UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: June 30, 2015

 

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission File No. 000-52289

 

POWER OF THE DREAM VENTURES, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		51-0597895
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

 

1095 Budapest

Soroksari ut 94-96

Hungary

(Address of principal executive offices)

 

+36-1-456-6061

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer	o		Accelerated filer	o
Non-accelerated filer	o		Smaller reporting company	x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

As of August 14, 2015, there were 46,700,896 shares outstanding of the registrant’s common stock.

 

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	27
Item 4.	Controls and Procedures.	27
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings.	28
Item 1A.	Risk Factors.	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	28
Item 3.	Defaults Upon Senior Securities.	28
Item 4.	Mine Safety Disclosures.	28
Item 5.	Other Information.	28
Item 6.	Exhibits.	29
Signatures		29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEET

FOR THE PERIODS ENDED JUNE 30, 2015 AND DECEMBER 31, 2014

 

Amounts in USD

 

	Notes	June 30, 2015	December 31, 2014
ASSETS
Current Assets
Cash		$1,791	$1,524
Other receivables	3	61,259	81,048
Inventories		17,331	18,825
Total Current Assets		80,381	101,397
Intangibles	4	294,240	315,327
Fixed assets, net	4	71,227	92,043
Total Assets		445,848	508,767
LIABILITIES
Current Liabilities
Accounts payable and accrued and other liabilities	7	$4,801,343	$4,465,149
Grants received	8	1,077,653	1,170,492
Capital leases payable, current portion		43,627	50,622
Short term loans from related parties		85,866	144,045
Liability from warrants	6	23,864	63,638
Note payable	5	330,964	330,964
Short term loans	9	2,282,378	2,304,120
Total Current Liabilities		8,645,695	8,529,030
Stockholders’ Equity
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 5,990,000 and 5,920,000 issued	6
of which Series “A”		2,000	2,000
of which Series “B”		1,000	1,000
of which Series “C”		1,000	1,000
of which Series “D”		1,000	1,000
of which Series “E”		990	920
Common stock, $.001 par value; 100,000,000 shares authorized, 47,900,896 and 46,700,896 shares issued and outstanding	6	47,901	46,701
Additional Paid-In Capital Deficit accumulated during development stage Other Comprehensive Income		36,335,444 (45,283,845) 694,663	36,246,114 (44,854,780) 535,782
Total Stockholders’ Equity		(8,199,847)	(8,020,263)
Total liabilities and stockholders’ equity		445,848	508,767

POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE PERIODS ENDED JUNE 30, 2015 AND 2014

 

	Notes	Three Months ended June 30, 2015		Three Months ended June 30, 2014		Six Months ended June 30, 2015		Six Months ended June 30, 2014
Net Sales		$ -		$ -		$ -		$ -
Cost of Sales		-		-		-		-
Gross margin		-		-		-		-
Material expenses		11,513		12,567		15,743		18,448
General administration		36,212		198,502		162,804		395,612
Research and development	4	-		-		-		-
Personnel expenses		4,610		24,607		19,794		44,413
Depreciation and amortization	5	16,631		29,548		32,789		56,433
Grants received	10	25,197		(61,358)		-		(34,859)
Other expenses, net	12	(6,480)		(127,163)		(12,178)		19,838
Operating expenses		87,683		76,703		218,952		499,885
Profit (Loss) from operations		(87,683)		(76,703)		(218,952)		(499,885)
Interest expense and exchange differences		(125,647)		(158,478)		(210,113)		(246,011)
Profit (Loss) before income taxes		(213,330)		(235,181)		(429,065)		(745,896)
Income taxes		-		-		-		-
Net profit (loss)		(213,330)		(235,181)		(429,065)		(745,896)
Other comprehensive income		39,467		39,507		158,881		113,536
Total comprehensive income		(173,863)		(195,674)		(270,184)		(632,360)
Basic loss per share Diluted loss per share Weighted average number of shares outstanding – Basic Weighted average number of shares outstanding – Diluted		$(0.00) $(0.00)   47,900,896   47,900,896		$(0.00) $(0.00)   46,500,896   46,500,896		$(0.01) $(0.01)   47,443,437   47,443,437		$(0.01) $(0.01)   46,500,896   46,500,896

POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE LOSS

Amounts in USD

 

		Preferred Shares	Common Shares	Stocks Amount		Accumulated Deficit During Developmental Stage	Additional Paid In Capital	Other Comprehensive Income		Total
Balance at December 31, 2014		5,920,000	46,700,896	$52,621		$(44,854,780)	36,246,114	$535,782		$(8,020,263)
Debt conversion			200,000	200			800			1,000
Private placement		70,000		70			49,930			50,000
Issue for services			1,000,000	1,000			38,600			39,600
Currency Translation Adjustment
Net loss for the period						(429,065)		158,881		(270,184)
Balance at June 30, 2015		5,990,000	47,900,896	53,891		(45,283,845)	36,335,444	694,663		(8,199,847)

 

POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF CASH FLOWS

Amounts in USD

		For the period ended June 30, 2015		For the period ended June 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit (loss)		$        (429,065)		$        (745,896)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment of intangibles				-
Issue of shares for services		39,600		-
Issue of shares for research and development		-		-
Change in value of liability from warrant		(39,774)		3,978
Reversal of grant accrual		-		-
Depreciation and amortization		32,789		56,433
		(396,450)		(685,485)
Changes in operating assets and liabilities:
(Increase) Decrease in other current assets		21,283		30,356
(Decrease) Increase in accounts payable and accrued liabilities		224,732		174,576
Net cash used in operating activities		(150,435)		(480,553)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of fixed assets		-		-
Purchase of fixed assets		-		-
Net cash used in investing activities		-		-
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stockholders		-		-
Proceeds from sale of preferred stock		50,000		377,949
Proceeds from sale of common stock		-		-
Proceeds from related party loans		(58,179)		(12,992)
Proceeds from issuance of notes		-		-
Net cash from financing activities		(8,179)		364,957
Effect of exchange rate changes on cash		158,881		113,536
Net (decrease) increase in cash		267		(2,060)
Cash at beginning of period		1,524		22,922
Cash at end of period		$1,791		$20,862
Supplemental disclosure of cash flow information:
Non-cash investing and financing transactions
Issuance of shares for services		$          39,600		$                -
Issuance of shares for liabilities assumed under reverse merger		-		-
Issuance of stock based compensation shares		-		-
Purchase of fixed assets through the assumption of capital lease obligations		-		-
Cash paid for:
Interest		-		-
Taxes		-		-

POWER OF THE DREAMS VENTURES, INC. (formerly TIA V)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED JUNE 30, 2015 AND JUNE 30, 2014

 

NOTE 1 - GENERAL INFORMATION

Power of the Dream Ventures, Inc., f/k/a “Tia V, Inc.” (“PDV” or the “Company”) was incorporated in Delaware on August 17, 2006, with the objective to acquire, or merge with, an operating business.

Reverse merger

PDV entered into and consummated a Securities Exchange Agreement (“Exchange Agreement”) on April 10, 2007. Under the terms of the Exchange Agreement, PDV acquired all the outstanding equity interests of Vidatech, Kft. (also known as Vidatech Technological Research and Development LLC) a limited liability company formed under the laws of the Republic of Hungary, (“Vidatech”) in exchange for 33,300,000 shares of PDV’s common stock, and Vidatech thereby became a wholly-owned Hungarian subsidiary of PDV. PDV is governed by the law of the State of Delaware, and its wholly-owned subsidiary, Vidatech, is governed by the law of the Republic of Hungary. PDV and Vidatech are herein collectively referred to as the “Company.”

Following the acquisition the former stockholders of Vidatech owned a majority of the issued and outstanding common stock of PDV and the management of Vidatech controlled the Board of Directors of PDV and its wholly-owned Hungarian subsidiary Vidatech. Therefore the acquisition has been accounted for as a reverse merger (the “Reverse Merger”) with Vidatech as the accounting acquirer of PDV. The accompanying consolidated financial statements of the Company reflect the historical results of Vidatech, and the consolidated results of operations of PDV subsequent to the acquisition date. In connection with the Exchange Agreement, PDV adopted the fiscal year end of Vidatech as December 31.

All reference to shares and per share amounts in the accompanying consolidated financial statements have been restated to reflect the aforementioned shares exchange.

Business

The Company is engaged in the acquisition, development, licensing and commercialization of and the investment in, directly or through business acquisitions, technologies developed in Hungary. In furtherance of its business, the Company provides research and development services to the companies, inventors from whom it acquires technologies or participation interests in technologies. A goal of the Company is to support research and development activities and to sell the products of inventions to the technological market.

Basis of presentation

The accompanying consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America for financial information have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying financial statements include all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading as of and for the period ended June 30, 2015.

 

 

Going Concern and Management’s Plan

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate the continuation of the Company as a going concern and assume realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses from operations since inception. Management anticipates incurring additional losses in 2015. Further, the Company may incur additional losses thereafter, depending on its ability to generate revenues from the licensing or sale of its technologies and products, or to enter into any or a sufficient number of joint ventures. The Company has minimal revenue to date. There is no assurance that the Company can successfully commercialize any of its technologies and products and realize any revenues therefore. The Company’s technologies and products have never been utilized on a large-scale commercial basis and there is no assurance that any of its technologies or products will receive market acceptance. There is no assurance that the Company can continue to identify and acquire new technologies.

As of June 30, 2015, the Company had an accumulated deficit of $45,283,845 and negative working capital of $(8,565,314). These circumstances raise substantial doubt about the ability of the company to continue as a going concern.

During 2015 the Company raised a total of $50,000 through private placements of preferred stock.

During 2014 and 2013 the Company raised a total of $677,949 and $401,500, respectively through private placements of common and preferred stock. These funds were used to finance operations, to reduce Genetic Immunity debt, and to finance Genetic Immunity’s regulatory process towards a marketing approval application. Additional funds used for these tasks, in the amount of $337,657 were previously provided in the prior years by the director, Peter Boros, who elected in November of 2013 to convert said loan into 1,000,000 shares of our Series D Preferred Stock.

On December 31, 2014 the Company entered into a Promissory Note with a private person provided $22,964, in loans to the Company. The note bears interest at 10%, is due in one year.

On July 28, 2014, on August 4, 2014, and on 14 August, 2014 the Company entered into three Promissory Notes with a private person provided $24,000, $55,000 and $75,000 dollars, respectively, in loans to the Company. The note bears interest at 10%, is due in one year.

 

While the company has had limited success in raising funds to continue operating, it has significant debt and other liabilitiess due with in the next 12 months with no resources available and no specific plans in place to satisfy these liabilities. If the note holders and vendors demand payment when these liabilities come due, we will be unable to meet their demands and will likely be forced to liquidate.

These consolidated financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary as a result of the above uncertainty.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies adopted in preparation of the consolidated financial statements are set out below.

Principles of Consolidation

The consolidated financial statements include the accounts of PDV and its wholly-owned Hungarian subsidiary, Vidatech. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates:

The preparation of the financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect amounts reported herein. Management believes that such estimates, judgments and assumptions are reasonable and appropriate. However, due to the inherent uncertainty involved, actual results may differ from those based upon management’s judgments, estimates and assumptions. Critical accounting policies requiring the use of estimates are depreciation and amortization and share-based payments

Revenue Recognition:

Sales are recognized when there is evidence of a sales agreement, the delivery of the goods or services has occurred, the sales price is fixed or determinable and collectability is reasonably assured, generally upon shipment of product to customers and transfer of title under standard commercial terms. Sales are measured based on the net amount billed to a customer. Generally there are no formal customer acceptance requirements or further obligations. Customers do not have a general right of return on products shipped therefore no provisions are made for return.

Accounts Receivable and Allowance for Doubtful Accounts:

Accounts receivable are stated at historical value, which approximates fair value. The Company does not require collateral for accounts receivable. Accounts receivable are reduced by an allowance for amounts that may be uncollectible in the future. This estimated allowance is determined by considering factors such as length of time accounts are past due, historical experience of write offs, and customers’ financial condition.

Inventories:

Inventories are stated at the lower of cost, determined based on weighted average cost or market. Inventories are reduced by an allowance for excess and obsolete inventories based on management’s review of on-hand inventories compared to historical and estimated future sales and usage.

Fixed assets:

Fixed assets are stated at cost or fair value for impaired assets. Depreciation and amortization is computed principally by the straight-line method. Asset amortization charges are recorded for long lived assets. In the related periods, no asset impairment charges were accounted for. Depreciation is recorded commencing the date the assets are placed in service and is calculated using the straight line basis over their estimated useful lives.

The estimated useful lives of the various classes of long-lived assets are approximately 3-7 years.

Pensions and Other Post-retirement Employee benefits:

In Hungary, pensions are guaranteed and paid by the government or by pension funds, therefore no pensions and other post-retirement employee benefit costs or liabilities are to be calculated and accounted by the Company.

Product warranty:

The Company accrues for warranty obligations for products sold based on management estimates, with support from sales, quality and legal functions, of the amount that eventually will be required to settle such obligations. At June 30, 2015, the Company had no warranty obligations in connection with products sold.

Advertising costs:

Advertising and sales promotion expenses are expensed as incurred.

Research and development and Investment and Advances to Non-Consolidated Entities:

In accordance with ASC 730-10-25 “Accounting for Research and Development Costs,” all research and development (“R&D”) costs are expensed when they are incurred, unless they are reimbursed under specific contracts. Assets used in R&D activity, such as machinery, equipment, facilities and patents that have alternative future use either in R&D activities or otherwise are capitalized. In connection with investments and advances in development-stage technology entities in which the company owns or controls less than a 50% voting interest, (see Note 4) where repayment from such entity is based on the results of the research and development having future economic benefit, the investment and advances are accounted for as costs incurred by the Company as research and development in accordance with ASC 730-20-25 “Research and Development Arrangements”.

Income taxes:

The Company accounts for income taxes in accordance with ASC 740-10-25, “Accounting for Income Taxes”. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are provided against deferred tax assets to the extent that it is more likely than not that the deferred tax assets will not be realized.

Comprehensive Income (Loss):

ASC 220-10-25, “Accounting for Comprehensive Income,” establishes standards for reporting and disclosure of comprehensive income and its components (including revenues, expenses, gains and losses) in a full set of general-purpose financial statements. The items of other comprehensive income that are typically required to be disclosed are foreign currency items, minimum pension liability adjustments, and unrealized gains and losses on certain investments in debt and equity securities. Accumulated other comprehensive income, at June 30, 2015 is $694,663.

Translation of Foreign Currencies:

The U.S. dollar is the functional currency for all of the Company’s businesses, except its operations in Hungary. Foreign currency denominated assets and liabilities for this unit is translated into U.S. dollars based on exchange rates prevailing at the end of each period presented, and revenues and expenses are translated at average exchange rates during the period presented. The effects of foreign exchange gains and losses arising from these translations of assets and liabilities are included as a component of equity, under other comprehensive income.

Loss per Share:

Under ASC 260-10-45, “Earnings Per Share”, basic loss per common share is computed by dividing the loss applicable to common stockholders by the weighted average number of common shares assumed to be outstanding during the period of computation. Diluted loss per common share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Accordingly, the weighted average number of common shares outstanding for the periods ended June 30, 2015 and 2014, respectively, is the same for purposes of computing both basic and diluted net income per share for such years. For the periods ended June 30, 2015 and 2014, all potential shares of common stock were excluded from diluted EPS as their effect would be anti-dilutive.

The Company currently has the following convertible securities issued and outstanding:

-

1,000,000 Shares of our Series B Preferred Stock used for the Genetic Immunity acquisition, convertible into 40 shares of common stock per each Series B preferred, or a total of 40,000,000 common shares on a fully converted basis, beginning on January 1, 2014.

-

1,000,000 Shares of our Series C Preferred Stock convertible into 20 shares of common stock per each Series C preferred, or a total of 20,000,000 common stock on a fully converted basis.

-

1,000,000 Shares of our Series D Preferred Stock convertible into 2 shares of common stock per each Series D preferred, or a total of 2,000,000 common stock on a fully converted basis.

-

1,045,000 Shares of our Series E Preferred Stock convertible into 10 shares of common stock per each Series E preferred, or a total of 10,450,000 common stock on a fully converted basis.

-

And we have one Warrant outstanding, convertible into 3,977,386 Shares of our common stock on a fully converted basis.

Business Segment:

ASC 280-10-45, “Disclosures About Segments of an Enterprise and Related Information,” establishes standards for the way public enterprises report information about operating segments in annual consolidated financial statements and requires reporting of selected information about operating segments in interim financial statements regarding products and services, geographical areas and major customers. The Company has determined that under ASC 280-10-45, there are no operating segments since substantially all business operations, assets and liabilities are in Hungarian geographic segment.

Share-Based Payments:

In accordance with ASC 718-10 “Share-Based Payment” all forms of share-based payment (“SBP”) awards including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights result in a cost that is measured at fair value on the awards’ grant date, based on the estimated number of awards that are expected to vest. As the Company did not issue any employee SBP prior to September 30, 2007, there is no compensation cost recognized in the accompanied consolidated financial statements.

The Company accounts for equity instruments issued to non-employees in accordance with the provisions of ASC 505-50, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” which requires that such equity instruments are recorded at their fair value on the measurement date. The measurement of stock-based compensation is subject to periodic adjustment as the underlying equity instrument vests. Non-employee stock-based compensation charges are amortized over the vesting period or period of performance of the services.

Recent Accounting Pronouncements:

On June 13, 2014, the FASB issued ASU 2014-10 ( “Elimination of Certain Financial Reporting Requirements, including an Amendment to Variable Interest Entities Guidance in ASC Topic 810, Consolidation”) to eliminate the concept of a development stage entity (“DSE”) from U.S. GAAP. This change rescinds certain financial reporting requirements that have historically applied to DSEs and is intended to result in cost-savings for affected entities, such as certain start-up or research and development entities. In addition, ASU 2014-10 introduces new disclosure requirements about the reporting entity’s risks and uncertainties. ASU 2014-101 is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2014 with an option for the early adoption. The Company adopted this standard on January 1 and has removed all references and disclosures related to its development stage.

In August 2014, the Financial Accounting Standards Board (‘‘FASB”) issued Accounting Standards Update (“ASU”) 2014- 15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern , which defines management’s responsibility to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures if there is substantial doubt about its ability to continue as a going concern. The pronouncement is effective for annual reporting periods ending after December 15, 2016 with early adoption permitted. The Company is currently evaluating the impact that this standard will have on its financial statements.

There were various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.

NOTE 3 - OTHER RECEIVABLES

 

		June 30, 2015				December 31, 2014
Taxes reclaimable		$	9,427			$	39,570
Advances given			51,832				40,840
Other			—				638
Total		$	61,259			$	81,048

 

Given advances contain advances to lawyers on the legal case of Genetic Immunity on its legal case in progress. The Company accounted for impairment on advances given in the amount of $141,889 during 2015 and 2014.

Also, advances given presents advances on rental of offices amounting to $13,885 (presented among tax reclaimable in prior period amounting to $30,093).

NOTE 4 - INTANGIBLES AND FIXED ASSETS

Intangibles and Net property and equipment consisted of the followings at June 30, 2015 and December 31, 2014:

		Intangibles	Machinery and other equipments	Vehicles		Total Net property and equipment
Gross book value
at December 31, 2013		30,612,186	677,434	327,781		1,005,215
Additions		-	-	-		-
Impairments		(29,570,912)	-	-		-
Change in FX rates		(154,878)	(133,832)	(55,378)		(189,210)
at December 31, 2014		886,396	543,602	272,403		816,005
Additions
Disposals
Change in FX rates		(14,867)	(41,807)	(21,605)		(63,412)
at June 30, 2015		871,529	501,795	250,798		752,593
Accumulated depreciation and amortization
at December 31, 2013		556,805	547,769	268,252		816,021
Additions		49,004	45,806	-		45,806
Disposals		-	-	-		-
Change in FX rates		(34,740)	(92,544)	(45,321)		(137,865)
at December 31, 2014		571,069	501,031	222,931		723,962
Additions		17,571	14,824	-		14,824
Disposals
Change in FX rates		(11,351)	(39,739)	(17,681)		(57,420)
at June 30, 2015		577,289	476,116	205,250		681,366
Net book values at
December 31, 2013		30,055,381	129,665	59,529		189,194
December 31, 2014		315,327	42,571	49,472		92,043
June 30, 2015		294,240	25,679	45,548		71,227

 

 

NOTE 4 - INTANGIBLES AND FIXED ASSETS

The net book value of fixed assets under capital lease amount to $45,548 and $49,472 at June 30, 2015 and at December 31, 2014, respectively.

 

The Patent intangible was acquired with the acquisition of Genetic Immunity in October, 2012. The patents are associated with Dermavir, the company’s drug candidate for a therapeutic HIV viaccine.

While the company continues to believe that the value of the patents associated with DermaVir will be recoverable through the eventual marketing and sale of DermaVir, it was determined that due to the continued limited success in raise the necessary amount of capital to bring DermaVir or any other product to market, the Company’s previous cash flow projections, as well as the discount rate used in the estimate of fair value, needed to be revised to reflect the uncertainty as to whether the Company will ultimately realize any cash flows from these patents. As a result, the Company recognized an impairment charge of $29,570,912 in 2014 related to our acquired patent intangibles.

NOTE 5 - NOTE PAYABLE

 

Mary Passalaqua

On April 10, 2007, in connection with reverse merger (See Note 1), the Company assumed a note payable of $250,000 to a former stockholder, Mary Passalaqua originally with one year maturity at April 5, 2008. The note has been expanded by one year to April 5, 2009 with the same conditions. As such note payable was issued immediately prior to the reverse merger, such issuance was recorded as additional compensation by the Company prior to the reverse merger. The note has been partially satisfied through a combination of cash and stock and the balance as of June 30, 2015 is $105,000 plus accrued interest. The note was due on December, 2012.

 

Infinite Funding

On July 19, 2011 the Company entered into a Promissory Note with Infinite Funding, Inc whereby Infinite Funding provided $49,000 dollars in loans to the Company. The Note bears interest at 12% per annum. The loan was due on December 2012.

On March 16, 2011 the Company entered into a Convertible Promissory Note with Infinite Funding LLC whereby Infinite Funding provided $76,000 dollars in loans to the Company. The note bears interest at 10%, is due December 5, 2011, and is convertible into shares of common stock at a conversion price of $0.05. On December 4, 2011 the Company received an extension to this note to December 31, 2012. On September 30, 2012, the loan was converted into 1,900,000 common stocks at a conversion price of $0.04 per share.

 

Other loans

On December 31, 2014 the Company entered into a Promissory Note with a private person provided $22,964, in loans to the Company. The note bears interest at 10%, is due in one year.

On July 28, 2014, on August 4, 2014, and on 14 August, 2014 the Company entered into three Promissory Notes with a private person provided $24,000, $55,000 and $75,000 dollars, respectively, in loans to the Company. The note bears interest at 10%, is due in one year.

 

All notes are due within one year and have been classified within current liabilities on our balance sheet. While none of the noteholders have demanded payment as of June 30, 2015, such a demand could not currently be met by the company and could force the company to liquidate.

 

NOTE 6 - STOCKHOLDERS’ EQUITY

 

On October 2, 2012 the Company acquired Genetic Immunity, Inc., a US corporation domiciled in the state of Delaware. Genetic Immunity is an immunotherapeutic vaccine company whose lead product candidate DermaVir has passed Phase II clinical trials.

 

Through the acquisitions Genetic Immunity became 100% wholly owned subsidiary. The acquisition was completed for 1,000,000 shares of Series B Preferred stock, convertible into 40 million shares of common stock beginning on January 1, 2014.

 

On October 26, 2011 the Company entered into an equity exchange agreement with each of Messrs. Viktor Rozsnyay and Daniel Kun, Jr. Mr. Rozsnyay is President, CEO and Chairman of the Board of Directors of the Company and Mr. Kun is its Vice-President. Each Agreement is identical and provides in summary form as follows: each of Messrs. Rozsnyay and Kun will deliver twelve million (12,000,000) shares of their shares of common stock of the Company to the Company for cancellation immediately. The Exchange Shares so delivered were returned to the treasury of the Company as unauthorized shares of common stock to be available for subsequent issuance. In return for the surrender of the Exchange Shares, the Company issued and deliver two million (2,000,000) restricted shares of a new class of Series A Preferred shares, 1,000,000 shares each to Mr. Rozsnyay and Mr. Kun.

Private placements

 

During May 2015, pursuant to a private placement under Regulation D of the Securities Act of 1933, as amended, the Company sold a total of 70,000 shares of its Series E Preferred Stock to two unaffiliated private investors for aggregate proceeds of $50,000.

 

On November 28, 2014, pursuant to a private placement under Regulation D of the Securities Act of 1933, as amended, the Company sold a total of 170,000 shares of its Series E Preferred Stock to five unaffiliated private investors for aggregate proceeds of $165,600.

 

In September, 2014, pursuant to a private placement under Regulation D of the Securities Act of 1933, as amended, the Company sold a total of 300,000 shares of its Series E Preferred Stock to seven unaffiliated private investors for aggregate proceeds of $300,000.

 

On May 28, 2014, pursuant to a private placement under Regulation D of the Securities Act of 1933, as amended, the Company sold a total of 200,000 shares of its Series E Preferred Stock to two unaffiliated private investors for aggregate proceeds of $100,000.

 

On April 28, 2014, pursuant to a private placement under Regulation D of the Securities Act of 1933, as amended, the Company sold a total of 100,000 shares of its Series C Preferred Stock to one unaffiliated private investor for aggregate proceeds of $27,949.

 

On April 7, 2014, pursuant to a private placement under Regulation D of the Securities Act of 1933, as amended, the Company sold a total of 50,000 shares of its Series E Preferred Stock to one unaffiliated private investor for aggregate proceeds of $50,000.

 

On February 19, 2014, pursuant to a private placement under Regulation D of the Securities Act of 1933, as amended, the Company sold a total of 200,000 shares of its Series E Preferred Stock to two unaffiliated private investors for aggregate proceeds of $200,000. The holders of Series E Preferred Stock are entitled to receive dividends equal to the amount that would be received if each one share of Series E Preferred stock was fully converted into twelve and one half shares of the common stock. Each one share of the Series E Preferred has voting rights equal to five votes of common Stock. Each share of Series E Preferred stock is convertible into 10 shares of common stock.

 

 

On November 1, 2013, pursuant to a private placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 1,000,000 shares of its Series D preferred stock to one affiliated private investor, Peter Boros, Director of the company, for aggregate proceeds of $337,653. This amount was previously provided to the company by Mr. Boros as a loan, and on November 1 Mr. Boros elected to convert this loan into aforementioned preferred stock. The Series D preferred stock is convertible into 2,000,000 shares of common stock on a fully converted basis. No special redemption rights.

 

On October 17, 2013, pursuant to a private placement under Regulation D of the Securities Act of 1933, as amended, the Company sold a total of 250,000 shares of its Series C Preferred Stock to one unaffiliated private investors for aggregate proceeds of $75,000.

 

On September 26, 2013, pursuant to a private placement under Regulation D of the Securities Act of 1933, as amended, the Company sold a total of 650,000 shares of its Series C Preferred Stock to two unaffiliated private investors for aggregate proceeds of $195,000.

 

On September 25, 2013, pursuant to a private placement under Regulation D of the Securities Act of 1933, as amended, the Company sold a total of 1,000,000 shares of its common stock to one unaffiliated private investors for aggregate proceeds of $80,000.

 

Series C Preferred Stocks can be converted with a completed form of conversion notice into 20 shares of common stock. The holders of Series C Preferred shall be entitled to receive dividends on a fully converted basis. Each one share of Series C Preferred shall be entitled to the dividend granted to each one share of common stock multiplied by twenty. Dividends on Series C Preferred must be delivered and paid to the holders not later than five business days after each specified payment date of the dividend.

 

On May 9, 2013, pursuant to a private placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 100,000 shares of its common stock at $0.035 per share to an unaffiliated private investor for aggregate proceeds of $3,500.

 

On April 3, 2013, pursuant to a private placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 1,400,000 shares of its common stock at $0.035 per share to an unaffiliated private investor for aggregate proceeds of $49,000.

Consulting agreements

On March 10, 2015, the Company issued a total of 1,000,000 shares of restricted our common stock to one unaffiliated entity, Berlini Kft in liu of payment of Geentic Immunity’s laboratory facilities.

Also on March 10, 2015, the Company issued a total of 200,000 shares of restricted our common stock to the Company’s Transfer Agent, Fidelity Transfer Company, for services rendered.

 

In connection with a stand-by equity agreement entered into in 2008, the company issued warrants that were later sold by the original warrantholder to Bluestar Consulting.

 

Bluestar Consulting now has the right to acquire, on or before October 8, 2013, 3,977,386 shares of common stock at a per share exercise price of $0.10. The terms of the warrants are such that the exercise price was lowered due to a subsequent round of financing, from $0.29 per share to the price the subsequent investors paid, $0.10 per share. This down round protection feature causes the warrant to fail the criteria in ASC 815-40-15-7 (EITF 07-5) which would permit them to be classified as equity.  Consequently, the warrants are recorded at fair value and classified as liabilities and marked to fair value each period. The warrant is extended to October 8, 2018.

 

 

The fair value of the liability using Black-Scholes valuation at June 30, 2015 is $23,864, which is classified at short term liabilities. The fair value of the liability is established as a Level 3 fair value measurement. The following table shows the movement in fair value along with the change of warrant conditions:

 

June 30, 2015		Book value				Fair value
Financial liabilities
Liabilities measured at fair value			23,864				23,864

  

December 31, 2014		Book value				Fair value
Financial liabilities
Liabilities measured at fair value			63,638				63,638

 

Fair value of warrant per share				June 30, 2015				December 31, 2014
	Per share			$	0.006			$	0.016

 

The inputs used in fair value estimation are:

 

current share price at June 30, 2015: $0.04

exercise price $0.10

expected time to expiry (years): 3.5

risk free rate 3.25 (FED prime rate)

expected dividend yield: 0

volatility: 50%

The change in the amount of warrant liability is accounted as other expense.

 

Reconciliation of warrant valuation:

 

Balance at December 31, 2014: $63,638

Decrease in fair value of share (39,774)

Balance at June 30, 2015: $23,864

NOTE 7 - ACCOUNTS PAYABLE, ACCRUED AND OTHER LIABILITIES

		June 30, 2015				December 31, 2014
Accounts payable and accrued expenses		$	1,910,296			$	1,672,947
Interest accruals			2,891,047				2,792,202
Total		$	4,801,343			$	4,465,149

 

In 2007, Genetic Immunity conducted a US$2.0 million convertible debenture bridge in anticipation of a reverse merger which was not consummated due to then current economic and market conditions. The debenture was due August 2009. The US$1.1 million in face value of debentures was purchased by a fund operating under the Small Business Investment Company (“SBIC”) which has since been put into receivership with the U.S. Small Business Administration (the “SBA”). The remaining US$900,000 of face value of the debenture is held by individuals. The debenture holders have liens on certain intellectual property of the Company. Because there is significant know how associated with the intellectual property, the involvement of the Company's management team and scientific team is necessary to commercialize the intellectual property.

In 2013, the Company accounted for the late payment interest for the Bridge loan (18%) which increased the accrued interest liability significantly, along with the interest expenses.

NOTE 8 - GRANTS RECEIVED

During 2007 and 2008, Genetic Immunity gained several government grants from the Hungarian state in order to finance the research and development projects. The grants are payable in arrears to 4 projects of the Company: DERMAVI_, DVCLIN01, FIBERSC2 and WINGS. The Company accrued for the grants received and it is reversed to the income statement along with the occurrence of the related expenses. Grants are payable in accordance with the milestone, not annually. Audited financial statements had to be disclosed to State Office as settlement of each milestone. Theses audits have been performed by the statutory auditor of the Hungarian Subsidiary. WINGS is an EU FP7 international consortium grant financed by the European Union.

DERMAVI_ is successfully closed in 2009. DVCLIN01 supported the Phase II clinical development of DermaVir. This grant was closed at the end of 2013. FIBERSC2 supports the investigation of DermaVir mechanism of action with novel fiber integrated microscopy. Originally scheduled for completion in February of 2014, this grant has been extended to August of 2014. WINGS supports the development of West Nile Virus vaccine with DermaVir technology. The grant ended in February of 2014, the Company has filed the required closing documents, this grant has been closed, the related liability is released at the official close at year end.

NOTE 9 - SHORT TERM LOANS

 

		June 30, 2015				December 31, 2014
Bridge Loan		$	2,000,000			$	2,000,000
RIGHT loan			231,095				274,120
Loans from private persons			21,283				—
Bryan Sanders loan			30,000				30,000
Total			2,282,378				2,304,120

 

 

Bridge Loan

 

On August 29, 2007, the Company entered into a Bridge Loan agreement as a Senior Secured Convertible Debenture for an amount of $2,000,000. The loan providers are the followings:

 

 

 

 

 

 

 

 

Name	Bridge Amount
SBIC Investors
Trident	$1,100,000
Non-SBIC Investors
Andy Browder	25,000
Proto Investments	250,000
Ford Sasser	25,000
Danny Vela	25,000
Steve Walton	150,000
Hilton Wilson	25,000
Will Wilson	250,000
Rodman & Renshaw	150,000
	$2,000,000

 

The loan bears an annual interest rate of 12%. According to the loan agreement, the Company settles the loan principal on the earlier of August 29, 2009 or consummation of a qualifying transaction other than reverse merger effected by the Company in completion of or in connection with a Public Offering. In case of late payment, the Company is liable to pay 18% late interest fee. The accumulated interest payable, along with the late payment interest is accrued in accrued expenses (see Note 6).

As of the printing of this document, the US$1.1 million in face value of debentures has been put into receivership with the U.S. SBA. The debenture holders have liens on certain intellectual property of the Company. Because there is significant know how associated with the intellectual property, the involvement of the Company's management team and scientific team is necessary to commercialize the intellectual property.

NOTE 10 - OTHER EXPENSES

Other expenses include the revaluation of liability for warrants for Bluestar Consulting in the amount of $39,774.

NOTE 11 - SUBSEQUENT EVENTS

 

None.

NOTE 12 - CONTINGENCIES

 

The Company’s wholly-owned subsidiary, Genetic Immunity, has initiated a lawsuit against the National Development Agency of Hungary. In 2009, Genetic Immunity successfully applied for and won an 800 million Hungarian forint (approximately $4,000,000) research grant to conduct dust mite allergy vaccine research. Subsequently, the agency refused to sign the grant and denied payment of funds. The company initiated a lawsuit to request that the court reinstate the contract that resulted in a grant award. On February 13, 2013, an appeals court ruled that the court could not reinstate the contract between Genetic Immunity and the National Development Agency as the contract has been validly in existence since its original execution in 2009. As such Genetic Immunity was ordered to pay 52,500,000 HUF (approximately $250,000) in lawsuit costs. However, simultaneously, the judgment stated that the company is entitled to receive the original grant amount, interest payment and/or damages since the original grant contract is valid. On February 18, 2013, the Company filed a new petition to have the courts establish the damages and awards that Genetic Immunity can receive based on the appeals court’s ruling. The Company is currently seeking 4,800,000,000 HUF (approximately $20 million) for damages sustained. On November 18, 2013, the Company has entered into a six month suspension of said lawsuit, as agreed with the government, in hopes of negotiating an out of court settlement. After the lapse of our six month suspension we once again resumed the trial. As ofMay 14, 2015 we are awaiting the next trial date to be set, anticipated to be in September of 2015, following the judiciary recess. We hope that at this new court event a final resolution will be agreed on and this case will be settled by the end of 2015.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

This quarterly report on Form 10-Q and other reports filed by Power of the Dream Ventures, Inc. (the “Company”) from time to time with the SEC contain or may contain forward-looking statements and information that are (collectively, the “Filings”) based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks contained in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the SEC, relating to the Company’s industry, the Company’s operations and results of operations, and any businesses that the Company may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

 

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this report.

 

OVERVIEW

 

We currently focus on enabling the operations of our wholly-owned subsidiary, Genetic Immunity, a Phase III clinical-stage biotechnology company focused on the discovery, development and commercialization of a new class of immunotherapeutic biologics ("Immune Therapies" or "Therapeutic Vaccines") for the treatment of chronic viral infections, cancer and allergy. Our Immune Therapies are designed to intensify or boost specific immune responses to modify or control these presently incurable diseases.

 

Plan of Operation

 

We are one of Hungary’s technology holding companies. We identify, invest in and acquire technologies originating in Hungary we deem to be internationally marketable. We currently hold equity interest in iGlue, Inc. a U.S. public company. Through our wholly owned subsidiary, Genetic Immunity, a biotechnology company we acquired in October of 2012, we now focus on the commercialization tasks related to Genetic Immunity’s lead product candidate DermaVir, a therapeutic HIV vaccine.

 

We are looking to generate revenue through the sale of Genetic Immunity’s Therapeutic Vaccines upon U.S., European and global marketing approvals, and through the sale of our equity interest in iGlue, Inc.

 

We believe we can raise sufficient additional financing through the sale of our common stock to allow us to continue operations and execute our business plan in the next 12 months. Should the need arise, we plan to raise additional funds, both from U.S. and international investors. We believe that through the acquisition of Genetic Immunity and the company’s lead product candidate DermaVir, we will be in a position to start generating revenue in 2015. We believe that our ownership of one of the world’s first, clinically proven, therapeutic HIV vaccines will prove attractive to both private and institutional investors, making fundraising a less strenuous process than before.

 

If necessary, we intend to raise additional capital in a manner that is the least dilutive to our shareholders yet at the same time serves our development, commercialization and operating needs. We anticipate one round of fundraising in 2015 as we move closer to commercializing DermaVir. By the end of 2015, we plan to seek conditional marketing approval for DermaVir in the European Union. At the same time we are currently working on submitting all required documentation to the US Food and Drug Administration to receive guidance on US approval.

 

Even though we believe our public status will allow us to raise additional capital, if needed, no assurance can be given that we can in fact obtain additional working capital, or if obtained, that such funding will not cause substantial dilution to shareholders of the Company. If we are unable to raise additional funds, we may be forced to change or delay our contemplated marketing and business plan.

 

By the end of 2015 we anticipate spending approximately $2,000,000 on DermaVir’s regulatory approval, commercialization and general administrative expenses. We believe these funds will become available to us from proceeds obtained from our lawsuit against the Hungarian Development Agency and from the sale of our common or preferred stok, if necessary.

 

Upon regulatory approval of DermaVir, we anticipate making substantial equipment purchases to expand GMP manufacturing and to increase our work force to fully implement commercialization tasks.

 

If we are unable to raise additional financing there is substantial doubt about our ability to continue as a going concern. The condensed consolidated financial statements included elsewhere in this prospectus do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary as a result of the above uncertainty.

 

Results of Operations

 

For the Six Months Ended June 30, 2015 Compared to the Six Months Ended June 30, 2014:

 

 

		For the Six Months Ended June 30								Increase/
		2015				2014				Decrease
Net sales		$	-				-				-
Gross profit		$	-				-				-
General and administrative expenses		$	162,804				395,612				(232,808)
Profit (Loss) from operations		$	(218,952)				(499,885)				280,933
Interest Expenses and Exchange Gains		$	(210,113)				(246,011)				35,898
Net profit (loss)		$	(429,065)				(745,896)				316,831

 

Revenue

For the six months ended June 30, 2015 and 2014, the Company had no revenues.

 

 

 

General, selling and administrative expenses

For the six months ended June 30, 2015, general, selling and administrative expenses were $162,804 as compared to $395,612 for the six months ended June 30, 2014. The decrease in general, selling and administrative expenses is attributable reduced spending attributed to Dermavir regulatory activites.

 

Personal expenses

For the six months ended June 30, 2015, personal expenses were $19,794 as compared to $44,413 for the six months ended June 30, 2014. The decrease in personal expenses is due to the decrease in headcount of Genetic Immunity.

Loss from Operations

Loss from operations for the six months ended June 30, 2015 and 2014 was $218,952 and $499,885, respectively. The primary decrease in loss from operations is attributable to the decrease of general administration expenses.

Net Profit (Loss)

The net loss for the six months ended June 30, 2015 and 2014 was $429,065 and $745,896, respectively.

 

For the Three Months Ended June 30, 2015 Compared to the Three Months Ended June 30, 2014:

 

		For the Three Months Ended June 30								Increase/
		2015				2014				Decrease
Net sales		$	-				-				-
Gross profit		$	-				-				-
General and administrative expenses		$	36,212				198,502				(162,290)
Profit (Loss) from operations		$	(87,683)				(76,703)				(10,980)
Interest Expenses and Exchange Gains		$	(125,647)				(158,478)				32,831
Net profit (loss)		$	(213,330)				(235,181)				21,851

 

Revenue

For the three months ended June 30, 2015 and 2014, the Company had no revenues.

 

General, selling and administrative expenses

For the three months ended June 30, 2015, general, selling and administrative expenses were $36,212 as compared to $198,502 for the three months ended June 30, 2014. The decrease in general, selling and administrative expenses is attributable reduced spending attributed to Dermavir regulatory activities.

 

Personal expenses

For the three months ended June 30, 2015, personal expenses were $4,610 as compared to $24,607 for the three months ended June 30, 2014. The decrease in personal expenses is due to the decrease in headcount of Genetic Immunity.

 

Loss from Operations

Loss from operations for the three months ended June 30, 2015 and 2014 was $87,683 and $76,703, respectively. The primary increase in loss from operations is attributable to Conferene fees attributed to Deramvir pharmaceutical partner search.

Net Profit (Loss)

The net loss for the three months ended June 30, 2015 and 2014 was $213,330 and $235,181, respectively.

 

Liquidity and Capital Resources

 

The following table summarizes total current assets, liabilities and working capital at June 30, 2015, compared to December 31, 2014:

 

		June 30, 2015				December 31, 2014				Increase/Decrease
Current Assets		$	80,381			$	101,397			$	(21,016	)
Current Liabilities		$	8,645,695			$	8,529,030			$	116,665
Working Capital (Deficit)		$	(8,565,314	)		$	(8,427,633	)		$	137,681

 

At June 30, 2015, we had a working capital deficit of $8,565,314, as compared to a working capital deficit of $8,427,633, at December 31, 2014, an increase of $137,681. The increase in the working capital deficit is primarly attributable to higher accounts payable, mainly due to interest accruals.

 

Net cash used in operating activities for the six months ended June 30, 2015 and 2014, was $150,435 and $480,553 respectively.

 

Equity position in iGlue, Inc.

 

We currently own a minority stake in iGlue, Inc. (“iGlue”), a development stage internet search and content organizer software company trading on the OTCQB exchange in the United States. We financed iGlue’s development efforts from August 2, 2007 (date of inception) to November 3, 2011 when iGlue went public. We still hold 2,884,986 shares of iGlue’s common stock and warrants to purchase a total of three million addition shares. The market value of our iGlue common stock at June 30, 2015 was $34,619, book value of the investment is $0.

 

Description of our Business and Properties

 

Through our Vidatech subsidiary, we provide pro-active support for idea, research, start-up and expansion-stage technology companies having rights to technologies or intellectual properties which we believe to be potentially commercially viable, by offering a range of services designed to encourage and protect the continuing development and eventual commercialization of those technologies.

 

Our focus will be on technologies and technology companies based in the Republic of Hungary. We believe that the availability of technologies for purchase or license, coupled with the lack of sufficient investment capital for such technologies in Hungary, present us with an opportunity to acquire technologies on terms and conditions that we deem advantageous

 

Our strategy is to acquire majority interests in technologies through, among other things, direct investment in start-up and expansion stage technologies and technology companies; cooperative research and development agreements with such companies; direct licensing agreements; joint venture arrangements; or, direct acquisition of technologies and intellectual properties.

 

We also intend to provide services to assist in:

 

- The design of, research of, building of and testing of prototypes;

- facilitation of preparation of filing and prosecution of patent applications with Hungarian patent attorneys;

- business structuring;

- financing of research and development activities;

- the exposure of the technology to international markets; and

- the commercialization and/or sale of the subject technology.

 

We expect to obtain a majority participation interest in any given transaction involving idea, research, seed, start-up, early stage, technologies.

 

Genetic Immunity

 

Through our wholly-owned subsidiary, Genetic Immunity, a Phase II clinical-stage biotechnology company, we focus on developing, regulatory approval subsequent commercialisation of a new class of immunotherapeutic biologics ("Immune Therapies") for the treatment of chronic viral infections, cancer and allergy. Our Immune Therapies are designed to intensify or boost specific immune responses to modify or control these presently incurable diseases. We focus on completing clinical trial programs as needed and on commercialization tasks related to the Company’s lead product candidate DermaVir therapeutic HIV vaccine.

 

As part of this process we are looking to submit a Conditional Marketing Approval request to the European Medicines Agency by the end of 2015, after we reach a definitive marketing approval path with the US FDA. We are currently working with our regulatory experts on providing the US Food and Drug Administration with all our our clinical trial data in order to receive guidance from the agency on marketing approval pathways.

 

Going Concern and Management’s Plan

 

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate the continuation of the Company as a going concern and assume realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses from operations since inception. Management anticipates incurring additional losses in 2014. Further, the Company may incur additional losses thereafter, depending on its ability to generate revenues from the licensing or sale of its technologies and products, or to enter into any or a sufficient number of joint ventures. The Company has minimal revenue to date. There is no assurance that the Company can successfully commercialize any of its technologies and products and realize any revenues therefrom. The Company’s technologies and products have never been utilized on a large-scale commercial basis and there is no assurance that any of its technologies or products will receive market acceptance. There is no assurance that the Company can continue to identify and acquire new technologies.

 

Since inception through June 30, 2015, the Company had an accumulated deficit of $45,283,845.

Management believes the Company has adequate capital to keep the Company functioning through June 30, 2016. As discussed in contingencies, the Company anticipates receiving funds from the Hungarian state pursuant to the lawsuit it has filed to recover the awards granted to the Company plus damages. Also, additional fund raisings are in progress. However, the Company cannot guarantee that any amount from the lawsuit will be recoverable nor that any fund raising activities will be successful. The need may arise, in the normal course of business, to raise additional capital if we want to accelerate development work, for the acquisition of additional technologies, or to meet unforeseen financial needs. No assurance can be given that the Company can obtain additional working capital, or if obtained, that such funding will not cause substantial dilution to shareholders of the Company. If the Company is unable to raise additional funds, if needed, it may be forced to change or delay its contemplated marketing and business plan. Being a development stage company, the Company is subject to all the risks inherent in the establishment of a new enterprise and the marketing and manufacturing of a new product, many of which risks are beyond the control of the Company. All of the factors discussed above raise substantial doubt about the Company’s ability to continue as a going concern.

 

 

The unaudited condensed consolidated financial statements included in this Form 10-Q do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary as a result of the above uncertainty.

 

Other than the recently completed private placement all of our funding to date has been generated from loans from our officers and directors. During the next twelve months we anticipate that we will have sufficient funding to pursue the regulatory pathway needed to achieve marketing or conditional marketing approval(s) for Genetic Immunity’s DermaVir HIV vaccine.

 

We currently have no other arrangements for financings and can give you no assurance that such financings will be available to us when required or on terms that we deem acceptable or at all.

 

Critical Accounting Estimates and Policies

 

This discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements that have been prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP"). This preparation requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. US GAAP provides the framework from which to make these estimates, assumption and disclosures. We chose accounting policies within US GAAP that management believes are appropriate to accurately and fairly report our operating results and financial position in a consistent manner. Our management regularly assesses these policies in light of current and forecasted economic conditions. Accounting policies that our management believes to be critical to understanding the results of our operations and the effect of the more significant judgments and estimates used in the preparation of the condensed consolidated financial statements are as those described in the Company’s Current Report on Form 8-K filed with the SEC on April 16, 2007 for the year ended December 31, 2006 and as amended on August 30, 2007.

 

Research and Development:

 

In accordance with ASC 730-10-25, "Accounting for Research and Development Costs," all research and development ("R&D") costs are expensed when they are incurred, unless they are reimbursed under specific contracts. Assets used in R&D activity, such as machinery, equipment, facilities and patents that have alternative future use either in R&D activities or otherwise are capitalized. In connection with the investment and advances in subsidiary, associate or other entity where repayment from such subsidiary, associate or entity solely on the results of the research and development having future economic benefit, the investment and advance is accounted for as costs incurred by the Company as research and development in accordance with ASC 730-20-25 "Research and Development Arrangements."

 

Share-Based Payment:

 

In accordance with ASC 718-10 “Share-Based Payment” all forms of share-based payment (“SBP”) awards including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights result in a cost that is measured at fair value on the awards’ grant date, based on the estimated number of awards that are expected to vest.

 

The Company accounts for equity instruments issued to non-employees in accordance with the provisions of ASC 505-50, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” which requires that such equity instruments are recorded at their fair value on the measurement date. The measurement of stock-based compensation is subject to periodic adjustment as the underlying equity instrument vests. Non-employee stock-based compensation charges are amortized over the vesting period or period of performance of the services.

 

 

Recent Accounting Pronouncements

 

On June 13, 2014, the FASB issued ASU 2014-101( “Elimination of Certain Financial Reporting Requirements, including an Amendment to Variable Interest Entities Guidance in ASC Topic 810, Consolidation”) to eliminate the concept of a development stage entity (“DSE”) from U.S. GAAP. This change rescinds certain financial reporting requirements that have historically applied to DSEs and is intended to result in cost-savings for affected entities, such as certain start-up or research and development entities. In addition, ASU 2014-10 introduces new disclosure requirements about the reporting entity’s risks and uncertainties. ASU 2014-101 is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2014 with an option for the early adoption. The adoption of the standard will not have a material impact on our financial position or results of operations.

 

In August 2014, the Financial Accounting Standards Board (‘‘FASB”) issued Accounting Standards Update (“ASU”) 2014- 15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern , which defines management’s responsibility to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures if there is substantial doubt about its ability to continue as a going concern. The pronouncement is effective for annual reporting periods ending after December 15, 2016 with early adoption permitted. The adoption of this guidance is not expected to have a material impact on the Company’s financial statements.

 

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.

 

Inflation and Foreign Currency

 

We maintain our books in local currency: US Dollars for the parent holding company and Gentic Immunity, Inc. in the United States of America and Hungarian Forint for Vidatech and Genetic Immunity, Kft. in Hungary.

 

Our operations are conducted primary outside of the United States through our wholly owned subsidiary. As a result, fluctuations in currency exchange rates may significantly affect our sales, profitability and financial position when the foreign currencies, primarily the Hungarian Forint, of its international operations are translated into U.S. dollars for financial reporting. In additional, we are also subject to currency fluctuation risk with respect to certain foreign currency denominated receivables and payables.

 

Although we cannot predict the extent to which currency fluctuations may or will affect our business and financial position, there is a risk that such fluctuations will have an adverse impact on our sales, profits and financial position. Because differing portions of our revenues and costs are denominated in foreign currency, movements could impact our margins by, for example, decreasing our foreign revenues when the dollar strengthens and not correspondingly decreasing our expenses. We do not currently hedge our currency exposure. In the future, we may engage in hedging transactions to mitigate foreign exchange risk.

 

The translation of our subsidiary’s Forint denominated balance sheets into U.S. dollars, as of June 30, 2015, has been affected by the strenghtening of the U.S. dollar against the Hungarian Forint from 259,55 HUF/USD as of December 31, 2014, to 281,91 HUF/USD as of June 30, 2015, an approximate 9% increase in value. The average Hungarian Forint/U.S. dollar exchange rates used for the translation of the subsidiaries’ forint denominated statements of operations into U.S. dollars, for the six months ended June 30, 2015 and 2014 were 276,36 and 225,86, respectively.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

We do not hold any derivative instruments and do not engage in any hedging activities.

 

Item 4. Controls and Procedures

 

(a) Evaluation of Disclosure Controls and Procedures

 

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s PEO and PFO concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s PEO and PFO, as appropriate, to allow timely decisions regarding required disclosure. Management concluded that our disclosure controls are not effective due to the internal control weaknesses described in our Form 10-k that still exist as of June 30, 2015, the period covered by this Form 10-Q.

 

(b) Changes in Internal Controls

 

There have been no changes in the Company’s internal control over financial reporting during the latest fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

Other than the matters previously disclosed, we are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 1A. Risk Factors.

 

We believe there are no changes that constitute material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on April 14, 2015.

 

Iitem 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

There were no unregistered sales of the Company’s equity securities during the quarter ended June 30, 2015, other than those previously reported in this Current Report.

 

Item 3. Defaults Upon Senior Securities.

 

There were no defaults upon senior securities during the quarter ended June 30, 2015.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

There is no other information required to be disclosed under this item which has not been previously disclosed.

Item 6.  Exhibits.

 

Exhibit No.		Description
31.1		Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002*
31.2		Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002*
32.1		Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2		Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.INS		XBRL Instance Document **
101.SCH		XBRL Taxonomy Extension Schema **
101.CAL		XBRL Taxonomy Extension Calculation Linkbase **
101.DEF		XBRL Taxonomy Extension Definition Linkbase **
101.LAB		XBRL Taxonomy Extension Label Linkbase **
101.PRE		XBRL Taxonomy Extension Presentation Linkbase **

 

* Filed herewith

 

** In accordance with Regulation S-T, the XBRL-related information on Exhibit No. 101 to this Quarterly Report on Form 10-Q shall be deemed “furnished” herewith and not “filed.”

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused the Report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	POWER OF THE DREAM VENTURES, INC.
Dated: August 14, 2015
	By:	/s/ Viktor Rozsnyay
		Name:	Viktor Rozsnyay
		Title:	Principal Executive Officer
Dated: August 14, 2015
	By:	/s/ Ildiko Rozsa
		Name:	Ildiko Rozsa
		Title:	Principal Financial Officer