Item 1. Financial Statements.
INDEX TO FINANCIAL STATEMENTS
|
|
Page
|
Balance Sheets as of June 30, 2013 (Unaudited) and December 31, 2012 (Audited)
|
|
F-2
|
|
|
|
Statements of Operations for the three and six months ended June 30, 2013 and 2012 and period from inception (January 1, 2001) to June 30, 2013 (Unaudited)
|
|
F-3
|
|
|
|
Statements of Changes in Stockholders' Deficiency for period from inception (January 1, 2001) to June 30, 2013 (Unaudited)
|
|
F-4
|
|
|
|
Statements of Cash Flows for the six months ended June 30, 2013 and 2012 and period from inception (January 1, 2001) to June 30, 2013 (Unaudited)
|
|
F-5
|
|
|
|
Notes to Financial Statements, June 30, 2013 (Unaudited)
|
|
F-6
|
3DIcon CORPORATION
(A Development Stage Company)
BALANCE SHEETS
June 30, 2013 and December 31, 2012
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
119,445
|
|
|
$
|
1,350
|
|
Prepaid expenses
|
|
|
6,553
|
|
|
|
12,610
|
|
Accounts receivable
|
|
|
-
|
|
|
|
78,428
|
|
Total current assets
|
|
|
125,998
|
|
|
|
92,388
|
|
|
|
|
|
|
|
|
|
|
Net property and equipment
|
|
|
1,198
|
|
|
|
4,280
|
|
Deposits-other
|
|
|
2,315
|
|
|
|
2,315
|
|
Total Assets
|
|
$
|
129,511
|
|
|
$
|
98,983
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Deficiency
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Current maturities of convertible notes and debentures payable
|
|
$
|
540,855
|
|
|
$
|
660,840
|
|
Warrant exercise advances
|
|
|
46,851
|
|
|
|
1
|
|
Accounts payable
|
|
|
503,457
|
|
|
|
324,473
|
|
Accrued salaries
|
|
|
19,652
|
|
|
|
10,958
|
|
Accrued interest on debentures
|
|
|
15,953
|
|
|
|
12,246
|
|
Total current liabilities
|
|
|
1,126,768
|
|
|
|
1,008,518
|
|
|
|
|
|
|
|
|
|
|
Convertible debentures payable
|
|
|
70,825
|
|
|
|
73,665
|
|
|
|
|
|
|
|
|
|
|
Long term debt
|
|
|
70,825
|
|
|
|
73,665
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
1,197,593
|
|
|
|
1,082,183
|
|
|
|
|
|
|
|
|
|
|
Common stock subject to put rights and call right, 1,685,714 shares
|
|
|
485,649
|
|
|
|
485,649
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficiency:
|
|
|
|
|
|
|
|
|
Common stock $.0002 par, 1,500,000,000 shares authorized; 76,597,574 and 45,934,839 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively
|
|
|
15,320
|
|
|
|
9,187
|
|
Additional paid-in capital
|
|
|
17,780,948
|
|
|
|
17,044,786
|
|
Deficit accumulated during development stage
|
|
|
(19,349,999
|
)
|
|
|
(18,522,822
|
)
|
Total Stockholders' Deficiency
|
|
|
(1,553,731
|
)
|
|
|
(1,468,849
|
)
|
Total Liabilities and Stockholders' Deficiency
|
|
$
|
129,511
|
|
|
$
|
98,983
|
|
Presentation gives effect to the Reverse Stock Split, which occurred on April 27, 2012 (see note 5)
See notes to financial statements
3DIcon CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Three and Six Months Ended June 30, 2013
and 2012 and
Period from Inception (January 1, 2001)
to June 30, 2013
(unaudited)
|
|
Three Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Inception to
|
|
|
|
June 30, 2013
|
|
|
June 30, 2012
|
|
|
June 30, 2013
|
|
|
June 30, 2012
|
|
|
June 30, 2013
|
|
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License fee
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
25,000
|
|
Sales
|
|
|
-
|
|
|
|
-
|
|
|
|
1,500
|
|
|
|
-
|
|
|
|
42,297
|
|
Grant income
|
|
|
-
|
|
|
|
11,020
|
|
|
|
-
|
|
|
|
63,668
|
|
|
|
281,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income
|
|
|
-
|
|
|
|
11,020
|
|
|
|
1,500
|
|
|
|
63,668
|
|
|
|
348,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
86,837
|
|
|
|
152,908
|
|
|
|
190,442
|
|
|
|
286,389
|
|
|
|
4,868,117
|
|
General and administrative
|
|
|
320,880
|
|
|
|
323,198
|
|
|
|
584,852
|
|
|
|
618,192
|
|
|
|
14,179,149
|
|
Interest
|
|
|
33,116
|
|
|
|
2,830
|
|
|
|
53,383
|
|
|
|
4,710
|
|
|
|
651,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
440,833
|
|
|
|
478,936
|
|
|
|
828,677
|
|
|
|
909,291
|
|
|
|
19,698,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(440,833
|
)
|
|
$
|
(467,916
|
)
|
|
$
|
(827,177
|
)
|
|
$
|
(845,623
|
))
|
|
$
|
(19,349,999
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.007
|
)
|
|
$
|
(0.013
|
)
|
|
$
|
(0.014
|
)
|
|
$
|
(0.024
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, Basic and diluted
|
|
|
65,014,503
|
|
|
|
37,051,815
|
|
|
|
58,135,328
|
|
|
|
35,466,209
|
|
|
|
|
|
Presentation gives effect to the Reverse Stock Split, which occurred on April 27, 2012 (see note 5)
See notes to financial statements
3DIcon CORPORATION
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS'
DEFICIENCY
Period from Inception (January 1, 2001)
to June 30, 2013
(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
|
|
|
|
(1734
|
)
|
|
|
-
|
|
|
|
-
|
|
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
|
|
Retrospective adjustment for the 1:35 reverse common stock split on April 27, 2012
|
|
|
(1,119,574,221
|
)
|
|
|
(223,915
|
)
|
|
|
223,915
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,320,469
|
)
|
|
|
(2,320,469
|
)
|
Balance, December 31, 2011
|
|
|
32,928,654
|
|
|
|
6,586
|
|
|
|
15,168,005
|
|
|
|
(16,421,120
|
)
|
|
|
(1,246,529
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants and options exercised
|
|
|
2,285
|
|
|
|
1
|
|
|
|
871,051
|
|
|
|
-
|
|
|
|
871,052
|
|
Debentures converted
|
|
|
9,884,674
|
|
|
|
1,976
|
|
|
|
37,803
|
|
|
|
-
|
|
|
|
39,779
|
|
Stock issued for interest
|
|
|
1,076
|
|
|
|
1
|
|
|
|
2,046
|
|
|
|
-
|
|
|
|
2,047
|
|
Stock issued for services
|
|
|
2,248,640
|
|
|
|
450
|
|
|
|
245,650
|
|
|
|
-
|
|
|
|
246,100
|
|
Stock issued for liabilities
|
|
|
869,510
|
|
|
|
173
|
|
|
|
366,191
|
|
|
|
-
|
|
|
|
366,364
|
|
Stock based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
354,040
|
|
|
|
-
|
|
|
|
354,040
|
|
Net loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,101,702
|
)
|
|
|
(2,101,702
|
)
|
Balance, December 31, 2012
|
|
|
45,934,839
|
|
|
|
9,187
|
|
|
|
17,044,786
|
|
|
|
(18,522,822
|
)
|
|
|
(1,468,849
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants and options exercised
|
|
|
811
|
|
|
|
1
|
|
|
|
309,559
|
|
|
|
-
|
|
|
|
309,560
|
|
Debentures converted
|
|
|
26,906,923
|
|
|
|
5,381
|
|
|
|
233,304
|
|
|
|
-
|
|
|
|
238,685
|
|
Stock issued for services
|
|
|
2,656,250
|
|
|
|
531
|
|
|
|
62,019
|
|
|
|
|
|
|
|
62,550
|
|
Stock issued for liabilities
|
|
|
1,098,751
|
|
|
|
220
|
|
|
|
31,280
|
|
|
|
|
|
|
|
31,500
|
|
Options issued for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
100,000
|
|
|
|
|
|
|
|
100,000
|
|
Net loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(827,177
|
)
|
|
|
(827,177
|
)
|
Balance June 30, 2013
|
|
|
76,597,574
|
|
|
$
|
15,320
|
|
|
$
|
17,780,948
|
|
|
$
|
(19,349,999
|
)
|
|
$
|
(1,553,731
|
)
|
Presentation gives effect to the Reverse Stock Split, which occurred on April 27, 2012 (see note 5)
See notes to financial statements
3DIcon CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2013 and 2012
and Period from Inception (January 1,
2001) to June 30, 2013
(unaudited)
|
|
Six Months
|
|
|
Six Months
|
|
|
Inception to
|
|
|
|
Ended June 30,
|
|
|
Ended June 30,
|
|
|
June 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(827,177
|
)
|
|
$
|
(845,623
|
)
|
|
$
|
(19,349,999
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Options issued for services
|
|
|
|
|
|
|
72,520
|
|
|
|
2,986,618
|
|
Stock issued for services
|
|
|
62,550
|
|
|
|
183,100
|
|
|
|
2,546,645
|
|
Stock issued for interest
|
|
|
-
|
|
|
|
-
|
|
|
|
143,719
|
|
Book value of assets retired
|
|
|
-
|
|
|
|
-
|
|
|
|
6,529
|
|
Amortization of debt issuance costs
|
|
|
30,860
|
|
|
|
332
|
|
|
|
280,107
|
|
Depreciation
|
|
|
3,082
|
|
|
|
2,870
|
|
|
|
35,802
|
|
Impairment of assets
|
|
|
-
|
|
|
|
-
|
|
|
|
292,202
|
|
Change in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
13,028
|
|
|
|
3,971
|
|
|
|
-
|
|
Prepaid expenses and other assets
|
|
|
6,057
|
|
|
|
(17,313
|
)
|
|
|
(257,268
|
)
|
Accounts payable and accrued liabilities
|
|
|
222,885
|
|
|
|
(70,593
|
)
|
|
|
2,731,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(488,715
|
)
|
|
|
(670,736
|
)
|
|
|
(10,584,003
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
421,810
|
|
|
|
638,831
|
|
|
|
5,699,376
|
|
Proceeds from issuance of debentures, notes and options
|
|
|
185,000
|
|
|
|
46,000
|
|
|
|
5,047,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
606,810
|
|
|
|
684,831
|
|
|
|
10,746,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
118,095
|
|
|
|
14,095
|
|
|
|
119,435
|
|
Cash, beginning of period
|
|
|
1,350
|
|
|
|
17,666
|
|
|
|
10
|
|
Cash, end of period
|
|
$
|
119,445
|
|
|
$
|
31,761
|
|
|
$
|
119,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Cash Investing and Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of debentures to common stock (net)
|
|
$
|
238,685
|
|
|
$
|
3,563
|
|
|
$
|
4,536,145
|
|
Cash paid for interest
|
|
$
|
18,816
|
|
|
$
|
1,634
|
|
|
$
|
322,512
|
|
Stock issued to satisfy payables
|
|
$
|
31,500
|
|
|
$
|
366,364
|
|
|
$
|
2,385,117
|
|
Debenture issued to satisfy payable
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
154,916
|
|
Stock issued subject to put rights and call right to satisfy payables
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
485,649
|
|
Presentation gives effect to the Reverse Stock Split, which occurred on April 27, 2012 (see note 5)
See notes to financial statements
3DIcon CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(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 June 30, 2013, and the statements
of its operations for the three and six months ended June 30, 2013 and 2012, and the period from inception (January 1, 2001) to
June 30, 2013, and cash flows for the six-month periods ended June 30, 2013 and 2012, and the period from inception (January 1,
2001) to June 30, 2013, 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 $19,349,999 for the period from inception (January 1, 2001) to June 30, 2013, and a net loss of $827,177 and $845,623 for
the six-months ended June 30, 2013 and 2012, 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. 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 or until the Debenture is converted
in full. In connection with each conversion, Golden State is expected to simultaneously exercise a percentage of warrants
equal to the percentage of the principal being converted. The warrants are exercisable at $381.50 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
and provided that Golden State is able to sell the shares under Rule 144, Golden State is required to convert $85.71 of the 4.75%
Convertible Debenture and exercise 857 warrants per month. Based upon our current stock price, our issued and outstanding
shares as of June 30, 2013 and ignoring the impact of the Beneficial Ownership Limitations, the Company may receive up to $327,000
per month in funding from Golden State as a result of warrant exercises. During the six-months ended June 30, 2013, the Company
received $421,810 in funding under the terms of the 4.75% Convertible Debenture (see Note 4).
Additionally, the Company is continuing to
pursue financing through private offerings of debt or common stock.
Registration Statement on Form S-1
Pursuant to a Registration Statement on Form
S-1 and the prospectus therein, filed on July 3, 2012, and amendment thereto, the Registration Statement was declared effective
on February 13, 2013.
Note 2 – Sponsored Research Agreement
("SRA") Common Stock Subject to Put Right 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 121,848 post-split equivalent 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 1,685,714 post-split
equivalent shares of Company stock (the “Shares”). The Shares are subject to an OU ‘put’ right and a 3DIcon
‘call’ right.
OU “Put” Right 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” Right 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 a put right, which is 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 $299,984, had a start date of January 1, 2009.
The Company received approval for a 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 $-0- and $63,688 from the grant during the six-month periods ended June 30, 2013 and 2012, respectively and
$281,492 from inception to date. The Company received approval for a no cost extension request for the second year of the
contract and, with the new modification, the second year ended on August 31, 2012.
During the six-month periods ended June 30,
2013 and 2012, the Company charged operations $-0- and $9,780, respectively, pursuant to the direct costs incurred and for the
use of the OU lab facilities in regard to the OCAST grant.
Note 4 – Debentures and Notes Payable
Debentures payable consist of the following:
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
Senior Convertible Debentures:
|
|
|
|
|
|
|
|
|
10% convertible debentures from Directors due June 2014
|
|
$
|
30,000
|
|
|
$
|
-
|
|
10% Debenture due 2013
|
|
|
29,007
|
|
|
|
29,007
|
|
4.75% Debenture due 2014
|
|
|
70,825
|
|
|
|
73,665
|
|
5.0% Notes due 2013 (net of $4,006 and $6,167 OID)
|
|
|
96,848
|
|
|
|
168,833
|
|
15% Bridge notes due 2013
|
|
|
385,000
|
|
|
|
463,000
|
|
|
|
|
|
|
|
|
|
|
Total Debentures
|
|
|
611,680
|
|
|
|
734,505
|
|
Less - Current Maturities
|
|
|
(540,855
|
)
|
|
|
(660,840
|
)
|
Long-term Debentures
|
|
$
|
70,825
|
|
|
$
|
73,665
|
|
Director Debenture
On June 24, 2013, the Company issued to Victor Keen and Martin
Keating, Directors of the Company, (“Directors”) 10% convertible debentures in a principal amount of $15,000 each,
due June 26, 2014. The Directors may elect to convert all or any portion of the outstanding principal amount of the debentures
at an exercise price of $0.01 per share. Provided that the debentures are paid in full or on before the maturity date, no interest
shall accrue on the unpaid balance of the principal amount. In the event that the debentures are not paid in full on or before
the maturity date, interest shall accrue on the unpaid outstanding balance of the principal amount of the debentures from June
26, 2013, until paid, at the fixed rate of ten percent (10%) per annum.
Newton, O'Connor, Turner & Ketchum
10% Convertible Debenture
On December 20, 2012, the Company issued to
Newton, O'Connor, Turner & Ketchum (“NOTK”) a 10% convertible debenture in a principal amount of $29,007, due September
30, 2013. NOTK may elect to convert all or any portion of the outstanding principal amount of the debenture at an exercise price
of $0.02534 per share. 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, 2012. The debenture was issued in settlement of the indebtedness.
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 2014, and warrants to buy 28,571 post-split
equivalent shares of the common stock at an exercise price of $381.50 per post-split share. In connection with each conversion,
Golden State is expected to simultaneously exercise a percentage of warrants equal to the percentage of the principal being converted.
During the year ended December 31, 2012, Golden State converted $7,991 of the $100,000 debenture into 9,577,906 post-split shares
of common stock, exercised warrants to purchase 2,285 post-split shares of common stock at $381.50 per share based on the formula
in the convertible debenture. Additionally Golden Gate advanced $789,111 against future exercises of warrants of which $805,652
was applied to the exercise of warrants leaving $1.00 of unapplied advances at December 31, 2012. During 2013, Golden State converted
$2,840 of the $100,000 debenture into 13,423,644 post-split shares of common stock, exercised warrants to purchase 811 post-split
shares of common stock at $381.50 per share based on the formula in the convertible debenture. Additionally Golden State advanced
$421,810 against future exercises of warrants of which $309,560 was applied to the exercise of warrants leaving $46,851 of unapplied
advances at June 30, 2013.
The conversion price for the 4.75% $100,000 convertible debenture is the lesser of (i) $4.00 (pre-split) 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 pre-split price is below $0.02, 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.
5% Convertible
Promissory Note #1
On June 6, 2012, the Company issued and
sold a convertible promissory note ("Note #1") in the principal amount of $275,000 to JMJ Financial
(“JMJ”). Note #1 includes a $25,000 original issue discount (the “OID”) that will be prorated based
on the advances actually paid to the Company. JMJ advanced $75,000 and collected $6,000 OID during 2012. During 2013, JMJ
advanced an additional $55,000 on the note and collected $15,500 OID. Additionally, JMJ converted $86,625 of the note into
6,057,305 shares of common stock at an average of $0.0143 per share based on the formula in the note. In addition to the OID,
Note #1 provides for a one-time interest charge of 5% to be applied to the principal sum advanced. Pursuant to the terms of
Note #1, JMJ may, at its election, convert all or a part of Note #1 into shares of the Company's common stock at a conversion
rate equal to the lesser of (i) $0.35 or (ii) 70% of the lowest trade price during the twenty-five trading days prior to
JMJ’s election to convert. If the Company repays Note #1 on or before ninety days from the date it was issued, the
interest rate will be zero percent. If the Company does not repay Note #1 on or before ninety days from the date it was
issued, a one-time interest charge of 5% shall be applied to the principal sum. The Company did not repay Note #1 within the
ninety-day period and $2,500 of interest has been accrued. The principal of Note #1 is due one year from the date of each of
the principal amounts advanced.
5% Convertible Promissory Note #2
On August 1, 2012, the Company issued and
sold a convertible promissory note #2 (“Note #2") in the principal amount of $140,000 to JMJ. Note #2 includes a $15,000
OID that will be prorated based on the advances actually paid to the Company. During 2012, JMJ advanced $75,000 on Note #2 and
collected $6,000 OID. During 2013 JMJ converted $71,220 of the note into 5,400,000 shares of common stock at an average of $0.0077
per share based on the formula in the note. In addition to the OID, Note #2 provides for a one-time interest charge of 5% to be
applied to the principal sum advanced. Pursuant to the terms of Note #2, JMJ may, at its election, convert all or a part of Note
#2 into shares of the Company's common stock at a conversion rate equal to the lesser of (i) $0.15 or (ii) 70% of the lowest trade
price during the twenty-five trading days prior to JMJ’s election to convert. If the Company repays Note #2 on or before
ninety days from the date it was issued, the interest rate will be zero percent. If the Company does not repay Note #2 on or before
ninety days from the date it was issued, a one-time interest charge of 5% shall be applied to the principal. The Company did not
repay Note #2 within the ninety day period and $5,000 of interest has been accrued. The principal of Note #2 is due one year from
the date of each of the principal amounts advanced.
The Notes were subject to a Mandatory
Registration Agreement (the “Agreement”) whereby no later than August 31, 2012, the Company agreed to file, at
its own expense, an amendment to the S-1 Registration Statement which the Company filed with the SEC on July 3, 2012, to
include in such Registration Statement 4,750,000 shares of common stock issuable under the Notes as set forth below. The
Company thereafter used its best efforts to cause such Registration Statement to become effective as soon as possible after
such filing but in no event later than one hundred and twenty (120) days from August 1, 2012, the date of the Agreement.
Failure to have the Registration Statement declared effective within 120 days of the date of the Agreement resulted in a
penalty/liquidated damages of $25,000. Any such penalties/liquidated damages were added to the balance of either the Note #1
or the Note #2 at the Holder’s discretion (under the Holder’s and the Company’s expectation that those
penalties/liquidated damages will tack back to the date of such Note for purposes of Rule 144).
The registration was not declared effective
within the 120 day period as specified in the Agreement and $25,000 was added to the principal of Note #2. The Registration Statement
was declared effective on February 13, 2013.
15%
Convertible Bridge Notes
On August 24,
2012, August 28, 2012 and September 11, 2012, the Company issued and sold to accredited investors Convertible Bridge Notes (the
“Bridge Notes”) in the aggregate principal amount of $438,000. The note sold on September 10, 2012 was purchased by
Victor Keen, a director of the Company. The Notes included a $73,000 original issue discount. Accordingly, the Company received
$365,000 gross proceeds from which the Company paid legal fees and placement agent fees totaling $77,700.
The Bridge Notes
mature 90 days from their date of issuance and, other than the original issue discount, the Bridge Notes do not carry interest.
However, in the event the Bridge Notes are not paid on maturity, all past due amounts will accrue interest at 15% per annum. Upon
maturity of the Bridge Notes, the holders of the Bridge Notes may elect to convert all or any portion of the outstanding principal
amount of the Bridge Notes into (i) the securities to be sold pursuant to the Registration Statement on Form S-1 and the prospectus
therein, filed on July 3, 2012, or amendment thereto at the offering price of such offering; (ii) or shares of the Company’s
common stock at a conversion price equal to the lesser of 100% of the Volume Weighted Average Price (VWAP), as reported for the
5 trading days prior to (a) the date of issuance of the Bridge Notes, (b) the maturity date of the Bridge Notes, or (c) the first
closing date of the securities sold pursuant to the Registration Statement.
In the event that
the Registration Statement is not declared effective 90 days from the date of the issuance of the Bridge Notes (the “Required
Effective Date”), the Company agreed to register the common stock of the Company into which the Bridge Notes are convertible.
The Company agreed to bear the cost of such registration. Furthermore, if the Registration Statement is not declared effective
by the Required Effective Date and the Bridge Notes are not paid in full by the Company, the Company will incur liquidated damages
equal to 2% of the outstanding principal for each 30 day period after the Required Effective Date the Registration Statement is
not declared effective, which amount will be increase to 3% per 30 days in the event that the Registration Statement is not declared
effective within 120 days.
On January 26, 2013,
the Company entered into two amendment agreements (the “Amendment Agreements”) with the two accredited investors, the
holders of certain Convertible Bridge Notes (the “Bridge Notes”) in principal amounts of $78,000 and $60,000, which
Bridge Notes were issued by the Company on August 28, 2012 and September 10, 2012, respectively. Victor Keen, a director on the
Company’s Board of Directors, is a holder of the $60,000 Bridge Note.
On or about November
26, 2012 and December 10, 2012, the Bridge Note reached their maturity dates, on which dates all past due amounts of the Bridge
Notes began accruing interest at 15% per annum. Furthermore, because the shares of the Company’s common stock into which
the Bridge Notes are convertible were not registered under an effective registration statement (the “Registration Statement”),
the holders were entitled to liquidated damages equal to 2% of the outstanding principal for each 30 day period the Registration
Statement is not declared effective after the maturity of the Bridge Notes (the “Liquidated Damages”).
Pursuant to the
Amendments, the holders agreed to extend the maturity of the Bridge Note to April 30, 2013 and waive any and all defaults, default
interest and Liquidated Damages then due to each of the holders.
Upon maturity, George Widener converted
the entire balance of his $78,000 Bridge Note into 2,025,974 shares of common stock. Victor Keen extended the maturity of his
Bridge Note to May 15, 2013.
Note 5 – Common Stock and Paid-In
Capital
Reverse Stock Split
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. On April 27, 2012 the Company 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. On April 27, 2012, the effective
date, every 35 shares of the Company’s issued and outstanding common stocks 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 were entitled to, upon surrender to the Company’s transfer agent of
certificates representing such shares, cash in lieu thereof.
Warrants issued
As of June 30, 2013,
there are warrants outstanding to purchase 125,098 shares of common stock at a price of $3.15 per share that expire on May 22,
2014 and, warrants to purchase 96,024 shares of common stock at a price of $3.15 per share that expire on June 1, 2015. Additionally,
Golden State has warrants outstanding to purchase 20,234 shares of common stock at a price of $381.50 per share which expire December
31, 2014.
Common stock and options issued for services
and liabilities
During the six-month periods ended June 30,
2013 and 2012, shares of common stock totaling 2,656,250 and 1,183,942, respectively were issued for consulting services for which
the Company recognized $62,550 and $183,100 of expense, respectively. Additionally, during the period ending June 30, 2013
and 2012, shares totaling 1,098,751 and 869,510, respectively were issued to consultants for previous services provided to the
Company for which the accounts payable liability was reduced by $31,500 and $366,364, respectively.
Employment Agreement - On March 19, 2012 the
Company announced that Sidney Aroesty would resign as CEO and join the Board of Directors.
Employment Agreement - On March 13, 2012,
the Company 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 57,143 shares at a price equal to the average price of the
five day period prior to March 19, 2012 which was $0.35 (the “Strike Price”). Furthermore, since Mr. Willner remained
employed by the Company at the end of each quarter ending June 30, 2012, September 30, 2012 and December 31, 2012, he received
additional stock options to purchase 28,571.5 shares at the Strike Price. In addition, since the Company achieved certain quarterly
business objectives, Mr. Willner received, at the end of each such quarterly period, a further grant of stock options to purchase
28,571.5 shares at the Strike Price. The estimated fair value of each of the 57,143 block of options, valued at $18,840, was determined
using the Black-Scholes option pricing model and was charged to operations in March 2012, June 2012, September 2012 and December
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.
Employment Agreement - On March 16, 2012,
the Company entered into a one (1) year Agreement for At-Will Employment with Assignment of Inventions (“Employment Agreement”)
with George Melnik, pursuant to which Mr. Melnik began serving as the Company’s Senior Technical Advisor, effective immediately.
Under the terms of the Employment Agreement, Mr. Melnik is entitled to an annual base salary of $144,000, 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. Melnik five-year stock options to purchase 28,571 shares at a price equal to the average price of the five
day period prior to March 16, 2012 which was $0.35 (the “Strike Price”). Furthermore, since Mr. Melnik remained employed
by the Company at the end of each quarter ending June 30, 2012, September 30, 2012 and December 31, 2012, he received additional
stock options to purchase 28,571 shares at the Strike Price. In addition, since the Company achieved certain quarterly business
objectives, Mr. Melnik received, at the end of each such quarterly period, a further grant of stock options to purchase 28,571
shares at the Strike Price. The estimated fair value of each of the 28,571 block of options, valued at $9,420, was determined using
the Black-Scholes option pricing model and was charged to operations in March 2012, June 2012, September 2012 and December 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. Melnik 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.
Employment Agreement - On January 28, 2013,
the Board of Directors of the Company appointed Ronald Robinson to serve as the Company’s Chief Financial Officer. Accordingly,
the Company decided not to renew its agreement with Christopher T. Dunstan pursuant to which Mr. Dunstan served as the Company’s
Interim Chief Financial Officer. The Company’s appointment of Mr. Robinson and decision not to renew its agreement with Mr.
Dunstan was not as a result of any disagreement between the Company and Mr. Dunstan.
On April 11, 2013, the Company
completed the sale of two options, each to purchase 10,000,000 shares of the Company’s common stock (the “Option
Agreements”) to two accredited investors. One of the accredited investors was Victor Keen, a director on the Board of
Directors of the Company. Each of the Option Agreements provide for the option to purchase up to 10,000,000 shares of
restricted common stock at a purchase price of $0.01 per share. The holders of the Option Agreements may exercise the option
to purchase common stock on a cashless basis for a period of five years. Furthermore, the holders of the Option Agreements
were granted “piggyback” registration rights for the inclusion, on a subsequent registration statement, the
shares of common stock underlying the Option Agreements. The gross proceeds to the Company for the sale of both Option
Agreements were $100,000.
The following summary reflects warrant and
option activity for the six-month period ended June 30, 2013:
|
|
Attached
Warrants
|
|
|
Golden State
Warrants
|
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding December 31, 2012
|
|
|
221,122
|
|
|
|
21,045
|
|
|
|
3,045,989
|
|
Granted/purchased
|
|
|
-
|
|
|
|
-
|
|
|
|
20,000,000
|
|
Exercised
|
|
|
-
|
|
|
|
(811
|
)
|
|
|
-
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding June 30, 2013
|
|
|
221,122
|
|
|
|
20,234
|
|
|
|
23,045,989
|
|
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 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. There are currently 44,673 shares available for issuance under the 2011 EIP.
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 1,755,001 and 2,172,463 were issued from the 2012 EIP during
2013 and 2012 respectively, for services rendered and to satisfy accounts payable to the Company. There are currently 1,072,536
shares available for issuance under the 2012 EIP.
In June 2013, the Company established the
3DIcon Corporation 2013 Equity Incentive Plan (the "2013 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 2013 EIP shall not exceed twenty million (20,000,000) post-split shares. The shares are included in
a registration statement filed June 10, 2013. Post-split shares totaling 2,000,000 were issued from the 2013 EIP during 2013 for
services rendered. There are currently 18,000,000 shares available for issuance under the 2013 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 (amendment 1) to extend the expiration date to
May 31, 2012. On July 24, 2012 the Lease Agreement was amended (amendment 2) to extend the expiration date to July 31,
2015. The minimum future lease payments to be paid annually under the three-year non-cancellable amended operating
lease for office space are as follows:
2013
|
|
$
|
12,000
|
|
2014
|
|
|
23,000
|
|
2015
|
|
|
13,000
|
|
|
|
|
|
|
Total
|
|
$
|
48,000
|
|
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 June 30, 2013 and June
30, 2012, the Company incurred legal fees to Newton, O’Connor, Turner & Ketchum in the amount of $14,539 and $14,438,
respectively.
Note 9 – Dimension Technologies Inc.
- Non-Binding Letter of Intent
As previously disclosed in the Company’s
Current Report on Form 8-K, filed with the SEC on July 19, 2012, on July 13, 2012, 3DIcon Corporation executed a non-binding letter
of intent (the “Letter of Intent”) outlining the principal terms and conditions to acquire Dimension Technologies Inc.,
a privately held New York corporation (“DTI”). DTI is a developer of glasses-free flat screen 3D display technologies
and products that are 2D/3D switchable. Founded in 1986, DTI’s intellectual property portfolio includes 10 patents that have
been granted in multiple countries. The Letter of Intent is not binding on either party and there is no assurance that the parties
will reach a definitive agreement, and if they do, there is no assurance that the conditions there under will be met to consummate
the acquisition. Furthermore, if the acquisition is consummated, there is no assurance that the anticipated effects of the transaction
will be realized.
In a letter to the shareholders of the Company,
issued on February 20, 2013, the Company’s Chief Executive Officer, Mark Willner, provided an update on the progress the
Company is making in its continued efforts to improve the performance of its CSpace technology and to seek out potential acquisitions
that would allow the Company to enter the glasses-free flat screen 3D space. The letter to shareholders explains that the Company and DTI mutually agreed not to renew the non-binding letter
of intent after a determination was made that DTI’s technology does not fit the specifics of the Company’s business
model. At this time, the Company does not have any definitive agreement in place and no assurances can be made the Company will
be able to consummate a transaction that would allow such entry into the glasses-free flat screen 3D space.
Note 10 – Subsequent Events
GCASIF Convertible Bridge Note
On July 22, 2013,
the Company entered into a third amendment agreement (the “Third Amendment”) with CP US Income Group LLC (“CPUS”),
the successor in interest of GCA Strategic Investment Fund Limited to that certain Convertible Bridge Note in principal amount
of $300,000 and due November 26, 2012, as amended on December 21, 2012 to increase the principal amount to $325,000 and on May
28, 2013 to extend the maturity date to August 1, 2013 (the “Assigned Note”) and that certain Securities Purchase Agreement
dated as of August 24, 2012, as amended on December 21, 2012 and May 28, 2013 (the “Assigned SPA”).
Pursuant to the
Amendment, CPUS agreed to extend the maturity of the Assigned Note from August 1, 2013 to July 22, 2014 and to waive, if any, existing
or prior defaults under the Assigned Note or Assigned SPA and the Company agreed to (i) amend the conversion price of the Assigned
Note to the greater of (x) the par value of the Common Stock, or (y) 60% of the lowest closing bid price, as reported by Bloomberg,
L.P., for the 10 trading days prior to the date CPUS requests conversion of all or part of the Assigned Note; and (ii) agreed to
file a prospectus supplement to the Form 424B3 filed by the Company on February 15, 2013 in order to identify CPUS as a Selling
Stockholder in place of GCASIF.
Keen Convertible Bridge Note
On July 30, 2013
(the “Amendment Date”), the Company entered into a second amendment agreement (the “Second Keen Amendment”)
with Victor Keen, a Director on the Board of Directors of the Company, to amend that certain Convertible Bridge Note in principal
amount of $60,000 and due December 10, 2012, as amended by that certain Amendment to Securities Purchase Agreement dated as of
January 23, 2013, extending the maturity date to April 30, 2013, and by letter agreement dated May 1, 2013, extending the maturity
date to May 15, 2013 and that certain Securities Purchase Agreement dated as of September 10, 2012, as amended on January 23, 2013
(the “Keen SPA”).
Pursuant to the
Second Keen Amendment, Mr. Keen agreed to extend the maturity of the Note from May 15, 2013 to August 31, 2013 (the “New
Maturity Date”) and to waive, if any, existing or prior defaults under the Keen Bridge Note or the Keen SPA and the Company
agreed to (i) amend the conversion provision to allow for conversions based on a conversion price calculated on the Amendment Date
or the New Maturity Date; and (ii) to include an interest rate equal to 10% per annum, payable on the New Maturity Date, as amended,
which accrual shall commence on December 10, 2012.
Settlement Agreement
On July 26, 2013,
the Circuit Court in the 12
th
Judicial Circuit in and for Sarasota County, Florida (the “Court”), entered
an Order Granting Approval of Settlement Agreement (the “Order”) approving, among other things, the fairness of the
terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, in accordance with
a Settlement Agreement (the “Settlement Agreement”) between the Company and IBC Funds, LLC, a Nevada limited liability
company (“IBC”), in the matter entitled
IBC Funds, LLC v. 3DIcon Corporation
, Case No. 2013 CA 5705 NC
(the “Action”). IBC commenced the Action against the Company on July 19, 2013 to recover an aggregate of $197,630.64
of past-due accounts payable of the Company, which IBC had purchased from certain vendors of the Company pursuant to the terms
of separate claim purchase agreements between IBC and each of such vendors (the “Assigned Accounts”), plus fees and
costs (the “Claim”). The Assigned Accounts relate to certain research, technical, development, accounting and legal
services. The Order provides for the full and final settlement of the Claim and the Action. The Settlement Agreement
became effective and binding upon the Company and IBC upon execution of the Order by the Court on July 26, 2013.
Pursuant to the
terms of the Settlement Agreement approved by the Order, on July 26, 2013, the Company issued 650,000 shares of Common Stock as
a settlement fee and agreed to issue, in one or more tranches as necessary, that number of shares equal to $197,630.64 upon conversion
to Common Stock at a conversion rate equal to 65% of the lowest closing bid price of the Common Stock during the ten trading days
prior to the date the conversion is requested by IBC
minus
$0.002.
Common stock issued for services and
liabilities
Subsequent to June 30, 2013, shares of
common stock totaling 5,160,599 were issued for consulting services for which the Company recognized $108,300 of expense.
Subsequent to June 30, 2013, shares of
common stock totaling 4,000,000 were issued in connection with the Settlement Agreement and the liabilities contained thereunder.
Subsequent to June 30, 2013, shares of
common stock totaling 9,439,419 were issued upon conversion of $106,696 in principal of outstanding convertible promissory notes
of the Company.
Subsequent to June 30, 2013, shares of common stock totaling
86 were issued upon exercise of 86 warrants at $381.50 per share for $32,700 and advanced $100,000 for future exercise of warrants
under the terms of the securities purchase agreements.
OCAST Grant
On July 2, 2013, the Company issued a
press release announcing that the Company was awarded a $300,000 grant in this year’s Oklahoma Applied Research Support
competition sponsored by the Oklahoma Center for the Advancement of Science and Technology. The Company explained that the grant
money will be used to support the development of the Company’s first Product Platform, which will be the basis for a family
of products based on the Company’s CSpace® volumetric 3D display technology.
Item 2.
Management's
Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
The information in
this report contains forward-looking statements. All statements other than statements of historical fact made in this report are
forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial
position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,”
“estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,”
“expects,” “may,” “will,” or “should” or other variations or similar words. No
assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking
statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly
from management’s expectations.
The following discussion
and analysis should be read in conjunction with our financial statements, included herewith. This discussion should not be construed
to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will
necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment
of our management.
Plan of Operation
Background:
3DIcon Corporation
(“3DIcon,” “the Company,” “we,” “us” or “our”) 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 $299,984, had a start
date of January 1, 2009. The Company received approval for a no cost extension request for the first year of the contract.
Accordingly, the first year ended on August 31, 2010. The award was for a maximum of $149,940 for 2009 and the remainder
for 2011. The Company received approval for a no cost extension request for the second year of the contract, extending the
second year to August 31, 2012. The Company earned $63,668 and $86,323 from the grant during the years ended December 31, 2012
and 2011, respectively and $281,492 from inception to December 31, 2012. The Company applied for and received the remaining $13,029
of grant funds in 2013 that were earned through the end of the grant period, August 31, 2012.
In July 2013, the
Company won first place in the Oklahoma Center for the Advancement of Science and Technology’s Oklahoma Applied Research
Support competition, securing $300,000 in grant funding. The Company intends to use the funds provided by the grant to support
the development of its First Product Platform, which will be the basis of a family of products leveraging the Company’s CSpace®
volumetric 3D display technology.
Overview of Business
3DIcon is a small
public company that is further developing a patented volumetric 3D display technology that was developed by and with the University
of Oklahoma (the “University” or “OU”) under a Sponsored Research Agreement. The development to date has
resulted in multiple new technologies, two working laboratory prototypes (Lab Proto 1 and Lab Proto 2), and eight provisional patents;
five of the eight provisional patents have been combined and converted to five utility patents. Under the Sponsored Research Agreement,
the Company has obtained the exclusive worldwide marketing rights to these 3D display technologies.
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. On August 21, 2012, the USPTO approved a continuation patent called “3D Volumetric
Display” and issued the US Patent No. 8,247,755. Under our agreement with the University of Oklahoma, the University filed
a continuation patent application on November 19, 2010, called “3D Light Surface Display”. This application
provides additional protections of our CSpace® technology. These patents describe what we are calling our CSpace® technology
(“CSpace”).
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 further develop
and commercialize this technology and the intellectual property developed by the University. 3DIcon plans to initially target high
value professional applications with products based on this technology within the government and industrial sectors including but
not limited to the following: air traffic control, passenger, luggage screening, battle space visualization, underwater targeting,
navigation, and exploration, simulation and training, medical imaging, oil and gas exploration, weather forecasting, and automotive
and aerospace design.. 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. On March 12, 2013, we filed a provisional
patent application for glasses-free rear projection 3D display with a new architecture that we believe will significantly lower
the cost of this type of display. This provisional patent application is called “Holoform Projection Display” and is
solely owned by 3DIcon. On July 26
th
, 2013, we filed a provisional patent application called “Ultra High Resolution
Three-Dimensional Display” for a Z-axis scanning system that significantly enhances the performance of the CSpace technology
and that is solely owned by 3DIcon.
Since March of 2012,
the Company has been exploring the possibility of developing and/or marketing glasses-free flat screen 3D displays based on next
generation glasses-free flat screen 3D display technology internally developed, acquired or licensed from another company. This
technology and any resultant display products would be in addition to and complementary with our internally developed CSpace glasses-free
volumetric 3D display technology. In 2012, the company met with multiple glasses-free flat screen 3D display companies, and has
had discussions with several of these companies about a potential acquisition or partnership. 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.
Progress on Research and Development
Activities
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 eight provisional
patents; five of the eight provisional patents have been combined and converted to five utility US patents, one pending European
patent and one pending Japanese patent.
List of the issued US patents:
|
-
|
”Computer System with Digital Micromirror Device,” United State Patent 8,487,865. July 16, 2013.
|
|
-
|
”3D Volumetric Display,” United State Patent 8,247,755. August 21, 2012.
|
|
-
|
”3D Light Surface Display,” United State Patent 8,075,139, December 13, 2011.
|
|
-
|
”Light Surface Display for Rendering a Three-Dimensional Image,” United State Patent 7,858,913, December, 28, 2010.
|
|
-
|
“Volumetric liquid crystal display for rendering a three-dimensional image,” United States Patent 7,537,345, May
26, 2009.
|
List of the pending patents:
European, pending
”Light Surface Display
for Rendering a Three-Dimensional Image,” European Application Number EP07755984. Filed April 25, 2007.
Japanese, pending
“Light Surface Display
for Rendering a Three-Dimensional Image.” Japanese Patent Application No. 2009-507766.
As mentioned above, 3DIcon has been aggressively
working to enhance the performance of CSpace display and create new 3D display technologies. Up-to-date, we filed two provisional
patents that are solely owned by 3DIcon
List of filed provisional
patents owned by 3DIcon
|
-
|
“Holoform Projection Display” US Provisional Patent filed on March 12, 2013
|
|
-
|
“Ultra High Resolution Three-Dimensional Display” US Provisional Patent filed on July
26, 2013
|
RESULTS OF OPERATIONS FOR THE THREE
MONTHS ENDED JUNE 30, 2013 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2012
Revenue
The Company completed the OCAST grant in
August 2012. However, we did receive the remaining OCAST grant earnings during the three months ended June 30, 2013 for grant funding
approved through August 2012. We earned $11,020 from the OCAST grant during the three months ended June 30, 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 not earned any income from the sales of Pixel Precision
for the three-months ended June 30, 2013 and June 30, 2012, 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 2013 to cover the operating expenses.
Research and Development Expenses
The research and development expenses
were $86,837 for the three months ended June 30, 2013, as compared to $152,908 for the three months ended June 30,
2012. The net decrease was a result of the decrease in cost for engaging outside research and development
consultants of approximately $18,890, travel of $5,387, patents of $10,845, options issued of $18,840, and the purchase of
approximately $12,393 of R & D equipment.
General and Administrative Expenses
Our general and administrative
expenses were $320,880 for the three months ended June 30, 2013, as compared to $323,198 for the three months ended June 30,
2012. The net decrease is due primarily to a $59,387 increase in legal fees regarding the DTC chill in 2013, a
decrease of $18,840 in options issued to the new CEO in 2012, a decrease in accounting fees of $17,500 a decrease in filing
fees of $11,109, a decrease in various administrative expenses of $8,000 and a $3,352 decrease due to the completion of
management consultant contracted in early 2012.
Interest Expense
Interest expense for the three months
ended June 30, 2013 was $33,116 as compared to $2,830 for the three months ended June 30, 2012. The net increase
was a result of an increase in the amounts outstanding on our JMJ convertible notes, bridge notes, OID amortization of
$14,600, extension fee of $15,000 and a decrease in interest costs on our 4.75% Convertible Debenture.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2013
COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2012
Revenue
The Company completed the OCAST grant in
August 2012. However, we did receive the remaining OCAST grant earnings during the six months ended June 30, 2013 for grant funding
approved through August 2012. We earned $63,668 from the OCAST grant during the six months ended June 30, 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 $1,500 and $-0- before commissions and costs from the sales of Pixel Precision for the six-months ended June
30, 2013 and June 30, 2012, 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 2013 to cover the operating expenses.
Research and Development Expenses
The research and development expenses were
$190,442 for the six months ended June 30, 2013, as compared to $286,389 for the six months ended June 30, 2012. The
net decrease was a result of the decrease in cost for engaging outside research and development consultants of approximately $66,671,
patents $11,865, and options issued for $18,840.
General and Administrative Expenses
Our general and
administrative expenses were $584,852 for the six months ended June 30, 2013, as compared to $618,192 for the six months
ended June 30, 2012. The net decrease is due primarily to a $76,800 increase in legal fees regarding the DTC chill
in 2013, a decrease of $37,680 in options issued to the new CEO in 2012, decreases in accounting fees of $14,094, outside
consultants of $4,250, payroll taxes of $5,966, insurance of $3,956, filing fees of $7,170, and rent of $2,800.
Interest Expense
Interest expense for the six months ended
June 30, 2013 was $53,383 as compared to $4,710 for the six months ended June 30, 2012. The net increase was a result
of an increase in the amounts outstanding on our convertible notes, bridge notes, $30,860 OID amortized on our new notes, an extension
fee of $15,000 and a decrease of $1,352 in interest costs on our 4.75% Convertible Debenture.
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, 2012, 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
$119,445 at June 30, 2013.
We had negative working
capital of $1,000,770 at June 30, 2013.
During the six
months ended June 30, 2013, we used $488,715 of cash for operating activities, a decrease of $182,021 or 27% compared to the
six months ended June 30, 2012. The decrease in the use of cash for operating activities was a result of the increase in
accounts payable.
There was no cash
used in investing activities during the six months ended June 30, 2013 or for the six months ended June 30, 2012.
Cash provided by financing
activities during the six months ended June 30, 2012 was $606,810, a decrease of $78,021 or 11% compared to the six months ended
June 30, 2012. 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.
On November 3, 2006,
the Company issued to Golden State a 4.75% convertible debenture in a principal amount of $100,000, due 2014, and warrants to buy
1,000,000 shares of the common stock at a pre-split exercise price of $10.90 per share. In connection with each conversion,
Golden State is expected to simultaneously exercise a percentage of warrants equal to the percentage of the principal being converted. During 2012, Golden State converted $7,991 of the $100,000
debenture into 9,577,906 post-split shares of common stock, exercised warrants to purchase 2,285 post-split shares of common stock
at $381.50 per share based on the formula in the convertible debenture. Additionally Golden State advanced $789,111 against future
exercises of warrants of which $805,652 was applied to the exercise of warrants leaving $1.00 of unapplied advances at December
31, 2012. During 2013, Golden State converted $2,840of the $100,000 debenture into 13,423,644post-split shares of common stock,
exercised warrants to purchase 811post-split shares of common stock at $381.50 per share based on the formula in the convertible
debenture. Additionally Golden Gate advanced $421,810against future exercises of warrants of which $309,560was applied to the exercise
of warrants leaving $46,851of unapplied advances at June 30, 2013.
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 $299,984, had a start
date of January 1, 2009. The Company received approval for a no cost extension request for the first year of the contract.
Accordingly, the first year ended on August 31, 2010. The award was for a maximum of $149,940 for 2009 and the remainder
for 2011. The Company received approval for a no cost extension request for the second year of the contract, extending the
second year to August 31, 2012. The Company earned $63,668 and $86,323 from the grant during the years ended December 31, 2012
and 2011, respectively and $281,492 from inception to December 31, 2012. The Company applied for and received the remaining $13,029
of grant funds in 2013 that were earned through the end of the grant period, August 31, 2012.
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 pre-split 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.
Director Debenture
On June 24, 2013, the Company issued to Victor Keen and Martin
Keating, Directors of the Company, (“Directors”) 10% convertible debentures in a principal amount of $15,000 each,
due June 26, 2014. The Directors may elect to convert all or any portion of the outstanding principal amount of the debentures
at an exercise price of $0.01 per share. Provided that the debentures are paid in full or on before the maturity date, no interest
shall accrue on the unpaid balance of the principal amount. In the event that the debentures are not paid in full on or before
the maturity date, interest shall accrue on the unpaid outstanding balance of the principal amount of the debentures from June
26, 2013, until paid, at the fixed rate of ten percent (10%) per annum.
5% Convertible Promissory Note #1
On June 6, 2012 (the
“Effective Date”), the Company issued and sold to JMJ Financial (“JMJ”) a convertible promissory note ("Note
#1"), which Note #1 allows the Company to request advances of principal up to its face amount of $275,000. Note #1 includes
a $25,000 original issue discount (the “OID”) that will be prorated based on the advances actually paid to the Company.
On June 6, 2012, JMJ advanced $50,000 on Note #1 and collected $4,000 OID, bringing the principal amount borrowed by the Company
of Note #1 to $54,000. During 2013, JMJ advanced an additional $48,500 towards Note #1 and collected $23,500 OID. Additionally
JMJ converted $52,767 of Note #1 into 2,400,000 shares of common stock at $0.022 per share based on the formula in Note #1. In
addition to the OID, Note #1 provides for a one-time interest charge of 5% to be applied to the principal sum advanced. Pursuant
to the terms of Note #1, JMJ may, at its election, convert all or a part of Note #1 into shares of the Company's common stock at
a conversion rate equal to the lesser of (i) $0.35 or (ii) 70% of the lowest trade price during the twenty-five trading days prior
to JMJ’s election to convert. In addition, pursuant to the terms of Note #1, the Company agreed to include on the next registration
statement filed by the Company with the SEC all shares issuable upon conversion of Note #1. Failure to do so will result in liquidated
damages of 25% of the outstanding principal balance of Note #1. If the Company repays Note #1 on or before ninety days from the
Effective Date, the interest rate will be zero percent. If the Company does not repay Note #1 on or before ninety days from the
Effective Date, a one-time interest charge of 5% shall be applied to the principal sum of $275,000. The principal of Note #1 is
due one year from the date of each of the principal amounts advanced.
5% Convertible Promissory Note #2
On August 1, 2012
(the “Note #2 Effective Date”), the Company issued and sold to JMJ a convertible promissory note #2 ( “Note #2"),
which Note #2 allows the Company to request advances of principal up to its face amount of $140,000. Note #2 includes a $15,000
original issue discount that will be prorated based on the advances actually paid to the Company. On August 1, 2012, JMJ advanced
$75,000 and collected $9,000 OID, bringing the principal amount borrowed by the Company of Note #2 to $84,000. No further advances
were requested by or paid to the Company. In addition to the OID, Note #2 provides for a one-time interest charge of 5% to be applied
to the principal sum advanced. Pursuant to the terms of Note #2, JMJ may, at its election, convert all or a part of Note #2 into
shares of the Company's common stock at a conversion rate equal to the lesser of (i) $0.15 or (ii) 70% of the lowest trade price
during the twenty-five trading days prior to JMJ’s election to convert. In addition, pursuant to the terms of Note #2, the
Company agreed to include on the next registration statement filed by the Company with the SEC all shares issuable upon conversion
of Note #2. Failure to do so will result in liquidated damages of 25% of the outstanding principal balance of Note #2. The principal
of Note #2 is due one year from the date of each of the principal amounts advanced.
Note #1 and Note #2
were subject to a Mandatory Registration Agreement (the “Registration Agreement”) whereby no later than August 31,
2012, the Company agreed to file, at its own expense, an amendment (the “Amendment”) to the S-1 Registration Statement
(the “Registration Statement”) the Company filed with the SEC on July 3, 2012, to include in such Amendment 4,750,000
shares of common stock issuable under Note #1 and the Note #2. The Company agreed, thereafter, to use its best efforts to cause
such Registration Statement to become effective as soon as possible after such filing but in no event later than one hundred and
twenty (120) days from the date of the Registration Agreement. Since the Company failed to get the Registration Statement declared
effective within the 120 days of the date of the Registration Agreement, a penalty/liquidated damages of $25,000 was added to the
balance of Note #2.
Newton, O'Connor, Turner & Ketchum 10% Convertible Debenture
On December 20, 2012, the Company
issued to Newton, O'Connor, Turner & Ketchum (“NOTK”) a 10% convertible debenture in a principal amount of
$29,007, due September 30, 2013. NOTK may elect to convert all or any portion of the outstanding principal amount of the
debenture at an exercise price of $0.02534 per share. 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, 2012. The debenture
was issued in settlement of the indebtedness.
Convertible Bridge Notes
On August 24, 2012,
August 28, 2012 and September 10, 2012, the Company issued and sold to three accredited investors Convertible Bridge Notes (the
“Bridge Notes”) in the aggregate principal amount of $438,000. The note sold on August 24, 2012, in principal amount
of $300,000, was purchased by GCA Strategic Investment Fund Limited, a Bermuda corporation ("GCASIF"). The note sold
August 28, 2012, in principal amount of $78,000, was purchased by George Widener. The note sold on September 10, 2012, in principal
amount of $60,000, was purchased by Victor Keen, a director of the Company.
The sale of the Bridge
Notes in aggregate principal of $438,000 included a $73,000 original issue discount. Accordingly, the Company received $365,000
gross proceeds from which the Company paid legal fees of $25,000 and placement agent fees of $27,675. The Bridge Notes mature in
90 days from their date of issuance and, other than the original issue discount, the Bridge Notes do not carry interest. However,
in the event the Bridge Notes are not paid on maturity, all past due amounts will accrue interest at 15% per annum. Upon maturity
of the Bridge Notes, the holders of the Bridge Notes may elect to convert all or any portion of the outstanding principal amount
of the Bridge Notes into (i) securities sold pursuant to an effective registration statement at the applicable offering price;
or (ii) shares of common stock at a conversion price equal to the lesser of 100% of the Volume Weighted Average Price (VWAP), as
reported for the 5 trading days prior to (a) the date of issuance of the Bridge Notes, (b) the maturity date of the Bridge Notes,
or (c) the first closing date of the securities sold pursuant an effective registration statement.
On December 21, 2012,
the Company entered into an amendment agreement (the “GCASIF Amendment”) with GCASIF, the holder of that certain Convertible
Bridge Note (the “GCA Bridge Note”) in the principal amount of $300,000.
The GCA Bridge Note
matured on or about November 22, 2012, on which date all past due amounts of the GCA Bridge Note began accruing interest at 15%
per annum. Furthermore, on November 22, 2012, because the shares of the Company’s common stock into which the GCA Bridge
Note is convertible were not registered under an effective registration statement (the “Registration Statement”), GCASIF
was entitled to liquidated damages equal to 2% of the outstanding principal for each 30 day period after the November 22, 2012
the Registration Statement is not declared effective (the “Liquidated Damages”).
Pursuant to the GCASIF
Amendment, GCASIF agreed to extend the maturity of the GCA Bridge Note from November 22, 2012 to March 21, 2013 and the Company
agreed to (i) increase the principal amount of the GCA Bridge Note from $300,000 to $325,000; (ii) amend the conversion price of
the GCA Bridge Note to the lesser of $0.04, or 100% of the Volume Weighted Average Price, as reported by Bloomberg, L.P., for the
5 trading days prior to the effective date of the Registration Statement; and (iii) grant additional registration rights to GCASIF
from 5,172,414 shares to 8,000,000 shares of the Company’s common stock into which the GCA Bridge Note may be convertible.
Furthermore, GCASIF agreed to waive any and all defaults, default interest and the Liquidated Damages due to GCASIF. In connection
with the GCASIF Amendment, the Company agreed to pay GCASIF a fee of $20,000. Subsequent to March 21, 2013, GCASIF agreed to waive
any defaults resulting from the non-payment of the GCA Bridge Note, so long as, GCASIF is paid in full by April 15, 2013 or GCASIF
elects to convert the GCA Bridge Note into shares of the Company’s common stock on or before April 15, 2013. Subsequent to
April 15, 2013, the GCA Bridge Note was assigned to a successor in interest and the Company executed an amendment to the GCA Bridge
Note in order to extend the maturity until July 22, 2014 and reduce the conversion price to the greater of (x) the par value of
the Common Stock, or (y) 60% of the lowest closing bid price, as reported by Bloomberg, L.P., for the 10 trading days prior to
the date the conversion of all or part of its principal and interest are requested.
On January 26, 2013,
the Company entered into an amendment agreement (the “Widener Amendment”) with George Widener, the holder of that certain
Convertible Bridge Note (the “Widener Bridge Note”) in the principal amount of $78,000 issued by the Company on August
30, 2012.
The Widener Bridge
Note matured on or about November 26, 2012, on which date all past due amounts of the Widener Bridge Note began accruing interest
at 15% per annum. Pursuant to the Widener Amendment, Mr. Widener agreed to extend the maturity date of the Widener Bridge Note
from November 26, 2012 to April 30, 2013 and to waive any and all defaults, default interest and Liquidated Damages then due to
Mr. Widener. Subsequent to April 30, 2013, Mr. Widener converted the entire $78,000 balance of the Widener Bridge Note into 2,025,974
shares of common stock.
On January 26, 2013,
the Company entered into an amendment agreement (the “Keen Amendment”) with Victor F. Keen, the holder of that certain
Convertible Bridge Note (the “Keen Bridge Note”) in the principal amount of $60,000 issued by the Company on September
10, 2012.
The Keen Bridge Note
matured on or about December 10, 2012, on which date all past due amounts of the Keen Bridge Note began accruing interest at 15%
per annum. Pursuant to the Keen Amendment, Mr. Keen agreed to extend the maturity date of the Keen Bridge Note from December 10,
2012 to April 30, 2013 and to waive any and all defaults, default interest and Liquidated Damages then due to Mr. Keen. Subsequent
to April 30, 2013, Mr. Keen agreed to waive any defaults for non-payment of the Keen Bridge Note or failure to issue shares of
our common stock upon conversion until August 31, 2013.
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.
Significant Accounting Policies
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.
Subsequent Events
GCASIF Convertible Bridge Note
On
July 22, 2013, the Company entered into a third amendment agreement (the “Third Amendment”) with CP US Income Group
LLC (“CPUS”), the successor in interest of GCA Strategic Investment Fund Limited to that certain Convertible Bridge
Note in principal amount of $300,000 and due November 26, 2012, as amended on December 21, 2012 to increase the principal amount
to $325,000 and on May 28, 2013 to extend the maturity date to August 1, 2013 (the “Assigned Note”) and that certain
Securities Purchase Agreement dated as of August 24, 2012, as amended on December 21, 2012 and May 28, 2013 (the “Assigned
SPA”).
Pursuant
to the Amendment, CPUS agreed to extend the maturity of the Assigned Note from August 1, 2013 to July 22, 2014 and to waive, if
any, existing or prior defaults under the Assigned Note or Assigned SPA and the Company agreed to (i) amend the conversion price
of the Assigned Note to the greater of (x) the par value of the Common Stock, or (y) 60% of the lowest closing bid price, as reported
by Bloomberg, L.P., for the 10 trading days prior to the date CPUS requests conversion of all or part of the Assigned Note; and
(ii) agreed to file a prospectus supplement to the Form 424B3 filed by the Company on February 15, 2013 in order to identify CPUS
as a Selling Stockholder in place of GCASIF.
Keen Convertible Bridge Note
On
July 30, 2013 (the “Amendment Date”), the Company entered into a second amendment agreement (the “Second
Keen Amendment”) with Victor Keen, a Director on the Board of Directors of the Company, to amend that certain
Convertible Bridge Note in principal amount of $60,000 and due December 10, 2012, as amended by that certain Amendment to
Securities Purchase Agreement dated as of January 23, 2013, extending the maturity date to April 30, 2013, and by letter
agreement dated May 1, 2013, extending the maturity date to May 15, 2013 and that certain Securities Purchase Agreement dated
as of September 10, 2012, as amended on January 23, 2013 (the “Keen SPA”).
Pursuant
to the Second Keen Amendment, Mr. Keen agreed to extend the maturity of the Note from May 15, 2013 to August 31, 2013 (the “New
Maturity Date”) and to waive, if any, existing or prior defaults under the Keen Bridge Note or the Keen SPA and the Company
agreed to (i) amend the conversion provision to allow for conversions based on a conversion price calculated on the Amendment Date
or the New Maturity Date; and (ii) to include an interest rate equal to 10% per annum, payable on the New Maturity Date, as amended,
which accrual shall commence on December 10, 2012.
Settlement Agreement
On
July 26, 2013, the Circuit Court in the 12
th
Judicial Circuit in and for Sarasota County, Florida (the “Court”),
entered an Order Granting Approval of Settlement Agreement (the “Order”) approving, among other things, the fairness
of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, in accordance
with a Settlement Agreement (the “Settlement Agreement”) between the Company and IBC Funds, LLC, a Nevada limited liability
company (“IBC”), in the matter entitled
IBC Funds, LLC v. 3DIcon Corporation
, Case No. 2013 CA 5705 NC
(the “Action”). IBC commenced the Action against the Company on July 19, 2013 to recover an aggregate of $197,630.64
of past-due accounts payable of the Company, which IBC had purchased from certain vendors of the Company pursuant to the terms
of separate claim purchase agreements between IBC and each of such vendors (the “Assigned Accounts”), plus fees and
costs (the “Claim”). The Assigned Accounts relate to certain research, technical, development, accounting and legal
services. The Order provides for the full and final settlement of the Claim and the Action. The Settlement Agreement
became effective and binding upon the Company and IBC upon execution of the Order by the Court on July 26, 2013.
Pursuant
to the terms of the Settlement Agreement approved by the Order, on July 26, 2013, the Company issued 650,000 shares of Common Stock
as a settlement fee and agreed to issue, in one or more tranches as necessary, that number of shares equal to $197,630.64 upon
conversion to Common Stock at a conversion rate equal to 65% of the lowest closing bid price of the Common Stock during the ten
trading days prior to the date the conversion is requested by IBC
minus
$0.002.
Common stock issued for services and
liabilities
Subsequent to June
30, 2013, shares of common stock totaling 5,160,599 were issued for consulting services for which the Company recognized $108,300
of expense.
Subsequent to June
30, 2013, shares of common stock totaling 4,000,000 were issued in connection with the Settlement Agreement and the liabilities
contained thereunder.
Subsequent to June
30, 2013, shares of common stock totaling 9,439,419 were issued upon conversion of $106,696 in principal of outstanding convertible
promissory notes of the Company.
Subsequent to June
30, 2013, shares of common stock totaling 86 were issued upon exercise of 86 warrants at $381.50 per share for $32,700 and advanced
$100,000 for future exercise of warrants under the terms of the securities purchase agreements.