CORETEC GROUP INC. - FORM 10-K

		Page
PART I
Item 1.	Business	3
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	12
Item 2.	Properties	12
Item 3.	Legal Proceedings	12
Item 4.	Reserved	12

PART II
Item 5.	Market for Common Equity, and Related Stockholder Matters and Issuer Purchases of Equity Securities	13
Item 6.	Selected Financial Data	14
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operation	15
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 8.	Financial Statements and Supplementary Data	21
Item 9.	Changes In and Disagreements with Accountants on Accounting
	and Financial Disclosure	21
Item 9A.	Controls and Procedures	22
Item 9B.	Other Information	22

PART III
Item 10.	Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(A) of the Exchange Act.	22
Item 11.	Executive Compensation	25
Item 12.	Security Ownership of Certain Beneficial Owners and Management
	and Related Stockholder Matters	27
Item 13.	Certain Relationships and Related Transactions, and Director Independence	28
Item 14.	Principal Accountant Fees and Services	28
PART IV
Item 15.	Exhibits	29

SIGNATURES		30

PART I

ITEM 1. BUSINESS.

Corporate History

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

In April 2004, we engaged the University to Oklahoma (“OU” or the “University”) to conduct a pilot study to determine the opportunity and feasibility for the creation of volumetric three dimensional communication systems.

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".

On February 23, 2007, we entered into a Sponsored Research Agreement with the University (Phase III) which was scheduled to expire on March 31, 2010. Under this agreement, the University conducted a research project entitled “3-Dimensional Display Development”.

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

The Oklahoma Center for the Advancement of Science and Technology (“OCAST”) approved our application for funding of a matching grant titled 800 Million Voxels Volumetric Display, on November 19, 2008. The two-year matching grant, totaling $299,932, had a start date of January 1, 2009. The award is for a maximum of $149,940 for 2009 and the remainder for 2010. We requested a no cost extension for the first year. OCAST approved our request and extended our first year contract to April 30, 2010. Funding beyond April 30, 2010 is contingent upon satisfactory performance evaluation and the availability of funds.

General Overview

We are a development stage company. Our mission is to pursue, develop and market full-color, 360-degree holographic or volumetric 3-D technology. Through a Sponsored Research Agreement with the University of Oklahoma, we have obtained the exclusive world-wide marketing rights to certain 3D display technologies under development by the University. The development to date has resulted in the University filing seven provisional patents; six of the seven provisional patents have been combined and converted to four utility patents. On May 26, 2009, the United States Patent and Trademark Office (USPTO) has approved the pending patent called “Volumetric liquid crystal display” for rendering a three-dimensional image” and converted it to US patent No. 7,537,345. At this time, we do not own any intellectual property rights in holographic technologies, and, apart from the Sponsored Research Agreement with the University, have no contracts or agreements pending to acquire such rights or any other interest in such rights. We plan to market the technology and the intellectual property developed by the University and our staff by targeting various industries, such as retail, manufacturing, entertainment, medical, healthcare, transportation, homeland security and the military. On April 6, 2009, we filed a provisional patent on an emissive two-dimensional (2D) screen that is controlled and driven by a standard digital light projector or other optical input source. This provisional patent is called “Flexible/inflexible front/back projection screen or display” and owned solely by 3DIcon Corporation.

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 auto stereoscopic 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 identifies 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, a portfolio of 3D Display Technologies is being developed in using the following approaches:

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

II – Static Volumetric Displays - Under Glass

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

IV – Free Space Volumetric Displays - Our ultimate goal is to develop Free Space Volumetric Displays. Our future plans include the possible use of magnetic nano particles to achieve this among others.

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

The Static Volume Display technology will employ the DMD using infra-red lasers to produce 3D images in advanced transparent nanotechnology materials, thereby enabling the creation, transmission and display of high resolution 3D images within a volume space, surrounded by glass or transparent screen. The Free Space technology will build upon the Static Volume 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. The initial investigation for the Static Volume system commenced in 2007. On September 2008, we built a laboratory prototype for CSpace®™ and demonstrated the creation of true 3D images within specified image space. New developments for eliminating the distortion occurred by the divergence of the constructed 3D image have been presented at the SPIE Europe Security & Defense conference in Berlin, Germany, August, 2009. Improvements for the optical systems utilized by CSpace®™ with the latest achieved resolution have been pblished on October 2009 at IEEE/OSA Journal of Display Technology titled “Static volumetric three-dimensional display”. On February 15, 2010, at the SPIE Medical Imaging conference, we presented the latest software developments that allow reading digital imaging and communication in medicine (DICOM) formats whether scanned by ultrasound devices, magnetic resonance imaging (MRI), or computed tomography (CT) scanners. With this new software architecture, CSpace®™ would have the capability of displaying medical images within binary 3D volume.

University of Oklahoma - 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, which expired October 19, 2004. We paid the University $14,116 pursuant to this agreement. The purpose of this agreement was to conduct a pilot study to investigate digital holography as a candidate technology for the development of three-dimensional (“3D”) imaging and visualization systems. The purpose of the pilot study was to investigate the current state-of-the-art research and development activities taking place in the field of digital holography, particularly emerging technologies. The scope of work for the study encompassed the following tasks:

Literature review to determine key leading edge research in relevant areas;

Review of related commercial products to identify technological approaches and potential competitors and/or partners;

Preliminary patent review;

Recommendations for product research and development directions.

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

produce patentable and/or copyrightable intellectual property;

produce proof-of-concept technology that demonstrates the viability of the intellectual property;

assess opportunities for manufacturing technological products in Oklahoma;

Investigate magnetic nanospheres MNs for use as a projection media;

Develop a control platform to actively distribute MNs in an unbounded volumetric space;

Investigate the doping of MNs with fluorescent materials for light emission at different wavelengths, i.e., develop fluorescent MNs (“FMNs”);

Evaluate other display medium technologies for potential strategic partnerships;

Evaluate the most appropriate (from a cost-to-benefit standpoint) solid-state light sources for projection applications;

Develop software for displaying ideal 3D images; and

Investigate software interface issues with other image capture technologies.

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

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

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

During the years ended December 31, 2009 and 2008, we charged operations $64,084 and $953,802, respectively pursuant to the SRA. At December 31, 2009, we owed the University $5,638 in aggregate monthly payments and $525,481 on the arrearages under the revised payment terms.

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

Description of Provisional Patent Application as Filed	Description of Utility Patent Application Filing (Combined)	Date of Filing	Grant Date of U.S. Patent	European Pending Patent- Date of Filing	Japanese Pending Patent- Date of Filing
Swept Volume Display	Swept Volume Display	September 2006

Colorful Translation Light Surface 3D Display Colorful Translation 3D Volumetric Display 3D Light Surface Display	Light Surface Display for Rendering Three-Dimensional Image (Combined)	April 2007		April 2007	April 2007

Volumetric Liquid Crystal Display	Volumetric Liquid Crystal Display for Rendering Three-Dimensional Image (Combined)	April 2007	May 2009

Computer System Interaction with DMD	Computer System Interaction with DMD	January 2008

Virtual Moving Screen for Rendering Three Dimensional Image	Virtual moving screen for rendering a three-dimensional image	January 2008

Marketing and Product Development

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

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

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

Digital Displays: Large Format, Retail Advertising;

Air Traffic Systems, Traffic Planning; Town Planning;

Pharmaceutical and Bio-Medical Research;

Homeland Defense and Security;

Architectural Plans and Virtual Structures;

Interactive Entertainment;

Geo-Spatial Applications;

Casino Gaming; and

Military Applications.

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:

Lightspace DepthCube™ from LightSpace Technologies, Inc.

Felix 3D Displays

Perspecta Spatial 3D Display from Actuality Systems

3D Technology Laboratories

Employees

We had three full-time employees as of December 31, 2009, Martin Keating, Chief Executive Officer, Dr. Hakki Refai, Chief Technology Officer, and Ms. Judith Keating, Company Secretary and Director of Investor Relations. None of our employees are covered by a collective bargaining agreement. We consider relations with our employees to be good.

ITEM 1A. RISK FACTORS.

Risks Relating to Our Business:

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

We have a limited operating history. We cannot assure you that we can achieve revenue or sustain revenue growth or profitability in the future. We have a cumulative net loss of $12,576,914 for the period from inception (January 1, 2001) to December 31, 2009. Our operations are subject to the risks and competition inherent in the establishment of a business enterprise. Unanticipated problems, expenses, and delays are frequently encountered in establishing a new business and marketing and developing products. These include, but are not limited to, competition, the need to develop customers and market expertise, market conditions, sales, marketing and governmental regulation. Our failure to meet any of these conditions would have a materially adverse effect upon us and may force us to reduce or curtail our operations. Revenues and profits, if any, will depend upon various factors. We may not achieve our business objectives and the failure to achieve such goals would have an adverse impact on our business.

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

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

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

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

We may not be able to compete successfully.

Although the volumetric 3D imaging and display technology that we are attempting to develop is new, and although at present we are aware of only a limited number of companies that have publicly disclosed their attempts to develop similar technology, we anticipate a number of companies are or will attempt to develop technologies/products that compete or will compete with our technologies. Further, even if we are the first to market with a technology of this type, and even if the technology is protected by patents or otherwise, because of the vast market and communications potential of such a product, we anticipate the market will be flooded by a variety of competitors (including traditional 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, 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 technologies being developed may not gain market acceptance.

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

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

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

Our success depends to a significant extent upon the continued services of Martin Keating, our Chairman and Chief Executive Officer, Dr. Hakki Refai,our Chief Technology Officer and, James N. Welsh, our President. Our success also depends on our ability to attract and retain other key executive officers.

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

In their report dated March 31, 2010, our auditors have expressed substantial doubt about our ability to continue as a going concern. These concerns arise from the fact that we are a development stage organization with insufficient revenues to fund development and operating expenses. If we are unable to continue as a going concern, you could lose your entire investment in us.

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

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

Risks Relating to Our Current Financing Arrangements:

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

As of March 31, 2010, we had 418,205,705 shares of common stock issued and outstanding and convertible debentures outstanding that may be converted into an estimated 2,203,577,831 shares of common stock at current market prices. The number of shares of common stock issuable upon conversion of the outstanding convertible debentures may increase if the market price of our stock declines. We also have outstanding warrants issued to Golden State Equity Investors, Inc. f/k/a Golden Gate Investors (“Golden State”) to purchase 919,683 shares of common stock at an exercise price of $10.90. The sale of the shares underlying the convertible debentures and warrants may adversely affect the market price of our common stock.

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

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

The following is an example of the amount of shares of our common stock that are issuable, upon conversion of our 4.75% $100,000 convertible debentures (excluding accrued interest) issued to Golden State on November 3, 2006, based on the remaining principal balance of $91,968 and market prices 25%, 50% and 75% below the market price as of March 24, 2010 of $0.006.

% Below Market	Price Per Share		Effective Conversion Price		Number of Shares Issuable(1)		% of Outstanding Stock
25%	$	0.0045	$	0.0036		2,812,266,151		672	%
50%	$	0.0030	$	0.0024		4,218,874,567		1,009	%
75%	$	0.0015	$	0.0012		8,438,669,817		2,018	%

(1) Shares issuable exclude 919,683 shares underlying the remaining warrants exercisable at $10.90 per share.

The following is an example of the amount of shares of our common stock that are issuable, upon conversion of the $1.25 million convertible debenture issued to Golden State on January 15, 2008 (the “Second Debenture”) (excluding accrued interest), based on the principal balance of $463,558 and market prices 25%, 50% and 75% below the market price as of March 24, 2010 of $0.006.

			Effective		Number		% of
% Below	Price Per		Conversion		of Shares		Outstanding
Market	Share		Price		Issuable		Stock
25%	$	0.0045	$	0.0040		114,458,800		27	%
50%	$	0.0030	$	0.0027		171,688,200		41	%
75%	$	0.0015	$	0.0013		343,376,400		82	%

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

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

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

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

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

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

Pay late payments to Golden State for late issuance of common stock upon conversion of the convertible debenture, in the amount of $100 per business day after the delivery date for each $10,000 of convertible debenture principal amount being converted or redeemed;

in the event we are prohibited from issuing common stock, or fail to timely deliver common stock on a delivery date, or upon the occurrence of an event of default, then at the election of Golden State, we must pay to Golden State a sum of money determined by multiplying up to the outstanding principal amount of the convertible debenture designated by Golden State by 130%, together with accrued but unpaid interest thereon; and

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

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

Risks Relating to Our Common Stock:

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.

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

that a broker or dealer approve a person's account for transactions in penny stocks; and

the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

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

obtain financial information and investment experience objectives of the person; and

make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

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

sets forth the basis on which the broker or dealer made the suitability determination; and

that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

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

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

ITEM 1B. UNRESOLVED STAFF COMMENTS.

N/A

ITEM 2. PROPERTIES.

Our executive offices are located at 6804 South Canton Avenue, Suite 150, Tulsa, Oklahoma 74136. The lease has a term of thirty-six (36) months, which began on June 1, 2008. We currently pay rent and related costs of approximately $2,255 per month.

ITEM 3. LEGAL PROCEEDINGS.

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

ITEM 4. RESERVED.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

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

For the periods indicated, the following table sets forth the high and low bid prices per share of common stock. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.

Year Ended December 31, 2009

	High		Low
First Quarter ended March 31, 2009	$	0.05	$	0.02
Second Quarter ended June 30, 2009	$	0.03	$	0.011
Third Quarter ended September 30, 2009	$	0.014	$	0.0075
Fourth Quarter ended December 31, 2009	$	0.0097	$	0.0051

Year Ended December 31, 2008

	High		Low
First Quarter ended March 31, 2008	$	0.32	$	0.20
Second Quarter ended June 30, 2008	$	0.24	$	0.08
Third Quarter ended September 30, 2008	$	0.18	$	0.05
Fourth Quarter ended December 31, 2008	$	0.15	$	0.04

Holders

As of March 31, 2010 we had approximately 387 active holders of our common stock. The number of active record holders was determined from the records of our transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies. Our transfer agent is Continental Stock Transfer & Trust Company, 17 Battery Place, New York, NY 10004.

Dividends

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

Equity Compensation Plan Information

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

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)
	(a)	(b)		(c)
Equity compensation plans approved by security holders	-		-	-

Equity compensation plans not approved by security holders:	0
2009 Amended Plan	36,271,123	$	0.64	14,422,012
2010 Plan	0			75,000,000
Total	36,271,123	$	0.64	89,422,012

Recent Sales of Unregistered Securities

During the fiscal year ended December 31, 2009, we issued the below securities without registration under the Securities Act of 1933, as amended (the "Securities Act").

Pursuant to subscription agreements entered into during March and April 2009, the Company sold 999,999 shares of the Company’s common stock at a per share price of $.03 per share and warrants to purchase an aggregate of 500,000 shares of its common stock at a price of $.10 per share from closing for a period of twelve months; $.15 per share for the second subsequent twelve months; or $0.20 per share for the subsequent twelve months to three accredited individuals. The Company received aggregate proceeds of $30,000 from the sale. The 500,000 warrants are valued at $6,579 and the 999,999 shares are valued at $23,421. The warrants terminate three year from date of issue in 2012.

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

On June 18, 2009 the Company entered into subscription agreements with two of its directors pursuant to which the two directors purchased an aggregate of 17,941,176 shares of the Company’s common stock at a price per share equal to 50% of the average closing price during the five days prior to June 18, 2009 (0.0068 per share) for aggregate proceeds of $122,000.

Pursuant to subscription agreements entered into during October and November 2009, the Company sold 1,666,666 shares of the Company’s common stock at a per share price of $.03 per share and warrants to purchase an aggregate of 16,666,666 shares of its common stock at a price of $.10 per share from closing for a period of twelve months; $.25 per share for the second subsequent twelve months; or $0.50 per share for the third subsequent twelve months to two accredited individuals. The Company received aggregate proceeds of $50,000 from the sale. The 16,666,666 warrants are valued at $35,225 and the 1,666,666 shares are valued at $14,775. The warrants terminate three years from date of issue in 2012.

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

ITEM 6. SELECTED FINANCIAL DATA.

N/A

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

Forward –Looking Statements

The information in this annual report contains forward-looking statements. All statements other than statements of historical fact made in this annual report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. Forward-looking statements reflect management's current expectations and are inherently uncertain. Our actual results may differ significantly from management's expectations.

The following discussion and analysis should be read in conjunction with the consolidated financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

Plan of Operation

Background:

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. 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 flat-panels to implement 3D displays on 2D screens, 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 the Company vision and appears to offer major opportunities for further technology development and creation of intellectual property through our staff and the University, to which 3DIcon will have exclusive rights.

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 our staff and the University, to which the Company has exclusive rights and engage in product research and development both directly related to the display as well as by-product technologies.

The Oklahoma Center for the Advancement of Science and Technology approved the Company’s application for funding of a matching grant titled "800 Million Voxels Volumetric Display," on November 19, 2008. The two-year matching grant, totaling $299,932, has a start date of January 1, 2009. The award is for a maximum of $149,940 for 2009 and the remainder for 2010. The Company received $35,139 from the grant during 2009. We received approval for our no cost extension request for the first year of the contract. With the new modification, the first year ends on April 30, 2010. Funding beyond April 30, 2010 is contingent upon satisfactory performance evaluation and the availability of funds.

Current Activities and Operations

Currently the Company is pursuing the research and development of volumetric 3-D display technology through the SRA with the University and with Dr. Hakki Refai, the former chief researcher at the University, who joined the Company as our Chief Technology Officer in October 2008. Our efforts are focused on multiple technological approaches, two of which are being further developed into proof-of-concept demonstration systems:

Static Volume Display Technology: Also known as CSpace®™, the Company has produced the first non-mechanical, 360-degree, multi-view, high-resolution volumetric display. A prototype was demonstrated during September 2008, when a 3D image was created within a proprietary volumetric media (also called projection space or image matrix). This technology incorporates existing and rapidly evolving image projection technologies, such as DLP®/DMD technology from Texas Instruments, allowing 3DIcon to pursue full-color, full-motion 3D visualization, in harmony with 3DIcon’s vision for product development.

Swept Volume Display Technology: Additional work on this particular approach has been deferred indefinitely because of the success and initial superiority of the CSpace®™ technology.

We have also released a software product called Pixel Precision™. The current version of the software is 2.0 that was released on February 12, 2009 to expand its capabilities and provide new compatibility with Texas Instrument’s newly released DLP® Discovery 4000 kits. We plan to continue to pursue this market and provide versions and variations of this software. The plans include enhancements to the functionality as well as variants to address additional opportunities.

We have signed a sales and distribution agreement with Digital Light Innovations (DLi) for the sales, marketing and first level support of the Pixel Precision™ software. Through DLi and its sub-distributors the software will be marketed in the United States as well as in Europe and Asia.

Progress on Research and Development Activities

The research team at OU filed two new patent applications in the first quarter of 2008 and converted one from a provisional to a utility filing.

Under the aegis of the SRA, the University has filed the following patent applications. The utility patents have been converted and consolidated from the previously filed provisional applications.

Description of Provisional Patent Application as Filed	Description of Utility Patent Application Filing (Combined)	Date of Filing	Granted U.S. Patent	European Pending Patent- Date of Filing	Japanese Pending Patent-Date of Filing
Swept Volume Display	Swept Volume Display	Filed by OU in September 2006

Colorful Translation Light Surface 3D Display Colorful Translation 3D Volumetric Display 3D Light Surface Display	Light Surface Display for Rendering Three-Dimensional Image (Combined)	Filed by OU in April 2007		April 2007	April 2007

Volumetric Liquid Crystal Display	Volumetric Liquid Crystal Display for Rendering Three-Dimensional Image (Combined)	Filed by OU in April 2007	May 2009

Computer System Interaction with DMD	Computer System Interaction with DMD	Filed by OU in January 2008

Virtual Moving Screen for Rendering Three Dimensional Image	Virtual moving screen for rendering a three-dimensional image	Filed by OU in January 2008

Optically Controlled Light Emitting…and System for Optically Written 2D and 3D Displays	Utility Patent Application to be filed	Filed by 3DIcon in April 2008

Further, we are taking steps to explore areas that may be related to assist in the protection of intellectual property assets. In addition, we have begun the process of applying for trademarks related to our 3D technologies.

Our research and development objectives for the 2010 calendar year are as follows. The work will mainly be done by the Company and researchers, faculty and selected graduate or doctoral level students at the University with oversight by Company personnel:

I. Static Volumetric Display (CSpace®™)

Continue work on development of blue and red up-conversion materials.

Synthesize near-transparent projection media suitable for dispersion of display materials.

Investigate the use of additional technologies for development of image space that enhance the commercialization of the technology. Dr. Hakki Refai has begun collaboration with parties outside of OU to explore alternate material development strategies.

Demonstrate improvements in optical properties for transparent projection materials. Static Volumetric Display and Nano-materials.

Continue software development to enhance CSpace®™ with the capability of displaying near real time 3D images.

Add gray-scale levels for the constructed 3D images by CSpace®™.

II. By-Product Technologies

Continue to generate revenue from Pixel Precision™ the DMD Control Software for DMD Application development markets.

Develop next generation of Pixel Precision™ software for controlling multiple DMDs as well as for controlling the next generation of the DMD-Discovery™ series.

Release Pixel Precision™ Version 3.0 for the Discovery 4000 series (D4000). This will be done in the near future.

Develop the new invention of 2D screen that can be optically driven if compared to the conventional electrically driven 2D screens.

III. New 3D Technologies

Continue to pursue new 3D opportunities across a broad technological spectrum, with the ultimate goal of the creation of a “free space” 3D display (i.e., one without a visible containment vessel).

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2009 COMPARED TO THE YEAR ENDED DECEMBER 31, 2008

Revenue

The Company received $35,139 from the OCAST grant during 2009 and $25,000 from a liscensing agreement during 2008.

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

We have earned income of $10,200 and $17,900 before commissions and costs from the sales of PixelPrecision™ for the years ended December 31, 2009 and December 31, 2008, respectively.

We expect sales of Pixel Precision™ to the installed and active user base of the earlier D1100 and D3000 systems in the near term and as companion product sales to D4000 systems. We expect that the revenue from this product to contribute to the operating expenses (general and administrative, research and development, interest) but do not expect the revenue generated in 2010 to cover the operating expenses.

Research and Development Expenses

The research and development expenses were $313,082 for the year ended December 31, 2009 as compared to $953,802 for the year ended December 31, 2008. The decrease was a result of modifications to the SRA whereby, on October 31, 2008 the University agreed to revise the payment terms under the SRA from a fixed monthly payment to a reimbursable cost payment basis effective September 1, 2008. Additionally on October 1, 2008 we employed Dr. Hakki Refai as Chief Technology Officer who previously was the lead investigator on the SRA with the University.

General and Administrative Expenses

Our general and administrative expenses were $1,218,798 for the year ended December 31, 2009 as compared to $2,578,357 for the year ended December 31, 2008. The decrease is due primarily to the decrease in salaries and related payroll taxes of $289,000, a decrease of $250,000 in options issued to employees, a $328,000 decrease due to options not being issued to Directors and consultants for services for the year ended December 31, 2009, a decrease in legal fees of approximately $100,000, termination of consulting contract of $176,000, decrease in annual meeting expense of approximately $37,000 and a general decrease in overall marketing, travel and administrative expenses due to decreased funding.

Interest Expense

Interest expense for the year ended December 31, 2009 was $80,294 as compared to $122,291 for the year ended December 31, 2008. The decrease in interest expense resulted from decrease in the amounts outstanding on our convertible debentures during the periods.

Financial Condition, Liquidity and Capital Resources

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

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

Acceleration of research and development through increased research personnel as well as other research agencies

General and administrative expenses: salaries, insurance, investor related expenses, rent, travel, website, etc.

Hiring executive officers for technology, operations and finance

Development, support and operational costs related to Pixel Precision™ software

Professional fees for accounting and audit; legal services for securities and financing; patent research and protection

Our independent registered public accountants, in their audit report accompanying our financial statements for the year ended December 31, 2009, expressed substantial doubt about our ability to continue as a going concern due to our status as a development stage organization with insufficient revenues to fund development and operating expenses.

We had net cash of $1,118 at December 31, 2009.

We had negative working capital of $1,751,634 at December 31, 2009.

During the year ended December 31, 2009, we used $539,883 of cash for operating activities, a decrease of $1,366,280 or 72% compared to the year ended December 31, 2008. The decrease in the use of cash for operating activities was a result of the decrease in net loss of $2,044,715.

Cash used in investing activities during the year ended December 31, 2009 was $0, a decrease of $25,363 compared to the year ended December 31, 2008. The decrease was a result of purchasing office furniture and equipment for the leased office space in the year ended December 31, 2008.

Cash provided by financing activities during the year ended December 31, 2009 was $492,601, a decrease of $781,806 or 61% compared to the year ended December 31, 2008. The decrease was the result of the decreased debenture funding, stock sales and warrant sales in 2009.

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

Our ability to fund the operations of the Company is highly dependent on the underlying stock price of the Company. As a result of our stock price being around the 52 week low mark and trending downward, our ability to raise cash is currently restricted.

Pursuant to the 4.75% Convertible Debenture due in 2011, beginning in November 2007, Golden State is obligated to submit conversion notices in an amount such that Golden State receives 1% of the outstanding shares of the Company every calendar quarter for a period of one year. In connection with each conversion, Golden State is expected to exercise warrants equal to 10 times the amount of principal converted. The warrants are exercisable at $10.90 per share. Beginning in November 2008, Golden State is required to convert $3,000 of the 4.75% Convertible Debenture and exercise 30,000 warrants per month. During the year ended December 31, 2009, we received $382,590 in funding from Golden State as a result of the 4.75% Convertible Debenture warrants exercised.

On November 19, 2008, we received a research grant from OCAST titled the "800 Million Voxels Volumetric Display." The two-year matching grant totals $299,932. The award is for a maximum of $149,940 for the calendar year 2009 and the remainder for calendar year 2010. Funding of the 2009 amount is contingent upon the Company providing matching funds for the first year’s research and submission of all required documentation to OCAST. We received approval for our no cost extension request for the first year of the contract. With the new modification, the first year ends on April 30, 2010.Funding beyond 2010 is contingent upon satisfactory performance evaluation and the availability of funds.

The Company was unable to meets it monthly payment obligations under the SRA and received notification from the University that they were in default. A new payment schedule has been negotiated. Failure of the Company to meet its payment obligations under the new payments schedule could result in the termination of the SRA, termination of the related projects and termination of any outstanding license agreements under the SRA.

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

The Company was unable to meet the revised payment schedule and on May 18, 2009 the University agreed to revise the payment terms. Under the terms of the revised base payments schedule, the arrearages scheduled to be paid in nine monthly base installments from October 31, 2008 to June 30, 2009 of amounts ranging from $35,000 to $101,132 were deferred to a monthly payment schedule of July 2009 through February 2010. On February 19, 2010 the University agreed to modify the repayment plan to retire the outstanding debt of $525,481. Under the terms of the modified repayment plan the Company agreed to make payments to the University, not less than quarterly, in an amount equal to 22.5% of any funding received by the Company. Eligible funding shall include all revenues, investments in the Company, funding from current sources or other funding, provided, however, that grants or other similar funding with specific allocation to designated research and development projects shall be excluded from such calculation. The quarterly payments shall be made within thirty (30) days of the end of each calendar quarter. The first quarterly payment is due to the University on April 30, 2010. The Company shall provide its financial statements to the University upon completion and submission to the SEC at the end of each quarter. These repayment terms shall remain in effect until the outstanding debt is retired. The University has the right at its sole discretion to request an independent audit of the Company’s financial statement the cost of which shall be borne solely by the Company.

In addition management put forward a proposal to the Board to reduce operating expenses further through temporary salary cuts, partial payments to consultants using stock and reduction in day-to-day expenses. This, along with other measures, has reduced our current cash flow burn rate from $267,000 per month to an estimated amount of $130,000 to $150,000 per month.

We also intend to raise additional funds as permitted by the terms of Golden State financing, to help with the short term capital needs.

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, and results of operations, liquidity or capital expenditures.

Significant Accounting Policies

Research and Development Costs

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

Stock-Based Compensation

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

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

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

Subsequent Events

Debentures payable

In accordance with the terms of the Second Debenture an event of default occurs if the common stock of the Company trades at a price per share of $0.21 or lower. The trading price was at $0.21 or lower on several occasions during the period ended December 31, 2009 and subsequent to December 31, 2009. On each of the occasions Golden State, by separate letter agreements, agreed that the occasions did not constitute a default and thereby waived the default provision for the occasions.

Subsequent to December 31, 2009 Golden State converted $1,200 of the 4.75% convertible debenture into 35,201,188 shares of common stock at $0.00004 per share and exercised 12,000 warrants at $10.90 per share for $130,800 under the terms of the securities purchase agreements.

Common stock and paid- in capital

Concordia Financial Group was issued 22,550,810 shares of common stock in payment of $63,000 for December, January, February, and March services under the terms of their consulting agreement. Additionally common shares totaling 5,000,000 were issued to vendors in payment of $9,650 for services.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

N/A

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

All financial information required by this Item is attached hereto at the end of this report beginning on page F-1 and is hereby incorporated by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

N/A

ITEM 9A. CONTROLS AND PROCEDURES.

Management’s Report on Internal Control over Financial Reporting

Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our President, Chief Financial Officer and Secretary, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) as of the end of the period covered by this report. Based upon that evaluation, our President, Chief Financial Officer and Secretary concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Management’s Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

Our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2009. In making this assessment, our management used the Committee of Sponsoring Organization of the Treadway Commission (“COSO”) framework, an integrated framework for the evaluation of internal controls issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that, as of December 31, 2009, our internal control over financial reporting was effective.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management's report in this annual report.

Changes. During the most recent quarter ended December 31, 2009, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

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

Name	Age	Position
Martin Keating	68	Chief Executive Officer and Director
James N. Welsh	66	President, Chief Operating Officer and Treasurer
Lawrence Field	48	Director
John O’Connor	53	Director
Victor F. Keen	68	Director

Martin Keating – Chief Executive Officer and Director

Martin Keating has been Chief Executive Officer and a director of the Company 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 is an attorney licensed to practice law in Oklahoma and Texas.

James N. Welsh – President, Chief Operating Officer and Treasurer

James N. Welsh was appointed as President, Chief Operating Officer and as Treasurer in March 2009. He is the founder and principal of Welsh & Associates, a consulting firm which provides financial and management consulting services. He also served as the interim president of TriCord Hurricane Holdings, Inc. until March 31, 2009. In addition, Mr. Welsh served as Chief Financial Officer of Global Safety Labs, Inc. from January, 2007 through August, 2007. He also served as the Chief Financial Officer of American Container Net, Inc. from October, 2003 through August, 2005.

Lawrence Field - Director

Mr. Lawrence Field was appointed to the Board of Directors of the Company in October 2007. Mr. Field is the cofounder and managing director of Regent Private Capital LLC, an investment management firm that invests globally through offices in New York City and Tulsa. Prior to co-founding Regent Private Capital LLC, Mr. Field was vice president of Capital Advisors, Inc., an investment management firm. Mr. Field holds a B.S. degree from the University of Texas at Austin.

John O’ Connor - Director

John O’Connor has been a director of the Company 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.

Victor F. Keen, Director

Mr. Victor F. Keen was appointed to the Board of Directors of the Company in November 2007. Until March 1, 2007, Mr. Keen served as the chair of the Tax Practice Group at Duane Morris. He is currently of counsel to the firm. Mr. Keen has served on the board of directors of Research Frontiers, Inc. (“Research Frontiers”) for over 10 years. He has been chair of the compensation committee of Research Frontiers for the last five years.

Audit Committee

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

Compensation Committee

On February 25, 2008, the Board of Directors created a Compensation Committee comprising Mr. Victor Keen (Chair) and Mr. Lawrence Field

Nomination and Corporate Governance Committee

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

Director or Officer Involvement in Certain Legal Proceedings

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

Board Leadership Structure and Role in Risk Oversight

Although we have not adopted a formal policy on whether the Chairman and Chief Executive Officer positions should be separate or combined, we have traditionally determined that it is in the best interests of the Company and its shareholders to combine these roles. Martin Keating has served as our Chairman and Chief Executive Officer since the inception of the Company. Due to the small size and early stage of the Company, we believe it is currently most effective to have the Chairman and Chief Executive Officer positions combined.

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

Code of Ethics

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

Employment Agreement

On July 28, 2008 the Company entered into an Employment Agreement with Dr. Hakki Refai (the “Employment Agreement”) pursuant to which Dr. Refai has agreed to serve as the Chief Technology Officer of the Company. Dr. Refai’s employment under the Employment Agreement commenced on October 1, 2008 and will continue for a term of one year from October 1, 2008, the date on which he became a full-time employee of the Company. The term of the Employment Agreement will automatically extend for successive one year periods unless otherwise terminated by the parties in accordance with the terms of the Employment Agreement. The following represents the material terms of the Employment Agreement:

Annual salary of $175,000 until the achievement of certain technical milestones as provided in the Employment Agreement (the “Technical Milestones”). Upon achievement of the Technical Milestones, the annual salary shall increase to $200,000;

Commission which shall not exceed 3% of sales of the Company’s Pixel Precision™ and CSpace®™ technologies products, which commission shall not exceed $30,000 for the 12 month period commencing on October 1, 2008 and $50,000 for the 12 month period commencing on October 1, 2009; and

Grant of 5,000,000 incentive stock options with a term of 10 years and an exercise price of $0.085 per share which vest as follows:

The first installment of 500,000 options, valued at $33,622, are vested and exercisable on October 1, 2008, the date Dr. Refai commences full-time employment;

3,500,000 options, valued at $235,357, vesting in accordance with certain technical achievements, deliverables and milestones as provided in the Employment Agreement; and

1,000,000 options vesting in accordance with certain non-technical, general milestones as provided in the Employment Agreement or upon severance of the Employment Agreement under certain conditions as provided in the Employment Agreement.

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

The estimated fair market value of the options was determined using the Black-Scholes option pricing model. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 95.50% is based on the historical volatility of the stock since July 25, 2007, the day the Company began trading on the Over-the-counter Bulletin Board. The risk-free interest rate of 2.0% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option of five years is based on historical exercise behavior and expected future experience. Operations were charged $100,867 in 2008 for the vesting of the options cost of Mr. Refai under the terms of the Employment Agreement.

On March 25, 2009 the Company entered into a Resolution Agreement with Dr. Hakki Refai (the “Resolution Agreement”) pursuant to which the Company agreed to remove the time constraints on the technical milestone achievements whereby the issuance of the options will be solely upon the achievement of the milestones.

ITEM 11. EXECUTIVE COMPENSATION.

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

SUMMARY COMPENSATION TABLE

The following information is furnished for the years ended December 31, 2009 and December 31, 2008 for our principal executive officer and the two most highly compensated officers other than our principal executive officer who was serving as such at the end of our last completed fiscal year:

Name & Principal Position	Year		Salary ($)	Bonus ($)		Stock Awards ($)	Option Awards ($)		Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Martin Keating CEO		2009	144,000											144,000
		2008	144,000		-	-		-	-		-	-		144,000

James N. Welsh, Pres. and COO		2009	95,000		-			0	-		-	0		95,000

Vivek Bhaman, Pres. and Coo		2008	250,000		-	-		50,782	-		-	33,333		334,115
		2009	71,955			-		98,148	-		-		-	170,103

Hakki Refai		2009	200,000			-		67,244	-		-		-	267,244
		2008				-		100,867	-		-		-	100,867

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

The following table sets forth with respect to grants of options to purchase our common stock to the executive officers as of December 31, 2009:

Name	Number of Securities Underlying Unexercised Options # Exercisable		Number of Securities Underlying Unexercised Options # Un-exercisable	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options #	Option Exercise Price $			Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested #	Market Value of Shares or Units of Stock That have not vested $		Equity Incentive Plan Awards: Number of Unearned Shares Units or Other Rights That Have Not Vested #	Equity Incentive Plan Awards Market or Payout Value of Unearned Shares Units or Other Rights That have not Vested $
Martin Keating		500,000	-	-	$	0.40		April 26, 2009	-		-	-		-

Vivek Bhaman (1)		1,425,000	5,075,000	-		(1	)	April 30, 2010	-		-	-		-

Dr. Hakki Refai		1,500,000	-	-	$	0.85		July 28, 2018	2,000,000		-	-
			3,500,000		$	0.85

(1) Mr. Bhaman’s options are exercisable as follows: 100,000 at $0.80 per share, 200,000 at $1.00 per share and 1,125,000 at $0.055 per share

Director Compensation

Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Victor Keen 2009		-	$	33,600		-		-		-		-	$	33,600
Victor Keen 2008					$	100,000							$	100,000
Lawrence Field 2008					$	100,000							$	100,000
John O’Connor 2009					$	125,391							$	125,391

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table provides information about shares of common stock beneficially owned as of

March 31, 2010 by:

each director;

each officer named in the summary compensation table;

each person owning of record or known by us, based on information provided to us by the persons named below, to own beneficially at least 5% of our common stock; and

all directors and executive officers as a group.

	Number of Shares Beneficially			Percentage
Name of Beneficial Owner (1)	Owned		Class of Stock	Outstanding (2)
Martin Keating (3)		42,217,474	Common		10.0	%
Victor F. Keen		24,599,729	Common		5.88	%
Lawrence Field (4)		7,953,134	Common		1.90	%
John O’Connor (5)		1,397,180	Common		*
Vivek Bhaman (6)		1,425,000	Common		*
James N. Welsh		14,963,571	Common		3.58
All directors and executive officers as a group (4 persons)		92,556,088	Common		21.36	%

Golden State Investors, Inc. (7)		32,679,588	Common		9.50

*	Less than 1%

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

(2)

Applicable percentage ownership is based on 418,205,705 shares of common stock outstanding as of March 31, 2010. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Options to acquire shares of common stock that are currently exercisable or exercisable within 60 days of March 31 2010 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage.

(3)	Represents (i) 37,987,452 shares of common stock owned by Mr. Keating and (ii) 4,230,022 shares of common stock owned by Mr. Keating’s wife, Judy Keating.

(4)	Represents (i) 2,146,660 shares of common stock owned by Regent Private Capital of which Mr. Lawrence Field is a principal and managing director. Mr. Field disclaims any beneficial ownership of these shares and (ii) 1,625,000 stock options.

(5)	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 and, (iii) 1,187,180 options owned by Mr. O’Connor.

(6)	Represents 1,425,000 stock options.

(7)	Excludes 11,000,000 shares held as collateral under the Securities Purchase Agreement, such shares are included in Martin Keating total shares.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

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 from 2005 through 2008. John O’Connor, a director of 3DIcon, is the Chairman of Newton, O’Connor, Turner & Ketchum.

Director Independence

Of the members of the Company’s board of directors, Victor F. Keen and Lawrence Field are considered to be independent under the listing standards of the Rules of NASDAQ set forth in the NASDAQ Manual.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Audit Fees

The aggregate fees billed by our principal accountant for the audit of our annual financial statements, review of financial statements included in the quarterly reports and other fees that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years ended December 31, 2009 and 2008 were $67,415 and $57,000, respectively.

Audit-Related Fees

The aggregate fees billed by our principal accountant for assurance and advisory services that were related to the performance of the audit or review of our financial statements for the fiscal years ended December 31, 2009 and 2008 were $0 and $0, respectively.

Tax Fees

The aggregate fees billed for professional services rendered by our principal accountant for tax compliance, tax advice and tax planning for the fiscal years ended December 31, 2009 and 2008 were $0 and $0, respectively.

All Other Fees

The aggregate fees billed for products and services provided by our principal accountant for the fiscal years ended December 31, 2009 and 2008 were $0 and $0, respectively.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to our Board of Directors regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. The Board of Directors may also pre-approve particular services on a case-by-case basis.

ITEM 15. EXHIBITS.

3.1		Certificate of Incorporation (1)

3.2		Bylaws (1)

3.3		Amended Certificate of Incorporation (1)

3.4		Amended Certificate of Incorporation (1)

3.5		Amended Certificate of Incorporation (1)

10.1		Securities Purchase Agreement (1)

10.2		Amendment No. 1 to Securities Purchase Agreement and Debenture (1)

10.3		Registration Rights Agreement dated November 3, 2006(1)

10.4		$100,000 convertible debenture (1)

10.5		$1.25 million convertible debenture dated November 3, 2006 (1)

10.6		Common Stock Purchase Warrant (1)

10.7		Sponsored Research Agreement by and between 3DIcon Corporation and the Board of Regents of the University of Oklahoma (1)

10.8		Sponsored Research Agreement Modification No. 1 by and between 3DIcon Corporation and the Board of Regents of the University of Oklahoma (1)

10.9		Sponsored Research Agreement Modification No. 2 by and between 3DIcon Corporation and the Board of Regents of the University of Oklahoma (1)

10.10		Amendment No. 2 to Securities Purchase Agreement, Debentures, and Registration Rights Agreement (2)

10.11		Securities Purchase Agreement dated June 11, 2007 (2)

10.12		$700,000 Convertible Debenture (2)

10.13		$1.25 million convertible debenture dated November 21, 2007

10.14		Registration Rights Agreement dated November 21, 2007

31.1		Certification by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act

31.2		Certification by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act

32.1		Certification by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code

32.2		Certification by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code

(1)	Incorporated by reference to Form SB-2 as filed on December 15, 2006 (File No. 333-139420) and subsequently withdrawn on February 5, 2007

(2)	Incorporated by reference to Form SB-2 as filed on June 14, 2007 (File No. 333-143761)

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	3DICON CORPORATION

Date: March 31, 2010	/s/ Martin Keating
	Name:	Martin Keating
	Title:	Chief Executive Officer
		(Principal Executive and Accounting Officer)

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE		TITLE	DATE

By:	/s/ Martin Keating	Chief Executive Officer, Director (Principal Executive and Accounting Officer)	March 31, 2010
	Martin Keating

By:		Director	March 31, 2010
	Lawrence Field

By:	/s/ John O’Connor	Director	March 31, 2010
	John O’Connor

By:	/s/ Victor F. Keen	Director	March 31, 2010
	Victor F. Keen

3DIcon CORPORATION

(A Development Stage Company)

December 31, 2009 and 2008

CONTENTS

Report of Independent Registered Public Accounting Firm		F-1

Balance Sheets as of December 31, 2009 and 2008		F-2

S Statements of Operations for the years ended December 31, 2009 and 2008 and period from inception (January 1, 2001) to December 31, 2009		F-3

S Statements of Changes in Stockholders’ Deficiency for period from inception (January 1, 2001) to December 31, 2009		F-4

Statements of Cash Flows for the years ended December 31, 2009 and 2008 and for period from inception (January 1, 2001) to December 31, 2009		F-6

Notes to Financial Statements, December 31, 2009 and 2008 and for period from inception (January 1, 2001) to December 31, 2009		F-7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

3DIcon Corporation

We have audited the accompanying balance sheets of 3DIcon Corporation (a Development Stage Company) as of December 31, 2009 and 2008, and the related statements of operations, stockholders' deficiency, and cash flows for the years then ended and for the period from inception (January 1, 2001) to December 31, 2009. 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 31, 2009 and 2008, and the results of its operations and its cash flows for the years then ended and for the period from inception (January 1, 2001) to December 31, 2009, in conformity with U.S. generally accepted accounting principles.

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

We were not engaged to examine management's assessment of the effectiveness of 3DIcon Corporation’s internal control over financial reporting as of December 31, 2009, included in the accompanying Management’s Report on Internal Control over Financial Reporting and, accordingly, we do not express an opinion thereon.

(A Development Stage Company)

BALANCE SHEETS

December 31, 2009 and 2008

	2009			2008
Assets
Current assets:
Cash	$	1,118		$	48,400
Prepaid expenses		11,304			16,113

Total current assets		12,422			64,513

Net property and equipment		18,624			31,537

Debt issue costs, net		16,706			56,978

Deposits-other		17,315			17,315

Total Assets	$	65,067		$	170,343

Liabilities and Stockholders' Deficiency
Current liabilities:
Current maturities of convertible debentures payable	$	564,261		$	364,000
Warrant exercise advances		48,511			140,500
Accounts payable		844,530			1,135,887
Accrued salaries		279,603			59,615
Accrued interest on debentures		16,151			6,808
Advance due officer		11,000			-

Total current liabilities		1,764,056			1,706,810

Convertible debentures payable, less current maturities		93,168			675,279

Total Liabilities		1,857,224			2,382,089

Stockholders' deficiency:
Common stock $.0002 par, 750,000,000 shares authorized; 343,690,812 and 157,515,766 shares issued and outstanding at December 31, 2009 and 2008, respectively		68,738			31,503
Additional paid-in capital		10,716,019			8,766,830
Deficit accumulated during development stage		(12,576,914	)		(11,010,079	)

Total stockholders' deficiency		(1,792,157	)		(2,211,746	)

Total Liabilities and Stockholders' Deficiency	$	65,067		$	170,343

See notes to financial statements

F-2

3DIcon CORPORATION

(A Development Stage Company)

STATEMENTS OF OPERATIONS

Years ended December 31, 2009 and 2008

and Period from Inception (January 1, 2001) to December 31, 2009

	2009			2008			Inception to December 31, 2009
Income:
License Fee	$	-		$	25,000		$	25,000
Grant income		35,139						35,139
Sales		10,200			17,900			28,100

Total income		45,339			42,900			88,239

Expenses:
Research and development		313,082			953,802			2,776,643
General and administrative		1,218,798			2,578,357			9,566,824
Interest		80,294			122,291			321,686

Total expenses		1,612,174			3,654,450			12,665,153

Net loss	$	(1,566,835	)	$	(3,611,550	)	$	(12,576,914	)

Loss per share:
Basic and diluted	$	(0.007	)	$	(0.025	)

Weighted average shares outstanding, Basic and diluted		238,635,629			142,669,496

See notes to financial statements

F-3

3DIcon CORPORATION

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

Period from Inception (January 1, 2001) to December 31, 2009

										Deficit
										Accumulated
	Common Stock						Additional			During the
	Shares			Par Value			Paid-In Capital			Development Stage			Total
Balance, January 1, 2001 – as reorganized		27,723,750		$	27,724		$	193,488		$	-		$	221,212

Adjustment to accrue compensation earned but not recorded		-			-			-			(60,000	)		(60,000	)
Stock issued for services		2,681,310			2,681			185,450			-			188,131
Stock issued for cash		728,500			729			72,121			-			72,850
Net loss for the year		-			-			-			(259,221	)		(259,221	)
Balance, December 31, 2001		31,133,560			31,134			451,059			(319,221	)		162,972

Adjustment to record compensation earned but not recorded		-			-			-			(60,000	)		(60,000	)
Stock issued for services		3,077,000			3,077			126,371			-			129,448
Stock issued for cash		1,479,000			1,479			146,421			-			147,900
Net loss for the year		-			-			-			(267,887	)		(267,887	)
Balance, December 31, 2002		35,689,560			35,690			723,851			(647,108	)		112,433

Adjustment to record compensation earned but not recorded		-			-			-			(90,000	)		(90,000	)
Stock issued for services		15,347,000			15,347			-			-			15,347
Stock issued for cash		1,380,000			1,380			33,620			-			35,000
Reverse split 1:10		(47,174,904	)		-			-			-			-
Par value $0.0001 to $0.0002		-			(51,369	)		51,369			-			-
Net loss for the year		-			-			-			(51,851	)		(51,851	)
Balance, December 31, 2003		5,241,656			1,048			808,840			(788,959	)		20,929

Additional Founders shares issued		25,000,000			5,000			(5,000	)		-			-
Stock issued for services		24,036,000			4,807			71,682			-			76,489
Stock issued for cash		360,000			72			28,736			-			28,808
Warrants issued to purchase common stock at $.025		-			-			18,900			-			18,900
Warrants issued to purchase common stock at $.05		-			-			42,292			-			42,292
Stock warrants exercised		2,100,000			420			60,580			-			61,000
Net loss for the year		-			-			-			(617,875	)		(617,875	)
Balance, December 31, 2004		56,737,656			11,347			1,026,030			(1,406,834	)		(369,457	)

Stock issued for services		5,850,000			1,170			25,201			-			26,371
Stock issued to settle liabilities		5,000,000			1,000			99,000			-			100,000
Stock issued for cash		1,100,000			220			72,080			-			72,300
Warrants issued to purchase common stock at $.025		-			-			62,300			-			62,300
Warrants issued to purchase common stock at $.05		-			-			140,400			-			140,400
Stock warrants exercised		5,260,000			1,052			172,948			-			174,000
Net loss for the year		-			-			-			(592,811	)		(592,811	)
Balance, December 31, 2005		73,947,656		$	14,789		$	1,597,959		$	(1,999,645	)	$	(386,897	)

F-4

3DIcon CORPORATION

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

Period from Inception (January 1, 2001) to December 31, 2009

								Deficit
								Accumulated
	Common Stock				Additional Paid-In			During the Development
	Shares		Par Value		Capital			Stage			Total

Stock issued for services		4,700,000		940		205,597			-			206,537
Debentures converted		3,000,000		600		149,400			-			150,000
Stock issued for cash		200,000		40		16,160			-			16,200
Warrants issued to purchase common stock		-		-		33,800			-			33,800
Warrants converted to purchase common stock		16,489,000		3,297		565,203			-			568,500
Net loss for the year		-		-		-			(1,469,888	)		(1,469,888	)
Balance, December 31, 2006		98,327,656		19,666		2,568,119			(3,469,533	)		(881,748	)
Stock issued for services		817,727		164		155,262			-			155,426
Stock issued for interest		767,026		153		38,198			-			38,351
Stock based compensation		-		-		1,274,666			-			1,274,666
Debentures converted		17,215,200		3,442		1,673,741			-			1,677,183
Stock issued for cash		1,188,960		238		191,898			-			192,136
Options exercised		222,707		45		(45	)		-			-
Warrants issued to purchase common stock		-		-		87,864			-			87,864
Warrants converted to purchase common stock		8,585,956		1,717		462,203			-			463,920
Net loss for the year		-		-		-			(3,928,996	)		(3,928,996	)
Balance, December 31, 2007		127,125,232		25,425		6,451,906			(7,398,529	)		(921,198	)
Stock issued for cash		515,677		103		24,897			-			25,000
Warrants exercised		1,347,261		269		362,425			-			362,694
Stock based compensation		-		-		654,199			-			654,199
Debentures converted		15,257,163		3,052		962,257			-			965,309
Options exercised and escrowed shares		8,671,460		1,734		(1,734	)		-			-
Stocks issued for service		4,598,973		920		312,880			-			313,800
Net loss for the year		-		-		-			(3,611,550	)		(3,611,550	)
Balance, December 31, 2008		157,515,766	$	31,503	$	8,766,830		$	(11,010,079	)	$	(2,211,746	)
Stock issued for cash		20,607,841		4,122		197,878			-			202,000
Warrants exercised		35,100		7		382,583			-			382,590
Debentures converted		77,451,141		15,490		467,514			-			483,004
Stocks issued for service		68,506,130		13,701		524,653			-			538,354
Stock issued for accounts payable		11,264,706		2,253		321,409			-			323,662
Stock issued for interest		8,310,128		1,662		41,647			-			43,309
Warrants issued for accounts payable		-		-		13,505			-			13,505
Net loss for the year		-		-		-			(1,566,835	)		(1,566,835	)
Balance, December 31, 2009		343,690,812	$	68,738	$	10,716,019		$	(12,576,914	)	$	(1,792,157	)

See notes to financial statements

F-5

3DIcon CORPORATION

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

Years ended December 31, 2009 and 2008

and Period from Inception (January 1, 2001) to December 31, 2009

	2009			2008			Inception to December 31, 2009
Cash Flows from Operating Activities
Net loss	$	(1,566,835	)	$	(3,611,550	)	$	(12,576,914	)
Adjustments to reconcile net loss to net cash used in operating activities:
Options issued for services		-			654,199			1,928,865
Stock issued for services		538,355			313,800			1,649,905
Stock issued for interest		43,309			-			81,660
Book value of assets retired		5,861						5,861
Amortization of debt issuance costs		54,227						153,708
Depreciation		7,052			5,658			14,796
Change in:
Impairment of assets					-			292,202
Prepaid expenses and other assets		4,809			(17,484	)		(262,019	)
Accounts payable and accrued liabilities		373,339			708,943			1,604,647

Net cash used in operating activities		(539,883	)		(1,906,163	)		(7,107,289	)

Cash Flows from Investing Activities
Purchase of office furniture and equipment		-			(25,363	)		(39,281	)
Net cash used in investing activities		-			(25,363	)		(39,281	)

Cash Flows from Financing Activities
Proceeds from stock and warrant sales, exercise of warrants and warrant exercise advances		492,601			528,194			3,238,965
Proceeds from issuance of debentures		-			746,213			3,908,713

Net cash provided by financing activities		492,601			1,274,407			7,147,678

Net increase (decrease) in cash		(47,282	)		(657,119	)		1,108
Cash, beginning of period		48,400			705,519			10

Cash, end of year	$	1,118		$	48,400		$	1,118
Supplemental Disclosures
Non-Cash Investing and Financing Activities
Conversion of debentures to common stock (net)	$	483,004		$	965,309		$	3,274,943
Cash paid for interest	$	-		$	124,336		$	232,326
Stock issued to satisfy payable		323,663			-			323,63
Debenture issued to satisfy payable		100,703						100,703

See notes to financial statements

F-6

3DIcon CORPORATION

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

Years ended December 31, 2009 and 2008

and period from Inception (January 1, 2001) to December 31, 2009

Note 1 – Organization and Operations

Organization

3DIcon Corporation (the “Company”) was incorporated on August 11, 1995, under the laws of the State of Oklahoma as First Keating Corporation. The articles of incorporation were amended August 1, 2003 to change the name to 3DIcon Corporation. The initial focus of First Keating Corporation was to market and distribute books written by its founder, Martin Keating. During 2001, First Keating Corporation began to focus on the development of 360-degree holographic technology. The effective date of this transition is January 1, 2001, and the financial information presented is from that date through the current period. The Company has accounted for this transition as reorganization and accordingly, restated its capital accounts as of January 1, 2001. From January 1, 2001, the Company's primary activity has been the raising of capital in order to pursue its goal of becoming a significant participant in the 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 insufficient revenue and capital commitments to fund the development of its planned product and to pay operating expenses. Additionally, the Company has been unable to meet its monthly payment obligations and has therefore been in default of the Sponsored Research Agreement (“SRA”) (see Note 4) and the Newton, O’Connor, Turner, Ketchum 10% convertible debenture (see Note 6). A revised payment schedule was agreed to with the University of Oklahoma (“University”) in October 2008, March 2009 and in and August 2009. Failure of the Company to meet its revised payment obligations could result in the termination or the SRA and any outstanding license agreements under the SRA. The University immediately and without notice or opportunity to cure, may terminate any or all existing agreements between the parties, including but not limited to, the Exclusive License Agreement, the Facilities/Resources Use Agreement, and the 2009 SRAs. The termination of the license agreement with the University would forfeit the Company’s rights to any or all intellectual property licensed to it under the terminated license.

F-7

The Company has realized a cumulative net loss of $12,576,914 for the period from inception (January 1, 2001) to December 31, 2009, and a net loss of $1,566,835 and $3,611,550 for the years ended December 31, 2009 and 2008, respectively.

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

Management plans to fund the future operations of the Company with existing cash of $1,118, grants and investor funding. Under the terms of the Golden State debentures, Golden State may advance an additional $378,787. The additional advance would be available if the Company filed a registration statement; however, the Company does not plan to file such registration statement. In addition, pursuant to the 4.75% Convertible Debenture due in 2011, beginning in November 2007, Golden State is obligated to submit conversion notices in an amount such that Golden State receives 1% of the outstanding shares of the Company every calendar quarter for a period of one year. In connection with each conversion, Golden State is expected to exercise warrants equal to 10 times the amount of principal converted. The warrants are exercisable at $10.90 per share. The number of warrants exercisable is subject to certain beneficial ownership limitations contained in the 4.75% Debenture and the warrants (“the Beneficial Ownership Limitations”). The Beneficial Ownership Limitations prevent Golden State from converting on the 4.75% Debenture or exercising warrants if such conversion or exercise would cause Golden State’s holdings to exceed 9.99% of the Company’s issued and outstanding common stock. Subject to the Beneficial Ownership Limitations, Golden State is required to convert $3,000 of the 4.75% Convertible Debenture and exercise 30,000 warrants per month. Based upon our current stock price, our issued and outstanding shares as of December 31, 2009 and ignoring the impact of the Beneficial Ownership Limitations, the Company may receive up to $3,924,000 in funding from Golden State as a result of warrant exercises during the year ended December 31, 2010.

The Company was approved for a matching grant from Oklahoma Center for the Advancement of Science and Technology (“OCAST”) on November 19, 2008 in the amount of approximately $300,000 to be provided during 2009 and 2010. (See note 10)

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

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

F-8

Income taxes

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

Net income (loss) per common share

The Company computes net income (loss) per share in accordance with ASC No. 260, Earnings Per Share. Under the provisions of this standard, basic net income (loss) per common share is based on the weighted-average outstanding common shares. Diluted net income (loss) per common share is based on the weighted-average outstanding shares adjusted for the dilutive effect of warrants to purchase common stock and convertible debentures. Due to the Company’s losses, such potentially dilutive securities are anti-dilutive for all periods presented. The weighted average number of potentially dilutive shares is 36,271,123 and 21,930,644 for the years ended December 31, 2009 and 2008, respectively.

Use of estimates

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

Debt issue costs

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

Fair value of financial instruments

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

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

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

Note 3 – Recent Accounting Pronouncements

The following are summaries of recent accounting pronouncements that are relevant to the Company:

Subsequent Events – In May 2009, the FASB issued new standards which establish the accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. In particular, the new standards set forth:

·	the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements (through the date that the financial statements are issued or are available to be issued);

F-9

·	the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and

·	the disclosures that an entity should make about events or transactions that occurred after the balance sheet date.

The Company adopted the new standard as of June 30, 2009. See Note 13.

Fair Value Measurements – The FASB’s fair value measurement standards establish a single authoritative definition of fair value based upon the assumptions market participants would use when pricing an asset or liability and create a fair value hierarchy that prioritizes the information used to develop those assumptions. The standards require additional disclosures, including disclosures of fair value measurements by level within the fair value hierarchy. As of January 1, 2008, we adopted the new standards as they related to our financial assets and liabilities. Adoption did not have a significant impact on our financial statements. As of January 1, 2009, we adopted the new standards as they related to our nonfinancial assets and liabilities. In April 2009, the FASB issued additional guidance clarifying the application of US GAAP for fair value measurements in the current economic environment, modifying the recognition of other-than-temporary impairments of debt securities, and requiring companies to disclose the fair value of financial instruments in interim periods. The revised guidance is effective for interim and annual periods ending after June 15, 2009. The guidance:

·	describes how to determine the fair value of assets and liabilities in the current economic environment and reemphasizes that the objective of a fair value measurement remains the price that would be received to sell an asset or paid to transfer a liability at the measurement date.

modifies the requirements for recognizing other-than-temporarily impaired debt securities and significantly changes the existing impairment model for such securities. It also modifies the presentation of other-than-temporary impairment losses and increases the frequency of and expands already required disclosures about other-than-temporary impairment for debt and equity securities.

requires disclosures of the fair value of financial instruments in interim financial statements, the method or methods and significant assumptions used to estimate the fair value of financial instruments, and a discussion of changes, if any, in the method or methods and significant assumptions during the period.

We adopted this new guidance for the quarter ended June 30, 2009. Adoption had no impact on our financial position or results of operations.

Accounting Standards Update – In August 2009, the FASB issued Accounting Standards Update (Update) 2009-5, “Measuring Liabilities at Fair Value” in order to provide further guidance on how to measure the fair value of a liability. The Update clarifies that, in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more prescribed techniques. We adopted the new guidance as of October 1, 2009. Adoption had no impact on our financial position or results of operations.

Accounting Standards Codification – In June 2009, the FASB established the FASB Accounting Standards Codification (Codification), which officially commenced July 1, 2009, to become the source of authoritative US GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative US GAAP for SEC registrants. Generally, the Codification is not expected to change US GAAP. All other accounting literature excluded from the Codification will be considered nonauthoritative. The Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. We adopted the new standards for our quarter ending September 30, 2009. All references to authoritative accounting literature are now referenced in accordance with the Codification.

F-10

Note 4 – Sponsored Research Agreement (SRA)

On April 20, 2004, the Company entered into a SRA entitled "Investigation of Emerging Digital Holography Technologies" (“Phase I”) with the University of Oklahoma (“University”), which expired October 19, 2004. 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 3-Dimensional Display Technologies". The agreement was modified in November 2006 to provide additional funding, and extended the term of the agreement through March 31, 2009.

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 agreed to pay the University $3,468,595 payable in monthly installments ranging from $92,263 to $112,777 beginning April 30, 2007 and ending March 31, 2010, an aggregate commitment of $4,047,439.

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

Should the Company fail to report revenue or fail to timely pay any of the quarterly amounts owed above, the University immediately and without notice or opportunity to cure, may terminate any or all existing agreements between the parties, including but not limited to, the Exclusive License Agreement, the Facilities/Resources Use Agreement, and the 2009 SRAs. The termination of the license agreement with the University would forfeit the Company’s rights to any or all intellectual property licensed to it under the terminated license.

During the years ended December 31, 2009 and 2008, the Company charged operations $64,084 and $953,802, respectively, pursuant to the SRA. At December 31, 2009, the Company owed the University $5,638 in aggregate monthly payments and $525,481 on the arrearages under the revised payment terms.

F-11

Note 5 – Consulting Agreements

Concordia Financial Group.

The Company entered into a one year Independent Consulting Agreement with Concordia effective November 1, 2007. Under the terms of the agreement Concordia will serve as liaison to Golden State Investors, Inc. and provide business strategy services by assisting the Company by reviewing and evaluating the Company’s plans, personnel, board composition, technology, development of business models, building financial models for projections, developing materials to describe the Company, developing capital sources and assisting and advising the Company in its financial negotiations with capital sources. Concordia also advised with respect to effective registration of offerings of Company securities, the management team, the Company’s development of near and long-term budgets, marketing strategies and plans, and assisted in presentations related to the above services. Concordia will be paid a monthly fee of $15,750. Concordia, at its option, may take up to 100% of this monthly fee in registered stock at 50% discount to market; and the Company, at its option, may pay up to 50% of Concordia’s monthly invoice in registered stock, at 50% discount to market, provided that the payment of stock is made within ten (10) days of receipt of invoice and further provided that the stock trades above $.30 per share at any time during the last business day of the month. Market is defined as the five day average of closing prices immediately proceeding the last business day of the calendar month in which the invoiced services were rendered. The Company paid Concordia $189,000 and $204,750 for services during the periods ended December 31, 2009 and 2008, respectively under the terms of the agreement. Under terms of the agreement, the services continue under a month-to-month basis.

In addition to the cash compensation, and conditioned upon terms of the agreement, the Company granted Concordia on May 1, 2008 and October 1, 2008, the option to purchase 250,000 shares of the Company stock, for a total of 500,000 options, at an exercise price of the average closing price of the stock for the five trading days prior to November 1, 2007 ($.37 per share). The shares, upon exercise will be freely tradable. The options expire on the third anniversary of the grant dates. The estimated fair value of the options is $78,391 which was charged to operations in the year ended December 31, 2008.

Innovation Drive, Inc.

Pursuant to a consulting agreement effective November 1, 2007 signed with Innovation Drive, Inc (“IDI”) the Company engaged IDI; (1) to assist in opportunities with the federal government in R & D opportunities and eventually in sales funding; (2) become a subcontractor to prime contractors; (3) investigate, explore and capture multi-agency and/or multi-organizational teaming opportunities to generate a variety of program (and funding) opportunities; and (4) develop and distribute to targeted audiences in Washington materials to generate brand recognition. The Company will pay a monthly fee of $15,000, payable $5,000 in cash and $10,000 in shares of Company stock, until the first contract is signed and thereafter 50% cash and 50% Company stock. The shares issued under the agreement will be issued to Carla R. York, CEO of IDI and discounted 25% from a twenty day moving average prior to the invoice date. Additionally a contract fee ranging from $20,000 to $30,000 will be paid on contracts greater than $200,000 and a fee ranging from $35,000 to $45,000 on contracts greater than $500,000. The variance in fees is based on a contract being awarded within 120 days or within 150 days. If a contract is not awarded within 150 days, the fee is 3% of the contract amount. The agreement is for one year and is automatically extended on a month-to-month basis unless terminated by either party. During 2008 IDI was paid $113,000 under the terms of the consulting agreement. The agreement was terminated effective August 18, 2008.

LIB Holdings, Inc

Pursuant to a letter agreement signed October 1, 2007, LIB Holdings, Inc. (“LIB”) agreed to provide marketing and public relation services which includes (1) assistance with development of written and verbal company communications; (2) assistance with the development and maintenance of relevant and current information on the Company web site; (3) creation of media opportunities for visibility of the Company technologies; and (4) assisting with logistics and other arrangements for Company events. The Company agreed to pay a monthly fee of $3,000 payable in registered shares of the company stock. The number of shares to be issued is based on the 20 day average of the closing price immediately preceding the last day of the calendar month for which the fee is due. The agreement trial commitment period terminated October 1, 2008 and is automatically extended on a month-to-month basis unless terminated by either party. The Company paid LIB $3,000 and $36,000 for services during the periods ended December 31, 2009 and 2008, respectively under the terms of the agreement. The contract was terminated February 1, 2009.

F-12

Corporate Profile LLC

Pursuant to a letter agreement signed October 1, 2007 Corporate Profile LLC agreed to provide investor relation services. The Company agreed to pay a monthly fee of $3,000. Corporate Profile LLC was paid $6,000 and $36,000 for the years ending December 31, 2009 and December 31, 2008 respectively under the terms of the agreement. The contract was terminated February 1, 2009.

Note 6 – Debentures Payable

Debentures payable consist of the following:

	December 31, 2009			December 31, 2008
Senior Convertible Debentures:
9.75% Debenture due July 31, 2009	$	-		$	364,000
6.25% Debenture due 2010		463,558			578,601
4.75% Debentures due 2011		93,168			96,678
10.0% Debenture due 2010		100,703			-
Total Debentures		657,429			1,039,279
Less - Current Maturities		(564,261	)		(364,000	)
Long-term Debentures	$	93,168		$	675,279

Securities Purchase Agreement

6.25% Convertible Debenture due 2009

The Company entered into a Securities Purchase Agreement (“Purchase Agreement”) with Golden State Investors, Inc. (“Golden State”) on November 3, 2006 for the sale of a 6.25% convertible debenture in the principal amount of $1,250,000 (the “First Debenture”). The Company filed a registration statement with the SEC for the resale of the common stock underlying the debenture, which became effective on July 3, 2007. Under the terms of the Purchase Agreement, Golden State advanced $125,000 during 2006 and converted the $125,000 debenture into 357,142 shares of common stock on July 16, 2007 at $0.35 per share. Golden State provided the Company with an additional $312,500 of debenture funding and converted the $312,500 debenture into 892,857 shares of common stock on July 17, 2007 at $0.35 per share. The remaining $812,500 of the $1.25 million debenture was advanced during 2007 and 2008. During the remainder of 2007, $400,000 was released to the Company and the balance of $412,500 was released in 2008. At various dates after July 3, 2007 $478,529 of the debenture was converted into 2,097,406 shares of common stock at prices ranging from $0.20 to $0.26 and during the first quarter of 2008 the remaining $333,971 of the debenture was converted into 2,061,573 shares of common stock at prices ranging from $0.12 to $0.20 based on the formula in the convertible debenture.

6.25% Convertible Debenture due 2010

Pursuant to the terms of the Purchase Agreement, on October 24, 2007, at such time as the principal balance of the First Debenture was less than $400,000, the Company provided Golden State with written notice that it desired to require Golden State to purchase the second debenture.

On November 21, 2007, the Company issued and sold a second convertible note in the principal amount of $1,250,000 to Golden State (the “Second Debenture”). Pursuant to the terms of the Second Debenture, Golden State may, at its election, convert all or a part of the Second Debenture into shares of the Company’s common stock at a conversion rate equal to the lesser of (i) $2.00 or (ii) 90% of the average of the five lowest volume weighted average prices during the twenty trading days prior to Golden State’s election to convert, subject to adjustment as provided in the Second Debenture. In addition, pursuant to the terms of the Second Debenture, the Company agreed to file a registration statement covering the shares of common stock issuable upon conversion or redemption of the Second Debenture. The Company filed a registration statement covering the shares to be issued upon conversion of the debenture. Included in the registration statement were 2.25 million shares issuable upon conversion of the balance of the First Debenture and 4.25 million shares issuable on the Second Debenture based on 2007 market prices and assuming full conversion of the convertible debentures The registration statement became effective on January 4, 2008.

F-13

Golden State advanced $125,000 on the second $1.25 million debenture on November 9, 2007. Additionally, Golden State advanced $312,500 directly to the Company and $433,713 to an escrow account on the Second Debenture in January 2008 at which time the Company placed 7,961,783 shares of common stock in escrow to be released as debentures are converted. As of December 31, 2008, Golden State has funded an aggregate of $871,213 on the Second Debenture. Golden State will be obligated to fund the Company for the remaining $378,787 in principal on the Second Debenture upon the effectiveness of a registration statement underlying the remaining unfunded principal balance on the Second Debenture. At this time, the Company has not filed a registration statement. Under the terms of the Securities Purchase Agreement, the escrowed funds were advanced to the Company during 2008. At various dates during 2008, $292,611 of the debenture was converted into 3,651,337 shares of common stock at prices ranging from $0.05 to $0.14 based on the formula in the convertible debenture. At various dates during 2009, $115,043, of the debenture was converted into 12,124,828 shares of common stock at prices ranging from $0.007 to $0.01 based on the formula in the convertible debenture. Shares remaining in escrow and reported as outstanding at December 31, 2009 total 4,310,449.

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

The Second Debenture is secured by the pledge of 11 million shares of common stock held by Martin Keating, the Chairman of the Company. In the event of default and the Company has not repaid all outstanding principal and accrued interest, along with liquidating damages of $250,000 within one day of default, Golden State shall have the right to immediately sell the pledged shares in satisfaction of any amounts of principal and interest owing under the Second Debenture.

In addition to standard default provisions concerning timeliness of payments, delivery and notifications, the Second Debenture will be in default if the common stock of the Company trades at a price per share of $0.21 or lower, regardless of whether the trading price subsequently is higher than $0.21 per share. The trading price was at $0.21 or lower on several occasions during and subsequent to 2009. On each of the occasions Golden State, by separate letter agreements, agreed that the occasions did not constitute a default and thereby waived the default provision for those occasions only. (See Note 13 -Subsequent Events)

4.75% Convertible Debenture due 2011

On November 3, 2006, the Company also issued to Golden State a 4.75% convertible debenture in a principal amount of $100,000, due 2011, and warrants to buy 1,000,000 shares of the common stock at an exercise price of $10.90 per share. Under the terms of the debenture, warrants are exercised in an amount equal to ten times the dollar amount of the debenture conversion. During 2007 Golden State converted $596 of the $100,000 debenture into 244,045 shares of common stock at $0.002 per share, exercised warrants to purchase 5,956 shares of common stock at $10.90 per share and the Company received $64,920 from the exercise of the warrants. During 2008, Golden State converted $2,726 of the $100,000 debenture into 5,115,695 shares of common stock at $0.002 per share, exercised warrants to purchase 27,261 shares of common stock at $10.90 per share and the Company received $297,145 from the exercise of the warrants. During 2009, Golden State converted $3,510 of the $100,000 debenture into 35,622,803 shares of common stock at $0.002 per share, exercised warrants to purchase 35,100 shares of common stock at $10.90 per share and the Company received $382,590 from the exercise of the warrants. During 2009 Golden State advanced $240,000 against future exercises of warrants and applied $4,181 of accrued interest due on the debenture to the advance account of which $336,170 was applied to the exercise of warrants leaving $48,511 of unapplied advances.

F-14

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

9.75% Convertible due July 31, 2009

To obtain funding for ongoing operations, the Company entered into a Bridge Financing Agreement with Golden State 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 filed a registration statement with the SEC within three days of closing for the resale of the common stock underlying the $1.25 million convertible debenture, which was issued to Golden State on November 3, 2006. The Company received gross proceeds of $700,000 from the sale of the aforementioned debenture. At various dates during 2008, $336,000 of the debenture was converted into 8,079,895 shares of common stock at prices ranging from $0.04 to $0.05 per common share based on the formula in the convertible debenture. At various dates during 2009 the remaining balance $364,000 of the debenture was converted into 29,703,510 shares of common stock at prices ranging from $0.029 to $0.009 per common share based on the formula in the convertible debenture.

Newton, O’Connor, Turner & Ketchum 10% convertible debenture due September 30, 2009

On May 22, 2009, the Company issued to Newton, O’Connor, Turner & Ketchum, a professional corporation (“NOTK”) and the legal counsel to the Company, a 10% convertible debenture in a principal amount of $100,703, due September 30, 2009, and warrants to purchase 4,378,394 shares of the common stock at an exercise price of $0.09 per share through September 30, 2010 and an exercise price of $0.18 per share through September 30, 2014. The Company was indebted to NOTK for legal services performed for the Company and reimbursement of expenses in rendition of those services for the period ended December 31, 2008. The debenture and the warrants were issued in settlement of the indebtedness. The debentures and warrants were recorded at their pro rata fair values in relation to the proceeds received. The warrants were valued at $13,504. The difference between the pro rata fair value and face value of the debenture was charged to operations in 2009. (See note 13)

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

Note 7 – Common Stock and Paid-In Capital

Pursuant to a special meeting of the stockholders held on August 21, 2009, the stockholders approved the filing of an amendment to the Company’s Articles of Incorporation to increase the Company’s authorized shares of common stock from 250,000,000 shares, par value $0.0002, to 750,000,000 shares, par value $0.0002.

At various dates throughout 2008, the Company issued 1,320,000 shares of its common stock pursuant to the exercise of the warrants by non-employees. The Company received $66,000 in cash. The remaining warrants totaling 80,000 were cancelled in 2008.

F-15

Pursuant to a Subscription Agreement dated October 12, 2007, the Company sold 1,188,960 shares of the Company’s common stock at a per share price equal to 75% of the average closing price during the five (5) days prior to the signing ($.31 per share) and warrants to purchase 594,482 shares of its common stock at a price of $.50 per share from October 12, 2008 through October 11, 2009 to two accredited individuals. The Company received $280,000 in cash from the sale. The warrants terminated October 11, 2009.

Pursuant to a Subscription Agreement dated October 1, 2008, the Company sold 515,677 shares of the Company’s common stock at a per share price equal to 80% of the average closing price during the five (5) days prior to the signing ($.048 per share) and warrants to purchase 257,839 shares of its common stock at a price of $.20 per share from October 1, 2008 through August 31, 2009, or $.25 per share from September 30, 2009 through August 31, 2010 to one accredited individual. The Company received $25,000 in cash from the sale. The warrants terminate August 31, 2010.

Pursuant to Subscription Agreements entered into during March and April 2009, the Company sold 999,999 shares of the Company’s common stock at a per share price of $.03 per share and warrants to purchase 500,000 shares of its common stock at a price of $.10 per share from closing for a period of twelve months; $.15 per share for the second subsequent twelve months or; $0.20 per share for the subsequent twelve months to three accredited individuals. The Company received $30,000 in cash from the sale. The 500,000 warrants are valued at $6,579 and the 999,999 shares are valued at $23,421. The warrants terminate three years from date of issue in 2012.

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

On June 18, 2009 the Company entered into Subscription Agreements with two of its directors pursuant to which the two directors purchased 17,941,176 shares of the Company’s common stock at a price per share equal to 50% of the average closing price during the five days prior to June 18, 2009 (0.0068 per share) for aggregate proceeds of $122,000.

Pursuant to Subscription Agreements entered into during October and November 2009, the Company sold 1,666,666 shares of the Company’s common stock at a per share price of $.03 per share and warrants to purchase 16,666,666 shares of its common stock at a price of $.10 per share from closing for a period of twelve months; $.25 per share for the second subsequent twelve months and; $0.50 per share for the third subsequent twelve months to two accredited individuals. The Company received $50,000 in cash from the sale. The 16,666,666 warrants are valued at $35,225 and the 1,666,666 shares are valued at $14,775. The warrants terminate three years from date of issue in 2012.

As of December 31, 2009, there are warrants outstanding to purchase 257,839 shares of common stock at a price of $.25 per share from September 30, 2009 through August 31, 2010, warrants outstanding to purchase 500,000 shares of common stock at a price of $.10 per share through various dates in March and April 2010; $.15 per share through various dates in March and April 2011; or $.20 per share that expire on various dates in March and April 2012, warrants to purchase 16,666,666 shares of its common stock at a price of $.10 per share from closing for a period of twelve months; $.25 per share for the second subsequent twelve months and; $0.50 per share for the third subsequent twelve months and, warrants to purchase 4,378,394 shares of common stock at a price of $0.09 per share through September 30, 2010 and $0.18 per share that expire on September 30, 2014. Additionally, Golden State has warrants outstanding to purchase 931,683 shares of common stock at a price of $10.90 per share which expire November 2, 2011.

F-16

Common stock and options issued for services

During 2009 and 2008 shares of common stock totaling 68,506,130 and 4,598,973 respectively were issued for consulting services for which the Company recognized $538,354 and $313,800 of expense respectively. Additionally, shares of common stock totaling 8,310,128 shares were issued to Golden State for accrued interest due December 1, 2009 for which the Company recognized $36,501 in expense and reduced accrued interest payable for $6,808. Shares totaling 4,264,706 were issued during 2009 to the University of Oklahoma under the repayment terms of the SRA (see Note 4) which were valued at $290,000. Shares totaling 7,000,000 were issued to consultant for previous services provided to the Company for which the accounts payable liability was reduced by $33,662.

Options granted

Board of Directors – On February 25, 2008, the Company agreed to compensate its non-employee Board members with options to purchase registered stock of the corporation equaling the value of $100,000 for each of the three non-employee Board members; using standard evaluation methods. The Board granted options to purchase an aggregate of 2,061,540 shares to its three non-employee Board members; the exercise price for each option is $0.24 per share. The options expire at the end of ten years. The $300,000 compensation is for services on the Board during all or part of the calendar year 2008 and is deemed fully vested on the date of the grant. Operations were charged with $300,000 for the year ended December 31, 2008.

Director - On October 12, 2008, the Company agreed to compensate its Director John O’Connor with 500,000 additional options to purchase stock of the corporation at $0.055 per share. The options expire at the end of ten years. The compensation is for services on the Board during all or part of the calendar year 2008 and is deemed fully vested on the date of the grant. Operations were charged with $25,391 for the year ended December 31, 2008.

Employment Agreement - On April 29, 2007 the Company entered into an Employment Agreement with Vivek Bhaman (the “Bhaman Agreement”) and an Amended Employment Agreement on October 12, 2008 pursuant to which Mr. Bhaman agreed to serve as the President and Chief Operating Officer of the Company. Mr. Bhaman’s employment under the Bhaman Agreement commenced on May 1, 2007 and continued until his resignation February 3, 2009. The following represents the material terms of the Bhaman Agreement:

Annual salary of $250,000;

Grant of 100,000 stock options valued at $21,032 with a term of 10 years and an exercise price of $0.080 per share which vest on the commencement date of employment, May 1, 2007;

Grant of 200,000 stock options valued at $44,064 with a term of 10 years and an exercise price of $1.00 per share which vest on May 1, 2008; and

F-17

Amended Employment Agreement- On October 12, 2008, the Company entered into an Amendment to the Employment Agreement of Vivek Bhaman, (the “Amendment”). Pursuant to the Amendment, Mr. Bhaman’s base salary effective May 1, 2008 was increased $50,000 to $300,000 annually. The Company had the option to defer payment of any or all of the increase until April 30, 2009. Under the deferment, the Company elected to pay the $50,000 increase with shares of the Company’s common stock at a 25% discount to the market price of the Company’s common stock. In addition, pursuant to the amendment, Mr. Bhaman was granted an aggregate of 6,000,000 options to purchase shares of the Company’s common stock at an exercise price of $0.055 per share with a term of 10 years comprised of (i) 1,000,000 options vesting immediately valued at $50,782, and (ii) 5,000,000 options valued at $253,909, vesting at a rate of 125,000 options per quarter. 125,000 of the 5,000,000 options had vested at the time of his resignation pursuant to the terms of the Amendment.

The estimated fair value of the options was determined using the Black-Scholes option pricing model. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 125.20% is based on the historical volatility of the stock since July 25, 2007, the day the Company began trading on the Over-the-counter Bulletin Board. The risk-free interest rate of 2.0% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option of five years is based on historical exercise behavior and expected future experience. Operations were charged $50,782 for the vesting of the one million options on October 1, 2008. Of the five million options, one hundred twenty-five thousand were vested upon resignation, valued at $6,348 and was charged to operations in 2009 under the terms of the Employment Agreement.

On February 3, 2009, Vivek Bhaman resigned as President, Chief Operating Officer and Treasurer of 3DIcon Corporation effective March 3, 2009. Mr. Bhaman was due an aggregate of $41,667 compensation for January and February 2009 under the terms of the April 29, 2007 Employment Agreement. Additionally he is due $41,667 under the terms of the October 12, 2008 Amended Employment Agreement which increased his annual compensation to $300,000 from $250,000. Under the terms of the contract, the Company elected to defer the $50,000 increase until April 30, 2009 and pay the increased compensation in registered common stock discounted at 25% to the market price. Mr. Bhaman was issued 1,851,852 registered common shares at $0.0225 per share for the $41,667 deferred compensation. The Company was unable to pay Mr. Bhaman timely for the remaining $41,667 compensation under his original Employment Contract and therefore agreed to compensate Mr. Bhaman an additional $58,333 in consideration under the terms of a Separation Agreement and Release signed April 29, 2009. Additionally under the terms of the employment agreements, Mr. Bhaman had vested a total of 1,425,000 options to purchase shares of common stock of the Company at prices ranging from $0.055 to $1.00 per share that expire at various dates through October 12, 2018. Mr. Bhaman continued to serve as a Director of the Company through his elected term ending May 17, 2009.

On February 9, 2009, the Board of Directors of the Company appointed James N. Welsh to serve as the Company’s Interim Chief Operating Officer and Treasurer. His appointment was effective as of March 1, 2009. Under the terms of the consulting agreement, Mr. Welsh is to be compensated $2,000 per week in either cash or stock. In the event stock is issued for the compensation, it will be issued at 50% of the average of the five previous closing prices. During the year ended December 31, 2009, $83,000 was charged to operations and Mr. Welsh was issued 7,119,231 shares in consideration of $61,000 at an average price of $0.009 per share in consideration of his services and was due an additional $22,000 at December 31, 2009.

Employment Agreement - On July 28, 2008 the Company entered into an Employment Agreement with Dr. Hakki Refai (the “Employment Agreement”) pursuant to which Dr. Refai has agreed to serve as the Chief Technology Officer of the Company. Dr. Refai’s employment under the Employment Agreement commenced on October 1, 2008 and will continue for a term of one year from October 1, 2008, the date on which he became a full-time employee of the Company. The term of the Employment Agreement will automatically extend for successive one year periods unless otherwise terminated by the parties in accordance with the terms of the Employment Agreement. The following represents the material terms of the Employment Agreement:

F-18

Commission which shall not exceed 3% of sales of the Company’s Pixel Precision™ and CSpace™ technologies products, which commission shall not exceed $30,000 for the 12 month period commencing on October 1, 2008 and $50,000 for the 12 month period commencing on October 1, 2009; and

Grant of 5,000,000 incentive stock options with a term of 10 years and an exercise price of $0.085 per share which vest as follows:

The first installment of 500,000 options, valued at $33,622, are vested and exercisable on October 1, 2008, the date Dr. Refai commences full-time employment;

3,500,000 options, valued at $235,357, vesting in accordance with certain technical achievements, deliverables and milestones as provided in the Employment Agreement; and

The estimated fair value of the options was determined using the Black-Scholes option pricing model. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 95.50% is based on the historical volatility of the stock since July 25, 2007, the day the Company began trading on the Over-the-counter Bulletin Board. The risk-free interest rate of 2.0% is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option of five years is based on historical exercise behavior and expected future experience. Operations were charged $100,867 in 2008 for the vesting of the options cost of Mr. Refai under the terms of the Employment Agreement.

The following summary reflects warrant and option activity for the year ended December 31, 2009

	Attached Warrants			Golden State Warrants			Options

Outstanding December 31, 2008		852,321			966,783			20,111,540
Granted		21,545,061			-			-
Exercised					(35,100	)		-
Cancelled		(594,482	)		-			(6,575,000	)
Outstanding December 31, 2009		21,802,900			931,683			13,536,540

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

F-19

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

Common stock rights

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

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

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

Note 8 – Incentive Stock Plan

In August 2007 the Company established the 3DIcon Corporation 2007 Incentive Stock Plan (the "2007 Plan"). The 2007 Plan is designed to retain directors, executives and selected employees and consultants and reward them for making major contributions to the success of the Company. These objectives are accomplished by making long-term incentive awards under the 2007 Plan thereby providing Participants with a proprietary interest in the growth and performance of the Company. The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2007 Plan shall not exceed eight million (8,000,000) shares. The shares are included in a registration statement filed August 7, 2007 which registered shares totaling fifteen million, (15,000,000) shares.

Incentive stock plan amended

The Company’s 2007 Plan was amended in February 2009 to increase the number of shares available to be issued upon exercise of outstanding options and warrants. Originally 8,000,000 shares were included in the 2007 Plan. The February amendment increased the available shares by 27,000,000 shares to 35,000,000 shares. Shares totaling 30,191,027, 598,973 and, 210,000 were issued from the amended 2007 Plan during the years ended December 31, 2009, 2008, and 2007, respectively , for services rendered to the Company. There are currently no shares available for issuance under the amended 2007 Plan.

In September 2009 the Company established the 3DIcon Corporation 2009 Incentive Stock Plan (the "2009 Plan"). The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2009 Plan shall not exceed 50,737,115 shares. The shares are included in a registration statement filed September 23, 2009. Shares totaling 36,315,103 were issued from the Plan during the year ended December 31, 2009 for services rendered to the Company There are 14,422,022 shares available under the plan at December 31, 2009 (See Note 13).

F-20

Note 9 – Office Lease

The Company signed an Office Lease Agreement (the “Agreement”) on April 24, 2008. The Agreement commences on June 1, 2008 and expires June 1, 2011. At December 31, 2009, minimum future lease payments to be paid annually under the three year non-cancellable operating lease for office space are as follows:

2010	$	27,570
2011	$	11,575
Total	$	39,145

Note 10 – OCAST Grant

The Oklahoma Center for the Advancement of Science and Technology approved the Company’s application for funding of a matching grant titled 800 Million Voxels Volumetric Display, on November 19, 2008. The two-year matching grant, totaling $299,932, has a start date of January 1, 2009. The award is for a maximum of $149,940 for 2009 and the remainder for 2010. The Company received $35,139 from the grant during 2009. The Company received approval for our no cost extension request for the first year of the contract. With the new modification, the first year ends on April 30, 2010. Funding beyond April 30, 2010 is contingent upon satisfactory performance evaluation and the availability of funds.

Note 11 – Income Taxes

At December 31, 2009 and 2008, the Company had accumulated net operating losses of approximately $10,900,000 and $9,335,000, respectively, available to reduce future federal and state taxable income. Unless utilized, the loss carryforward amounts will begin to expire in 2014.

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

The deferred tax asset consisted of the following:

	December 31,			December 31,
	2009			2008
Loss carry forward amount	$	10,900,000		$	9,335,000
Effective tax rate		38	%		38	%
Deferred tax asset		4,142,000			3,547,300
Less valuation allowance		(4,142,000	)		(3,547,000	)
Net deferred taxes	$	-		$	-

Note 12 – Related Party Transaction

3DIcon has engaged the law firm of Newton, O’Connor, Turner & Ketchum as its outside corporate counsel since 2005 through 2008. John O’Connor, a director of 3DIcon, is the Chairman of Newton, O’Connor, Turner & Ketchum. During the years ended December 31, 2009 and 2008, the Company incurred legal fees to Newton, O’Connor, Turner & Ketchum in the amount of $41,509 and $135,440 respectively.

The Company has fee income of $25,000 during 2008 with a company affiliated by common ownership.

F-21

Note 13 – Subsequent Events

Debentures payable

Subsequent to December 31, 2009 Golden State converted $975 of the 4.75% convertible debenture into 29,310,581 shares of common stock at $0.0002 per share and exercised 9,750 warrants at $10.90 per share for $106,275 under the terms of the securities purchase agreements.

Newton, O'Connor, Turner & Ketchum 10% convertible debenture due September 30, 2009

On March 1, 2010, Newton, O'Connor, Turner & Ketchum agreed to extend the due date of their 10% debenture to March 31, 2010 in consideration for one million (1,000,000) shares of common stock. The shares were valued at 50% of the average of the previous five day closing price, which was $0.003 per share totaling $3,000 and will be charged to operations in March 2010.

Common stock and paid in capital

Concordia was issued 22,550,810 shares of common stock in payment of $63,000 for December, January and February services under the consulting agreement. James N. Welsh, President, was issued 10,250,895 shares of common stock in payment of $30,000 for September through December services under the consulting agreement. Dr. Hakki Refai was issued 1,500,000 shares valued at $0.02 per share in payment of accrued salary of $30,000. Additionally common shares totaling 5,000,000 were issued to vendors in payment of $9,650 for services.

CORETEC GROUP INC. - FORM 10-K - March 31, 2010

Attached files

CORETEC GROUP INC. Reports