**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington, D.C. 20549




**Form
      10-KSB**




(Mark
      One)




**x** **ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF**  **1934**




**FOR
      THE FISCAL YEAR ENDED DECEMBER 31, 2007**




**o** **TRANSITION
        REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
        1934**





**FOR
      THE TRANSITION PERIOD FROM __________ TO __________**




**COMMISSION**  **FILE
      NUMBER ________________________________**





**3DICON
      CORPORTION**


(Name
      of
      small business issuer in its charter)




OKLAHOMA
            
            73-1479206(State
                or other jurisdiction of
            
            (I.R.S.
                Employerincorporation
                or organization)
            
            Identification
                No.)





7507
      S. Sandusky Avenue, Tulsa, OK 74136


(Address
      of principal executive offices) (Zip Code)





Issuer's
      telephone Number: (918) 492-5082




Securities
      registered under Section 12(b) of the Exchange Act: None.




Securities
      registered under Section 12(g) of the Exchange Act: Common Stock,


$.0002
      par value




Check
      whether the issuer is not required to file reports pursuant to Section
      13


or
      15(d)
      of the Exchange Act. o




Check
      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




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant's knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. o




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




State
      issuer's revenues for its most recent fiscal year. $ None




The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates, computed by reference to the average bid and asked price of
      such
      common equity as of March 28, 2008 was $29,588,538.




As
      of
      March 28, 2008, the issuer had 136,039,254 outstanding shares of Common
      Stock.




**DOCUMENTS
      INCORPORATED BY REFERENCE: NONE**




Transitional
      Small Business Disclosure Format (check one): Yes o No x







TABLE
      OF
      CONTENTS





PagePART
                IItem
                1.
            Description
                of Business
            
            3Item
                2.
            Description
                of Property
            
            12Item
                3.
            Legal
                Proceedings
            
            12Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            12PART
                IIItem
                5.
            Market
                for Common Equity and Related Stockholder Matters
            
            12Item
                6.
            Management's
                Discussion and Analysis or Plan of Operation
            
            14Item
                7.
            Financial
                Statements
            
            24Item
                8.
            Changes
                In and Disagreements with Accountants on Accountingand
                Financial Disclosure
            
            24Item
                8A.
            Controls
                and Procedures
            
            24Item
                8B.
            Other
                Information
            
            25PART
                IIIItem
                9.
            Directors,
                Executive Officers, Promoters and Control Persons;
            
            25Item
                10.
            Executive
                Compensation
            
            27Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Managementand
                Related Stockholder Matters
            
            28Item
                12.
            Certain
                Relationship and Related Transactions
            
            29Item
                13.
            Exhibits
            
            29Item
                14.
            Principal
                Accountant Fees and Services
            
            30SIGNATURES
            
            31





2


**PART
      I**


**ITEM
      1. DESCRIPTION OF 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 in 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 to conduct a pilot study to
      determine the opportunity and feasibility for the creation of volumetric 3
      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 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”.




In
      the
      fourth quarter of 2007 we announced the release of our first product, “Pixel
      Precision”. This is a companion software application to the DMD Discovery TM line
      of products manufactured by Texas Instruments®.





**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. At this time,
      we do not own any intellectual property rights in holographic technologies,
      and,
      apart from the Sponsored Research Agreement with the University of Oklahoma,
      have no contracts or agreements pending to acquire such rights or any other
      interest in such rights. We plan to market the technology and the intellectual
      property developed by the University of Oklahoma by targeting various
      industries, such as retail, manufacturing, entertainment, medical, healthcare,
      transportation, homeland security and the military.





**Overview
      of Development of 3D Technology**





Holography
      as a means of wavefront, or 3D image, reconstruction was first introduced by
      Dennis Gabor in 1948 when he developed a process for recording the amplitude
      and
      phase of an optical wavefront. The word “holography” is derived from the Greek
      words *holos* (whole)
      and *graphein* (to
      write), and Gabor coined the term “hologram” to refer to a “total recording.”
The widespread practice of holography took off in the early 1960s with the
      invention of the laser. Since that time, holography has been used in a variety
      of applications, many in routine commercial use today. *Digital
      holography* refers
      to the use of digital computers to create holograms, sometimes referred to
      as *computer-generated
      holograms* .
      Upon
      undertaking this investigation into the use of digital holography as a viable
      technology for 3D imaging and visualization, we found that holography is often
      the starting point for technologists seeking to realize practical commercial
      systems, but in practice, many solutions involve other approaches such as
      stereoscopic and swept-volume techniques.





A
      team of
      researchers led by Harold Garner at the University of Texas Southwestern Medical
      School at Dallas is working on a *HoloTV* project
      to develop technology that can deliver 3D moving images for applications in
      medical imaging, “heads up” displays, video games, and air traffic control
      display. Current development efforts involve the use of the Digital Micromirror
      Device 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.




3





Stereoscopic
      techniques are being investigated as a means of achieving 3D imaging and
      display. A recent paper by Jang and Javidi describes a technique called 3D
      projection integral imaging to create 3D orthoscopic virtual images. The
      technique employs a micro-convex-mirror array to convert inputs from 2D image
      sensors to 3D images with a viewing angle of over 60 o and has
      been successfully demonstrated in the laboratory. Another paper by Choi *et
      al* reports
      on the construction of a novel full-color autostereoscopic 3D display system
      using scaling constraints and phase quantization leveling to reduce the color
      dispersion and the phase difference. The system employs
      color-dispersion-compensated (CDC) synthetic phase holograms (SPHs) to create
      3D
      images and video frames that don’t require the use of special glasses for
      viewing. While both of these technical approaches have been successfully
      demonstrated in a laboratory environment, neither easily lends itself to the
      kind of embodiment envisioned by 3DIcon.





Sato *et
      al* report
      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. We are currently
                in the
                process of evaluating the commercialization potential of such
                technologies.





·
            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 is now entering into the subsequent second stage of improvement and
      development. Initial target markets for swept volume displays would include
      retail, advertising industry and large venue applications.





The
      Static Volume Display technology will employ DMDs 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.
      Initial investigation for the Static Volume system commenced in 2007. There
      is
      currently no estimated prototype/demonstration date for this
      technology.





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





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






4





·
            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:





·
            To
                produce patentable and/or copyrightable intellectual
                property;





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





·
            To
                assess opportunities for manufacturing technological products in
                Oklahoma;





·
            Investigate
                magnetic nanospheres (MNs) for use as a projection
                media;





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





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





·
            Evaluate
                other display medium technologies for potential strategic
                partnerships;





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





·
            Develop
                software for displaying ideal 3D
                images;





·
            Investigate
                software interface issues with other image capture
                technologies.





The
      final
      payment of $226,792, due on July 15, 2006, was not paid. On November 1, 2006
      the
      Sponsored Research Agreement was modified to provide $125,259 additional
      funding, extend the term of the agreement through March 31, 2007, and revise
      the
      payment schedule to combine the July 15, 2005 remaining balance due of $226,792
      with the additional funding into a revised payment schedule. Under the terms
      of
      the agreement, we agreed to pay the combined remaining obligation of $352,051
      in
      four equal monthly installments of $88,013 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
      will
      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. We were
      current on our payments to the University through October 2007.





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


**Description
                  of Provisional Patent Application as Filed**
              
              **Description
                  of Utility Patent Application Filing (Combined)**
              
              **Date
                  of Filing**Swept
                  Volume Display
              
              Swept
                  Volume Display
              
              September
                  2006Colorful
                  Translation Light Surface 3D Display
              
              Light
                  Surface Display for
              
              April
                  2007Colorful
                  Translation 3D Volumetric Display
              
              Rendering
                  Three-Dimensional3D
                  Light Surface Display
              
              Image
                  (Combined)Volumetric
                  Liquid Crystal Display
              
              Volumetric
                  Liquid Crystal Display
              
              April
                  2007for
                  Rendering Three-DimensionalImage
                  (Combined)Computer
                  System Interaction with DMD
              
              Computer
                  System Interaction with DMD
              
              January
                  2008Virtual
                  Moving Screen for Rendering Three Dimensional Image
              
              Utility
                  Patent Application to be filed
              
              January
                  2008
                (Provisional)





5




**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 Digital Micromirror Device (“DMD”). The
      product is targeted at the application development market involving the use
      of
      DMDs, specifically the DMD-DiscoveryTM line from Texas InstrumentsTM.





We
      do not
      have any products, services or technologies in the area of 3 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 of Oklahoma:





·
            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
                DepthCubeTM from LightSpace Technologies,
                Inc.





·
            Felix
                3D Displays





·
            Perspecta
                Spatial 3D Display from Actuality
                Systems





·
            3D
                Technology Laboratories





**Employees**





We
      have
      four full-time employees, Martin Keating, Chief Executive Officer, Vivek Bhaman,
      President and Chief Operating Officer, Ms. Judith Keating nee Snider, Company
      secretary and Director of Investor Relations and Mr. Luis Paez, Project Manager
      (from March 2008). None of our employees are covered by a collective bargaining
      agreement. We consider relations with our employees to be good.





**Risk
      Factors**





**Risks
      Relating to Our Business:**





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




6




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 $7,398,529 for the period from inception (January 1, 2001) to December
      31, 2007.   Our operations are subject to the risks and competition
      inherent in the establishment of a business enterprise. Unanticipated problems,
      expenses, and delays are frequently encountered in establishing a new business
      and marketing and developing products. These include, but are not limited to,
      competition, the need to develop customers and market expertise, market
      conditions, sales, marketing and governmental regulation. Our failure to meet
      any of these conditions would have a materially adverse effect upon us and
      may
      force us to reduce or curtail our operations. Revenues and profits, if any,
      will
      depend upon various factors. We may not achieve our business objectives and
      the
      failure to achieve such goals would have an adverse impact on our
      business.





**Currently,
      our only significant asset is our Sponsored Research Agreement with the
      University of Oklahoma, and our ability to accomplish our business plan relies
      entirely on the ability of the University of Oklahoma to successfully develop
      marketable 3D communications and display technologies.**





Our
      only
      significant asset at the present time is our Sponsored Research Agreement with
      the University of Oklahoma. If the University of Oklahoma is not successful
      in
      developing 3D display/communications technologies that we have envisioned in
      our
      business plan, our ability to generate revenues from marketing of the
      technologies and/or product or products on which our business plan is based
      will
      be severely impacted, which could threaten the very existence of the
      Company.





Even
      if
      the University of Oklahoma is successful in developing 3D communications and
      display system technologies, because of the revolutionary nature of such a
      product (i.e., no similar product currently exists, and there are numerous
      unknowns relating to the product, such as manufacturing costs and operational
      costs), there can be no assurance that our marketing plans for the product
      will
      be successful.





Therefore,
      the fact that our success depends almost entirely on the efforts of others
      to
      develop technologically challenging new technologies that will be in a form
      readily licensable and/or marketable and acceptable to a given market, and
      our
      ability to then successfully market such technologies, 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 and/or
      technologies.





**We
      may not be able to compete successfully.**





Although
      the volumetric 3D imaging and display technology that the University of Oklahoma
      is attempting to develop is new, and although at present we are aware of only
      a
      limited number of companies that have publicly disclosed their attempts to
      develop similar technology, we anticipate a number of companies are or will
      attempt to develop 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 of Oklahoma, and may be better positioned
      to
      continue to improve their technology in order to compete in an evolving
      industry. Further, technology in this industry may evolve rapidly once an
      initially successful product is introduced, making timely product innovations
      and use of new technologies essential to our success in the marketplace. The
      introduction by our competitors of products with improved technologies or
      features may render any product we initially market obsolete and unmarketable.
      If we do not have available to us products that respond to industry changes
      in a
      timely manner, or if our products do not perform well, our business and
      financial condition will be adversely affected.





7





**The
      technologies being developed may not gain market
      acceptance.**





The
      products that the University of Oklahoma is currently developing utilize new
      technologies. As with any new technologies, in order for us to be successful,
      these technologies must gain market acceptance. Since the 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 the University of Oklahoma on the 3D technology are
      subject to unanticipated delays, expenses or technical or other problems, as
      well as the possible insufficiency of funding to complete development. Our
      success will depend upon the ultimate products and technologies meeting
      acceptable cost and performance criteria, and upon their timely introduction
      into the marketplace. The proposed products and technologies may never be
      successfully developed, and even if developed, they may not satisfactorily
      perform the functions for which they are designed. Additionally, these 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 the
      current senior management. Our success also depends on our ability to attract
      and retain other key executive officers.





**Our
      auditors have included a going concern qualification in their opinion; if we
      do
      not continue as a going concern, investors will lose their entire
      investment.**





Our
      auditors have qualified their opinion on our financial statements because of
      concerns about our ability to continue as a going concern. These concerns arise
      from the fact that we are a development stage organization with insufficient
      revenues to fund development and operating expenses. If we are unable to
      continue as a going concern, you could lose your entire investment in
      us.





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





Our
      capital requirements in connection with our development activities and
      transition to commercial operations have been and will continue to be
      significant. We will require 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.





**As
      a result of becoming a reporting company, our expenses will increase
      significantly.**





As
      a
      result of becoming a reporting company whose shares are registered pursuant
      to
      Section 12 of the Securities Act, our ongoing expenses are expected to increase
      significantly, including expenses in compensation to our officers, ongoing
      public company expenses, including increased legal and accounting expenses
      as a
      result of our status as a reporting company, expenses incurred in complying
      with
      the internal controls requirements of the Sarbanes-Oxley Act. These increased
      expenses will negatively impact our ability to become profitable.





**Risks
      Relating to Our Current Financing Arrangement** s **:**





**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 18, 2008, we had approximately 136,039,294 shares of common stock
      issued and outstanding and convertible debentures outstanding that may be
      converted into an estimated 6,500,000 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 Gate Investors
      (“Golden Gate”) to purchase 755,955 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.




8





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 the remaining principal balance of the $1.25
      million debenture issued to Golden Gate Investors on November 3, 2006 (the
      “First Debenture”) of $60,971 (excluding accrued interest), based on market
      prices 25%, 50% and 75% below the market price as of March 28, 2008 of
      $0.225.


%
                  Below
                Market
              
              
              Price
                  Per
                Share
              
              
              Effective
                Conversion
                Price
              
              
              Number
                of
                  Shares
                Issuable(1)
              
              
              %
                  of Outstanding Stock25%
              
              $
              0.169
              
              $
              0.118
              
              
              516,157
              
              
              *50%
              
              $
              0.113
              
              $
              0.079
              
              
              774,235
              
              
              *75%
              
              $
              0.056
              
              $
              0.039
              
              
              1,540,470
              
              
              1.14
              %





*
      Less
      than 1%





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 Gate Investors on November 3,
      2006, based on the remaining principal balance of $99,053and market prices
      25%,
      50% and 75% below the market price as of March 28, 2008 of $0.225.


%
                  Below
                Market
              
              
              Price
                  Per
                Share
              
              
              Effective
                Conversion
                Price
              
              
              Number
                of
                  Shares
                Issuable(1)
              
              
              %
                  of Outstanding Stock25%
              
              $
              0.169
              
              $
              0.135
              
              
              736,329
              
              
              .5
              %50%
              
              $
              0.113
              
              $
              0.090
              
              
              1,104,493
              
              
              .8
              %75%
              
              $
              0.056
              
              $
              0.045
              
              
              2,208,986
              
              
              1.7
              %







*
      Less
      than 1%





The
      following is an example of the amount of shares of our common stock that are
      issuable, upon conversion of our 9 3⁄4% $700,000 convertible debentures (excluding
      accrued interest), based on the remaining principal balance of $700,000 and
      market prices 25%, 50% and 75% below the market price as of March 28, 2008
      of
      $0.225.


Effective
              
              Number
              
              %
                  of%
                  Below
              
              Price
                  Per
              
              Conversion
              
              of
                  Shares
              
              OutstandingMarket
              
              
              Share
              
              
              Price
              
              
              Issuable
              
              
              Stock25%
              
              $
              0.169
              
              $
              0.122
              
              
              5,761,317
              
              
              4.24
              %50%
              
              $
              0.113
              
              $
              0.081
              
              
              8,641,975
              
              
              6.35
              %75%
              
              $
              0.056
              
              $
              0.040
              
              
              17,283,951
              
              
              12.71
              %





9


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 Gate Investors on January 15, 2008 (the “Second Debenture”) (excluding
      accrued interest), based on the principal balance of $871,213 and market prices
      25%, 50% and 75% below the market price as of March 28, 2008 of
      $0.22.


%
                    Below
              
              
              Price
                    Per
              
              
              Effective
                  Conversion
              
              
              Number
                  of
                    Shares
              
              
              %
                    of
                  OutstandingMarket
              
              
              Share
              
              
              Price
              
              
              Issuable
              
              
              Stock25%
              
              $
              0.169
              
              $
              0.152
              
              
              8,230,453
              
              
              4.3
              %50%
              
              $
              0.113
              
              $
              0.101
              
              
              12,345,679
              
              
              6.4
              %75%
              
              $
              0.056
              
              $
              0.051
              
              
              24,691,358
              
              
              12.9
              %





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 $2.00 the issuance of shares in
      connection with the conversion of the First Debenture results in the issuance
      of
      shares at an effective 30% discount to the trading price of the common stock
      prior to the conversion. Similarly, so long as the market price of our stock
      is
      below $4.00, the issuance of shares in connection with the conversion of the
      $100,000 convertible debenture results in the issuance of shares at an effective
      20% discount to the trading price of the common stock prior to the conversion.
      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 Gate Investors may not
      convert its convertible debentures and/or exercise their warrants if such
      conversion or exercise would cause it to own more than 9.9% of our outstanding
      common stock, this restriction does not prevent the selling stockholder from
      converting and selling some of their holdings and then converting the rest
      of
      their holdings. In this way, assuming the market price remains at a level
      acceptable to the selling stockholder, the selling stockholder could continue
      on
      a “conversion-sell-conversion” trend while never holding more than 9.99% of our
      common stock. Further, under the convertible debentures there is theoretically
      no upper limit on the number of shares that may be issued, which will have
      the
      effect of further diluting the proportionate equity interest and voting power
      of
      holders of our common stock.





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




If
      we are
      unable to issue shares of common stock upon conversion of the convertible
      debenture as a result of our inability to increase our authorized shares of
      common stock or as a result of any other reason, we are required
      to:




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






10





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





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




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





**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.





11


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





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





**ITEM
      2. DESCRIPTION OF PROPERTY.**





Our
      executive offices are located at 7507 S. Sandusky, Tulsa, Oklahoma 74136. Our
      office space is provided to us by one of our officers at no cost to the
      Company.





**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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.**




None





**ITEM
      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS.**





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 (1).




Year
              Ended December 31, 2007
            
            High
            
            LowFirst
                Quarter ended March 31, 2007
            
            $
            .70
            
            $
            .39Second
                Quarter ended June 30, 2007
            
            $
            .72
            
            $
            .32Third
                Quarter ended September 30, 2007 (1)
            
            $
            1.05
            
            $
            .31Fourth
                Quarter ended December 31, 2007
            
            $
            .59
            
            $
            .28




Year
              Ended December 31, 2006
            
            High
            
            LowFirst
                Quarter ended March 31, 2006
            
            $
            .86
            
            $
            .14Second
                Quarter ended June 30, 2006
            
            $
            3.27
            
            $
            .56Third
                Quarter ended September 30, 2006
            
            $
            1.73
            
            $
            .90Fourth
                Quarter ended December 31, 2006
            
            $
            1.29
            
            $
            .36





(1)
            The
                Company’s Shares were traded on the Pink Sheets until July 25, 2007 and
                began trading on the OTC Bulletin Board
                thereafter.





12




**Holders**





As
      of
      March 28, 2008 we had approximately 409 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. Effective March 19, 2008 the transfer
      agent of our common stock 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
      incentive stock plan under which our common stock is authorized for issuance
      as
      of the year ended December 31, 2007.


**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**
              
              
              0
              
              
              
              
              $**Equity
                  compensation plans not approved by security
                  holders**
              
              
              -
              
              
              
              
              
              7,657,273**Total**
              
              
              -
              
              
              
              
              $
              7,657,273
  **Recent
        Sales of Unregistered Securities**





During
      the fiscal year ended December 31, 2007, we issued the below securities without
      registration under the Securities Act of 1933, as amended (the "Securities
      Act").





Pursuant
      to a Subscription Agreement dated October 12, 2007, 3DIcon sold 1,188,959 of
      its
      restricted shares of the Company’s common stock, $0.002 par value (the “Common
      Stock”), at a per share price equal to 75% of the average of the Average Closing
      Price during the five (5) days prior to the Signing Date ($0.31 per share)
      and
      warrants to purchase 594,482 shares of its common stock at a price of $.40
      per
      share from October 12, 2007 through October 11, 2008, and .50 per shares from
      October 12, 2008 though October 11, 2009 (the “Warrants”) to two accredited
      individuals. The Warrants terminate on October 11, 2009. The Company received
      gross proceeds of $280,000 from the sale of the aforementioned
      securities.





Previous
      to 2007 the Company sold shares of common stock with warrants attached for
      $0.025 per share and $0.05 per share pursuant to an exempt offering. Each
      subscriber received one share of common stock with two separate warrants to
      purchase additional shares of Rule 144 stock.




13





At
      various dates throughout 2007 the Company issued 1,200,000 of its common stock
      pursuant to the exercise of $.025 warrants by non-employees. The Company
      received $30,000 in cash.





At
      various dates throughout 2007 the Company issued 7,380,000 shares of its common
      stock pursuant to the exercise of $.05 warrants by non-employees. The Company
      received $369,000 in cash.





During
      2007 shares of common stock totaling 817,727 (342,727 of which were registered
      shares) were issued for legal and consulting services for which the Company
      recognized $155,426 of expense. The shares are valued based upon invoices
      received, if applicable or using a discount structure as the other restricted
      common stock transactions and ranged from $0.04 to $0.35 during 2007.





To
      obtain
      funding for ongoing operations, the Company entered into a Bridge Financing
      Agreement with Golden Gate Investors which closed on June 11, 2007 (the
“Financing Agreement”), for the sale of a 9 3⁄4% convertible debenture in the
      principal amount of $700,000. The Company received gross proceeds of $700,000
      from the sale of the aforementioned debenture.





The
      debenture may be converted, at Golden Gate’s option, in whole or in part, into
      restricted shares of the Company’s common stock. The conversion price will be
      $0.28 until the earlier of, the Company’s shares trading on the OTC Bulletin
      Board or other trading market that the SEC recognizes as a trading market,
      or
      January 1, 2008.  Subsequently, the conversion price is equal to 72% of the
      average of the five lowest volume weighted average prices for the common stock
      for the 20 trading days prior to the conversion date. The convertible debenture
      matures June 11, 2008; subject to an option held by Golden Gate to extend the
      maturity for one period of six months. Interest on the convertible debenture
      is
      payable monthly in cash.





**ITEM
      6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN 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 360 o volumetric imaging and display technology, specifically in the areas identified
      by the initial in-depth investigation conducted by the University of Oklahoma
      (OU or University). The identified areas are two major complementary areas
      of
      technology that comprise the spectrum of the solution and application (1) a
      means of recording 3D objects as digital holographic data elements (capture);
      and (2) a means of reconstructing and displaying the 3D images
      (display).





Based
      on
      the investigation as well as review of existing patents and technologies, it
      was
      concluded that the area of 3-D image capture and recording had multiple
      solutions and technologies that adequately served the market. Therefore our
      primary area of focus is to develop products and intellectual property in the
      reconstruction and display of 3D images where we see the most opportunity.
      We
      aim to establish strategic partnerships with the assignees or license holders
      of
      existing 3D recording technologies as well as integrate our technologies with
      existing solutions.




14





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 the
      University of Oklahoma, to which 3DIcon will have exclusive world-wide
      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 the University of Oklahoma,
      to
      which 3DIcon has exclusive rights and engage in product research and development
      both directly related to the display as well as by-product
      technologies.





**Current
      Activities and Operations**




Currently
      the Company is pursuing the research and development of volumetric 3-D display
      technology through the Sponsored Research Agreement (“SRA”) with the University
      of Oklahoma (“OU”). Our efforts are focused on multiple technological
      approaches, two of which are being further developed into proof-of-concept
      demonstration systems:





(a)
      Swept
      Volume Display Technology





(b)
      Static Volume Display Technology: An alternate approach to the volumetric
      display in which certain media, such as nano-particles in a transparent or
      semi-transparent medium to produce an innovative “volumetric projection screen
      or projection space”. This, in addition to existing and rapidly evolving image
      projection technologies, such as DLP®/DMD technology from Texas Instruments, are
      being innovatively incorporated to produce full-color, full-motion 3D
      visualization, and in harmony with 3DIcon’s vision for product
      development.





The
      Company has expanded the scope of the initial SRA with OU to include the
      research and prototype development of the volumetric displays using
      nanotechnology.





The
      OU
      team has made significant progress in the development of a proof-of-concept
      demonstration unit for the Swept Volume Display and the University has
      demonstrated a Stage I Swept Volume volumetric display in the third quarter
      of
      2007 that renders full color volumetric 3D images. The research team is now
      aiming to create the second stage demonstration prototype that aims to improve
      certain aspects as well as demonstrate additional embodiments as claimed in
      the
      patent filing.





Under
      the
      scope of the revised SRA, OU has assigned a second multi-disciplinary team
      to
      focus on the development of light sensitive nano-materials (up-conversion
      materials), the medium for dispersion of the up-conversion materials and the
      optics using digital micro-mirror devices including the controls
      thereof.




The
      Company also has released a software product called Pixel PrecisionTM. The
      current version of the software is 1.0. The Company plans 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.





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




15





**Progress
      on Research and Development Activities**





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**Swept
                  Volume Display
              
              Swept
                  Volume Display
              
              September
                  2006Colorful
                  Translation Light Surface 3D Display
              
              Light
                  Surface Display for
              
              April
                  2007Colorful
                  Translation 3D Volumetric Display
              
              Rendering
                  Three-Dimensional3D
                  Light Surface Display
              
              Image
                  (Combined)Volumetric
                  Liquid Crystal Display
              
              Volumetric
                  Liquid Crystal Display
              
              April
                  2007for
                  Rendering Three-DimensionalImage
                  (Combined)Computer
                  System Interaction with DMD
              
              Computer
                  System Interaction with DMD
              
              January
                  2008Virtual
                  Moving Screen for Rendering Three Dimensional Image
              
              Utility
                  Patent Application to be filed
              
              January
                  2008
                (Provisional)




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 2008 calendar year are as follows.
      The work will mainly be done by researchers, faculty and selected graduate
      or
      doctoral level students at the University of Oklahoma with oversight by 3DIcon
      personnel:





I.
      Swept
      Volume Display (SVD)




·
            Provide
                Stage II of Swept Volume demonstration of technology as described
                above by
                the end of 2008





·
            Investigate
                technical feasibility of developing large format 3D displays employing
                the
                3D SVD technology developed thus far





·
            Investigate
                the use of time-synchronized panes for improved
                stability





·
            Create
                “opacity” also understood as “blocking” or
                “directionality”





II.
      Static Volumetric Display and Nano-materials





·
            Complete
                the optical improvements for green-color nano-size up-conversion
                materials





·
            Commence
                work on development of blue and red nano-size up-conversion
                materials





·
            Synthesize
                near transparent projection medium suitable for dispersion of
                nano-particles





·
            Investigate
                the use of additional technologies for development of image space
                that
                enhance the commercialization of the
                technology





·
            Demonstrate
                improvements in optical properties for transparent projection material
                ,
                dispersed with nano-particles - 1stcolor





III.
      By-Product Technologies





·
            Generate
                revenue from Pixel PrecisionTM the DMD Control Software for DMD Application
                development markets





·
            Develop
                next generation of Pixel PrecisionTM software for controlling multiple DMDs
                as well as for controlling the next generation of the DMD-DiscoveryTM
                series




16





*Hiring
      of Senior Management Officer*





On
      May 1,
      2007 the Company hired Mr. Vivek Bhaman as President and Chief Operating
      Officer. Mr. Bhaman has over 15 years of global experience, including experience
      with start-up and development companies in the high technology fields. The
      employment contract is valid for a period of one year and is renewable at the
      end of the period.





*Other
      Hiring*





In
      March
      2008, the company hired Mr. Luis Paez as Manager Projects. Mr. Paez has a B.S.
      in Electric Engineering from the University of South Florida. He has a proven
      track record of handling diverse projects and assignments across several
      countries.





Mr.
      Paez
      will be responsible for overseeing the research and handling day-to-day liaison
      with the University. He will also be responsible for several aspects of the
      companies operations and Pixel Precision. He reports to the
      President.





This
      position does not qualify as an “Officer” or “Director” as defined by the
      Securities & Exchange Commission.





**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 of Oklahoma. This includes development of an initial
                demonstrable prototype and a second prototype with for static volume
                technology





·
            Operating
                expenses: salaries, insurance, investor related expenses, rent; travel,
                website, etc.





·
            Hiring
                executive officers for operations and
                finance





·
            Development,
                support and operational costs related to Pixel PrecisionTM 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, 2007, 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.





The
      Company has been actively engaged in efforts to raise additional capital through
      sale of stock as well as instruments of debt to fund our ongoing research and
      operational costs. Management expects to continue to seek sources of capital
      from financial institutions as well as private capital. Additionally, we intend
      to explore the possibility of acquiring research funding from the
      government.





As
      of
      December 31, 2007, our accounts payable totaled $484,513 and we had a working
      capital deficit of $471,904. We will need to obtain additional capital in
      order to sustain our operations through 2008. However, there can be no assurance
      that any additional financing will become available to us, and if available,
      on
      terms acceptable to us.





On
      November 1, 2006, we modified the SRA to provide $125,259 additional funding,
      extend the term of the agreement through March 31, 2007, and revise the payment
      schedule to combine the July 15, 2006 remaining balance due of $226,792 with
      the
      additional funding into a revised payment schedule. Under the terms of the
      agreement, we agreed to pay the combined remaining obligation of $352,051 in
      four equal monthly installments of $88,013 on December 31, 2006 through March
      31, 2007.




17





On
      February 23, 2007 we entered into a SRA with the University (Phase III) which
      expires March 31, 2010. Under this agreement the University will conduct a
      research project entitled “3-Dimensional Display Development” that seeks to make
      significant progress in the development of 3-dimensional display technologies.
      The Company will pay the University $3,468,595 payable in monthly installments
      ranging from $92,263 to $112,777 beginning April 30, 2007 and ending March
      31,
      2010.




**Financings**





Unsecured
      debentures payable





*8%
      Senior convertible debentures due 2006*





We
      issued
      convertible debentures aggregating $160,000 during 2005 and issued an additional
      $125,000 during 2006 at par value for cash. The debentures bore interest at
      8%
      per annum, and were due no later than December 31, 2007. During 2007 and 2006
      debentures totaling $135,000 and $150,000 were converted to 2,700,000 and
      3,000,000 shares respectively, of common stock. Upon conversion, we paid all
      accrued interest totaling $18,128. We issued 247,140 shares at $0.05 per share
      in payment of $12,357 of accrued interest and the balance of $5,771 was paid
      in
      cash.





*8%
      Unsecured debentures due 2007*





As
      of
      December 31, 2006 we had issued $430,000 unsecured convertible debentures at
      par
      value for cash. The debentures bore interest at 8% per annum, were convertible
      to common shares at $0.40 per share and were due no later than March 31, 2007.
      We were not able to retire the debentures by the due date and as a result we
      were in default. As a result of the default, the debentures were due in cash
      on
      the demand of the holders, but could be converted into common stock at a
      conversion price of $0.05 per share at the request of the holders at anytime.
      The holders elected to convert the $430,000 of debentures into 8.6 million
      shares of common stock and additionally received 519,886 shares of common stock
      for the $25,994 interest accrued on the debentures.





Secured
      debentures payable





*Golden
      Gate Debentures*





On
      November 3, 2006, pursuant to the terms of the Securities Purchase Agreement
      dated November 3, 2006 as amended on December 15, 2006 and February 6, 2007,
      by
      and between 3DIcon and Golden Gate (the “Securities Purchase Agreement”) the
      Company issued and sold a convertible note in the principal amount of $1,250,000
      to Golden Gate (the “First Debenture”). The terms of the Securities Purchase
      Agreement also provided that at such time as the principal balance of the First
      Debenture is less than $400,000 and provided that the Company is then in
      compliance with the terms of the First Debenture and the Securities Purchase
      Agreement, the Company may require Golden Gate to purchase a second debenture
      in
      the principal amount of $1,250,000. Pursuant to the terms of the Securities
      Purchase Agreement, the closing of the purchase and sale of the Second Debenture
      must occur within 30 days of the date on which the principal balance of the
      First Debenture is less than $400,000.





Pursuant
      to the Securities Purchase Agreement, upon closing on the First Debenture,
      Golden Gate provided the Company with $125,000. Golden Gate was required to
      and
      has provided us with an additional $312,500 upon effectiveness of the
      registration statement. Following the declaration of effectiveness of the
      registration statement, the aggregate sum of $812,500 has been placed in escrow,
      which is to be release at a rate of $200,000 per month on the first day of
      each
      month, beginning with the second month following the effective date of the
      registration statement, subject to certain conditions as provided in the
      Securities Purchase Agreement.




The
      First
      Debenture bears interest at 6 1⁄4%, matures three years from the date of issuance,
      and is convertible into our common stock, at Golden Gate’s option. The First
      debenture is convertible into the number of our shares of common stock equal
      to
      the dollar amount of the debenture divided by the conversion price. The
      conversion price for the First debenture is the lesser of (i) $2.00, (ii) 70%
      of
      the average of the five lowest volume weighted average prices during the twenty
      (20) trading days prior to the conversion (the 70% figure is known as the **“** Discount
      Multiplier **”** ). If
      Golden Gate elects to convert a portion of the First debenture and, on the
      day
      that the election is made, the volume weighted average price is below $0.75,
      3DIcon shall have the right to prepay that portion of the debenture that Golden
      Gate elected to convert, plus any accrued and unpaid interest, at 135% of such
      amount.  Interest
      is payable monthly in cash or, at Golden Gate’s option, in shares of common
      stock of the Company valued at the then applicable conversion price. As of
      March
      28, 2008, the escrow agent has released an aggregate of $600,000 from escrow.
      As
      of March 28, 2008, Golden Gate has converted the aggregate principal amount
      of
      $1,189,029 on the First Debenture to 4,904,335 shares of Common Stock of the
      Company.




18





In
      addition, on November 3, 2006, we issued to Golden Gate a $100,000 convertible
      debenture. The $100,000 debenture, as amended, bears interest at 4 3⁄4 %,
      matures five years from the date of issuance, and is convertible into our common
      stock, at Golden Gate’s option. The $100,000 convertible debenture is
      convertible into the number of our shares of common stock equal to the dollar
      amount of the debenture divided by the conversion price. The conversion price
      for the $100,000 convertible debenture is the lesser of (i) $4.00, (ii) 80%
      of
      the average of the five lowest volume weighted average prices during the twenty
      (20) trading days prior to the conversion (the 80% figure is known as the **“** Discount
      Multiplier **”** ).
      If
      Golden Gate elects to convert a portion of the debenture and, on the day that
      the election is made, the volume weighted average price is below $1.00, 3DIcon
      shall have the right to prepay that portion of the debenture that Golden Gate
      elected to convert, plus any accrued and unpaid interest, at 135% of such
      amount. The $1.00 figure shall be adjusted, on the date that is one year after
      the closing date and every six months thereafter (“Adjustment Dates”), to a
      price equal to 65% of the average of the current market prices for the fifteen
      trading days prior to each Adjustment Date.  In
      connection with the issuance of the $100,000 debenture, we also issued to Golden
      Gate warrants to purchase 1,000,000 shares of our common stock at an exercise
      price of $10.90. As of March 28, 2008, Golden Gate has converted an aggregate
      of
      $947 on the $100,000 debenture to 440,535 shares of common stock of the Company
      and has exercised warrants to purchase an aggregate of 9,467 shares of the
      Company’s common stock.





*Golden
      Gate Bridge Finance*





To
      obtain
      funding for ongoing operations, the Company entered into a Bridge Financing
      Agreement with Golden Gate, which closed on June 11, 2007 (the “Financing
      Agreement”), for the sale of a 9 3⁄4% convertible debenture in the principal
      amount of $700,000. Pursuant to the Financing Agreement, the Company agreed
      to
      file a registration statement with the SEC within three days of closing for
      the
      resale of the common stock underlying the First Debenture.




The
      9 3⁄4%
      debenture may be converted, at Golden Gate’s option, in whole or in part, into
      restricted shares of the Company’s common stock. The conversion price is equal
      to 72% of the average of the five lowest volume weighted average prices for
      the
      common stock for the 20 trading days prior to the conversion date. The
      convertible debenture matures June 11, 2008 subject to an option held by Golden
      Gate to extend the maturity for one period of six months. Interest on the
      convertible debenture is payable monthly in cash.





In
      addition to standard default provisions concerning timeliness of payments,
      delivery and notifications, the following events shall accelerate the maturity
      date of the 9 3⁄4% Debenture, and all outstanding principal and accrued and unpaid
      interest along with $250,000 in liquidated damages, all becoming immediately
      due
      and payable:




1.
            The
                common stock of the Company trades at a price per share of $0.21
                or lower,
                regardless of whether the trading price subsequently is higher than
                $0.21
                per share; or





2.
            Any
                scheduled monthly payment of interest under the 9 3⁄4% Debenture is more
                than one day late.





3.
            A
                default or event of default (subject to applicable grace or cure
                period)
                under any Transaction Documents or Material Lease document or instrument
                to which the Company is obligated and not covered in (4)
                below.




19




4.
            The
                Company is in default of its obligations under any mortgage, credit
                agreement or other facility, indenture agreement, factoring agreement
                or
                other instrument under which there may be issued, or by which there
                may be
                secured or evidenced by indebtedness for borrowed money or money
                due under
                any long term leasing or factoring arrangement of the Company in
                an amount
                exceeding $250,000, that (a) involves an obligation greater than now
                exists and (b) results in such indebtedness being declared due and
                payable
                prior to the date on which it would otherwise become due and
                payable.




5.
            Any
                monetary judgment, writ or similar final process is filed or entered
                against the Company or any subsidiary thereof or any of their respective
                property or other assets for more than $250,000 and such judgment,
                writ or
                final process remains unvacated, unstayed or unabandoned for a period
                of
                45 calendar days.





The
      9 3⁄4%
      Debenture is secured by the pledge of 11 million shares of common stock held
      by
      affiliates in the Company (the “Pledged Shares”), which shares have been held by
      the Pledgors for a period of not less than two years. In the event of a default
      and the Company has not repaid all outstanding principal and accrued and unpaid
      interest, along with the liquidated damages of $250,000 within one day of
      default, Golden Gate shall have the right to immediately sell the Pledged Shares
      in satisfaction of any amounts of principal and interest owing under the
      Debenture. Golden Gate shall only sell such amount of Pledged Shares to satisfy
      any principal and accrued interest, along with $250,000 in liquidated damages
      and shall return unsold shares to the Pledgors.





Pursuant
      to the terms of the Securities 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 Gate with written notice that it desired to require
      Golden Gate to purchase the Second Debenture. On November 21, 2007, the Company
      issued and sold a convertible note in the principal amount of $1,250,000 to
      Golden Gate (the “Second Debenture”). Pursuant to the terms of the Second
      Debenture, Golden Gate may at their 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 of (ii) 90% of the average of the five lowest volume
      weighted average prices during the 20 trading days prior to Golden Gate’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 registration
      statement was filed December 28, 2007 and was effective January 4, 2008. As
      of
      March 28, 2008, the principal balance outstanding on the Second Debenture was
      $871,213.





*Incentive
      Stock Plan*





In
      August
      2007 the Company established the 3DIcon Corporation 2007 Incentive Stock
      Plan ( the
      "Plan").  The plan is designed to (i) retain directors, executives and
      selected employees and consultants and reward them for making major
      contributions to the success of the Company and (ii) to retain selected
      consultants who will accept options in lieu or partially in lieu of cash
      compensation. These objectives are accomplished by making incentive awards
      under
      the 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 Plan shall not exceed eight
      million (8,000,000) shares. In the year 2007, the Company issued 342,727 shares
      leaving a balance of 7,657,723 shares remaining available for the future
      issuance under equity compensation plans.




S-8
      Registration Statement




In
      2007,
      the Company registered 15 million shares of its common stock on Form S-8
      effective August
      8, 2007.  The shares registered are allocated as follows:




(1)
            8,000,000
                shares of common stock represent the maximum aggregate number of
                shares
                presently issuable under the 2007 Incentive Stock
                Plan.




(2)
            5,000,000
                shares of common stock represent shares issuable under the Independent
                Consultant Agreement by and between 3DIcon Corporation and certain
                consultants of 3DIcon Corporation.




(3)
            1,500,000
                shares of common stock represent shares issuable to members of our
                Board
                of Directors approved by the unanimous written consent of our Board
                of
                Directors




(4)
            500,000
                shares of common stock represent shares issuable pursuant to the
                Employment Agreement of certain officers of 3DIcon Corporation




Independent
      Consultant Agreements





*Concordia
      Financial Group*





The
      Company signed an Independent Consultant Agreement with Concordia Financial
      Group (“Concordia”) on August 7, 2007 to memorialize an oral agreement for
      consultant services that Concordia has performed since November 16, 2005, and
      continued through October 31, 2007 when it was terminated. Under the terms
      of
      the agreement Concordia assisted 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 and listing of the Company on the OTC Bulletin Board, 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. The Company paid Concordia $74,460 in 2007. As additional
      consideration for business strategy consulting services, the Company granted
      Concordia options to purchase 5 million shares of Company stock with an exercise
      price of $0.05 per share. The options were valued at $843,390 and were charged
      to operations in 2007. The estimated fair market value of the options was
      determined by using the Black-Scholes option pricing model.




20





The
      Company entered into a new one year Independent Consulting Agreement with
      Concordia effective November 1, 2007. Under the new agreement Concordia will
      serve as liaison to Golden Gate and provide business strategy services similar
      to those provided under the previous agreement. 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 preceding the
      last
      business day of the calendar month in which the invoiced services were rendered.
      Additionally, 3DIcon paid Concordia approximately $40,540 for services during
      the period November 1, 2007 to December 31, 2007.





In
      addition to the cash compensation, and conditioned upon terms of the agreement,
      the Company may grant 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 $130,430 which
      will
      be recognized in the period earned under the terms of the agreement. The
      estimated fair market value of the options was determined by using the
      Black-Scholes option pricing model. Each grant of options to purchase shares
      is
      conditioned upon the Board’s assessment, satisfaction and approval of
      Concordia’s performance to the grant date. There were no charges to expense in
      relation to the options in 2007.





*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 Research and Development (“R&D”) opportunities and
      eventually in sales funding; (2) to assist in opportunities to 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 common stock until the first contract is signed and thereafter
      50% cash and 50% Company common stock. The shares issued under the agreement
      will be issued to Carla R. York, CEO and will be discounted 25% from a twenty
      day moving average prior to the invoice date. Additionally an initial 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.





*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 per month
      payable in registered shares of the Company’s common 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. As
      additional compensation LIB was issued 150,000 restricted shares of the
      Company’s common stock. The restricted shares were valued consistent with other
      shares issued for services at $4,625. The agreement is for one year and is
      automatically extended on a month-to-month basis unless terminated by either
      party.




21





*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. The agreement is for one year and is automatically extended on a
      month-to-month basis unless terminated by either party.





**Off
      Balance Sheet Arrangements**




3DIcon
      does not engage in any off balance sheet arrangements that are reasonably likely
      to have a current or future effect on our financial condition, revenues, results
      of operations, liquidity or capital expenditures.





**Significant
      Accounting Policies**




Research
      and Development Costs





Statement
      of Accounting Standards No. 2, “Accounting for Research and Development Costs,”
requires that all research and development costs be expensed as incurred. Until
      we have developed a commercial product, all costs incurred in connection with
      the Sponsored Research Agreement with the University of Oklahoma, as well as
      all
      other research and development costs incurred, will be expensed. After a
      commercial product has been developed, we will report costs incurred in
      producing products for sale as assets, but we will continue to expense costs
      incurred for further product research and development activities.





Stock-Based
      Compensation





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. Statement of
      Financial Accounting Standards No. 123 “ *Accounting
      for Stock Based Compensation”* and No.
      123(R), *“Share
      Based Payments* ,”
      requires us to estimate the value of securities used for compensation and to
      charge such amounts to expense over the periods benefited.




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:**




·
            The
                University of Oklahoma filed one provisional patent and converted
                one
                provisional patent to a utility patent in January
                2008





·
            The
                Company appointed Mr. Vivek Bhaman, President and Chief Operating
                Officer
                to the Board of Directors on February 25,
                2008





·
            The
                Board created Compensation, Audit and Nomination/governance Committees
                on
                February 25, 2008




·
            In
                March 2008, the Company signed an Exclusive Distributorship Agreement
                with
                Digital Light Innovations (DLi) whereby DLi was appointed the exclusive
                worldwide distributor and reseller for Pixel
                Precision





·
            Consequent
                to appointing DLi as the sales and distribution agent for Pixel Precision,
                the product was officially available for
                purchase.





·
            The
                Company hired Mr. Luis Paez as Manager - Projects in March
                2008





·
            The
                Company appointed Continental Stock Transfer & Trust Company as the
                Transfer Agent for its common stock on March 19,
                2008





22




*Debentures
      payable*





Pursuant
      to the terms of the second $1.25 million debenture, the Company filed a
      registration statement covering the common shares to be issued upon conversion
      of the debenture. The registration statement was effective January
      4,  2008.  Included
      in the registration statement are 2.25 million common shares issuable upon
      conversion of the $333,971 balance of the First $1.25 million debenture and
      4.25
      million common shares issuable on the Second $1.25 million debenture based
      on
      current market prices and assuming full conversion of the convertible
      debentures.





Subsequent
      to December 31, 2007 Golden Gate converted $273,000 of the First $1.25 million
      debenture into 1,556,930 shares of the Company’s common stock leaving a balance
      of $60,971 on the debenture. Golden Gate also converted $351 of the $100,000
      4
3⁄4% debenture into 3,511 Company’s common stock at a price of $10.90 per share
      and exercised warrants for 196,489 shares of the Company’s common stock.
      Accordingly 200,000 shares were issued from the conversion and the exercise
      of
      the warrants, $38,270 was received from the warrants exercised and the 4 3⁄4%
      debenture balance was reduced to $99,053.





In
      accordance with the terms of the second $1.25 million 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 four occasions,
      January 23, March 6, 14 and 18, 2008. On each of the four occasions Golden
      Gate,
      by separate letter agreements, agreed that the occasions did not constitute
      a
      default and thereby waived the default provision for those four occasions
      only.





*Common
      stock and paid in capital*





Under
      the
      terms of the Concordia consulting agreement, Concordia exercised an option
      to
      purchase 209,677 shares of common stock at the agreed exercise price of $.05.
      Warrants attached to common stock were exercised for $56,000 and 1,120,000
      common shares were issued at $.05 per share.





Concordia
      was issued 206,557 shares of common stock in payments for services under the
      consulting agreement. Additionally common shares totaling 159,115 were issued
      to
      vendors in payment of $35,000 for services.





**Recent
      Accounting Pronouncements:**





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





In
      December 2007 the Financial Accounting Standards Board (“FASB”) issued *SFAS
      No. 141R, “Business Combinations”.* This
      statement replaces *SFAS
      141* and
      defines the acquirer in a business combination as the entity that obtains
      control of one or more businesses in a business combination and establishes
      the
      acquisition date as the date that the acquirer achieves control. *SFAS
      No. 141R* requires
      an acquirer to recognize the assets acquired, the liabilities assumed, and
      any
      noncontrolling interest in the acquiree at the acquisition date, measured at
      their fair values as of that date. *SFAS
      No. 141R* also
      requires the acquirer to recognize contingent consideration at the acquisition
      date, measured at its fair value at that date. This statement is effective
      for
      fiscal years, and interim periods within those fiscal years, beginning on or
      after December 15, 2008. Earlier adoption is prohibited. The adoption of
      this statement is not expected to have a material effect on the Company’s
      financial statements.





In
      December 2007, FASB issued *SFAS
      No. 160, “Noncontrolling Interests in Consolidated Financial Statements —
an Amendment of ARB No. 51”* .
      This
      statement amends *ARB
      51* to
      establish accounting and reporting standards for the Noncontrolling interest
      in
      a subsidiary and for the deconsolidation of a subsidiary. This statement is
      effective for fiscal years, and interim periods within those fiscal years,
      beginning on or after December 15, 2008. Earlier adoption is prohibited. We
      do not have such subsidiaries therefore the adoption of the provisions of *SFAS
      No. 160* will not
      affect our results of operations or financial position.




23





In
      February 2007 FASB issued *SFAS
      No. 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities — Including an Amendment of FASB Statement
      No. 115”.* This
      statement permits entities to choose to measure certain financial instruments
      and liabilities at fair value. *SFAS
      No. 159* is
      effective as of the beginning of an entity’s first fiscal year that begins after
      November 15, 2007. Early adoption is permitted as of the beginning of a
      fiscal year that begins on or before November 15, 2007, provided the entity
      also elects to apply the provision of *SFAS
      No. 157, “Fair Value Measurements”.* The
      adoption of this statement is not expected to have a material effect on the
      Company’s financial statements.





In
      September 2006, the FASB issued *SFAS
      No. 157* ,
      “ *Fair
      Value Measurements” (“SFAS No. 157”).* This
      Statement defines fair value as used in numerous accounting pronouncements,
      establishes a framework for measuring fair value in generally accepted
      accounting principles (“GAAP”) and expands disclosure related to the use of fair
      value measures in financial statements. SFAS No. 157 does not expand the
      use of fair value measures in financial statements, but standardizes its
      definition and guidance in GAAP. The Standard emphasizes that fair value is
      a
      market-based measurement and not an entity-specific measurement based on an
      exchange transaction in which the entity sells an asset or transfers a liability
      (exit price). SFAS No. 157 establishes a fair value hierarchy from
      observable market data as the highest level to fair value based on an entity’s
      own fair value assumptions as the lowest level. SFAS No. 157 is effective
      in fiscal years beginning after November 15, 2007. Adoption of this
      statement is not expected to materially impact our results of operations or
      financial position.




Also
      in
      September 2006, the FASB released *SFAS
      No. 158, “Employers’ Accounting for Defined Benefit Pension and Other
      Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and
      132(R)” (“SFAS No. 158”).* Under
      the new standard, companies must recognize a net liability or asset to report
      the funded status of their defined benefit pension and other postretirement
      benefit plans on their balance sheets. We do not have such plans therefore
      the
      adoption of the provisions of SFAS 158 will not affect our results of operations
      or financial position.





In
      June 2006, the Financial Accounting Standards Board issued *FASB
      Interpretation No. 48* , *Accounting
      for Uncertainty in Income Taxes - an interpretation of FASB Statement
      No. 109* (FIN
      48).
      This interpretation clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise's financial statements in accordance with *FASB
      Statement No. 109* , *Accounting
      for Income Taxes.* FIN
      48
      prescribes a recognition threshold and measurement attribute for the financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return. It also provides guidance on derecognition,
      classification, interest and penalties, accounting in interim periods,
      disclosure, and transition. FIN 48 is effective for fiscal years beginning
      after
      December 15, 2006. The Company adopted FIN 48 effective January 1, 2007 and
      the adoption did not have a material effect on its financial statements and
      related disclosures.





**ITEM
      7. FINANCIAL STATEMENTS.**





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
      8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE.**





None.





**ITEM
      8A. CONTROLS AND PROCEDURES.**




**Management’s
      Report on Internal Control over Financial Reporting**




24





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting in accordance with Exchange Act Rule 13a-15.
      Our internal control system was designed to provide reasonable assurance to
      our
      management and Board of Directors regarding the preparation and fair
      presentation of published financial statements.





All
      internal control systems, no matter how well designed, have inherent
      limitations. Therefore, even those systems determined to be effective can
      provide only reasonable assurance with respect to financial statement
      preparation and presentation.





Our
      management, with the participation of our Chief Executive Officer and Chief
      Financial Officer, assessed the effectiveness of our internal control over
      financial reporting as of December 31, 2007. In making this assessment, we
      used
      the criteria set forth by the Committee of Sponsoring Organizations of the
      Treadway Commission (COSO) in *Internal
      Control—Integrated Framework.* Based
      on
      our assessment we believe that, as of December 31, 2007, our internal control
      over financial reporting is effective based on those criteria. Because of the
      inherent limitation in all control systems, no evaluation of controls can
      provide absolute assurance that all control issues and instances of fraud,
      if
      any, within the Company have been detected.





This
      annual report does not include an attestation report of the Company’s registered
      accounting firm regarding internal control over financial reporting.
      Management’s report was not subject to attestation by the Company’s registered
      public accounting firm pursuant to temporary rules of the Securities and
      Exchange Commission





**ITEM
      8B. OTHER INFORMATION.**




None.





**PART
      III**





**ITEM
      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
      PERSONS.**





**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
            
            PositionMartin
                Keating
            
            66
            
            Chief
                Executive Officer, DirectorVivek
                Bhaman
            
            41
            
            President,
                Chief Operating Officer, DirectorLawrence
                Field
            
            48
            
            DirectorJohn
                O’Connor
            
            53
            
            DirectorVictor
                F. Keen
            
            66
            
            Director




Martin
      Keating has been the President, Chief Executive Officer and a director of 3DIcon
      since 1998. Previously, Mr. Keating organized and managed private placement
      limited partnerships, ranging from real estate development to motion picture
      financing. Mr. Keating was also general counsel and director of investor
      relations for CIS Technologies, then a NASDAQ company. Mr. Keating is an
      attorney licensed to practice law in Oklahoma and Texas.





Vivek
      Bhaman has been the President and Chief Operating Officer of 3DIcon since May
      2007. He has held leadership positions in VeriFone/Hewlett-Packard, and with
      global media giants Omnicom Group and the Interpublic Group. His experience
      includes consumer and business technologies such as cell phones and secure
      e-commerce transaction systems for VeriFone/HP, where he was responsible for
      launching and managing the Asia-Pacific operations of the Electronic Commerce
      division. His involvement extended from development to marketing/sales. Prior
      to
      joining 3DIcon, Mr. Bhaman successfully led the startup and marketing operations
      for an enterprise-software technology company, including its acquisition of
      marquee customers Walt Disney, Southern California Edison, and Freeman Group.
      Mr. Bhaman holds a Bachelors Degree in Engineering and an MBA with
      specializations in Marketing and Finance.




25





Mr.
      Lawrence Field was appointed to the Board of Directors of 3DIcon Corporation
      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 has been a director of 3DIcon since October 2006. Since 1981, Mr.
      O’Connor has practiced law in Oklahoma, concentrating in the areas of corporate
      and commercial law. Mr. O’Connor served as President of the law firm of Newton,
      O’Connor, Turner & Ketchum from 2001 to 2005 and has served as its Chairman
      from 2001 to present.





Mr.
      Victor F. Keen was appointed to the Board of Directors of 3DIcon Corporation
      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 5 years.





**Audit
      Committee**





On
      February 25, 2008, the Board of Directors created an Audit Committee comprising
      Mr. Lawrence Field (Chair) and 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.





**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.





**Director
      Compensation**





On
      April
      27, 2007, the Company granted its three Directors 1,500,000 options exercisable
      at $.40 per share. The options were valued at $431,276 and were charged to
      operations in 2007. The estimated fair market value of the options was
      determined by 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 124.4% is based on the historical volatility
      of our stock. The risk-free interest rate of 3.0% is based on the
      U.S. Treasury Constant Maturity rates as of the grant date. The expected
      life of the option of two years is based on historical exercise behavior and
      expected future experience.





**Employment
      Agreement**





On
      April
      29, 2007, Vivek Bhaman and the Company entered into an employment agreement
      (the
“Bhaman Agreement”) pursuant to which Mr. Bhaman agreed to serve as the
      Company’s President and Chief Operating Officer. The Bhaman Agreement contains
      the following terms:





·
            base
                salary of $250,000;






26





·
            bonus
                for calendar year 2007 equal to 25% of the base salary, payable on
                or
                before March 15, 2008 (the “Payment Date”) if the Company books revenue of
                $500,000 for calendar year 2007 and Bhaman is an employee of the
                Company
                on the Payment Date;





·
            bonus
                beyond calendar year 2007 shall be in the discretion of the Board
                of
                Directors;





·
            participation
                in employee benefit plans and programs of the Company;
                and





·
            reimbursement
                of reasonable expenses




The
      term
      of the Bhaman Agreement is one year commencing on May 1, 2007 and will
      automatically extend for successive one-year periods unless otherwise terminated
      by Bhaman or the Company upon 30 days notice.





**ITEM
      10. 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, 2007,
      2006 and 2005 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
                  KeatingCEO
              
              
              2007
              
              
              144,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -2006
              
              
              90,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -2005
              
              
              90,000
              
              
              -
              
              
              14,792
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              104,792Vivek
                  Bhaman, Pres. and COO
              
              
              2007
              
              
              166,666





**OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR END [VIVEK, PLEASE UPDATE FOR
      2007**




The
      following table sets forth with respect to grants of options to purchase our
      common stock to the name executive officers as of December 31, 2007


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, 2009Vivek
                  Bhaman
              
              
              100,000
              
              
              400,000
              
              
              
              
              
              (1
              )
              
              April
                  30, 2010




(1)
      Mr.
      Bhaman’s options are exercisable as follows: 100,000 at $0.80 per share, 200,000
      at $1.00 per share and 200,000 at $1.50 per share




27





**ITEM
      11. 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
      28, 2008 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
              
              
              
              PercentageName
                  of Beneficial Owner (1)
              
              Owned
              
              Class
                  of Stock
              
              Outstanding
                  (2)Martin
                  Keating (3)
              
              
              41,848,474
              
              
              Common
              
              
              30.76
              %Victor
                  F. Keen
              
              
              5,206,667
              
              
              Common
              
              
              3.8
              %Lawrence
                  Field (4)
              
              
              4,343,460
              
              
              Common
              
              
              -John
                  O’Connor (5)
              
              
              1,460,000
              
              
              Common
              
              
              1.0
              %Vivek
                  Bhaman (6)
              
              
              100,000
              
              
              Common
              
              
              *All
                  directors and executive officers as a group (5 persons)
              
              
              52,958,601
              
              
              
              
              
              38.93
              %


*  Less
      than
      1%





(1)
            Unless
                otherwise indicated, the address of each beneficial owner listed
                below is
                c/o 3DIcon Corporation, 7507 S. Sandusky, Tulsa, Oklahoma 74136.





(2)
            Applicable
                percentage ownership is based on 136,039,254 shares of common stock
                outstanding as of March 18, 2008. 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 18 2008 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)
                38,977,452 shares of common stock owned by Mr. Keating and (ii) 1,906,272
                shares of common stock owned by Mr. Keating’s wife, Judy Keating.





(4)
            Represents
                (i) 2,718,460 shares of common stock owned by Regent Private Capital
                of
                which Mr. Lawrence Field is a principal and managing director and
                (ii)
                1,625,000 stock options.





(5)
            Represents
                (i) 110,000 shares of common stock owned by Mr. O’Connor, (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) 1,250,000 options to purchase common stock of
                the
                Company.





(6)
            Represents
                100,000 stock options




28




**ITEM
      12. 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 since 2005. 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
      13. 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)




29


10.13
            
            $1.25
                million convertible debenture dated November 21, 200710.14
            
            Registration Rights Agreement dated November 21, 200731.1
            
            Certification
                by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
                of the Exchange Act31.2
            
            Certification
                by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
                of the Exchange Act32.1
            
            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 Code32.2
            
            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)





**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, 2007 and 2006 were $43,800 and $64,350.




**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, 2007 and 2006 were $0 and $0, respectively. These fees
      related to the preparation of federal income and state franchise tax
      returns.





**All
      Other Fees**




There
      were no other fees billed for products or services provided by our principal
      accountant for the fiscal years ended December 31, 2007 and 2006.




30


**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, 2008
            
            /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, 2008.**Martin
                Keating**By:*
            /s/
              Vivek Bhaman
            
            *President,
                Chief Operating Officer, Director*
            
            *March
                31, 2008.**Vivek
                Bhaman**By:*
            /s/
              Lawrence Field
            
            *Director*
            
            *March
                31, 2008.**Lawrence
                Field**By:*
            /s/
              John O’Connor
            
            *Director*
            
            *March
                31, 2008.**John
                O’Connor**By:*
            /s/
              Victor F. Keen
            
            *Director*
            
            *March
                31, 2008.**Victor
                F. Keen*




31


3DIcon
        CORPORATION
 (A
        Development Stage Company)
 
 December
        31, 2007 and 2006
 
 CONTENTS
  Report
                  of Independent Registered Public Accounting Firm
              
              F-2Balance
                  Sheets as of December 31, 2007 and 2006
              
              F-3Statements
                  of Operations for the years ended December 31, 2007 and 2006 and
                  period
                  from inception (January 1, 2001) toDecember
                  31, 2007
              
              F-4Statements
                  of Changes in Stockholders’ Deficiency for period from inception (January
                  1, 2001) to December 31, 2007
              
              F-5Statements
                  of Cash Flows for the years ended December 31, 2007 and 2006 and
                  for
                  period from inception (January 1, 2001) to December 31, 2007
              
              F-7Notes
                  to Financial Statements, December 31, 2007 and 2006 and for period
                  from
                  inception (January
                  1, 2001) to December 31, 2007
              
              F-8
  F-1
 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, 2007 and 2006, and the related statements
          of
          operations, changes in stockholders' deficiency and cash flows for the
          years
          then ended and for the period from inception (January 1, 2001) to December
          31,
          2007. 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, 2007 and 2006, 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, 2007, in conformity with accounting principles generally accepted in
          the
          United States of America.
 
 The
          accompanying financial statements have been prepared assuming that the
          Company
          will continue as a going concern. As discussed in Note 1 to the financial
          statements, the Company is a development stage organization, having no
          revenues
          and insufficient capital commitments to fund the development of its planned
          products. This raises substantial doubt about the Company's ability to
          continue
          as a going concern. Management's plan in regard to these matters is also
          described in Note 1. The financial statements do not include any adjustments
          that might result from the outcome of this uncertainty.
 
 We
          were
          not engaged to examine management’s assertion about the effectiveness of 3DIcon
          Corporation’s internal controls over financial reporting as of December 31, 2007
          included in the accompanying Management’s Report on Internal Control over
          Financial Reporting and, accordingly, we do not express an opinion
          thereon.
 
 
 
 /s/
          Tullius Taylor Sartain & Sartain LLP
 Tulsa,
          Oklahoma
 March
          31, 2008
   F-2
 3DIcon
          CORPORATION
 (A
          Development Stage Company)
 
 BALANCE
          SHEETS
 
 December
          31, 2007 and 2006
 **2007**
              
              **2006****Assets**Current
                  assets:Cash
              
              $
              705,519
              
              $
              202,431Prepaid
                  expenses
              
              
              15,944
              
              
              -Total
                  current assets
              
              
              721,463
              
              
              202,431Net
                  property and equipment
              
              
              11,832
              
              
              4,810Debt
                  issue costs, net
              
              
              97,249
              
              
              104,596Total
                  Assets
              
              $
              830,544
              
              $
              311,837**Liabilities
                  and Stockholders' Deficiency**Current
                  liabilities:Current
                  maturities of convertible debentures payable
              
              $
              700,000
              
              $
              565,000Accounts
                  payable
              
              
              484,513
              
              
              378,007Accrued
                  interest on debentures
              
              
              8,854
              
              
              25,578Total
                  current liabilities
              
              
              1,193,367
              
              
              968,585Convertible
                  debentures payable, less current maturities
              
              
              558,375
              
              
              225,000Total
                  Liabilities
              
              
              1,751,742
              
              
              1,193,585Stockholders'
                  deficiency:Common
                  stock $.0002 par, 250,000,000 shares authorized;127,125,232
                  and 98,327,656 shares issued and outstanding atDecember
                  31, 2007 and 2006, respectively
              
              
              25,425
              
              
              19,666Additional
                  paid-in capital
              
              
              6,451,906
              
              
              2,568,119Deficit
                  accumulated during development stage
              
              
              (7,398,529
              )
              
              (3,469,533
              )Total
                  stockholders' deficiency
              
              
              (921,198
              )
              
              (881,748
              )Total
                  Liabilities and Stockholders' Deficiency
              
              $
              830,544
              
              $
              311,837
 See
          notes
          to financial statements
  F-3
 3DIcon
          CORPORATION
 (A
          Development Stage Company)
 
 STATEMENTS
          OF OPERATIONS
 
 Years
          ended December 31, 2007 and 2006
 And
          period from Inception (January 1, 2001) to December 31, 2007
 2007
              
              2006
              
              Inception
                  to
                December
                  31,
                2007**Income:**Sales
              
              $
              -
              
              $
              -
              
              $
              -**Expenses:**Research
                  and development
              
              
              1,020,888
              
              
              247,687
              
              
              1,509,759General
                  and administrative
              
              
              2,819,525
              
              
              1,191,683
              
              
              5,769,669Interest
              
              
              88,583
              
              
              30,518
              
              
              119,101Total
                  expenses
              
              
              3,928,996
              
              
              1,469,888
              
              
              7,398,529Net
                  loss
              
              $
              (3,928,996
              )
              $
              (1,469,888
              )
              $
              (7,398,529
              )Loss
                  per share:Basic
                  and diluted
              
              $
              (.035
              )
              $
              (.017
              )Weighted
                  average shares outstanding, basicand
                  diluted
              
              
              113,468,331
              
              
              88,297,738
 
 See
        notes
        to financial statements
  F-4
 3DIcon
            CORPORATION
 (A
            Development Stage Company)
 
 STATEMENTS
            OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
 
 Period
            from Inception (January 1, 2001) to December 31, 2007
 DeficitAccumulatedCommon
                  Stock
              
              Additional
              
              During
                  theShares
              
              ParValue
              
              Paid-In
                Capital
              
              Development
                Stage
              
              TotalBalance,
                  January 1, 2001 - as reorganized
              
              
              27,723,750
              
              $
              27,724
              
              $
              193,488
              
              $
              -
              
              $
              221,212Adjustment
                  to accrue compensation earned but not recorded
              
              
              -
              
              
              -
              
              
              -
              
              
              (60,000
              )
              
              (60,000
              )Stock
                  issued for services
              
              
              2,681,310
              
              
              2,681
              
              
              185,450
              
              
              -
              
              
              188,131Stock
                  issued for cash
              
              
              728,500
              
              
              729
              
              
              72,121
              
              
              -
              
              
              72,850Net
                  loss for the year
              
              
              -
              
              
              -
              
              
              -
              
              
              (259,221
              )
              
              (259,221
              )Balance,
                  December 31, 2001
              
              
              31,133,560
              
              
              31,134
              
              
              451,059
              
              
              (319,221
              )
              
              162,972Adjustment
                  to record compensation earned but not recorded
              
              
              -
              
              
              -
              
              
              -
              
              
              (60,000
              )
              
              (60,000
              )Stock
                  issued for services
              
              
              3,077,000
              
              
              3,077
              
              
              126,371
              
              
              -
              
              
              129,448Stock
                  issued for cash
              
              
              1,479,000
              
              
              1,479
              
              
              146,421
              
              
              -
              
              
              147,900Net
                  loss for the year
              
              
              -
              
              
              -
              
              
              -
              
              
              (267,887
              )
              
              (267,887
              )Balance,
                  December 31, 2002
              
              
              35,689,560
              
              
              35,690
              
              
              723,851
              
              
              (647,108
              )
              
              112,433Adjustment
                  to record compensation earned but not recorded
              
              
              -
              
              
              -
              
              
              -
              
              
              (90,000
              )
              
              (90,000
              )Stock
                  issued for services
              
              
              15,347,000
              
              
              15,347
              
              
              -
              
              
              -
              
              
              15,347Stock
                  issued for cash
              
              
              1,380,000
              
              
              1,380
              
              
              33,620
              
              
              -
              
              
              35,000Reverse
                  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
              )
              
              20,929Additional
                  Founders shares issued
              
              
              25,000,000
              
              
              5,000
              
              
              (5,000
              )
              
              -
              
              
              -Stock
                  issued for services
              
              
              24,036,000
              
              
              4,807
              
              
              71,682
              
              
              -
              
              
              76,489Stock
                  issued for cash
              
              
              360,000
              
              
              72
              
              
              28,736
              
              
              -
              
              
              28,808Warrants
                  issued to purchase common stock at $.025
              
              
              -
              
              
              -
              
              
              18,900
              
              
              -
              
              
              18,900Warrants
                  issued to purchase common stock at $.05
              
              
              -
              
              
              -
              
              
              42,292
              
              
              -
              
              
              42,292Stock
                  warrants exercised
              
              
              2,100,000
              
              
              420
              
              
              60,580
              
              
              -
              
              
              61,000Net
                  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
              
              
              -
              
              
              26,371Stock
                  issued to settle liabilities
              
              
              5,000,000
              
              
              1,000
              
              
              99,000
              
              
              -
              
              
              100,000Stock
                  issued for cash
              
              
              1,100,000
              
              
              220
              
              
              72,080
              
              
              -
              
              
              72,300Warrants
                  issued to purchase common stock at $.025
              
              
              -
              
              
              -
              
              
              62,300
              
              
              -
              
              
              62,300Warrants
                  issued to purchase common stock at $.05
              
              
              -
              
              
              -
              
              
              140,400
              
              
              -
              
              
              140,400Stock
                  warrants exercised
              
              
              5,260,000
              
              
              1,052
              
              
              172,948
              
              
              -
              
              
              174,000Net
                  loss for the year
              
              
              -
              
              
              -
              
              
              -
              
              
              (592,811
              )
              
              (592,811
              )Balance,
                  December 31, 2005
              
              
              73,947,656
              
              $
              14,789
              
              $
              1,597,959
              
              $
              (1,999,645
              )
              $
              (386,897
              )
 See
          notes
          to financial statements
 F-5
 
 3DIcon
            CORPORATION
 (A
            Development Stage Company)
 
 STATEMENTS
            OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
 
 Period
            from Inception (January 1, 2001) to December 31, 2007
 DeficitAccumulatedCommonStock
              
              
              Additional
              
              
              During
                  theShares
              
              
              Par
                  Value
              
              
              Paid-In
                Capital
              
              
              Development
                Stage
              
              
              TotalStock
                  issued for services
              
              
              4,700,000
              
              
              940
              
              
              205,597
              
              
              -
              
              
              206,537Debentures
                  converted
              
              
              3,000,000
              
              
              600
              
              
              149,400
              
              
              -
              
              
              150,000Stock
                  issued for cash
              
              
              200,000
              
              
              40
              
              
              16,160
              
              
              -
              
              
              16,200Warrants
                  issued to purchasecommon
                  stock
              
              
              -
              
              
              -
              
              
              33,800
              
              
              -
              
              
              33,800Warrants
                  converted to purchase common stock
              
              
              16,489,000
              
              
              3,297
              
              
              565,203
              
              
              -
              
              
              568,500Net
                  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
              
              
              -
              
              
              155,426Stock
                  issued for interest
              
              
              767,026
              
              
              153
              
              
              38,198
              
              
              -
              
              
              38,351Options
                  issued for services
              
              
              -
              
              
              -
              
              
              1,274,666
              
              
              -
              
              
              1,274,666Debentures
                  converted
              
              
              17,215,200
              
              
              3,442
              
              
              1,673,741
              
              
              -
              
              
              1,677,183Stock
                  issued for cash
              
              
              1,188,960
              
              
              238
              
              
              191,898
              
              
              -
              
              
              192,136Options
                  exercised
              
              
              222,707
              
              
              45
              
              
              (45
              )
              
              -
              
              
              -Warrants
                  issued to purchasecommon
                  stock
              
              
              -
              
              
              -
              
              
              87,864
              
              
              -
              
              
              87,864Warrants
                  converted to purchasecommon
                  stock
              
              
              8,585,956
              
              
              1,717
              
              
              462,203
              
              
              -
              
              
              463,920Net
                  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
              )
 
 See
          notes
          to financial statements
 F-6
  3DIcon
        CORPORATION
 (A
        Development Stage Company)
 
 STATEMENTS
        OF CASH FLOWS
 
 Years
        ended December 31, 2007 and 2006
 and
        period from Inception (January 1, 2001) to December 31, 2007
 
 2007
              
              2006
              
              Inception
                  to
                December
                  31,
                2007**Cash
                  Flows from Operating Activities**Net
                  loss
              
              $
              (3,928,996
              )
              $
              (1,469,888
              )
              $
              (7,398,529
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Options
                  issued for services
              
              
              1,274,666
              
              
              -
              
              
              1,274,666Stock
                  issued for services
              
              
              155,426
              
              
              206,537
              
              
              797,749Stock
                  issued for interest
              
              
              38,351
              
              
              -
              
              
              38,351Depreciation
              
              
              1,734
              
              
              352
              
              
              2,086Change
                  in:Impairment
                  of assets
              
              
              -
              
              
              -
              
              
              292,202Prepaid
                  expenses and other assets
              
              
              (85,539
              )
              
              (101,146
              )
              
              (190,134
              )Accounts
                  payable and accrued liabilities
              
              
              89,782
              
              
              25,867
              
              
              522,366Net
                  cash used in operating activities
              
              
              (2,454,576
              )
              
              (1,338,278
              )
              
              (4,661,243
              )**Cash
                  Flows from Investing Activities**Purchase
                  of office furniture and equipment
              
              
              (8,756
              )
              
              (5,162
              )
              
              (13,918
              )Net
                  cash used in investing activities
              
              
              (8,756
              )
              
              (5,162
              )
              
              (13,918
              )**Cash
                  Flows from Financing Activities**Proceeds
                  from stock and warrant sales and exercise of warrants
              
              
              743,920
              
              
              618,500
              
              
              2,218,170Proceeds
                  from issuance of debentures
              
              
              2,222,500
              
              
              780,000
              
              
              3,162,500Net
                  cash provided by financing activities
              
              
              2,966,420
              
              
              1,398,500
              
              
              5,380,670Net
                  increase in cash
              
              
              503,088
              
              
              55,060
              
              
              705,509Cash,
                  beginning of period
              
              
              202,431
              
              
              147,371
              
              
              10Cash,
                  end of year
              
              $
              705,519
              
              $
              202,431
              
              $
              705,519Supplemental
                  Disclosures**Non-Cash
                  Investing and Financing Activities**Conversion
                  of debentures tocommon
                  stock (net)
              
              $
              1,677,183
              
              $
              150,000
              
              $
              1,827,183Cash
                  paid for interest
              
              $
              52,535
              
              $
              4,940
              
              $
              107,990
 See
          notes
          to financial statements
 F-7
 3DIcon
          CORPORATION
 (A
          Development Stage Company)
 
 NOTES
          TO
          FINANCIAL STATEMENTS
 
 December
          31, 2007 and 2006 and period from inception
 (January
          1, 2001) to December 31, 2007
 **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 no source of revenue to fund
        the
        development of its planned product or to pay operating expenses. This has
        resulted in the Company realizing a cumulative net loss of $7,398,529 for
        the
        period from inception (January 1, 2001) to December 31, 2007, and a net loss
        of
        $3,928,996 and $1,469,888 for the years ended December 31, 2007 and 2006,
        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.
  F-8
  **Note
        1 - Organization and Operations (continued)**
 
 *Uncertainties
        (continued)*
 
 Management
        plans to fund the future operations of the Company with the available cash
        of
        $705,519 and the proceeds from exercise of stock warrants of up to $307,792
        in
        2008. Further, the Company has negotiated funding from Golden Gate Investors,
        Inc. Under the terms of the debentures, Golden gate will advance an additional
        $1,125,000 to the Company in 2008 (see Note 6). Additionally the Company
        is
        continuing to pursue additional capitalization through Rule 144 stock sales,
        debentures, and other venture capital investments. There is also the possibility
        of revenue in 2008 from sales and licensing of the Company’s
        products.
 
 **Note
        2 - Summary of Significant Accounting Policies**
 
 *Research
        and development*
 
 Research
        and development costs, including payments made to the University of Oklahoma
        pursuant to the Sponsored Research Agreement, are expensed as incurred. (Note
        4)
 
 *Stock-based
        compensation*
 
 The
        Company accounts for stock-based compensation arrangements for employees
        in
        accordance with *Statement
        of Financial Accounting Standards (SFAS) No. 123(R* ), *Share-Based
        Payments.* The
        Company recognizes expenses for employee services received in exchange for
        stock
        based compensation on the grant-date fair value of the shares awarded. The
        Company accounts for stock issued to non-employees in accordance with the
        provisions of *SFAS
        No. 123* , *Accounting
        for Stock-Based Compensation* ,
        and the
        related Emerging Issues Task Force (EITF) Consensuses.
 
 *Income
        taxes*
 
 The
        Company accounts for income taxes in accordance with *Statement
        of Financial Accounting Standards (SFAS) No. 109, Accounting for Income
        Taxes* . *SFAS
        No. 109* requires
        the recognition of deferred tax assets and liabilities for the estimated
        future
        tax consequences attributable to temporary differences between the financial
        statement carrying amounts of existing assets and liabilities and their
        respective tax bases. In addition, *SFAS
        No. 109* requires
        the recognition of future tax benefits, such as net operating loss carry
        forwards, to the extent that realization of such benefits is more likely
        than
        not. The amount of deferred tax liabilities or assets is calculated using
        tax
        rates in effect for the year in which those temporary differences are expected
        to be recovered or settled. The effect on deferred tax assets and liabilities
        of
        a change in tax rate is recognized in income in the period that includes
        the
        enactment date. Valuation allowances are established when necessary to reduce
        deferred tax assets to the amounts more likely than not to be
        realized.
  F-9
 
 **Note
        2 - Summary of Significant Accounting Policies (continued)**
  *Net
        income (loss) per common share*
  The
        Company computes net income (loss) per share in accordance with *SFAS
        No. 128* , *Earnings
        per Share* and *SEC
        Staff Accounting Bulletin No. 98 (“SAB 98”).* Under
        the provisions of *SFAS
        No. 128* and *SAB
        98,* basic
        net income (loss) per common share is based on the weighted-average outstanding
        common shares. Diluted net income (loss) per common share is based on the
        weighted-average outstanding shares adjusted for the dilutive effect of warrants
        to purchase common stock and convertible debentures. Due to the Company’s
        losses, such potentially dilutive securities are anti dilutive for all periods
        presented. The weighted average number of potentially dilutive shares is
        10,935,382 and 14,705,000 for the years ended December 31, 2007 and 2006,
        respectively.
 
 *Use
        of estimates*
 
 The
        preparation of financial statements in conformity with U. S. generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect the reported amounts of assets, liabilities, revenues, expenses and
        the
        disclosure of contingent assets and liabilities. Actual results could differ
        from the estimates and assumptions used.
 
 *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. The quarterly adjustment is charged
        to
        paid in capital.
 
 *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.
  F-10
  **Note
        3 - Recent Accounting Pronouncements**
 
 The
        following are summaries of recent accounting pronouncements that are relevant
        to
        the Company:
 
 In
        December 2007 the Financial Accounting Standards Board (“FASB”) issued *SFAS
        No. 141R “Business Combinations”.* This
        statement replaces *SFAS
        141* and
        defines the acquirer in a business combination as the entity that obtains
        control of one or more businesses in a business combination and establishes
        the
        acquisition date as the date that the acquirer achieves control. *SFAS
        No. 141R* requires
        an acquirer to recognize the assets acquired, the liabilities assumed, and
        any
        noncontrolling interest in the acquiree at the acquisition date, measured
        at
        their fair values as of that date. *SFAS
        No. 141R* also
        requires the acquirer to recognize contingent consideration at the acquisition
        date, measured at its fair value at that date. This statement is effective
        for
        fiscal years, and interim periods within those fiscal years, beginning on
        or
        after December 15, 2008. Earlier adoption is prohibited. The adoption of
        this statement is not expected to have a material effect on the Company’s
        financial statements.
 
 In
        December 2007, FASB issued *SFAS
        No. 160, “Noncontrolling Interests in Consolidated Financial Statements —
an Amendment of ARB No. 51”* .
        This
        statement amends *ARB
        51* to
        establish accounting and reporting standards for the Noncontrolling interest
        in
        a subsidiary and for the deconsolidation of a subsidiary. This statement
        is
        effective for fiscal years, and interim periods within those fiscal years,
        beginning on or after December 15, 2008. Earlier adoption is prohibited. We
        do not have such subsidiaries therefore the adoption of the provisions of *SFAS
        No. 160* will not
        affect our results of operations or financial position.
 
 In
        February 2007 FASB issued *SFAS
        No. 159, “The Fair Value Option for Financial Assets and Financial
        Liabilities — Including an Amendment of FASB Statement
        No. 115”.* This
        statement permits entities to choose to measure certain financial instruments
        and liabilities at fair value. *SFAS
        No. 159* is
        effective as of the beginning of an entity’s first fiscal year that begins after
        November 15, 2007. Early adoption is permitted as of the beginning of a
        fiscal year that begins on or before November 15, 2007, provided the entity
        also elects to apply the provision of *SFAS
        No. 157, “Fair Value Measurements”.* The
        adoption of this statement is not expected to have a material effect on the
        Company’s financial statements.
 
 In
        September 2006, the FASB issued *SFAS
        No. 157* ,
        “ *Fair
        Value Measurements” (“SFAS No. 157”).* This
        Statement defines fair value as used in numerous accounting pronouncements,
        establishes a framework for measuring fair value in generally accepted
        accounting principles (“GAAP”) and expands disclosure related to the use of fair
        value measures in financial statements. SFAS No. 157 does not expand the
        use of fair value measures in financial statements, but standardizes its
        definition and guidance in GAAP. The Standard emphasizes that fair value
        is a
        market-based measurement and not an entity-specific measurement based on
        an
        exchange transaction in which the entity sells an asset or transfers a liability
        (exit price). SFAS No. 157 establishes a fair value hierarchy from
        observable market data as the highest level to fair value based on an entity’s
        own fair value assumptions as the lowest level. SFAS No. 157 is effective
        in fiscal years beginning after November 15, 2007. Adoption of this
        statement is not expected to materially impact our results of operations
        or
        financial position.
  F-11
  **Note
        3 - Recent Accounting Pronouncements (continued)**
 
 Also
        in
        September 2006, the FASB released *SFAS
        No. 158, “Employers’ Accounting for Defined Benefit Pension and Other
        Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and
        132(R)” (“SFAS No. 158”).* Under
        the new standard, companies must recognize a net liability or asset to report
        the funded status of their defined benefit pension and other postretirement
        benefit plans on their balance sheets. We do not have such plans therefore
        the
        adoption of the provisions of SFAS 158 will not affect our results of operations
        or financial position.
 
 In
        June 2006, the Financial Accounting Standards Board issued *FASB
        Interpretation No. 48* , *Accounting
        for Uncertainty in Income Taxes - an interpretation of FASB Statement
        No. 109* (FIN
        48).
        This interpretation clarifies the accounting for uncertainty in income taxes
        recognized in an enterprise's financial statements in accordance with *FASB
        Statement No. 109* , *Accounting
        for Income Taxes.* FIN
        48
        prescribes a recognition threshold and measurement attribute for the financial
        statement recognition and measurement of a tax position taken or expected
        to be
        taken in a tax return. It also provides guidance on derecognition,
        classification, interest and penalties, accounting in interim periods,
        disclosure, and transition. FIN 48 is effective for fiscal years beginning
        after
        December 15, 2006. The Company adopted FIN 48 effective January 1, 2007 and
        the adoption did not have a material effect on its financial statements and
        related disclosures.
 .
 **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
        -
        Tulsa (“University”), which expired October 19, 2004. The Company paid the
        University $14,116 pursuant to this agreement. On July 15, 2005, the Company
        entered into a SRA with the University (Phase II), which expired January
        14,
        2007. Under this agreement the University conducted a research project entitled
        "Investigation of Emerging 3-Dimensional Display Technologies" and the Company
        agreed to pay the University $453,584 at various dates from November 10,
        2005
        through July 15, 2006 to cover the costs of the research. The final payment
        of
        $226,792, due on July 15, 2006, was not paid and the agreement was modified
        in
        November 2006 to provide $125,259 additional funding, extend the term of
        the
        agreement through March 31, 2007, and revise the payment schedule to combine
        the
        July 15, 2006 remaining balance due of $226,792 with the additional funding
        into
        a revised payment schedule. Under the terms of the agreement the Company
        agreed
        to pay the combined remaining obligation of $352,052 in four equal installments
        of $88,013 on December 31, 2006 through March 31, 2007.
 
 On
        February 23, 2007 the Company entered into a SRA with the University (Phase
        III)
        which expires March 31, 2010. Under this agreement the University will conduct
        a
        research project entitled “3-Dimensional Display Development” that seeks to make
        significant progress in the development of 3-dimensional display technologies.
        The Company will pay the University $3,468,595 payable in monthly installment
        ranging from $92,263 to $112,777 beginning April 30, 2007 and ending March
        31,
        2010, an aggregate commitment of $4,047,439.
  F-12
 
 **Note
        5 - Consulting Agreements**
 
 *Concordia
        Financial Group*
 
 The
        Company signed an Independent Consultant Agreement with Concordia Financial
        Group (“Concordia”) on August 7, 2007 to memorialize an oral agreement for
        consultant services that Concordia has performed since November 16, 2005,
        and
        continued through October 31, 2007 when it was terminated. Under the terms
        of
        the agreement Concordia assisted 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 and listing of the Company on the OTC Bulletin Board, 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. The Company paid Concordia $74,460 in 2007. As additional
        consideration for business strategy consulting services, the Company granted
        Concordia options to purchase 5 million shares of Company stock with an exercise
        price of $0.05 per share. The options were valued at $843,390 and were charged
        to operations in 2007. The estimated fair market value of the options was
        determined by 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 147.83% is based on the historical volatility
        of our stock. The risk-free interest rate of 3.0% is based on the
        U.S. Treasury Constant Maturity rates as of the grant date. The expected
        life of the option of two years is based on historical exercise behavior
        and
        expected future experience.  (See Note 7)
 
 The
        Company entered into a new one year Independent Consulting Agreement with
        Concordia effective November 1, 2007. Under the new agreement Concordia will
        serve as liaison to Golden Gate Investors, Inc. and provide business strategy
        services similar to those provided under the previous agreement. 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. Additionally, 3DIcon paid Concordia
        approximately $40,540 for services during the period November 1, 2007 to
        December 31, 2007.
 
 In
        addition to the cash compensation, and conditioned upon terms of the agreement,
        the Company may grant 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 $130,430 which
        will
        be recognized in the period earned under the terms of the agreement. (See
        Note
        7)
  F-13
  **Note
        5 - Consulting Agreements (continued)**
 
 Each
        grant of options to purchase shares is conditioned upon the Board’s assessment,
        satisfaction and approval of Concordia’s performance to the grant date. There
        were no charges to expense in relation to the options in 2007.
 
 *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.
 
 *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. As additional compensation
        LIB was issued 150,000 restricted shares of the Company’s common stock. The
        restricted shares were valued consistent with other shares issued for services
        at $4,625. The agreement is for one year and is automatically extended on
        a
        month-to-month basis unless terminated by either party. ****
 
 *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. The agreement is for one year and is automatically extended on a
        month-to-month basis unless terminated by either party.
  F-14
 
 **Note
        6 - Debentures Payable**
 
 Debentures
        payable consist of the following:
 
 2007
              
              2006Senior
                  Convertible Debentures:8.0%
                  Debenture due 2006
              
              $
              -
              
              $
              135,0009.75%
                  Debentures due 2008
              
              
              700,000
              
              
              -6.25%
                  Debentures due 2009
              
              
              333,971
              
              
              125,0006.25%
                  Debentures due 2010
              
              
              125,000
              
              
              -4.75%
                  Debentures due 2011
              
              
              99,404
              
              
              100,0001,258,375
              
              
              360,0008.00%
                  Unsecured Debentures due 2007
              
              
              -
              
              
              430,000Total
                  Debentures
              
              
              1,258,375
              
              
              790,000Less
                  Current Maturities
              
              
              (700,000
              )
              
              (565,000
              )Long-term
                  Debentures
              
              $
              558,375
              
              $
              225,000
 
 *8%
        Senior convertible debentures due 2006*
 
 The
        Company issued convertible debentures aggregating $160,000 during 2005 and
        issued an additional $125,000 during 2006 at par value for cash. The debentures
        bore interest at 8% per annum, and were due no later than December 31, 2007.
        During 2007 and 2006 debentures totaling $135,000 and $150,000 were converted
        to
        2,700,000 and 3,000,000 shares respectively, of common stock. Upon conversion,
        the Company paid all accrued interest totaling $18,128. The Company issued
        247,140 shares at $0.05 per share in payment of $12,357 of accrued interest
        and
        the balance of $5,771 was paid in cash.
 
 *8%
        Unsecured debentures due 2007*
 
 As
        of
        December 31, 2006 the Company had issued $430,000 unsecured convertible
        debentures at par value for cash. The debentures bore interest at 8% per
        annum,
        were convertible to common shares
        at
        $0.40 per share and were due no later than March 31, 2007. The Company was
        not
        able to retire the debentures by the due date and as a result the Company
        was in
        default. As a result of the default, the debentures were due in cash on the
        demand of the holders, but could be converted into common stock at a conversion
        price of $0.05 at the request of the holders at anytime. The holders elected
        to
        convert the $430,000 of debentures into 8.6 million shares of Common Stock
        and
        additionally received 519,886 shares of Common Stock for the $25,994 interest
        accrued on the debentures.
  F-15
  Note
        6 - Debentures Payable
        (continued)
  *Securities
        Purchase Agreement*
 
 The
        Company entered into a Securities Purchase Agreement (“Purchase Agreement”) with
        Golden Gate Investors, Inc. (“Golden Gate”) on November 3, 2006, as amended on
        December 15, 2006 and February 6, 2007, for the sale of a 6.25% convertible
        debenture in the principal amount of $1,250,000. The Company agreed to file
        a
        registration statement with the SEC for the resale of the common stock
        underlying the debenture. The registration statement became effective on
        July 3,
        2007. Under the terms of the Purchase Agreement, Golden Gate 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. Pursuant to the Securities Purchase
        Agreement, Golden Gate provided the Company with an additional $312,500 of
        debenture funding upon effectiveness of the registration statement 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
        placed with an escrow agent during 2007. During the remainder of 2007 $400,000
        was released and $412,500 remains available. At various dates after the
        effectiveness of the registration statement, $478,529 of the debenture were
        converted into 2,097,406 shares of common stock at prices ranging from $0.20
        to
        $0.26 based on the formula in the convertible debenture. After the conversion
        to
        common stock, $333,971 of the $1,250,000 debenture remains
        outstanding.
 
 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 Gate with written notice that it desired to require Golden
        Gate
        to purchase the second debenture. Golden Gate advanced $125,000 on the second
        $1.25 million debenture on November 9, 2007. On November 21, 2007, the Company
        issued and sold a convertible note in the principal amount of $1,250,000
        to
        Golden Gate (the “Second Debenture”). Pursuant to the terms of the Second
        Debenture, Golden Gate 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 Gate’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 registration
        statement became effective on January 4, 2008.
  F-16
 
 **Note
        6 - Debentures Payable (continued** )
 
 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 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 Gate shall have the right to immediately sell the pledged shares in
        satisfaction of any amounts of principal and interest owing under the Second
        Debenture. (See Note -10 Subsequent events)
 
 On
        November 3, 2006, the Company also issued to Golden Gate a 43⁄4% 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. Golden
        Gate
        converted $596 of the $100,000 debenture into 244,045 shares of common stock
        on
        December 4, 2007 at $0.002 per share and exercised warrants to purchase 5,956
        shares of common stock at $10.90 per share. The Company received $64,920
        from
        the exercise of the warrants.
 
 To
        obtain
        funding for ongoing operations, the Company entered into a Bridge Financing
        Agreement with Golden Gate Investors which closed on June 11, 2007 (the
“Financing Agreement”), for the sale of a 9.75% convertible debenture in
        the principal amount of $700,000. Pursuant to the Financing Agreement, the
        Company agreed to file a registration statement with the SEC within three
        days
        of closing for the resale of the common stock underlying the $1.25 million
        convertible debenture, which was issued to Golden Gate Investors on November
        3,
        2006. The Company received gross proceeds of $700,000 from the sale of the
        aforementioned debenture.
 
 The
        debenture may be converted, at Golden Gate’s option, in whole or in part, into
        restricted shares of the Company’s common stock. The conversion price will be
        $0.28 until the earlier of, the Company’s shares trading on the OTC Bulletin
        Board or other trading market that the SEC recognizes as a trading market,
        or
        January 1, 2008.  Subsequently, the conversion price is equal to 72% of the
        average of the five lowest volume weighted average prices for the common
        stock
        for the 20 trading days prior to the conversion date. The convertible debenture
        matures June 11, 2008; subject to an option held by Golden Gate to extend
        the
        maturity for one period of six months. Interest on the convertible debenture
        is
        payable monthly in cash.
 
 Interest
        on the 61⁄4% convertible debentures is payable monthly in cash or, at Golden
        Gate’s option, in shares of common stock of the Company valued at the then
        applicable conversion price. The initial $1.25 million convertible debenture
        is
        convertible into the number of the shares of common stock equal to the dollar
        amount of the debenture divided by the conversion price.
  F-17
 
 **Note
        6 - Debentures Payable (continued)**
 
 The
        conversion price for the initial $1.25 million convertible debenture is (1)
        $.35 per share until the common stock is quoted on the OTC Bulletin Board
        or
        otherwise trading on the NASDAQ or a national securities exchange and (2)
        thereafter the lesser of (i) $2.00 or, (ii) 70% of the average of
 the
        five
        lowest volume weighted average prices during the twenty (20) trading days
        prior
        to the conversion. The conversion price for the second $1.25 million convertible
        debenture is (1) $.35 per share until the common stock is quoted on the OTC
        Bulletin Board or otherwise listed as trading on the NASDAQ or a national
        securities exchange and thereafter (2) the lesser of (i) $2.00 or (ii) 90%
        of
        the average of the five lowest volume weighted average prices during the
        twenty
        (20) trading days prior to the conversion. The conversion price for the $100,000
        convertible debenture is $.35 per share until the earlier of January 1, 2008
        or
        the date the common stock is quoted on the OTC Bulletin Board or otherwise
        listed as trading on the NASDAQ or a national securities exchange and
        thereafter, the lesser of (i) $4.00 or (ii) 80% of the average of the five
        lowest volume weighted average prices during the twenty (20) trading days
        prior
        to the conversion. If Golden Gate elects to convert a portion of the debenture
        and, on the day that the election is made, the volume weighted average price
        is
        below $0.75, the Company shall have the right to prepay that portion of the
        debenture that Golden Gate elected to convert, plus any accrued and unpaid
        interest, at 135% of such amount.
  *Debentures
        payable-related party*
 
 Judith
        F.
        Keating, the Secretary of the Company and the wife of Martin Keating, Chairman
        and CEO of the Company, advanced the Company $272,500 for working capital
        during
        2007. The Company issued convertible debentures for the amounts advanced.
        The
        debentures were converted into 2,732,750 shares of common stock effective
        March
        2, 2007.
 
 **Note
        7 - Common Stock and Paid-In Capital**
 
 At
        various dates throughout 2006, the Company sold 200,000 shares of common
        stock
        with warrants attached for $.25 per share pursuant to an exempt offering.
        Each
        subscriber received one share of common stock with two separate warrants
        to
        purchase additional shares of Rule 144 stock as follows: (a) ten times the
        number of shares within one year of the date subscribed at $.025 per share
        and
        (b) another ten times the number of shares within two years of the date
        subscribed at $.05 per share. Warrants not exercised under their terms will
        be
        terminated.
 
 At
        various dates throughout 2007 and 2006, the Company issued 7,380,000 and
        6,260,000 shares, respectively, of its common stock pursuant to the exercise
        of
        $.05 warrants by non-employees. The Company received $369,000 and $313,000,
        respectively, in cash.
 
 At
        various dates throughout 2007 and 2006, the Company issued 1,200,000 and
        10,220,000, respectively, of its common stock pursuant to the exercise of
        $.025
        warrants by non-employees. The Company received $30,000 and $255,500,
        respectively, in cash.
  F-18
 
 **Note
        7 - Common Stock and Paid-In Capital (continued)**
 
 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 594,480 shares of its common stock at a price
        of
        $.40 per share from October 12, 2007 through October 11, 2008, or $.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 terminate
        October 11, 2009.
 
 As
        of
        December 31, 2007, there are warrants outstanding to purchase 1,400,000 shares
        of common stock at $.05 per share expiring at various dates throughout 2008
        and
        594,480 warrants to purchase common stock at a price of $.40 per share from
        October 12, 2007 through October 11, 2008, or $.50 per share from October
        12,
        2008 through October 11, 2009.
 
 *Common
        stock and options issued for services*
 
 During
        2007 shares of common stock totaling 817,727 were issued for legal and
        consulting services for which the Company recognized $155,426 of expense.
        During
        2006, 1,100,000 shares of common stock were issued for consulting services
        for
        which the Company recognized $15,437 of expense. Additionally, the Company
        issued 2,700,000 shares of common stock at various dates throughout 2006
        to its
        President and Chief Executive Officer for services rendered. The Company
        issued
        900,000 shares at various dates throughout 2006 to its employee for services
        rendered. The shares are valued based upon invoices received, if applicable
        or
        using the same discount structure as the other common stock transactions
        and
        ranged from $0.04 to $0.35 during 2007 and $0.01 to $0.09 during 2006. The
        Company recognized $191,100 in compensation expense in 2006 related to these
        transactions.
 
 *Options
        granted*
 
 On
        April
        27, 2007, the Company granted its three Directors 1,500,000 options exercisable
        at $.40 per share. The options were valued at $431,276 and were charged to
        operations in 2007. 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 124.4% is based on the historical volatility of our stock.
        The
        risk-free interest rate of 3.0% is based on the U.S. Treasury Constant
        Maturity rates as of the grant date. The expected life of the option of two
        years is based on historical exercise behavior and expected future
        experience.
  F-19
 
 **Note
        7 - Common Stock and Paid-In Capital (continued)**
 
 The
        following summary reflects warrant and option activity for the year ended
        December 31, 2007:
 
 **Attached**
                **Warrants**
              
              **Golden
                  Gate**
                **Warrants**
              
              **Options****Outstanding
                  December 31, 2006**
              
              
              10,880,000
              
              
              1,000,000
              
              
              -Granted
              
              
              594,480
              
              
              -
              
              
              6,500,000Exercised
              
              
              (8,580,000
              )
              
              (244,045
              )
              
              (250,000
              )Cancelled
              
              
              (900,000
              )
              
              -
              
              
              -**Outstanding
                  December 31, 2007**
              
              
              1,994,480
              
              
              755,955
              
              
              6,250,000
  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 our 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.
  F-20
 
 **Note
        7 - Common Stock and Paid-In Capital (continued)**
 
 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 3DIcon Corporation 2007 Incentive Stock Plan
        (the
        "Plan"). The 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 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 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
        shares.
  **Note
        9 - Income Taxes**
  At
        December 31, 2007 and 2006, the Company had accumulated net operating losses
        of
        approximately $6,650,000 and $3,115,000, 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, 2007
              
              December
                  31, 2006Loss
                  carry forward amount
              
              $
              6,650,000
              
              $
              3,115,000Effective
                  tax rate
              
              
              38
              %
              
              38
              %Deferred
                  tax asset
              
              
              2,527,000
              
              
              1,183,700Less
                  valuation allowance
              
              
              (2,527,000
              )
              
              (1,183,700
              )Net
                  deferred taxes
              
              $
              -
              
              $
              -
 
 F-21
 
 **Note
        10 - Related party transaction**
 
 3DIcon
        has engaged the law firm of Newton, O’Connor, Turner & Ketchum as its
        outside corporate counsel since 2005. John O’Connor, a director of 3DIcon, is
        the Chairman of Newton, O’Connor, Turner & Ketchum.
 
 **Note
        11 - Subsequent events**
 
 *Debentures
        payable*
 
 Pursuant
        to the terms of the second $1.25 million debenture, the Company filed a
        registration statement covering the shares to be issued upon conversion of
        the
        debenture. The registration statement was effective January 4, 2008. Included
        in
        the registration statement are 2.25 million shares issuable upon conversion
        of
        the $333,971 balance of the First Debenture and 4.25 million shares issuable
        on
        the Second Debenture based on current market prices and assuming full conversion
        of the convertible debentures.
 
 Subsequent
        to December 31, 2007 Golden Gate converted $273,000 of the First Debenture
        into
        1,556,930 shares of the Company’s common stock leaving a balance of $60,971 on
        the debenture. Golden Gate also converted $351 of the $100,000 4.75% debenture
        into 3,511 shares of the Company’s common stock at a price of $10.90 per share
        and exercised warrants for 196,489 shares of the Company’s common stock.
        Accordingly 200,000 shares were issued from the conversion and the exercise
        of
        the warrants, $38,270 was received from the warrants exercised and the 4.75%
        debenture balance was reduced to $99,053.
 
 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 four occasions, January 23, March
        6,
        14 and 18, 2008. On each of the four occasions Golden Gate, by separate letter
        agreements, agreed that the occasions did not constitute a default and thereby
        waived the default provision for those four occasions only.
 
 *Common
        stock and paid in capital*
 
 Under
        the
        terms of the Concordia consulting agreement (Note 5), Concordia exercised
        options to purchase 209,677 shares of common stock at the agreed exercise
        price
        of $.05. Warrants attached to common stock (Note 7) were exercised for $56,000
        and 1,120,000 shares of common stock were issued at $.05 per share.
 
 Concordia
        was issued 206,557 shares of common stock in payment for services under the
        consulting agreement. Additionally common shares totaling 159,115 were issued
        to
        vendors in payment of $35,000 for services.
  F-22