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Significant Accounting Policies [Text Block]

Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated

financial statements of the Company have been prepared in accordance with US GAAP. Any reference in these notes to applicable guidance is meant to refer to US GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.

On an ongoing basis, the Company evaluates its estimates using historical experience and other factors, including the current economic environment. Significant items subject to such estimates are assumptions used for purposes of determining stock-based compensation, the fair value of the convertible notes, allocation of the purchase price and accounting for research and development activities. Management believes its estimates to be reasonable under the circumstances. Actual results could differ significantly from those estimates.

Fair Value of Financial Instruments

The carrying amounts of the Company’s financial instruments, including cash equivalents, accounts payable, and accrued expenses approximate fair value due to the short-term nature of those instruments. The carrying value of the contingent consideration liability is the estimated fair value of the liability (See Note

15).

As of

December

31,

2016,

and

December

31,

2015,

the fair value of the Company’s outstanding convertible notes was approximately

$2.6

million and

$4.8

million, respectively.

The fair value of the convertible notes is determined using a binomial lattice model that utilizes certain unobservable inputs that fall within Level

of the fair value hierarchy.

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash on deposit with multiple financial institutions, the balances of which frequently exceed federally insured limits.

Cash and Cash Equivalents

The Company considers any highly liquid investments, such as money market funds, with an original maturity of

three

months or less to be cash and cash equivalents.

Property and Equipment

The Company records property and equipment at cost less accumulated depreciation and amortization. Costs of renewals and improvements that extend the useful lives of the assets are capitalized. Maintenance and repairs are expensed as incurred. Depreciation is recognized on a straight-line basis over the estimated useful lives of the assets, which generally range from

years. The Company amortizes leasehold improvements over the shorter of the estimated useful life of the asset or the term of the related lease. Upon retirement or disposition of assets, the costs and related accumulated depreciation and amortization are removed from the accounts with the resulting gains or losses, if any, reflected in results of operations.

Long-Lived Assets

Long-lived assets are reviewed for potential impairment whenever events indicate that the carrying amount of such assets

may

not be recoverable. The Company does this by comparing the carrying value of the long-lived assets with the estimated future undiscounted cash flows expected to result from the use of the assets, including cash flows from disposition. If it is determined an impairment exists, the asset is written down to its estimated fair value. The Company has

not

recognized any impairment of long-lived assets during the years ended

December

31,

2016

and

2015,

respectively.

Intangible Assets

Intangible assets are comprised of identifiable in-process research and development (IPR&D) assets and are considered indefinite-lived intangible assets and are assessed for impairment annually on

October

or more frequently if impairment indicators exist. If the associated research and development effort is abandoned, the related assets will be written-off and the Company will record a non-cash impairment loss. For those compounds that reach commercialization, the IPR&D assets will be amortized over their estimated useful lives. In

August

2016,

the Company abandoned the future development efforts with respect to its RES-

440

product candidate, and the value of the associated IPR&D asset was written down to

zero

(See Note

4).

Goodwill

Goodwill is the excess of the cost of an acquired entity over the net amounts assigned to tangible and intangible assets acquired and liabilities assumed. Goodwill is not amortized, but is subject to an annual impairment test. The Company has a single reporting unit and all goodwill relates to that reporting unit.

The Company performs its annual goodwill impairment test on

October

of each fiscal year or more frequently if changes in circumstances or the occurrence of events suggest that an impairment exists. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the reporting unit’s goodwill is less than the carrying value of the reporting unit’s goodwill. The Company did not recognize any impairment of goodwill during the year ended

December

31,

2016.

Offering Costs

Offering costs consist principally of legal costs incurred through the balance sheet date related to our private placement financing (See Note

17)

and are recognized in other assets on the consolidated balance sheet.

Research and Development

Major components of research and development costs include internal research and development (such as salaries and related employee benefits, equity-based compensation, supplies and allocated facility costs) and contracted services (research and development activities performed on the Company’s behalf). Costs incurred for research and development are expensed as incurred.

At the end of the reporting period, the Company compares payments made to

third

-party service providers to the estimated progress toward completion of the research or development objectives. Such estimates are subject to change as additional information becomes available. Depending on the timing of payments to the service providers and the progress that the Company estimates has been made as a result of the services provided, the Company

may

record net prepaid or accrued expenses relating to these costs.

Upfront payments made to

third

parties who perform research and development services on the Company’s behalf are expensed as services are rendered.

Patent Costs

Patent costs, including related legal costs, are expensed as incurred and are recorded within general and administrative expenses in the statements of operations.

Income Taxes

Prior to the Merger, Diffusion LLC was treated as a partnership for federal and state income tax purposes. Diffusion LLC’s taxable income or loss, as well as certain other tax attributes, were passed through directly to its members and were reported in each member’s individual income tax return.

Upon completion of the Merger as discussed in Note

the Company converted from a partnership to a corporation for accounting purposes. As a corporation, the Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The Company recognizes the benefit of an uncertain tax position that it has taken or expects to take on its income tax return it files, if such a position is more likely than not to be sustained.

Debt Issuance Costs

Debt issuance costs incurred in connection with financing arrangements are amortized to interest expense over the life of the respective financing arrangement using the effective interest method. Debt issuance costs, net of related amortization, are deducted from the carrying amount of the related debt.

Stock-based Compensation

The Company measures employee and nonemployee stock-based awards at grant-date fair value and records compensation expense on a straight-line basis over the vesting period of the award. Stock-based awards issued to non-employees are revalued until the award vests. The Company uses the Black-Scholes option pricing model to value its stock option awards. Estimating the fair value of stock option awards requires management to apply judgment and make estimates, including the volatility of the Company’s common stock, the expected term of the Company’s stock options, the expected dividend yield and the fair value of the Company’s common stock on the measurement date. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards.

The expected term of stock options was estimated using the “simplified method” for employee options as the Company has no historical information to develop reasonable expectations about future exercise patterns and post vesting employment termination behavior for its stock option grants. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. For options granted to non-employees, the Company uses the remaining contractual life. For stock price volatility, the Company uses comparable public companies as a basis for its expected volatility to calculate the fair value of option grants. The Company assumes no dividend yield because dividends are not expected to be paid in the near future, which is consistent with the Company’s history of not paying dividends.

The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the option.

Net Loss Per Share

Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as convertible debt, warrants, stock options and unvested restricted stock that would result in the issuance of incremental shares of common stock. In computing the basic and diluted net loss per share, the weighted average number of shares remains the same for both calculations due to the fact that when a net loss exists, dilutive shares are not included in the calculation as the impact is anti-dilutive.

The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted average shares outstanding, as they would be anti-dilutive:

	December 31,
	2016		2015
Convertible debt		757,909		427,108
Common stock warrants		460,721		—
Stock options		2,207,409		1,495,582
Unvested restricted stock awards		9,204		15,341
		3,435,243		1,938,031

Amounts in the table reflect the common stock equivalents of the noted instruments.

Comprehensive Loss

The Company has no items of comprehensive income or loss other than net loss.

Recent Accounting Pronouncements

August

2016,

the FASB issued ASU

2016

15,

Classification of Certain Cash Receipts and Cash Payments

which will reduce diversity in practice on how certain cash receipts and cash payments are classified in the statement of cash flows. The guidance is applicable to public business entities for fiscal years beginning after

December

15,

2017

and interim periods within those years. The ASU should be applied retrospectively and early adoption is permitted. The Company is currently evaluating the impact of adopting this new guidance on its financial statements and related disclosures.

March

2016,

the FASB issued ASU

2016

09,

Compensation – Improvements to Employee Share-Based Payment Accounting

, which simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The guidance is applicable to public business entities for fiscal years beginning after

December

15,

2016

and interim periods within those years. The Company is currently evaluating the effect that ASU

2016

will have on its consolidated financial statements and related disclosures.

February

2016,

the FASB issued ASU

2016

02,

Leases (Topic

842)

. The FASB issued the update to require the recognition of lease assets and liabilities on the balance sheet of lessees. The standard will be effective for fiscal years beginning after

December

15,

2018,

including interim periods within such fiscal years. The ASU requires a modified retrospective transition method with the option to elect a package of practical expedients. Early adoption is permitted. The Company is currently evaluating the potential impact of the adoption of this standard on its consolidated results of operations, financial position and cash flows and related disclosures.

August

2014,

the FASB issued ASU

2014

15,

Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern

. The amendments in this update will explicitly require a company’s management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. The new standard is effective in the

first

annual period ending after

December

15,

2016.

The Company adopted this standard as of

December

31,

2016

and the adoption of this standard did not have a material impact on our financial statements.

Reclassification

Certain prior period balances have been reclassified to conform with the current period presentation.

Note 4 - Acquisitions

12 Months Ended

Dec. 31, 2016

Business Combination Disclosure [Text Block]

Acquisitions

Merger with Diffusion Pharmaceuticals LLC

December

15,

2015,

the Company entered into a merger agreement (the “Merger Agreement”) with Diffusion LLC. On

January

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 note would have been convertible under the terms of the note 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

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 and Note

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

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

2015.

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 3 1 ,

	2016			2015

Net revenues	$	—		$	—

Net loss	$	(16,471,398	)	$	(17,618,292	)

Basic and diluted loss per share	$	(1.60	)	$	(3.89	)

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

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.

The Company excluded an

$11.1

million impairment charge incurred by RestorGenex as well as combined transaction costs from Diffusion and RestoGenex in the amount of

$1.9

million from the pro forma financial information for the year ended

December

31,

2015.

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

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+ Details

Note 5 - Property and Equipment

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment Disclosure [Text Block]

Property and Equipment

Property and equipment consists of the following:

	December 31,
	2016			2015
Laboratory equipment	$	182,357		$	182,357
Furniture and office equipment		137,290			84,668
Total property and equipment		319,647			267,025
Less: accumulated depreciation		(239,892	)		(215,029	)
Property and equipment, net	$	79,755		$	51,996

Depreciation expense was approximately

$25.0

thousand and

$8.0

thousand for the year ended

December

31,

2016

and

2015,

respectively.

Note 6 - Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Text Block]

Goodwill and Intangible Assets

The Company completes its annual impairment test on

October

each year, or more frequently if triggering events indicate a possible impairment. The Company continually evaluates financial performance, economic conditions and other relevant developments in assessing if an interim period impairment test is necessary.

Changes in the carrying amount of goodwill for the period ended

December

31,

2016

consisted of the following:

	Goodwill
Balance as of December 31, 2015	$	—
Goodwill as a result of the Merger		6,929,258
Balance as of December 31, 2016	$	6,929,258

Intangible assets consisted of the following:

	Acquisition Date Fair Value		Accumulated Amortization		Impairment Upon Abandonment			Carrying Value at December 31, 2016
RES-529	$	8,639,000	$	-	$	-		$	8,639,000
RES-440		961,000		-		(961,000	)	$	-
Total in-process research and development costs (IPR&D)	$	9,600,000	$	-	$	(961,000	)	$	8,639,000

The Company’s novel

PI3K/Akt/mTOR

pathway inhibitor, RES-

529,

is in preclinical development for oncology. Through a series of in vitro and in vivo animal models, RES-

529

has been shown to have activity in several cancer types due to its ability to target and inhibit the

PI3K/Akt/mTOR

signal transduction pathway. RES-

529

is a

first

-in-class inhibitor of both

TORC1

and

TORC2

that is mechanistically differentiated from other

PI3K/Akt/mTOR

pathway inhibitors currently in development. RES-

529

has shown activity in both in vitro and in vivo glioblastoma animal models and has been demonstrated to be orally bioavailable and can cross the blood brain barrier.

August

2016,

the Board of Directors determined that RES-

440,

a “soft” anti-androgen compound for the treatment of acne vulgaris, was outside the Company’s core product focus, and was not a priority. Therefore, future development efforts were abandoned in the

third

quarter of

2016.

In connection with its review of such abandonment, the Company concluded RES-

440

was impaired in its entirety and the CVRs were remeasured and determined to have no value as of

December

31,

2016.

The abandonment resulted in a net impairment charge of

$1.0

million and was recorded as a component of research and development expenses within the Company’s consolidated statement of operations for the year ended

December

31,

2016.

The abandonment also resulted in an income tax benefit of

$0.4

million.

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details

Note 7 - Other Assets

12 Months Ended

Dec. 31, 2016

Other Assets Disclosure [Text Block]

Other Assets

Other assets consist of the following:

	December 31,
	2016		2015
Offering costs	$	180,456	$	—
Clinical studies deposits		—		160,400
Other		52,219		21,087
Total	$	232,675	$	181,487

Note 8 - Accrued Expenses and Other Current Liabilities

12 Months Ended

Dec. 31, 2016

Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Current [Text Block]

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

	December 31,
	2016		2015
Accrued interest payable	$	29,359	$	14,009
Accrued payroll and payroll related expenses		399,740		56,947
Accrued professional fees		72,855		327,950
Accrued clinical studies expenses		220,978		184,737
Other		151,332		38,026
Total	$	874,264	$	621,669

Note 9 - Convertible Debt

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Text Block]

Convertible Debt

September

27,

2016,

the Company issued and sold convertible promissory notes

(“2016

Convertible Notes”) in an aggregate principal amount of

$1.9

million. The

2016

Convertible Notes were issued to an investor and certain other parties in connection with the settlement of a litigation matter (See Note

10).

The

2016

Convertible Notes have a term of

one

(1)

year and bear interest at a rate of

6.0%

per annum with the principal and accrued interest due upon the earlier of the maturity date or conversion date. At any time prior to the maturity date, the holders

may

elect to convert, in whole or in part, the

2016

Convertible Notes (including any accrued but unpaid interest) into shares of the Company’s common stock at a conversion price of

$3.50

per share. In the event of a Change of Control (as defined in the

2016

Convertible Notes), the holders of the

2016

Convertible Notes

may

declare the aggregate outstanding amount of the

2016

Convertible Notes to be immediately due and payable or

may

elect to convert the

2016

Convertible Notes and any accrued but unpaid interest as if such conversion took place on the maturity date.

The Company accounted for the issuance of the convertible promissory notes in accordance with ASC

470

and, at the time of issuance, recorded a litigation settlement expense of

$2.5

million which represents the difference between the estimated fair value of the

2016

Convertible Notes issued and the cash received from the noteholders.

From

December

2009

through

December

2015,

the Company issued unsecured convertible promissory notes (the “Old Convertible Notes”) for aggregate gross proceeds of

$22.4

million. The Old Convertible Notes bore interest at either

1.5%

per annum, however, all Old Convertible Notes outstanding at

December

31,

2016

bear interest at a rate of

per annum. The Old Convertible Notes accrue interest beginning on the date of issuance, with the principal and accrued interest due upon the earlier of the maturity date or conversion date. At any time prior to the maturity date, the holders

may

elect to convert, in whole or in part, the Old Convertible Notes and any related accrued but unpaid interest into common stock of the Company at a price per share equal to the conversion price.

In the event of a Change of Control or a Qualified Financing (each as defined below), the holders of the Old Convertible Notes

may

declare the aggregate outstanding amount of the Old Convertible Notes to be immediately due and payable or

may

elect to convert the Convertible Notes and any accrued but unpaid interest as if such conversion took place on the maturity date. A Change of Control is defined as: (i) a merger or consolidation in which the owners immediately prior to the transaction do not own, directly or indirectly, more than

50%

of the surviving company; (ii) the acquisition of more than

50%

of the Company’s outstanding shares by a single person, entity or group or persons or entities acting in concert or (iii) the sale or transfer of all or substantially all of the assets of the Company. A Qualified Financing is defined as a sale of shares or other transaction that results in gross proceeds to the Company of at least

$50.0

million, including proceeds received in connection with the conversion of any Old Convertible Notes. Through the date the financial statements were available to be issued, there have been no Change of Control or Qualified Financing events.

The Company

may

prepay the Old Convertible Notes, in full or in part, at any time on a pari passu basis. Upon receipt of notice that the Company intends to prepay the Old Convertible Notes, holders will have the option to convert their notes in lieu of payment.

At the effective time of the Merger,

$1.1

million in aggregate principal amount of Old Convertible Notes were outstanding and

the rights of the holders of each such outstanding Old Convertible Note convertible into Diffusion Units were converted into the right to convert such securities into a number of shares of the Company’s common stock equal to the number of Diffusion Units such Old Convertible Note would be convertible into pursuant to its terms multiplied by the Exchange Ratio.

The following table provides the details of the Convertible Notes outstanding at

December

31,

2016:

Convertible Note Series	Issue Date	Maturity Date	Conversion Price		Interest Rate			Total Principal
2016 Convertible Notes	9/27/2016	9/27/2017	$	3.50		6.00	%	$	1,880,000

Series B Note	3/15/2011	6/30/2018	$	2.74		1.00	%		550,000

Total principal amount									2,430,000

Less current portion of convertible notes									(1,880,000	)

Convertible notes, net of current portion								$	550,000

During the year ended

December

31,

2016,

Old Convertible Notes of

$0.7

million and related accrued interest of

$16.4

thousand were converted into

217,122

shares of common stock:

The following table provides the details of the Convertible Notes outstanding at

December

31,

2015:

Convertible Note Series	Issue Date	Maturity Date	Conversion Price		Interest Rate			Total Principal
B	3/15/2011	6/30/2018	$	2.74		1.00	%		570,000

C	09/14/12	6/30/2018	$	2.74		1.00	%		425,000

E	06/30/2014	06/30/2018	$	4.11		1.00	%		50,000

F	12/04/2015	12/04/2019	$	5.48		1.00	%		200,000

Total principal amount									1,245,000

Less: unamortized debt issuance costs									(1,390	)

Less current portion of convertible notes									(424,964	)

Convertible notes, net of current portion								$	818,646

During the year ended

December

31,

2015,

Old Convertible Notes of

$19.1

million and related accrued interest of

$0.6

million were converted into

5,891,574

shares of common stock:

Note 10 - Commitments and Contingencies	12 Months Ended
Note 10 - Commitments and Contingencies	Dec. 31, 2016
Notes to Financial Statements
Commitments and Contingencies Disclosure [Text Block]	10. Commitments and Contingencies Operating Lease The Company leases office and laboratory facilities in Charlottesville, Virginia under a month-to-month cancelable operating lease. Rent expense related to the operating lease was $66.0 thousand for each of the years ended December 31, 2016 and 2015. Legal Proceedings On August 7, 2014, a complaint was filed in the Superior Court of Los Angeles County, California by Paul Feller, the Company’s former Chief Executive Officer under the caption Paul Feller v. RestorGenex Corporation, Pro Sports & Entertainment, Inc., ProElite, Inc. and Stratus Media Group, GmbH (Case No. BC553996). The complaint asserts various causes of action, including, among other things, promissory fraud, negligent misrepresentation, breach of contract, breach of employment agreement, breach of the covenant of good faith and fair dealing, violations of the California Labor Code and common counts. The plaintiff is seeking, among other things, compensatory damages in an undetermined amount, punitive damages, accrued interest and an award of attorneys’ fees and costs. On December 30, 2014, the Company filed a petition to compel arbitration and a motion to stay the action. On April 1, 2015, the plaintiff filed a petition in opposition to the Company’s petition to compel arbitration and a motion to stay the action. After a hearing for the petition and motion on April 14, 2015, the Court granted the Company’s petition to compel arbitration and a motion to stay the action. On January 8, 2016, the plaintiff filed an arbitration demand with the American Arbitration Association. No arbitration hearing has yet been scheduled. The Company believes this matter is without merit and intends to defend the arbitration vigorously. Because this matter is in an early stage, the Company is unable to predict its outcome and the possible loss or range of loss, if any, associated with its resolution or any potential effect the matter may have on the Company’s financial position. Depending on the outcome or resolution of this matter, it could have a material effect on the Company’s financial position. On September 21, 2015, David Schmidt, a former member of Diffusion LLC and current stockholder of the Company, filed suit (the “Original Complaint”) in the Circuit Court for Albemarle County, Virginia (Case. No. CL15 - 791, David G. Schmidt v. Diffusion Pharmaceuticals LLC), which Complaint was amended on April 14, 2016 (the “Amended Complaint”). The Original Complaint alleged that a breach of contract with respect to Mr. Schmidt’s previously converted convertible note, and requested relief of specific performance requiring Diffusion LLC to issue him additional units, representing the additional number of units he would have received had he converted at the renegotiated conversion price. On September 27, 2016, the Company, Diffusion LLC, Mr. Schmidt and the other parties thereto entered into a Settlement Agreement (the “Settlement Agreement”) pursuant to which, among other things, (i) Mr. Schmidt and Diffusion each agreed to submit a consent order to the Court dismissing all claims set forth in the Amended Complaint with prejudice and without an admission of liability by any party, (ii) Mr. Schmidt and Diffusion each released, on behalf of such party and its heirs, assigns, representatives, affiliates and agents, all claims and causes of action of any nature against the other party existing as of the date of the Settlement Agreement and (iii) as consideration therefor, the Company agreed to issue and sell, to Mr. Schmidt and the other parties to the Settlement Agreement, the 2016 Convertible Notes in an aggregate principal amount of $1.9 million and are convertible into shares of Common Stock at an initial conversion price of $3.50 per share. The Company recognized a litigation settlement charge of $2.5 million which represents the difference between the fair value of the 2016 Convertible Notes issued and the cash received from Mr. Schmidt and other parties. The settlement charge was recorded as a component of general and administrative expenses within the Company’s consolidated statement of operations for the year ended December 31, 2016.

Note 11 - Stockholder's Equity	12 Months Ended
Note 11 - Stockholder's Equity	Dec. 31, 2016
Notes to Financial Statements
Stockholders' Equity Note Disclosure [Text Block]	11. Stockholder’s Equity Common Stock In connection with the Merger (See Note 4) the Company ascribed non-cash consideration of $0.4 million to 478,200 warrants outstanding prior to the Merger. During the year ended December 31, 2016, the Company issued 2,226,698 shares of its Common Stock of which 1,861,503 are shares held by the pre-Merger stockholders of the Company, 45,643 shares were issued for advisory services provided in connection with the Merger, 102,430 shares were issued for general financial advisory services provided to the Company and 217,122 shares were issued pursuant to conversions of convertible debt as discussed in Note 9. The Company did not purchase or retire any shares of its common stock. Warrants During the year ended December 31, 2016, the Company did not grant any warrants to purchase shares of its common stock and no warrants were exercised. During the year ended December 31, 2016, warrants to purchase an aggregate of 17,479 shares of common stock expired unexercised. Warrants to purchase an aggregate of 460,721 shares of the Company’s common stock were outstanding and exercisable as of December 31, 2016, with per share exercise prices ranging from $20.00 to $750.00 and a weighted average exercise price of $54.27 per share.

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

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Reference 7: http://www.xbrl.org/2003/role/presentationRef
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Reference 8: http://www.xbrl.org/2003/role/presentationRef
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+ Details

Note 12 - Stock-based Compensation

12 Months Ended

Dec. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

12.

Stock-Based Compensation

Upon consummation of the Merger, all outstanding options to purchase Diffusion Units were converted into stock options to purchase the Company’s common stock on terms substantially identical to those in effect prior to the reverse merger, except for adjustments to the underlying number of shares and the exercise price based on the Exchange Ratio. At the time of the Merger, there were

301,156

stock options that were exercisable for shares of the Company’s common stock at a weighted average exercise price of

$40.13

per share.

2015

Equity Plan

The

2015

Equity Plan, as amended in

July

2016,

currently allows for the issuance of up to a maximum of

500,000

shares of common stock in connection with the grant of stock-based awards, including stock options, restricted stock, restricted stock units, stock appreciation rights and other types of awards as deemed appropriate, not including shares subject to awards assumed in connection with certain transactions, including the Merger. As of

December

31,

2016,

there were

40,507

shares of common stock available for future issuance under the

2015

Equity Plan. In addition, beginning on

January

2017,

on each

January

through the term of the plan, up to

4.0%

of the total shares of the Company’s common stock outstanding as of

December

will be added to the plan reserve, unless a lesser amount is stipulated by the Compensation Committee of the Company’s Board of Directors. On

January

2017,

the maximum number of shares of the

2015

Equity Plan increased by

413,825

shares, or

4.0%

of the total shares of the Company’s common stock outstanding at

December

31,

2016.

The Company recorded stock-based compensation expense in the following expense categories of its consolidated statements of operations for the periods indicated:

	Year ended December 31 ,
	2016		2015

Research and development	$	674,643	$	309,579

General and administrative		716,425		284,596

Total stock-based compensation expense	$	1,391,068	$	594,175

The following table summarizes the activity related to all stock option grants to employees and non-employees for the year ended

December

31,

2016:

	Number of Options			Weighted average exercise price per share		Weighted average remaining contractual life (in years)		Aggregate Intrinsic Value (A)
Balance at January 1, 2016		1,495,615		$	3.92

RestorGenex options outstanding		301,156			40.13

Cancelled		(48,190	)		61.30

Granted		458,828			6.25

Outstanding at December 31, 2016		2,207,409		$	8.09		7.8		$94,599

Exercisable at December 31, 2016		1,446,121		$	9.36		7.0		$94,599

Vested and expected to vest at December 31, 2016		2,203,011		$	8.09		7.8		$94,599


	(A)	The difference, if positive, between the stock option’s exercise price and the closing price of the Company’s common stock at December 31, 2016.

Generally, the options have a

ten

(10)

year contractual term and vest in equal monthly installments over

three

(3)

years. In

August

2016,

the Company granted an option to purchase

204,907

shares of Common Stock to a director in connection with the director’s appointment to the board of directors. The options will vest in equal quarterly installments over

ten

(10)

years and any options exercised are restricted from being sold until

August

2021.

Non-employee Stock Options

Non-employee options are remeasured to fair value each period through operations using a Black-Scholes option-pricing model until the options vest. There were

stock options granted to non-employees during the year ended

December

31,

2016.

Key assumptions used to estimate the fair value of the non-employee stock options granted during the year ended

December

31,

2015

included risk-free interest rates of

1.9%

2.4%,

an expected volatility of

125.8%

127.4%,

expected dividend yield and an expected term equal to the remaining contractual option term. The total fair value of non-employee stock options vested during the years ended

December

31,

2016

and

2015

was

$0.8

million and

$0.2

million, respectively. The weighted average stock price used to determine the fair value of non-employee stock options that vested during the years ended

December

31,

2016

and

2015

was

$8.27

and

$1.90,

respectively. At

December

31,

2016,

there was

$75.0

thousand of unrecognized compensation cost related to

42,963

unvested stock options and subject to re-measurement until vested. The total unrecognized compensation expense will be recognized as expense over a weighted-average period of

1.0

year.

Employee Stock Options

The weighted average grant date fair value of stock option awards granted to employees was

$5.55

and

$2.25

during the year ended

December

31,

2016

and

2015,

respectively. The total fair value of options vested during the years ended

December

31,

2016

and

2015

were

$0.6

million and

$0.3

million, respectively.

options were exercised during any of the periods presented. At

December

31,

2016,

there was

$2.9

million of unrecognized compensation cost related to unvested options that will be recognized as expense over a weighted-average period of

6.02

years.

The grant date fair value of employee stock options is determined using the Black-Scholes model. The following assumptions were used during the years ended

December

31,

2016

and

2015:

	2016			2015
Expected term (in years)	5.76	-	7.48		5.76
Risk-free interest rate	1.2%	-	2.0%	2.1%	-	2.3%
Expected volatility	106.8%	-	125.5%	125.6%	-	125.8%
Dividend yield		0%			0%

Restricted Stock Awards

As of

December

31,

2016,

there were

9,198

unvested shares of restricted stock. During the year ended

December

31,

2016,

6,140

shares vested. The fair value as of the respective vesting dates of the restricted stock awards was

$12.0

thousand and

$6.0

thousand for

2016

and

2015,

respectively. The grant date fair value of each restricted stock award granted during the year ended

December

31,

2015

was

$1.97.

There were

restricted stock awards granted in

2016.

December

31,

2016,

there was

$18.0

thousand of unrecognized compensation cost related to unvested restricted stock that will be recognized as expense over a weighted average period of

1.5

years.

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References + Details

Note 13 - Defined Contribution Retirement Plan	12 Months Ended
Note 13 - Defined Contribution Retirement Plan	Dec. 31, 2016
Notes to Financial Statements
Pension and Other Postretirement Benefits Disclosure [Text Block]	13. Defined Contribution Retirement Plan The Company has established a 401(k) defined contribution plan (the 401(k) Plan) that covers all employees who qualify under the terms of the plan. Eligible employees may elect to contribute to the 401(k) Plan up to 90% of their compensation, limited by the IRS-imposed maximum. The Company provides a safe harbor match with a maximum amount of 4% of the participant’s compensation. The Company made matching contributions under the 401(k) Plan of $28.0 thousand and $10.0 thousand for the years ended December 31, 2016 and 2015, respectively.

Note 14 - Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Text Block]

. Income Taxes

Prior to the Merger, the Company was treated as a partnership for federal income tax purposes.

Deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect for years in which differences are expected to reverse. A deferred tax liability of

$3.6

million was recorded for the basis differences associated with indefinite-lived in-process R&D assets. In

August

2016,

the Company abandoned future development efforts for the IPR&D asset associated with RES-

440

and recorded an impairment charge of

$1.0

million which is equal to its acquired value. Upon recognizing the impairment, the Company recognized an income tax benefit of

$0.4

million and reduced the carrying value of the related deferred tax liability as of

December

31,

2016

(See Note

4).

Significant components of the Company's deferred tax assets for federal income taxes as of

December

31,

2016

consisted of the following:

Deferred tax assets	December 31, 2016
Net operating loss carryforwards	$	7,547,296

Stock option compensation		2,720,186

Orphan Drug credits		1,218,069

Capitalized start-up costs and other		4,690,843

Valuation allowance		(16,176,394	)

Net deferred tax asset	$	—


Deferred tax liabilities

Intangible assets		(3,279,363	)

Net deferred tax liability	$	(3,279,363	)

The changes in the valuation allowance that occurred during

2016

were as follows:

Valuation allowance at beginning of year	$	—

Changes recorded to income tax provision		5,017,047

Changes recorded in purchase accounting		11,159,347

Valuation allowance at end of year	$	16,176,394

The Company does not have unrecognized tax benefits as of

December

31,

2016.

The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

The Company had net operating loss carryforwards (“NOL”) for federal and state income tax purposes at

December

31,

2016

of approximately:

Upon completion of the Merger, the Company acquired the net operating losses for federal and state income tax purposes which RestorGenex has incurred since inception. The Tax Reform Act of

1986

(the “Act”) provides for limitation on the use of net operating loss following certain ownership changes (as defined in the Act) that could limit the Company’s ability to utilize these carryforwards. The Company experienced an ownership change as a result of the Merger.

The net operating loss carryforwards begin expiring in

2034

for federal income tax purposes and for state income tax purposes. In

January

2016,

the number of outstanding shares of RestorGenex common stock increased in connection with the Merger discussed in note

This increase in the number of shares outstanding resulted in a change of ownership, under the provisions of Internal Revenue Code Section

382

and similar state provisions, and limits the Company’s ability to utilize these net operating loss carryforwards to offset future income. The amounts above reflect the amount of NOLs that the Company expects to be able to utilize as a result of the limitation. The Company recorded a

100%

valuation allowance of the deferred tax assets as of

December

31,

2016,

because of the uncertainty of their realization.

A reconciliation of income tax benefit at the statutory federal income tax rate and income taxes as reflected in the financial statements as of

December

31,

2016

is as follows:

Rate reconciliation:	December 31, 2016
Federal tax benefit at statutory rate		(34.0	) %

State tax, net of Federal benefit		(2.3	)

Litigation settlement charge		4.6

Acquisition costs		2.8

Orphan drug credit		(4.4	)

Change in valuation allowance		27.2

Stock compensation		4.2

Other		(0.1	)

Total provision		(2.0	) %

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company’s

2013

2015

tax years remain open and subject to examination.

Note 15 - Fair Value Measurements

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Text Block]

15.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in

one

of the following

three

levels of the fair value hierarchy, of which the

first

two

are considered observable and the last is considered unobservable:

●

Level

1—Quoted

prices in active markets for identical assets or liabilities.

●

Level

2—Observable

inputs (other than Level

quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

●

Level

3—Unobservable

inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis:

	December 31 , 2016

	(Level 1)		(Level 2)		(Level 3)
Assets

Cash and cash equivalents	$	1,552,852	$	—	$	—

Liabilities

Contingent value rights distribution	$	—	$	—	$	—

	December 31, 2015

	(Level 1)		(Level 2)		(Level 3)
Assets

Cash and cash equivalents	$	1,997,192	$	—	$	—

Liabilities

Contingent value rights distribution	$	—	$	—	$	—

Contingent Value Rights Distribution

Each CVR represents a non-transferable right (subject to certain limited exceptions) to potentially receive certain cash payments, not to exceed

$50.0

million in the aggregate, 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 relating to RES-

440.

Any option or warrant holder of the Company as of the record date for the CVRs would, at the time of exercise, be entitled to receive

one

CVR for each share of the Company’s common stock issued upon the future exercise of the option or warrant, which would entitle the holder to a pro rata portion of any CVR payments made after the date of exercise.

In connection with the abandonment of the RES-

440

IPR&D asset (See Note

4),

the Company remeasured the value of each CVR and as of

December

31,

2016,

determined the CVRs have no value.

The reconciliation of the contingent consideration liability measured at fair value on a recurring basis using significant unobservable inputs (Level

is as follows:

	Contingent Value Rights Distribution
Issued in connection with the Merger transaction	$	10,000

Change in fair value upon abandonment of RES-440		(10,000	)

Balance at December 31, 2016	$	—

Basis of Accounting, Policy [Policy Text Block]

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Note 16 - Related Party Transactions	12 Months Ended
Note 16 - Related Party Transactions	Dec. 31, 2016
Notes to Financial Statements
Related Party Transactions Disclosure [Text Block]	16. Related Party Transactions The Company’s Director of Information Technologies is also the son of the Chief Executive Officer and he has held that position since December 2014.

Note 17 - Subsequent Events	12 Months Ended
Note 17 - Subsequent Events	Dec. 31, 2016
Notes to Financial Statements
Subsequent Events [Text Block]	17. Subsequent Events The Company is conducting the Private Placement of (i) shares of its Series A Convertible Preferred Stock, each share of Series A Convertible Preferred Stock being convertible into one share of its common stock, subject to adjustment, and (ii) for each share of Series A Convertible Preferred Stock purchased in the Private Placement, a 5 -year warrant to purchase one share of common stock (the “Warrant” and collectively with the Series A Convertible Preferred Stock, the “Securities”). On March 14, 2017, the Company entered into Subscription Agreements with certain accredited investors and conducted an initial closing of the Private Placement pursuant to which the Company sold 7,837,023 shares of the Series A Convertible Preferred Stock at a purchase price of $2.02 per share (the “ Initial Closing ”). In addition, each investor received a Warrant to purchase one share of common stock for each share of Series A Convertible Preferred Stock purchased by such investor in the Private Placement at an exercise price of $2.22, subject to adjustment thereunder. The Company received net cash proceeds of approximately $14.1 million from the Initial Closing, after deducting $1.7 million in placement agent fees and expenses associated with the Initial Closing. The Company may periodically conduct one or more additional closings up to aggregate gross proceeds of $25.0 million.

Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Basis of Presentation

The accompanying consolidated

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

15).

As of

December

31,

2016,

and

December

31,

2015,

the fair value of the Company’s outstanding convertible notes was approximately

$2.6

million and

$4.8

million, respectively.

The fair value of the convertible notes is determined using a binomial lattice model that utilizes certain unobservable inputs that fall within Level

of the fair value hierarchy.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration of Credit Risk

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

The Company considers any highly liquid investments, such as money market funds, with an original maturity of

three

months or less to be cash and cash equivalents.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Long-Lived Assets

Long-lived assets are reviewed for potential impairment whenever events indicate that the carrying amount of such assets

may

December

31,

2016

and

2015,

respectively.

Goodwill and Intangible Assets, Intangible Assets, Policy [Policy Text Block]

Intangible Assets

Intangible assets are comprised of identifiable in-process research and development (IPR&D) assets and are considered indefinite-lived intangible assets and are assessed for impairment annually on

October

August

2016,

the Company abandoned the future development efforts with respect to its RES-

440

product candidate, and the value of the associated IPR&D asset was written down to

zero

(See Note

4).

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

Goodwill

The Company performs its annual goodwill impairment test on

October

December

31,

2016.

Offering Costs, Policy [Policy Text Block]

Offering Costs

Offering costs consist principally of legal costs incurred through the balance sheet date related to our private placement financing (See Note

17)

and are recognized in other assets on the consolidated balance sheet.

Research and Development Expense, Policy [Policy Text Block]

Research and Development

At the end of the reporting period, the Company compares payments made to

third

may

record net prepaid or accrued expenses relating to these costs.

Upfront payments made to

third

parties who perform research and development services on the Company’s behalf are expensed as services are rendered.

Legal Costs, Policy [Policy Text Block]

Patent Costs

Patent costs, including related legal costs, are expensed as incurred and are recorded within general and administrative expenses in the statements of operations.

Income Tax, Policy [Policy Text Block]

Income Taxes

Upon completion of the Merger as discussed in Note

Debt, Policy [Policy Text Block]

Debt Issuance Costs

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-based Compensation

The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the option.

Earnings Per Share, Policy [Policy Text Block]

Net Loss Per Share

The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted average shares outstanding, as they would be anti-dilutive:

	December 31,
	2016		2015
Convertible debt		757,909		427,108
Common stock warrants		460,721		—
Stock options		2,207,409		1,495,582
Unvested restricted stock awards		9,204		15,341
		3,435,243		1,938,031

Amounts in the table reflect the common stock equivalents of the noted instruments.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Loss

The Company has no items of comprehensive income or loss other than net loss.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

August

2016,

the FASB issued ASU

2016

15,

Classification of Certain Cash Receipts and Cash Payments

December

15,

2017

March

2016,

the FASB issued ASU

2016

09,

Compensation – Improvements to Employee Share-Based Payment Accounting

December

15,

2016

and interim periods within those years. The Company is currently evaluating the effect that ASU

2016

will have on its consolidated financial statements and related disclosures.

February

2016,

the FASB issued ASU

2016

02,

Leases (Topic

842)

. The FASB issued the update to require the recognition of lease assets and liabilities on the balance sheet of lessees. The standard will be effective for fiscal years beginning after

December

15,

2018,

August

2014,

the FASB issued ASU

2014

15,

Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern

first

annual period ending after

December

15,

2016.

The Company adopted this standard as of

December

31,

2016

and the adoption of this standard did not have a material impact on our financial statements.

Reclassification

Certain prior period balances have been reclassified to conform with the current period presentation.

Note 3 - Basis of Presentation and Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2016

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	December 31,
	2016		2015
Convertible debt		757,909		427,108
Common stock warrants		460,721		—
Stock options		2,207,409		1,495,582
Unvested restricted stock awards		9,204		15,341
		3,435,243		1,938,031

Note 4 - Acquisitions (Tables)

12 Months Ended

Dec. 31, 2016

Business Combination, Preliminary Purchase Price Consideration [Table Text Block]

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

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

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

Business Acquisition, Pro Forma Information [Table Text Block]

	Year ended December 3 1 ,

	2016			2015

Net revenues	$	—		$	—

Net loss	$	(16,471,398	)	$	(17,618,292	)

Basic and diluted loss per share	$	(1.60	)	$	(3.89	)

Note 5 - Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment [Table Text Block]

	December 31,
	2016			2015
Laboratory equipment	$	182,357		$	182,357
Furniture and office equipment		137,290			84,668
Total property and equipment		319,647			267,025
Less: accumulated depreciation		(239,892	)		(215,029	)
Property and equipment, net	$	79,755		$	51,996

Note 6 - Goodwill and Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2016

Schedule of Goodwill [Table Text Block]

	Goodwill
Balance as of December 31, 2015	$	—
Goodwill as a result of the Merger		6,929,258
Balance as of December 31, 2016	$	6,929,258

Schedule of Indefinite-Lived Intangible Assets [Table Text Block]

	Acquisition Date Fair Value		Accumulated Amortization		Impairment Upon Abandonment			Carrying Value at December 31, 2016
RES-529	$	8,639,000	$	-	$	-		$	8,639,000
RES-440		961,000		-		(961,000	)	$	-
Total in-process research and development costs (IPR&D)	$	9,600,000	$	-	$	(961,000	)	$	8,639,000

Note 7 - Other Assets (Tables)

12 Months Ended

Dec. 31, 2016

Schedule of Other Assets [Table Text Block]

	December 31,
	2016		2015
Offering costs	$	180,456	$	—
Clinical studies deposits		—		160,400
Other		52,219		21,087
Total	$	232,675	$	181,487

Note 8 - Accrued Expenses and Other Current Liabilities (Tables)

12 Months Ended

Dec. 31, 2016

Other Current Liabilities [Table Text Block]

	December 31,
	2016		2015
Accrued interest payable	$	29,359	$	14,009
Accrued payroll and payroll related expenses		399,740		56,947
Accrued professional fees		72,855		327,950
Accrued clinical studies expenses		220,978		184,737
Other		151,332		38,026
Total	$	874,264	$	621,669

Note 9 - Convertible Debt (Tables)

12 Months Ended

Dec. 31, 2016

Convertible Debt [Table Text Block]

Convertible Note Series	Issue Date	Maturity Date	Conversion Price		Interest Rate			Total Principal
2016 Convertible Notes	9/27/2016	9/27/2017	$	3.50		6.00	%	$	1,880,000

Series B Note	3/15/2011	6/30/2018	$	2.74		1.00	%		550,000

Total principal amount									2,430,000

Less current portion of convertible notes									(1,880,000	)

Convertible notes, net of current portion								$	550,000

Convertible Note Series	Issue Date	Maturity Date	Conversion Price		Interest Rate			Total Principal
B	3/15/2011	6/30/2018	$	2.74		1.00	%		570,000

C	09/14/12	6/30/2018	$	2.74		1.00	%		425,000

E	06/30/2014	06/30/2018	$	4.11		1.00	%		50,000

F	12/04/2015	12/04/2019	$	5.48		1.00	%		200,000

Total principal amount									1,245,000

Less: unamortized debt issuance costs									(1,390	)

Less current portion of convertible notes									(424,964	)

Convertible notes, net of current portion								$	818,646

Note 12 - Stock-based Compensation (Tables)

12 Months Ended

Dec. 31, 2016

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Year ended December 31 ,
	2016		2015

Research and development	$	674,643	$	309,579

General and administrative		716,425		284,596

Total stock-based compensation expense	$	1,391,068	$	594,175

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Number of Options			Weighted average exercise price per share		Weighted average remaining contractual life (in years)		Aggregate Intrinsic Value (A)
Balance at January 1, 2016		1,495,615		$	3.92

RestorGenex options outstanding		301,156			40.13

Cancelled		(48,190	)		61.30

Granted		458,828			6.25

Outstanding at December 31, 2016		2,207,409		$	8.09		7.8		$94,599

Exercisable at December 31, 2016		1,446,121		$	9.36		7.0		$94,599

Vested and expected to vest at December 31, 2016		2,203,011		$	8.09		7.8		$94,599

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	2016			2015
Expected term (in years)	5.76	-	7.48		5.76
Risk-free interest rate	1.2%	-	2.0%	2.1%	-	2.3%
Expected volatility	106.8%	-	125.5%	125.6%	-	125.8%
Dividend yield		0%			0%

Note 14 - Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

Deferred tax assets	December 31, 2016
Net operating loss carryforwards	$	7,547,296

Stock option compensation		2,720,186

Orphan Drug credits		1,218,069

Capitalized start-up costs and other		4,690,843

Valuation allowance		(16,176,394	)

Net deferred tax asset	$	—


Deferred tax liabilities

Intangible assets		(3,279,363	)

Net deferred tax liability	$	(3,279,363	)

Summary of Valuation Allowance [Table Text Block]

Valuation allowance at beginning of year	$	—

Changes recorded to income tax provision		5,017,047

Changes recorded in purchase accounting		11,159,347

Valuation allowance at end of year	$	16,176,394

Summary of Operating Loss Carryforwards [Table Text Block]

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

Rate reconciliation:	December 31, 2016
Federal tax benefit at statutory rate		(34.0	) %

State tax, net of Federal benefit		(2.3	)

Litigation settlement charge		4.6

Acquisition costs		2.8

Orphan drug credit		(4.4	)

Change in valuation allowance		27.2

Stock compensation		4.2

Other		(0.1	)

Total provision		(2.0	) %

Note 15 - Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2016