|6 Months Ended|
Jun. 30, 2012
Note 9 – Subsequent Events
In accordance with the terms of the Second Debenture an event of default occurs if the common stock of the Company trades at a post-split price per share of $7.35 or lower. The trading price was at $7.35 or lower on several occasions during the period ended June 30, 2012 and subsequent to June 30, 2012. On each of the occasions Golden State, by letter agreements, agreed that the occasions did not constitute a default and thereby waived the default provision for the occasions.
Subsequent to June 30, 2012, Golden State converted $1,370 of the 4.75% convertible debenture into 1,134,233 shares of common stock at $0.0012 per share and exercised 392 warrants at $381.50 per share for $158,159 and advanced $50,000 for future exercise of warrants under the terms of the securities purchase agreements.
5% Convertible Promissory Note
Subsequent to June 30, 2012, JMJ advanced $25,000 and collected $2,000 OID on the 5.0% convertible promissory note.
5% Convertible Promissory Note #2
On July 27, 2012 (the Effective Date”), the Company issued and sold a convertible promissory note #2 (the “Note #2") in the principal amount of $140,000 to JMJ Financial (“JMJ”). The Note includes a $15,000 original issue discount (the “OID”) that will be prorated based on the advances actually paid to the Company. JMJ advanced $75,000 upon execution of the Note and collected $6,000 OID. Pursuant to the terms of the Note #2, JMJ may, at its election, convert all or a part of the Note #2 into shares of the Company's common stock at a conversion rate equal to the lesser of (i) $0.15 or (ii) 70% of the lowest trade price during the twenty-five trading days prior to JMJ’s election to convert. In addition, pursuant to the terms of the Note #2, the Company agreed to include on the next registration statement filed by the Company with the SEC all shares issuable upon conversion of the Note #2. Failure to do so will result in liquidated damages of 25% of the outstanding principal balance of the Note #2. If the Company repays the Note #2 on or before ninety days from the Effective Date, the interest rate will be zero percent. If the company does not repay the Note #2 on or before ninety days from the Effective Date, a one-time interest charge of 5% shall be applied to the principal sum of $140,000. The principal of the Note #2 is due one year from the date of each of the principal amounts advanced.
The Note #2 is subject to a Mandatory Registration Agreement (the “Agreement”) whereby no later than August 31, 2012, the Company agrees to file, at its own expense, an amendment to the S-1 Registration Statement the Company filed with the SEC on July 3, 2012, to include in such Registration Statement 4,750,000 shares of common stock issuable under the Notes, (the Note and Note #2) as set forth below. The Company will thereafter use its best efforts to cause such Registration Statement to become effective as soon as possible after such filing but in no event later than one hundred and twenty (120) days from the date of this Agreement. Failure to file the Amended Registration Statement by August 15, 2012 will result in a penalty/liquidated damages of $10,000. In addition, failure to have the Registration Statement declared effective within 120 days of the date of this Agreement will result in a penalty/liquidated damages of $25,000. Any such penalties/liquidated damages will be added to the balance of either the Note or the Note #2 at the Holder’s discretion (under the Holder’s and the Company’s expectation that those penalties/liquidated damages will tack back to the date of such Note for purposes of Rule 144).
Common stock issued for services and liabilities
Subsequent to June 30, 2012 post-split shares of common stock totaling 358,508 were issued for consulting services for which the Company recognized $31,500 of expense.
On July 2, 2012, the Board of Directors were granted options to purchase 919,768 restricted shares of common stock at $0.232 per shares as compensation for their services during 2012. The options are fully vested and expire at the end of ten years. The estimated fair value of the options is $200,000 and was determined using the Black-Scholes option pricing model and was charged to operations in July 2012. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 170% 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 1.64% 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.
Additionally on July 2, 2012 the Board of Directors granted Victor Keen, a board member, options to purchase 114,971 restricted shares of common stock at $0.232 per shares as compensation for his services in regard to the DTI acquisition. The options are fully vested and expire at the end of ten years. The estimated fair value of the options is $25,000 and was determined using the Black-Scholes option pricing model and was charged to operations in July 2012. The expected dividend yield of $-0- is based on the average annual dividend yield as of the grant date. Expected volatility of 170% 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 1.64% 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 July 3, 2012, the Company filed a registration statement on Form S-1 with the SEC for a public offering of our securities. We expect to amend the registration statement, which amendment or amendments are expected to contain further details regarding the offering.
Equity Incentive Stock Plan
Post-split shares totaling 1,107,765 were issued from the 2012 EIP subsequent to June 30, 2012 for services rendered and to satisfy accounts payable of the Company. There are currently 3,892,235 shares available for issuance under the 2012 EIP.
The Company signed an Office Lease Agreement (the “Lease Agreement”) on April 24, 2008. The Lease Agreement commenced on June 1, 2008 and expired June 1, 2011. On March 8, 2011 the Lease Agreement was amended (amendment 1) to extend the expiration date to May 31, 2012. On July 24, 2012 the Lease Agreement was amended (amendment 2) to extend the expiration date to July 31, 2015. The minimum future lease payments to be paid annually under the three-year non-cancellable amended operating lease for office space are as follows:
Dimension Technologies Inc. - Non-Binding Letter of Intent
As previously disclosed in the Company Current Report on Form 8-K, filed with the SEC on July 19, 2012, on July 13, 2012, 3DIcon Corporation executed a non-binding letter of intent (the “Letter of Intent”) outlining the principal terms and conditions to acquire Dimension Technologies Inc., a privately held New York corporation (“DTI”). DTI is a developer of glasses-free flat screen 3D display technologies and products that are 2D/3D switchable. Founded in 1986, DTI’s intellectual property portfolio includes 10 patents that have been granted in multiple countries. The Letter of Intent is not binding on either party and there is no assurance that the parties will reach a definitive agreement, and if they do, there is no assurance that the conditions thereunder will be met to consummate the acquisition. Furthermore, if the acquisition is consummated, there is no assurance that the anticipated effects of the transaction will be realized.