Annual report pursuant to Section 13 and 15(d)

Preferred Stock, Warrants and Options

v3.7.0.1
Preferred Stock, Warrants and Options
12 Months Ended
Dec. 31, 2016
Common Stock, Including Additional Paid In Capital, Net Of Discount [Abstract]  
Preferred Stock, Warrants and Options
Note 7 – Preferred Stock, Warrants and Options
 
The terms of the Series A Convertible Preferred Stock, Series B Convertible Preferred Stock and Warrants are as follows: 
 
Series A Convertible Preferred Stock
 
A total of 500,000 shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”) have been authorized for issuance under the Certificate of Designation of Preferences, Rights and Limitation of Series A Convertible Preferred Stock of 3DIcon Corporation (the “Certificate of Designation”), which Certificate of Designation was filed with the Secretary of State of the State of Oklahoma on December 11, 2013. The shares of Series A Preferred Stock have a par value of $0.0002 per share and a stated value of $1.00 per share (the “Stated Value”), and shall receive a dividend of 6% of their Stated Value per annum payable or upon conversion or redemption of Series A Preferred at the option of the Corporation. We have not paid any cash or stock dividends to the holders of our Series A Preferred. As of December 31, 2016 dividends in arrears totaled approximately $66,000. Under the Certificate of Designation, the holders of the Series A Preferred Stock have the following rights, preferences and privileges:
 
The Series A Preferred Stock may, at the option of the Investor, be converted at any time after the first anniversary of the issuance of the Series A Preferred Stock or from time to time thereafter into 50,000,000 shares of Common Stock that such investor is entitled to in proportion to the 500,000 shares of Series A Preferred so designated in the Certificate of Designation.
 
The Series A Preferred Stock will automatically be converted into Common Stock anytime the 5 day average VWAP of the Company’s Common Stock prior to such conversion is equal to $0.05 or more. Such mandatory conversion would be converted by the same method described above for discretionary conversions. 
 
Except as otherwise required by law, the holders of shares of Series A Preferred Stock shall not have voting rights or powers. 
 
In the event of any (i) liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or ii) sale, merger, consolidation, reorganization or other transaction that results in a change of control of the Company, each holder of a share of Series A Preferred shall be entitled to receive, subject to prior preferences and other rights of any class or series of stock of the Company senior to the Series A Preferred, but prior and in preference to any distribution of any of the assets or surplus funds of the Company to holders of Common Stock, or any other class or series of stock of the Company junior to the Series A Preferred, an amount equal to the Stated Value plus accrued and unpaid dividends (as adjusted for any stock dividends, combinations or splits with respect to such shares) (the “Preference Amount”). After such payment has been made to the holders of Series A Preferred of the full Preference Amount to which such holders shall be entitled, the remaining net assets of the Company available for distribution, if any, shall be distributed pro rata among the holders of Common Stock. In the event the funds or assets legally available for distribution to the holders of Series A Preferred are insufficient to pay the Preference Amount, then all funds or assets available for distribution to the holders of capital stock shall be paid to the holders of Series A Preferred pro rata based on the full Preference Amount to which they are entitled.
 
The Company may not declare, pay or set aside any dividends on shares of any class or series of capital stock of the Company (other than dividends on shares of Common Stock payable in shares of Common Stock) unless the holders of the Series A Preferred Stock shall first receive, or simultaneously receive, a dividend on each outstanding share of Series A Preferred in an amount equal to the dividend per share that such holders would have received had they converted their shares of Series A Preferred into shares of Common Stock immediately prior to the record date for the declaration of the Common Stock dividend in an amount equal to the average VWAP during the 5 trading days prior to the date such dividend is due.  
 
In regards to the implications of the Exchange Transaction on Section 6 of the Series A Certificate of Designation (“COD”), the Company’s position is that a “Liquidity Event” as defined in Section 6(b) of the COD, as the concept was intended by all the Company and investors purchasing the shares, has not occurred.
 
Series A Warrants
 
Each Unit under the Securities Purchase Agreement consists of warrants entitling the investor to purchase fifty (50) shares of Common Stock for each share of Series A Preferred purchased by such investor in the Private Placement, at an initial exercise price per share of $0.0055. The exercise price and number of shares of Common Stock issuable under the warrants are subject to adjustments for stock dividends, splits, combinations and similar events. On or after the first anniversary of the issuance of the warrants and prior to close of business on the fourth anniversary of the issuance of the warrants, the warrants may be exercised at any time upon the election of the holder, provided however, that an investor may at any given time convert only up to that number of shares of Common Stock so that, upon conversion, the aggregate beneficial ownership of the Company’s Common Stock (calculated pursuant to Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of such investor and all persons affiliated with such investor, is not more than 4.99% of the Company’s Common Stock then outstanding (subject to adjustment up to 9.99% at the investor’s discretion upon 61 days’ prior notice).   
 
Series B Convertible Preferred Stock
 
On March 22, 2016, 3DIcon filed with the Secretary of State of the State of Oklahoma a Certificate of Designation (the “Certificate of Designation”), setting for the Preferences, Rights and Limitation of the Company’s Series B Convertible Preferred Stock (the “Series B Preferred”). The Two Million (2,000,000) shares of Series B Preferred designated under the Certificate of Designation have a stated value of $1.00 per share (the “Stated Value”). Under the Certificate of Designation, the holders of the Series B Preferred have the following rights, preferences and privileges: 
 
The holders of Series B Preferred are not entitled to receive dividends but have voting rights equal to the number of shares of the Company’s Common Stock into which their Series B Preferred can be converted, whether or not the shares are available for issuance.
 
At the option of the holder, Series B Preferred may be converted in whole or in part, from time to time, into One Thousand Nine Hundred Fourteen (1,914) shares of Common Stock. The Series B Preferred Stock will automatically be converted into Common Stock if (i) at anytime the 5 day average VWAP of the Company’s Common Stock prior to such automatic conversion is equal to $0.10 or more; or (ii) the Company enters into a transaction for which the Company enters into a share exchange agreement or agreement and plan of merger, which agreement is executed within ninety (90) days after the date of the Certificate of Designation and pursuant to which the Company thereafter becomes a consolidated company with another entity, and the Company issues equity securities of the Company. Such automatic conversion would be converted by the same method described above for discretionary conversions.  
 
In the event of any i) liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or ii) sale, merger, consolidation, reorganization or other transaction that results in a change of control of the Company, each holder of a share of Series B Preferred shall be entitled to receive, subject to prior preferences and other rights of any class or series of stock of the Company senior to the Series B Preferred, but prior and in preference to any distribution of any of the assets or surplus funds of the Company to holders of Common Stock, or any other class or series of stock of the Company junior to the Series B Preferred, an amount equal to the Stated Value (as adjusted for any stock dividends, combinations or splits with respect to such shares) (the “Preference Amount”). After such payment has been made to the holders of Series B Preferred of the full Preference Amount to which such holders shall be entitled, the remaining net assets of the Company available for distribution, if any, shall be distributed pro rata among the holders of Common Stock. In the event the funds or assets legally available for distribution to the holders of Series B Preferred are insufficient to pay the Preference Amount, then all funds or assets available for distribution to the holders of capital stock shall be paid to the holders of Series B Preferred pro rata based on the full Preference Amount to which they are entitled.
 
On September 30, 2016, 3DIcon filed with the Secretary of State of the State of Oklahoma a Certificate of Amendment to the Certificate of Designation, increasing the number of authorized shares of Series B Preferred Stock from 2,000,000 shares to 6,600,000 shares.
 
Pursuant to the Share Exchange Agreement (see Note 2), 3DIcon issued 4,760,872 shares of 3DIcon’s Series B Convertible Preferred Stock in the reverse acquisition of Coretec.
 
Golden State and Other Warrants
 
As of December 31, 2016, Golden State has warrants outstanding to purchase 18,318 shares of common stock at a price of $381.50 per share which expire December 31, 2016, subsequently extended to June 1, 2017. Global Capital has warrants outstanding to purchase 300,000 shares of common stock at a price of $0.0032 per shares which expire on March 31, 2019. Additionally, from the Series A preferred stock issuance, there are 6,000,000 warrants outstanding to purchase common shares at $0.0055 per share which expire December 31, 2017 and 13,250,000 warrants outstanding that were issued to Victor Keen, Co-Chairman of the Board of Directors of the Company, which expire on January 17, 2018.   
 
Warrants Summary
 
The following table summarizes the Company’s warrant activity during the year ended December 31, 2016:
 
 
 
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
 
 
 
Weighted
 
 
Average
 
 
 
 
 
 
 
 
 
Average
 
 
Remaining
 
 
Aggregate
 
 
 
Number of
 
 
Exercise
 
 
Life
 
 
Intrinsic
 
 
 
Warrants
 
 
Price
 
 
In Years
 
 
Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding, December 31, 2015
 
 
19,789,516
 
 
 
0.40
 
 
 
 
 
 
 
 
 
Granted
 
 
-
 
 
 
-
 
 
 
 
 
 
 
 
 
Expired
 
 
(221,121
)
 
 
3.15
 
 
 
 
 
 
 
 
 
Exercised
 
 
(77
)
 
 
381.50
 
 
 
 
 
 
 
 
 
Outstanding, December 31, 2016
 
 
19,568,318
 
 
$
0.36
 
 
 
1.0
 
 
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercisable, December 31, 2016
 
 
19,568,318
 
 
$
0.36
 
 
 
1.0
 
 
$
-
 
 
The following table summarizes the Company’s warrants as of December 31, 2016:
 
Warrants Outstanding
 
 
Warrants Exercisable
 
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
 
Outstanding
 
 
Average
 
 
Exercisable
 
Exercise
 
 
Number of
 
 
Remaining Life
 
 
Number of
 
Price
 
 
Warrants
 
 
In Years
 
 
Warrants
 
 
 
 
 
 
 
 
 
 
 
 
$
0.0055
 
 
 
19,250,000
 
 
 
1.0
 
 
 
19,250,000
 
$
0.0032
 
 
 
300,000
 
 
 
2.2
 
 
 
300,000
 
$
381.50
 
 
 
18,318
 
 
 
0.4
 
 
 
18,318
 
 
 
 
 
 
19,568,318
 
 
 
1.0
 
 
 
318,318
 
 
Options Summary
 
Stock options for employees, directors or consultants that vest immediately, 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 vested. 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.
 
The following table summarizes the Company’s option activity during the year ended December 31, 2016:
 
 
 
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
 
 
 
Weighted
 
 
Average
 
 
 
 
 
 
 
 
 
Average
 
 
Remaining
 
 
Aggregate
 
 
 
Number of
 
 
Exercise
 
 
Life
 
 
Intrinsic
 
 
 
Options
 
 
Price
 
 
In Years
 
 
Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding, December 31, 2015
 
 
23,030,274
 
 
$
0.08
 
 
 
 
 
 
 
 
 
Granted
 
 
-
 
 
 
-
 
 
 
 
 
 
 
 
 
Expired
 
 
(57,143
)
 
 
1.08
 
 
 
 
 
 
 
 
 
Exercised
 
 
-
 
 
 
-
 
 
 
 
 
 
 
 
 
Outstanding, December 31, 2016
 
 
22,973,131
 
 
$
0.08
 
 
 
1.6
 
 
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercisable, December 31, 2016
 
 
22,973,131
 
 
$
0.08
 
 
 
1.6
 
 
$
-
 
  
The following table summarizes the Company’s options as of December 31, 2016:
 
Options Outstanding
 
 
Options Exercisable
 
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
 
Outstanding
 
 
Average
 
 
Exercisable
 
Exercise
 
 
Number of
 
 
Remaining Life
 
 
Number of
 
Price
 
 
Options
 
 
In Years
 
 
Options
 
 
 
 
 
 
 
 
 
 
 
 
$
0.01
 
 
 
20,000,000
 
 
 
1.3
 
 
 
20,000,000
 
$
0.18
 
 
 
1,314,959
 
 
 
3.5
 
 
 
1,314,959
 
$
0.23
 
 
 
1,034,739
 
 
 
5.5
 
 
 
1,034,739
 
$
0.35
 
 
 
342,856
 
 
 
0.6
 
 
 
342,856
 
$
1.40
 
 
 
169,534
 
 
 
4.4
 
 
 
169,534
 
$
1.93
 
 
 
46,428
 
 
 
1.8
 
 
 
46,428
 
$
8.40
 
 
 
58,901
 
 
 
1.2
 
 
 
58,901
 
$
35.00
 
 
 
5,714
 
 
 
1.3
 
 
 
5,714
 
 
 
 
 
 
22,973,131
 
 
 
1.6
 
 
 
22,973,131