3DICON CORPORATION

(Exact Name of small business issuer as specified in its charter)

 

Oklahoma	73-1479206
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

6804 South Canton Avenue, Suite 150, Tulsa, Oklahoma 74136

(Address of principal executive offices) (Zip Code)

Issuer's Telephone Number: (918) 494-0505

 

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x   No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x   No o

 

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

 

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o (do not check if smaller reporting company)

Smaller reporting company  x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No x

 

As of November 12, 2010, the issuer had 686,747,383 outstanding shares of Common Stock.

 

 

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TABLE OF CONTENTS

	PART I		Page
Item 1.	Financial Statements		3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		22
Item 4T.	Controls and Procedures		22
	PART II		23
Item 1.	Legal Proceedings		23
Item 1A.	Risk Factors		23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		23
Item 3.	Defaults Upon Senior Securities		23
Item 4.	Reserved		24
Item 5.	Other Information		24
Item 6.	Exhibits		25
SIGNATURES			26

 

 

2

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PART I

 

ITEM 1. FINANCIAL STATEMENTS.

 

INDEX TO FINANCIAL STATEMENTS

		Page
Balance Sheets as of September 30, 2010 (Unaudited) and December 31, 2009 (Audited)		4
Statements of Operations for the three and nine months ended September 30, 2010 and 2009 and period from inception (January 1, 2001) to Septembers 30, 2010 (Unaudited)		5
Statements of Changes in Stockholders' Deficiency for period from inception (January 1, 2001) to September 30, 2010  (Unaudited)		6
Statements of Cash Flows for the nine  months ended September 30, 2010 and 2009 and  period from inception (January 1, 2001) to September 30, 2010 (Unaudited)		7
Notes to Financial Statements, September 30, 2010 (Unaudited)		8

3

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3DIcon CORPORATION

(A Development Stage Company)

BALANCE SHEETS

September 30, 2010 and December 31, 2009

		September 30, 2010 (Unaudited)				December 31,  2009 (Audited)
Assets
Current assets:
Cash		$	2,416			$	1,118
Accounts receivable			2,600				-
Prepaid expenses			41,259				11,304
Total current assets			46,275				12,422
Net Property and equipment, net			14,000				18,624
Debt issue costs, net			-				16,706
Deposits-other			17,315				17,315
Total Assets		$	77,590			$	65,067
Liabilities and Stockholders' Deficiency
Current liabilities:
Current maturities of convertible debentures payable		$	426,323			$	564,261
Warrant exercise advances			-				48,511
Accounts payable			823,002				844,530
Accrued salaries			459,914				279,603
Accrued interest on debentures			31,274				16,151
Advance due officer			13,000				11,000
Total current liabilities			1,753,513				1,764,056
Convertible debentures payable, less current maturities			90,416				93,168
Total liabilities			1,843,929				1,857,224
Stockholders' deficiency:
Common stock $.0002 par, 750,000,000 shares authorized; 645,307,673 and 343,690,812 shares issued and outstanding at September 30, 2010 and December 31, 2009  respectively			129,062				68,738
Additional paid-in capital			11,874,132				10,716,019
Deficit accumulated during development stage			(13,769,533	)			(12,576,914	)
Total stockholders' deficiency			(1,766,339	)			(1,792,157	)
Total Liabilities and Stockholders' Deficiency		$	77,590			$	65,067

See notes to financial statements

 

4

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3DIcon CORPORATION

(A Development Stage Company)

STATEMENTS OF OPERATIONS

Three and Nine Months Ended September 30, 2010 and 2009 and period

From Inception (January 1, 2001) to September 30, 2010

(Unaudited)

		Three Months				Three Months				Nine Months				Nine Months
		Ended				Ended				Ended				Ended				Inception to
		September 30,				September 30,				September 30,				September 30,				September 30,
		2010				2009				2010				2009				2010
Income:
Sales		$	-			$	4,000			$	4,300			$	10,500			$	32,400
License fee			-				-								-				25,000
Grant income			22,908				4,428				51,672				23,403				86,811
Total income			22,908				8,428				55,972				33,903				144,211
Expenses:
Research and development			68,710				80,070				388,769				248,912				3,165,412
General and administrative			252,525				287,825				793,358				912,546				10,360,182
Interest			33,514				15,160				66,464				56,596				388,150
Total expenses			354,749				383,055				1,248,591				1,218,054				13,913,744
Net Loss		$	(331,841	)		$	(374,627	)		$	(1,192,619	)		$	(1,184,151	)		$	(13,769,533	)
Loss per share:
Basic and diluted		$	(0.001	)		$	(0.002	)		$	(0.003	)		$	(0.006	)
Weighted average shares  outstanding, basic and diluted			615,702,636				230,510,289				476,016,326				210,358,321

 

See notes to financial statements 

 

5

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3DIcon CORPORATION

(A Development Stage Company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

 

Period from Inception (January 1, 2001) to September 30, 2010

														Deficit
														Accumulated
		Common Stock								Additional				During the
						Par				Paid-In				Development
		Shares				Value				Capital				Stage				Total
Balance, January 1, 2001 – as reorganized			27,723,750			$	27,724			$	193,488			$	-			$	221,212
Adjustment to accrue compensation earned but not recorded			-				-				-				(60,000	)			(60,000	)
Stock issued for services			2,681,310				2,681				185,450				-				188,131
Stock issued for cash			728,500				729				72,121				-				72,850
Net  loss for the year			-				-				-				(259,221	)			(259,221	)
Balance, December 31, 2001			31,133,560				31,134				451,059				(319,221	)			162,972
Adjustment to record compensation earned but not recorded			-				-				-				(60,000	)			(60,000	)
Stock issued for services			3,077,000				3,077				126,371				-				129,448
Stock issued for cash			1,479,000				1,479				146,421				-				147,900
Net loss for the year			-				-				-				(267,887	)			(267,887	)
Balance, December 31, 2002			35,689,560				35,690				723,851				(647,108	)			112,433
Adjustment to record compensation earned but not recorded			-				-				-				(90,000	)			(90,000	)
Stock issued for services			15,347,000				15,347				-				-				15,347
Stock issued for cash			1,380,000				1,380				33,620				-				35,000
Reverse split 1:10			(47,174,904	)			-				-				-				-
Par value $0.0001 to $0.0002			-				(51,369	)			51,369				-				-
Net loss for the year			-				-				-				(51,851	)			(51,851	)
Balance, December 31, 2003			5,241,656				1,048				808,840				(788,959	)			20,929
Additional Founders shares issued			25,000,000				5,000				(5,000	)			-				-
Stock issued for services			24,036,000				4,807				71,682				-				76,489
Stock issued for cash			360,000				72				28,736				-				28,808
Warrants issued to purchase common stock at $.025			-				-				18,900				-				18,900
Warrants issued to purchase common stock at $.05			-				-				42,292				-				42,292
Stock warrants exercised			2,100,000				420				60,580				-				61,000
Net loss for the year			-				-				-				(617,875	)			(617,875	)
Balance, December 31, 2004			56,737,656				11,347				1,026,030				(1,406,834	)			(369,457	)
Stock issued for services			5,850,000				1,170				25,201				-				26,371
Stock issued to settle liabilities			5,000,000				1,000				99,000				-				100,000
Stock issued for cash			1,100,000				220				72,080				-				72,300
Warrants issued to purchase common stock at $.025			-				-				62,300				-				62,300
Warrants issued to purchase common stock at $.05			-				-				140,400				-				140,400
Stock warrants exercised			5,260,000				1,052				172,948				-				174,000
Net loss for the year			-				-				-				(592,811	)			(592,811	)
Balance, December 31, 2005			73,947,656				14,789				1,597,959				(1,999,645	)			(386,897	)
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	)			-				-
Stock 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
Stock 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	)
Warrants exercised			27,523				5				299,995				-				300,000
Stock issued for cash			5,714,286				1,143				8,857								10,000
Debentures converted			143,439,343				28,688				112,003				-				140,691
Stock issued for accounts payable			79,157,897				15,832				228,404				-				244,236
Stock issued for accrued interest			6,093,396				1,219				15,843								17,062
Stock issued for services			67,184,416				13,437				137,398				-				150,835
Options issued for services			-				-				355,613								355,613
Net loss for the period			-				-				-				(1,192,619	)			(1,192,619	)
Balance, September 30, 2010 (unaudited)			645,307,673			$	129,062			$	11,874,132			$	(13,769,533	)		$	(1,766,339	)

See notes to financial statements

 

6

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3DIcon CORPORATION

(A Development Stage Company)

 

STATEMENTS OF CASH FLOWS

 

Nine Months Ended September 30, 2010 and 2009 and period

From Inception (January 1, 2001) to September 30, 2010

(Unaudited)

 

		Nine Months				Nine Months
		Ended				Ended				Inception to
		September 30,				September 30,				September 30,
		2010				2009				2010
Cash Flows From Operating Activities
Net loss		$	(1,192,619	)		$	(1,184,151	)		$	(13,769,533	)
Adjustments to reconcile net loss to  net cash used in operating activities:
Options issued for services			355,613				-				2,284,477
Stock issued for services			150,835				410,105				1,800,740
Stock issued for interest			17,062				-				98,722
Loss on disposal of assets			-				5,861				-
Depreciation			4,624				5,514				19,420
Amortization of debt issue costs			16,706				30,880				170,414
Asset impairments			-				-				298,063
Change in:
Accounts receivable			(2,600)				-				(2,600	)
Prepaid expenses and other assets			(29,955	)			(49,719	)			(291,974	)
Accounts payable and accrued liabilities			420,142				357,331				2,024,791
Net cash used in operating activities			(260,192	)			(424,179	)			(7,367,480	)
Cash Flows From Investing Activities:
Purchase of office furniture and equipment			-				-				(39,281	)
Class Flows from Financing Activities:
Proceeds from stock sales and exercise of warrants			261,490				438,870				3,500,454
Proceeds from issuance of debentures			-				-				3,908,713
Net cash provided by financing  activities			261,490				438,870				7,409,167
Net increase (decrease) in cash			1,298				14,691				2,406
Cash, beginning of period			1,118				48,400				10
Cash, end of period		$	2,416			$	63,091			$	2,416
Supplemental disclosures
Non-Cash Investing and Financing Activities
Conversion of liabilities and debentures to common stock		$	684,927			$	868,917			$	3,723,695
Cash paid for interest		$	-			$	15,433			$	323,663

 

See notes to financial statements

 

7

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3DIcon CORPORATION

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

Nine months ended September 30, 2010 and 2009

(Unaudited)

Note 1 – Uncertainties and Use of Estimates

Basis of Presentation

The accompanying financial statements of 3DIcon Corporation (the “Company”) have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures made are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company's year-end audited financial statements and related footnotes included in the previously filed 10-K. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company as of September 30, 2010, and the statements of its operations for the three and nine months ended September 30, 2010, and 2009 and the period from inception (January 1, 2001) to September 30, 2010, and cash flows for the nine-month periods ended September 30, 2010 and 2009, and the period from inception (January 1, 2001) to September 30, 2010, have been included. The results of operations for interim periods may not be indicative of the results which may be realized for the full year.

Use of Estimates

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

Revenue Recognition

Revenues from software license fees are accounted for in accordance with Accounting Standards Codification (“ASC”) 985-650, “Software Revenue Recognition”.  The Company recognizes revenue when (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) the sales price is fixed or determinable; and (iv) collectability is reasonably assured. 

Grant revenue is recognized when earned.

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 3).  A revised payment schedule was agreed to with the University of Oklahoma (“University”) in October 2008, March 2009, August 2009 and in February 2010.  Failure of the Company to meet its revised payment obligations could result in the termination of 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 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. (see Note 10 – Subsequent Events)

The Company has realized a cumulative net loss of $13,769,533 for the period from inception (January 1, 2001) to September 30, 2010, and a net loss of $1,192,619 and $1,184,151 for the nine months ended September 30, 2010 and 2009, 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. 

 

8

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Management plans to fund the future operations of the Company with existing cash, grants and investor funding. Under the terms of the Golden State debentures, 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 September 30, 2010 and ignoring the impact of the Beneficial Ownership Limitations, the Company may receive up to $981,000 in funding from Golden State as a result of warrant exercises during the remainder of 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.  There remains $213,189 of grant funds to be provided during 2010 and 2011.  (see Note 4)

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

Note 2 – Recent Accounting Pronouncements

 

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

 

In June 2009, the Financial Accounting Standards Board ("FASB") issued new guidance on the accounting for transfers of financial assets. The new guidance requires additional disclosures for transfers of financial assets, including securitization transactions, and any continuing exposure to the risks related to transferred financial assets. There is no longer a concept of a qualifying special-purpose entity, and the requirements for derecognizing financial assets have changed. The Company has adopted this new guidance as of January 1, 2010. The adoption of this new guidance did not have any impact on its financial statements.

 

In June 2009, the FASB issued new guidance on the accounting for variable interest entities. The new guidance requires an enterprise to perform an analysis to determine whether the enterprise's variable interest or interests give it a controlling financial interest in a variable interest entity; to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity; to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity; to add an additional reconsideration event for determining whether an entity is a variable interest entity when any changes in facts and circumstances occur such that holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights of those investments to direct the activities of the entity that most significantly impact the entity's economic performance; and to require enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise's involvement in a variable interest entity. The Company has adopted this new guidance as of January 1, 2010. The adoption of this new guidance did not have any impact on its financial statements.

 

In January 2010, the FASB issued new guidance on improving disclosures about fair value measurements. The new guidance does not change how fair values are measured. The Company has adopted this new guidance as of January 1, 2010. The adoption of this new guidance did not have any impact on its financial statements.

Note 3 – 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 expired March 31, 2010.  Under this agreement the University conducted 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.

 

9

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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 included monthly payments due for December 2007 through August 31, 2008 of $861,131.  The $1,804,687 balance of the remaining scheduled payment obligation was cancelled.  Under the terms of the revised base payments schedule, the arrearages would be paid in nine monthly base installments from October 31, 2008 to June 30, 2009 of amounts ranging from $35,000 to $101,132 leaving a remaining balance after the base payments of $290,000.  In addition to the monthly base payments, the Company agreed to make additional payments on the $861,131 arrearages based on a formula of 50% of funding in excess of $120,000 plus the base monthly payment.  Without additional payments, the remaining balance was $290,000, which the University accepted 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 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.

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 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.

At September 30, 2010, the Company owed the University $485,649 on the arrearages under the revised payment terms.  (see Note 10 – Subsequent Events)

Note 4 – OCAST Grant

 

The Oklahoma Center for the Advancement of Science and Technology approved the Company’s application for funding of a matching grant titled 800 Million Voxels Volumetric Display, on November 19, 2008.  The two-year matching grant, totaling $299,932, had a start date of January 1, 2009.  The award is for a maximum of $149,940 for 2009 and the remainder for 2010.  The Company received $51,672 and $23,403 from the grant during the periods ended September 30, 2010 and 2009, and $86,811 inception to date.  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 August 31, 2010. Funding beyond August 31, 2010 is contingent upon satisfactory performance evaluation and the availability of funds.

Note 5 – Debentures Payable

Debentures payable consist of the following:

		September 30, 2010				December 31, 2009
Senior Convertible Debentures:
6.25% Debenture due 2010		$	325,620			$	463,558
4.75% Debenture due 2011			90,416				93,168
10.0% Debenture due 2010			100,703				100,703
Total Debentures			516,739				657,429
Less - Current Maturities			(426,323	)			(564,261	)
Long-term Debentures		$	90,416			$	93,168

 

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6.25% Convertible Debenture due October 24, 2010

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

 

Golden State advanced $125,000 on the $1.25 million Debenture on November 9, 2007and $746,213 in January 2008 at which time the Company placed 7,961,783 shares of common stock in escrow to be released as debentures are converted. As of September 30, 2010, Golden State has funded an aggregate of $871,213 on the Debenture. Golden State will be obligated to fund the Company for the remaining $378,787 in principal on the Debenture upon the effectiveness of a registration statement underlying the remaining unfunded principal balance on the Debenture. At this time, the Company has not filed a registration statement.  At various dates during 2009, $115,043, of the Debenture was converted into 12,124,828 shares of common stock at prices ranging from $0.007 to $0.01 based on the formula in the convertible debenture.   At various dates during 2010, $137,938, of the Debenture was converted into 47,141,415 shares of common stock at prices ranging from $0.0028 to $0.003 based on the formula in the convertible debenture. Shares remaining in escrow and reported as outstanding at September 30, 2010 total 4,310,449.

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

In addition to standard default provisions concerning timeliness of payments, delivery and notifications, the Second Debenture will be in default if the common stock of the Company trades at a price per share of $0.21 or lower, regardless of whether the trading price subsequently is higher than $0.21 per share.  The trading price was at $0.21 or lower on several occasions during and subsequent to the period ended September 30, 2010. 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 10 -Subsequent Events) 

4.75% Convertible Debenture due November 3, 2011

On November 3, 2006, the Company also issued to Golden State a 4.75% convertible debenture in a principal amount of $100,000, due 2011, and warrants to buy 1,000,000 shares of the common stock at an exercise price of $10.90 per share.   Under the terms of the debenture, warrants are exercised in an amount equal to ten times the dollar amount of the debenture conversion.  During 2009, Golden State converted $3,510 of the $100,000 debenture into 35,622,803 shares of common stock, exercised warrants to purchase 35,100 shares of common stock at $10.90 per share and the Company received $382,590 from the exercise of the warrants.  During 2009 Golden State advanced $240,000 against future exercises of warrants and applied $4,181 of accrued interest due on the debenture to the advance account of which $336,170 was applied to the exercise of warrants leaving $48,511 of unapplied advances at December 31, 2009.  During 2010, Golden State converted $2,752 of the $100,000 debenture into 96,297,928  shares of common stock, exercised warrants to purchase 27,523 shares of common stock at $10.90 per share and advanced $251,489 against future exercises of warrants of which $300,000 was applied to the exercise of warrants leaving $-0- of unapplied advances at September 30, 2010.

 

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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.

Newton, O’Connor, Turner & Ketchum 10% Convertible Debenture due September 30, 2010

 

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

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

On June 30, 2010, Newton, O'Connor, Turner & Ketchum agreed to extend the March 31, 2010 due date of their 10% debenture to September 30, 2010 in consideration for two million five hundred thousand (2,500,000) shares of common stock.  The shares, which are restricted under SEC Section 144, were valued at 50% of the average of the previous five day closing price on March 1, 2010, which was $0.002 per share totaling $5,175.

Note 6 – 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.

Warrants issued

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.

 

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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.

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 warrants of five years is based on historical exercise behavior and expected future experience.

As of September 30, 2010, there are warrants outstanding to purchase 500,000 shares of common stock at a price of $.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 through November 2010; $.25 per share through November 2011 and; $0.50 per share through November 2012 and, warrants to purchase 4,378,394 shares of common stock at a price of $0.18 per share that expire on September 30, 2014.  Additionally, Golden State has warrants outstanding to purchase 904,160 shares of common stock at a price of $10.90 per share which expire November 2, 2011.

Options granted

Under the terms of an employment agreement dated July 28, 2008 with Dr. Hakki Refai (the “Employment Agreement”) pursuant to which Dr. Refai agreed to serve as the Chief Technology Officer of the Company, Dr. Refai was granted 5,000,000 incentive stock options with a term of 10 years and an exercise price of $0.085 per share which would vest over a period of time based upon certain technical achievements, product deliverables and milestones as provided in the Employment Agreement.  On May 11, 2010 the Board of Directors of the Company agreed to immediately vest the options.  The total value of the options was $268,979 of which $100,867 was charged to operations in 2008.  The remaining value of $168,112 was charged to operations in the second quarter of 2010.

The estimated fair 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. (See also, Note 10)

On July 1, 2010, the Company agreed to compensate its non-employee Board members with options to purchase registered stock of the corporation equaling the value of $100,000 for each of the three non-employee Board members; using standard evaluation methods.  The Board granted options to purchase an aggregate of 57,529,455 shares to its three non-employee Board members; the exercise price for each option is $0.005 per share. The options expire at the end of ten years. The $250,000 compensation (one Board member received one-half the amount due to his resignation in mid-year) is for services of the Board during the period ending December 31, 2010 and is deemed fully vested on the date of the grant. Operations were charged with $125,000 for the period ended June 30, 2010 and $62,500 will be charged to operations in each of the quarters ending September 30, 2010 and December 31, 2010.

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

 

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The following summary reflects warrant and option activity for the period ended September 30, 2010:

		Attached Warrants				Golden State Warrants				Options
Outstanding December 31, 2009			21,802,900				931,683				13,536,540
Granted			-				-				57,529,455
Exercised			-				(27,523	)			-
Cancelled			(257,839)				-				-
Outstanding September 30, 2010			21,545,061				904,160				71,065,995

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

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

Common stock issued for services

The law firm of Newton, O’Connor, Turner & Ketchum was issued shares totaling 2,500,000 in consideration of extending the due date of the 10% convertible debenture due March 31, 2010 to September 30, 2010.

During the nine- month periods ended September 30, 2010 and 2009 shares of common stock totaling 67,184,416 and 42,039,444 respectively were issued for consulting services for which the Company recognized $150,835 and $410,105 of expense respectively.  Additionally, during the period ending September 30, 2010 shares totaling 79,157,897 were issued to consultant for previous services provided to the Company for which the accounts payable liability was reduced by $244,236.

Note 7 – 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 September 30, 2010, minimum future lease payments to be paid annually under the three year non-cancellable operating lease for office space are as follows:

2010		$	6,944
2011		$	11,575
Total		$	18,519

Note 8 – Incentive Stock Plan

In September 2009 the Company established the 3DIcon Corporation 2009 Incentive Stock Plan (the "2009 Plan"). The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2009 Plan shall not exceed 50,737,115 shares.  The shares are included in a registration statement filed September 23, 2009.  Shares totaling 36,315,103 were issued from the Plan during the year ended December 31, 2009 for services rendered to the Company.  Shares totaling 14,422,012 were issued from the amended 2009 Plan during the period ended February 28, 2010 for services rendered to the Company. There are currently no shares available for issuance under the 2009 Plan.

In February 2010 the Company established the 3DIcon Corporation 2010 Incentive Stock Plan (the "2010 Plan"). The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2010 Plan shall not exceed seventy-five million (75,000,000) shares. The shares are included in a registration statement filed February 26, 2010. Shares totaling 71,910,973 were issued from the 2010 Plan during the period ended September 30, 2010 for services rendered and to satisfy accounts payable to the Company. There are currently 3,089,027 shares available for issuance under the 2010 Plan. 

In June 2010 the Company established the 3DIcon Corporation 2010 Equity Incentive Stock Plan (the "2010 EIP"). The total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the 2010 EIP shall not exceed sixty million (60,000,000) shares.  The shares are included in a registration statement filed June 24, 2010. Shares totaling 58,509,328 were issued from the 2010 EIP during the period ended September 30, 2010 for services rendered and to satisfy accounts payable to the Company. There are currently 1,490,672 shares available for issuance under the 2010 EIP.

 

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Note 9 – Related Party Transaction

3DIcon has engaged the law firm of Newton, O’Connor, Turner & Ketchum as its outside corporate counsel since 2005 and through 2008. John O’Connor, a director of 3DIcon, is the Chairman of Newton, O’Connor, Turner & Ketchum.   During the periods ended September 30, 2010 and 2009, the Company incurred legal fees to Newton, O’Connor, Turner & Ketchum in the amount of $21,551 and $33,701 respectively.

Martin Keating, the Chairman and major shareholder, has advanced the company $13,000 and is owed an additional $16,068 in unreimbursed business expenses at September 30, 2010.  Currently there are no specific terms for repayment.  Additionally Mr. Keating and his wife, an employee of the Company are due accrued salaries totaling $365,034.

Note 10 – 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 September 30, 2010 and subsequent to September 30, 2010.  On each of the occasions Golden State, by letter agreements, agreed that the occasions did not constitute a default and thereby waived the default provision for the occasions. 

Subsequent to September 30, 2010 Golden State converted $70,000 of the 6.25% convertible debenture into 26,036,484 common shares at $0.0028 per share under the terms of the securities purchase agreements. 

5% Convertible Promissory Note

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

 

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-Looking Statements

The information in this report contains forward-looking statements. All statements other than statements of historical fact made in this report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should” or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations.

 

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

Plan of Operation

Background:

 

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 the University and our Chief Technology Officer have 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 3DIcon 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 and $51,672 during the first nine months of 2010.  We received approval for our no cost extension request for the first year of the contract. With the new modification, the first year ended on August 31, 2010. Funding beyond August 31, 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 Sponsored Research Agreement (“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®™, 3DIcon 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.

 

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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		Light Surface Display for		Filed by OU in April 2007				April 2007		April 2007
Colorful Translation 3D Volumetric Display		Rendering Three-Dimensional
3D Light Surface Display		Image (Combined)
Volumetric Liquid Crystal Display		Volumetric Liquid Crystal Display		Filed by OU in April 2007		May 2009
		for Rendering Three-Dimensional
		Image (Combined)
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

 

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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 3DIcon and researchers, faculty and selected graduate or doctoral level students at the University with oversight by 3DIcon 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 the University 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).