0001144204-12-038093.txt : 20120703 0001144204-12-038093.hdr.sgml : 20120703 20120703163114 ACCESSION NUMBER: 0001144204-12-038093 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 20120703 DATE AS OF CHANGE: 20120703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 3DICON CORP CENTRAL INDEX KEY: 0001375195 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-182532 FILM NUMBER: 12945477 BUSINESS ADDRESS: STREET 1: 7507 S SANDUSKY CITY: TULSA STATE: OK ZIP: 74136 BUSINESS PHONE: 918-492-5802 MAIL ADDRESS: STREET 1: 7507 S SANDUSKY CITY: TULSA STATE: OK ZIP: 74136 S-1 1 v317194_s1.htm FORM S-1

 

As filed with the Securities and Exchange Commission on July 3, 2012

            Registration No. 333-________         

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

____________________________

 

FORM S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

_____________________________

 

3DICON CORPORATION

(Name of registrant in its charter)

 

Oklahoma   3679   73-1479206

(State or other Jurisdiction

of Incorporation or Organization)

 

(Primary Standard Industrial

Classification Code Number)  

 

(I.R.S. Employer

Identification No.)

  

6804 South Canton Avenue, Suite 150

Tulsa, OK 74136

(918) 494-0505

(Address and telephone number of principal executive offices and principal place of business)

 

John M. O’Connor, Esq.

Newton, O’Connor, Turner & Ketchum, a Professional Corporation

15 W. Sixth Street, Suite 2700

Tulsa, OK 74119

 (Name, address and telephone number of agent for service)

 

Copies to:

 

Gregory Sichenzia, Esq.
Jay Yamamoto, Esq.
Timothy O’Brien, Esq.
Sichenzia Ross Friedman Ference LLP
61 Broadway, 32nd Flr.
New York, New York 10006
(212) 930-9700
(212) 930-9725 (fax)

 

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:

From time to time after this Registration Statement becomes effective.

 

If any securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: ¨

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company.  See definitions of “large accelerated filer,” “accelerated filed,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ¨  Accelerated filer ¨
Non-accelerated filer ¨  Smaller reporting company x
(Do not check if a smaller reporting company)  

 

 
 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class Of

Securities To Be Registered

 

Proposed Maximum

Aggregate

Offering Price (2)

   

Amount Of

Registration Fee

 
Common Stock, $0.0002 par value per share (1)   $       $    
                 
Common Stock Purchase Warrant (3)   $       $    
                 
Shares of Common Stock underlying Common Stock Purchase Warrant (1)   $       $    
                 
Total   $    5,000,000     $   573  

 

(1) This registration statement shall also cover any additional shares of common stock that shall become issuable by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration that results in an increase in the number of the outstanding shares of common stock.

 

(2)

 

(3)

Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

 

No registration fee required pursuant to Rule 457(g) under the Securities Act.

  

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 
 

 

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED JULY 3, 2012

 

 

 

Up to         Shares of Common Stock

and

Warrants to Purchase up to         Shares of Common Stock

 

   

We are offering up to         shares of our common stock, par value $0.0002 per share, and warrants to purchase up to       shares of our common stock. Each investor will receive a warrant to purchase one share of common stock for each share of common stock purchased in this offering.   We are not required to sell any specific dollar amount or number of shares of common stock or warrants, but will use our best efforts to sell all of the shares of common stock and warrants being offered.  The offering expires on the earlier of (i) the date upon which all of the shares of common stock and warrants being offered have been sold, or (ii)             , 2012.

 

Our common stock is quoted on the OTC Bulletin Board under the symbol “TDCP.OB”. On June 29, 2012, the last reported sale price for our common stock was $0.22 per share.  

 

Investing in the offered securities involves a high degree of risk. See “Risk Factors” beginning on page 5 of this prospectus for a discussion of information that you should consider before investing in our securities.

  

    Per Share     Total  
             
Public offering price   $       $    
Underwriting discounts and commissions   $       $    
Proceeds, before expenses, to us   $       $    

 

We estimate the total expenses of this offering will be approximately $           . Because there is no minimum offering amount required as a condition to closing in this offering, the actual public offering amount and proceeds to us, if any, are not presently determinable and may be substantially less than the total maximum offering set forth above. The offering is being conducted on a best efforts basis and unless we engage an underwriter, broker dealer or selling agent, securities in this offering shall be sold by our officers and directors. None of these officers or directors will receive any commission or compensation for the sale of the securities.  We have no current arrangements nor have we entered into any agreements with any underwriters, broker-dealers or selling agents for the sale of the securities, but we reserve the right to enter into such arrangements and agreements.  If we engage one or more underwriters, broker-dealers or selling agents and enter into any such arrangement(s), the securities will be sold through such licensed underwriter(s), broker-dealer(s) and/or selling agent(s). See “Plan of Distribution” beginning on page 36 of this prospectus for more information on this offering.

 

This offering will terminate on              , 2012, unless the offering is fully subscribed before that date or we decide to terminate the offering prior to that date. In either event, the offering may be closed without further notice to you. All costs associated with the registration will be borne by us.  As there is no minimum purchase requirement, no funds are required to be escrowed and all net proceeds will be available to us at closing for use as set forth in “Use of Proceeds” beginning on page 13.

 

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

The date of this prospectus is              , 2012

 

 
 

 

TABLE OF CONTENTS

 

    Page
Prospectus Summary   3
Risk Factors   5
Forward-Looking Statements   12
Use of Proceeds   13
Capitalization   13
Market Price of and Dividends on the Common Equity and Related Stockholder Matters   14
Dilution   16
Description of Business   17
Management’s Discussion and Analysis of Financial Condition and Results of  Operations   22
Description of Property   30
Legal Proceedings   30
Directors, Executive Officers, Promoters and Control Persons   30
Executive Compensation   33
Certain Relationships and Related Transactions   34
Security Ownership of Certain Beneficial Owners and Management   35
Plan of Distribution   36
Description of Securities   37
Indemnification for Securities Act Liabilities   38
Legal Matters   39
Experts   39
Where You Can Find More Information   39
Financial Statements   40

 

No dealer, salesperson or other person has been authorized to give any information or to make any representations other than those contained in this prospectus in connection with the offer contained in this prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by us.

 

Neither the delivery of this prospectus nor any sale made hereunder shall under any circumstances create an implication that there has been no change in our affairs since the date hereof. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy securities other than those specifically offered hereby or of any securities offered hereby in any jurisdiction where, or to any person to whom, it is unlawful to make such offer or solicitation. The information contained in this prospectus speaks only as of the date of this prospectus unless the information specifically indicates that another date applies.

 

This prospectus has been prepared based on information provided by us and by other sources that we believe are reliable. This prospectus summarizes certain documents and other information in a manner we believe to be accurate, but we refer you to the actual documents, if any, for a more complete understanding of what we discuss in this prospectus. In making a decision to invest in the common stock, you must rely on your own examination of us and the terms of the offering and securities offered in this prospectus, including the merits and risks involved.

 

We are not making any representation to you regarding the legality of an investment in the securities offered in this prospectus under any legal investment or similar laws or regulations. You should not consider any information in this prospectus to be legal, business, tax or other advice. You should consult your own attorney, business advisor and tax advisor for legal, business and tax advice regarding an investment in our common stock.

 

2
 

 

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information other than that contained in this prospectus. This prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any jurisdiction where the offer or sale of these securities is not permitted. You should assume that the information contained in this prospectus is accurate as of the date on the front of this prospectus only. Our business, prospects, results of operation and financial condition may have changed since that date.  This prospectus will be updated as required by law.

 

 PROSPECTUS SUMMARY

 

The following summary highlights selected information contained in this prospectus. This summary does not contain all the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the “Risk Factors” section, the financial statements and the notes to the financial statements.

 

References in this prospectus to “3DIcon,” “the Company,” “we,” “us” or “our” refer to 3DIcon Corporation.

 

3DICON CORPORATION

 

Our mission is to pursue, develop and market full-color volumetric 3D display technology. Through a Sponsored Research Agreement with the University of Oklahoma (the “University” or “OU”), we have obtained the exclusive worldwide marketing rights to certain 3D display technologies under development by the University. The development to date has resulted in the University filing seven provisional patents; six of the seven provisional patents have been combined and converted to four utility patents.

 

On May 26, 2009, the United States Patent and Trademark Office ("USPTO") approved the pending patent called "Volumetric Liquid Crystal Display" for rendering a three-dimensional image and converted it to US patent No. 7,537,345. On December 28, 2010, USPTO approved the pending patent called “Light Surface Display for Rendering a Three-Dimensional Image,” and issued the United States Patent No. 7,858,913.  This patent describes what we are calling our CSpace®™ technology (“CSpace”).

 

We plan to market the technology and the intellectual property developed by the University and our staff by targeting various industries, such as retail, manufacturing, entertainment, medical, healthcare, transportation, homeland security and the military.

 

On April 6, 2009, we filed a provisional patent on an emissive two-dimensional (“2D”) screen that is controlled and driven by a standard digital light projector or other optical input source. This provisional patent is called "Flexible/Inflexible Front/Back Projection screen or display" and owned solely by 3DIcon Corporation.   Through the current agreement with the University of Oklahoma, OU filed a continuation patent application on November 19, 2010, called “3D Light Surface Display”.  This application provides additional protections of our CSpace®™ technology.

 

We have only been engaged in our current and proposed business operations since January 2001, and to date, we have been primarily focused on the development of 360-degree volumetric imaging and display technology.

 

Since March of 2012, the Company has been exploring the possibility of developing and marketing glasses-free flat screen 3D displays based on next generation glasses-free flat screen 3D display technology acquired or licensed from another company. This acquired technology and any resultant display products would be in addition to and complementary with our internally developed CSpace glasses-free volumetric 3D display technology. Recently, the company has met with multiple glasses-free flat screen 3D display companies, is in discussion with several of these companies about a potential acquisition or partnership, and is engaged in non-binding discussions to acquire one of these companies. Currently, we do not have any agreements in place that would allow such entry into the flat screen segment of the glasses-free 3D display industry and no assurances can be made, if an acquisition or partnership is consummated, that the Company could successfully bring to market such technology.

 

Our principal executive offices are located at 6804 South Canton Avenue, Suite 150, Tulsa, OK 74136. Our telephone number is (918) 494-0505. Our website address is www.3dicon.net. Our website and the information contained on our website are not incorporated into this prospectus or the registration statement of which it forms a part. Further, our references to the URLs for these websites are intended to be inactive textual references only.

 

3
 

 

 The Offering
     
Securities offered by us:   Up to            shares of common stock and warrants to purchase up to        shares of common stock. The warrants will be exercisable at a price of $      per share and have a    year term.
     
Common Stock to be outstanding  after this offering:              shares.
     

Use of Proceeds:

 

  We expect to use any proceeds received from this offering for repayment of debt and general corporate purposes, such as research and development, business development, working capital and capital expenditures. For a more complete description of our anticipated use of proceeds from this offering, see “Use of Proceeds.”
     
Risk Factors:   See “Risk Factors” beginning on page 5 and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding whether to purchase our securities.
     
OTC Bulletin Board symbol for our Common Stock    TDCP.OB 

 

The number of shares of our common stock to be outstanding after this offering is based on 39,570,228 shares of common stock outstanding as of June 29, 2012 (reflecting a 1-for-35 reverse stock split of our common stock effected on April 27, 2012) and excludes as of that date:

 

  an aggregate of 1,954,109 shares of common stock issuable upon the exercise of stock options outstanding as of June 29, 2012 at a weighted average exercise price of $0.59 per share;

 

  an aggregate of 3,892,235 additional shares reserved for future issuance under the 3DIcon Corporation 2012 Equity Incentive Plan;

 

  an aggregate of 720,167 shares of our common stock issuable upon exercise of warrants with expiration dates between October 2012 and June 2015 at exercise prices ranging from $3.15 to $381.50 per share; and

 

  an aggregate of 45,061,766 shares of our common stock issuable upon conversion of convertible debentures including shares of common stock that may be issuable in the future if we elect to pay all interest due under the terms of the convertible debentures in shares of common stock.

 

Unless we specifically state otherwise, the share information in this prospectus is as of June 29, 2012 and reflects or assumes no exercise of outstanding options or warrants to purchase shares of our common stock or the conversion of convertible debentures into our common stock.

 

Summary Historical Financial Information

 

The following table summarizes our financial data.  We have derived the following summary of our statements of operations data for the three months ended March 31, 2012 and 2011 from our unaudited financial statements appearing elsewhere in this prospectus and the summary of our balance sheet data as of March 31, 2012 and 2011 from our unaudited financial statements appearing elsewhere in this prospectus. We have derived the following summary of our statements of operations data for the fiscal years ended December 31, 2011 and 2010 from our audited financial statements appearing elsewhere in this prospectus and the summary of our balance sheet data as of December 31, 2011 and 2010 from our audited financial statements appearing elsewhere in this prospectus.   The following summary of our financial data set forth below should be read together with our financial statements and the related notes to those statements, as well as the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” appearing elsewhere in this prospectus.

 

   Three Months Ended
March 31,
   Year Ended
December 31,
 
   (Unaudited)     
   2012   2011   2011   2010 
Statement of Operations Data:                    
                     
 Revenues  $52,649   $33,000   $89,323   $106,059 
 Research and development costs   133,481    65,003    942,240    469,408 
 General and administrative costs   296,875    324,605    1,430,365    1,084,419 
 Total expenses   430,356    389,608    2,409,792    1,629,796 
                     
 Net loss attributable to common stockholders  $(377,707)  $(356,608)  $(2,320,469)  $(1,523,737)
                     
 Balance Sheet Data:                    
                     
 Current assets   173,612    900,020    70,101    395,964 
 Working capital (deficit)   (740,860)   188,232    (659,560)   (753,607)
 Total assets   184,354    916,502    82,225    413,988 
 Long term debt, including current portion   111,781    441,591    113,444    404,998 
 Total stockholders’ equity (deficit)   (1,327,548)   (434,915)   (1,246,529)   (1,626,230)

 

4
 

 

RISK FACTORS

 

This investment has a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below and the other information in this prospectus. If any of the following risks actually occur, our business, prospects, results of operation and financial condition could be harmed and the value of our stock could go down. This means you could lose all or a part of your investment.

 

Risks Relating to Our Business

 

We have a limited operating history, as well as a history of operating losses.

 

We have a limited operating history. We cannot assure you that we can achieve revenue or sustain revenue growth or profitability in the future. We have a cumulative net loss of $16,798,827 for the period from inception (January 1, 2001) to March 31, 2012. Our operations are subject to the risks and competition inherent in the establishment of a business enterprise. Unanticipated problems, expenses, and delays are frequently encountered in establishing a new business and marketing and developing products. These include, but are not limited to, competition, the need to develop customers and market expertise, market conditions, sales, marketing and governmental regulation. Our failure to meet any of these conditions would have a materially adverse effect upon us and may force us to reduce or curtail our operations. Revenues and profits, if any, will depend upon various factors. We may not achieve our business objectives and the failure to achieve such goals would have an adverse impact on our business.

 

Currently, our only significant assets are our Sponsored Research Agreement with the University and the exclusive license agreement covering the technology on which the University and the Company are working. Our ability to accomplish our business plan relies entirely on our ability to successfully develop marketable 3D display technology.

 

Our only significant assets at the present time are our Sponsored Research Agreement with the University and the exclusive license agreement covering the technology on which the University and the Company are currently working. In October 2008, Dr. Hakki Refai, the former chief researcher at the University joined the Company as our Chief Technology Officer. Any technology independently developed by the Company subsequent to October 2008, will be the sole property of 3DIcon. If we or the University researchers are not successful in developing 3D display technology that we have envisioned in our business plan, our ability to generate revenues from marketing of the product or technologies on which our business plan is based will be severely impacted, which could threaten the very existence of the Company.

 

Even if we or the University researchers are successful in developing 3D display technology, because of the revolutionary nature of such technology (i.e., no similar technology currently exists, and there are numerous unknowns relating to the technology, such as manufacturing costs and operational costs), there can be no assurance that our marketing plans for the technology will be successful.

 

Therefore, the fact that our success depends significantly on our efforts to develop a technologically challenging new product that will be in a form readily marketable and acceptable to a given market, and our ability to then successfully market such technology, makes an investment in the Company much more risky than a comparable investment in other companies that may have a broad range of existing, proven products.

 

We may not be able to compete successfully.

 

Although the volumetric 3D imaging and display technology that we are attempting to develop is new, and although at present we are aware of only a limited number of companies that have publicly disclosed their attempts to develop similar technology, we anticipate a number of companies are or will attempt to develop technologies/products that compete or will compete with our technologies. Further, even if we are the first to market with a technology of this type, and even if the technology is protected by patents or otherwise, because of the vast market and communications potential of such a product, we anticipate the market will be flooded by a variety of competitors (including traditional display companies), many of which will offer a range of products in areas other than those in which we compete, which may make such competitors more attractive to prospective customers. In addition, many if not all of our competitors and potential competitors will initially be larger and have greater financial resources than we do. Some of the companies with which we may now be in competition, or with which we may compete in the future, have or may have more extensive research, marketing and manufacturing capabilities and significantly greater technical and personnel resources than we do, even given our relationship to the University, and may be better positioned to continue to improve their technology in order to compete in an evolving industry. Further, technology in this industry may evolve rapidly once an initially successful product is introduced, making timely product innovations and use of new technologies essential to our success in the marketplace. The introduction by our competitors of products with improved technologies or features may render any product we initially market obsolete and unmarketable. If we or our partners are not able to deliver to market products that respond to industry changes in a timely manner, or if our products do not perform well, our business and financial condition will be adversely affected.

 

5
 

 

The technologies being developed may not gain market acceptance.

 

The products that we are currently developing utilize new technologies. As with any new technologies, in order for us to be successful, these technologies must gain market acceptance. Since the technologies that we anticipate introducing to the marketplace will exploit or encroach upon markets that presently utilize or are serviced by products from competing technologies, meaningful commercial markets may not develop for our technologies.

  

In addition, the development efforts of 3DIcon and the University on the 3D technology are subject to unanticipated delays, expenses or technical or other problems, as well as the possible insufficiency of funding to complete development. Our success will depend upon the ultimate products and technologies meeting acceptable cost and performance criteria, and upon their timely introduction into the marketplace. The proposed products and technologies may never be successfully developed, and even if developed, they may not satisfactorily perform the functions for which they are designed. Additionally, these may not meet applicable price or performance objectives. Unanticipated technical or other problems may occur which would result in increased costs or material delays in their development or commercialization.

 

If we are unable to successfully retain existing management and recruit qualified personnel having experience in our business, we may not be able to continue our operations.

 

Our success depends to a significant extent upon the continued services of our Board of Directors, management officers and our Chief Technology Officer.  Our success also depends on our ability to attract and retain other key executive officers.

 

Our auditors have expressed substantial doubt about our ability to continue as a going concern. If we do not continue as a going concern, investors will lose their entire investment.

 

In their report dated April 6, 2012, our auditors have expressed substantial doubt about our ability to continue as a going concern. These concerns arise from the fact that we are a development stage organization with insufficient revenues to fund development and operating expenses. If we are unable to continue as a going concern, you could lose your entire investment in us.

 

We will need significant additional capital, which we may be unable to obtain.

 

Our capital requirements in connection with our development activities and transition to commercial operations have been and will continue to be significant. We will require approximately $2.5 million additional funds over the next two years to continue research, development and testing of our technologies, to obtain intellectual property protection relating to our technologies when appropriate, and to improve and market our technologies. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all.

 

Risks Related to Our Intellectual Property

 

If we fail to establish, maintain and enforce intellectual property rights with respect to our technology and/or licensed technology, our financial condition, results of operations and business could be negatively impacted.

 

Our ability to establish, maintain and enforce intellectual property rights with respect to our technology and the University’s ability to establish, maintain and enforce intellectual property rights with respect to our exclusively licensed technology, once successfully developed into 3D display technology that we intend to market, will be a significant factor in determining our future financial and operating performance. We seek to protect our intellectual property rights by relying on a combination of patent, trade secret and copyright laws. We also use confidentiality and other provisions in our agreements that restrict access to and disclosure of its confidential know-how and trade secrets.

 

Outside of our pending patent applications, we seek to protect our technology as trade secrets and technical know-how. However, trade secrets and technical know-how are difficult to maintain and do not provide the same legal protections provided by patents. In particular, only patents will allow us to prohibit others from using independently developed technology that are similar. If competitors develop knowledge substantially equivalent or superior to our trade secrets and technical know-how, or gain access to our knowledge through other means such as observation of our technology that embodies trade secrets at customer sites which we do not control, the value of our trade secrets and technical know-how would be diminished.

 

6
 

 

While we strive to maintain systems and procedures to protect the confidentiality and security of our trade secrets and technical know-how, these systems and procedures may fail to provide an adequate degree of protection. For example, although we generally enter into agreements with our employees, consultants, advisors, and strategic partners restricting the disclosure and use of trade secrets, technical know-how and confidential information, we cannot provide any assurance that these agreements will be sufficient to prevent unauthorized use or disclosure. In addition, some of the technology deployed at customer sites in the future, which we do not control, may be readily observable by third parties who are not under contractual obligations of non-disclosure, which may limit or compromise our ability to continue to protect such technology as a trade secret.

 

While we are not currently aware of any infringement or other violation of our intellectual property rights, monitoring and policing unauthorized use and disclosure of intellectual property is difficult. If we learned that a third party was in fact infringing or otherwise violating our intellectual property, we may need to enforce our intellectual property rights through litigation. Litigation relating to our intellectual property may not prove successful and might result in substantial costs and diversion of resources and management attention.

 

If our technology is licensed to customers at some point in the future, the strength of the intellectual property under which we would to grant licenses can be a critical determinant of the value of such potential licenses. If we are unable to secure, protect and enforce our intellectual property now and in the future, it may become more difficult for us to attract such customers.  Any such development could have a material adverse effect on our business, prospects, financial condition and results of operations.

 

We may face claims that we are violating the intellectual property rights of others.

 

Although we are not aware of any potential violations of others’ intellectual property rights, we may face claims, including from direct competitors, other companies, scientists or research universities, asserting that our technology or the commercial use of such technology infringes or otherwise violates the intellectual property rights of others. We cannot be certain that our technologies and processes do not violate the intellectual property rights of others. If we are successful in developing technologies that allow us to earn revenues and our market profile grows we could become increasingly subject to such claims.

 

We may also face infringement claims from the employees, consultants, agents and outside organizations we have engaged to develop our technology. While we have sought to protect ourselves against such claims through contractual means, we cannot provide any assurance that such contractual provisions are adequate, and any of these parties might claim full or partial ownership of the intellectual property in the technology that they were engaged to develop.

 

If we were found to be infringing or otherwise violating the intellectual property rights of others, we could face significant costs to implement work-around methods, and we cannot provide any assurance that any such work-around would be available or technically equivalent to our potential technology. In such cases, we might need to license a third party’s intellectual property, although any required license might not be available on acceptable terms, or at all. If we are unable to work around such infringement or obtain a license on acceptable terms, we might face substantial monetary judgments against us or an injunction against continuing to use or license such technology, which might cause us to cease operations.

 

In addition, even if we are not infringing or otherwise violating the intellectual property rights of others, we could nonetheless incur substantial costs in defending ourselves in suits brought against us for alleged infringement. Also, if we are to enter into a license agreement in the future and it provides that we will defend and indemnify our customer licensees for claims against them relating to any alleged infringement of the intellectual property rights of third parties in connection with such customer licensees’ use of such technologies, we may incur substantial costs defending and indemnifying any customer licensees to the extent they are subject to these types of claims. Such suits, even if without merit, would likely require our management team to dedicate substantial time to addressing the issues presented. Any party bringing claims might have greater resources than we do, which could potentially lead to us settling claims against which we might otherwise prevail on the merits.

 

Any claims brought against us or any customer licensees alleging that we have violated the intellectual property of others could have negative consequences for our financial condition, results of operations and business, each of which could be materially adversely affected as a result.

 

Risks Relating to Our Current Financing Arrangements:

 

There are a large number of shares underlying our convertible debentures, and warrants that may be available for future sale and the sale of these shares may depress the market price of our common stock.

 

As of June 29, 2012, we had 39,570,228 shares of common stock issued and outstanding and convertible debentures outstanding that may be converted into an estimated 48,187,404 shares of common stock at current market prices. The number of shares of common stock issuable upon conversion of the outstanding convertible debentures may increase if the market price of our stock declines. We also have outstanding warrants issued to Golden State Equity Investors, Inc. f/k/a Golden Gate Investors ("Golden State") to purchase 22,543 shares of common stock at an exercise price of $381.50. The sale of the shares underlying the convertible debentures and warrants may adversely affect the market price of our common stock.

 

Our obligation to issue shares upon conversion of our convertible debentures is essentially limitless.

 

7
 

 

The conversion price of our convertible debentures is continuously adjustable, which could require us to issue a substantially greater number of shares, which will cause dilution to our existing stockholders.  

 

The following is an example of the amount of shares of our common stock that are issuable, upon conversion of our 4.75% $100,000 convertible debenture (excluding accrued interest) issued to Golden State on November 3, 2006, based on the remaining principal balance of $78,092 and market prices 25%, 50% and 75% below the market price as of June 29, 2012 of $0.22.

 

% Below
Market
   Price Per
Share
   Effective
Conversion
Price
   Number
of Shares
Issuable(1)
   % of
Outstanding
Stock
 
 25%  $0.165   $0.132    72,795,807    184%
 50%  $0.110   $0.088    109,635,790    277%
 75%  $0.055   $0.044    220,155,740    556%

 

(1) Shares issuable exclude 22,543 shares underlying the remaining warrants exercisable at $381.50 per share.

 

The following is an example of the amount of shares of our common stock that are issuable, upon conversion of the $1.25 million convertible debenture issued to Golden State on January 15, 2008 (the "Second Debenture") (excluding accrued interest), based on the principal balance of $31,788 and market prices 25%, 50% and 75% below the market price as of June 29, 2012 of $0.22.

 

        Effective   Number   % of 
% Below   Price Per   Conversion   of Shares   Outstanding 
Market   Share   Price   Issuable   Stock 
 25%  $0.165   $0.149    214,063    0.5%
 50%  $0.110   $0.099    321,094    0.8%
 75%  $0.055   $0.049    642,189    1.6%

 

As illustrated, the number of shares of common stock issuable upon conversion of our convertible debentures will increase if the market price of our stock declines, which will cause dilution to our existing stockholders.

 

The continuously adjustable conversion price feature of our convertible debentures may encourage investors to make short sales in our common stock, which could have a depressive effect on the price of our common stock.

 

So long as the market price of our stock is below $4.00, the issuance of shares in connection with the conversion of the $100,000 convertible debenture results in the issuance of shares at an effective 20% discount to the trading price of the common stock prior to the conversion. So long as the market price of our stock is below $2.00 the issuance of shares in connection with the conversion of the Second Debenture results in the issuance of shares at an effective 10% discount to the trading price of the common stock prior to the conversion. The significant downward pressure on the price of the common stock as the selling stockholder converts and sells material amounts of common stock could encourage short sales by investors. This could place further downward pressure on the price of the common stock. The selling stockholder could sell common stock into the market in anticipation of covering the short sale by converting their securities, which could cause the further downward pressure on the stock price. In addition, not only the sale of shares issued upon conversion or exercise of debentures and warrants, but also the mere perception that these sales could occur, may adversely affect the market price of the common stock.

 

The issuance of shares upon conversion of the convertible debentures and exercise of outstanding warrants may cause immediate and substantial dilution to our existing stockholders.

 

The issuance of shares upon conversion of our convertible debentures and exercise of warrants may result in substantial dilution to the interests of other stockholders since the selling stockholder may ultimately convert and sell the full amount issuable on conversion. Although Golden State may not convert its convertible debentures and/or exercise their warrants if such conversion or exercise would cause it to own more than 9.9% of our outstanding common stock, this restriction does not prevent the selling stockholder from converting and selling some of their holdings and then converting the rest of their holdings. In this way, assuming the market price remains at a level acceptable to the selling stockholder, the selling stockholder could continue on a "conversion-sell-conversion" trend while never holding more than 9.9% of our common stock. Further, under the convertible debentures there is theoretically no upper limit on the number of shares that may be issued, which will have the effect of further diluting the proportionate equity interest and voting power of holders of our common stock.

 

If we are unable to issue shares of common stock upon conversion of the convertible debenture as a result of our inability to increase our authorized shares of common stock or as a result of any other reason, we are required to pay penalties to Golden State, redeem the convertible debenture at 130% and/or compensate Golden State for any buy-in that it is required to make.

 

If we are unable to issue shares of common stock upon conversion of the convertible debenture as a result of our inability to increase our authorized shares of common stock or as a result of any other reason, we are required to:

 

  Pay late payments to Golden State for late issuance of common stock upon conversion of the convertible debenture, in the amount of $100 per business day after the delivery date for each $10,000 of convertible debenture principal amount being converted or redeemed;
  In the event we are prohibited from issuing common stock, or fail to timely deliver common stock on a delivery date, or upon the occurrence of an event of default, then at the election of Golden State, we must pay to Golden State a sum of money determined by multiplying up to the outstanding principal amount of the convertible debenture designated by Golden State by 130%, together with accrued but unpaid interest thereon; and

 

8
 

 

  If ten days after the date we are required to deliver common stock to Golden State pursuant to a conversion, Golden State purchases (in an open market transaction or otherwise) shares of common stock to deliver in satisfaction of a sale by Golden State of the common stock which it anticipated receiving upon such conversion (a "Buy-In"), then we are required to pay in cash to Golden State the amount by which its total purchase price (including brokerage commissions, if any) for the shares of common stock so purchased exceeds the aggregate principal and/or interest amount of the convertible debenture for which such conversion was not timely honored, together with interest thereon at a rate of 15% per annum, accruing until such amount and any accrued interest thereon is paid in full.

 

In the event that we are required to pay penalties to Golden State or redeem the convertible debentures held by Golden State, we may be required to curtail or cease our operations.

 

 

Risks Relating to Our Common Stock:

 

The price of our common stock is volatile and fluctuations in our operating results and announcements and developments concerning our business affect our stock price, which may cause investment losses for our stockholders.

 

The market for our common stock is highly volatile and the trading price of our stock on the OTCBB is subject to wide fluctuations in response to, among other things, operating results, the number of stockholders desiring to sell their shares, changes in general economic conditions and the financial markets, the execution of new contracts and the completion of existing agreements and other developments affecting us. In addition, statements or changes in opinions, ratings, or earnings estimates made by brokerage firms or industry analysts relating to our market or relating to us could result in an immediate and adverse effect on the market price of our common stock. The highly volatile nature of our stock price may cause investment losses for our shareholders. In the past, securities class action litigation has often been brought against companies following periods of volatility in the market price of their securities. If securities class action litigation is brought against us, such litigation could result in substantial costs while diverting management’s attention and resources.

 

Our common stock is subject to the "Penny Stock" rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.

 

The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:

 

  That a broker or dealer approve a person's account for transactions in penny stocks; and
  The broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

 

In order to approve a person's account for transactions in penny stocks, the broker or dealer must:

 

  Obtain financial information and investment experience objectives of the person; and
  Make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:

 

  Sets forth the basis on which the broker or dealer made the suitability determination; and
  That the broker or dealer received a signed, written agreement from the investor prior to the transaction.

 

Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

 

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

 

Financial Industry Regulatory Authority, Inc. (“FINRA”) sales practice requirements may limit a shareholder’s ability to buy and sell our common shares.

 

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

 

9
 

 

Our stock is thinly traded, so you may be unable to sell your shares at or near the quoted bid prices if you need to sell a significant number of your shares.

 

The shares of our common stock are thinly-traded on the OTC Bulletin Board, meaning that the number of persons interested in purchasing our common shares at or near bid prices at any given time may be relatively small or non-existent.  As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common shares will develop or be sustained, or that current trading levels will be sustained. Due to these conditions, we can give you no assurance that you will be able to sell your shares at or near bid prices or at all if you need money or otherwise desire to liquidate your shares.

 

Shares eligible for future sale may adversely affect the market.

 

From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144 promulgated under the Securities Act, subject to certain limitations. In general, pursuant to amended Rule 144, non-affiliate stockholders may sell freely after six months subject only to the current public information requirement. Affiliates may sell after six months subject to the Rule 144 volume, manner of sale (for equity securities), current public information and notice requirements. Any substantial sales of our common stock pursuant to Rule 144 may have a material adverse effect on the market price of our common stock.

 

We could issue additional common stock, which might dilute the book value of our common stock.

 

Our Board of Directors has authority, without action or vote of our shareholders, to issue all or a part of our authorized but unissued shares. Such stock issuances could be made at a price that reflects a discount or a premium from the then-current trading price of our common stock. In addition, in order to raise capital, we may need to issue securities that are convertible into or exchangeable for a significant amount of our common stock. These issuances would dilute the percentage ownership interest, which would have the effect of reducing your influence on matters on which our shareholders vote, and might dilute the book value of our common stock. You may incur additional dilution if holders of stock options, whether currently outstanding or subsequently granted, exercise their options, or if warrant holders exercise their warrants to purchase shares of our common stock.


Our common stock could be further diluted as the result of the issuance of convertible securities, warrants or options.

 

In the past, we have issued convertible securities (such as convertible debentures and notes), warrants and options in order to raise money or as compensation for services and incentive compensation for our employees and directors. We have shares of common stock reserved for issuance upon the exercise of certain of these securities and may increase the shares reserved for these purposes in the future. Our issuance of these convertible securities, options and warrants could affect the rights of our stockholders, could reduce the market price of our common stock or could result in adjustments to exercise prices of outstanding warrants (resulting in these securities becoming exercisable for, as the case may be, a greater number of shares of our common stock), or could obligate us to issue additional shares of common stock to certain of our stockholders.

 

We do not intend to pay dividends.

 

We do not anticipate paying cash dividends on our common stock in the foreseeable future. We may not have sufficient funds to legally pay dividends. Even if funds are legally available to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends. The declaration, payment and amount of any future dividends will be made at the discretion of our board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors our board of directors may consider relevant. There is no assurance that we will pay any dividends in the future, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.

 

If we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.

 

Our internal control over financial reporting may have weaknesses and conditions that could require correction or remediation, the disclosure of which may have an adverse impact on the price of our common stock.  We are required to establish and maintain appropriate internal controls over financial reporting.  Failure to establish those controls, or any failure of those controls once established, could adversely affect our public disclosures regarding our business, prospects, financial condition or results of operations.  In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors.  Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.

 

10
 

 

We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002 and if we fail to comply in a timely manner, our business could be harmed and our stock price could decline.

 

Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require an annual assessment of internal controls over financial reporting, and for certain issuers an attestation of this assessment by the issuer’s independent registered public accounting firm.  The standards that must be met for management to assess the internal controls over financial reporting as effective are evolving and complex, and require significant documentation, testing, and possible remediation to meet the detailed standards.  We expect to incur significant expenses and to devote resources to Section 404 compliance on an ongoing basis.  It is difficult for us to predict how long it will take or costly it will be to complete the assessment of the effectiveness of our internal control over financial reporting for each year and to remediate any deficiencies in our internal control over financial reporting. As a result, we may not be able to complete the assessment and remediation process on a timely basis.  In addition, although attestation requirements by our independent registered public accounting firm are not presently applicable to us we could become subject to these requirements in the future and we may encounter problems or delays in completing the implementation of any resulting changes to internal controls over financial reporting.  In the event that our Chief Executive Officer or Chief Financial Officer determine that our internal control over financial reporting is not effective as defined under Section 404, we cannot predict how regulators will react or how the market prices of our shares will be affected; however, we believe that there is a risk that investor confidence and share value may be negatively affected.

 

Risks Related to this Offering

 

Our management team will have immediate and broad discretion over the use of the net proceeds from this offering and we may use the net proceeds in ways with which you disagree.

 

There is no minimum offering amount required as a condition to closing this offering and therefore net proceeds from this offering will be immediately available to our management to use at their discretion. We currently intend to use the net proceeds from this offering for repayment of debt and general corporate purposes. See “Use of Proceeds.” We have not allocated specific amounts of the net proceeds from this offering for any of the foregoing purposes. Accordingly, our management will have significant discretion and flexibility in applying the net proceeds of this offering. You will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that the net proceeds will be invested in a way that does not yield a favorable, or any, return for us or our stockholders. The failure of our management to use such funds effectively could have a material adverse effect on our business, prospects, financial condition, and results of operation.

 

You will experience immediate and substantial dilution as a result of this offering and may experience additional dilution in the future.

 

You will incur immediate and substantial dilution as a result of this offering. After giving effect to the sale by us of up to         shares offered in this offering at an assumed public offering price of $         per share, and after deducting underwriter’s discounts and commissions, if any, and estimated offering expenses payable by us, investors in this offering can expect an immediate dilution of $          per share, or          %, at the assumed public offering price. In addition, in the past, we issued options and warrants to acquire shares of common stock. To the extent these options are ultimately exercised, you will sustain future dilution. We may also acquire or license other technologies or finance strategic alliances by issuing equity, which may result in additional dilution to our stockholders.

 

If you are not an institutional investor, you may purchase shares in this offering only if you reside within the states in which we will apply to have the securities registered or are exempt from registration, and, if required, meet any requisite suitability standards.

 

Because our common stock is quoted on the OTC Bulletin Board and not listed on a national securities exchange, this offering must be registered, or be exempt from registration, in any state in which the common stock and warrants are to be offered or sold. We will apply to register the common stock and warrants, or will seek to obtain an exemption from registration, only in certain states. In addition, if we register the common stock and warrants in the State of California, sales will only be made to residents of California who have not less than (i) a $60,000 liquid net worth (exclusive of home, home furnishings and automobile) plus $60,000 gross annual income, or (ii) a $225,000 liquid net worth. If you are not an “institutional investor,” you must be a resident of the jurisdictions to purchase our shares in the offering are registered or exempt from registration. The definition of an “institutional investor” varies from state to state, but generally includes financial institutions, broker-dealers, banks, insurance companies and other qualified entities. If you are not an institutional investor, you may purchase shares in this offering only if you reside in the jurisdictions where there is an effective registration or exemption, and, if required, meet any requisite suitability standards.

 

There is no public market for the offered securities other than our common stock.

 

Our common stock is traded on the OTC Bulletin Board and is not listed on any securities exchange. We have not registered any series of our currently issued and outstanding preferred stock for trading in the public securities markets and do not intend to do so. There is no established public trading market for any securities that we may offer and sell under this prospectus other than our common stock. Without an active market, the liquidity of the securities other than our common stock will be limited.

 

Because this is a direct public offering, with no minimum number of shares that must be sold, we may receive some or no proceeds.

 

This is a direct public offering by the Company of up to          shares of our common stock. There is no minimum number of shares that must be sold in the offering, we will retain the proceeds from the sale of any of the offered shares, and funds will not be returned to investors. As a result, we may receive some or no proceeds from the offering. If any proceeds are received, it is possible that such proceeds may not be sufficient to cover the costs of the offering.

 

11
 

 

FORWARD-LOOKING STATEMENTS

 

Statements in this prospectus may be “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this prospectus, including the risks described under “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus and in other documents which we file with the Securities and Exchange Commission (the “SEC”). In addition, such statements could be affected by risks and uncertainties related to our ability to raise any financing which we may require for our operations, competition, government regulations and requirements, pricing and development difficulties, our ability to make acquisitions and successfully integrate those acquisitions with our business, as well as general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this prospectus, except as may be required under applicable securities laws.

 

12
 

 

USE OF PROCEEDS

 

Based on an assumed public offering price of $     per share, we estimate that the net proceeds to us from the sale of the shares that we are offering, assuming gross proceeds of $      million, will be approximately $      million, after deducting underwriting discounts and commissions and estimated offering expenses..

 

If a warrant holder elects to pay the exercise price, rather than exercising the warrants on a “cashless” basis, we may also receive proceeds from the exercise of warrants.  We cannot predict when, or if, the warrants will be exercised.  It is possible that the warrants may expire and may never be exercised.

 

We expect to use any proceeds received from this offering for repayment of debt and general corporate purposes, such as research and development, business development, working capital and capital expenditures.

 

Pending the application of the net proceeds as described above or otherwise, we may invest the proceeds in short-term, investment-grade, interest-bearing securities or guaranteed obligations of the U.S. government or other securities.

 

We have not allocated specific amounts of the net proceeds from this offering for any of the foregoing purposes. Accordingly, our management will have significant discretion and flexibility in applying the net proceeds of this offering.

 

CAPITALIZATION

 

The following table sets forth our capitalization, as of March 31, 2012:

 

  ¨ on an actual basis; and

 

  ¨ on a pro forma as adjusted basis to give effect to the issuance of the shares offered hereby.

 

You should consider this table in conjunction with our financial statements and the notes to those financial statements included elsewhere in this prospectus.

 

    Actual     Proforma  
SHAREHOLDERS' EQUITY            
             
      -          
   Common stock, $0.0002 par value;                
     1,500,000,000 authorized common shares                
    33,949,163  shares                
     issued and outstanding   $ 6,790          
   Additional paid in capital     15,464,489          
   Common stock subscription payable     -          
   Deficit accumulated during the development stage     (16,798,827)          
                 
                      TOTAL SHAREHOLDERS' EQUITY   $ (1,327,548)          

 

This table excludes the following:

 

-   1,868,394 post-split shares of our common stock issuable upon the exercise of options outstanding as of March 31, 2012 with a weighted average exercise price of $0.61 per share.

 

-   1,868,394 post-split shares of our common stock issuable upon the exercise of warrants outstanding as of March 31, 2012 with a weighted average exercise price of $24.49 per share.

 

13
 

 

MARKET PRICE OF AND DIVIDENDS ON THE COMMON EQUITY AND RELATED

STOCKHOLDER MATTERS

 

Our common stock is quoted on the OTC Bulletin Board under the symbol “TDCP”.

 

For the periods indicated, the following table sets forth the high and low bid prices per share of common stock. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions. Where applicable, the prices set forth below give retroactive effect to our one-for-thirty-five reverse stock split which became effective on April 27, 2012.

 

2012 Fiscal Year

 

   High   Low 
First Quarter ended March 31, 2012  $0.54   $0.28 
Second Quarter ended June 30, 2012  $0.55   $0.09 

  

Year Ended December 31, 2011

 

   High   Low 
First Quarter ended March 31, 2011  $3.64   $0.39 
Second Quarter ended June 30, 2011  $2.78   $0.70 
Third Quarter ended September 30, 2011  $1.12   $0.46 
Fourth Quarter ended December 31, 2011  $0.63   $0.24 

 

Year Ended December 31, 2010

   High   Low 
First Quarter ended March 31, 2010  $0.31   $0.10 
Second Quarter ended June 30, 2010  $0.21   $0.09 
Third Quarter ended September 30, 2010  $0.20   $0.09 
Fourth Quarter ended December 31, 2010  $0.98   $0.01 

 

The market price of our common stock, like that of other technology companies, is highly volatile and is subject to fluctuations in response to variations in operating results, announcements of technological innovations or new products, or other events or factors. Our stock price may also be affected by broader market trends unrelated to our performance.

 

Holders

 

As of June 29, 2012 we had approximately 390 active holders of our common stock. The number of active record holders was determined from the records of our transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies. Our transfer agent is Continental Stock Transfer & Trust Company, 17 Battery Place, New York, NY 10004.

 

Dividend Policy

 

We have not declared any dividends to date. We have no present intention of paying any cash dividends on our common stock in the foreseeable future, as we intend to use earnings, if any, to generate growth. The payment of dividends, if any, in the future, rests within the discretion of our Board of Directors and will depend, among other things, upon our earnings, capital requirements and our financial condition, as well as other relevant factors. There are no restrictions in our Certificate of Incorporation or By-laws that restrict us from declaring dividends.

 

14
 

 

Equity Compensation Plan Information

 

The following table sets forth the information indicated with respect to our compensation plans under which our common stock is authorized for issuance.

 

Plan category

  Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights
    Weighted average
exercise price of
outstanding options,
warrants and rights
    Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in
column (a)
 
    (a)     (b)     (c)  
Equity compensation plans approved by security holders     -       -       -  
Equity compensation plans not approved by security holders:                        
                         
2012 Plan(1)                     3,592,235  
2011 Plan     171,429     $ 0.59       173,244  
Total     -     $ -       -  

 

 

(1) Our board of directors adopted this plan in May 2012.  The Plan was registered on Form S-8, filed May 4, 2012.

 

 

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DILUTION

 

Our pro forma net tangible book value as of             , 2012 was $           or $       per share of common stock, based upon           shares outstanding as of that date. Net tangible book value per share is determined by dividing such number of outstanding shares of common stock into our net tangible book value, which is our total tangible assets less total liabilities. After giving effect to the sale of the shares in this offering at the assumed public offering price of $      per share, at          , 2012, after deducting underwriting discounts and commissions and other estimated offering expenses payable by us, our pro forma as adjusted net tangible book value at          , 2012 would have been approximately          , or $          per share. This represents an immediate increase in net tangible book value of approximately $          per share to our existing stockholders, and an immediate dilution of $           per share to investors purchasing shares in the offering.

 

The following table illustrates the per share dilution to investors purchasing shares in the offering:

 

Assumed public offering price per share   $    
Pro forma net tangible book value per share as of             , 2012   $    
Increase per share attributable to sale of shares to investors   $    
Pro forma as adjusted net tangible book value per share after the offering   $    
Dilution per share to investors   $    

 

The foregoing illustration does not reflect potential dilution from the exercise of outstanding options or warrants to purchase shares of our common stock. The foregoing illustration also does not reflect the dilution that would result from the underwriter warrants.

 

16
 

 

BUSINESS

 

Organizational History

 

3DIcon Corporation was incorporated on August 11, 1995, under the laws of the State of Oklahoma as First Keating Corporation. Our articles of incorporation were amended August 1, 2003 to change the name to 3DIcon Corporation. The initial focus of First Keating Corporation was to market and distribute books written by its founder, Martin Keating. During 2001, First Keating Corporation began to focus on the development of 360-degree holographic technology. The effective date of this transition is January 1, 2001. We have accounted for this transition as reorganization and accordingly, restated its capital accounts as of January 1, 2001. At the inception on January 1, 2001, our primary activity was the raising of capital in order to pursue its goal of becoming a significant participant in the formation and commercialization of interactive, optical holography for the communications and entertainment industries.

 

In April 2004, we engaged the University of Oklahoma to conduct a pilot study to determine the opportunity and feasibility for the creation of volumetric three dimensional display systems.

 

On July 15, 2005, we entered into a Sponsored Research Agreement with the University, which expired on January 14, 2007. Under this agreement, the University conducted a research project entitled "Investigation of 3-Dimensional Display Technologies".

 

On February 23, 2007, we entered into an SRA with the University, which SRA expired on March 31, 2010. Under this agreement, the University conducted a research project entitled "3-Dimensional Display Development".

 

In the fourth quarter of 2007 we announced the release of our first product, "Pixel Precision". On February 12, 2009, version 2.0 of Pixel Precision was released to expand its capabilities and provide new compatibility with Texas Instrument's newly released DLP® Discovery 4000 kits.  This is a companion software application to the DMD Discovery ™ line of products manufactured by Texas Instruments®.

 

The Oklahoma Center for the Advancement of Science and Technology approved the Company’s application for funding of a matching grant titled 800 Million Voxels Volumetric Display, on November 19, 2008.  The two-year matching grant, totaling $299,932, had a start date of January 1, 2009.  The Company received approval for our no cost extension request for the first year of the contract. With the new modification, the first year ended on August 31, 2010.  The award is for a maximum of $149,940 for 2009 and the remainder for 2011.  The Company earned 52,649 and $30,000 from the grant during the three-month periods ended March 31, 2012 and 2011, respectively and $270,473 from inception to date.  The Company received approval for our no cost extension request for the second year of the contract and, with the new modification, the second year ends on August 31, 2012.

 

Overview of Business

 

We are a development stage company. Our mission is to pursue, develop and market full-color volumetric 3D display technology. Through a Sponsored Research Agreement with the University of Oklahoma, we have obtained the exclusive worldwide marketing rights to certain 3D display technologies under development by the University. The development to date has resulted in the University filing seven provisional patents; six of the seven provisional patents have been combined and converted to four utility patents. On May 26, 2009, the United States Patent and Trademark Office approved the pending patent called "Volumetric Liquid Crystal Display" for rendering a three-dimensional image and converted it to US patent No. 7,537,345. On December 28, 2010, USPTO approved the pending patent called “Light Surface Display for Rendering a Three-Dimensional Image,” and issued the United States Patent No. 7,858,913.  This patent describes what we are calling our CSpace®™ technology. At this time, we do not own any intellectual property rights in these technologies, and, apart from the Sponsored Research Agreement with the University, have no contracts or agreements pending to acquire such rights or any other interest in such rights. We plan to market the technology and the intellectual property developed by the University and our staff by targeting various industries, such as retail, manufacturing, entertainment, medical, healthcare, transportation, homeland security and the military. On April 6, 2009, we filed a provisional patent on an emissive two-dimensional screen that is controlled and driven by a standard digital light projector or other optical input source. This provisional patent is called "Flexible/Inflexible Front/Back Projection screen or display" and owned solely by 3DIcon Corporation.   Through the current agreement with the University of Oklahoma, OU filed a continuation patent application on November 19, 2010, called “3D Light Surface Display”.  This application provides additional protections of our CSpace®™ technology.

 

Since March of 2012, the Company has been exploring the possibility of developing and marketing glasses-free flat screen 3D displays based on next generation glasses-free flat screen 3D display technology acquired or licensed from another company. This acquired technology and any resultant display products would be in addition to and complementary with our internally developed CSpace glasses-free volumetric 3D display technology. Recently, the company has met with multiple glasses-free flat screen 3D display companies, is in discussion with several of these companies about a potential acquisition or partnership, and is engaged in non-binding discussions to acquire one of these companies. Currently, we do not have any agreements in place that would allow such entry into the flat screen segment of the glasses-free 3D display industry and no assurances can be made, if an acquisition or partnership is consummated, that the Company could successfully bring to market such technology.

 

17
 

 

Overview of Development of 3D Technology

 

Pursuant to the Sponsored Research Agreement, a portfolio of 3D Display Technologies is being developed in using the following approaches:

 

  I – Swept Volume Displays - We have successfully achieved the initial demonstration and proof of technology for this approach.

 

  II – Static Volumetric Displays - Under Glass.

 

  III – Stacked Volume Displays - We also have investigated the technologies for developing innovative Stacked Volumetric Displays.

 

The Swept Volume Display is designed to be a 3D display system showing a volumetric image generated from an electronic medium. A proof-of-concept demonstration was achieved by the researchers around September 2007. The Swept Volume Display R&D entered into the subsequent second stage of improvement and development in 2008. Additional work on this particular approach has been deferred indefinitely because of the success and initial superiority of the CSpace®™ technology.

 

Our implementation of a Static Volume Display (CSpace®™) employs one or more Digital Micro-Mirror Devices (DMDs) and infra-red lasers to produce 3D images in advanced transparent nanotechnology materials, thereby enabling the creation, transmission and display of high resolution 3D images within a volume space, surrounded by glass or transparent screen. The initial investigation for the Static Volume system commenced in 2007. On September 2008, we built a laboratory prototype Static Volume Display using the CSpace®™ technology and demonstrated the creation of true 3D images within a specified image space. New developments for eliminating the distortion occurred by the divergence of the constructed 3D image have been presented at the SPIE Europe Security & Defense conference in Berlin, Germany in August 2009. Improvements for the optical systems utilized by CSpace®™ with the latest achieved resolution were published on October 2009 in IEEE/OSA Journal of Display Technology titled "Static Volumetric Three-Dimensional Display". On February 15, 2010, at the SPIE Medical Imaging conference, we presented the latest software developments that allow reading Digital Imaging and Communication In Medicine ("DICOM") formats whether scanned by ultrasound devices, magnetic resonance imaging ("MRI"), or computed tomography ("CT") scanners. With this new software architecture, Static Volume 3D displays based on the CSpace®™ technology would have the capability of displaying medical images.

 

On April 14, 2010, at the OSA Digital Holography and Three-Dimensional Imaging conference in Miami, FL, we presented an increase in brightness of the constructed 3D images.  On September 23, 2010, at the SPIE Europe Security & Defense conference in Toulouse, France, we presented new implementations to reduce flicker of the 3D Images constructed by CSpace®™ display.  In November 2010, we published a new method of rendering 3D Images using a rotational-slicing technique at the Journal of the Society for Information Display. In December 2010, we published the utilization of new materials for CSpace®™ image space at the Journal of the Society for Information Display. In April 2011, New Developments That Allow CSpace®™ To Perfectly Fit Applications Such As Air Traffic Control was published in the IEEE/OSA Journal of Display Technology.

 

Regarding our continued efforts to improve the performance of the CSpace technology, we are making better-than-expected progress on our second-generation prototype. Our goals for this new prototype are to first improve image brightness, and then to improve resolution (increase the number of voxels or 3D pixels), and lastly to increase the size of the image. Our technical team has made significant improvements in brightness and resolution since March of 2012. The image generated by the second-generation prototype is approximately fifty times (50x) brighter than our first generation prototype and can now be viewed in normal room lighting. As a result of the increased brightness, resolution has also been improved. The estimated resolution of the second-generation prototype is approximately five times (5x) greater than the first generation prototype. The Company has put in place a new development strategy and, in about three months since its implementation, we have already reached an important goal. Furthermore, in accordance with the development strategy, we plan to further increase resolution, as well as image size, in the coming months.

 

University of Oklahoma - Sponsored Research Agreement

 

On April 20, 2004, we entered into a Sponsored Research Agreement entitled "Investigation of Emerging Digital Holography Technologies" with the University, which expired October 19, 2004. We paid the University $14,116 pursuant to this agreement. The purpose of this agreement was to conduct a pilot study to investigate digital holography as a candidate technology for the development of three-dimensional ("3D") imaging and visualization systems. The purpose of the pilot study was to investigate the current state-of-the-art research and development activities taking place in the field of digital holography, particularly emerging technologies. The scope of work for the study encompassed the following tasks:

 

  Literature review to determine key leading edge research in relevant areas;
  Review of related commercial products to identify technological approaches and potential competitors and/or partners;
  Preliminary patent review; and
  Recommendations for product research and development directions.

 

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On July 15, 2005, we entered into a Sponsored Research Agreement with the University, which expired on January 14, 2007. Under this agreement, the University conducted a research project entitled "Investigation of 3-Dimensional Display Technologies" and the Company agreed to pay the University $453,584 at various dates from November 10, 2005 through July 15, 2006 to cover the costs of the research. The goals for this research were as follows:

 

  Produce patentable and/or copyrightable intellectual property;
  Produce proof-of-concept technology that demonstrates the viability of the intellectual property;
  Assess opportunities for manufacturing technological products in Oklahoma;
  Investigate magnetic nanospheres (“MNs”) for use as a projection media;
  Develop a control platform to actively distribute MNs in an unbounded volumetric space;
  Investigate the doping of MNs with fluorescent materials for light emission at different wavelengths, i.e., develop fluorescent MNs ("FMNs");
  Evaluate other display medium technologies for potential strategic partnerships;
  Evaluate the most appropriate (from a cost-to-benefit standpoint) solid-state light sources for projection applications;
  Develop software for displaying ideal 3D images; and
  Investigate software interface issues with other image capture technologies.

  

The final payment of $226,792, due on July 15, 2006, was not paid. On November 1, 2006 the Sponsored Research Agreement was modified to provide $125,259 additional funding, extend the term of the agreement through March 31, 2007, and revise the payment schedule to combine the July 15, 2006 remaining balance due of $226,792 with the additional funding into a revised payment schedule. Under the terms of the agreement, we agreed to pay the combined remaining obligation of $352,051 in four equal monthly installments of $88,013 beginning on December 31, 2006 through March 31, 2007.

 

On February 23, 2007, we entered into a Sponsored Research Agreement with the University of Oklahoma, which expired on March 31, 2010. Under this agreement, the University conducted a research project entitled "3-Dimensional Display Development". We agreed to pay the University $3,468,595 in monthly installments ranging from $92,263 to $112,777 beginning on April 30, 2007 and ending on March 31, 2010.

 

On October 31, 2008, OU agreed to revise the payment terms under the SRA from a fixed monthly payment to a reimbursable cost payment basis effective September 1, 2008. As of September 30, 2008 we had a remaining obligation under the previous SRA payment schedule of $2,665,818, which included monthly payments due for December 2007 through August 31, 2008 totaling $861,131. The $1,804,687 balance of the remaining scheduled payment obligation was cancelled by OU. Under the terms of the revised base payments schedule, the arrearages would be paid in nine monthly base installments from October 31, 2008 to June 30, 2009 of amounts ranging from $35,000 to $101,132 leaving a remaining balance after the base payments of $290,000. In addition to the monthly base payments, we agreed to make additional payments on the $861,131 arrearages based on a formula of 50% of funding in excess of $120,000 plus the base monthly payment. In the event funding did not provide for any additional payments, the remaining balance would be $290,000, which OU agreed to accept 4,264,707 shares of our common stock based on the October 14, 2008 market price as reported on the OTC Bulletin Board of $0.068 per share as payment on June 30, 2009. We had the option to repurchase the shares at $0.068 per share by September 30, 2009 or at market value, but not less than $0.068 per share, if the repurchase occurred after September 30, 2009.

 

On May 18, 2009, the University agreed to revise the payment terms. Under the terms of the revised base payments schedule, the arrearages scheduled to be paid in nine monthly base installments from October 31, 2008 to June 30, 2009 of amounts ranging from $35,000 to $101,132 were deferred to a monthly payment schedule of July 2009 through February 2010.

 

On February 19, 2010, OU agreed to modify the repayment plan to retire the remaining arrearages outstanding of $525,481. Under the terms of the modified repayment plan the Company agreed to make payments to the University, not less than quarterly, in an amount equal to 22.5% of any funding received by the Company. The first quarterly payment was due to the University on April 30, 2010. These repayment terms were to remain in effect until the outstanding debt was retired.

 

On December 1, 2010, the Company entered into an agreement (the "Agreement") with OU pursuant to which OU agreed to convert all sums due to it from the Company in connection with its SRA with the Company, which as of December 1, 2010 amounted to approximately $485,000, into an aggregate of 59,000,000 shares of the Company's common stock (the "Shares"). As a result of the debt conversion, OU became the holder of approximately 8% of the outstanding common stock of the Company. Pursuant to the Agreement, the Shares are subject to a put option allowing OU to require the Company to purchase certain of the Shares upon the occurrence of certain events. In addition, the Shares are subject to a call option allowing the Company to require OU to sell to the Company the Shares then held by OU in accordance with the terms of the Agreement.

 

The Agreement also amended the existing agreements between the Company and OU such that all intellectual property, including all inventions and or discoveries, patentable or un-patentable, developed before July 28, 2008 by OU under the SRA is owned by OU. All intellectual property, including all inventions and/or discoveries, patentable or un-patentable, developed jointly by the Company and OU at any time is jointly owned by the Company and OU. Finally, all intellectual property developed by the Company after July 28, 2008, including all inventions and or discoveries, patentable or un-patentable, is owned by the Company.   

 

19
 

 

During the years ended December 31, 2011 and 2010, the Company charged operations $37,363 and $43,884, respectively, pursuant to the SRA. At December 31, 2011, the Company owed the University $7,686 in direct costs.

 

Progress on Research and Development Activities and Intellectual Property Rights

 

We own all worldwide rights to commercial and government usage of the intellectual property being developed by the University. The University has applied for the following patents with the U.S. Patent and Trademark Office:

  

 

Description of

Provisional Patent

Application as Filed

 

 

 

Description of Utility

Patent Application

Filing (Combined)

 

 

 

 

 

Date of Filing

 

 

 

 

Granted

U.S. Patent

 

European

Pending

Patent-

Date of

Filing

 

 

Japanese

Pending

Patent-Date of

Filing

Swept Volume Display   Swept Volume Display   Filed by OU in September 2006            
                     
Colorful Translation Light Surface 3D Display Colorful Translation 3D Volumetric Display 3D Light Surface Display   Light Surface Display for Rendering Three-Dimensional Image (Combined)   Filed by OU in April 2007    December 2010   April 2007   April 2007
                     
Volumetric Liquid Crystal Display   Volumetric Liquid Crystal Display for Rendering Three-Dimensional Image (Combined)   Filed by OU in April 2007   May 2009        
                     
Computer System Interaction with DMD   Computer System Interaction with DMD   Filed by OU in January 2008            
                     
Virtual Moving Screen for Rendering Three Dimensional Image   Virtual moving screen for rendering a three-dimensional image   Filed by OU in January 2008            
                     
Optically Controlled Light Emitting and System for Optically Written 2D and 3D Displays   Utility Patent Application to be filed   Filed by 3DIcon in April 2008            

 

Marketing and Product Development

 

We produced our first product "Pixel Precision" in 2007. The product has been made commercially available through a sales and distribution arrangement with Digital Light Innovations that was signed March 6, 2008. This product is a result of our research efforts involving the use of the Texas Instruments Digital Micro-Mirror Device. The product is targeted at the application development market involving the use of DMDs, specifically the DMD-Discovery™ line from Texas Instruments™.

 

We do not have any commercial products, services or technologies in the area of Three Dimensional Displays as yet. We envision the sale of products developed or jointly developed with partners in various industry verticals, the sub-licensing of University-owned technology, or a combination thereof.

 

We have identified the following potential markets and uses for the technology being developed by the Company:

 

  Medical Imaging (CT, MRI, Dental);
  Digital Displays: Large Format, Retail Advertising;
  Air Traffic Systems, Traffic Planning, Town Planning;
  Pharmaceutical and Bio-Medical Research;
  Homeland Defense and Security (Baggage and Cargo Scanning);
  Architectural Plans and Virtual Structures;
  Interactive Entertainment;
  Geo-Spatial Applications;
  Casino Gaming;
  Military Applications;
  Engineering and Geospatial Exploration;

 

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  Military Performance (mission planning, tactical awareness, decision support, and post engagement assessment)
  Space Transportation Systems;
  Earth Science Research;
  Education and Training Applications; and
  Entertainment Applications (video games).

 

Competition

 

There are a number of different technologies that are at different stages of research and development to enable the display of 3D images. The following is a summary of volumetric or rear projection 3D display research or product development activities of which we are currently aware:

 

  LightSpace DepthCube™ from LC Tech
  Felix 3D Displays
  Perspecta Spatial 3D Display from Optics for Hire
  3D Technology Laboratories
  Xigen – Rotating helix 3D display
  USC – Rotating light field 3D display
  Setred – Rear projection 3D display
  Zecotek – Rear projection 3D display

 

Employees

 

We had five employees as of July 3, 2012, Mark Willner, Chief Executive Officer, Mr. Chris Dunstan, Interim Chief Financial Officer, Dr. Hakki Refai, Chief Technology Officer, Dr. George Melnik, Senior Technical Advisor, and Ms. Judith Keating, Company Secretary and Director of Investor Relations. None of our employees are covered by a collective bargaining agreement. We consider relations with our employees to be good.

 

21
 

 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

 

The following discussion and analysis should be read together with our financial statements and the related notes appearing elsewhere in this prospectus. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.

 

Overview of Business

 

We are a development stage company. Our mission is to pursue, develop and market full-color volumetric 3D technology. Through a Sponsored Research Agreement with the University of Oklahoma, we have obtained the exclusive worldwide marketing rights to certain 3D display technologies under development by the University. The development to date has resulted in the University filing seven provisional patents; six of the seven provisional patents have been combined and converted to four utility patents. On May 26, 2009, the United States Patent and Trademark Office approved the pending patent called "Volumetric Liquid Crystal Display" for rendering a three-dimensional image and converted it to US patent No. 7,537,345. On December 28, 2010, USPTO approved the pending patent called “Light Surface Display for Rendering a Three-Dimensional Image,” and issued the United States Patent No. 7,858,913.  This patent describes what we are calling our CSpace®™ technology. At this time, we do not own any intellectual property rights in these technologies, and, apart from the Sponsored Research Agreement with the University, have no contracts or agreements pending to acquire such rights or any other interest in such rights. We plan to market the technology and the intellectual property developed by the University and our staff by targeting various industries, such as retail, manufacturing, entertainment, medical, healthcare, transportation, homeland security and the military. On April 6, 2009, we filed a provisional patent on an emissive two-dimensional screen that is controlled and driven by a standard digital light projector or other optical input source. This provisional patent is called "Flexible/Inflexible Front/Back Projection screen or display" and owned solely by 3DIcon Corporation.   Through the current agreement with the University of Oklahoma, OU filed a continuation patent application on November 19, 2010, called “3D Light Surface Display”.  This application provides additional protections of our CSpace®™ technology.

 

Since March of 2012, the Company has been exploring the possibility of developing and marketing glasses-free flat screen 3D displays based on next generation glasses-free flat screen 3D display technology acquired or licensed from another company. This acquired technology and any resultant display products would be in addition to and complementary with our internally developed CSpace glasses-free volumetric 3D display technology. Recently, the company has met with multiple glasses-free flat screen 3D display companies, is in discussion with several of these companies about a potential acquisition or partnership, and is engaged in non-binding discussions to acquire one of these companies. Currently, we do not have any agreements in place that would allow such entry into the flat screen segment of the glasses-free 3D display industry and no assurances can be made, if an acquisition or partnership is consummated, that the Company could successfully bring to market such technology.

 

Reverse Stock Split

 

On April 27, 2012, 3DIcon Corporation, an Oklahoma corporation filed an Amended Certificate of Incorporation to effect a 1-for-35 reverse split of the Company’s common stock. The reverse stock split was announced by Financial Industry Regulatory Authority on April 26, 2012 and became effective on April 27, 2012. As previously reported on the Company’s Current Report on Form 8-K, filed on October 20, 2011, this action followed a stockholder vote at the Company’s annual meeting of the stockholders of the Company, which vote authorized the Company’s Board of Directors to effect a reverse stock split of the Company’s authorized, issued and outstanding common stock.

 

On April 27, 2012, the effective date, every 35 shares of the Company’s issued and outstanding common stock were combined into one share of common stock. The Company did not issue any fractional shares in connection with the reverse stock split. Stockholders of record who otherwise would have been entitled to receive fractional shares will be entitled, upon surrender to our transfer agent of certificates representing such shares, cash in lieu thereof.

 

Throughout this prospectus, each instance which refers to a number of shares of our common stock refers to the number of shares of common stock after giving effect to the Reverse Split, unless otherwise indicated.   References to a number of shares of common stock in our historical financial statements for the three month period ended March 31, 2012 and for the years ended December 31, 2011 and 2010, included in related Forms 10-Q and 10-K, respectively, are reported on a post-Reverse Split basis.

 

22
 


Critical Accounting Policies

 

The Securities and Exchange Commission ("SEC") defines "critical accounting policies" as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Not all of the accounting policies require management to make difficult, subjective or complex judgments or estimates. However, the following policies could be deemed to be critical within the SEC definition. 

 

Research and Development Costs

 

The Company expenses all research and development costs as incurred. Until we have developed a commercial product, all costs incurred in connection with the SRA with the University, as well as all other research and development costs incurred, will be expensed as incurred. After a commercial product has been developed, we will report costs incurred in producing products for sale as assets, but we will continue to expense costs incurred for further product research and development activities.

 

Stock-Based Compensation

 

Since its inception 3DIcon has used its common stock or warrants to purchase its common stock as a means of compensating our employees and consultants. Financial Accounting Standards Board ("FASB") guidance on accounting for share based payments requires us to estimate the value of securities used for compensation and to charge such amounts to expense over the periods benefited.

 

The estimated fair value at date of grant of options for our common stock is estimated using the Black-Scholes option pricing model, as follows:

 

The expected dividend yield is based on the average annual dividend yield as of the grant date. Expected volatility is based on the historical volatility of our stock. The risk-free interest rate is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option is based on historical exercise behavior and expected future experience.

 

Revenue Recognition

 

We recognize revenue when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, and the fair value of stock options. Actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

The following methods and assumptions were used to estimate the fair value of each class of financial instrument held by the Company:

 

Current assets and current liabilities – The carrying value approximates fair value due to the short maturity of these items.

 

Debentures payable – The fair value of the Company's debentures payable has been estimated by the Company based upon the liability's characteristics, including interest rate. The carrying value approximates fair value.

 

Recently Issued Accounting Pronouncements

 

Management reviewed accounting pronouncements issued during the three months ended September 30, 2011, and no pronouncements were adopted during the period.

 

23
 

 

Results of Operations

 

Results of Operations for the three months ended March 31, 2012 compared to the three months ended March 31, 2011.

 

   Three Months Ended 
   March 31,
2012
(Unaudited)
   March 31,
2011
(Unaudited)
 
Revenue  $52,649   $33,000 
           
Operating Expenses, Depreciation and Amortization   430,356    389,608 
           
Loss from Operations before Other Income/(Expense)   (377,707)   (356,608)
           
Other Income/(Expense)   -    - 
           
Loss Before Provision For Taxes   (377,707)   (356,608)
           
Income Taxes        
           
Net Loss  $(377,707)  $(356,608)

 

Revenue

 

The Company earned $52,649 from the OCAST grant during the three months ended March 31, 2012.

 

In January 2008 we launched our first software product Pixel Precision™. We appointed Digital Light Innovations for the sales and distribution of this product in March 2008.

 

We have earned income of $-0- and $3,000 before commissions and costs from the sales of Pixel Precision™ for the three-months ended March 31, 2012 and March 31, 2011, respectively.

 

We expect sales of Pixel Precision™ to the installed and active user base of the earlier D1100 and D3000 systems in the near term and as companion product sales to D4000 systems. We expect that the revenue from this product to contribute to the operating expenses (general and administrative, research and development, interest) but do not expect the revenue generated in 2012 to cover the operating expenses.

 

Research and Development Expenses

 

The research and development expenses were $133,481 for the three months ended March 31, 2012, as compared to $65,003 for the three months ended March 31, 2011.  The increase was a result of engaging outside research and development consultants.

 

General and Administrative Expenses

 

Our general and administrative expenses were $294,994 for the three months ended March 31, 2012, as compared to $296,252 for the three months ended March 31, 2011.  The net decrease is due primarily to a $70,000 increase in consulting fees, $18,840 in options issued to the new CEO and a $52,000 decrease in legal fees incurred during the period, a decrease in accounting and auditing fees of $8,000, a $5,000 decrease in shareholder expense a various other administrative expense aggregating approximately $20,000.

 

Interest Expense

 

Interest expense for the three months ended March 31, 2012 was $1,881 as compared to $28,353 for the three months ended March 31, 2011.  The net decrease was a result of a decrease in the amounts outstanding on our convertible debentures and a decrease in interest costs for the extension of the Newton, O'Connor, Turner & Ketchum 13% Convertible Debentures.

 

Financial Condition, Liquidity and Capital Resources

 

Management remains focused on controlling cash expenses. We recognize our limited cash resources and plan our expenses accordingly. We intend to leverage stock-for-services wherever possible. The operating budget consists of the following expenses:

 

  Research and development expenses pursuant to our SRA with the University. This includes development of an initial demonstrable prototype and a second prototype for static volume technology.

 

24
 

 

. Acceleration of research and development through increased research personnel as well as other research agencies.
  General and administrative expenses: salaries, insurance, investor related expenses, rent, travel, website, etc.
  Hiring executive officers for technology, operations and finance.
  Development, support and operational costs related to Pixel Precision™ software.
  Professional fees for accounting and audit; legal services for securities and financing; patent research and protection.

 

Our independent registered public accountants, in their audit report accompanying our financial statements for the year ended December 31, 2011, expressed substantial doubt about our ability to continue as a going concern due to our status as a development stage organization with insufficient revenues to fund development and operating expenses.

 

We had net cash of $81,286 at March 31, 2012.

 

We had negative working capital of $740,860 at March 31, 2012.

 

During the three months ended March 31, 2012, we used $301,160 of cash for operating activities, an increase of $34,829 or 13% compared to the three months ended March 31, 2011. The increase in the use of cash for operating activities was a result of the reduction in accounts payable.

 

There was no cash used in investing activities during the three months ended March 31, 2012 or for the three months ended March 31, 2011.

 

Cash provided by financing activities during the three months ended March 31, 2012 was $364,780, a decrease of $385,220 or 51% compared to the three months ended March 31, 2011.  The decrease was the result of warrant exercise advances from Golden State under the terms of our 4.75% convertible debenture.

 

We expect to fund the ongoing operations through the existing financing in place (see below); through raising additional funds as permitted by the terms of Golden State financing as well as reducing our monthly expenses.

 

Our ability to fund the operations of the Company is highly dependent on the underlying stock price of the Company.

 

Pursuant to the 6.25% Convertible Debenture now due in 2014, on November 21, 2007, the Company issued and sold a convertible note in the principal amount of $1,250,000 (the “Debenture”) to Golden State Equity Investors, Inc. f/k/a Golden Gate Investors (“Golden Gate”). Pursuant to the terms of the Debenture, Golden State may, at its election, convert all or a part of the Debenture into shares of the Company's common stock at a conversion rate equal to the lesser of (i) $2.00 or (ii) 90% of the average of the five lowest volume weighted average prices during the twenty trading days prior to Golden State's election to convert, subject to adjustment as provided in the Debenture. In addition, pursuant to the terms of the Debenture, the Company agreed to file a registration statement covering the shares of common stock issuable upon conversion or redemption of the Debenture. The Company filed a registration statement covering the shares to be issued upon conversion of the Debenture. Included in the registration statement were 4.25 million shares issuable on the Debenture based on 2007 market prices and assuming full conversion of the convertible debenture. The registration statement became effective on January 4, 2008.

 

Golden State advanced $125,000 on the $1.25 million Debenture on November 9, 2007 and $746,213 in January 2008 at which time the Company placed 7,961,783 shares of common stock in escrow to be released as debentures are converted. As of September 30, 2011, Golden State has funded an aggregate of $871,213 on the Debenture. Golden State will be obligated to fund the Company for the remaining $378,787 in principal on the Debenture upon the effectiveness of a registration statement underlying the remaining unfunded principal balance on the Debenture. At this time, the Company has not filed a registration statement. At various dates during 2009, $115,043, of the Debenture was converted into 12,124,828 shares of common stock at prices ranging from $0.007 to $0.01 based on the formula in the convertible debenture. At various dates during 2010, $274,438 of the Debenture was converted into 93,196,578 shares of common stock at prices ranging from $0.0027 to $0.004 based on the formula in the convertible debenture. Shares totaling 6,093,396 were issued in payment of $17,062 of accrued interest during 2010. At various dates during 2011, $157,331 of the Debenture was converted into 16,156,404 shares of common stock at prices ranging from $0.0059 to $0.0174 based on the formula in the convertible debenture. Additionally $12,669 was added to the principle balance of the debenture in payment of accrued interest during 2011. The 4,310,446 shares remaining in escrow and reported as outstanding at December 31, 2010 were cancelled in the first quarter of 2011.

 

25
 

 

Pursuant to the 4.75% Convertible Debenture now due in 2014, beginning in November 2007, Golden State is obligated to submit conversion notices in an amount such that Golden State receives 1% of the outstanding shares of the Company every calendar quarter for a period of one year. In connection with each conversion, Golden State is expected to exercise warrants equal to 10 times the amount of principal converted. The warrants are exercisable at $10.90 per share. Beginning in November 2008, Golden State is required to convert $3,000 of the 4.75% Convertible Debenture and exercise 30,000 warrants per month. During 2009, Golden State converted $3,510 of the $100,000 debenture into 35,622,803 shares of common stock, exercised warrants to purchase 35,100 shares of common stock at $10.90 per share and the Company received $382,590 from the exercise of the warrants. During 2009, Golden State advanced $240,000 against future exercises of warrants and applied $4,181 of accrued interest due on the debenture to the advance account of which $336,170 was applied to the exercise of warrants leaving $48,511 of unapplied advances at December 31, 2009. During 2010, Golden State converted $4,752 of the $100,000 debenture into 162,454,399 shares of common stock, exercised warrants to purchase 47,523 shares of common stock at $10.90 per share and advanced $251,489 against future exercises of warrants of which $300,000 was applied to the exercise of warrants leaving $-0- of unapplied advances at December 31, 2010. During 2011, Golden State converted $6,760 of the $100,000 debenture into 60,601,868, shares of common stock and exercised warrants to purchase 67,600 shares of common stock at $10.90 per share based on the formula in the convertible debenture. Additionally Golden Gate advanced $753,381 against future exercises of warrants of which $736,840 was applied to the exercise of warrants leaving $16,542 of unapplied advances at December 31, 2011. During 2012, Golden State converted $1,663 of the $100,000 debenture into 25,049,954 shares of common stock and exercised warrants to purchase 16,635 shares of common stock at $10.90 per share based on the formula in the convertible debenture. Additionally Golden Gate advanced $364,781 against future exercises of warrants of which $181,322 was applied to the exercise of warrants leaving $200,001 of unapplied advances at March 31, 2012.

 

The Oklahoma Center for the Advancement of Science and Technology approved our application for funding of a matching grant titled 800 Million Voxels Volumetric Display, on November 19, 2008. The two-year matching grant, totaling $299,932, had a start date of January 1, 2009. We received approval for a no cost modification request, which extended the first year of the contract to August 31, 2010. In addition, the Company received approval for a second year no cost modification request, which extended the second year of the contract to August 31, 2012. In connection with the grant, the Company received (i) $35,139 during 2009; (ii) $96,362 during 2010; (iii) $86,323 during 2011; and $217,824 from inception to date.

 

On October 31, 2008 OU agreed to revise the payment terms under the SRA from a fixed monthly payment to a reimbursable cost payment basis effective September 1, 2008. As of September 30, 2008 the Company had a remaining obligation under the previous SRA payment schedule of $2,665,818 which included monthly payments due for December 2007 through August 31, 2008 of $861,131. The $1,804,687 balance of the remaining scheduled payment obligation was cancelled. Under the terms of the revised base payments schedule, the arrearages would be paid in nine monthly base installments from October 31, 2008 to June 30, 2009 of amounts ranging from $35,000 to $101,132 leaving a remaining balance after the base payments of $290,000. In addition to the monthly base payments, the Company agreed to make additional payments on the $861,131 arrearages based on a formula of 50% of funding in excess of $120,000 plus the base monthly payment. In the event funding did not provide for any additional payments, the remaining balance would be $290,000, which OU agreed to accept 4,264,707 shares of the Company's common stock based on the October 14, 2008 market price as reported on the OTC Bulletin Board of $0.068 per share as payment on June 30, 2009. The Company had the option to repurchase the shares at $0.068 per share by September 30, 2009 or at market value, but not less than $0.068 per share, if the repurchase occurred after September 30, 2009.

 

The Company was unable to meet the revised payment schedule and on May 18, 2009 the University agreed to revise the payment terms. Under the terms of the revised base payments schedule, the arrearages scheduled to be paid in nine monthly base installments from October 31, 2008 to June 30, 2009 of amounts ranging from $35,000 to $101,132, were deferred to a monthly payment schedule of July 2009 through February 2010. On February 19, 2010, the University agreed to modify the repayment plan to retire the outstanding debt of $525,481. Under the terms of the modified repayment plan the Company agreed to make payments to the University, not less than quarterly, in an amount equal to 22.5% of any funding received by the Company. The Company complied with the agreed upon payment schedule and on December 1, 2010 the Company entered into an agreement with OU pursuant to which OU agreed to convert all sums due to it from the Company in connection with its SRA with the Company, which as of December 1, 2010 amounted to approximately $485,000, into an aggregate of 59,000,000 shares of the Company's common stock. As a result of the debt conversion, OU became the holder of approximately 8% of the outstanding common stock of the Company. Pursuant to the agreement, the shares are subject to a put option allowing OU to require the Company to purchase certain of the shares upon the occurrence of certain events. In addition, the shares are subject to a call option allowing the Company to require OU to sell to the Company the shares then held by OU in accordance with the terms of the agreement.

 

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Results of Operations for the year ended December 31, 2011 compared to the year ended December 31, 2010

 

The following table presents our results of operations for the year ended December 31, 2011 and compared to the year ended December 31, 2010.

 

   Year Ended 
   December 
31, 2011
(Audited)
   December 
31, 2010
(Audited)
 
         
Revenue  $89,323   $106,059 
           
Operating Expenses   2,409,792    1,629,796 
           
Loss from Operations before Other Income/(Expense)   (2,320,469)   (1,523,737)
           
Other Income/(Expense)   -    - 
           
Loss Before Provision for Taxes   (2,320,469)   (1,523,737)
           
Income Taxes   -    - 
           
Net Loss  $(2,320,469)  $(1,523,737)

 

Revenue

 

The Company received $86,323 and $96,362 from the OCAST grant during 2011 and 2010, respectively.

 

We have launched our first software product Pixel Precision™. We appointed Digital Light Innovations for the sales and distribution of this product in March 2008.

 

We have earned income of $3,000 and $9,697 before commissions and costs from the sales of Pixel Precision™ for the years ended December 31, 2011 and December 31, 2010, respectively.

 

We expect sales of Pixel Precision™ to the installed and active user base of the earlier D1100 and D3000 systems in the near term and as companion product sales to D4000 systems. We expect that the revenue from this product to contribute to the operating expenses (general and administrative, research and development, interest) but do not expect the revenue generated in 2012 to cover the operating expenses.

 

Research and Development Expenses

 

The research and development expenses were $942,240 for the year ended December 31, 2011 as compared to $469,408 for the year ended December 31, 2010. The increase was a result of engaging outside research and development consultants.

 

General and Administrative Expenses

 

Our general and administrative expenses were $1,430,365 for the year ended December 31, 2011 as compared to $1,084,419 for the year ended December 31, 2010. The increase is due primarily to contracting with Mr. Aroesty, the new CEO, the new interim CFO and 10,000,000 (ten million) shares issued to Concordia Financial Group as additional compensation under the terms of the Independent Consulting Agreement.

 

Interest Expense

 

Interest expense for the year ended December 31, 2011 was $37,187 as compared to $75,969 for the year ended December 31, 2010. The decrease in interest expense resulted from the decrease of the amounts outstanding under the convertible debentures and promissory notes.

 

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Financial Condition, Liquidity and Capital Resources

 

Management remains focused on controlling cash expenses. We recognize our limited cash resources and plan our expenses accordingly. We intend to leverage stock-for-services wherever possible. The operating budget consists of the following expenses:

 

  Research and development expenses pursuant to our SRA with the University. This includes development of an initial demonstrable prototype and a second prototype for static volume technology.
  Acceleration of research and development through increased research personnel as well as other research agencies.
  General and administrative expenses: salaries, insurance, investor related expenses, rent, travel, website, etc.
  Hiring executive officers for technology, operations and finance.
  Development, support and operational costs related to Pixel Precision™ software.
  Professional fees for accounting and audit; legal services for securities and financing; patent research and protection.

 

Our independent registered public accountants, in their audit report accompanying our financial statements for the year ended December 31, 2011, expressed substantial doubt about our ability to continue as a going concern due to our status as a development stage organization with insufficient revenues to fund development and operating expenses.

 

We had net cash of $17,666 at December 31, 2011.

 

We had negative working capital of $659,560 at December 31, 2011.

 

During the year ended December 31, 2011, we used $1,118,437 of cash for operating activities, an increase of $607,302 or 119% compared to the year ended December 31, 2010. The increase in the use of cash for operating activities was a result of the increased loss from operations during 2011.

 

Cash used in investing activities during the year ended December 31, 2011 was $998 a decrease of $2,252 compared to the year ended December 31, 2010.  The decrease was a result of the decrease in the amount of office equipment purchased in 2011.

 

Cash provided by financing activities during the year ended December 31, 2011 was $770,000 a decrease of $110,368 or 13% compared to the year ended December 31, 2010.  The decrease was the result of an increase in funding under the terms of the convertible debentures from Golden State in 2011 and a decrease of in the amount of promissory notes issued from 2010.

 

We expect to fund the ongoing operations through the existing financing in place (see below); through raising additional funds as permitted by the terms of Golden State financing as well as reducing our monthly expenses.

 

Our ability to fund the operations of the Company is highly dependent on the underlying stock price of the Company.

 

Pursuant to the 6.25% Convertible Debenture now due in 2014, on November 21, 2007, the Company issued and sold a convertible note in the principal amount of $1,250,000 to Golden State Equity Investors, Inc. f/k/a Golden Gate Investors. Pursuant to the terms of the Debenture, Golden State may, at its election, convert all or a part of the Debenture into shares of the Company's common stock at a conversion rate equal to the lesser of (i) $2.00 or (ii) 90% of the average of the five lowest volume weighted average prices during the twenty trading days prior to Golden State's election to convert, subject to adjustment as provided in the Debenture. In addition, pursuant to the terms of the Debenture, the Company agreed to file a registration statement covering the shares of common stock issuable upon conversion or redemption of the Debenture. The Company filed a registration statement covering the shares to be issued upon conversion of the Debenture. Included in the registration statement were 4.25 million shares issuable on the Debenture based on 2007 market prices and assuming full conversion of the convertible debenture. The registration statement became effective on January 4, 2008.

 

Golden State advanced $125,000 on the $1.25 million Debenture on November 9, 2007 and $746,213 in January 2008 at which time the Company placed 7,961,783 shares of common stock in escrow to be released as debentures are converted. As of September 30, 2011, Golden State has funded an aggregate of $871,213 on the Debenture. Golden State will be obligated to fund the Company for the remaining $378,787 in principal on the Debenture upon the effectiveness of a registration statement underlying the remaining unfunded principal balance on the Debenture. At this time, the Company has not filed a registration statement. At various dates during 2009, $115,043, of the Debenture was converted into 12,124,828 shares of common stock at prices ranging from $0.007 to $0.01 based on the formula in the convertible debenture. At various dates during 2010, $274,438 of the Debenture was converted into 93,196,578 shares of common stock at prices ranging from $0.0027 to $0.004 based on the formula in the convertible debenture. Shares totaling 6,093,396 were issued in payment of $17,062 of accrued interest during 2010. At various dates during 2011, $157,331 of the Debenture was converted into 16,156,404 shares of common stock at prices ranging from $0.0059 to $0.0174 based on the formula in the convertible debenture. Additionally $12,669 was added to the principle balance of the debenture in payment of accrued interest during 2011. The 4,310,446 shares remaining in escrow and reported as outstanding at December 31, 2010 were cancelled in the first quarter of 2011.

 

28
 

 

Pursuant to the 4.75% Convertible Debenture now due in 2014, beginning in November 2007, Golden State is obligated to submit conversion notices in an amount such that Golden State receives 1% of the outstanding shares of the Company every calendar quarter for a period of one year. In connection with each conversion, Golden State is expected to exercise warrants equal to 10 times the amount of principal converted. The warrants are exercisable at $10.90 per share. Beginning in November 2008, Golden State is required to convert $3,000 of the 4.75% Convertible Debenture and exercise 30,000 warrants per month. During 2009, Golden State converted $3,510 of the $100,000 debenture into 35,622,803 shares of common stock, exercised warrants to purchase 35,100 shares of common stock at $10.90 per share and the Company received $382,590 from the exercise of the warrants. During 2009, Golden State advanced $240,000 against future exercises of warrants and applied $4,181 of accrued interest due on the debenture to the advance account of which $336,170 was applied to the exercise of warrants leaving $48,511 of unapplied advances at December 31, 2009. During 2010, Golden State converted $4,752 of the $100,000 debenture into 162,454,399 shares of common stock, exercised warrants to purchase 47,523 shares of common stock at $10.90 per share and advanced $251,489 against future exercises of warrants of which $300,000 was applied to the exercise of warrants leaving $-0- of unapplied advances at December 31, 2010. During 2011, Golden State converted $6,760 of the $100,000 debenture into 60,601,868, shares of common stock and exercised warrants to purchase 67,600 shares of common stock at $10.90 per share based on the formula in the convertible debenture. Additionally Golden Gate advanced $753,381 against future exercises of warrants of which $736,840 was applied to the exercise of warrants leaving $16,542 of unapplied advances at December 31, 2011.

 

The Oklahoma Center for the Advancement of Science and Technology approved our application for funding of a matching grant titled 800 Million Voxels Volumetric Display, on November 19, 2008. The two-year matching grant, totaling $299,932, had a start date of January 1, 2009. We received approval for a no cost modification request, which extended the first year of the contract to August 31, 2010. In addition, the Company received approval for a second year no cost modification request, which extended the second year of the contract to February 28, 2012. In connection with the grant, the Company received (i) $35,139 during 2009; (ii) $96,362 during 2010; (iii) $86,323 during 2011; and $217,824 from inception to date.

 

On October 31, 2008 OU agreed to revise the payment terms under the SRA from a fixed monthly payment to a reimbursable cost payment basis effective September 1, 2008. As of September 30, 2008 the Company had a remaining obligation under the previous SRA payment schedule of $2,665,818 which included monthly payments due for December 2007 through August 31, 2008 of $861,131. The $1,804,687 balance of the remaining scheduled payment obligation was cancelled. Under the terms of the revised base payments schedule, the arrearages would be paid in nine monthly base installments from October 31, 2008 to June 30, 2009 of amounts ranging from $35,000 to $101,132 leaving a remaining balance after the base payments of $290,000. In addition to the monthly base payments, the Company agreed to make additional payments on the $861,131 arrearages based on a formula of 50% of funding in excess of $120,000 plus the base monthly payment. In the event funding did not provide for any additional payments, the remaining balance would be $290,000, which OU agreed to accept 4,264,707 shares of the Company's common stock based on the October 14, 2008 market price as reported on the OTC Bulletin Board of $0.068 per share as payment on June 30, 2009. The Company had the option to repurchase the shares at $0.068 per share by September 30, 2009 or at market value, but not less than $0.068 per share, if the repurchase occurred after September 30, 2009.

 

The Company was unable to meet the revised payment schedule and on May 18, 2009 the University agreed to revise the payment terms. Under the terms of the revised base payments schedule, the arrearages scheduled to be paid in nine monthly base installments from October 31, 2008 to June 30, 2009 of amounts ranging from $35,000 to $101,132, were deferred to a monthly payment schedule of July 2009 through February 2010. On February 19, 2010, the University agreed to modify the repayment plan to retire the outstanding debt of $525,481. Under the terms of the modified repayment plan the Company agreed to make payments to the University, not less than quarterly, in an amount equal to 22.5% of any funding received by the Company. The Company complied with the agreed upon payment schedule and on December 1, 2010 the Company entered into an agreement with OU pursuant to which OU agreed to convert all sums due to it from the Company in connection with its SRA with the Company, which as of December 1, 2010 amounted to approximately $485,000, into an aggregate of 59,000,000 shares of the Company's common stock. As a result of the debt conversion, OU became the holder of approximately 8% of the outstanding common stock of the Company. Pursuant to the agreement, the shares are subject to a put option allowing OU to require the Company to purchase certain of the shares upon the occurrence of certain events. In addition, the shares are subject to a call option allowing the Company to require OU to sell to the Company the shares then held by OU in accordance with the terms of the agreement.

 

Off-Balance Sheet Arrangements

 

The Company does not engage in any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity or capital expenditures.

 

Related Party Transactions

 

3DIcon has engaged the law firm of Newton, O’Connor, Turner & Ketchum as its outside corporate counsel since 2005. John O’Connor, a director of 3DIcon, is the Chairman of Newton, O’Connor, Turner & Ketchum.   During the periods ended March 31, 2012 and 2011, the Company incurred legal fees to Newton, O’Connor, Turner & Ketchum in the amount of $1,479 and $29,461, respectively. During the years ended December 31, 2011 and 2010, the Company incurred legal fees to Newton, O'Connor, Turner & Ketchum in the amount of $61,570 and $22,287 respectively.

 

29
 

 

DESCRIPTION OF PROPERTY

 

Our executive offices are located at 6804 South Canton Avenue, Suite 150, Tulsa, Oklahoma 74136. The lease has a term of forty-eight (48) months, which began on June 1, 2008.  We currently pay rent and related costs of approximately $2,315 per month. We currently are in discussion with the landlord to renew the lease for an additional 36 months.

 

LEGAL PROCEEDINGS

 

We are not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of our business. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.

 

 

Civil Action Complaint

 

As previously disclosed, on April 2, 2012, the Company was served with a Summons and Complaint (the “Complaint”) for a civil action involving a billing dispute.  The Complaint was filed by Advanced Optical Technologies, Inc. (“AOT”) in the Second Judicial District Court of New Mexico, County of Bernalillo.  On May 11, 2012, the Company and AOT entered a settlement agreement pursuant to which the parties agreed to discontinue all legal proceedings and AOT agreed to take all legal action to withdraw the Complaint.  In connection therewith, the Company agreed to pay AOT $95,125.

 

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

 

The following table sets forth the names and ages of the members of our Board of Directors and our executive officers and the positions held by each. There are no family relationships among any of our Directors and Executive Officers.

 

Name   Age   Position
Mark Willner   61   Chief Executive Officer
Chris T. Dunstan   57   Interim Chief Financial Officer
Sidney A. Aroesty   64   Director
Martin Keating   71   Director
John O'Connor   57   Director
Victor F. Keen   71   Director

 

Mark Willner – Chief Executive Officer

 

Mark Willner was appointed Chief Executive Officer on March 19, 2012. Mr. Willner founded nFlexion LLC, a management consulting firm specializing in early stage technology companies. Since 2001 Mr. Willner served, and continues to serve, as nFlexion LLC’s founding and managing partner. nFlexion LLC is a provider of interim executive services and general management consulting to early state high tech companies. Mr. Willner has over 30 years of product development, product commercialization, sales, entrepreneurial, and executive experience in the display industry. He has held key positions with a number of technology companies, including Wyse Technology and Hewlett-Packard. In addition, Mr. Willner was the founder of Colorado MicroDisplay, a U.S. company that made miniature displays used in cameras, camcorders and other products.

 

Chris T. Dunstan – Interim Chief Financial Officer

 

Chris Dunstan has been Interim Chief Financial Officer since August 8, 2011. He has over 25 years of corporate, executive and management experience. He is currently a Director of TH Business Advisor, LLC. From 1998 to 2010, Mr. Dunstan served as Director of the John R. Oishei Foundation. From 2003 to 2006, Mr. Dunstan was Executive Vice President and Chief Financial Officer to Rich Products Corporation, a global food manufacturer with $3 billion of annual revenue. Mr. Dunstan held various other executive positions, including Executive Vice President, Chief Financial Officer and Treasurer for Adelphi Cable Corporation, a publically traded broadcast media company; Senior Vice President and Chief Financial Officer for Sentry Group; Vice Chairman and Chief Financial Officer of Trico Products Corporation, a public automotive products company; and Vice President of Finance, Treasurer and Director of Strategic Planning for Schlegel Corporation. Mr. Dunstan was a Certified Public Accountant with KPMG/Peat Marwick; a Sales Manager for General Electric Credit Corporation; a member of the Executive Advisory Committee and Dean’s Council at the University of Rochester’s Simon School of Business; and a member on the Board of Project Jumpstart NY.

 

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Sidney A. Aroesty – Director

 

Sidney Aroesty was Chief Executive Officer from June 13, 2011 to March 19, 2012, on which date he was elected to the Board of Directors. Mr. Aroesty currently serves as a member of TH Business Advisors, LLC. From October 2009 to present, Mr. Aroesty has acted as a Managing Director for TH Business Advisors, LLC. From 1984 to 2006, Mr. Aroesty served in several senior management roles including President, Chief Operating Officer, and member of the Board of Directors for Diagnostic Products Corporation, a New York Stock Exchange-listed medical technology firm. After Diagnostic Products Corporation was acquired by Siemens Healthcare, Mr. Aroesty served as Chief Operating Officer of the Siemens Healthcare division which acquired Diagnostic Products Corporation. He directed operating activities, including research and development, quality control and regulatory affairs at both companies. From 1995 to 2005, Mr. Aroesty served on the Trustee’s Council of the University of Rochester and as a member of the Visiting Committee at the School of Engineering and Applied Sciences at the University of Rochester.

 

John O' Connor – Director and Co-Chairman

 

John O'Connor has been a director of the Company since October 2006. Mr. O’Connor is Chairman of the Board of the Tulsa law firm of Newton, O'Connor, Turner & Ketchum. He has practiced law in Tulsa since 1981, concentrating in the areas of corporate and commercial law. Mr. O’Connor has served two terms on the board of the Oklahoma Bar Association-Young Lawyers Division, and he has served on several committees of the Tulsa County Bar Association. He is a former member of the Oklahoma Academy of Mediators and Arbitrators, and has served as a Barrister in The Council Oak American Inn of Court.

 

Mr. O'Connor is a regular presenter at continuing legal education seminars sponsored by the Oklahoma Bar Association and the University Of Tulsa College Of Law. Mr. O'Connor is a member of the American Bar Association, the Oklahoma Bar Association, and the Tulsa County Bar Association. He is admitted to practice before the U.S. District Court of the Northern District of Oklahoma and state courts in Oklahoma and the U.S. Tax Court. He is a member of the Cherokee Nation Bar Association. Mr. O’Connor received his law degree from the University Of Tulsa College Of Law and his BA in political science from Oklahoma State University. He studied international law at the Friedreich Wilhelm Rheinische Universtat in Bonn, Germany.

 

Victor F. Keen – Director and Co-Chairman

 

Victor F. Keen, the largest shareholder of 3DIcon, joined the board in November 2007. Mr. Keen is a graduate of Harvard Law School and Trinity College. Until recently he was the chair of the Tax Practice Group at the international law firm, Duane Morris, LLP. Mr. Keen has become Of Counsel to the firm and devotes the majority of his time to his board memberships as well as real estate investments in New York City. For more than ten years Mr. Keen has served on the board of Research Frontiers (NASDAQ: REFR), a developer of “Smart Glass” through licensees around the world. For the past five years he has also served as the head of the Compensation Committee for Research Frontiers. Recently, Mr. Keen assumed the position of Board Observer for Egenix, Inc., a bioresearch firm focused on developing treatments for several specific cancers. Mr. Keen has been an active investor in a number of companies, both start up and later stage, including: Lending Tree, acquired by IAC Interactive Corp. (NASDAQ:IACI), a company controlled by Barry Diller; Circle Lending, Inc., now part of Richard Branson’s Virgin empire; and Rollover Systems, Inc., a privately held company involved in the matching of individual IRA/pension accounts with appropriate managers.

 

Martin Keating – Director

 

Martin Keating was Chief Executive Officer until August 8, 2011 and has been a director of the Company since 1998. As the founder, chairman, and CEO of 3DIcon Corporation, Mr. Keating has applied his vision and efforts to the creation and development of breakthrough 3D technology. Prior to founding the company, Mr. Keating structured and managed numerous investment vehicles including the capitalization and NASDAQ listing of CIS Technologies, where he served as general counsel. He also completed financing of the Academy Award-winning motion picture, “The Buddy Holly Story”. Mr. Keating has been a guest lecturer at several colleges and universities across the country. He has been featured on national television and radio programs including CNN, CNBC, HARD COPY, etc. In 1996, Mr. Keating published "The Final Jihad," a terrorist suspense novel which was excerpted four times by King Features Syndicate for more than 1,500 newspapers. Mr. Keating is an attorney licensed to practice law in Oklahoma and Texas.

 

Audit Committee

 

On February 25, 2008, the Board of Directors created an Audit Committee comprising of Mr. Victor Keen.

 

Compensation Committee

 

On February 25, 2008, the Board of Directors created a Compensation Committee comprising of Mr. Victor Keen.

 

Nomination and Corporate Governance Committee

 

On February 25, 2008, the Board of Directors created Nominations and Corporate Governance Committee comprising of Mr. Victor Keen.

 

31
 

 

Director or Officer Involvement in Certain Legal Proceedings

 

Our directors and executive officers were not involved in any legal proceedings as described in Item 401(f) of Regulation S-K in the past ten years.

 

Board Leadership Structure and Role in Risk Oversight

 

Although we have not adopted a formal policy on whether the Chairman and Chief Executive Officer positions should be separate or combined, in the past we determined that it was in the best interests of the Company and its shareholders to combine these roles. From the inception of the Company through June 13, 2011, Martin Keating served as our Chairman and Chief Executive Officer. Due to the small size and early stage of the Company, we believe it was most effective to have the Chairman and Chief Executive Officer positions combined. Since June 13, 2011, the role of the Company’s Chief Executive Officer and the Chairman, or any member, of the Board of Directors was separated.

 

Our Board of Directors receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our Company's assessment of risks. Our Board of Directors focuses on the most significant risks facing our Company and our Company's general risk management strategy, and also ensure that risks undertaken by us are consistent with the Board's appetite for risk. While the Board oversees our Company's risk management, management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that our board leadership structure and role in risk oversight is effective.

 

Code of Ethics

 

We have not adopted a Code of Ethics and Business Conduct for Officers, Directors and Employees that applies to all of our officers, directors and employees.

 

Employment Agreement

 

On March 25, 2009 the Company entered into an agreement with Dr. Hakki Refai pursuant to which Dr. Refai agreed to serve as the Chief Technology Officer of the Company. Dr. Refai's employment under the agreement commenced on March 25, 2009 and had a term of one year. The term of the agreement automatically extended for successive one year periods until terminated by the parties in accordance with the terms of the agreement.

 

Prior to Dr. Refai joining the Company on a full-time basis, he served as the co-principal investigator for the Static Volume / CSpace®™ technologies being developed under the Company's SRA with the University of Oklahoma. Dr. Refai is the lead inventor of the CSpace®™ technology and the creator of the Company's first product, Pixel Precision™. He authored the patent applications for the Static Volume Displays, Virtual Moving Screen Displays and Interaction of Micro-Mirror Device with Computer System. Dr. Refai received his BS degree in electrical engineering in 1992 from Aleppo University in Syria and his MS and PhD degrees in electrical and computer engineering in 2002 and 2005, respectively, from the University of Oklahoma.

 

On June 13, 2011, the Company entered into a one (1) year Agreement for At-Will Employment with Assignment of Inventions (“Aroesty Employment Agreement”) with Sid Aroesty, pursuant to which Mr. Aroesty began serving as the Company’s Chief Executive Officer, effective June 13, 2011. Under the terms of the Aroesty Employment Agreement, Mr. Aroesty was entitled to an annual base salary of $120,000 and, at the discretion of the Company’s Board of Directors, performance-based bonuses and/or salary increases. Pursuant to the Aroesty Employment Agreement, the Company granted Mr. Aroesty five-year stock options to purchase two (2) million shares at a price equal to the average price of the five day period prior to June 13, 2011 (the “Strike Price”). Furthermore, if Mr. Aroesty remained employed by the Company, he was entitled to receive additional stock options to purchase three (3) million shares at the Strike Price upon the completion of a trade show prototype that displays the Company’s technology.

 

The Aroesty Employment Agreement contains provisions for non-disclosure of confidential information pursuant to which Mr. Aroesty agreed to refrain from using or disclosing to third parties, directly or indirectly, any Confidential Information, as defined in the Aroesty Employment Agreement, either during or following his employment with the Company. Furthermore, Mr. Aroesty unconditionally and irrevocably assigned any now-existing or later-created Invention(s), as defined in the Aroesty Employment Agreement, which are developed during or three (3) years after his employment with the Company.

 

The Aroesty Employment Agreement was terminable with or without reason by either the Company or Mr. Aroesty and at any time, upon sixty (60) days written notice. The term of the Employment Agreement was one (1) year and automatically renewed, subject to the same termination rights. Upon termination, the Company agreed to pay any base pay, bonus and benefits that have been earned and are due as of the date of the termination.

 

On March 19, 2012 the Company announced that Sidney Aroesty resigned as CEO and joined the Board of Directors and that the Board of Directors appointed display industry veteran Mark Willner as CEO. Mr. Aroesty was compensated as CEO under the terms of the Aroesty Employment Agreement through March 19, 2012.

 

32
 

 

On March 13, 2012, the “Company entered into a one (1) year Agreement for At-Will Employment with Assignment of Inventions (“Willner Employment Agreement”) with Mark Willner, pursuant to which Mr. Willner began serving as the Company’s Chief Executive Officer, effective immediately. Under the terms of the Willner Employment Agreement, Mr. Willner is entitled to an annual base salary of $180,000, and, at the discretion of the Company’s Board, performance-based bonuses and/or salary increases. Pursuant to the Willner Employment Agreement, the Company granted Mr. Willner five-year stock options to purchase two (2) million shares at a price equal to the average price of the five day period prior to March 19, 2012 (the “Willner Strike Price”). Furthermore, if Mr. Willner remains employed by the Company at the end of each quarter ending June 30, 2012, September 30, 2012 and December 31, 2012, he will receive additional stock options to purchase one (1) million shares at the Willner Strike Price. In addition, if the Company has achieved certain quarterly business objectives, Mr. Willner will receive, at the end of each such quarterly periods, a further grant of stock options to purchase one (1) million shares at the Willner Strike Price.

 

The Willner Employment Agreement contains provisions for non-disclosure of confidential information pursuant to which Mr. Willner agreed to refrain from using or disclosing to third parties, directly or indirectly, any Confidential Information, as defined in the Willner Employment Agreement, either during or following his employment with the Company. Furthermore, Mr. Willner unconditionally and irrevocably assigned any now existing or later created Invention(s), as defined in the Willner Employment Agreement, which are developed during or two (2) years after his employment with the Company.

 

The Willner Employment Agreement may be terminated with or without reason by either the Company or Mr. Willner and at any time, upon sixty (60) days written notice. The terms of the Willner Employment Agreement will remain effective for one (1) year and will automatically renew, subject to the same termination rights. Upon termination, the Company will pay any base pay, bonus and benefits that have been earned and are due as of the date of the termination.

 

EXECUTIVE COMPENSATION

 

The following table sets forth all compensation earned in respect of our Chief Executive Officer and those individuals who received compensation in excess of $100,000 per year, collectively referred to as the named executive officers, for our last three completed fiscal years.

 

SUMMARY COMPENSATION TABLE

 

The following information is furnished for the years ended December 31, 2011 and December 31, 2010 for our principal executive officer and the two most highly compensated officers other than our principal executive officer who was serving as such at the end of our last completed fiscal year:

 

Name &
Principal
Position
    Year     Salary
($)
    Bonus
($)
    Stock
Awards
($)
    Option
Awards
($)
    Non-Equity
Incentive Plan
Compensation ($)
    Change in
Pension Value
and Non-Qualified
Deferred
Compensation
Earnings
($)
    All Other
Compensation ($)
    Total
($)
 
Sidney Aroesty     2011     $ 65,000     $ -     $ -     $ 60,600     $ -     $ -     $ -     $ 125,600  
Former CEO*     2010     $ -     $ -     $ -     $ -     $ -     $ -     $ -     $ -  
                                                                         
Mark Willner     2011     $ -     $ -     $ -     $ -     $ -     $ -     $ -     $ -  
CEO**     2010     $ -     $ -     $ -     $ -     $ -     $ -     $ -     $ -  
                                                                         
Chris Dunstan     2011     $ 25,000     $ -     $ 5,000     $ -     $ -     $ -     $ -     $ 30,000  
Interim CFO     2010     $ -     $ -     $ -     $ -     $ -     $ -     $ -     $ -  
                                                                         
Martin Keating     2011     $ -     $ -     $ -     $       $ -     $ -     $ -     $ -  
Director & former CEO     2010     $ 144,000     $ -     $ -     $ -     $ -     $ -     $ -     $ 144,000  
                                                                         
Hakki Refai     2011     $ 200,000     $ -     $ -     $       $ -     $ -     $ -     $ 200,000  
      2010     $ 200,000     $ -     $ -     $ 168,112     $ -     $ -     $ -     $ 368,112  

 * Sidney Aroesty was Chief Executive Officer from June 13, 2011 to March 19, 2012.

** Mark Willner was appointed Chief Executive Officer on March 19, 2012. See the “Employment Agreement” section for a discussion of Mr. Willner’s compensation arrangement.

 

33
 

 

Compensation of Directors

 

Name  Fees
Earned or
Paid in
Cash ($)
   Stock
Awards
($)
   Option
Awards
($)
   Non-Equity
Incentive Plan
Compensation
($)
   Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings ($)
   All Other
Compensation
($)
   Total ($) 
Victor Keen  $-    -   $75,000    -    -    -   $75,000 
Martin Keating  $-    -   $75,000    -    -    -   $75,000 
John O'Connor  $-    -   $75,000    -    -    -   $75,000 
Sidney
Aroesty*
  $-    -   $75,000    -    -    -   $75,000 
                                    

* Sidney Areosty was elected to the board on March 19, 2012.

 

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

 

The following table sets forth with respect to grants of options to purchase our common stock to the executive officers as of December 31, 2011:

 

Name   Number of
Securities
Underlying
Unexercised
Options
#
Exercisable
    Number of
Securities
Underlying
Unexercised
Options
#
Un-exercisable
    Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
#
    Option
Exercise
Price
$
    Option
Expiration
Date
  Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
#
    Market
Value
of
Shares
or Units
of Stock
That
have not
vested
$
    Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares Units
or Other
Rights That
Have Not
Vested #
    Equity
Incentive
Plan
Awards
Market or
Payout
Value of
Unearned
Shares Units
or Other
Rights That
have not
Vested
$
 
Sidney A. Aroesty     2,000,000       -       -     $ 0.031     June 13, 2016     -       -       -       -  
                                                                     
Vivek Bhaman (1)     1,325,000       -       -     $   (1)   October 12, 2018     -       -       -       -  

 

(1) Mr. Bhaman's options are exercisable as follows: 200,000 at $1.00 per share and 1,125,000 at $0.055 per share

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

There has not been, nor is there any proposed transaction where we were or will be a party in which the amount involved exceeded or will exceed $120,000 and in which any director, executive officer, holder of more than 5% of any class of our voting securities, or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest.

 

34
 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information regarding the beneficial ownership of our common stock as of  June 29, 2012 by (i) each director, (ii) each executive officer, (iii) all directors and executive officers as a group, and (iv) each person who beneficially owns more than five percent of our common stock. Beneficial ownership is determined in accordance with the rules of the SEC. The percentage ownership of each beneficial owner is based on 39,570,228 outstanding shares of common stock after giving effect to the Reverse Split. Except as indicated, each person listed below has sole voting and investment power with respect to the shares set forth opposite such person’s name.

 

Name of Beneficial Owner (1)   Number of 
Shares 
Beneficially Owned
    Class of Stock   Percentage Outstanding (2)  
Mark Willner (3)   114,286     Common   * %
                 
Sidney Aroesty (4)   57,143     Common   * %
                 
Chris Dunstan   15,111     Common   * %
                 
Hakki Refai   644,856     Common   1.81 %
                 
Martin Keating (5)   2,405,582     Common   6.07 %
                 
Victor F. Keen (6)   4,470,570     Common   11.09 %
                 
John O'Connor (7)   1,594,237     Common   3.93 %
                 
All directors and executive officers as a group (6 persons)   8,656,929     Common   20.86 %
                 
Golden State Investors, Inc.   2,245,407     Common   5.67 %
                 
University of Oklahoma   1,807,563     Common   4.57 %

 

  * Less than 1%

 

  (1) Unless otherwise indicated, the address of each beneficial owner listed below is c/o 3DIcon Corporation, 6804 South Canton Avenue, Suite 150, Tulsa, Oklahoma 74136.

 

  (2) Applicable percentage ownership is based on 39,570,228 shares of common stock outstanding as of June 29, 2012. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Options to acquire shares of common stock that are currently exercisable or exercisable within 60 days of June 29, 2012 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage.
     
  (3) Represents options granted under the terms of Mr. Willner’s employment agreement, of which 28,571 options remain subject to Board of Directors’ approval of performance parameters.

 

  (4) Represents options granted under the terms of Mr. Aroesty’s employment agreement.

 

  (5) Represents (i) 1,942,411 shares of common stock, (ii) 56,511 options to purchase common stock and (ii) 406,572 shares of common stock owned by Mr. Keating's wife, Judy Keating.
     
  (6) Represents (i) 3,736,945 shares of common stock and (ii) 733,625 options to purchase common stock.

 

  (7) Represents (i) 3,143 shares of common stock owned by Mr. O'Connor and (ii) 2,857 shares of common stock owned by the John M. and Lucia D. O'Connor Revocable Living Trust over which Mr. O'Connor has voting and investment control and, (iii) 619,205 shares owned by Newton O’Connor & Ketchum (“NOTK”), a corporation of which Mr. O’Conner is partial owner and (vi) 969,032 options and warrants owned by Mr. O'Connor or NOTK.

  

35
 

 

PLAN OF DISTRIBUTION

 

The offering is being conducted on a best efforts basis and unless we engage an underwriter, broker dealer or selling agent, securities in this offering shall be sold by our officers and directors. None of these officers or directors will receive any commission or compensation for the sale of the securities.  The offering will be presented by us primarily through mail, telephone, electronic transmission and direct meetings in those states in which we have registered the securities or exempt from registering the securities. There can be no assurance that all, or any, of the shares and warrants will be sold in the offering.

 

Pursuant to the provisions of Rule 3a4-1 of the Securities Exchange Act of 1934, we believe that none of our officers or directors offering the shares and warrants is considered to be a broker of such securities as (i) no such officer or director is subject to any statutory disqualification, (ii) no such officer or director is nor will be compensated by commissions for sales of the securities, (iii) no such officer or director is associated with a broker or dealer, (iv) all such officers or directors perform substantial duties the Company other than in connection with transactions in securities, and (v) no such officer or director participates in offering and selling securities more than once every 12 months other than as permitted under Rule 3a4-1.

 

We have no current arrangements nor have we entered into any agreements with any underwriters, broker-dealers or selling agents for the sale of the securities, but we reserve the right to enter into such arrangements and agreements.  If we engage one or more underwriters, broker-dealers or selling agents and enter into any such arrangement(s), the securities will be sold through such licensed underwriter(s), broker-dealer(s) and/or selling agent(s). See “Plan of Distribution” beginning on page 36 of this prospectus for more information on this offering.   We reserve the right to compensate underwriters, broker-dealers or selling agents that sell securities in this offering with a cash commission of no more than % of the gross proceeds from the securities sold by them.

 

State securities laws require either that a company’s securities be registered for sale or that the securities themselves or the transaction under which they are issued, be exempt from registration. Because our common stock is quoted on the OTC Bulletin Board and not listed on a national securities exchange, exemptions will generally not be available and this offering must be registered in nearly all states and jurisdictions in which the shares and warrants are to be offered or sold. We will apply to register the shares and warrants, or will seek to obtain an exemption from registration, only in certain states. In the states that require registration, and in which applications are filed, shares and warrants will not be sold to retail customers until such registration is effective. In addition, if we register the shares and warrants in the State of California, sales will only be made to residents of California who have not less than (i) a $60,000 liquid net worth (exclusive of home, home furnishings and automobile) plus $60,000 gross annual income, or (ii) a $225,000 liquid net worth.

 

Institutional investors may purchase shares and warrants in the offering pursuant to exemptions provided for sales to such entities under the laws of various states. The definition of an “institutional investor” varies from state to state, but generally includes financial institutions, broker-dealers, banks, insurance companies and other qualified entities. If you are not an institutional investor, you may purchase shares and warrants in this offering only if you reside in the jurisdictions where there is an effective registration or exemption, and, if required, meet any requisite suitability standards.

 

We have not taken any action to permit a public offering of our securities outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to this offering of shares and the distribution of the prospectus outside the United States.

 

Investors can purchase common stock and warrants in this offering by completing a Subscription Agreement, a copy of which is filed as Exhibit 99.1 to the registration statement of which this prospectus is a part, and sending it together with payment in full. All payments must be made in United States currency either by wire transfer, personal check, bank draft, or cashier check. There is no minimum subscription requirement. All subscription agreements and checks are irrevocable. We expressly reserve the right to either accept or reject any subscription. Any subscription rejected will be returned to the subscriber within five business days of the rejection date. Furthermore, once a subscription agreement is accepted, it will be executed without reconfirmation to or from the subscriber. Once we accept a subscription, the subscriber cannot withdraw it.

 

 

36
 

 

DESCRIPTION OF SECURITIES

 

Authorized Capital Stock

 

Our Articles of Incorporation, as amended, authorize the issuance of 1,500,000,000 shares of common stock. On April 27, 2012, a one-for-thirty-five reverse stock split became effective.

 

As of June 29, 2012, we had issued and outstanding:

 

  an aggregate of 39,570,228 of common stock;

 

  0 shares of preferred stock;

 

  an aggregate of 1,954,109 shares of common stock issuable upon the exercise of stock options outstanding as of June 29, 2012 at a weighted average exercise price of $0.59 per share under our equity incentive plans;

 

  an aggregate of 720,167 shares of our common stock issuable upon exercise of warrants with expiration dates between October, 2012 and Jun, 2015 at exercise prices ranging from $3.15 to $381.50 per share; and

 

  an aggregate of 45,061,766 shares of our common stock issuable upon conversion of convertible debentures including shares of common stock that may be issuable in the future if we elect to pay all interest due under the terms of the convertible debentures in shares of common stock.

 

Description of Common Stock

 

We are authorized to issue 1,500,000,000 shares of common stock, par value $0.0002 per share after giving effect to the Reverse Split. As of June 29, 2012, we had 39,570,228 shares of common stock outstanding after giving effect to the Reverse Split.

 

Holders of shares of common stock are entitled to one vote per share on all matters submitted to a vote of the shareholders. Shares of common stock do not have cumulative voting rights. Holders of record of shares of common stock are entitled to receive dividends when and if declared by the board of directors. To date, the Company has not paid cash dividends. The Company intends to retain any earnings for the operation and expansion of its business and does not anticipate paying cash dividends in the foreseeable future.

 

Any future determination as to the payment of cash dividends will depend on future earnings, results of operations, capital requirements, financial condition and such other factors as the Board of Directors may consider. Upon any liquidation, dissolution or termination of the Company, holders of shares of common stock are entitled to receive a pro rata distribution of the assets of the Company after liabilities are paid.

 

Holders of common stock do not have pre-emptive rights to subscribe for or to purchase any stock, obligations or other securities of 3DIcon.

 

Warrants

 

In connection with this offering, we will issue warrants to purchase up to           shares of common stock. Each warrant entitles the holder to purchase one share of common stock at an exercise price of $         per share for a period of          years. After the expiration of the exercise period, warrant holders will have no further rights to exercise such warrants.

 

The warrants may be exercised only for full shares of common stock, and may be exercised on a “cashless” basis if the registration statement covering the shares issuable upon exercise of the warrants is no longer effective and will be issued with restrictive legends unless such shares are eligible for sale under Rule 144. We will not issue fractional shares of common stock or cash in lieu of fractional shares of common stock. Warrant holders do not have any voting or other rights as a stockholder of our company. The exercise price and the number of shares of common stock purchasable upon the exercise of each warrant are subject to adjustment upon the happening of certain events, such as stock dividends, distributions, and splits.

 

 

37
 

 

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

 

Sections 18-1031(A) of the Oklahoma General Corporations Act provide us with the power to indemnify any of our directors and officers. The director or officer must have acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue, or matter as to which the person shall have been adjudged to be liable to the corporation unless and only to the extent that the court in which the action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for expenses which the court shall deem proper, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was unlawful.

 

Under NRS Section 18-1031(E), expenses incurred by an officer or director in defending a civil or criminal action, suit, or proceeding may be paid by the corporation in advance of the final disposition of the action, suit, or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it shall ultimately be determined that the person is not entitled to be indemnified by the corporation.

 

Our articles of incorporation include an indemnification provision under which we have the power to indemnify our directors, officers, employees and other agents of the Company to the fullest extent permitted by applicable law.

 

38
 

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted for our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

LEGAL MATTERS

 

Sichenzia Ross Friedman Ference LLP, New York, New York will issue an opinion with respect to the validity of the shares of common stock being offered hereby.   

 

EXPERTS

 

Hogan Taylor LLP  independent registered public accounting firm, have audited, as set forth in their report thereon appearing elsewhere herein, our financial statements at December 31, 2011 and 2010 and for the years then ended that appear in the prospectus. The financial statements referred to above are included in this prospectus with reliance upon the independent registered public accounting firm’s opinion based on their expertise in accounting and auditing.

.

WHERE YOU CAN FIND MORE INFORMATION

 

We have filed a registration statement on Form S-1 under the Securities Act of 1933, as amended, relating to the shares of common stock being offered by this prospectus, and reference is made to such registration statement. This prospectus constitutes the prospectus of 3DIcon Corporation, filed as part of the registration statement, and it does not contain all information in the registration statement, as certain portions have been omitted in accordance with the rules and regulations of the Securities and Exchange Commission.

 

We are subject to the informational requirements of the Securities Exchange Act of 1934 which requires us to file reports, proxy statements and other information with the Securities and Exchange Commission. Such reports, proxy statements and other information may be inspected at public reference facilities of the SEC at 100 F Street, N.E., Washington D.C. 20549. Copies of such material can be obtained from the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549 at prescribed rates. Because we file documents electronically with the SEC, you may also obtain this information by visiting the SEC's Internet website at http://www.sec.gov.

 

39
 

 

FINANCIAL INFORMATION INDEX

 

Report of Independent Registered Public Accounting Firm F-1
Audited Consolidated Financial Statements as of December 31, 2011 and 2010 F-2
Notes to the Consolidated Financial Statements as of December 31, 2011 and 2010 F-7
Unaudited Consolidated Financial Statements as of March 31, 2012 and  March 31, 2011 F-18
Notes to the Unaudited Consolidated Financial Statements as of March 31, 2012 and  March 31, 2011 F-21

 

40
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Board of Directors and Stockholders of

3DIcon Corporation

 

We have audited the accompanying balance sheets of 3DIcon Corporation (a Development Stage Company) as of December 31, 2011 and 2010, and the related statements of operations, stockholders' deficiency, and cash flows for the years then ended and for the period from inception (January 1, 2001) to December 31, 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of 3DIcon Corporation as of December 31, 2011 and 2010, and the results of its operations and its cash flows for the years then ended and for the period from inception (January 1, 2001) to December 31, 2011, in conformity with U.S. generally accepted accounting principles.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company is a development stage company having insufficient revenues and capital commitments to fund the development of its planned products. This raises substantial doubt about the Company's ability to continue as a going concern. Management's plan in regard to these matters is also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

 

 

/s/ HOGANTAYLOR LLP

 

Tulsa, Oklahoma

April 6, 2012

 

 

F-1
 

 

3DIcon CORPORATION

(A Development Stage Company)

 

BALANCE SHEETS

 

December 31, 2011 and 2010

   2011   2010 
Assets          
Current assets:          
Cash  $17,666   $367,101 
Prepaid expenses   35,435    21,771 
Accounts receivable   17,000    7,092 
Total current assets   70,101    395,964 
           
Net property and equipment   9,809    15,709 
Deposits-other   2,315    2,315 
Total Assets  $82,225   $413,988 
           
Liabilities and Stockholders' Deficiency          
Current liabilities:          
Current maturities of convertible debentures payable  $-   $403,445 
Warrant exercise advances   16,542    - 
Accounts payable   698,131    203,590 
Accrued salaries   13,189    501,362 
Accrued interest on debentures   1,799    41,174 
Total current liabilities   729,661    1,149,571 
           
Convertible debentures payable   113,444    - 
Promissory notes, 5%, due 2013   -    400,878 
Accrued interest due 2013   -    4,120 
Long term debt   113,444    404,998 
           
Total Liabilities   843,105    1,554,569 
           
Common stock subject to put rights and call rights; 59,000,000 shares   485,649    485,649 
           
Stockholders' deficiency:          
Common stock $.0002 par, 1,500,000,000 shares authorized; 1,152,502,875 and 757,539,307 shares issued and outstanding at December 31, 2011 and 2010, respectively   230,501    151,508 
Additional paid-in capital   14,944,090    12,322,913 
Deficit accumulated during development stage   (16,421,120)   (14,100,651)
Total Stockholders' Deficiency   (1,246,529)   (1,626,230)
Total Liabilities and Stockholders' Deficiency  $82,225   $413,988 

 

See notes to financial statements

 

F-2
 

 

3DIcon CORPORATION

(A Development Stage Company)

 

STATEMENTS OF OPERATIONS

 

Years ended December 31, 2011 and 2010

and Period from Inception (January 1, 2001) to December 31, 2011

 

           Inception to 
   2011   2010   December
31, 2011
 
Income:               
Grant income  $86,323   $96,362   $217,824 
Sales   3,000    9,697    40,797 
License fee   -    -    25,000 
                
Total income   89,323    106,059    283,621 
                
Expenses:               
Research and development   942,240    469,408    4,158,240 
General and administrative   1,430,365    1,084,419    12,111,659 
Interest   37,187    75,969    434,842 
                
Total expenses   2,409,792    1,629,796    16,704,741 
                
Net loss  $(2,320,469)  $(1,523,737)  $(16,421,120)
                
Loss per share:               
Basic and diluted  $(0.002)  $(0.003)     
                
Weighted average shares outstanding, Basic and diluted   1,086,576,438    532,386,253      

 

See notes to financial statements

 

F-3
 

 

3DIcon CORPORATION

(A Development Stage Company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

 

Period from Inception (January 1, 2001) to December 31, 2011

 

           Deficit     
           Accumulated     
   Common Stock   Additional   During the     
   Shares   Par
Value
   Paid-In
Capital
   Development
Stage
   Total 
Balance, January 1, 2001 – as reorganized   27,723,750   $27,724   $193,488   $-   $221,212 
                          
Adjustment to accrue compensation earned but not recorded   -    -    -    (60,000)   (60,000)
Stock issued for services   2,681,310    2,681    185,450    -    188,131 
Stock issued for cash   728,500    729    72,121    -    72,850 
Net loss for the year   -    -    -    (259,221)   (259,221)
Balance, December 31, 2001   31,133,560    31,134    451,059    (319,221)   162,972 
                          
Adjustment to record compensation earned but not recorded   -    -    -    (60,000)   (60,000)
Stock issued for services   3,077,000    3,077    126,371    -    129,448 
Stock issued for cash   1,479,000    1,479    146,421    -    147,900 
Net loss for the year   -    -    -    (267,887)   (267,887)
Balance, December 31, 2002   35,689,560    35,690    723,851    (647,108)   112,433 
                          
Adjustment to record compensation earned but not recorded   -    -    -    (90,000)   (90,000)
Stock issued for services   15,347,000    15,347    -    -    15,347 
Stock issued for cash   1,380,000    1,380    33,620    -    35,000 
Reverse split 1:10   (47,174,904)   -    -    -    - 
Par value $0.0001 to $0.0002   -    (51,369)   51,369    -    - 
Net loss for the year   -    -    -    (51,851)   (51,851)
Balance, December 31, 2003   5,241,656    1,048    808,840    (788,959)   20,929 
                          
Additional founders shares issued   25,000,000    5,000    (5,000)   -    - 
Stock issued for services   24,036,000    4,807    71,682    -    76,489 
Stock issued for cash   360,000    72    28,736    -    28,808 
Warrants issued to purchase common stock at $.025   -    -    18,900    -    18,900 
Warrants issued to purchase common stock at $.05   -    -    42,292    -    42,292 
Stock warrants exercised   2,100,000    420    60,580    -    61,000 
Net loss for the year   -    -    -    (617,875)   (617,875)
Balance, December 31, 2004   56,737,656    11,347    1,026,030    (1,406,834)   (369,457)
                          
Stock issued for services   5,850,000    1,170    25,201    -    26,371 
Stock issued to settle liabilities   5,000,000    1,000    99,000    -    100,000 
Stock issued for cash   1,100,000    220    72,080    -    72,300 
Warrants issued to purchase common stock at $.025   -    -    62,300    -    62,300 
Warrants issued to purchase common stock at $.05   -    -    140,400    -    140,400 
Stock warrants exercised   5,260,000    1,052    172,948    -    174,000 
Net loss for the year   -    -    -    (592,811)   (592,811)
Balance, December 31, 2005   73,947,656   $14,789   $1,597,959   $(1,999,645)  $(386,897)

 

F-4
 

 

3DIcon CORPORATION

(A Development Stage Company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

 

Period from Inception (January 1, 2001) to December 31, 2011

 

               Deficit     
               Accumulated     
   Common Stock   Additional
Paid-In
   During the
Development
     
   Shares   Par Value   Capital   Stage   Total 
                     
Stock issued for services   4,700,000    940    205,597    -    206,537 
Debentures converted   3,000,000    600    149,400    -    150,000 
Stock issued for cash   200,000    40    16,160    -    16,200 
Warrants issued to purchase common stock   -    -    33,800    -    33,800 
Warrants converted to purchase common stock   16,489,000    3,297    565,203    -    568,500 
Net loss for the year   -    -    -    (1,469,888)   (1,469,888)
Balance, December 31, 2006   98,336,656    19,666    2,568,119    (3,469,533)   (881,748)
Stock issued for services   817,727    164    155,262    -    155,426 
Stock issued for interest   767,026    153    38,198    -    38,351 
Stock based compensation   -    -    1,274,666    -    1,274,666 
Debentures converted   17,215,200    3,442    1,673,741    -    1,677,183 
Stock issued for cash   1,188,960    238    191,898    -    192,136 
Options exercised   222,707    45    (45)   -    - 
Warrants issued to purchase common stock   -    -    87,864    -    87,864 
Warrants converted to purchase common stock   8,585,956    1,717    462,203    -    463,920 
Net loss for the year   -    -    -    (3,928,996)   (3,928,996)
Balance, December 31, 2007   127,125,232    25,425    6,451,906    (7,398,529)   (921,198)
Stock issued for cash   515,677    103    24,897    -    25,000 
Warrants exercised   1,347,261    269    362,425    -    362,694 
Stock based compensation   -    -    654,199    -    654,199 
Debentures converted   15,257,163    3,052    962,257    -    965,309 
Options exercised and escrowed shares   8,671,460    1,734    (1,734)   -    - 
Stocks issued for service   4,598,973    920    312,880    -    313,800 
Net loss for the year   -    -    -    (3,611,550)   (3,611,550)
Balance, December 31, 2008   157,515,766    31,503    8,766,830    (11,010,079)   (2,211,746)
Stock issued for cash   20,607,841    4,122    197,878    -    202,000 
Warrants exercised   35,100    7    382,583    -    382,590 
Debentures converted   77,451,141    15,490    467,514    -    483,004 
Stocks issued for service   68,506,130    13,701    524,653    -    538,354 
Stock issued for accounts payable   11,264,706    2,253    321,409    -    323,662 
Stock issued for interest   8,310,128    1,662    41,647    -    43,309 
Warrants issued for accounts payable   -    -    13,505    -    13,505 
Net loss for the year   -    -    -    (1,566,835)   (1,566,835)
Balance, December 31, 2009   343,690,812    68,738    10,716,019    (12,576,914)   (1,792,157)
Stock issued for cash   5,714,286    1,143    8,857    -    10,000 
Warrants exercised   47,523    9    517,991    -    518,000 
Debentures converted   255,650,977    51,130    228,061    -    279,191 
Stock issued for services   97,684,416    19,538    213,348    -    232,886 
Stock issued for liabilities   48,657,897    9,732    204,682    -    214,414 
Stock issued for interest   6,093,396    1,218    15,843    -    17,061 
Stock based compensation   -    -    418,112    -    418,112 
Net loss for the year   -    -    -    (1,523,737)   (1,523,737)
Balance, December 31, 2010   757,539,307    151,508    12,322,913    (14,100,651)   (1,626,230)
Warrants and options exercised   12,308,915    2,462    754,378    -    756,840 
Debentures converted   252,267,600    50,453    653,093    -    703,546 
Stock issued for services   30,072,595    6,015    349,190    -    355,205 
Stock issued for liabilities   97,530,393    19,506    536,521    -    556,027 
Stock issued for interest   7,094,511    1,419    41,533    -    42,952 
Escrowed shares cancelled   (4,310,446)   (862)   862    -    - 
Stock based compensation   -    -    285,600    -    285,600 
Net loss for the period   -    -    -    (2,320,469)   (2,320,469)
Balance, December 31, 2011   1,152,502,875   $230,501   $14,944,090   $(16,421,120)  $(1,246,529)

 

See notes to financial statements

 

F-5
 

 

3DIcon CORPORATION

(A Development Stage Company)

 

STATEMENTS OF CASH FLOWS

 

Years ended December 31, 2011 and 2010

and Period from Inception (January 1, 2001) to December 31, 2011

 

           Inception to 
           December 31, 
   2011   2010   2011 
Cash Flows from Operating Activities               
Net loss  $(2,320,469)  $(1,523,737)  $(16,421,120)
Adjustments to reconcile net loss to net cash used in operating activities:               
Options issued for services   285,600    418,112    2,632,578 
Stock issued for services   355,205    232,886    2,237,995 
Stock issued for interest   42,952    17,061    141,672 
Book value of assets retired   668    —     6,529 
Amortization of debt issuance costs   —     16,706    170,414 
Depreciation   6,230    6,165    27,191 
Impairment of assets   —     —     292,202 
                
Change in:                
Prepaid expenses   (13,664)   (10,467)   (286,150)
Accounts receivable    (9,908)   (7,092)   (17,000)
Accounts payable and accrued liabilities   534,949    339,231    2,478,828 
                
Net cash used in operating activities   (1,118,437)   (511,135)   (8,736,861)
                
Cash Flows from Investing Activities               
Purchase of office furniture and equipment   (998)   (3,250)   (43,529)
Net cash used in investing activities   (998)   (3,250)   (43,529)
                
Cash Flows from Financing Activities               
Proceeds from stock and warrant sales, exercise of warrants and warrant exercise advances   770,000    479,490    4,488,455 
Proceeds from issuance of debentures and notes   —     400,878    4,309,591 
                
Net cash provided by financing activities   770,000    880,368    8,798,046 
                
Net increase (decrease) in cash   (349,435)   365,983    17,656 
Cash, beginning of period   367,101    1,118    10 
                
Cash, end of year  $17,666   $367,101   $17,666 
Supplemental Disclosures               
Non-Cash Investing and Financing Activities               
Conversion of debentures to common stock (net)  $703,546   $279,191   $4,257,681 
Cash paid for interest  $10,493   $33,885   $301,727 
Stock issued to satisfy payables  $556,027   $700,063   $1,987,253 
Debenture issued to satisfy payable  $—    $25,206   $125,909 
Stock issued subject to put rights and call right to satisfy payables  $—    $485,649   $485,649 
                

 

See notes to financial statements

 

F-6
 

 

3DIcon CORPORATION

(A Development Stage Company)

 

NOTES TO FINANCIAL STATEMENTS

 

Years ended December 31, 2011 and 2010

and Period from Inception (January 1, 2001) to December 31, 2011

 

Note 1 – Organization and Operations

 

Organization

 

3DIcon Corporation (the "Company") was incorporated on August 11, 1995, under the laws of the State of Oklahoma as First Keating Corporation. The articles of incorporation were amended August 1, 2003 to change the name to 3DIcon Corporation. The initial focus of First Keating Corporation was to market and distribute books written by its founder, Martin Keating. During 2001, First Keating Corporation began to focus on the development of 360-degree holographic technology. The effective date of this transition is January 1, 2001, and the financial information presented is from that date through the current period. The Company has accounted for this transition as reorganization and accordingly, restated its capital accounts as of January 1, 2001. From January 1, 2001, the Company's primary activity has been the raising of capital in order to pursue its goal of becoming a significant participant in the development, commercialization and marketing of next generation 3D display technologies.

 

The mission of the company is to develop (or acquire), commercialize, and market next generation 3D display technologies including auto-stereoscopic (glasses-free) volumetric 360-degree full-color 3D displays and possibly auto-stereoscopic (glasses-free) flat screen 3D displays. Our initial market focus is on business, industrial, and government applications of the technologies. At this time the Company owns no intellectual property in 3D displays but does own the exclusive worldwide rights to commercial and government usage of the 3D display intellectual property developed by the University of Oklahoma.

 

Uncertainties

 

The accompanying financial statements have been prepared on a going concern basis. The Company is in the development stage and has insufficient revenue and capital commitments to fund the development of its planned product and to pay operating expenses.

 

The Company has realized a cumulative net loss of $16,421,120 for the period from inception (January 1, 2001) to December 31, 2011, and a net loss of $2,320,469 and $1,523,737 for the years ended December 31, 2011 and 2010, respectively.

 

The ability of the Company to continue as a going concern during the next year depends on the successful completion of the Company's capital raising efforts to fund the development of its planned technologies.  The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Management plans to fund the future operations of the Company with existing cash of $17,666, grants and investor funding. Under the terms of the Golden State debentures, Golden State may advance an additional $378,787. The additional advance would be available if the Company filed a registration statement; however, the Company does not plan to file such registration statement. In addition, pursuant to the 4.75% Convertible Debenture due on December 31, 2014, beginning in November 2007, Golden State is obligated to submit conversion notices in an amount such that Golden State receives 1% of the outstanding shares of the Company every calendar quarter for a period of one year. In connection with each conversion, Golden State is expected to exercise warrants equal to 10 times the amount of principal converted. The warrants are exercisable at $10.90 per share. The number of warrants exercisable is subject to certain beneficial ownership limitations contained in the 4.75% Debenture and the warrants ("the Beneficial Ownership Limitations"). The Beneficial Ownership Limitations prevent Golden State from converting on the 4.75% Debenture or exercising warrants if such conversion or exercise would cause Golden State's holdings to exceed 9.99% of the Company's issued and outstanding common stock. Subject to the Beneficial Ownership Limitations, Golden State is required to convert $3,000 of the 4.75% Convertible Debenture and exercise 30,000 warrants per month. Based upon our current stock price, our issued and outstanding shares as of December 31, 2011 and ignoring the impact of the Beneficial Ownership Limitations, the Company may receive up to $981,000 in funding from Golden State as a result of warrant exercises during the year ended December 31, 2012.

 

The Company was approved for a matching grant from Oklahoma Center for the Advancement of Science and Technology (“OCAST”) on November 19, 2008 in the amount of approximately $300,000.  There remains $82,176 of grant funds to be provided through the end of the grant period, February 28, 2012.  (see Note 5 and Note 14)

 

Additionally, the Company is continuing to pursue financing through private offering of debt or common stock.

 

F-7
 

 

Note 2 – Summary of Significant Accounting Policies

 

Research and development

 

Research and development costs, including payments made to the University of Oklahoma pursuant to the SRA, are expensed as incurred (see Note 4).

 

Stock-based compensation

 

The Company accounts for stock-based compensation arrangements for employees in accordance with Accounting Standards Codification ("ASC") No. 718, Compensation-Stock Compensation. The Company recognizes expenses for employee services received in exchange for stock based compensation based on the grant-date fair value of the shares awarded. The Company accounts for stock issued to non-employees in accordance with the provisions of ASC No. 718.

 

Income taxes

 

The Company accounts for income taxes in accordance with ASC No. 740, Income Taxes. This standard requires the recognition of deferred tax assets and liabilities for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In addition, this standard requires the recognition of future tax benefits, such as net operating loss carry forwards, to the extent that realization of such benefits is more likely than not. The amount of deferred tax liabilities or assets is calculated using tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized.

 

Net income (loss) per common share

 

The Company computes net income (loss) per share in accordance with ASC No. 260, Earnings Per Share. Under the provisions of this standard, basic net income (loss) per common share is based on the weighted-average outstanding common shares. Diluted net income (loss) per common share is based on the weighted-average outstanding shares adjusted for the dilutive effect of warrants to purchase common stock and convertible debentures. Due to the Company's losses, such potentially dilutive securities are anti-dilutive for all periods presented. The weighted average number of potentially dilutive shares is 90,616,272 and 98,856,063 for the years ended December 31, 2011 and 2010, respectively.

 

Use of estimates

 

The preparation of financial statements in conformity with U. S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. Actual results could differ from the estimates and assumptions used.

 

Debt issue costs

 

The Company defers and amortizes the legal and filing fees associated with long-term debt that is issued. These costs are primarily related to the convertible debentures, the majority of which have a three-year term. The amortization is charged to operations over the three-year term and then adjusted quarterly for debenture conversions to common stock.

 

Fair value of financial instruments

 

The following methods and assumptions were used to estimate the fair value of each class of financial instrument held by the Company:

 

Current assets and current liabilities – The carrying value approximates fair value due to the short maturity of these items.

 

Debentures payable – The fair value of the Company's debentures payable has been estimated by the Company based upon the liability's characteristics, including interest rate. The carrying value approximates fair value.

 

Note 3 – Recent Accounting Pronouncements

 

The following is a summary of a recent accounting pronouncement that is relevant to the Company:

 

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. ASU 2011-4 is intended to improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS. The amendments are of two types: (i) those that clarify the Board’s intent about the application of existing fair value measurement and disclosure requirements and (ii) those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The guidance is effective for annual periods beginning after December 15, 2011. The adoption of the provisions of this guidance is not expected to materially impact our financial statements.

 

F-8
 

 

Note 4 – Sponsored Research Agreement ("SRA") Common Stock Subject to Put Rights and Call Right

 

Since April 20, 2002, the Company has entered into a number of Sponsored Research Agreements with the University of Oklahoma (“OU”) as follows:

 

Phase I: “Pilot Study to Investigate Digital Holography”, April 20, 2004. The Company paid OU $14,116.

 

Phase II: “Investigation of 3-Dimensional Display Technologies”, April 15, 2005, as amended. The Company paid OU $528,843.

 

Phase III: “3-Dimensional Display Development”. The Company made partial payment to OU by issuing 4,264,707 shares with a market price of $290,000 on October 14, 2008 and final payment on December 1, 2010 in the amount of $525,481 of which $40,481 was in cash and 59 million shares of Company stock (the “Shares”). The Shares are subject to an OU ‘put’ right and a 3Dicon ‘call’ right.

 

OU “Put” Rights on the Shares

 

First “put” period: December 1, 2012 to November 31, 2013. If the Shares (held plus previously sold) are valued at less than $100,000 than OU can “put” one-tenth of the Shares for $50,000 plus accrued interest retro-active to December 1, 2012 less the value of sold shares.

 

Second “put” period: December 1, 2013 to November 31, 2014. If the Shares (held & previously sold) are valued at less than $970,000 than OU can “put” the remaining Shares for $485,000 plus accrued interest retro-active to December 1, 2012 less the value of shares previously sold or redeemed during the first “put”.

 

3DIcon “Call” rights on the Shares

 

Commencing December 1, 2012, the Company shall have the right to “call” the Shares for an amount equal to $970,000 less the amount (if any) of prior Share shares by OU including amounts “put” to 3DIcon.

 

The Company has presented the shares outside of deficit in the mezzanine section of the balance sheets, as the Agreement includes put rights, which are not solely within the control of the Company.

 

The Agreement also amended the existing agreements between the Company and OU such that all intellectual property, including all inventions and or discoveries, patentable or un-patentable, developed before July 28, 2008 by OU under the SRA is owned by OU. All intellectual property, including all inventions and/or discoveries, patentable or un-patentable, developed jointly by the Company and OU at any time is jointly owned by the Company and OU. Finally, all intellectual property developed by the Company after July 28, 2008, including all inventions and or discoveries, patentable or un-patentable, is owned by the Company.   

 

Note 5 – OCAST Grant

 

The Oklahoma Center for the Advancement of Science and Technology approved the Company’s application for funding of a matching grant titled 800 Million Voxels Volumetric Display, on November 19, 2008.  The two-year matching grant, totaling $299,932, had a start date of January 1, 2009.  The Company received approval for our no cost extension request for the first year of the contract. With the new modification, the first year ended on August 31, 2010.  The award is for a maximum of $149,940 for 2009 and the remainder for 2011.  The Company earned $86,323 and $96,361 from the grant during the twelve-month periods ended December 31, 2011 and 2010, respectively and $217,824 from inception to date.  The Company received approval for our no cost extension request for the second year of the contract and, with the new modification, the second year ends on February 28, 2012.

 

During the years ended December 31, 2011 and 2010, the Company charged operations $37,363 and $43,884, respectively, pursuant to the direct costs incurred and for the use of the OU lab facilities in regard to the OCAST grant. At December 31, 2011, the Company owed the University $7,686 in direct costs.

 

Note 6 – Consulting Agreements

 

Concordia Financial Group

 

The Company entered into a one-year Independent Consulting Agreement with Concordia effective November 1, 2007, and month-to-month thereafter. Under the terms of the agreement Concordia will serve as liaison to Golden State Investors, Inc. and provide business strategy services by assisting the Company by reviewing and evaluating the Company's plans, personnel, board composition, technology, development of business models, building financial models for projections, developing materials to describe the Company, developing capital sources and assisting and advising the Company in its financial negotiations with capital sources. Concordia also advised with respect to effective registration of offerings of Company securities, the management team, the Company's development of near and long-term budgets, marketing strategies and plans, and assisted in presentations related to the above services. Concordia will be paid a monthly fee of $15,750. Concordia, at its option, may take up to 100% of this monthly fee in registered stock at 50% discount to market; and the Company, at its option, may pay up to 50% of Concordia's monthly invoice in registered stock, at 50% discount to market, provided that the payment of stock is made within ten (10) days of receipt of invoice and further provided that the stock trades above $.30 per share at any time during the last business day of the month. Market is defined as the five day average of closing prices immediately preceding the last business day of the calendar month in which the invoiced services were rendered. The Company incurred consulting fees of $189,000 for services from Concordia during each of the periods ended December 31, 2011 and 2010, under the terms of the agreement.  Additionally, on May 10, 2011, the Board of Directors awarded Concordia 10,000,000 (ten million) shares of common stock with a value of $172,100, for consulting services which have gone above and beyond the contract. The common shares were valued at $0.01721 per share which was 50% of the average of the five previous day’s closing price.

 

F-9
 

 

Note 7 – Debentures Payable

 

Debentures payable consist of the following:

 

   December 31,
2011
   December 31,
2010
 
Senior Convertible Debentures:          
6.25% Debenture due 2014  $31,788   $189,120 
4.75% Debenture due 2014   81,656    88,416 
13.0% Debenture due 2011   —      100,703 
13.0% Debenture due 2011   —      25,206 
Total Debentures   113,444    403,445 
Less - Current Maturities   —      (403,445)
Long-term Debentures  $113,444   $—   

 

Securities Purchase Agreement

 

6.25% Convertible Debenture due December 31, 2014

 

On November 21, 2007, the Company issued and sold a convertible note in the principal amount of $1,250,000 to Golden State (the "Debenture"). Pursuant to the terms of the Debenture, Golden State may, at its election, convert all or a part of the Debenture into shares of the Company's common stock at a conversion rate equal to the lesser of (i) $2.00 or (ii) 90% of the average of the five lowest volume weighted average prices during the twenty trading days prior to Golden State's election to convert, subject to adjustment as provided in the Debenture. In addition, pursuant to the terms of the Debenture, the Company agreed to file a registration statement covering the shares of common stock issuable upon conversion or redemption of the Debenture. The Company filed a registration statement covering the shares to be issued upon conversion of the Debenture. Included in the registration statement were 4.25 million shares issuable on the Debenture based on 2007 market prices and assuming full conversion of the convertible debenture. The registration statement became effective on January 4, 2008.

 

Golden State advanced $125,000 on the $1.25 million Debenture on November 9, 2007 and $746,213 in January 2008 at which time the Company placed 7,961,783 shares of common stock in escrow to be released as debentures are converted. As of September 30, 2011, Golden State has funded an aggregate of $871,213 on the Debenture. Golden State will be obligated to fund the Company for the remaining $378,787 in principal on the Debenture upon the effectiveness of a registration statement underlying the remaining unfunded principal balance on the Debenture. At this time, the Company has not filed a registration statement. At various dates during 2010, $274,438 of the Debenture was converted into 93,196,578 shares of common stock at prices ranging from $0.0027 to $0.004 based on the formula in the convertible debenture. Additionally shares totaling 6,093,396 were issued in payment of $17,062 of accrued interest during 2010. At various dates during 2011, $157,331 of the Debenture was converted into 16,156,404 shares of common stock at prices ranging from $0.0059 to $0.0174 based on the formula in the convertible debenture. Additionally $12,669 was added to the principle balance of the debenture in payment of accrued interest during 2011.

 

The conversion price for the $1.25 million Debenture is the lesser of (i) $2.00 or (ii) 90% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion.  If Golden State elects to convert a portion of the debenture and, on the day that the election is made, the volume weighted average price is below $0.75, the Company shall have the right to prepay that portion of the debenture that Golden State elected to convert, plus any accrued and unpaid interest, at 135% of such amount.

 

In addition to standard default provisions concerning timeliness of payments, delivery and notifications, the Second Debenture will be in default if the common stock of the Company trades at a price per share of $0.21 or lower, regardless of whether the trading price subsequently is higher than $0.21 per share. The trading price was at $0.21 or lower on several occasions during and subsequent to the period ended December 31, 2011. On each of the occasions Golden State, by separate letter agreements, agreed that the occasions did not constitute a default and thereby waived the default provision for those occasions only.  (See Note 14 -Subsequent Events) 

 

F-10
 

 

4.75% Convertible Debenture due December 31, 2014

 

On November 3, 2006, the Company also issued to Golden State a 4.75% convertible debenture in a principal amount of $100,000, due 2011, and warrants to buy 1,000,000 shares of the common stock at an exercise price of $10.90 per share. Under the terms of the debenture, warrants are exercised in an amount equal to ten times the dollar amount of the debenture conversion. During 2010, Golden State converted $4,752 of the $100,000 debenture into 162,454,399 shares of common stock, exercised warrants to purchase 47,523 shares of common stock at $10.90 per share and advanced $251,489 against future exercises of warrants of which $300,000 was applied to the exercise of warrants leaving $-0- of unapplied advances at December 31, 2010. During 2011, Golden State converted $6,760 of the $100,000 debenture into 60,601,868, shares of common stock, exercised warrants to purchase 67,600 shares of common stock at $10.90 per share based on the formula in the convertible debenture. Additionally Golden Gate advanced $753,381 against future exercises of warrants of which $736,840 was applied to the exercise of warrants leaving $16,542 of unapplied advances at December 31, 2011.

 

The conversion price for the 4.75% $100,000 convertible debenture is the lesser of (i) $4.00 or (ii) 80% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion. If Golden State elects to convert a portion of the debenture and, on the day that the election is made, the volume weighted average price is below $0.75, the Company shall have the right to prepay that portion of the debenture that Golden State elected to convert, plus any accrued and unpaid interest, at 135% of such amount.

 

13% Convertible Debentures due 2011

 

On May 22, 2009, the Company issued to Newton, O'Connor, Turner & Ketchum, a professional corporation ("NOTK") and the legal counsel to the Company through 2008, a 10% convertible debenture in a principal amount of $100,703, due September 30, 2009, and warrants to purchase 4,378,394 shares of the common stock at an exercise price of $0.09 per share through September 30, 2010 and an exercise price of $0.18 per share through September 30, 2014. The Company was indebted to NOTK for legal services performed for the Company and reimbursement of expenses in rendition of those services for the period ended December 31, 2008. The debenture and the warrants were issued in settlement of the indebtedness. The debentures and warrants were recorded at their pro rata fair values in relation to the proceeds received. The warrants were valued at $13,504. The difference between the pro rata fair value and face value of the debenture was charged to operations in 2009. The interest rate on the debenture increased to 13% during 2009 due to the Company not making payments when due.

 

The estimated fair value of the warrants was determined using the Black-Scholes option pricing model. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 160.73% is based on the historical volatility of the stock since July 25, 2007, the day the Company began trading on the Over-The-Counter Bulletin Board. The risk-free interest rate of 2.23% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the warrant of two years is based on historical exercise behavior and expected future experience.

 

On March 1, 2010, Newton, O'Connor, Turner & Ketchum agreed to extend the September 30, 2009 due date of their 13% debenture to March 31, 2010, in consideration for one million (1,000,000) shares of common stock. The shares, which are restricted under SEC Section 144, were valued at 50% of the average of the previous five day closing price on March 1, 2010, which was $0.002 per share totaling $4,140.

 

On June 1, 2010, Newton, O'Connor, Turner & Ketchum agreed to extend the March 31, 2010 due date of their 13% debenture to September 30, 2010 in consideration for one million five hundred thousand (1,500,000) shares of common stock and a reduction in the exercise price of the warrants. The revised price at which the warrant may be exercised shall be $0.045 per share for exercises made during the period between the date of grant and the second anniversary of the revised maturity date, and $0.09 per share for exercises made during the forty-eight month period between the second anniversary of the revised maturity date and the sixth anniversary of the maturity date. The shares, which are restricted under SEC Section 144, were valued at 50% of the average of the previous five day closing price on June 1, 2010, which was $0.004 per share totaling $6,210.

 

On March 31, 2011, Newton, O'Connor, Turner & Ketchum agreed to extend the September 30, 2010 due date of their 13% debenture to April 30, 2011 in consideration for two hundred thousand (200,000) shares of common stock and an extension of the exercise dates of the warrants. The revised dates at which the warrant may be exercised shall be $0.045 per share for exercises made during the period between the date of grant and the second anniversary of the revised maturity date, and $0.09 per share for exercises made during the forty-eight month period between the second anniversary of the revised maturity date and the sixth anniversary of the revised maturity date. The shares, which are restricted under SEC Section 144, were valued at 50% of the average of the previous five day closing price on March 31, 2011, which was $0.07 per share totaling $14,048. 

 

On June 2, 2010, the Company issued to NOTK a second 10% convertible debenture in a principal amount of $25,206, due September 30, 2010, and warrants to purchase 3,360,847 shares of the common stock at an exercise price of $0.045 per share through September 30, 2012 and an exercise price of $0.09 per share through September 30, 2016. The Company was indebted to NOTK for legal services performed for the Company and reimbursement of expenses in rendition of those services for the period ended December 31, 2009. The debenture and the warrants were issued in settlement of the indebtedness.  The interest rate on the debenture increased to 13% during 2010 due to the Company not making payments when due.

 

On April 30, 2011, Newton, O'Connor, Turner & Ketchum agreed to convert their 13% convertible debentures and accrued interest, which totaled in the aggregate $159,842 into 18,972,186 common shares of the Company’s common stock, at an average price per share of $0.008, under the terms of the convertible debentures. The shares are restricted under SEC Section 144.

 

F-11
 

 

Note 8 – Convertible Promissory Notes 5%, Due 2013

 

In October 2010, the Company issued 5% Convertible Promissory Notes (the “Notes”) to six persons, in the aggregate, totaling $400,877. The Notes mature three years from the date issued. The Notes automatically convert to common stock of the Company at $0.0034 per share (the "Fixed Conversion Price") prior to March 15, 2011, upon the merger or consolidation of the Company with or into another person, the Company effects any sale of all or substantially all of its assets, any tender or exchange offer of the Company's common stock, or the Company effectively converts into or exchanges the Company's common stock for other securities, cash or property. Additionally, after March 15, 2011, at the option of the holder, the Notes are convertible into common stock of the Company at a price per share of $0.0025 (75% of the "Fixed Conversion Price"). Interest on the Notes accrue from the original issue date at 5% annually, is payable upon maturity or conversion of the Notes and such interest may be converted in whole or part to shares of common stock at the effective conversion price.

 

At various dates during 2011, the six persons converted the $400,877 Notes and accrued interest of $9,020 into 163,631,653 shares of common stock at $0.0025 per share.  The shares are restricted under SEC Section 144.

 

Note 9 – Common Stock and Paid-In Capital

 

On November 19, 2010 the Board of Directors of the Company authorized an amendment to the Company's Certificate of Incorporation in order to (i) increase the authorized shares of the Company's common stock from 750,000,000 shares, par value $0.0002 to 1,500,000,000 shares, par value $0.0002, (ii) effect a reverse split of the Company's common stock in a ratio in the range between 1 for 10 and 1 for 25, as will be selected by the Company's Board of Directors (the "Reverse Split"), and (ii) create a series of "blank check" preferred stock consisting of 25,000,000 shares, par value $0.0002.   On May 16, 2011, the Company announced that the Company’s Board of Directors elected to allow its authorization to effect a reverse stock split to expire on June 1, 2011.

 

On August 27, 2010, the Company entered into Subscription Agreements with one of its directors pursuant to which the director purchased 5,714,286 shares of the Company's common stock at a price per share equal to 50% of the average closing price during the five days prior to August 27, 2 010 ($0.00175 per share) for aggregate proceeds of $10,000.

 

As of December 31, 2011, there are warrants outstanding to purchase 500,000 shares of common stock at a price of $0.15 per share through various dates in March and April 2011; or $0.20 per share that expire on various dates in March and April 2012, warrants to purchase 16,666,666 shares of its common stock at a price of $0.50 per share through 2012, warrants to purchase 4,378,394 shares of common stock at a price of $0.045 per share through September 30, 2010 or $0.09 per share that expire on September 30, 2015 and, warrants to purchase 3,360,847 shares of common stock at a price of $0.045 per share through June 1, 2012 and $0.09 per share thereafter, that expire on June 1, 2015. Additionally, Golden State has warrants outstanding to purchase 816,560 shares of common stock at a price of $10.90 per share which expire December 31, 2011. 

 

Common stock and options issued for services and liabilities

 

On February 9, 2009, the Board of Directors of the Company appointed James N. Welsh to serve as the Company's Interim Chief Operating Officer and Treasurer. His appointment was effective as of March 1, 2009. Under the terms of the consulting agreement, Mr. Welsh was compensated $2,000 per week in either cash or stock. In the event stock was issued for the compensation, it was issued at 50% of the average of the five previous closing prices. Mr. Welsh was due $34,000 at December 31, 2009 for which 10,250,895 shares of common stock were issued in 2010 as satisfaction of the amount. The Company accepted the resignation of Mr. Welsh effective August 2, 2010.

 

During 2011 and 2010, shares of common stock totaling 30,072,595 and 97,684,416, respectively, were issued for consulting services for which the Company recognized $355,205 and $232,886 of expense, respectively. Shares of common stock totaling 7,094,511 and 6,093,396 were issued to debenture holder in 2011 and 2010, respectively for accrued interest due for which the Company recognized $42,952 and $17,061 in expense in 2011 and 2010 respectively. Shares totaling 59,000,000 issued during 2010 to the University of Oklahoma under the repayment terms of the SRA which were valued at $485,649 (see Note 4). During 2011 and 2010, shares totaling 57,530,393 and 48,657,897, respectively, were issued to employees and consultants for previous services provided to the Company for which the Company reduced accounts payable and accrued liabilities by $148,526 and $214,414, respectively. Additionally, shares totaling 40,000,000 were issued under the terms of an agreement dated December 21, 2010, in payment of accrued salaries and payroll taxes totaling $407,501 due Martin Keating, Chairman of the Board of Directors, and Judith Keating, the secretary of the Company. The shares were issued January 4, 2011.

 

Options granted 

 

Employment Agreement - On July 28, 2008, the Company entered into an Employment Agreement with Dr. Hakki Refai (the "Employment Agreement") pursuant to which Dr. Refai has agreed to serve as the Chief Technology Officer of the Company. Dr. Refai's employment under the Employment Agreement commenced on October 1, 2008 and will continue for a term of one year from October 1, 2008, the date on which he became a full-time employee of the Company. The term of the Employment Agreement will automatically extend for successive one year periods unless otherwise terminated by the parties in accordance with the terms of the Employment Agreement. On March 25, 2009, the Company entered into an agreement with Dr. Hakki Refai pursuant to which the Company agreed to remove the time constraints on the technical milestone achievements whereby the issuance of the 3,500,000 milestone options will be solely upon the achievement of the milestones.

 

F-12
 

 

On May 11, 2010, the Board of Directors of the Company agreed to immediately vest the 3,500,000 milestone options. The total value of the options was $268,979 of which $100,867 was charged to operations in 2008. The remaining value of $168,112 was charged to operations in the second quarter of 2010.

 

The estimated fair value of the options was determined using the Black-Scholes option pricing model. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 95.50% is based on the historical volatility of the stock since July 25, 2007, the day the Company began trading on the Over-The-Counter Bulletin Board. The risk-free interest rate of 2.0% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option of five years is based on historical exercise behavior and expected future experience.  

 

Employment Agreement - On June 13, 2011, the Company entered into a one (1) year Agreement for At-Will Employment with Assignment of Inventions (“Employment Agreement”) with Sidney A. Aroesty, pursuant to which Mr. Aroesty began serving as the Company’s Chief Executive Officer, effective June 13, 2011.  Under the terms of the Employment Agreement, Mr. Aroesty is entitled to an annual base salary of $120,000 and, at the discretion of the Company’s Board of Directors (the “Board”), performance-based bonuses and/or salary increases.  Pursuant to the Employment Agreement, the Company granted Mr. Aroesty five-year stock options to purchase two (2) million shares at an exercise price of $0.031 (the “Strike Price”).  Furthermore, if Mr. Aroesty remains employed by the Company, he will receive additional stock options to purchase three (3) million shares at the Strike Price upon the completion of a trade show prototype that displays the Company’s technology. (see Note – 14, Subsequent Events)

 

The Employment Agreement contains provisions for non-disclosure of confidential information pursuant to which Mr. Aroesty agreed to refrain from using or disclosing to third parties, directly or indirectly, any Confidential Information, as defined in the Employment Agreement, either during or following his employment with the Company.  Furthermore, Mr. Aroesty unconditionally and irrevocably assigned any now-existing or later-created Invention(s), as defined in the Employment Agreement, which are developed during or three (3) years after his employment with the Company.

 

The Employment Agreement may be terminated with or without reason by either the Company or Mr. Aroesty and at any time, upon sixty (60) days written notice.  The terms of the Employment Agreement will remain effective for one (1) year and will automatically renew, subject to the same termination rights.  Upon termination, the Company will pay any base pay, bonus and benefits that have been earned and are due as of the date of the termination.

 

The estimated fair value of the two million options of $60,600, was determined using the Black-Scholes option pricing model and was charged to operations in June 2011. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 172% is based on the historical volatility of the stock since July 25, 2007, the day the Company began trading on the Over-The-Counter Bulletin Board. The risk-free interest rate of 1.43% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option of five years is based on historical exercise behavior and expected future experience.

 

Board of Directors – On June 22, 2010, the Company agreed to compensate its non-employee Board members with options to purchase registered stock of the corporation equaling the value of $100,000 for each of the three non-employee Board members for services during 2010; using standard evaluation methods. The Board granted options to purchase an aggregate of 57,529,455 shares to its three non-employee Board members; the exercise price for each option is $0.005 per share. The options expire at the end of ten years. The $250,000 (one Board member received one-half the amount due to his resignation in mid-year) compensation is for services on the Board during all or part of the calendar year 2010 and is deemed fully vested on the date of the grant. Operations were charged with $250,000 for the year ended December 31, 2010.

 

The estimated fair market value of the options was determined using the Black-Scholes option pricing model. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 133.46% is based on the historical volatility of the stock since July 25, 2007, the day the Company began trading on the Over-the-counter Bulletin Board. The risk-free interest rate of 1.43% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option of five years is based on historical exercise behavior and expected future experience. 

 

Board of Directors – On May 17, 2011, the Company agreed to compensate its non-employee Board members with options to purchase registered stock of the corporation equaling the value of $75,000 for each of the three non-employee Board members for services during 2011; using standard evaluation methods. The Board granted options to purchase an aggregate of 5,933,700 shares to its three non-employee Board members; the exercise price for each option is $0.04 per share. The options expire at the end of ten years. The $225,000 compensation is for services on the Board during all or part of the calendar year 2011 and is deemed fully vested on December 31, 2011. Operations were charged with $225,000 for the year ended December 31, 2011.

 

The estimated fair value of the options of $225,000 was determined using the Black-Scholes option pricing model.  The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 172% is based on the historical volatility of the stock since July 25, 2007, the day the Company began trading on the Over-The-Counter Bulletin Board. The risk-free interest rate of 1.87% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option of five years is based on historical exercise behavior and expected future experience.

 

F-13
 

 

The following summary reflects warrant and option activity for the year ended December 31, 2011:

 

   Attached
Warrants
   Golden State
Warrants
   Options   
             
Outstanding December 31, 2010   24,905,908    884,160    70,965,995 
Granted   —      —      14,933,700 
Exercised   —      (67,600)   (15,505,891)
Cancelled   —      —      (5,500,000)
Outstanding December 31, 2011   24,905,908    816,560    64,893,804 

 

Stock options are valued at the date of award, which does not precede the approval date, and compensation cost is recognized in the period the options are granted. Stock options generally become exercisable on the date of grant and expire based on the terms of each grant. 

 

The estimated fair value of options for common stock granted was determined using the Black-Scholes option pricing model. The expected dividend yield is based on the average annual dividend yield as of the grant date. Expected volatility is based on the historical volatility of our stock. The risk-free interest rate is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option is based on historical exercise behavior and expected future experience.  

 

Common stock rights

 

Holders of shares of common stock are entitled to one vote per share on all matters submitted to a vote of the shareholders. Shares of common stock do not have cumulative voting rights. Holders of record of shares of common stock are entitled to receive dividends when and if declared by the board of directors. To date, the Company has not paid cash dividends. The Company intends to retain any earnings for the operation and expansion of its business and does not anticipate paying cash dividends in the foreseeable future.

 

Any future determination as to the payment of cash dividends will depend on future earnings, results of operations, capital requirements, financial condition and such other factors as the Board of Directors may consider. Upon any liquidation, dissolution or termination of the Company, holders of shares of common stock are entitled to receive a pro rata distribution of the assets of the Company after liabilities are paid.

 

Holders of common stock do not have pre-emptive rights to subscribe for or to purchase any stock, obligations or other securities of 3DIcon.

 

Note 10 – Incentive Stock Plan

 

In September 2009 the Company established the 3DIcon Corporation 2009 Incentive Stock Plan (the "2009 Plan"). The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2009 Plan shall not exceed 50,737,115 shares. The shares are included in a registration statement filed September 23, 2009. Shares totaling 14,422,012 and 36,315,103 were issued from the Plan during the years ended December 31, 2010 and 2009, respectively, for services rendered to the Company. There are no shares remaining for issuance under the 2009 Plan.

 

In February 2010 the Company established the 3DIcon Corporation 2010 Incentive Stock Plan (the "2010 Plan"). The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2010 Plan shall not exceed seventy-five million (75,000,000) shares. The shares are included in a registration statement filed February 26, 2010. Shares totaling 3,089,027 and 71,910,973 were issued from the 2010 Plan during the years ended December 31, 2011 and 2010, respectively, for services rendered and to satisfy accounts payable to the Company. There are no shares remaining for issuance under the 2010 Plan.

 

In June 2010 the Company established the 3DIcon Corporation 2010 Equity Incentive Stock Plan (the "2010 EIP"). The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2010 EIP shall not exceed sixty million (60,000,000) shares. The shares are included in a registration statement filed June 24, 2010. Shares totaling 1,490,672 and 58,509,328 were issued from the 2010 EIP during the years ended December 31, 2011 and 2010, respectively, for services rendered and to satisfy accounts payable to the Company. There are no shares available for issuance under the 2010 EIP.

 

In January 2011 the Company established the 3DIcon Corporation 2011 Equity Incentive Plan (the "2011 EIP"). The 2011 EIP is designed to retain directors, executives and selected employees and consultants and reward them for making contributions to the success of the Company. These objectives are accomplished by making long-term incentive awards under the 2011 EIP thereby providing participants with a proprietary interest in the growth and performance of the Company. The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2011 EIP shall not exceed one hundred million (100,000,000) shares. The shares are included in a registration statement filed January 14, 2011. Shares totaling 53,893,572 were issued from the 2011 EIP for services rendered and to satisfy accounts payable to the Company. There are currently 46,106,428 shares available for issuance under the 2011 EIP.

 

F-14
 

 

Note 11 – Office Lease

 

The Company signed an Office Lease Agreement (the “Lease Agreement”) on April 24, 2008. The Lease Agreement commenced on June 1, 2008 and expired June 1, 2011. On March 8, 2011 the Lease Agreement was amended to extend the expiration date to May 31, 2012.  At December 31, 2011, minimum future lease payments to be paid through May 31, 2012 under the non-cancelable operating lease for office space are $11,573.

 

Note 12 – Income Taxes

 

At December 31, 2011 and 2010, the Company had accumulated net operating losses of approximately $13,000,000 and $11,000,000, respectively, available to reduce future federal and state taxable income. Unless utilized, the loss carry forward amounts will begin to expire in 2013.

 

Deferred tax assets resulting from the operating loss carry forward, are reduced by a valuation allowance.

 

The deferred tax asset consisted of the following:

 

   December 31,   December 31, 
   2011   2010 
Loss carry forward amount  $13,000,000   $11,000,000 
Effective tax rate   38%   38%
Deferred tax asset   4,940,000    4,180,000 
Less valuation allowance   (4,940,000)   (4,180,000)
Net deferred taxes  $—     $—   

 

Note 13 – Related Party Transaction

 

3DIcon engaged the law firm of Newton, O'Connor, Turner & Ketchum as its outside corporate counsel from 2005 through 2008 and for certain legal services subsequent to 2008.  John O'Connor, a director of 3DIcon, is the Chairman of Newton, O'Connor, Turner & Ketchum. During the years ended December 31, 2011 and 2010, the Company incurred legal fees to Newton, O'Connor, Turner & Ketchum in the amount of $61,570 and $22,287 respectively.

 

Note 14 – Subsequent Events

 

Debentures payable

 

In accordance with the terms of the Second Debenture an event of default occurs if the common stock of the Company trades at a price per share of $0.21 or lower. The trading price was at $0.21 or lower on several occasions during the period ended December 31, 2011 and subsequent to December 31, 2011. On each of the occasions Golden State, by separate letter agreements, agreed that the occasions did not constitute a default and thereby waived the default provision for the occasions.

 

Subsequent to December 31, 2011 Golden State converted $1,664 of the 4.75% convertible debenture into 25,049,954 shares of common stock at $0.00007 per share and exercised 16,635 warrants at $10.90 per share for $181,322 and advanced $100,000 for future exercise of warrants under the terms of the securities purchase agreements.

 

Common stock and paid in capital

 

Shares of common stock totaling 10,651,232 were issued in payment of $78,863 in legal and consulting fees under the terms of our agreements for service during 2011 and 2012.

 

OCAST Grant

 

The Company received approval for our no cost extension request for the second year of the contract and, with the new modification, the second year ends on August 31, 2012.

 

F-15
 

 

Employment contracts

 

On March 19, 2012 the Company announced that Sidney Aroesty would resign as CEO and join the Board of Directors. The Board appointed display industry veteran Mark Willner as CEO with an annual salary of $180,000.

 

Dr. George Melnik was appointed the new Senior Technical Advisor with an annual salary of $144,000. Dr. Hakki Refai as Chief Technical Officer.

 

Civil Action Complaint

 

On April 2, 2012, the Company was served with a Summons and Complaint (the “Complaint”) for a civil action filed by Advanced Optical Technologies, Inc. (“AOT”) in the Second Judicial District Court of New Mexico, County of Bernalillo. In the Complaint, AOT alleged that the Company owed and refused to pay the amount of $90,124.91 for services performed by AOT through December 28, 2011 and AOT also asserted a fraud claim. The Company believes the allegations in the Complaint to be without merit. Nevertheless, the Company made efforts to resolve the dispute with AOT and believed the matter to be resolved, subject to documentation. The Company intends to aggressively defend the claims set forth in the Complaint.

 

F-16
 

 

3DIcon CORPORATION

(A Development Stage Company)

BALANCE SHEETS

March 31, 2012 and December 31, 2011

 

   March 31,   December 31, 
   2012   2011 
   (Unaudited)   (Audited) 
Assets          
Current assets:          
Cash  $81,286   $17,666 
Prepaid expenses   51,510    35,435 
Accounts receivable   40,816    17,000 
Total current assets   173,612    70,101 
           
Net property and equipment   8,427    9,809 
Deposits-other   2,315    2,315 
Total Assets  $184,354   $82,225 
           
Liabilities and Stockholders' Deficiency          
Current liabilities:          
    -    - 
Warrant exercise advances  $200,001   $16,542 
Accounts payable   695,020    698,131 
Accrued salaries   17,987    13,189 
Accrued interest on debentures   1,464    1,799 
Total current liabilities   914,472    729,661 
           
Convertible debentures payable   111,781    113,444 
           
Long term debt   111,781    113,444 
           
Total Liabilities   1,026,253    843,105 
           
Common stock subject to put rights and call rights; 1,685,714 shares   485,649    485,649 
           
Stockholders' deficiency:          
Common stock $.0002 par, 1,500,000,000 shares authorized; 33,949,163 and 32,928,654 shares issued and outstanding at March  31, 2012 and December 31, 2011, respectively   6,790    6,586 
Additional paid-in capital   15,464,489    15,168,005 
Deficit accumulated during development stage   (16,798,827)   (16,421,120)
Total Stockholders' Deficiency   (1,327,548)   (1,246,529)
Total Liabilities and Stockholders' Deficiency  $184,354   $82,225 

 

Presentation gives effect to the Reverse Stock Split, which occurred on April 27, 2012 (see note 9)

 

See notes to financial statements

 

F-17
 

 

3DIcon CORPORATION

(A Development Stage Company)

STATEMENTS OF OPERATIONS

Three months ended March 31, 2012 and 2011

and Period from Inception (January 1, 2001) to March 31, 2012

(unaudited)

 

   Three Months   Three Months     
   Ended   Ended   Inception to 
   March 31,   March 31,   March 31, 
   2012   2011   2012 
Income:               
License fee  $-   $-   $25,000 
Grant income   52,649    30,000    270,473 
Sales   -    3,000    40,797 
                
Total income   52,649    33,000    336,270 
                
Expenses:               
Research and development   133,481    65,003    4,291,721 
General and administrative   294,994    296,252    12,406,653 
Interest   1,881    28,353    436,723 
                
Total expenses   430,356    389,608    17,135,097 
                
Net loss  $(377,707)  $(356,608)  $(16,798,827)
                
Loss per share:               
Basic and diluted  $(0.0107)  $(0.0140)     
                
Weighted average shares outstanding, Basic and diluted   35,409,004    25,418,470      

 

Presentation gives effect to the Reverse Stock Split, which occurred on April 27, 2012 (see note 9)

 

See notes to financial statements

 

F-18
 

 

3DIcon CORPORATION

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

Period from Inception (January 1, 2001) to March 31, 2012

(unaudited)

 

               Deficit     
               Accumulated     
   Common Stock   Additional   During the     
       Par   Paid-In   Development     
   Shares   Value   Capital   Stage   Total 
Balance, January 1, 2001 – as reorganized   27,723,750   $27,724   $193,488   $-   $221,212 
                          
Accrue compensation earned but unrecorded   -    -    -    (60,000)   (60,000)
Stock issued for services   2,681,310    2,681    185,450    -    188,131 
Stock issued for cash   728,500    729    72,121    -    72,850 
Net loss for the year   -    -    -    (259,221)   (259,221)
Balance, December 31, 2001   31,133,560    31,134    451,059    (319,221)   162,972 
                          
Accrue compensation earned but unrecorded   -    -    -    (60,000)   (60,000)
Stock issued for services   3,077,000    3,077    126,371    -    129,448 
Stock issued for cash   1,479,000    1,479    146,421    -    147,900 
Net loss for the year   -    -    -    (267,887)   (267,887)
Balance, December 31, 2002   35,689,560    35,690    723,851    (647,108)   112,433 
                          
Accrue compensation earned but unrecorded   -    -    -    (90,000)   (90,000)
Stock issued for services   15,347,000    15,347    -    -    15,347 
Stock issued for cash   1,380,000    1,380    33,620    -    35,000 
Reverse split 1:10   (47,174,904)   -    -    -    - 
Par value $0.0001 to $0.0002   -    (51,369)   51,369    -    - 
Net loss for the year   -    -    -    (51,851)   (51,851)
Balance, December 31, 2003   5,241,656    1,048    808,840    (788,959)   20,929 
                          
Additional founders shares issued   25,000,000    5,000    (5,000)   -    - 
Stock issued for services   24,036,000    4,807    71,682    -    76,489 
Stock issued for cash   360,000    72    28,736    -    28,808 
Warrants issued to purchase common stock at $.025   -    -    18,900    -    18,900 
Warrants issued to purchase common stock at $.05   -    -    42,292    -    42,292 
Stock warrants exercised   2,100,000    420    60,580    -    61,000 
Net loss for the year   -    -    -    (617,875)   (617,875)
Balance, December 31, 2004   56,737,656    11,347    1,026,030    (1,406,834)   (369,457)
                          
Stock issued for services   5,850,000    1,170    25,201    -    26,371 
Stock issued to settle liabilities   5,000,000    1,000    99,000    -    100,000 
Stock issued for cash   1,100,000    220    72,080    -    72,300 
Warrants issued to purchase common stock at $.025   -    -    62,300    -    62,300 
Warrants issued to purchase common stock at $.05   -    -    140,400    -    140,400 
Stock warrants exercised   5,260,000    1,052    172,948    -    174,000 
Net loss for the year   -    -    -    (592,811)   (592,811)
Balance, December 31, 2005   73,947,656    14,789    1,597,959    (1,999,645)   (386,897)
                          
Stock issued for services   4,700,000    940    205,597    -    206,537 
Debentures converted   3,000,000    600    149,400    -    150,000 
Stock issued for cash   200,000    40    16,160    -    16,200 
Warrants issued to purchase common stock   -    -    33,800    -    33,800 
Warrants converted to purchase common stock   16,489,000    3,297    565,203    -    568,500 
Net loss for the year   -    -    -    (1,469,888)   (1,469,888)
Balance, December 31, 2006   98,336,656    19,666    2,568,119    (3,469,533)   (881,748)
                          
Stock issued for services   817,727    164    155,262    -    155,426 
Stock issued for interest   767,026    153    38,198    -    38,351 
Stock based compensation   -    -    1,274,666    -    1,274,666 
Debentures converted   17,215,200    3,442    1,673,741    -    1,677,183 
Stock issued for cash   1,188,960    238    191,898    -    192,136 
Options exercised   222,707    45    (45)   -    - 
Warrants issued to purchase common stock   -    -    87,864    -    87,864 
Warrants converted to purchase common stock   8,585,956    1,717    462,203    -    463,920 
Net loss for the year   -    -    -    (3,928,996)   (3,928,996)
Balance, December 31, 2007   127,125,232    25,425    6,451,906    (7,398,529)   (921,198)
                          
Stock issued for cash   515,677    103    24,897    -    25,000 
Warrants exercised   1,347,261    269    362,425    -    362,694 
Stock based compensation   -    -    654,199    -    654,199 
Debentures converted   15,257,163    3,052    962,257    -    965,309 
Options exercised and escrowed shares   8,671,460    1,734    (1,734)   -    - 
Stocks issued for service   4,598,973    920    312,880    -    313,800 
Net loss for the year   -    -    -    (3,611,550)   (3,611,550)
Balance, December 31, 2008   157,515,766    31,503    8,766,830    (11,010,079)   (2,211,746)
                          
Stock issued for cash   20,607,841    4,122    197,878    -    202,000 
Warrants exercised   35,100    7    382,583    -    382,590 
Debentures converted   77,451,141    15,490    467,514    -    483,004 
Stocks issued for service   68,506,130    13,701    524,653    -    538,354 
Stock issued for accounts payable   11,264,706    2,253    321,409    -    323,662 
Stock issued for interest   8,310,128    1,662    41,647    -    43,309 
Warrants issued for accounts payable   -    -    13,505    -    13,505 
Net loss for the year   -    -    -    (1,566,835)   (1,566,835)
Balance, December 31, 2009   343,690,812    68,738    10,716,019    (12,576,914)   (1,792,157)
                          
Stock issued for cash   5,714,286    1,143    8,857    -    10,000 
Warrants exercised   47,523    9    517,991    -    518,000 
Debentures converted   255,650,977    51,130    228,061    -    279,191 
Stock issued for services   97,684,416    19,538    213,348    -    232,886 
Stock issued for liabilities   48,657,897    9,732    204,682    -    214,414 
Stock issued for interest   6,093,396    1,218    15,843    -    17,061 
Stock based compensation   -    -    418,112    -    418,112 
Net loss for the year   -    -    -    (1,523,737)   (1,523,737)
Balance, December 31, 2010   757,539,307    151,508    12,322,913    (14,100,651)   (1,626,230)
                          
Warrants and options exercised   12,308,915    2,462    754,378    -    756,840 
Debentures converted   252,267,600    50,453    653,093    -    703,546 
Stock issued for services   30,072,595    6,015    349,190    -    355,205 
Stock issued for liabilities   97,530,393    19,506    536,521    -    556,027 
Stock issued for interest   7,094,511    1,419    41,533    -    42,952 
Escrowed shares cancelled   (4,310,446)   (862)   862    -    - 
Stock based compensation   -    -    285,600    -    285,600 
Net loss for the period   -    -    -    (2,320,469)   (2,320,469)
Balance, December 31, 2011   1,152,502,875    230,501    14,944,090    (16,421,120)   (1,246,529)
                          
Warrants and options exercised   16,635    3    181,318    -    181,321 
Debentures converted   25,049,954    5,010    (3,347)   -    1,663 
Stock issued for services   7,437,643    1,488    40,612    -    42,100 
Stock issued for liabilities   3,213,589    642    36,122    -    36,764 
Stock based compensation   -    -    34,840    -    34,840 
Retrospective adjustment for the 1:35 reverse common stock split   (1,154,271,533)   (230,854)   230,854    -    - 
Net loss for the period   -    -    -    (377,707)   (377,707)
Balance, March 31, 2012   33,949,163   $6,790   $15,464,489   $(16,798,827)  $(1,327,548)

 

March 31, 2012 amounts have been retrospectively adjusted for the one-for-thirty-five reverse stock split that occurred April 27, 2012 (see note 9).

 

See notes to financial statements

 

F-19
 

 

3DIcon CORPORATION

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

Three months ended March 31, 2012 and 2011

and Period from Inception (January 1, 2001) to March 31, 2012

(unaudited)

 

   Three Months   Three Months   Inception to 
   Ended March 31,   Ended March 31,   March 31, 
   2012   2011   2012 
Cash Flows from Operating Activities               
                
Net loss  $(377,707)  $(356,608)  $(16,798,827)
Adjustments to reconcile net loss to net cash used in operating activities:               
Options issued for services   34,840    -    2,667,418 
Stock issued for services   42,100    38,473    2,280,095 
Stock issued for interest   -    17,842    141,672 
Book value of assets retired   -    -    6,529 
Amortization of debt issuance costs   -    -    170,414 
Depreciation   1,382    1,542    28,573 
Change in:   -           
Impairment of assets   -    -    292,202 
Accounts receivable   (23,816)   (22,908)   (40,816)
Prepaid expenses and other assets   (16,075)   2,521    (302,226)
Accounts payable and accrued liabilities   38,116    52,807    2,516,944 
                
Net cash used in operating activities   (301,160)   (266,331)   (9,038,022)
                
Cash Flows from Investing Activities               
Purchase of office furniture and equipment   -    -    (43,529)
Net cash used in investing activities   -    -    (43,529)
                
Cash Flows from Financing Activities               
Proceeds from stock and warrant sales, exercise of warrants and warrant exercise advances   364,780    750,000    4,853,236 
Proceeds from issuance of debentures and notes        -    4,309,591 
                
Net cash provided by financing activities   364,780    750,000    9,162,827 
                
Net increase  in cash   63,620    483,669    81,276 
Cash, beginning of period   17,666    367,101    10 
                
Cash, end of period  $81,286   $850,770   $81,286 
                
Supplemental Disclosures               
Non-Cash Investing and Financing Activities               
Conversion of debentures to common stock  $1,663   $375,400   $4,259,344 
Cash paid for interest  $-   $31,581   $301,727 
Stock issued to satisfy payables  $36,764   $540,277   $2,024,017 
Debenture issued to satisfy payable  $-   $-   $125,909 
                
Stock issued subject to put rights and call right to satisfy payables  $-   $-   $485,649 

 

See notes to financial statements

 

F-20
 

 

3DIcon CORPORATION

(A Development Stage Company)

 

NOTES TO FINANCIAL STATEMENTS

 

Three months ended March 31, 2012 and 2011

(Unaudited)

 

Note 1 – Uncertainties and Use of Estimates

 

Basis of Presentation

 

The accompanying financial statements of 3DIcon Corporation (the “Company”) have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures made are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company's year-end audited financial statements and related footnotes included in the previously filed 10-K. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company as of March 31, 2012, and the statements of its operations for the three months ended March 31, 2012 and 2011, and the period from inception (January 1, 2001) to March 31, 2012, and cash flows for the three month periods ended March 31, 2012 and 2011, and the period from inception (January 1, 2001) to March 31, 2012, have been included. The results of operations for interim periods may not be indicative of the results which may be realized for the full year.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. Actual results could differ from the estimates and assumptions used.

 

Revenue Recognition

 

Revenues from software license fees are accounted for in accordance with Accounting Standards Codification (“ASC”) 985-605, “Software Revenue Recognition”.  The Company recognizes revenue when (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) the sales price is fixed or determinable; and (iv) collectability is reasonably assured.

 

Grant revenue is recognized when earned.

 

Recent Accounting Pronouncements

 

Based on management's assessment no new accounting standards, if adopted, would have a material impact on the accompanying financial statements.

 

Uncertainties

 

The accompanying financial statements have been prepared on a going concern basis.  The Company is in the development stage and has insufficient revenue and capital commitments to fund the development of its planned product and to pay operating expenses.

 

The Company has realized a cumulative net loss of $16,798,827 for the period from inception (January 1, 2001) to March 31, 2012, and a net loss of $377,707 and $356,608 for the three months ended March 31, 2012 and 2011, respectively.

 

The ability of the Company to continue as a going concern during the next year depends on the successful completion of the Company's capital raising efforts to fund the development of its planned products.  The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Management plans to fund the future operations of the Company with existing cash, grants and investor funding. Under the terms of the Golden State debentures, as further described in Note 4, Golden State may advance an additional $378,787.  The additional advance would be available if the Company filed a registration statement; however, the Company does not plan to file such registration statement. In addition, pursuant to the 4.75% Convertible Debenture due in December 2014, beginning in November 2007, Golden State is obligated to submit conversion notices in an amount such that Golden State receives 1% of the outstanding shares of the Company every calendar quarter for a period of one year.  In connection with each conversion, Golden State is expected to exercise warrants equal to ten times the amount of principal converted.  The warrants are exercisable at $10.90 per share.  The number of warrants exercisable is subject to certain beneficial ownership limitations contained in the 4.75% Convertible Debenture (“the Beneficial Ownership Limitations”).  The Beneficial Ownership Limitations prevent Golden State from converting on the 4.75% Convertible Debenture or exercising warrants if such conversion or exercise would cause Golden State’s holdings to exceed 9.99% of the Company’s issued and outstanding common stock.  Subject to the Beneficial Ownership Limitations, Golden State is required to convert $3,000 of the 4.75% Convertible Debenture and exercise 30,000 warrants per month.  Based upon our current stock price, our issued and outstanding shares as of March 31, 2012 and ignoring the impact of the Beneficial Ownership Limitations, the Company may receive up to $981,000 in funding from Golden State as a result of warrant exercises during the year ended December 31, 2012. During the three months ended March 31, 2012, the Company received $364,780 in funding under the terms of the 4.75% Convertible Debenture (see Note 4). 

 

F-21
 

 

The Company was approved for a matching grant from Oklahoma Center for the Advancement of Science and Technology (“OCAST”) on November 19, 2008 in the amount of approximately $300,000.  There remains $51,836 of grant funds to be provided through the end of the grant period, August 31, 2012.  (see Note 3)

 

Additionally, the Company is continuing to pursue financing through private offerings of debt or common stock.

 

Note 2 – Sponsored Research Agreement ("SRA") Common Stock Subject to Put Rights and Call Right

 

Since April 20, 2002, the Company has entered into a number of Sponsored Research Agreements with the University of Oklahoma (“OU”) as follows:

 

Phase I: “Pilot Study to Investigate Digital Holography”, April 20, 2004. The Company paid OU $14,116.

 

Phase II: “Investigation of 3-Dimensional Display Technologies”, April 15, 2005, as amended. The Company paid OU $528,843.

 

Phase III: “3-Dimensional Display Development”. The Company made partial payment to OU by issuing 4,264,707 shares with a market price of $290,000 on October 14, 2008 and final payment on December 1, 2010 in the amount of $525,481 of which $40,481 was in cash and 59 million shares of Company stock (the “Shares”). The Shares are subject to an OU ‘put’ right and a 3Dicon ‘call’ right.

 

OU “Put” Rights on the Shares

 

First “put” period: December 1, 2012 to November 31, 2013. If the Shares (held plus previously sold) are valued at less than $100,000 then OU can “put” one-tenth of the Shares for $50,000 plus accrued interest retroactive to December 1, 2012 less the value of sold shares.

 

Second “put” period: December 1, 2013 to November 31, 2014. If the Shares (held & previously sold) are valued at less than $970,000 then OU can “put” the remaining Shares for $485,000 plus accrued interest retroactive to December 1, 2012 less the value of shares previously sold or redeemed during the first “put”.

 

3DIcon “Call” Rights on the Shares

 

Commencing December 1, 2012, the Company shall have the right to “call” the Shares for an amount equal to $970,000 less the amount (if any) of prior Shares by OU including amounts “put” to 3DIcon.

 

The Company has presented the Shares outside of deficit in the mezzanine section of the balance sheets, as the Agreement includes put rights, which are not solely within the control of the Company.

 

The Agreement also amended the existing agreements between the Company and OU such that all intellectual property, including all inventions and or discoveries, patentable or un-patentable, developed before July 28, 2008 by OU under the SRA is owned by OU. All intellectual property, including all inventions and/or discoveries, patentable or un-patentable, developed jointly by the Company and OU at any time is jointly owned by the Company and OU. Finally, all intellectual property developed by the Company after July 28, 2008, including all inventions and or discoveries, patentable or un-patentable, is owned by the Company.   

 

Note 3 – OCAST Grant

 

The Oklahoma Center for the Advancement of Science and Technology approved the Company’s application for funding of a matching grant titled 800 Million Voxels Volumetric Display, on November 19, 2008.  The two-year matching grant, totaling $299,932, had a start date of January 1, 2009.  The Company received approval for our no cost extension request for the first year of the contract. With the new modification, the first year ended on August 31, 2010.  The award is for a maximum of $149,940 for 2009 and the remainder for 2011.  The Company earned 52,649 and $30,000 from the grant during the three-month periods ended March 31, 2012 and 2011, respectively and $270,473 from inception to date.  The Company received approval for our no cost extension request for the second year of the contract and, with the new modification, the second year ends on August 31, 2012.

 

During the three-month periods ended March 31, 2012 and 2011, the Company charged operations $4,890 and $8,456, respectively, pursuant to the direct costs incurred and for the use of the OU lab facilities in regard to the OCAST grant. At March 31, 2012, the Company owed the University $4,890 in direct costs.

 

F-22
 

 

Note 4 – Debentures Payable

 

Debentures payable consist of the following:

 

   March 31, 2012   December 31, 2011 
Senior Convertible Debentures:          
6.25% Debenture due 2011  $31,788   $31,788 
4.75% Debenture due 2011   79,993    81,656 
Total Debentures   111,781    113,444 
Less - Current Maturities   (111,781)   (113,444)
Long-term Debentures  $-   $- 

 

Securities Purchase Agreement

 

6.25% Convertible Debenture due December 31, 2014

 

On November 21, 2007, the Company issued and sold a convertible note in the principal amount of $1,250,000 to Golden State (the "Debenture"). Pursuant to the terms of the Debenture, Golden State may, at its election, convert all or a part of the Debenture into shares of the Company's common stock at a conversion rate equal to the lesser of (i) $2.00 or (ii) 90% of the average of the five lowest volume weighted average prices during the twenty trading days prior to Golden State's election to convert, subject to adjustment as provided in the Debenture. In addition, pursuant to the terms of the Debenture, the Company agreed to file a registration statement covering the shares of common stock issuable upon conversion or redemption of the Debenture. The Company filed a registration statement covering the shares to be issued upon conversion of the Debenture. Included in the registration statement were 4.25 million shares issuable on the Debenture based on 2007 market prices and assuming full conversion of the convertible debenture. The registration statement became effective on January 4, 2008.

 

Golden State advanced $125,000 on the $1.25 million Debenture on November 9, 2007 and $746,213 in January 2008 at which time the Company placed 7,961,783 shares of common stock in escrow to be released as debentures are converted. As of September 30, 2011, Golden State has funded an aggregate of $871,213 on the Debenture. Golden State will be obligated to fund the Company for the remaining $378,787 in principal on the Debenture upon the effectiveness of a registration statement underlying the remaining unfunded principal balance on the Debenture. At this time, the Company has not filed a registration statement. At various dates during 2010, $274,438 of the Debenture was converted into 93,196,578 shares of common stock at prices ranging from $0.0027 to $0.004 based on the formula in the convertible debenture. Additionally shares totaling 6,093,396 were issued in payment of $17,062 of accrued interest during 2010. At various dates during 2011, $157,331 of the Debenture was converted into 16,156,404 shares of common stock at prices ranging from $0.0059 to $0.0174 based on the formula in the convertible debenture. Additionally $12,669 was added to the principle balance of the debenture in payment of accrued interest during 2011.

 

The conversion price for the $1.25 million Debenture is the lesser of (i) $2.00 or (ii) 90% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion.  If Golden State elects to convert a portion of the debenture and, on the day that the election is made, the volume weighted average price is below $0.75, the Company shall have the right to prepay that portion of the debenture that Golden State elected to convert, plus any accrued and unpaid interest, at 135% of such amount.

 

In addition to standard default provisions concerning timeliness of payments, delivery and notifications, the Second Debenture will be in default if the common stock of the Company trades at a price per share of $0.21 or lower, regardless of whether the trading price subsequently is higher than $0.21 per share. The trading price was at $0.21 or lower on several occasions during and subsequent to the period ended March 31, 2012. On each of the occasions Golden State, by separate letter agreements, agreed that the occasions did not constitute a default and thereby waived the default provision for those occasions only.  (See Note 9 Subsequent Events) 

 

4.75% Convertible Debenture due November 3, 2011

 

 On November 3, 2006, the Company also issued to Golden State a 4.75% convertible debenture in a principal amount of $100,000, due 2011, and warrants to buy 1,000,000 shares of the common stock at an exercise price of $10.90 per share. Under the terms of the debenture, warrants are exercised in an amount equal to ten times the dollar amount of the debenture conversion. During 2010, Golden State converted $4,752 of the $100,000 debenture into 162,454,399 shares of common stock, exercised warrants to purchase 47,523 shares of common stock at $10.90 per share and advanced $251,489 against future exercises of warrants of which $300,000 was applied to the exercise of warrants leaving $-0- of unapplied advances at December 31, 2010. During 2011, Golden State converted $6,760 of the $100,000 debenture into 60,601,868, shares of common stock, exercised warrants to purchase 67,600 shares of common stock at $10.90 per share based on the formula in the convertible debenture. Additionally Golden Gate advanced $753,381 against future exercises of warrants of which $736,840 was applied to the exercise of warrants leaving $16,542 of unapplied advances at December 31, 2011. During 2012, Golden State converted $1,663 of the $100,000 debenture into 25,049,954 shares of common stock, exercised warrants to purchase 16,635 shares of common stock at $10.90 per share based on the formula in the convertible debenture. Additionally Golden Gate advanced $364,781 against future exercises of warrants of which $181,322 was applied to the exercise of warrants leaving $200,001 of unapplied advances at March 31, 2012.

 

The conversion price for the 4.75% $100,000 convertible debenture is the lesser of (i) $4.00 or (ii) 80% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion. If Golden State elects to convert a portion of the debenture and, on the day that the election is made, the volume weighted average price is below $0.75, the Company shall have the right to prepay that portion of the debenture that Golden State elected to convert, plus any accrued and unpaid interest, at 135% of such amount.

 

F-23
 

 

Note 5 – Common Stock and Paid-In Capital (see note 9)

 

 On October 24, 2011 the Board of Directors, subject to the approval of the shareholders of the Company, authorized an amendment to the Company's Certificate of Incorporation in order to effect a reverse split of the Company's common stock in a ratio in the range between 1 for 15 and 1 for 35, as will be selected by the Company's Board of Directors (the "Reverse Split").  On October 15, 2011, the Company held an annual meeting of stockholders, at which annual meeting the stockholders approved the Reverse Split and approved the filing of an Amended Certificate of Incorporation to effect the Reverse Split at the discretion of the Board of Directors.

 

Warrants issued 

  

As of March 31, 2012, there are warrants outstanding to purchase 166,667 shares of common stock at a price of $0.20 per share that expire in April 2012, warrants to purchase 16,666,666 shares of its common stock at a price of $0.50 per share through 2012, warrants to purchase 4,378,394 shares of common stock at a price of $0.09 per share that expire on September 30, 2015 and, warrants to purchase 3,360,847 shares of common stock at a price of $0.045 per share through June 1, 2012 and $0.09 per share thereafter, that expire on June 1, 2015. Additionally, Golden State has warrants outstanding to purchase 799,925 shares of common stock at a price of $10.90 per share which expire December 31, 2014. 

 

Common stock and options issued for services and liabilities

 

During the three-month periods ended March 31, 2012 and 2011, shares of common stock totaling 7,437,643, and 2,500,000, respectively were issued for consulting services for which the Company recognized $42,100 and $24,425 of expense, respectively.  Additionally, during the period ending March 31, 2012 and 2011, shares totaling 3,213,589 and 33,338,612, respectively were issued to consultants for previous services provided to the Company for which the accounts payable liability was reduced by $36,764 and 79,871, respectively.  Shares totaling 57,000,000, which are restricted under SEC Section 144, were issued in the first quarter of 2011 in payment of accrued salaries and payroll taxes totaling $460,405 due Martin Keating, Chairman of the Board of Directors, Hakki Refai, Chief Technology Officer and Judith Keating the Secretary of the Company. 

 

On March 13, 2012, 3DIcon Corporation entered into a one (1) year Agreement for At-Will Employment with Assignment of Inventions (“Employment Agreement”) with Mark Willner, pursuant to which Mr. Willner began serving as the Company’s Chief Executive Officer, effective immediately. Under the terms of the Employment Agreement, Mr. Willner is entitled to an annual base salary of $180,000, and, at the discretion of the Company’s Board of Directors, performance-based bonuses and/or salary increases. Pursuant to the Employment Agreement, the Company granted Mr. Willner five-year stock options to purchase two (2) million shares at a price equal to the average price of the five day period prior to March 19, 2012 (the “Strike Price”) which was $0.01. Furthermore, if Mr. Willner remains employed by the Company at the end of each quarter ending June 30, 2012, September 30, 2012 and December 31, 2012, he will receive additional stock options to purchase one (1) million shares at the $0.01 Strike Price. In addition, if the Company has achieved certain quarterly business objectives, Mr. Willner will receive, at the end of each such quarterly periods, a further grant of stock options to purchase one (1) million shares at the Strike Price. The estimated fair value of the two million options of $18,840, was determined using the Black-Scholes option pricing model and was charged to operations in March 2012. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 163% is based on the historical volatility of the stock since July 25, 2007, the day the Company began trading on the Over-The-Counter Bulletin Board. The risk-free interest rate of 1.87% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option of five years is based on historical exercise behavior and expected future experience.

 

The Employment Agreement may be terminated with or without reason by either the Company or Mr. Willner and at any time, upon sixty (60) days written notice. The terms of the Employment Agreement will remain effective for one (1) year and will automatically renew, subject to the same termination rights. Upon termination, the Company will pay any base pay, bonus and benefits that have been earned and are due as of the date of the termination.

 

The following summary reflects warrant and option activity for the three-month period ended March 31, 2012:

 

   Attached
Warrants
   Golden State
Warrants
   Options 
             
Outstanding December 31, 2011   24,905,908    816,560    64,893,804 
Granted   -    -    700,000 
Exercised   -    (16,635)   - 
Cancelled   (333,334)   -    - 
                
Outstanding March 31, 2012   24,572,574    799,925    65,593,804 

 

Stock options are valued at the date of award, which does not precede the approval date, and compensation cost is recognized in the period the options are granted. Stock options generally become exercisable on the date of grant and expire based on the terms of each grant.

 

F-24
 

 

The estimated fair value of options for common stock granted was determined using the Black-Scholes option pricing model. The expected dividend yield is based on the average annual dividend yield as of the grant date. Expected volatility is based on the historical volatility of our stock. The risk-free interest rate is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option is based on historical exercise behavior and expected future experience.

 

Note 6 – Incentive Stock Plan

 

In January 2011 the Company established the 3DIcon Corporation 2011 Equity Incentive Stock Plan (the "2011 EIP"). The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2011 EIP shall not exceed one hundred million (100,000,000) shares.  The shares are included in a registration statement filed January 14, 2011. Shares totaling 10,525,369 were issued from the 2011 EIP during the period ended March 31, 2012 for services rendered and to satisfy accounts payable to the Company. There are currently 24,054,365 shares available for issuance under the 2011 EIP.

 

Note 7 – Office Lease

 

The Company signed an Office Lease Agreement (the “Lease Agreement”) on April 24, 2008. The Lease Agreement commenced on June 1, 2008 and expired June 1, 2011. On March 8, 2011 the Lease Agreement was amended to extend the expiration date to May 31, 2012.  At March 31, 2012, minimum future lease payments to be paid through May 31, 2012 under the non-cancelable operating lease for office space are $4,629. 

 

Note 8 – Related Party Transaction

 

3DIcon has engaged the law firm of Newton, O’Connor, Turner & Ketchum as its outside corporate counsel since 2005. John O’Connor, a director of 3DIcon, is the Chairman of Newton, O’Connor, Turner & Ketchum.   During the periods ended March 31, 2012 and 2011, the Company incurred legal fees to Newton, O’Connor, Turner & Ketchum in the amount of $1,479 and $29,461, respectively.

 

Note 9 – Subsequent Events

 

Reverse Stock Split

 

On April 27, 2012, 3DIcon Corporation, an Oklahoma corporation filed an Amended Certificate of Incorporation to effect a 1-for-35 reverse split of the Company’s common stock. The reverse stock split was announced by Financial Industry Regulatory Authority on April 26, 2012 and became effective on April 27, 2012. As previously reported on the Company’s Current Report on Form 8-K, filed on October 20, 2011, this action followed a stockholder vote at the Company’s annual meeting of the stockholders of the Company, which vote authorized the Company’s Board of Directors to effect a reverse stock split of the Company’s authorized, issued and outstanding common stock.

 

On April 27, 2012, the effective date, every 35 shares of the Company’s issued and outstanding common stock were combined into one share of common stock. The Company did not issue any fractional shares in connection with the reverse stock split. Stockholders of record who otherwise would have been entitled to receive fractional shares will be entitled, upon surrender to our transfer agent of certificates representing such shares, cash in lieu thereof.

 

Debentures payable

 

In accordance with the terms of the Second Debenture an event of default occurs if the common stock of the Company trades at a price per share of $0.21 or lower. The trading price was at $0.21 or lower on several occasions during the period ended March 31, 2012 and subsequent to March 31, 2012.  On each of the occasions Golden State, by letter agreements, agreed that the occasions did not constitute a default and thereby waived the default provision for the occasions.

 

Subsequent to March 31, 2012 Golden State advanced $100,000 of warrant exercise advances on the 4.75% convertible debenture.

 

Common stock issued for services and liabilities

 

Subsequent to March 31, 2012 post-split shares of common stock totaling 102,041 were issued for consulting services for which the Company recognized $15,750 of expense. Additionally post-split shares totaling 1,005,724 we issued for accounts payable for which the Company reduced the accounts payable liability by $376,850.

 

Equity Incentive Stock Plan

 

In April 2012 the Company established the 3DIcon Corporation 2012 Equity Incentive Plan (the "2012 EIP"). The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2012 EIP shall not exceed five million (5,000,000) post-split shares.  The shares are included in a registration statement filed May 3, 2012. Post-split shares totaling 1,107,765 were issued from the 2012 EIP subsequent to March 31, 2012 for services rendered and to satisfy accounts payable to the Company. There are currently 3,892,235 shares available for issuance under the 2012 EIP.

 

Civil Action Complaint

 

As previously disclosed, on April 2, 2012, the Company was served with a Summons and Complaint (the “Complaint”) for a civil action involving a billing dispute.  The Complaint was filed by Advanced Optical Technologies, Inc. (“AOT”) in the Second Judicial District Court of New Mexico, County of Bernalillo.  On May 11, 2012, the Company and AOT entered a settlement agreement pursuant to which the parties agreed to discontinue all legal proceedings and AOT agreed to take all legal action to withdraw the Complaint.  In connection therewith, the Company agreed to pay AOT $95,125.

 

F-25
 

 

 

 

 

 

Up to         Shares of Common Stock

and

Warrants to Purchase up to         Shares of Common Stock

 

3DIcon Corporation

 

 

 

 

 

 

PROSPECTUS

  

41
 

 

PART II

 

INFORMATION NOT REQUIRED IN PROSPECTUS

 

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

 

The following table sets forth an itemization of all estimated expenses, all of which we will pay, in connection with the issuance and distribution of the securities being registered:

 

NATURE OF EXPENSE AMOUNT

 

SEC registration fee     $ 573  
Accounting fees and expenses       *
Legal fees and expenses        *
Transfer agent's fees and expenses        *
Printing and related fees       *
Miscellaneous       *
TOTAL   $   *
         
* Estimated.        

 

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

 

Sections 18-1031(A) of the Oklahoma General Corporations Act provide us with the power to indemnify any of our directors and officers. The director or officer must have acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue, or matter as to which the person shall have been adjudged to be liable to the corporation unless and only to the extent that the court in which the action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for expenses which the court shall deem proper, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was unlawful.

 

Under NRS Section 18-1031(E), expenses incurred by an officer or director in defending a civil or criminal action, suit, or proceeding may be paid by the corporation in advance of the final disposition of the action, suit, or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it shall ultimately be determined that the person is not entitled to be indemnified by the corporation.

 

Our articles of incorporation include an indemnification provision under which we have the power to indemnify our directors, officers, employees and other agents of the Company to the fullest extent permitted by applicable law.

 

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

(Shares of our common stock in this Item 15 refer to the number of shares of common stock after giving effect to the Reverse Split.)

 

On June 18, 2009 the Company entered into subscription agreements with two of its directors pursuant to which the two directors purchased an aggregate of 512.605 shares of the Company’s common stock at a price per share equal to 50% of the average closing price during the five days prior to June 18, 2009 (0.238 per share) for aggregate proceeds of $122,000.

 

Pursuant to subscription agreements entered into during October and November 2009, the Company sold 47,619 shares of the Company’s common stock at a price of $1.05 per share and warrants to purchase an aggregate of 47,619 shares of its common stock at a price of $3.50 per share from closing for a period of twelve months; $8.75 per share for the second subsequent twelve months; or $17.50 per share for the third subsequent twelve months to two accredited individuals. The Company received aggregate proceeds of $50,000 from the sale.  The 47,619 warrants are valued at $35,225 and the 47,619 shares are valued at $14,775.  The warrants terminate three years from date of issue in October and November 2012.

 

42
 

 

The estimated fair value of the warrants was determined using the Black-Scholes option pricing model. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 178% is based on the historical volatility of the stock since July 25, 2007, the day the Company began trading on the OTC Bulletin Board. The risk-free interest rate of 1.38% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option of three years is based on historical exercise behavior and expected future experience.

 

On February 24, 2010, Dr. Hakki Refai, the Chief Technology Officer of the Company was issued 42,857 shares in consideration of $30,000 of accrued salary. The shares were issued at $0.07 per share.

 

On June 30, 2010, Newton, O'Connor, Turner & Ketchum agreed to extend the March 31, 2010 due date of their 10% debenture to September 30, 2010 in consideration for 71,429 shares of common stock. The shares were valued at 50% of the average of the previous five day closing price on March 1, 2010, which was $0.145 per share totaling $10,350.

 

On August 27, 2010, Victor Keen, a member of the Board of Directors, was issued 163,265 shares of common stock in consideration of $10,000 cash. The shares were issued at $0.06125 per share.

 

In October 2010 and November 2010, the Company conducted a private placement pursuant to which it may issue Convertible Promissory Notes in the aggregate principal amount of up to $700,000. The Convertible Promissory Notes bear interest at a rate of 5% per annum and are due two years from date of issue. If, prior to March 15, 2011, the Company: (i) consummates a merger or consolidation of the Company; (ii) effects a sale of substantially all of its assets; (iii) agrees to any tender or exchange offer involving the Company's shares; or (iv) effects any reclassification of its common stock or any compulsory share exchange, the Convertible Promissory Notes shall be automatically converted into shares of the Company's common stock at a price per share equal to the average closing price of the five trading days previous to the closing of the offering (the “Fixed Conversion Price"). Following March 15, 2011, the Convertible Promissory Notes shall be convertible, at the option of the holder, into shares of the Company's common stock at a rate of 75% of the Fixed Conversion Price per share.

 

On December 1, 2010, the Company entered into an agreement with OU, pursuant to which OU agreed to convert all sums due to it from the Company in connection with its SRA with the Company, which as of December 1, 2010 amounted to approximately $485,000, into an aggregate of 1,685,714 shares of the Company's common stock. As a result of the debt conversion, OU became the holder of approximately 8% of the outstanding common stock of the Company. Pursuant to the Agreement, the Shares are subject to a put option allowing OU to require us to purchase certain of the Shares upon the occurrence of certain events. In addition, the Shares are subject to a call option allowing us to require OU to sell to us the Shares then held by OU in accordance with the terms of the Agreement.

 

In January and February 2011 shares totaling 1,628,571 were issued in payment of accrued salaries and payroll taxes totaling $460,405 due Martin Keating, Member of the Board of Directors, Hakki Refai, Chief Technology Officer, and Judith Keating, Secretary.

 

On March 31, 2011, Newton, O'Connor, Turner & Ketchum agreed to extend the September 30, 2010 due date of their 13% debenture to April 30, 2011 in consideration for 5,714 shares of common stock and an extension of the exercise dates of the warrants. The revised dates at which the warrant may be exercised shall be $1.575 per share for exercises made during the period between the date of grant and the second anniversary of the revised maturity date, and $3.15 per share for exercises made during the forty-eight month period between the second anniversary of the revised maturity date and the sixth anniversary of the revised maturity date. The shares, which are restricted under SEC Section 144, were valued at 50% of the average of the previous five day closing price on March 31, 2011, which was $2.45 per share totaling $14,048. 

 

On April 30, 2011, Newton, O'Connor, Turner & Ketchum agreed to convert their 13% convertible debentures and accrued interest, which totaled in the aggregate $159,842 into 542,062 common shares of the Company’s common stock, at an average price per share of $0.28, under the terms of the convertible debentures.

 

On June 30, 2011, the Company received an aggregate exercise price of $20,000 and, after withholding the related income taxes, shares of common stock totaling 110,570 were issued upon the exercise of 114,285 options under the terms of the employment agreement with Dr. Hakki Refai.

 

On September 27, 2011, the Company issued shares of common stock totaling 239,182 upon the cashless exercise of 328,740 options under the terms of the stock option agreement granted to Lawrence Field by the Board of Directors.

 

In October 2010 and November 2010, the Company conducted a private placement pursuant to which it may issue Convertible Promissory Notes in the aggregate principal amount of up to $700,000, of which $400,877 was issued. The Convertible Promissory Notes bear interest at a rate of 5% per annum and were due two years from date of issue. The Convertible Promissory Notes were convertible, at the option of the holder, into shares of the Company's common stock at a price per share of $0.0975. At various dates during 2011, the $400,877 of Notes and accrued interest of $9,020 were converted into 467,519 shares of common stock at $0.0875 per share.  

 

During the fiscal year ended December 31, 2011, the Company issued a total of 8,321 shares of common stock to the Company’s interim Chief Financial Officer, Chris Dunstan, for services rendered to the Company.

 

During the three-month period ended March 31, 2012 shares of common stock totaling 6,790 were issued for consulting services for which the Company charged operation $2,500.

 

43
 

 

In connection with the securities issuances reported in this Item, the Company relied upon the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”).  No advertising or general solicitation was employed in offering any securities.

 

ITEM 16. EXHIBITS.

 

3.1   Certificate of Incorporation (1)
     
3.2   Bylaws (1)
     
3.3   Amended Certificate of Incorporation (1)
     
3.4   Amended Certificate of Incorporation (1)
     
3.5   Amended Certificate of Incorporation (1)
     
3.6   Amended Certificate of Incorporation (3)
     
3.7   Amended Certificate of Incorporation (4)
     
4.1   Form of Warrant
     
5.1   Opinion of Sichenzia Ross Friedman Ference LLP*
     
10.1   Securities Purchase Agreement (1)
     
10.2   Amendment No. 1 to Securities Purchase Agreement and Debenture (1)
     
10.3   Registration Rights Agreement dated November 3, 2006 (1)
     
10.4   $100,000 convertible debenture (1)
     
10.5   $1.25 million convertible debenture dated November 3, 2006 (1)
     
10.6   Common Stock Purchase Warrant (1)
     
10.7   Sponsored Research Agreement by and between 3DIcon Corporation and the Board of Regents of the University of Oklahoma (1)
     
10.8   Sponsored Research Agreement Modification No. 1 by and between 3DIcon Corporation and the Board of Regents of the University of Oklahoma (1)
     
10.9   Sponsored Research Agreement Modification No. 2 by and between 3DIcon Corporation and the Board of Regents of the University of Oklahoma (1)
     
10.10   Amendment No. 2 to Securities Purchase Agreement, Debentures, and Registration Rights Agreement (2)
     
10.11   Securities Purchase Agreement dated June 11, 2007 (2)
     
10.12   $700,000 Convertible Debenture (2)
     
10.13   $1.25 million convertible debenture dated November 21, 2007 (4)
     
10.14   Registration Rights Agreement dated November 21, 2007 (4)
     
10.15   2012 Equity Incentive Plan (6)

 

10.16   Agreement to Convert Debt to Stock dated November 30, 2010 (5)
     
23.1   Consent of Independent Registered Accounting Firm

 

44
 

 

23.2   Consent of Sichenzia Ross Friedman Ference LLP (included in Exhibit 5.1)*
     
24.1   Power of Attorney (included in the Registration Statement under “Signatures”)
     
99.1   Form of Subscription Agreement

 

(1) Incorporated by reference to Form SB-2 as filed on December 15, 2006 (File No. 333-139420) and subsequently withdrawn on February 5, 2007
   
(2) Incorporated by reference to Form SB-2 as filed on June 14, 2007 (File No. 333-143761)
   
(3) Incorporated by reference to Current Report on Form 8-K as filed on December 7, 2010 (File No. 333-143761)
   
(4) Incorporated by reference to Current Report on Form 8-K as filed on May 2, 2012 (File No. 333-143761)
   
(5) Incorporated by reference to Current Report on Form 8-K as filed on November 26, 2007 (File No. 333-143761)
   
(6) Incorporated by reference to Current Report on Form 8-K as filed on December 23, 2010 (File No. 333-143761)
   
(7) Incorporated by reference to Form S-8 as filed on May 4, 2012  (File No. 333-181156)
   
* To be filed by amendment.

 

ITEM 17. UNDERTAKINGS.

 

(a)           The undersigned registrant hereby undertakes to:

 

(1) File, during any period in which it offers or sells securities, a post-effective amendment to this Registration Statement to:

 

(i) Include any prospectus required by Section 10(a)(3) of the Securities Act;

 

(ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective Registration Statement.

 

(iii) Include any additional or changed material information on the plan of distribution.

  

(2)         For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.

 

(3)         File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.

 

(b)             Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to directors, officers and controlling persons of the registrant pursuant to foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.   In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

 

(c)           Each prospectus filed pursuant to Rule 424(b)(Sec.230.424(b) of this chapter) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (Sec.230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

 

(d)          For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) or under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

 

(e)           For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

45
 

 

SIGNATURES

 

In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form S-1 and authorizes this registration statement to be signed on its behalf by the undersigned, on July 3, 2012.

 

  3DICON INC.  
       
Date: July 3, 2012 By: /s/  Mark Willner  
    Mark Willner  
   

Chief Executive Officer

(Principal Executive Officer)

 

  

POWER OF ATTORNEY

 

KNOW ALL PERSONS BY THESE PRESENTS:

 

That the undersigned officers and directors of  3DIcon Corporation, an Oklahoma corporation, do hereby constitute and appoint Mark Willner his or her true and lawful attorney-in-fact and agent with full power and authority to do any and all acts and things and to execute any and all instruments which said attorney and agent, determine may be necessary or advisable or required to enable said corporation to comply with the Securities Act of 1933, as amended, and any rules or regulations or requirements of the Securities and Exchange Commission in connection with this Registration Statement. Without limiting the generality of the foregoing power and authority, the powers granted include the power and authority to sign the names of the undersigned officers and directors in the capacities indicated below to this Registration Statement, and to any and all instruments or documents filed as part of or in conjunction with this Registration Statement or amendments or supplements thereof, including post-effective amendments, to this Registration Statement or any registration statement relating to this offering to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, and each of the undersigned hereby ratifies and confirms that said attorney and agent, shall do or cause to be done by virtue thereof. This Power of Attorney may be signed in several counterparts.

 

IN WITNESS WHEREOF, each of the undersigned has executed this Power of Attorney. In accordance with the requirements of the Securities Act of 1933, as amended, this registration statement was signed by the following persons in the capacities and on the dates stated:

 

  3DICON CORPORATION  
     
Date: July 3, 2012 /s/ Mark Willner  
  Name: Mark Willner  
  Title: Chief Executive Officer  
    (Principal Executive Officer)  
       
  /s/ Chris T. Dunstan  
  Name: Chris T. Dunstan  
  Title: Interim Chief Financial Officer  
    (Principal Financial Officer)  

 

SIGNATURE   TITLE   DATE
           
By: /s/ Martin Keating   Director   July 3, 2012
  Martin Keating        
           
By: /s/ John O'Connor   Co-Chairman   July 3, 2012
  John O'Connor        
           
By: /s/ Victor F. Keen   Co-Chairman   July 3, 2012
  Victor F. Keen        
           
By: /s/ Sidney A. Aroesty   Director   July 3, 2012
  Sidney A. Aroesty        

 

46
 

 

EXHIBIT INDEX

   

3.1   Certificate of Incorporation (1)
     
3.2   Bylaws (1)
     
3.3   Amended Certificate of Incorporation (1)
     
3.4   Amended Certificate of Incorporation (1)
     
3.5   Amended Certificate of Incorporation (1)
     
3.6   Amended Certificate of Incorporation (3)
     
3.7   Amended Certificate of Incorporation (4)
     
4.1   Form of Warrant
     
5.1   Opinion of Sichenzia Ross Friedman Ference LLP*
     
10.1   Securities Purchase Agreement (1)
     
10.2   Amendment No. 1 to Securities Purchase Agreement and Debenture (1)
     
10.3   Registration Rights Agreement dated November 3, 2006(1)
     
10.4   $100,000 convertible debenture (1)
     
10.5   $1.25 million convertible debenture dated November 3, 2006 (1)
     
10.6   Common Stock Purchase Warrant (1)
     
10.7   Sponsored Research Agreement by and between 3DIcon Corporation and the Board of Regents of the University of Oklahoma (1)
     
10.8   Sponsored Research Agreement Modification No. 1 by and between 3DIcon Corporation and the Board of Regents of the University of Oklahoma (1)
     
10.9   Sponsored Research Agreement Modification No. 2 by and between 3DIcon Corporation and the Board of Regents of the University of Oklahoma (1)
     
10.10   Amendment No. 2 to Securities Purchase Agreement, Debentures, and Registration Rights Agreement (2)
     
10.11   Securities Purchase Agreement dated June 11, 2007 (2)
     
10.12   $700,000 Convertible Debenture (2)
     
10.13   $1.25 million convertible debenture dated November 21, 2007 (4)
     
10.14   Registration Rights Agreement dated November 21, 2007 (4)
     
10.15   2012 Equity Incentive Plan (6)

 

10.16   Agreement to Convert Debt to Stock dated November 30, 2010 (5)
     
23.1   Consent of Independent Registered Accounting Firm
     
23.2   Consent of Sichenzia Ross Friedman Ference LLP (included in Exhibit 5.1)*
     
24.1   Power of Attorney (included in the Registration Statement under “Signatures”)

 

47
 

 

     
99.1   Form of Subscription Agreement

 

(1) Incorporated by reference to Form SB-2 as filed on December 15, 2006 (File No. 333-139420) and subsequently withdrawn on February 5, 2007
   
(2) Incorporated by reference to Form SB-2 as filed on June 14, 2007 (File No. 333-143761)
   
(3) Incorporated by reference to Current Report on Form 8-K as filed on December 7, 2010 (File No. 333-143761)
   
(4) Incorporated by reference to Current Report on Form 8-K as filed on May 2, 2012 (File No. 333-143761)
   
(5) Incorporated by reference to Current Report on Form 8-K as filed on November 26, 2007 (File No. 333-143761)
   
(6) Incorporated by reference to Current Report on Form 8-K as filed on December 23, 2010 (File No. 333-143761)
   
(7) Incorporated by reference to Form S-8 as filed on May 4, 2012  (File No. 333-181156)
   
* To be filed by amendment.

 

48

 

EX-4.1 2 v317194_ex4-1.htm EXHIBIT 4.1

 

Exhibit 4.1

 

 

[FORM OF WARRANT]

 

COMMON STOCK PURCHASE WARRANT

 

3DICON CORPORATION

 

 

Warrant Shares : _______ Initial Exercise Date:   ______, 201 [   ]

 

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, _____________ (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time or times on or after the date hereof (the “Exercisability Date”), but not after 11:59 p.m., New York City time, on ______, 201[  ] (the “Termination Date”), to subscribe for and purchase from 3DIcon Corporation, an Oklahoma Corporation (the “Company”), up to ______ shares (the “Warrant Shares”) of Common Stock. 

 

Section 1.     Definitions.   In addition to the terms defined elsewhere in this Warrant, for all purposes of this Warrant, the following terms have the meanings set forth in this Section 1. This Warrant is one of a series of warrants issued by the Company as of the date hereof (individually, a “Warrant,” and collectively, the “Warrants”) pursuant to (i) the Subscription Agreement dated __________, 2012, by and between the Company and the Holder, and (ii) the Company’s Registration Statement on Form S-1 (File number 333-_______) (the “Registration Statement”).

 

 “Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.  With respect to a Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.

  

 “Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

  

 “Commission” means the United States Securities and Exchange Commission.

 

 “Common Stock” means the common stock of the Company, par value $0.0002 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

 

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

    

 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

   

 “Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

 “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Subsidiary” means any subsidiary of the Company, and shall, where applicable, also include any subsidiary of the Company formed or acquired after the date hereof.

 

 “Trading Day” means a day on which the principal Trading Market is open for trading.

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

 

 
 

 

“Transaction Documents” means this Warrant, the Subscription Agreement and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

“Transfer Agent” means Continental Stock Transfer & Trust Company, the current transfer agent of the Company, with a mailing address of 17 Battery Place, 8th Floor and a facsimile number of (303) 262-0700, and any successor transfer agent of the Company.

     

Section 2.     Exercise.

 

  a) Exercise of Warrant .  Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Exercisability Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise annexed hereto; and, within three (3) Trading Days of the date said Notice of Exercise is delivered to the Company, the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank or, if available, pursuant to the cashless exercise procedure specified in Section 2(c) below.  Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company.  Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases.  The Company shall deliver any objection to any Notice of Exercise within two (2) Business Days of receipt of such notice.  The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

  b)  Exercise Price.  The exercise price per share of the Common Stock under this Warrant shall be $[        ], subject to adjustment hereunder (the “Exercise Price”).

 

  c)  Cashless Exercise.  If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder or an exemption from registration is not available such that the Holder (unless the Holder is at the time of exercise is an Affiliate of the Company) could not immediately resell all Warrant Shares without any filing or limitation on volume, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

  (A) = the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;

 

  (B) = the Exercise Price of this Warrant, as adjusted hereunder; and

 

  (X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

 

VWAP ” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (“Bloomberg”) (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported by OTC Market Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Company.

 

 
 

 

  d) Mechanics of Exercise.

 

  i) Delivery of Certificates Upon Exercise.  Certificates for shares purchased hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s prime broker with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement covering the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise by the date that is three (3) Trading Days after the latest of (A) the delivery to the Company of the Notice of Exercise, (B) surrender of this Warrant (if required) and (C) payment of the aggregate Exercise Price as set forth above (including by cashless exercise, if permitted) (such date, the “Warrant Share Delivery Date”).  This Warrant shall be deemed to have been properly exercised on the first date on which all of the foregoing have been delivered to the Company.  The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(v) prior to the issuance of such shares, having been paid.ii) Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

  iii) Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.  In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such Warrant Share Delivery Date, the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder.  For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

 

  iv)   No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price.

 

  v)   Charges, Taxes and Expenses.  Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which transfer taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided , however , that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by a written assignment of this Warrant substantially in the form attached hereto (the “Assignment Form”) duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

 

  vi) Closing of Books.  The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

 
 

 

  e) Holder’s Exercise Limitations.  The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other  Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.   To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination and shall have no liability for exercises of the Warrant that are not in compliance with the Beneficial Ownership Limitation.   In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding as established by (A), (B), or (C) above, as applicable.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant.  The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply.  Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company and shall only be effective with respect to such Holder.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

 
 

 

Section 3.      Certain Adjustments.

 

(a)            Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged.  Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

   

 (b)            Rights Upon Distribution of Assets.  If at any time or from time to time the holders of Common Stock of the Company (or any shares of stock or other securities at the time receivable upon the exercise of this Warrant) shall have received or become entitled to receive, without payment therefore:

 

  i)  Common Stock or any shares of stock or other securities which are at any time directly or indirectly convertible into or exchangeable for Common Stock, or any rights or options to subscribe for, purchase or otherwise acquire any of the foregoing by way of dividend or other distribution (other than a dividend or distribution covered in Section 3(a) above);

 

  ii) any cash paid or payable otherwise than as a cash dividend; or

 

  iii) Common Stock or additional stock or other securities or property (including cash) by way of spinoff, split-up, reclassification, combination of shares or similar corporate rearrangement (other than shares of Common Stock pursuant to Section 3(a) above), then and in each such case, the Holder hereof will, upon the exercise of this Warrant, be entitled to receive, in addition to the number of shares of Common Stock receivable thereupon, and without payment of any additional consideration therefor, the amount of stock and other securities and property (including cash in the cases referred to in clauses (ii) and (iii) above) which such Holder would hold on the date of such exercise had such Holder been the holder of record of such Common Stock as of the date on which holders of Common Stock received or became entitled to receive such shares or all other additional stock and other securities and property.

 

 
 

 

(c)            Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person (but excluding a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company), (ii) the Company, directly or indirectly, effects any sale, assignment, transfer or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant).  For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.  Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act, or (3) a Fundamental Transaction involving a person or entity not traded on a national securities exchange, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction, purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction.  “Black Scholes Value” means the value of this Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(c) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

(d)            Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

 
 

 

(e)            Notice to Holder.

 

(i)            Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

(ii)            Notice to Allow Exercise by Holder. If during the term in which this Warrant may be exercised by the Holder (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.  To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.  The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

Section 4.        Transfer of Warrant.

 

(a)            Transferability.  Subject to compliance with applicable securities laws, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with the Assignment Form duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  The Warrant, if properly assigned in accordance   herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued. 

 

(b)            New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Notwithstanding anything to the contrary herein, in no event shall this Warrant be subdivided into units of less than 1,000 Warrant Shares and such new Warrants shall not be further subdivided. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall include reference to the initial issuance date set forth on the first page of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

(c)            Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

(d)            Understandings or Arrangements.  Such Holder is acquiring this Warrant as principal for its own account and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Warrant (this representation and warranty not limiting such Holder’s right to sell the Warrant pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws.) Such Holder is acquiring this Warrant hereunder in the ordinary course of its business.

 

Section 5.        Miscellaneous

 

(a)            No Rights as Stockholder Until Exercise.  Except as otherwise provided herein, this Warrant does not entitle the Holder to any voting rights, including, without limitation, any right to consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise) nor any right to receive notice of meetings, nor does it entitle the Holder to any right to receive dividends or subscription rights, or any other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i).

 

(b)            Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock   certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

 
 

 

(c)            Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day. 

  

(d)            Authorized Shares.  The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.  Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant. 

 

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall use commercially reasonable efforts to obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof. 

 

(e)           Jurisdiction. This Warrant shall be governed by, and construed in accordance with, the internal laws of the State of New York, without reference to the choice of law provisions thereof.  The Company and, by accepting this Warrant, the Holder, each irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Warrant and the transactions contemplated hereby.  Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Warrant.  The Company and, by accepting this Warrant, the Holder, each irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court.  The Company and, by accepting this Warrant, the Holder, each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATING TO OR ARISING OUT OF THIS WARRANT AND THE TRANSACTIONS CONTEMPLATED HEREBY.

 

 
 

 

(f)            Restrictions.  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.  

 

(g)            Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies.  Without limiting any other provision of this Warrant or the Subscription Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder. 

 

(h)            Notices.  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Subscription Agreement.  

 

(i)            Limitation of Liability.  No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.  

 

(j)            Remedies.  The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.  

 

(k)            Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for   the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares. 

 

(l)            Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and Holder. 

 

(m)            Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant. 

 

(n)            Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

********************

 

(Signature Pages Follow)

 

 
 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

  3DICON CORPORATION  
       
  By:    
    Name: Mark Willner  
   

Title: Chief Executive Officer

 

 
       

 

 
 

 

NOTICE OF EXERCISE

 

 

TO:            3DICON CORPORATION

 

(1)      The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2)      Payment shall take the form of (check applicable box):

 

  [  ] in lawful money of the United States; or 

 

  [ ] [if permitted] the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

 

(3)      Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned registered holder:

 

____________________________

 

The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:

 

____________________________

 

____________________________

 

____________________________

 

 

[SIGNATURE OF HOLDER]

 

 

 

Name of Investing Entity: _____________________________________________________

 

Signature of Authorized Signatory of Investing Entity:  _______________________________

 

Name of Authorized Signatory: _________________________________________________

 

Title of Authorized Signatory: __________________________________________________

 

Date: _____________________________________________________________________

 

 

 
 

 

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

 

FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

_______________________________________________ whose address is

 

_______________________________________________________________.

 

_______________________________________________________________

 

Dated:  ______________, _______

 

 

Holder’s Signature:                              _____________________________

 

Holder’s Address:                                _____________________________

 

Signature Guaranteed:  ___________________________________________

 

 

NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company.  Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

 

 

 

EX-23.1 3 v317194_ex23-1.htm EXHIBIT 23.1

  

EXHIBIT 23.1

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors

3DIcon Corporation

Tulsa, Oklahoma

 

We consent to the use in this Registration Statement on Form S-1of 3DIcon Corporation of our report dated April 6, 2012, relating to our audit of the financial statements, appearing in the Prospectus, which is part of this Registration Statement.  Our report dated April 6, 2012, relating to the financial statements includes an emphasis paragraph relating to an uncertainty as to the Company's ability to continue as a going concern.

 

We also consent to the reference to our firm under the captions “Experts” in such Prospectus.

 

 

/s/ Hogan Taylor LLP
Hogan Taylor LLP
Tulsa, Oklahoma
July 3, 2012

 

 

 

EX-99.1 4 v317194_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

3DICON CORPORATION

 

SUBSCRIPTION AGREEMENT

 

 

To 3DIcon Corporation

 

The undersigned in this Subscription Agreement hereby acknowledges receipt of the prospectus, dated __________________, 2012, of 3DIcon, an Oklahoma Corporation, (the “Prospectus” and the “Company”), and irrevocably subscribes for __________ shares (the “Shares”) of the Company’s common stock, par value $0.0002 per share (the “Common Stock”) and warrants (the “Warrants”) to purchase __________ shares of Common Stock for an aggregate purchase price of $____________.

 

By subscribing for the Shares and Warrants, the undersigned represents and warrants to the Company as follows:

 

(a)   The undersigned has carefully read, reviewed and  is familiar with the Prospectus.

 

(b)   The undersigned has been advised to pay particular attention to the Risk Factors section of the Prospectus and, accordingly recognizes that an investment in the Company involves a high degree of risk, and is prepared for the possibility of the loss of the undersigned’s entire investment.

 

(c)   The undersigned has secured, or has waived the right to secure, the advice of legal counsel, accountants or other financial advisors with respect to an investment in the Shares and Warrants.

 

(d)   It is understood that this subscription is not binding upon the Company until accepted by the Company, and that the Company has the right to accept or reject this subscription, in whole or in part, in its sole and complete discretion.  If this subscription is rejected in whole, the Company shall return to the undersigned, without interest, the payment tendered by the undersigned, in which case the Company and undersigned shall have no further obligation to each other hereunder.  In the event of a partial rejection of this subscription, the undersigned’s payment will be returned to the undersigned, without interest, whereupon the undersigned agrees to deliver a new payment in the amount of the purchase price for the number of Shares and Warrants to be purchased hereunder following a partial rejection of this subscription.

 

(e)   The undersigned’s principal residence, or (if not an individual) the undersigned’s principal place of business, and in either case, such location is the location where the decision to invest in the Shares and Warrants was made, is the address of the undersigned set forth on the following page of this Subscription Agreement.

 

(f)   This Subscription Agreement shall be governed and construed in all respects in accordance with the the laws of the State of New York, without giving effect to any conflict of laws or choice of law rules.

 

(g)   All of the information provided below is complete and accurate and may be relied on by the Company:

 

 

 
 

                      

     
     
Name Typed or Printed   Name Typed or Printed
     
     
Title (if Subscriber is an Entity)   Title (if Subscriber is an Entity)
     
     
Entity Name (if applicable)   Entity Name (if applicable)
     
     
Address   Address
     
     
City, State and Zip Code   City, State and Zip Code
     
     
Telephone   Telephone
     
     
Facsimile   Facsimile
     
     
E-Mail   E-Mail
     
     
Tax ID # or Social Security #   Tax ID # or Social Security #

 

Name in which securities should be issued:                                                                                                  

 

 

Manner in which title is to be held: (check only one)

 

0 Individual Ownership

 

Joint Subscription:

0  Community Property

0  Joint Tenant with Right of Survivorship (JTWRS)

0  Tenants in Common (TIC)

0  Tenants by Entirety (TBE)

(If Shares and Warrants are being subscribed for as a joint subscription, both parties must sign.)

 

Entity

0  Partnership

0 Company

0 Self-Directed Retirement Account

0 Trust

0 Other_________________________

 

 
 

 

INVESTOR SIGNATURE

 

           By signing this Subscription Agreement the undersigned acknowledges and agree to all of its terms and the undersigned confirms the accuracy of the information it has provided.

 

 

       
  Signature    
       
       
  Print Name (and title if purchaser is an entity)    
       
       
  Date of Signing    
       
       

 

*********************

 

NOTE :   California Representation – Mandatory for California Residents

 

The Shares and Warrants have been approved for sale in California pursuant to a limited offering qualification where sales can only be made to proposed California purchasers based on their meeting certain suitability standards whereby a purchaser of Shares and Warrants must have not less than (i) $60,000 liquid net worth (a net worth exclusive of home, home furnishings and automobile) plus $60,000 gross annual income, or (ii) $225,000 liquid net worth.

 

Because the offering of Shares and Warrants were approved in California on the basis of a limited offering qualification, 3DIcon Corporation did not have to demonstrate compliance with some of the merit regulations of the California Department of Corporations that are found in Title 10, California Code of Regulations, Rule 260.140 et seq.

 

The information supplied below will be used in determining whether the undersigned’s proposed purchase of Shares and Warrants meets the suitability criteria stated above.

 

 

This Subscription Agreement is agreed to and accepted as of ________________, 201__.

 

  3DIcon Corporation  
       
  By:    
    Name:  Mark Willner  
    Title:           Chief Executive Officer  
       

 

 
 

 

Confirmation of Status as a suitable investor

 

           Please initial the box or boxes below that describe you:

 

 

______

(Initial)

The undersigned/purchaser has a $60,000 liquid net worth (a net worth exclusive of home, home furnishings and automobile) plus $60,000 gross annual income.

 

______

(Initial)

The undersigned/purchaser has a $225,000 liquid net worth.

 

 

The undersigned understands the Shares and Warrants are being sold in California without registration with the California Department of Corporations upon the limited offering qualification described above.  For the foregoing reasons, and to induce the seller of such Shares and Warrants to accept its offer to purchase Shares and Warrants, the undersigned represents and warrants that the information stated herein is true, accurate, and complete to the best of its knowledge and belief; and it agrees to notify and supply corrective information promptly if, prior to the consummation of its purchase of Shares and Warrants, any of the information provided becomes inaccurate or incomplete.

 

 

____________________________                                                                                     ______________________________

Print Name of Purchaser                                                                                     Signature

 

____________________________                                                                                     ______________________________

Print Title of Signatory if                                                                                     Date

Purchaser is an Entity

 

 

 

 

 

 

 

 

 

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FONT: 10pt Times New Roman, Times, Serif"><b>Note 9 &#x2013; Common Stock and Paid-In Capital</b></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On November 19, 2010 the Board of Directors of the Company authorized an amendment to the Company's Certificate of Incorporation in order to (i) increase the authorized shares of the Company's common stock from 750,000,000 shares, par value $0.0002 to 1,500,000,000 shares, par value $0.0002, (ii) effect a reverse split of the Company's common stock in a ratio in the range between 1 for 10 and 1 for 25, as will be selected by the Company's Board of Directors (the "Reverse Split"), and (ii) create a series of "blank check" preferred stock consisting of 25,000,000 shares, par value $0.0002.&#xA0;&#xA0;&#xA0;On May 16, 2011, the Company announced that the Company&#x2019;s Board of Directors elected to allow its authorization to effect a reverse stock split to expire on June 1, 2011.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On August 27, 2010, the Company entered into Subscription Agreements with one of its directors pursuant to which the director purchased 5,714,286 shares of the Company's common stock at a price per share equal to 50% of the average closing price during the five days prior to August 27, 2 010 ($0.00175 per share) for aggregate proceeds of $10,000.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">As of December 31, 2011, there are warrants outstanding to purchase 500,000 shares of common stock at a price of $0.15 per share through various dates in March and April 2011; or $0.20 per share that expire on various dates in March and April 2012, warrants to purchase 16,666,666 shares of its common stock at a price of $0.50 per share through 2012, warrants to purchase 4,378,394 shares of common stock at a price of $0.045 per share through September 30, 2010 or $0.09 per share that expire on September 30, 2015 and, warrants to purchase 3,360,847 shares of common stock at a price of $0.045 per share through June 1, 2012 and $0.09 per share thereafter, that expire on June 1, 2015. Additionally, Golden State has warrants outstanding to purchase 816,560 shares of common stock at a price of $10.90 per share which expire December 31, 2011.&#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>Common stock and options issued for services and liabilities</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On February 9, 2009, the Board of Directors of the Company appointed James N. Welsh to serve as the Company's Interim Chief Operating Officer and Treasurer. His appointment was effective as of March 1, 2009. Under the terms of the consulting agreement, Mr. Welsh was compensated $2,000 per week in either cash or stock. In the event stock was issued for the compensation, it was issued at 50% of the average of the five previous closing prices. Mr. Welsh was due $34,000 at December 31, 2009 for which 10,250,895 shares of common stock were issued in 2010 as satisfaction of the amount. The Company accepted the resignation of Mr. Welsh effective August 2, 2010.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">During 2011 and 2010, shares of common stock totaling 30,072,595 and 97,684,416, respectively, were issued for consulting services for which the Company recognized $355,205 and $232,886 of expense, respectively. Shares of common stock totaling 7,094,511 and 6,093,396 were issued to debenture holder in 2011 and 2010, respectively for accrued interest due for which the Company recognized $42,952 and $17,061 in expense in 2011 and 2010 respectively. Shares totaling 59,000,000 issued during 2010 to the University of Oklahoma under the repayment terms of the SRA which were valued at $485,649 (see Note 4). During 2011 and 2010, shares totaling 57,530,393 and 48,657,897, respectively, were issued to employees and consultants for previous services provided to the Company for which the Company reduced accounts payable and accrued liabilities by $148,526 and $214,414, respectively. Additionally, shares totaling 40,000,000 were issued under the terms of an agreement dated December 21, 2010, in payment of accrued salaries and payroll taxes totaling $407,501 due Martin Keating, Chairman of the Board of Directors, and Judith Keating, the secretary of the Company. The shares were issued January 4, 2011.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>Options granted</i>&#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> Employment Agreement - On July 28, 2008, the Company entered into an Employment Agreement with Dr. Hakki Refai (the "Employment Agreement") pursuant to which Dr. Refai has agreed to serve as the Chief Technology Officer of the Company. Dr. Refai's employment under the Employment Agreement commenced on October 1, 2008 and will continue for a term of one year from October 1, 2008, the date on which he became a full-time employee of the Company. The term of the Employment Agreement will automatically extend for successive one year periods unless otherwise terminated by the parties in accordance with the terms of the Employment Agreement. On March 25, 2009, the Company entered into an agreement with Dr. Hakki Refai pursuant to which the Company agreed to remove the time constraints on the technical milestone achievements whereby the issuance of the 3,500,000 milestone options will be solely upon the achievement of the milestones.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On May 11, 2010, the Board of Directors of the Company agreed to immediately vest the 3,500,000 milestone options. The total value of the options was $268,979 of which $100,867 was charged to operations in 2008. The remaining value of $168,112 was charged to operations in the second quarter of 2010.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The estimated fair value of the options was determined using the Black-Scholes option pricing model. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 95.50% is based on the historical volatility of the stock since July 25, 2007, the day the Company began trading on the Over-The-Counter Bulletin Board. The risk-free interest rate of 2.0% is based on the U.S.&#xA0;Treasury Constant Maturity rates as of the grant date. The expected life of the option of five years is based on historical exercise behavior and expected future experience.&#xA0;&#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> Employment Agreement - On June 13, 2011, the Company entered into a one (1) year Agreement for At-Will Employment with Assignment of Inventions (&#x201C;Employment Agreement&#x201D;) with Sidney A. Aroesty, pursuant to which Mr. Aroesty began serving as the Company&#x2019;s Chief Executive Officer, effective June 13, 2011.&#xA0;&#xA0;Under the terms of the Employment Agreement, Mr. Aroesty is entitled to an annual base salary of $120,000 and, at the discretion of the Company&#x2019;s Board of Directors (the &#x201C;Board&#x201D;), performance-based bonuses and/or salary increases.&#xA0;&#xA0;Pursuant to the Employment Agreement, the Company granted Mr. Aroesty five-year stock options to purchase two (2) million shares at&#xA0;an exercise price&#xA0;of $0.031&#xA0;(the &#x201C;Strike Price&#x201D;).&#xA0;&#xA0;Furthermore, if Mr. Aroesty remains employed by the Company, he will receive additional stock options to purchase three (3) million shares at the Strike Price upon the completion of a trade show prototype that displays the Company&#x2019;s technology. (see Note &#x2013; 14, Subsequent Events)</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The Employment Agreement contains provisions for non-disclosure of confidential information pursuant to which Mr. Aroesty agreed to refrain from using or disclosing to third parties, directly or indirectly, any Confidential Information, as defined in the Employment Agreement, either during or following his employment with the Company.&#xA0;&#xA0;Furthermore, Mr. Aroesty unconditionally and irrevocably assigned any now-existing or later-created Invention(s), as defined in the Employment Agreement, which are developed during or three (3) years after his employment with the Company.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The Employment Agreement may be terminated with or without reason by either the Company or Mr. Aroesty and at any time, upon sixty (60) days written notice.&#xA0;&#xA0;The terms of the Employment Agreement will remain effective for one (1) year and will automatically renew, subject to the same termination rights.&#xA0;&#xA0;Upon termination, the Company will pay any base pay, bonus and benefits that have been earned and are due as of the date of the termination.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The estimated fair value of the two million options of $60,600, was determined using the Black-Scholes option pricing model and was charged to operations in June 2011. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 172% is based on the historical volatility of the stock since July 25, 2007, the day the Company began&#xA0;trading on the Over-The-Counter Bulletin Board. The risk-free interest rate of 1.43% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option of five years is based on historical exercise behavior and expected future experience.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Board of Directors &#x2013; On June 22, 2010, the Company agreed to compensate its non-employee Board members with options to purchase registered stock of the corporation equaling the value of $100,000 for each of the three non-employee Board members for services during 2010; using standard evaluation methods. The Board granted options to purchase an aggregate of 57,529,455 shares to its three non-employee Board members; the exercise price for each option is $0.005 per share. The options expire at the end of ten years. The $250,000 (one Board member received one-half the amount due to his resignation in mid-year) compensation is for services on the Board during all or part of the calendar year 2010 and is deemed fully vested on the date of the grant. Operations were charged with $250,000 for the year ended December 31, 2010.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The estimated fair market value of the options was determined using the Black-Scholes option pricing model. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 133.46% is based on the historical volatility of the stock since July 25, 2007, the day the Company began trading on the Over-the-counter Bulletin Board. The risk-free interest rate of 1.43% is based on the U.S.&#xA0;Treasury Constant Maturity rates as of the grant date. The expected life of the option of five years is based on historical exercise behavior and expected future experience.&#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Board of Directors &#x2013; On May 17, 2011, the Company agreed to compensate its non-employee Board members with options to purchase registered stock of the corporation equaling the value of $75,000 for each of the three non-employee Board members for services during 2011; using standard evaluation methods. The Board granted options to purchase an aggregate of 5,933,700 shares to its three non-employee Board members; the exercise price for each option is $0.04 per share. The options expire at the end of ten years. The $225,000 compensation is for services on the Board during all or part of the calendar year 2011 and is deemed fully vested on December 31, 2011. Operations were charged with $225,000 for the year ended December 31, 2011.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The estimated fair value of the options of $225,000 was determined using the Black-Scholes option pricing model.&#xA0; The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 172% is based on the historical volatility of the stock since July 25, 2007, the day the Company began&#xA0;trading on the Over-The-Counter Bulletin Board. The risk-free interest rate of 1.87% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option of five years is based on historical exercise behavior and expected future experience.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The following summary reflects warrant and option activity for the year ended December 31, 2011:</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <table style="WIDTH: 100%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0"> <tr style="VERTICAL-ALIGN: bottom"> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center; FONT-WEIGHT: bold" colspan="2">Attached<br /> Warrants</td> <td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold">&#xA0;</td> <td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center; FONT-WEIGHT: bold" colspan="2">Golden&#xA0;State<br /> Warrants</td> <td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold">&#xA0;</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2"><b>Options</b> &#xA0;</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> </tr> <tr style="VERTICAL-ALIGN: bottom"> <td>&#xA0;</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: right" colspan="2">&#xA0;</td> <td>&#xA0;</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: right" colspan="2">&#xA0;</td> <td>&#xA0;</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: right" colspan="2">&#xA0;</td> <td>&#xA0;</td> </tr> <tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom"> <td style="WIDTH: 64%; FONT-WEIGHT: bold">Outstanding December 31, 2010</td> <td style="WIDTH: 1%">&#xA0;</td> <td style="TEXT-ALIGN: left; WIDTH: 1%">&#xA0;</td> <td style="TEXT-ALIGN: right; WIDTH: 9%">24,905,908</td> <td style="TEXT-ALIGN: left; WIDTH: 1%">&#xA0;</td> <td style="WIDTH: 1%">&#xA0;</td> <td style="TEXT-ALIGN: left; WIDTH: 1%">&#xA0;</td> <td style="TEXT-ALIGN: right; WIDTH: 9%">884,160</td> <td style="TEXT-ALIGN: left; WIDTH: 1%">&#xA0;</td> <td style="WIDTH: 1%">&#xA0;</td> <td style="TEXT-ALIGN: left; WIDTH: 1%">&#xA0;</td> <td style="TEXT-ALIGN: right; WIDTH: 9%">70,965,995</td> <td style="TEXT-ALIGN: left; WIDTH: 1%">&#xA0;</td> </tr> <tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom"> <td>Granted</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td style="TEXT-ALIGN: right">&#x2014;&#xA0;&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td style="TEXT-ALIGN: right">&#x2014;&#xA0;&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td style="TEXT-ALIGN: right">14,933,700</td> <td style="TEXT-ALIGN: left">&#xA0;</td> </tr> <tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom"> <td>Exercised</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td style="TEXT-ALIGN: right">&#x2014;&#xA0;&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td style="TEXT-ALIGN: right">(67,600</td> <td style="TEXT-ALIGN: left">)</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td style="TEXT-ALIGN: right">(15,505,891</td> <td style="TEXT-ALIGN: left">)</td> </tr> <tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom"> <td style="PADDING-BOTTOM: 1pt">Cancelled</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right"> &#x2014;&#xA0;&#xA0;</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right"> &#x2014;&#xA0;&#xA0;</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right"> (5,500,000</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td> </tr> <tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom"> <td style="PADDING-BOTTOM: 2.5pt; FONT-WEIGHT: bold">Outstanding December 31, 2011</td> <td style="PADDING-BOTTOM: 2.5pt">&#xA0;</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right"> 24,905,908</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">&#xA0;</td> <td style="PADDING-BOTTOM: 2.5pt">&#xA0;</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right"> 816,560</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">&#xA0;</td> <td style="PADDING-BOTTOM: 2.5pt">&#xA0;</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right"> 64,893,804</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">&#xA0;</td> </tr> </table> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Stock options are valued at the date of award, which does not precede the approval date, and compensation cost is recognized in the period the options are granted. Stock options generally become exercisable on the date of grant and expire based on the terms of each grant.&#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The estimated fair value of options for common stock granted was determined using the Black-Scholes option pricing model. The expected dividend yield is based on the average annual dividend yield as of the grant date. Expected volatility is based on the historical volatility of our stock. The risk-free interest rate is based on the U.S.&#xA0;Treasury Constant Maturity rates as of the grant date. The expected life of the option is based on historical exercise behavior and expected future experience. &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>Common stock rights</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Holders of shares of common stock are entitled to one vote per share on all matters submitted to a vote of the shareholders. Shares of common stock do not have cumulative voting rights. Holders of record of shares of common stock are entitled to receive dividends when and if declared by the board of directors. To date, the Company has not paid cash dividends. The Company intends to retain any earnings for the operation and expansion of its business and does not anticipate paying cash dividends in the foreseeable future.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Any future determination as to the payment of cash dividends will depend on future earnings, results of operations, capital requirements, financial condition and such other factors as the Board of Directors may consider. Upon any liquidation, dissolution or termination of the Company, holders of shares of common stock are entitled to receive a pro rata distribution of the assets of the Company after liabilities are paid.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Holders of common stock do not have pre-emptive rights to subscribe for or to purchase any stock, obligations or other securities of 3DIcon.</p> </div> -998 9908 89323 <div style="FONT: 10pt Times New Roman, Times, Serif"> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note 11 &#x2013; Office Lease</b></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The Company signed an Office Lease Agreement (the &#x201C;Lease Agreement&#x201D;) on April 24, 2008. The Lease Agreement commenced on June 1, 2008 and expired June 1, 2011. On March 8, 2011 the Lease Agreement was amended to extend the expiration date to May 31, 2012.&#xA0;&#xA0;At December 31, 2011, minimum future lease payments to be paid through May 31, 2012 under the non-cancelable operating lease for office space are $11,573.</p> </div> <div style="FONT: 10pt Times New Roman, Times, Serif"> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note 7 &#x2013; Debentures Payable</b></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> Debentures payable consist of the following:</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <table style="WIDTH: 95%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0"> <tr style="VERTICAL-ALIGN: bottom"> <td>&#xA0;</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2">December&#xA0;31,<br /> 2011</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2">December&#xA0;31,<br /> 2010</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> </tr> <tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom"> <td style="TEXT-ALIGN: left">Senior Convertible Debentures:</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td style="TEXT-ALIGN: right">&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td style="TEXT-ALIGN: right">&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> </tr> <tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom"> <td style="TEXT-ALIGN: left; WIDTH: 74%">6.25% Debenture due 2014</td> <td style="WIDTH: 1%">&#xA0;</td> <td style="TEXT-ALIGN: left; WIDTH: 1%">$</td> <td style="TEXT-ALIGN: right; WIDTH: 10%">31,788</td> <td style="TEXT-ALIGN: left; WIDTH: 1%">&#xA0;</td> <td style="WIDTH: 1%">&#xA0;</td> <td style="TEXT-ALIGN: left; WIDTH: 1%">$</td> <td style="TEXT-ALIGN: right; WIDTH: 10%">189,120</td> <td style="TEXT-ALIGN: left; WIDTH: 1%">&#xA0;</td> </tr> <tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom"> <td style="TEXT-ALIGN: left">4.75% Debenture due 2014</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td style="TEXT-ALIGN: right">81,656</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td style="TEXT-ALIGN: right">88,416</td> <td style="TEXT-ALIGN: left">&#xA0;</td> </tr> <tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom"> <td style="TEXT-ALIGN: left">13.0% Debenture due 2011</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td style="TEXT-ALIGN: right">&#x2014;&#xA0;&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td style="TEXT-ALIGN: right">100,703</td> <td style="TEXT-ALIGN: left">&#xA0;</td> </tr> <tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom"> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">13.0% Debenture due 2011</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left"> &#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right"> &#x2014;&#xA0;&#xA0;</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left"> &#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right"> 25,206</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">&#xA0;</td> </tr> <tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom"> <td style="TEXT-ALIGN: left">Total Debentures</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td style="TEXT-ALIGN: right">113,444</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td style="TEXT-ALIGN: right">403,445</td> <td style="TEXT-ALIGN: left">&#xA0;</td> </tr> <tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom"> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Less - Current Maturities</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left"> &#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right"> &#x2014;&#xA0;&#xA0;</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left"> &#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right"> (403,445</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td> </tr> <tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom"> <td style="PADDING-BOTTOM: 1pt">Long-term Debentures</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">$</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right"> 113,444</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">$</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right"> &#x2014;&#xA0;&#xA0;</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">&#xA0;</td> </tr> </table> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>Securities Purchase Agreement</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>6.25% Convertible Debenture due December 31, 2014</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> On November 21, 2007, the Company issued and sold a convertible note in the principal amount of $1,250,000 to Golden State (the "Debenture"). Pursuant to the terms of the Debenture, Golden State may, at its election, convert all or a part of the Debenture into shares of the Company's common stock at a conversion rate equal to the lesser of (i) $2.00 or (ii) 90% of the average of the five lowest volume weighted average prices during the twenty trading days prior to Golden State's election to convert, subject to adjustment as provided in the Debenture. In addition, pursuant to the terms of the Debenture, the Company agreed to file a registration statement covering the shares of common stock issuable upon conversion or redemption of the Debenture. The Company filed a registration statement covering the shares to be issued upon conversion of the Debenture. Included in the registration statement were 4.25 million shares issuable on the Debenture based on 2007 market prices and assuming full conversion of the convertible debenture. The registration statement became effective on January 4, 2008.</p> <p style="TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> Golden State advanced $125,000 on the $1.25 million Debenture on November 9, 2007 and $746,213 in January 2008 at which time the Company placed 7,961,783 shares of common stock in escrow to be released as debentures are converted. As of September 30, 2011, Golden State has funded an aggregate of $871,213 on the Debenture. Golden State will be obligated to fund the Company for the remaining $378,787 in principal on the Debenture upon the effectiveness of a registration statement underlying the remaining unfunded principal balance on the Debenture. At this time, the Company has not filed a registration statement. At various dates during 2010, $274,438 of the Debenture was converted into 93,196,578 shares of common stock at prices ranging from $0.0027 to $0.004 based on the formula in the convertible debenture. Additionally shares totaling 6,093,396 were issued in payment of $17,062 of accrued interest during 2010. At various dates during 2011, $157,331 of the Debenture was converted into 16,156,404 shares of common stock at prices ranging from $0.0059 to $0.0174 based on the formula in the convertible debenture. Additionally $12,669 was added to the principle balance of the debenture in payment of accrued interest during 2011.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> The conversion price for the $1.25 million Debenture is the lesser of (i) $2.00 or (ii) 90% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion.&#xA0; If Golden State elects to convert a portion of the debenture and, on the day that the election is made, the volume weighted average price is below $0.75, the Company shall have the right to prepay that portion of the debenture that Golden State elected to convert, plus any accrued and unpaid interest, at 135% of such amount.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> In addition to standard default provisions concerning timeliness of payments, delivery and notifications, the Second Debenture will be in default if the common stock of the Company trades at a price per share of $0.21 or lower, regardless of whether the trading price subsequently is higher than $0.21 per share. The trading price was at $0.21 or lower on several occasions during and subsequent to the period ended December&#xA0;31, 2011. On each of the occasions Golden State, by separate letter agreements, agreed that the occasions did not constitute a default and thereby waived the default provision for those occasions only.&#xA0; (See Note 14 -Subsequent Events)&#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>4.75% Convertible Debenture due December 31, 2014</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> On November 3, 2006, the Company also issued to Golden State a 4.75% convertible debenture in a principal amount of $100,000, due 2011, and warrants to buy 1,000,000 shares of the common stock at an exercise price of $10.90 per share. Under the terms of the debenture, warrants are exercised in an amount equal to ten times the dollar amount of the debenture conversion. During 2010, Golden State converted $4,752 of the $100,000 debenture into 162,454,399 shares of common stock, exercised warrants to purchase 47,523 shares of common stock at $10.90 per share and advanced $251,489 against future exercises of warrants of which $300,000 was applied to the exercise of warrants leaving $-0- of unapplied advances at December 31, 2010. During 2011, Golden State converted $6,760 of the $100,000 debenture into 60,601,868, shares of common stock, exercised warrants to purchase 67,600 shares of common stock at $10.90 per share based on the formula in the convertible debenture. Additionally Golden Gate advanced $753,381 against future exercises of warrants of which $736,840 was applied to the exercise of warrants leaving $16,542 of unapplied advances at December 31, 2011.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> The conversion price for the 4.75% $100,000 convertible debenture is the lesser of (i) $4.00 or (ii) 80% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion. If Golden State elects to convert a portion of the debenture and, on the day that the election is made, the volume weighted average price is below $0.75, the Company shall have the right to prepay that portion of the debenture that Golden State elected to convert, plus any accrued and unpaid interest, at 135% of such amount.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><i>13% Convertible Debentures due 2011</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On May 22, 2009, the Company issued to Newton, O'Connor, Turner &amp; Ketchum, a professional corporation ("NOTK") and the legal counsel to the Company through 2008, a 10% convertible debenture in a principal amount of $100,703, due September 30, 2009, and warrants to purchase 4,378,394 shares of the common stock at an exercise price of $0.09 per share through September 30, 2010 and an exercise price of $0.18 per share through September 30, 2014. The Company was indebted to NOTK for legal services performed for the Company and reimbursement of expenses in rendition of those services for the period ended December 31, 2008. The debenture and the warrants were issued in settlement of the indebtedness. The debentures and warrants were recorded at their pro rata fair values in relation to the proceeds received. The warrants were valued at $13,504. The difference between the pro rata fair value and face value of the debenture was charged to operations in 2009.&#xA0;The interest rate on the debenture increased to 13% during 2009 due to the Company not making payments when due.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The estimated fair value of the warrants was determined using the Black-Scholes option pricing model. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 160.73% is based on the historical volatility of the stock since July 25, 2007, the day the Company began trading on the Over-The-Counter Bulletin Board. The risk-free interest rate of 2.23% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the warrant of two years is based on historical exercise behavior and expected future experience.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On March 1, 2010, Newton, O'Connor, Turner &amp; Ketchum agreed to extend the September 30, 2009 due date of their 13% debenture to March 31, 2010, in consideration for one million (1,000,000) shares of common stock. The shares, which are restricted under SEC Section 144, were valued at 50% of the average of the previous five day closing price on March 1, 2010, which was $0.002 per share totaling $4,140.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On June 1, 2010, Newton, O'Connor, Turner &amp; Ketchum agreed to extend the March 31, 2010 due date of their 13% debenture to September 30, 2010 in consideration for one million five hundred thousand (1,500,000) shares of common stock and a reduction in the exercise price of the warrants. The revised price at which the warrant may be exercised shall be $0.045 per share for exercises made during the period between the date of grant and the second anniversary of the revised maturity date, and $0.09 per share for exercises made during the forty-eight month period between the second anniversary of the revised maturity date and the sixth anniversary of the maturity date. The shares, which are restricted under SEC Section 144, were valued at 50% of the average of the previous five day closing price on June 1, 2010, which was $0.004 per share totaling $6,210.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On March 31, 2011, Newton, O'Connor, Turner &amp; Ketchum agreed to extend the September 30, 2010 due date of their 13% debenture to April 30, 2011 in consideration for two hundred thousand (200,000) shares of common stock and an extension of the exercise dates of the warrants. The revised dates at which the warrant may be exercised shall be $0.045 per share for exercises made during the period between the date of grant and the second anniversary of the revised maturity date, and $0.09 per share for exercises made during the forty-eight month period between the second anniversary of the revised maturity date and the sixth anniversary of the revised maturity date. The shares, which are restricted under SEC Section 144, were valued at 50% of the average of the previous five day closing price on March 31, 2011, which was $0.07 per share totaling $14,048.<font style="FONT-SIZE: 10pt">&#xA0;</font></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On June 2, 2010, the Company issued to NOTK a second 10% convertible debenture in a principal amount of $25,206, due September&#xA0;30, 2010, and warrants to purchase 3,360,847 shares of the common stock at an exercise price of $0.045 per share through September 30, 2012 and an exercise price of $0.09 per share through September 30, 2016. The Company was indebted to NOTK for legal services performed for the Company and reimbursement of expenses in rendition of those services for the period ended December 31, 2009. The debenture and the warrants were issued in settlement of the indebtedness.&#xA0; The interest rate on the debenture increased to 13% during 2010 due to the Company not making payments when due.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On April 30, 2011, Newton, O'Connor, Turner &amp; Ketchum agreed to convert their 13% convertible debentures and accrued interest, which totaled in the aggregate $159,842 into 18,972,186 common shares of the Company&#x2019;s common stock, at an average price per share of $0.008, under the terms of the convertible debentures. The shares are restricted under SEC Section 144.</p> </div> -1118437 770000 355205 <div style="FONT: 10pt Times New Roman, Times, Serif"> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note 4 &#x2013; Sponsored Research Agreement ("SRA") Common Stock Subject to Put Rights and Call Right</b></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Since April 20, 2002, the Company has entered into a number of Sponsored Research Agreements with the University of Oklahoma (&#x201C;OU&#x201D;) as follows:</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Phase I: &#x201C;Pilot Study to Investigate Digital Holography&#x201D;, April 20, 2004. The Company paid OU $14,116.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Phase II: &#x201C;Investigation of 3-Dimensional Display Technologies&#x201D;, April 15, 2005, as amended. The Company paid OU $528,843.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Phase III: &#x201C;3-Dimensional Display Development&#x201D;. The Company made partial payment to OU by issuing 4,264,707 shares with a market price of $290,000 on October 14, 2008 and final payment on December 1, 2010 in the amount of $525,481 of which $40,481 was in cash and 59 million shares of Company stock (the &#x201C;Shares&#x201D;). The Shares are subject to an OU &#x2018;put&#x2019; right and a 3Dicon &#x2018;call&#x2019; right.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">OU &#x201C;Put&#x201D; Rights on the Shares</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">First &#x201C;put&#x201D; period: December 1, 2012 to November 31, 2013. If the Shares (held plus previously sold) are valued at less than $100,000 than OU can &#x201C;put&#x201D; one-tenth of the Shares for $50,000 plus accrued interest retro-active to December 1, 2012 less the value of sold shares.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Second &#x201C;put&#x201D; period: December 1, 2013 to November 31, 2014. If the Shares (held &amp; previously sold) are valued at less than $970,000 than OU can &#x201C;put&#x201D; the remaining Shares for $485,000 plus accrued interest retro-active to December 1, 2012 less the value of shares previously sold or redeemed during the first &#x201C;put&#x201D;.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">3DIcon &#x201C;Call&#x201D; rights on the Shares</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> Commencing December 1, 2012, the Company shall have the right to &#x201C;call&#x201D; the Shares for an amount equal to $970,000 less the amount (if any) of prior Share shares by OU including amounts &#x201C;put&#x201D; to 3DIcon.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The Company has presented the shares outside of deficit in the mezzanine section of the balance sheets, as the Agreement includes put rights, which are not solely within the control of the Company.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The Agreement also amended the existing agreements between the Company and OU such that all intellectual property, including all inventions and or discoveries, patentable or un-patentable, developed before July 28, 2008 by OU under the SRA is owned by OU. All intellectual property, including all inventions and/or discoveries, patentable or un-patentable, developed jointly by the Company and OU at any time is jointly owned by the Company and OU. Finally, all intellectual property developed by the Company after July 28, 2008, including all inventions and or discoveries, patentable or un-patentable, is owned by the Company.</p> </div> 13664 6230 534949 37187 <div style="FONT: 10pt Times New Roman, Times, Serif"> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note 14 &#x2013; Subsequent Events</b></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>Debentures payable</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In accordance with the terms of the Second Debenture an event of default occurs if the common stock of the Company trades at a price per share of $0.21 or lower. The trading price was at $0.21 or lower on several occasions during the period ended December 31, 2011 and subsequent to December 31, 2011. On each of the occasions Golden State, by separate letter agreements, agreed that the occasions did not constitute a default and thereby waived the default provision for the occasions.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> Subsequent to December 31, 2011 Golden State converted $1,664 of the 4.75% convertible debenture into 25,049,954 shares of common stock at $0.00007 per share and exercised 16,635 warrants at $10.90 per share for $181,322 and advanced $100,000 for future exercise of warrants under the terms of the securities purchase agreements.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>Common stock and paid in capital</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Shares of common stock totaling 10,651,232 were issued in payment of $78,863 in legal and consulting fees under the terms of our agreements for service during 2011 and 2012.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>OCAST Grant</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>&#xA0;</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The Company received approval for our no cost extension request for the second year of the contract and, with&#xA0;the new modification, the second year ends on August 31, 2012.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="TEXT-ALIGN: left; MARGIN-TOP: 0pt; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0pt"> <i>Employment contracts</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>&#xA0;</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On March 19, 2012 the Company announced that Sidney Aroesty would resign as CEO and join the Board of Directors. The Board appointed display industry veteran Mark Willner as CEO with an annual salary of $180,000.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Dr. George Melnik was appointed the new Senior Technical Advisor with an annual salary of $144,000. Dr. Hakki Refai as Chief Technical Officer.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>Civil Action Complaint</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>&#xA0;</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On April 2, 2012, the Company was served with a Summons and Complaint (the &#x201C;Complaint&#x201D;) for a civil action filed by Advanced Optical Technologies, Inc. (&#x201C;AOT&#x201D;) in the Second Judicial District Court of New Mexico, County of Bernalillo. In the Complaint, AOT alleged that the Company owed and refused to pay the amount of $90,124.91 for services performed by AOT through December 28, 2011 and AOT also asserted a fraud claim. The Company believes the allegations in the Complaint to be without merit. Nevertheless, the Company made efforts to resolve the dispute with AOT and believed the matter to be resolved, subject to documentation. The Company intends to aggressively defend the claims set forth in the Complaint.</p> </div> <div style="FONT: 10pt Times New Roman, Times, Serif"> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note 3 &#x2013; Recent Accounting Pronouncements</b></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The following is a summary of a recent accounting pronouncement that is relevant to the Company:</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In May 2011, the FASB issued ASU 2011-04, <i>Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.</i> ASU 2011-4 is intended to improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS. The amendments are of two types: (i) those that clarify the Board&#x2019;s intent about the application of existing fair value measurement and disclosure requirements and (ii) those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The guidance is effective for annual periods beginning after December 15, 2011. The adoption of the provisions of this guidance is not expected to materially impact our financial statements.</p> </div> -2320469 942240 <div style="FONT: 10pt Times New Roman, Times, Serif"> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note 2 &#x2013; Summary of Significant Accounting Policies</b></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>Research and development</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> Research and development costs, including payments made to the University of Oklahoma pursuant to the SRA, are expensed as incurred (see Note 4).</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>Stock-based compensation</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The Company accounts for stock-based compensation arrangements for employees in accordance with <i>Accounting Standards Codification ("ASC") No. 718, Compensation-Stock Compensation</i>. The Company recognizes expenses for employee services received in exchange for stock based compensation based on the grant-date fair value of the shares awarded. The Company accounts for stock issued to non-employees in accordance with the provisions of ASC <i>No. 718.</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>Income taxes</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The Company accounts for income taxes in accordance with<i>&#xA0;</i>ASC No. 740<i>, Income Taxes.</i> This standard<i>&#xA0;</i>requires the recognition of deferred tax assets and liabilities for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In addition, this standard requires the recognition of future tax benefits, such as net operating loss carry forwards, to the extent that realization of such benefits is more likely than not. The amount of deferred tax liabilities or assets is calculated using tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><i>Net income (loss) per common share</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The Company computes net income (loss) per share in accordance with ASC No. 260, <i>Earnings Per Share</i>. Under the provisions of this standard<i>,</i> basic net income (loss) per common share is based on the weighted-average outstanding common shares. Diluted net income (loss) per common share is based on the weighted-average outstanding shares adjusted for the dilutive effect of warrants to purchase common stock and convertible debentures. Due to the Company's losses, such potentially dilutive securities are anti-dilutive for all periods presented. The weighted average number of potentially dilutive shares is 90,616,272 and 98,856,063 for the years ended December 31, 2011 and 2010, respectively.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><i>Use of estimates</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The preparation of financial statements in conformity with U. S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. Actual results could differ from the estimates and assumptions used.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><i>Debt issue costs</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The Company defers and amortizes the legal and filing fees associated with long-term debt that is issued. These costs are primarily related to the convertible debentures, the majority of which have a three-year term. The amortization is charged to operations over the three-year term and then adjusted quarterly for debenture conversions to common stock.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><i>Fair value of financial instruments</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The following methods and assumptions were used to estimate the fair value of each class of financial instrument held by the Company:</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>Current assets and current liabilities</i> &#x2013; The carrying value approximates fair value due to the short maturity of these items.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>Debentures payable</i> &#x2013; The fair value of the Company's debentures payable has been estimated by the Company based upon the liability's characteristics, including interest rate. The carrying value approximates fair value.</p> </div> 703546 668 285600 998 <div style="FONT: 10pt Times New Roman, Times, Serif"> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note 1 &#x2013; Organization and Operations</b></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>Organization</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">3DIcon Corporation (the "Company") was incorporated on August 11, 1995, under the laws of the State of Oklahoma as First Keating Corporation. The articles of incorporation were amended August 1, 2003 to change the name to 3DIcon Corporation. The initial focus of First Keating Corporation was to market and distribute books written by its founder, Martin Keating. During 2001, First Keating Corporation began to focus on the development of 360-degree holographic technology. The effective date of this transition is January 1, 2001, and the financial information presented is from that date through the current period. The Company has accounted for this transition as reorganization and accordingly, restated its capital accounts as of January 1, 2001. From January 1, 2001, the Company's primary activity has been the raising of capital in order to pursue its goal of becoming a significant participant in the development, commercialization and marketing of next generation 3D display technologies.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The mission of the company is to develop (or acquire), commercialize, and market next generation 3D display technologies including auto-stereoscopic (glasses-free) volumetric 360-degree full-color 3D displays and possibly auto-stereoscopic (glasses-free) flat screen 3D displays. Our initial market focus is on business, industrial, and government applications of the technologies. At this time the Company owns no intellectual property in 3D displays but does own the exclusive worldwide rights to commercial and government usage of the 3D display intellectual property developed by the University of Oklahoma.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>Uncertainties</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The accompanying financial statements have been prepared on a going concern basis. The Company is in the development stage and has insufficient revenue and capital commitments to fund the development of its planned product and to pay operating expenses.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The Company has realized a cumulative net loss of $16,421,120 for the period from inception (January 1, 2001) to December 31, 2011, and a net loss of $2,320,469 and $1,523,737 for the years ended December 31, 2011 and 2010, respectively.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The ability of the Company to continue as a going concern during the next year depends on the successful completion of the Company's capital raising efforts to fund the development of its planned technologies.&#xA0;&#xA0;The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> Management plans to fund the future operations of the Company with existing cash of $17,666, grants and investor funding. Under the terms of the Golden State debentures, Golden State may advance an additional $378,787. The additional advance would be available if the Company filed a registration statement; however, the Company does not plan to file such registration statement. In addition, pursuant to the 4.75% Convertible Debenture due on December 31, 2014, beginning in November 2007, Golden State is obligated to submit conversion notices in an amount such that Golden State receives 1% of the outstanding shares of the Company every calendar quarter for a period of one year. In connection with each conversion, Golden State is expected to exercise warrants equal to 10 times the amount of principal converted. The warrants are exercisable at $10.90 per share. The number of warrants exercisable is subject to certain beneficial ownership limitations contained in the 4.75% Debenture and the warrants ("the Beneficial Ownership Limitations"). The Beneficial Ownership Limitations prevent Golden State from converting on the 4.75% Debenture or exercising warrants if such conversion or exercise would cause Golden State's holdings to exceed 9.99% of the Company's issued and outstanding common stock. Subject to the Beneficial Ownership Limitations, Golden State is required to convert $3,000 of the 4.75% Convertible Debenture and exercise 30,000 warrants per month. Based upon our current stock price, our issued and outstanding shares as of December 31, 2011 and ignoring the impact of the Beneficial Ownership Limitations, the Company may receive up to $981,000 in funding from Golden State as a result of warrant exercises during the year ended December 31, 2012.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The Company was approved for a matching grant from Oklahoma Center for the Advancement of Science and Technology (&#x201C;OCAST&#x201D;) on November 19, 2008 in the amount of approximately $300,000.&#xA0; There remains $82,176 of grant funds to be provided through the end of the grant period, February 28, 2012.&#xA0;&#xA0;(see Note 5 and Note 14)</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> Additionally, the Company is continuing to pursue financing through private offering of debt or common stock.</p> </div> 3000 -42952 86323 -349435 <div style="FONT: 10pt Times New Roman, Times, Serif"> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note 12 &#x2013; Income Taxes</b></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">At December 31, 2011 and 2010, the Company had accumulated net operating losses of approximately $13,000,000 and $11,000,000, respectively, available to reduce future federal and state taxable income. Unless utilized, the loss carry forward amounts will begin to expire in 2013.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> Deferred tax assets resulting from the operating loss carry forward, are reduced by a valuation allowance.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The deferred tax asset consisted of the following:</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <table style="WIDTH: 70%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0" align="center"> <tr style="VERTICAL-ALIGN: bottom"> <td>&#xA0;</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: center" colspan="2">December&#xA0;31,</td> <td>&#xA0;</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: center" colspan="2">December&#xA0;31,</td> <td>&#xA0;</td> </tr> <tr style="VERTICAL-ALIGN: bottom"> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2">2011</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2">2010</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> </tr> <tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom"> <td style="TEXT-ALIGN: left; WIDTH: 64%">Loss carry forward amount</td> <td style="WIDTH: 1%">&#xA0;</td> <td style="TEXT-ALIGN: left; WIDTH: 1%">$</td> <td style="TEXT-ALIGN: right; WIDTH: 15%">13,000,000</td> <td style="TEXT-ALIGN: left; WIDTH: 1%">&#xA0;</td> <td style="WIDTH: 1%">&#xA0;</td> <td style="TEXT-ALIGN: left; WIDTH: 1%">$</td> <td style="TEXT-ALIGN: right; WIDTH: 15%">11,000,000</td> <td style="TEXT-ALIGN: left; WIDTH: 1%">&#xA0;</td> </tr> <tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom"> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Effective tax rate</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left"> &#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right"> 38</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">%</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left"> &#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right"> 38</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">%</td> </tr> <tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom"> <td style="TEXT-ALIGN: left">Deferred tax asset</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td style="TEXT-ALIGN: right">4,940,000</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td>&#xA0;</td> <td style="TEXT-ALIGN: left">&#xA0;</td> <td style="TEXT-ALIGN: right">4,180,000</td> <td style="TEXT-ALIGN: left">&#xA0;</td> </tr> <tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom"> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Less valuation allowance</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left"> &#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right"> (4,940,000</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td> <td style="PADDING-BOTTOM: 1pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left"> &#xA0;</td> <td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right"> (4,180,000</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td> </tr> <tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom"> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">Net deferred taxes</td> <td style="PADDING-BOTTOM: 2.5pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left"> $</td> <td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right"> &#x2014;&#xA0;&#xA0;</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">&#xA0;</td> <td style="PADDING-BOTTOM: 2.5pt">&#xA0;</td> <td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left"> $</td> <td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right"> &#x2014;&#xA0;&#xA0;</td> <td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">&#xA0;</td> </tr> </table> </div> 10493 <div style="FONT: 10pt Times New Roman, Times, Serif"> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note 10 &#x2013; Incentive Stock Plan</b></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In September 2009 the Company established the 3DIcon Corporation 2009 Incentive Stock Plan (the "2009 Plan"). The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2009 Plan shall not exceed 50,737,115 shares. The shares are included in a registration statement filed September 23, 2009. Shares totaling 14,422,012 and 36,315,103 were issued from the Plan during the years ended December 31, 2010 and 2009, respectively, for services rendered to the Company. There are no shares remaining for issuance under the 2009 Plan.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In February 2010 the Company established the 3DIcon Corporation 2010 Incentive Stock Plan (the "2010 Plan"). The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2010 Plan shall not exceed seventy-five million (75,000,000) shares. The shares are included in a registration statement filed February 26, 2010. Shares totaling&#xA0;3,089,027 and 71,910,973 were issued from the 2010 Plan during the years ended December 31, 2011 and 2010, respectively, for services rendered and to satisfy accounts payable to the Company. There are no shares remaining for issuance under the 2010 Plan.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In June 2010 the Company established the 3DIcon Corporation 2010 Equity Incentive Stock Plan (the "2010 EIP"). The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2010 EIP shall not exceed sixty million (60,000,000) shares. The shares are included in a registration statement filed June 24, 2010. Shares totaling 1,490,672 and 58,509,328 were issued from the 2010 EIP during the years ended December 31, 2011 and 2010, respectively, for services rendered and to satisfy accounts payable to the Company. There are no shares available for issuance under the 2010 EIP.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In January 2011 the Company established the 3DIcon Corporation 2011 Equity Incentive Plan (the "2011 EIP"). The 2011 EIP is designed to retain directors, executives and selected employees and consultants and reward them for making contributions to the success of the Company. These objectives are accomplished by making long-term incentive awards under the 2011 EIP thereby providing participants with a proprietary interest in the growth and performance of the Company. The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2011 EIP shall not exceed one hundred million (100,000,000) shares. The shares are included in a registration statement filed January 14, 2011. Shares totaling 53,893,572 were issued from the 2011 EIP for services rendered and to satisfy accounts payable to the Company. There are currently 46,106,428 shares available for issuance under the 2011 EIP.</p> </div> <div style="FONT: 10pt Times New Roman, Times, Serif"> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note 13 &#x2013; Related Party Transaction</b></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">3DIcon engaged the law firm of Newton, O'Connor, Turner &amp; Ketchum as its outside corporate counsel from 2005 through 2008 and for certain legal services subsequent to 2008.&#xA0;&#xA0;John O'Connor, a director of 3DIcon, is the Chairman of Newton, O'Connor, Turner &amp; Ketchum. During the years ended December 31, 2011 and 2010, the Company incurred legal fees to Newton, O'Connor, Turner &amp; Ketchum in the amount of $61,570 and $22,287 respectively.</p> </div> 1430365 770000 -0.002 756840 2409792 703546 1086576438 <div style="FONT: 10pt Times New Roman, Times, Serif"> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note 8 &#x2013; Convertible Promissory Notes 5%, Due 2013</b></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In October 2010, the Company issued 5% Convertible Promissory Notes (the &#x201C;Notes&#x201D;) to six persons, in the aggregate, totaling $400,877. The Notes mature three years from the date issued. The Notes automatically convert to common stock of the Company at $0.0034 per share (the "Fixed Conversion Price") prior to March 15, 2011, upon the merger or consolidation of the Company with or into another person, the Company effects any sale of all or substantially all of its assets, any tender or exchange offer of the Company's common stock, or the Company effectively converts into or exchanges the Company's common stock for other securities, cash or property. Additionally, after March 15, 2011, at the option of the holder, the Notes are convertible into common stock of the Company at a price per share of $0.0025 (75% of the "Fixed Conversion Price"). Interest on the Notes accrue from the original issue date at 5% annually, is payable upon maturity or conversion of the Notes and such interest may be converted in whole or part to shares of common stock at the effective conversion price.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">At various dates during 2011, the six persons converted the $400,877 Notes and accrued interest of $9,020 into 163,631,653 shares of common stock at $0.0025 per share.&#xA0;&#xA0;The shares are restricted under SEC Section 144.</p> </div> <div style="FONT: 10pt Times New Roman, Times, Serif"> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note 6 &#x2013; Consulting Agreements</b></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <i>Concordia Financial Group</i></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The Company entered into a one-year Independent Consulting Agreement with Concordia effective November 1, 2007, and month-to-month thereafter. Under the terms of the agreement Concordia will serve as liaison to Golden State Investors, Inc. and provide business strategy services by assisting the Company by reviewing and evaluating the Company's plans, personnel, board composition, technology, development of business models, building financial models for projections, developing materials to describe the Company, developing capital sources and assisting and advising the Company in its financial negotiations with capital sources. Concordia also advised with respect to effective registration of offerings of Company securities, the management team, the Company's development of near and long-term budgets, marketing strategies and plans, and assisted in presentations related to the above services. Concordia will be paid a monthly fee of $15,750. Concordia, at its option, may take up to 100% of this monthly fee in registered stock at 50% discount to market; and the Company, at its option, may pay up to 50% of Concordia's monthly invoice in registered stock, at 50% discount to market, provided that the payment of stock is made within ten (10) days of receipt of invoice and further provided that the stock trades above $.30 per share at any time during the last business day of the month. Market is defined as the five day average of closing prices immediately preceding the last business day of the calendar month in which the invoiced services were rendered. The Company incurred consulting fees of $189,000 for services from Concordia during each of the periods ended December 31, 2011 and 2010, under the terms of the agreement.&#xA0;Additionally, on May 10, 2011, the Board of Directors awarded Concordia 10,000,000 (ten million) shares of common stock with a value of $172,100, for consulting services which have gone above and beyond the contract. The common shares were valued at $0.01721 per share which was 50% of the average of the five previous day&#x2019;s closing price.</p> </div> <div style="FONT: 10pt Times New Roman, Times, Serif"> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note 5 &#x2013; OCAST Grant</b></p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The Oklahoma Center for the Advancement of Science and Technology approved the Company&#x2019;s application for funding of a matching grant titled 800 Million Voxels Volumetric Display, on November 19, 2008.&#xA0; The two-year matching grant, totaling $299,932, had&#xA0;a start date of January 1, 2009.&#xA0; The Company received approval for our no cost extension request for the first year of the contract. With the new modification, the first year ended on August 31, 2010.&#xA0;&#xA0;The award is for a maximum of $149,940 for 2009 and the remainder for 2011.&#xA0; The Company earned $86,323 and $96,361 from the grant during the twelve-month periods ended December 31, 2011 and 2010, respectively and $217,824 from inception to date.&#xA0; The Company received approval for our no cost extension request for the second year of the contract and, with&#xA0;the new modification, the second year ends on February 28, 2012.</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> &#xA0;</p> <p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">During the years ended December 31, 2011 and 2010, the Company charged operations $37,363 and $43,884, respectively, pursuant to the direct costs incurred and for the use of the OU lab facilities in regard to the OCAST grant. At December 31, 2011, the Company owed the University $7,686 in direct costs.</p> </div> 2462 -862 50453 4310446 252267600 12308915 19506 97530393 1419 7094511 6015 30072595 285600 754378 862 653093 536521 41533 349190 -2320469 556027 42952 355205 <div style="font: 10pt Times New Roman, Times, Serif"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <b>Note 5 &#x2013; Common Stock and Paid-In Capital (see note 9)</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;On October 24, 2011 the Board of Directors, subject to the approval of the shareholders of the Company, authorized an amendment to the Company's Certificate of Incorporation in order to effect a reverse split of the Company's common stock in a ratio in the range between 1 for 15 and 1 for 35, as will be selected by the Company's Board of Directors (the "Reverse Split").&#xA0;&#xA0;On October 15, 2011, the Company held an annual meeting of stockholders, at which annual meeting the stockholders approved the Reverse Split and approved the filing of an Amended Certificate of Incorporation to effect the Reverse Split at the discretion of the Board of Directors.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <i>Warrants issued</i>&#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;&#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> As of March 31, 2012, there are warrants outstanding to purchase 166,667 shares of common stock at a price of $0.20 per share that expire in April 2012, warrants to purchase 16,666,666 shares of its common stock at a price of $0.50 per share through 2012, warrants to purchase 4,378,394 shares of common stock at a price of $0.09 per share that expire on September 30, 2015 and, warrants to purchase 3,360,847 shares of common stock at a price of $0.045 per share through June 1, 2012 and $0.09 per share thereafter, that expire on June 1, 2015. Additionally, Golden State has warrants outstanding to purchase 799,925 shares of common stock at a price of $10.90 per share which expire December 31, 2014.&#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <i>Common stock and options issued for services and liabilities</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> During the three-month periods ended March 31, 2012 and 2011, shares of common stock totaling 7,437,643, and 2,500,000, respectively were issued for consulting services for which the Company recognized $42,100 and $24,425 of expense, respectively.&#xA0; Additionally, during the period ending March 31, 2012 and 2011, shares totaling 3,213,589 and 33,338,612, respectively were issued to consultants for previous services provided to the Company for which the accounts payable liability was reduced by $36,764 and 79,871, respectively.&#xA0;&#xA0;Shares totaling 57,000,000, which are restricted under SEC Section 144, were issued in the first quarter of 2011 in payment of accrued salaries and payroll taxes totaling $460,405 due Martin Keating, Chairman of the Board of Directors, Hakki Refai, Chief Technology Officer and Judith Keating the Secretary of the Company.&#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> On March 13, 2012, 3DIcon Corporation entered into a one (1) year Agreement for At-Will Employment with Assignment of Inventions (&#x201C;Employment Agreement&#x201D;) with Mark Willner, pursuant to which Mr. Willner began serving as the Company&#x2019;s Chief Executive Officer, effective immediately. Under the terms of the Employment Agreement, Mr. Willner is entitled to an annual base salary of $180,000, and, at the discretion of the Company&#x2019;s Board of Directors, performance-based bonuses and/or salary increases. Pursuant to the Employment Agreement, the Company granted Mr. Willner five-year stock options to purchase two (2) million shares at a price equal to the average price of the five day period prior to March 19, 2012 (the &#x201C;Strike Price&#x201D;) which was $0.01. Furthermore, if Mr. Willner remains employed by the Company at the end of each quarter ending June 30, 2012, September 30, 2012 and December 31, 2012, he will receive additional stock options to purchase one (1) million shares at the $0.01 Strike Price. In addition, if the Company has achieved certain quarterly business objectives, Mr. Willner will receive, at the end of each such quarterly periods, a further grant of stock options to purchase one (1) million shares at the Strike Price. The estimated fair value of the two million options of $18,840, was determined using the Black-Scholes option pricing model and was charged to operations in March 2012. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 163% is based on the historical volatility of the stock since July 25, 2007, the day the Company began&#xA0;trading on the Over-The-Counter Bulletin Board. The risk-free interest rate of 1.87% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option of five years is based on historical exercise behavior and expected future experience.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> The Employment Agreement may be terminated with or without reason by either the Company or Mr. Willner and at any time, upon sixty (60) days written notice. The terms of the Employment Agreement will remain effective for one (1) year and will automatically renew, subject to the same termination rights. Upon termination, the Company will pay any base pay, bonus and benefits that have been earned and are due as of the date of the termination.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> The following summary reflects warrant and option activity for the three-month period ended March 31, 2012:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td nowrap="nowrap">&#xA0;</td> <td nowrap="nowrap" style="font-weight: bold; padding-bottom: 1pt"> &#xA0;</td> <td colspan="2" nowrap="nowrap" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"> Attached<br /> Warrants</td> <td nowrap="nowrap" style="padding-bottom: 1pt; font-weight: bold"> &#xA0;</td> <td nowrap="nowrap" style="font-weight: bold; padding-bottom: 1pt"> &#xA0;</td> <td colspan="2" nowrap="nowrap" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"> Golden&#xA0;State<br /> Warrants</td> <td nowrap="nowrap" style="padding-bottom: 1pt; font-weight: bold"> &#xA0;</td> <td nowrap="nowrap" style="font-weight: bold; padding-bottom: 1pt"> &#xA0;</td> <td colspan="2" nowrap="nowrap" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"> Options</td> <td nowrap="nowrap" style="padding-bottom: 1pt; font-weight: bold"> &#xA0;</td> </tr> <tr style="vertical-align: bottom"> <td>&#xA0;</td> <td>&#xA0;</td> <td colspan="2">&#xA0;</td> <td>&#xA0;</td> <td>&#xA0;</td> <td colspan="2">&#xA0;</td> <td>&#xA0;</td> <td>&#xA0;</td> <td colspan="2">&#xA0;</td> <td>&#xA0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td style="width: 61%; font-weight: bold">Outstanding December 31, 2011</td> <td style="width: 1%">&#xA0;</td> <td style="width: 1%; text-align: left">&#xA0;</td> <td style="width: 10%; text-align: right">24,905,908</td> <td style="width: 1%; text-align: left">&#xA0;</td> <td style="width: 1%">&#xA0;</td> <td style="width: 1%; text-align: left">&#xA0;</td> <td style="width: 10%; text-align: right">816,560</td> <td style="width: 1%; text-align: left">&#xA0;</td> <td style="width: 1%">&#xA0;</td> <td style="width: 1%; text-align: left">&#xA0;</td> <td style="width: 10%; text-align: right">64,893,804</td> <td style="width: 1%; text-align: left">&#xA0;</td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td>Granted</td> <td>&#xA0;</td> <td style="text-align: left">&#xA0;</td> <td style="text-align: right">-</td> <td style="text-align: left">&#xA0;</td> <td>&#xA0;</td> <td style="text-align: left">&#xA0;</td> <td style="text-align: right">-</td> <td style="text-align: left">&#xA0;</td> <td>&#xA0;</td> <td style="text-align: left">&#xA0;</td> <td style="text-align: right">700,000</td> <td style="text-align: left">&#xA0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td>Exercised</td> <td>&#xA0;</td> <td style="text-align: left">&#xA0;</td> <td style="text-align: right">-</td> <td style="text-align: left">&#xA0;</td> <td>&#xA0;</td> <td style="text-align: left">&#xA0;</td> <td style="text-align: right">(16,635</td> <td style="text-align: left">)</td> <td>&#xA0;</td> <td style="text-align: left">&#xA0;</td> <td style="text-align: right">-</td> <td style="text-align: left">&#xA0;</td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 1pt">Cancelled</td> <td style="padding-bottom: 1pt">&#xA0;</td> <td style="border-bottom: Black 1pt solid; text-align: left"> &#xA0;</td> <td style="border-bottom: Black 1pt solid; text-align: right"> (333,334</td> <td style="padding-bottom: 1pt; text-align: left">)</td> <td style="padding-bottom: 1pt">&#xA0;</td> <td style="border-bottom: Black 1pt solid; text-align: left"> &#xA0;</td> <td style="border-bottom: Black 1pt solid; text-align: right"> -</td> <td style="padding-bottom: 1pt; text-align: left">&#xA0;</td> <td style="padding-bottom: 1pt">&#xA0;</td> <td style="border-bottom: Black 1pt solid; text-align: left"> &#xA0;</td> <td style="border-bottom: Black 1pt solid; text-align: right"> -</td> <td style="padding-bottom: 1pt; text-align: left">&#xA0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td>&#xA0;</td> <td>&#xA0;</td> <td style="text-align: left">&#xA0;</td> <td style="text-align: right">&#xA0;</td> <td style="text-align: left">&#xA0;</td> <td>&#xA0;</td> <td style="text-align: left">&#xA0;</td> <td style="text-align: right">&#xA0;</td> <td style="text-align: left">&#xA0;</td> <td>&#xA0;</td> <td style="text-align: left">&#xA0;</td> <td style="text-align: right">&#xA0;</td> <td style="text-align: left">&#xA0;</td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="font-weight: bold; padding-bottom: 2.5pt">Outstanding March 31, 2012</td> <td style="padding-bottom: 2.5pt">&#xA0;</td> <td style="border-bottom: Black 2.5pt double; text-align: left"> &#xA0;</td> <td style="border-bottom: Black 2.5pt double; text-align: right"> 24,572,574</td> <td style="padding-bottom: 2.5pt; text-align: left">&#xA0;</td> <td style="padding-bottom: 2.5pt">&#xA0;</td> <td style="border-bottom: Black 2.5pt double; text-align: left"> &#xA0;</td> <td style="border-bottom: Black 2.5pt double; text-align: right"> 799,925</td> <td style="padding-bottom: 2.5pt; text-align: left">&#xA0;</td> <td style="padding-bottom: 2.5pt">&#xA0;</td> <td style="border-bottom: Black 2.5pt double; text-align: left"> &#xA0;</td> <td style="border-bottom: Black 2.5pt double; text-align: right"> 65,593,804</td> <td style="padding-bottom: 2.5pt; text-align: left">&#xA0;</td> </tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> Stock options are valued at the date of award, which does not precede the approval date, and compensation cost is recognized in the period the options are granted. Stock options generally become exercisable on the date of grant and expire based on the terms of each grant.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> The estimated fair value of options for common stock granted was determined using the Black-Scholes option pricing model. The expected dividend yield is based on the average annual dividend yield as of the grant date. Expected volatility is based on the historical volatility of our stock. The risk-free interest rate is based on the U.S.&#xA0;Treasury Constant Maturity rates as of the grant date. The expected life of the option is based on historical exercise behavior and expected future experience.</p> </div> <div style="font: 10pt Times New Roman, Times, Serif"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <b>Note 1 &#x2013; Uncertainties and Use of Estimates</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <i>Basis of Presentation</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> The accompanying financial statements of 3DIcon Corporation (the &#x201C;Company&#x201D;) have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (&#x201C;SEC&#x201D;). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures made are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company's year-end audited financial statements and related footnotes included in the previously filed 10-K. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company as of March 31, 2012, and the statements of its operations for the three months ended March 31, 2012 and 2011, and the period from inception (January 1, 2001) to March 31, 2012, and cash flows for the three month periods ended March 31, 2012 and 2011, and the period from inception (January 1, 2001) to March 31, 2012, have been included. The results of operations for interim periods may not be indicative of the results which may be realized for the full year.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <i>Use of Estimates</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. Actual results could differ from the estimates and assumptions used.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <i>Revenue Recognition</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> Revenues from software license fees are accounted for in accordance with Accounting Standards Codification (&#x201C;ASC&#x201D;) 985-605, &#x201C;Software Revenue Recognition&#x201D;.&#xA0; The Company recognizes revenue when (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) the sales price is fixed or determinable; and (iv) collectability is reasonably assured.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> Grant revenue is recognized when earned.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <i>Recent Accounting Pronouncements</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> Based on management's assessment no new accounting standards, if adopted, would have a material impact on the accompanying financial statements.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <i>Uncertainties</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> The accompanying financial statements have been prepared on a going concern basis.&#xA0; The Company is in the development stage and has insufficient revenue and capital commitments to fund the development of its planned product and to pay operating expenses.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> The Company has realized a cumulative net loss of $16,798,827 for the period from inception (January 1, 2001) to March 31, 2012, and a net loss of $377,707 and $356,608 for the three months ended March 31, 2012 and 2011, respectively.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> The ability of the Company to continue as a going concern during the next year depends on the successful completion of the Company's capital raising efforts to fund the development of its planned products.&#xA0; The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> Management plans to fund the future operations of the Company with existing cash, grants and investor funding. Under the terms of the Golden State debentures, as further described in Note 4, Golden State may advance an additional $378,787.&#xA0; The additional advance would be available if the Company filed a registration statement; however, the Company does not plan to file such registration statement. In addition, pursuant to the 4.75% Convertible Debenture due in December 2014, beginning in November 2007, Golden State is obligated to submit conversion notices in an amount such that Golden State receives 1% of the outstanding shares of the Company every calendar quarter for a period of one year.&#xA0; In connection with each conversion, Golden State is expected to exercise warrants equal to ten times the amount of principal converted.&#xA0; The warrants are exercisable at $10.90 per share.&#xA0; The number of warrants exercisable is subject to certain beneficial ownership limitations contained in the 4.75% Convertible Debenture (&#x201C;the Beneficial Ownership Limitations&#x201D;).&#xA0; The Beneficial Ownership Limitations prevent Golden State from converting on the 4.75% Convertible Debenture or exercising warrants if such conversion or exercise would cause Golden State&#x2019;s holdings to exceed 9.99% of the Company&#x2019;s issued and outstanding common stock.&#xA0; Subject to the Beneficial Ownership Limitations, Golden State is required to convert $3,000 of the 4.75% Convertible Debenture and exercise 30,000 warrants per month.&#xA0; Based upon our current stock price, our issued and outstanding shares as of March 31, 2012 and ignoring the impact of the Beneficial Ownership Limitations, the Company may receive up to $981,000 in funding from Golden State as a result of warrant exercises during the year ended December 31, 2012. During the three months ended March 31, 2012, the Company received $364,780 in funding under the terms of the 4.75% Convertible Debenture (see Note 4).&#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> The Company was approved for a matching grant from Oklahoma Center for the Advancement of Science and Technology (&#x201C;OCAST&#x201D;) on November 19, 2008 in the amount of approximately $300,000.&#xA0; There remains $51,836 of grant funds to be provided through the end of the grant period, August 31, 2012.&#xA0;&#xA0;(see Note 3)</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> Additionally, the Company is continuing to pursue financing through private offerings of debt or common stock.</p> </div> <div style="font: 10pt Times New Roman, Times, Serif"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <b>Note 7 &#x2013; Office Lease</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> The Company signed an Office Lease Agreement (the &#x201C;Lease Agreement&#x201D;) on April 24, 2008. The Lease Agreement commenced on June 1, 2008 and expired June 1, 2011. On March 8, 2011 the Lease Agreement was amended to extend the expiration date to May 31, 2012.&#xA0;&#xA0;At March 31, 2012, minimum future lease payments to be paid through May 31, 2012 under the non-cancelable operating lease for office space are $4,629.</p> </div> <div style="font: 10pt Times New Roman, Times, Serif"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <b>Note 4 &#x2013; Debentures Payable</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> Debentures payable consist of the following:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1pt">&#xA0;</td> <td style="font-weight: bold; padding-bottom: 1pt">&#xA0;</td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"> March 31, 2012</td> <td style="font-weight: bold; padding-bottom: 1pt">&#xA0;</td> <td style="font-weight: bold; padding-bottom: 1pt">&#xA0;</td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"> December&#xA0;31, 2011</td> <td style="font-weight: bold; padding-bottom: 1pt">&#xA0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td style="text-align: left">Senior Convertible Debentures:</td> <td>&#xA0;</td> <td style="text-align: left">&#xA0;</td> <td style="text-align: right">&#xA0;</td> <td style="text-align: left">&#xA0;</td> <td>&#xA0;</td> <td style="text-align: left">&#xA0;</td> <td style="text-align: right">&#xA0;</td> <td style="text-align: left">&#xA0;</td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 70%; text-align: left">6.25% Debenture due 2011</td> <td style="width: 1%">&#xA0;</td> <td style="width: 1%; text-align: left">$</td> <td style="width: 12%; text-align: right">31,788</td> <td style="width: 1%; text-align: left">&#xA0;</td> <td style="width: 1%">&#xA0;</td> <td style="width: 1%; text-align: left">$</td> <td style="width: 12%; text-align: right">31,788</td> <td style="width: 1%; text-align: left">&#xA0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td style="text-align: left; padding-bottom: 1pt">4.75% Debenture due 2011</td> <td style="padding-bottom: 1pt">&#xA0;</td> <td style="border-bottom: Black 1pt solid; text-align: left"> &#xA0;</td> <td style="border-bottom: Black 1pt solid; text-align: right"> 79,993</td> <td style="padding-bottom: 1pt; text-align: left">&#xA0;</td> <td style="padding-bottom: 1pt">&#xA0;</td> <td style="border-bottom: Black 1pt solid; text-align: left"> &#xA0;</td> <td style="border-bottom: Black 1pt solid; text-align: right"> 81,656</td> <td style="padding-bottom: 1pt; text-align: left">&#xA0;</td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Total Debentures</td> <td>&#xA0;</td> <td style="text-align: left">&#xA0;</td> <td style="text-align: right">111,781</td> <td style="text-align: left">&#xA0;</td> <td>&#xA0;</td> <td style="text-align: left">&#xA0;</td> <td style="text-align: right">113,444</td> <td style="text-align: left">&#xA0;</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td style="text-align: left; padding-bottom: 1pt">Less - Current Maturities</td> <td style="padding-bottom: 1pt">&#xA0;</td> <td style="text-align: left; border-bottom: Black 1pt solid"> &#xA0;</td> <td style="text-align: right; border-bottom: Black 1pt solid"> (111,781</td> <td style="text-align: left; padding-bottom: 1pt">)</td> <td style="padding-bottom: 1pt">&#xA0;</td> <td style="text-align: left; border-bottom: Black 1pt solid"> &#xA0;</td> <td style="text-align: right; border-bottom: Black 1pt solid"> (113,444</td> <td style="text-align: left; padding-bottom: 1pt">)</td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 2.5pt">Long-term Debentures</td> <td style="padding-bottom: 2.5pt">&#xA0;</td> <td style="text-align: left; border-bottom: Black 2.5pt double"> $</td> <td style="text-align: right; border-bottom: Black 2.5pt double"> -</td> <td style="text-align: left; padding-bottom: 2.5pt">&#xA0;</td> <td style="padding-bottom: 2.5pt">&#xA0;</td> <td style="text-align: left; border-bottom: Black 2.5pt double"> $</td> <td style="text-align: right; border-bottom: Black 2.5pt double"> -</td> <td style="text-align: left; padding-bottom: 2.5pt">&#xA0;</td> </tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <i>Securities Purchase Agreement</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <i>6.25% Convertible Debenture due December 31, 2014</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> On November 21, 2007, the Company issued and sold a convertible note in the principal amount of $1,250,000 to Golden State (the "Debenture"). Pursuant to the terms of the Debenture, Golden State may, at its election, convert all or a part of the Debenture into shares of the Company's common stock at a conversion rate equal to the lesser of (i) $2.00 or (ii) 90% of the average of the five lowest volume weighted average prices during the twenty trading days prior to Golden State's election to convert, subject to adjustment as provided in the Debenture. In addition, pursuant to the terms of the Debenture, the Company agreed to file a registration statement covering the shares of common stock issuable upon conversion or redemption of the Debenture. The Company filed a registration statement covering the shares to be issued upon conversion of the Debenture. Included in the registration statement were 4.25 million shares issuable on the Debenture based on 2007 market prices and assuming full conversion of the convertible debenture. The registration statement became effective on January 4, 2008.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> Golden State advanced $125,000 on the $1.25 million Debenture on November 9, 2007 and $746,213 in January 2008 at which time the Company placed 7,961,783 shares of common stock in escrow to be released as debentures are converted. As of September 30, 2011, Golden State has funded an aggregate of $871,213 on the Debenture. Golden State will be obligated to fund the Company for the remaining $378,787 in principal on the Debenture upon the effectiveness of a registration statement underlying the remaining unfunded principal balance on the Debenture. At this time, the Company has not filed a registration statement. At various dates during 2010, $274,438 of the Debenture was converted into 93,196,578 shares of common stock at prices ranging from $0.0027 to $0.004 based on the formula in the convertible debenture. Additionally shares totaling 6,093,396 were issued in payment of $17,062 of accrued interest during 2010. At various dates during 2011, $157,331 of the Debenture was converted into 16,156,404 shares of common stock at prices ranging from $0.0059 to $0.0174 based on the formula in the convertible debenture. Additionally $12,669 was added to the principle balance of the debenture in payment of accrued interest during 2011.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> The conversion price for the $1.25 million Debenture is the lesser of (i) $2.00 or (ii) 90% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion.&#xA0; If Golden State elects to convert a portion of the debenture and, on the day that the election is made, the volume weighted average price is below $0.75, the Company shall have the right to prepay that portion of the debenture that Golden State elected to convert, plus any accrued and unpaid interest, at 135% of such amount.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> In addition to standard default provisions concerning timeliness of payments, delivery and notifications, the Second Debenture will be in default if the common stock of the Company trades at a price per share of $0.21 or lower, regardless of whether the trading price subsequently is higher than $0.21 per share. The trading price was at $0.21 or lower on several occasions during and subsequent to the period ended March&#xA0;31, 2012. On each of the occasions Golden State, by separate letter agreements, agreed that the occasions did not constitute a default and thereby waived the default provision for those occasions only.&#xA0; (See Note 9 Subsequent Events)&#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <i>4.75% Convertible Debenture due November 3, 2011</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> &#xA0;On November 3, 2006, the Company also issued to Golden State a 4.75% convertible debenture in a principal amount of $100,000, due 2011, and warrants to buy 1,000,000 shares of the common stock at an exercise price of $10.90 per share. Under the terms of the debenture, warrants are exercised in an amount equal to ten times the dollar amount of the debenture conversion. During 2010, Golden State converted $4,752 of the $100,000 debenture into 162,454,399 shares of common stock, exercised warrants to purchase 47,523 shares of common stock at $10.90 per share and advanced $251,489 against future exercises of warrants of which $300,000 was applied to the exercise of warrants leaving $-0- of unapplied advances at December 31, 2010. During 2011, Golden State converted $6,760 of the $100,000 debenture into 60,601,868, shares of common stock, exercised warrants to purchase 67,600 shares of common stock at $10.90 per share based on the formula in the convertible debenture. Additionally Golden Gate advanced $753,381 against future exercises of warrants of which $736,840 was applied to the exercise of warrants leaving $16,542 of unapplied advances at December 31, 2011. During 2012, Golden State converted $1,663 of the $100,000 debenture into 25,049,954 shares of common stock, exercised warrants to purchase 16,635 shares of common stock at $10.90 per share based on the formula in the convertible debenture. Additionally Golden Gate advanced $364,781 against future exercises of warrants of which $181,322 was applied to the exercise of warrants leaving $200,001 of unapplied advances at March 31, 2012.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> The conversion price for the 4.75% $100,000 convertible debenture is the lesser of (i) $4.00 or (ii) 80% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion. If Golden State elects to convert a portion of the debenture and, on the day that the election is made, the volume weighted average price is below $0.75, the Company shall have the right to prepay that portion of the debenture that Golden State elected to convert, plus any accrued and unpaid interest, at 135% of such amount.</p> </div> <div style="font: 10pt Times New Roman, Times, Serif"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <b>Note 2 &#x2013; Sponsored Research Agreement ("SRA") Common Stock Subject to Put Rights and Call Right</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> Since April 20, 2002, the Company has entered into a number of Sponsored Research Agreements with the University of Oklahoma (&#x201C;OU&#x201D;) as follows:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> Phase I: &#x201C;Pilot Study to Investigate Digital Holography&#x201D;, April 20, 2004. The Company paid OU $14,116.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> Phase II: &#x201C;Investigation of 3-Dimensional Display Technologies&#x201D;, April 15, 2005, as amended. The Company paid OU $528,843.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> Phase III: &#x201C;3-Dimensional Display Development&#x201D;. The Company made partial payment to OU by issuing 4,264,707 shares with a market price of $290,000 on October 14, 2008 and final payment on December 1, 2010 in the amount of $525,481 of which $40,481 was in cash and 59 million shares of Company stock (the &#x201C;Shares&#x201D;). The Shares are subject to an OU &#x2018;put&#x2019; right and a 3Dicon &#x2018;call&#x2019; right.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> OU &#x201C;Put&#x201D; Rights on the Shares</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> First &#x201C;put&#x201D; period: December 1, 2012 to November 31, 2013. If the Shares (held plus previously sold) are valued at less than $100,000 then OU can &#x201C;put&#x201D; one-tenth of the Shares for $50,000 plus accrued interest retroactive to December 1, 2012 less the value of sold shares.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> Second &#x201C;put&#x201D; period: December 1, 2013 to November 31, 2014. If the Shares (held &amp; previously sold) are valued at less than $970,000 then OU can &#x201C;put&#x201D; the remaining Shares for $485,000 plus accrued interest retroactive to December 1, 2012 less the value of shares previously sold or redeemed during the first &#x201C;put&#x201D;.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> 3DIcon &#x201C;Call&#x201D; Rights on the Shares</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> Commencing December 1, 2012, the Company shall have the right to &#x201C;call&#x201D; the Shares for an amount equal to $970,000 less the amount (if any) of prior Shares by OU including amounts &#x201C;put&#x201D; to 3DIcon.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> The Company has presented the Shares outside of deficit in the mezzanine section of the balance sheets, as the Agreement includes put rights, which are not solely within the control of the Company.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> The Agreement also amended the existing agreements between the Company and OU such that all intellectual property, including all inventions and or discoveries, patentable or un-patentable, developed before July 28, 2008 by OU under the SRA is owned by OU. All intellectual property, including all inventions and/or discoveries, patentable or un-patentable, developed jointly by the Company and OU at any time is jointly owned by the Company and OU. Finally, all intellectual property developed by the Company after July 28, 2008, including all inventions and or discoveries, patentable or un-patentable, is owned by the Company.</p> </div> <div style="font: 10pt Times New Roman, Times, Serif"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <b>Note 9 &#x2013; Subsequent Events</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <i>Reverse Stock Split</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <i>&#xA0;</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> On April 27, 2012, 3DIcon Corporation, an Oklahoma corporation filed an Amended Certificate of Incorporation to effect a 1-for-35 reverse split of the Company&#x2019;s common stock. The reverse stock split was announced by Financial Industry Regulatory Authority on April 26, 2012 and became effective on April 27, 2012. As previously reported on the Company&#x2019;s Current Report on Form 8-K, filed on October 20, 2011, this action followed a stockholder vote at the Company&#x2019;s annual meeting of the stockholders of the Company, which vote authorized the Company&#x2019;s Board of Directors to effect a reverse stock split of the Company&#x2019;s authorized, issued and outstanding common stock.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> On April 27, 2012, the effective date, every 35 shares of the Company&#x2019;s issued and outstanding common stock were combined into one share of common stock. The Company did not issue any fractional shares in connection with the reverse stock split. Stockholders of record who otherwise would have been entitled to receive fractional shares will be entitled, upon surrender to our transfer agent of certificates representing such shares, cash in lieu thereof.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <i>Debentures payable</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> In accordance with the terms of the Second Debenture an event of default occurs if the common stock of the Company trades at a price per share of $0.21 or lower. The trading price was at $0.21 or lower on several occasions during the period ended March 31, 2012 and subsequent to March 31, 2012.&#xA0; On each of the occasions Golden State, by letter agreements, agreed that the occasions did not constitute a default and thereby waived the default provision for the occasions.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> Subsequent to March 31, 2012 Golden State advanced $100,000 of warrant exercise advances on the 4.75% convertible debenture.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <i>Common stock issued for services and liabilities</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> Subsequent to March 31, 2012 post-split shares of common stock totaling 102,041 were issued for consulting services for which the Company recognized $15,750 of expense.&#xA0;Additionally post-split shares totaling 1,005,724 we issued for accounts payable for which the Company reduced the accounts payable liability by $376,850.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <i>Equity Incentive Stock Plan</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <i>&#xA0;</i></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> In April 2012 the Company established the 3DIcon Corporation 2012 Equity Incentive Plan (the "2012 EIP"). The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2012 EIP shall not exceed five million (5,000,000) post-split shares.&#xA0;&#xA0;The shares are included in a registration statement filed May 3, 2012. Post-split shares totaling 1,107,765 were issued from the 2012 EIP subsequent to March 31, 2012 for services rendered and to satisfy accounts payable to the Company. 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(&#x201C;AOT&#x201D;) in the Second Judicial District Court of New Mexico, County of Bernalillo.&#xA0; On May 11, 2012, the Company and AOT entered a settlement agreement pursuant to which the parties agreed to discontinue all legal proceedings and AOT agreed to take all legal action to withdraw the Complaint.&#xA0; In connection therewith, the Company agreed to pay AOT $95,125.</p> </div> <div style="font: 10pt Times New Roman, Times, Serif"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <b>Note 6 &#x2013; Incentive Stock Plan</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> In January 2011 the Company established the 3DIcon Corporation 2011 Equity Incentive Stock Plan (the "2011 EIP"). The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2011 EIP shall not exceed one hundred million (100,000,000) shares.&#xA0;&#xA0;The shares are included in a registration statement filed January 14, 2011. Shares totaling 10,525,369 were issued from the 2011 EIP during the period ended March 31, 2012 for services rendered and to satisfy accounts payable to the Company. 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John O&#x2019;Connor, a director of 3DIcon, is the Chairman of Newton, O&#x2019;Connor, Turner &amp; Ketchum.&#xA0;&#xA0;&#xA0;During the periods ended March 31, 2012 and 2011, the Company incurred legal fees to Newton, O&#x2019;Connor, Turner &amp; Ketchum in the amount of $1,479 and $29,461, respectively.</p> </div> <div style="font: 10pt Times New Roman, Times, Serif"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> <b>Note 3 &#x2013; OCAST Grant</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> The Oklahoma Center for the Advancement of Science and Technology approved the Company&#x2019;s application for funding of a matching grant titled 800 Million Voxels Volumetric Display, on November 19, 2008.&#xA0; The two-year matching grant, totaling $299,932, had&#xA0;a start date of January 1, 2009.&#xA0; The Company received approval for our no cost extension request for the first year of the contract. With the new modification, the first year ended on August 31, 2010.&#xA0;&#xA0;The award is for a maximum of $149,940 for 2009 and the remainder for 2011.&#xA0; The Company earned 52,649 and $30,000 from the grant during the three-month periods ended March 31, 2012 and 2011, respectively and $270,473 from inception to date.&#xA0; The Company received approval for our no cost extension request for the second year of the contract and, with&#xA0;the new modification, the second year ends on August 31, 2012.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> &#xA0;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> During the three-month periods ended March 31, 2012 and 2011, the Company charged operations $4,890 and $8,456, respectively, pursuant to the direct costs incurred and for the use of the OU lab facilities in regard to the OCAST grant. 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    Summary of Significant Accounting Policies
    12 Months Ended
    Dec. 31, 2011
    Summary of Significant Accounting Policies

    Note 2 – Summary of Significant Accounting Policies

     

    Research and development

     

    Research and development costs, including payments made to the University of Oklahoma pursuant to the SRA, are expensed as incurred (see Note 4).

     

    Stock-based compensation

     

    The Company accounts for stock-based compensation arrangements for employees in accordance with Accounting Standards Codification ("ASC") No. 718, Compensation-Stock Compensation. The Company recognizes expenses for employee services received in exchange for stock based compensation based on the grant-date fair value of the shares awarded. The Company accounts for stock issued to non-employees in accordance with the provisions of ASC No. 718.

     

    Income taxes

     

    The Company accounts for income taxes in accordance with ASC No. 740, Income Taxes. This standard requires the recognition of deferred tax assets and liabilities for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In addition, this standard requires the recognition of future tax benefits, such as net operating loss carry forwards, to the extent that realization of such benefits is more likely than not. The amount of deferred tax liabilities or assets is calculated using tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized.

     

    Net income (loss) per common share

     

    The Company computes net income (loss) per share in accordance with ASC No. 260, Earnings Per Share. Under the provisions of this standard, basic net income (loss) per common share is based on the weighted-average outstanding common shares. Diluted net income (loss) per common share is based on the weighted-average outstanding shares adjusted for the dilutive effect of warrants to purchase common stock and convertible debentures. Due to the Company's losses, such potentially dilutive securities are anti-dilutive for all periods presented. The weighted average number of potentially dilutive shares is 90,616,272 and 98,856,063 for the years ended December 31, 2011 and 2010, respectively.

     

    Use of estimates

     

    The preparation of financial statements in conformity with U. S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. Actual results could differ from the estimates and assumptions used.

     

    Debt issue costs

     

    The Company defers and amortizes the legal and filing fees associated with long-term debt that is issued. These costs are primarily related to the convertible debentures, the majority of which have a three-year term. The amortization is charged to operations over the three-year term and then adjusted quarterly for debenture conversions to common stock.

     

    Fair value of financial instruments

     

    The following methods and assumptions were used to estimate the fair value of each class of financial instrument held by the Company:

     

    Current assets and current liabilities – The carrying value approximates fair value due to the short maturity of these items.

     

    Debentures payable – The fair value of the Company's debentures payable has been estimated by the Company based upon the liability's characteristics, including interest rate. The carrying value approximates fair value.

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    Organization and Operations
    12 Months Ended
    Dec. 31, 2011
    Organization and Operations

    Note 1 – Organization and Operations

     

    Organization

     

    3DIcon Corporation (the "Company") was incorporated on August 11, 1995, under the laws of the State of Oklahoma as First Keating Corporation. The articles of incorporation were amended August 1, 2003 to change the name to 3DIcon Corporation. The initial focus of First Keating Corporation was to market and distribute books written by its founder, Martin Keating. During 2001, First Keating Corporation began to focus on the development of 360-degree holographic technology. The effective date of this transition is January 1, 2001, and the financial information presented is from that date through the current period. The Company has accounted for this transition as reorganization and accordingly, restated its capital accounts as of January 1, 2001. From January 1, 2001, the Company's primary activity has been the raising of capital in order to pursue its goal of becoming a significant participant in the development, commercialization and marketing of next generation 3D display technologies.

     

    The mission of the company is to develop (or acquire), commercialize, and market next generation 3D display technologies including auto-stereoscopic (glasses-free) volumetric 360-degree full-color 3D displays and possibly auto-stereoscopic (glasses-free) flat screen 3D displays. Our initial market focus is on business, industrial, and government applications of the technologies. At this time the Company owns no intellectual property in 3D displays but does own the exclusive worldwide rights to commercial and government usage of the 3D display intellectual property developed by the University of Oklahoma.

     

    Uncertainties

     

    The accompanying financial statements have been prepared on a going concern basis. The Company is in the development stage and has insufficient revenue and capital commitments to fund the development of its planned product and to pay operating expenses.

     

    The Company has realized a cumulative net loss of $16,421,120 for the period from inception (January 1, 2001) to December 31, 2011, and a net loss of $2,320,469 and $1,523,737 for the years ended December 31, 2011 and 2010, respectively.

     

    The ability of the Company to continue as a going concern during the next year depends on the successful completion of the Company's capital raising efforts to fund the development of its planned technologies.  The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

     

    Management plans to fund the future operations of the Company with existing cash of $17,666, grants and investor funding. Under the terms of the Golden State debentures, Golden State may advance an additional $378,787. The additional advance would be available if the Company filed a registration statement; however, the Company does not plan to file such registration statement. In addition, pursuant to the 4.75% Convertible Debenture due on December 31, 2014, beginning in November 2007, Golden State is obligated to submit conversion notices in an amount such that Golden State receives 1% of the outstanding shares of the Company every calendar quarter for a period of one year. In connection with each conversion, Golden State is expected to exercise warrants equal to 10 times the amount of principal converted. The warrants are exercisable at $10.90 per share. The number of warrants exercisable is subject to certain beneficial ownership limitations contained in the 4.75% Debenture and the warrants ("the Beneficial Ownership Limitations"). The Beneficial Ownership Limitations prevent Golden State from converting on the 4.75% Debenture or exercising warrants if such conversion or exercise would cause Golden State's holdings to exceed 9.99% of the Company's issued and outstanding common stock. Subject to the Beneficial Ownership Limitations, Golden State is required to convert $3,000 of the 4.75% Convertible Debenture and exercise 30,000 warrants per month. Based upon our current stock price, our issued and outstanding shares as of December 31, 2011 and ignoring the impact of the Beneficial Ownership Limitations, the Company may receive up to $981,000 in funding from Golden State as a result of warrant exercises during the year ended December 31, 2012.

     

    The Company was approved for a matching grant from Oklahoma Center for the Advancement of Science and Technology (“OCAST”) on November 19, 2008 in the amount of approximately $300,000.  There remains $82,176 of grant funds to be provided through the end of the grant period, February 28, 2012.  (see Note 5 and Note 14)

     

    Additionally, the Company is continuing to pursue financing through private offering of debt or common stock.

    XML 17 R2.htm IDEA: XBRL DOCUMENT v2.4.0.6
    BALANCE SHEETS (USD $)
    Mar. 31, 2012
    Dec. 31, 2011
    Dec. 31, 2010
    Current assets:      
    Cash $ 81,286 $ 17,666 $ 367,101
    Prepaid expenses 51,510 35,435 21,771
    Accounts receivable 40,816 17,000 7,092
    Total current assets 173,612 70,101 395,964
    Net property and equipment 8,427 9,809 15,709
    Deposits-other 2,315 2,315 2,315
    Total Assets 184,354 82,225 413,988
    Current liabilities:      
    Current maturities of convertible debentures payable     403,445
    Warrant exercise advances 200,001 16,542  
    Accounts payable 695,020 698,131 203,590
    Accrued salaries 17,987 13,189 501,362
    Accrued interest on debentures 1,464 1,799 41,174
    Total current liabilities 914,472 729,661 1,149,571
    Convertible debentures payable 111,781 113,444  
    Promissory notes, 5%, due 2013     400,878
    Accrued interest due 2013     4,120
    Long term debt 111,781 113,444 404,998
    Total Liabilities 1,026,253 843,105 1,554,569
    Common stock subject to put rights and call rights value 485,649 485,649 485,649
    Stockholders' deficiency:      
    Common stock value 6,790 230,501 151,508
    Additional paid-in capital 15,464,489 14,944,090 12,322,913
    Deficit accumulated during development stage (16,798,827) (16,421,120) (14,100,651)
    Total Stockholders' Deficiency (1,327,548) (1,246,529) (1,626,230)
    Total Liabilities and Stockholders' Deficiency $ 184,354 $ 82,225 $ 413,988
    XML 18 R6.htm IDEA: XBRL DOCUMENT v2.4.0.6
    STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY (USD $)
    3 Months Ended 12 Months Ended 3 Months Ended 12 Months Ended 3 Months Ended 12 Months Ended 3 Months Ended 12 Months Ended 3 Months Ended 12 Months Ended 3 Months Ended 12 Months Ended 3 Months Ended 12 Months Ended 3 Months Ended 12 Months Ended 3 Months Ended 12 Months Ended 3 Months Ended 12 Months Ended
    Mar. 31, 2012
    Dec. 31, 2011
    Dec. 31, 2010
    Dec. 31, 2009
    Dec. 31, 2008
    Dec. 31, 2007
    Dec. 31, 2006
    Dec. 31, 2005
    Dec. 31, 2004
    Dec. 31, 2003
    Dec. 31, 2002
    Dec. 31, 2001
    Mar. 31, 2012
    Stock issued for services
    Dec. 31, 2011
    Stock issued for services
    Dec. 31, 2010
    Stock issued for services
    Dec. 31, 2009
    Stock issued for services
    Dec. 31, 2008
    Stock issued for services
    Dec. 31, 2007
    Stock issued for services
    Dec. 31, 2006
    Stock issued for services
    Dec. 31, 2005
    Stock issued for services
    Dec. 31, 2004
    Stock issued for services
    Dec. 31, 2003
    Stock issued for services
    Dec. 31, 2002
    Stock issued for services
    Dec. 31, 2001
    Stock issued for services
    Dec. 31, 2010
    Stock issued for cash
    Dec. 31, 2009
    Stock issued for cash
    Dec. 31, 2008
    Stock issued for cash
    Dec. 31, 2007
    Stock issued for cash
    Dec. 31, 2006
    Stock issued for cash
    Dec. 31, 2005
    Stock issued for cash
    Dec. 31, 2004
    Stock issued for cash
    Dec. 31, 2003
    Stock issued for cash
    Dec. 31, 2002
    Stock issued for cash
    Dec. 31, 2001
    Stock issued for cash
    Dec. 31, 2005
    Warrants issued to purchase common stock at $.025
    Dec. 31, 2004
    Warrants issued to purchase common stock at $.025
    Dec. 31, 2005
    Warrants issued to purchase common stock at $.05
    Dec. 31, 2004
    Warrants issued to purchase common stock at $.05
    Mar. 31, 2012
    Stock issued to settle liabilities
    Dec. 31, 2011
    Stock issued to settle liabilities
    Dec. 31, 2010
    Stock issued to settle liabilities
    Dec. 31, 2005
    Stock issued to settle liabilities
    Dec. 31, 2011
    Stock issued for interest
    Dec. 31, 2010
    Stock issued for interest
    Dec. 31, 2009
    Stock issued for interest
    Dec. 31, 2007
    Stock issued for interest
    Dec. 31, 2009
    Accounts payable
    Mar. 31, 2012
    Common Stock
    Dec. 31, 2011
    Common Stock
    Dec. 31, 2010
    Common Stock
    Dec. 31, 2009
    Common Stock
    Dec. 31, 2008
    Common Stock
    Dec. 31, 2007
    Common Stock
    Dec. 31, 2006
    Common Stock
    Dec. 31, 2005
    Common Stock
    Dec. 31, 2004
    Common Stock
    Dec. 31, 2003
    Common Stock
    Dec. 31, 2001
    Common Stock
    Dec. 31, 2000
    Common Stock
    Mar. 31, 2012
    Common Stock
    Stock issued for services
    Dec. 31, 2011
    Common Stock
    Stock issued for services
    Dec. 31, 2010
    Common Stock
    Stock issued for services
    Dec. 31, 2009
    Common Stock
    Stock issued for services
    Dec. 31, 2008
    Common Stock
    Stock issued for services
    Dec. 31, 2007
    Common Stock
    Stock issued for services
    Dec. 31, 2006
    Common Stock
    Stock issued for services
    Dec. 31, 2005
    Common Stock
    Stock issued for services
    Dec. 31, 2004
    Common Stock
    Stock issued for services
    Dec. 31, 2003
    Common Stock
    Stock issued for services
    Dec. 31, 2002
    Common Stock
    Stock issued for services
    Dec. 31, 2001
    Common Stock
    Stock issued for services
    Dec. 31, 2010
    Common Stock
    Stock issued for cash
    Dec. 31, 2009
    Common Stock
    Stock issued for cash
    Dec. 31, 2008
    Common Stock
    Stock issued for cash
    Dec. 31, 2007
    Common Stock
    Stock issued for cash
    Dec. 31, 2006
    Common Stock
    Stock issued for cash
    Dec. 31, 2005
    Common Stock
    Stock issued for cash
    Dec. 31, 2004
    Common Stock
    Stock issued for cash
    Dec. 31, 2003
    Common Stock
    Stock issued for cash
    Dec. 31, 2002
    Common Stock
    Stock issued for cash
    Dec. 31, 2001
    Common Stock
    Stock issued for cash
    Dec. 31, 2004
    Common Stock
    Additional founders shares issued
    Mar. 31, 2012
    Common Stock
    Stock issued to settle liabilities
    Dec. 31, 2011
    Common Stock
    Stock issued to settle liabilities
    Dec. 31, 2010
    Common Stock
    Stock issued to settle liabilities
    Dec. 31, 2005
    Common Stock
    Stock issued to settle liabilities
    Dec. 31, 2011
    Common Stock
    Stock issued for interest
    Dec. 31, 2010
    Common Stock
    Stock issued for interest
    Dec. 31, 2009
    Common Stock
    Stock issued for interest
    Dec. 31, 2007
    Common Stock
    Stock issued for interest
    Dec. 31, 2009
    Common Stock
    Accounts payable
    Mar. 31, 2012
    Additional Paid-In Capital
    Dec. 31, 2011
    Additional Paid-In Capital
    Dec. 31, 2010
    Additional Paid-In Capital
    Dec. 31, 2009
    Additional Paid-In Capital
    Dec. 31, 2008
    Additional Paid-In Capital
    Dec. 31, 2007
    Additional Paid-In Capital
    Dec. 31, 2006
    Additional Paid-In Capital
    Dec. 31, 2005
    Additional Paid-In Capital
    Dec. 31, 2004
    Additional Paid-In Capital
    Dec. 31, 2003
    Additional Paid-In Capital
    Dec. 31, 2001
    Additional Paid-In Capital
    Dec. 31, 2000
    Additional Paid-In Capital
    Mar. 31, 2012
    Additional Paid-In Capital
    Stock issued for services
    Dec. 31, 2011
    Additional Paid-In Capital
    Stock issued for services
    Dec. 31, 2010
    Additional Paid-In Capital
    Stock issued for services
    Dec. 31, 2009
    Additional Paid-In Capital
    Stock issued for services
    Dec. 31, 2008
    Additional Paid-In Capital
    Stock issued for services
    Dec. 31, 2007
    Additional Paid-In Capital
    Stock issued for services
    Dec. 31, 2006
    Additional Paid-In Capital
    Stock issued for services
    Dec. 31, 2005
    Additional Paid-In Capital
    Stock issued for services
    Dec. 31, 2004
    Additional Paid-In Capital
    Stock issued for services
    Dec. 31, 2002
    Additional Paid-In Capital
    Stock issued for services
    Dec. 31, 2001
    Additional Paid-In Capital
    Stock issued for services
    Dec. 31, 2010
    Additional Paid-In Capital
    Stock issued for cash
    Dec. 31, 2009
    Additional Paid-In Capital
    Stock issued for cash
    Dec. 31, 2008
    Additional Paid-In Capital
    Stock issued for cash
    Dec. 31, 2007
    Additional Paid-In Capital
    Stock issued for cash
    Dec. 31, 2006
    Additional Paid-In Capital
    Stock issued for cash
    Dec. 31, 2005
    Additional Paid-In Capital
    Stock issued for cash
    Dec. 31, 2004
    Additional Paid-In Capital
    Stock issued for cash
    Dec. 31, 2003
    Additional Paid-In Capital
    Stock issued for cash
    Dec. 31, 2002
    Additional Paid-In Capital
    Stock issued for cash
    Dec. 31, 2001
    Additional Paid-In Capital
    Stock issued for cash
    Dec. 31, 2004
    Additional Paid-In Capital
    Additional founders shares issued
    Dec. 31, 2005
    Additional Paid-In Capital
    Warrants issued to purchase common stock at $.025
    Dec. 31, 2004
    Additional Paid-In Capital
    Warrants issued to purchase common stock at $.025
    Dec. 31, 2005
    Additional Paid-In Capital
    Warrants issued to purchase common stock at $.05
    Dec. 31, 2004
    Additional Paid-In Capital
    Warrants issued to purchase common stock at $.05
    Mar. 31, 2012
    Additional Paid-In Capital
    Stock issued to settle liabilities
    Dec. 31, 2011
    Additional Paid-In Capital
    Stock issued to settle liabilities
    Dec. 31, 2010
    Additional Paid-In Capital
    Stock issued to settle liabilities
    Dec. 31, 2005
    Additional Paid-In Capital
    Stock issued to settle liabilities
    Dec. 31, 2011
    Additional Paid-In Capital
    Stock issued for interest
    Dec. 31, 2010
    Additional Paid-In Capital
    Stock issued for interest
    Dec. 31, 2009
    Additional Paid-In Capital
    Stock issued for interest
    Dec. 31, 2007
    Additional Paid-In Capital
    Stock issued for interest
    Dec. 31, 2009
    Additional Paid-In Capital
    Accounts payable
    Mar. 31, 2012
    Deficit Accumulated During the Development Stage
    Dec. 31, 2011
    Deficit Accumulated During the Development Stage
    Dec. 31, 2010
    Deficit Accumulated During the Development Stage
    Dec. 31, 2009
    Deficit Accumulated During the Development Stage
    Dec. 31, 2008
    Deficit Accumulated During the Development Stage
    Dec. 31, 2007
    Deficit Accumulated During the Development Stage
    Dec. 31, 2006
    Deficit Accumulated During the Development Stage
    Dec. 31, 2005
    Deficit Accumulated During the Development Stage
    Dec. 31, 2004
    Deficit Accumulated During the Development Stage
    Dec. 31, 2003
    Deficit Accumulated During the Development Stage
    Dec. 31, 2002
    Deficit Accumulated During the Development Stage
    Dec. 31, 2001
    Deficit Accumulated During the Development Stage
    Beginning Balance (in shares)                                                                                               1,152,502,875 757,539,307 343,690,812 157,515,766 127,125,232 98,336,656 73,947,656 56,737,656 5,241,656 35,689,560 31,133,560 27,723,750                                                                                                                                                                                      
    Beginning Balance $ (1,246,529) $ (1,626,230) $ (1,792,157) $ (2,211,746) $ (921,198) $ (881,748) $ (386,897) $ (369,457) $ 20,929 $ 112,433 $ 162,972 $ 221,212                                                                       $ 230,501 $ 151,508 $ 68,738 $ 31,503 $ 25,425 $ 19,666 $ 14,789 $ 11,347 $ 1,048 $ 35,690 $ 31,134 $ 27,724                                                                 $ 14,944,090 $ 12,322,913 $ 10,716,019 $ 8,766,830 $ 6,451,906 $ 2,568,119 $ 1,597,959 $ 1,026,030 $ 808,840 $ 723,851 $ 451,059 $ 193,488                                                                       $ (16,421,120) $ (14,100,651) $ (12,576,914) $ (11,010,079) $ (7,398,529) $ (3,469,533) $ (1,999,645) $ (1,406,834) $ (788,959) $ (647,108) $ (319,221)  
    Warrants and options exercised (in shares)                                                                                               16,635 12,308,915                                                                                                                                                                                                          
    Warrants and options exercised 181,321 756,840                                                                                           3 2,462                                                                                     181,318 754,378                                                                                                                  
    Stock warrants exercised (in shares)                                                                                                   47,523 35,100 1,347,261     5,260,000 2,100,000                                                                                                                                                                                            
    Stock warrants exercised     518,000 382,590 362,694     174,000 61,000                                                                                 9 7 269     1,052 420                                                                           517,991 382,583 362,425     172,948 60,580                                                                                                    
    Accrue compensation earned but unrecorded                   (90,000) (60,000) (60,000)                                                                                                                                                                                                                                                                               (90,000) (60,000) (60,000)
    Stock based compensation 34,840 285,600 418,112   654,199 1,274,666                                                                                                                                                                           34,840 285,600 418,112   654,199 1,274,666                                                                                                          
    Debentures converted (in shares)                                                                                               25,049,954 252,267,600 255,650,977 77,451,141 15,257,163 17,215,200 3,000,000                                                                                                                                                                                                
    Debentures converted 1,663 703,546 279,191 483,004 965,309 1,677,183 150,000                                                                                 5,010 50,453 51,130 15,490 3,052 3,442 600                                                                           (3,347) 653,093 228,061 467,514 962,257 1,673,741 149,400                                                                                                        
    Options exercised and escrowed shares (in shares)                                                                                                       8,671,460 222,707                                                                                                                                                                                                  
    Options exercised and escrowed shares                                                                                                       1,734 45                                                                                     (1,734) (45)                                                                                                          
    Stock issued (in shares)                                                                                                                       7,437,643 30,072,595 97,684,416 68,506,130 4,598,973 817,727 4,700,000 5,850,000 24,036,000 15,347,000 3,077,000 2,681,310 5,714,286 20,607,841 515,677 1,188,960 200,000 1,100,000 360,000 1,380,000 1,479,000 728,500 25,000,000 3,213,589 97,530,393 48,657,897 5,000,000 7,094,511 6,093,396 8,310,128 767,026 11,264,706                                                                                                                      
    Stock issued                         42,100 355,205 232,886 538,354 313,800 155,426 206,537 26,371 76,489 15,347 129,448 188,131 10,000 202,000 25,000 192,136 16,200 72,300 28,808 35,000 147,900 72,850         36,764 556,027 214,414 100,000 42,952 17,061 43,309 38,351 323,662                         1,488 6,015 19,538 13,701 920 164 940 1,170 4,807 15,347 3,077 2,681 1,143 4,122 103 238 40 220 72 1,380 1,479 729 5,000 642 19,506 9,732 1,000 1,419 1,218 1,662 153 2,253                         40,612 349,190 213,348 524,653 312,880 155,262 205,597 25,201 71,682 126,371 185,450 8,857 197,878 24,897 191,898 16,160 72,080 28,736 33,620 146,421 72,121 (5,000)         36,122 536,521 204,682 99,000 41,533 15,843 41,647 38,198 321,409                        
    Escrowed shares cancelled (in shares)                                                                                                 (4,310,446)                                                                                                                                                                                                          
    Escrowed shares cancelled                                                                                                 (862)                                                                                       862                                                                                                                  
    Warrants issued           87,864 33,800                                                       62,300 18,900 140,400 42,292                 13,505                                                                                                   87,864 33,800                                                       62,300 18,900 140,400 42,292                 13,505                        
    Warrants converted to purchase common stock (in shares)                                                                                                         8,585,956 16,489,000                                                                                                                                                                                                
    Warrants converted to purchase common stock           463,920 568,500                                                                                           1,717 3,297                                                                                     462,203 565,203                                                                                                        
    Reverse split (in shares)                                                                                               (1,154,271,533)                 (47,174,904)                                                                                                                                                                                          
    Retrospective adjustment for the 1:35 reverse common stock split                                                                                               (230,854)                                                                                       230,854                                                                                                                    
    Par value $0.0001 to $0.0002                                                                                                                 (51,369)                                                                                       51,369                                                                                                  
    Net loss (377,707) (2,320,469) (1,523,737) (1,566,835) (3,611,550) (3,928,996) (1,469,888) (592,811) (617,875) (51,851) (267,887) (259,221)                                                                                                                                                                                                                                                             (377,707) (2,320,469) (1,523,737) (1,566,835) (3,611,550) (3,928,996) (1,469,888) (592,811) (617,875) (51,851) (267,887) (259,221)
    Ending Balance (in shares)                                                                                               33,949,163 1,152,502,875 757,539,307 343,690,812 157,515,766 127,125,232 98,336,656 73,947,656 56,737,656 5,241,656 31,133,560 27,723,750                                                                                                                                                                                      
    Ending Balance $ (1,327,548) $ (1,246,529) $ (1,626,230) $ (1,792,157) $ (2,211,746) $ (921,198) $ (881,748) $ (386,897) $ (369,457) $ 20,929 $ 112,433 $ 162,972                                                                       $ 6,790 $ 230,501 $ 151,508 $ 68,738 $ 31,503 $ 25,425 $ 19,666 $ 14,789 $ 11,347 $ 1,048 $ 31,134 $ 27,724                                                                 $ 15,464,489 $ 14,944,090 $ 12,322,913 $ 10,716,019 $ 8,766,830 $ 6,451,906 $ 2,568,119 $ 1,597,959 $ 1,026,030 $ 808,840 $ 451,059 $ 193,488                                                                       $ (16,798,827) $ (16,421,120) $ (14,100,651) $ (12,576,914) $ (11,010,079) $ (7,398,529) $ (3,469,533) $ (1,999,645) $ (1,406,834) $ (788,959) $ (647,108) $ (319,221)
    XML 19 R22.htm IDEA: XBRL DOCUMENT v2.4.0.6
    Uncertainties and Use of Estimates
    3 Months Ended
    Mar. 31, 2012
    Uncertainties and Use of Estimates

    Note 1 – Uncertainties and Use of Estimates

     

    Basis of Presentation

     

    The accompanying financial statements of 3DIcon Corporation (the “Company”) have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures made are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company's year-end audited financial statements and related footnotes included in the previously filed 10-K. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company as of March 31, 2012, and the statements of its operations for the three months ended March 31, 2012 and 2011, and the period from inception (January 1, 2001) to March 31, 2012, and cash flows for the three month periods ended March 31, 2012 and 2011, and the period from inception (January 1, 2001) to March 31, 2012, have been included. The results of operations for interim periods may not be indicative of the results which may be realized for the full year.

     

    Use of Estimates

     

    The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. Actual results could differ from the estimates and assumptions used.

     

    Revenue Recognition

     

    Revenues from software license fees are accounted for in accordance with Accounting Standards Codification (“ASC”) 985-605, “Software Revenue Recognition”.  The Company recognizes revenue when (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) the sales price is fixed or determinable; and (iv) collectability is reasonably assured.

     

    Grant revenue is recognized when earned.

     

    Recent Accounting Pronouncements

     

    Based on management's assessment no new accounting standards, if adopted, would have a material impact on the accompanying financial statements.

     

    Uncertainties

     

    The accompanying financial statements have been prepared on a going concern basis.  The Company is in the development stage and has insufficient revenue and capital commitments to fund the development of its planned product and to pay operating expenses.

     

    The Company has realized a cumulative net loss of $16,798,827 for the period from inception (January 1, 2001) to March 31, 2012, and a net loss of $377,707 and $356,608 for the three months ended March 31, 2012 and 2011, respectively.

     

    The ability of the Company to continue as a going concern during the next year depends on the successful completion of the Company's capital raising efforts to fund the development of its planned products.  The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

     

    Management plans to fund the future operations of the Company with existing cash, grants and investor funding. Under the terms of the Golden State debentures, as further described in Note 4, Golden State may advance an additional $378,787.  The additional advance would be available if the Company filed a registration statement; however, the Company does not plan to file such registration statement. In addition, pursuant to the 4.75% Convertible Debenture due in December 2014, beginning in November 2007, Golden State is obligated to submit conversion notices in an amount such that Golden State receives 1% of the outstanding shares of the Company every calendar quarter for a period of one year.  In connection with each conversion, Golden State is expected to exercise warrants equal to ten times the amount of principal converted.  The warrants are exercisable at $10.90 per share.  The number of warrants exercisable is subject to certain beneficial ownership limitations contained in the 4.75% Convertible Debenture (“the Beneficial Ownership Limitations”).  The Beneficial Ownership Limitations prevent Golden State from converting on the 4.75% Convertible Debenture or exercising warrants if such conversion or exercise would cause Golden State’s holdings to exceed 9.99% of the Company’s issued and outstanding common stock.  Subject to the Beneficial Ownership Limitations, Golden State is required to convert $3,000 of the 4.75% Convertible Debenture and exercise 30,000 warrants per month.  Based upon our current stock price, our issued and outstanding shares as of March 31, 2012 and ignoring the impact of the Beneficial Ownership Limitations, the Company may receive up to $981,000 in funding from Golden State as a result of warrant exercises during the year ended December 31, 2012. During the three months ended March 31, 2012, the Company received $364,780 in funding under the terms of the 4.75% Convertible Debenture (see Note 4). 

     

     

    The Company was approved for a matching grant from Oklahoma Center for the Advancement of Science and Technology (“OCAST”) on November 19, 2008 in the amount of approximately $300,000.  There remains $51,836 of grant funds to be provided through the end of the grant period, August 31, 2012.  (see Note 3)

     

    Additionally, the Company is continuing to pursue financing through private offerings of debt or common stock.

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    XML 21 R7.htm IDEA: XBRL DOCUMENT v2.4.0.6
    STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY (Parenthetical) (USD $)
    3 Months Ended 12 Months Ended
    Mar. 31, 2012
    Dec. 31, 2005
    Warrants issued to purchase common stock at $.025
    Dec. 31, 2004
    Warrants issued to purchase common stock at $.025
    Dec. 31, 2005
    Warrants issued to purchase common stock at $.05
    Dec. 31, 2004
    Warrants issued to purchase common stock at $.05
    Warrants issued to purchase common stock, per share   $ 0.025 $ 0.025 $ 0.05 $ 0.05
    Retrospective adjustment for the reverse common stock split, ratio 35        
    XML 22 R3.htm IDEA: XBRL DOCUMENT v2.4.0.6
    BALANCE SHEETS (Parenthetical) (USD $)
    Mar. 31, 2012
    Dec. 31, 2011
    Dec. 31, 2010
    Common stock subject to put rights and call rights, shares 1,685,714 59,000,000 59,000,000
    Common stock, par $ 0.0002 $ 0.0002 $ 0.0002
    Common stock, shares authorized 1,500,000,000 1,500,000,000 1,500,000,000
    Common stock, shares issued 33,949,163 1,152,502,875 757,539,307
    Common stock, shares outstanding 33,949,163 1,152,502,875 757,539,307
    XML 23 R17.htm IDEA: XBRL DOCUMENT v2.4.0.6
    Incentive Stock Plan
    3 Months Ended 12 Months Ended
    Mar. 31, 2012
    Dec. 31, 2011
    Incentive Stock Plan

    Note 6 – Incentive Stock Plan

     

    In January 2011 the Company established the 3DIcon Corporation 2011 Equity Incentive Stock Plan (the "2011 EIP"). The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2011 EIP shall not exceed one hundred million (100,000,000) shares.  The shares are included in a registration statement filed January 14, 2011. Shares totaling 10,525,369 were issued from the 2011 EIP during the period ended March 31, 2012 for services rendered and to satisfy accounts payable to the Company. There are currently 24,054,365 shares available for issuance under the 2011 EIP.

    Note 10 – Incentive Stock Plan

     

    In September 2009 the Company established the 3DIcon Corporation 2009 Incentive Stock Plan (the "2009 Plan"). The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2009 Plan shall not exceed 50,737,115 shares. The shares are included in a registration statement filed September 23, 2009. Shares totaling 14,422,012 and 36,315,103 were issued from the Plan during the years ended December 31, 2010 and 2009, respectively, for services rendered to the Company. There are no shares remaining for issuance under the 2009 Plan.

     

    In February 2010 the Company established the 3DIcon Corporation 2010 Incentive Stock Plan (the "2010 Plan"). The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2010 Plan shall not exceed seventy-five million (75,000,000) shares. The shares are included in a registration statement filed February 26, 2010. Shares totaling 3,089,027 and 71,910,973 were issued from the 2010 Plan during the years ended December 31, 2011 and 2010, respectively, for services rendered and to satisfy accounts payable to the Company. There are no shares remaining for issuance under the 2010 Plan.

     

    In June 2010 the Company established the 3DIcon Corporation 2010 Equity Incentive Stock Plan (the "2010 EIP"). The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2010 EIP shall not exceed sixty million (60,000,000) shares. The shares are included in a registration statement filed June 24, 2010. Shares totaling 1,490,672 and 58,509,328 were issued from the 2010 EIP during the years ended December 31, 2011 and 2010, respectively, for services rendered and to satisfy accounts payable to the Company. There are no shares available for issuance under the 2010 EIP.

     

    In January 2011 the Company established the 3DIcon Corporation 2011 Equity Incentive Plan (the "2011 EIP"). The 2011 EIP is designed to retain directors, executives and selected employees and consultants and reward them for making contributions to the success of the Company. These objectives are accomplished by making long-term incentive awards under the 2011 EIP thereby providing participants with a proprietary interest in the growth and performance of the Company. The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2011 EIP shall not exceed one hundred million (100,000,000) shares. The shares are included in a registration statement filed January 14, 2011. Shares totaling 53,893,572 were issued from the 2011 EIP for services rendered and to satisfy accounts payable to the Company. There are currently 46,106,428 shares available for issuance under the 2011 EIP.

    XML 24 R1.htm IDEA: XBRL DOCUMENT v2.4.0.6
    Document and Entity Information
    3 Months Ended
    Mar. 31, 2012
    Document Information [Line Items]  
    Document Type S-1
    Amendment Flag false
    Document Period End Date Mar. 31, 2012
    Trading Symbol TDCP
    Entity Registrant Name 3DICON CORP
    Entity Central Index Key 0001375195
    Entity Filer Category Smaller Reporting Company
    XML 25 R18.htm IDEA: XBRL DOCUMENT v2.4.0.6
    Office Lease
    3 Months Ended 12 Months Ended
    Mar. 31, 2012
    Dec. 31, 2011
    Office Lease

    Note 7 – Office Lease

     

    The Company signed an Office Lease Agreement (the “Lease Agreement”) on April 24, 2008. The Lease Agreement commenced on June 1, 2008 and expired June 1, 2011. On March 8, 2011 the Lease Agreement was amended to extend the expiration date to May 31, 2012.  At March 31, 2012, minimum future lease payments to be paid through May 31, 2012 under the non-cancelable operating lease for office space are $4,629.

    Note 11 – Office Lease

     

    The Company signed an Office Lease Agreement (the “Lease Agreement”) on April 24, 2008. The Lease Agreement commenced on June 1, 2008 and expired June 1, 2011. On March 8, 2011 the Lease Agreement was amended to extend the expiration date to May 31, 2012.  At December 31, 2011, minimum future lease payments to be paid through May 31, 2012 under the non-cancelable operating lease for office space are $11,573.

    XML 26 R4.htm IDEA: XBRL DOCUMENT v2.4.0.6
    STATEMENTS OF OPERATIONS (USD $)
    3 Months Ended 12 Months Ended 132 Months Ended 135 Months Ended
    Mar. 31, 2012
    Mar. 31, 2011
    Dec. 31, 2011
    Dec. 31, 2010
    Dec. 31, 2011
    Mar. 31, 2012
    Income:            
    Grant income $ 52,649 $ 30,000 $ 86,323 $ 96,362 $ 217,824 $ 270,473
    Sales   3,000 3,000 9,697 40,797 40,797
    License fee         25,000 25,000
    Total income 52,649 33,000 89,323 106,059 283,621 336,270
    Expenses:            
    Research and development 133,481 65,003 942,240 469,408 4,158,240 4,291,721
    General and administrative 294,994 296,252 1,430,365 1,084,419 12,111,659 12,406,653
    Interest 1,881 28,353 37,187 75,969 434,842 436,723
    Total expenses 430,356 389,608 2,409,792 1,629,796 16,704,741 17,135,097
    Net loss $ (377,707) $ (356,608) $ (2,320,469) $ (1,523,737) $ (16,421,120) $ (16,798,827)
    Loss per share:            
    Basic and diluted $ (0.0107) $ (0.0140) $ (0.002) $ (0.003)    
    Weighted average shares outstanding, Basic and diluted 35,409,004 25,418,470 1,086,576,438 532,386,253    
    XML 27 R12.htm IDEA: XBRL DOCUMENT v2.4.0.6
    OCAST Grant
    3 Months Ended 12 Months Ended
    Mar. 31, 2012
    Dec. 31, 2011
    OCAST Grant

    Note 3 – OCAST Grant

     

    The Oklahoma Center for the Advancement of Science and Technology approved the Company’s application for funding of a matching grant titled 800 Million Voxels Volumetric Display, on November 19, 2008.  The two-year matching grant, totaling $299,932, had a start date of January 1, 2009.  The Company received approval for our no cost extension request for the first year of the contract. With the new modification, the first year ended on August 31, 2010.  The award is for a maximum of $149,940 for 2009 and the remainder for 2011.  The Company earned 52,649 and $30,000 from the grant during the three-month periods ended March 31, 2012 and 2011, respectively and $270,473 from inception to date.  The Company received approval for our no cost extension request for the second year of the contract and, with the new modification, the second year ends on August 31, 2012.

     

    During the three-month periods ended March 31, 2012 and 2011, the Company charged operations $4,890 and $8,456, respectively, pursuant to the direct costs incurred and for the use of the OU lab facilities in regard to the OCAST grant. At March 31, 2012, the Company owed the University $4,890 in direct costs.

    Note 5 – OCAST Grant

     

    The Oklahoma Center for the Advancement of Science and Technology approved the Company’s application for funding of a matching grant titled 800 Million Voxels Volumetric Display, on November 19, 2008.  The two-year matching grant, totaling $299,932, had a start date of January 1, 2009.  The Company received approval for our no cost extension request for the first year of the contract. With the new modification, the first year ended on August 31, 2010.  The award is for a maximum of $149,940 for 2009 and the remainder for 2011.  The Company earned $86,323 and $96,361 from the grant during the twelve-month periods ended December 31, 2011 and 2010, respectively and $217,824 from inception to date.  The Company received approval for our no cost extension request for the second year of the contract and, with the new modification, the second year ends on February 28, 2012.

     

    During the years ended December 31, 2011 and 2010, the Company charged operations $37,363 and $43,884, respectively, pursuant to the direct costs incurred and for the use of the OU lab facilities in regard to the OCAST grant. At December 31, 2011, the Company owed the University $7,686 in direct costs.

    XML 28 R11.htm IDEA: XBRL DOCUMENT v2.4.0.6
    Sponsored Research Agreement ("SRA") Common Stock Subject to Put Rights and Call Right
    3 Months Ended 12 Months Ended
    Mar. 31, 2012
    Dec. 31, 2011
    Sponsored Research Agreement ("SRA") Common Stock Subject to Put Rights and Call Right

    Note 2 – Sponsored Research Agreement ("SRA") Common Stock Subject to Put Rights and Call Right

     

    Since April 20, 2002, the Company has entered into a number of Sponsored Research Agreements with the University of Oklahoma (“OU”) as follows:

     

    Phase I: “Pilot Study to Investigate Digital Holography”, April 20, 2004. The Company paid OU $14,116.

     

    Phase II: “Investigation of 3-Dimensional Display Technologies”, April 15, 2005, as amended. The Company paid OU $528,843.

     

    Phase III: “3-Dimensional Display Development”. The Company made partial payment to OU by issuing 4,264,707 shares with a market price of $290,000 on October 14, 2008 and final payment on December 1, 2010 in the amount of $525,481 of which $40,481 was in cash and 59 million shares of Company stock (the “Shares”). The Shares are subject to an OU ‘put’ right and a 3Dicon ‘call’ right.

     

    OU “Put” Rights on the Shares

     

    First “put” period: December 1, 2012 to November 31, 2013. If the Shares (held plus previously sold) are valued at less than $100,000 then OU can “put” one-tenth of the Shares for $50,000 plus accrued interest retroactive to December 1, 2012 less the value of sold shares.

     

    Second “put” period: December 1, 2013 to November 31, 2014. If the Shares (held & previously sold) are valued at less than $970,000 then OU can “put” the remaining Shares for $485,000 plus accrued interest retroactive to December 1, 2012 less the value of shares previously sold or redeemed during the first “put”.

     

    3DIcon “Call” Rights on the Shares

     

    Commencing December 1, 2012, the Company shall have the right to “call” the Shares for an amount equal to $970,000 less the amount (if any) of prior Shares by OU including amounts “put” to 3DIcon.

     

    The Company has presented the Shares outside of deficit in the mezzanine section of the balance sheets, as the Agreement includes put rights, which are not solely within the control of the Company.

     

    The Agreement also amended the existing agreements between the Company and OU such that all intellectual property, including all inventions and or discoveries, patentable or un-patentable, developed before July 28, 2008 by OU under the SRA is owned by OU. All intellectual property, including all inventions and/or discoveries, patentable or un-patentable, developed jointly by the Company and OU at any time is jointly owned by the Company and OU. Finally, all intellectual property developed by the Company after July 28, 2008, including all inventions and or discoveries, patentable or un-patentable, is owned by the Company.

    Note 4 – Sponsored Research Agreement ("SRA") Common Stock Subject to Put Rights and Call Right

     

    Since April 20, 2002, the Company has entered into a number of Sponsored Research Agreements with the University of Oklahoma (“OU”) as follows:

     

    Phase I: “Pilot Study to Investigate Digital Holography”, April 20, 2004. The Company paid OU $14,116.

     

    Phase II: “Investigation of 3-Dimensional Display Technologies”, April 15, 2005, as amended. The Company paid OU $528,843.

     

    Phase III: “3-Dimensional Display Development”. The Company made partial payment to OU by issuing 4,264,707 shares with a market price of $290,000 on October 14, 2008 and final payment on December 1, 2010 in the amount of $525,481 of which $40,481 was in cash and 59 million shares of Company stock (the “Shares”). The Shares are subject to an OU ‘put’ right and a 3Dicon ‘call’ right.

     

    OU “Put” Rights on the Shares

     

    First “put” period: December 1, 2012 to November 31, 2013. If the Shares (held plus previously sold) are valued at less than $100,000 than OU can “put” one-tenth of the Shares for $50,000 plus accrued interest retro-active to December 1, 2012 less the value of sold shares.

     

    Second “put” period: December 1, 2013 to November 31, 2014. If the Shares (held & previously sold) are valued at less than $970,000 than OU can “put” the remaining Shares for $485,000 plus accrued interest retro-active to December 1, 2012 less the value of shares previously sold or redeemed during the first “put”.

     

    3DIcon “Call” rights on the Shares

     

    Commencing December 1, 2012, the Company shall have the right to “call” the Shares for an amount equal to $970,000 less the amount (if any) of prior Share shares by OU including amounts “put” to 3DIcon.

     

    The Company has presented the shares outside of deficit in the mezzanine section of the balance sheets, as the Agreement includes put rights, which are not solely within the control of the Company.

     

    The Agreement also amended the existing agreements between the Company and OU such that all intellectual property, including all inventions and or discoveries, patentable or un-patentable, developed before July 28, 2008 by OU under the SRA is owned by OU. All intellectual property, including all inventions and/or discoveries, patentable or un-patentable, developed jointly by the Company and OU at any time is jointly owned by the Company and OU. Finally, all intellectual property developed by the Company after July 28, 2008, including all inventions and or discoveries, patentable or un-patentable, is owned by the Company.

    XML 29 R19.htm IDEA: XBRL DOCUMENT v2.4.0.6
    Income Taxes
    12 Months Ended
    Dec. 31, 2011
    Income Taxes

    Note 12 – Income Taxes

     

    At December 31, 2011 and 2010, the Company had accumulated net operating losses of approximately $13,000,000 and $11,000,000, respectively, available to reduce future federal and state taxable income. Unless utilized, the loss carry forward amounts will begin to expire in 2013.

     

    Deferred tax assets resulting from the operating loss carry forward, are reduced by a valuation allowance.

     

    The deferred tax asset consisted of the following:

     

        December 31,     December 31,  
        2011     2010  
    Loss carry forward amount   $ 13,000,000     $ 11,000,000  
    Effective tax rate     38 %     38 %
    Deferred tax asset     4,940,000       4,180,000  
    Less valuation allowance     (4,940,000 )     (4,180,000 )
    Net deferred taxes   $ —       $ —    
    XML 30 R15.htm IDEA: XBRL DOCUMENT v2.4.0.6
    Convertible Promissory Notes 5%, Due 2013
    12 Months Ended
    Dec. 31, 2011
    Convertible Promissory Notes 5%, Due 2013

    Note 8 – Convertible Promissory Notes 5%, Due 2013

     

    In October 2010, the Company issued 5% Convertible Promissory Notes (the “Notes”) to six persons, in the aggregate, totaling $400,877. The Notes mature three years from the date issued. The Notes automatically convert to common stock of the Company at $0.0034 per share (the "Fixed Conversion Price") prior to March 15, 2011, upon the merger or consolidation of the Company with or into another person, the Company effects any sale of all or substantially all of its assets, any tender or exchange offer of the Company's common stock, or the Company effectively converts into or exchanges the Company's common stock for other securities, cash or property. Additionally, after March 15, 2011, at the option of the holder, the Notes are convertible into common stock of the Company at a price per share of $0.0025 (75% of the "Fixed Conversion Price"). Interest on the Notes accrue from the original issue date at 5% annually, is payable upon maturity or conversion of the Notes and such interest may be converted in whole or part to shares of common stock at the effective conversion price.

     

    At various dates during 2011, the six persons converted the $400,877 Notes and accrued interest of $9,020 into 163,631,653 shares of common stock at $0.0025 per share.  The shares are restricted under SEC Section 144.

    XML 31 R13.htm IDEA: XBRL DOCUMENT v2.4.0.6
    Consulting Agreements
    12 Months Ended
    Dec. 31, 2011
    Consulting Agreements

    Note 6 – Consulting Agreements

     

    Concordia Financial Group

     

    The Company entered into a one-year Independent Consulting Agreement with Concordia effective November 1, 2007, and month-to-month thereafter. Under the terms of the agreement Concordia will serve as liaison to Golden State Investors, Inc. and provide business strategy services by assisting the Company by reviewing and evaluating the Company's plans, personnel, board composition, technology, development of business models, building financial models for projections, developing materials to describe the Company, developing capital sources and assisting and advising the Company in its financial negotiations with capital sources. Concordia also advised with respect to effective registration of offerings of Company securities, the management team, the Company's development of near and long-term budgets, marketing strategies and plans, and assisted in presentations related to the above services. Concordia will be paid a monthly fee of $15,750. Concordia, at its option, may take up to 100% of this monthly fee in registered stock at 50% discount to market; and the Company, at its option, may pay up to 50% of Concordia's monthly invoice in registered stock, at 50% discount to market, provided that the payment of stock is made within ten (10) days of receipt of invoice and further provided that the stock trades above $.30 per share at any time during the last business day of the month. Market is defined as the five day average of closing prices immediately preceding the last business day of the calendar month in which the invoiced services were rendered. The Company incurred consulting fees of $189,000 for services from Concordia during each of the periods ended December 31, 2011 and 2010, under the terms of the agreement. Additionally, on May 10, 2011, the Board of Directors awarded Concordia 10,000,000 (ten million) shares of common stock with a value of $172,100, for consulting services which have gone above and beyond the contract. The common shares were valued at $0.01721 per share which was 50% of the average of the five previous day’s closing price.

    XML 32 R14.htm IDEA: XBRL DOCUMENT v2.4.0.6
    Debentures Payable
    3 Months Ended 12 Months Ended
    Mar. 31, 2012
    Dec. 31, 2011
    Debentures Payable

    Note 4 – Debentures Payable

     

    Debentures payable consist of the following:

     

        March 31, 2012     December 31, 2011  
    Senior Convertible Debentures:                
    6.25% Debenture due 2011   $ 31,788     $ 31,788  
    4.75% Debenture due 2011     79,993       81,656  
    Total Debentures     111,781       113,444  
    Less - Current Maturities     (111,781 )     (113,444 )
    Long-term Debentures   $ -     $ -  

     

    Securities Purchase Agreement

     

    6.25% Convertible Debenture due December 31, 2014

     

    On November 21, 2007, the Company issued and sold a convertible note in the principal amount of $1,250,000 to Golden State (the "Debenture"). Pursuant to the terms of the Debenture, Golden State may, at its election, convert all or a part of the Debenture into shares of the Company's common stock at a conversion rate equal to the lesser of (i) $2.00 or (ii) 90% of the average of the five lowest volume weighted average prices during the twenty trading days prior to Golden State's election to convert, subject to adjustment as provided in the Debenture. In addition, pursuant to the terms of the Debenture, the Company agreed to file a registration statement covering the shares of common stock issuable upon conversion or redemption of the Debenture. The Company filed a registration statement covering the shares to be issued upon conversion of the Debenture. Included in the registration statement were 4.25 million shares issuable on the Debenture based on 2007 market prices and assuming full conversion of the convertible debenture. The registration statement became effective on January 4, 2008.

     

    Golden State advanced $125,000 on the $1.25 million Debenture on November 9, 2007 and $746,213 in January 2008 at which time the Company placed 7,961,783 shares of common stock in escrow to be released as debentures are converted. As of September 30, 2011, Golden State has funded an aggregate of $871,213 on the Debenture. Golden State will be obligated to fund the Company for the remaining $378,787 in principal on the Debenture upon the effectiveness of a registration statement underlying the remaining unfunded principal balance on the Debenture. At this time, the Company has not filed a registration statement. At various dates during 2010, $274,438 of the Debenture was converted into 93,196,578 shares of common stock at prices ranging from $0.0027 to $0.004 based on the formula in the convertible debenture. Additionally shares totaling 6,093,396 were issued in payment of $17,062 of accrued interest during 2010. At various dates during 2011, $157,331 of the Debenture was converted into 16,156,404 shares of common stock at prices ranging from $0.0059 to $0.0174 based on the formula in the convertible debenture. Additionally $12,669 was added to the principle balance of the debenture in payment of accrued interest during 2011.

     

    The conversion price for the $1.25 million Debenture is the lesser of (i) $2.00 or (ii) 90% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion.  If Golden State elects to convert a portion of the debenture and, on the day that the election is made, the volume weighted average price is below $0.75, the Company shall have the right to prepay that portion of the debenture that Golden State elected to convert, plus any accrued and unpaid interest, at 135% of such amount.

     

    In addition to standard default provisions concerning timeliness of payments, delivery and notifications, the Second Debenture will be in default if the common stock of the Company trades at a price per share of $0.21 or lower, regardless of whether the trading price subsequently is higher than $0.21 per share. The trading price was at $0.21 or lower on several occasions during and subsequent to the period ended March 31, 2012. On each of the occasions Golden State, by separate letter agreements, agreed that the occasions did not constitute a default and thereby waived the default provision for those occasions only.  (See Note 9 Subsequent Events) 

     

    4.75% Convertible Debenture due November 3, 2011

     

     On November 3, 2006, the Company also issued to Golden State a 4.75% convertible debenture in a principal amount of $100,000, due 2011, and warrants to buy 1,000,000 shares of the common stock at an exercise price of $10.90 per share. Under the terms of the debenture, warrants are exercised in an amount equal to ten times the dollar amount of the debenture conversion. During 2010, Golden State converted $4,752 of the $100,000 debenture into 162,454,399 shares of common stock, exercised warrants to purchase 47,523 shares of common stock at $10.90 per share and advanced $251,489 against future exercises of warrants of which $300,000 was applied to the exercise of warrants leaving $-0- of unapplied advances at December 31, 2010. During 2011, Golden State converted $6,760 of the $100,000 debenture into 60,601,868, shares of common stock, exercised warrants to purchase 67,600 shares of common stock at $10.90 per share based on the formula in the convertible debenture. Additionally Golden Gate advanced $753,381 against future exercises of warrants of which $736,840 was applied to the exercise of warrants leaving $16,542 of unapplied advances at December 31, 2011. During 2012, Golden State converted $1,663 of the $100,000 debenture into 25,049,954 shares of common stock, exercised warrants to purchase 16,635 shares of common stock at $10.90 per share based on the formula in the convertible debenture. Additionally Golden Gate advanced $364,781 against future exercises of warrants of which $181,322 was applied to the exercise of warrants leaving $200,001 of unapplied advances at March 31, 2012.

     

    The conversion price for the 4.75% $100,000 convertible debenture is the lesser of (i) $4.00 or (ii) 80% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion. If Golden State elects to convert a portion of the debenture and, on the day that the election is made, the volume weighted average price is below $0.75, the Company shall have the right to prepay that portion of the debenture that Golden State elected to convert, plus any accrued and unpaid interest, at 135% of such amount.

    Note 7 – Debentures Payable

     

    Debentures payable consist of the following:

     

        December 31,
    2011
        December 31,
    2010
     
    Senior Convertible Debentures:                
    6.25% Debenture due 2014   $ 31,788     $ 189,120  
    4.75% Debenture due 2014     81,656       88,416  
    13.0% Debenture due 2011     —         100,703  
    13.0% Debenture due 2011     —         25,206  
    Total Debentures     113,444       403,445  
    Less - Current Maturities     —         (403,445 )
    Long-term Debentures   $ 113,444     $ —    

     

    Securities Purchase Agreement

     

    6.25% Convertible Debenture due December 31, 2014

     

    On November 21, 2007, the Company issued and sold a convertible note in the principal amount of $1,250,000 to Golden State (the "Debenture"). Pursuant to the terms of the Debenture, Golden State may, at its election, convert all or a part of the Debenture into shares of the Company's common stock at a conversion rate equal to the lesser of (i) $2.00 or (ii) 90% of the average of the five lowest volume weighted average prices during the twenty trading days prior to Golden State's election to convert, subject to adjustment as provided in the Debenture. In addition, pursuant to the terms of the Debenture, the Company agreed to file a registration statement covering the shares of common stock issuable upon conversion or redemption of the Debenture. The Company filed a registration statement covering the shares to be issued upon conversion of the Debenture. Included in the registration statement were 4.25 million shares issuable on the Debenture based on 2007 market prices and assuming full conversion of the convertible debenture. The registration statement became effective on January 4, 2008.

     

    Golden State advanced $125,000 on the $1.25 million Debenture on November 9, 2007 and $746,213 in January 2008 at which time the Company placed 7,961,783 shares of common stock in escrow to be released as debentures are converted. As of September 30, 2011, Golden State has funded an aggregate of $871,213 on the Debenture. Golden State will be obligated to fund the Company for the remaining $378,787 in principal on the Debenture upon the effectiveness of a registration statement underlying the remaining unfunded principal balance on the Debenture. At this time, the Company has not filed a registration statement. At various dates during 2010, $274,438 of the Debenture was converted into 93,196,578 shares of common stock at prices ranging from $0.0027 to $0.004 based on the formula in the convertible debenture. Additionally shares totaling 6,093,396 were issued in payment of $17,062 of accrued interest during 2010. At various dates during 2011, $157,331 of the Debenture was converted into 16,156,404 shares of common stock at prices ranging from $0.0059 to $0.0174 based on the formula in the convertible debenture. Additionally $12,669 was added to the principle balance of the debenture in payment of accrued interest during 2011.

     

    The conversion price for the $1.25 million Debenture is the lesser of (i) $2.00 or (ii) 90% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion.  If Golden State elects to convert a portion of the debenture and, on the day that the election is made, the volume weighted average price is below $0.75, the Company shall have the right to prepay that portion of the debenture that Golden State elected to convert, plus any accrued and unpaid interest, at 135% of such amount.

     

    In addition to standard default provisions concerning timeliness of payments, delivery and notifications, the Second Debenture will be in default if the common stock of the Company trades at a price per share of $0.21 or lower, regardless of whether the trading price subsequently is higher than $0.21 per share. The trading price was at $0.21 or lower on several occasions during and subsequent to the period ended December 31, 2011. On each of the occasions Golden State, by separate letter agreements, agreed that the occasions did not constitute a default and thereby waived the default provision for those occasions only.  (See Note 14 -Subsequent Events) 

     

     

    4.75% Convertible Debenture due December 31, 2014

     

    On November 3, 2006, the Company also issued to Golden State a 4.75% convertible debenture in a principal amount of $100,000, due 2011, and warrants to buy 1,000,000 shares of the common stock at an exercise price of $10.90 per share. Under the terms of the debenture, warrants are exercised in an amount equal to ten times the dollar amount of the debenture conversion. During 2010, Golden State converted $4,752 of the $100,000 debenture into 162,454,399 shares of common stock, exercised warrants to purchase 47,523 shares of common stock at $10.90 per share and advanced $251,489 against future exercises of warrants of which $300,000 was applied to the exercise of warrants leaving $-0- of unapplied advances at December 31, 2010. During 2011, Golden State converted $6,760 of the $100,000 debenture into 60,601,868, shares of common stock, exercised warrants to purchase 67,600 shares of common stock at $10.90 per share based on the formula in the convertible debenture. Additionally Golden Gate advanced $753,381 against future exercises of warrants of which $736,840 was applied to the exercise of warrants leaving $16,542 of unapplied advances at December 31, 2011.

     

    The conversion price for the 4.75% $100,000 convertible debenture is the lesser of (i) $4.00 or (ii) 80% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion. If Golden State elects to convert a portion of the debenture and, on the day that the election is made, the volume weighted average price is below $0.75, the Company shall have the right to prepay that portion of the debenture that Golden State elected to convert, plus any accrued and unpaid interest, at 135% of such amount.

     

    13% Convertible Debentures due 2011

     

    On May 22, 2009, the Company issued to Newton, O'Connor, Turner & Ketchum, a professional corporation ("NOTK") and the legal counsel to the Company through 2008, a 10% convertible debenture in a principal amount of $100,703, due September 30, 2009, and warrants to purchase 4,378,394 shares of the common stock at an exercise price of $0.09 per share through September 30, 2010 and an exercise price of $0.18 per share through September 30, 2014. The Company was indebted to NOTK for legal services performed for the Company and reimbursement of expenses in rendition of those services for the period ended December 31, 2008. The debenture and the warrants were issued in settlement of the indebtedness. The debentures and warrants were recorded at their pro rata fair values in relation to the proceeds received. The warrants were valued at $13,504. The difference between the pro rata fair value and face value of the debenture was charged to operations in 2009. The interest rate on the debenture increased to 13% during 2009 due to the Company not making payments when due.

     

    The estimated fair value of the warrants was determined using the Black-Scholes option pricing model. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 160.73% is based on the historical volatility of the stock since July 25, 2007, the day the Company began trading on the Over-The-Counter Bulletin Board. The risk-free interest rate of 2.23% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the warrant of two years is based on historical exercise behavior and expected future experience.

     

    On March 1, 2010, Newton, O'Connor, Turner & Ketchum agreed to extend the September 30, 2009 due date of their 13% debenture to March 31, 2010, in consideration for one million (1,000,000) shares of common stock. The shares, which are restricted under SEC Section 144, were valued at 50% of the average of the previous five day closing price on March 1, 2010, which was $0.002 per share totaling $4,140.

     

    On June 1, 2010, Newton, O'Connor, Turner & Ketchum agreed to extend the March 31, 2010 due date of their 13% debenture to September 30, 2010 in consideration for one million five hundred thousand (1,500,000) shares of common stock and a reduction in the exercise price of the warrants. The revised price at which the warrant may be exercised shall be $0.045 per share for exercises made during the period between the date of grant and the second anniversary of the revised maturity date, and $0.09 per share for exercises made during the forty-eight month period between the second anniversary of the revised maturity date and the sixth anniversary of the maturity date. The shares, which are restricted under SEC Section 144, were valued at 50% of the average of the previous five day closing price on June 1, 2010, which was $0.004 per share totaling $6,210.

     

    On March 31, 2011, Newton, O'Connor, Turner & Ketchum agreed to extend the September 30, 2010 due date of their 13% debenture to April 30, 2011 in consideration for two hundred thousand (200,000) shares of common stock and an extension of the exercise dates of the warrants. The revised dates at which the warrant may be exercised shall be $0.045 per share for exercises made during the period between the date of grant and the second anniversary of the revised maturity date, and $0.09 per share for exercises made during the forty-eight month period between the second anniversary of the revised maturity date and the sixth anniversary of the revised maturity date. The shares, which are restricted under SEC Section 144, were valued at 50% of the average of the previous five day closing price on March 31, 2011, which was $0.07 per share totaling $14,048. 

     

    On June 2, 2010, the Company issued to NOTK a second 10% convertible debenture in a principal amount of $25,206, due September 30, 2010, and warrants to purchase 3,360,847 shares of the common stock at an exercise price of $0.045 per share through September 30, 2012 and an exercise price of $0.09 per share through September 30, 2016. The Company was indebted to NOTK for legal services performed for the Company and reimbursement of expenses in rendition of those services for the period ended December 31, 2009. The debenture and the warrants were issued in settlement of the indebtedness.  The interest rate on the debenture increased to 13% during 2010 due to the Company not making payments when due.

     

    On April 30, 2011, Newton, O'Connor, Turner & Ketchum agreed to convert their 13% convertible debentures and accrued interest, which totaled in the aggregate $159,842 into 18,972,186 common shares of the Company’s common stock, at an average price per share of $0.008, under the terms of the convertible debentures. The shares are restricted under SEC Section 144.

    XML 33 R16.htm IDEA: XBRL DOCUMENT v2.4.0.6
    Common Stock and Paid-In Capital
    3 Months Ended 12 Months Ended
    Mar. 31, 2012
    Dec. 31, 2011
    Common Stock and Paid-In Capital

    Note 5 – Common Stock and Paid-In Capital (see note 9)

     

     On October 24, 2011 the Board of Directors, subject to the approval of the shareholders of the Company, authorized an amendment to the Company's Certificate of Incorporation in order to effect a reverse split of the Company's common stock in a ratio in the range between 1 for 15 and 1 for 35, as will be selected by the Company's Board of Directors (the "Reverse Split").  On October 15, 2011, the Company held an annual meeting of stockholders, at which annual meeting the stockholders approved the Reverse Split and approved the filing of an Amended Certificate of Incorporation to effect the Reverse Split at the discretion of the Board of Directors.

     

    Warrants issued 

      

    As of March 31, 2012, there are warrants outstanding to purchase 166,667 shares of common stock at a price of $0.20 per share that expire in April 2012, warrants to purchase 16,666,666 shares of its common stock at a price of $0.50 per share through 2012, warrants to purchase 4,378,394 shares of common stock at a price of $0.09 per share that expire on September 30, 2015 and, warrants to purchase 3,360,847 shares of common stock at a price of $0.045 per share through June 1, 2012 and $0.09 per share thereafter, that expire on June 1, 2015. Additionally, Golden State has warrants outstanding to purchase 799,925 shares of common stock at a price of $10.90 per share which expire December 31, 2014. 

     

    Common stock and options issued for services and liabilities

     

    During the three-month periods ended March 31, 2012 and 2011, shares of common stock totaling 7,437,643, and 2,500,000, respectively were issued for consulting services for which the Company recognized $42,100 and $24,425 of expense, respectively.  Additionally, during the period ending March 31, 2012 and 2011, shares totaling 3,213,589 and 33,338,612, respectively were issued to consultants for previous services provided to the Company for which the accounts payable liability was reduced by $36,764 and 79,871, respectively.  Shares totaling 57,000,000, which are restricted under SEC Section 144, were issued in the first quarter of 2011 in payment of accrued salaries and payroll taxes totaling $460,405 due Martin Keating, Chairman of the Board of Directors, Hakki Refai, Chief Technology Officer and Judith Keating the Secretary of the Company. 

     

    On March 13, 2012, 3DIcon Corporation entered into a one (1) year Agreement for At-Will Employment with Assignment of Inventions (“Employment Agreement”) with Mark Willner, pursuant to which Mr. Willner began serving as the Company’s Chief Executive Officer, effective immediately. Under the terms of the Employment Agreement, Mr. Willner is entitled to an annual base salary of $180,000, and, at the discretion of the Company’s Board of Directors, performance-based bonuses and/or salary increases. Pursuant to the Employment Agreement, the Company granted Mr. Willner five-year stock options to purchase two (2) million shares at a price equal to the average price of the five day period prior to March 19, 2012 (the “Strike Price”) which was $0.01. Furthermore, if Mr. Willner remains employed by the Company at the end of each quarter ending June 30, 2012, September 30, 2012 and December 31, 2012, he will receive additional stock options to purchase one (1) million shares at the $0.01 Strike Price. In addition, if the Company has achieved certain quarterly business objectives, Mr. Willner will receive, at the end of each such quarterly periods, a further grant of stock options to purchase one (1) million shares at the Strike Price. The estimated fair value of the two million options of $18,840, was determined using the Black-Scholes option pricing model and was charged to operations in March 2012. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 163% is based on the historical volatility of the stock since July 25, 2007, the day the Company began trading on the Over-The-Counter Bulletin Board. The risk-free interest rate of 1.87% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option of five years is based on historical exercise behavior and expected future experience.

     

    The Employment Agreement may be terminated with or without reason by either the Company or Mr. Willner and at any time, upon sixty (60) days written notice. The terms of the Employment Agreement will remain effective for one (1) year and will automatically renew, subject to the same termination rights. Upon termination, the Company will pay any base pay, bonus and benefits that have been earned and are due as of the date of the termination.

     

    The following summary reflects warrant and option activity for the three-month period ended March 31, 2012:

     

        Attached
    Warrants
        Golden State
    Warrants
        Options  
                       
    Outstanding December 31, 2011     24,905,908       816,560       64,893,804  
    Granted     -       -       700,000  
    Exercised     -       (16,635 )     -  
    Cancelled     (333,334 )     -       -  
                             
    Outstanding March 31, 2012     24,572,574       799,925       65,593,804  

     

    Stock options are valued at the date of award, which does not precede the approval date, and compensation cost is recognized in the period the options are granted. Stock options generally become exercisable on the date of grant and expire based on the terms of each grant.

     

     

    The estimated fair value of options for common stock granted was determined using the Black-Scholes option pricing model. The expected dividend yield is based on the average annual dividend yield as of the grant date. Expected volatility is based on the historical volatility of our stock. The risk-free interest rate is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option is based on historical exercise behavior and expected future experience.

    Note 9 – Common Stock and Paid-In Capital

     

    On November 19, 2010 the Board of Directors of the Company authorized an amendment to the Company's Certificate of Incorporation in order to (i) increase the authorized shares of the Company's common stock from 750,000,000 shares, par value $0.0002 to 1,500,000,000 shares, par value $0.0002, (ii) effect a reverse split of the Company's common stock in a ratio in the range between 1 for 10 and 1 for 25, as will be selected by the Company's Board of Directors (the "Reverse Split"), and (ii) create a series of "blank check" preferred stock consisting of 25,000,000 shares, par value $0.0002.   On May 16, 2011, the Company announced that the Company’s Board of Directors elected to allow its authorization to effect a reverse stock split to expire on June 1, 2011.

     

    On August 27, 2010, the Company entered into Subscription Agreements with one of its directors pursuant to which the director purchased 5,714,286 shares of the Company's common stock at a price per share equal to 50% of the average closing price during the five days prior to August 27, 2 010 ($0.00175 per share) for aggregate proceeds of $10,000.

     

    As of December 31, 2011, there are warrants outstanding to purchase 500,000 shares of common stock at a price of $0.15 per share through various dates in March and April 2011; or $0.20 per share that expire on various dates in March and April 2012, warrants to purchase 16,666,666 shares of its common stock at a price of $0.50 per share through 2012, warrants to purchase 4,378,394 shares of common stock at a price of $0.045 per share through September 30, 2010 or $0.09 per share that expire on September 30, 2015 and, warrants to purchase 3,360,847 shares of common stock at a price of $0.045 per share through June 1, 2012 and $0.09 per share thereafter, that expire on June 1, 2015. Additionally, Golden State has warrants outstanding to purchase 816,560 shares of common stock at a price of $10.90 per share which expire December 31, 2011. 

     

    Common stock and options issued for services and liabilities

     

    On February 9, 2009, the Board of Directors of the Company appointed James N. Welsh to serve as the Company's Interim Chief Operating Officer and Treasurer. His appointment was effective as of March 1, 2009. Under the terms of the consulting agreement, Mr. Welsh was compensated $2,000 per week in either cash or stock. In the event stock was issued for the compensation, it was issued at 50% of the average of the five previous closing prices. Mr. Welsh was due $34,000 at December 31, 2009 for which 10,250,895 shares of common stock were issued in 2010 as satisfaction of the amount. The Company accepted the resignation of Mr. Welsh effective August 2, 2010.

     

    During 2011 and 2010, shares of common stock totaling 30,072,595 and 97,684,416, respectively, were issued for consulting services for which the Company recognized $355,205 and $232,886 of expense, respectively. Shares of common stock totaling 7,094,511 and 6,093,396 were issued to debenture holder in 2011 and 2010, respectively for accrued interest due for which the Company recognized $42,952 and $17,061 in expense in 2011 and 2010 respectively. Shares totaling 59,000,000 issued during 2010 to the University of Oklahoma under the repayment terms of the SRA which were valued at $485,649 (see Note 4). During 2011 and 2010, shares totaling 57,530,393 and 48,657,897, respectively, were issued to employees and consultants for previous services provided to the Company for which the Company reduced accounts payable and accrued liabilities by $148,526 and $214,414, respectively. Additionally, shares totaling 40,000,000 were issued under the terms of an agreement dated December 21, 2010, in payment of accrued salaries and payroll taxes totaling $407,501 due Martin Keating, Chairman of the Board of Directors, and Judith Keating, the secretary of the Company. The shares were issued January 4, 2011.

     

    Options granted 

     

    Employment Agreement - On July 28, 2008, the Company entered into an Employment Agreement with Dr. Hakki Refai (the "Employment Agreement") pursuant to which Dr. Refai has agreed to serve as the Chief Technology Officer of the Company. Dr. Refai's employment under the Employment Agreement commenced on October 1, 2008 and will continue for a term of one year from October 1, 2008, the date on which he became a full-time employee of the Company. The term of the Employment Agreement will automatically extend for successive one year periods unless otherwise terminated by the parties in accordance with the terms of the Employment Agreement. On March 25, 2009, the Company entered into an agreement with Dr. Hakki Refai pursuant to which the Company agreed to remove the time constraints on the technical milestone achievements whereby the issuance of the 3,500,000 milestone options will be solely upon the achievement of the milestones.

     

     

    On May 11, 2010, the Board of Directors of the Company agreed to immediately vest the 3,500,000 milestone options. The total value of the options was $268,979 of which $100,867 was charged to operations in 2008. The remaining value of $168,112 was charged to operations in the second quarter of 2010.

     

    The estimated fair value of the options was determined using the Black-Scholes option pricing model. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 95.50% is based on the historical volatility of the stock since July 25, 2007, the day the Company began trading on the Over-The-Counter Bulletin Board. The risk-free interest rate of 2.0% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option of five years is based on historical exercise behavior and expected future experience.  

     

    Employment Agreement - On June 13, 2011, the Company entered into a one (1) year Agreement for At-Will Employment with Assignment of Inventions (“Employment Agreement”) with Sidney A. Aroesty, pursuant to which Mr. Aroesty began serving as the Company’s Chief Executive Officer, effective June 13, 2011.  Under the terms of the Employment Agreement, Mr. Aroesty is entitled to an annual base salary of $120,000 and, at the discretion of the Company’s Board of Directors (the “Board”), performance-based bonuses and/or salary increases.  Pursuant to the Employment Agreement, the Company granted Mr. Aroesty five-year stock options to purchase two (2) million shares at an exercise price of $0.031 (the “Strike Price”).  Furthermore, if Mr. Aroesty remains employed by the Company, he will receive additional stock options to purchase three (3) million shares at the Strike Price upon the completion of a trade show prototype that displays the Company’s technology. (see Note – 14, Subsequent Events)

     

    The Employment Agreement contains provisions for non-disclosure of confidential information pursuant to which Mr. Aroesty agreed to refrain from using or disclosing to third parties, directly or indirectly, any Confidential Information, as defined in the Employment Agreement, either during or following his employment with the Company.  Furthermore, Mr. Aroesty unconditionally and irrevocably assigned any now-existing or later-created Invention(s), as defined in the Employment Agreement, which are developed during or three (3) years after his employment with the Company.

     

    The Employment Agreement may be terminated with or without reason by either the Company or Mr. Aroesty and at any time, upon sixty (60) days written notice.  The terms of the Employment Agreement will remain effective for one (1) year and will automatically renew, subject to the same termination rights.  Upon termination, the Company will pay any base pay, bonus and benefits that have been earned and are due as of the date of the termination.

     

    The estimated fair value of the two million options of $60,600, was determined using the Black-Scholes option pricing model and was charged to operations in June 2011. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 172% is based on the historical volatility of the stock since July 25, 2007, the day the Company began trading on the Over-The-Counter Bulletin Board. The risk-free interest rate of 1.43% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option of five years is based on historical exercise behavior and expected future experience.

     

    Board of Directors – On June 22, 2010, the Company agreed to compensate its non-employee Board members with options to purchase registered stock of the corporation equaling the value of $100,000 for each of the three non-employee Board members for services during 2010; using standard evaluation methods. The Board granted options to purchase an aggregate of 57,529,455 shares to its three non-employee Board members; the exercise price for each option is $0.005 per share. The options expire at the end of ten years. The $250,000 (one Board member received one-half the amount due to his resignation in mid-year) compensation is for services on the Board during all or part of the calendar year 2010 and is deemed fully vested on the date of the grant. Operations were charged with $250,000 for the year ended December 31, 2010.

     

    The estimated fair market value of the options was determined using the Black-Scholes option pricing model. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 133.46% is based on the historical volatility of the stock since July 25, 2007, the day the Company began trading on the Over-the-counter Bulletin Board. The risk-free interest rate of 1.43% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option of five years is based on historical exercise behavior and expected future experience. 

     

    Board of Directors – On May 17, 2011, the Company agreed to compensate its non-employee Board members with options to purchase registered stock of the corporation equaling the value of $75,000 for each of the three non-employee Board members for services during 2011; using standard evaluation methods. The Board granted options to purchase an aggregate of 5,933,700 shares to its three non-employee Board members; the exercise price for each option is $0.04 per share. The options expire at the end of ten years. The $225,000 compensation is for services on the Board during all or part of the calendar year 2011 and is deemed fully vested on December 31, 2011. Operations were charged with $225,000 for the year ended December 31, 2011.

     

    The estimated fair value of the options of $225,000 was determined using the Black-Scholes option pricing model.  The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 172% is based on the historical volatility of the stock since July 25, 2007, the day the Company began trading on the Over-The-Counter Bulletin Board. The risk-free interest rate of 1.87% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option of five years is based on historical exercise behavior and expected future experience.

     

     

    The following summary reflects warrant and option activity for the year ended December 31, 2011:

     

        Attached
    Warrants
        Golden State
    Warrants
        Options    
                       
    Outstanding December 31, 2010     24,905,908       884,160       70,965,995  
    Granted     —         —         14,933,700  
    Exercised     —         (67,600 )     (15,505,891 )
    Cancelled     —         —         (5,500,000 )
    Outstanding December 31, 2011     24,905,908       816,560       64,893,804  

     

    Stock options are valued at the date of award, which does not precede the approval date, and compensation cost is recognized in the period the options are granted. Stock options generally become exercisable on the date of grant and expire based on the terms of each grant. 

     

    The estimated fair value of options for common stock granted was determined using the Black-Scholes option pricing model. The expected dividend yield is based on the average annual dividend yield as of the grant date. Expected volatility is based on the historical volatility of our stock. The risk-free interest rate is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option is based on historical exercise behavior and expected future experience.  

     

    Common stock rights

     

    Holders of shares of common stock are entitled to one vote per share on all matters submitted to a vote of the shareholders. Shares of common stock do not have cumulative voting rights. Holders of record of shares of common stock are entitled to receive dividends when and if declared by the board of directors. To date, the Company has not paid cash dividends. The Company intends to retain any earnings for the operation and expansion of its business and does not anticipate paying cash dividends in the foreseeable future.

     

    Any future determination as to the payment of cash dividends will depend on future earnings, results of operations, capital requirements, financial condition and such other factors as the Board of Directors may consider. Upon any liquidation, dissolution or termination of the Company, holders of shares of common stock are entitled to receive a pro rata distribution of the assets of the Company after liabilities are paid.

     

    Holders of common stock do not have pre-emptive rights to subscribe for or to purchase any stock, obligations or other securities of 3DIcon.

    XML 34 R21.htm IDEA: XBRL DOCUMENT v2.4.0.6
    Subsequent Events
    3 Months Ended 12 Months Ended
    Mar. 31, 2012
    Dec. 31, 2011
    Subsequent Events

    Note 9 – Subsequent Events

     

    Reverse Stock Split

     

    On April 27, 2012, 3DIcon Corporation, an Oklahoma corporation filed an Amended Certificate of Incorporation to effect a 1-for-35 reverse split of the Company’s common stock. The reverse stock split was announced by Financial Industry Regulatory Authority on April 26, 2012 and became effective on April 27, 2012. As previously reported on the Company’s Current Report on Form 8-K, filed on October 20, 2011, this action followed a stockholder vote at the Company’s annual meeting of the stockholders of the Company, which vote authorized the Company’s Board of Directors to effect a reverse stock split of the Company’s authorized, issued and outstanding common stock.

     

    On April 27, 2012, the effective date, every 35 shares of the Company’s issued and outstanding common stock were combined into one share of common stock. The Company did not issue any fractional shares in connection with the reverse stock split. Stockholders of record who otherwise would have been entitled to receive fractional shares will be entitled, upon surrender to our transfer agent of certificates representing such shares, cash in lieu thereof.

     

    Debentures payable

     

    In accordance with the terms of the Second Debenture an event of default occurs if the common stock of the Company trades at a price per share of $0.21 or lower. The trading price was at $0.21 or lower on several occasions during the period ended March 31, 2012 and subsequent to March 31, 2012.  On each of the occasions Golden State, by letter agreements, agreed that the occasions did not constitute a default and thereby waived the default provision for the occasions.

     

    Subsequent to March 31, 2012 Golden State advanced $100,000 of warrant exercise advances on the 4.75% convertible debenture.

     

    Common stock issued for services and liabilities

     

    Subsequent to March 31, 2012 post-split shares of common stock totaling 102,041 were issued for consulting services for which the Company recognized $15,750 of expense. Additionally post-split shares totaling 1,005,724 we issued for accounts payable for which the Company reduced the accounts payable liability by $376,850.

     

    Equity Incentive Stock Plan

     

    In April 2012 the Company established the 3DIcon Corporation 2012 Equity Incentive Plan (the "2012 EIP"). The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2012 EIP shall not exceed five million (5,000,000) post-split shares.  The shares are included in a registration statement filed May 3, 2012. Post-split shares totaling 1,107,765 were issued from the 2012 EIP subsequent to March 31, 2012 for services rendered and to satisfy accounts payable to the Company. There are currently 3,892,235 shares available for issuance under the 2012 EIP.

     

    Civil Action Complaint

     

    As previously disclosed, on April 2, 2012, the Company was served with a Summons and Complaint (the “Complaint”) for a civil action involving a billing dispute.  The Complaint was filed by Advanced Optical Technologies, Inc. (“AOT”) in the Second Judicial District Court of New Mexico, County of Bernalillo.  On May 11, 2012, the Company and AOT entered a settlement agreement pursuant to which the parties agreed to discontinue all legal proceedings and AOT agreed to take all legal action to withdraw the Complaint.  In connection therewith, the Company agreed to pay AOT $95,125.

    Note 14 – Subsequent Events

     

    Debentures payable

     

    In accordance with the terms of the Second Debenture an event of default occurs if the common stock of the Company trades at a price per share of $0.21 or lower. The trading price was at $0.21 or lower on several occasions during the period ended December 31, 2011 and subsequent to December 31, 2011. On each of the occasions Golden State, by separate letter agreements, agreed that the occasions did not constitute a default and thereby waived the default provision for the occasions.

     

    Subsequent to December 31, 2011 Golden State converted $1,664 of the 4.75% convertible debenture into 25,049,954 shares of common stock at $0.00007 per share and exercised 16,635 warrants at $10.90 per share for $181,322 and advanced $100,000 for future exercise of warrants under the terms of the securities purchase agreements.

     

    Common stock and paid in capital

     

    Shares of common stock totaling 10,651,232 were issued in payment of $78,863 in legal and consulting fees under the terms of our agreements for service during 2011 and 2012.

     

    OCAST Grant

     

    The Company received approval for our no cost extension request for the second year of the contract and, with the new modification, the second year ends on August 31, 2012.

     

     

    Employment contracts

     

    On March 19, 2012 the Company announced that Sidney Aroesty would resign as CEO and join the Board of Directors. The Board appointed display industry veteran Mark Willner as CEO with an annual salary of $180,000.

     

    Dr. George Melnik was appointed the new Senior Technical Advisor with an annual salary of $144,000. Dr. Hakki Refai as Chief Technical Officer.

     

    Civil Action Complaint

     

    On April 2, 2012, the Company was served with a Summons and Complaint (the “Complaint”) for a civil action filed by Advanced Optical Technologies, Inc. (“AOT”) in the Second Judicial District Court of New Mexico, County of Bernalillo. In the Complaint, AOT alleged that the Company owed and refused to pay the amount of $90,124.91 for services performed by AOT through December 28, 2011 and AOT also asserted a fraud claim. The Company believes the allegations in the Complaint to be without merit. Nevertheless, the Company made efforts to resolve the dispute with AOT and believed the matter to be resolved, subject to documentation. The Company intends to aggressively defend the claims set forth in the Complaint.

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    STATEMENTS OF CASH FLOWS (USD $)
    3 Months Ended 12 Months Ended 132 Months Ended 135 Months Ended
    Mar. 31, 2012
    Mar. 31, 2011
    Dec. 31, 2011
    Dec. 31, 2010
    Dec. 31, 2011
    Mar. 31, 2012
    Cash Flows from Operating Activities            
    Net loss $ (377,707) $ (356,608) $ (2,320,469) $ (1,523,737) $ (16,421,120) $ (16,798,827)
    Adjustments to reconcile net loss to net cash used in operating activities:            
    Options issued for services 34,840   285,600 418,112 2,632,578 2,667,418
    Stock issued for services 42,100 38,473 355,205 232,886 2,237,995 2,280,095
    Stock issued for interest   17,842 42,952 17,061 141,672 141,672
    Book value of assets retired     668   6,529 6,529
    Amortization of debt issuance costs       16,706 170,414 170,414
    Depreciation 1,382 1,542 6,230 6,165 27,191 28,573
    Impairment of assets         292,202 292,202
    Change in:            
    Prepaid expenses     (13,664) (10,467) (286,150)  
    Impairment of assets         292,202 292,202
    Accounts receivable (23,816) (22,908) (9,908) (7,092) (17,000) (40,816)
    Prepaid expenses and other assets (16,075) 2,521       (302,226)
    Accounts payable and accrued liabilities 38,116 52,807 534,949 339,231 2,478,828 2,516,944
    Net cash used in operating activities (301,160) (266,331) (1,118,437) (511,135) (8,736,861) (9,038,022)
    Cash Flows from Investing Activities            
    Purchase of office furniture and equipment     (998) (3,250) (43,529) (43,529)
    Net cash used in investing activities     (998) (3,250) (43,529) (43,529)
    Cash Flows from Financing Activities            
    Proceeds from stock and warrant sales, exercise of warrants and warrant exercise advances 364,780 750,000 770,000 479,490 4,488,455 4,853,236
    Proceeds from issuance of debentures and notes       400,878 4,309,591 4,309,591
    Net cash provided by financing activities 364,780 750,000 770,000 880,368 8,798,046 9,162,827
    Net increase (decrease) in cash 63,620 483,669 (349,435) 365,983 17,656 81,276
    Cash, beginning of period 17,666 367,101 367,101 1,118 10 10
    Cash, end of period 81,286 850,770 17,666 367,101 17,666 81,286
    Non-Cash Investing and Financing Activities            
    Conversion of debentures to common stock (net) 1,663 375,400 703,546 279,191 4,257,681 4,259,344
    Cash paid for interest   31,581 10,493 33,885 301,727 301,727
    Stock issued to satisfy payables 36,764 540,277 556,027 700,063 1,987,253 2,024,017
    Debenture issued to satisfy payable       25,206 125,909 125,909
    Stock issued subject to put rights and call right to satisfy payables       $ 485,649 $ 485,649 $ 485,649
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    Recent Accounting Pronouncements
    12 Months Ended
    Dec. 31, 2011
    Recent Accounting Pronouncements

    Note 3 – Recent Accounting Pronouncements

     

    The following is a summary of a recent accounting pronouncement that is relevant to the Company:

     

    In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. ASU 2011-4 is intended to improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS. The amendments are of two types: (i) those that clarify the Board’s intent about the application of existing fair value measurement and disclosure requirements and (ii) those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The guidance is effective for annual periods beginning after December 15, 2011. The adoption of the provisions of this guidance is not expected to materially impact our financial statements.

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    Related Party Transaction
    3 Months Ended 12 Months Ended
    Mar. 31, 2012
    Dec. 31, 2011
    Related Party Transaction

    Note 8 – Related Party Transaction

     

    3DIcon has engaged the law firm of Newton, O’Connor, Turner & Ketchum as its outside corporate counsel since 2005. John O’Connor, a director of 3DIcon, is the Chairman of Newton, O’Connor, Turner & Ketchum.   During the periods ended March 31, 2012 and 2011, the Company incurred legal fees to Newton, O’Connor, Turner & Ketchum in the amount of $1,479 and $29,461, respectively.

    Note 13 – Related Party Transaction

     

    3DIcon engaged the law firm of Newton, O'Connor, Turner & Ketchum as its outside corporate counsel from 2005 through 2008 and for certain legal services subsequent to 2008.  John O'Connor, a director of 3DIcon, is the Chairman of Newton, O'Connor, Turner & Ketchum. During the years ended December 31, 2011 and 2010, the Company incurred legal fees to Newton, O'Connor, Turner & Ketchum in the amount of $61,570 and $22,287 respectively.