On September 14, 2020, the Company acquired Anelixis pursuant to that certain Agreement and Plan of Merger, dated September 14, 2020 (the “Merger Agreement”), by and among Novus, Nautilus Merger Sub 1, Inc., a Delaware corporation and wholly owned subsidiary of Novus (“First Merger Sub”), Nautilus Merger Sub 2, LLC, a Delaware limited liability company and wholly owned subsidiary of Novus (“Second Merger Sub”), and Anelixis. Pursuant to the Merger Agreement, First Merger Sub merged with and into Anelixis, pursuant to which Anelixis was the surviving entity and became a wholly owned subsidiary of Novus (the “First Merger”). Immediately following the First Merger, Anelixis merged with and into Second Merger Sub, pursuant to which Second Merger Sub was the surviving entity (the “Second Merger,” together with the First Merger, the “Merger”). The Merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes. Following the acquisition of Anelixis, the Company has continued to maintain its corporate headquarters in Southern California and maintain research and development facilities in the Boston area.

Under the terms of the Merger Agreement, at the closing of the Merger, Novus issued to the stockholders of Anelixis 175,488 shares of the common stock of Novus, par value $0.001 per share and 140,026 shares of newly designated Series X¹ Preferred Stock. Subject to stockholder approval, each share of Series X¹ Preferred Stock is convertible into approximately 55.5556 shares of common stock. The preferences, rights and limitations applicable to the Series X¹ Preferred Stock are set forth in the Certificate of Designation, as filed with the SEC.

In addition to the common stock and preferred stock issued, certain outstanding warrants issued and equity awards granted by Anelixis were not settled upon completion of the merger, and instead were assumed and then replaced with Novus warrants and equity awards. The amounts for the assumed and replaced warrants and equity awards attributed to pre-merger services are included in other consideration amounts transferred and added to goodwill.

Concurrently and in connection with the execution of the Merger Agreement, the Company entered into the Purchase Agreement with certain institutional and accredited investors. Pursuant to the Stock Purchase Agreement, the Company agreed to sell an aggregate of approximately 199,112 shares of Series X¹ Preferred Stock for an aggregate purchase price of approximately $99.1 million in the Financing (collectively, the “Financing”). Novus has commitments for an additional $9.0 million in equity financing that is contingent upon the satisfaction of certain incremental closing conditions, including stockholders’ approval of the issuance of the Company’s common stock upon the conversion of the Company’s Series X¹ Preferred Stock and the effective registration of its common stock. The merger was a pre-requisite in order for the Financing to transpire; without the merger, those certain institutional and accredited investors would not have purchased the Company’s Series X¹ convertible preferred stock.

The following table summarizes the fair value of purchase price consideration to acquire Anelixis (in thousands):

Description	Amount
Fair value of purchase consideration:
Common shares issued (1)	$	1,194
Preferred shares issued (2)		69,723
Options assumed (3)		3,278
Warrants assumed (3)		12,944
Total purchase consideration	$	87,139

(1)

The fair value of common shares issued in the merger is based on 175,488 shares issued on the September 14, 2020 acquisition date at the closing price of the Company's common stock of $6.80 per share.

(2)

The fair value of preferred shares issued in the merger is based on the amount per share of Series X¹ preferred stock in the September 2020 Purchase Agreement.

(3)

The fair value of the options and warrants assumed and replaced in the merger is based on applying the Black-Scholes valuation method using appropriate inputs of volatility rates ranging from 82% to 83%, expected terms of 5.0 to 5.9 years and risk-free rates of 0.27% to 0.45%.

The following is an allocation of purchase price as of the September 14, 2020 acquisition closing date based upon a preliminary estimate of the fair value of the assets acquired and the liabilities assumed by the Company in the acquisition (in thousands):

Description	Amount
Cash and cash equivalents	$	11,035
Prepaid expenses and other current assets		27
Other non-current assets		11
Accounts payable		(580	)
Accrued expenses and other liabilities		(206	)
Net identifiable assets acquired		10,287

Goodwill		44,466
Identifiable intangible assets		32,386
Net assets acquired	$	87,139

Acquisition costs of approximately $2.2 million were included in general and administrative expenses in the Company’s condensed consolidated statements of operations and comprehensive loss.

Through its acquisition of Anelixis, the Company acquired intangible assets that consisted of in-process research and development (“IPR&D”) with an estimated fair value of $32.4 million, related to its clinical development program of AT-1501. The estimated fair value of the IPR&D was determined by management based on external valuation specialists’ analysis of replacement costs to recreate AT-1501 in its current clinical stage. The replacement cost method contemplates the cost to recreate the utility of AT-1501 but in a form that is not a replica of AT-1501. In this method, the replacement cost is determined and reduced for depreciation of the asset. In this context, depreciation has three components: (i) physical deterioration, (ii) functional obsolescence, and (iii) economic obsolescence.

Under the acquisition method of accounting, goodwill of approximately $44.5 million would be generated after accounting for Anelixis’ assets acquired, liabilities assumed, and intangible assets identified and valued.

The following unaudited pro forma combined financial information is presented to illustrate the estimated effects of the Merger based on the historical financial statements and accounting records of Novus and Anelixis after giving effect to the Merger and the Merger-related pro forma adjustments.

The unaudited pro forma combined statement of operations for the three and nine months ended September 30, 2020 combine the historical statements of operations of Novus and Anelixis, giving effect to the Merger as if it had occurred on January 1, 2019, the first day of the fiscal year ended December 31, 2019.

The unaudited pro forma combined financial information has been presented for informational purposes only. The unaudited pro forma combined financial information does not purport to represent the actual results of operations that Novus and Anelixis would have achieved had the companies been combined during the periods presented in the unaudited pro forma combined financial statements and is not intended to project the future results of operations that the combined company may achieve after the Merger. The unaudited pro forma combined financial information does not reflect any potential cost savings that may be realized as a result of the Merger and also does not reflect any restructuring or integration-related costs to achieve those potential cost savings. Additionally, the unaudited pro forma combined financial information does not reflect any merger-related expenses, which totaled approximately $2.2 million and were removed from general and administrative expenses in the pro forma calculations below.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Revenue	$	120		$	250		$	120		$	250

Operating expenses
Research and development		1,779			2,267			6,556			9,077
General and administrative		1,918			1,761			5,622			6,141
Restructuring expense		1,802			—			2,292			—
Total operating expenses		5,499			4,028			14,470			15,218
Loss from operations		(5,379	)		(3,778	)		(14,350	)		(14,968	)
Other income (expense), net		4			27			(4,790	)		17
Net loss and other comprehensive loss	$	(5,375	)	$	(3,751	)	$	(19,140	)	$	(14,951	)
Net loss per share, basic and diluted	$	(4.28	)	$	(4.18	)	$	(16.35	)	$	(18.49	)
Weighted-average shares outstanding, basic and diluted		1,257,194			896,318			1,170,608			808,675