3.	PURCHASE ACCOUNTING

Private Acer recorded $272,315 of goodwill in connection with its acquisition of Anchor in 2015. Under the merger agreement with Anchor, if the pepducin business was not sold within 12 months of the merger date, the pepducin business reverted to the holders of Anchor’s equity immediately prior to the merger. The sale did not occur within this period. The reversion was accomplished through a Pepducin Transfer Agreement, entered into on August 19, 2016, pursuant to which the Company transferred all the outstanding stock of Anchor to Teserx, Inc., a new entity designated by the stockholders’ representative for the benefit of holders of Anchor’s equity immediately prior to the merger. The Company retained the exclusive rights to the two pepducin drug targets and obtained ownership to the third. No gain or loss was recorded by the Company when the pepducin business reverted back to the prior holders of Anchor’s equity and the Company has no continuing involvement in the pepducin business or with Teserx, Inc.

Merger with Opexa Therapeutics, Inc.

The Merger was accounted for using the purchase method of accounting as a reverse acquisition. In a reverse acquisition, the post-acquisition net assets of the surviving combined company includes the historical cost basis of the net assets of the accounting acquirer (Private Acer) plus the fair value of the net assets of the accounting acquiree (the Registrant). Further, under the purchase method, the purchase price is allocated to the assets acquired, liabilities assumed, and identifiable intangible assets based on their estimated fair values, with the remaining excess purchase price over net assets acquired allocated to goodwill.

The fair value of the consideration transferred in the Merger was $7,007,069 and was calculated as the number of shares of common stock that Private Acer issued (adjusted for the exchange ratio) in order for the Registrant’s shareholders to hold an 11% equity interest in the combined company post-acquisition, multiplied by the estimated fair value of Private Acer’s common stock on the acquisition date. The estimated fair value of Private Acer’s common stock was based on the offering price of the common stock sold in the Concurrent Financing that was both completed concurrently with and conditioned upon the closing of the Merger. This price was determined to be the best indication of fair value on that date since the price was based on an arm’s length negotiation with a group consisting of both new and existing investors of Private Acer that had been advised of the pending Merger and assumed similar liquidity risk as those investors holding the majority of shares being valued as purchase consideration.

The following table summarizes the Company’s determination of fair values of the assets acquired and the liabilities assumed as of the date of acquisition. As of December 31, 2017, the Company has determined that no impairment charges were necessary.

Consideration - issuance of securities and cash paid for fractional shares	$	7,007,069
Assets acquired and liabilities assumed:
Cash	$	1,058,276
Other assets		5,000
Accrued liabilities		(1,431,159	)
Goodwill		7,374,952
Total purchase price	$	7,007,069

The Company determined that the acquired legacy technology of the Registrant had no value as of the date of the acquisition.

Goodwill represents the excess of the purchase price (consideration paid plus net liabilities assumed) of an acquired business over the fair value of the underlying net tangible and intangible assets. Goodwill includes the value of the Registrant’s standing as a public entity. None of the goodwill associated with the Merger is deductible for income tax purposes. All of the goodwill will be allocated to the Company’s single reportable segment.

There were no changes in goodwill during the year ended December 31, 2017, after the initial purchase accounting.

Unaudited pro forma operating results, assuming the Merger occurred as of January 1, 2016, are as follows:

	Years Ended December 31,
	2017			2016
Net loss	$	(17,733,252	)	$	(15,993,790	)
Net loss per share - basic and diluted	$	(2.73	)	$	(2.73	)