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Document and Entity Information
6 Months Ended
Jun. 30, 2013
Aug. 19, 2013
Document And Entity Information
Entity Registrant Name Hanover Portfolio Acquisitions, Inc.
Entity Central Index Key 0001528172
Document Type 10-Q
Document Period End Date Jun 30, 2013
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 Common Stock, Shares Outstanding 70,935,514
Document Fiscal Period Focus Q2
Document Fiscal Year Focus 2013
Amendment Description Amendment #1
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Consolidated Balance Sheets (USD $)
Jun. 30, 2013
Dec. 31, 2012
Current Assets
Cash $ 2,138 $ 800
Total Current Assets 2,138 800
Property Plant and Equipment, net 59,782 65,301
Investment in securities 12,000 12,000
Total Assets 73,920 78,101
Current Liabilities
Accounts payable and accrued expenses 2,444,599 1,516,600
Notes payable, net discount of $45,632 and $0 410,730 236,000
Note payable-related party, net of discount of $83 and $0 24,917 0
Total Current Liabilities 2,880,246 1,752,600
Notes payable 54,478 51,656
Acquisition payable 155,000 155,000
Total Liabilities 3,089,724 1,959,256
Shareholders' Deficit
Series AA super voting preferred stock, $0.0001 par value, 1,000,000 authorized and 0 issued and outstanding 0 0
Preferred stock, $0.0001 par value; 5,000,000 shares authorized, 0 shares issued and outstanding 0 0
Common stock, 0.001 par value, 61,153,823 and 53,692,673 shares issued and outstanding 7,094 5,370
Additional paid-in capital 1,183,633 554,062
Accumulated deficit (4,206,531) (2,440,587)
Total Shareholders' Deficit (3,015,804) (1,881,155)
Total Liabilities and Shareholders' Deficit $ 73,920 $ 78,101
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Consolidated Balance Sheets (Parenthetical) (USD $)
Jun. 30, 2013
Dec. 31, 2012
Statement of Financial Position [Abstract]
Series AA Preferred stock, par value $ 0.0001 $ 0.0001
Series AA Preferred stock, authorized 1,000,000 1,000,000
Series AA Preferred stock, issued 0 0
Series AA Preferred stock, outstanding 0 0
Preferred Stock
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock, authorized 5,000,000 5,000,000
Preferred stock, issued 0 0
Preferred stock, outstanding 0 0
COMMON STOCK
Common stock, par value $ 0.001 $ 0.001
Common stock, authorized 75,000,000 75,000,000
Common stock, issued 61,153,823 53,692,673
Common stock, outstanding 61,153,823 53,692,673
Current notes payable discount $ 45,632 $ 0
Current notes payable discount, related party $ 83 $ 0
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Consolidated Statements of Operations (USD $)
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Income Statement [Abstract]
Revenues, net $ 0 $ 8,091 $ 0 $ 9,765
Operating Expenses 481,596 403,753 1,506,933 830,967
Operating Loss (481,596) (395,662) (1,506,933) (821,202)
Other Income (Expense)
Impairment expense (101,957) 0 (101,957) (155,000)
Interest income 4,032 4 4,032 12
Interest expense (60,471) (34,950) (160,553) (40,200)
Loss Before Provision for Income Taxes (639,992) (430,608) (1,765,411) (1,016,390)
Provision for Income Taxes 0 0 533 0
Net Loss $ (639,992) $ (430,608) $ (1,765,944) $ (1,016,390)
Basic and diluted loss per common share $ (0.01) $ (0.01) $ (0.03) $ (0.01)
Weighted average common share outstanding - basic and diluted 68,727,323 48,429,970 63,802,939 21,234,053
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Consolidated Statement of Cash Flows (USD $)
6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Cash Flows From Operating Activities
Net loss $ (1,765,944) $ (1,016,390)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense 4,862 24,054
Impairment expense 101,957 155,000
Fair value of equity issued for services 475,170 121,050
Amortization of note discount 104,410 0
Changes in operating assets and liabilities:
Account receivable 300 4,314
Prepaid expenses 0 (14,000)
Accounts payable and accrued expenses 903,656 529,814
Net Cash Used in Operating Activities (175,589) (196,158)
Cash Flows From Investing Activities
Net cash received in acquisition of subsidiary 3,743 53,048
Net Cash Provided by Investing Activities 3,743 53,048
Cash Flows From Financing Activities
Sale of common stock 0 145,000
Proceeds from the issuance of notes payable 175,000 0
Payment for notes payable (1,816) 0
Net Cash Provided by Financing Activities 173,184 145,000
Net Increase (Decrease) in Cash 1,338 1,890
Cash, Beginning of Period 800 9,247
Cash, End of Period 2,138 11,137
Supplemental disclosure of cash flow information:
Cash paid for interest 5,911 0
Cash paid for income taxes 532 0
Supplemental disclosure of non-cash financing and investing:
Debt acquired in acquisition 98,150
Debt acquired in purchase of property, plant and equipment 60,841
Acquisition payable $ 155,000
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Note 1 - Organization and Nature of Business
6 Months Ended
Jun. 30, 2013
Notes to Financial Statements
Note 1 - 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.

 

Reverse Acquisition

 

On March 14, 2012, HPA, entered into a Share Exchange Agreement (“Agreement”) with IP Resources International (“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, which is 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, officers 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 accompanying condensed 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 Aviva Companies Corporation Acquisition

 

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.

  

Basis of Presentation and Principles of Consolidation

 

The accompanying unaudited interim condensed consolidated financial statements of Hanover Portfolio Acquisition’s, Inc. have been presented 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. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. The condensed consolidated financial statements as of June 30, 2013 and 2012 are unaudited; however, in the opinion of management such interim condensed 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.

 

The consolidated financial statements of the Company include the accounts of HPA, IPR and Aviva. All significant intercompany accounts and transactions are eliminated in consolidated.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Actual results could differ from those estimates.

 

Liquidity

 

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.

 

Recent Accounting Standard Updates

 

In July 2012, the FASB issued ASU 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment, which amended the guidance in ASU 2011-08 to simplify the testing of indefinite-lived intangible assets other than goodwill for impairment. ASU 2012-02 becomes effective for annual and interim impairment tests performed for fiscal years beginning on or after September 15, 2012 and earlier adoption is permitted. We adopted this standard in the second quarter of fiscal year 2012. We believe adoption did not have a material effect on our 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 condensed consolidated financial statements.

 

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Note 2 - Acquisition
6 Months Ended
Jun. 30, 2013
Business Combinations [Abstract]
Note 2 - Acquisition

Note 2 - Acquisition

 

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.

 

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.

 

The following table summarizes the estimated fair values at the date of acquisition:

 

Current assets   $ 4,043 
Goodwill   101,957 
Current liabilities   (100,000)
Total purchase consideration   $ 6,000 

 

 

The purchase consideration was comprised entirely of shares of Hanover Portfolio Acquisitions, Inc. issued to the former shareholders of Aviva Companies Corporation, which were valued at $6,000 on the date of acquisition. The Company estimated the acquisition date fair value of the assets and liabilities acquired and determined there were no identifiable intangible assets acquired in the transaction.

 

Hanover Portfolio Acquisitions, Inc. assumed the outstanding debts of The Aviva Company Corporations and all outstanding accrued interest. The principal balance of these notes acquired on April 2, 2013 was $75,000 with accrued interest of $21,275, see note 4.

 

Goodwill

 

The Company reviews the amounts of intangible assets for impairment at least annually, and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. In the event the carrying value of the assets is not expected to be recovered, the assets are written down to their estimated fair values.

 

During the period ended June 30, 2013, the intangible assets acquired in the acquisition were reviewed and the Company determined them to be fully impaired, as such the Company recorded an impairment expense of $101,957.

 

Goodwill as of December 31, 2012   $            - 
Goodwill acquired on April 2, 2013   101,957 
Impairment of Goodwill   (101,957)
Net Goodwill as of June 30, 2013   $            - 

 

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Note 3 - Intangible Assets
6 Months Ended
Jun. 30, 2013
Notes to Financial Statements
Note 3 - Intangible Assets

Note 3 - Intangible Assets

 

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 was to be for the greater of the life of the provisional patents, for the technology, or twenty-one years. The term was to automatically renew for an additional one year term unless either party notified 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 $1,000,000 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 was to be issued on or before October 12, 2011, (actually issued on October 17, 2011 the date of incorporation of IPR). The Company paid $10,000 towards the promissory note on October 18, 2011.

 

The unpaid balance of the note bore simple interest at a rate of 6% per annum commencing on the date of the initial payment of $10,000.

 

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, which amounted to $990,000 on the date of termination. 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 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.

 

In connection with the acquisition of Aviva Companies Corporation on April 2, 2013, the Company acquired goodwill of $101,957. The Company assessed the fair value of the Goodwill acquired in the acquisition and determined the asset to be fully impaired and recorded impairment expense of $101,957 as of June 30, 2013, see note 2.

 

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Note 4 - Notes payable
6 Months Ended
Jun. 30, 2013
Notes to Financial Statements
Note 4 - Notes payable

Note 4 - Notes payable

 

In 2012, 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 maturity date of 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. As of June 30, 2013, the balance outstanding on these notes is $175,000.

 

In October and November 2012, the Company issued two (2) 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. As of June 30, 2013, the balances of these notes were $25,000 and $25,000, respectively.

 

These notes payable, which aggregate $225,000 as of June 30, 2013, mature as follows: $150,000 in September 2013, $50,000 in October 2013 and $25,000 in January 2013. The note which matured in January 2013 remains outstanding as of June 30, 2013.

 

In November 2012, the Company purchased a vehicle for $64,458. The purchase was financed through a note payable for $64,458 at interest of 2.99% per annum with sixty payments of $1,060 per month. As of June 30, 2013 the balance of the note was $60,840.

 

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. These shares were valued at their issuance date fair market value and $25,000 was recorded as a note discount with the excess $12,500 recognized as a charge to interest expense upon issuance. The note carries an interest rate of 10% per annum and a maturity date of April 14, 2013 with interest due monthly in arrears. As of June 30, 2013, the outstanding balance on the note was $25,000

 

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. These shares were valued at their issuance date fair market value and $25,000 was recorded as a note discount with the excess $12,500 recognized as a charge to interest expense upon issuance. The note carries an interest rate of 10% per annum and a maturity date of July 1, 2013 with interest due monthly in arrears. As of June 30, 2013, the balance of the note was $25,000.

 

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. These shares were valued at their issuance date fair market value of $75,000, which was recorded as a note discount. The note carries an interest rate of 10% per annum and a maturity date of January 30, 2014 with interest due monthly in arrears. As of June 30, 2013 the outstanding balance of the note was $100,000.

 

In connection with acquisition of Aviva Companies Corporation on April 2, 2013, the Company assumed a note payable for an aggregate principal amount of $25,000 and accrued interest of $1,042 as of April 2, 2013. The note accrues interest of 10% per annum and matured on May 1, 2013 however remains outstanding as of June 30, 2013 accruing interest. As of June 30, 2013 the outstanding balance of the note was $25,000.

 

In connection with acquisition of Aviva Companies Corporation on April 2, 2013, the Company acquired a note payable for an aggregate principal amount of $50,000 and accrued interest of $20,233 as of April 2, 2013. The note accrued interest of 10% per annum and matured on May 1, 2013, however remains outstanding as of June 30, 2013 accruing interest. As of June 30, 2013 the outstanding balance on the note was $50,000.

 

Promissory Note - Related Party

 

On May 10, 2013, the Company issued a promissory note to an affiliate 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 8% per annum and a maturity date of October 10, 2013 with interest due in arrears. A note discount of $125 was recorded on date of issuance. As of June 30, 2013 the outstanding balance on the note was $25,000.

 

Amortization of note discounts amounted to $84,635 during the period ended June 30, 2013. As of June 30, 2013, there was $45,715 of note discount unamortized.

 

As of June 30, 2013, future minimum payments due fiscal years due on notes payable are as follows:

 

Fiscal Year  
2013 $ 481,362
2014 12,720
2015 12,720
2016 12,720
2017 12,720
Thereafter 158,598
  $ 690,840

 

 

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Note 5 - Shareholders' Deficit
6 Months Ended
Jun. 30, 2013
Notes to Financial Statements
Note 5 - Shareholders' Deficit

Note 5- Shareholders’ Deficit

 

Common Stock

 

The Company 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 in over the term of the contract. The consultant is issued a prorated number of shares of common stock at the beginning of the contract, which 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-Employees, the common stock shares issued to the consultant are valued upon their vesting, with interim estimates of value as appropriate during the vesting period. The shares of common stock that have vested through January 2013 were valued based on a valuation performed by an independent valuation firm as the Company had no active market for its shares prior to that time. The Company’s shares began trading in January 2013; as a result the Company utilized market value for its stock when valuing its common stock for the three months ended March 31, 2013. During the second quarter of 2013, the Company revalued the shares based on low trading volume to $0.001. As of June 30, 2013, the total awards granted were 42,694,220 shares with 22,536,255 shares vested and issued and 20,157,965 shares unvested. The total expense recorded for the six months ended June 30, 2013 and 2012, was $475,170 and $121,050, respectively.

 

Series AA Preferred Shares

 

On February 22, 2013, the Board of Directors of the Company authorized an amendment to the Company’s Articles of Incorporation, as amended (the “Articles of Incorporation”), in the form of a Certificate of Designation that authorized the issuance of up to one million (1,000,000) shares of a new series of preferred stock, par value $0.001 per share, designated “Series AA Super Voting Preferred Stock,” for which the board of directors established the rights, preferences and limitations thereof.

 

Each holder of outstanding shares of Series AA Super Voting Preferred Stock shall be entitled to one hundred thousand (100,000) votes for each share of Series AA Super Voting Preferred Stock held on the record date for the determination of stockholders entitled to vote at each meeting of stockholders of the Company. As of June 30, 2013, there were no shares of Series AA Preferred stock outstanding.

 

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Note 6 - Segment Information
6 Months Ended
Jun. 30, 2013
Notes to Financial Statements
Note 6 - Segment Information

Note 6 – 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.

 

Through June 30, 2013, all of the Company’s revenue has been generated from our debt portfolio segment.

 

For the three and six months ended June 30, 2013, net revenues of $0 were contributed from our debt portfolio segment. For the three months ended June 30, 2013, the Company’s operating loss of $639,992 was contributed by the intellectual property management for approximately $488,322 and the debt portfolio management for approximately $151,670, respectively. For the six months ended June 30, 2012, the Company’s operating loss of approximately $1,765,944 was contributed by the intellectual property management for approximately $1,450,945 and the debt portfolio management for approximately $314, respectively.

 

For the three and six months ended June 30, 2012, net revenues of $8,091 and $9,765, respectively are contributed from our debt portfolio segment. For the three months ended June 30, 2012, the Company’s operating loss of $431,000 was contributed by the intellectual property management for approximately $345,000, the debt portfolio management for approximately $46,000 and corporate overhead for approximately $40,000, respectively. For the six months ended June 30, 2012, the Company’s operating loss of approximately $1,016,000 was contributed by the intellectual property management for approximately $752,000, the debt portfolio management for approximately $54,000 and corporate overhead for approximately $210,000, respectively.

 

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Note 7 - Fair Value Measurements
6 Months Ended
Jun. 30, 2013
Fair Value Disclosures [Abstract]
Note 7 - Fair Value Measurements

Note 7 – Fair Value Measurements

 

The Company measures its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., exit price) in an orderly transaction between market participants at the measurement date. Additionally, the Company is required to provide disclosure and categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation. Level 1 provides the most reliable measure of fair value while Level 3 generally requires significant management judgment. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. The fair value hierarchy is defined as follows:

 

Level 1 – Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly.

Level 3 – Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’s best estimate of what market participants would use in valuing the asset or liability at the measurement date.

The following table summarizes fair value measurements at June 30, 2013 and December 31, 2012 for assets and liabilities measured at fair value on a recurring basis:

 

June 30, 2013                
     Level 1    Level 2    Level 3    Total
Cash and Cash Equivalents   $ 2,138   $ -   $ -   $ 2,138
                 
December 31, 2012                
     Level 1    Level 2    Level 3    Total
Cash and Cash Equivalents   $ 800   $ -   $ -   $ 800

 

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Note 1 - Organization and Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2013
Notes to Financial Statements
Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation

 

The accompanying unaudited interim condensed consolidated financial statements of Hanover Portfolio Acquisition’s, Inc. have been presented 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. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. The condensed consolidated financial statements as of June 30, 2013 and 2012 are unaudited; however, in the opinion of management such interim condensed 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.

 

The consolidated financial statements of the Company include the accounts of HPA, IPR and Aviva. All significant intercompany accounts and transactions are eliminated in consolidated.

 

Use of Estimates

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Actual results could differ from those estimates.

 

Liquidity

Liquidity

 

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.

 

Recent Accounting Standard Updates

Recent Accounting Standard Updates

 

In July 2012, the FASB issued ASU 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment, which amended the guidance in ASU 2011-08 to simplify the testing of indefinite-lived intangible assets other than goodwill for impairment. ASU 2012-02 becomes effective for annual and interim impairment tests performed for fiscal years beginning on or after September 15, 2012 and earlier adoption is permitted. We adopted this standard in the second quarter of fiscal year 2012. We believe adoption did not have a material effect on our 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 condensed consolidated financial statements.

 

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Note 7 - Fair Value Measurements (Policies)
6 Months Ended
Jun. 30, 2013
Fair Value Disclosures [Abstract]
Fair Value Measurements

Fair Value Measurements

 

The Company measures its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., exit price) in an orderly transaction between market participants at the measurement date. Additionally, the Company is required to provide disclosure and categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation. Level 1 provides the most reliable measure of fair value while Level 3 generally requires significant management judgment. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. The fair value hierarchy is defined as follows:

 

Level 1 – Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly.

 

Level 3 – Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’s best estimate of what market participants would use in valuing the asset or liability at the measurement date.

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Note 2 - Acquisition (Tables)
6 Months Ended
Jun. 30, 2013
Business Combinations [Abstract]
Estimated fair values of acquisition
Current assets   $ 4,043 
Goodwill   101,957 
Current liabilities   (100,000)
Total purchase consideration   $ 6,000 
Goodwill
Goodwill as of December 31, 2012   $            - 
Goodwill acquired on April 2, 2013   101,957 
Impairment of Goodwill   (101,957)
Net Goodwill as of June 30, 2013   $            - 
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Note 4 - Notes payable (Tables)
6 Months Ended
Jun. 30, 2013
Notes to Financial Statements
Future minimum payments
Fiscal Year  
2013 $ 481,362
2014 12,720
2015 12,720
2016 12,720
2017 12,720
Thereafter 158,598
  $ 690,840
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Note 7 - Fair Value Measurements (Tables)
6 Months Ended
Jun. 30, 2013
Fair Value Disclosures [Abstract]
Fair Value Measurements
June 30, 2013                
     Level 1    Level 2    Level 3    Total
Cash and Cash Equivalents   $ 2,138   $ -   $ -   $ 2,138
                 
December 31, 2012                
     Level 1    Level 2    Level 3    Total
Cash and Cash Equivalents   $ 800   $ -   $ -   $ 800
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Note 1 - Organization and Significant Accounting Policies (Details Narrative) (USD $)
1 Months Ended
Nov. 30, 2012
Oct. 31, 2012
Jun. 30, 2013
Apr. 02, 2013
Dec. 31, 2012
Mar. 14, 2012
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 2,138 800 53,048
Accounts receivable 4,954
Fixed assets 73,920 78,101 2,164
Liabilities 3,089,724 1,959,256 0
Net book value of HPA 60,166
Common stock issued to Aviva for all of their outstanding shares, shares 6,000,000
Common stock issued to Aviva for all of their outstanding shares, value 6,000
Debt financing raised $ 25,000 $ 25,000
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Note 2 - Acquisition (Details) (USD $)
6 Months Ended
Jun. 30, 2013
Apr. 02, 2013
Dec. 31, 2012
Estimated fair value of acquisition of Aviva
Current Assets of Aviva $ 4,043
Goodwill of Aviva 101,957
Current liabilities of Aviva (100,000)
Total purchase consideration of Aviva 6,000
Goodwill acquired in acquisition of Aviva
Goodwill 0
Goodwill Acquired 101,957
Impairment of Goodwill (101,957)
Net Goodwill $ 0
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Note 2 - Acquisition (Details Narrative) (USD $)
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Apr. 02, 2013
Business Combinations [Abstract]
Common stock issued to Aviva for all of their outstanding shares, shares 6,000,000
Common stock issued to Aviva for all of their outstanding shares, value $ 6,000
Outstanding debts of Aviva assumed in acquisition 75,000
Accrued Interest on outstanding debts of Aviva assumed in acquisition 21,275
Impairment expense $ (101,957) $ 0 $ (101,957) $ (155,000)
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Note 3 - Intangible Assets (Details Narrative) (USD $)
36 Months Ended
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%
License Fee payment paid to IPR after receipt of bridge funding $ 10,000
Simple interest rate on unpaid balance of license fee commencing on date of first $10,000 payment 6.00%
Gain from termination of agreement 96,347
Termination of note payable license fee amount 990,000
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 4 - 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
Jun. 30, 2013
Notes to Financial Statements
Future minimum payments due on notes $ 12,720 $ 12,720 $ 12,720 $ 12,720 $ 481,362
Future minimum payments thereafter due on notes 158,598
Total future minimum payments due $ 690,840
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Note 4 - Notes payable (Details Narrative) (USD $)
1 Months Ended 6 Months Ended 12 Months Ended
Oct. 31, 2013
Sep. 30, 2013
Jan. 31, 2013
Nov. 30, 2012
Oct. 31, 2012
Jun. 30, 2013
Dec. 31, 2012
May 10, 2013
Jan. 14, 2013
Promissory Note #1
Jan. 14, 2013
Promissory Note #2
Jan. 31, 2013
Promissory Note #3
Apr. 02, 2013
Promissory Note Acquired By Aviva #1
Apr. 02, 2013
Promissory Note Acquired By Aviva #2
IPR Private Placement
IPR 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 IPR private placement 2
Aggregate principal amount of notes issued in IPR private placement 175,000
IPR notes oustanding 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
Balance on $25,000 October and November notes outstanding 50,000
Total outstanding notes payable excluding interest 225,000
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
Balance due on auto financing note 60,840
Aggregate principal amount of promissory note issued by the Company 25,000 25,000 100,000
Common shares issued for notes as a loan fee 125,000 125,000 500,000
Fair market value of common shares issued for notes as a note discount 25,000 25,000 75,000
Note interest rate per annum 10.00% 10.00% 10.00%
Maturity date of note Apr 14, 2013 Jul 1, 2013 Jan 30, 2014
Balance on $25,000 January 14 #1 note outstanding 25,000
Charge to interest expense upon issuance of #1 note 12,500
Balance on $25,000 January 14 #2 note outstanding 25,000
Charge to interest expense upon issuance of #2 note 12,500
Balance on $100,000 January 31 note outstanding 100,000
Amortization of note discounts 84,635
Note discount unamortized 45,715
Notes Acquired in Acquisition of Aviva
Note acquired in acquisition, amount 25,000 50,000
Note acquired in acquisition, accrued interest 1,042 20,233
Note acquired in acquisition, percent interest 10.00% 10.00%
Note acquired in acquisition, date of maturity 2013-05-01 2013-05-01
Balance of note acquired in acquisition, outstanding 25,000 50,000
Notes- Related Party
Aggregate principal amount of realted party promissory note issued by the Company 25,000
Common shares issued for related party notes as a loan fee 125,000
Related party note interest rate per annum 8.00%
Maturity date of related party note 2013-10-10
Related party note discount 125
Balance of related party note outstanding $ 25,000
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Note 5 - Shareholders' Deficit (Details Narrative) (USD $)
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2013
Jun. 30, 2012
Feb. 22, 2013
Dec. 31, 2012
Common Stock
Revaluation of shares based on low trading volume $ 0.001
Award grant shares 42,694,220 42,694,220
Award grant shares vested 22,536,255 22,536,255
Award grant shares unvested 20,157,965 20,157,965
Expense recorded for fair value of shares issued for services $ 475,170 $ 121,050
Series AA Preferred Shares
Series AA Preferred stock, par value $ 0.0001 $ 0.0001 $ 0.001 $ 0.0001
Series AA Preferred stock, authorized 1,000,000 1,000,000 1,000,000 1,000,000
Series AA Preferred stock, outstanding 0 0 0
Number of votes for each preferred share $ 100,000
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Note 6 - Segment Information (Details Narrative) (USD $)
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Segment Information
Net revenues of debt portfolio segment $ 0 $ 8,091 $ 0 $ 9,765
Operating loss of company 639,992 430,608 1,765,944 1,016,390
Operating loss of intellectual property management segment 488,322 345,000 1,450,945 752,000
Operating loss of debt portfolio management segment 151,670 46,000 314,000 54,000
Operating loss of corporate overhead $ 40,000 $ 210,000
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Note 7 - Fair Value Measurements (Details) (USD $)
Jun. 30, 2013
Dec. 31, 2012
Jun. 30, 2012
Dec. 31, 2011
Cash and cash equivalents $ 2,138 $ 800 $ 11,137 $ 9,247
Fair Value Level 1
Cash and cash equivalents 2,138 800
Fair Value Level 2
Cash and cash equivalents 0 0
Fair Value Level 3
Cash and cash equivalents 0 0
Fair Value Total
Cash and cash equivalents $ 2,138 $ 800
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