

4.	Acquisition

Reverse Merger with RestorGenex

On January 8, 2016, the Company completed a reverse merger transaction with RestorGenex. The Company entered into the Merger transaction in an effort to provide improved access to the capital markets in order to obtain the resources necessary to accelerate development of TSC in multiple clinical programs and continue to build an oncology-focused company.

The purchase price was calculated as follows:



Fair value of RestorGenex shares outstanding	$	19,546,000
Estimated fair value of RestorGenex stock options outstanding	1,321,000
Estimated fair value of RestorGenex warrants outstanding	384,000
CVRs – RES-440 product candidate	10,000
Total purchase price	$	21,261,000

The reverse merger transaction has been accounted for using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The valuation technique utilized to value the IPR&D was the cost approach.

The following table summarizes the allocation of the purchase price to the assets acquired and liabilities assumed as of the acquisition date:



Cash and cash equivalents	$	8,500,602
Prepaid expenses and other assets	195,200
Property and equipment	57,531
Intangible assets	9,600,000
Goodwill	6,929,258
Accrued liabilities	(377,432		)
Deferred tax liability	(3,644,159		)
Net assets acquired	$	21,261,000

Qualitative factors supporting the recognition of goodwill due to the reverse merger transaction include the Company’s anticipated enhanced ability to secure additional capital and gain access to capital market opportunities as a public company and the potential value created by having a more well-rounded clinical development portfolio by adding the earlier stage products acquired in the reverse merger transaction to the Company’s later state product portfolio. The goodwill is not deductible for income tax purposes.

Pro Forma Financial Information (Unaudited)

The following pro forma financial information reflects the condensed consolidated results of operations of the Company as if the acquisition of RestorGenex had taken place on January 1, 2016. The pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transactions been effected on the assumed date.



	Three Months Ended March 31, 2016
	Three Months Ended March 31, 2016
Net revenues	$	—
Net loss	(4,655,944		)
Basic and diluted loss per share	$	0.47

Non-recurring pro forma transaction costs directly attributable to the Merger were $1.6 million for the three months ended March 31, 2016 and have been deducted from the net loss presented above. The costs deducted from the three months ended March 31, 2016 period includes a success fee of $1.1 million and approximately 46,000 shares of common stock with a fair market value of $0.5 million paid to a financial adviser upon the closing of the Merger on January 8, 2016. Additionally, RestorGenex incurred approximately $3.0 million in severance costs as a result of resignations of executive officers immediately prior to the Merger and approximately $2.7 million in share based compensation expense as a result of the acceleration of vesting of stock options at the time of the Merger. These costs are excluded from the pro forma financial information for the three months ended March 31, 2016. No such costs were recorded in the three months ended March 31, 2017.