Annual report pursuant to Section 13 and 15(d)

Share Exchange Agreement

Share Exchange Agreement
12 Months Ended
Dec. 31, 2016
Share Exchange Agreement [Abstract]  
Share Exchange Agreement
Note 2 – Share Exchange Agreement
On May 31, 2016, 3DIcon entered into a Share Exchange Agreement with Coretec and its Members, which Members held all outstanding membership interests in Coretec. Pursuant to the Share Exchange Agreement, the Members agreed to sell all their membership interests in Coretec to 3DIcon in exchange for 3DIcon’s issuance of an aggregate 4,760,872 shares of 3DIcon’s Series B Convertible Preferred Stock to the Members.
Upon the closing of the Share Exchange Agreement on the Closing Date, considering any preferred stock on an “as converted” basis, approximately 65% of 3DIcon’s issued and outstanding common stock is now owned by the former Coretec Members. The remaining 35% is held by 3DIcon’s prior stockholders. Upon the closing of the Share Exchange Agreement, two of the former 3DIcon directors resigned and three new directors associated with Coretec were nominated and elected, giving control of the board of directors to the former Coretec Members. The 65% holders of 3DIcon common stock on an as converted basis will be unable to sell that stock for a period of one year under the terms of a lock-up agreement reached between the parties. Victor Keen, the largest shareholder of 3DIcon prior to the reverse acquisition, is also a participant in the lock-up agreement. 
Consummation of the Exchange was subject to customary conditions, including without limitation, (i) Coretec’s delivery to 3DIcon a representation letter attesting to each of the Members’ or their designees’ status as an “accredited investor;” (ii) Coretec’s delivery to 3DIcon a letter agreement executed by each of the Members or their designees, if any, agreeing to automatically convert the shares of Series B Preferred issued to them pursuant to the Share Exchange Agreement upon the occurrence of certain events; (iii) Coretec’s delivery to 3DIcon a lock up agreement executed by each of the Members or their designees, if any, in the form attached to the Share Exchange Agreement; (iv) Coretec’s delivery to 3DIcon a license agreement between Coretec and North Dakota State University allowing Coretec to license certain intellectual property concerning cyclohexasilane or other silicon-based materials; (v) the delivery to 3DIcon of the required Coretec audited and unaudited financial statements; and (vi) delivery by 3DIcon and Coretec all required consents to consummate all transactions contemplated by the Share Exchange Agreement.
The Company engaged a law firm to prepare the necessary documents for the Share Exchange Agreement, including resolutions of the entities authorizing the closing, preparation and filing of Form 14F, and filing of the Form 8K. As of December 31, 2016, the law firm had completed the engagement and the Company has expensed $100,000, $75,000 of which was recoginized in the financial statements of 3DIcon prior to the September 30, 2016 Share Exchange Agreement.
The Company has a complex equity structure which includes two series of preferred stock, common stock, warrants and options.  The acquisition date fair value of the consideration transferred was calculated as follows:
Company enterprise value
Less: interest bearing debt
Company equity value
The fair value of the assets acquired and liabilities assumed at the closing date were based on management estimates, except for the patents which were valued by an independent valuation expert. Based upon the preliminary purchase price allocation, the following table summarizes the estimated provisional fair value of the assets acquired and liabilities assumed at the date of acquisition:
Prepaid expenses
Due from related party
Total assets acquired at fair value
Accounts payable and accrued expenses
Notes payable
Notes payable - related party
Total liabilities assumed
Total identifiable net assets
Total preliminary purchase consideration
The purchase price exceeded the fair value of the net assets acquired by approximately $166,000, which was recorded as goodwill.
In connection with the reverse acquisition, the Company incurred approximately $110,000 for related transaction costs for the year ended December 31, 2016, which are included in general and administrative expenses in the accompanying consolidated statements of operations.
The following unaudited pro forma results for the year ended December 31, 2016 and for the period from inception (June 2, 2015) to December 31, 2015 summarizes the consolidated results of operations of the Company, assuming the reverse acquisition had occurred on January 1, 2015 and after giving effect to the reverse acquisition adjustments, including amortization of tangible and intangible assets acquired in the transaction:
For the Period from
For the Year Ended
Inception (June 2, 2015) to
December 31, 2016
December 31, 2015
Net revenues
Net loss