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Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2012
Apr. 16, 2013
Document And Entity Information
Entity Registrant Name Hanover Portfolio Acquisitions, Inc.
Entity Central Index Key 0001528172
Document Type 10-K
Document Period End Date Dec 31, 2012
Amendment Flag true
Current Fiscal Year End Date --12-31
Is Entity a Well-known Seasoned Issuer? No
Is Entity a Voluntary Filer? Yes
Is Entity's Reporting Status Current? Yes
Entity Filer Category Smaller Reporting Company
Entity Public Float $ 0
Entity Common Stock, Shares Outstanding 66,403,824
Document Fiscal Period Focus FY
Document Fiscal Year Focus 2012
Amendment Description Amendment #1
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Consolidated Balance Sheets (USD $)
Dec. 31, 2012
Dec. 31, 2011
Current Assets
Cash $ 800 $ 9,444
Total Current Assets 800 9,444
Property Plant and Equipment, net 65,301 0
Investment in equity securities 12,000 0
Intangible Assets 0 984,127
Total Assets 78,101 993,571
Current Liabilities
Accounts payable and accrued expenses 1,516,600 275,798
Current portion - notes payable license fee 0 240,000
Notes payable- current portion 236,000 175,000
Total Current Liabilities 1,752,600 690,798
Acquisition payable 155,000 0
Note payable - less current portion 51,656 0
Note payable - license fee, less current portion 0 750,000
Total Liabilities 1,959,256 1,440,798
Shareholders' Deficit
Common stock, 0.001 par value, 53,692,673 and 38,312,812 shares issued and outstanding 5,370 3,832
Additional paid-in capital 554,062 74,977
Accumulated deficit (2,440,587) (526,036)
Total Shareholders' Deficit (1,881,155) (447,227)
Total Liabilities and Shareholders' Deficit $ 78,101 $ 993,571
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Consolidated Balance Sheets (Parenthetical) (USD $)
Dec. 31, 2012
Dec. 31, 2011
COMMON STOCK
Common stock, par value $ 0.001 $ 0.001
Common stock, authorized 75,000,000 75,000,000
Common stock, issued 53,692,673 38,312,812
Common stock, outstanding 53,692,673 38,312,812
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Consolidated Statements of Operations (USD $)
4 Months Ended 12 Months Ended
Dec. 31, 2011
Dec. 31, 2012
Income Statement [Abstract]
Revenues, net $ 0 $ 30,581
Operating Expenses 504,622 1,772,930
Operating Loss (504,622) (1,742,349)
Other Income (Expenses)
Interest expense (21,414) (113,549)
Gain from disposition of License Agreement 0 96,347
Acquisition expense 0 (155,000)
Loss Before Provision for Income Taxes (526,036) (1,914,551)
Provision for Income Taxes 0 0
Net Loss $ (526,036) $ (1,914,551)
Basic and diluted loss per common share $ (0.01) $ (0.04)
Weighted average common share outstanding - basic and diluted 36,933,007 48,137,820
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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
Shares issued for license agreement, Shares 3,559,797
Shares issued for license agreement, Amount 356 (356) 0
Share issued for service rendered, Shares 3,116,355
Share issued for service rendered, Amount 312 74,580 0
Shares issued with notes payable, Shares 719,950
Shares issued with notes payable, Amount 72 3,845 0
Net loss (526,036) (526,036)
Ending Balance, amount at Dec. 31, 2011 3,832 74,977 (526,036) (447,227)
Ending Balance, shares at Dec. 31, 2011 38,312,812
Share issued for service rendered, Shares 13,462,813
Share issued for service rendered, Amount 1,346 240,289 0 241,635
Unearned stock compensation (162,655) (162,655)
Shares issued with notes payable, Shares 425,000
Shares issued with notes payable, Amount 43 1,482 0 1,525
Shares issued for cash, Shares 700,000 175,000
Shares issued for cash, Amount 70 174,930 175,000
Share issued for acquisition of HPA, Shares 4,557,545
Share issued for acquisition of HPA, Amount 456 59,710 0 60,166
Shares Cancelled, Shares (205,700)
Shares Cancelled, Amount (21) 21 0 0
Cancellation of P3D shares, Shares (3,559,797)
Cancellation of P3D shares, Amount (356) 356 0 0
Fair value of stock options issued 2,297 2,297
Net loss (1,914,551) (1,914,551)
Ending Balance, amount at Dec. 31, 2012 $ 5,370 $ 554,062 $ (2,440,587) $ (1,881,155)
Ending Balance, shares at Dec. 31, 2012 53,692,673
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Consolidated Statement of Cash Flows (USD $)
4 Months Ended 12 Months Ended
Dec. 31, 2011
Dec. 31, 2012
Cash Flows From Operating Activities
Net loss $ (526,036) $ (1,914,551)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense 15,873 37,034
Fair value of equity issued for services 74,892 243,932
Gain from disposition of license agreement 0 (96,347)
Fair value of shares issued with notes payable 3,917 1,525
Acquisition expense 0 155,000
Changes in operating assets and liabilities:
Account receivable 0 4,954
Prepaid expenses 0 (14,000)
Accounts payable and accrued expenses 275,798 1,297,562
Net Cash Used in Operating Activities (155,556) (284,891)
Cash Flows From Investing Activities
Purchase of automobile 0 (64,458)
Cash paid for acquisition of HPA, net of cash received 0 53,048
Net Cash Used in Investing Activities 0 (11,410)
Cash Flows From Financing Activities
Sale of common stock 0 175,000
Proceeds from the issuance of notes payable 175,000 114,458
Payment for notes payable 0 (1,801)
Payment for P3D note (10,000) 0
Net Cash Provided by Financing Activities 165,000 287,657
Net Increase (Decrease) in Cash 9,444 (8,644)
Cash, Beginning of Period 9,444
Cash, End of Period 9,444 800
Supplemental disclosure of cash flow information:
Cash paid for interest 0 0
Cash paid for income taxes 0 0
Noncash investing and financing activities: 0 0
Shares issued for HPA assets 0 60,166
Acquisition of license agreement with note payable $ 1,000,000 $ 0
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Note 1 - Organization and Significant Accounting Policies
12 Months Ended
Dec. 31, 2012
Notes to Financial Statements
Note 1 - Organization and Significant Accounting Policies

Note 1 – Organization and Significant Accounting Policies

 

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.

 

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, and $155,000 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. The $155,000 was not paid at closing.  The Company recorded the $155,000 as long-term liability acquisition payable non-interest bearing. IPR agreed to make payments of up to 25% of the proceeds from any private placement or gross profits earned by IPR until the obligation is satisfied. The percentage of the proceeds to be paid is at the sole discretion of IPR’s Chief Executive Officer and the ex-Chief Executive Officer of the Company based on the liquidity of the Company.

 

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 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. As of the date of the acquisition, HPA balance sheet consisted of cash of $53,048, accounts receivable of $4,954, fixed assets of $2,164 and no liabilities, for a net book value of $60,166.

 

The following table presents the two companies as if the acquisition occurred as of September 1, 2011:

 

 

    For the Year ended December 31, 2012   (Unaudited) HPA January 1, 2012 - March 13, 2012 Pro-forma Adjustments    (Unaudited)
 Revenues, net  $ 30,581   $ 10,351  -  $ 40,932 
 Operating Expenses   1,772,930    22,146  -   1,775,076 
 Operating Loss   (1,742,349)   (11,795)     (1,754,144)
 Other Income (Expense)              
 Interest expense   (113,549)   -   (113,549)
 Gain from disposal of license agreement   96,347          96,347 
               
 Acquisition cost   (155,000)   -   (155,000)
 Loss Before Provision for Income Taxes   (1,914,551)   (11,795)     (1,926,346)
 Provision for Income Taxes     -  
 Net Loss  $ (1,914,551)  $ (11,795)    $ (1,926,346)
 Basic and diluted loss per common share  $ (0.04)        $ (0.04)
 Weighted average common share outstanding - basic and diluted   48,137,820          49,046,839 

 

 

 

    For the four months ended December 31, 2011   (Unaudited) HPA four months ended December 31, 2011 Pro-forma Adjustments   (Unaudited)
 Revenues, net  $  $ 17,716  -  $ 17,716 
 Operating Expenses   504,622    44,632  -   549,254 
 Operating Loss   (504,622)   (26,917)     (531,538)
 Other Income (Expense)              
 Interest expense   (21,414)    -   (21,414) 
 Gain from disposal of license agreement     -  
 Loss Before Provision for Income Taxes   (526,036)   (26,917)     (552,952)
 Provision for Income Taxes     -  
 Net Loss  $ (526,036)  $ (26,917)    $ (552,952)
 Basic and diluted loss per common share  $ (0.01)        $ (0.01)
 Weighted average common share outstanding - basic and diluted   36,933,667          41,940,552 

 

 

 

IPR Operations

IPR’S operations began on September 1, 2011, and was formally incorporated on October 17, 2011. The financial statements of IPR have been presented in the consolidated financial statements from inception (September 1, 2011).

 

Going Concern

These 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 December 31, 2012, the Company has raised $150,000 in debt financing 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. No adjustments have been made to the carrying value of assets or liabilities as a result of this uncertainty.

 

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, has initiated a private placement offering to raise capital through the sale of its common stock and is seeking out profitable companies and debt portfolios for acquisition. 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.

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Critical estimates include the value of its debt portfolios, the useful lives of property and equipment, and the valuation of deferred income tax assets. Management uses its historical records and knowledge of its business in making these estimates. Actual results could differ from these estimates.

 

Cash and Cash Equivalents

The Company considers all highly liquid financial instruments with maturity of three months or less to be cash equivalents. As of December 31, 2012 and 2011, the Company had no cash equivalents

 

Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash. The Company primarily places its cash with high-credit quality financial institutions. Cash deposits up to approximately $100,000 are federally insured. From time-to-time the Company could have deposits in excess of the insured amounts.

 

Property plant and equipment

Property, plant and equipment are stated at cost.  Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range between five and seven years.  Expenditures for repairs and maintenance are expensed as incurred.

 

The majority of the Company’s property, plant and equipment is the Company automobile. As of December 31, 2012, the cost basis was $64,458 with accumulated depreciation of $1,075. The asset is being amortized over its estimated useful life of 5 years. The depreciation expense for the year ended December 31, 2012 was $1,075. The depreciation expense is estimated to be $12,891 over the next four years and $11,816 in the fifth year.

 

Debt Portfolios

The Company reviews its debt portfolios for impairment each reporting period. If, based on current information and events, the Company determines that it is probable that it will be unable to collect all cash flows expected at acquisition of the portfolio, the Company will record an impairment of the portfolio in earnings to reduce the carrying amount to its fair market value. The Company uses third-party valuations of the resale value of its debt portfolios when assessing impairment. These valuations are based on industry data of portfolios with similar characteristics. The Company recorded $0 of impairment losses related to its debt portfolios during the year ended December 31, 2012. On December 31, 2012 the Company didn’t have any debt portfolios outstanding.

 

The Company recognizes interest income on notes receivable using the effective interest method. If the Company determines that the recoverability of any of its notes receivable is not probable, it will place the notes on nonaccrual status and will cease recording interest income. Should the Company later determine that the notes receivable balance is recoverable, it will resume the accrual of interest.

 

Impairment of Long-lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted future cash flows generated from the asset group to the recorded value of the asset group. If impairment is indicated, the asset is written down to its estimated fair value. There were no such impairments for the years ended December 31, 2012 and 2011.

 

Investment in equity securities

Investee companies not accounted for under the consolidation or the equity method of accounting are accounted for under the cost method of accounting. Under this method, the Company’s share of the earnings or losses of such Investee companies is not included in the Consolidated Balance Sheet or Statement of Operations. However, impairment charges are recognized in the Consolidated Statement of Operations. If circumstances suggest that the value of the Investee company has subsequently recovered, such recovery is not recorded.

 

Revenue Recognition

The Company recognizes revenue on its debt portfolios using the cost recovery method in accordance with FASB ASC 310-30. Under the cost recovery method, the Company records cash receipts related to debt portfolios as a reduction of the cost of the debt portfolio. The Company will record revenue related to debt portfolios once cash collections exceed the portfolio’s carrying amount.

 

Stock-Based Compensation

The Company measures stock-based compensation cost at the grant date based on the fair value of the award and recognizes it as expense, net of estimated forfeitures, over the vesting or service period, as applicable, of the stock award using the straight-line method. Because our common stock is thinly traded, we have made estimates of the fair value of the common stock based not only on market prices but other factors such as financial condition and results of operations.

 

Income Taxes

The Company records a tax provision for the anticipated tax consequences of its reported results of operations. The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and income tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. The Company records a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized.

 

The Company has adopted ASC Topic 740, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC Topic 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognition of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure and transition. The Company has determined that the adoption did not result in the recognition of any liability for unrecognized tax benefits and that there are no unrecognized tax benefits that would, if recognized, affect the Company’s effective tax rate. Based on the Company’s review of its tax positions as of December 31, 2012 and 2011, no uncertain tax positions have been identified.

 

The Company has elected to include interest and penalties related to uncertain tax positions as a component of income tax expense. To date, no penalties or interest has been accrued.

 

Tax years 2008 forward are open and subject to examination by the U.S. taxing authorities. The Company is not currently under examination, nor has it been notified of a pending examination.

 

Segments

Our chief operating decision-maker is our Chief Executive Officer who reviews financial information. There are segment managers who are held accountable by the chief operating decision-maker for operations, operating results, and planning for levels or components below the consolidated unit level. Accordingly, we have determined that we have two reporting segment and operating unit structure.

 

Comprehensive Loss

Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, including foreign currency translation adjustments and unrealized gains and losses on marketable securities.

 

Net Income (Loss) per Share

Basic net income (loss) per share is calculated based on the net income (loss) attributable to common shareholders divided by the weighted average number of shares outstanding for the period excluding any dilutive effects of options, warrants, unvested share awards and convertible securities. Diluted net income (loss) per common share assumes the conversion of all dilutive securities using the if-converted method, and assumes the exercise or vesting of other dilutive securities, such as options, warrants and restricted stock using the treasury stock method. For the years ended December 31, 2012 and 2011 the Company did not have dilutive securities.

 

Fair Value of Financial Instruments

The Company has adopted accounting standards that define fair value, establish a framework for measuring fair value in accordance with existing generally accepted accounting principles, and expand disclosures about fair value measurements. Assets and liabilities recorded at fair value in the balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The categories are as follows:

 

Level Input:   Input Definition:
     
Level I   Inputs are unadjusted, quoted prices for the identical assets or liabilities in active markets at the measurement date.
     
Level II   Inputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date.
     
Level III   Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date.

 

 

The carrying amount of certain of the Company’s financial instruments approximates fair value due to the relatively short maturity of such instruments. The fair value of notes payable is not considered to be significantly different than its carrying amount because the stated rates for such debt reflect current market rates and conditions.

 

Recent Accounting Standard Updates

In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” with the objective of improving the reporting of reclassifications out of accumulated other comprehensive income. This update requires the effect of significant reclassifications out of accumulated other comprehensive income be shown by component. Significant reclassifications should be shown by the respective line items of net income only if the amount reclassified is required to be reclassified to net income under U.S. GAAP. If the reclassification to net income is not required under U.S. GAAP, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. This update is effective prospectively for our fiscal 2014 and early adoption is permitted. Besides changes to disclosures, we do not expect the adoption of this update to have a significant impact on our consolidated financial statements.

 

In January 2013, the FASB issued ASU 2013-01, “Balance Sheet (Topic 220)-Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities,” which amends previous guidance on the disclosures about offsetting assets and liabilities on the balance sheet to clarify that the scope of this guidance applies to derivatives (including bifurcated embedded derivatives), repurchase agreements (and reverse repurchase agreements) and securities borrowing (and lending) transactions that are offset or subject to an enforceable master netting arrangement or similar agreement. The guidance becomes effective at the beginning of our fiscal 2014 and should be applied retrospectively for all comparative periods. The adoption of this update is not expected to have a significant impact on our consolidated financial statements.

 

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Note 2 - License Agreements
12 Months Ended
Dec. 31, 2012
Notes to Financial Statements
Note 2 - License Agreements

Note 2 - License Agreements

 

Personal 3D

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 countries. 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 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. 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 (“Share Issuance”). The Shares Issuance shall be issued on or before October 12, 2011, (were issued on October 17, 2011 the date of incorporation of IPR). The $1,000,000 (“Note Payable – License Fee”) 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.

 

On October 14, 2012, the Company and P3D entered into an agreement to terminate the license agreement. Under the terms of the termination, P3D was required to surrender the Share Issuance and the IPR was released of its liability under the Note Payable – License Fee. The Company recognized a gain of $96,347 as a result of the termination of this agreement.

 

The Company's CEO was also the CEO of P3D at the time the license agreement was executed, however he resigned from P3D prior to the execution of the license rescission agreement.

 

CPAIR, Inc.

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 license fee.

 

American Cryostem Corp.

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 license fee.

 

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Note 3 - Notes payable
12 Months Ended
Dec. 31, 2012
Notes to Financial Statements
Note 3 - 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.

 

Under the private placement, the Company has issued a total of two notes for an aggregate principal amount of $175,000. In addition IPR issued 719,950 share of its common stock at a fair value of $3,917 as determined using a valuation performed by a third party valuation firm.

 

In October 2012, the two note holders agreed to extend the mature date the notes for a period of one year. The Company paid an extension of 175,000 shares of the Company’s common stock at a fair value of $175 as determined by a valuation performed by a third party valuation firm.

 

In October and November 2012, the Company issued promissory notes in the amounts of $25,000 and $25,000, respectively. In addition the Company issued 250,000 share of its common stock at a fair value of $250 as determined by a valuation performed by a third party valuation firm.

 

The total outstanding of $225,000 as of December 31, 2012, $150,000 matures in September 2013, $50,000 matures in October 2013 and $25,000 matures in January 2013.

 

In November 2012, the Company purchased a vehicle for $64,458. The purchase was finances through a note payable for $64,458 at interest of 2.99% per annum with sixty payments of $1,060 per month.

 

The scheduled maturities of notes payable are as follows for the years ending December 31,

 

2013   $ 236,000
2014     11,000
2015     11,677
2016     12,031
2017     12,395
Thereafter     4,555
      287,656
Less: current portion   236,000
Notes payable long-term $ 51,656

 

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Note 4 - Shareholders' Deficit
12 Months Ended
Dec. 31, 2012
Notes to Financial Statements
Note 4 - Shareholders' Deficit

Note 4- Shareholders’ Deficit

 

Common Stock

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 December 31, 2012, the total awards granted were 32,326,380 shares with 13,292,930 shares vested and issued and 19,033,450 shares unvested. The total expense recorded for the years ended December 31, 2012 and 2011, was $241,635 and $74,892, respectively.

 

The following table presents the issuance, vesting and shares to be vested of the stock grants. The unvested as of December 31, 2012 and 2011 will vest on a weighted average of approximately 2.75 years and 2.0 years, respectively:

 

  Number of shares   Estimated Market value
 Beginning balance, September 1, 2011  -       
 Issued  18,513,000    
 Vested  (2,776,950)    
 Forfeited  -       
 Balance unvested, December 31, 2011  15,736,050 $  267,513
 Issued  13,813,380    
 Vested  (10,515,980)    
 Forfeited  -       
 Ending balance, December 31, 2012  19,033,450 $  19,033

 

 

During the year ended December 31, 2012, the Company issued 2,251,079 shares its common stock at a fair value of $53,771 (as determined by a valuation performed by a third party valuation firm) for services rendered.

 

During the year ended December 31, 2012, the Company issued 700,000 shares its common stock for $175,000.

 

During the year ended December 31, 2012, the Company issued to two consultants options to purchase in the aggregate 4,000,000 shares of the Company’s common stock.

 

Stock Options

In, May 2012, The Company issued stock options to purchase 1,000,000 shares of the Company’s common stock at a price of $0.25 per shares and the option expires five years from the date of vesting. The option vests in eight equal installments of 125,000 options with the first tranche vesting on August 31, 2012.

 

In August 2012, the Company issued stock options to 3,000,000 shares of the Company’s common stock at a price of $0.25 per share and the options expire five years from the date of vesting. The options vest over twelve equal installments of 250,000 options with the first tranche vesting on date of issuance.

 

The fair value for stock options was estimated at the date of grant using the Black-Scholes pricing model using a risk free interest rate ranging from 0.39% to 0.42%, expected dividend yield of 0, expected life of three years and a volatility ranging from 107% to 112%.

 

The risk-free interest rate used in the Black-Scholes valuation method is based on the implied yield currently available for U.S. Treasury securities at maturity with an equivalent term. The Company has not declared or paid any dividends on its common stock and does not currently expect to do so in the future. The Company does not have any experience to determine the expected term of the options, so the expected term of the options was determined by using the provisions of Staff Accounting Bulletin No. (“SAB No.”) 110, simplified calculation. There was no market for the Company’s common stock. To determine the expected volatility, the Company used the provisions of ASC 718 to calculate the estimated volatility based annualized daily historical volatility using the implied volatility for comparable entities within the Company’s industry.

 

The Company’s stock price volatility, risk free-rate, and option lives involve management’s best estimates, both of which impact the fair value of the option calculated under the Black-Scholes methodology and, ultimately, the expense that will be recognized over the life of the option. Also, the Company recognizes compensation expense for only the portion of the options that are expected to vest. Based on the current economical factors for the Company, the Company applied estimated forfeiture rates of zero. If the actual number of forfeitures differs from the Company’s estimates, additional adjustments to compensation expense may be required in future periods.

 

The weighted average exercise price of options exercisable at December 31, 2012 was $0.25. The weighted average fair value of options granted was $14,445 and $0 during 2012 and 2011, respectively.

 

The total fair value of stock options vested and charged to expense during the year ended December 31, 2012 and 2011 was $2,297 and $0, respectively.

 

The weighted average exercise price for the options granted during December 31, 2012 and outstanding as of December 31, 2012 was $0.25 and $0.25, respectively, with a weighted average remaining contractual term of 4.5 years.

 

The following table presents the issuance, vesting and options to be vested. Subsequent to December 31, 2012, all of the unvested stock options were terminated, as the independent contractors executed new agreements.

 

  Number of options
   
 Balance unvested, December 31, 2011  -   
 Issued  4,000,000
 Vested  750,000
 Forfeited  -   
 Ending balance, December 31, 2012  4,750,000
 December 31, 2012 expected to be vested 750,000

 

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Note 5 - Segment Information
12 Months Ended
Dec. 31, 2012
Notes to Financial Statements
Note 5 - 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 year ended December 31, 2012, net revenues of $30,581 and $0, respectively, are contributed from our debt portfolio and intellectual property management segments. For the year ended December 31, 2012, operating losses of $706,230 and $1,440,315, respectively, are contributed from our debt portfolio and intellectual property management segments.

 

For the period from Inception (September 1, 2011) to December 31, 2011, net revenues of $0, are contributed from each of our debt portfolio and intellectual property management segments. For the period from Inception (September 1, 2011) to December 31, 2011, operating losses of $0 and $463,286, respectively, are contributed from our debt portfolio and intellectual property management segments.

 

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Note 6 - Income Taxes
12 Months Ended
Dec. 31, 2012
Income Tax Disclosure [Abstract]
Note 6 - Income Taxes

Note 6 – Income taxes

 

The Company files income tax returns with the Internal Revenue Service (“IRS”) and various state jurisdictions. For jurisdictions in which tax filings are prepared, the Company is subject to income tax examinations by state tax authorities and federal tax authorities for all tax years.

 

The deferred tax assets are mainly comprised of net loss carryforwards. As of December 31, 2012, the Company had approximately $550,000 of net operating loss carryforwards, that it can use to offset a certain amount of taxable income in the future. These net operating loss carryforwards expire through 2032. The resulting deferred tax asset is offset by a 100% valuation allowance due to the uncertainty of its realization.

 

A reconciliation of the provision for income tax expense with the expected income tax computed by applying the federal statutory income tax rate to income before provision for income taxes was as follows for the years ended December 31, 2012 and 2011:

 

    2012       2011  
Income tax computed at federal statutory tax rate   -34.0 %     -34.0 %
Change in valuation allowance   39.8 %     39.8 %
State taxes, net of federal benefit   -5.8 %     -5.8 %
Total   0.0 %     0.0 %

 

The primary difference between income tax expense attributable to continuing operations and the amount of income tax expense that would result from applying domestic federal statutory rates to income before provision for income taxes relates to the change in the valuation allowance.

 

The Company has adopted the accounting standards that clarify the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold of more likely than not and a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  In making this assessment, a company must determine whether it is more likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position and must assume that the tax position will be examined by taxing authorities. Our policy is to include interest and penalties related to unrecognized tax benefits in income tax expense. Interest and penalties totaled $0 for the years ended December 31, 2012 and 2011.

 

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Note 7 - Commitments and Contingencies
12 Months Ended
Dec. 31, 2012
Commitments and Contingencies Disclosure [Abstract]
Note 7 - Commitments and Contingencies

Note 7 - Commitments and Contingencies

 

Legal matters

The Company may become involved in various legal proceedings in the normal course of business. The Company is not a party to any legal proceedings as of December 31, 2012.

 

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Note 8 - Subsequent Events
12 Months Ended
Dec. 31, 2012
Notes to Financial Statements
Note 8 - Subsequent Events

Note 8 - Subsequent Events

 

On January 14, 2013, the Company issued a promissory note for an aggregate principal amount of $25,000. In addition, the Company issued 125,000 shares of its common stock in connection with the issuance of the note as loan fees. The Note carries an interest rate of 10% per annum and a maturity date of April 14, 2013 with interest due monthly in arrears.

 

On January 14, 2013, the Company issued a promissory note for an aggregate principal amount of $25,000. In addition, the Company issued 125,000 shares of its common stock in connection with the issuance of the note as loan fees. The Note carries an interest rate of 10% per annum and a maturity date of July 1, 2013 with interest due monthly in arrears.

 

On January 16, 2013, the Company entered into a non-exclusive strategic marketing agreement with Hunter Marketing, LLC for 1,200,000 shares of its common stock.

 

On January 31, 2013, the Company issued a promissory note for an aggregate principal amount of $100,000. In addition, the Company issued 500,000 shares of its common stock in connection with the issuance of the note as loan fees. The Note carries an interest rate of 10% per annum and a maturity date of January 30, 2014 with interest due monthly in arrears.

 

On April 2, 2013, the Company entered into an Acquisition Agreement (the “Acquisition Agreement”) with (i) The Aviva Companies Corporation (“Aviva”) and (ii) all of the shareholders of Aviva (the “Shareholders”) pursuant to which the Company acquired all of the outstanding shares of Aviva in exchange for the issuance of 6,000,000 shares of our common stock, par value $0.001 per share to the Shareholders (the “Share Exchange”). As a result of the Share Exchange, Aviva became a wholly-owned subsidiary of the Company. The Company has not provided all the detailed disclosures for this transaction pursuant to ASC 805. as the transaction closed within a period of time that did not permit the Company to accurately assess and gather the required information.

 

Aviva is an early stage company seeking to identify, and commercialize intellectual property in healthcare and technology. Aviva works closely with inventors of IP in both the United States and Israel.

 

Other than in respect to the transaction, there is no material relationship among Aviva’s stockholders and any of the Company’s affiliates, directors or officers.

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Note 1 - Organization and Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2012
Notes to Financial Statements
Reverse Acquisition

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, and $155,000 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. The $155,000 was not paid at closing.  The Company recorded the $155,000 as long-term liability acquisition payable non-interest bearing. IPR agreed to make payments of up to 25% of the proceeds from any private placement or gross profits earned by IPR until the obligation is satisfied. The percentage of the proceeds to be paid is at the sole discretion of IPR’s Chief Executive Officer and the ex-Chief Executive Officer of the Company based on the liquidity of the Company.

 

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 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. As of the date of the acquisition, HPA balance sheet consisted of cash of $53,048, accounts receivable of $4,954, fixed assets of $2,164 and no liabilities, for a net book value of $60,166.

 

The following table presents the two companies as if the acquisition occurred as of September 1, 2011:

 

 

    For the Year ended December 31, 2012   (Unaudited) HPA January 1, 2012 - March 13, 2012 Pro-forma Adjustments    (Unaudited)
 Revenues, net  $ 30,581   $ 10,351  -  $ 40,932 
 Operating Expenses   1,772,930    22,146  -   1,775,076 
 Operating Loss   (1,742,349)   (11,795)     (1,754,144)
 Other Income (Expense)              
 Interest expense   (113,549)   -   (113,549)
 Gain from disposal of license agreement   96,347          96,347 
               
 Acquisition cost   (155,000)   -   (155,000)
 Loss Before Provision for Income Taxes   (1,914,551)   (11,795)     (1,926,346)
 Provision for Income Taxes     -  
 Net Loss  $ (1,914,551)  $ (11,795)    $ (1,926,346)
 Basic and diluted loss per common share  $ (0.04)        $ (0.04)
 Weighted average common share outstanding - basic and diluted   48,137,820          49,046,839 

 

 

 

    For the four months ended December 31, 2011   (Unaudited) HPA four months ended December 31, 2011 Pro-forma Adjustments   (Unaudited)
 Revenues, net  $  $ 17,716  -  $ 17,716 
 Operating Expenses   504,622    44,632  -   549,254 
 Operating Loss   (504,622)   (26,917)     (531,538)
 Other Income (Expense)              
 Interest expense   (21,414)    -   (21,414) 
 Gain from disposal of license agreement     -  
 Loss Before Provision for Income Taxes   (526,036)   (26,917)     (552,952)
 Provision for Income Taxes     -  
 Net Loss  $ (526,036)  $ (26,917)    $ (552,952)
 Basic and diluted loss per common share  $ (0.01)        $ (0.01)
 Weighted average common share outstanding - basic and diluted   36,933,667          41,940,552 

 

 

 

IPR Operations

IPR Operations

IPR’S operations began on September 1, 2011, and was formally incorporated on October 17, 2011. The financial statements of IPR have been presented in the consolidated financial statements from inception (September 1, 2011).

 

Going Concern

Going Concern

These 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 December 31, 2012, the Company has raised $150,000 in debt financing 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. No adjustments have been made to the carrying value of assets or liabilities as a result of this uncertainty.

 

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, has initiated a private placement offering to raise capital through the sale of its common stock and is seeking out profitable companies and debt portfolios for acquisition. 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.

 

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Critical estimates include the value of its debt portfolios, the useful lives of property and equipment, and the valuation of deferred income tax assets. Management uses its historical records and knowledge of its business in making these estimates. Actual results could differ from these estimates.

 

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly liquid financial instruments with maturity of three months or less to be cash equivalents. As of December 31, 2012 and 2011, the Company had no cash equivalents

 

Credit Risk

Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash. The Company primarily places its cash with high-credit quality financial institutions. Cash deposits up to approximately $100,000 are federally insured. From time-to-time the Company could have deposits in excess of the insured amounts.

 

Property Plant and Equipment

Property plant and equipment

Property, plant and equipment are stated at cost.  Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range between five and seven years.  Expenditures for repairs and maintenance are expensed as incurred.

 

The majority of the Company’s property, plant and equipment is the Company automobile. As of December 31, 2012, the cost basis was $64,458 with accumulated depreciation of $1,075. The asset is being amortized over its estimated useful life of 5 years. The depreciation expense for the year ended December 31, 2012 was $1,075. The depreciation expense is estimated to be $12,891 over the next four years and $11,816 in the fifth year.

 

Debt Portfolios

Debt Portfolios

The Company reviews its debt portfolios for impairment each reporting period. If, based on current information and events, the Company determines that it is probable that it will be unable to collect all cash flows expected at acquisition of the portfolio, the Company will record an impairment of the portfolio in earnings to reduce the carrying amount to its fair market value. The Company uses third-party valuations of the resale value of its debt portfolios when assessing impairment. These valuations are based on industry data of portfolios with similar characteristics. The Company recorded $0 of impairment losses related to its debt portfolios during the year ended December 31, 2012. On December 31, 2012 the Company didn’t have any debt portfolios outstanding.

 

The Company recognizes interest income on notes receivable using the effective interest method. If the Company determines that the recoverability of any of its notes receivable is not probable, it will place the notes on nonaccrual status and will cease recording interest income. Should the Company later determine that the notes receivable balance is recoverable, it will resume the accrual of interest.

 

Impairment of Long-lived Assets

Impairment of Long-lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted future cash flows generated from the asset group to the recorded value of the asset group. If impairment is indicated, the asset is written down to its estimated fair value. There were no such impairments for the years ended December 31, 2012 and 2011.

 

Investment in Equity Securities

Investment in equity securities

Investee companies not accounted for under the consolidation or the equity method of accounting are accounted for under the cost method of accounting. Under this method, the Company’s share of the earnings or losses of such Investee companies is not included in the Consolidated Balance Sheet or Statement of Operations. However, impairment charges are recognized in the Consolidated Statement of Operations. If circumstances suggest that the value of the Investee company has subsequently recovered, such recovery is not recorded.

 

Revenue Recognition

Revenue Recognition

The Company recognizes revenue on its debt portfolios using the cost recovery method in accordance with FASB ASC 310-30. Under the cost recovery method, the Company records cash receipts related to debt portfolios as a reduction of the cost of the debt portfolio. The Company will record revenue related to debt portfolios once cash collections exceed the portfolio’s carrying amount.

 

Stock-Based Compensation

Stock-Based Compensation

The Company measures stock-based compensation cost at the grant date based on the fair value of the award and recognizes it as expense, net of estimated forfeitures, over the vesting or service period, as applicable, of the stock award using the straight-line method. Because our common stock is thinly traded, we have made estimates of the fair value of the common stock based not only on market prices but other factors such as financial condition and results of operations.

 

Income Taxes

Income Taxes

The Company records a tax provision for the anticipated tax consequences of its reported results of operations. The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and income tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. The Company records a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized.

 

The Company has adopted ASC Topic 740, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC Topic 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognition of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure and transition. The Company has determined that the adoption did not result in the recognition of any liability for unrecognized tax benefits and that there are no unrecognized tax benefits that would, if recognized, affect the Company’s effective tax rate. Based on the Company’s review of its tax positions as of December 31, 2012 and 2011, no uncertain tax positions have been identified.

 

The Company has elected to include interest and penalties related to uncertain tax positions as a component of income tax expense. To date, no penalties or interest has been accrued.

 

Tax years 2008 forward are open and subject to examination by the U.S. taxing authorities. The Company is not currently under examination, nor has it been notified of a pending examination.

 

Segments

Segments

Our chief operating decision-maker is our Chief Executive Officer who reviews financial information. There are segment managers who are held accountable by the chief operating decision-maker for operations, operating results, and planning for levels or components below the consolidated unit level. Accordingly, we have determined that we have two reporting segment and operating unit structure.

 

Comprehensive Loss

Comprehensive Loss

Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, including foreign currency translation adjustments and unrealized gains and losses on marketable securities.

 

Net Income (Loss) per Share

Net Income (Loss) per Share

Basic net income (loss) per share is calculated based on the net income (loss) attributable to common shareholders divided by the weighted average number of shares outstanding for the period excluding any dilutive effects of options, warrants, unvested share awards and convertible securities. Diluted net income (loss) per common share assumes the conversion of all dilutive securities using the if-converted method, and assumes the exercise or vesting of other dilutive securities, such as options, warrants and restricted stock using the treasury stock method. For the years ended December 31, 2012 and 2011 the Company did not have dilutive securities.

 

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company has adopted accounting standards that define fair value, establish a framework for measuring fair value in accordance with existing generally accepted accounting principles, and expand disclosures about fair value measurements. Assets and liabilities recorded at fair value in the balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The categories are as follows:

 

Level Input:   Input Definition:
     
Level I   Inputs are unadjusted, quoted prices for the identical assets or liabilities in active markets at the measurement date.
     
Level II   Inputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date.
     
Level III   Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date.

 

 

The carrying amount of certain of the Company’s financial instruments approximates fair value due to the relatively short maturity of such instruments. The fair value of notes payable is not considered to be significantly different than its carrying amount because the stated rates for such debt reflect current market rates and conditions.

 

Recent Accounting Standard Updates

Recent Accounting Standard Updates

In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” with the objective of improving the reporting of reclassifications out of accumulated other comprehensive income. This update requires the effect of significant reclassifications out of accumulated other comprehensive income be shown by component. Significant reclassifications should be shown by the respective line items of net income only if the amount reclassified is required to be reclassified to net income under U.S. GAAP. If the reclassification to net income is not required under U.S. GAAP, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. This update is effective prospectively for our fiscal 2014 and early adoption is permitted. Besides changes to disclosures, we do not expect the adoption of this update to have a significant impact on our consolidated financial statements.

 

In January 2013, the FASB issued ASU 2013-01, “Balance Sheet (Topic 220)-Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities,” which amends previous guidance on the disclosures about offsetting assets and liabilities on the balance sheet to clarify that the scope of this guidance applies to derivatives (including bifurcated embedded derivatives), repurchase agreements (and reverse repurchase agreements) and securities borrowing (and lending) transactions that are offset or subject to an enforceable master netting arrangement or similar agreement. The guidance becomes effective at the beginning of our fiscal 2014 and should be applied retrospectively for all comparative periods. The adoption of this update is not expected to have a significant impact on our consolidated financial statements.

 

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Note 1 - Organization and Significant Accounting Policies (Tables)
5 Months Ended 12 Months Ended
Dec. 31, 2011
Dec. 31, 2012
Notes to Financial Statements
Pro Forma Financial Statements
    For the four months ended December 31, 2011   (Unaudited) HPA four months ended December 31, 2011 Pro-forma Adjustments   (Unaudited)
 Revenues, net  $  $ 17,716  -  $ 17,716 
 Operating Expenses   504,622    44,632  -   549,254 
 Operating Loss   (504,622)   (26,917)     (531,538)
 Other Income (Expense)              
 Interest expense   (21,414)    -   (21,414) 
 Gain from disposal of license agreement     -  
 Loss Before Provision for Income Taxes   (526,036)   (26,917)     (552,952)
 Provision for Income Taxes     -  
 Net Loss  $ (526,036)  $ (26,917)    $ (552,952)
 Basic and diluted loss per common share  $ (0.01)        $ (0.01)
 Weighted average common share outstanding - basic and diluted   36,933,667          41,940,552 
    For the Year ended December 31, 2012   (Unaudited) HPA January 1, 2012 - March 13, 2012 Pro-forma Adjustments    (Unaudited)
 Revenues, net  $ 30,581   $ 10,351  -  $ 40,932 
 Operating Expenses   1,772,930    22,146  -   1,775,076 
 Operating Loss   (1,742,349)   (11,795)     (1,754,144)
 Other Income (Expense)              
 Interest expense   (113,549)   -   (113,549)
 Gain from disposal of license agreement   96,347          96,347 
               
 Acquisition cost   (155,000)   -   (155,000)
 Loss Before Provision for Income Taxes   (1,914,551)   (11,795)     (1,926,346)
 Provision for Income Taxes     -  
 Net Loss  $ (1,914,551)  $ (11,795)    $ (1,926,346)
 Basic and diluted loss per common share  $ (0.04)        $ (0.04)
 Weighted average common share outstanding - basic and diluted   48,137,820          49,046,839 
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Note 3 - Notes payable (Tables)
12 Months Ended
Dec. 31, 2012
Notes to Financial Statements
Scheduled Maturities of Notes Payable
2013   $ 236,000
2014     11,000
2015     11,677
2016     12,031
2017     12,395
Thereafter     4,555
      287,656
Less: current portion   236,000
Notes payable long-term $ 51,656
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Note 4 - Shareholder's Deficit (Tables)
12 Months Ended
Dec. 31, 2012
Notes to Financial Statements
Stock Grants
  Number of shares   Estimated Market value
 Beginning balance, September 1, 2011  -       
 Issued  18,513,000    
 Vested  (2,776,950)    
 Forfeited  -       
 Balance unvested, December 31, 2011  15,736,050 $  267,513
 Issued  13,813,380    
 Vested  (10,515,980)    
 Forfeited  -       
 Ending balance, December 31, 2012  19,033,450 $  19,033
Stock Options
  Number of options
   
 Balance unvested, December 31, 2011  -   
 Issued  4,000,000
 Vested  750,000
 Forfeited  -   
 Ending balance, December 31, 2012  4,750,000
 December 31, 2012 expected to be vested 750,000
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Note 6 - Income Taxes (Tables)
12 Months Ended
Dec. 31, 2012
Income Tax Disclosure [Abstract]
Income Tax Provision
    2012       2011  
Income tax computed at federal statutory tax rate   -34.0 %     -34.0 %
Change in valuation allowance   39.8 %     39.8 %
State taxes, net of federal benefit   -5.8 %     -5.8 %
Total   0.0 %     0.0 %
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Note 1 - Pro Forma Financial Statements 2012 (Details) (USD $)
4 Months Ended 12 Months Ended 3 Months Ended 4 Months Ended 12 Months Ended 4 Months Ended 12 Months Ended
Dec. 31, 2011
Dec. 31, 2012
Mar. 13, 2012
HPA (Unaudited)
Dec. 31, 2011
HPA (Unaudited)
Dec. 31, 2011
Pro-forma Adjustments
Dec. 31, 2012
Pro-forma Adjustments
Dec. 31, 2011
Pro-forma Total (Unaudited)
Dec. 31, 2012
Pro-forma Total (Unaudited)
Revenues, net $ 0 $ 30,581 $ 10,351 $ 17,716 $ 0 $ 0 $ 17,716 $ 40,932
Operating Expenses 504,622 1,772,930 22,146 44,632 0 0 549,254 1,795,076
Operating Loss (504,622) (1,742,349) (11,795) (26,917) 0 0 (531,538) (1,754,144)
Other Income (Expense)
Interest expense (21,414) (113,549) 0 0 0 0 (21,414) (113,549)
Gain from disposition of license agreement 0 96,347 0 0 0 0 0 96,347
Acquisition cost 0 (155,000) 0 0 (155,000)
Loss Before Provision for Income Taxes (526,036) (1,914,551) (11,795) (26,917) 0 0 (552,952) (1,926,346)
Provision for Income Taxes 0 0 0 0 0 0 0 0
Net Loss $ (526,036) $ (1,914,551) $ (11,795) $ (26,917) $ 0 $ 0 $ (552,952) $ (1,926,346)
Basic and diluted loss per common share $ (0.01) $ (0.04) $ 0 $ 0 $ 0 $ 0 $ (0.01) $ (0.04)
Weighted average common share outstanding - basic and diluted 36,933,007 48,137,820 0 0 0 0 41,940,552 49,046,839
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Note 1 - Pro Forma Financial Statements 2011 (Details) (USD $)
4 Months Ended 12 Months Ended 3 Months Ended 4 Months Ended 12 Months Ended 4 Months Ended 12 Months Ended
Dec. 31, 2011
Dec. 31, 2012
Mar. 13, 2012
HPA (Unaudited)
Dec. 31, 2011
HPA (Unaudited)
Dec. 31, 2011
Pro-forma Adjustments
Dec. 31, 2012
Pro-forma Adjustments
Dec. 31, 2011
Pro-forma Total (Unaudited)
Dec. 31, 2012
Pro-forma Total (Unaudited)
Revenues, net $ 0 $ 30,581 $ 10,351 $ 17,716 $ 0 $ 0 $ 17,716 $ 40,932
Operating Expenses 504,622 1,772,930 22,146 44,632 0 0 549,254 1,795,076
Operating Loss (504,622) (1,742,349) (11,795) (26,917) 0 0 (531,538) (1,754,144)
Other Income (Expense)
Interest expense (21,414) (113,549) 0 0 0 0 (21,414) (113,549)
Gain from disposition of license agreement 0 96,347 0 0 0 0 0 96,347
Loss Before Provision for Income Taxes (526,036) (1,914,551) (11,795) (26,917) 0 0 (552,952) (1,926,346)
Provision for Income Taxes 0 0 0 0 0 0 0 0
Net Loss $ (526,036) $ (1,914,551) $ (11,795) $ (26,917) $ 0 $ 0 $ (552,952) $ (1,926,346)
Basic and diluted loss per common share $ (0.01) $ (0.04) $ 0 $ 0 $ 0 $ 0 $ (0.01) $ (0.04)
Weighted average common share outstanding - basic and diluted 36,933,007 48,137,820 0 0 0 0 41,940,552 49,046,839
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Note 1 - Organization and Significant Accounting Policies (Details Narrative) (USD $)
1 Months Ended 3 Months Ended 12 Months Ended 48 Months Ended
Nov. 30, 2012
Oct. 31, 2012
Apr. 16, 2013
Dec. 31, 2017
Dec. 31, 2012
Dec. 31, 2016
Mar. 14, 2012
Dec. 31, 2011
Reverse Acquisition
IPR common shares transferred for HPA common shares per Share Exchange Agreement 33,234,294
Cash payment pleged by IPR per Share Exchange Agreement $ 155,000
Share exchange ratio 1.2342
Shares of HPA issued for IPR shares 41,017,766
Payment due recorded as long-term liability acquisition payable 155,000
Maximum percent of IPR proceeds from any private placement or gross profits earned by IPR agreed to be paid to HPA until the obligation is satisfied 25.00%
Percent of shares owned by former shareholders of IPR 89.00%
Shares issued in acquisition 4,557,545
Value of shares issued in acquisition 60,166
Cash 800 53,048 9,444
Accounts receivable 4,954
Fixed assets 78,101 2,164 993,571
Liabilities 1,959,256 0 1,440,798
Net book value of HPA 60,166
Debt financing raised 25,000 25,000 150,000
Cash equivalents 0 0
Cash deposits into financial institutions insured up to this amount 100,000
Impairment losses related to debt portfolios 0
Property Plant and Equipment
Cost basis 64,458
Accumulated depreciation 1,075
Estimated useful life 5 years
Depreciation expense 1,075
Estimated depreciation expense $ 11,816 $ 12,891
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Note 2 - License Agreements (Details Narrative) (USD $)
18 Months Ended 24 Months Ended 36 Months Ended
Mar. 01, 2013
Mar. 01, 2017
Mar. 01, 2015
Nov. 11, 2014
Nov. 11, 2012
Oct. 14, 2012
Jan. 27, 2012
Oct. 18, 2011
Oct. 17, 2011
Aug. 31, 2011
P3D Agreement
Minimum license agreement term (in years) 21 years
Renewal term if not cancelled by either party 90 days in advance of expiration 1 year
Minimum required cancellation notification required before expiration date to extend license a year 90 days
Interest in outstanding common stock of IPR that P3D retained 9.90%
Bridge funding received $ 150,000
License Fee payment paid to IPR after receipt of bridge funding 10,000
Total license fee to be paid by IPR 1,000,000
Distributer or sub licenser payment distribution ratio between IPR and ACSC 1
Fee due after initial equity funding 90,000
Fee payment due within 6 months of equity funding 150,000
Fee payment due within 12 months of equity funding 250,000
Final Fee payment due within 18 months of equity funding 500,000
Minimum percent of non-bridge loan funding to pay down $1,000,000 in first 1.5 years 10.00%
Minimum percentage applies on excess funding over certain amount 2,000,000
Period that minimum percent is applied to 1 year 6 months
Simple interest rate on unpaid balance of license fee commencing on date of first $10,000 payment 6.00%
Period in which license payment is due in full upon change of control of IPR (days) 5 days
Royalty percent payment due from IPR's quarterly profits from P3D technology in Europe 25.00%
Termination right if royalties after the $150,000 funding do not meet a minimum amount 500,000 500,000
Gain from termination of agreement 96,347
CPaiR Agreement
Minimum license agreement term (in years) 21 years
Renewal term if not cancelled by either party 90 days in advance of expiration 1 year
Minimum required cancellation notification required before expiration date to extend license a year 90 days
Minimum payment to CPaiR to avoid termination 1,000,000
Period for which the license agreement must be paid in 3 years
Royalties of sublease agreement paid percentage 20.00%
Payment of upfront license fee for CPaiR technology 20.00%
Percentage of gross revenues paid without subleasing 10.00%
Quarterly revenue paid to CPaiR 20.00%
ACSC Agreement
Upfront license fee paid to ACSC $ 0
License agreement term (in years) 1 year
Renewal term if not cancelled by either party 90 days in advance of expiration 1 year
Percent of quarterly gross revenue owed by distributor or sub-licensee 25.00%
Gross revenue split ratio between IPR and ACSC 1
Percent of upfront license fee paid to ACSC 50.00%
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Note 3 - Notes payable (Details) (USD $)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Jan. 01, 2018
Dec. 31, 2012
Dec. 31, 2011
Notes to Financial Statements
Notes Payable $ 287,656
Maturity schedule of notes payable 12,395 12,031 11,677 11,000 236,000
Remaining notes payable 4,555
Less: current portion 236,000 175,000
Notes payable long term $ 51,656
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Note 3 - Notes payable (Details Narrative) (USD $)
1 Months Ended 2 Months Ended 3 Months Ended 12 Months Ended
Oct. 31, 2013
Sep. 30, 2013
Jan. 31, 2013
Nov. 30, 2012
Oct. 31, 2012
Nov. 30, 2012
Apr. 16, 2013
Dec. 31, 2012
Dec. 31, 2011
Notes to Financial Statements
Private placement maximum amount $ 1,000,000
Notes payable issued in the private placement, minimum amount 25,000
Interest rate of notes payable issued in private placement 12.00%
Term of note payable issued in private placement 1 year
Shares of common stock issued for each minimum amount loaned in private placement 102,850
Notes issued in private placement 2
Aggregate principal amount of notes issued in private placement 175,000
Common stock issued for private placement notes 719,950
Fair value of common stock issued for private placement notes 3,917
Noteholders agreeing to extend maturity date of notes 2
Term of extension of maturity date of notes 1 year
Common stock issued for private placement note term extension 175,000
Fair value of common stock issed for private placement note term extension 175
Promissory notes issued 25,000 25,000 150,000
Shares issued 250,000 700,000
Fair value of shares issued 250 53,771
Total outstanding notes payable 236,000 175,000
Maturity of notes payable, amount 50,000 150,000 25,000
Financing amount on vehicle purchase, note payable 64,458
Interest rate of vehicle purchase financing 2.99%
Term of vehicle financing (in months) 60 months
Monthly auto financing payment $ 1,060
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Note 4 - Stock Grants (Details) (USD $)
Dec. 31, 2012
Balance
Dec. 31, 2011
Balance
Aug. 31, 2011
Balance
Dec. 31, 2012
Issued Member
Dec. 31, 2011
Issued Member
Dec. 31, 2012
Vested
Dec. 31, 2011
Vested
Dec. 31, 2012
Forfeited
Dec. 31, 2011
Forfeited
Number of stock grant shares, instant 19,033,450 15,736,050 0
Number of stock grant shares, duration 13,813,380 18,513,000 (10,515,980) (2,776,950) 0 0
Estimated market value $ 19,033 $ 267,513 $ 0
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Note 4 - Stock Options (Details)
Dec. 31, 2012
Dec. 31, 2012
Balance
Dec. 31, 2011
Balance
Dec. 31, 2012
Issued Member
Dec. 31, 2012
Vested Member
Dec. 31, 2012
Forfeited Member
Number of options, instant 4,750,000 0
Number of options, duration 4,000,000 750,000 0
Expected to be vested 750,000
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Note 4 - Shareholders' Deficit (Details Narrative) (USD $)
1 Months Ended 2 Months Ended 12 Months Ended
Aug. 31, 2012
May 31, 2012
Nov. 30, 2012
Dec. 31, 2012
Dec. 31, 2011
Aug. 31, 2011
Common Stock
Common stock issued to founders 30,916,710
Award grant shares 32,326,380
Award grant shares vested 13,292,930
Award grant shares unvested 19,033,450
Expense recorder for fair value of shares issued for services $ 241,635 $ 74,892
Weighted average vesting period on stock grants 2 years 9 months 2 years
Common stock issued for services 2,251,079
Fair value of common stock issued 250 53,771
Common stock issued 250,000 700,000
Common stock issued for cash 175,000
Consultant options issued 2
Consultant options issued, underlying shares 4,000,000
Stock Options
Stock options issued 3,000,000 1,000,000
Stock options, exercise price per share $ 0.25 $ 0.25
Stock options expiration period 5 years 5 years
Equal stock option installments to vest 12 8
Stock option installment size, shares 250,000 125,000
First vested tranche of the 1,000,000 stock option block 125,000
First vested tranche of the 3,000,000 stock option block 250,000
Estimated Forfeiture rates 0.00%
Weighted average exercise price of options exercisable, duration $ 0.25 $ 0.25
Weighted average fair value of options granted 0 14,445
Total fair value of stock options vested and charged to expense $ 0 $ 2,297
Weighted Average Remaining Contractual Life (in years), duration 4 years 6 months 4 years 6 months
Weighted average exercise price of options granted, duration $ 0.25 $ 0.25
Black Sholes Assumptions For Estimated Fair Value of Stock Options
Expected life (year), duration 3 years 3 years
Risk-Free interest rate, minimum 0.39% 0.39%
Risk-Free interest rate, maximum 0.42% 0.42%
Expected dividend yield 0.00% 0.00%
Volatility, minimum 107.00% 107.00%
Volatility, maximum 112.00% 112.00%
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Note 5 - Segment Information (Details Narrative) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Segment Information
Net revenues of debt portfolio segment $ 30,581 $ 0
Net revenues of intellectual property management segment 0 0
Operating loss of intellectual property management segment 1,440,315 463,286
Operating loss of debt portfolio management segment $ 706,230 $ 0
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Note 6 - Income Tax Provision (Details)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Income Tax Disclosure [Abstract]
Income tax computed at federal statutory tax rate (34.00%) (34.00%)
Change in valuation allowance 39.80% 39.80%
State taxes, net of federal benefit (5.80%) (5.80%)
Total 0.00% 0.00%
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Note 6 - Income Taxes (Details Narrative) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Income Tax Disclosure [Abstract]
Net operating loss carryforwards $ 550,000
Net operating loss carryforwards expiration year 2036
Valuation allowance percent 100.00%
Interest and penalties $ 0 $ 0
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Note 8 - Subsequent Events (Details Narrative) (USD $)
Apr. 02, 2013
Jan. 31, 2013
Jan. 16, 2013
Jan. 14, 2013
January 14, 2013 A
Jan. 14, 2013
January 14, 2013 B
Aggregate principal amount of promissory note issued by the Company $ 100,000 $ 25,000 $ 25,000
Common shares issued for notes as a loan fee 500,000 125,000 125,000
Note interest rate per annum 10.00% 10.00% 10.00%
Maturity date of note Jan 30, 2014 Apr 14, 2013 Jul 1, 2013
Marketing agreement with shares paid as consideration 1,200,000
Common stock issued to Aviva for all of their outstanding shares, shares 6,000,000
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