As
filed
with the Securities and Exchange Commission on June 14, 2007
Registration
No. 333-____
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington
D.C. 20549
FORM
SB-2
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
3DIcon
Corporation
(Name
of
small business issuer in its charter)
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Oklahoma
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3669
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73-1479206
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(State
or other Jurisdiction
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(Primary
Standard Industrial
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(I.R.S.
Employer
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of
Incorporation or Organization)
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Classification
Code Number)
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Identification
No.)
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7507
S.
Sandusky
Tulsa,
OK
74136
(918)
492-5082
(Address
and telephone number of principal executive offices
and
principal place of business)
John
M.
O’Connor, Esq.
Newton,
O’Connor, Turner & Ketchum
15
W.
Sixth Street, Suite 2700
Tulsa,
Oklahoma 74119
(918)
587-0101
(918)
587-0102 (fax)
(Name,
address and telephone number of agent for service)
Copies
to:
Gregory
Sichenzia, Esq.
Sichenzia
Ross Friedman Ference LLP
61
Broadway, 32nd
Floor
New
York,
New York 10006
(212)
930-9700
(212)
930-9725 (fax)
APPROXIMATE
DATE OF PROPOSED SALE TO THE PUBLIC:
From
time
to time after this Registration Statement becomes effective.
If
any
securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: x
If
this
Form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. o
If
this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o
If
this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box. o
CALCULATION
OF REGISTRATION FEE
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Title
of each class of securities to be registered
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Amount
to be
registered
(1)
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Proposed
maximum offering price
per share
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Proposed
maximum aggregate
offering
price
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Amount
of
registration
fee
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|||||||||
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Common
stock issuable upon conversion of debentures
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3,040,909
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(2)
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$
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0.39
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(3)
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$
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1,845,954.51
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$
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36.40
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(1)
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Includes
shares of our common stock, par value $0.002 per share, which may
be
offered pursuant to this registration statement, which shares are
issuable
upon conversion of convertible debentures held by the selling stockholder.
The amount to be registered includes a good faith estimate of the
number
of shares issuable upon conversion of the debentures. In addition,
the
amount to be registered includes 200,000 shares which have been issued
to
a selling stockholder as compensation for services rendered. Should
the conversion ratio of our convertible debentures result in our
having
insufficient shares, we will not rely upon Rule 416, but will file
a new
registration statement to cover the resale of such additional shares
should that become necessary. In addition, should a decrease in the
exercise price as a result of an issuance or sale of shares below
the then
current market price, result in our having insufficient shares, we
will
not rely upon Rule 416, but will file a new registration statement
to
cover the resale of such additional shares should that become
necessary.
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(2)
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Includes
a good faith estimate of the shares underlying convertible debentures
to
account for market fluctuations.
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(3)
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Estimated
solely for purposes of calculating the registration fee in accordance
with
Rule 457(c) under the Securities Act of 1933, using the average of
the
high and low price as reported on the Pink Sheets on June 12, 2007,
which
was $0.39 per share.
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The
registrant hereby amends this registration statement on such date or dates
as
may be necessary to delay its effective date until the registrant shall file
a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
PRELIMINARY
PROSPECTUS SUBJECT TO COMPLETION, DATED June 14, 2007
3DICON
CORPORATION
3,040,909 SHARES
OF
COMMON
STOCK
This
prospectus relates to the resale by the selling stockholders of up to 3,040,909
shares of our common stock including 2,840,909 shares, underlying a $1.25
million convertible debenture and 200,000 shares which have been issued to
a
selling stockholder as compensation for services rendered. The conversion
formula for the convertible debenture is the lesser of (i) $2.00 or
(ii) seventy percent of the average of the five lowest volume weighted
average prices during the twenty (20) trading days prior to the conversion.
The
selling stockholder may sell common stock from time to time in the principal
market on which the stock is traded at the prevailing market price or in
negotiated transactions. The selling stockholder may be deemed an underwriter
of
the shares of common stock, which it is offering. We will pay the expenses
of
registering these shares.
Our
common stock is listed on the Pink Sheets under the symbol "TDCP". The last
reported sales price per share of our common stock as reported by the Pink
Sheets on June 12, 2007, was $0.42.
Investing
in these securities involves significant risks. See "Risk Factors" beginning
on
page 5.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this Prospectus
is
truthful or complete. Any representation to the contrary is a criminal
offense.
The
date
of this prospectus is _______, 2007.
The
information in this Prospectus is not complete and may be changed. This
Prospectus is included in the Registration Statement that was filed by 3DIcon
Corporation with the Securities and Exchange Commission. The selling stockholder
may not sell these securities until the registration statement becomes
effective. This Prospectus is not an offer to sell these securities and is
not
soliciting an offer to buy these securities in any state where the sale is
not
permitted.
-2-
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Prospectus
Summary
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4
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Risk
Factors
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5
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Use
of Proceeds
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13
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Market
for Common Equity and Related Stockholder Matters
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13
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Description
of Business
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13
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Description
of Property
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17
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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18
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Legal
Proceedings
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24
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Directors,
Executive Officers, Promoters and Control Persons
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24
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Executive
Compensation
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25
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Security
Ownership of Certain Beneficial Owners and Management
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25
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Description
of Securities Being Registered
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26
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Plan
of Distribution
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26
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Selling
Stockholder
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29
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Certain
Relationships and Related Transactions
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31
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Changes
In and Disagreements with Accountants on Accounting and Financial
Disclosure
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31
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Legal
Matters
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31
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Experts
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32
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Available
Information
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32
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Financial
Statements
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F-1
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-3-
The
following summary highlights selected information contained in this prospectus.
This summary does not contain all the information you should consider before
investing in the securities. Before making an investment decision, you should
read the entire prospectus carefully, including the "risk factors" section,
the
financial statements and the notes to the financial statements.
3DICON
CORPORATION
3DIcon
Corporation is a development stage company. Our mission is to pursue, develop
and market full-color, 360-degree person-to-person holographic technology that
is both simple and portable. Through a “sponsored research agreement” with the
University of Oklahoma, we have obtained the world-wide marketing rights to
certain 3D display systems under development by the University. The development
to date has resulted in the University filing three provisional patents and
one
utility patent on its technology. At this time, we do not own any intellectual
property rights in holographic technologies, and, apart from the sponsored
research agreement with the University of Oklahoma, have no contracts or
agreements pending to acquire such rights or any other interest in such rights.
We plan to market the technology developed by the University of Oklahoma by
targeting various industries, such as retail, manufacturing, entertainment,
medical, healthcare, and the military.
We
have
not had any revenues since our inception. For the three months ended March
31,
2007, we incurred a net loss of $918,307. For the years ended December 31,
2006
and 2005, we incurred a net loss of $1,469,888 and $592,811, respectively.
As a
result of our insufficient revenues to fund development and operating expenses,
our auditors in have expressed substantial doubt about our ability to continue
as going concern.
Our
principal offices are located at 7507 S. Sandusky, Tulsa, Oklahoma 74136, and
our telephone number is (918) 492-5082 . Our website is www.3DIcon.net
. We are
an Oklahoma corporation.
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The
Offering
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Common
stock offered by selling stockholder
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Up
to 3,040,909 shares including 2,540,909 shares, underlying a convertible
debenture in the amount of $1,250,000, based on current market prices
and
assuming full conversion of the convertible debenture (includes a
good
faith estimate of the shares underlying convertible debenture and
200,000
shares which have been issued to a selling stockholder as compensation
for
services rendered). This number represents approximately 2.7% of
our then
current outstanding stock.
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Common
stock to be outstanding after the offering
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Up
to 115,454,866 shares assuming the full conversion of
our initial $1.25 million convertible
debenture.
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Use
of proceeds
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We
will not receive any proceeds from the sale of the common stock.
We have
received gross proceeds of $125,000 and expect to receive additional
gross
proceeds of $1,125,000 in connection with the issuance of the convertible
debenture to the selling stockholder. We plan to use the proceeds
for
research and development, general working capital purposes and the
payment
of professional fees.
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Pink
Sheets Ticker Symbol
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TDCP
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The
above
information regarding common stock to be outstanding after the offering is
based
on 112,413,957 shares of common stock outstanding as of June 12, 2007 and
assumes the subsequent conversion of the $1.25 million convertible debentures
by
our selling stockholder.
-4-
To
obtain
funding for our ongoing operations, we entered into a Securities Purchase
Agreement with Golden Gate Investors, Inc. (“Golden Gate”) on November 3, 2006,
as amended on December 15, 2006 (the “Purchase Agreement”), for the sale of a 6
¼% convertible debenture of the Company in the principal amount of $1,250,000.
Pursuant to the Purchase Agreement, at such time as the principal balance of
this debenture is less than $400,000, the Company shall have the right to
require Golden Gate to purchase a second debenture, also in the principal amount
of $1,250,000. On November 3, 2006, we also issued to Golden Gate a 6 ¼%
convertible debenture in a principal amount of $100,000 and warrants to purchase
1,000,000 shares of our common stock at an exercise price of $10.90.
This
prospectus relates to the resale of the common stock underlying the initial
$1.25 million convertible debenture only.
Golden
Gate provided us with $125,000 upon execution of the Purchase Agreement.
Pursuant to the Purchase Agreement, Golden Gate is required to provide us with
an additional $312,500 upon effectiveness of the registration statement of
which
this prospectus is a part. The balance of $812,500 shall be wired to the escrow
agent, which is required to release $200,000 on the first day of each month,
beginning with the second month following the effective date of the registration
statement.
The
debentures are convertible into our common stock, at the selling stockholder’s
option. The 6.15% $1.25 million convertible debentures mature three years
from the date of issuance. The 4.75% $100,000 convertible debenture matures
five years from the date of issuance. Interest on our 6 ¼% convertible
debentures is payable monthly in cash or, at Golden Gate’s option, in shares of
common stock of the Company valued at the then applicable conversion price.
The
initial $1.25 million convertible debenture is convertible into the number
of
our shares of common stock equal to the dollar amount of the debenture divided
by the conversion price. The conversion price for the initial $1.25 million
convertible debenture is the lesser of (i) $2.00 or (ii) 70% of the average
of
the five lowest volume weighted average prices during the twenty (20) trading
days prior to the conversion. The conversion price for the second $1.25 million
convertible debenture is the lesser of (i) $2.00 or (ii) 90% of the average
of
the five lowest volume weighted average prices during the twenty (20) trading
days prior to the conversion. The conversion price for the $100,000 convertible
debenture is the lesser of (i) $4.00 or (ii) 80% of the average of the five
lowest volume weighted average prices during the twenty (20) trading days prior
to the conversion. Accordingly, there is in fact no limit on the number of
shares into which the debentures may be converted over time. If Golden Gate
elects to convert a portion of the debenture and, on the day that the election
is made, the volume weighted average price is below $0.75, 3DIcon shall have
the
right to prepay that portion of the debenture that Golden Gate elected to
convert, plus any accrued and unpaid interest, at 135% of such
amount.
In
addition, 3DIcon entered into a registration rights agreement with Golden Gate
pursuant to which the Company agreed to file, within 30 days after the closing,
the registration statement of which this prospectus is a part covering the
common stock issuable upon conversion of the initial $1.25 million debenture
only. In the event we fail to meet this schedule and other timetables provided
in the registration rights agreement, liquidated damages and other potential
penalties could be imposed (for example, the discount multiplier of 70% shall
decrease by three percentage points for each month or partial month occurring
after we fail to meet the timetables provided in the registration rights
agreement). In addition, Golden Gate may demand repayment of one hundred and
fifteen percent (115%) of the principal amount of the debenture, together with
all accrued and unpaid interest on the principal amount of the debenture, in
cash, if we fail to meet the timetables provided in the registration rights
agreement.
We
agreed
to amend the securities purchase agreement (“Amendment No. 1”) such that the
issuance of the Second Debenture was now at our option, rather than as of
right.
In addition, we agreed to amend the securities purchase agreement, the
debenture, the registration rights agreement and Amendment No. 1 to extend
the
deadline for effectiveness of the registration statement until June 15, 2007
and
to provide for fixed conversion prices on all three debentures until such
time
as our common stock is quoted on the OTCBB or is otherwise listed and trading
on
NASDAQ or a national securities exchange. The conversion price of the initial
$1.25 million debenture, as amended, is now $0.35 per share until our common
stock is listed on the OTCBB or is otherwise listed and trading on NASDAQ
or a
national securities exchange and thereafter the lesser of (i) $2.00 or (ii)
70%
of the average of the five lowest Volume Weighted Average Prices during the
twenty (20) days prior to the conversion. The conversion price of the second
debenture, as amended, is now $0.35 per share until our common stock is listed
on the OTCBB or is otherwise listed and trading on NASDAQ or a national
securities exchange and thereafter the lesser of (i) $2.00 or (ii) 90% of
the
average of the five lowest Volume Weighted Average Prices during the twenty
(20)
days prior to the conversion. The conversion price on the third debenture,
as
amended, is now $0.35 per share until our common stock is listed on the OTCBB
or
is otherwise listed and trading on NASDAQ or a national securities exchange
and
thereafter the lesser of (i) $2.00 or (ii) 80% of the average of the five
lowest
Volume Weighted Average Prices during the twenty (20) days prior to the
conversion.
In
the
event the Company elects, and Golden Gate fails, to enter into the second
debenture, Golden Gate would be required to pay liquidated damages in the amount
of $250,000.
To
obtain
funding for ongoing operations, the Company entered into a Bridge Financing
Agreement with Golden Gate which closed on June 11, 2007 (the “Financing
Agreement”), for the sale of a 9.75% convertible debenture in the principal
amount of $700,000. Pursuant to the Financing Agreement, the Company agreed
to
file a registration statement with the SEC within three days of closing for
the
resale of the common stock underlying the initial $1.25 million convertible
debenture as discussed in Note 6.
The
debenture may be converted, at Golden Gate’s option, in whole or in part, into
restricted shares of the Company’s common stock. The conversion price will be
$0.28 until the earlier of, the Company’s shares trading on the OTC Bulletin
Board or other trading market that the SEC recognizes as a trading market,
or
January 1,2008. Subsequently, the conversion price is equal to 72% of the
average of the five lowest volume weighted average prices for the common
stock
for the 20 trading days prior to the conversion date. The convertible debenture
matures June 11, 2007; subject to an option held by Golden Gate to extend
the
maturity for one period of six months. Interest on the convertible debenture
is
payable monthly in cash.
-5-
In
addition to standard default provisions concerning timeliness of payments,
delivery and notifications, any other event of default, as defined in the
debenture, will accelerate the maturity date of the debenture, and all
outstanding principal and accrued and unpaid interest along with $250,000
in
liquidated damages, will become immediately due and payable. Such events
of
default include: failure to observe or perform material covenants of any
notes;
the making of a representation or warranty in any material agreement, report
of
financial statement; filing of a voluntary or involuntary proceeding for
bankruptcy by the Company; a default under any mortgage, credit agreement
or
other facility, indenture agreement, factoring agreement or other instrument;
the common stock of the Company trades below $0.21 per share; the Company
is a
party to any Change of Control Transaction and agrees to sell or dispose
of all
or in excess of 33% of its assets in one or more transactions (whether or
not
such sale would constitute a Change of Control Transaction) or shall redeem
or
repurchase more than ten percent (10%) of its outstanding shares of Common
Stock
or other equity securities of the Company; the Company does not file the
Registration Statement, as amended to reflect the Company’s responses to the
latest comments made to such Registration Statement by the Commission relating
to the Registration Rights Agreement dated November 3, 2006 between the Company
and Golden Gate Investors Inc. by June 14, 2007 or the related Registration
Statement is not declared effective by the Commission on or prior to September
14, 2007; if during the effectiveness period of such Registration Statement
its
effectiveness lapses or the selling stockholder is unable to sell its shares
for
a period of 20 days; the Company fails to deliver certificates following
a
conversion under the debenture within 3 days; or any monetary judgment, writ
or
similar final process shall be entered or filed against the Company, any
Subsidiary or any of their respective property or other assets for more than
$250,000, and such judgment, writ or similar final process shall remain
unvacated, unabandoned or unstayed for a period of 45 calendar
days.
The
Debenture is secured by the pledge of 11 million shares of common stock held
by
affiliates in the Company (the “Pledged Shares”). Such shares shall have been
held by the Pledgors for a period of not less than two years. In the event
of a
default and the Company has not repaid all outstanding principal and accrued
and
unpaid interest, along with the liquidated damages of $250,000 within one
day of
default, Golden Gate shall have the right to immediately sell the Pledged
Shares
in satisfaction of any amounts of principal and interest owing under the
Debenture. Golden Gate shall only sell such amount of Pledged Shares to satisfy
any principal and accrued interest, along with $250,000 in liquidated damages
and shall return unsold shares to the Pledgors.
See
the
"Selling Stockholders" and "Risk Factors" sections for a complete description
of
the convertible debentures.
This
investment has a high degree of risk. Before you invest you should carefully
consider the risks and uncertainties described below and the other information
in this prospectus. If any of the following risks actually occur, our business,
operating results and financial condition could be harmed and the value of
our
stock could go down. This means you could lose all or a part of your
investment.
Risks
Relating to Our Business :
We
have a limited operating history, as well as a history of operating
losses.
We
have a
limited operating history. We cannot assure you that we can achieve or sustain
revenue growth or profitability in the future. We have a cumulative net loss
of
$4,387,840 for the period from inception (January 1, 2001) to March 31, 2007.
Our operations are subject to the risks and competition inherent in the
establishment of a business enterprise. Unanticipated problems, expenses, and
delays are frequently encountered in establishing a new business and marketing
and developing products. These include, but are not limited to, competition,
the
need to develop customers and market expertise, market conditions, sales,
marketing and governmental regulation. Our failure to meet any of these
conditions would have a materially adverse effect upon us and may force us
to
reduce or curtail our operations. Revenues and profits, if any, will depend
upon
various factors. We may not achieve our business objectives and the failure
to
achieve such goals would have an adverse impact on our business.
Currently,
our only significant asset is our sponsored research agreement with the
University of Oklahoma, and our ability to accomplish our business plan relies
entirely on the ability of the University of Oklahoma to successfully develop
a
marketable 3D communications system.
Our
only
significant asset at the present time is our sponsored research agreement with
the University of Oklahoma. If the University of Oklahoma is not successful
in
developing a portable 3D communications system that we have envisioned in our
business plan, our ability to generate revenues from marketing of the product
or
products on which our business plan is based will be severely impacted, which
could threaten the very existence of the Company.
-6-
Even
if
the University of Oklahoma is successful in developing a portable 3D
communications system, because of the revolutionary nature of such a product
(i.e., no similar product currently exists, and there are numerous unknowns
relating to the product, such as manufacturing costs and operational costs),
there can be no assurance that our marketing plans for the product will be
successful.
Therefore,
the fact that our success depends almost entirely on the efforts of others
to
develop a technologically challenging new product that will be in a form readily
marketable and acceptable to a given market, and our ability to then
successfully market such product, makes an investment in the Company much more
risky than a comparable investment in other companies that may have a broad
range of existing, proven products.
We
may not be able to compete successfully.
Although
the 3D imaging and display technology that the University of Oklahoma is
attempting to develop is new, and although at present we are aware of only
a
limited number of companies that have publicly disclosed their attempts to
develop similar technology, we anticipate a number of companies are or will
attempt to develop products that compete or will compete with our products.
Further, even if we are the first to market with a product of this type, and
even if the technology is protected by patents or otherwise, because of the
vast
market and communications potential of such a product, we anticipate the market
will be flooded by a variety of competitors (including traditional
communications companies), many of which will offer a range of products in
areas
other than those in which we compete, which may make such competitors more
attractive to prospective customers. In addition, many if not all of our
competitors and potential competitors will initially be larger and have greater
financial resources than we do. Some of the companies with which we may now
be
in competition, or with which we may compete in the future, have or may have
more extensive research, marketing and manufacturing capabilities and
significantly greater technical and personnel resources than we do, even given
our relationship to the University of Oklahoma, and may be better positioned
to
continue to improve their technology in order to compete in an evolving
industry. Further, technology in this industry may evolve rapidly once an
initially successful product is introduced, making timely product innovations
and use of new technologies essential to our success in the marketplace. The
introduction by our competitors of products with improved technologies or
features may render any product we initially market obsolete and unmarketable.
If we do not have available to us products that respond to industry changes
in a
timely manner, or if our products do not perform well, our business and
financial condition will be adversely affected.
The
products being developed may not gain market acceptance.
The
products that the University of Oklahoma is currently developing utilize new
technologies. As with any new technologies, in order for us to be successful,
these technologies must gain market acceptance. Since the products that we
anticipate introducing to the marketplace will exploit or encroach upon markets
that presently utilize or are serviced by products from competing technologies,
meaningful commercial markets may not develop for our products.
In
addition,
the
development efforts of the University of Oklahoma on the 3D technology are
subject to unanticipated delays, expenses or technical or other problems, as
well as the possible insufficiency of funding to complete development. Our
success will depend upon the ultimate products and technologies meeting
acceptable cost and performance criteria, and upon their timely introduction
into the marketplace. The proposed products and technologies may never be
successfully developed, and even if developed, they may not satisfactorily
perform the functions for which they are designed. Additionally, these products
may not meet applicable price or performance objectives. Unanticipated technical
or other problems may occur which would result in increased costs or material
delays in their development or commercialization.
-7-
If
we are unable to retain the services of Martin Keating, or if we are unable
to
successfully recruit qualified personnel having experience in our business,
we
may not be able to continue our operations.
Our
success depends to a significant extent upon the continued service of Martin
Keating, our founder, Chief Executive Officer, and a Director. Our success
also
depends on our ability to attract and retain other key executive officers.
Loss
of the services of Mr. Keating could have a material adverse effect on our
growth, revenues, and prospective business. In addition, in order to
successfully implement and manage our business plan, we will be dependent upon,
among other things, successfully recruiting qualified personnel having
experience in business. Competition for qualified individuals in our industry
is
intense. There can be no assurance that we will be able to find, attract and
retain existing employees or that we will be able to find, attract and retain
qualified personnel on acceptable terms.
Our
auditors have included a going concern qualification in their opinion which
may
make it more difficult for us to raise capital.
Our
auditors have qualified their opinion on our financial statements because of
concerns about our ability to continue as a going concern. These concerns arise
from the fact that we are a development stage organization with insufficient
revenues to fund development and operating expenses. If we are unable to
continue as a going concern, you could lose your entire investment in
us.
We
will need significant additional capital, which we may be unable to
obtain.
Our
capital requirements in connection with our development activities and
transition to commercial operations have been and will continue to be
significant. We will require substantial additional funds to continue research,
development and testing of our technologies and products, to obtain intellectual
property protection relating to our technologies when appropriate, and to
manufacture and market our products. There can be no assurance that financing
will be available in amounts or on terms acceptable to us, if at
all
As
a result of becoming a reporting company, our expenses will increase
significantly.
As
a
result of becoming a reporting company whose shares are registered pursuant
to
Section 12 of the Securities Act, our ongoing expenses are expected to increase
significantly, including expenses in compensation to our officers, ongoing
public company expenses, including increased legal and accounting expenses
as a
result of our status as a reporting company, expenses incurred in complying
with
the internal controls requirements of the Sarbanes-Oxley Act. Our failure to
generate sufficient revenue and gross profit could result in reduced profits
or
increased losses as a result of the additional expenses.
Risks
Relating to Our Current Financing Arrangement :
There
are a large number of shares underlying our 6 ¼% convertible debentures, and
warrants that may be available for future sale and the sale of these shares
may
depress the market price of our common stock.
As
of
June 12, 2007, we had approximately 112,413,957 shares of common stock
issued and outstanding and convertible debentures outstanding that may be
converted into an estimated 2,976,190 shares of common stock at current market
prices. The number of shares of common stock issuable upon conversion of the
outstanding $1.25 million convertible debenture and $100,000 convertible
debenture may increase if the market price of our stock declines. We also have
outstanding the warrants issued to Golden Gate to purchase 1,000,000 shares
of
common stock at an exercise price of $10.90. Further, when the outstanding
principal balance of our initial $1.25 million debenture issued to Golden Gate
is less than $400,000, we may require Golden Gate to purchase a second $1.25
million convertible debenture. In addition, on June 11, 2007, we issued a
$700,000 convertible debenture to obtain funding for ongoing
operations. The sale of the shares underlying the convertible debentures
and warrants may adversely affect the market price of our common
stock.
-8-
The
conversion price of our 6.25% convertible debentures is $0.35 until our
common stock is quoted on the OTC Bulletin Board (“OTCBB”) or is otherwise
trading on Nasdaq or a national securities exchange. Thereafter the conversion
price feature of our convertible debentures is continuously adjustable, which
could require us to
issue a substantially greater number of shares, which will cause dilution to
our
existing stockholders.
Our
obligation to issue shares upon conversion of our convertible debentures
following our common stock being quoted on the OTCBB or otherwise trading on
Nasdaq or a national securities exchange is essentially limitless. The following
is an example of the amount of shares of our common stock that are issuable,
upon conversion of our convertible debentures (excluding accrued interest),
based on market prices 25%, 50% and 75% below the market price as of June 12,
2007 of $0.42.
|
%
Below
Market
|
Price
Per
Share
|
Effective
Conversion
Price
|
Number
of
Shares
Issuable
|
%
of
Outstanding
Stock
|
|||||||||
|
25%
|
$
|
0.315
|
$
|
0.221
|
5,656,108
|
5.0 | % | ||||||
|
50%
|
$
|
0.210
|
$
|
0.147
|
8,503,401
|
7.6 | % | ||||||
|
75%
|
$
|
0.105
|
$
|
0.074
|
16,891,891
|
15.0 | % | ||||||
The
conversion price of our 9.75% convertible debentures is $0.28 until our common
stock is quoted on the OTC Bulletin Board (“OTCBB”) or is otherwise trading on
Nasdaq or a national securities exchange or January 1, 2008, whichever shall
occur first. Thereafter the conversion price feature of our convertible
debentures is continuously adjustable, which could require
us to
issue a substantially greater number of shares, which will cause dilution
to our
existing stockholders.
Our
obligation to issue shares upon conversion of our convertible debentures
following our common stock being quoted on the OTCBB or otherwise trading
on
Nasdaq or a national securities exchange or January 8, 2008 is essentially
limitless. The following is an example of the amount of shares of our common
stock that are issuable, upon conversion of our convertible debentures
(excluding accrued interest), based on market prices 25%, 50% and 75% below
the
market price as of June 12, 2007 of $0.42.
|
|
|
Effective
|
Number
|
%
of
|
|||||||||
|
%
Below
|
Price
Per
|
Conversion
|
of
Shares
|
Outstanding
|
|||||||||
|
Market
|
Share
|
Price
|
Issuable
|
Stock
|
|||||||||
|
|
|
|
|
|
|||||||||
|
25%
|
$
|
0.315
|
$
|
0.2268
|
3,086,419
|
5.0
|
%
|
||||||
|
50%
|
$
|
0.210
|
$
|
0.1512
|
4,629,629
|
7.6
|
%
|
||||||
|
75%
|
$
|
0.105
|
$
|
0.0756
|
9,259,259
|
15.0
|
%
|
||||||
As
illustrated, following our common stock being quoted on the OTCBB or otherwise
trading on Nasdaq or a national securities exchange, the number of shares of
common stock issuable upon conversion of our convertible debentures will
increase if the market price of our stock declines, which will cause dilution
to
our existing stockholders.
The
continuously adjustable conversion price feature of our 6.25% and 9.75%
convertible debentures following
our common stock being quoted on the OTCBB or otherwise trading on Nasdaq or
a
national securities exchange may
encourage investors to make short sales in our common stock, which could have
a
depressive effect on the price of our common stock.
So
long
as the market price of our stock is below $2.00 following our common stock
being
quoted on the OTCBB or otherwise trading on Nasdaq or a national securities
exchange, the issuance of shares in connection with the conversion of the $1.25
million convertible debenture results in the issuance of shares at an effective
30% discount to the trading price of the common stock prior to the conversion.
Similarly, so long as the market price of our stock is below $4.00, the issuance
of shares in connection with the conversion of the $100,000 convertible
debenture results in the issuance of shares at an effective 20% discount to
the
trading price of the common stock prior to the conversion. The significant
downward pressure on the price of the common stock as the selling stockholder
converts and sells material amounts of common stock could encourage short sales
by investors. This could place further downward pressure on the price of the
common stock. The selling stockholder could sell common stock into the market
in
anticipation of covering the short sale by converting their securities, which
could cause the further downward pressure on the stock price. In addition,
not
only the sale of shares issued upon conversion or exercise of debentures and
warrants, but also the mere perception that these sales could occur, may
adversely affect the market price of the common stock.
The
issuance of shares upon conversion of the 6.25% and 9.75% convertible debentures
and exercise of outstanding warrants may cause immediate and substantial
dilution to our existing stockholders.
The
issuance of shares upon conversion of our 6 ¼% convertible debentures and
exercise of warrants may result in substantial dilution to the interests of
other stockholders since the selling stockholder may ultimately convert and
sell
the full amount issuable on conversion. Although the selling stockholder may
not
convert its convertible debentures and/or exercise their warrants if such
conversion or exercise would cause it to own more than 9.9% of our outstanding
common stock, this restriction does not prevent the selling stockholder from
converting and selling some of their holdings and then converting the rest
of
their holdings. In this way, assuming the market price remains at a level
acceptable to the selling stockholder, the selling stockholder could continue
on
a “conversion-sell-conversion” trend while never holding more than 9.99% of our
common stock. Further, under the convertible debentures there is theoretically
no upper limit on the number of shares that may be issued, which will have
the
effect of further diluting the proportionate equity interest and voting power
of
holders of our common stock, including investors in this offering.
If
we are unable to issue shares of common stock upon conversion of the convertible
debenture as a result of our inability to increase our authorized shares of
common stock or as a result of any other reason,
we are required to pay penalties to Golden Gate, redeem the convertible
debenture at 130% and/or compensate Golden Gate for any buy-in that it is
required to make.
-9-
If
we are
unable to issue shares of common stock upon conversion of the convertible
debenture as a result of our inability to increase our authorized shares of
common stock or as a result of any other reason, we are required
to:
|
·
|
pay
late payments to Golden Gate for late issuance of common stock upon
conversion of the convertible debenture, in the amount of $100 per
business day after the delivery date for each $10,000 of convertible
debenture principal amount being converted or
redeemed.
|
|
·
|
in
the event we are prohibited from issuing common stock, or fail to
timely
deliver common stock on a delivery date, or upon the occurrence of
an
event of default, then at the election of Golden Gate, we must pay
to
Golden Gate a sum of money determined by multiplying up to the outstanding
principal amount of the convertible debenture designated by Golden
Gate by
130%, together with accrued but unpaid interest
thereon
|
|
·
|
if
ten days after the date we are required to deliver common stock to
Golden
Gate pursuant to a conversion, Golden Gate purchases (in an open
market
transaction or otherwise) shares of common stock to deliver in
satisfaction of a sale by Golden Gate of the common stock which it
anticipated receiving upon such conversion (a "Buy-In"), then we
are
required to pay in cash to Golden Gate the amount by which its total
purchase price (including brokerage commissions, if any) for the
shares of
common stock so purchased exceeds the aggregate principal and/or
interest
amount of the convertible debenture for which such conversion was
not
timely honored, together with interest thereon at a rate of 15% per
annum,
accruing until such amount and any accrued interest thereon is paid
in
full.
|
In
the
event that we are required to pay penalties to Golden Gate or redeem the
convertible debentures held by Golden Gate, we may be required to curtail or
cease our operations.
-10-
We
may be required to file a subsequent registration statement covering additional
shares.
Based
on
our current market price and the potential decrease in its market price as
a
result of the issuance of shares upon conversion of the convertible debentures,
we have made a good faith estimate as to the amount of shares of common stock
that it is required to register and allocate for conversion of the convertible
debentures. In the event that our stock price decreases, the shares of common
stock we have allocated for conversion of the convertible debentures and are
registering hereunder will not be adequate. If the shares we have allocated
to
the registration statement are not adequate and we are required to file an
additional registration statement, we may incur substantial costs in connection
with the preparation and filing of such registration statement.
Risks
Relating to Our Common Stock :
Fluctuations
in our operating results and announcements and developments concerning our
business affect our stock price.
Our
quarterly operating results, the number of stockholders desiring to sell their
shares, changes in general economic conditions and the financial markets, the
execution of new contracts and the completion of existing agreements and other
developments affecting us, could cause the market price of our common stock
to
fluctuate substantially.
Our
Common Stock is Subject to the "Penny Stock" Rules of the SEC and the Trading
Market in Our Securities is Limited, Which Makes Transactions in Our Stock
Cumbersome and May Reduce the Value of an Investment in Our
Stock.
Our
common stock is quoted on the Pink Sheets under the symbol "TDCP". To date
there
is a limited trading market in our common stock on the Pink Sheets. Failure
to
develop or maintain an active trading market could negatively affect the value
of our shares and make it difficult for our shareholders to sell their shares
or
recover any part of their investment in us. The market price of our common
stock
may be highly volatile. In addition to the uncertainties relating to our future
operating performance and the profitability of our operations, factors such
as
variations in our interim financial results, or various, as yet unpredictable
factors, many of which are beyond our control, may have a negative effect on
the
market price of our common stock.
The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes
the
definition of a "penny stock," for the purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions.
For
any transaction involving a penny stock, unless exempt, the rules
require:
|
·
|
that
a broker or dealer approve a person's account for transactions in
penny
stocks; and
|
|
|
|
·
|
the
broker or dealer receive from the investor a written agreement to
the
transaction, setting forth the identity and quantity of the penny
stock to
be purchased.
|
In
order
to approve a person's account for transactions in penny stocks, the broker
or
dealer must:
|
·
|
obtain
financial information and investment experience objectives of the
person;
and
|
|
|
|
·
|
make
a reasonable determination that the transactions in penny stocks
are
suitable for that person and the person has sufficient knowledge
and
experience in financial matters to be capable of evaluating the risks
of
transactions in penny stocks.
|
The
broker or dealer must also deliver, prior to any transaction in a penny stock,
a
disclosure schedule prescribed by the Commission relating to the penny stock
market, which, in highlight form:
|
·
|
sets
forth the basis on which the broker or dealer made the suitability
determination; and
|
|
|
·
|
that
the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
|
-11-
Generally,
brokers may be less willing to execute transactions in securities subject to
the
"penny stock" rules. This may make it more difficult for investors to dispose
of
our common stock and cause a decline in the market value of our
stock.
Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both
the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account
and
information on the limited market in penny stocks.
-12-
This
prospectus relates to shares of our common stock that may be offered and sold
from time to time by the selling stockholder. We will not receive any proceeds
from the sale of shares of common stock in this offering. However, we have
received $125,000 in connection with the issuance of the $1.25 million
convertible debenture to the selling stockholder, and expect to receive the
balance of $1.125 million following effectiveness of the registration statement.
We have used the $125,000 for the general working capital purposes and the
payment of professional fees. We expect to use the additional proceeds for
general working capital purposes.
Our
common stock is quoted on the Pink Sheets under the symbol "TDCP". For the
periods indicated, the following table sets forth the high and low bid prices
per share of common stock. These prices represent inter-dealer quotations
without retail markup, markdown, or commission and may not necessarily represent
actual transactions.
|
Quarter
Ended
|
High
($)
|
Low
($)
|
|||||
|
June
30, 2007 (through June 12, 2007)
|
0.45
|
0.32
|
|||||
|
March
31, 2007
|
0.70
|
0.39
|
|||||
|
December
31, 2006
|
1.29
|
0.36
|
|||||
|
September
30, 2006
|
1.73
|
0.90
|
|||||
|
June
30, 2006
|
3.27
|
0.56
|
|||||
|
March
31, 2006
|
0.86
|
0.14
|
|||||
|
December
31, 2005
|
0.33
|
0.014
|
|||||
|
September
30, 2005
|
0.03
|
0.008
|
|||||
|
June
30, 2005
|
0.045
|
0.009
|
|||||
|
March
31, 2005
|
0.18
|
0.031
|
|||||
|
December
31, 2004
|
0.40
|
0.04
|
|||||
|
September
30, 2004
|
0.64
|
0.15
|
|||||
|
June
30, 2004
|
0.64
|
0.03
|
|||||
|
March
31, 2004
|
0.21
|
0.04
|
|||||
Holders
As
of
June 12, 2007, we had approximately 397 active holders of our common stock.
The
number of active record holders was determined from the records of our transfer
agent and does not include beneficial owners of common stock whose shares are
held in the names of various security brokers, dealers, and registered clearing
agencies. The transfer agent of our common stock is Executive Registrar &
Transfer, Inc., 315 South Huron Street, Suite 104, Englewood, CO
80110.
Corporate
History
3DIcon
Corporation (the Company) was incorporated on August 11, 1995, under the laws
of
the State of Oklahoma as First Keating Corporation. The articles of
incorporation were amended August 1, 2003 to change the name to 3DIcon
Corporation. The initial focus of First Keating Corporation was to market and
distribute books written by its founder, Martin Keating. During 2001, First
Keating Corporation began to focus on the development of 360-degree holographic
technology. The effective date of this transition is January 1, 2001. The
Company has accounted for this transition as a reorganization and accordingly,
restated its capital accounts as of January 1, 2001. From January 1, 2001,
the
Company's primary activity has been the raising of capital in order to pursue
its goal of becoming a significant participant in the formation and
commercialization of interactive, optical holography for the communications
and
entertainment industries.
-13-
General
Overview
3Dicon
Corporation is a development stage company. Our mission is to pursue, develop
and market full-color, 360-degree person-to-person 3D holographic technology
that is both simple and portable. Through a “sponsored research agreement” with
the University of Oklahoma, we have obtained the world-wide marketing rights
to
certain 3D display systems under development by the University. The development
to date has resulted in the University filing three provisional patents and
one
utility patent on its technology. At this time, we do not own any intellectual
property rights in holographic technologies, and, apart from the sponsored
research agreement with the University of Oklahoma, have no contracts or
agreements pending to acquire such rights or any other interest in such rights.
We plan to market the technology developed by the University of Oklahoma by
targeting various industries, such as retail, manufacturing, entertainment,
medical, healthcare, and the military.
Overview
of Development of 3D Technology
Holography
as a means of wavefront, or 3D image, reconstruction was first introduced by
Dennis Gabor in 1948 when he developed a process for recording the amplitude
and
phase of an optical wavefront. The word “holography” is derived from the Greek
words holos
(whole)
and graphein
(to
write), and Gabor coined the term “hologram” to refer to a “total recording.”
The widespread practice of holography took off in the early 1960s with the
invention of the laser. Since that time, holography has been used in a variety
of applications, many in routine commercial use today. Digital
holography
refers
to the use of digital computers to create holograms, sometimes referred to
as
computer-generated
holograms
. Upon
undertaking this investigation into the use of digital holography as a viable
technology for 3D imaging and visualization, we found that holography is often
the starting point for technologists seeking to realize practical commercial
systems, but in practice, many solutions involve other approaches such as
stereoscopic and swept-volume techniques.
A
team of
researchers led by Harold Garner at the University of Texas Southwestern Medical
School at Dallas is working on a HoloTV
project
to develop technology that can deliver 3D moving images for applications in
medical imaging, “heads up” displays, video games, and air traffic control
display. Current development efforts involve the use of the Digital Micromirror
Device (DMD) from Texas Instruments, as well as eight-layer liquid-crystal
screen. The DMD focuses image points on various locations throughout the screen
to produce 3D images.
Stereoscopic
techniques are being investigated as a means of achieving 3D imaging and
display. A recent paper by Jang and Javidi describes a technique called 3D
projection integral imaging to create 3D orthoscopic virtual images. The
technique employs a micro-convex-mirror array to convert inputs from 2D image
sensors to 3D images with a viewing angle of over 60 o
and has
been successfully demonstrated in the laboratory. Another paper by Choi
et
al
reports
on the construction of a novel full-color autostereoscopic 3D display system
using scaling constraints and phase quantization leveling to reduce the color
dispersion and the phase difference. The system employs
color-dispersion-compensated (CDC) synthetic phase holograms (SPHs) to create
3D
images and video frames that don’t require the use of special glasses for
viewing. While both of these technical approaches have been successfully
demonstrated in a laboratory environment, neither easily lends itself to the
kind of embodiment envisioned by 3DIcon.
Sato
et
al
report
identify space
projection method
for
producing 3D images using DMDs. This method uses a volumetric screen of water
particles upon which color 3D images can be projected using the combination
of a
white light laser, variable color filter, and DMD. The authors report that
this
so-called electro-holographic display is capable of producing color 3D images
with a large viewing angle. We believe that this approach has merit, but also
presents barriers to commercial implementation, particularly from a cost and
size perspective.
Pursuant
to the Sponsored Research Agreement, 3D Display Technology is being developed
in
three phases, as follows:
|
|
·
|
Phase
I - Swept Volume Displays
|
-14-
|
|
·
|
Phase
II - Static Volumetric Displays (Under Glass)
|
|
|
·
|
Phase
III Free-Space Volumetric Displays (Free
Space)
|
The
Phase
I Swept Volume Display is designed to be an inexpensive 3D display system
showing high resolution image generated from a diskette or similar medium.
A
prototype is projected to be available in early 2007. Initial target markets
for
swept volume displays include retail and manufacturing companies.
The
Phase
II technology will employ DMDs using infared lasers to produce 3D images in
advanced transparent nanotechnology materials, thereby enabling the creation,
transmission and display of high resolution 3D images within a volume space,
surrounded by glass or transparent screen. A prototype demonstration is planned
for Summer 2007. Target markets for static volumetric displays include
interactive entertainment, casino gaming, government, sales, medical and
pharmaceutical development, military, and architectural.
The
Phase
III technology will build upon the Phase II technology so as to eliminate the
need for an enclosed vessel, thereby enabling the creation, transmission and
display of high resolution 3D images in free space utilizing a portable system.
Initial research for this system is commenced in 2007. There is currently no
estimated prototype date for this technology.
University
of Oklahoma - Tulsa Sponsored Research Agreement
On
April
20, 2004, we entered into a sponsored research agreement entitled "Investigation
of Emerging Digital Holography Technologies" (Phase I) with the University
of
Oklahoma - Tulsa (University), which expired October 19, 2004. We have paid
the
University $14,116 pursuant to this agreement. The purpose of this agreement
was
to conduct a pilot study to investigate digital holography as a candidate
technology for the development of three-dimensional (3D) imaging and
visualization systems. The purpose of the pilot study was to investigate the
current state-of-the-art research and development activities taking place in
the
field of digital holography, particularly emerging technologies. The scope
of
work for the study encompassed the following tasks:
|
|
·
|
Literature
review to determine key leading edge research in relevant
areas;
|
|
|
·
|
Review
of related commercial products to identify technological approaches
and
potential competitors and/or partners;
|
|
|
·
|
Preliminary
patent review;
|
|
|
·
|
Recommendations
for product research and development
directions.
|
On
July
15, 2005, we entered into a Sponsored Research Agreement with the University
(Phase II), which expired on January 14, 2007. Under this agreement, the
University conducted a research project entitled "Investigation of 3-Dimensional
Display Technologies" and the Company agreed to pay the University $453,584
at
various dates from November 10, 2005 through July 15, 2006 to cover the costs
of
the research. Either party may terminate the agreement at any time by giving
60
days written notice. The goals for this research are as follows:
|
|
·
|
To
produce patentable and/or copyrightable intellectual
property;
|
|
|
·
|
To
produce proof-of-concept technology that demonstrates the viability
of the
intellectual property;
|
|
|
·
|
To
assess opportunities for manufacturing technological products in
Oklahoma;
|
|
|
·
|
Investigate
magnetic nanospheres (MNs) for use as a projection
media;
|
|
|
·
|
Develop
a control platform to actively distribute (MNs) in an unbounded volumetric
space;
|
|
|
·
|
Investigate
the doping of MNs with fluorescent materials for light emission at
different wavelengths, i.e., develop fluorescent MNs
(FMNs);
|
|
|
·
|
Evaluate
other display medium technologies for potential strategic
partnerships;
|
|
|
·
|
Evaluate
the most appropriate (from a cost-to-benefit standpoint) solid-state
light
sources for projection applications;
|
|
|
·
|
Develop
software for displaying ideal 3D images;
|
|
|
·
|
Investigate
software interface issues with other image capture
technologies.
|
-15-
The
final
payment of $226,792, due on July 15, 2006, was not paid. On November 1, 2006
the
sponsored research agreement was modified to provide $125,259 additional
funding, extend the term of the agreement through March 31, 2007, and revise
the
payment schedule to combine the July 15, 2005 remaining balance due of $226,792
with the additional funding into a revised payment schedule. Under the terms
of
the agreement, we agreed to pay the combined remaining obligation of $352,051
in
four equal monthly installments of $88,013 on December 31, 2006 through March
31, 2007. The Company is in default on its March 31, 2007 payment.
On
February 23, 2007, the Company entered into a sponsored research agreement
with
the University of Oklahoma (Phase III) which expires on March 31, 2010. Under
this agreement, the University will conduct a research project entitled
“3-Dimensional Display Development”. The Company will pay the University
$3,468,595 payable in monthly installments ranging from $92,263 to $112,777
beginning on April 30, 2007 and ending on March 31, 2010.
3DIcon
owns all worldwide rights to commercial and government usage of the intellectual
property being developed by the University of Oklahoma. The University of
Oklahoma has applied for the following patents with the U.S. Patent and
Trademark Office:
|
|
·
|
Utility
patent for Swept Volume Display, filed in September,
2006;
|
|
|
·
|
Provisional
patent for Colorful Translational Light Surface 3D Display filed
in April,
2006;
|
|
|
·
|
Provisional
patent for 3D Light Surface Display filed in September,
2006;
|
|
|
·
|
Provisional
patent for Volumetric Liquid Crystal Display filed in April,
2006.
|
Marketing
and Product Development
3DIcon
currently has no products or services. We envision the sale of products, the
licensing of University-owned technology, or a combination of thereof beginning
in 2007.
We
have
identified the following potential markets and uses for the technology being
developed by the University of Oklahoma:
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Driver
education, simulation and testing;
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·
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Healthcare
education;
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·
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Plastic
Surgery;
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·
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Architectural
plans and virtual structures;
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·
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Training
programs for pilots;
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·
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Virtual
live entertainment;
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·
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Displays
of art for museums;
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·
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Digital
signage;
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·
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Fashion
design;
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Casino
gaming;
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Homeland
security.
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Competition
There
are
numerous technologies which are under development to enable the display of
3D
images. The following is a summary of research being conducted and products
under development in the 3D display system marketplace of which we are currently
aware.
Rosen
et
al
report
on a psychophysical comparison of visual perception for a 3D display (the
Perspecta produced by Actuality Systems) and a high-resolution flat-panel
display. The results indicated that the binocular view of Perspecta was similar
or slightly better in performance than the monoscopic view of flat-panel
display, because of its low contrast.
A
collaborative paper from Cambridge University and the MIT Media Lab reports
that
a DMD can be used to launch view-sequential 3D images, leading to the
construction a virtual 3D image. This paper provides further reinforcement
of
the utility of DMD devices for 3D imaging and display applications.
Matsuda
and Kakeya propose a 3D camera system that implements combinational techniques
using hardware and software to capture object images from both eyes of the
viewer. An image captured by only one camera is not sufficient to supply the
information needed to reconstruct a 3D image back from the viewpoint of a free
observer. The authors propose the use of a stereo camera which, with the aid
of
3D position sensors, can follow the viewer’s motion and send the information
back to a camera system using a computational algorithm. Such an approach might
prove useful in recording images for subsequent display on 3D visualization
systems.
-16-
Fujii
and
Tanimoto report the investigation of two types of real-time Ray-Space
acquisition systems. The first system used 16 cameras, all connected via a
PC
cluster, to capture the information for subsequent 3D image display. The second
system used a single high-speed camera with scanning optics and offered better
performance due to the ability to capture a real-time Ray-Space at video rates.
The
DepthCube TM
Technology system consists of a rear projection volumetric computer monitor
that
produces 3D images. Unlike a conventional projection surface, the DepthCube
incorporates an electronically-controlled multiplanar optical element (MOE)
that
allows the formation of 3D volumetric images. The display also incorporates
Texas Instruments’ (TI’s) DLP technology and is capable of 1500 frames per
second. While this is impressive technology for a variety of visualization
applications, it does not represent the kind of technology 3DIcon intends to
develop.
The
FELIX
Technology display is a technology that uses the swept volume technique, where
a
rotating projection screen sweeps out a volume upon which a 3D image can be
formed. This FELIX 3D appears to represent a viable technology that would likely
compete with 3DIcon on some level.
A
related
technology is the SOLID FELIX static volume 3D display which uses a solid cube
of transparent crystalline material doped with rare earth ions. The rare earth
ions are capable of producing visible light by a two-frequency upconversion
(frequency-doubling) process when illuminated with intersecting infrared laser
beams.
The
Perspecta Spatial 3D Technology 3D display presents another example of a
technology that utilizes a rotating projection screen. The display uses three
of
TI’s DMDs to direct red, green, blue light beams onto the rotation screen at the
appropriate times to form 3D volumetric images. Again, the Perspecta Spatial
3D
display appears to represent a viable technology that would likely compete
with
3DIcon on some level.
The
VR4MAX Technology demonstrates another screen-based approach to 3D
visualization. As in the case of the DepthCube, while VR4MAX is no doubt useful
for a variety of visualization applications, it does not represent the kind
of
technology 3DIcon wants to develop.
The
FogScreen technology by itself does not represent a 3D display. Rather, it
may
prove to be a viable volumetric screen for space projection implementations.
A
FogScreen unit consists of a water tank, water level controller, water filter,
water fountain, and a number of hydrosonic generators. The unit produces a
dry
fog which can provide a source of small particles off of which light can be
scattered to display images.
Employees
3DIcon
Corporation has three full-time employees. We have identified the need for
additional personnel, including a marketing manager, a product manager and
a
product development engineer/manager. The marketing manager would lead the
creation of the specifications of what we should build and create all necessary
materials to successfully launch the product including an analysis of
competitive technologies. The responsibilities of the product manager would
include working with the University of Oklahoma and the marketing organization
to develop detailed specifications of the product, maintain the schedule, and
bring the product to market in a timely fashion. The responsibilities of the
product development engineer/manager would include seeking out competent
manufacturers, understanding the details of the design, and overseeing
production of a product within the guidelines of manufacturability and
serviceability.
Our
executive offices are located at 7507 S. Sandusky, Tulsa, Oklahoma 74136. Our
office space is provided to us by one of our officers at no cost to the
Company.
-17-
AND
PLAN OF OPERATION
Some
of
the information in this Form SB-2 contains forward-looking statements that
involve substantial risks and uncertainties. You can identify these statements
by forward-looking words such as "may," "will," "expect," "anticipate,"
"believe," "estimate" and "continue," or similar words. You should read
statements that contain these words carefully because they:
|
|
·
|
discuss
our future expectations;
|
|
|
·
|
contain
projections of our future results of operations or of our financial
condition; and
|
|
·
|
state
other "forward-looking"
information.
|
We
believe it is important to communicate our expectations. However, there may
be
events in the future that we are not able to accurately predict or over which
we
have no control. Our actual results and the timing of certain events could
differ materially from those anticipated in these forward-looking statements
as
a result of certain factors, including those set forth under "Risk Factors,"
"Business" and elsewhere in this prospectus. See "Risk Factors."
Overview
This
management discussion and analysis aims to provide greater transparency and
understanding of material aspects of the financial condition and the plan of
operation.
| (a) |
Plan
of Operation: provides information on the activities that have had
significant bearing on the performance of the company as well as
forward
looking plans for the forthcoming fiscal
period.
|
| (b) |
Discussion
of Financial Condition: provides explanation for significant items
as
provided in the financial results of the company. This section also
provides the management plan to address key financial
issues
|
Plan
of Operation
Background:
The
company is engaged in the development of 360o
volumetric imaging and display technology, specifically in the areas identified
by the initial in-depth investigation conducted by the University of Oklahoma
(OU or University). The identified areas are two major complementary areas
of
technology that comprise the spectrum of the solution and application (1) a
means of recording 3D objects as digital holographic data elements (capture);
and (2) a means of reconstructing and displaying the 3D images
(display).
Based
on
the investigation as well as review of existing patents and technologies, it
was
concluded that the area of 3-D image capture and recording had multiple
solutions and technologies that adequately served the market. Therefore our
primary area of focus is to develop products and intellectual property in the
reconstruction and display of 3D images where we see the most opportunity.
We
aim to establish strategic partnerships with the assignees or license holders
of
existing 3D recording technologies as well as integrate our technologies with
existing solutions.
The
existing products reviewed can generally be broken down into two broad
categories: stereoscopic - those that use multi-layer/element flat-panels to
implement 3D displays, and those that implement volumetric 3D displays. The
flat-panel approaches, as previously noted, do not support 3DIcon’s planned
embodiment of the technology. However, the application space of volumetric
3D
displays supports 3DIcon’s vision and appears to offer major opportunities for
further technology development and creation of intellectual property through
the
University of Oklahoma, to which 3DIcon will have exclusive rights.
-18-
The
research team at OU has been working to integrate open source image capture
applications as well as to establish 3D image capture systems.
We
continue to build intellectual property through the University of Oklahoma,
to
which 3DIcon has exclusive rights and engage in product research and development
both directly related to the display as well as by-product technologies.
Current
Activities and Operations
Currently
the company is pursuing the research and development of volumetric 3-D display
technology through the Sponsored Research Agreement (SRA) with the University
of
Oklahoma (OU). Our efforts are focused on two technological
approaches:
(a)
Swept
Volume Display Technology
(b)
An
alternate approach to the volumetric display in which certain media, such as
nano-particles in a transparent or semi-transparent medium to produce an
innovative volumetric “projection screen”. This, in addition to existing and
rapidly evolving image projection technologies, such as DLP technology from
Texas Instruments, are being innovatively incorporated to produce full-color,
full-motion 3D visualization, and in harmony with 3DIcon’s vision for product
development.
The
company has expanded the scope of the initial SRA with OU to include the
research and prototype development of the volumetric displays using
nanotechnology.
The
OU
team has made significant progress toward development of a proof-of-concept
prototype for the Swept Volume Display and we expect see the first working
prototype displaying 3-D images by the second half of 2007.
Under
the
scope of the revised SRA, OU has assigned a second multi-disciplinary team
to
focus on the development of light sensitive nano-materials, the medium for
dispersion of the nano-materials and the optics using digital micro-mirror
devices including the controls thereof.
The
following provisional patents are scheduled to be converted to utility and
international filings over the course of 2007. The company will be undertaking
the effort to convert these.
| 1. |
06NOR033
- “Swept Volume Display”
|
| 2. |
06TUL016
- “Colorful Translation Light Surface 3-D Display, Colorful Translation
3D
Volumetric Display”
|
| 3. |
06TUL038
- “Volumetric Liquid Crystal
Display”
|
| 4. |
07NOR016
- Directional 3-D Light Surface
Display
|
| 5. |
07TUL027
- “Computer System Interaction with Digital Micromirror
Device”
|
Further,
we are taking steps to explore areas that may be related to assist in the
protection of intellectual property assets. In addition, the company has started
the process of applying for trademarks related to our 3-D technologies. We
believe both these additional efforts will be beneficial to the strategy of
building and maintaining intellectual property assets.
Our
research and development objectives for the 2007 calendar year are as follows.
The work will mainly be done by researchers, students and faculty at the
University of Oklahoma with oversight by 3DIcon personnel:
I.
Phase
I Swept Volume Display
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·
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Provide
2nd
proof-of-concept prototype with LEDs by mid 2007;
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·
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Investigate
alternate image pane technologies (3 Color LED; OLED) by September
1;
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·
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If
3-color LED prototype is not satisfactory, develop new prototype
by
December 1
|
-19-
II.
Phase
II Static Volumetric Display
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·
|
Develop
single-color prototype and solve alignment issues;
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·
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Develop
Software;
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·
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Develop
multicolor prototype (materials dependent);
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·
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Provide
prototype demonstration in the summer of
2007.
|
III.
Nanomaterials - in support of Phase II Static Volume Display
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·
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Identify
and synthesize further optical upconversion nanosized
materials;
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·
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Synthesize
and optimize aerogels;
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·
|
Embed
light-emitting nanoparticles;
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·
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Test
2-photon materials;
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·
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Investigate
encapsulating materials;
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·
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Synthesize
quantum dots, tune, and characterize quantum
dots.
|
IV.
Patents (Intellectual Property)
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·
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File
utility patent for Colorful Translational Light Surface 3D Display;
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·
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File
utility patent for 3D Light Surface
Display;
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·
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File
utility patent for Volumetric Liquid Crystal Display;
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V.
Image
Capture
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Image
capture survey;
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Develop
conversion/translation software;
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Continue
with investigation of integral imaging
techniques.
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Financial
Condition, Liquidity and Capital Resources
Our
current 12-month operating budget is expected to be approximately $3,500,000,
consisting of the following expenses:
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|
·
|
Research
and development expenses pursuant to our Sponsored Research Agreement
with
the University of Oklahoma. This includes development of an initial
demonstrable prototype and a second prototype with Phase II technology;
|
|
·
|
Operating
expenses: Salaries; Insurance; Investor related expenses; rent; travel
etc.
|
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·
|
Hiring
executive officers for operations and
finance
|
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·
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Professional
fees for accounting and audit; legal services for securities and
financing; patent research and protection;
|
As
of
March 31, 2007 we had a total stockholder deficiency of approximately
$1,101,055. The cash on hand as of March 31, 2007 is $150,864. From the
inception, through the end of this period, we have generated no revenues and
have incurred operating losses in every period. We have a cumulative net loss
of
$4,387,840 for the period from inception (January 1, 2001) to March 31,
2007.
In
the
opinion of the management the above results reported, specifically the
non-generation of revenues, are consistent with the expectations of a
development stage company engaged in the invention of unique technology. We
do
expect revenue generation to start in 2007. The revenue generated is not
expected to be sufficient to cover the operating expenses for the next fiscal
year.
Our
independent registered public accountants, in their audit report accompanying
our financial statements for the year ended December 31, 2006, 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.
-20-
The
company has been actively engaged in efforts to raise additional capital through
sale of stock as well as instruments of debt to fund the ongoing research and
operational costs. Management expects to continue to seek sources of capital
from financial institutions, private capital as well as explore the possibility
of acquiring research funding from the government.
As
of
March 31, 2007, our accounts payable totaled $394,945 and we had a working
capital deficit of $965,995. Our current cash balance is insufficient to pay
the
current accounts payable. We will need to obtain additional capital in
order to sustain our operations beyond March 31, 2007. However, there can be
no
assurance that that any additional financing will become available to us, and
if
available, on terms acceptable to us.
On
November 1, 2006, we modified the SRA to provide $125,259 additional funding,
extend the term of the agreement through March 31, 2007, and revise the payment
schedule to combine the July 15, 2006 remaining balance due of $226,792 with
the
additional funding into a revised payment schedule. Under the terms of the
agreement, we agreed to pay the combined remaining obligation of $352,051 in
four equal monthly installments of $88,013 on December 31, 2006 through March
31, 2007.
On
February 23, 2007 the Company entered into a SRA with the University (Phase
III)
which expires March 31, 2010. Under this agreement the University will conduct
a
research project entitled “3-Dimensional Display Development” that seeks to make
significant progress in the development of 3-dimensional display technologies.
The company will pay the University $3,468,595 payable in monthly installment
ranging from $92,263 to $112,777 beginning April 30, 2007 and ending March
31,
2010.
The
liquidity impact of our outstanding indebtedness is as follows:
The
Company issued convertible debentures aggregating $160,000 during 2005 and
issued an additional $125,000 during 2006 at par value for cash. The debentures
bear interest at 8% per annum, and were due no later than December 31, 2007.
The
Company may prepay without penalty all of the outstanding principal amount
and
accrued interest. Upon receiving notice of the Company's intent to prepay,
holders of the debentures may convert the principal amount due to common stock
at the rate of one share of common stock for each $.05 of principal amount
converted. Upon conversion, the Company will pay all accrued interest. No
fractional shares will be issued upon conversion of a debenture. During 2006
debentures totaling $150,000 were converted to 3,000,000 shares of common stock,
leaving $125,000 principal balance outstanding.
Unsecured
debentures payable
During
the third quarter of 2006 the Company authorized the issuance of unsecured
convertible debentures aggregating $800,000. As of December 31, 2006 the Company
has issued $430,000 of these debentures at par value for cash. The debentures
bear interest at 8% per annum, are convertible to common shares at $0.40 per
share and are due no later than March 31, 2007. At the option of the Company,
interest may be paid in cash or common stock, valued at the bid price on the
day
immediately prior to the date paid. The debentures are not secured by any asset
or pledge of the Company or any officer, stockholder or director. The Company
has agreed to provide, with respect to the common shares issued upon conversion
of the debentures, certain registration rights under the Securities Act of
1933.
At December 31, 2006 the balance outstanding of $430,000 in unsecured debentures
payable may be converted to 1,075,000 shares of the Company’s common stock. The
company is in default with respect to providing the registration rights and
hence the debentures are eligible for conversion at $0.05 per share.
Since
March 01, 2007 $275,000 has been converted to 5,500,000 shares at $0.05 per
share and $155,000 is eligible for conversion to 3,100,000 shares at $0.05
per
share.
-21-
Golden
Gate Debentures
On
November 3, 2006, we issued two 6 ¼% convertible debentures to Golden Gate
Investors, Inc. in an aggregate principal amount of $1,350,000. Of this amount,
Golden Gate has provided us with $225,000. Golden Gate is required to provide
us
with an additional $312,500 upon effectiveness of the registration statement.
The balance of $812,500 shall be wired to the escrow agent, which is required
to
release $200,000 of on the first day of each month, beginning with the second
month following the effective date of the registration statement.
The
$100,000 debenture bears interest at 4 ¾%, matures
five
years from the date of issuance, and is convertible into our common stock,
at
Golden Gate’s option. The $100,000 convertible debenture is convertible into the
number of our shares of common stock equal to the dollar amount of the debenture
divided by the conversion price. The conversion price for the $100,000
convertible debenture is $.35 per share until the earlier of January 1, 2008
or
the date the common stock is quoted on the NASDAQ or a national securities
exchange and thereafter, the lesser of (i) $4.00, (ii) 80% of the average of
the
five lowest volume weighted average prices during the twenty (20) trading days
prior to the conversion (the 80% figure is known as the “Discount
Multiplier”).
If
Golden Gate elects to convert a portion of the debenture and, on the day that
the election is made, the volume weighted average price is below $1.00, 3DIcon
shall have the right to prepay that portion of the debenture that Golden Gate
elected to convert, plus any accrued and unpaid interest, at 135% of such
amount. The $1.00 figure shall be adjusted, on the date that is one year after
the closing date and every six months thereafter (“Adjustment Dates”), to a
price equal to 65% of the average of the current market prices for the fifteen
Trading Days prior to each Adjustment Date.
In
connection with the $100,000 debenture, we issued to Golden Gate warrants to
purchase 1,000,000 shares of our common stock at an exercise price of
$10.90.
The
$1.25
million debenture bears interest at 6 ¼%, matures three years from the date of
issuance, and is convertible into our common stock, at Golden Gate’s option. The
$1.25 million convertible debenture is convertible into the number of our shares
of common stock equal to the dollar amount of the debenture divided by the
conversion price. The conversion price for the $1.25 million convertible
debenture is $.35 per share until the common stock is quoted on the OTC Bulletin
Board or otherwise trading on the NASDAQ or a national securities exchange
and
thereafter, the lesser of (i) $2.00, (ii) 70% of the average of the five lowest
volume weighted average prices during the twenty (20) trading days prior to
the
conversion (the 70% figure is known as the “Discount
Multiplier”).
If
Golden Gate elects to convert a portion of the $1.25 million debenture and,
on
the day that the election is made, the volume weighted average price is below
$0.75, 3DIcon shall have the right to prepay that portion of the debenture
that
Golden Gate elected to convert, plus any accrued and unpaid interest, at 135%
of
such amount.
Interest
on our at 6 ¼ % convertible debentures is payable monthly in cash or, at
Golden Gate’s option, in shares of common stock of the Company valued at the
then applicable conversion price.
Subsequent
Event Disclosures:
Hiring
of Senior Management Officer
On
May
01, 2007 the company hired Mr. Vivek Bhaman, as President and Chief Operating
Officer. Mr. Bhaman has over 15 years global experience, including experience
with start-up and development companies in the high technology fields. The
employment contract is valid for a period of one year and is renewable at the
end of the period.
Golden
Gate Bridge Finance
To
obtain
funding for ongoing operations, the Company entered into a Bridge Financing
Agreement with Golden Gate which closed on June 11, 2007 (the “Financing
Agreement”), for the sale of a 9.75% convertible debenture in the principal
amount of $700,000. Pursuant to the Financing Agreement, the Company agreed
to
file a registration statement with the SEC within three days of closing for
the
resale of the common stock underlying the initial $1.25 million convertible
debenture as discussed in Note 6.
-22-
The
debenture may be converted, at Golden Gate’s option, in whole or in part, into
restricted shares of the Company’s common stock. The conversion price will be
$0.28 until the earlier of, the Company’s shares trading on the OTC Bulletin
Board or other trading market that the SEC recognizes as a trading market ,
or
January 1,2008. Subsequently, the conversion price is equal to 72% of the
average of the five lowest volume weighted average prices for the common stock
for the 20 trading days prior to the conversion date. The convertible debenture
matures June 11, 2007; subject to an option held by Golden Gate to extend the
maturity for one period of six months. Interest on the convertible debenture
is
payable monthly in cash.
In
addition to standard default provisions concerning timeliness of payments,
delivery and notifications, the following events shall accelerate the maturity
date of the Debenture, and all outstanding principal and accrued and unpaid
interest along with $250,000 in liquidated damages, all becoming immediately
due
and payable.
1.
The
Registration Statement for the November 3, 2006 6 ¼ % Debentures with Golden
Gate and the November 3, 2006 $100,000 Debenture with Golden Gate is not filed
within 3 days of the closing of this transaction; and is not effective by
September 14, 2007.
2.
The
common stock of the Company trades at a price per share of $0.21 or lower,
regardless of whether the trading price subsequently is higher than $0.21 per
share; or
3.
Any
scheduled monthly payment of interest under the Debenture is more
than one day late.
4.
A
default or event of default (subject to applicable grace or cure period) under
any Transaction Documents or Material Lease, document or instrument to which
the
company is obligated and not covered in (5) below.
5.
The
company is in default of its obligations under any mortgage, credit agreement
or
other facility, indenture agreement, factoring agreement
or
other
instrument under which there may be issued, or by which there may be secured
or
evidenced my indebtedness for borrowed money or money due under any long term
leasing or factoring arrangement of the Company in an amount exceeding S250,000,
that (a) involves m obligation greater than now exists and (b) results in such
indebtedness being declared due and payable prior to the date on which it would
otherwise become due and payable.
6
Any
monetary judgment, writ or similar final process is filed or entered against
the
Company or any subsidiary thereof or any of their respective property or other
assets for more than $250,000 and such judgment, writ or final process remains
unvacated, unstayed or unabandoned for a period of 45 calendar days.
The
Debenture shall be secured by the pledge of 11 million shares of common stock
held by affiliates in the Company (the “Pledged Shares”). Such shares shall have
been held by the Pledgors for a period of not less than two years. In the event
of a default and the Company has not repaid all outstanding principal and
accrued and unpaid interest, along with the liquidated damages of $250,000
within one day of default, Golden Gate shall have the right to immediately
sell
the Pledged Shares in satisfaction of any amounts of principal and interest
owing under the Debenture. Golden Gate shall only sell such amount of Pledged
Shares to satisfy any principal and accrued interest, along with $250,000 in
liquidated damages and shall return unsold shares to the Pledgors.
Off
Balance Sheet Arrangements
3DIcon
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, results
of operations, liquidity or capital expenditures.
Significant
Accounting Policies
Research
and Development Costs
Statement
of Accounting Standards No. 2, “Accounting for Research and Development Costs,”
requires that all research and development costs be expensed as incurred. Until
we have developed a commercial product, all costs incurred in connection with
the Sponsored Research Agreement with the University of Oklahoma, as well as
all
other research and development costs incurred, will be expensed. 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
3DIcon
has, since its inception, used its common stock, or warrants to purchase
its
common stock, as a means of compensating our employees and consultants.
Statement of Financial Accounting Standards No. 123(R), “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. Since we do not
have
a stock option plan, employees have been granted shares of common stock for
services. Such share are valued based on current prices in the over-the-counter
market, discounted for such matters as Rule 144 trading restrictions and
other
factors affecting the lack of marketability of the stock.
Recent
Accounting Pronouncements
In
June 2006, the Financial Accounting Standards Board issued FASB
Interpretation No. 48, Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement
No. 109 (FIN
48).
This interpretation clarifies the accounting for uncertainty in income taxes
recognized in an enterprise's financial statements in accordance with FASB
Statement No. 109, Accounting
for Income Taxes. FIN
48
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to
be
taken in a tax return. It also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition. FIN 48 is effective for fiscal years beginning
after
December 15, 2006. We adopted FIN 48 beginning January 1, 2007, as required,
with no effect on our financial statements.
In
September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS
No. 157). This Statement establishes a framework for fair value measurements
in
the financial statements by providing a definition of fair value, provides
guidance on the methods used to estimate fair value and expands disclosures
about fair value measurements. SFAS
No.
157 is effective for fiscal years beginning after November 15, 2007 and is
generally applied prospectively. We will assess the impact of SFAS No. 157
on
our financial statements
In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities - Including an Amendment of FASB
Statement No. 115" (SFAS No. 159). SFAS 159 permits an entity to choose to
measure many financial instruments and certain other items at fair value. The
objective of the statement is to provide entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets
and
liabilities differently without having to apply complex hedge accounting
provisions. SFAS 159 is effective as of the beginning of an entity’s fiscal year
beginning after November 15, 2007. We will assess the impact of SFAS No. 159
on
our financial statements.
-23-
Other
than as set forth below, 3DIcon is not a party to any pending legal proceeding,
nor is its property the subject of a pending legal proceeding, that is not
in
the ordinary course of business or otherwise material to the financial condition
of 3DIcon's business.
On
April
17, 2006, 3DIcon filed an action in the District Court of Tulsa County,
Oklahoma, against Andrew Stack and Lion Capital Holdings, Inc. stating claims
for fraudulent inducement, breach of contract, unjust enrichment, breach of
fiduciary duty, conversion, violation of the Oklahoma Deceptive Trade Practices
Act and state securities fraud, breach of an accord. According to the
Petition: Stack and his company, Lion Capital Holdings, solicited a contract
with 3DIcon under which the defendants promised to raise capital for 3DIcon,
which they never did; and the Defendants did retain, however, the shares of
3DIcon stock which were issued for the defendants’ prospective
shareholders.
On
October 4, 2006, 3DIcon amended its Petition to name Joseph Padilla and John
R.
Shrewder as defendants. Claims for civil conspiracy, fraud, deceit,
constructive fraud, accounting, restitution, injunctive relief, constructive
trust, piercing the corporate veil, malpractice and violation of the Oklahoma
Consumer Protection Act were added to the lawsuit.
3DIcon
seeks disgorgement, restitution, actual and punitive damages, attorneys’ fees,
costs, interest, accounting, imposition of a constructive trust and other
injunctive relief from the defendants, as stated in the Petition, as
amended.
There
are
motions pending and the case is in the discovery phase.
The
following table sets forth current information regarding our executive officers,
senior managers and directors:
|
Name
|
|
Age
|
|
Position
|
|
Martin
Keating
|
|
65
|
|
Chief
Executive Officer, Director
|
|
Vivek
Bhaman
|
41
|
President,
Chief Operating Officer
|
||
|
Philip
Suomu
|
|
52
|
|
Director
|
|
John
O’Connor
|
|
52
|
|
Director
|
|
|
|
|
|
|
Martin
Keating has been the President, Chief Executive Officer and a director of 3DIcon
since 1998. Previously, Mr. Keating organized and managed private placement
limited partnerships, ranging from real estate development to motion picture
financing. Mr. Keating was also general counsel and director of investor
relations for CIS Technologies, then a NASDAQ company. Mr. Keating wrote and
published "The Final Jihad," a terrorist suspense novel. Mr. Keating is an
attorney licensed to practice law in Oklahoma and Texas.
Vivek
Bhaman has been the President and Chief Operating Officer of 3DIcon since May
2007. He
has
held leadership positions in VeriFone, Hewlett-Packard, and with global media
giants Omnicom Group and the Interpublic Group. For more than 15 years, Mr.
Bhaman has been at the forefront of introducing new technologies and products
to
markets across the world. His spectrum includes consumer and business
technologies such as cell phones and secure e-commerce transaction systems
for
Verifone/HP, where he was responsible for launching and managing the
Asia-Pacific operations of the Electronic Commerce division. His involvement
extended from development to marketing/sales. Prior to joining 3DIcon, Mr.
Bhaman successfully led the startup and marketing operations for an
enterprise-software technology company, including its acquisition of marquee
customers Walt Disney, Southern California Edison, and Freeman Group. Mr. Bhaman
holds a Bachelors Degree in Engineering and an MBA with specializations in
Marketing and Finance.
Philip
Suomu has been a director of 3DIcon since October 2006 and its Director of
Technology since May 2005. Mr. Suomo works for 3DIcon on a part-time basis.
Since January, 2001, Mr. Suomu has served as President of PNERC Associates
L.P.,
which provides financial and technical guidance for new business development.
From April 1997 to September 2001, Mr. Suomu held the position of Director
of
Sales for CIENA Communications, which manufactures and markets advanced fiber
optic equipment for the telecommunications industry.
-24-
John
O’Connor has been a director of 3DIcon since October 2006. Since 1981, Mr.
O’Connor has practiced law in Oklahoma, concentrating in the areas of corporate
and commercial law. Mr. O’Connor served as President of the law firm of Newton,
O’Connor, Turner & Ketchum from 2001 to 2005 and has served as its Chairman
from 2001 to present.
Employment
Agreements
None.
Audit
Committee
We
do not
have a separately designated standing audit committee.
Code
of Ethics
We
have
not adopted a Code of Ethics and Business Conduct for Officers, Directors and
Employees that applies to all of our officers, directors and employees.
The
following table summarizes all compensation paid by the Company with respect
to
the fiscal years ended December 31, 2006 and 2005 for the Chief Executive
Officer and all other executive officers whose total cash compensation
exceeds
$100,000 in the fiscal years ended December 31, 2006 and 2005.
SUMMARY
COMPENSATION TABLE
|
Name
& Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan Compensation ($)
|
Change
in Pension Value and Non-Qualified Deferred Compensation
Earnings
($)
|
All
Other Compensation ($)
|
Total
($)
|
|||||||||||||||||||
|
Martin
Keating
CEO
|
2006 |
90,000
|
-
|
-
|
-
|
-
|
-
|
-
|
90,000
|
|||||||||||||||||||
| 2005 |
90,000
|
-
|
(1)14,792
|
-
|
-
|
-
|
-
|
104,792
|
||||||||||||||||||||
| 2004 |
90,000
|
-
|
(1)
1,980
|
-
|
-
|
-
|
91,980
|
|||||||||||||||||||||
(1)
The
Company issued 7,880,000 and 1,980,000 shares of common stock at various
dates
throughout 2005 and 2004, respectively, to its President and Chief Executive
Officer for services rendered. The shares issued were valued at the closing
price of the stock on or previous to the date of issuance less a 50% discount
due to the restrictive nature of the stock, a 50% discount for lack of
earnings
or sales consistency of the Company, a 50% discount due to the dollar and
share
volume of sales of the Company's securities in the public market, and an
additional 35% discount due to the trading market in which the Company's
securities are sold. The shares issued to directors are valued using the
same
discount structure as the other common stock issued for services transactions,
and ranged from $.0002 to $.0074 during 2005 and $.001 to $.014 during
2004. The
Company recognized $14,792 and $1,980 in compensation expense in 2005 and
2004,
respectively, related to these transactions.
Options
Grants in Last Fiscal Year
None.
Aggregate
Option Exercises In Last Fiscal Year and Fiscal Year End Option
Values
The
following table indicates beneficial ownership of our common stock as of June
11, 2007 by each person or entity known by us to beneficially own more than
5%
of the outstanding shares of our common stock; each of our executive officers
and directors; and all of our executive officers and directors as a group.
Unless otherwise indicated, the address of each beneficial owner listed below
is
c/o 3DIcon Corporation.
-25-
|
|
Number
of Shares
|
|
Percentage
|
|||||||
|
Name
of Beneficial Owner
|
Beneficially
Owned
|
Class
of Stock
|
Outstanding
(1)
|
|||||||
|
|
|
|
|
|||||||
|
Martin
Keating (2)
|
40,883,724
|
Common
|
36.4
|
%
|
||||||
| Judy Keating (2) | 40,883,724 |
Common
|
36.4 |
%
|
||||||
|
Philip
Suomu
|
143,600
|
Common
|
*
|
|||||||
|
John
O’Connor (3)
|
210,000
|
Common
|
*
|
|||||||
|
All
directors and executive officers as a group (3 persons)
|
41,237,324
|
36.7
|
%
|
|||||||
|
*
|
less
than 1%
|
|
(1)
|
Applicable
percentage ownership is based on 112,213,957 shares of common stock
outstanding as of June 12, 2007. Beneficial ownership is determined
in
accordance with the rules of the Securities and Exchange Commission
and
generally includes voting or investment power with respect to securities.
Options to aquire shares of common stock that are currently exercisable
or
exercisable within 60 days of November 15, 2006 are deemed to be
beneficially owned by the person holding such securities for the
purpose
of computing the percentage of ownership of such person, but are
not
treated as outstanding for the purpose of computing the percentage
ownership of any other person.
|
|
(2)
|
Represents (i)
38,977,452 shares of common
stock owned by Mr. Keating and (ii) 1,906,272 shares of common stock
owned
by Mrs. Keating.
|
|
|
|
|
(3)
|
Represents
(i) 110,000 shares of common stock owned by Mr. O’Connor and (ii) 100,000
shares of common stock owned by the John M. and Lucia D. O’Connor
Revocable Living Trust over which Mr. O’Connor has voting and investment
control.
|
The
securities being offered are shares of common stock. Our authorized capital
includes 250,000,000 shares of common stock, $0.0002 par value per
share.
Holders
of shares of common stock are entitled to one vote per share on all matters
submitted to a vote of the shareholders. Shares of common stock do not have
cumulative voting rights.
Holders
of record of shares of common stock are entitled to receive dividends when
and
if declared by the board of directors. To date, the Company has not paid cash
dividends. The Company intends to retain any earnings for the operation and
expansion of its business and does not anticipate paying cash dividends in
the
foreseeable future.
Any
future determination as to the payment of cash dividends will depend on future
earnings, results of operations, capital requirements, financial condition
and
such other factors as the board of directors may consider.
Upon
any
liquidation, dissolution or termination of the Company, holders of shares of
common stock are entitled to receive a pro rata distribution of the assets
of
the Company after liabilities are paid.
Holders
of common stock do not have pre-emptive rights to subscribe for or to purchase
any stock, obligations or other securities of 3DIcon.
The
selling stockholder and any of its pledgees, donees, assignees and other
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which
the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholder may use any one or more of the
following methods when selling shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits the purchaser;
|
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
-26-
|
·
|
privately-negotiated
transactions;
|
|
|
·
|
broker-dealers
may agree with the selling stockholder to sell a specified number
of such
shares at a stipulated price per share;
|
|
|
·
|
through
the writing of options on the shares
|
|
|
·
|
a
combination of any such methods of sale; and
|
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
selling stockholder may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus. The selling stockholder
shall have the sole and absolute discretion not to accept any purchase offer
or
make any sale of shares if they deem the purchase price to be unsatisfactory
at
any particular time.
The
selling stockholder or its pledgees, donees, transferees or other successors
in
interest, may also sell the shares directly to market makers acting as
principals and/or broker-dealers acting as agents for themselves or their
customers. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholder and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and
at
their own risk. It is possible that a selling stockholder will attempt to sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market price. The
selling stockholder cannot assure that all or any of the shares offered in
this
prospectus will be issued to, or sold by, the selling stockholder. The selling
stockholder and any brokers, dealers or agents, upon effecting the sale of
any
of the shares offered in this prospectus, may be deemed to be "underwriters"
as
that term is defined under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, or the rules and regulations under
such acts. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities
Act.
We
are
required to pay all fees and expenses incident to the registration of the
shares, including fees and disbursements of counsel to the selling stockholder,
but excluding brokerage commissions or underwriter discounts.
The
selling stockholder, alternatively, may sell all or any part of the shares
offered in this prospectus through an underwriter. No selling stockholder has
entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into.
The
selling stockholder may pledge its shares to their brokers under the margin
provisions of customer agreements. If a selling stockholder defaults on a margin
loan, the broker may, from time to time, offer and sell the pledged shares.
The
selling stockholder and any other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
under
such act, including, without limitation, Regulation M. These provisions may
restrict certain activities of, and limit the timing of purchases and sales
of
any of the shares by, the selling stockholder or any other such person. In
the
event that the selling stockholder is deemed affiliated with purchasers or
distribution participants within the meaning of Regulation M, then the selling
stockholder will not be permitted to engage in short sales of common stock.
Furthermore, under Regulation M, persons engaged in a distribution of securities
are prohibited from simultaneously engaging in market making and certain other
activities with respect to such securities for a specified period of time prior
to the commencement of such distributions, subject to specified exceptions
or
exemptions. In regards to short sells, the selling stockholder is contractually
restricted from engaging in short sells. In addition, if such short sale is
deemed to be a stabilizing activity, then the selling stockholder will not
be
permitted to engage in a short sale of our common stock. All of these
limitations may affect the marketability of the shares.
We
have
agreed to indemnify the selling stockholder, or their transferees or assignees,
against certain liabilities, including liabilities under the Securities Act
of
1933, as amended, or to contribute to payments the selling stockholder or their
respective pledgees, donees, transferees or other successors in interest, may
be
required to make in respect of such liabilities.
-27-
If
the
selling stockholder notifies us that it has a material arrangement with a
broker-dealer for the resale of the common stock, then we would be required
to
amend the registration statement of which this prospectus is a part, and file
a
prospectus supplement to describe the agreements between the selling stockholder
and the broker-dealer.
-28-
The
table
below sets forth information concerning the resale of the shares of common
stock
by the selling stockholder. We will not receive any proceeds from the resale
of
the common stock by the selling stockholder. We will receive proceeds from
the
exercise of the warrants. Assuming all the shares registered below are sold
by
the selling stockholder, it will not continue to own any shares of our common
stock.
The
following table also sets forth the name of each person who is offering the
resale of shares of common stock by this prospectus, the number of shares of
common stock beneficially owned by each person, the number of shares of common
stock that may be sold in this offering and the number of shares of common
stock
each person will own after the offering, assuming they sell all of the shares
offered.
|
Name
|
Total
Shares of
Common
Stock
Issuable
Upon
Conversion
of
Debenture
|
Total
Percentage
of
Common
Stock,
Assuming
Full
Conversion
|
Shares
of
Common
Stock
Included
in
Prospectus
(1)
|
Beneficial
Ownership
Before
the
Offering*
|
Percentage
of
Common
Stock
Owned
Before
Offering*
|
Beneficial
Ownership
After
the
Offering
(4)
|
Percentage
of
Common
Stock
Owned
After
Offering
(4)
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Golden
Gate
|
2,840,909
|
(3)
|
3.0
|
%
|
Up
to
|
206,250
|
9.99
|
%
|
—
|
—
|
||||||||||||
|
Investors,
Inc. (2)
|
2,840,909
|
|||||||||||||||||||||
|
|
shares
of
|
|||||||||||||||||||||
|
|
common
stock
|
|||||||||||||||||||||
|
Sichenzia
Ross
Friedman
Ference LLP
|
200,000 |
**
|
200,000 |
—
|
—
|
—
|
—
|
|||||||||||||||
|
|
||||||||||||||||||||||
|
*
|
These
columns represents the aggregate maximum number and percentage of
shares
that the selling stockholder can own at one time (and therefore,
offer for
resale at any one time) due to their 9.9% limitation.
|
|
**
|
Less than 1% |
The
number and percentage of shares beneficially owned is determined in accordance
with Rule 13d-3 of the Securities Exchange Act of 1934, and the information
is
not necessarily indicative of beneficial ownership for any other purpose. Under
such rule, beneficial ownership includes any shares as to which the selling
stockholder has sole or shared voting power or investment power and also any
shares, which the selling stockholder has the right to acquire within 60 days.
The actual number of shares of common stock issuable upon the conversion of
the
convertible debentures is subject to adjustment depending on, among other
factors, the future market price of the common stock, and could be materially
less or more than the number estimated in the table.
|
(1)
|
Includes
a good faith estimate of the shares issuable upon conversion of the
convertible debenture based on current market prices. Because the
number
of shares of common stock issuable upon conversion of the convertible
debenture is dependent in part upon the market price of the common
stock
prior to a conversion, the actual number of shares of common stock
that
will be issued upon conversion will fluctuate daily and cannot be
determined at this time. Under the terms of the convertible debenture,
if
the convertible debenture had actually been converted on December
15
,
2006, the conversion price would have been $0.44. The actual number
of
shares of common stock offered in this prospectus, and included in
the
registration statement of which this prospectus is a part, includes
such
additional number of shares of common stock as may be issued or issuable
upon conversion of the convertible debenture by reason of any stock
split,
stock dividend or similar transaction involving the common stock,
in
accordance with Rule 416 under the Securities Act of 1933. In addition,
on
June 11, 2007 the Company issued a 9.75% convertible debenture to
the
selling shareholder. Such issuance could potentially increase the
number
of shares beneficially owned. However the selling stockholder has
contractually agreed to restrict their ability to convert their
convertible debenture or exercise their warrants and receive shares
of our
common stock such that the number of shares of common stock held
by them
in the aggregate and their affiliates after such conversion or exercise
does not exceed 9.99% of the then issued and outstanding shares of
common
stock as determined in accordance with Section 13(d) of the Exchange
Act.
Accordingly, the number of shares of common stock set forth in the
table
for the selling stockholder exceeds the number of shares of common
stock
that the selling stockholder could own beneficially at any given
time
through their ownership of the convertible debenture and the warrants.
In
that regard, the beneficial ownership of the common stock by the
selling
stockholder set forth in the table is not determined in accordance
with
Rule 13d-3 under the Securities Exchange Act of 1934, as
amended.
|
-29-
|
(2)
|
The
selling stockholder is an unaffiliated third party. In accordance
with
rule 13d-3 under the Securities Exchange Act of 1934, Norman Lizt
may be
deemed a control person of the shares owned by the selling
stockholder.
|
|
(3)
|
Includes
2,840,909 shares of common stock underlying our $1,250,000 convertible
debenture issued to Golden Gate Investors,
Inc.
|
|
(4)
|
Assumes
that all securities registered will be sold, which does not represent
all
of the shares of common stock potentially issuable upon conversion
of the
convertible debenture held by Golden Gate at current market
prices.
|
Terms
of Convertible Debenture
To
obtain
funding for our ongoing operations, we entered into a Securities Purchase
Agreement with Golden Gate Investors, Inc. (“Golden Gate”) on November 3, 2006,
as amended on December 15, 2006 (the “Purchase Agreement”), for the sale of a 6
¼% convertible debenture of the Company in the principal amount of $1,250,000.
Pursuant to the Purchase Agreement, at such time as the principal balance of
this debenture is less than $400,000, the Company shall have the right to
require Golden Gate to purchase a second debenture, also in the principal amount
of $1,250,000. On November 3, 2006, we also issued to Golden Gate a 4.75%
convertible debenture in a principal amount of $100,000 and warrants to purchase
1,000,000 shares of our common stock at an exercise price of $10.90.
This
prospectus relates to the resale of the common stock underlying the initial
$1.25 million convertible debenture and the shares issued to the selling
stockholder as consideration for services rendered for a total of 3,040,909
shares. Such amount represents approximately 4% of our "public
float".
Golden
Gate provided us with $125,000 upon execution of the Purchase Agreement.
Pursuant to the Purchase Agreement, Golden Gate is required to provide us with
an additional $312,500 upon effectiveness of the registration statement of
which
this prospectus is a part. The balance of $812,500 shall be wired to the escrow
agent, which is required to release $200,000 on the first day of each month,
beginning with the second month following the effective date of the registration
statement.
The
debentures bear interest at 6 ¼%, and are convertible into our common stock, at
the selling stockholder’s option. The $1.25 million convertible debentures
mature three years from the date of issuance. The $100,000 convertible debenture
matures five years from the date of issuance. Interest on our 6 ¼% convertible
debentures is payable monthly in cash or, at Golden Gate’s option, in shares of
common stock of the Company valued at the then applicable conversion price.
The
initial $1.25 million convertible debenture is convertible into the number
of
our shares of common stock equal to the dollar amount of the debenture divided
by the conversion price. The conversion price for the initial $1.25 million
convertible debenture is the lesser of (i) $2.00 or (ii) 70% of the average
of
the five lowest volume weighted average prices during the twenty (20) trading
days prior to the conversion. The conversion price for the second $1.25 million
convertible debenture is the lesser of (i) $2.00 or (ii) 90% of the average
of
the five lowest volume weighted average prices during the twenty (20) trading
days prior to the conversion. The conversion price for the $100,000 convertible
debenture is the lesser of (i) $4.00 or (ii) 80% of the average of the five
lowest volume weighted average prices during the twenty (20) trading days prior
to the conversion. Accordingly, there is in fact no limit on the number of
shares into which the debentures may be converted over time. If Golden Gate
elects to convert a portion of the debenture and, on the day that the election
is made, the volume weighted average price is below $0.75, 3DIcon shall have
the
right to prepay that portion of the debenture that Golden Gate elected to
convert, plus any accrued and unpaid interest, at 135% of such
amount.
In
addition, 3DIcon entered into a registration rights agreement with Golden Gate
pursuant to which the Company agreed to file, within 30 days after the closing,
the registration statement of which this prospectus is a part covering the
common stock issuable upon conversion of the initial $1.25 million debenture
only. In the event we fail to meet this schedule and other timetables provided
in the registration rights agreement, liquidated damages and other potential
penalties could be imposed (for example, the discount multiplier of 70% shall
decrease by three percentage points for each month or partial month occurring
after we fail to meet the timetables provided in the registration rights
agreement). In addition, Golden Gate may demand repayment of one hundred and
fifteen percent (115%) of the principal amount of the debenture, together with
all accrued and unpaid interest on the principal amount of the debenture, in
cash, if we fail to meet the timetables provided in the registration rights
agreement.
-30-
In
the
event the Company elects, and Golden Gate fails, to enter into the second
debenture, Golden Gate would be required to pay liquidated damages in the amount
of $250,000.
We
agreed
to amend the securities purchase agreement (“Amendment No. 1”) such that the
issuance of the Second Debenture was now at our option, rather than as of right.
In addition, we agreed to amend the securities purchase agreement, the
debenture, the registration rights agreement and Amendment No. 1 to extend
the
deadline for effectiveness of the registration statement until January 1, 2008
and to provide for fixed conversion prices on all three debentures until such
time as our common stock is quoted on the OTCBB or is otherwise listed and
trading on NASDAQ or a national securities exchange. The conversion price of
the
initial $1.25 million debenture, as amended, is now $0.35 per share until our
common stock is listed on the OTCBB or is otherwise listed and trading on NASDAQ
or a national securities exchange and thereafter the lesser of (i) $2.00 or
(ii)
70% of the average of the five lowest Volume Weighted Average Prices during
the
twenty (20) days prior to the conversion. The conversion price of the second
debenture, as amended, is now $0.35 per share until our common stock is listed
on the OTCBB or is otherwise listed and trading on NASDAQ or a national
securities exchange and thereafter the lesser of (i) $2.00 or (ii) 90% of the
average of the five lowest Volume Weighted Average Prices during the twenty
(20)
days prior to the conversion. The conversion price on the third debenture,
as
amended, is now $0.35 per share until our common stock is listed on the OTCBB
or
is otherwise listed and trading on NASDAQ or a national securities exchange
and
thereafter the lesser of (i) $2.00 or (ii) 80% of the average of the five lowest
Volume Weighted Average Prices during the twenty (20) days prior to the
conversion.
Bridge
Financing
To
obtain
funding for ongoing operations, the Company entered into a Bridge Financing
Agreement with Golden Gate which closed on June 11, 2007 (the “Financing
Agreement”), for the sale of a 9.75% convertible debenture in the principal
amount of $700,000. Pursuant to the Financing Agreement, the Company agreed
to
file a registration statement with the SEC within three days of closing for
the
resale of the common stock underlying the initial $1.25 million convertible
debenture as discussed in Note 6.
The
debenture may be converted, at Golden Gate’s option, in whole or in part, into
restricted shares of the Company’s common stock. The conversion price will be
$0.28 until the earlier of, the Company’s shares trading on the OTC Bulletin
Board or other trading market that the SEC recognizes as a trading market,
or
January 1,2008. Subsequently, the conversion price is equal to 72% of the
average of the five lowest volume weighted average prices for the common stock
for the 20 trading days prior to the conversion date. The convertible debenture
matures June 11, 2007; subject to an option held by Golden Gate to extend the
maturity for one period of six months. Interest on the convertible debenture
is
payable monthly in cash.
In
addition to standard default provisions concerning timeliness of payments,
delivery and notifications, any other event of default, as defined in the
debenture, will accelerate the maturity date of the debenture, and all
outstanding principal and accrued and unpaid interest along with $250,000 in
liquidated damages, will become immediately due and payable. Such events of
default include: failure to observe or perform material covenants of any notes;
the making of a representation or warranty in any material agreement, report
of
financial statement; filing of a voluntary or involuntary proceeding for
bankruptcy by the Company; a default under any mortgage, credit agreement or
other facility, indenture agreement, factoring agreement or other instrument;
the common stock of the Company trades below $0.21 per share; the Company is
a
party to any Change of Control Transaction and agrees to sell or dispose of
all
or in excess of 33% of its assets in one or more transactions (whether or not
such sale would constitute a Change of Control Transaction) or shall redeem
or
repurchase more than ten percent (10%) of its outstanding shares of Common
Stock
or other equity securities of the Company; the Company does not file the
Registration Statement, as amended to reflect the Company’s responses to the
latest comments made to such Registration Statement by the Commission relating
to the Registration Rights Agreement dated November 3, 2006 between the Company
and Golden Gate Investors Inc. by June 14, 2007 or the related Registration
Statement is not declared effective by the Commission on or prior to September
14, 2007; if during the effectiveness period of such Registration Statement
its
effectiveness lapses or the selling stockholder is unable to sell its shares
for
a period of 20 days; the Company fails to deliver certificates following a
conversion under the debenture within 3 days; or any monetary judgment, writ
or
similar final process shall be entered or filed against the Company, any
Subsidiary or any of their respective property or other assets for more than
$250,000, and such judgment, writ or similar final process shall remain
unvacated, unabandoned or unstayed for a period of 45 calendar
days.
The
Debenture is secured by the pledge of 11 million shares of common stock held
by
affiliates in the Company (the “Pledged Shares”). Such shares shall have been
held by the Pledgors for a period of not less than two years. In the event
of a
default and the Company has not repaid all outstanding principal and accrued
and
unpaid interest, along with the liquidated damages of $250,000 within one day
of
default, Golden Gate shall have the right to immediately sell the Pledged Shares
in satisfaction of any amounts of principal and interest owing under the
Debenture. Golden Gate shall only sell such amount of Pledged Shares to satisfy
any principal and accrued interest, along with $250,000 in liquidated damages
and shall return unsold shares to the Pledgors.
Other
than as set forth below, during the last two fiscal years there have not been
any relationships, transactions, or proposed transactions to which 3DIcon was
or
is to be a party, in which any of the directors, officers, or 5% or greater
stockholders (or any immediate family thereof) had or is to have a direct or
indirect material interest.
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
2004, the Company issued 25,000,000 additional shares to the Company’s founder,
President and Chief Executive Officer due to the reverse stock split in 2003
and
the corporate reorganization that took place during 2004.
DISCLOSURE
Not
applicable.
Sichenzia
Ross Friedman Ference LLP, New York, New York will issue an opinion with respect
to the validity of the shares of common stock being offered hereby. Sichenzia
Ross Friedman Ference LLP has received 200,000 shares of the Company’s
common stock issued as compensation for legal services.
-31-
Tullius
Taylor Sartain & Sartain LLP, Independent Registered Public Accountants,
have audited, as set forth in their report thereon appearing elsewhere herein,
our financial statements at December 31, 2006 and 2005 and for the years then
ended that appear in the prospectus. The financial statements referred to above
are included in this prospectus with reliance upon the auditors’ opinion based
on their expertise in accounting and auditing.
We
have
filed a registration statement on Form SB-2 under the Securities Act of 1933,
as
amended, relating to the shares of common stock being offered by this
prospectus, and reference is made to such registration statement. This
prospectus constitutes the prospectus of 3DIcon Corporation, filed as part
of
the registration statement, and it does not contain all information in the
registration statement, as certain portions have been omitted in accordance
with
the rules and regulations of the Securities and Exchange
Commission.
We
are
subject to the informational requirements of the Securities Exchange Act of
1934
which requires us to file reports, proxy statements and other information with
the Securities and Exchange Commission. Such reports, proxy statements and
other
information may be inspected at public reference facilities of the SEC at 100
F
Street N.E., Washington D.C. 20549. Copies of such material can be obtained
from
the Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street
N.W., Washington, D.C. 20549 at prescribed rates. Because we file documents
electronically with the SEC, you may also obtain this information by visiting
the SEC's Internet website at http://www.sec.gov.
-32-
3DIcon
CORPORATION
(A
Development Stage Company)
March
31,
2007
(Unaudited)
CONTENTS
|
For
the Three Months Ended March 31, 2007 of 3DIcon
Corporation
|
|
|
Balance
Sheet as of March 31, 2007 (Unaudited)
|
F-2
|
|
|
|
|
Statements
of Operations for the three months ended March 31, 2007 and 2006
and from
inception (January 1, 2001) to March 31, 2007 (Unaudited)
|
F-3
|
|
|
|
|
Statements
of Changes in Stockholders’ Equity for the three months ended March 31,
2007 and from inception (January 1, 2001) to March 31, 2007
(Unaudited)
|
F-4
|
|
|
|
|
Statements
of Cash Flows for the three months ending March 31, 2007 and 2006
and from
inception (January 1, 2001) to March 31, 2007 (Unaudited)
|
F-6
|
|
|
|
|
Notes
to Financial Statements March 31, 2007 (Unaudited)
|
F-7
|
|
|
|
|
For
the Years Ended December 31, 2006 and 2005 of 3DIcon
Corporation
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-19
|
|
Balance
Sheets as of December 31, 2006 and 2005
|
F-20
|
|
Statements
of Operations for the years ended December 31, 2006 and 2005 and
period
from inception (January 1, 2001) to December 31, 2006
|
F-21
|
|
Statements
of Changes in Stockholders’ Deficiency for the period from inception
(January 1, 2001) to December 31, 2006
|
F-22
|
|
Statements
of Cash Flows for the years ended December 31, 2006 and 2005 and
for the
period from inception
|
|
|
(January
1, 2001) to December 31, 2006
|
F-24
|
|
Notes
to Financial Statements, December 31, 2006 and 2005 and for period
from
inception (January 1, 2001) to December 31, 2006
|
F-25
|
F-1
3DIcon
CORPORATION
(A
Development Stage Company)
March
31,
2007
(Unaudited)
CONTENTS
|
Balance
Sheet as of March 31, 2007 (Unaudited)
|
F-2
|
|||
|
Statements
of Operations for the three months ended March 31, 2007 and 2006
and for
period from inception (January 1, 2001) to March 31, 2007
(Unaudited)
|
F-3
|
|||
|
Statements
of Changes in Stockholders’ Deficiency for period from inception (January
1, 2001) to March 31, 2007
|
F-4
|
|||
|
Statements
of Cash Flows for the three months ended March 31, 2007 and 2006
and for
period from inception (January 1, 2001) to March 31, 2007 (Unaudited)
|
F-6
|
|||
|
Notes
to Financial Statements, March 31, 2007 (Unaudited)
|
F-7
|
3DIcon
CORPORATION
(A
Development Stage Company)
BALANCE
SHEET
March
31,
2007
(Unaudited)
|
Assets
|
||||
|
Current
assets:
|
||||
|
Cash
|
$
|
150,864
|
||
|
Total
current assets
|
150,864
|
|||
|
Property
and equipment, net
|
4,810
|
|||
|
Debt
issue costs, net
|
135,130
|
|||
|
Total
assets
|
$
|
290,804
|
||
|
Liabilities
and Stockholders' Deficiency
|
||||
|
Current
liabilities:
|
||||
|
Current
maturities of convertible debentures payable
|
$
|
555,000
|
||
|
Accounts
payable
|
384,945
|
|||
|
Note
payable - related party
|
192,500
|
|||
|
Accrued
interest on debentures
|
34,414
|
|||
|
Total
current liabilities
|
1,166,859
|
|||
|
Convertible
debentures payable, less current maturities
|
225,000
|
|||
|
Total
liabilities
|
1,391,859
|
|||
|
Stockholders'
deficiency:
|
||||
|
Common
stock; $.0002 par, 250,000,000 shares authorized and 101,407,656
shares
issued and outstanding
|
20,282
|
|||
|
Additional
paid-in capital
|
3,266,503
|
|||
|
Deficit
accumulated during development stage
|
(4,387,840
|
)
|
||
|
Total
stockholders' deficiency
|
(1,101,055
|
)
|
||
|
Total
liabilities and stockholders' deficiency
|
$
|
290,804
|
||
See
notes
to financial statements
F-2
3DIcon
CORPORATION
(A
Development Stage Company)
STATEMENTS
OF OPERATIONS
Three
months ended March 31, 2007 and 2006 and period
from
inception (January 1, 2001) to March 31, 2007
|
Three
Months Ended
March
31, 2007
|
Three
Months
Ended
March
31, 2006
|
Inception
to
March
31,
2007
|
||||||||
|
Income:
|
||||||||||
|
Sales
|
$
|
-
|
$
|
-
|
$
|
-
|
||||
|
Expenses:
|
||||||||||
|
Research
and development
|
104,611
|
240,355
|
593,482
|
|||||||
|
General
and administrative
|
800,652
|
157,697
|
3,875,796
|
|||||||
|
Interest
|
13,044
|
5,652
|
43,562
|
|||||||
|
Total
expenses
|
918,307
|
403,704
|
4,387,840
|
|||||||
|
Net
loss
|
$
|
(918,307
|
)
|
$
|
(403,704
|
)
|
$
|
(4,387,840
|
)
|
|
|
Loss
per share:
|
||||||||||
|
Basic
and diluted
|
$
|
(.009
|
)
|
$
|
(.005
|
)
|
||||
|
Weighted
average shares outstanding, basic
|
||||||||||
|
and
diluted
|
100,940,776
|
76,804,025
|
||||||||
See
notes to financial statements
F-3
3DIcon
CORPORATION
(A
Development Stage Company)
STATEMENTS
OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
Three
months ended March 31, 2007 and 2006 and period
from
inception (January 1, 2001) to March 31, 2007
(Unaudited)
|
Deficit
|
||||||||||||||||
|
Accumulated
|
||||||||||||||||
|
Additional
|
During
the
|
|||||||||||||||
|
Common
Stock
|
Paid-In
|
Development
|
||||||||||||||
|
Shares
|
Par
Value
|
Capital
|
Stage
|
Total
|
||||||||||||
|
Balance,
January 1, 2001 - as reorganized
|
27,723,750
|
$
|
27,724
|
$
|
193,488
|
$
|
-
|
$
|
221,212
|
|||||||
|
Adjustment
to accrue compensation earned but not recorded
|
-
|
-
|
-
|
(60,000
|
)
|
(60,000
|
)
|
|||||||||
|
Stock
issued for services
|
2,681,310
|
2,681
|
185,450
|
-
|
188,131
|
|||||||||||
|
Stock
issued for cash
|
728,500
|
729
|
72,121
|
-
|
72,850
|
|||||||||||
|
Net
loss for the year
|
-
|
-
|
-
|
(259,221
|
)
|
(259,221
|
)
|
|||||||||
|
Balance,
December 31, 2001
|
31,133,560
|
31,134
|
451,059
|
(319,221
|
)
|
162,972
|
||||||||||
|
Adjustment
to record compensation earned but not recorded
|
-
|
-
|
-
|
(60,000
|
)
|
(60,000
|
)
|
|||||||||
|
Stock
issued for services
|
3,077,000
|
3,077
|
126,371
|
-
|
129,448
|
|||||||||||
|
Stock
issued for cash
|
1,479,000
|
1,479
|
146,421
|
-
|
147,900
|
|||||||||||
|
Net
loss for the year
|
-
|
-
|
-
|
(267,887
|
)
|
(267,887
|
)
|
|||||||||
|
Balance,
December 31, 2002
|
35,689,560
|
35,690
|
723,851
|
(647,108
|
)
|
112,433
|
||||||||||
|
Adjustment
to record compensation earned but not recorded
|
-
|
-
|
-
|
(90,000
|
)
|
(90,000
|
)
|
|||||||||
|
Stock
issued for services
|
15,347,000
|
15,347
|
-
|
-
|
15,347
|
|||||||||||
|
Stock
issued for cash
|
1,380,000
|
1,380
|
33,620
|
-
|
35,000
|
|||||||||||
|
Reverse
split 1:10
|
(47,174,904
|
)
|
-
|
-
|
-
|
-
|
||||||||||
|
Par
value $0.0001 to $0.0002
|
-
|
(51,369
|
)
|
51,369
|
-
|
-
|
||||||||||
|
Net
loss for the year
|
-
|
-
|
-
|
(51,851
|
)
|
(51,851
|
)
|
|||||||||
|
Balance,
December 31, 2003
|
5,241,656
|
1,048
|
808,840
|
(788,959
|
)
|
20,929
|
||||||||||
|
Additional
Founders shares issued
|
25,000,000
|
5,000
|
(5,000
|
)
|
-
|
-
|
||||||||||
|
Stock
issued for services
|
24,036,000
|
4,807
|
71,682
|
-
|
76,489
|
|||||||||||
|
Stock
issued for cash
|
360,000
|
72
|
28,736
|
-
|
28,808
|
|||||||||||
|
Warrants
issued to purchase common stock at $.025
|
-
|
-
|
18,900
|
-
|
18,900
|
|||||||||||
|
Warrants
issued to purchase common stock at $.05
|
-
|
-
|
42,292
|
-
|
42,292
|
|||||||||||
|
Stock
warrants exercised
|
2,100,000
|
420
|
60,580
|
-
|
61,000
|
|||||||||||
|
Net
loss for the year
|
-
|
-
|
-
|
(617,875
|
)
|
(617,875
|
)
|
|||||||||
|
Balance,
December 31, 2004
|
56,737,656
|
11,347
|
1,026,030
|
(1,406,834
|
)
|
(369,457
|
)
|
|||||||||
See
notes to financial statements
F-4
3DIcon
CORPORATION
(A
Development Stage Company)
STATEMENTS
OF CHANGES IN STOCKHOLDERS’ DEFICIENCY (con't)
Three
months ended March 31, 2007 and 2006 and period
from
inception (January 1, 2001) to March 31, 2007
(Unaudited)
|
Deficit
|
||||||||||||||||
|
Accumulated
|
||||||||||||||||
|
Additional
|
During
the
|
|||||||||||||||
|
Common
Stock
|
Paid-In
|
Development
|
||||||||||||||
|
Shares
|
Par
Value
|
Capital
|
Stage
|
Total
|
||||||||||||
|
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 at $.025
|
-
|
-
|
18,400
|
-
|
18,400
|
|||||||||||
|
Warrants
issued to purchase
|
||||||||||||||||
|
common
stock at $.05
|
-
|
-
|
15,400
|
-
|
15,400
|
|||||||||||
|
Warrants
converted to purchase common stock at $.025
|
10,220,000
|
2,045
|
253,455
|
-
|
255,500
|
|||||||||||
|
Warrants
converted to purchase common stock at $.05
|
6,260,000
|
1,252
|
311,748
|
-
|
313,000
|
|||||||||||
|
Net
loss for the year
|
-
|
-
|
-
|
(1,469,888
|
)
|
(1,469,888
|
)
|
|||||||||
|
Balance,
December 31, 2006
|
98,327,656
|
19,666
|
2,568,119
|
(3,469,533
|
)
|
(881,748
|
)
|
|||||||||
|
Debentures
converted
|
200,000
|
40
|
9,960
|
-
|
10,000
|
|||||||||||
|
Warrants
converted to purchase common stock at $.025
|
1,200,000
|
240
|
29,760
|
-
|
30,000
|
|||||||||||
|
Warrants
converted to purchase common stock at $.05
|
1,680,000
|
336
|
83,664
|
-
|
84,000
|
|||||||||||
|
Options
issued for services
|
-
|
-
|
575,000
|
-
|
575,000
|
|||||||||||
|
Net
loss for the period
|
-
|
-
|
-
|
(918,307
|
)
|
(918,307
|
)
|
|||||||||
|
Balance,
March 31, 2007
|
101,407,656
|
$
|
20,282
|
$
|
3,266,503
|
$
|
(4,387,840
|
)
|
$
|
(1,101,055
|
)
|
|||||
See
notes to financial statements
F-5
3DIcon
CORPORATION
(A
Development Stage Company)
STATEMENTS
OF CASH FLOWS
Three
months ended March 31, 2007 and 2006 and period
from
inception (January 1, 2001) to March 31, 2007
(Unaudited)
|
Three
Months Ended
March
31, 2007
|
Three
Months Ended
March
31, 2006
|
Inception
to
March
31,
2007
|
||||||||
|
Cash
Flows from Operating Activities
|
||||||||||
|
Net
loss
|
$
|
(918,307
|
)
|
$
|
(403,704
|
)
|
$
|
(4,387,840
|
)
|
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||
|
Options
and stock issued for services
|
575,000
|
-
|
1,217,323
|
|||||||
|
Depreciation
|
-
|
27
|
352
|
|||||||
|
Asset
impairments
|
-
|
-
|
292,203
|
|||||||
|
Change
in:
|
||||||||||
|
Prepaid
expenses and other assets
|
(30,534
|
)
|
2,686
|
(135,130
|
)
|
|||||
|
Accounts
payable and accrued liabilities
|
15,774
|
103,769
|
448,358
|
|||||||
|
Net
cash used in operating activities
|
(358,067
|
)
|
(297,222
|
)
|
(2,564,734
|
)
|
||||
|
Cash
Flows from Investing Activities
|
||||||||||
|
Purchase
of office furniture and equipment
|
-
|
-
|
(5,162
|
)
|
||||||
|
Cash
Flows from Financing Activities
|
||||||||||
|
Proceeds
from stock and warrant sales and exercise of warrants
|
114,000
|
272,388
|
1,588,250
|
|||||||
|
Proceeds
from issuance of debentures
|
192,500
|
-
|
1,132,500
|
|||||||
|
Net
cash provided by financing activities
|
306,500
|
272,388
|
2,720,750
|
|||||||
|
Net
increase (decrease) in cash
|
(51,567
|
)
|
(24,834
|
)
|
150,854
|
|||||
|
Cash,
beginning of period
|
202,431
|
147,371
|
10
|
|||||||
|
Cash,
end of period
|
$
|
150,864
|
$
|
122,537
|
$
|
150,864
|
||||
|
Supplemental
Disclosures
|
||||||||||
|
Non-Cash
Investing and Financing Activities
|
||||||||||
|
Conversion
of debentures to common stock
|
$
|
10,000
|
$
|
-
|
$
|
160,000
|
||||
See
notes to financial statements
F-6
3DIcon
CORPORATION
(A
Development Stage Company)
NOTES
TO
FINANCIAL STATEMENTS.
Three
Months Ended March 31, 2007 and 2006 and period
from
Inception (January 1, 2001) to March 31, 2007
Note
1 - Organization and Operations
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 registration statement on pages 18 through 28.
In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial position of the Company
as of March 31, 2007, and the statements of its operations, changes in
stockholders' deficiency and cash flows for the three month periods ended
March
31, 2007, and 2006 and the period from inception (January 1, 2001) to March
31,
2007, 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.
Organization
3DIcon
Corporation was incorporated on August 11, 1995, under the laws of the State
of
Oklahoma as First Keating Corporation. The articles of incorporation were
amended August 1, 2003 to change the name to 3DIcon Corporation. The initial
focus of First Keating Corporation was to market and distribute books written
by
its founder, Martin Keating. During 2001, First Keating Corporation began
to
focus on the development of 360-degree holographic technology. The effective
date of this transition is January 1, 2001, and the financial information
presented is from that date through the current period. The Company has
accounted for this transition as a reorganization and accordingly, restated
its
capital accounts as of January 1, 2001. From January 1, 2001, the Company's
primary activity has been the raising of capital in order to pursue its goal
of
becoming a significant participant in the formation and commercialization
of
interactive, optical holography for the communications and entertainment
industries.
F-7
Note
1 - Organization and Operations (continued)
The
mission of the Company is to pursue, develop and market full-color, 360-degree
person-to-person holographic technology. Its primary focus is to invest and
participate in the commercialization of optical holographic technologies
now
planned and/or under development, particularly those employing derivative
broadband, satellite-based systems.
Uncertainties
The
accompanying financial statements have been prepared on a going concern basis.
The Company is in the development stage and has no source of revenue to fund
the
development of its planned product or to pay operating expenses. This has
resulted in the Company realizing a cumulative net loss of $4,387,840 for
the
period from inception (January 1, 2001) to March 31, 2007. The Company is
currently in default of its obligations under its Sponsored Research Agreement
(SRA), (Note 5) and its 8% unsecured debentures due December 31, 2007. 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 the proceeds from
exercise of stock warrants of up to $330,000 in 2007 and $70,000 in 2008.
Further, the Company has negotiated funding from Golden Gate Investors, Inc.
(see Notes 6 and 10) and is continuing to pursue additional capitalization
through Rule 144 stock sales, debentures, and other venture capital investments.
There is also the possibility of revenue in 2007 from sales and licensing
of the
Company’s products.
Note
2 - Summary of Significant Accounting Policies
Research
and development
Research
and development costs, including payments made to the University of Oklahoma
pursuant to the Sponsored Research Agreement (“SRA”), are expensed as incurred.
(Note 5)
Stock-based
compensation
The
Company accounts for stock-based compensation arrangements for employees
in
accordance with Statement of Accounting Standard (SFAS) No. 123(R), Share-Based
Payments. The
Company recognizes expenses for employee services received in exchange for
stock
based on the grant-date fair value of the shares awarded. The Company accounts
for stock issued to non-employees in accordance with the provisions of SFAS
No.
123, Accounting
for Stock-Based Compensation,
and the
related Emerging Issues Task Force (EITF) Consensuses.
F-8
Income
taxes
The
Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards (SFAS) No. 109, Accounting for Income
Taxes.
SFAS
No. 109
requires
the recognition of deferred tax assets and liabilities for the estimated
future
tax consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. In addition, SFAS
No. 109
requires
the recognition of future tax benefits, such as net operating loss
carryforwards, to the extent that realization of such benefits is more likely
than not. The amount of deferred tax liabilities or assets is calculated
using
tax rates in effect for the year in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rate is recognized in income in the period
that
includes
Note
2 - Summary of Significant Accounting Policies (continued)
the
enactment date. Valuation allowances are established when necessary to reduce
deferred tax assets to the amounts more likely than not to be
realized.
In
determining the quarterly provision for income taxes, the Company uses an
annual
effective tax rate based on expected annual income and statutory tax rates.
Significant discreet items are separately recognized in the income tax provision
in the quarter in which they occur.
Net
income (loss) per common share
The
Company computes net income (loss) per share in accordance with SFAS
No. 128,
Earnings
per Share
and
SEC
Staff Accounting Bulletin No. 98 (“SAB 98”).
Under
the provisions of SFAS
No. 128
and
SAB
98,
basic
net income (loss) per common share is based on the weighted-average outstanding
common shares. Diluted net income (loss) per common share is based on the
weighted-average outstanding shares adjusted for the dilutive effect of warrants
and options to purchase common stock and convertible debentures. Due to the
Company’s 1osses, such potential dilutive securities are antidilutive for all
periods presented. The number of additional shares that would be issued if
all
warrants, options and convertible debentures were exercised or converted
is
24,566,607and 20,280,000 at March 31, 2007 and 2006, respectively.
Use
of estimates
The
preparation of financial statements in conformity with U. S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues, expenses and
the
disclosure of contingent assets and liabilities. Actual results could differ
from the estimates and assumptions used.
Note
3 - Recent Accounting Pronouncements
The
following are summaries of recent accounting pronouncements that are relevant
to
the Company:
F-9
Note
3 - Recent Accounting Pronouncements (continued)
In
June 2006, the Financial Accounting Standards Board issued FASB
Interpretation No. 48,
Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement
No. 109 (FIN
48).
This interpretation clarifies the accounting for uncertainty in income taxes
recognized in an enterprise's
financial statements in accordance with FASB
Statement No. 109,
Accounting
for Income Taxes. FIN
48
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected
to be
taken in a tax return. It also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition. FIN 48 is effective for fiscal years beginning
after
December 15, 2006. The Company adopted FIN 48 beginning January 1, 2007, as
required, with no effect on its financial statements.
In
September 2006, the FASB issued SFAS
No. 157,
“Fair
Value Measurements ”
(SFAS 157). This statement defines fair value, establishes a framework for
measuring
fair value in GAAP, and expands disclosures about fair value measurements.
SFAS
157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007. The Company is currently evaluating the impact of
adopting SFAS 157 on its financial condition and results of operations.
In
February 2007, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities - including
an
amendment of FASB Statement No. 115. SFAS
No.
159 permits entities to choose to measure many financial instruments and
certain
other items at fair value. The objection of the statement is to provide entities
with the opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. SFAS No. 159 is effective as of the
beginning of an entity’s fiscal year beginning after November 15, 2007. SFAS No.
159 is not expected to significantly impact the Company’s financial
statements.
Note
4 - Fair Value of Financial Instruments
The
following methods and assumptions were used to estimate the fair value of
each
class of financial instrument held by the Company:
Current
assets and current liabilities
- The
carrying value approximates fair value due to the short maturity of these
items.
Debentures
payable
- The
fair value of the Company's debentures payable has been estimated by the
Company
based upon the liability’s characteristics, including interest rate. The
carrying value approximates fair value.
Note
5 - Commitments and Contingencies
On
April
20, 2004, the Company entered into a SRA entitled "Investigation of Emerging
Digital Holography Technologies" (Phase I) with the University of Oklahoma
-
Tulsa (“University”), which expired October 19, 2004. The Company paid the
University $14,116 pursuant to this agreement.
On July 15, 2005, the Company entered into a SRA with the University (Phase
II),
which expired January 14, 2007. Under this agreement the University conducted
a
research project entitled "Investigation of Emerging 3-Dimensional Display
Technologies" and the Company agreed to pay the University $453,584 at various
dates from November 10, 2005 through July 15, 2006 to cover the costs of
the
research. The final payment of $226,792, due on July 15, 2006, was not paid
and
the agreement was modified in November 2006 to provide $125,259 additional
funding, extend the term of the agreement through March 31, 2007, and revise
the
payment schedule to combine the July 15, 2006 remaining balance due of $226,792
with the additional funding into a revised payment schedule. Under the terms
of
the agreement the Company agreed to pay the combined remaining obligation
of
$352,052 in four equal installments of $88,013 on December 31, 2006 through
March 31, 2007. The Company has not paid the March 31, 2007 payment. On February
23, 2007 the Company entered into a SRA with the University (Phase III) which
expires March 31, 2010. Under this agreement the University
will conduct a research project entitled “3-Dimensional Display Development”
that seeks to make significant progress in the development of 3-dimensional
display technologies. The company will pay the University $3,468,595 payable
in
monthly installment ranging from $92,263 to $112,777 beginning April 30,
2007
and ending March 31, 2010.
F-10
Note
5 - Commitments and Contingencies
3DIcon
has a consulting agreement with Concordia Financial Group. Concordia counsels
3DIcon regarding financial matters and the acquisition of capital, including
rendering advice in the preparation of models for financial projections,
identification of sources for capital in the start-up phase technology company
capital market, development of business models, and assistance with the
structuring of transactions involving the raising of capital. For its services
under the agreement, in addition to cash compensation, Concordia will receive
options to purchase common stock. In January 2007, Concordia was issued options
to purchase 2,500,000 shares at $.05 per share. An additional 2,500,000 shares
could be granted by December 31, 2009. The options issued in 2007 were valued
at
$575,000 and were charged to operations in the first quarter.
At
March
31, 2007, 2,500,000 shares of common stock are held by a third party and
are in
dispute as to whether or not they are legally issued. Management contends
that
the shares were not legally issued and should be returned to the Company.
However, they are reported as issued and outstanding at par value in the
accompanying financial statements due to the uncertainty surrounding resolution
of the issue. The Company paid approximately $18,455 in legal fees for the
period ended March 31, 2007 related to this issue, which is included in general
and administrative expenses in the accompanying statement of
operations.
Note
6 - Debentures Payable
Debentures
payable consist of the following:
|
March
31, 2007
|
||||
|
Senior
Convertible Debentures:
|
||||
|
8.00%
Debentures due 2007
|
$
|
125,000
|
||
|
6.25%
Debentures due 2009
|
125,000
|
|||
|
4.75%
Debentures due 2011
|
100,000
|
|||
|
350,000
|
||||
|
8.00%
Unsecured Debentures due 2007
|
430,000
|
|||
|
Total
Debentures
|
780,000
|
|||
|
Less
- Current Maturities
|
(555,000
|
)
|
||
|
Long-term
Debentures
|
$
|
225,000
|
F-11
Note
6 - Debentures Payable
(continued)
Senior
debenture payable
The
Company issued convertible debentures aggregating $160,000 during 2005 and
issued an additional $125,000 during 2006 at par value for cash. The debentures
bear interest at 8% per annum, and are due no later than December 31, 2007.
The
Company may prepay without penalty all of the outstanding principal amount
and
accrued interest. Upon receiving notice of the Company's intent to prepay,
holders of the debentures may convert the principal amount due to common
stock
at the rate of one share of common stock for each $.05 of principal amount
converted. Upon conversion, the Company will pay all accrued interest. No
fractional shares will be issued upon conversion of a debenture. During the
three months ended 2007 and the year ended December 31,2006 debentures totaling
$10,000 and $150,000 were converted to 3,200,000 shares of common stock,
leaving
$125,000 principal balance outstanding.
Unsecured
debentures payable
During
the third quarter of 2006 the Company authorized the issuance of unsecured
convertible debentures aggregating $800,000. As of March 31, 2007 the Company
has issued $430,000 of these debentures at par value for cash. The debentures
bear interest at 8% per annum and are due no later than March 31, 2007. At
the
option of the Company, interest may be paid in cash or Common Stock, valued
at
the bid price on the day immediately prior to the date paid. The debentures
are
not secured by any asset or pledge of the Company or any officer, stockholder
or
director. The Company has agreed to provide, with respect to the common shares
issued upon conversion of the debentures, certain registration rights under
the
Securities Act of 1933. The Company is in default with respect to the unsecured
debentures.
F-12
Note
6 - Debentures Payable (continued)
As
a
result of the default, the debentures are due in cash on the demand of the
holders, but can be converted into common stock at a conversion price of
$0.05
at the request of the holders at anytime. Subsequent to March 31, 2007, $275,000
of debentures were converted into 5,500,000 shares.
Securities
Purchase Agreement
To
obtain
funding for the ongoing operations, the Company entered into a Securities
Purchase Agreement with Golden Gate Investors, Inc. (“Golden Gate”) on November
3, 2006, as amended on December 15, 2006 and February 6, 2007 (the “Purchase
Agreement”), for the sale of a 6¼% convertible debenture of the Company in
the principal amount of $1,250,000. Pursuant to the Purchase Agreement, at
such
time as the principal balance of this debenture is less than $400,000 as
a
result of conversion to common stock or payment, the Company shall have the
right to require Golden Gate to purchase a second debenture, also in the
principal amount of $1,250,000. On November 3, 2006, the Company also issued
to
Golden Gate a 4¾% convertible debenture in a principal amount of $100,000, due
2011, and warrants to buy 1,000,000 shares of the common stock at an exercise
price of $10.90 per share. The Company agreed to file a registration statement
with the SEC for the resale of the common stock underlying the initial $1.25
million convertible debenture only.
Golden
Gate provided the Company with $125,000 upon execution of the Purchase
Agreement. Pursuant to the Purchase Agreement, Golden Gate is required to
provide the Company with an additional $312,500 upon effectiveness of the
registration statement. The balance of $812,500 shall be wired to the escrow
agent, which is required to release $200,000 on the first day of each month,
beginning with the second month following the effective date of the registration
statement.
The
debentures bear interest at 6¼%, and are convertible into the Company’s
common stock, at the selling stockholder’s option. The $1.25 million
convertible debentures mature three years from the date of issuance. The
$100,000 convertible debenture matures five years from the date of issuance.
Interest on the 6¼% convertible debentures is payable monthly in cash or,
at Golden Gate’s option, in shares of common stock of the Company valued at the
then applicable conversion price. The initial $1.25 million convertible
debenture is convertible into the number of the shares of common stock equal
to
the dollar amount of the debenture divided by the conversion price. The
conversion price for the initial $1.25 million convertible debenture is (1)
$.35 per share until the common stock is quoted on the OTC Bulletin Board
or
otherwise trading on
the
NASDAQ or a national securities exchange and (2) thereafter the lesser of
(i)
$2.00 or (ii) 70% of the average of the five lowest volume weighted average
prices during the twenty (20) trading days prior to the conversion. The
conversion price for the second $1.25 million convertible debenture is (1)
$.35
per share until the common stock is quoted on the OTC Bulletin Board or
otherwise listed as trading on the NASDAQ or a national securities exchange
and
thereafter (2) the lesser of (i) $2.00 or (ii) 90% of the average of the
five
lowest volume weighted average prices during the twenty (20) trading days
prior
to the conversion. The conversion price for the $100,000 convertible debenture
is $.35 per share until the earlier of January 1, 2008 or the date the common
stock is quoted on the OTC Bulletin Board or otherwise listed as trading
on the
NASDAQ or a national securities exchange and thereafter, the lesser of (i)
$4.00
or (ii) 80% of the
average of the five lowest volume weighted average prices during the twenty
(20)
trading days prior to the conversion. If Golden Gate elects to convert a
portion
of the debenture and, on the day that the election is made, the volume weighted
average price is below $0.75, the Company shall have the right to prepay
that
portion of the debenture that Golden Gate elected to convert, plus any accrued
and unpaid interest, at 135% of such amount.
F-13
In
addition, the Company entered into a registration rights agreement with Golden
Gate pursuant to which the Company agreed to file a registration statement
of
which this prospectus is a part covering the common stock issuable upon
conversion of the initial $1.25 million debenture only. In the event the
Company
fails to meet this schedule and other timetables provided in the registration
rights agreement, liquidated damages and other potential penalties could
be
imposed (for example, the discount multiplier of 70% shall decrease by three
percentage points for each month or partial month occurring after the Company
fails to meet the timetables provided in the registration rights
agreement).
In
the
event the Company elects, and Golden Gate fails to enter into the second
debenture, Golden Gate would be required to pay liquidated damages in the
amount
of $250,000.
Note
7 - Note payable - related party
During
February and March of 2007, a shareholder whom is the Corporate Secretary
and
wife of the Chairman of the Company, advanced $192,500 to the Company under
a
one-year, 6% convertible debenture agreement. The principal is convertible
into
2,323,750 restricted shares of the company’s stock.
Note
8 - Common Stock and Paid-In Capital
At
various dates throughout 2006, 2005 and 2004, the Company sold 200,000,
1,100,000 and 360,000 shares, respectively, of common stock with warrants
attached for $.25 per share pursuant to an exempt offering. Each subscriber
received one share of common stock with two separate warrants to purchase
additional shares of Rule 144 stock as follows: (a) ten times the number
of
shares within one year of the date subscribed at $.025 per share and (b)
another
ten times the number of shares within two years of the date subscribed at
$.05
per share. Warrants not exercised under their terms will be terminated. The
Company received $50,000, $275,000 and $90,000, respectively, in cash.
F-14
Note
8- Common Stock and Paid-In Capital (continued)
At
various dates throughout 2006, 2005 and 2004, the Company issued 4,400,000,
1,740,000 and 340,000 shares, respectively, of its common stock pursuant
to the
exercise of $.05 warrants by non-employees. The Company received $220,000,
$86,000 and $17,000, respectively, in cash.
At
various dates throughout 2006, 2005 and 2004, the Company issued 8,020,000,
3,520,000 and 1,760,000, respectively, of its common stock pursuant to the
exercise of $.025 warrants by non-employees. The Company received $200,500,
$88,000 and $44,000, respectively, in cash.
As
of
March 31, 2007, there are warrants outstanding to purchase 6,600,000 shares
of
common stock at $.05 per share expiring at various dates remaining in 2007,
and
warrants outstanding to purchase 1,400,000 shares of common stock at $.05
per
share expiring at various dates throughout 2008.
Common
stock issued for services
During
the first quarter of 2006, 800,000 shares of common stock were issued for
consulting services for which the Company recognized $11,050 of
expense.
During
2005, 2,010,000 shares of common stock were issued for consulting services
for
which the Company recognized $2,469 of expense. During 2004, 3,376,000 shares
of
common stock were issued for services for consulting which the Company
recognized $26,829 of expenses. Additionally,
the Company issued 2,700,000, 7,880,000 and 1,980,000 shares of common stock
at
various dates throughout 2006, 2005 and 2004, respectively, to its President
and
Chief Executive Officer for services rendered. The Company issued 900,000,
960,000 and 1,660,000 shares at various dates throughout 2006, 2005 and 2004,
respectively, to its employee for services rendered. The shares are valued
using
the same discount structure as the other common stock transactions and ranged
from $.01 to $.09 during 2006, $.0004 to $.0074 during 2005 and $.002 to
$.014
during 2004. The Company recognized $191,100, $23,903 and $49,465 in
compensation expense in 2006, 2005 and 2004, respectively, related to these
transactions.
During
2004, the Company issued 25,000,000 additional founders shares due to the
reverse stock split in 2003 and the corporate reorganization that took place
during 2004. The shares were valued at par value.
The
shares issued were valued at the closing price of the stock on or previous
to
the date of issuance less a 50% discount due to the restrictive nature of
the
stock, a 50% discount for lack of earnings or sales consistency of the Company,
a 50% discount due to the dollar and share volume of sales of the Company's
securities in the public market, and an additional 35% discount due to the
trading market in which the Company's securities are sold.
Holders
of shares of common stock are entitled to one vote per share on all matters
submitted to a vote of the stockholders. Shares of common stock do not have
cumulative voting rights.
Holders
of record of shares of common stock are entitled to receive dividends when
and
if declared by the board of directors. To date, the Company has not paid
cash
dividends. The Company intends to retain any earnings for the operation and
expansion of its business and does not anticipate paying cash dividends in
the
foreseeable future. Any future determination as to the payment of cash dividends
will depend on future earnings, results of operations, capital requirements,
financial condition and such other factors as the board of directors may
consider.
F-15
Note
8- Common Stock and Paid-In Capital (continued)
Upon
any liquidation, dissolution or termination of the Company, holders of shares
of
common stock are entitled to receive a pro rata distribution of the assets
of
the Company after liabilities are paid.
Holders
of common stock do not have pre-emptive rights to subscribe for or to purchase
any stock, obligations or other securities of 3DIcon.
Note
9 - Income Taxes
At
March
31, 2007, the Company had accumulated net operating losses of approximately
$3,812,840 available to reduce future federal and state taxable income. Unless
utilized, the loss carry forward amounts will begin to expire in 2013.
The
operating loss carryforward, giving rise to deferred tax assets, are reduced
by
a valuation allowance. The Company has established a valuation allowance
for its
deferred tax assets due to the uncertainty of the future utilization of the
loss
carry forward.
The
deferred tax asset consisted of the following at March 31, 2007:
|
Loss
carry forward amount
|
$
|
4,387,840
|
||
|
Effective
tax rate
|
38
|
%
|
||
|
Deferred
tax asset
|
1,667,000
|
|||
|
Less
valuation allowance
|
(1,667,000
|
)
|
||
|
Deferred
tax asset
|
$
|
-
|
Note
10 - Subsequent Events
Options
Granted
On
April
27, 2007, the Company granted its three Directors 1,500,000 options exercisable
at $.40 per share.
Bridge
Financing
To
obtain
funding for ongoing operations, the Company entered into a Bridge Financing
Agreement with Golden Gate which closed on June 11, 2007 (the “Financing
Agreement”), for the sale of a 9.75% convertible debenture in the principal
amount of $700,000. Pursuant to the Financing Agreement, the Company agreed
to
file a registration statement with the SEC within three days of closing for
the
resale of the common stock underlying the initial $1.25 million convertible
debenture as discussed in Note 6.
F-16
Note
10 - Subsequent Events (continued)
The
debenture may be converted, at Golden Gate’s option, in whole or in part, into
restricted shares of the Company’s common stock. The conversion price will be
$0.28 until the earlier of, the Company’s shares trading on the OTC Bulletin
Board or other trading market that the SEC recognizes as a trading market
, or
January 1,2008. Subsequently, the conversion price is equal to 72% of the
average of the five lowest volume weighted average prices for the common
stock
for the 20 trading days prior to the conversion date. The convertible debenture
matures June 11, 2007; subject to an option held by Golden Gate to extend
the
maturity for one period of six months. Interest on the convertible debenture
is
payable monthly in cash.
In
addition to standard default provisions concerning timeliness of payments,
delivery and notifications, the following events shall accelerate the maturity
date of the Debenture, and all outstanding principal and accrued and unpaid
interest along with $250,000 in liquidated damages, all becoming immediately
due
and payable:
|
1.
|
The
Registration Statement for the November 3, 2006 6 ¼ % Debentures with
Golden Gate and the November 3, 2006 $100,000 Debenture with Golden
Gate
is not filed within 3 days of the closing of this transaction;
and is not
effective by September 14, 2007.
|
|
2.
|
The
common stock of the Company trades at a price per share of $0.21
or lower,
regardless of whether the trading price subsequently is higher
than $0.21
per share; or
|
|
3.
|
Any
scheduled monthly payment of interest under the Debenture is more
than one
day late.
|
The
Debenture shall be secured by the pledge of 11 million shares of common stock
held by affiliates in the Company (the “Pledged Shares”). Such shares shall have
been held by the Pledgors for a period of not less than two years. In the
event
of a default and the Company has not repaid all outstanding principal and
accrued and unpaid interest, along with the liquidated damages of $250,000
within one day of default, Golden Gate shall have the right to immediately
sell
the Pledged Shares in satisfaction of any amounts of principal and interest
owing under the Debenture. Golden Gate shall only sell such amount of Pledged
Shares to satisfy any principal and accrued interest, along with $250,000
in
liquidated damages and shall return unsold shares to the Pledgors.
F-17
3DIcon
CORPORATION
(A
Development Stage Company)
December
31, 2006 and 2005
CONTENTS
|
Report
of Independent Registered Public Accounting Firm
|
F-19
|
|||
|
Balance
Sheet as of December 31, 2006 and 2005
|
F-20
|
|||
|
Statements
of Operations for the years ended December 31, 2006 and 2005
and period
from
|
||||
|
inception
(January 1, 2001) to December 31, 2006
|
F-21
|
|||
|
Statements
of Changes in Stockholders’ Deficiency for period from Inception (January
1, 2001)
|
||||
|
to
December 31, 2006
|
F-22
|
|||
|
Statements
of Cash Flows for the years ended December 31, 2006 and 2005
and for
period from
|
||||
|
inception
(January 1, 2001) to December 31, 2006
|
F-24
|
|||
|
Notes
to Financial Statements, December 31, 2006 and 2005 and for period
from
inception
|
||||
|
(January
1, 2001) to December 31, 2006
|
F-25
|
F-18
2424 E 21st Street, suite 200
Tulsa,
OK 74114-1736
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of
3DIcon
Corporation
We
have audited the accompanying balance sheets of 3DIcon Corporation (a
Development Stage Company) as of December 3 1, 2006 and 2005, and the
related
statements of operations, changes in stockholders' deficiency and cash
flows for
the years then ended and for the period from inception (January 1, 2001)
to
December 31, 2006. These financial statements are the responsibility
of the
Company's management. Our responsibility is to express an opinion on
these
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audit to obtain reasonable assurance about whether the
financial
statements are free of material misstatement. An
audit
includes examining, on a test basis, evidence supporting the amounts
and
disclosures in the financial statements. An audit also includes assessing
the
accounting principles used and significant estimates made by management,
as well
as evaluating the overall financial statement presentation. We believe
that our
audits provide a reasonable basis for our opinion.
In
our opinion, the financial statements referred to above present fairly,
in all
material respects, the financial position of 3DIcon Corporation, as of
December
3 1,2006 and 2005, and the results of its operations and its cash flows
for the
years then ended and for the period from inception (January 1, 2001)
to December
3 1, 2006, in conformity with accounting principles generally accepted
in the
United States of America.
The
accompanying financial statements have been prepared assuming that the
Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company is a development stage organization, having no
revenues
and insufficient capital commitments to fund the development of its planned
products. This raises substantial doubt about the Company's ability to
continue
as a going concern. Management's plan in regard to these matters is also
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
April
27,2007
F-19
3DIcon
CORPORATION
(A
Development Stage Company)
BALANCE
SHEETS
December
31, 2006 and 2005
|
2006
|
|
2005
|
|||||
|
Assets
|
|||||||
|
Current
assets:
|
|||||||
|
Cash
|
$
|
202,431
|
$
|
147,371
|
|||
|
Prepaid
expenses
|
-
|
3,450
|
|||||
|
Net
property and equipment
|
4,810
|
- | |||||
|
Debt
issue costs, net
|
104,596
|
- | |||||
|
Total
assets
|
$
|
311,837
|
$
|
150,821
|
|||
|
Liabilities
and Stockholders' Deficiency
|
|||||||
|
Current
liabilities:
|
|||||||
|
Current
maturities of convertible debentures payable
|
$
|
565,000
|
$
|
-
|
|||
|
Accounts
payable
|
378,007
|
213,696
|
|||||
|
Accrued
compensation due founder
|
-
|
164,022
|
|||||
|
Accrued
interest on debentures
|
25,578
|
- | |||||
|
Total
current liabilities
|
968,585
|
377,718
|
|||||
|
Convertible
debentures payable, less current maturities
|
225,000
|
160,000
|
|||||
|
Total
liabilities
|
1,193,585
|
537,718
|
|||||
|
Stockholders'
deficiency:
|
|||||||
|
Common
stock; $.0002 par, 250,000,000 shares authorized and
|
|||||||
|
98,327,656
and 73,947,656 shares issued and outstanding at
|
|||||||
|
December
31, 2006 and 2005, respectively
|
19,666
|
14,789
|
|||||
|
Additional
paid-in capital
|
2,568,119
|
1,597,959
|
|||||
|
Deficit
accumulated during development stage
|
(3,469,533
|
)
|
(1,999,645
|
)
|
|||
|
Total
stockholders' deficiency
|
(881,748
|
)
|
(386,897
|
)
|
|||
|
Total
liabilities and stockholders' deficiency
|
$
|
311,837
|
$
|
150,821
|
|||
See
notes to financial statements
F-20
3DIcon
CORPORATION
(A
Development Stage Company)
STATEMENTS
OF OPERATIONS
Years
ended December 31, 2006 and 2005
And
period from Inception (January 1, 2001) to December 31, 2006
|
|
Inception
to
|
|||||||||
|
December
31,
|
||||||||||
|
2006
|
2005
|
2006
|
||||||||
|
Income:
|
||||||||||
|
Sales
|
$
|
-
|
$
|
-
|
$
|
-
|
||||
|
Expenses:
|
||||||||||
|
Research
and development
|
247,687
|
227,042
|
488,871
|
|||||||
|
General
and administrative
|
1,191,683
|
365,769
|
2,950,144
|
|||||||
|
Interest
|
30,518
|
-
|
30,518
|
|||||||
|
Total
expenses
|
1,469,888
|
592,811
|
3,469,533
|
|||||||
|
Net
loss
|
$
|
(1,469,888
|
)
|
$
|
(592,811
|
)
|
$
|
(3,469,533
|
)
|
|
|
Loss
per share:
|
||||||||||
|
Basic
and diluted
|
$
|
(.017
|
)
|
$
|
(.009
|
)
|
||||
|
Weighted
average shares outstanding,
|
||||||||||
|
basic
and diluted
|
88,297,738
|
63,134,905
|
||||||||
See
notes to financial statements
F-21
3DIcon
CORPORATION
(A
Development Stage Company)
STATEMENTS
OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
Period
from Inception (January 1, 2001) to December 31, 2006
|
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
|
|||||||
|
Adjustment
to accrue compensation
|
||||||||||||||||
|
earned
but not recorded
|
-
|
-
|
-
|
(60,000
|
)
|
(60,000
|
)
|
|||||||||
|
Stock
issued for services
|
2,681,310
|
2,681
|
185,450
|
-
|
188,131
|
|||||||||||
|
Stock
issued for cash
|
728,500
|
729
|
72,121
|
-
|
72,850
|
|||||||||||
|
Net
loss for the year
|
-
|
-
|
-
|
(259,221
|
)
|
(259,221
|
)
|
|||||||||
|
Balance,
December 31, 2001
|
31,133,560
|
31,134
|
451,059
|
(319,221
|
)
|
162,972
|
||||||||||
|
Adjustment
to record compensation
|
||||||||||||||||
|
earned
but not recorded
|
-
|
-
|
-
|
(60,000
|
)
|
(60,000
|
)
|
|||||||||
|
Stock
issued for services
|
3,077,000
|
3,077
|
126,371
|
-
|
129,448
|
|||||||||||
|
Stock
issued for cash
|
1,479,000
|
1,479
|
146,421
|
-
|
147,900
|
|||||||||||
|
Net
loss for the year
|
-
|
-
|
-
|
(267,887
|
)
|
(267,887
|
)
|
|||||||||
|
Balance,
December 31, 2002
|
35,689,560
|
35,690
|
723,851
|
(647,108
|
)
|
112,433
|
||||||||||
|
Adjustment
to record compensation
|
||||||||||||||||
|
earned
but not recorded
|
-
|
-
|
-
|
(90,000
|
)
|
(90,000
|
)
|
|||||||||
|
Stock
issued for services
|
15,347,000
|
15,347
|
-
|
-
|
15,347
|
|||||||||||
|
Stock
issued for cash
|
1,380,000
|
1,380
|
33,620
|
-
|
35,000
|
|||||||||||
|
Reverse
split 1:10
|
(47,174,904
|
)
|
-
|
-
|
-
|
-
|
||||||||||
|
Par
value $0.0001 to $0.0002
|
-
|
(51,369
|
)
|
51,369
|
-
|
-
|
||||||||||
|
Net
loss for the year
|
-
|
-
|
-
|
(51,851
|
)
|
(51,851
|
)
|
|||||||||
|
Balance,
December 31, 2003
|
5,241,656
|
1,048
|
808,840
|
(788,959
|
)
|
20,929
|
||||||||||
|
Additional
Founders shares issued
|
25,000,000
|
5,000
|
(5,000
|
)
|
-
|
-
|
||||||||||
|
Stock
issued for services
|
24,036,000
|
4,807
|
71,682
|
-
|
76,489
|
|||||||||||
|
Stock
issued for cash
|
360,000
|
72
|
28,736
|
-
|
28,808
|
|||||||||||
|
Warrants
issued to purchase common
|
||||||||||||||||
|
stock
at $.025
|
-
|
-
|
18,900
|
-
|
18,900
|
|||||||||||
|
Warrants
issued to purchase common
|
||||||||||||||||
|
stock
at $.05
|
-
|
-
|
42,292
|
-
|
42,292
|
|||||||||||
|
Stock
warrants exercised
|
2,100,000
|
420
|
60,580
|
-
|
61,000
|
|||||||||||
|
Net
loss for the year
|
-
|
-
|
-
|
(617,875
|
)
|
(617,875
|
)
|
|||||||||
|
Balance,
December 31, 2004
|
56,737,656
|
11,347
|
1,026,030
|
(1,406,834
|
)
|
(369,457
|
)
|
|||||||||
|
Stock
issued for services
|
5,850,000
|
1,170
|
25,201
|
-
|
26,371
|
|||||||||||
|
Stock
issued to settle liabilities
|
5,000,000
|
1,000
|
99,000
|
-
|
100,000
|
|||||||||||
|
Stock
issued for cash
|
1,100,000
|
220
|
72,080
|
-
|
72,300
|
|||||||||||
|
Warrants
issued to purchase common
|
||||||||||||||||
|
stock
at $.025
|
-
|
-
|
62,300
|
-
|
62,300
|
|||||||||||
|
Warrants
issued to purchase common
|
||||||||||||||||
|
stock
at $.05
|
-
|
-
|
140,400
|
-
|
140,400
|
|||||||||||
|
Stock
warrants exercised
|
5,260,000
|
1,052
|
172,948
|
-
|
174,000
|
|||||||||||
|
Net
loss for the year
|
-
|
-
|
-
|
(592,811
|
)
|
(592,811
|
)
|
|||||||||
|
Balance,
December 31, 2005
|
73,947,656
|
$
|
14,789
|
$
|
1,597,959
|
$
|
(1,999,645
|
)
|
$
|
(386,897
|
)
|
|||||
See
notes to financial statements
F-22
3DIcon
CORPORATION
(A
Development Stage Company)
STATEMENTS
OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
Period
from Inception (January 1, 2001) to December 31, 2006
|
Deficit
|
||||||||||||||||
|
Accumulated
|
||||||||||||||||
|
Common
|
Stock
|
Additional
|
During
the
|
|||||||||||||
|
Paid-In
|
Development
|
|||||||||||||||
|
Shares
|
Par
Value
|
Capital
|
Stage
|
Total
|
||||||||||||
|
Stock
issued for services
|
4,700,000
|
940
|
205,597
|
-
|
206,537
|
|||||||||||
|
Debentures
converted
|
3,000,000
|
600
|
149,400
|
-
|
150,000
|
|||||||||||
|
Stock
issued for cash
|
200,000
|
40
|
16,160
|
-
|
16,200
|
|||||||||||
|
Warrants
issued to purchase
|
||||||||||||||||
|
common
stock at $.025
|
-
|
-
|
18,400
|
-
|
18,400
|
|||||||||||
|
Warrants
issued to purchase
|
||||||||||||||||
|
common
stock at $.05
|
-
|
-
|
15,400
|
-
|
15,400
|
|||||||||||
|
Warrants
converted to purchase
|
||||||||||||||||
|
common
stock at $.025
|
10,220,000
|
2,045
|
253,455
|
-
|
255,500
|
|||||||||||
|
Warrants
converted to purchase
|
||||||||||||||||
|
common
stock at $.05
|
6,260,000
|
1,252
|
311,748
|
-
|
313,000
|
|||||||||||
|
Net
loss for the year
|
-
|
-
|
-
|
(1,469,888
|
)
|
(1,469,888
|
)
|
|||||||||
|
Balance,
December 31, 2006
|
98,327,656
|
$
|
19,666
|
$
|
2,568,119
|
$
|
(3,469,533
|
)
|
$
|
(881,748
|
)
|
|||||
See
notes to financial statements
F-23
3DIcon
CORPORATION
(A
Development Stage Company)
STATEMENTS
OF CASH FLOWS
Years
ended December 31, 2006 and 2005
and
period from Inception (January 1, 2001) to December 31, 2006
|
Inception
to
|
||||||||||
|
December
31,
|
||||||||||
|
2006
|
|
2005
|
2006
|
|||||||
|
Cash
Flows from Operating Activities
|
||||||||||
|
Net
loss
|
$
|
(1,469,888
|
)
|
$
|
(592,811
|
)
|
$
|
(3,469,533
|
)
|
|
|
Adjustments
to reconcile net loss to net cash
|
||||||||||
|
used
in operating activities:
|
||||||||||
|
Stock
issued for services
|
206,537
|
26,371
|
642,323
|
|||||||
|
Depreciation
|
352
|
-
|
352
|
|||||||
|
Asset
impairments
|
-
|
-
|
292,203
|
|||||||
|
Change
in:
|
||||||||||
|
Prepaid
expenses and other assets
|
(101,146
|
)
|
(3,450
|
)
|
(104,596
|
)
|
||||
|
Accounts
payable and accrued
|
||||||||||
|
liabilities
|
25,867
|
100,759
|
432,584
|
|||||||
|
Net
cash used in operating activities
|
(1,338,278
|
)
|
(469,131
|
)
|
(2,206,667
|
)
|
||||
|
Cash
Flows from Investing Activities
|
||||||||||
|
Purchase
of office furniture and equipment
|
(5,162
|
)
|
-
|
(5,162
|
)
|
|||||
|
Net
cash used in investing activities
|
(5,162
|
)
|
-
|
(5,162
|
)
|
|||||
|
Cash
Flows from Financing Activities
|
||||||||||
|
Proceeds
from stock and warrant sales and
|
||||||||||
|
exercise
of warrants
|
618,500
|
449,000
|
1,474,250
|
|||||||
|
Proceeds
from issuance of debentures
|
780,000
|
160,000
|
940,000
|
|||||||
|
Net
cash provided by financing activities
|
1,398,500
|
609,000
|
2,414,250
|
|||||||
|
Net
increase in cash
|
55,060
|
139,869
|
202,421
|
|||||||
|
Cash,
beginning of year
|
147,371
|
7,502
|
10
|
|||||||
|
Cash,
end of year
|
$
|
202,431
|
$
|
147,371
|
$
|
202,431
|
||||
|
Supplemental
Disclosures
|
||||||||||
|
Non-Cash
Investing and Financing Activities
|
||||||||||
|
Conversion
of debentures to
|
||||||||||
|
common
stock
|
$
|
150,000
|
-
|
$
|
150,000
|
|||||
See
notes to financial statements
F-24
3DIcon
CORPORATION
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
December
31, 2006 and 2005 and period from inception
(January
1, 2001) to December 31, 2006
Note
1 - Organization and Operations
Organization
3DIcon
Corporation (the “Company”) was incorporated on August 11, 1995, under the laws
of the State of Oklahoma as First Keating Corporation. The articles of
incorporation were amended August 1, 2003 to change the name to 3DIcon
Corporation. The initial focus of First Keating Corporation was to market
and
distribute books written by its founder, Martin Keating. During 2001, First
Keating Corporation began to focus on the development of 360-degree holographic
technology. The effective date of this transition is January 1, 2001, and
the
financial information presented is from that date through the current period.
The Company has accounted for this transition as a reorganization and
accordingly, restated its capital accounts as of January 1, 2001. From
January
1, 2001, the Company's primary activity has been the raising of capital
in order
to pursue its goal of becoming a significant participant in the formation
and
commercialization of interactive, optical holography for the communications
and
entertainment industries.
The
mission of the Company is to pursue, develop and market full-color, 360-degree
person-to-person holographic technology. Its primary focus is to invest
and
participate in the commercialization of optical holographic technologies
now
planned and/or under development, particularly those employing derivative
broadband, satellite-based systems. At this time, the Company owns no
intellectual property rights in holographic technologies and has no contracts
or
agreements pending to acquire such rights.
Uncertainties
The
accompanying financial statements have been prepared on a going concern
basis.
The Company is in the development stage and has no source of revenue to
fund the
development of its planned product or to pay operating expenses. This has
resulted in the Company realizing a cumulative net loss of $3,469,533 for
the
period from inception (January 1, 2001) to December 31, 2006, and a net
loss of
$1,469,888 and $592,811 for the years ended December 31, 2006 and 2005,
respectively. The Company is currently in default of its obligations under
its
Sponsored Research Agreement (SRA) (Note 4) and its 8% unsecured debentures
due
2007. 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.
F-25
Note
1 - Organization and Operations (continued)
Uncertainties
(continued)
Management
plans to fund the future operations of the Company with the proceeds from
exercise of stock warrants of up to $424,000 in 2007 and $80,000 in 2008.
Further, the Company has negotiated funding from Golden Gate Investors,
Inc.
(see Note 5) and is continuing to pursue additional capitalization through
Rule
144 stock sales, debentures, and other venture capital investments. There
is
also the possibility of revenue in 2007 from sales and licensing of the
Company’s products.
Note
2 - Summary of Significant Accounting Policies
Research
and development
Research
and development costs, including payments made to the University of Oklahoma
pursuant to the SRA, are expensed as incurred. (Note 4).
Stock-based
compensation
The
Company accounts for stock-based compensation arrangements for employees
in
accordance with Statement
of Financial Accounting Standards (SFAS) No. 123(R),
Share-Based
Payments. The
Company recognizes expenses for employee services received in exchange
for stock
based on the grant-date fair value of the shares awarded. The Company accounts
for stock issued to non-employees in accordance with the provisions of
SFAS
No. 123,
Accounting
for Stock-Based Compensation,
and the related Emerging Issues Task Force (EITF) Consensuses.
Income
taxes
The
Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards (SFAS) No. 109, Accounting for Income
Taxes.
SFAS
No. 109
requires the recognition of deferred tax assets and liabilities for the
estimated future tax consequences attributable to temporary differences
between
the financial statement carrying amounts of existing assets and liabilities
and
their respective tax bases. In addition, SFAS
No. 109
requires the recognition of future tax benefits, such as net operating
loss
carry forwards, to the extent that realization of such benefits is more
likely
than not. The amount of deferred tax liabilities or assets is calculated
using
tax rates in effect for the year in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets
and
liabilities of a change in tax rate is recognized in income in the period
that
includes the enactment date. Valuation allowances are established when
necessary
to reduce deferred tax assets to the amounts more likely than not to be
realized.
F-26
Note
2 - Summary of Significant Accounting Policies
Net
income (loss) per common share
The
Company computes net income (loss) per share in accordance with SFAS
No. 128,
Earnings
per Share
and SEC
Staff Accounting Bulletin No. 98 (“SAB 98”). Under
the provisions of SFAS
No. 128
and SAB
98,
basic net income (loss) per common share is based on the weighted-average
outstanding common shares. Diluted net income (loss) per common share is
based
on the weighted-average outstanding shares adjusted for the dilutive effect
of
warrants to purchase common stock and convertible debentures. Due to the
Company’s losses, such potentially dilutive securities are anti dilutive for all
periods presented. The weighted average number of potentially dilutive
shares is
14,705,000 and 26,140,000 for the years ended December 31, 2006 and 2005,
respectively.
Use
of estimates
The
preparation of financial statements in conformity with U. S. generally
accepted
accounting principles requires management to make estimates and assumptions
that
affect the reported amounts of assets, liabilities, revenues, expenses
and the
disclosure of contingent assets and liabilities. Actual results could differ
from the estimates and assumptions used.
Note
3 - Recent Accounting Pronouncements
The
following are summaries of recent accounting pronouncements that are relevant
to
the Company:
In
May 2005, the Financial Accounting Standards Board issued Statement of
Financial
Accounting Standards No. 154, Accounting
Changes and Error Corrections (SFAS 154),
which replaces APB Opinion No. 20, Accounting
Changes,
and FASB Statement 3, Reporting
Accounting Changes in Interim Financial Statements.
This statement changes the requirements for the accounting for and reporting
of
a change in accounting principle, including all voluntary changes in accounting
principles. It also applies to changes required by an accounting pronouncement
in the unusual instance that the pronouncement does not include specific
transition provisions. This statement requires voluntary changes in accounting
principles be recognized retrospectively to prior periods' financial statements,
rather than recognition in the net income of the current period. Retrospective
application requires restatements of prior period financial statements
as if
that accounting principle had always been used. This statement carries
forward,
without change, the guidance contained in Opinion 20 for reporting the
correction of an error in previously issued financial statements and a
change in
accounting estimate. The provisions of SFAS
No. 154
is beginning January 1, 2006. It had no effect on the accompanying financial
statements.
F-27
Note
3 - Recent Accounting Pronouncements (continued)
In
June 2006, the Financial Accounting Standards Board issued FASB
Interpretation No. 48,
Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement No.
109
(FIN
48). This interpretation clarifies the accounting for uncertainty in income
taxes recognized in an enterprise's financial statements in accordance
with
FASB
Statement No. 109,
Accounting
for Income Taxes. FIN
48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken
or
expected to be taken in a tax return. It also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. FIN 48 is effective for fiscal years
beginning after December 15, 2006. The Company does not expect the adoption
of
FIN 48 to have a material effect on its financial statements and related
disclosures.
In
September 2006, the FASB issued SFAS
No. 157,
“Fair
Value Measurements ”
(SFAS 157). This statement defines fair value, establishes a framework
for
measuring fair value in GAAP, and expands disclosures about fair value
measurements. SFAS 157 is effective for financial statements issued for
fiscal
years beginning after November 15, 2007. The Company is currently evaluating
the
impact of adopting SFAS 157 on our financial condition and results of
operations.
In
February 2007, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities - including
an
amendment of FASB Statement No. 115. SFAS
No. 159 permits entities to choose to measure many financial instruments
and
certain other items at fair value. The objection of the statement is to
provide
entities with the opportunity to mitigate volatility in reported earnings
caused
by measuring related assets and liabilities differently without having
to apply
complex hedge accounting provisions. SFAS No. 159 is effective as of the
beginning of an entity’s fiscal year beginning after November 15, 2007. SFAS No.
159 is not expected to significantly impact the Company’s Consolidated Financial
Statements.
Note
4 - Commitments and Contingencies
On
April 20, 2004, the Company entered into a SRA entitled "Investigation
of
Emerging Digital Holography Technologies" (Phase I) with the University
of
Oklahoma - Tulsa (“University”), which expired October 19, 2004. The Company
paid the University $14,116 pursuant to this agreement. On July 15, 2005,
the
Company entered into a SRA with the University (Phase II), which expires
January
14, 2007. Under this agreement the University conducted a research project
entitled "Investigation of Emerging 3-Dimensional Display Technologies"
and the
Company agreed to pay the University $453,584 at various dates from November
10,
2005 through July 15, 2006 to cover the costs of the research. The final
payment
of $226,792, due on July 15, 2006, was not paid and the agreement was modified
in November 2006 to provide $125,259 additional funding, extend the term
of the
agreement through March 31, 2007, and revise the payment schedule to combine
the
July 15, 2006 remaining balance due of $226,792 with the additional funding
into
a revised payment schedule. Under the terms of the agreement the Company
agreed
to pay the combined remaining obligation of $352,052 in four equal installments
of $88,013 on December 31, 2006 through March 31, 2007. The Company is
in
default on its March 31, 2007 payment. On February 23, 2007 the Company
entered
into a SRA with the University (Phase III) which expires March 31, 2010.
Under
this agreement the University will conduct a research project entitled
“3-Dimensional Display Development” that seeks to make significant progress in
the development of 3-dimensional display technologies. The company will
pay the
University $3,468,595 payable in monthly installment ranging from $92,263
to
$112,777 beginning April 30, 2007 and ending March 31, 2010.
F-28
Note
4 - Commitments and Contingencies (continued)
3DIcon
has a consulting agreement with Concordia Financial Group. Concordia counsels
3DIcon regarding financial matters and the acquisition of capital, including
rendering advice in the preparation of models for financial projections,
identification of sources for capital in the start-up phase technology
company
capital market, development of business models, and assistance with the
structuring of transactions involving the raising of capital. 3DIcon pays
a
monthly fee for Concordia’s services of approximately $2,000 per month. 3DIcon
paid Concordia approximately $54,000 for the year ended December 31, 2006.
At
December 31, 2006 and 2005, 17,000,000 shares of common stock are held
by a
third party and are in dispute as to whether or not they are legally issued.
Management contends that the shares were not legally issued and should
be
returned to the Company. However, they are reported as issued and outstanding
at
par value in the accompanying financial statements due to the uncertainty
surrounding resolution of the issue. The Company paid approximately $255,000
in
legal fees for the year ended December 31, 2006 related to this issue,
which is
included in general and administrative expenses in the accompanying statement
of
operations.
Note
5 - Debentures Payable
Debentures
payable consist of the following:
|
December
31,
|
December
31,
|
||||||
|
2006
|
2005
|
||||||
|
Senior
Convertible Debentures:
|
|||||||
|
8.00%
Debentures due 2007
|
$
|
135,000
|
$
|
160,000
|
|||
|
6.25%
Debentures due 2009
|
125,000
|
-
|
|||||
|
4.75%
Debentures due 2011
|
100,000
|
-
|
|||||
|
360,000
|
160,000
|
||||||
|
8.00%
Unsecured Debentures due 2007
|
430,000
|
-
|
|||||
|
Total
Debentures at December 31
|
790,000
|
160,000
|
|||||
|
Current
Maturities
|
(565,000
|
)
|
-
|
||||
|
Long-term
Debentures at
|
|||||||
|
December
31
|
$
|
225,000
|
$
|
160,000
|
|||
F-29
Note
5 - Debentures Payable (continued)
Senior
debenture payable
The
Company issued convertible debentures aggregating $160,000 during 2005
and
issued an additional $125,000 during 2006 at par value for cash. The debentures
bear interest at 8% per annum, and are due no later than December 31, 2007.
The
Company may prepay without penalty all of the outstanding principal amount
and
accrued interest. Upon receiving notice of the Company's intent to prepay,
holders of the debentures may convert the principal amount due to common
stock
at the rate of one share of common stock for each $.05 of principal amount
converted. Upon conversion, the Company will pay all accrued interest.
No
fractional shares will be issued upon conversion of a debenture. During
2006
debentures totaling $150,000 were converted to 3,000,000 shares of common
stock.
Unsecured
debentures payable
During
the third quarter of 2006 the Company authorized the issuance of unsecured
convertible debentures aggregating $800,000. As of December 31, 2006 the
Company
has issued $430,000 of these debentures at par value for cash. The debentures
bear interest at 8% per annum, are convertible to common shares at $0.40
per
share and are due no later than March 31, 2007. At the option of the Company,
interest may be paid in cash or Common Stock, valued at the bid price on
the day
immediately prior to the date paid. The debentures are not secured by any
asset
or pledge of the Company or any officer, stockholder or director. The Company
has agreed to provide, with respect to the common shares issued upon conversion
of the debentures, certain registration rights under the Securities Act
of 1933.
At December 31, 2006 the balance outstanding of $430,000 in unsecured debentures
payable may be converted to 1,075,000 shares of the Company’s common stock. The
Company is in default with respect to the unsecured debentures. As a result
of
the default, the debentures are due in cash on the demand of the holders,
but
can be converted into common stock at a conversion price of $0.05 at the
request
of the holders at anytime.
Securities
Purchase Agreement
To
obtain funding for the ongoing operations, the Company entered into a Securities
Purchase Agreement with Golden Gate Investors, Inc. (“Golden Gate”) on November
3, 2006, as amended on December 15, 2006 and February 6, 2007 (the “Purchase
Agreement”), for the sale of a 6¼% convertible debenture of the Company in the
principal amount of $1,250,000. Pursuant to the Purchase Agreement, at
such time
as the principal balance of this debenture is less than $400,000 as a result
of
conversion to common stock or payment, the Company shall have the right
to
require Golden Gate to purchase a second debenture, also in the principal
amount
of $1,250,000. On November 3, 2006, the Company also issued to Golden Gate
a 4¾%
convertible debenture in a principal amount of $100,000, due 2011, and
warrants
to buy 1,000,000 shares of the common stock at an exercise price of $10.90.
The
Company agreed to file a registration statement with the SEC for the resale
of
the common stock underlying the initial $1.25 million convertible debenture
only.
F-30
Note
5 - Debentures Payable (continued)
Golden
Gate provided the Company with $125,000 upon execution of the Purchase
Agreement. Pursuant to the Purchase Agreement, Golden Gate is required
to
provide the Company with an additional $312,500 upon effectiveness of the
registration statement. The balance of $812,500 shall be wired to the escrow
agent, which is required to release $200,000 on the first day of each month,
beginning with the second month following the effective date of the registration
statement.
The
debentures bear interest at 6%, and are convertible into the Company’s common
stock, at the selling stockholder’s option. The $1.25 million convertible
debentures mature three years from the date of issuance. The $100,000
convertible debenture matures five years from the date of issuance. Interest
on
the 6% convertible debentures is payable monthly in cash or, at Golden
Gate’s
option, in shares of common stock of the Company valued at the then applicable
conversion price. The initial $1.25 million convertible debenture is convertible
into the number of the shares of common stock equal to the dollar amount
of the
debenture divided by the conversion price. The conversion price for the
initial
$1.25 million convertible debenture is (1) $.35 per share until the common
stock
is quoted on the OTC Bulletin Board or otherwise trading on the NASDAQ
or a
national securities exchange and (2) thereafter the lesser of (i) $2.00,
(ii)
70% of the average of the five lowest volume weighted average prices during
the
twenty (20) trading days prior to the conversion. The conversion price
for the
second $1.25 million convertible debenture is (1) $.35 per share until
the
common stock is quoted on the OTC Bulletin Board or otherwise listed as
trading
on the NASDAQ or a national securities exchange and thereafter (2) the
lesser of
(i) $2.00 or (ii) 90% of the average of the five lowest volume weighted
average
prices during the twenty (20) trading days prior to the conversion. The
conversion price for the $100,000 convertible debenture is $.35 per share
until
the earlier of January 1, 2008 or the date the common stock is quoted on
the OTC
Bulletin Board or otherwise listed as trading on the NASDAQ or a national
securities exchange and thereafter, the lesser of (i) $4.00 or (ii) 80%
of the
average of the five lowest volume weighted average prices during the twenty
(20)
trading days prior to the conversion. If Golden Gate elects to convert
a portion
of the debenture and, on the day that the election is made, the volume
weighted
average price is below $0.75, the Company shall have the right to prepay
that
portion of the debenture that Golden Gate elected to convert, plus any
accrued
and unpaid interest, at 135% of such amount.
In
addition, the Company entered into a registration rights agreement with
Golden
Gate pursuant to which the Company agreed to file, within 30 days after
the
closing, the registration statement of which this prospectus is a part
covering
the common stock issuable upon conversion of the initial $1.25 million
debenture
only. In the event the Company fails to meet this schedule and other timetables
provided in the registration rights agreement, liquidated damages and other
potential penalties could be imposed (for example, the discount multiplier
of
70% shall decrease by three percentage points for each month or partial
month
occurring after the Company fails to meet the timetables provided in the
registration rights agreement).
F-31
Note
5 - Debentures Payable (continued)
In
addition, Golden Gate may demand repayment of one hundred and fifteen percent
(115%) of the principal amount of the debenture, together with all accrued
and
unpaid interest on the principal amount of the debenture, in cash, if the
Company fails to meet the timetables provided in the registration rights
agreement.
In
the event the Company elects, and Golden Gate fails to enter into the second
debenture, Golden Gate would be required to pay liquidated damages in the
amount
of $250,000.
Note
6 - Common Stock and Paid-In Capital
At
various dates throughout 2006 and 2005, the Company sold 200,000 and 1,100,000
shares, respectively, of common stock with warrants attached for $.25 per
share
pursuant to an exempt offering. Each subscriber received one share of common
stock with two separate warrants to purchase additional shares of Rule
144 stock
as follows: (a) ten times the number of shares within one year of the date
subscribed at $.025 per share and (b) another ten times the number of shares
within two years of the date subscribed at $.05 per share. Warrants not
exercised under their terms will be terminated. The Company received $50,000
and
$275,000, respectively, in cash from the exercise of the warrants.
At
various dates throughout 2006 and 2005, the Company issued 6,260,000 and
1,740,000 shares, respectively, of its common stock pursuant to the exercise
of
$.05 warrants by non-employees. The Company received $313,000 and $86,000,
respectively, in cash.
At
various dates throughout 2006 and 2005, the Company issued 10,220,000 and
3,520,000, respectively, of its common stock pursuant to the exercise of
$.025
warrants by non-employees. The Company received $255,500 and $88,000,
respectively, in cash.
As
of December 31, 2006, there are warrants outstanding to purchase 800,000
shares
of common stock at $.025 per share expiring at various dates throughout
2007;
warrants outstanding to purchase 8,080,000 of common stock at $.05 per
share
expiring at various dates throughout 2007; and warrants to purchase 1,600,000
shares of common stock at $.05 per share expiring in 2008.
Common
stock issued for services
During
2006, 1,100,000 shares of common stock were issued for consulting services
for
which the Company recognized $15,438 of expense. During 2005, 2,010,000
shares
of common stock were issued for consulting services which the Company recognized
$2,469 of expenses. Additionally, the Company issued 2,700,000 and 7,880,000
shares of common stock at various dates throughout 2006 and 2005, respectively,
to its President and Chief Executive Officer for services rendered. The
Company
issued 900,000 and 960,000 shares at various dates throughout 2006 and
2005,
respectively, to its employee for services rendered. The shares are valued using
the same discount structure as the other common stock transactions and
ranged
from $0.01 to $0.09 during 2006 and $.0004 to $.0074 during 2005. The Company
recognized $191,100 and $23,903 in compensation expense in 2006 and 2005,
respectively, related to these transactions.
F-32
Note
6 - Common Stock and Paid-In Capital (continued)
During
2004, the Company issued 25,000,000 additional founders shares due to the
reverse stock split in 2003 and the corporate reorganization that took
place
during 2004. The shares were valued at the closing price of the stock on
or
previous to the date of issuance less a 50% discount due to the restrictive
nature of the stock, a 50% discount for lack of earnings or sales consistency
of
the Company, a 50% discount due to the dollar and share volume of sales
of the
Company's securities in the public market, and an additional 35% discount
due to
the trading market in which the Company's securities are sold.
Common
stock rights
Holders
of shares of common stock are entitled to one vote per share on all matters
submitted to a vote of the shareholders. Shares of common stock do not
have
cumulative voting rights.
Holders
of record of shares of common stock are entitled to receive dividends when
and
if declared by the board of directors. To date, the Company has not paid
cash
dividends. The Company intends to retain any earnings for the operation
and
expansion of its business and does not anticipate paying cash dividends
in the
foreseeable future.
Any
future determination as to the payment of cash dividends will depend on
future
earnings, results of operations, capital requirements, financial condition
and
such other factors as the board of directors may consider.
Upon
any liquidation, dissolution or termination of the Company, holders of
shares of
common stock are entitled to receive a pro rata distribution of the assets
of
the Company after liabilities are paid.
Holders
of common stock do not have pre-emptive rights to subscribe for or to purchase
any stock, obligations or other securities of 3DIcon.
Note
7 - Income taxes
At
December 31, 2006 and 2005, the Company had accumulated net operating losses
of
approximately $3,115,000 and $1,588,000, respectively, available to reduce
future federal and state taxable income. Unless utilized, the loss carry
forward
amounts will begin to expire in 2013.
Deferred
tax assets resulting from the operating loss carryforward, are reduced
by a
valuation allowance.
F-33
Note
7 - Income taxes (continued)
The
deferred tax asset consisted of the following:
|
December
31,
|
December
31,
|
||||||
|
2006
|
2005
|
||||||
|
Loss
carry forward amount
|
$
|
3,115,000
|
$
|
1,588,000
|
|||
|
Effective
tax rate
|
38
|
%
|
38
|
%
|
|||
|
Deferred
tax asset
|
1,183,700
|
603,440
|
|||||
|
Less
valuation allowance
|
(1,183,700
|
)
|
(603,440
|
)
|
|||
|
Net
deferred taxes
|
$
|
-
|
$
|
-
|
|||
F-34
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our
bylaws provide that 3DIcon may indemnify any person who was or is a party or
is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
other than an action by or in the right of the corporation, by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys fees,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was
unlawful.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-1
The
following table sets forth an itemization of all estimated expenses, all of
which we will pay, in connection with the issuance and distribution of the
securities being registered:
NATURE
OF EXPENSE AMOUNT
|
SEC
Registration fee
|
$
|
197.58
|
||
|
Accounting
fees and expenses
|
15,000*
|
|||
|
Legal
fees and expenses
|
50,000*
|
|||
|
TOTAL
|
$
|
65,197.58*
|
|
*
|
Estimated.
|
ITEM
26. RECENT SALES OF UNREGISTERED SECURITIES.
To
obtain
funding for ongoing operations, the Company entered into a Bridge Financing
Agreement with Golden Gate which closed on June 11, 2007 (the “Financing
Agreement”), for the sale of a 9.75% convertible debenture in the principal
amount of $700,000. Pursuant to the Financing Agreement, the Company agreed
to
file a registration statement with the SEC within three days of closing for
the
resale of the common stock underlying the initial $1.25 million convertible
debenture as discussed in Note 6.
The
debenture may be converted, at Golden Gate’s option, in whole or in part, into
restricted shares of the Company’s common stock. The conversion price will be
$0.28 until the earlier of, the Company’s shares trading on the OTC Bulletin
Board or other trading market that the SEC recognizes as a trading market,
or
January 1,2008. Subsequently, the conversion price is equal to 72% of the
average of the five lowest volume weighted average prices for the common
stock
for the 20 trading days prior to the conversion date. The convertible debenture
matures June 11, 2007; subject to an option held by Golden Gate to extend
the
maturity for one period of six months. Interest on the convertible debenture
is
payable monthly in cash.
In
addition to standard default provisions concerning timeliness of payments,
delivery and notifications, any other event of default, as defined in the
debenture, will accelerate the maturity date of the debenture, and all
outstanding principal and accrued and unpaid interest along with $250,000
in
liquidated damages, will become immediately due and payable. Such events
of
default include: failure to observe or perform material covenants of any
notes;
the making of a representation or warranty in any material agreement, report
of
financial statement; filing of a voluntary or involuntary proceeding for
bankruptcy by the Company; a default under any mortgage, credit agreement
or
other facility, indenture agreement, factoring agreement or other instrument;
the common stock of the Company trades below $0.21 per share; the Company
is a
party to any Change of Control Transaction and agrees to sell or dispose
of all
or in excess of 33% of its assets in one or more transactions (whether or
not
such sale would constitute a Change of Control Transaction) or shall redeem
or
repurchase more than ten percent (10%) of its outstanding shares of Common
Stock
or other equity securities of the Company; the Company does not file the
Registration Statement, as amended to reflect the Company’s responses to the
latest comments made to such Registration Statement by the Commission relating
to the Registration Rights Agreement dated November 3, 2006 between the Company
and Golden Gate Investors Inc. by June 14, 2007 or the related Registration
Statement is not declared effective by the Commission on or prior to September
14, 2007; if during the effectiveness period of such Registration Statement
its
effectiveness lapses or the selling stockholder is unable to sell its shares
for
a period of 20 days; the Company fails to deliver certificates following
a
conversion under the debenture within 3 days; or any monetary judgment, writ
or
similar final process shall be entered or filed against the Company, any
Subsidiary or any of their respective property or other assets for more than
$250,000, and such judgment, writ or similar final process shall remain
unvacated, unabandoned or unstayed for a period of 45 calendar
days.
The
Debenture is secured by the pledge of 11 million shares of common stock held
by
affiliates in the Company (the “Pledged Shares”). Such shares shall have been
held by the Pledgors for a period of not less than two years. In the event
of a
default and the Company has not repaid all outstanding principal and accrued
and
unpaid interest, along with the liquidated damages of $250,000 within one
day of
default, Golden Gate shall have the right to immediately sell the Pledged
Shares
in satisfaction of any amounts of principal and interest owing under the
Debenture. Golden Gate shall only sell such amount of Pledged Shares to satisfy
any principal and accrued interest, along with $250,000 in liquidated damages
and shall return unsold shares to the Pledgors.
During
2005, 2,010,000 shares of common stock were issued for consulting services
for
which the Company recognized $2,469 of expense. During 2004, 3,376,000 shares
of
common stock were issued for services for consulting which the Company
recognized $26,829 of expenses.
Additionally,
the Company issued 7,880,000 and 1,980,000 shares of common stock at various
dates throughout 2005 and 2004, respectively, to its President and Chief
Executive Officer for services rendered. The Company issued 960,000 and
1,660,000 shares at various dates throughout 2005 and 2004, respectively, to
its
employee for services rendered. The shares are valued using the same discount
structure as the other common stock transactions and ranged from $.0004 to
$.0074 during 2005 and $.002 to $.014 during 2004. The Company recognized
$23,903 and $49,465 in compensation expense in 2005 and 2004, respectively,
related to these transactions.
II-2
At
various dates throughout 2005 and 2004, the Company sold 1,100,000 and 360,000
shares, respectively, of common stock with warrants attached for $.25 per share
pursuant to an exempt offering. Each subscriber received one share of common
stock with two separate warrants to purchase additional shares of Rule 144
stock
as follows: (a) ten times the number of shares within one year of the date
subscribed at $.025 per share and (b) another ten times the number of shares
within two years of the date subscribed at $.05 per share. Warrants not
exercised under their terms will be terminated. The Company received $275,000
and $90,000, respectively, in cash.
At
various dates throughout 2005 and 2004, the Company issued 1,740,000 and 340,000
shares, respectively, of its common stock pursuant to the exercise of $.05
warrants by non-employees. The Company received $86,000 and $17,000,
respectively, in cash.
At
various dates throughout 2005 and 2004, the Company issued 3,520,000 and
1,760,000, respectively, of its common stock pursuant to the exercise of $.025
warrants by non-employees. The Company received $88,000 and $44,000,
respectively, in cash.
During
2004, the Company issued 25,000,000 additional shares to the Company’s founder,
President and Chief Executive Officer due to the reverse stock split in 2003
and
the corporate reorganization that took place during 2004. The shares were valued
at par value.
*
All of
the above offerings and sales were deemed to be exempt under rule 506 of
Regulation D and Section 4(2) of the Securities Act of 1933, as amended. No
advertising or general solicitation was employed in offering the securities.
The
offerings and sales were made to a limited number of persons, all of whom were
accredited investors, business associates of 3DIcon Corporation or executive
officers of 3DIcon Corporation, and transfer was restricted by 3DIcon
Corporation in accordance with the requirements of the Securities Act of 1933.
In addition to representations by the above-referenced persons, we have made
independent determinations that all of the above-referenced persons were
accredited or sophisticated investors, and that they were capable of analyzing
the merits and risks of their investment, and that they understood the
speculative nature of their investment. Furthermore, all of the above-referenced
persons were provided with access to our Securities and Exchange Commission
filings.
Except
as
expressly set forth above, the individuals and entities to whom we issued
securities as indicated in this section of the registration statement are
unaffiliated with us.
ITEM
27. EXHIBITS.
The
following exhibits are included as part of this Form SB-2. References to "the
Company" in this Exhibit List
mean
3DIcon Corp., an Oklahoma corporation.
|
3.1
|
Certificate
of Incorporation (1)
|
|
3.2
|
Bylaws
(1)
|
|
3.3
|
Amended
Certificate of Incorporation (1)
|
|
3.4
|
Amended
Certificate of Incorporation (1)
|
|
3.5
|
Amended
Certificate of Incorporation (1)
|
|
5.1
|
Consent
of Sichenzia Ross Friedman Ference LLP (1)
|
|
10.1
|
Securities
Purchase Agreement (1)
|
|
10.2
|
Amendment
No. 1 to Securities Purchase Agreement and Debenture
(1)
|
|
10.3
|
Registration
Rights Agreement (1)
|
|
10.4
|
$100,000
convertible debenture (1)
|
|
10.5
|
$1.25
million convertible debenture (1)
|
|
10.6
|
Common
Stock Purchase Warrant (1)
|
|
10.7
|
Sponsored
Research Agreement by and between 3DIcon Corporation and the Board
of
Regents of the University of Oklahoma (1)
|
|
10.8
|
Sponsored
Research Agreement Modification No. 1 by and between 3DIcon Corporation
and the Board of Regents of the University of Oklahoma
(1)
|
|
10.9
|
Sponsored
Research Agreement Modification No. 2 by and between 3DIcon Corporation
and the Board of Regents of the University of Oklahoma
(1)
|
|
10.10
|
Amendment
No. 2 to Securities Purchase Agreement, Debentures, and Registration
Rights Agreement
|
|
10.11
|
Securities
Purchase Agreement dated June 11, 2007
|
|
10.12
|
$700,000
Convertible Debenture
|
|
23.1
|
Consent
of Sichenzia Ross Friedman Ference LLP (see Exhibit
5.1)
|
|
23.2
|
Consent
of Tullius Taylor Sartain & Sartain LLP
|
|
(1)
|
Incorporated
by reference to Form SB-2 as filed on December 15, 2006 (File No.
333-139420) and subsequently withdrawn on February 5,
2007
|
II-3
ITEM
28. UNDERTAKINGS.
The
undersigned registrant hereby undertakes to:
(1)
File,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement to: (i) Include any prospectus required
by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities
Act"); (ii) Reflect in the prospectus any facts or events which, individually
or
together, represent a fundamental change in the information in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume
of
securities offered (if the total dollar value of the securities offered would
not exceed that which was registered) and any deviation from the low or high
end
of the estimated maximum offering range may be reflected in the form of a
prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set forth
in
the "Calculation of Registration Fee" table in the effective registration
statement, and (iii) Include any additional or changed material information
on
the plan of distribution.
(2)
For
determining liability under the Securities Act, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide
offering.
(3)
File
a post-effective amendment to remove from registration any of the securities
that remain unsold at the end of the offering.
(4)
For
determining liability of the undersigned small business issuer under the
Securities Act to any purchaser in the initial distribution of the securities,
the undersigned undertakes that in a primary offering of securities of the
undersigned small business issuer pursuant to this registration statement,
regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means
of
any of the following communications, the undersigned small business issuer
will
be a seller to the purchaser and will be considered to offer or sell such
securities to such purchaser:
(i)
Any
preliminary prospectus or prospectus of the undersigned small business issuer
relating to the offering required to be filed pursuant to Rule 424; (ii) Any
free writing prospectus relating to the offering prepared by or on behalf of
the
undersigned small business issuer or used or referred to by the undersigned
small business issuer; (iii) The portion of any other free writing prospectus
relating to the offering containing material information about the undersigned
small business issuer or its securities provided by or on behalf of the
undersigned small business issuer; and (iv) Any other communication that is
an
offer in the offering made by the undersigned small business issuer to the
purchaser.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and
is, therefore, unenforceable.
In
the
event that a claim for indemnification against such liabilities (other than
the
payment by the registrant of expenses incurred or paid by a director, officer
or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
(5)
Each
prospectus filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying on Rule
430B
or other than prospectuses filed in reliance on Rule 430A, shall be deemed
to be
part of and included in the registration statement as of the date it is first
used after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into
the
registration statement or prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such first
use,
supersede or modify any statement that was made in the registration statement
or
prospectus that was part of the registration statement or made in any such
document immediately prior to such date of first use.
II-4
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant,
3DIcon Corporation, certifies that it has reasonable grounds to believe that
it
meets all of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement on Form SB-2 to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
3DICON
CORPORATION
|
||
| |
|
|
|
/s/
Martin Keating
|
||
|
|
||
|
Name:
|
Martin
Keating
|
|
|
Title:
|
Chief
Executive Officer
|
|
|
(Principal
Executive and Financial
Officer)
|
||
Each
person whose signature appears below constitutes and appoints Martin Keating,
his true and lawful attorney-in-fact and agent, acting alone, with full power
of
substitution and resubstitution, for him and in his name, place and stead,
in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and any registration statement
of
the same offering which is effective upon filing pursuant to Rule 462(b)
under
the Securities Act, and to file the same, with all exhibits thereto, and
other
documents in connection therewith, with the Commission, granting unto said
attorney-in-fact and agent, each acting alone, full power and authority to
do
and perform each and every act and thing requisite and necessary to be done
in
and about the premises, as fully to all intents and purposes as he might
or
could do in person, hereby ratifying and confirming all said attorney-in-fact
and agent, acting alone, or his substitute or substitutes, may lawfully do
or
cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
on Form SB-2 has been signed below by the following persons in the capacities
and on the dates indicated:
|
SIGNATURE
|
|
TITLE
|
|
DATE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
/s/
Martin Keating
|
|
Chief
Executive Officer, Director
|
|
June
14, 2007
|
|
|
Martin
Keating
|
|
|
|
||
|
|
|
|
|
|
|
|
By: /s/
Vivek Bhaman
|
|
President,
Chief Operating Officer
|
|
June
14, 2007
|
|
|
Vivek
Bhaman
|
|||||
|
By:
/s/Philip
Suomu
|
|
Director
|
|
June14,
2007
|
|
|
Philip
Suomu
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
/s/John
O’Connor
|
|
Director
|
|
June
14, 2007
|
|
|
John
O’Connor
|
|
|
|
|
|
II-5
EXHIBIT
5.1
SICHENZIA
ROSS FRIEDMAN FERENCE LLP
61
Broadway, 32nd
Floor
New
York,
NY 10018
Telephone:
(212) 930-9700
Facsimile:
(212) 930-9725
June
14,
2007
VIA
ELECTRONIC TRANSMISSION
Securities
and Exchange Commission
100
F
Street, N.E.
Washington,
DC 20549
RE:
3DIcon Corporation
Form
SB-2 Registration Statement (File No. 333-______)
Ladies
and Gentlemen:
We
refer
to the above-captioned registration statement on Form SB-2 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act"), filed
by
3DIcon Corporation, an Oklahoma corporation (the "Company"), with the Securities
and Exchange Commission.
We
have
examined the originals, photocopies, certified copies or other evidence of
such
records of the Company, certificates of officers of the Company and public
officials, and other documents as we have deemed relevant and necessary as
a
basis for the opinion hereinafter expressed. In such examination, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as certified copies or photocopies and the authenticity of
the
originals of such latter documents.
Based
on
our examination mentioned above, we are of the opinion that the securities
being
sold pursuant to the Registration Statement are duly authorized and will be,
when issued in the manner described in the Registration Statement, legally
and
validly issued, fully paid and non-assessable.
We
hereby
consent to the filing of this opinion as Exhibit 5.1 to the Registration
Statement and to the reference to our firm under "Legal Matters" in the related
Prospectus. In giving the foregoing consent, we do not hereby admit that we
are
in the category of persons whose consent is required under Section 7 of the
Act,
or the rules and regulations of the Securities and Exchange
Commission.
| /s/ Sichenzia Ross Friedman Ference LLP | ||
|
Sichenzia
Ross Friedman Ference LLP
|
||
EXHIBIT
23.2
CONSENT
OF INDEPENDENT REGISTERED
PUBLIC
ACCOUNTING FIRM
We
consent to the use in this Registration Statement on Form SB-2 of 3DIcon
Corporation of our report dated April 27, 2007, relating to our audits of the
financial statements appearing in the Prospectus, which is part of this
Registration Statement. Our report dated April 27, 2007 relating to the
financial statements includes an emphasis paragraph relating to an uncertainty
as to the Company's ability to continue as a going concern. We also consent
to
the reference to our firm under the captions "Experts" in such
Prospectus.
Tulsa,
Oklahoma
June
14,
2007
Sichenzia
Ross Friedman Ference LLP
61
Broadway, 32nd
Floor
New
York,
New York 10006
Securities
and Exchange Commission
Washington,
DC 20549
Mail
Stop
3720
Attention:
Larry
Spirgel, Esq. Assistant Director
|
Re:
|
3DIcon
Corporation
|
|
Form
SB-2
|
|
|
File
No. 333-139420
|
|
|
Filed
December 15, 2006
|
Ladies
and Gentlemen:
On
February 5, 2007, 3DIcon Corporation (the “Company”), withdrew the above
captioned Form SB-2. On June 14, 2007, the Company is re-filing the
aforementioned SB-2 in accordance with the Staff’s comments of January 3, 3007.
The Company did not file a red-lined version with such filing as the original
filing was withdrawn but would be happy to do so upon the Staff’s request. Set
forth below is the Company’s response to the Staff’s comments.
General
|
1.
|
The
private placement of the shares of the 6 ¼% convertible debenture, which
has a conversion rate tied to the market price, cannot be completed
until
the terms of the transaction are fixed. In this regard, we believe
that
trading on the Pink Sheets only does not constitute an existing market
for
your common stock, and therefore there has been no meeting of the
minds as
to the conversion price. Accordingly, please remove from the registration
statement the shares issuable upon conversion of the convertible
debenture
until the terms of conversion are revised to be a fixed price or
the
shares are quoted on the OTC Bulletin
Board.
|
Response:
The
securities purchase agreement and the debenture have been amended such that
they
now provide for fixed conversion prices on all three debentures until such
time
as our common stock is quoted on the OTCBB or is otherwise listed and trading
on
NASDAQ or a national securities exchange. The Company has disclosed the fixed
price nature of the conversion feature on pages five (5) and thirty-one (31)
of
its Form SB-2.
Executive
Compensation, page 25
|
2.
|
Once
the terms of conversion are revised to be a fixed price or shares
are
quoted on the OTC Bulletin Board, update your executive compensation
information for 2006.
|
Response:
As
stated
in the response to Comment 6, the securities purchase agreement and the
debenture have been amended such that they now provide for fixed conversion
prices on all three debentures until such time as our common stock is quoted
on
the OTCBB or is otherwise listed and trading on NASDAQ or a national securities
exchange. In connection with the Company’s current SB-2 filing, the executive
compensation information beginning on page twenty-five (25) of Form
SB-2.
If
you
have any further comments and/or questions, please contact the undersigned
at
(212) 930 9700.
|
Very
truly yours,
|
|
/s/
Sean F. Reid
|
|
Sean
F. Reid
|