Note 4: Reverse Merger

12 Months Ended

Dec. 31, 2016

Notes

Note 4: Reverse Merger

NOTE 4: REVERSE MERGER

On August 9, 2016 (the "merger date"), Techcare and Novomic completed a reverse merger. Pursuant to the merger, Techcare issued to Novomic's shareholders approximately 622 common stock for each share held by Novomic's shareholders. Upon issuance, Novomic became a wholly-owned subsidiary of Techcare.

Immediately prior to the merger date, Techcare’s stockholders approved the following: (i) a reverse split of Techcare’s common stock at a ratio of 1 for 30, (ii) the authorization of ten million (10,000,000) shares of preferred stock, par value $0.0001 (the "Preferred Stock"), which may be issued in one or more classes or series, having such designations, preferences, privileges and rights as the Board of Directors may determine. After giving effect to the reverse split, the former holders of Novomic common stock held 73.52% of the Company’s common stock and the holders of Techcare common shares retained 26.48% of the Company’s common stock. The calculation of the common stock to be held after the merger by the Novomic shareholders and the Techcare stockholders gave effect to the assumed exercise of all outstanding in-the-money options of each entity.

While Techcare was the legal acquirer in the merger, Novomic was treated as the acquiring company in the merger for accounting purposes with the merger accounted for as a reverse merger. As a result, the financial statements of

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the Company prior to the merger date are the historical financial statements of Novomic. The financial statements of the Company after the merger date reflect the results of the operations of Novomic and Techcare on a combined basis. The net acquired assets of the Company as of the merger date was $1,144,930 and were comprised of tangible assets and liabilities.  There were no fair value adjustments necessary to perform as the carrying values of the tangible assets and liabilities approximated fair value.  Further, given the nature of the operations of TechCare prior to the merger, there were no intangible assets, including goodwill, established as a result of the merger.  

At the completion of the merger, each outstanding option to purchase one share of Novomic ordinary shares was subject to conversion into approximately 622 options to purchase common stock of the Company at an exercise price equal to $0.0001 and in accordance with the original terms of the Novomic option.   Stock-based compensation expenses of $442 thousand were recognized on the merger date as a result of the abovementioned modification – see Note 9 for further details.

The converted stock options represent the fair value of such options attributable to services prior to the merger date using the stock price on the merger date as an input to the Black-Scholes valuation model to determine the fair value of the options.

The following assumptions were applied in determining the fair value of deemed (for accounting purposes only) conversion of Novomic equity awards for a weighted average grant date fair value that was between $0.36 and $0.69 per share:

Risk-free interest rate	0.78%
Expected shares price volatility	70%
Expected option term (years)	2.8
Dividend yield	-

The following unaudited pro forma financial information reflects the merger transaction between Novomic and TechCare as if the acquisition had occurred on January 1, 2015.

		Pro forma
		Combined
		unaudited
		Year Ended
		December 31, 2016
Revenues	$	-
Operating loss		(2,540,113)
Net loss	$	(2,540,113)
Net loss for common stock – Basic and diluted		0.12
		Pro forma
		Combined
		unaudited
		Year Ended
		December 31, 2015
Revenues	$	5,848
Operating loss		(1,824,691)
Loss from continuing operations		(1,946,087)
Loss from discontinuing operations		(354,492)
Net loss	$	(2,300,579)
Net loss for common stock – Basic and diluted		0.11