growth strategy and product development efforts. These statements
constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended , and Section
21E of the Exchange Act. The words “may,” “might,” “will,” “should,” “estimate,”
“project,” “plan,” “anticipate,” “expect,” “intend,” “outlook,”
“believe” and other similar expressions are intended to identify forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward-looking statements
are based on estimates and assumptions by our management that, although we believe to be reasonable, are inherently uncertain and
subject to a number of risks and uncertainties.
Forward-looking statements appear in a
number of places in this prospectus and include, but are not limited to, statements regarding our intent, belief or current expectations.
Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to
our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed
or implied in the forward-looking statements due to various factors, including, but not limited to:
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our operation as a development-stage company with limited operating history and a history of operating losses;
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our need for substantial additional funding to continue the development of our product candidates before we can expect to become
profitable from sales of our products;
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our dependence on the success of Keyzilen® (AM-101), AM-111 and AM-125, which are still in clinical development and may
eventually prove to be unsuccessful, including the likelihood that the TACTT3 clinical trial with Keyzilen® may not meet its
endpoints, or that the post-hoc analysis in the subpopulation of profound acute hearing loss patients in the HEALOS trial may not
be considered acceptable for regulatory filing purposes by relevant health authorities, which may impair our ability to raise additional
funding to continue the development of our product candidates;
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the chance that we may become exposed to costly and damaging liability claims resulting from the testing of our product candidates
in the clinic or in the commercial stage;
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the chance our clinical trials may not be completed on schedule, or at all, as a result of factors such as delayed enrollment
or the identification of adverse effects;
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uncertainty surrounding whether any of our product candidates will receive regulatory approval, which is necessary before they
can be commercialized;
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if our product candidates obtain regulatory approval, our being subject to expensive, ongoing obligations and continued regulatory
overview;
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enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval and commercialization;
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the chance that we do not obtain orphan drug exclusivity for AM-111, which would allow our competitors to sell products that
treat the same conditions;
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dependence on governmental authorities and health insurers establishing adequate reimbursement levels and pricing policies;
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our products may not gain market acceptance, in which case we may not be able to generate product revenues;
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our reliance on our current strategic relationships with INSERM or Xigen and the potential success or failure of strategic
relationships, joint ventures or mergers and acquisitions transactions;
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our reliance on third parties to conduct our nonclinical and clinical trials and on third-party, single-source suppliers to
supply or produce our product candidates;
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our ability to comply with the requirements under our term loan facility with Hercules, including repayment of amounts outstanding
when due;
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our ability to meet the continuing listing requirements of Nasdaq and remain listed on the Nasdaq Capital Market; and
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other risk factors set forth in our most recent Annual Report on Form 20-F.
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Our actual results or performance could
differ materially from those expressed in, or implied by, any forward-looking statements relating to those matters. Accordingly,
no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if
any of them do so, what impact they will have on our results of operations, cash flows or financial condition. Except as required
by law, we are under no obligation, and expressly disclaim any obligation, to update, alter or otherwise revise any forward-looking
statement, whether written or oral, that may be made from time to time, whether as a result of new information, future events or
otherwise.
Market For
Our Common Shares
Our common shares are quoted on the NASDAQ
Capital Market under the symbol “EARS.” The following table sets forth on a per share basis the low and high closing
sale prices of our common shares as reported by the NASDAQ Capital Market for the periods presented.
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High
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Low
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Year Ended:
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December 31, 2015
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6.38
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3.02
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December 31, 2016
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7.79
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0.89
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December 31, 2017
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1.27
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0.39
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Year Ended December 31, 2016:
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First Quarter
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7.79
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3.36
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Second Quarter
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4.33
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3.13
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Third Quarter
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5.35
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1.58
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Fourth Quarter
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1.75
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0.90
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Year Ended December 31, 2017:
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First Quarter
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1.27
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0.67
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Second Quarter
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0.92
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0.61
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Third Quarter
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0.93
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0.64
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Fourth Quarter
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0.95
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0.39
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Month Ended:
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August 31, 2017
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0.81
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0.64
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September 30, 2017
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0.82
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0.67
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October 31, 2017
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0.95
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0.76
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November 30, 2017
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0.93
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0.42
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December 31, 2017
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0.62
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0.39
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January 31, 2018
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0.62
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0.37
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February 28, 2018 (through February 7, 2018)
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0.37
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0.30
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As of February 7, 2018, we had 61,173,889
common shares issued and outstanding held by 8 registered holders, one of which is Cede & Co., a nominee for The Depository
Trust Company (“DTC”). All of the common shares held by brokerage firms, banks and other financial institutions as
nominees for beneficial owners are deposited into participant accounts at DTC and therefore are considered to be held of record
by Cede & Co. as one shareholder.
Use of Proceeds
We will not receive any of the proceeds
from the sale of securities by the selling shareholders pursuant to this prospectus. We may receive up to approximately $3.7 million
in aggregate gross proceeds from cash exercises of the warrants, based on the per share exercise price of the warrants. Any proceeds
we receive from the exercise of the warrants will be used for working capital and general corporate purposes.
Selling
Shareholders
The common shares being
offered by the selling shareholders are those issuable to the selling shareholders, upon exercise of the warrants. For additional
information regarding the issuances of those warrants, see “Summary—Offering of Common Shares and Warrants” above.
We are registering the common shares in order to permit the selling shareholders to offer the shares for resale from time to time.
Except for the ownership of the warrants, the selling shareholders have not had any material relationship with us within the past
three years.
The table below lists
the selling shareholders and other information regarding the beneficial ownership of the common by each of the selling shareholders.
The second column lists the number of common shares beneficially owned by each selling shareholder as of February 7, 2018, assuming
exercise of the warrants held by the selling shareholders on that date, without regard to any limitations on exercises.
The third column lists
the common shares being offered by this prospectus by the selling shareholders.
In accordance with
the terms of the Purchase Agreement, this prospectus generally covers the resale of the maximum number of common shares issuable
upon exercise of the warrants, determined as if the outstanding warrants were exercised in full as of the trading day immediately
preceding the date this registration statement was initially filed with the SEC, each as of the trading day immediately preceding
the applicable date of determination and all subject to adjustment as provided in the registration right agreement, without regard
to any limitations on the exercise of the warrants. The fourth and fifth columns assume the sale of all of the common shares offered
by the selling shareholders pursuant to this prospectus but no other common shares owned by the selling shareholders prior to this
offering.
The percentage of common
shares beneficially owned after this offering is based on 68,673,889 common shares that will be issued and outstanding upon the
completion of this offering (assuming the exercise of all warrants issued pursuant to the Purchase Agreement).
Under the terms of
the warrants, a selling shareholder may not exercise the warrants to the extent such exercise would cause such selling shareholder,
together with its affiliates and attribution parties, to beneficially own a number of common shares which would exceed 4.99% of
our then outstanding common shares following such exercise, excluding for purposes of such determination common shares issuable
upon exercise of the warrants which have not been exercised. The number of shares in the second column does not reflect this limitation.
The selling shareholders may sell all, some or none of their shares in this offering. See "Plan of Distribution.
”
|
Selling
Shareholder
|
Shares
Beneficially Owned Before this Offering
|
Maximum
Number of Common Shares to be Sold Pursuant to this Prospectus(1)
|
Number
of Common Shares Beneficially Owned After this Offering(2)
|
Percentage
of Common Shares Beneficially Owned After this Offering(2)
|
|
Anson Investments Master Fund LP(3)
|
3,339,499
|
1,500,000
|
1,839,499
|
2.68%
|
|
Empery Asset Master, LTD(4)
|
2,109,624
|
684,129
|
1,425,495
|
2.08%
|
|
Empery Tax Efficient, LP(5)
|
887,447
|
268,505
|
618,942
|
0.90%
|
|
Empery Tax Efficient II, LP(6)
|
1,747,669
|
547,366
|
1,200,303
|
1.75%
|
|
Iroquois Capital Investment Group LLC(7)
|
1,129,283
|
545,454
|
583,829
|
0.85%
|
|
Iroquois Master Fund Ltd(8)
|
1,288,303
|
954,545
|
333,758
|
0.49%
|
|
Lincoln Park Capital Fund, LLC(9)
|
3,607,630
|
1,500,000
|
2,107,630
|
3.07%
|
|
Sabby Volatility Warrant Master Fund, Ltd.(10)
|
3,997,399
|
1,500,000
|
2,497,399
|
3.64%
|
(1) The
actual number of common shares offered hereby and included in the registration statement of which this prospectus forms a part
includes, in accordance with Rule 416 under the Securities Act, such indeterminate number of additional common shares as may become
issuable in connection with any proportionate adjustment for any stock splits, stock combinations, stock dividends, recapitalizations
or similar events with respect to the common shares.
(2) Assumed
the sale of all of the common shares offered by the selling shareholders pursuant to this prospectus but no other common shares
owned by the selling shareholders prior to this offering.
(3) Anson
Advisors Inc and Anson Funds Management LP, the Co-Investment Advisers of Anson Investments Master Fund LP (“Anson”),
hold voting and dispositive power over the common shares held by Anson. Bruce Winson is the managing member of Anson Management
GP LLC, which is the general partner of Anson Funds Management LP. Moez Kassam and Adam Spears are directors of Anson Advisors
Inc. Mr. Winson, Mr. Kassam and Mr. Spears each disclaim beneficial ownership of these common shares except to the extent of their
pecuniary interest therein. The principal business address of Anson is 190 Elgin Ave; George Town, Grand Cayman.
(4) Empery
Asset Management LP, the authorized agent of Empery Asset Master Ltd ("EAM"), has discretionary authority to vote and
dispose of the shares held by EAM and may be deemed to be the beneficial owner of these shares. Martin Hoe and Ryan Lane, in their
capacity as investment managers of Empery Asset Management LP, may also be deemed to have investment discretion and voting power
over the shares held by EAM. EAM, Mr. Hoe and Mr. Lane each disclaim any beneficial ownership of these shares. The address of Empery
Asset Master, LTD is c/o Empery Asset Management, LP, 1 Rockefeller Plaza, Suite 1205, New York, New York 10020.
(5) Empery
Asset Management LP, the authorized agent of Empery Tax Efficient, LP ("ETE"), has discretionary authority to vote and
dispose of the shares held by ETE and may be deemed to be the beneficial owner of these shares. Martin Hoe and Ryan Lane, in their
capacity as investment managers of Empery Asset Management LP, may also be deemed to have investment discretion and voting power
over the shares held by ETE. ETE, Mr. Hoe and Mr. Lane each disclaim any beneficial ownership of these shares. The address of Empery
Tax Efficient, LP is c/o Empery Asset Management, LP, 1 Rockefeller Plaza, Suite 1205, New York, New York 10020.
(6) Empery
Asset Management LP, the authorized agent of Empery Tax Efficient II, LP ("ETE II"), has discretionary authority to vote
and dispose of the shares held by ETE II and may be deemed to be the beneficial owner of these shares. Martin Hoe and Ryan Lane,
in their capacity as investment managers of Empery Asset Management LP, may also be deemed to have investment discretion and voting
power over the shares held by ETE II. ETE II, Mr. Hoe and Mr. Lane each disclaim any beneficial ownership of these shares. The
address of Empery Tax Efficient II, LP is c/o Empery Asset Management, LP, 1 Rockefeller Plaza, Suite 1205, New York, New York
10020.
(7) Mr.
Richard Abbe is the managing member of Iroquois Capital Investment Group LLC. Mr. Abbe has voting control and investment discretion
over securities held by Iroquois Capital Investment Group LLC. As such, Mr. Abbe may be deemed to be the beneficial owner (as determined
under Section 13(d) of the Securities Exchange Act of 1934, as amended) of the securities held by Iroquois Capital Investment Group
LLC. The address of Iroquois Capital Investment Group LLC is 205 E. 42
nd
Street, 16
th
Floor, New York, New
York 10017.
(8) Iroquois
Capital Management L.L.C. (“Iroquois Capital”) is the investment manager of Iroquois Master Fund, Ltd (“IMF”).
Consequently, Iroquois Capital has voting control and investment discretion over securities held by IMF. As President of Iroquois
Capital, Richard Abbe makes voting and investment decisions on behalf of Iroquois Capital in its capacity as investment manager
to IMF. As a result of the foregoing, Mr. Abbe may be deemed to have beneficial ownership (as determined under Section 13(d) of
the Securities Exchange Act of 1934, as amended) of the securities held by IMF. The address of Iroquois Master Fund Ltd is 205
E. 42
nd
Street, 16
th
Floor, New York, New York 10017.
(9) Joshua
Scheinfeld and Jonathan Cope, the principals of Lincoln Park are deemed to be beneficial owners of all the shares of common stock
owned by Lincoln Park. Messrs. Scheinfeld and Cope have shared voting and disposition power over the shares being offered. The
address of Lincoln Park Capital Fund, LLC is 440 N. Wells Street, Suite 410, Chicago, Illinois 60654.
(10) The
address of Sabby Volatility Warrant Master Fund, Ltd. is c/o Ogier Fiduciary Services (Cayman) Limited, 89 Nexus Way, Camana Bay,
Grand Cayman KY1-9007, Cayman Islands. This stockholder has indicated that Hal Mintz has voting and investment power over the shares
held by it. This stockholder has indicated that Sabby Management, LLC serves as its investment manager, that Hal Mintz is the manager
of Sabby Management, LLC and that each of Sabby Management, LLC and Hal Mintz disclaims beneficial ownership over these shares
except to the extent of any pecuniary interest therein.
Dividend
Policy
We have never paid a dividend, and we do
not anticipate paying dividends in the foreseeable future. We intend to retain all available funds and any future earnings to fund
the development and expansion of our business. As a result, investors in our common shares will benefit in the foreseeable future
only if our common shares appreciate in value.
Under Swiss law, any dividend must be proposed
by our board of directors and approved by a shareholders’ meeting. In addition, our auditors must confirm that the dividend
proposal of our board of directors conforms to Swiss statutory law and our articles of association. A Swiss corporation may pay
dividends only if it has sufficient distributable profits brought forward from the previous business years (“
Gewinnvortrag
”)
or if it has distributable reserves (“
frei verfügbare Reserven
”), each as evidenced by its audited standalone
statutory balance sheet prepared pursuant to Swiss law and after allocations to reserves required by Swiss law and its articles
of association have been deducted. Distributable reserves are generally booked either as “free reserves” (“
freie
Reserven
”) or as “reserve from capital contributions” (“
Reserven aus Kapitaleinlagen
”).
Distributions out of issued share capital, which is the aggregate nominal value of a corporation’s issued shares, may be
made only by way of a share capital reduction. See “Description of Share Capital and Articles of Association.”
We are a holding company with no material
direct operations. As a result, we would be dependent on dividends, other payments or loans from our subsidiaries in order to pay
a dividend. Our subsidiaries are subject to legal requirements of their respective jurisdictions of organization that may restrict
their paying dividends or other payments, or making loans, to us.
Capitalization
The table below sets forth our cash and
cash equivalents and our total capitalization (defined as total debt and shareholders’ equity) as of September 30, 2017:
|
|
·
|
on a pro forma basis to give effect to the Recent LPC Issuances and the January 2018 Registered Offering;and the
concurrent private placement of warrants to purchase up to 7,499,999 of our common shares;and
|
|
|
·
|
on a pro forma as adjusted basis to reflect the pro forma adjustments discussed above and to give effect to our issuance of
the 7,499,999 common shares offered for resale hereby upon exercise by the selling shareholders of the warrants at an exercise
price of $0.50 per common share.
|
Investors should read this table in conjunction
with our audited consolidated financial statements and related notes as of and for the year ended December 31, 2016 and our unaudited
consolidated interim financial statements as of and for the nine months ended September 30, 2017 and management’s discussion
and analysis thereon, each as incorporated by reference into this prospectus supplement.
U.S. dollar amounts have been translated
into Swiss Francs at a rate of CHF 0.9688 to USD 1.00, the official exchange rate quoted as of September 29, 2017 by the U.S. Federal
Reserve Bank (as no exchange rate is quoted for September 30, 2017). Such Swiss Francs amounts are not necessarily indicative of
the amounts of Swiss Francs that could actually have been purchased upon exchange of U.S. dollars on September 30, 2017 and have
been provided solely for the convenience of the reader.
|
|
|
September 30, 2017
|
|
|
|
Actual
|
|
Pro Forma
|
|
Pro Forma As Adjusted
|
|
|
|
(in thousands of CHF except share and per share data)
|
|
Cash and cash equivalents(1)
|
|
|
20,198
|
|
|
|
27,407
|
|
|
|
31,023
|
|
|
Total debt(2)
|
|
|
11,033
|
|
|
|
11,033
|
|
|
|
11,033
|
|
|
Derivative Financial Instruments(3)
|
|
|
3,503
|
|
|
|
4,964
|
|
|
|
3,503
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares, nominal value CHF 0.40 per share; 44,329,704 common shares issued and outstanding on an actual basis; 61,173,889 common shares issued and outstanding on a pro forma basis and 68,673,888 common shares issued and outstanding on a pro forma as adjusted basis
|
|
|
17,732
|
|
|
|
24,470
|
|
|
|
27,470
|
|
|
Share premium
|
|
|
113,349
|
|
|
|
112,359
|
|
|
|
114,436
|
|
|
Foreign currency translation reserve
|
|
|
(28
|
)
|
|
|
(28
|
)
|
|
|
(28
|
)
|
|
Accumulated deficit
|
|
|
(131,531
|
)
|
|
|
(131,531
|
)
|
|
|
(131,531
|
)
|
|
Total shareholders’ equity attributable to owners of the company(1)
|
|
|
(478
|
)
|
|
|
5,270
|
|
|
|
10,347
|
|
|
Total capitalization(1)
|
|
|
14,058
|
|
|
|
21,267
|
|
|
|
24,883
|
|
|
|
(1)
|
Pro forma as adjusted cash and cash equivalents represents actual cash and cash equivalents, the cash proceeds from the Recent
LPC Issuances, the January 2018 Registered Offering and the full exercise of the warrants.
|
|
|
(2)
|
Total debt is comprised of the $12.5 million drawn on July 19, 2016 under our $20.0 million secured term loan facility with
Hercules as administrative agent. The loan was initially recognized at transaction value less the fair value of the warrant issued
to Hercules in connection with the loan as of the transaction date and less directly attributable transactions costs. Following
the initial recognition, the loan is measured at amortized cost using the effective interest method. As of September 30, 2017,
the loan is valued at CHF 11,032,733. Of the CHF 11,032,733 an amount of CHF 4,406,208, reflecting amortization payments due within
the next 12 months, is classified as current liability and the remainder as non-current liability.
|
|
|
(3)
|
The fair value calculation of the warrants is determined according to the Black-Scholes option pricing model. Assumptions are
made regarding inputs such as volatility and the risk free rate in order to determine the fair value of the warrant.
|
The table above is based on our actual
common shares outstanding as of September 30, 2017 on an actual, pro forma and pro forma as adjusted basis and excludes:
|
|
·
|
6,500,000 of our common shares available for issuance pursuant to our conditional share capital for equity incentive plans
pursuant to our amended and restated articles of association, including 1,743,150 of our common shares issuable upon the exercise
of options outstanding as of September 30, 2017 at a weighted average exercise price of $2.11 per common share;
|
|
|
·
|
5,305,815 common shares available for issuance for financing purposes pursuant to our amended and restated articles of association;
|
|
|
·
|
156,726 common shares issuable upon the exercise of a warrant issued to Hercules Capital, Inc., or Hercules, at an exercise
price of $3.94 per common share; and
|
|
|
·
|
7,945,000 common shares issuable upon exercise of warrants issued on February 21, 2017 in a public offering at an exercise
price of US$1.20 per common share.
|
Exchange
Rates
The following table sets forth, for the
periods indicated, the high, low, average and period-end exchange rates for the purchase of U.S. dollars expressed in CHF per U.S.
dollar. The average rate is calculated by using the average of the U.S. Federal Reserve Bank’s reported exchange rates on
each day during a monthly period and on the last day of each month during an annual period. On February 5, 2018, the exchange rate
as reported by the U.S. Federal Reserve Bank was CHF0.9320 to $1.00.
|
|
Period-End
|
Average
for Period
|
Low
|
High
|
|
|
(CHF per U.S. dollar)
|
|
Year Ended December 31:
|
|
|
|
|
|
2013
|
0.8904
|
0.9269
|
0.8856
|
0.9814
|
|
2014
|
0.9934
|
0.9147
|
0.8712
|
0.9934
|
|
2015
|
1.0017
|
0.9628
|
0.8488
|
1.0305
|
|
2016
|
1.0160
|
0.9848
|
0.9536
|
1.0334
|
|
2017
|
0.9738
|
0.9842
|
0.9456
|
1.0266
|
|
Month Ended:
|
|
|
|
|
|
August 31, 2017
|
0.9610
|
0.9653
|
0.9480
|
0.9766
|
|
September 30, 2017
|
0.9688
|
0.9625
|
0.9456
|
0.9745
|
|
October 31, 2017
|
0.9968
|
0.9821
|
0.9732
|
0.9969
|
|
November 31, 2017
|
0.9838
|
0.9915
|
0.9788
|
1.0014
|
|
December 31, 2017
|
0.9738
|
0.9870
|
0.9738
|
0.9928
|
|
January 31, 2018
|
0.9321
|
0.9604
|
0.9321
|
0.9832
|
|
February 28, 2018 (through February 5, 2018)
|
0.9320
|
0.9304
|
0.9288
|
0.9320
|
Description
of Share Capital and Articles of Association
The Company
We are a Swiss stock corporation (Aktiengesellschaft)
organized under the laws of Switzerland. We were formed in 1998 and started operations as Auris Medical in 2003. We are currently
registered in Zug, Switzerland. Our head office is currently located at Bahnhofstrasse 21, 6300 Zug, Switzerland.
The Company’s corporate purpose as
set forth in its articles of association is to participate in business organizations of all kinds in Switzerland and abroad, particularly
in relation to pharmaceutical products and services. Moreover, the Company may transact any business conducive to developing the
Company or furthering the Company’s corporate purpose. The Company may also arrange financing for its own or third party
account, in particular it may grant loans to affiliated companies or to third parties, as well as guarantees or surety bonds of
any sort for obligations towards affiliated companies. These loans or guarantees may also be granted without any remuneration or
compensation. The Company may in addition participate in cash-pooling operations with affiliated companies.
Share Capital
As of February 7, 2018, our issued fully
paid-in share capital consists of CHF 24,469,555.60, divided into 61,173,889 common shares with a nominal value of CHF 0.40 each
and no preferred shares.
Articles of Association
When we refer to our articles of association
in this prospectus, we refer to our amended and restated articles of association dated as of April 13, 2017 (as amended by common
share issuances since that date).
Ordinary Capital Increase, Authorized
and Conditional Share Capital
Under Swiss law, we may increase our share
capital (
Aktienkapital
) with a resolution of the general meeting of shareholders (ordinary capital increase) that must be
carried out by the board of directors within three months in order to become effective. In the case of subscription and increase
against payment of contributions in cash, a resolution passed by an absolute majority of the shares represented at the general
meeting of shareholders is required. In the case of subscription and increase against contributions in kind or to fund acquisitions
in kind, when shareholders’ statutory pre-emptive rights are withdrawn or where transformation of reserves into share capital
is involved, a resolution passed by two-thirds of the shares represented at a general meeting of shareholders and the absolute
majority of the nominal amount of the shares represented is required.
Our shareholders, by a resolution passed
by two-thirds of the shares represented at a general meeting of shareholders and the absolute majority of the nominal amount of
the shares represented, may empower our board of directors to issue shares of a specific aggregate nominal amount up to a maximum
of 50% of the share capital in the form of:
|
|
·
|
conditional capital (
bedingtes Kapital
) for the purpose of issuing shares in connection with, among other things, (i)
option and conversion rights granted in connection with warrants, convertible bonds or other financial market instruments issued
by the Company or one of our subsidiaries or (ii) grants of rights to employees, members of our board of directors or consultants
or our subsidiaries to subscribe for new shares (conversion or option rights); and/or
|
|
|
·
|
authorized capital (
genehmigtes Kapital
) to be utilized by the board of directors within a period determined by the
shareholders but not exceeding two years from the date of the shareholder approval.
|
Pre-emptive Rights
Pursuant to the Swiss Code of Obligations,
or CO, shareholders have pre-emptive rights (
Bezugsrechte
) to subscribe for new issuances of shares. With respect to conditional
capital in connection with the issuance of conversion rights, convertible bonds or similar debt instruments, shareholders have
advance subscription rights (
Vorwegzeichnungsrechte
) for the subscription of conversion rights, convertible bonds or similar
debt instruments.
A resolution passed at a general meeting
of shareholders by two-thirds of the shares represented and the absolute majority of the nominal value of the shares represented
may authorize our board of directors to withdraw or limit pre-emptive rights and/or advance subscription rights in certain circumstances.
If pre-emptive rights are granted, but not exercised, the board of directors may allocate the pre-emptive rights as it elects.
With respect to our authorized share capital,
the board of directors is authorized by our articles of association to withdraw or to limit the pre-emptive rights of shareholders,
and to allocate them to third parties or to us, in the event that the newly issued shares are used for a purpose set forth in our
articles of association.
Our Authorized Share Capital
At our ordinary general meeting of shareholders
dated April 13, 2017, the shareholders approved an amendment to our authorized share capital. The new provision (article 3a of
the articles of association) reads as follows (translation of the binding original German version):
“
The Board of Directors
is authorized at any time until 13 April 2019 to increase the share capital by a maximum aggregate amount of CHF 8,860,000.00 through
the issuance of not more than 22,150,000 registered shares, which will have to be fully paid-in, with a nominal value of CHF 0.40
each.
Increases in partial amounts
are permitted. The Board of Directors may issue new shares also by means of underwriting or in any other manner by one or more
banks and subsequent offer to shareholders or third parties. The Board of Directors determines the type of contributions, the issue
price, the time of the issue, the conditions for the exercise of the pre-emptive rights, the allocation of pre-emptive rights which
have not been exercised, and the date on which the dividend entitlement starts. The Board of Directors is authorized to permit,
to restrict or to deny the trade with pre-emptive rights.
If pre-emptive rights are
granted, but not exercised, the Board of Directors may use the respective shares in the interest of the Corporation.
The Board of Directors is
authorized to restrict or to exclude the pre-emptive rights of the shareholders, and to allocate them to third parties or to the
Corporation, in the event of use of the shares for the purpose of: a) expanding the shareholder base in certain capital markets
or in the context of the listing, admission to official trading or registration of the shares at domestic or international stock
exchanges; b) granting an over-allotment option (“greenshoe”) to one or several underwriters in connection with a placement
of shares; c) share placements, provided the issue price is determined by reference to the market price; d) the participation of
employees, Members of the Board of Directors or consultants of the Corporation or of one of its Group companies according to one
or several equity incentive plans issued by the Board of Directors; e) the acquisition of companies, company assets, participations,
the acquisition of products, intellectual property rights, licenses or new investment projects or for public or private share placements
for the financing and/or refinancing of such transactions; f) for raising equity capital in a fast and flexible manner as such
transaction would be difficult to carry out, or could be carried out only at less favorable terms, without the exclusion of the
pre-emptive rights of the existing shareholders; or g) the acquisition of a participation in the Corporation by a strategic partner
(including in the case of a public takeover offer).
”
The authorized share capital in article
3a of the articles of association has been reduced as a result of several share issuances and capital increases, respectively since
April 13, 2017. As of February 7, 2018, the board of directors is authorized at any time until April 13, 2019 to increase the share
capital by a maximum aggregate amount of CHF 2,122,326 through the issuance of not more than 5,305,815 registered shares, which
will have to be fully paid-in, with a nominal value of CHF 0.40 each.
Within the limits of Swiss law, the general
meeting of shareholders may increase or alter the authorization granted to the board of directors. See “—Ordinary Capital
Increase, Authorized and Conditional Share Capital.”
On January 24, 2018, the Company’s
board of directors approved the use of our authorized share capital allowing the issuance and transfer of new common shares in
connection with the offering of the warrants to the selling shareholders. To effect any capital increase based on our authorized
share capital in connection with any
offering, the Company will have to follow the relevant procedures
under Swiss law. In particular, the Company’s board of directors will have to approve a general authorization resolution
(
Ermächtigungsbeschluss
), issue a capital increase report (
Kapitalerhöhungsbericht
), approve a notarized
confirmation resolution (
Feststellungsbeschluss
) on the capital increase and the amended articles of association, and obtain
(i) duly executed subscription form(s) covering the subscription of the relevant number of new shares, (ii) a report of an audit
firm relating to the withdrawal of the pre-emptive rights, as well as (iii) a banking confirmation confirming the payment of the
aggregate nominal value of the respective number of new shares to a special Swiss bank account, all in accordance with Swiss law.
The Company’s board of directors will subsequently have to file the relevant documentation accompanied by an application
form with the competent commercial register. Any issuance of common shares based on such filing(s) is subject to the recording
of the respective capital increase(s) in the commercial register in accordance with Swiss law.
Our Conditional Share Capital
Conditional Share Capital for Warrants and Convertible
Bonds
At our ordinary general meeting of shareholders
dated April 13, 2017, the shareholders approved an amendment to our conditional share capital for financing purposes. The new provision
(article 3b of the articles of association) reads as follows (translation of the binding original German version):
“
The Corporation’s
share capital shall be increased by a maximum aggregate amount of CHF 6,260,000.00 through the issuance of not more than 15,650,000
registered shares, which will have to be fully paid-in, with a nominal value of CHF 0.40 each, by the exercise of option and conversion
rights which are granted in connection with bonds, similar obligations, loans or other financial market instruments or contractual
obligations of the Corporation or one of its Group companies, and/or by the exercise of option rights issued by the Corporation
or one of its Group companies (“Financial Instruments”). The pre-emptive rights of shareholders are excluded. The holders
of Financial Instruments are entitled to the new shares. The conditions of the Financial Instruments shall be determined by the
Board of Directors.
When issuing Financial Instruments
the Board of Directors is authorized to limit or exclude the advance subscription rights of shareholders:
|
|
a)
|
for the purpose of financing or refinancing the acquisition of enterprises, divisions thereof, or of participations, products,
intellectual property rights, licenses, cooperations or of newly planned investments of the Corporation;
|
|
|
b)
|
if the issue occurs on domestic or international capital markets including private placements; or
|
|
|
c)
|
for purposes of an underwriting of the Financial Instruments by a banking institution or a consortium of banks with subsequent
offering to the public.
|
To the extent that the advance
subscription rights are excluded, i) the Financial Instruments are to be placed at market conditions; ii) the exercise period,
the conversion period or the exchange period of the Financial Instruments may not exceed 10 years as of the date of the issue;
and iii) the conversion price, the exchange price or other exercise price of the Financial Instruments must be determined by reference
to the market price
.”
Of
this amount, CHF
19,310
, or
48,275
common
shares, remains available, taking into account all warrants granted as at February 7, 2018.
Conditional Share Capital for Equity Incentive
Plans
At our ordinary general meeting of shareholders
dated April 13, 2017, the shareholders approved an amendment to our conditional share capital for equity incentive plans. The new
provision (last paragraph of article 3b of the articles of association) reads as follows (translation of the binding original German
version):
“
The Corporation’s share
capital shall, to the exclusion of the pre-emptive rights and advance subscription rights of shareholders, be increased by a maximum
aggregate amount of CHF 2,600,000.00 through the issuance of
not more than 6,500,000 registered shares, which shall be
fully paid-in, with a nominal value of CHF 0.40 each, by issuance of shares upon the exercise of options or pre-emptive rights
thereof, which have been issued or granted to employees, Members of the Board of Directors or consultants of the Corporation or
of one of its Group companies according to one or several equity incentive plans or regulations issued by the Board of Directors.
The details shall be determined by the Board of Directors
.”
Of
this amount, CHF 1,719,384, or
4,298,460
common shares, remains
available, taking into account all options granted as at February 7, 2018.
Uncertificated Securities
Our shares are uncertificated securities
(
Wertrechte
, within the meaning of art. 973c of the CO) and, when administered by a financial intermediary (
Verwahrungsstelle
,
within the meaning of the Federal Act on Intermediated Securities, “FISA”), qualify as intermediated securities (
Bucheffekten
,
within the meaning of the FISA). In accordance with art. 973c of the CO, we maintain a non-public register of uncertificated securities
(
Wertrechtebuch
). We may at any time convert uncertificated securities into share certificates (including global certificates),
one kind of certificate into another, or share certificates (including global certificates) into uncertificated securities. If
registered in our share register, a shareholder may at any time request from us a written confirmation in respect of the shares.
Shareholders are not entitled, however, to request the printing and delivery of certificates.
Participation certificates and profit
sharing certificates
The Company has not issued any non-voting
equity securities, such as participation certificates (
Partizipationsscheine
) or profit sharing certificates (
Genussscheine
),
nor has it issued any preference shares (
Vorzugsaktien
).
General Meeting of Shareholders
Ordinary/extraordinary meetings and powers
The general meeting of shareholders is
our supreme corporate body. Under Swiss law, ordinary and extraordinary general meetings of shareholders may be held. Under Swiss
law, an ordinary general meeting of shareholders must be held annually within six months after the end of a corporation’s
financial year. In our case, this means on or before June 30.
The following powers are vested exclusively
in the general meeting of shareholders:
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adopting and amending our articles of association;
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electing the members of the board of directors, the chairman of the board of directors, the members of the compensation committee,
the auditors and the independent proxy;
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approving the annual report, the annual statutory financial statements and the consolidated financial statements, and deciding
on the allocation of profits as shown on the balance sheet, in particular with regard to dividends and bonus payments to members
of the board of directors;
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approving the compensation of members of the board of directors and executive management, which under Swiss law is not necessarily
limited to the executive officers;
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discharging the members of the board of directors and executive management from liability with respect to their tenure in the
previous financial year;
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dissolving the Company with or without liquidation;
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deciding matters reserved to the general meeting of shareholders by law or our articles of association or that are presented
to it by the board of directors.
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An extraordinary general meeting of shareholders
may be called by a resolution of the board of directors or, under certain circumstances, by the Company’s auditor, liquidator
or the representatives of convertible bond holders, if any. In addition, the board of directors is required to convene an extraordinary
general meeting of shareholders if shareholders representing at least ten percent of the share capital request such general meeting
of shareholders in writing. Such request must set forth the items to be discussed and the proposals to be acted upon. The board
of directors must convene an extraordinary general meeting of shareholders and propose financial restructuring measures if, based
on the Company’s stand-alone annual statutory balance sheet, half of our share capital and reserves are not covered by our
assets.
Voting and Quorum Requirements
Shareholder resolutions and elections (including
elections of members of the board of directors) require the affirmative vote of the absolute majority of shares represented at
the general meeting of shareholders, unless otherwise stipulated by law.
A resolution of the general meeting of
the shareholders passed by two-thirds of the shares represented at the meeting, and the absolute majority of the nominal value
of the shares represented is required for:
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amending the Company’s corporate purpose;
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creating or cancelling shares with preference rights or amending rights attached to such shares;
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cancelling or amending the transfer restrictions of registered shares;
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creating authorized or conditional share capital;
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increasing the share capital out of equity, against contributions in kind or for the purpose of acquiring specific assets and
granting specific benefits;
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limiting or suppressing shareholder’s pre-emptive rights;
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dissolving or liquidating the Company.
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The same voting requirements apply to resolutions
regarding transactions among corporations based on Switzerland’s Federal Act on Mergers, Demergers, Transformations and the
Transfer of Assets, or the Merger Act (including a merger, demerger or conversion of a corporation) see “—Compulsory
Acquisitions; Appraisal Rights.”
In accordance with Swiss law and generally
accepted business practices, our articles of association do not provide quorum requirements generally applicable to general meetings
of shareholders. To this extent, our practice varies from the requirement of Nasdaq Listing Rule 5620(c), which requires an issuer
to provide in its bylaws for a generally applicable quorum, and that such quorum may not be less than one-third of the outstanding
voting stock.
Notice
General meetings of shareholders must be
convened by the board of directors at least twenty days before the date of the meeting. The general meeting of shareholders is
convened by way of a notice appearing in our official publication medium, currently the Swiss Official Gazette of Commerce. Registered
shareholders may also be informed by ordinary mail. The notice of a general meeting of shareholders must state the items on the
agenda, the proposals to be acted upon and, in case of elections, the names of the nominated candidates. Except in the limited
circumstances listed below, a resolution may not be passed at a general meeting without proper notice. This limitation does not
apply to proposals to convene an extraordinary general meeting of shareholders or to initiate a special investigation. No previous
notification is required for proposals concerning items included in the agenda or for debates that do not result in a vote. The
notice period for a general meeting of shareholders may be waived if all shareholders are present or represented at such meeting.
Agenda Requests
Pursuant to Swiss law, one or more shareholders
whose combined shareholdings represent the lower of (i) one tenth of the share capital or (ii) an aggregate nominal value of at
least CHF 1,000,000, may request that an item be included in the agenda for an ordinary general meeting of shareholders. To be
timely, the shareholder’s request must be received by us at least 45 calendar days in advance of the meeting. The request
must be made in writing and contain, for each of the agenda items, the following information:
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a brief description of the business desired to be brought before the ordinary general meeting of shareholders and the reasons
for conducting such business at the ordinary general meeting of shareholders;
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the name and address, as they appear in the share register, of the shareholder proposing such business; and
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all other information required under the applicable laws and stock exchange rules.
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Our business report, the compensation report
and the auditor’s report must be made available for inspection by the shareholders at our registered office no later than
20 days prior to the general meeting of shareholders. Shareholders of record may be notified of this in writing.
Voting Rights
Each of our shares entitles a holder to
one vote, regardless of its nominal value. The shares are not divisible. The right to vote and the other rights of share ownership
may only be exercised by shareholders (including any nominees) or usufructuaries who are entered in our share register at cut-off
date determined by the board of directors. Those entitled to vote in the general meeting of shareholders may be represented by
the independent proxy holder (annually elected by the general meeting of shareholders), another registered shareholder or third
person with written authorization to act as proxy or the shareholder’s legal representative. The chairman has the power to
decide whether to recognize a power of attorney.
Dividends and Other Distributions
Our board of directors may propose to shareholders
that a dividend or other distribution be paid but cannot itself authorize the distribution. Dividend payments require a resolution
passed by an absolute majority of the shares represented at a general meeting of shareholders. In addition, our auditors must confirm
that the dividend proposal of our board of directors conforms to Swiss statutory law and our articles of association.
Under Swiss law, we may pay dividends only
if we have sufficient distributable profits brought forward from the previous business years (
Gewinnvortrag
), or if we have
distributable reserves (
frei verfügbare Reserven
), each as evidenced by our audited stand-alone statutory balance sheet
prepared pursuant to Swiss law, and after allocations to reserves required by Swiss law and the articles of association have been
deducted. We are not permitted to pay interim dividends out of profit of the current business year.
Distributable reserves are generally booked
either as “free reserves” (
freie Reserven
) or as “reserve from capital contributions” (
Reserven
aus Kapitaleinlagen
). Under the CO, if our general reserves (
allgemeine Reserve
) amount to less than 20% of our share
capital recorded in the commercial register (i.e., 20% of the aggregate nominal value of our issued capital), then at least 5%
of our annual profit must be retained as general reserves. The CO permits us to accrue additional general reserves. Further, a
purchase of our own shares (whether by us or a subsidiary) reduces the distributable reserves in an amount corresponding to the
purchase price of such own shares. Finally, the CO under certain circumstances requires the creation of revaluation reserves which
are not distributable.
Distributions out of issued share capital
(i.e. the aggregate nominal value of our issued shares) are not allowed and may be made only by way of a share capital reduction.
Such a capital reduction requires a resolution passed by an absolute majority of the shares represented at a general meeting of
shareholders. The resolution of the shareholders must be recorded in a public deed and a special audit report must confirm that
claims of our creditors remain fully covered despite the reduction in the share capital recorded in the commercial register. The
share capital may be reduced below CHF 100,000 only if and to the extent that at the same time the statutory minimum share capital
of CHF 100,000 is reestablished by sufficient new fully paid-up capital. Upon approval by the general meeting of shareholders of
the capital reduction, the board of directors must give public notice of the capital reduction resolution in the Swiss Official
Gazette of Commerce three times and notify creditors that they may
request, within two months of the third publication,
satisfaction of or security for their claims. The reduction of the share capital may be implemented only after expiration of this
time limit.
Our board of directors determines the date
on which the dividend entitlement starts. Dividends are usually due and payable shortly after the shareholders have passed the
resolution approving the payment, but shareholders may also resolve at the ordinary general meeting of shareholders to pay dividends
in quarterly or other installments.
Transfer of Shares
Shares in uncertificated form (
Wertrechte
)
may only be transferred by way of assignment. Shares that constitute intermediated securities (
Bucheffekten
) may only be
transferred when a credit of the relevant intermediated securities to the acquirer’s securities account is made in accordance
with the relevant provisions of the FISA. Article 4 of our articles of association provides that in the case of securities held
with an intermediary such as a registrar, transfer agent, trust corporation, bank or similar entity, any transfer, grant of a security
interest or usufructuary right in such intermediated securities and the appurtenant rights associated therewith requires the cooperation
of the intermediary in order for such transfer, grant of a security interest or usufructuary right to be valid against us.
Voting rights may be exercised only after
a shareholder has been entered in our share register (
Aktienbuch
) with his or her name and address (in the case of legal
entities, the registered office) as a shareholder with voting rights. Any acquirer of our shares who is not registered in our share
register as a shareholder with voting rights will still be entitled to dividends and other rights with financial value with respect
to such shares.
Inspection of Books and Records
Under the CO, a shareholder has a right
to inspect our share register with respect to his own shares and otherwise to the extent necessary to exercise his shareholder
rights. No other person has a right to inspect our share register. Our books and correspondence may be inspected with the express
authorization of the general meeting of shareholders or by resolution of the board of directors and subject to the safeguarding
of our business secrets. See “Comparison of Swiss Law and Delaware Law—Inspection of Books and Records.”
Special Investigation
If the shareholders’ inspection rights
as outlined above prove to be insufficient in the judgment of the shareholder, any shareholder may propose to the general meeting
of shareholders that specific facts be examined by a special commissioner in a special investigation. If the general meeting of
shareholders approves the proposal, we or any shareholder may, within 30 calendar days after the general meeting of shareholders,
request a court in Zug, Switzerland, our registered office, to appoint a special commissioner. If the general meeting of shareholders
rejects the request, one or more shareholders representing at least 10 percent of the share capital or holders of shares in an
aggregate nominal value of at least CHF 2,000,000 may request that the court appoint a special commissioner. The court will issue
such an order if the petitioners can demonstrate that the board of directors, any member of the board of directors or our executive
management infringed the law or our articles of association and thereby caused damages to the Company or the shareholders. The
costs of the investigation would generally be allocated to us and only in exceptional cases to the petitioners.
Compulsory Acquisitions; Appraisal Rights
Business combinations and other transactions
that are governed by the Swiss Merger Act (i.e. mergers, demergers, transformations and certain asset transfers) are binding on
all shareholders. A statutory merger or demerger requires approval of two-thirds of the shares represented at a general meeting
of shareholders and the absolute majority of the nominal value of the shares represented.
Swiss corporations may be acquired by an
acquirer through the direct acquisition of the share capital of the Swiss corporation. The Swiss Merger Act provides for the possibility
of a so-called “cash-out” or “squeeze-out” merger if the acquirer controls 90% of the outstanding shares.
In these limited circumstances, minority shareholders of the corporation being acquired may be compensated in a form other than
through shares of the acquiring corporation (for instance, through cash or securities of a parent corporation of the acquiring
corporation or of another corporation). Following a statutory merger or demerger, pursuant to the Merger Act, shareholders can
file an appraisal action against the surviving company. If the consideration is deemed inadequate, the court will determine an
adequate compensation payment.
In addition, under Swiss law, the sale
of “all or substantially all of our assets” by us may require the approval of two-thirds of the number of shares represented
at a general meeting shareholders and the absolute majority of the nominal value of the shares represented. Whether a shareholder
resolution is required depends on the particular transaction, including whether the following test is satisfied:
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a core part of the Company’s business is sold without which it is economically impracticable or unreasonable to continue
to operate the remaining business;
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the Company’s assets, after the divestment, are not invested in accordance with the Company’s statutory business
purpose; and
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the proceeds of the divestment are not earmarked for reinvestment in accordance with the Company’s business purpose but,
instead, are intended for distribution to the Company’s shareholders or for financial investments unrelated to the Company’s
business.
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Board of Directors
Our articles of association provide that
the board of directors shall consist of at least three and not more than nine members.
The members of the board of directors and
the chairman are elected annually by the general meeting of shareholders for a period until the completion of the subsequent ordinary
general meeting of shareholders and are eligible for re-election. Each member of the board of directors must be elected individually.
Unless an exception is granted by the general meeting of shareholders, only persons who have not completed their seventy-fifth
year of age on the election date are eligible for election.
The members of the board of directors of
the Company are currently Thomas Meyer (Chairman), Armando Anido, Mats Blom, Oliver Kubli, Berndt A. Modig and Calvin W. Roberts.
The members of our management team are currently Thomas Meyer (CEO), Andrea Braun and Hernan Levett.
Powers
The board of directors has the following
non-delegable and inalienable powers and duties:
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the ultimate direction of the business of the Company and issuing of the relevant directives;
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laying down the organization of the Company;
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formulating accounting procedures, financial controls and financial planning, to the extent required for the governance of
the Company;
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nominating and removing persons entrusted with the management and representation of the Company and regulating the power to
sign for the Company;
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the ultimate supervision of those persons entrusted with management of the Company, with particular regard to adherence to
law, our articles of association, and regulations and directives of the Company;
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issuing the annual report and the compensation report, and preparing for the general meeting of shareholders and carrying out
its resolutions; and
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informing the court in case of over-indebtedness.
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The board of directors may, while retaining
such non-delegable and inalienable powers and duties, delegate some of its powers, in particular direct management, to a single
or to several of its members, managing directors, committees or to third parties who need be neither members of the board of directors
nor shareholders. Pursuant to Swiss law and Article 13 of our articles of association, details of the delegation and other procedural
rules such as quorum requirements must be set in the organizational rules issued by the board of directors.
Indemnification of Executive Management and
Directors
Subject to Swiss law, Article 17 of our
articles of association provides for indemnification of the existing and former members of the board of directors, executive management
and their heirs, executors and administrators, against liabilities arising in connection with the performance of their duties in
such capacity, and permits us to advance the expenses of defending any act, suit or proceeding to our directors and executive management.
In addition, under general principles of
Swiss employment law, an employer may be required to indemnify an employee against losses and expenses incurred by such employee
in the proper execution of their duties under the employment agreement with the employer. See “Comparison of Swiss Law and
Delaware Law—Indemnification of directors and executive management and limitation of liability.”
We have entered into indemnification agreements
with each of the members of our board of directors and executive management. The indemnification agreements and our articles of
association require us to indemnify our directors and executive officers to the fullest extent permitted by law.
Conflict of Interest, Management Transactions
Swiss law does not provide for a general
provision regarding conflicts of interest. However, the CO contains a provision that requires our directors and executive management
to safeguard the Company’s interests and imposes a duty of loyalty and duty of care on our directors and executive management.
This rule is generally understood to disqualify directors and executive management from participation in decisions that directly
affect them. Our directors and executive officers are personally liable to us for breach of these provisions. In addition, Swiss
law contains provisions under which directors and all persons engaged in the Company’s management are liable to the Company,
each shareholder and the Company’s creditors for damages caused by an intentional or negligent violation of their duties.
Furthermore, Swiss law contains a provision under which payments made to any of the Company’s shareholders or directors or
any person associated with any such shareholder or director, other than payments made at arm’s length, must be repaid to
the Company if such shareholder or director acted in bad faith.
Our board of directors has adopted a Code
of Business Conduct and Ethics that covers a broad range of matters, including the handling of conflicts of interest.
Principles of the Compensation of the
Board of Directors and the Executive Management
Pursuant to Swiss law, our shareholders
must annually resolve on the approval of the compensation of the board of directors and the persons whom the board of directors
has, fully or partially, entrusted with the management of the Company. The board of directors must issue, on an annual basis, a
written compensation report that must be reviewed together with a report on our business by our auditor. The compensation report
must disclose all compensation, loans and other forms of indebtedness granted by the Company, directly or indirectly, to current
or former members of the board of directors and executive management to the extent related to their former role within the Company
or not on customary market terms.
The disclosure concerning compensation,
loans and other forms of indebtedness must include the aggregate amount for the board of directors and the executive management
as well as the particular amount for each member of the board of directors and executive officer, specifying the name and function
of each respective person.
Certain forms of compensation are prohibited
for members of our board of directors and executive management, such as:
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severance payments provided for either contractually or in the articles of association (compensation due until the termination
of a contractual relationship does not qualify as severance payment);
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incentive fees for the acquisition or transfer of corporations or parts thereof by the Company or by companies being, directly
or indirectly, controlled by us;
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loans, other forms of indebtedness, pension benefits not based on occupational pension schemes and performance-based compensation
not provided for in the articles of association; and
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equity securities and conversion and option rights awards not provided for in the articles of association.
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Compensation to members of the board of
directors and executive management for activities in entities that are, directly or indirectly, controlled by the Company is prohibited
if the compensation (i) would have been prohibited if it was paid directly by the Company, (ii) is not provided for in the articles
of association or (iii) has not been approved by the general meeting of shareholders.
The general meeting of shareholders annually
votes on the proposals of the board of directors with respect to:
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the maximum aggregate amount of compensation of the board of directors for the subsequent term of office; and
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the maximum aggregate amount of compensation of the executive management for the subsequent financial year.
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The board of directors may submit for approval
at the general meeting of shareholders deviating or additional proposals relating to the same or different periods.
In the event that at the general meeting
of shareholders the shareholders do not approve a proposal of the board of directors, the board of directors must form a new proposal
for the maximum aggregate compensation and the particular compensation for each individual, taking into account all relevant factors,
and submit the new proposal for approval by the same general meeting of shareholders, at a subsequent extraordinary general meeting
or the next ordinary general meeting of shareholders.
In addition to fixed compensation, members
of the board of directors and executive management may be paid variable compensation, depending on the achievement of certain performance
criteria. The performance criteria may include individual targets, targets of the Company or parts thereof and targets in relation
to the market, other companies or comparable benchmarks, taking into account the position and level of responsibility of the recipient
of the variable compensation. The board of directors or, where delegated to it, the compensation committee shall determine the
relative weight of the performance criteria and the respective target values.
Compensation may be paid or granted in
the form of cash, shares, financial instruments, in kind, or in the form of other types of benefits. The board of directors or,
where delegated to it, the compensation committee shall determine grant, vesting, exercise and forfeiture conditions.
Borrowing Powers
Neither Swiss law nor our articles of association
restrict in any way our power to borrow and raise funds. The decision to borrow funds is made by or under the direction of our
board of directors, and no approval by the shareholders is required in relation to any such borrowing.
Repurchases of Shares and Purchases of
Own Shares
The CO limits our right to purchase and
hold our own shares. We and our subsidiaries may purchase shares only if and to the extent that (i) we have freely distributable
reserves in the amount of the purchase price; and (ii) the aggregate nominal value of all shares held by us does not exceed 10
percent of our share capital. Pursuant to Swiss law, where shares are acquired in connection with a transfer restriction set out
in the articles of association, the foregoing upper limit is 20 percent. We currently do not have any transfer restriction in our
articles of association. If we own shares that exceed the threshold of 10 percent of our share capital, the excess must be sold
or cancelled by means of a capital reduction within two years.
Shares held by us or our subsidiaries are
not entitled to vote at the general meeting of shareholders but are entitled to the economic benefits applicable to the shares
generally, including dividends and pre-emptive rights in the case of share capital increases.
Notification and Disclosure of Substantial
Share Interests
The disclosure obligations generally applicable
to shareholders of Swiss corporations under the Swiss Financial Market Infrastructure Act do not apply to us since our shares are
not listed on a Swiss exchange.
Pursuant to art. 663c of the CO, Swiss
corporations whose shares are listed on a stock exchange must disclose their significant shareholders and their shareholdings in
the notes to their balance sheet, where this information is known or ought to be known. Significant shareholders are defined as
shareholders and groups of shareholders linked through voting rights who hold more than five percent of all voting rights.
Stock Exchange Listing
Our common shares are listed on the Nasdaq
Capital Market under the symbol “EARS.”
The Depository Trust Company
Initial settlement of any common shares
to be issued pursuant to this prospectus will take place through The Depository Trust Company, or DTC, in accordance with its customary
settlement procedures for equity securities. Each person owning common shares held through DTC must rely on the procedures thereof
and on institutions that have accounts therewith to exercise any rights of a holder of the shares.
Transfer Agent and Registrar of Shares
Our share register is currently kept by
American Stock Transfer & Trust Company, LLC, which acts as transfer agent and registrar. The share register reflects only
record owners of our shares.
Comparison
of Swiss Law and Delaware Law
The Swiss laws applicable to Swiss corporations
and their shareholders differ from laws applicable to U.S. corporations and their shareholders. The following table summarizes
significant differences in shareholder rights between the provisions of the Swiss Code of Obligations (
Schweizerisches Obligationenrecht)
and the Swiss Ordinance against excessive compensation in listed stock corporations applicable to our company and the Delaware
General Corporation Law applicable to companies incorporated in Delaware and their shareholders. Please note that this is only
a general summary of certain provisions applicable to companies in Delaware. Certain Delaware companies may be permitted to exclude
certain of the provisions summarized below in their charter documents.
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Delaware
Corporate Law
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Swiss
Corporate Law
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Mergers and similar arrangements
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Under the Delaware General Corporation Law, with certain exceptions, a merger, consolidation, sale, lease or transfer of all or substantially all of the assets of a corporation must be approved by the board of directors and a majority of the outstanding shares entitled to vote thereon. A shareholder of a Delaware corporation participating in certain major corporate transactions may, under certain circumstances, be entitled to appraisal rights pursuant to which such shareholder may receive cash in the amount of the fair value of the shares held by such shareholder (as determined by a court) in lieu of the consideration such shareholder would otherwise receive in the transaction. The Delaware General Corporation Law also provides that a parent corporation, by resolution of its board of directors, may merge with any subsidiary, of which it owns at least 90.0% of each class of capital stock without a vote by the shareholders of such subsidiary. Upon any such merger, dissenting shareholders of the subsidiary would have appraisal rights.
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Under Swiss law, with certain exceptions, a merger or a division of the corporation or a sale of all or substantially all of the assets of a corporation must be approved by two-thirds of the shares represented at the respective general meeting of shareholders as well as the absolute majority of the share capital represented at such shareholders’ meeting. The articles of association may increase the voting threshold. A shareholder of a Swiss corporation participating in a statutory merger or demerger pursuant to the Swiss Merger Act can file an appraisal right lawsuit against the surviving company. As a result, if the consideration is deemed “inadequate,” such shareholder may, in addition to the consideration (be it in shares or in cash) receive an additional amount to ensure that such shareholder receives the fair value of the shares held by such shareholder. Swiss law also provides that a parent corporation, by resolution of its board of directors, may merge with any subsidiary, of which it owns at least 90.0% of the shares without a vote by shareholders of such subsidiary, if the shareholders of the subsidiary are offered the payment of the fair value in cash as an alternative to shares.
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Shareholders’ suits
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Class actions and derivative actions generally are available to shareholders of a Delaware corporation for, among other things, breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law. In such actions, the court has discretion to permit the winning party to recover attorneys’ fees incurred in connection with such action.
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Class actions and derivative actions as such are not available under Swiss law. Nevertheless, certain actions may have a similar effect. A shareholder is entitled to bring suit against directors for breach of, among other things, their fiduciary duties and claim the payment of the company’s damages to the corporation. Likewise, an appraisal lawsuit won by a shareholder will indirectly compensate all shareholders. Under Swiss law, the winning party is generally entitled to recover attorneys’ fees incurred in connection with such action, provided, however, that the court has discretion to permit the shareholder whose claim has been dismissed to recover attorneys’ fees incurred to the extent he acted in good faith.
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Shareholder vote on board and management compensation
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Under the Delaware General Corporation Law, the board of directors has the authority to fix the compensation of directors, unless otherwise restricted by the certificate of incorporation or bylaws.
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Pursuant to the Swiss Ordinance against excessive compensation in listed stock corporations, the general meeting of shareholders has the non-transferable right, amongst others, to vote on the compensation due to the board of directors, executive management and advisory
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Delaware
Corporate Law
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Swiss
Corporate Law
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boards.
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Annual vote on board renewal
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Unless directors are elected by written consent in lieu of an annual meeting, directors are elected in an annual meeting of stockholders on a date and at a time designated by or in the manner provided in the bylaws. Re-election is possible.
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The general meeting of shareholders elects annually (i.e. until the following general meeting of shareholders) the members of the board of directors (including the chairman) and the members of the compensation committee individually for a term of office of one year. Re-election is possible.
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Classified boards are permitted.
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Indemnification of directors and executive management and limitation of liability
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The Delaware General Corporation Law provides that a certificate
of incorporation may contain a provision eliminating or limiting the personal liability of directors (but not other controlling
persons) of the corporation for monetary damages for breach of a fiduciary duty as a director, except no provision in the certificate
of incorporation may eliminate or limit the liability of a director for:
·
any
breach of a director’s duty of loyalty to the corporation or its shareholders;
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acts
or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
·
statutory
liability for unlawful payment of dividends or unlawful stock purchase or redemption; or
·
any
transaction from which the director derived an improper personal benefit.
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Under Swiss corporate law, an indemnification of a director
or member of the executive management in relation to potential personal liability is not effective to the extent the director or
member of the executive management intentionally or negligently violated his or her corporate duties towards the corporation (certain
views advocate that at least a grossly negligent violation is required to exclude the indemnification). Most violations of corporate
law are regarded as violations of duties towards the corporation rather than towards the shareholders. In addition, indemnification
of other controlling persons is not permitted under Swiss corporate law, including shareholders of the corporation.
Nevertheless, a corporation may enter into and pay for directors’
and officers’ liability insurance which typically covers negligent acts as well.
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A Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any proceeding, other than an action by or on behalf of the corporation, because the person is or was a director or officer, against liability incurred in connection with the proceeding if the director or officer acted in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of the corporation; and the director or officer, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.
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Unless ordered by a court, any foregoing indemnification is
subject to a determination that the director or officer has met the applicable standard of conduct:
·
by
a majority vote of the directors who are not parties to the proceeding, even though less than a quorum;
·
by
a committee of directors designated by a majority vote of the eligible directors, even
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Delaware
Corporate Law
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Swiss
Corporate Law
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though less than a quorum;
·
by
independent legal counsel in a written opinion if there are no eligible directors, or if the eligible directors so direct; or
·
by
the shareholders.
Moreover, a Delaware corporation may not indemnify a director
or officer in connection with any proceeding in which the director or officer has been adjudged to be liable to the corporation
unless and only to the extent that the court determines that, despite the adjudication of liability but in view of all the circumstances
of the case, the director or officer is fairly and reasonably entitled to indemnity for those expenses which the court deems proper.
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Directors’ fiduciary duties
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A director of a Delaware corporation has a fiduciary duty to
the corporation and its shareholders. This duty has two components:
·
the
duty of care; and
·
the
duty of loyalty.
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A director of a Swiss corporation has a fiduciary duty to the
corporation only. This duty has two components:
·
the
duty of care; and
·
the
duty of loyalty.
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The duty of care requires that a director act in good faith,
with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform
himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The
duty of loyalty requires that a director act in a manner he reasonably believes to be in the best interests of the corporation.
He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates
that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer
or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have
been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation.
However, this presumption may be rebutted by evidence a breach of one of the fiduciary duties.
Should such evidence be presented concerning a transaction by
a director, a director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the
corporation.
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The duty of care requires that a director act in good faith,
with the care that an ordinarily prudent director would exercise under similar circumstances. Under this duty, a director must
inform himself of, and disclose, all material information reasonably available regarding a significant transaction.
The duty of loyalty requires that a director act in a manner
he reasonably believes to be in the best interest of the corporation. He must not use his corporate position for personal gain
or advantage. This duty prohibits in principle self-dealing by a director and mandates that the best interest of the corporation
take precedence over any interest possessed by a director or officer.
The burden of proof for a violation of these duties is with
the corporation or with the shareholder bringing a suit against the director.
Directors also have an obligation to treat shareholders equally
proportionate to their share ownership.
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Shareholder action by written consent
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A Delaware corporation may, in its certificate of incorporation, eliminate the right of shareholders to act by written consent.
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Shareholders of a Swiss corporation may only exercise their voting rights in a general meeting of shareholders and may not act by written consent.
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Delaware
Corporate Law
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Swiss
Corporate Law
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Shareholder proposals
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A shareholder of a Delaware corporation has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.
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At any general meeting of shareholders any shareholder may put
proposals to the meeting if the proposal is part of an agenda item. Unless the articles of association provide for a lower threshold
or for additional shareholders’ rights:
·
one
or several shareholders representing 10.0% of the share capital may ask that a general meeting of shareholders be called for specific
agenda items and specific proposals; and
·
one
or several shareholders representing 10.0% of the share capital or CHF 1.0 million of nominal share capital may ask that an agenda
item including a specific proposal be put on the agenda for a regularly scheduled general meeting of shareholders, provided such
request is made with appropriate notice.
Any shareholder can propose candidates for election as directors
without prior written notice.
In addition, any shareholder is entitled, at a general meeting
of shareholders and without advance notice, to (i) request information from the Board on the affairs of the company (note, however,
that the right to obtain such information is limited), (ii) request information from the auditors on the methods and results of
their audit, and (iii) request, under certain circumstances and subject to certain conditions, a special audit.
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Cumulative voting
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Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation provides for it.
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Cumulative voting is not permitted under Swiss corporate law. Pursuant to Swiss law, shareholders can vote for each proposed candidate, but they are not allowed to cumulate their votes for single candidates. An annual individual election of all members of the board of directors (including the chairman) for a term of office of one year (i.e. until the following annual general meeting) is mandatory for listed companies.
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Removal of directors
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A Delaware corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise.
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A Swiss corporation may remove, with or without cause, any director at any time with a resolution passed by an absolute majority of the shares represented at a general meeting of shareholders. The articles of association may provide for a qualified majority for the removal of a director.
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Transactions with interested shareholders
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The Delaware General Corporation Law generally prohibits a Delaware corporation from engaging in certain business combinations with an “interested shareholder” for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or group who or which
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No such rule applies to a Swiss corporation.
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Delaware
Corporate Law
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Swiss
Corporate Law
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owns or owned 15.0% or more of the corporation’s outstanding voting stock within the past three years.
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Dissolution; Winding up
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Unless the board of directors of a Delaware corporation approves the proposal to dissolve, dissolution must be approved by shareholders holding 100.0% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board.
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A dissolution and winding up of a Swiss corporation requires the approval by two-thirds of the shares represented as well as the absolute majority of the nominal value of the share capital represented at a general meeting of shareholders passing a resolution on such dissolution and winding up. The articles of association may increase the voting thresholds required for such a resolution (but only by way of a resolution with the majority stipulated by law).
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Variation of rights of shares
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A Delaware corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise.
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A Swiss corporation may modify the rights of a category of shares with (i) a resolution passed by an absolute majority of the shares represented at the general meeting of shareholders and (ii) a resolution passed by an absolute majority of the shares represented at the special meeting of the affected preferred shareholders. Shares that are granted more voting power are not regarded a special class for these purposes.
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Amendment of governing documents
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A Delaware corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise.
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By way of a public deed, the articles of association of a Swiss corporation may be amended with a resolution passed by an absolute majority of the shares represented at such meeting, unless otherwise provided in the articles of association. There are a number of resolutions, such as an amendment of the stated purpose of the corporation and the introduction of authorized and conditional capital, that require the approval by two-thirds of the votes and an absolute majority of the nominal value of the shares represented at a shareholders’ meeting. The articles of association may increase the voting thresholds.
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Inspection of Books and Records
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Shareholders of a Delaware corporation, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose, and to obtain copies of list(s) of shareholders and other books and records of the corporation and its subsidiaries, if any, to the extent the books and records of such subsidiaries are available to the corporation.
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Shareholders of a Swiss corporation may only inspect books and records if the general meeting of shareholders or the board of directors approved such inspection. The inspection right is limited in scope and only extends to information required for the exercise of shareholder rights and does not extend to confidential information. The right to inspect the share register is limited to the right to inspect that shareholder’s own entry in the share register.
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Payment of dividends
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The board of directors may approve a dividend without shareholder
approval. Subject to any restrictions contained in its certificate of incorporation, the board may declare and pay dividends upon
the shares of its capital stock either:
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Dividend payments are subject to the approval of the general
meeting of shareholders. The board of directors may propose to shareholders that a dividend shall be paid but cannot itself authorize
the distribution.
Payments out of the Company’s share capital (in other
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Delaware
Corporate Law
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Swiss
Corporate Law
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o
out of its surplus, or
o
in case there is no such surplus, out of its net
profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.
Stockholder approval is required to authorize capital stock
in excess of that provided in the charter. Directors may issue authorized shares without stockholder approval.
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words, the aggregate nominal value of the Company’s registered share capital) in the form of dividends are not allowed and may be made by way of a capital reduction only. Dividends may be paid only from the profits brought forward from the previous business years or if the Company has distributable reserves, each as will be presented on the Company’s audited annual stand-alone balance sheet. The dividend may be determined only after the allocations to reserves required by the law and the articles of association have been deducted.
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Creation and issuance of new shares
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All creation of shares require the board of directors to adopt a resolution or resolutions, pursuant to authority expressly vested in the board of directors by the provisions of the company’s certificate of incorporation.
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All creation of shares requires a shareholders’ resolution documented by way of a public deed. Authorized shares can be, once created by shareholders’ resolution, issued by the board of directors (subject to fulfillment of the authorization). Conditional shares are created and issued through the exercise of options and conversion rights related to debt instruments issued by the board of directors or such rights issued to employees.
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Taxation
The following summary contains a description
of the material Swiss and U.S. federal income tax consequences of the acquisition, ownership and disposition of common shares,
but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase
common shares. The summary is based upon the tax laws of Switzerland and regulations thereunder and on the tax laws of the United
States and regulations thereunder as of the date hereof, which are subject to change.
Swiss Tax Considerations
This summary of material Swiss tax consequences
is based on Swiss law and regulations and the practice of the Swiss tax administration as in effect on the date hereof, all of
which are subject to change (or subject to changes in interpretation), possibly with retroactive effect. The summary does not purport
to take into account the specific circumstances of any particular shareholder or potential investor and does not relate to persons
in the business of buying and selling common shares or other securities. The summary is not intended to be, and should not be interpreted
as, legal or tax advice to any particular potential shareholder/s, and no representation with respect to the tax consequences to
any particular shareholder/s is made.
Current and prospective shareholders are
advised to consult their own tax advisers in light of their particular circumstances as to the Swiss tax laws, regulations and
regulatory practices that could be relevant for them in connection with the acquiring, owning and selling or otherwise disposing
of common shares and receiving dividends and similar cash or in-kind distributions on common shares (including dividends on liquidation
proceeds and stock dividends) or distributions on common shares based upon a capital reduction (
Nennwertrückzahlungen
)
or reserves paid out of capital contributions (
Reserven aus Kapitaleinlagen
) and the consequences thereof under the tax
laws, regulations and regulatory practices of Switzerland.
Taxation of Auris Medical Holding AG
Auris Medical Holding AG is a Swiss based
company, taxed as a holding company in the Canton of Zug. The company is taxed at a current effective income tax rate of 7.83%
(including direct federal as well as cantonal/communal taxes), whereby a participation relief applies to dividend income from qualifying
participations, and a current annual capital tax rate of 0.003% which is levied on the net equity of the Company.
Switzerland is currently in the process
of reforming certain elements of its corporate tax law which may impact the taxation of Auris Medical Holding AG (including the
abolition of the holding privilege at cantonal/communal level). Whether and when such new rules will enter into force is not known.
Swiss Federal Withholding Tax on Dividends
and other Distributions
Dividend payments and similar cash or in-kind
distributions on the common shares (including dividends on liquidation proceeds and stock dividends) that the Company makes to
shareholders are subject to Swiss federal withholding tax (
Verrechnungssteuer
) at a rate of 35% on the gross amount of the
dividend. The Company is required to withhold the Swiss federal withholding tax from the dividend and remit it to the Swiss Federal
Tax Administration. Distributions based upon a capital reduction (
Nennwertrückzahlungen
) and reserves paid out of capital
contributions (
Reserven aus Kapitaleinlagen
) are not subject to Swiss federal withholding tax.
The redemption of common shares in the
Company may under certain circumstances (in particular, if the common shares in the Company are redeemed for subsequent cancellation)
be taxed as a partial liquidation for Swiss federal withholding tax purposes, with the consequence that the difference between
the repurchase price and the nominal value of the shares (
Nennwertprinzip
) plus capital contribution reserves (
Reserven
aus Kapitaleinlagen
) is subject to Swiss federal withholding tax.
The Swiss federal withholding tax is refundable
or creditable in full to a Swiss tax resident corporate and individual shareholder as well as to a non-Swiss tax resident corporate
or individual shareholder who holds the common shares as part of a trade or business carried on in Switzerland through a permanent
establishment or fixed place of business situated for tax purposes in Switzerland, if such person is the beneficial owner of the
distribution and, in the case of a Swiss tax resident individual who holds the common shares as part of his private assets, duly
reports the gross distribution received in his individual income tax return or, in the case of a person who holds the common shares
as part of a trade or business carried on in Switzerland through a permanent establishment or fixed
place of business situated for tax purposes
in Switzerland, recognizes the gross dividend distribution for tax purposes as earnings in the income statements and reports the
annual profit in the Swiss income tax return.
If a shareholder who is not a Swiss resident
for tax purposes and does not hold the common shares in connection with the conduct of a trade or business in Switzerland through
a permanent establishment or fixed place of business situated, for tax purposes in Switzerland, receives a distribution from the
Company, the shareholder may be entitled to a full or partial refund or credit of Swiss federal withholding tax incurred on a taxable
distribution if the country in which such shareholder is resident for tax purposes has entered into a treaty for the avoidance
of double taxation with Switzerland and the further prerequisites of the treaty for a refund have been met. Shareholders not resident
in Switzerland should be aware that the procedures for claiming treaty benefits (and the time required for obtaining a refund or
credit) may differ from country to country.
Besides the bilateral treaties, on January
1, 2017 Switzerland implemented the agreement with the European Community regarding the Automatic Exchange of Information in Tax
Matters. This agreement contains in its Article 19 provisions on taxation of dividends which apply with respect to EU member states
and provides for an exemption of Withholding Tax for companies under certain circumstances.
Individual and Corporate Income Tax on
Dividends
Swiss resident individuals holding the
common shares as part of their private assets who receive dividends and similar distributions (including stock dividends and liquidation
proceeds), which are not repayments of the nominal value (
Nennwertrückzahlungen
) of the common shares or reserves paid
out of capital contributions (
Reserven aus Kapitaleinlagen
) are required to report such payments in their individual income
tax returns and are liable to Swiss federal, cantonal and communal income taxes on any net taxable income for the relevant tax
period. Furthermore, for the purpose of the Direct Federal Tax, dividends, shares in profits, liquidation proceeds and pecuniary
benefits from shares (including bonus shares) are included in the tax base for only 60% of their value (
Teilbesteuerung
),
if the investment amounts to at least 10% of nominal share capital of the Company. All Swiss cantons have introduced similar partial
taxation measures at cantonal and communal levels.
Swiss resident individuals as well as non-Swiss
resident individual taxpayers holding the common shares in connection with the conduct of a trade or business in Switzerland through
a permanent establishment or fixed place of business situated, for tax purposes, in Switzerland, are required to recognize dividends,
distributions based upon a capital reduction (
Nennwertrückzahlungen
) and reserves paid out of capital contributions
(
Reserven aus Kapitaleinlagen
) in their income statements for the relevant tax period and are liable to Swiss federal, cantonal
and communal individual or corporate income taxes, as the case may be, on any net taxable earnings accumulated (including the payment
of dividends) for such period. Furthermore, for the purpose of the Direct Federal Tax, dividends, shares in profits, liquidation
proceeds and pecuniary benefits from shares (including bonus shares) are included in the tax base for only 50% (
Teilbesteuerung
),
if the investment is held in connection with the conduct of a trade or business or qualifies as an opted business asset (
gewillkürtes
Geschäftsvermögen
) according to Swiss tax law and amounts to at least 10% of nominal share capital of the Company.
All cantons have introduced similar partial taxation measures at cantonal and communal levels.
Swiss resident corporate taxpayers as well
as non-Swiss resident corporate taxpayers holding the common shares in connection with the conduct of a trade or business through
a permanent establishment or fixed place of business situated, for tax purposes, in Switzerland, are required to recognize dividends,
distributions based upon a capital reduction (
Nennwertrückzahlungen
) and reserves paid out of capital contributions
(
Reserven aus Kapitaleinlagen
) in their income statements for the relevant tax period and are liable to Swiss federal, cantonal
and communal corporate income taxes on any net taxable earnings accumulated for such period. Swiss resident corporate taxpayers
as well as non-Swiss resident corporate taxpayers holding the common shares in connection with the conduct of a trade or business
through a permanent establishment or fixed place of business situated, for tax purposes, in Switzerland may be eligible for participation
relief (
Beteiligungsabzug
) in respect of dividends and distributions based upon a capital reduction (
Nennwertrückzahlungen
)
and reserves paid out of capital contributions (
Reserven aus Kapitaleinlagen
) if the common shares held by them as part
of a Swiss business have an aggregate market value of at least CHF 1 million or represent at least 10% of the nominal share capital
of the Company or give entitlement to at least 10% of the profits and reserves of the Company, respectively.
Recipients of dividends and similar distributions
on the common shares (including stock dividends and liquidation proceeds) who neither are residents of Switzerland nor during the
current taxation year have engaged in a
trade or business in Switzerland and who are
not subject to taxation in Switzerland for any other reason are not subject to Swiss federal, cantonal or communal individual or
corporate income taxes in respect of dividend payments and similar distributions because of the mere holding of the common shares.
Wealth and Annual Capital Tax on Holding
of Common Shares
Swiss resident individuals and non-Swiss
resident individuals holding the common shares or warrants in connection with the conduct of a trade or business in Switzerland
through a permanent establishment or fixed place of business situated, for tax purposes, in Switzerland, are required to report
their common shares or warrants as part of their wealth and will be subject to cantonal and communal wealth tax to the extent the
aggregate taxable net wealth is allocable to Switzerland.
Swiss resident corporate taxpayers and
non-Swiss resident corporate taxpayers holding the common shares or warrants in connection with the conduct of a trade or business
in Switzerland through a permanent establishment or fixed place of business situated, for tax purposes, in Switzerland, will be
subject to cantonal and communal annual capital tax on the taxable capital to the extent the aggregate taxable capital is allocable
to Switzerland.
Individuals and corporate taxpayers not
resident in Switzerland for tax purposes and not holding the common shares or warrants in connection with the conduct of a trade
or business in Switzerland through a permanent establishment or fixed place of business situated, for tax purposes, in Switzerland,
are not subject to wealth or annual capital tax in Switzerland because of the mere holding of the common shares.
Capital Gains on Disposal of Common Shares
or Warrants
Swiss resident individuals who sell or
otherwise dispose of the common shares or warrants realize a tax-free capital gain, or a non-deductible capital loss, as the case
may be, provided that they hold the common shares or warrants, as applicable, as part of their private assets. Under certain circumstances,
the sale proceeds may be requalified into taxable investment income (e.g., if the taxpayer is deemed to be a professional securities
dealer).
Capital gains realized on the sale of the
common shares or warrants held by Swiss resident individuals, Swiss resident corporate taxpayers as well as non-Swiss resident
individuals and corporate taxpayers holding the common shares or warrants in connection with the conduct of a trade or business
in Switzerland through a permanent establishment or fixed place of business situated, for tax purposes, in Switzerland, will be
subject to Swiss federal, cantonal and communal individual or corporate income tax, as the case may be. This also applies to Swiss
resident individuals who, for individual income tax purposes, are deemed to be professional securities dealers for reasons of,
inter alia, frequent dealing and debt-financed purchases. Capital gains realized by resident individuals who hold the common shares
as business assets might be entitled to reductions or partial taxations similar to those mentioned above for dividends (
Teilbesteuerung
)
if certain conditions are met (e.g. holding period of at least one year and participation of at least 10% of nominal share capital
of the Company).
Swiss resident corporate taxpayers as well
as non-Swiss resident corporate taxpayers holding the common shares or warrants in connection with the conduct of a trade or business,
through a permanent establishment or fixed place of business situated, for tax purposes, in Switzerland, are required to recognize
such capital gain in their income statements for the relevant tax period. Corporate taxpayers may qualify for participation relief
on capital gains (
Beteiligungsabzug
), if the common shares sold during the tax period represent at least 10% of the Company’s
share capital or if the common shares sold give entitlement to at least 10% of the Company’s profit and reserve and were
held for at least one year. The tax relief applies to the difference between the sale proceeds of common shares by the Company
and the acquisition costs of the participation (
Gestehungskosten
).
Individuals and corporations not resident
in Switzerland for tax purposes and not holding the common shares or warrants in connection with the conduct of a trade or business
in Switzerland through a permanent establishment or fixed place of business situated, for tax purposes, in Switzerland, are not
subject to Swiss federal, cantonal and communal individual income or corporate income tax, as the case may be, on capital gains
realized on the sale of the common shares or warrants.
Gift and Inheritance Tax
Transfers of common shares or warrants
may be subject to cantonal and/or communal inheritance or gift taxes if the deceased or the donor or the recipient were resident
in a Canton levying such taxes and, in international
circumstances where residency requirements
are satisfied, if the applicable tax treaty were to allocate the right to tax to Switzerland.
Swiss Issuance Stamp Duty
The Company is subject to paying to the
Swiss Federal Tax Administration a 1% Swiss federal issuance stamp tax (
Emissionsabgabe
) on any increase of the nominal
share capital of the Company (with or without issuance of shares) or any other equity contributions received by the Company (regardless
of whether or not any compensation is paid to the shareholder in connection with the contribution). Certain costs incurred in connection
with the issuance of shares (if any) may be deductible. There are several exemptions from issuance stamp tax that may apply under
certain circumstances (e.g., certain intercompany reorganizations).
Swiss Securities Transfer Tax
The purchase or sale (or other financial
transfer) of the common shares, whether by Swiss residents or non-Swiss residents, may be subject to Swiss securities transfer
tax of up to 0.15%, calculated on the purchase price or the proceeds if the purchase or sale occurs through or with a Swiss bank
or other Swiss securities dealer as defined in the Swiss Federal Stamp Duty Act as an intermediary or party to the transaction
unless an exemption applies.
Material U.S. Federal Income Tax Considerations for U.S.
Holders
The following is a description of the material
U.S. federal income tax consequences to U.S. Holders described below of owning and disposing of common shares, but it does not
purport to be a comprehensive description of all tax considerations that may be relevant to a particular person’s decision
to acquire the common shares. This discussion applies only to a U.S. Holder that holds the common shares as capital assets for
U.S. federal income tax purposes. In addition, it does not describe all of the tax consequences that may be relevant in light of
a U.S. Holder’s particular circumstances, including alternative minimum tax consequences, the potential application of the
provisions of the Internal Revenue Code of 1986, as amended, or the Code, known as the Medicare contribution tax and tax consequences
applicable to U.S. Holders subject to special rules, such as:
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certain financial institutions;
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·
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dealers or traders in securities who use a mark-to-market method of tax accounting;
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·
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persons holding common shares as part of a straddle, wash sale, or conversion transaction or persons entering into a constructive
sale with respect to the common shares;
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·
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persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;
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·
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entities classified as partnerships for U.S. federal income tax purposes;
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·
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tax-exempt entities, including an “individual retirement account” or “Roth IRA”;
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·
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persons that own or are deemed to own ten percent or more of the vote or value of our stock; or
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·
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persons holding shares in connection with a trade or business conducted outside of the United States.
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If an entity that is classified as a partnership
for U.S. federal income tax purposes holds common shares, the U.S. federal income tax treatment of a partner will generally depend
on the status of the partner and the activities of the partnership. Partnerships holding common shares and partners in such partnerships
should consult their tax advisers as to their particular U.S. federal income tax consequences of holding and disposing of the common
shares.
This discussion is based on the Code, administrative
pronouncements, judicial decisions, final, temporary and proposed Treasury regulations, and the income tax treaty between Switzerland
and the United States, or the Treaty, all as of the date hereof, any of which is subject to change, possibly with retroactive effect.
A “U.S. Holder” is a holder
who, for U.S. federal income tax purposes, is a beneficial owner of common shares who is eligible for the benefits of the Treaty
and is:
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·
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an individual who is a citizen or resident of the United States;
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·
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a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any
state therein or the District of Columbia; or
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·
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an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
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U.S. Holders should consult their tax advisers
concerning the U.S. federal, state, local and non-U.S. tax consequences of owning and disposing of common shares in their particular
circumstances.
Passive Foreign Investment Company Rules
We believe that we were a “passive
foreign investment company,” or PFIC, for U.S. federal income tax purposes for our 2017 taxable year, and we expect to be
a PFIC for our current taxable year and for the foreseeable future. In addition, we may, directly or indirectly, hold equity interests
in other PFICs, or Lower-tier PFICs. In general, a non-U.S. corporation will be considered a PFIC for any taxable year in which
(i) 75% or more of its gross income consists of passive income or (ii) 50% or more of the average quarterly value of its assets
consists of assets that produce, or are held for the production of, passive income. For purposes of the above calculations, a non-U.S.
corporation that directly or indirectly owns at least 25% by value of the shares of another corporation is treated as if it held
its proportionate share of the assets of the other corporation and received directly its proportionate share of the income of the
other corporation. Passive income generally includes dividends, interest, rents, royalties and capital gains.
Under attribution rules, assuming we are
a PFIC, U.S. Holders will be deemed to own their proportionate shares of Lower-tier PFICs and will be subject to U.S. federal income
tax according to the rules described in the following paragraphs on (i) certain distributions by a Lower-tier PFIC and (ii) a disposition
of shares of a Lower-tier PFIC, in each case as if the U.S. Holder held such shares directly, even if the U.S. Holder has not received
the proceeds of those distributions or dispositions.
If we are a PFIC for any taxable year during
which a U.S. Holder holds our shares, the U.S. Holder may be subject to certain adverse tax consequences. Unless a U.S. Holder
makes a timely “mark-to-market” election or “qualified electing fund” election, each as discussed below,
gain recognized on a disposition (including, under certain circumstances, a pledge) of common shares by the U.S. Holder, or on
an indirect disposition of shares of a Lower-tier PFIC, will be allocated ratably over the U.S. Holder’s holding period for
the shares. The amounts allocated to the taxable year of disposition and to years before we became a PFIC, if any, will be taxed
as ordinary income. The amounts allocated to each other taxable year will be subject to tax at the highest rate in effect for that
taxable year for individuals or corporations, as appropriate, and an interest charge will be imposed on the tax attributable to
the allocated amounts. Further, to the extent that any distribution received by a U.S. Holder on our common shares (or a distribution
by a Lower-tier PFIC to its shareholder that is deemed to be received by a U.S. Holder) exceeds 125% of the average of the annual
distributions on the shares received during the preceding three years or the U.S. Holder’s holding period, whichever is shorter,
the distribution will be subject to taxation in the same manner as gain, described immediately above.
If we are a PFIC for any year during which
a U.S. Holder holds common shares, we generally will continue to be treated as a PFIC with respect to the U.S. Holder for all succeeding
years during which the U.S. Holder holds common shares, even if we cease to meet the threshold requirements for PFIC status. U.S.
Holders should consult their tax advisers regarding the potential availability of a “deemed sale” election that would
allow them to eliminate this continuing PFIC status under certain circumstances.
If our common shares are “regularly
traded” on a “qualified exchange,” a U.S. Holder may make a mark-to-market election with respect to the shares
that would result in tax treatment different from the general tax treatment for PFICs described above. Our common shares will be
treated as “regularly traded” in any calendar year in which more than a
de minimis
quantity of the common shares
is traded on a qualified exchange on at least 15 days during each calendar quarter. NASDAQ, on which the common shares are listed,
is a qualified exchange for this purpose. U.S. Holders should consult their tax advisers regarding the availability and advisability
of making a mark-to-market election in their particular circumstances. In particular, U.S. Holders should consider carefully the
impact of a mark-to-market election with respect to their common shares given that we may have Lower-tier PFICs for which a mark-to-market
election may not be available.
If a U.S. Holder makes the mark-to-market
election, the U.S. Holder generally will recognize as ordinary income any excess of the fair market value of the common shares
at the end of each taxable year over their adjusted tax basis, and will recognize an ordinary loss in respect of any excess of
the adjusted tax basis of the common shares over their fair market value at the end of the taxable year (but only to the extent
of the net amount of income previously included as a result of the mark-to-market election). If a U.S. Holder makes the election,
the U.S. Holder’s tax basis in the common shares will be adjusted to reflect the income or loss amounts recognized. Any gain
recognized on a sale or other disposition of common shares in a year in which we are a PFIC will be treated as ordinary income
and any loss will be treated as an ordinary loss (but only to the extent of the net amount of income previously included as a result
of the mark-to-market election). Distributions paid on common shares will be treated as discussed below under “
Taxation
of Distributions
.”
Alternatively, a U.S. Holder can make an
election, if we provide the necessary information, to treat us and each Lower-tier PFIC as a qualified electing fund (a “QEF
Election”) in the first taxable year that we are treated as a PFIC with respect to the U.S. Holder. A U.S. Holder must make
the QEF Election for each PFIC by attaching a separate properly completed IRS Form 8621 for each PFIC to its timely filed U.S.
federal income tax return. Upon request of a U.S. Holder, we will provide the information necessary for a U.S. Holder to make a
QEF Election with respect to us and will use commercially reasonable efforts to cause each Lower-tier PFIC that we control to provide
such information with respect to such Lower-tier PFIC. However, no assurance can be given that such QEF information will be available
for any Lower-tier PFIC.
If a U.S. Holder makes a QEF Election with
respect to a PFIC, the U.S. Holder will be currently taxable on its
pro rata
share of the PFIC’s ordinary earnings
and net capital gain (at ordinary income and capital gain rates, respectively) for each taxable year that the entity is classified
as a PFIC. If a U.S. Holder makes a QEF Election with respect to us, any distributions paid by us out of our earnings and profits
that were previously included in the U.S. Holder’s income under the QEF Election will not be taxable to the U.S. Holder.
A U.S. Holder will increase its tax basis in its common shares by an amount equal to any income included under the QEF Election
and will decrease its tax basis by any amount distributed on the common shares that is not included in its income. In addition,
a U.S. Holder will recognize capital gain or loss on the disposition of common shares in an amount equal to the difference between
the amount realized and its adjusted tax basis in the common shares. U.S. Holders should note that if they make QEF Elections with
respect to us and Lower-tier PFICs, they may be required to pay U.S. federal income tax with respect to their common shares for
any taxable year significantly in excess of any cash distributions received on the shares for such taxable year. U.S. Holders should
consult their tax advisers regarding making QEF Elections in their particular circumstances.
Furthermore, if with respect to a particular
U.S. Holder we are treated as a PFIC for the taxable year in which we paid a dividend or the prior taxable year, the preferential
dividend rate with respect to dividends paid to certain non-corporate U.S. Holders will not apply.
If we are a PFIC for any taxable year during
which a U.S. Holder holds common shares, such U.S. Holder will be required to file an annual information report with such U.S.
Holder’s U.S. Federal income tax return on IRS Form 8621.
U.S. Holders should consult their tax advisers
concerning our PFIC status and the tax considerations relevant to an investment in a PFIC.
Taxation of Distributions on Common Shares
As discussed above under “Dividend
Policy,” we do not currently expect to make distributions on our common shares. In the event that we do make distributions
of cash or other property, subject to the PFIC rules described above, distributions paid on common shares, other than certain
pro
rata
distributions of common shares, will be treated as dividends to the extent paid out of our current or accumulated earnings
and profits (as determined under U.S. federal income tax principles). The amount of a dividend will include any amounts withheld
by us in respect of Swiss taxes. The U.S. dollar amount of any dividend will be treated as foreign-source dividend income to U.S.
Holders and will not be eligible for the dividends-received deduction generally available to U.S. corporations under the Code.
Dividends will be included in a U.S. Holder’s income on the date of the U.S. Holder’s receipt of the dividend. The
amount of any dividend income paid in Swiss Francs will be the U.S. dollar amount calculated by reference to the exchange rate
in effect on the date of receipt, regardless of whether the payment is in fact converted into U.S. dollars. If the dividend is
converted into U.S. dollars on the date of receipt, a U.S. Holder should not be
required to recognize foreign currency gain
or loss in respect of the dividend income. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into
U.S. dollars after the date of receipt.
Subject to applicable limitations, some
of which vary depending upon the U.S. Holder’s circumstances, Swiss income taxes withheld from dividends on common shares
at a rate not exceeding the rate provided by the Treaty may be creditable against the U.S. Holder’s U.S. federal income tax
liability. Swiss taxes withheld in excess of the rate applicable under the Treaty will not be eligible for credit against a U.S.
Holder’s federal income tax liability. The rules governing foreign tax credits are complex, and U.S. Holders should consult
their tax advisers regarding the creditability of foreign taxes in their particular circumstances. In lieu of claiming a foreign
tax credit, U.S. Holders may, at their election, deduct foreign taxes, including the Swiss withholding tax, in computing their
taxable income, subject to generally applicable limitations under U.S. law. An election to deduct foreign taxes instead of claiming
foreign tax credits applies to all foreign taxes paid or accrued in the taxable year.
Sale or Other Disposition of Common Shares
Subject to the PFIC rules described above,
for U.S. federal income tax purposes, gain or loss realized on the sale or other disposition of common shares will be capital gain
or loss, and will be long-term capital gain or loss if the U.S. Holder held the common shares for more than one year. The amount
of the gain or loss will equal the difference between the U.S. Holder’s tax basis in the common shares disposed of and the
amount realized on the disposition, in each case as determined in U.S. dollars. This gain or loss will generally be U.S.-source
gain or loss for foreign tax credit purposes.
Information Reporting and Backup Withholding
Payments of dividends and sales proceeds
that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information
reporting, and may be subject to backup withholding, unless (i) the U.S. Holder is a corporation or other exempt recipient or (ii)
in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not
subject to backup withholding.
The amount of any backup withholding from
a payment to a U.S. Holder will be allowed as a credit against the holder’s U.S. federal income tax liability and may entitle
it to a refund, provided that the required information is timely furnished to the IRS.
Information With Respect to Foreign Financial
Assets
Certain U.S. Holders who are individuals
and certain entities may be required to report information relating to an interest in our common shares, subject to certain exceptions
(including an exception for common shares held in accounts maintained by certain U.S. financial institutions). U.S. Holders should
consult their tax advisers regarding the effect, if any, of this legislation on their ownership and disposition of the common shares.
Plan of
Distribution
Each selling shareholder of the common
shares and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities
covered hereby on the Nasdaq Capital Market or any other stock exchange, market or trading facility on which the securities are
traded or in private transactions. These sales may be at fixed or negotiated prices. A selling shareholder may use any one or more
of the following methods when selling common shares:
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ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion
of the block as principal to facilitate the transaction;
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purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
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an exchange distribution in accordance with the rules of the applicable exchange;
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privately negotiated transactions;
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settlement of short sales;
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in transactions through broker-dealers that agree with the selling shareholders to sell a specified number of such securities
at a stipulated price per security;
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through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
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a combination of any such methods of sale; or
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any other method permitted pursuant to applicable law.
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The selling shareholders may also sell
common shares under Rule 144 or any other exemption from registration under the Securities Act of 1933, as amended (the “
Securities
Act
”), if available, rather than under this prospectus.
Broker-dealers engaged by the selling shareholders
may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling
shareholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated,
but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary
brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance
with FINRA IM-2440.
In connection with the sale of the common
shares or interests therein, the selling shareholders may enter into hedging transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The
selling shareholders may also sell common shares short and deliver these common shares to close out their short positions, or loan
or pledge the common shares to broker-dealers that in turn may sell these common shares. The selling shareholders may also enter
into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities
which require the delivery to such broker-dealer or other financial institution of common shares offered by this prospectus, which
common shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended
to reflect such transaction).
The selling shareholders and any broker-dealers
or agents that are involved in selling the common shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the common shares purchased by them may be deemed to be underwriting commissions or discounts under the
Securities Act. Each selling shareholder has informed us that it does not have any written or oral agreement or understanding,
directly or indirectly, with any person to distribute the common shares.
We are required to pay certain fees and
expenses incident to the registration of the common shares. We have agreed to indemnify the selling shareholders against certain
losses, claims, damages and liabilities, including liabilities under the Securities Act.
With certain limited exceptions, we have
agreed to keep this prospectus effective until the earlier of (i) the date on which the common shares may be resold by the selling
shareholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without
the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act
or any other rule of similar effect or (ii) all of the common shares have been sold pursuant to this prospectus or Rule 144 under
the Securities Act or any other rule of similar effect. The common shares covered hereby will be sold only through registered or
licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities
covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied with.
Under applicable rules and regulations
under the Exchange Act of 1934, as amended (the “Exchange Act”), any person engaged in the distribution of the common
shares covered hereby may not simultaneously engage in market making activities with respect to the common shares for the applicable
restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling shareholders
will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M,
which may limit the timing of purchases and sales of the common shares by the selling shareholders or any other person. We will
make copies of this prospectus available to the selling shareholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).
Legal Matters
The validity of the common shares and certain
other matters of Swiss law will be passed upon for us by Walder Wyss Ltd., Zurich, Switzerland. Certain matters of U.S. federal
and New York State law will be passed upon for us by Davis Polk & Wardwell LLP, New York, New York.
Experts
The consolidated financial statements incorporated
in this Prospectus by reference from the Auris Medical Holding AG’s Annual Report on Form 20-F for the year ended December
31, 2016 have been audited by Deloitte AG, an independent registered public accounting firm, as stated in their report, which is
incorporated herein by reference. Such consolidated financial statements have been so incorporated in reliance upon the report
of such firm, given upon their authority as experts in accounting and auditing.
The current address of Deloitte AG is General
Guisan-Quai 38, 8002 Zurich, Switzerland, phone number + (41) 58 279 60 00.
Enforcement
Of Judgments
We are organized under the laws of Switzerland
and our jurisdiction of incorporation is Zug, Switzerland. Moreover, a number of our directors and executive officers and a number
of directors of each of our subsidiaries are not residents of the United States, and all or a substantial portion of the assets
of such persons are located outside the United States. As a result, it may not be possible for investors to effect service of process
within the United States upon us or upon such persons or to enforce against them judgments obtained in U.S. courts, including judgments
in actions predicated upon the civil liability provisions of the federal securities laws of the United States. We have been advised
by our Swiss counsel that there is doubt as to the enforceability in Switzerland of original actions, or in actions for enforcement
of judgments of U.S. courts, of civil liabilities to the extent predicated upon the federal and state securities laws of the United
States. Original actions against persons in Switzerland based solely upon the U.S. federal or state securities laws are governed,
among other things, by the principles set forth in the Swiss Federal Act on International Private Law. This statute provides that
the application of provisions of non-Swiss law by the courts in Switzerland shall be precluded if the result was incompatible with
Swiss public policy. Also, mandatory provisions of Swiss law may be applicable regardless of any other law that would otherwise
apply.
Switzerland and the United States do not
have a treaty providing for reciprocal recognition of and enforcement of judgments in civil and commercial matters. The recognition
and enforcement of a judgment of the courts of the United States in Switzerland is governed by the principles set forth in the
Swiss Federal Act on Private International Law. This statute provides in principle that a judgment rendered by a non-Swiss court
may be enforced in Switzerland only if:
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the non-Swiss court had jurisdiction pursuant to the Swiss Federal Act on Private International Law;
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the judgment of such non-Swiss court has become final and non-appealable;
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the judgment does not contravene Swiss public policy;
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the court procedures and the service of documents leading to the judgment were in accordance with the due process of law; and
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no proceeding involving the same position and the same subject matter was first brought in Switzerland, or adjudicated in Switzerland,
or was earlier adjudicated in a third state and this decision is recognizable in Switzerland.
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Where You
Can Find More Information
We have filed with the U.S. Securities
and Exchange Commission a registration statement (including amendments and exhibits to the registration statement) on Form F-1
under the Securities Act. This prospectus, which is part of the registration statement, does not contain all of the information
set forth in the registration statement and the exhibits and schedules to the registration statement. For further information,
we refer you to the registration statement and the exhibits and schedules filed as part of the registration statement. If a document
has been filed as an exhibit to the registration statement, we refer you to the copy of the document that has been filed. Each
statement in this prospectus relating to a document filed as an exhibit is qualified in all respects by the filed exhibit.
We are subject to the informational requirements
of the Exchange Act. Accordingly, we are required to file reports and other information with the SEC, including annual reports
on Form 20-F and reports on Form 6-K. You may inspect and copy reports and other information filed with the SEC at the Public Reference
Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by
calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet website that contains reports and other information
about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
As a foreign private issuer, we are exempt
under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our
directors, executive officers and principal shareholders are exempt from the reporting and short-swing profit recovery provisions
contained in Section 16 of the Exchange Act.
Incorporation
of Certain Information by Reference
The SEC allows us to incorporate by reference
information into this document. This means that we can disclose important information to you by referring you to another document
filed separately with the SEC. The information incorporated by reference is considered to be a part of this document, except for
any information superseded by information that is included directly in this prospectus or incorporated by reference subsequent
to the date of this prospectus.
We incorporate by reference the following
documents or information that we have filed with the SEC
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our Annual Report on Form 20-F for the fiscal year ended December 31, 2016;
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our Reports on Form 6-K filed on April 13, 2017, May 11, 2017 (other than Exhibit 99.3 thereto), August 10, 2017 (other than
Exhibit 99.3 thereto), September 26, 2017, September 28, 2017, October 11, 2017 (other than Exhibit 99.1 thereto), November 28,
2017 (other than Exhibits 99.3 and 99.4 thereto), January 4, 2018 and January 30, 2018, and
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the description of our common shares contained in our registration statement on Form 8-A filed with the SEC on July 29, 2014
and amended on June 1, 2016.
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Documents incorporated by reference in
this prospectus are available from us without charge upon written or oral request, excluding any exhibits to those documents that
are not specifically incorporated by reference into those documents. You can obtain documents incorporated by reference in this
document by requesting them from us in writing or at Auris Medical Holding AG, Bahnhofstrasse 21, 6300 Zug, Switzerland or via
telephone at +41 (0)41 729 71 94.
Part II
Information Not Required in the Prospectus
Item 6. Indemnification of Directors and Officers
Under Swiss law, a corporation may indemnify
its directors or officers against losses and expenses (except for such losses and expenses arising from willful misconduct or negligence,
although legal scholars advocate that at least gross negligence be required), including attorney’s fees, judgments, fines
and settlement amounts actually and reasonably incurred in a civil or criminal action, suit or proceeding by reason of having been
the representative of, or serving at the request of, the corporation.
Subject to Swiss law, Article 17 of our
articles of association provides for indemnification of the existing and former members of our board of directors, executive management,
and their heirs, executors and administrators, against liabilities arising in connection with the performance of their duties in
such capacity, and permits us to advance the expenses of defending any act, suit or proceeding to members of our board of directors
and executive management.
In addition, under general principles of
Swiss employment law, an employer may be required to indemnify an employee against losses and expenses incurred by such employee
in the proper execution of their duties under the employment agreement with the company.
We have entered into indemnification agreements
with each of the members of our board of directors and executive officers in the form filed as Exhibit 10.9 to this registration
statement.
Insofar as indemnification for liabilities
arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the Company,
the Company has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable.
Item 7. Recent Sales of Unregistered Securities
None.
Item 8. Exhibits
(a) The
following documents are filed as part of this registration statement:
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1.1
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Articles of Association of Auris Medical Holding AG, (incorporated by reference to exhibit 4.1 of the Auris Medical Holding AG registration statement on Form F-3 (Registration no. 333-217305) filed with the Commission on April 14, 2017)
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4.1
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Form of Registration Rights Agreement between Auris Medical Holding AG and the shareholders listed therein (incorporated by reference to exhibit 4.1 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on July 21, 2014)
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4.2
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Warrant Agreement, dated as of July 19, 2016, between Auris Medical Holding AG and Hercules Capital, Inc. (incorporated by reference to exhibit 10.2 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on July 19, 2016)
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4.3
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Registration Rights Agreement, dated as of October 10, 2017 between Auris Medical Holding AG and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.3 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on October 11, 2017
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4.4
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Purchase Agreement, dated as of October 10, 2017 between Auris Medical Holding AG and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on October 11, 2017
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4.5
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Purchase Agreement, dated as of October 10, 2017 between Auris Medical Holding AG and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.2 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on October 11, 2017
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4.6
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Placement Agency Agreement, dated as of January 28, 2018, between Auris Medical Holding AG and Ladenburg Thalmann & Co. Inc. (incorporated by reference to exhibit 1.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on January 30, 2018)
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4.7
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Securities Purchase Agreement, dated as of January 26, 2018 by and among Auris Medical Holding AG and the investors named therein (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on January 30, 2018)
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5.1
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Opinion of Walder Wyss, Swiss counsel of Auris Medical Holding AG, as to the validity of the common shares
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10.1*
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Collaboration and License Agreement, dated October 21, 2003, between Auris Medical AG and Xigen SA (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014)
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10.2
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Co-Ownership and Exploitation Agreement, dated September 29, 2003, between Auris Medical AG and INSERM (incorporated by reference to exhibit 10.2 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014)
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10.3
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Form of Indemnification Agreement (incorporated by reference to exhibit 99.4 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on May 11, 2016)
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10.4
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English language translation of Lease Agreement between Auris Medical AG and Privera AG (incorporated by reference to exhibit 10.10 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014)
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10.5
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Stock Option Plan A (incorporated by reference to exhibit 10.11 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014)
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10.6
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Stock Option Plan C (incorporated by reference to exhibit 10.12 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014)
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10.7
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English language translation of Termination of Lease Agreement between Auris Medical AG and Privera AG (incorporated by reference to exhibit 4.7 of the Auris Medical Holding AG Annual Report on Form 20-F filed with the Commission on March 14, 2017)
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10.8
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English language translation of Lease Agreement between Auris Medical AG and PSP Management AG (incorporated by reference to exhibit 4.8 of the Auris Medical Holding AG Annual Report on Form 20-F filed with the Commission on March 14, 2017)
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10.9
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Controlled Equity OfferingSM Sales Agreement, dated as of June 1, 2016, between Auris Medical Holding AG and Cantor Fitzgerald & Co. (incorporated by reference to exhibit 1.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on June 1, 2016)
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10.10
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Share Lending Agreement, dated as of June 1, 2016, between Thomas Meyer and Cantor Fitzgerald & Co. (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on June 1, 2016)
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10.11
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Loan and Security Agreement, dated as of July 19, 2016, between Auris Medical Holding AG, the several banks and other financial institutions or entities from time to time parties to the agreement and Hercules Capital, Inc. (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG rep ort on Form 6-K filed with the Commission on July 19, 2016)
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10.12
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Share Pledge Agreement, dated July 19, 2016, between Auris Medical Holding AG and Hercules Capital, Inc. (incorporated by reference to exhibit 10.3 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on July 19, 2016)
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10.13
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Claims Security Assignment Agreement, dated July 19, 2016, between Auris Medical Holding AG and Hercules Capital, Inc. (incorporated by reference to exhibit 10.4 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on July 19, 2016)
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10.14
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Bank Account Claims Security Assignment Agreement, dated July 19, 2016, between Auris Medical Holding AG and Hercules Capital, Inc. (incorporated by reference to exhibit 10.5 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on July 19, 2016)
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*
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Confidential treatment requested as to portions of the exhibit. Confidential materials omitted and filed separately with the
Securities and Exchange Commission.
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(b)
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Financial Statement Schedules None.
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Item 9. Undertakings
The undersigned hereby undertakes:
(a) The
undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each
purchaser.
(b) Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion
of the U.S. Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(c) The
undersigned registrant hereby undertakes that:
(1) For
purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement
as of the time it was declared effective.
(2) For
the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof.
EXHIBIT INDEX
The following documents are filed as part
of this registration statement:
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1.1
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Articles of Association of Auris Medical Holding AG, (incorporated by reference to exhibit 4.1 of the Auris Medical Holding AG registration statement on Form F-3 (Registration no. 333-217305) filed with the Commission on April 14, 2017)
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4.1
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Form of Registration Rights Agreement between Auris Medical Holding AG and the shareholders listed therein (incorporated by reference to exhibit 4.1 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on July 21, 2014)
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4.2
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Warrant Agreement, dated as of July 19, 2016, between Auris Medical Holding AG and Hercules Capital, Inc. (incorporated by reference to exhibit 10.2 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on July 19, 2016)
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4.3
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Registration Rights Agreement, dated as of October 10, 2017 between Auris Medical Holding AG and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.3 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on October 11, 2017
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4.4
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Purchase Agreement, dated as of October 10, 2017 between Auris Medical Holding AG and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on October 11, 2017
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4.5
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Purchase Agreement, dated as of October 10, 2017 between Auris Medical Holding AG and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.2 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on October 11, 2017
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4.6
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Placement Agency Agreement, dated as of January 28, 2018, between Auris Medical Holding AG and Ladenburg Thalmann & Co. Inc. (incorporated by reference to exhibit 1.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on January 30, 2018)
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4.7
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Securities Purchase Agreement, dated as of January 26, 2018 by and among Auris Medical Holding AG and the investors named therein (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on January 30, 2018)
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5.1
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Opinion of Walder Wyss, Swiss counsel of Auris Medical Holding AG, as to the validity of the common shares
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10.1*
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Collaboration and License Agreement, dated October 21, 2003, between Auris Medical AG and Xigen SA (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014)
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10.2
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Co-Ownership and Exploitation Agreement, dated September 29, 2003, between Auris Medical AG and INSERM (incorporated by reference to exhibit 10.2 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014)
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10.3
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Form of Indemnification Agreement (incorporated by reference to exhibit 99.4 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on May 11, 2016)
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10.4
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English language translation of Lease Agreement between Auris Medical AG and Privera AG (incorporated by reference to exhibit 10.10 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014)
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10.5
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Stock Option Plan A (incorporated by reference to exhibit 10.11 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014)
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10.6
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Stock Option Plan C (incorporated by reference to exhibit 10.12 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014)
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10.7
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English language translation of Termination of Lease Agreement between Auris Medical AG and Privera AG (incorporated by reference to exhibit 4.7 of the Auris Medical Holding AG Annual Report on Form 20-F filed with the Commission on March 14, 2017)
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10.8
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English language translation of Lease Agreement between Auris Medical AG and PSP Management AG (incorporated by reference to exhibit 4.8 of the Auris Medical Holding AG Annual Report on Form 20-F filed with the Commission on March 14, 2017)
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10.9
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Controlled Equity OfferingSM Sales Agreement, dated as of June 1, 2016, between Auris Medical Holding AG and Cantor Fitzgerald & Co. (incorporated by reference to exhibit 1.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on June 1, 2016)
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10.10
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Share Lending Agreement, dated as of June 1, 2016, between Thomas Meyer and Cantor Fitzgerald & Co. (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on June 1, 2016)
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10.11
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Loan and Security Agreement, dated as of July 19, 2016, between Auris Medical Holding AG, the several banks and other financial institutions or entities from time to time parties to the agreement and Hercules Capital, Inc. (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG rep ort on Form 6-K filed with the Commission on July 19, 2016)
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10.12
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Share Pledge Agreement, dated July 19, 2016, between Auris Medical Holding AG and Hercules Capital, Inc. (incorporated by reference to exhibit 10.3 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on July 19, 2016)
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10.13
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Claims Security Assignment Agreement, dated July 19, 2016, between Auris Medical Holding AG and Hercules Capital, Inc. (incorporated by reference to exhibit 10.4 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on July 19, 2016)
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10.14
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Bank Account Claims Security Assignment Agreement, dated July 19, 2016, between Auris Medical Holding AG and Hercules Capital, Inc. (incorporated by reference to exhibit 10.5 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on July 19, 2016)
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21.1
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List of subsidiaries (incorporated by reference to exhibit 21.1 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014)
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23.1
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Consent of Deloitte AG
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23.2
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Consent of Walder Wyss, Swiss counsel of Auris Medical Holding AG (included in Exhibit 5.1)
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24.1
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Powers of attorney (included on signature page to the registration statement)
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*
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Confidential treatment requested as to portions of the exhibit. Confidential materials omitted and filed separately with the
Securities and Exchange Commission.
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SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing
on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized,
in Zug, Switzerland on February 9, 2018.
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Auris Medical Holding AG
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By:
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/s/ Thomas Meyer
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Name:
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Thomas Meyer
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Title:
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Chief Executive Officer
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KNOW ALL PERSONS BY THESE PRESENTS, that
each person whose signature appears below hereby constitutes and appoints Thomas Meyer and Hernan Levett and each of them, individually,
as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name,
place and stead in any and all capacities, in connection with this registration statement, including to sign in the name and on
behalf of the undersigned, this registration statement and any and all amendments thereto, including post-effective amendments
and registrations filed pursuant to Rule 462 under the U.S. Securities Act of 1933, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto such attorneys-in-fact
and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or his substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities
Act of 1933, as amended, this registration statement has been signed by the following persons on February 9, 2018 in the capacities
indicated:
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By:
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/s/ Thomas Meyer
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Name:
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Thomas Meyer
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Title:
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Chief Executive Officer and Director
(principal executive officer)
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By:
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/s/ Hernan Levett
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Name:
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Hernan Levett
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Title:
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Chief Financial Officer
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(principal financial officer and principal accounting officer)
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By:
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/s/ Armando Anido
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Name:
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Armando Anido
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Title:
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Director
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By:
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/s/ Mats Blom
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Name:
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Mats Blom
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Title:
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Director
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By:
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/s/ Oliver Kubli
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Name:
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Oliver Kubli
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Title:
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Director
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By:
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Name:
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Berndt Modig
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Title:
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Director
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By:
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/s/ Calvin Roberts
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Name:
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Calvin Roberts
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Title:
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Director
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By:
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/s/ Colleen A. DeVries
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Name:
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Colleen A. DeVries
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Title:
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SVP Cogency Global Inc.
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Authorized Representative in the United States
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