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Document and Entity Information
3 Months Ended
Mar. 31, 2012
May 21, 2012
Document And Entity Information
Entity Registrant Name Hanover Portfolio Acquisitions, Inc.
Entity Central Index Key 0001528172
Document Type 10-Q
Document Period End Date Mar 31, 2012
Amendment Flag false
Current Fiscal Year End Date --12-31
Is Entity a Well-known Seasoned Issuer? No
Is Entity a Voluntary Filer? No
Is Entity's Reporting Status Current? Yes
Entity Filer Category Smaller Reporting Company
Entity Common Stock, Shares Outstanding 48,534,511
Document Fiscal Period Focus Q1
Document Fiscal Year Focus 2012
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Consolidated Balance Sheets (USD $)
Mar. 31, 2012
Dec. 31, 2011
Current Assets
Cash $ 51,977 $ 9,247
Accounts receivable 1,004 0
Debt portfolios 0 0
Total Current Assets 52,981 9,247
Property Plant and Equipment, net 1,919 0
Intangible Assets 972,222 984,127
Total Assets 1,027,122 993,374
Current Liabilities
Accounts payable and accrued expenses 580,853 254,396
Current portion - notes payable license fee 240,000 240,000
Notes payable 175,000 175,000
Total Current Liabilities 995,853 669,396
Note payable - license fee, less current portion 750,000 750,000
Total Liabilities 1,745,853 1,419,396
Shareholders' Deficit
Common stock, 0.001 par value, 46,482,411 and 38,312,812 shares issued and outstanding 2012 and 2011, respectively 4,649 3,832
Additional paid-in capital 149,485 12,227
Accumulated deficit (872,865) (442,081)
Total Shareholders' Deficit (718,731) (426,022)
Total Liabilities and Shareholders' Deficit $ 1,027,122 $ 993,374
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Consolidated Balance Sheets (Parenthetical) (USD $)
Mar. 31, 2012
Dec. 31, 2011
COMMON STOCK
Common stock, par value $ 0.0001 $ 0.0001
Common stock, authorized 75,000,000 75,000,000
Common stock, issued 46,482,411 38,312,812
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Consolidated Statement of Operations (USD $)
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Income Statement [Abstract]
Revenues, net $ 1,673 $ 0
Operating Expenses 427,214 0
Operating Loss (425,541) 0
Other Income (Expense)
Interest income 7 0
Interest expense (5,250) 0
Loss Before Provision for Income Taxes (430,784) 0
Provision for Income Taxes 0 0
Net Loss $ (430,784) $ 0
Basic and diluted loss per common share $ (0.01) $ 0
Weighted average common share outstanding - basic and diluted 40,472,391 0
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Consolidated Statement of Stockholders' Deficit (USD $)
Common Stock
Additional Paid-in Capital
Retained Earnings
Total
Beginning Balance, Amount at Aug. 31, 2011 $ 0 $ 0 $ 0 $ 0
Beginning Balance, Shares at Aug. 31, 2011 0
Share issued to founders, Shares 30,916,710
Share issued to founders, Amount 3,092 (3,092) 0 0
Shares issued for license agreement, Shares 3,559,797
Shares issued for license agreement, Amount 356 (356) 0 0
Share issued for service rendered, Shares 3,116,355
Share issued for service rendered, Amount 312 47,863 0 48,175
Unearned stock compensation (36,033) 0 (36,033)
Shares issued with notes payable, Shares 719,950
Shares issued with notes payable, Amount 72 3,845 0 3,917
Net loss 0 0 (442,081) (442,081)
Ending Balance, Amount at Dec. 31, 2011 3,832 12,227 (442,081) (426,022)
Ending Balance, Shares at Dec. 31, 2011 38,312,812
Share issued for acquisition of HPA, Shares 4,557,545
Share issued for acquisition of HPA, Amount 456 59,710 0 60,166
Share issued for service rendered, Shares 3,572,054
Share issued for service rendered, Amount 357 51,642 0 51,999
Unearned stock compensation 15,910 15,910
Shares issued for cash, Shares 40,000
Shares issued for cash, Amount 4 9,996 0 10,000
Net loss (430,784) (430,784)
Ending Balance, Amount at Mar. 31, 2012 $ 4,649 $ 149,485 $ (872,865) $ (718,731)
Ending Balance, Shares at Mar. 31, 2012 46,482,411
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Consolidated Statement of Cash Flows (USD $)
3 Months Ended 4 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Dec. 31, 2011
Cash Flows From Operating Activities
Net loss $ (430,784) $ 0 $ (442,081)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense 12,150 0
Fair value of shares issued for services 67,909 0
Changes in assets and liabilities:
Accounts receivable 3,950 0
Accounts payable and accrued expenses 326,458 0
Net Cash Used in Operating Activities (20,318) 0
Cash Flows From Investing Activities
Cash paid for acquisition of HPA, net of cash received 53,048 0
Net Cash Provided by Investing Activities 53,048 0
Sale of shares of common stock 10,000 0
Net Cash Provided by Financing Activities 10,000
Net Increase (Decrease) in Cash 42,730 0
Cash, Beginning of Period 9,247 0
Cash, End of Period 51,977 0 9,247
Supplemental disclosure of cash flow information:
Cash paid for interest 0 0
Cash paid for income taxes 0
Noncash investing and financing activities: $ 0 $ 0
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Organization and Nature of Business
3 Months Ended
Mar. 31, 2012
Notes to Financial Statements
Organization and Nature of Business

Note 1 – Organization and Nature of Business

 

Hanover Portfolio Acquisitions, Inc. (the “Company” or "HPA") operates in two business segments 1) purchases distressed debt portfolios at a significant discount to their face value and seeks to either collect on the outstanding balances or resell some or all of the portfolios and 2) intellectual property licensing and commercialization.

 

IP Resources International, Inc. (“IPR”) formed its operations on September 1, 2011, under an operating agreement (“Operating Agreement”) with U.S. Debt Settlement, Inc. (“USDS”). The operator of IPR was a majority owner (“Operator”) of USDS. Under the terms of the Operating Agreement, USDS was to remain a publicly held entity. If USDS could not maintain its status as a publicly held company, the operator had the right to the operations. On October 13, 2011, USDS management informed the Operator that USDS had lost its status as a publicly held company. The Operator entered into an assumption agreement with USDS and all interested parties to transfer the operating assets and liabilities to a newly formed entity IPR. IPR was formed on October 17, 2011 with the majority shareholders’ of USDS as the majority shareholders of IPR. Since the majority ownership of the assets and liabilities of the operations did not significantly change, the asset and liabilities were transferred at their historical cost basis. The financial statements of IPR have been presented in the consolidated financial statements from inception, September 1, 2011.

 

Reverse Acquisition

 

On March 14, 2012, HPA, entered into a Share Exchange Agreement (“Agreement”) with IPR and certain of its shareholders. Under the Agreement, each participating IPR shareholder exchanged all of their issued and outstanding IPR common shares totaling 33,234,294, free and clear of all liens, for Company common shares of equal to 1.2342 times the number of IPR shares being transferred to the Company for a total of 41,017,766 shares.

 

As a result of the Agreement, the former shareholders of IPR owned approximately 89% of the Company and its officer and directors constitute the majority of the officers and directors of the Company at the closing. Since the shareholders, offices and directors of IPR have control of the Company the acquisition constitutes a reverse acquisition, so IPR is the accounting acquirer and HPA is the accounting acquiree. For accounting purposes IPR becomes the parent and HPA becomes a wholly owned subsidiary. In comparison, the legal form of the acquisition is that HPA is the legal parent and IPR is the legal subsidiary.

 

The accompany consolidated financial statements are presented as IPR being the parent company and HPA as the wholly owned subsidiary with the historical financial position and results of operations being of the operations of IPR, which include the results of operations of HPA from the date of acquisition on March 14, 2012. IPR began its operations on September 1, 2011.

 

As a result of this transaction, the Company will also operate as an intellectual property licensing and commercialization firm. IPR believes that its primary markets will include Asia, Brazil, and Europe.

 

As of the date of the acquisition, the sole director and officer and significant shareholder of HPA was a significant shareholder of IPR. Given the relationship, the transaction is considered not to be an arms length transaction and a step-up in the basis of the assets and liabilities acquired is precluded, as the transfer of assets and liabilities has not been affected. The Company has recorded the acquisition and issuance of 4,557,545 shares of its common stock at a value of $60,166, which is the historical cost basis of HPA as of the date of the transaction.

 

Unaudited Interim Consolidated Financial Statements

 

The accompanying interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Article 8 of Regulation S-X. The consolidated financial statements as of March 31, 2012 and for the three months ended March 31 2012 are unaudited; however, in the opinion of management such interim consolidated financial statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The results of operations for the Period presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year.

 

Liquidity

 

Our accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve month period following the date of these consolidated financial statements. However, the Company has incurred substantial losses, its current liabilities exceed its current assets and available cash is not sufficient to fund the expected future operation. Subsequent to March 31, 2012, the Company raised approximately $115,000 in gross proceeds in connection with the issuance of common stock as discussed in Note 6, Subsequent Events. The Company is raising additional capital through debt and equity securities in order to continue the funding of its operations. However, there is no assurance that the Company can raise enough funds or generate sufficient revenues to pay its obligations as they become due, which raises substantial doubt about our ability to continue as a going concern.

 

To reduce the risk of not being able to continue as a going concern, management has implemented its business plan to materialize revenues from it license agreements and has initiated a private placement offering to raise capital through the sale of its common stock. Although, uncertainty exists as to whether the Company will be able generate enough cash from operations to fund the Company’s working capital needs or raise sufficient capital to meet the Company’s obligations as they become due, no adjustments have been made to the carrying value of assets or liabilities as a result of this uncertainty.

 

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License Agreements
3 Months Ended
Mar. 31, 2012
Notes to Financial Statements
License Agreements

Note 2 - License Agreement

 

Effective September 1, 2011, IPR entered into a license agreement with Personal 3D, Inc. (“P3D”)to acquire the rights to market and distribute certain intellectual property in the territories of the European and Eastern European counties. The term of the license agreement shall be for the greater of the life of the provisional patents, for the technology, or twenty-one years. The tem shall automatically renew for an additional one year term unless either party notifies the other that it does not desire to renew the license agreement ninety days before the then-current term of the license agreement expires. The license fee to be paid by IPR was $1,000,0000 and common stock of IPR in an amount that would give P3D 9.9% interest in outstanding common stock of IPR. The shares of IPR’s common stock shall be issued on or before October 12, 2011, (were issued on October 17, 2011 the date of incorporation of IPR). The $1,00,000 is required to be paid in installments as follows:

 

a)   A payment of $10,000 on, or before, the second business day after the later of the execution and delivery of the license agreement and IPR’s receipt of $150,000 in bridge funding, which occurred on October 18, 2011 and the $10,000 was paid;
b)  A payment of $90,000 within two business days after IPR’s receipt of an initial equity funding (excluding the funding referenced in (a) above) in the amount of at least $1,000,000 (which has not occurred as of the date of these consolidated financial statements);
c)  A payment of $150,000 within six months after the payment reference in (b) above;
d)  A payment of $250,000 twelve months after the payment referenced in (b) above;
e)  A final payment of $500,000 eighteen months after the payment referenced in (b) above; and
f)  Notwithstanding anything to the contrary, during the first one and half years of the license agreement a minimum of ten percent (10%) of all funding raised by IPR in excess $2,000,000, excluding funding reference in (a) above, shall be used to pay down the $1,000,000

 

The unpaid balance shall bear simple interest at a rate of 6% per annum commencing on the date of the initial payment of $10,000 as defined in (a) above. Also, in the event of a change in control of IPR the unpaid balance of the note shall accelerate and become immediately payable on five business days.

 

In addition to the license fee, IPR is required to pay a royalty of 25% of IPR’s quarterly profits from the P3D technology in Europe. Also, P3D has the right to terminate the license agreement

 

P3D shall have the right to terminate this Agreement if the amount paid in royalties under the license agreement for the twenty-four months, after the $150,000 funding as referenced in (c) above, does not equal or exceed $500,000 or if the amount paid in royalties for the twenty-fifth month through the forty-eighth month, after the $150,000 funding as referenced in (c) above, does not equal or exceed $500,000. IPR in its sole discretion may pay any portion of such minimum royalty to P3D, without regard to the actual amount of royalty generated in order to retain the license.

 

Effective November 11, 2011, IPR entered into an Exclusive License Agreement with CPAIR, Inc. (“CPaiR”) to acquire the rights to market and distribute certain intellectual property on a worldwide basis except for the United States. The terms of the license agreement shall be for the greater of the life of the provisional patents, for the technology, or twenty-one years. The term shall automatically renew for an additional one year term unless either party notifies the other that it does not desire to renew the license agreement ninety days before the then-current term of the license agreement expires. Under the Exclusive License Agreement, if IPR enters into a sublicense agreement, IPR is required to pay CPaiR 20% of royalties received by IPR. If IPR elects to distribute the product, without sublicenses, then CPaiR receives 10% of gross revenues. Also, IPR is required to pay to CPaiR 20% of any upfront license fee actually received by IPR in connection with the CPaiR intellectual property and 20% of the quarterly revenue actually received by IPR in connection with such intellectual property. If IPR does not pay a minimum of $1,000,000 to CPaiR within a period of three years from the Effective date, the license agreement will terminate. IPR has the right to pay the difference between the amounts paid by IPR and the minimum payment of $1,000,000. Under the terms of the agreement, IPR was not required to pay an upfront fees license fee.

 

Effective January 27, 2012, IPR entered into a License Agreement with American Cryostem Corp. ("ACSC") to acquire the rights to and to distribute certain intellectual property in China and Brazil. The term of the License Agreement shall be for one year. The term shall automatically renew for an additional one year term unless either party notifies the other that it does not desire to renew the License Agreement. Under the License Agreement, any distributer or sub-licensee, engaged by IPR, must pay a 25% of its quarterly gross revenue. Of the 25% of quarterly gross revenue, IPR and ACSC split 50/50. In the event that IPR receives any upfront license fee from a sub-licensee, IPR is required to pay to ACSC 50% of any upfront license fee actually received. Under the terms of the agreement, IPR was not required to pay an upfront fees license fee.

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Notes payable
3 Months Ended
Mar. 31, 2012
Notes to Financial Statements
Notes payable

Note 3 - Notes payable

 

IPR initiated a private placement for up to $1,000,000 of financing by the issuance of notes payable at a minimum of $25,000. The notes bear interest at 12% per annum and are due and payable with accrued interest one year from issuance. Also, IPR agreed to issue 102,850 shares of its common stock for every $25,000 invested.

 

The Company has issued a total of three notes, to two investors, for an aggregate principal amount of $175,000. In addition IPR issued 719,950 share of its common stock at a fair value of $1,267 as determined by a valuation performed by a third party valuation firm. These loans are secured by the P3D license agreement as described in Note 2- License Agreements.

 

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Shareholders' Deficit
3 Months Ended
Mar. 31, 2012
Notes to Financial Statements
Shareholders' Deficit

Note 4- Shareholders’ Deficit

 

IPR issued 30,916,710 shares of its common stock on the date of incorporation to the founders of the corporation.

 

IPR has entered into consulting agreements with various consultants for service to be provided to the Company. The agreements stipulate a monthly fee and a certain number of shares that the consultant vests over the term of the contract. The consultant is issued a prorated number of the shares of common at the beginning of the contract that the consultant earns over a three-month period. At the anniversary of each quarter, the consultant is issued a new allotment of common stock. In accordance with ASC 505-50 – Equity-Based Payment to Non-Employee, the common stock shares issued to the consultant are valued upon issuance. The shares of common stock that have been issued were valued based on a valuation performed by an independent valuation firm. As of March 31, 2012, the total award grants was 27,684,000 shares with 4,466,850 vested shares and 23,217,150 shares unvested. The total expense recorded as of March 31, 2012 was $80,051.

 

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Segment Information
3 Months Ended
Mar. 31, 2012
Notes to Financial Statements
Segment Information

Note 5 – Segment Information

 

The Company has two reporting segments: debt portfolio management and intellectual property management. The debt portfolio segment purchases defaulted unsecured consumer receivables in the secondary market and generate revenue through collections utilizing an outsourced collection network and through the strategic resale of portfolios. The intellectual property management segment licenses various commercially desirable technologies and patents from companies that need operating capital or that need help commercializing their technology and sublicense such technology in designated territories. We have no intersegment sales or transfer. The Company’s reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies. Most of the businesses were acquired as a unit, and the management at the time of the acquisition was retained.

 

For the three months ended March 31, 2012, net revenues of $1,673 are contributed from our debt portfolio segment, and $400,560 and $26,654 of the operating loss are contributed by the intellectual property management and debt portfolio management segments, respectively.

 

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Subsequent Events
3 Months Ended
Mar. 31, 2012
Notes to Financial Statements
Subsequent Events

Note 6 - Subsequent Events

 

Subsequent to March 31, 2012, the Company sold 460,000 shares of its common stock for $115,000

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