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RestorGenex and Diffusion Pharmaceuticals Form Merger Agreement

Wednesday, December 16, 2015  
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RestorGenex Corporation and Diffusion Pharmaceuticals LLC, a privately‐held biotechnology company, have entered into a definitive merger agreement under which a newly formed subsidiary of RestorGenex will merge with and into Diffusion in an all‐stock transaction, with Diffusion surviving as a wholly owned subsidiary of RestorGenex. Upon completion, RestorGenex will issue to Diffusion equity holders shares of RestorGenex common stock such that the current equity holders of Diffusion will own approximately 83% of the combined company’s outstanding shares and current stockholders of RestorGenex will own approximately 17%.

These percentage ownerships are subject to potential adjustment depending upon the amount of net cash of RestorGenex at closing as provided in the merger agreement. In addition, immediately prior to the merger, RestorGenex plans to distribute to its then current stockholders contingent value rights (CVRs) providing payment rights with respect to the first $50 million of net proceeds arising from a future sale, transfer, license or similar transaction involving RestorGenex’s RES‐440 product candidate for the treatment of acne vulgaris. Any current RestorGenex option or warrant holder would, at the time of exercise, be entitled to receive one CVR for each share of RestorGenex common stock issued upon exercise of the option and warrant, which would entitle the holder to a pro rata portion of any CVR payments made.

The current directors and executive officers of RestorGenex will resign from their positions with
RestorGenex upon the closing of the proposed merger, and the combined company will be under the leadership of Diffusion's current executive management team with David G. Kalergis serving as chief executive officer. The board of directors of the combined company is expected to consist of six members, all of whom will be designated by Diffusion. The corporate headquarters of the combined company will be located in Charlottesville, Virginia. Following completion of the merger, the combined company will be renamed Diffusion Pharmaceuticals, Inc.

The proposed merger will create a clinical‐stage company with a diversified development portfolio of product candidates addressing novel targets in oncology, including several orphan indications. Initially, the combined company will be focused on the development of Diffusion’s lead molecule trans sodium
crocetinate (TSC). TSC has received orphan drug designation for the treatment of glioblastoma
multiforme (GBM) and expects to enter a Phase III study in newly diagnosed GBM patients in 2016.
Future development of TSC includes other orphan indications such as pancreatic cancer and brain metastases. TSC’s novel mechanism of action enhances the diffusion of oxygen to cancerous tumors, improving the effects of cancer treatments such as radiation therapy and chemotherapy.

Stephen M. Simes, RestorGenex’s chief executive officer, stated, “We have chosen to combine with
Diffusion in order to add a clinical‐ready product to our oncology portfolio. Specifically the key Diffusion product is scheduled to enter a Phase III clinical trial in 2016 thereby accelerating our product development dramatically. The board and management of RestorGenex conducted an extensive process and thorough review of strategic alternatives and we believe the proposed merger provides an attractive opportunity for value appreciation for RestorGenex’s stockholders.”

David Kalergis, chief executive officer of Diffusion Pharmaceuticals, added, “We expect to be positioned to move forward with a pivotal Phase III trial of TSC in newly diagnosed GBM patients, with plans to begin enrollment in 2016. We also are planning to commence a Phase II/III trial in pancreatic cancer in
2016 with a Phase II/III study in brain metastases to follow. The merger between Diffusion and
RestorGenex will 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 transaction has been approved unanimously by the boards of directors of both companies. The proposed merger is expected to close in the first quarter of 2016, subject to customary closing conditions, including the approval of Diffusion’s members.

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