Purchase Accounting

12 Months Ended

Dec. 31, 2018

Business Combinations [Abstract]

Purchase Accounting

3. PURCHASE ACCOUNTING

Merger with Opexa Therapeutics, Inc.

The September 19, 2017 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 include 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 Company determined that the acquired legacy technology of the Registrant had no value as of the date of the Merger.

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, 2018, and no changes in goodwill during the year ended December 31, 2017 after the initial purchase accounting. As of December 31, 2018, the Company has determined that no impairment charges were necessary.