Attached files
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
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ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2009
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TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from _______________ to _________________
Commission File Number 000-52289
Power of the Dream Ventures, Inc.
(Name of Small Business Issuer in its charter)
(Name of Small Business Issuer in its charter)
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Delaware
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51-0597895
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(State or other jurisdiction of incorporation or organization)
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(I.R.S Employer Identification No.)
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1095 Budapest, Soroksari ut 94-96, Hungary
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(Address of principal executive offices) (Zip Code)
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+36-1-456-6061
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(Issuer’s telephone number)
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Securities registered under Section 12(g) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $0.0001 per share
Indicate by a check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No x
Check whether the issuer is not required to file reports pursuant to Section 13 or 15 (d) of the Exchange Act.
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 requirement for the past 90 days. Yes xNo
Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted or posted pursuant to rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and to post such files. Yes No
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-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934. (Check one)
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company x
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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
Issuer had revenues of $0 for the year ended December 31, 2009. As of March 15, 2010, 48,916,291 shares of Common Stock were outstanding of which approximately 16,017,936 were held by non-affiliates of the Company. The aggregate market value of the Common Stock held by non-affiliates of the Company as of March 15, 2010 was $1,281,362.
Documents Incorporated by Reference: None.
Transitional Small Business Disclosure Format (check one): Yes o No o
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POWER OF THE DREAM VENTURES, INC. (formerly TIA V, Inc.)
(A Development Stage Company)
INDEX TO FORM 10-K
December 31, 2009
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Page
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PART I
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Item 1.
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4
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Item 1A.
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10
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Item 2.
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15
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Item 3.
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16
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Item 4.
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16
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PART II
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Item 5.
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17
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Item 6.
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19
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Item 7.
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19
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Item 8.
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25
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Item 9.
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Item 9A.
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25
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Item 9B.
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PART III
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Item 10.
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28
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Item 11.
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30
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Item 12.
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30
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Item 13.
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31
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Item 14.
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Principal Accountant Fees and Services
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32
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PART IV
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Item 15.
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PART I
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ITEM 1.
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DESCRIPTION OF BUSINESS
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This report contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as “anticipate,” “expect,” “intend,” “plan,” “will,” “we believe,” “Company believes,” “management believes” and similar language. The forward-looking statements are based on the current expectations of the Company and are subject to certain risks, uncertainties and assumptions, including those set forth in the discussion under “Description of Business” and “Management’s Discussion and Analysis or Plan of Operation”. The actual results may differ materially from results anticipated in these forward-looking statements. We base the forward-looking statements on information currently available to us, and we assume no obligation to update them.
The Company’s Business
Power of the Dream Ventures, Inc., (“PDV” or “We” or the “Company”) is Hungary’s premier holding company focused on technology acquisition and development enabling the delivery of revolutionary concepts and ready to market products to the international market place. We develop, acquire, license, or co-develop technologies that originate exclusively in Hungary that are in prototype stage based on existing patents; in prototype stage prior to patenting; existing products that require expansion capital to commercialize; emerging science and high-technology research projects that require help in patenting, developing the product and marketing, university spin-off technologies and ideas from the very early stages of what represents “disruptive technologies.”
We were incorporated in Delaware on August 17, 2006, under the name Tia V, Inc. Since inception, and prior to our acquisition of Vidatech on April 10, 2007, we were engaged solely in organizational efforts and obtaining initial financing. Our sole business purpose was to identify, evaluate and complete a business combination with an operating company.
On April 10, 2007, we completed our acquisition of Vidatech, Kft. (also know as Vidatech Technological Research and Development LLC) a limited liability company formed under the laws of the Republic of Hungary. Vidatech is a company formed for the purpose of investing in, acquiring, developing, licensing, and commercializing technologies developed in Hungary. In furtherance of its business, Vidatech provides research and development services to the companies from which it acquires technologies or participation interests in such technologies.
Through Vidatech, we aim to provide pro-active support for idea, research, start-up and expansion-stage technology companies having rights to technologies or intellectual properties which we believe to be potentially commercially viable, by offering a range of services designed to encourage and protect the continuing development and eventual commercialization of those technologies.
The Company’s Industry
The Company develops proprietary products for a wide range of industry sectors. These include, but are not limited to:
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Software industry, form online applications to stand alone products
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Energy industry from power generation technologies to power transmission and power storage methods
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Manufacturing sectors from sub-component assemblies to whole units
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Chemical sector, with a special focus on biodegradable solutions for environmentally sensitive applications
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Biotechnology sector with a special emphasis on cancer and cholesterol treatment methods
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Pharmaceutical products
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Medical equipment with a special emphasis on products that offer better solution to existing treatment methodologies
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Transportation related products that are environmentally friendly and provide alternatives to current methods
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Chemicals that are biodegradable and environmentally friendly solutions for diverse application areas from fire fighting to waste processing
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Equipment for the leisure industry
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Communications products and methods that offer significant industry enhancement to solutions currently in use
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Entertainment industry products for movie, television and gaming
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Disruptive technologies for all industries where there is a discernable need or suitable market opportunity for new technology penetration
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Metals industries such as precious metals refining and end user sales
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As a diversified technology manager we seek to license and sell technologies within any of these industries.
The Company’s Business Strategy
To date, the primary focus of Central European countries has been to develop a solid infrastructure required for a market economy. Due to the high-perceived risks of these economies, institutional financial support for start-ups and expansion stage companies has been lacking.
With several Central European economies expected to join the European Monetary Union by 2012, Hungary, as one of the most developed Central European countries, is moving from a transition to a converging economy. With the continued stabilization and the transition of Hungary to a converging economy the time is ripe for a local entity with high level technology skills to selectively acquire, develop, license and/or co-developed international market ready technologies.
The Company’s Products
From inception through December 31, 2009, the Company primarily focused on the raising of capital. As of December 31, 2010, the Company manages eight technologies: RiverPower, the Kalmar inventions (FireSAFE fire-proofing liquid; technology for utilizing communal waste as a concrete additive; technology for repairing potholes with the use of recycled plastics; technology for neutralizing red mud; biodegreadable deiing solution and PVC shielded electric cable recycling technology), and an equity interest in ‘in4 Kft’, a company formed to develop next generation semantic internet based search engine and content organizer applications. All of these technologies are still in the development stage (see Note 4).
A detailed analysis of these technologies is as follows:
The Buresch Inventions: Desalination and H2O gas technologies
Following a yearlong market study as to the benefits, feasibility and financial resources required to complete prototype building and eventual commercialization of theses technologies, on October 30, 2009 we have elected to terminate the original invention transfer agreements signed on January 16, 2008 and discontinue further efforts to commercialize these product. We believe our efforts and resources are best allocated by focusing our immediate efforts in completing development and bringing to market our iGlue software in 2010. Total negative exposure relating to the acquisition of these technologies amounts to USD 25,000.
The TothTelescope
On July 15, 2009 our exclusive distributor agreement expired with Attila Toth, Inventor of the TothTelescope. After extensive review of the technology, the available market and hurdles associated with manufacturing and distributing the TothTelescope, we have elected not to renew the distribution agreement and discontinue the project. Since inception only 10 telescopes were sold. Overall invested capital was returned from commissions eared on these sales.
RiverPower Technology
Development of our RiverPower technology is currently on hold pending the outcome of a law suit brought against us by RiverPower’s inventor, Janos Salca. As disclosed in our second quarter report, on May 12, 2009 we were presented with a court order for a hearing, initiated by Janos Salca, inventor of our RiverPower technology. In the court documents made available to us Mr. Salca alleges that at the signing of our Invention Transfer Agreement, dated May 24, 2006 we intentionally mislead him as to our intent to develop his technology. On June 22, 2009 our Legal Counsel attended the court hearing on the inventor’s motion to annul the invention transfer agreement. At this hearing the judge asked us to submit documentation showing our continued development of our RiverPower technology as proof that we are in fact working toward a commercial product as opposed to the claim of the inventor that we are not. As per this ruling our legal counsel submitted all required document to the court. A second hearing on this issue was held on January 15, 2010. In this hearing the judge asked Janos Salca to withdraw his claims and Us to mediate a mutually agreeable resolution. He set a third and final hearing for September of 2010. As of this date we have not heard from Janos Salca on his willingness to discuss his withdrawal of his claim.
We believe the claim brought forth by Mr. Salca to be completely without merit. We have been diligently, although at a much slower pace than originally anticipated, pursuing development of RiverPower. We anticipate having a full scale prototype available for river testing in the first half of 2010 pending completion of technology optimization, and the securing of required licenses and permits. In addition, we are also continuing development of the associated slow prm, 50Hz syncron generator, which is now available for testing after completion of a working prototype at the end of 2009. In addition, we have also received the second round of testing results from VITUKI, the independent agency we have commissioned for the testing of RiverPower.
Even though we believe that an eventual verdict will be rendered in our favor, until such time we have elected to place on hold further development of RiverPower. Our current financial resources are better optimized on completing our iGlue software development. If and when the final verdict of this case is made in our favour, we will resume development of RiverPower.
The Kalmar Inventions: FireSAFE, HardCrete concrete from communal waste additive; Recycled plastic pothole filler; PVC covered electrical cable and radial tire recycling technology; red mud neutralization; and environmentally friendly salt free de-icing solution.
As of this writing the development of these technologies in on indefinite hold as we currently lack the financial resources needed to further develop these inventions. Our intention remains to allocate all required assets needed to fully test, prototype and develop these products. However we currently are not capable of supporting any development work outside of our iGlue software. Once we are able to successfully commercialize that product, or we are able to raise additional capital, we will be in a better position to continue developing these Kalmar Inventions.
iGlue Software via Equity position in in4, Ltd.
Given our current financial resources, and the amount of funding that has been allocated to developing iGlue, we feel it is in the best interest of the Company to concentrate all available resources in completing and bringing to market this remarkable product. It is anticipated, pending our ability to raise a minimum of USD 200,000 dollars, that iGlue will be released to the general public in the first half of 2010.
iGlue technology via equity purchase in ‘in4 Kft’.
On August 2, 2007 Vidatech Kft., our wholly owned Hungarian subsidiary, entered into a joint development agreement with the inventors/creators of iGlue, an online content organization and search application based on semantic web technology. In the transaction Vidatech received 30% equity in the newly formed in4 Kft (http://www.in4.hu), the owner and exclusive developer of iGlue (http://www.iglue.com), for HUF 900 thousand (approximately USD 5,000). Up until May 31, 2009, Vidatech is expected to provide up to HUF 48 million (approximately USD 271,000) in member loans to in4 Kft. to cover development expenses of iGlue.
As of December 31, 2008 we have provided this amount to in4, Ltd.
As part of the agreement, Vidatech has the option of converting its HUF 48 million member loan into an additional 10% equity in in4 Kft. at or before the end of May, 2009. As of January 8, 2009 we have elected to covert our member loan into the additional 10% equity in in4, Ltd. As of that date we own 40% of in4, Ltd. Throughout 2009 we have provided an additional HUF 60 million ($310,000) as member loan to in4 Ltd. to finance development work.
Since the establishment of in4 Kft. the company has focused on completing development work on iGlue. On June 24, 2008 in4, Ltd released on the World Wide Web a product demonstrator of iGlue. Subsequent to that on February 2, 2009 in4 released a call for 1,000 beta tester to register at the products official website located at http://www.iglue.com Subsequent to that, in November of 2009, in4 released the server side open Beta of iGlue for general use. It is now anticipated that the fully functional annotation module of the system will be released in the first half of 2010, bringing to fruition almost three years of development work.
Upon successful launch we will aim to provide free and value added services of iGlue, generating revenue from subscribers, advertising fees and technology licenses.
The iGlue technology is composed of the following main building blocks:
Integrated content management
Content that has been created, or made accessible with iGlue, can be reused in any environment (e.g. at another site) and custom-tailored to user requirements. The semantic added value provided by the data structure enables a more versatile use of the created content than is possible with content management and search methods based on simple string matching.
Collaborative database building, community intelligence
The use of collaborative database building enhances the application with a relevance factor that relies on community intelligence; this in turn provides self-repair capability and also makes the suggestion function more efficient.
Modular structure
Owing to its modular structure, iGlue can be used to replace multiple data entry utilities, and users can even use its API (application programming interface) to develop program components themselves. This greatly improves the efficiency of data management and storage.
Purely online application, no installation needed
In contrast to traditional desktop applications, iGlue represents a new generation of programs that are used purely online. Accordingly, there is no need for updates, upgrades, or maintenance – the program is always available for use in its latest version. This results in significant cost savings in delivery, packaging, and distribution.
Platform-independent and browser-agnostic
The platform, developed using the JAVA programming language and the extensible markup language (XML), is platform-independent and browser-agnostic, can be run on any operating system, and is built on open standards. The fact that the application is completely independent from the program environment makes for cost-efficient operation.
Asynchronous data handling (AJAX)
Thanks to the integrated AJAX functions that use the latest technology, parts of the page can also be refreshed separately; users don’t need to download full pages while using the site, so this online application is as feature-rich as a desktop program while it also eliminates the slow response times frequently experienced with online applications. Compared to traditional (synchronous) methods that use full page downloads, this approach saves time and provides ease of use, which translates into significant savings in terms of work time. Cross-domain web services using AJAX
One of iGlue’s highlights is that using plug-ins, users can call the application through external sites, which empowers any site with the search and content management capabilities of the source site. The integration of web service and AJAX technologies resulting in such a rich functionality is currently an unrivaled feature of this program.
Accurately targeted ads
Semantic data entry allows a more efficient use of ad space, avoiding the “banner graveyard” effect caused by untargeted ads. Ads based on the users’ activities significantly enhance ad efficiency, making the selling of these ad spaces more profitable.
Semantic web represents disruptive technology with the power to challenge today’s Internet titans. In4 Kft, in close working relationship with Vidatech, aims to be the premier developer and operator of next generation intelligent web sites.
The Company’s Competition
The Company conducts its business in several complex and highly competitive industries. The global high-technology industry principally involves the supply of systems, modules, components and technologies to a diverse number of companies in diverging fields. Even though high technology is always in demand the field is saturated with many well established companies whose history, operating resources and reach is far wider than those of the Company.
A summary of the Company’s primary independent competitors is provided below.
Software – The Company’s principal competitors in the technology segment included the following: Yahoo! Inc., Google Inc., Microsoft, Kango, Hakia, Semantinet, Radar Networks.
Desalination – Zenon Environmental Inc., Consolidated Water Co. Ltd., IDE Technologies Ltd., Veolia Environment
Energy – Ocean Power Technologies, First Solar, Inc., Suntech Power Holdings Co.
The Company’s Workforce and Employee Relations
The Company’s workforce at December 31, 2009 included 7 persons, of which 4 were salaried employees and 2 were hourly workers.
In the third quarter of 2009 we have terminated the employment agreement of our Chief Technology Officer, Mihaly Zala. The termination was on good terms and its primary purpse was to streamline company operations and conserve available resurces.
The Company’s Product Research and Development
The Company’s research and development efforts are intended to establish leadership positions in core technology lines and provide the Company with a competitive edge as it seeks additional business with new customers. Total research and development expenditures for the nine technologies currently managed by the Company were approximately $247,450 in 2009, decreasing from $425,974 in 2008.
The Company’s Intellectual Property
The Company owns significant intellectual property, including nine patent applications, proprietary prototypes of managed technologies and numerous trade secrets. Although the Company’s intellectual property plays an important role in maintaining its competitive position, no single patent, prototype, tool or technology or trade secret, in the opinion of management, is of such value to the Company that its business would be materially affected by the expiration or termination thereof. The Company’s general policy is to apply for patents on an ongoing basis, in appropriate countries, on its patentable developments which are considered to have commercial significance.
The Company’s Raw Materials and Suppliers
Raw materials used by the Company in the design, prototyping and manufacture of its products primarily include steel, aluminum, resins, precious metals, chemicals and electronics components, which are readily available. The Company does not anticipate significant interruption in the supply of raw materials.
Impact of Environmental Regulations on the Company
The Company is subject to the requirements of federal, state, local and foreign environmental and occupational safety and health laws and regulations. These include laws regulating air emissions and water discharge. The Company is also subject to environmental laws requiring the Company to obtain licenses for a number of technologies currently undergoing development. Such licenses are needed for field testing of the Company’s RiverPower, FireSAFE, PVC Cable recycling and Red Mud Neutralization technologies.
During 2009, the Company did not make any material capital expenditures relating to environmental compliance.
The Company’s Website and Access to Available Information
The Company’s current and periodic reports filed with the Securities and Exchange Commission, including amendments to those reports, may be obtained through its internet website at www.poweroftehdream.com free of charge as soon as reasonably practicable after the Company files these reports with the SEC.
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Item 1.A.
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Risk Factors
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We have a limited operating history, which makes your evaluation of our business difficult. We have incurred losses in recent periods for start-up efforts and may incur losses in the future.
Our future is dependent upon our ability to obtain financing and upon future profitable operations from the commercial exploitation of the technologies in which we invest, acquire or license. These factors raise substantial doubt that we will be able to continue as a going concern. From April 26, 2006 (inception) through December 31, 2009, we incurred aggregate losses of $7,754,624 and anticipate incurring additional losses for at least the next twelve (12) months.
Our auditors have expressed substantial doubt about our ability to continue as a going concern.
We will require additional financing to sustain our operations and without it we will not be able to continue operations.
Our ability to obtain additional funding will determine our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Management believes the Company can raise adequate capital to keep the Company functioning through December 31, 2010. However, the need may arise, in the normal course of business, to raise additional capital if we want to accelerate development work, for the acquisition of additional technologies, or to meet unforeseen financial needs.. No assurance can be given that the Company can obtain additional working capital, or if obtained, that such funding will not cause substantial dilution to shareholders of the Company. If the Company is unable to raise additional funds, if needed, it may be forced to change or delay its contemplated marketing and business plan. Being a development stage company, the Company is subject to all the risks inherent in the establishment of a new enterprise and the marketing and manufacturing of a new product, many of which risks are beyond the control of the Company. All of the factors discussed above raise substantial doubt about the Company’s ability to continue as a going concern.
Our future is dependent upon our ability to obtain financing. If we do not obtain such financing, we may have to cease research activities and investors could lose their entire investment. We have no arrangements or agreements with any person regarding any potential future financings.
Other than our right to market, sell and distribute the TothTelescope, from which we have not derived any meaningful revenues, we currently do not have, and may never develop or acquire any commercialized products for distribution and sale.
We currently do not have any commercialized product(s) or any significant source of revenue. We have invested substantially all of our time and resources over the last two years in identification, research and development of technologies. The technologies, which are the subject of our ongoing research programs, will require additional development, clinical evaluation, regulatory approval, significant marketing efforts and substantial additional investment before they can provide us with any revenue. We cannot currently estimate with any accuracy the amount of funds that may be required because it may vary significantly depending on the results of our current research and development activities, product testing, costs of acquiring licenses, changes in the focus and direction of our research and development programs, competitive and technological advances, the cost of filing, prosecuting, defending and enforcing patent claims, the regulatory process, manufacturing, marketing and other costs associated with the commercialization of products following receipt of approval, if required, from regulatory bodies and other factors.
Our efforts may not lead to commercially successful products for a number of reasons, including:
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we may not be able to obtain regulatory approvals, if required, or the approved indication may be narrower than we seek;
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our technologies or products, if any, derived from our research and development efforts may not prove to be safe and effective in clinical trials or testing;
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any products that may be approved may not be accepted in the marketplace;
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we may not have adequate financial or other resources to complete the development and commercialization of products derived from our research and development efforts;
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we may not be able to manufacture our products in commercial quantities or at an acceptable cost; and
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rapid technological change may make our technologies, and products derived from those technologies, obsolete.
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We expect to operate in a highly competitive market; we may face competition from large, well-established companies with significant resources, and against which we may not be able to effectively compete.
Our commercial success will depend on our ability and the ability of our sublicensees, if any, to compete effectively in product development, customer compliance, price, marketing and distribution. There can be no assurance that competitors will not succeed in developing products that are more effective than any products derived from our research and development efforts or that would render such products obsolete and non-competitive.
The technology sector is characterized by intense competition, rapid product development and technological change. We expect that most of the competition that we will encounter will come from companies, research institutions and universities who are researching and developing technologies and products similar to or competitive with any we may develop.
These companies may enjoy numerous competitive advantages, including:
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significantly greater name recognition;
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established distribution networks;
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additional lines of products, and the ability to offer rebates, higher discounts or incentives to gain a competitive advantage;
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greater experience in conducting research and development, manufacturing, obtaining regulatory approval for products, and marketing approved products; and
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greater financial and human resources for product development, sales and marketing, and patent litigation.
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As a result, we may not be able to compete effectively against these companies or their products.
The success of our research and development effort is uncertain and we expect to be engaged in research and development efforts for a considerable period of time before we will be in a position, if ever, to develop and commercialize products derived from our technologies.
We expect to continue our current research and development programs through at least the end of 2009. Research and development activities, by their nature, preclude definitive statements as to the time required and costs involved in reaching certain objectives. Actual costs may exceed the amounts we have budgeted and actual time may exceed our expectations. If our research and development requires more funding or time than we anticipate, then we may have to reduce technological development efforts or seek additional financing. There can be no assurance that we will be able to secure any necessary additional financing or that such financing would be available to us on favorable terms. Additional financings could result in substantial dilution to existing shareholders. Even if we are able to fully fund our research and development program, there is no assurance that, even upon successful completion of our program, we will ever be able to commercialize products, if any, derived from our research efforts or that we will be able to generate any revenues from operations.
Our research and development programs are in the preliminary development stage and the results we attain may not prove to be adequate for purposes of developing and commercializing any products or otherwise to support a profitable business venture.
Our research and development programs are in the preliminary development stage. We will require significant further research, development, testing and regulatory approvals and significant additional investment before we will be in a position to attempt to commercialize products derived from our research and development programs. We cannot currently estimate with any accuracy the amount of these funds because it may vary significantly depending on the results of our research and development activities, product testing, costs of acquiring licenses, changes in the focus and direction of our research and development programs, competitive and technological advances, the cost of filing, prosecuting, defending and enforcing patent claims, the regulatory process, manufacturing, marketing and other costs associated with commercialization of products following receipt of approval from regulatory bodies and other factors.
There can be no assurances that our early stage research will be successful. The ultimate results of our ongoing research programs may demonstrate that the technologies being researched by us may be ineffective, unsafe or unlikely to receive necessary regulatory approvals. If such results are obtained, we will be unable to create marketable products or generate revenues and we may have to cease operations.
We intend to conduct sales and marketing efforts internally, but lack sales and marketing experience. Additionally, we may rely on third party marketers, in which case, we will be dependent on their efforts.
We expect to market and sell or otherwise commercialize our technologies (or any products derived from the technologies) ourselves as well as through distribution, co-marketing, co-promotion or licensing arrangements with third parties. We have no experience in sales, marketing or distribution of such technologies or products and our current management and staff is not experienced or trained in these areas. Accordingly, if our attempts to market any products directly are not successful, our business may be adversely affected. To the extent that we enter into distribution, co-marketing, co-promotion or licensing arrangements for the marketing or sale of our technologies (or any products derived from the technologies) any revenues received by us will be dependent on the efforts of third parties. If such parties were to breach or terminate their agreement with us or otherwise fail to conduct marketing activities successfully and in a timely manner, the commercialization of our technologies (or any products derived from the technologies) would be delayed or terminated.
There are risks associated with our proposed operations in Hungary.
Special risks may be associated with our efforts to undertake operations in the Republic of Hungary. Such operations will be subject to political, economic and other uncertainties, including among other things, import, export and transportation regulations, tariffs, taxation policy, including royalty and tax increases and retroactive tax claims, exchange controls, currency fluctuations and other uncertainties arising out of the Republic of Hungary’s sovereignty over our operations.
Fluctuation in the value of the Hungarian Forint relative to other currencies may have a material adverse effect on our business and/or an investment in our shares.
We maintain our books in local currency: U.S. dollars for Power of the Dream in the United States and the Hungarian Forint for Vidatech in Hungary. Our operations are conducted primarily outside of the United States through Vidatech, our wholly-owned subsidiary. As a result, fluctuations in currency exchange rates may significantly affect our sales, profitability and financial position when the foreign currencies, primarily the Hungarian Forint, of our international operations are translated into U.S. dollars for financial reporting. During 2009, the Hungarian Forint has fluctuated between HUF 235 and HUF 182 to the U.S. dollar. In addition, we are also subject to currency fluctuation risk with respect to certain foreign currency denominated receivables and payables. Although we cannot predict the extent to which currency fluctuations may or will affect our business and financial position, there is a risk that such fluctuations will have an adverse impact on our sales, profits and financial position. Because differing portions of our revenues and costs are denominated in foreign currency, movements could impact our margins by, for example, decreasing our foreign revenues when the dollar strengthens and not correspondingly decreasing our expenses. We do not currently hedge our currency exposure. In the future, we may engage in hedging transactions to mitigate foreign exchange risk.
Our management team has limited experience in public company matters, which could impair our ability to comply with legal and regulatory requirements.
Our management team has had limited experience managing a U.S. public company, which could impair our ability to comply with legal and regulatory requirements, such as the Sarbanes-Oxley Act of 2002 and applicable federal securities laws, including filing on a timely basis required reports and other required information. Our management may not be able to implement programs and policies in an effective and timely manner that adequately responds to increased legal or regulatory compliance and reporting requirements imposed by such laws and regulations. Our failure to comply with such laws and regulations could lead to the imposition of fines and penalties and further result in the deterioration of our business.
Investor confidence and the market price of our shares may be adversely impacted if we or our independent registered public accountants are unable to issue an unqualified opinion on the adequacy of our internal controls over our financial reporting.
We are subject to the reporting requirements of the U.S. Securities and Exchange Commission, or SEC. The SEC, as directed by Section 404 of the U.S. Sarbanes-Oxley Act of 2002, adopted rules requiring public companies to include a report of management on their internal control structure and procedures for financial reporting in their annual reports on Form 10-K that contain an assessment by management of the effectiveness of their internal controls over financial reporting. These requirements first applied to our annual report on Form 10-KSB for the fiscal year ending on December 31, 2007, however the independent public accountants’ report will not be required until our fiscal year ending December 31, 2010. Our management may not conclude that our internal controls over financial reporting are effective. Any failure to implement effective controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Moreover, even if our management does conclude that our internal controls over financial reporting are effective, if our independent registered public accountants are not satisfied with our internal control structure and procedures, the level at which our internal controls are documented, designed, operated or reviewed, or if the independent registered public accountants interpret the requirements, rules or regulations differently from us, they may not concur with our management’s assessment or may not issue a report that is unqualified. Any of these possible outcomes could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our financial statements, which could lead to a decline in the market price of our shares.
Concentration of ownership among our directors, executive officers and principal shareholders may prevent new investors from influencing significant corporate decisions.
Based upon beneficial ownership as of December 31, 2009, our directors, executive officers and holders of more than 5% of our common stock, alone or together with their affiliates own, in the aggregate, approximately 76% of our outstanding shares of common stock. As a result, these shareholders, will be able to exercise a controlling influence over matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions, and will have significant control over our management and policies. Some of these persons or entities may have interests that are different from yours. For example, these shareholders may support proposals and actions with which you may disagree or which are not in your interests. The concentration of ownership could delay or prevent a change in control of our company or otherwise discourage a potential acquirer from attempting to obtain control of our company, which in turn could reduce the price of our common stock. In addition, these shareholders, some of whom have representatives sitting on our Board of Directors, could use their voting influence to maintain our existing management and directors in office, delay or prevent changes of control of our company, or support or reject other management and board proposals that are subject to stockholder approval, such as amendments to our employee stock plans and approvals of significant financing transactions.
We will need to hire additional employees as the number of technologies in which we have an interest increases.
We anticipate that it will be necessary for us to add employees with technology and management experience as well as support staff to accommodate the increasing number of technologies we acquire. We may also need to provide additional scientific, business, accounting, legal or investment training for our hires. There is competition for highly qualified personnel, and we may not be successful in our efforts to recruit and retain highly qualified personnel.
We do not intend to pay dividends for the foreseeable future.
We currently intend to retain future earnings, if any, to support the development and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. Our payment of any future dividends will be at the discretion of our Board of Directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit or other agreements that we may be a party to at the time. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize their investment.
We may conduct further offerings in the future, in which case your percentage interest in our Company will be diluted.
Since inception, we have relied on sales of our common stock to fund our operations. We may conduct further offerings in the future to finance our current projects or to finance subsequent projects that we decide to undertake. If common stock is issued in return for additional funds, the price per share could be lower than that paid by our current shareholders. We anticipate continuing to rely on equity sales of our common stock in order to fund our business operations. If we issue additional stock, your percentage interest in us will be diluted and the value of your stock could be reduced.
We may issue preferred stock which may have greater rights than our common stock.
We are permitted in our Certificate of Incorporation to issue up to 10,000,000 shares of preferred stock. Currently no preferred shares are issued and outstanding; however, we can issue shares of our preferred stock in one or more series and can set the terms of the preferred stock without seeking any further approval from our common shareholders. Any preferred stock that we issue may rank ahead of our common stock in terms of dividend priority or liquidation premiums and may have greater voting rights than our common stock. In addition, such preferred stock may contain provisions allowing it to be converted into shares of common stock, which could dilute the value of common stock to current shareholders and could adversely affect the market price, if any, of our common stock.
Our common stock is a “penny stock,” and because “penny stock” rules will apply, you may find it difficult to sell the shares of our common stock you acquired in this offering.
Our common stock is a “penny stock” as that term is defined under Rule 3a51-1 of the Securities Exchange Act of 1934. Generally, a “penny stock” is a common stock that is not listed on a securities exchange and trades for less than $5.00 a share. Prices often are not available to buyers and sellers and the market for penny stocks may be very limited. Penny stocks in start-up companies are among the riskiest equity investments. Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. The document provides information about penny stocks and the nature and level of risks involved in investing in the penny stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser, and obtain the purchaser’s written agreement to the purchase. Many brokers choose not to participate in penny stock transactions. Because of the penny stock rules, there is less trading activity in penny stocks and you are likely to have difficulty selling your shares.
Because our business assets, directors, and officers are located outside of the United States, our shareholders may be limited in their ability to enforce civil actions against our assets or our directors and officers.
We are incorporated under the laws of Delaware but, because we are headquartered in Hungary, all of our officers reside in Hungary. Of our Board of Directors one resides in Hungary and one in the United States. Therefore our shareholders may have difficulty enforcing civil liabilities under the U.S. federal securities laws against our officers and directors. Because some of our assets are located outside the U.S., it may be difficult for an investor to succeed in an action, for any reason, against us or any of our directors or officers through U.S. jurisdictions. If an investor was able to obtain a judgment against us or any of our directors or officers in a U.S. court based on U.S. securities or other laws, it may be difficult to enforce such judgment in Hungary. We are uncertain as to the enforceability, in original actions in Hungarian courts, of liability based upon the U.S. federal securities laws and as to the enforceability in Hungarian courts of judgments of U.S. courts obtained in actions based upon the civil liability provisions of the U.S. federal securities laws.
Our compliance with changing laws and rules regarding corporate governance and public disclosure may result in additional expenses to us which, in turn, may adversely affect our ability to continue our operations.
Keeping abreast of, and in compliance with, changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations and, in the event we are ever approved for listing on either NASDAQ or a registered exchange, NASDAQ and stock exchange rules, will require an increased amount of management attention and external resources. We intend to continue to invest all reasonably necessary resources to comply with evolving standards, which may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. This could have a materially adverse effect on our ongoing operations.
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ITEM 2.
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DESCRIPTION OF PROPERTY
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The Company’s principal executive offices are located at Soroksari ut 94-96, Budapest, Hungary. The offices are leased on a monthly basis for a fee of $1,100. The premises consist of approximately 1,000 square feet of space.
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ITEM 3.
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LEGAL PROCEEDINGS
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On May 12, 2009 we were presented with a court order for a hearing, initiated by Janos Salca, inventor of our RiverPower technology. In the court documents made available to us Mr. Salca alleges that at the signing of our Invention Transfer Agreement, dated May 24, 2006 we intentionally mislead him as to our intent to develop his technology. On June 22, 2009 our Legal Counsel attended the court hearing on the inventor’s motion to annul the invention transfer agreement. At this hearing the judge asked us to submit documentation showing our continued development of our RiverPower technology as proof that we are in fact working toward a commercial product as opposed to the claim of the inventor that we are not. As per this ruling our legal counsel submitted all required document to the court. A second hearing on this issue was held on January 15, 2010. In this hearing the judge asked Janos Salca to withdraw his claims and Us to mediate a mutually agreeable resolution. He set a third and final hearing for September of 2010. As of this date we have not heard from Janos Salca on his willingness to discuss his withdrawal of his claim.
We believe the claim brought forth by Mr. Salca to be completely without merit. We have been diligently, although at a much slower pace than originally anticipated, pursuing development of RiverPower. We anticipate having a full scale prototype available for river testing in the first half of 2010 pending completion of technology optimisation, and the securing of required licenses and permits. In addition, we are also continuing development of the associated slow prm, 50Hz syncron generator, which should be available for testing by the end of November 2010. In addition, we have also received the second round of testing results from VITUKI, the independent agency we have commissioned for the testing of RiverPower.
It is our opinion that the baseless case filed by Mr. Salca case will be dismissed as one without merit. We do not foresee it having any effect on our continued development RiverPower. However we cannot guarantee that the technology will ever be commercialised if at any phase of its development we learn that the power output anticipated can not be achieved and RiverPower cannot provide an economical solution for power generation. Our continued investigation will shed light on this in the first half of 2010.
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ITEM 4.
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RESERVED
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None.
PART II
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ITEM 5.
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MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
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Safe Harbor for Forward-Looking Statements
When used in this report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934 regarding events, conditions, and financial trends that may affect the Company’s future plans of operations, business strategy, operating results, and financial position. Persons reviewing this report are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and that actual results may differ materially from those included within the forward-looking statements as a result of various factors. Such factors are discussed further elsewhere in this annual report and also include general economic factors and conditions that may directly or indirectly impact our financial condition or results of operations.
Market Information
The Company’s common stock is listed on the OTC Bulletin Board (OTCBB) in the United States under the symbol “PWRV.” Our common began trading on the OTC Bulletin Board on February 21, 2008. There was no trading activity of our common stock prior to February 21, 2008. Trading in our common stock has been limited and sporadic. The following table shows the range of high and low bid quotations reported by OTCBB in each fiscal quarter from January 1, 2006 to December 31, 2007. The OTCBB quotations below reflect inter-dealer prices without retail mark-up, mark-down or commission and may not represent actual transactions.
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High
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Low
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Fiscal 2007
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||||||||
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Quarter Ended March 31, 2007
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- | - | ||||||
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Quarter Ended June 30, 2007
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- | - | ||||||
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Quarter ended September 30, 2007
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- | - | ||||||
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Quarter ended December 31, 2007
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- | - | ||||||
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Fiscal 2008
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||||||||
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Quarter Ended March 31, 2008
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$ | 4.00 | $ | 3.90 | ||||
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Quarter Ended June 30, 2008
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$ | 4.00 | $ | 1.85 | ||||
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Quarter ended September 30, 2008
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$ | 2.00 | $ | 0.10 | ||||
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Quarter ended December 31, 2008
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$ | 1.00 | $ | 0.17 | ||||
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Fiscal 2009
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||||||||
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Quarter Ended March 31, 2009
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$ | 0.30 | $ | 0.02 | ||||
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Quarter Ended June 30, 2009
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$ | 0.02 | $ | 0.08 | ||||
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Quarter ended September 30, 2009
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$ | 0.02 | $ | 0.10 | ||||
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Quarter ended December 31, 2009
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$ | 0.07 | $ | 0.24 | ||||
Holders
As of December 31, 2009, the Company had 48,916,291 shares of its common stock $0.0001 par value outstanding, which were owned by approximately 150 shareholders of record.
Transfer Agent
Our transfer agent is Fidelity Transfer Company, 8915 S. 700 E. Suite 102, Sandy, UT 84070. Our transfer agent’s telephone number is (801) 562-1300.
Dividend Policy
We have not declared any dividends on our common stock since inception and do not intend to pay dividends on our common stock in the foreseeable future.
Authorization of Securities for Issuance Under Equity Compensation Plans
None.
Recent Sales of Unregistered Securities
On November 19, 2009, the Company consummated a private placement of 230,555 shares of its common stock to two investors for an aggregate purchase price of $39,111. The shares of common stock were sold to non-US Persons in reliance on the exemptions from the registration requirements of the Securities Act provided by the provisions of Regulation S as promulgated under the Securities Act. Proceeds from the offering were used to finance in4 limited’s development of iGlue and for general corporate expenses.
On December 7, 2009, the Company consummated a private placement of 55,555 shares of its common stock to one investor for an aggregate purchase price of $11,111. The shares of common stock were sold to non-US Person in reliance on the exemptions from the registration requirements of the Securities Act provided by the provisions of Regulation S as promulgated under the Securities Act. Proceeds from the offering were used to finance in4 limited’s development of iGlue and for general corporate expenses.
On February 1, 2010, the Company consummated a private placement of 65,000 shares of its common stock to one investor for an aggregate purchase price of $11,111. The shares of common stock were sold to non-US Person in reliance on the exemptions from the registration requirements of the Securities Act provided by the provisions of Regulation S as promulgated under the Securities Act. Proceeds from the offering were used to finance in4 limited’s development of iGlue and for general corporate expenses.
Issuer Purchases Of Equity Securities
None.
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ITEM 6.
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SELECTED FINANCIAL DATA
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2009
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2008
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Revenues
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- | - | ||||||
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General and administration expenses
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965,323 | 3,249,997 | ||||||
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Research and development
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247,450 | 425,974 | ||||||
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Net loss
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1,518,077 | 3,958,212 | ||||||
For the year ended December 31, 2009, we had $0 revenue as compared the $0 revenue in the same period in the previous year. The Company is still focused on product development. First revenues are expected to occur in 2010. For the years ended December 31, 2009 general, selling and administrative expenses were $965,323 as compared to $3,249,997 for the year ended December 31, 2008.
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ITEM 7.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
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Plan of Operation
Since inception through December 31, 2009, we had a deficit accumulated during the development stage of $7,754,624 and net cash used in operations of $1,919,825. To date all of our funding has been provided through sale of our common stock. We believe we can raise sufficient additional financing through the sale of our common shares to allow us to continue operations and execute our business plan to the end of 2010. Should the need arise, we plan to raise additional funds, both from U.S. and international investors. We believe that the technologies we currently have under management, especially our iGlue software which is nearing wide release, will prove attractive to both private and institutional investors, making fund raising a less strenuous process than it was before. We also believe that as the only Hungarian public (or private) company that is actively engaged in Hungarian intellectual property acquisition and commercialization, we are an even more attractive investment opportunity.
If needed, we will raise additional capital in a manner that is the least dilutive to our shareholders yet at the same time serves our development and operating needs. We anticipate no more than two additional fund raising round in 2010, after which we hope to rely solely on income generated from our technologies. We also anticipate our investment in in4 Ltd to start generating funds in the second half of 2010. All other technologies currently in our portfolio have been placed on indefinite hold, until we can partially or wholly exit and monetize our in4 Ltd, holding.
Even though we believe our public status will allow us to raise additional capital, if needed, no assurance can be given that we can in fact obtain additional working capital, or if obtained, that such funding will not cause substantial dilution to shareholders of the Company. If we are unable to raise additional funds, we may be forced to change or delay our contemplated marketing and business plan.
In 2010 we anticipate spending approximately $250,000 on general administrative expenses, $150,000 on legal, accounting and compliance related expenses, and up to $500,000 on our in4 investment. All other technologies in our portfolio are currently on hold until we a) either raise more financing b) realize revenue from iGlue via partial or full sale of our equity interest.
Our original current commitment to in4 Ltd. to provide HUF 48,000,000 (approximately US$270,000) has been fulfilled as of December 31, 2008. During 2009 we provided an additional HUF 60,000,000 ($310,000) to finance development of iGlue. We are now nearing commercial release of this product. As such we have elected to continue finance in4 operations on a continuous basis going forward until iGlue enters the market and starts generating revenue for the company. This financing is provided on a member loan basis to in4 Ltd. We also have ongoing lease obligations for company cars in the amount of approximately US$5,000 per month.
We also have an outstanding note in the amount of $250,000 payable to Mary Passalaqua, our former President and CEO. This note, which bears interest at the U.S. prime rate, was due and payable April 5, 2009, was issued immediately prior to the reverse merger and assumed by us in connection with the reverse merger. The note was recorded by us as additional compensation to Ms. Passalaqua. Such compensation is reflected in our condensed balance sheet as the accumulated deficit of the Company, and will not be reflected in our statement of operations, as such compensation expense was structured as an expense prior to our recapitalization. In the event that we raise in excess of $3,000,000 dollars in capital the note is payable immediately.
In November of 2008 we provided a payment of $35,000 towards the $250,000 NOTE, therefore reducing our NOTE outstanding to $215,000 plus accumulated interest.
In May of 2009 we provided a payment of an additional $20,000 towards the $250,000 NOTE, therefore reducing our NOTE outstanding to $195,000 plus accumulated interest.
On February 5, 2009 we entered into restricted stock agreements with certain of our employees, pursuant to which we granted a total of 760,000 shares of restricted common stock. The shares will vest in installments, with all shares vesting by the end of 2009. The total value of these shares is $280,000 based on a per share price of $0.40, and the entire amount was recognized as an expense in 2009. As shares are vesting by the end of 2009, an originally issued 60,000 was forfeited due to the termination of the contract with Mihaly Zala.
Being a development stage company, we are subject to all the risks inherent in the establishment of a new enterprise and the marketing and manufacturing of new products, many of which risks are beyond the control of the Company. Many of our technologies are in the preliminary development stage. While international patent searches have been conducted to verify the patentability of these technologies, many of the actual patents are still being prepared. As of this writing we have filed the following patent applications: 2 Hungarian and two PCT applications for RiverPower; one Hungarian and one PCT application for FireSAFE; one Hungarian application for our Desalination technology; one Hungarian application for our PVC shielded electric cable recycling technology; one Hungarian application communal waste additive to concrete technology and one Hungarian application four our biodegradable deicing solution. All other patents relating to additional properties we own are currently being prepared based on market conditions permitting we intend to file these patents in 2010.
Over the course of the next 12 months we plan to focus on one primary technologies in order to become cash flow positive: our investment in in4 Ltd aimed at completing development and commercial release of the iGlue semantic search and content organizer application. All other projects are currently on hold pending completion and either partial or full exit from our iGlue holding, or the availability of additional financing.
Although we see our position and the strength of iGlue as formidable, there can be no assurance that materialize partial or full exit from this investment will materialize in 2010. If we are unable to derive revenue from this technology within the next 12 months we will be required to raise substantial additional capital to support our operations until such time when we can maintain operations from income.
We don’t anticipate making any substantial equipment purchase or increasing our work force in the foreseeable future.
All of the factors discussed above raise substantial doubt about our ability to continue as a going concern. The condensed consolidated financial statements included elsewhere in this prospectus do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary as a result of the above uncertainty.
2009 Overview and Financial Results
The high-technology development and commercialisation industry remains challenging in North America and Europe, with continued market share pressures concentrated in the U.S. While our transition from a private company to a public one following our reverse merger significantly increased our compliance related financial burden, it also provided us with opportunities to seek financing for the execution of our business plan. Based on this financing we were able to significantly increase our technology acquisition and development footprint, and lay the foundation of fully executing our business strategy beginning in 2008 and 2009.
Debt and Capital Structure
Future maturities of the Company’s debt are as follows: 2010 — $195,000. The Company continues to explore opportunities to enhance liquidity, improve financial flexibility and reduce the long term costs of capital.
Critical Accounting Estimates
The consolidated financial statements accompanying this Annual Report on Form 10-K have been prepared in conformity with accounting principles generally accepted in the United States and, accordingly, the Company’s accounting policies have been disclosed in Note 2 to the consolidated financial statements.
We account for stock-based compensation in accordance with SFAS No. 123(R). Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period. Determining the fair value of share-based awards at the grant date requires judgment. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially impacted.
When more than one accounting principle, or the method of its application, is generally accepted, management selects the principle or method that it considers to be the most appropriate given the specific circumstances. Application of these accounting principles requires the Company’s management to make estimates about the future resolution of existing uncertainties. Estimates are typically based upon historical experience, current trends, contractual documentation, and other information, as appropriate. Due to the inherent uncertainty involving estimates, actual results reported in the future may differ from those estimates. In preparing these financial statements, management has made its best estimates and judgments of the amounts and disclosures included in the financial statements.
Environmental Matters
The Company is subject to the requirements of federal, state, local and foreign environmental and occupational safety and health laws and regulations. These include laws regulating air emissions and water discharge. The Company is also subject to environmental laws requiring the Company to obtain licenses for a number of technologies currently undergoing development. Such licenses are needed for field testing of the Company’s RiverPower, FireSAFE, PVC Cable recycling and Red Mud Neutralization technologies.
During 2009, the Company did not make any material capital expenditures relating to environmental compliance.
Income Taxes
The Company accounts for income taxes in accordance with 740-10-25, “Accounting for Income Taxes”. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company records a valuation allowance on deferred tax assets by tax jurisdiction when it is more likely than not that such assets will not be realized. Management judgment is required in determining the Company’s valuation allowance on deferred tax assets.
Results of Operations
Revenue
For the year ended December 31, 2009, we had $0 revenue as compared the $0 revenue in the same period in the previous year. The Company is still focused on product development. First revenues are expected to occur in 2010.
General, selling and administrative expenses
For the years ended December 31, 2009 general, selling and administrative expenses were $965,323 as compared to $3,249,997 for the year ended December 31, 2008. The $2,284,674 decrease in general, selling and administrative expenses is attributable to decrease in marketing expenses and the decrease in share based payments to personnel. During 2009 the company terminated its employment agreement with our Chief Technology Officer to consolidate operations and reduce expenses.
Inflation and foreign currency
The Company maintains its books in local currency: US Dollars for the parent holding Company in the United States of America and Hungarian Forint for Vidatech in Hungary.
The Company’s operations are primary outside of the United States through its wholly owned subsidiary. As a result, fluctuations in currency exchange rates may significantly affect the Company’s sales, profitability and financial position when the foreign currencies, primarily the Hungarian Forint, of its international operations are translated into U.S. dollars for financial reporting. In additional, we are also subject to currency fluctuation risk with respect to certain foreign currency denominated receivables and payables. Although the Company cannot predict the extent to which currency fluctuations may or will affect the Company’s business and financial position, there is a risk that such fluctuations will have an adverse impact on the Company’s sales, profits and financial position. Because differing portions of our revenues and costs are denominated in foreign currency, movements could impact our margins by, for example, decreasing our foreign revenues when the dollar strengthens and not correspondingly decreasing our expenses. The Company does not currently hedge its currency exposure. In the future, we may engage in hedging transactions to mitigate foreign exchange risk.
The translation of the Company’s subsidiaries forint denominated balance sheets into U.S. Dollars, as of December 31, 2009, has been affected by the strengthening of the U.S. Dollar against the Hungarian Forint from 188.55 HUF/USD as of December 31, 2008, to 187.7 HUF/USD as of December 31, 2009, an approximate 1% decrease in value. The average Hungarian Forint/U.S. Dollar exchange rates used for the translation of the subsidiaries forint denominated statements of operations into U.S. dollars, for the years ended December 31, 2009 and 2008 were 200.19 and 184.66, respectively.
The Company’s cash and liquidity needs are impacted by research and development expenses, legal, accounting and regulatory filing expenses and operating expenses. At the current rate monthly expenditures, including operating expenses and technology management total approximately $50,000.
Cash and Equivalents
As of December 31, 2009 and 2008, consolidated cash and equivalent balances totalled $9,726 and $650,945, respectively. As of December 31, 2009 approximately 99% of the Company’s cash balance is located in jurisdictions outside of the U.S. The Company’s ability to efficiently access cash balances in foreign jurisdictions is subject to local regulatory and statutory requirements.
Cash Flows
Sale of common stock. To date all of the Company’s operations have been financed through the sale of common stock. It is anticipated that this trend will continue for at least an additional twelve months before operating expenses can be fully or partially by financed from operating activities.
Other Debt and Capital Structure
Other Debt
Additional information related to the Company’s other debt and related agreements is set forth in Note 8 “Note Payable” and Note 9 “Capital lease payable” to the consolidated financial statements which are included in this Annual Report on Form 10-K.
Off-Balance Sheet Arrangements
None.
Recent Accounting Pronouncements
In December 2007, the FASB issued ASC 805-10-15, “Business Combinations” (“SFAS 141(R)”). It expands on the disclosures previously required by SFAS 141, better defines the acquirer and the acquisition date in a business combination, and establishes principles for recognizing and measuring the assets acquired (including goodwill), the liabilities assumed and any non-controlling interests in the acquired business. ASC 805-10-15 also requires an acquirer to record an adjustment to income tax expense for changes in valuation allowances or uncertain tax positions related to acquired businesses. ASC 805-10-15 is effective for all business combinations with an acquisition date in the first annual period following December 15, 2008; early adoption is not permitted. We adopted this statement as of January 1, 2009. The adoption of ASC 805-10-15 did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
In December 2007, the FASB issued ASC 810-10-65, “Non-controlling Interests in Consolidated Financial Statements-an amendment of ARB No. 51” (SFAS 160). It requires that non-controlling (or minority) interests in subsidiaries be reported in the equity section of the company’s balance sheet, rather than in a mezzanine section of the balance sheet between liabilities and equity. ASC 810-10-65 also changes the manner in which the net income of the subsidiary is reported and disclosed in the controlling company’s income statement. ASC 810-10-65 also establishes guidelines for accounting for changes in ownership percentages and for deconsolidation. ASC 810-10-65 is effective for financial statements for fiscal years beginning on or after December 15, 2008 and interim periods within those years. The adoption of ASC 810-10-65 did not have a material impact on our financial position, results of operations or cash flows.
In March 2008, the FASB issued ASC 815-10-65, “Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133”. It requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. ASC 815-10-65 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The adoption of ASC 815-10-65 did not have a material impact on our financial position, results of operations or cash flows.
In March 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. This statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with US GAAP. This statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.
Effective January 1, 2009, the Company adopted ASC 470-20 "Accounting for Convertible Debt Instruments that may be settled in Cash upon Conversion (Including Partial Cash Settlement)". ASC 470-20 requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate. ASC 470-20 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis. The adoption of ASC 470-20 did not have a material impact on our financial position, results of operations or cash flows.
Effective January 1, 2009, the Company adopted the ASC 260-10, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities”. This required that all unvested share-based payment awards that contain nonforfeitable rights to dividends should be included in the basic Earnings Per Share (EPS) calculation. This standard did not affect the consolidated financial position or results of operations.
Effective April 1, 2009, the Company adopted ASC 320-10-65, “Recognition and Presentation of Other-Than-Temporary Impairments”. ASC 320-10-65 provides guidance in determining whether impairments in debt securities are other than temporary, and modifies the presentation and disclosures surrounding such instruments. This is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. This standard did not affect the consolidated financial position or results of operations.
Effective April 1, 2009, the Company adopted ASC 820-10-65, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”. ASC 820-10-65 provides additional guidance in determining whether the market for a financial asset is not active and a transaction is not distressed for fair value measurement purposes as defined in ASC 820-10-55, “Fair Value Measurements.” ASC 820-10-65 is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. This standard did not affect the consolidated financial position or results of operations.
Effective April 1, 2009 the Company adopted ASC 825-10-65, “Interim Disclosures about Fair Value of Financial Instruments”. This amends ASC 820-10-55, “Disclosures about Fair Values of Financial Instruments,” to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. It also amends ASC 270-10, “Interim Financial Reporting,” to require those disclosures in all interim financial statements. This standard did not affect the consolidated financial position or results of operations.
In May 2009, FASB issued ASC 855-10, Subsequent Events. The standard introduces the concept of financial statements being available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. In accordance with this statement, an entity should apply the requirements to interim or annual financial periods ending after June 15, 2009. Management performed an evaluation of the Company’s activities through the time of filing this Annual Report on Form 10-K, and has concluded that there are no significant subsequent events requiring recognition or disclosure in these consolidated financial statements.
In June 2009, FASB issued SFAS No. 167, an amendment to FASB Interpretation No. 46(R). This Statement amends Interpretation 46(R) to require an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity. This analysis identifies the primary beneficiary of a variable interest entity as the enterprise that has several defined characteristics. Additionally, an enterprise is required to assess whether it has an implicit financial responsibility to ensure that a variable interest entity operates as designed when determining whether it has the power to direct the activities of the variable interest entity that most significantly impact the entity’s economic performance. This amendment shall be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. The adoption of is not expected to this interpretation have a material impact on our financial position, results of operations or cash flows.
In June 2009, FASB issued ASC 105-10, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162. The FASB Accounting Standards Codification (Codification) became the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification became non-authoritative. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted this requirement.
|
ITEM 8.
|
FINANCIAL STATEMENTS
|
Reference is made to the Consolidated Financial Statements of the Company, beginning with the index thereto on page F-1.
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
Since February 18, 2008, BDO has been engaged, on a continuous basis, as the Company’s independent certified accountants.
There are no disagreements between the Company and BDO.
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the company’s management, as appropriate, to allow timely decisions regarding required disclosure, and are operating in an effective manner.
As of December 31, 2009, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and our principal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is also responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) and 15d-15(f). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Our internal control over financial reporting includes those policies and procedures that:
|
|
|
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
|
|
|
|
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and
|
|
|
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
|
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 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. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Management conducted an evaluation, under the supervision and with the participation of our principal executive officer and our principal financial officer of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the company’s internal control over financial reporting was effective as of December 31, 2009.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Changes in Internal Control Over Financial Reporting
There were no changes in internal controls over financial reporting that occurred during the last quarter of 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
|
ITEM 9B.
|
OTHER INFORMATION
|
2008 Annual Base Salary Rates
On October 25 2007, the Board of Directors approved annual base salary rates for the following executives:
|
2009 Annual Base
|
||||
|
Name and Position
|
Salary Rate
|
|||
|
Viktor Rozsnyay*
|
$
|
13,006
|
||
|
Chairman, President and Chief Executive Officer
|
||||
|
Daniel Kun, Jr.
|
$
|
21,850
|
||
|
Vice President
|
||||
|
Ildiko Rozsa
|
$
|
25,148
|
||
|
Chief Financial Officer
|
||||
|
Mihaly Zala
|
$
|
38,839
|
||
|
Chief Technology Officer
|
||||
|
Szilvia Toth
|
41,158
|
|||
|
Chief Accounting Officer
|
||||
*Director of the Company
Executive Officer Appointment
On October 24, 2007, the Board of Directors of the Company appointed Mr. Daniel Kun, Jr. to serve as Vice President of the Company. As an extension of the appointment, on February 5, 2009, the Company granted 200,000 restricted stock units to Mr. Kun, vesting in equal installments on a quarterly basis up to December 31, 2009.
On the same day the Board of Directors of the Company appointed Mrs. Ildiko Rozsa to serve as Chief Financial Officer of the Company. As an extension of the appointment, on February 5, 2009, the Company granted 120,000 restricted stock units to Mrs. Rozsa, vesting in equal installments on a quarterly basis up to December 31, 2009.
On the same day the Board of Directors of the Company appointed Ms. Szilvia Toth to serve as Chief Accounting Officer of the Company. As an extension of the appointment, on February 5, 2009, the Company granted 120,000 restricted stock units to Ms. Toth, vesting in equal installments on a quarterly basis up to December 31, 2009.
On August 24, 2007, the Board of Directors of the Company appointed Mr. Mihaly Zala to serve as Chief Technology Officer of the Company. As an extension of the appointment, on February 5, 2009, the Company granted 120,000 restricted stock units to Mr. Zala, vesting in equal installments on a quarterly basis up to December 31, 2009. On July 1, the company terminated the employment agreement of Mihaly Zala, and recalled 60,000 shares of unvested common stock and returned it to the authorized but unissued stock of the Company, The employment agreement was terminated on mutually agreed upon terms.
PART III
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
|
The table below sets forth the names and ages of our directors and executive officers as of January 1, 2010:
|
Name
|
Age
|
Position
|
|
Viktor Rozsnyay
|
39
|
Chairman of the Board, President & Chief Executive Officer
|
|
Daniel Kun, Jr.
|
35
|
Vice President
|
|
Ildiko Rozsa
|
35
|
Chief Financial Officer
|
|
Szilvia Toth
|
29
|
Chief Accounting Officer
|
|
Eugene L. Guhne
|
45
|
Member of the Board of Directors
|
Viktor Rozsnyay has served as the Chairman, President & Chief Executive Officer of the Company since April 5, 2007. From April 2006 to present, Mr. Rozsnyay has been a Manager of Vidatech Kft., a Hungarian company focused on the acquisition of technologies developed in Hungary, of which he was a founder; Vidatech is now our wholly owned Hungarian subsidiary. From 2004 to 2006 Mr. Rozsnyay was engaged in researching and establishing the foundation of Vidatech. From 2001 to 2004, he was the Founder and Chief Operating Officer of 10Charge, Inc., an ISSO R&D spin-off company formed to commercialize 10 minute battery charging technology, a product Mr. Rozsnyay and his former partners invented and patented. Prior thereto, Mr. Rozsnyay was the Founder and Managing Director of ISSO R&D Kft., an aerospace research company based in the Republic of Hungary, pursuing advanced aerospace propulsion research. Mr. Rozsnyay attended the Jozsef Katona Technical College in Budapest, graduating in 1989.
Daniel Kun, Jr. has served as the Vice President of the Company since October 24, 2007. In April 2006 Mr. Kun co-founded Vidatech Kft. and since its establishment has acted as Vidatech’s Managing Director. Vidatech is now our wholly owned Hungarian subsidiary. Since 1996 Mr. Kun has been a part owner of Lira Kft., a Hungarian company involved in building engineering and heating installations throughout Hungary. From March 2000 to April 2006, he also acted as Managing Director of Lira Kft. Mr. Kun attended the Istvan Vagi Technical College in Budapest, graduating in 1992. Subsequently, Mr. Kun attended the Sligo Regional Technical Colleague in Ireland studying international business and marketing from 1994-1995. Mr. Kun is a certified TUV ISO auditor.
Ildiko Rozsa has served as the Chief Financial Officer of the Company since October 24, 2007. Mrs. Rozsa is a qualified statutory accountant, currently completing her PhD studies at the Budapest Technical and Economic University in Business Science. Ms. Rozsa graduated at the College of Finance and Accountancy, later obtaining her mastered degree (MBA) at the Budapest University of Economics. From 1995 through 1996 she was audit assistant at Price Waterhouse’s Budapest Audit Department, where she gained experience in IAS and HAS audits. From 1997 through 2002 Ms. Rozsa was Finance and Accounting Director at Vivendi Telecom Hungary. Ms. Rozsa was responsible for the production of Vivendi Group Consolidated Financial Statements for 23 companies including foreign companies in accordance with IFRS, US GAAP and the related statutory requirements; definition of the accounting policy and procedures of the group, and controlling of their application. Management of the related audits and Managing the Accounting Department, the Reporting and Consolidation Department and the Payroll Department of Vivendi Group which consists of approximately 60 persons. From 2002 through 2004 Ms. Rozsa was Chief Financial Officer at Bacardi-Martini Hungary Kft., where she was responsible for Managing the finance and administration team of the company. Responsible for financial, accounting, controlling, IT, customs and payroll activities. In 2004 she founded and became Managing Director, RIBZ Consulting where she works for multinational clients on IFRS and US GAAP projects, on privatization engagements. Ildiko is a tutor at the Budapest Technical University, Economic Faculty.
Szilvia Toth has served as the Chief Accounting Officer of the Company since October 24, 2007. Ms. Toth graduated in 2004 from the College of Finance and Accountancy in Budapest as an Economist on Accountancy. After a short professional practice in 2005 she worked at DHL Express Hungary Kft. as an accountant for different territories (posting of creditors, bank statements and taxes). Following her DHL tenure from 2005 to 2006 Ms. Toth worked at TMF Hungary Kft., an international accounting firm. From 2006 to 2007 Ms. Toth worked at BDO Forte AccRoll Kft., where her responsibilities included full scale bookkeeping including preparing of financial statements, reports, tax-returns, etc. of Hungarian and foreign companies.
Eugene L. Guhne has served as a member of the Board of Directors of the Company since March 4, 2008. Mr. Guhne joined the Company on April 26, 2007 when he was appointed to serve as a member of our Advisory Board. Mr. Guhne has served as a Vice President, Sales of Ultimate Software, Inc. (NASDAQ: ULTI) since November 1999. From February 1998 to November 1999, Mr. Guhne served as Director of Sales, Mid-Atlantic Division of Ultimate Software, Inc. Prior to joining Ultimate Software, Inc., from 1992 to 1998, Mr. Guhne was the President of The Ultimate Software Group of the Carolinas, Inc. and the Vice President of The Ultimate Group of Virginia, Inc., a reseller of Ultimate Software which was acquired by it in March 1998. From 1987 to 1992, Mr. Guhne served in various positions at ADP, where his most recent position was Director of Sales. Mr. Guhne is a shareholder and Director of the Company.
Family Relationships
There are no family relationships between any of directors or executive officers.
Audit Committee
Currently, our entire board of directors serves as our audit committee. Because of the small size of the Company and the risk attendant to a small public company, we are currently unable to attract an audit committee financial expert to our Board of Directors.
Code of Ethics
We currently do not have a Code of Ethics that applies to all of our officers, directors and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller, and others performing similar functions. Company management believes that current resources, both monetary and time wise, are better allocated for developing our business. We also believe that our current management is capable of self judgment and the exercise of ‘common sense code of conduct’. However, in the near future, as our work load permits, we will develop and post on our website an appropriate Code of conduct document as required by public company ethics.
Changes in Director Nomination Process for Stockholders
None.
Compliance With Section 16 (A) of the Exchange Act
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us pursuant to Rule 16a-3(e) under the Securities Exchange Act of 1934 during our most recent fiscal year and Forms 5 and amendments thereto furnished to us with respect to our most recent fiscal year, certain officers, directors and owners of 10% or more of our outstanding shares have not filed Forms 3, 4 and 5 required by Section 16(a) of the Securities Exchange Act of 1934, as amended.
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
The following summary compensation tables set forth information concerning the annual and long-term compensation for services in all capacities for the years ended December 31, 2009, of those persons who were, at December 31, 2009, Power of the Dream Ventures’ chief executive officer, chief financial officer, and other executive officers whose 2009 compensation exceeded $50,000.
|
SUMMARY COMPENSATION TABLE*
|
|||||||||||||||||||||||||||||||
|
Name and principal position
|
Year
|
Salary ($)
|
Bonus ($)
|
Stock Awards ($)
|
Option Awards ($)
|
Non-Equity Incentive Plan Compensation ($)
|
Nonqualified Deferred Compensation Earnings ($)
|
All Other Compensation ($)
|
Total ($)
|
||||||||||||||||||||||
|
Viktor Rozsnyay
President & CEO
|
2009
|
8,600 | 0 | 8,600 | |||||||||||||||||||||||||||
|
Daniel Kun
Vice President
|
2009
|
8,600 | 80,000 | 88,600 | |||||||||||||||||||||||||||
|
Ildiko Rozsa
Chief Financial Officer
|
2009
|
18,000 | 48,000 | 66,000 | |||||||||||||||||||||||||||
|
Szilvia Toth
Chief Accounting Officer
|
2009
|
25,000 | 48,000 | 73,000 | |||||||||||||||||||||||||||
|
Total
|
60,200 | 176,000 | 236,200 | ||||||||||||||||||||||||||||
* The amounts in the stock awards column represent the full grant date fair value determined in accordance with ASC 718. The grant date fair value of the awards was based on the market price of the stock at the commitment date of the agreements. See also Note 10 of the financial statements for additional information on these awards.
|
DIRECTORS’ COMPENSATION TABLE
|
||||||||||||||||||||||||||||||||||
|
Name and principal position
|
Year
|
Salary ($)
|
Bonus ($)
|
Stock Awards ($)
|
Option Awards ($)
|
Non-Equity Incentive Plan Compensation ($)
|
Nonqualified Deferred Compensation Earnings ($)
|
All Other Compensation ($)
|
Total ($)
|
|||||||||||||||||||||||||
|
Eugene Guhne
Director
|
2009
|
40,000 | 40,000 | |||||||||||||||||||||||||||||||
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATE STOCKHOLDER MATTERS
|
The following table sets forth certain information regarding beneficial ownership of Common Stock as of December 31, 2009 by each person known to us to own beneficially more than 5% of our Common Stock, each of our directors, each of our named executive officers, and all executive officers and directors as a group. Under the SEC rules, beneficial ownership includes any shares as to which the individual has the sole or shared voting power or investment power. In addition, beneficial ownership includes any shares that the individual has the right to acquire within 60 days. Unless otherwise indicated, the Company believes that all persons named in the table below have sole voting and investment power with respect to all shares of common stock beneficially owned by them.
|
Common Stock
|
||||||||
|
Number of shares
|
Percent of Class
|
|||||||
|
Ildiko Rozsa (1)
|
425,555 | * | ||||||
|
Szilvia Toth (2)
|
220,000 | * | ||||||
|
Mihaly Zala (3)
|
310,000 | * | ||||||
|
Gene Guhne (4)
|
1,100,000 | 2.24 | % | |||||
|
Mary Passalaqua (5)
|
2,500,000 | 5.21 | % | |||||
|
Daniel Kun, Jr. (6)
|
14,190,000 | 29 | % | |||||
|
Viktor Rozsnyay (7)
|
13,455,500 | 27. | % | |||||
|
Daniel Kun, Sr. (8)
|
2,550,000 | 5.21 | % | |||||
|
Total
|
34,441,000 | 68.66 | % | |||||
|
|
·
|
Less than 1%
|
(1) Address is 1066 Budapest, Terez Krt. 22, Hungary
(2) Address is 1095Budapest, Kalman Imre u. 22 II/6, Hungary
(3) Address is 1163 Budapest, Kerepesi u. 190, Hungary
(4) Address is 585 Cross Creek Tr. Gibsonville, NC 27249
(5) Address is 7325 Oswego Road, Suite D, Liverpool, New York, 13090
(6) Address is 1037 Budapest, Perenyi u 16/B, Hungary
(7) Address is 2049 Diosd, Ligetszepe ut 54, Hungary
(8) Address is 1037 Budapest, Perenyi u 16/B, Hungary
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
There has not been since January 1, 2009 nor is there currently pending any transaction or series of similar transactions to which we were or are a party in which the amount involved exceeded $120,000 and in which any director, executive officer, holder of more than 5% of our common stock or any member of the immediate family of any of these persons had or will have a direct or indirect material interest.
Director Independence
Each of the directors qualify as “independent” under the NASDAQ rules, except for Viktor Rozsnyay who is the employer in the Company. The NASDAQ independence definition includes objective measures that disqualify a director from being independent, including whether the director is an employee of the company or has engaged in various types of business dealings with the company. These objective measures assist our board of directors in making determinations of director independence under the NASDAQ rules. Our board of directors makes a determination regarding the independence of each director annually based on all relevant facts and circumstances.
Principal Accounting Fees and Services
The following is a summary of the fees billed to the Company by M&K and BDO Forte Audit Kft. for professional services rendered for the fiscal years ended December 31, 2009 and 2008, respectively:
|
Fee Category
|
Fiscal 2009
Fees
|
Fiscal 2008
Fees
|
||||||
|
M&K audit fees
|
$ | - | $ | 11,352 | ||||
|
BDO Forte Audit Kft. audit Fees
|
$ | 34,391 | $ | 25,971 | ||||
|
Total Fees
|
$ | 34,391 | $ | 37,323 | ||||
The audit fees consists of fees billed for professional services rendered for the audit of the Company’s consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided in connection with statutory and regulatory filings or engagements.
PART IV
|
ITEM 15.
|
EXHIBITS
|
|
Exhibit No.
|
Description of Exhibit.
|
|
3.1
|
Original Certificate of Incorporation of the Registrant, as filed with the Delaware Secretary of State on August 17, 2006*
|
|
3.2
|
Certificate of Amendment to Certificate of Incorporation of the Registrant as filed on April 12, 2007**
|
|
3.3
|
Bylaws of the Registrant*
|
|
Form of Subscription Agreement of the Registrant
|
|
|
Restricted Stock Agreement for Gene Guhne
|
|
|
Consultation Agreement for Berta Olah
|
|
|
Employee Restricted Stock Agreements
|
|
Consent of BDO Kontroll Ltd.
|
|
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
Certification of the Chief Financial Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
* Filed as an exhibit to Form 8-K Current Report, as filed with the U.S. Securities & Exchange Commission on October 14, 2008, and incorporated herein by reference.
** Filed as an exhibit to Form 8-K Current Report, as filed with the U.S. Securities & Exchange Commission on October 14, 2008, and incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused the Report to be signed on its behalf by the undersigned thereunto duly authorized.
|
Power of the Dream Ventures, Inc.
(formerly known as “Tia V, Inc.”)
|
||
|
Dated: March 31, 2010
|
By:
|
/s/ Viktor Rozsnyay
|
|
Viktor Rozsnyay
|
||
|
Principal Executive Officer
|
||
|
/s/ Ildiko Rozsa
|
||
|
Principal Financial Officer
|
||
Index to Financial Statements
|
Page No.
|
|
|
Report of Independent Registered Public Accounting Firm
|
F-1
|
|
Consolidated Balance Sheet at December 31, 2009
|
F-2
|
|
Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2009 and 2008
|
F-3
|
|
Consolidated Statements of Deficiency in Stockholders’ Equity for the two years ended December 31, 2009
|
F-4 to F-5
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008
|
F-6
|
|
Notes to Consolidated Financial Statements
|
F-7 to F-21
|
Report of Independent Public Accounting Firm
Board of Directors and Stockholders
Power of the Dream Ventures, Inc. (formerly Tia V)
(a development stage company)
Budapest, Hungary
We have audited the accompanying balance sheets of Power of the Dream Ventures, Inc. (formerly Tia V), a development stage company, as of December 31, 2009 and 2008 and the related statements of operations, stockholders’ equity, and cash flows for each of the two years in the period then ended and the period from inception (April 26, 2006) to December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 Power of the Dream Ventures, Inc. (formerly Tia V) at December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the two years in the period then ended and the period from inception (April 26, 2006) through December 31, 2009, 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 has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
March 31, 2010
BDO Hungary Audit Ltd.
MKVK number: 002387
|
Ferenc Baumgartner
|
András Nagy
|
|
General Manager
|
Registered Auditor
|
MKVK number: 005718
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
Amounts in USD
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December 31, 2009
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December 31, 2008
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ASSETS
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Current Assets
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||||||||||||
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Cash
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$ | 9,726 | $ | 650,945 | ||||||||
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Other receivables
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3 | 19,710 | 25,131 | |||||||||
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Total Current Assets
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29,436 | 676,076 | ||||||||||
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Fixed assets, net
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5 | 453,751 | 614,723 | |||||||||
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Total Assets
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483,187 | 1,290,799 | ||||||||||
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LIABILITIES
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Current Liabilities
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||||||||||||
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Accounts payable and accrued and other liabilities
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$ | 225,150 | $ | 236,821 | ||||||||
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Capital leases payable, current portion
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7 | 60,035 | 63,399 | |||||||||
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Note payable
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6 | 195,000 | 215,000 | |||||||||
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Total Current Liabilities
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480,185 | 515,220 | ||||||||||
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Long term liabilities
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||||||||||||
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Capital leases payable, less current portion
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7 | 252,156 | 343,159 | |||||||||
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Total Long Term Liabilities
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252,156 | 343,159 | ||||||||||
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Stockholders’ Equity
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Preferred stock, $0.0001 par value, 10,000,000 shares authorized, -0- issued
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||||||||||||
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Common stock, $.0001 par value; 250,000,000 shares authorized, 47,615,181 and 41,165,000 shares issued and outstanding
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8 | 4,886 | 4,762 | |||||||||
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Additional Paid-In Capital
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7,471,146 | 7,041,048 | ||||||||||
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Deficit accumulated during development stage
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(7,754,624 | ) | (6,236,547 | ) | ||||||||
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Other Comprehensive Income
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44,438 | 26,615 | ||||||||||
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Unearned Compensation
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(15,000 | ) | (403,458 | ) | ||||||||
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Total Stockholders’ Equity
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(249,154 | ) | 432,420 | |||||||||
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Total liabilities and stockholders’ equity
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483,187 | 1,290,799 | ||||||||||
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
Amounts in USD
|
Notes
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For the year ended December 31, 2009
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For the year ended December 31, 2008
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For the Period from April 26, 2006 (date of inception) to December 31, 2009
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|||||||||||||
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Net Sales
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$ | - | $ | - | $ | 5,833 | ||||||||||
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Cost of Sales
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- | - | (3,711 | ) | ||||||||||||
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Gross margin
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- | - | 2,122 | |||||||||||||
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Material expenses
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15,566 | 21,144 | 61,734 | |||||||||||||
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General administration
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9 | 965,323 | 3,249,997 | 6,051,753 | ||||||||||||
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Research and development
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4 | 247,450 | 425,974 | 774,807 | ||||||||||||
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Personnel expenses
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107,368 | 158,038 | 303,108 | |||||||||||||
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Depreciation and amortization
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5 | 118,166 | 102,471 | 263,259 | ||||||||||||
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Other expenses, net
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11,660 | (10,082 | ) | 8,205 | ||||||||||||
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Operating expenses
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1,465,533 | 3,947,542 | 7,462,866 | |||||||||||||
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Loss from operations
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(1,465,533 | ) | (3,947,542 | ) | (7,460,744 | ) | ||||||||||
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Interest income and exchange gains
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(51,339 | ) | (10,670 | ) | (41,912 | ) | ||||||||||
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Loss before provision (benefit) for income taxes
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(1,516,872 | ) | (3,958,212 | ) | (7,502,656 | ) | ||||||||||
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Provision (benefit) for income taxes
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(1,205 | ) | - | (1,205 | ) | |||||||||||
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Net loss
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(1,518,077 | ) | (3,958,212 | ) | $ | (7,503,861 | ) | |||||||||
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Basic loss per share
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$ | (0.03 | ) | $ | (0.09 | ) | ||||||||||
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Diluted loss per share
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$ | (0.03 | ) | $ | (0.09 | ) | ||||||||||
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Weighted average number of shares outstanding – Basic
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48,458,195 | 42,724,459 | ||||||||||||||
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Weighted average number of shares outstanding – Diluted
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48,458,195 | 42,724,459 | ||||||||||||||
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE LOSS
Amounts in USD
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Common
Shares
|
Stocks
Amount
|
Accumulated Deficit During Developmental Stage
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Additional
Paid In
Capital
|
Other Comprehensive Income
|
Unearned Compensation
|
Total
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Comprehensive Income/ (Loss)
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|||||||||||||||||||||||||
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Issuance of common stock
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33,300,000 | $ | 3,330 | $ | 10,670 | $ | 14,000 | |||||||||||||||||||||||||
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Contributed Capital
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96,100 | 96,100 | ||||||||||||||||||||||||||||||
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Currency Translation Adjustment
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$ | 4,151 | 4,151 | 4,151 | ||||||||||||||||||||||||||||
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Net loss for the period
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$ | (35,100 | ) | (35,100 | ) | (35,100 | ) | |||||||||||||||||||||||||
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Balance at December 31, 2006
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33,300,000 | 3,330 | (35,100 | ) | 106,770 | 4,151 | - | 79,151 | (30,949 | ) | ||||||||||||||||||||||
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Contributed Capital
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53,735 | 53,735 | ||||||||||||||||||||||||||||||
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Recapitalization upon Reverse Merger on April 10, 2007 (See Note 1)
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2,500,000 | 250 | (250,763 | ) | (250,513 | ) | ||||||||||||||||||||||||||
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Private placement of shares at $0.34 per share (See Note 10)
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2,250,000 | 225 | 764,775 | 765,000 | ||||||||||||||||||||||||||||
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Shares issued for services at $0.34 per share (See Note 10)
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1,875,000 | 188 | 637,313 | $ | (467,501 | ) | 170,000 | |||||||||||||||||||||||||
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Shares issued for research and development at $0.34 per share (See Note 10)
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100,000 | 10 | 33,990 | 34,000 | ||||||||||||||||||||||||||||
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Private placement at $2.5 per share (See Note 10)
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104,000 | 10 | 259,990 | 260,000 | ||||||||||||||||||||||||||||
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Shares issued for stock based compensation at $2.5 per share (See Note 10)
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1,036,000 | 104 | 2,589,896 | (2,590,000 | ) | - | ||||||||||||||||||||||||||
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Amortization of Unearned Compensation
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1,124,932 | 1,124,932 | ||||||||||||||||||||||||||||||
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Currency Translation Adjustment
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(14,001 | ) | (14,001 | ) | (14,001 | ) | ||||||||||||||||||||||||||
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Net loss for the period
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(1,992,472 | ) | (1,992,472 | ) | (1,992,472 | ) | ||||||||||||||||||||||||||
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Balance at December 31, 2007
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41,165,000 | $ | 4,117 | $ | (2,278,335 | ) | $ | 4,446,469 | $ | (9,850 | ) | $ | (1,932,569 | ) | $ | 229,832 | $ | (2,006,473 | ) | |||||||||||||
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE LOSS
Amounts in USD
|
Common
Shares
|
Stocks
Amount
|
Accumulated Deficit During Developmental Stage
|
Additional
Paid In
Capital
|
Other Comprehensive Income
|
Unearned Compensation
|
Total
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Comprehensive Income/ (Loss)
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|||||||||||||||||||||||||
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Balance at December 31, 2007
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41,165,000 | $ | 4,117 | $ | (2,278,335 | ) | $ | 4,446,469 | $ | (9,850 | ) | $ | (1,932,569 | ) | $ | 229,832 | ||||||||||||||||
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Private placement of shares at $3.25 per share (See Note 10)
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32,500 | 3 | 105,622 | 105,625 | ||||||||||||||||||||||||||||
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Shares issued for services at $0.7 per share (See Note 10)
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306,570 | 31 | 214,568 | (214,599 | ) | - | ||||||||||||||||||||||||||
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Shares issued for services at $0.75 per share (See Note 10)
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1,500,000 | 150 | 1,124,850 | (1,125,000 | ) | - | ||||||||||||||||||||||||||
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Shares issued for services at $1.35 per share (See Note 10)
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111,111 | 11 | 149,989 | (150,000 | ) | - | ||||||||||||||||||||||||||
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Private placement of shares at $0.4 per share (See Note 10)
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2,500,000 | 250 | 999,750 | 1,000,000 | ||||||||||||||||||||||||||||
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Shares issued for Standby Equity Distribution Agreement at $0.4 per share
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2,000,000 | 200 | (200 | ) | - | |||||||||||||||||||||||||||
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Amortization of Unearned Compensation
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3,018,710 | 3,018,710 | ||||||||||||||||||||||||||||||
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Currency Translation Adjustment
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36,465 | 36,465 | 36,465 | |||||||||||||||||||||||||||||
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Net loss for the period
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(3,958,212 | ) | (3,958,212 | ) | (3,958,212 | ) | ||||||||||||||||||||||||||
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Balance at December 31, 2008
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47,615,181 | $ | 4,762 | $ | (6,236,547 | ) | $ | 7,041,048 | $ | 26,615 | $ | (403,458 | ) | $ | 432,420 | $ | (3,921,747 | ) | ||||||||||||||
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Shares issued for stock based compensation at $0.4 per share (See Note 8)
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700,000 | 70 | 279,930 | (280,000 | ) | - | ||||||||||||||||||||||||||
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Private placement for $0.2 per share
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111,110 | 11 | 22,211 | 22,222 | ||||||||||||||||||||||||||||
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Private placement for $0.16 per share
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175,000 | 18 | 27,982 | 28,000 | ||||||||||||||||||||||||||||
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Shares issued for services at $0.4 per share (See Note 8
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250,000 | 25 | 99,975 | (60,000 | ) | 40,000 | ||||||||||||||||||||||||||
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Amortization of Unearned Compensation
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728,458 | 728,458 | ||||||||||||||||||||||||||||||
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Currency Translation Adjustment
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17,823 | 17,823 | 17,823 | |||||||||||||||||||||||||||||
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Net loss for the period
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(1,518,077 | ) | (1,518,077 | ) | (1,518,077 | ) | ||||||||||||||||||||||||||
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Balance at December 31, 2009
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48,851,291 | $ | 4,886 | $ | (7,754,624 | ) | $ | 7,471,146 | $ | 44,438 | $ | (15,000 | ) | $ | (249,154 | ) | $ | (1,500,254 | ) | |||||||||||||
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
Amounts in USD
|
For the year ended
December 31, 2009
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For the year ended
December 31, 2008
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Cumulative from April 26, 2006 (date of inception) to December 31, 2009
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||||||||||
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CASH FLOWS FROM OPERATING ACTIVITIES
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||||||||||||
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Net loss
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$ | (1,518,077 | ) | $ | (3,958,212 | ) | $ | (7,503,861 | ) | |||
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Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||||||
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Amortization of stock-based compensation
|
728,458 | 3,018,710 | 4,872,100 | |||||||||
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Recapitalization under reverse merger
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- | - | (250,763 | ) | ||||||||
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Issue of shares for services
|
40,000 | - | 210,000 | |||||||||
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Issue of shares for research and development
|
- | - | 34,000 | |||||||||
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Depreciation and amortization
|
118,166 | 102,471 | 263,259 | |||||||||
| (631,453 | ) | (837,031 | ) | (2,375,265 | ) | |||||||
|
Changes in operating assets and liabilities:
|
||||||||||||
|
Increase in inventories
|
- | 4,028 | - | |||||||||
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(Increase) Decrease in other current assets
|
5,421 | 53,675 | (19,710 | ) | ||||||||
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(Increase) Decrease in related party receivables
|
- | 100,000 | - | |||||||||
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(Decrease) Increase in accounts payable and accrued liabilities
|
(11,671 | ) | 118,861 | 475,150 | ||||||||
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Net cash used in operating activities
|
(637,703 | ) | (560,467 | ) | (1,919,825 | ) | ||||||
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CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
|
Purchase of fixed assets
|
(51,561 | ) | (78,896 | ) | (404,819 | ) | ||||||
|
Net cash used in investing activities
|
(51,561 | ) | (78,896 | ) | (404,819 | ) | ||||||
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CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
|
Proceeds from stockholders
|
- | - | 149,835 | |||||||||
|
Proceeds from sale of common stock
|
50,222 | 1,105,625 | 2,205,517 | |||||||||
|
Repayments of notes
|
(20,000 | ) | (35,000 | ) | (55,000 | ) | ||||||
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Net cash from financing activities
|
30,222 | 1,070,625 | 2,300,352 | |||||||||
|
Effect of exchange rate changes on cash
|
17,823 | 36,903 | 34,018 | |||||||||
|
Net (decrease) increase in cash
|
(641,219 | ) | 468,165 | 9,726 | ||||||||
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Cash at beginning of period
|
650,945 | 182,780 | - | |||||||||
|
Cash at end of period
|
$ | 9,726 | $ | 650,945 | $ | 9,726 | ||||||
|
Supplemental disclosure of cash flow information:
|
||||||||||||
|
Non-cash investing and financing transactions
|
||||||||||||
|
Issuance of shares for services
|
$ | 2,389,599 | $ | 2,289,599 | $ | 3,061,100 | ||||||
|
Issuance of shares for liabilities assumed under reverse merger
|
- | - | $ | 250,513 | ||||||||
|
Issuance of stock based compensation shares
|
- | - | $ | 2,590,000 | ||||||||
|
Purchase of fixed assets through the assumption of capital lease obligations
|
406,558 | 406,558 | $ | 406,558 | ||||||||
|
Cash paid for:
|
||||||||||||
|
Interest
|
30,955 | 10,670 | 40,980 | |||||||||
|
Taxes
|
- | |||||||||||
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
NOTE 1 -
|
GENERAL INFORMATION
|
Power of the Dream Ventures, Inc., f/k/a “Tia V, Inc.” (“PDV” or the “Company”) was incorporated in Delaware on August 17, 2006, with the objective to acquire, or merge with, an operating business.
Reverse merger
PDV entered into and consummated a Securities Exchange Agreement (“Exchange Agreement”) on April 10, 2007. Under the terms of the Exchange Agreement, PDV acquired all the outstanding equity interests of Vidatech, Kft. (also known as Vidatech Technological Research and Development LLC) a limited liability company formed under the laws of the Republic of Hungary, (“Vidatech”) in exchange for 33,300,000 shares of PDV’s common stock, and Vidatech thereby became a wholly-owned Hungarian subsidiary of PDV. PDV is governed by the law of the State of Delaware, and its wholly-owned subsidiary, Vidatech, is governed by the law of the Republic of Hungary. PDV and Vidatech are herein collectively referred to as the “Company.”
Following the acquisition the former stockholders of Vidatech owned a majority of the issued and outstanding common stock of PDV and the management of Vidatech controlled the Board of Directors of PDV and its wholly-owned Hungarian subsidiary Vidatech. Therefore the acquisition has been accounted for as a reverse merger (the “Reverse Merger”) with Vidatech as the accounting acquirer of PDV. The accompanying consolidated financial statements of the Company reflect the historical results of Vidatech, and the consolidated results of operations of PDV subsequent to the acquisition date. In connection with the Exchange Agreement, PDV adopted the fiscal year end of Vidatech as December 31.
All reference to shares and per share amounts in the accompanying consolidated financial statements have been restated to reflect the aforementioned shares exchange.
Business
The Company is engaged in the acquisition, development, licensing and commercialization of and the investment in, directly or through business acquisitions, technologies developed in Hungary. In furtherance of its business, the Company provides research and development services to the companies, inventors from whom it acquires technologies or participation interests in technologies. A goal of the Company is to support research and development activities and to sell the products of inventions to the technological market.
From inception through December 31, 2009, the Company primarily focused on the raising of capital. As of December 31, 2009, the Company manages eight technologies, RiverPower, the Kalmar inventions (FireSAFE fire-proofing liquid; technology for utilizing communal waste as a concrete additive; technology for repairing potholes with the use of recycled plastics; technology for neutralizing red mud; biodegreadable deiing solution and PVC shielded electric cable recycling technology), and an equity interest in ‘in4 Kft’, a company formed to develop next generation semantic internet based search engine and content organizer applications. All of these technologies are still in the development stage (see Note 4). As of December 31, 2009, the Company has only realized limited revenues from the now discontinued TothTelescope project and has not realized any revenues from the other inventions. As a result, the accompanying consolidated financial statements have been presented on a development stage basis.
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
FireSAFE
On August 20, 2008 the Company licensed its FireSAFE technology to a group of Hungarian investors for a license acquisition fee of HUF 20,000,000 (approximately $120,000), where half of the license fee was received by the Company in August of 2008, and the other half due once independent testing and verification of the technology completed, but no later than June 31, 2009. The received amount was recorded as a liability in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104"), which superseded Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (“SAB 101"). A new company called FireLESS Ltd. was established and given commercialization license. The Company received 30% equity in FireLESS Ltd in addition to the one time license acquisition fee which was recorded as research and development expense in accordance with with ASC 730-10-25 “Accounting for Research and Development Costs (See also Note 4).
The new company will focus on acquiring the appropriate licenses and certificates to internationally market FireSAFE and will work with local and international fire agencies to test and establish usability baselines for FireSAFE. As of December 31, 2009 we are completing data analysis of independent testing completed on FireSafe. Results of this analysis, expected to be completed in 2010, will determine the next course of action.
To further these goals, by protecting the intellectual property FireSAFE represents, on October 20, 2008 the Company filed a PCT patent application in addition to the already filed Hungarian application to protect FireSAFE internationally.
FireSAFE is an environmentally friendly, biodegradable liquid designed to prevent, and if necessary extinguish natural fires that are exceedingly hard, or impossible to contain with water or other fire-fighting solutions. This category includes forest, bush and other natural fires. FireSAFE reaches the heart of the fire, coating all surfaces with a crystalline layer that hardens when exposed to heat. The layer thus formed is capable of withstanding heat as high as 1,100 degrees centigrade, enough to stop the most fearsome forest fires. Following use (containment of the fire) the biodegradable active ingredient will decompose in approximately four months. FireSAFE can also be used as a preventive solution, both in the wild and in treating lumber. During fire season those areas that are the most likely to be burnt can be sprayed with the solution as a preventive measure. Lumber used in construction can also be treated with FireSAFE to increase its fire resistance factor. FireSAFE can be manufactured anywhere on the planet with ease as all its ingredients are widely and cheaply available.
TothTelescope
On July 15, 2009 our exclusive distributor agreement expired with Attila Toth, Inventor of the TothTelescope. After extensive review of the technology, the available market and hurdles associated with manufacturing and distributing the TothTelescope, we have elected not to renew the distribution agreement and discontinue the project. Since inception only 10 telescopes were sold. Overall invested capital was returned from commissions earned on these sales.
Yorkville SEDA
On October 8, 2008, Power of the Dream Ventures, Inc. (the “Company”) entered into a Standby Equity Distribution Agreement (the “Standby Equity Distribution Agreement”) with YA Global Investments, L.P. (the “Investor”). Pursuant to the terms of the Standby Equity Distribution Agreement, the Company (a) agreed to issue and sell to the Investor up to $5,000,000 of shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) in tranches of equity, based upon a specified discount to the market price of the Common Stock, calculated over the five trading days following notice by the Company of an election to sell shares; and (b) issued to the Investor a warrant (the “Warrant”) to purchase 4,027,386 shares of Common Stock at the exercise price per share of $0.29. The Warrant is not part of the commitment shares issued by the company to the investor. The investor must purchase the shares underlying the Warrant. The Warrant price was determined based upon the highest Bid price on the day of the closing of the agreement.
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
Yorkville SEDA (Continued)
In connection with the Standby Equity Distribution Agreement, the Company entered into a Registration Rights Agreement with the Investor (the “Registration Rights Agreement”) pursuant to which the Company agreed to register for resale the shares of Common Stock that may be purchased by the Investor pursuant to the Standby Equity Distribution Agreement, the shares of Common Stock issuable upon exercise of the Warrant and 2,000,000 shares of Common Stock (the “Commitment Shares”) issued to the Investor as a commitment fee pursuant to the terms of the Standby Equity Distribution Agreement. The commitment fee is recorded by decreasing additional paid in capital.
Financing from this transaction will be used by the Company for the continued development of its current technologies, commercialization of same, the acquisition of new technologies and for general corporate expenses.
The Company filed the details of this transaction on Form 8-K with the Commission on October 14, 2008.
As of the date of this filing the company has not utilized any of the funds available under the Standby Equity Distribution Agreement.
Genetic Immunity
On February 23, 2009 the Company entered into a consultation agreement with Genetic Immunity, a Hungarian biotechnology research and development company working on immune amplification nanomedicine products, including a HIV vaccine currently in Phase 2 clinical trials.
According to the terms of the agreement PDV will provide Genetic Immunity business development expertise, will facilitate the publication, via internationally distributed press releases, of Genetic Immunity’s past, present and future news items, and will advise Genetic Immunity on going public in the United States based on Power of the Dream Ventures’ own experience in achieving public states.
In addition, PDV was granted rights to acquire equity in Genetic Immunity in one or several tranches for total consideration of USD $10 million in exchange for 20% equity in the Company, if all options are exercised.
Exact terms of this equity purchase option are: PDV is to acquire 2% of the Company via a USD 1,000,000 investment by April 30, 2009 in exchange for 72 units of the Genetic Immunity’s Class B stock; Company is to acquire an additional 2% of the Genetic Immunity via a USD 1,000,000 investment by August 30, 2009 in exchange for 72 units of the Genetic Immunity’s Class B stock. PDV is also granted an option to acquire an additional 16% of the Genetic Immunity via an $8,000,000 investment by February 20, 2010, in tranches or in whole, in exchange for 578 units of the Genetic Immunity’s Class B stock. If the Company misses the first deadline of April 30, 2009 this agreement shall immediately terminate. If the Company completes the first investment but missed the second date of August 30, 2009 this agreement shall terminate, but the Company will retain the Class B units already acquired. Any portion of the optional 16% equity purchase that is not exercised and closed by February 23, 2010 shall terminate. The option was extended for an unlimited period.
As of the date of this report the Company has not yet acquired any equity in Genetic immunity but still intends to do so pending availability of sufficient capital. As a direct result of this intention, both parties agree the original agreement is still if effect.
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
Basis of presentation
The accompanying consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America for financial information have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying financial statements include all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading as of and for the period ended December 31, 2009 and for the period from April 26, 2006 (date of inception) to December 31, 2009.
Going Concern and Management’s Plan
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate the continuation of the Company as a going concern and assume realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses from operations since inception. Management anticipates incurring additional losses in 2010. Further, the Company may incur additional losses thereafter, depending on its ability to generate revenues from the licensing or sale of its technologies and products, or to enter into any or a sufficient number of joint ventures. The Company has minimal revenue to date. There is no assurance that the Company can successfully commercialize any of its technologies and products and realize any revenues therefore. The Company’s technologies and products have never been utilized on a large-scale commercial basis and there is no assurance that any of its technologies or products will receive market acceptance. There is no assurance that the Company can continue to identify and acquire new technologies.
Since inception through December 31, 2009, the Company had an accumulated deficit of $7,754,624 and net cash used in operations of $1,919,825. However, management of the Company believes that the recent funding from the private placement of the Company’s common shares (See Note 8) will allow them to continue operations and execute its business plan.
Management believes the Company has adequate capital to keep the Company functioning through December 31, 2010. However, the need may arise, in the normal course of business, to raise additional capital if we want to accelerate development work, for the acquisition of additional technologies, or to meet unforeseen financial needs. No assurance can be given that the Company can obtain additional working capital, or if obtained, that such funding will not cause substantial dilution to shareholders of the Company. If the Company is unable to raise additional funds, if needed, it may be forced to change or delay its contemplated marketing and business plan. Being a development stage company, the Company is subject to all the risks inherent in the establishment of a new enterprise and the marketing and manufacturing of a new product, many of which risks are beyond the control of the Company. All of the factors discussed above raise substantial doubt about the Company’s ability to continue as a going concern.
These consolidated financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary as a result of the above uncertainty.
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
NOTE 2 –
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
The significant accounting policies adopted in preparation of the consolidated financial statements are set out below.
Principles of Consolidation
The consolidated financial statements include the accounts of PDV and its wholly-owned Hungarian subsidiary, Vidatech. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates:
The preparation of the financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect amounts reported herein. Management believes that such estimates, judgments and assumptions are reasonable and appropriate. However, due to the inherent uncertainty involved, actual results may differ from those based upon management’s judgments, estimates and assumptions. Critical accounting policies requiring the use of estimates are depreciation and amortization and share-based payments
Revenue Recognition:
Sales are recognized when there is evidence of a sales agreement, the delivery of the goods or services has occurred, the sales price is fixed or determinable and collectability is reasonably assured, generally upon shipment of product to customers and transfer of title under standard commercial terms. Sales are measured based on the net amount billed to a customer. Generally there are no formal customer acceptance requirements or further obligations. Customers do not have a general right of return on products shipped therefore no provisions are made for return.
Accounts Receivable and Allowance for Doubtful Accounts:
Accounts receivable are stated at historical value, which approximates fair value. The Company does not require collateral for accounts receivable. Accounts receivable are reduced by an allowance for amounts that may be uncollectible in the future. This estimated allowance is determined by considering factors such as length of time accounts are past due, historical experience of write offs, and customers’ financial condition.
Inventories:
Inventories are stated at the lower of cost, determined based on weighted average cost or market. Inventories are reduced by an allowance for excess and obsolete inventories based on management’s review of on-hand inventories compared to historical and estimated future sales and usage.
Fixed assets:
Fixed assets are stated at cost or fair value for impaired assets. Depreciation and amortization is computed principally by the straight-line method. Asset amortization charges are recorded for long lived assets. In the related periods, no asset impairment charges were accounted for.
Depreciation is recorded commencing the date the assets are placed in service and is calculated using the straight line basis over their estimated useful lives.
The estimated useful lives of the various classes of long-lived assets are approximately 3-7 years.
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
Pensions and Other Post-retirement Employee benefits:
In Hungary, pensions are guaranteed and paid by the government or by pension funds, therefore no pensions and other post-retirement employee benefit costs or liabilities are to be calculated and accounted by the Company.
Product warranty:
The Company accrues for warranty obligations for products sold based on management estimates, with support from sales, quality and legal functions, of the amount that eventually will be required to settle such obligations. At December 31, 2009, the Company had no warranty obligations in connection with the products sold.
Advertising costs:
Advertising and sales promotion expenses are expensed as incurred.
Research and development and Investment and Advances to Non-Consolidated Entities:
In accordance with ASC 730-10-25 “Accounting for Research and Development Costs,” all research and development (“R&D”) costs are expensed when they are incurred, unless they are reimbursed under specific contracts. Assets used in R&D activity, such as machinery, equipment, facilities and patents that have alternative future use either in R&D activities or otherwise are capitalized. In connection with investments and advances in development-stage technology entities in which the company owns or controls less than a 50% voting interest, (see Note 4) where repayment from such entity is based on the results of the research and development having future economic benefit, the investment and advances are accounted for as costs incurred by the Company as research and development in accordance with ASC 730-20-25 “Research and Development Arrangements”.
Income taxes:
The Company accounts for income taxes in accordance with ASC 740-10-25, “Accounting for Income Taxes”. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Valuation allowances are provided against deferred tax assets to the extent that it is more likely than not that the deferred tax assets will not be realized.
Comprehensive Income (Loss):
ASC 220-10-25, “Accounting for Comprehensive Income,” establishes standards for reporting and disclosure of comprehensive income and its components (including revenues, expenses, gains and losses) in a full set of general-purpose financial statements. The items of other comprehensive income that are typically required to be disclosed are foreign currency items, minimum pension liability adjustments, and unrealized gains and losses on certain investments in debt and equity securities. Accumulated other comprehensive income, at December 31, 2009 is $44,438.
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
Translation of Foreign Currencies:
The U.S. dollar is the functional currency for all of the Company’s businesses, except its operations in Hungary. Foreign currency denominated assets and liabilities for this unit is translated into U.S. dollars based on exchange rates prevailing at the end of each period presented, and revenues and expenses are translated at average exchange rates during the period presented. The effects of foreign exchange gains and losses arising from these translations of assets and liabilities are included as a component of equity, under other comprehensive income.
Loss per Share:
Under ASC 260-10-45, “Earnings Per Share”, basic loss per common share is computed by dividing the loss applicable to common stockholders by the weighted average number of common shares assumed to be outstanding during the period of computation. Diluted loss per common share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. There were no common stock equivalents or potentially dilutive securities outstanding during the years ended December 31, 2009 and 2008, respectively. Accordingly, the weighted average number of common shares outstanding for the years ended December 31, 2009 and 2008, respectively, is the same for purposes of computing both basic and diluted net income per share for such years.
Business Segment:
ASC 280-10-45, “Disclosures About Segments of an Enterprise and Related Information,” establishes standards for the way public enterprises report information about operating segments in annual consolidated financial statements and requires reporting of selected information about operating segments in interim financial statements regarding products and services, geographical areas and major customers. The Company has determined that under ASC 280-10-45, there are no operating segments since substantially all business operations, assets and liabilities are in Hungarian geographic segment.
Share-Based Payments:
In accordance with ASC 718-10 “Share-Based Payment” all forms of share-based payment (“SBP”) awards including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights result in a cost that is measured at fair value on the awards’ grant date, based on the estimated number of awards that are expected to vest. As the Company did not issue any employee SBP prior to September 30, 2007, there is no compensation cost recognized in the accompanied consolidated financial statements.
The Company accounts for equity instruments issued to non-employees in accordance with the provisions of ASC 505-50, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” which requires that such equity instruments are recorded at their fair value on the measurement date. The measurement of stock-based compensation is subject to periodic adjustment as the underlying equity instrument vests. Non-employee stock-based compensation charges are amortized over the vesting period or period of performance of the services.
Recent Accounting Pronouncements:
In December 2007, the FASB issued ASC 805-10-15, “Business Combinations” (“SFAS 141(R)”). It expands on the disclosures previously required by SFAS 141, better defines the acquirer and the acquisition date in a business combination, and establishes principles for recognizing and measuring the assets acquired (including goodwill), the liabilities assumed and any non-controlling interests in the acquired business. ASC 805-10-15 also requires an acquirer to record an adjustment to income tax expense for changes in valuation allowances or uncertain tax positions related to acquired businesses. ASC 805-10-15 is effective for all business combinations with an acquisition date in the first annual period following December 15, 2008; early adoption is not permitted. We adopted this statement as of January 1, 2009. The adoption of ASC 805-10-15 did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
In December 2007, the FASB issued ASC 810-10-65, “Non-controlling Interests in Consolidated Financial Statements-an amendment of ARB No. 51” (SFAS 160). It requires that non-controlling (or minority) interests in subsidiaries be reported in the equity section of the company’s balance sheet, rather than in a mezzanine section of the balance sheet between liabilities and equity. ASC 810-10-65 also changes the manner in which the net income of the subsidiary is reported and disclosed in the controlling company’s income statement. ASC 810-10-65 also establishes guidelines for accounting for changes in ownership percentages and for deconsolidation. ASC 810-10-65 is effective for financial statements for fiscal years beginning on or after December 15, 2008 and interim periods within those years. The adoption of ASC 810-10-65 did not have a material impact on our financial position, results of operations or cash flows.
In March 2008, the FASB issued ASC 815-10-65, “Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133”. It requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. ASC 815-10-65 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The adoption of ASC 815-10-65 did not have a material impact on our financial position, results of operations or cash flows.
In March 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. This statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with US GAAP. This statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.
Effective January 1, 2009, the Company adopted ASC 470-20 "Accounting for Convertible Debt Instruments that may be settled in Cash upon Conversion (Including Partial Cash Settlement)". ASC 470-20 requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate. ASC 470-20 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis. The adoption of ASC 470-20 did not have a material impact on our financial position, results of operations or cash flows.
Effective January 1, 2009, the Company adopted the ASC 260-10, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities”. This required that all unvested share-based payment awards that contain nonforfeitable rights to dividends should be included in the basic Earnings Per Share (EPS) calculation. This standard did not affect the consolidated financial position or results of operations.
Effective April 1, 2009, the Company adopted ASC 320-10-65, “Recognition and Presentation of Other-Than-Temporary Impairments”. ASC 320-10-65 provides guidance in determining whether impairments in debt securities are other than temporary, and modifies the presentation and disclosures surrounding such instruments. This is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. This standard did not affect the consolidated financial position or results of operations.
Effective April 1, 2009, the Company adopted ASC 820-10-65, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”. ASC 820-10-65 provides additional guidance in determining whether the market for a financial asset is not active and a transaction is not distressed for fair value measurement purposes as defined in ASC 820-10-55, “Fair Value Measurements.” ASC 820-10-65 is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. This standard did not affect the consolidated financial position or results of operations.
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
Effective April 1, 2009 the Company adopted ASC 825-10-65, “Interim Disclosures about Fair Value of Financial Instruments”. This amends ASC 820-10-55, “Disclosures about Fair Values of Financial Instruments,” to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. It also amends ASC 270-10, “Interim Financial Reporting,” to require those disclosures in all interim financial statements. This standard did not affect the consolidated financial position or results of operations.
In May 2009, FASB issued ASC 855-10, Subsequent Events. The standard introduces the concept of financial statements being available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. In accordance with this statement, an entity should apply the requirements to interim or annual financial periods ending after June 15, 2009. Management performed an evaluation of the Company’s activities through the time of filing this Annual Report on Form 10-K and has concluded that there are no significant subsequent events requiring recognition or disclosure in these consolidated financial statements.
In June 2009, FASB issued SFAS No. 167, an amendment to FASB Interpretation No. 46(R). This Statement amends Interpretation 46(R) to require an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity. This analysis identifies the primary beneficiary of a variable interest entity as the enterprise that has several defined characteristics. Additionally, an enterprise is required to assess whether it has an implicit financial responsibility to ensure that a variable interest entity operates as designed when determining whether it has the power to direct the activities of the variable interest entity that most significantly impact the entity’s economic performance. This amendment shall be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. The adoption of is not expected to this interpretation have a material impact on our financial position, results of operations or cash flows.
In June 2009, FASB issued ASC 105-10, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162. The FASB Accounting Standards Codification (Codification) became the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification became non-authoritative. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted this requirement.
|
NOTE 3 -
|
OTHER RECEIVABLES
|
|
December 31,
2009
|
December 31,
2008
|
|||||||
|
VAT reclaimable
|
$ | 10,595 | $ | 20,214 | ||||
|
Advances given
|
- | 668 | ||||||
|
Other
|
9,115 | 4,249 | ||||||
|
Total
|
$ | 19,710 | $ | 25,131 | ||||
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
NOTE 4 -
|
RESEARCH AND DEVELOPMENT (“R&D”)
|
In August, 2008, the Company entered into an agreement with a Hungarian individual to establish FireLESS Kft (FireLESS). FireLESS’s business is focused on acquiring the appropriate licenses and certificates to internationally market FireSAFE and will work with local and international fire agencies to test and establish usability baselines for FireSAFE. The Company is a minority shareholder in FireLESS with 30% voting rights, which operates under independent management.
In August, 2007, the Company entered into an agreement with two Hungarian individuals to establish In4 Kft (“in4). in4’s business is focused on software development and information technology purposes. Originally the Company was a minority shareholder in in4 with 30% voting rights. In4 Ltd. operates under independent management.
In August, 2007, the Company also entered into a loan commitment agreement with in4. According to the agreement the Company has committed a loan of approximately $271,000 to in4. The loan amount has been provided by May 31, 2009. In November of 2008 the Company transferred to in4 the entire loan amount, upon which the Company elected to covert the loan into an additional 10% equity in in4. As of January 15, 2009 the Company maintains a minority 40% equity in in4 Ltd. Since capitalization of the loan to equity, as of December 31, 2009 the Company has provided an additional $310,000 loan to in4.
Since the repayment of loans, advances and other investment is contingent on the results of the R&D of iGlue having future economic benefit, management has expensed the Company's investment in in4 and in FireLESS of approximately $5,000 and $900, respectively, and loans to in4 of approximately $310,000 as R&D in the accompanying condensed consolidated statements of operations, in accordance with ASC 730-10-25 "Research and Development Arrangements".
|
NOTE 5 -
|
FIXED ASSETS
|
Net property and equipment consisted of the followings at December 31, 2009 and 2008:
|
December 31,
2009
|
December 31,
2008
|
|||||||
|
Machinery and equipment
|
$ | 68,357 | $ | 68,026 | ||||
|
Vehicles
|
483,108 | 582,087 | ||||||
|
Office equipment
|
74,570 | 46,646 | ||||||
|
Software and website registration rights
|
32,419 | 22,252 | ||||||
|
Total
|
658,454 | 719,011 | ||||||
|
Less: Accumulated depreciation and amortization
|
(204,703 | ) | (104,288 | ) | ||||
|
Net property and equipment
|
453,751 | 614,723 | ||||||
The net book value of fixed assets under capital lease amount to $358,543 and $516,188 at December 31, 2009 and at December 31, 2008, respectively. Depreciation and amortization expense for the years ended December 31, 2009 and December 31, 2008 was $118,166 and $102,471, respectively and $263,259 for the period from April 26, 2006 (date of inception) to December 31, 2009.
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
NOTE 6 -
|
NOTE PAYABLE
|
On April 10, 2007, in connection with reverse merger (See Note 1), the Company assumed a note payable of $250,000 to a former stockholder, Mary Passalaqua originally with one year maturity at April 5, 2008. The note has been expanded by one year to April 5, 2009 with the same conditions. As such note payable was issued immediately prior to the reverse merger, such issuance was recorded as additional compensation by the Company prior to the reverse merger. Accordingly, such compensation is reflected in the accompanying consolidated balance sheet as the accumulated deficit of the Company, and will not be reflected in the Statement of operations, as such compensation expense was structured as an expense prior to the recapitalization.
In November, 2008 the Company settled $35,000 from the outstanding liability, and in May of 2009 the Company settled another $20,000 from the liability. The note payable bears interest at the prime rate (3.25% at December 31, 2009). Interest expense in connection with such note amounted to $33,998 and $27,010 for the year ended at December 31, 2009 and at December 31, 2008, respectively, and was accrued and included in accounts payable and accrued liabilities in the accompanying consolidated balance sheet.
|
NOTE 7 -
|
CAPITAL LEASES PAYABLE
|
In August, 2007, the Company entered into capital lease agreements on 3 vehicles for management purposes. The maturity of the lease is 60 months and is denominated in CHF. Installments and interest is due on a monthly basis.In December, 2007, the Company entered into additional capital lease agreements on 2 vehicles for management purposes. The maturity of the lease is 72 months and is denominated in CHF. Installments and interest is due on a monthly basis.
In December 2008, the Company settled the capital lease agreements on 2 vehicles and replaced them with new agreements for additional 2 vehicles, totaling 5 capital lease agreements at December 31, 2008. The maturity of the new leases varies from 60 to 72 months and are denominated in EUR and CHF. Installments and interests are due on a monthly basis.
In September 2009, the Company closed a capital lease agreement for one vehicle. The related asset has been sold.
The following is a schedule by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of December 31, 2009:
|
For the year ending December 31, 2009
|
Amounts
|
|||
|
2010
|
95,206 | |||
|
2011
|
88,830 | |||
|
2012
|
88,830 | |||
|
2013
|
87,346 | |||
|
2014
|
27,222 | |||
|
Total minimum lease payments
|
387,434 | |||
|
Less: amounts representing interest
|
75,243 | |||
|
Present value of net minimum lease payments
|
312,191 | |||
|
Less: current portion
|
60,035 | |||
|
Long term liability
|
$ | 252,156 | ||
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
NOTE 8 -
|
STOCKHOLDERS’ EQUITY
|
In November 2009, pursuant to a private placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 175,000 shares of its common stock at $0.16 and 111,110 shares of it common stock at $0.20 per share for aggregate proceeds of $50,222.
In April 2009, the Company entered into an agreement with two professionals for consulting services. According to the agreement the professionals provided consulting services to the Company in 2009. In connection with these services, the Company issued to them 250,000 shares of the Company’s common stock. These share issuances were recorded at $0.40 per share in the total amount of $100,000 and the related expense was recorded under general administration.
On February 5, 2009, the Company entered into a restricted stock agreement with Ildiko Rozsa, who is to serve as the Chief Financial Officer of the Company. As part of the agreement Ms. Rozsa was granted 120,000 shares of the Company’s restricted common stock of which 30,000 shares will vest quarterly, at the end of each quarter, so long as Ms. Rozsa is employed by the Company.
On February 5, 2009, the Company entered into a restricted stock agreement with Szilvia Toth, the Chief Accounting Officer of the Company. As part of the agreement Ms. Toth was granted 120,000 shares of restricted common stock, of which 30,000 shares will vest quarterly, at the end of each quarter, so long as Ms. Toth is employed by the Company.
On February 5, 2009, the Company entered into a restricted stock agreement with Mihaly Zala, the Chief Technology Officer of the Company. As part of the agreement Mr. Zala was granted 120,000 shares of restricted common stock, which will vest on equal installments of 30,000 shares quarterly, at the end of each quarter, so long as Mr. Zala is employed by the Company. As of July 15, 2009 Mr. Zala is no longer employed by the Company, therefore 60,000 shares of the 120,000 granted to him were cancelled and returned to the authorized and unissued stock of the company.
On February 5, 2009, the Company entered into a restricted stock agreement with Imre Eotvos, the Technology Assistant of the Company. As part of the agreement Mr. Eotvos was granted 200,000 shares of restricted common stock, which will vest on equal installments of 50,000 shares quarterly, at the end of each quarter, so long as Mr. Eotvos is employed by the Company.
On February 5, 2009, the Company entered into a restricted stock agreement with Daniel Kun, Jr., who is to serve as Secretary and Vice President of the company on a going forward basis. As part of the agreement Mr. Kun was granted 200,000 shares of restricted common stock, which will vest on equal installments of 50,000 shares quarterly, at the end of each quarter, so long as Mr. Kun is employed by the Company.
As consideration for the above services, the Company issued an aggregate of 700,000 shares of the Company’s common stock. These share issuances were recorded at $0.4 per share in the total amount of $280,000 in accordance with measurement date principles prescribed under FAS 123 (R).
On October 24, 2008, the Company entered into a Restricted Stock Purchase Agreement with one accredited investor. Pursuant to the terms of the Stock Purchase Agreement, the Company agreed to issue and sell to the Investor $1,000,000 of shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) at a purchase price of $0.40 cents per share.
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
On October 8, 2008, Power of the Dream Ventures, Inc. (the “Company”) entered into a Standby Equity Distribution Agreement (the “Standby Equity Distribution Agreement”) with YA Global Investments, L.P. (the “Investor”). Pursuant to the terms of the Standby Equity Distribution Agreement, the Company (a) agreed to issue and sell to the Investor up to $5,000,000 of shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) in tranches of equity, based upon a 7% discount to the market price of the Common Stock, calculated over the five trading days following notice by the Company of an election to sell shares; and (b) issued to the Investor a warrant (the “Warrant”) to purchase 4,027,386 shares of Common Stock at the exercise price per share of $0.29. The Warrant is not part of the commitment shares issued by the company to the investor. The investor must purchase the shares underlaying the Warrant. The Warrant price was determined based upon the highest Bid price on the day of the closing of the agreement. The YA Global is required to exercise the warrant upon notice by PDV of an election to have the warrants exercised at a fix price of $0.29 per common stock.
In connection with the Standby Equity Distribution Agreement, the Company entered into a Registration Rights Agreement with the Investor (the “Registration Rights Agreement”) pursuant to which the Company agreed to register for resale the shares of Common Stock that may be purchased by the Investor pursuant to the Standby Equity Distribution Agreement, the shares of Common Stock issuable upon exercise of the Warrant and 2,000,000 shares of Common Stock (the “Commitment Shares”) issued to the Investor as a commitment fee pursuant to the terms of the Standby Equity Distribution Agreement. The 2,000,000 shares issued as a commitment fee were valued at $0.4 per share or of $800,000 based on the fair value at issuance date. The $800,000 commitment fee has been debited against additional paid in capital in accordance with the provisions of Staff Accounting Bulletin Topic 5A .
There is no limit to the amount of each advance. We are not obligated to utilize any of the $5.0 million available under the SEDA and there are no minimum commitments or minimum use penalties. Based upon our outstanding shares of common stock, and warrants to purchase common stock as of December 31, 2008, there is no limit on the number of share we may issue without stockholder approval. Based on the price of our stock at December 31, 2009, the maximum number of shares that could be sold under this agreement is approximately 35,714,000 shares.
Summaries of non-vested restricted stock awards are as follows:
| # |
Weighted Average
|
|||||||
|
Shares
|
Grant date fair value
|
|||||||
|
Non-vested at December 31, 2009
|
555,368 | $ | 403,458 | |||||
|
Granted in 2009
|
950,000 | 380,000 | ||||||
|
Forfeited
|
||||||||
|
Vested in 2009
|
(1,467,868 | ) | (768,458 | ) | ||||
|
Non-vested at December 31, 2009
|
37,500 | $ | 15,000 | |||||
As of December 31, 2009, we had estimated unrecognized stock-based compensation expense of $15,000 related to non-vested restricted stock awards and units. This expense is expected to be recognized over a weighted-average period of 1 year.
The weighted average grant-date fair value of restricted stock awards granted for the year ended December 31, 2009 and 2008 were $0.40 and $0.73, respectively. The total fair value of shares vested during the year ended December 31, 2009 was $768,458.
On February 20, 2008 shares of the Company’s common stock was approved for quotation and trading by FINRA on the Over The Counter Bulletin Board (OTCBB) under the ticker symbol PWRV. Trading commences in the Company’s securities on the OTCBB beginning on February 21, 2008.
On January 30, 2008, pursuant to a private placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 104,000 shares of its common stock at $3.25 per share for aggregate proceeds of $105,625.
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
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NOTE 8 -
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STOCKHOLDERS’ EQUITY (Continued)
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In October 2007, pursuant to a private placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 104,000 shares of its common stock at $2.50 per share for aggregate proceeds of $260,000. The Company also entered into a Registration Rights Agreement, pursuant to which it agreed that as soon as practicable from the Offering Termination Date, as defined in the Registration Rights Agreement, it would file a registration statement with the SEC covering the resale of the shares of the Company’s common stock that are issuable pursuant to this private placement. There are no stipulated damages outlined in the Registration Rights Agreement for failure to file within the agreed upon time frame. Under such agreement, the holder is entitled to exercise all rights granted by law, including recovery of damages under this agreement. The company filed on Form SB-2 a registration statement with the SEC on November 14, 2007, which was approved on January 30, 2008.
On October 24, 2007, the Company entered into a restricted stock agreement with Ildiko Rozsa, who is to serve as the Chief Financial Officer of the Company. As part of the agreement Ms. Rozsa was granted 250,000 shares of the Company’s restricted common stock of which 100,000 shares are vested upon grant and 30,000 shares will vest quarterly, at the end of each quarter, so long as Ms. Rozsa is employed by the Company.
On October 1, 2007, the Company entered into a restricted stock agreement with Szilvia Toth, the Chief Accounting Officer of the Company. As part of the agreement Ms. Toth was granted 100,000 shares of restricted common stock of which 50,000 shares are vested upon grant and 10,000 shares will vest quarterly, at the end of each quarter, so long as Ms. Toth is employed by the Company.
On October 24, 2007, the Company entered into a restricted stock agreement with Mihaly Zala, the Chief Technology Officer of the Company. As part of the agreement Mr. Zala was granted 150,000 shares of restricted common stock, which will vest on equal installments of 30,000 shares quarterly, at the end of each quarter, so long as Mr. Zala is employed by the Company.
On October 24, 2007, the Company entered into a restricted stock agreement with Imre Eotvos, the Technology Assistant of the Company. As part of the agreement Mr. Eotvos was granted 25,000 shares of restricted common stock, which will vest on equal installments of 5,000 shares quarterly, at the end of each quarter, so long as Mr. Eotvos is employed by the Company.
On October 1, 2007, the Company entered into a restricted stock agreement with Sandorne Juhasz, who provides payroll accounting services to the Company on a subcontracting basis. As part of the agreement Ms. Juhasz was granted 11,000 shares of restricted common stock, of which 8,000 is will vest upon grant and 750 shares will vest quarterly, at the end of each quarter, so long as Ms. Juhasz is employed by the Company.
On October 24, 2007, the Company entered into a restricted stock agreement with Daniel Kun, Jr., who is to serve as Secretary and Vice President of the company on a going forward basis. Previously Mr. Kun served as Secretary, Treasurer and Chief Financial Officer. As part of the agreement Mr. Kun was granted 250,000 shares of restricted common stock, which will vest on equal installments of 50,000 shares quarterly, at the end of each quarter, so long as Mr. Kun is employed by the Company.
On October 24, 2007, the Company entered into a restricted stock agreement with Viktor Rozsnyay, who is serving as President and Chief Executive Officer of the Company. As part of the agreement Mr. Rozsnyay was granted 250,000 shares of restricted common stock, which will vest on equal installments of 50,000 shares quarterly, at the end of each quarter, so long as Mr. Rozsnyay is employed by the Company.
As consideration for the above services, the Company issued an aggregate of 1,036,000 shares of the Company’s common stock. These share issuances were recorded at $2.5 per share in the total amount of $2,590,000 in accordance with measurement date principles prescribed under ASC 505-50 and ASC 718-10. The fair value of share was determined based on the last private placements. The Company is amortizing the fair value of the shares over the term of the agreement to stock-based compensation expense, which amounted to $0 and $1,755,625 for the year ended December 31, 2009 and December 31, 2008, respectively and $2,590,000 for the period from April 26, 2006 (date of inception) to December 31, 2009, in accordance with ASC 505-50 and ASC 718-10.
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
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NOTE 8 -
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STOCKHOLDERS’ EQUITY (Continued)
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In June 2007, pursuant to a private placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 2,250,000 shares of its common stocks at $0.34 per share for a total subscription receivable of $765,000. The Company also entered into a Registration Rights Agreement, pursuant to which it agreed that as soon as practicable from the Offering Termination Date, as defined in the Registration Rights Agreement, it would file a registration statement with the SEC covering the resale of the shares of the Company’s common stock that are issuable pursuant to this private placement. There are no stipulated damages outlined in the Registration Rights Agreement for failure to file within the agreed upon time frame. Under such agreement, the holder is entitled to exercise all rights granted by law, including recovery of damages under this agreement.
In June 2007, the Company entered into five consulting agreements with five consultants for 12 to 24 month periods. According to the agreements the consultants will provide general business consulting services. As consideration for such services, the Company issued an aggregate of 1,375,000 shares of the Company’s common stock. These share issuances were recorded at $0.34 per share in the total amount of $467,501 in accordance with measurement date principles prescribed under ASC 505-50 and ASC 718-10. The Company is amortizing the fair value of the shares over the term of the agreement to stock-based compensation expense, which amounted to $7,083 and $169,859 for the periods ended December 31, 2009 and 2008, respectively and $467,501 for the period from April 26, 2006 (date of inception) to September 30, 2009, in accordance with ASC 505-50 and ASC 718-10.
On April 10, 2007, PDV entered into a reverse merger transaction with Vidatech. In connection with the merger 2,500,000 shares of PDV common stock remained outstanding and PDV issued 33,300,000 shares of its common stock for all the outstanding common stock of Vidatech. As a result of this transaction, the former stockholders of Vidatech became the controlling stockholders of PDV. Accordingly, the reverse merger has been accounted for as a recapitalization of Vidatech.
In April 2007, the Company entered into an agreement with two professionals for legal services. According to the agreement the professionals provided legal services to the Company in 2007. In connection with these services, the Company issued to them 500,000 shares of the Company’s common stock. These share issuances were recorded at $0.34 per share in the total amount of $170,000 and the related expense was recorded under general administration.
In connection with the ITA (See Note 4), the Company issued 100,000 shares of the Company’s common stock to the Inventors. These shares issuance were recorded at fair value of $0.34 per share in the total amount of $34,000. The cost of the related invention was recorded as research and development expense.
In May, 2006, the Company entered into a short term loan agreement with its Chief Executive Officer, Viktor Rozsnyay, for approximately $96,100 with a maturity of April 30, 2007. On December 28, 2006 Mr. Rozsnyay elected to convert the loan into equity, which is recorded as additional paid in capital.
In March, 2007, the Company entered into a short term loan agreement with its Chief Financial Officer, Daniel Kun Jr., for approximately $53,735 with a maturity of March 31, 2007. On March 31, 2007 Mr. Kun elected to convert the loan into equity, which is recorded as additional paid in capital.
POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
NOTE 9 -
|
GENERAL AND ADMINISTRATION
|
General and administration expenses consisted of the followings at December 31, 2009 and at December 31, 2008:
|
December 31,
2009
|
December 31,
2008
|
|||||||
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Stock based compensation
|
280,000 | 1,755,625 | ||||||
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Stock based Consultant services
|
92,083 | 169,859 | ||||||
|
Marketing expenses
|
396,374 | 1,093,224 | ||||||
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Other
|
196,866 | 231,289 | ||||||
|
Total
|
965,323 | 3,249,997 | ||||||
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NOTE 10 -
|
SUBSEQUENT EVENTS
|
On February 1, 2010, the Company consummated a private placement of 65,000 shares of its common stock to one investor for an aggregate purchase price of $11,111. The shares of common stock were sold to a non-US Person in reliance on the exemptions from the registration requirements of the
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NOTE 11 -
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COMMITMENTS AND CONTINGENCIES
|
Development of our RiverPower technology is currently on hold pending the outcome of a law suit brought against us by RiverPower’s inventor, Janos Salca. The Company was presented with a court order for a hearing, initiated by Janos Salca, inventor of our RiverPower technology. In the court documents made available to the Company Mr. Salca alleges that at the signing of our Invention Transfer Agreement, dated May 24, 2006 the Company intentionally mislead him as to our intent to develop his technology. On June 22, 2009 the Company’s Legal Counsel attended the court hearing on the inventor’s motion to annul the invention transfer agreement. At this hearing the judge asked the Company to submit documentation showing a continued development of RiverPower technology as proof that the Company is working toward a commercial product as opposed to the claim of the inventor. As per this ruling the legal counsel submitted all required document to the court. A second hearing on this issue was held on January 15, 2010. In this hearing the judge asked Janos Salca to withdraw his claims and the Company to mediate a mutually agreeable resolution. He set a third and final hearing for September of 2010. As of this date the Company have not heard from Janos Salca on his willingness to discuss his withdrawal of his claim.
The management of the Company believes the claim brought forth by Mr. Salca to be completely without merit. The Company have been diligently, although at a much slower pace than originally anticipated, pursuing development of RiverPower. The management anticipates having a full scale prototype available for river testing in the first half of 2010 pending completion of technology optimization, and the securing of required licenses and permits. In addition, the Company is also continuing development of the associated slow prm, 50Hz syncron generator, which is now available for testing after completion of a working prototype at the end of 2009. In addition, the Company has also received the second round of testing results from VITUKI, the independent agency we have commissioned for the testing of RiverPower.
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