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Note 4 - Acquisition | 12 Months Ended
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Dec. 31, 2017
Notes to Financial Statements |
Business Combination Disclosure [Text Block] | 4. Acquisitions Merger with Diffusion Pharmaceuticals LLC On December 15, 2015, the Company entered into a merger agreement (the “Merger Agreement”) with Diffusion LLC. On January 8, 2016, the Company completed the merger (the “Merger”), with Diffusion LLC surviving as a wholly-owned subsidiary of the Company. Subsequent to the Merger, the Company was renamed “Diffusion Pharmaceuticals Inc.” and the Company ’s ticker symbol was changed from “RESX” to “DFFN.” In November 2016, the Company’s Common Stock was approved for listing on the NASDAQ Capital Market and continues to trade under the ticker symbol “DFFN”. The Company and Diffusion LLC entered into the Merger Agreement 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 Merger was accounted for as a reverse acquisition under the acquisition method of accounting. Because Diffusion LLC ’s pre-transaction owners held an 84.1% economic and voting interest in the combined company immediately following the completion of the Merger, Diffusion LLC is considered to be the acquirer of the Company for accounting purposes. Each Diffusion Unit was converted into the right to receive 0.3652658 shares of Common Stock based on the Exchange Ratio. Additionally, the rights of holders of Diffusion LLC ’s outstanding convertible notes to convert such notes into Diffusion Units was converted into the right to convert such notes into a number of shares of Common Stock equal to the number of Diffusion Units into which such notes would have been convertible under the terms of the notes in effect immediately prior to the consummation of the Merger multiplied by the Exchange Ratio. In addition, all outstanding options to purchase Diffusion Units were assumed by the Company and the right to exercise such options for Diffusion Units converted into a right to exercise such options for Common Stock on terms substantially identical to those in effect prior to the Merger transaction, except for adjustments to the underlying number of shares and the exercise price based on the Exchange Ratio. In connection with the Merger, the Company ’s former Board of Directors authorized, declared and effected a distribution of contingent value rights (“CVRs”) to stockholders of the Company as of the close of business on January 7, 2016. Each CVR is a non-transferable right to potentially receive certain cash payments in the event the Company receives net cash payments during the five ( 5 ) year period after the Merger as a result of the sale, transfer, license or similar transaction or any other agreement to the extent relating to the development of the Company’s product currently known as RES- 440, a “soft” anti-androgen. See below for additional fair value information. The purchase consideration in a reverse acquisition is determined with reference to the value of equity that the accounting acquirer, in this case, Diffusion LLC, would have had to issue to the owners of the accounting acquiree, the Company, to give the pre-acquisition equity holders of the Company the same percentage interest in Diffusion LLC that such pre-acquisition equity holders held in the Company immediately following the Merger. The purchase price was calculated as follows:
Fair value of the Company ’s pre-Merger shares outstanding |  | $ | 19,546,000 |
Estimated fair value of the Company ’s pre-Merger stock options outstanding |  |  | 1,321,000 |
Estimated fair value of the Company ’s pre-Merger warrants outstanding |  |  | 384,000 |
CVRs – RES-440 product candidate |  |  | 10,000 |
Total purchase price |  | $ | 21,261,000 |
The 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 Merger 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 Merger to the Company’s later state product portfolio. The goodwill is not deductible for income tax purposes. The values allocated to IPR&D intangible assets are $8.6 million for the RES- 529 compound and $1.0 million for the RES- 440 compound, each with indefinite useful lives. See Note 6 for additional information. Pro Forma Financial Information (Unaudited) The following pro forma financial information reflects the consolidated results of operations of the Company as if the Merger 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.
|  | Year ended December 31, 2016 |
Net revenues |  | $ | — |
Net loss |  | $ | (16,471,398 | )
Basic and diluted loss per share |  | $ | (1.60 | )
Non-recurring pro forma transaction costs directly attributable to the Merger were $1.6 million for the year ended December 31, 2016 and have been deducted from the net loss presented above. The costs deducted from the year ended December 31, 2016 period included a success fee and other transaction costs 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 advisor 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 Merger. These costs are excluded from the pro forma financial information for the year ended December 31, 2016. No such costs were recorded during the year ended December 31, 2017.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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