10-Q

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, 2011

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number: 000-27866

POWERVERDE, INC.

(Exact name of Registrant as specified in its charter)

Delaware	88-0271109
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

23429 N. 35th Drive, Glendale, Arizona 85310

(Address of principal executive offices)

(623) 780-3321

(Registrant’s telephone number including area code)

(Former name, former address and former fiscal year, if changed since last report)

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 (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes o No

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).

o Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

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).

o Yes x No

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of August 22, 2011 the issuer had 25,624,565 shares of common stock outstanding.

Index to Form 10-Q

		Page
PART I	FINANCIAL INFORMATION	2
Item 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Consolidated Statements of Changes in Stockholders’ Equity (Deficiency)	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	13
Item 4.	Controls and Procedures	14
PART II	OTHER INFORMATION	15
Item 1.	Legal Proceedings	15
Item 1A.	Risk Factors	15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	15
Item 3.	Defaults upon Senior Securities	15
Item 4.	(Removed and Reserved)	15
Item 5.	Other Information	15
Item 6.	Exhibits	16
SIGNATURES		17

PART I FINANCIAL INFORMATION

Item 1. Financial Statements.

PowerVerde, Inc. and Subsidiary

(A Development Stage Company)

Condensed Consolidated Balance Sheets

June 30, 2011 and December 31, 2010

(Unaudited)

	2011			2010
Assets
Current Assets:
Cash and cash equivalents	$	496,280		$	15,646
Accounts receivable		113,332			5,350
Prepaid insurance		18,271			—
Inventory		130,000			—
Total Current Assets		757,883			20,996
Property and Equipment
Property and equipment, net of accumulated depreciation of $16,846 and $13,103, respectively		19,483			12,034
Total Assets	$	777,366		$	33,030
Liabilities and Stockholders’ Equity (Deficiency)
Current Liabilities
Accounts payable and accrued expenses	$	163,737		$	153,891
Deferred revenue		130,000			—
Total Current Liabilities		293,737			153,891
Long-Term Liabilities
Payable to related party		173,915			—
Total Long-Term Liabilities		173,915			—
Total Liabilities		467,652			153,891
Stockholders’ Equity (Deficiency)
Preferred stock: 50,000,000 preferred shares authorized, par value $0.0001 per share, no shares issued and outstanding at June 30, 2011 and December 31, 2010		—			—
Common stock: 100,000,000 common shares authorized, par value $0.0001 per share, 30,043,065 common shares issued and 25,543,065 shares outstanding at June 30, 2011 and 28,043,065 common shares issued and outstanding at December 31, 2010		3,004			2,804
Additional paid-in capital		4,426,029			2,179,625
Treasury stock, 4,500,000 shares at cost		(170,758	)		—
Deficit accumulated in the development stage		(3,948,561	)		(2,303,290	)
Total Stockholders’ Equity (Deficiency)		309,714			(120,861	)
Total Liabilities and Stockholders’ Equity (Deficiency)	$	777,366		$	33,030

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2

PowerVerde, Inc. and Subsidiary

(A Development Stage Company)

Condensed Consolidated Statements of Operations

For the three and six months ended June 30, 2011 and 2010, and the

period from March 9, 2007 (Date of Inception) to June 30, 2011

(Unaudited)

	Three months ended June 30,						Six months ended June 30,						Cumulative from inception through
	2011			2010			2011			2010			June 30, 2011
Revenue, Net	$	20,553		$	5,640		$	30,991		$	18,687		$	122,356
Cost of Goods Sold		6,925			—			6,925			—			6,925
Gross Profit		13,628			5,640			24,066			18,687			115,431
Operating Expenses
Research and development		358,729			29,609			558,815			74,651			1,571,879
General and administrative		902,503			52,242			1,131,022			115,555			2,173,893
Total Operating Expenses		1,261,232			81,851			1,689,837			190,206			3,745,772
Loss from Operations		(1,247,604	)		(76,211	)		(1,665,771	)		(171,519	)		(3,630,341	)
Other Income (Expenses)
Interest income		—			—			—			—			2,401
Interest expense		(3,157	)		—			(3,157	)		—			(336,632	)
Other income (expense)		—			—			23,657			—			16,011
Total Other Income (Expense)		(3,157	)		—			20,500			—			(318,220	)
Loss before Income Taxes		(1,250,761	)		(76,211	)		(1,645,271	)		(171,519	)		(3,948,561	)
Provision for Income Taxes		—			—			—			—			—
Net Loss	$	(1,250,761	)	$	(76,211	)	$	(1,645,271	)	$	(171,519	)	$	(3,948,561	)
Net Loss per Share – Basic and Diluted	$	(0.05	)	$	(0.01	)	$	(0.06	)	$	(0.01	)
Weighted Average Common Shares Outstanding – Basic and Diluted		25,415,167			27,795,226			27,074,012			27,724,694

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

PowerVerde, Inc. and Subsidiary

(A Development Stage Company)

Consolidated Statement of Changes in Stockholders’ Equity (Deficiency)

For the six months ended June 30, 2011

(Unaudited)

	Common Shares			Common Stock		Additional Paid in Capital		Treasury Stock			Deficit Accumulated during the Development Stage			Total Stockholders’ Equity (Deficiency)
Balances, December 31, 2010		28,043,065		$	2,804	$	2,179,625	$	—		$	(2,303,290	)	$	(120,861	)
Sale of common stock at $0.75 per share, net of stock issuance costs of $150,000		2,000,000			200		1,349,800		—			—			1,350,000
Stock-based compensation		—			—		284,454		—			—			284,454
Warrants issued for services		—			—		612,150		—			—			612,150
Treasury stock		(4,500,000	)		—		—		(170,758	)		—			(170,758	)
Net loss for the six months ended June 30, 2011		—			—		—		—			(1,645,271	)		(1,645,271	)
Balances, June 30, 2011		25,543,065		$	3,004	$	4,426,029	$	(170,758	)	$	(3,948,561	)	$	309,714

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

PowerVerde, Inc. and Subsidiary

(A Development Stage Company)

Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2011 and 2010, and the

period from March 9, 2007 (Date of Inception) to June 30, 2011

(Unaudited)

	2011			2010			Cumulative from inception through June 30, 2011
Cash Flows from Operating Activities
Net loss	$	(1,645,271	)	$	(171,519	)	$	(3,948,561	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation, amortization, and impairment charges		3,743			2,834			16,846
Amortization of discount		3,157			—			332,619
Stock based compensation		284,454			—			340,704
Warrants issued for services		612,150			—			612,150
Changes in operating assets and liabilities:
Accounts receivable and other assets		(126,253	)		1,986			(131,603	)
Stock subscription receivable		—			(25,000	)		—
Inventory		(130,000	)		—			(130,000	)
Deferred revenue		130,000			—			130,000
Accounts payable and accrued liabilities		9,846			22,970			(66,804	)
Cash Used in Operating Activities		(858,174	)		(168,729	)		(2,844,649	)
Cash Flows From Investing Activities
Purchase of fixed assets		(11,192	)		—			(36,328	)
Cash acquired in business acquisition		—			—			872
Cash Used in Investing Activities		(11,192	)		—			(35,456	)
Cash Flows from Financing Activities
Proceeds from issuance of common stock		1,500,000			215,000			3,530,000
Proceeds from notes payable		—			—			300,000
Payment of line of credit		—			—			(50,000	)
Payment of note payable		—			—			(90,217	)
Payment of stock issuance costs		(150,000	)		(21,500	)		(313,398	)
Cash Provided by Financing Activities		1,350,000			193,500			3,376,385
Net Increase in Cash and Cash Equivalents		480,634			24,771			496,280
Cash and Cash Equivalents, at Beginning of Period		15,646			20,457		$	—
Cash and Cash Equivalents, at End of Period	$	496,280		$	45,228		$	496,280
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest	$	—		$	—		$	24,221
Cash paid during the period for income taxes	$	—		$	—		$	—
Supplemental Schedule of Non-Cash Investing and Financing Transactions
Common stock issued for convertible debt	$	—		$	—		$	189,261
Common stock issued for services	$	—		$	—		$	56,250
Purchase of treasury stock with long-term related party payable	$	170,758		$	—		$	170,758
Warrants issued in connection with debt	$	—		$	—		$	299,984
Common stock issued in connection with debt forgiveness and services rendered	$	—		$	—		$	250,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

PowerVerde, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2011

Note 1 – Condensed Consolidated Financial Statements

The accompanying unaudited condensed consolidated financial statements prepared in accordance with instructions for Form 10-Q, include all adjustments (consisting only of normal recurring accruals) which are necessary for a fair presentation of the results for the periods presented. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the annual report of PowerVerde, Inc. (“PowerVerde,” “we,” “us,” “our” or the “Company”) as of and for the year ended December 31, 2010. The results of operations for the six months ended June 30, 2011, are not necessarily indicative of the results to be expected for the full year. The condensed consolidated financial statements include the accounts of PowerVerde, Inc., formerly known as Vyrex Corporation (the “Company”), and PowerVerde Systems, Inc., formerly known as PowerVerde, Inc., its wholly-owned subsidiary. Intercompany balances and transactions have been eliminated in consolidation.

Note 2 – Going Concern

The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has had recurring operating losses and negative cash flows from operations. Those factors, as well as uncertainty in securing additional funds for continued operations, create an uncertainty about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Note 3 – Summary of Significant Accounting Policies

Inventories

Inventories, which consist of finished goods are stated at the lower of cost or market value, cost being determined using the first-in, first-out method. The Company records reserves for inventory shrinkage and obsolescence, when considered necessary. At June 30, 2011 the Company wrote down inventory to net realizable value.

Accounts Receivable

Accounts receivable consist of balances due from sales. The Company monitors accounts receivable and provides allowances when considered necessary. At June 30, 2011, accounts receivable were considered to be fully collectible. Accordingly, no allowance for doubtful accounts was provided.

Revenue Recognition

Sales revenues and associated cost of sales are recognized when title of the goods sold pass to the buyer, when shipped, and when accounts receivable are determined to be reasonably collectable. Certain sales agreements also require installation and training by PowerVerde once goods are received and accepted by the customer. The Company does not consider these agreements multiple elements arrangements as defined by ASC 605-25 Revenue Recognition, as the Company does not offer installation or training as services separate from the sale of its products at this time. Therefore a “best estimate of selling price” or individual pricing in accordance with ASC 605-25 is undeterminable. The Company defers all revenues and costs of sales until the agreement is 100% complete.

Licensing and royalty revenue from royalty agreements is recognized in accordance with the terms of the specific agreement.

Stock-based Compensation

The Company accounts for share-based compensation in accordance with ASC Topic 718 Share-Based Payments. The Company has used the Black-Scholes option pricing model to estimate the fair value of stock options on the date of grant.

6

Note 3 – Summary of Significant Accounting Policies (continued)

Common Stock Purchase Warrants

The Company accounts for common stock purchase warrants in accordance with ASC Topic 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity (“ASC 815-40”). Based on the provisions of ASC 815-40, the Company classifies as equity any contracts that (i) require physical settlement or net-share settlement, or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), or (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).

Accounting for Uncertainty in Income Taxes

The Company applies the accounting standard regarding “Accounting for Uncertain Tax Positions” which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements, and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The standard also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our consolidated financial statements. Our evaluation was performed for the tax years ended December 31, 2007, 2008, 2009 and 2010, the tax years which remain subject to examination by major tax jurisdictions as of June 30, 2011.

We may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. In the event we have received an assessment for interest and/or penalties, it has been classified in the consolidated financial statements as selling, general and administrative expense.

Note 4 – Recent Accounting Pronouncements

In December 2010, the Financial Accounting Standards Board (“FASB”) amended its existing guidance for goodwill and other intangible assets. This authoritative guidance modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if there are qualitative factors indicating that it is more likely than not that a goodwill impairment exists. The qualitative factors are consistent with the existing guidance which requires goodwill of a reporting unit to be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. This authoritative guidance becomes effective for the Company in fiscal 2012. The implementation of this authoritative guidance is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

In April 2011, the FASB issued new guidance clarifying when a debt restructuring by a creditor constitutes a troubled debt restructuring, which is effective July 1, 2011 for all restructurings that occurred on or after January 1, 2011. Specifically, the guidance clarifies that a troubled debt restructuring only exists when a creditor makes a concession in interest rates or payment terms to a debtor experiencing financial difficulties. It provides additional guidance on determining what constitutes a concession, and on the use of probability in determining if a debtor could be experiencing financial difficulty prior to defaulting on payments. The adoption of this new guidance is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

In May 2011, the FASB issued Accounting Standard Update (“ASU”) 2011-04, which generally aligns the principles for fair value measurements contained in Accounting Standard Codification (“ASC”) 820, and the related disclosures under U.S. GAAP and International Financial Reporting Standards (“IFRS”). The amendments to ASC 820 generally relate to changes to a principle or requirement for measuring fair value, clarifications of the FASB’s intent regarding the application of existing requirements and additional disclosure requirements. This ASU is effective in interim and annual periods beginning after December 15, 2011. Early adoption is not permitted. The Company is presently evaluating the impact, if any, of this ASU on its consolidated financial statements.

7

Note 4 – Recent Accounting Pronouncements (continued)

In June 2011, the FASB issued ASU 2011-05 amending ASC Topic 220 related to comprehensive income. The amendment to ASC 220 requires companies to present items of net income, items of other comprehensive income (“OCI”) and total comprehensive income in one continuous statement or two separate but consecutive statements. Companies will no longer be allowed to present OCI in the statement of stockholders’ equity. The reclassification adjustments between OCI and net income will be presented separately on the face of the financial statements. This ASU is effective in interim and annual periods beginning after December 15, 2011. Early adoption is permitted. The Company is presently evaluating the impact, if any, of this ASU on its consolidated financial statements.

Note 5 – Property and Equipment

A summary of property and equipment at June 30, 2011 and December 31, 2010 is as follows:

	June 30, 2011			December 31, 2010			Estimated Useful Lives (in years)
Equipment	$	25,426		$	22,339		5
Computer equipment (hardware)		6,974			2,798		3-5
Software		3,929			—		3
		36,329			25,137
Less: Accumulated depreciation		(16,846	)		(13,103	)
	$	19,483		$	12,034

The amounts charged to operations for depreciation for the six months ended June 30, 2011 and 2010 were $3,743 and $2,834, respectively.

Note 6 – Stockholders’ Equity

Warrants

In 2008, the Company issued warrants to purchase 250,000 and 50,000 unregistered shares of the Company’s common stock at exercise prices of $1.50 and $2.30 per share, respectively. Of these warrants 167,500 and 50,000 were still outstanding as of June 30, 2011. The warrants expire on various dates through November 2011. At June 30, 2011 82,500 of these warrants had expired. No warrants were exercised as of June 30, 2011.

During March through December 2010, the Company issued warrants to purchase 439,999 unregistered shares of the Company’s common stock at an exercise price of $0.75 per share in association with stock subscription agreements. These warrants expire on various dates through December 2013. As of August 22, 2011, none of these warrants were exercised or had expired.

During January through June 2011, the Company issued warrants to purchase 2,000,000 unregistered shares of the Company’s common stock at an exercise price of $0.75 per share in association with stock subscription agreements. These warrants expire on various dates through June 2014. As of August 22, 2011, none of these warrants were exercised or had expired.

The Company also issued warrants on June 3, 2011 to various persons, including affiliates of the Company, for services provided to the Company. These warrants covered the purchase of 1,855,000 unregistered shares of the Company’s stock at an exercise price of $1.05 per share with a five-year term. These share based payments have been accounted for in accordance with ASC 815-40 using Black Scholes warrant pricing model to determine the fair value of each warrant.

Expenses related to warrants issued for services for the six months ended June 30, 2011 and 2010 were $612,150 and $0, respectively.

8

Note 6 – Stockholders’ Equity (continued)

A summary of warrants issued, exercised and expired during the six months ended June 30, 2011 is as follows:

	Shares			Weighted Average Exercise Price
Balance at December 31, 2010		739,999			1.11
Issued		3,855,000			.89
Exercised		—			—
Expired		(82,500	)		1.50
Balance at June 30, 2011		4,512,499			0.92

The weighted average grant date fair value of warrants issued during the six month period June 30, 2011 amounted to $1.02 per warrant. The fair value of each warrant granted as compensation for services was determined using the Black-Scholes warrant pricing model and the following assumptions:

	June 30, 2011
Risk free interest rate	1.59	%
Expected life	5.0 years
Annualized volatility	131	%
Expected dividends	—

The warrant shares referred to above are unregistered shares of the Company’s stock and are restricted from trading as defined under Rule 144 of the United States Securities Act of 1933.

Private Placement of Common Stock

During January 2011 through June 2011, the Company raised $1,500,000 through the private placement of 2,000,000 shares of its common stock to accredited investors at $0.75 per share. Each investor received a three-year warrant to purchase unregistered stock at $0.75 per share for a number of shares of common stock equal to the number of shares purchased by the investor in this offering. On January 31, 2011, the Company entered into a Binding Letter of Intent for European Distribution (the “BLOI”) with Newton Investments BV, a Dutch corporation based in Leeuwarden, Netherlands (“Newton”), as disclosed in Note 8, below. The $1,500,000 referred to above included a $250,000 investment purchased by a Newton affiliate in conjunction with the Newton BLOI.

Treasury Shares

On April 7, 2011, 4,500,000 shares of the Company’s stock were surrendered to Treasury in exchange for a $200,000 note payable in April 2013. See Note 8 - Commitments.

Preferred Shares

The Company has 50,000,000 shares of authorized, $0.0001 par value preferred stock. At June 30, 2011, no shares had been issued.

Note 7 – Stock Options

On January 1, 2011, the Company entered into a nonqualified stock option agreement with an employee, granting the employee a 10-year option to purchase 1,350,000 shares of the Company’s common stock at a price of $0.59 per share, of which one-fourth of the option shares, i.e., 337,500 shares, vested as of the date of the nonqualified stock option agreement, and the balance vests in equal installments every six months thereafter until fully vested, provided that the employee is still employed by the Company at the time.

9

Note 7 – Stock Options (continued)

On June 15, 2011 the Company entered into nonqualified stock option agreements with three employees, granting the employees 10-year options to purchase a total of 600,000 shares of the Company’s common stock consisting of 300,000 shares of the Company’s common stock at a price of $1.23 per share and 300,000 shares of the Company’s common stock at a price of $2.00 per share. In each case, one-fourth of the option shares vested as of the date of each employee’s respective nonqualified stock option agreement, and the balance vests in equal installments every six months thereafter until fully vested, provided that the relevant employee is still employed by the Company at the time. See “Note 8 Commitments.”

The fair value of each stock option granted was determined using the Black-Scholes stock option pricing model and the following weighted average assumptions:

	June 30, 2011
Risk free interest rate	1.54	%
Expected life	5.75 years
Annualized volatility	131	%
Expected dividends	—

Stock option activity for the six months ended June 30, 2011, is summarized as follows:

	Shares		Weighted Average Exercise  Price		Weighted Average Remaining Contractual Life (Years)
Options outstanding at December 31, 2010		—	$	—
Granted		1,950,000	$	0.91
Expired or forfeited		—		—
Options outstanding at June 30, 2011		1,950,000	$	0.91		10.00
Options exercisable at June 30, 2011		412,500	$	0.85		10.00
Options vested or expected to vest at June 30, 2011		487,500	$	0.91		10.00

Total stock compensation for the six months ended June 30, 2011 and 2010 was $284,454 and $0, respectively. Remaining stock compensation of $853,362 will be recognized ratably over 18 months from the grant date.

Note 8 – Commitments

On January 31, 2011, the Company entered into a BLOI with Newton Investments BV, a Dutch corporation based in Leeuwarden, Netherlands (“Newton”). Pursuant to the BLOI, the Company and Newton agreed to enter into a definitive agreement within 60 days (since extended to 210 days), pursuant to which Newton will, for a period of 10 years, be the exclusive manufacturer and distributor of the Company’s proprietary emissions-free electrical power generation systems (the “Systems”) in the 27 countries which are currently members of the European Union, subject to Newton achieving minimum sales of at least 100 Systems per year and investing at least $750,000 in establishing its manufacturing facility and distribution network. Pursuant to the BLOI, the Company will receive as a royalty an amount equal to 20% of the gross sale price of each System sold by Newton. The Company has authorized Newton to manufacture our Systems under a strict licensing agreement with a Dutch/German foundry and machine shop. Of the 27 European Union nations, the Company is initially focusing on the Netherlands, Belgium, Germany and Scandinavian countries. Newton also agreed to purchase an initial System from the Company for a discounted price. In connection with the BLOI, an affiliate of Newton invested $250,000 in PowerVerde by privately purchasing 333,333 restricted shares of common stock at a price of $0.75 per share. In connection with this purchase, the Company issued to the investor a three-year warrant to buy an additional 333,333 unregistered shares at a price of $0.75 per share. In February 2011, the Company received $30,000 from Newton as a deposit on the $130,000 purchase price for the initial System, which was delivered in the third quarter of 2011.

10

Note 8 – Commitments (Continued)

On April 7, 2011, in order to enhance the Company’s ability to raise capital and limit dilution of its stockholders, the Company entered into an agreement with its co-founder, President and then-Chief Executive Officer, George Konrad, pursuant to which Mr. Konrad agreed to surrender to the treasury 4,500,000 shares of common stock owned by him since inception in exchange for the Company agreeing to pay to Mr. Konrad’s company, Arizona Research and Development (“ARD”), a related party, $200,000 to be paid no later than April of 2013. A discount of approximately $30,000 was recognized on the long-term payable as imputed interest of 8%. Interest accrued for the quarter approximated $3,200. On August 19, 2011, this agreement was amended and restated. See Note 9 - Subsequent Events.

In addition, on April 7, 2011, the Company entered into a two-year employment agreement with Mr. Konrad, pursuant to which Mr. Konrad serves as President. Pursuant to this employment agreement, the Company pays to Mr. Konrad’s company, ARD, $10,000 per month. The employment agreement contains standard confidentiality provisions, as well as standard non-competition and non-solicitation provisions which survive for two years following termination of employment.

On June 3, 2011, the Company granted to Mr. Richard Davis a three-year warrant to purchase 600,000 unregistered shares of the Company’s common stock at an exercise price of $1.05 per share, in consideration for his service as a Director and for his substantial consulting services since inception, incorporated in the warrant section of Note 6 Stockholder’ s Equity. Since 2008, Richard H. Davis has served, and continues to serve, as a Director of the Company. The Company’s Board of Directors will determine an appropriate compensation package for Mr. Davis in consideration of his serving as the Company’s Chief Executive Officer. See Note 9 - Subsequent Events.

Effective June 15, 2011, the Company entered into an employment agreement with Mark P. Prinz, pursuant to which Mr. Prinz serves as a Project Engineer of the Company. Pursuant to this agreement, the Company pays Mr. Prinz a salary of $11,250 per month, and paid him a one-time signing bonus of $5,000. This agreement is terminable by either party without cause upon 30 days’ prior written notice. In connection with this employment agreement, the Company granted Mr. Prinz (i) a 10-year option to purchase 100,000 shares of the Company’s common stock at a price of $1.23 per share; and (ii) a 10-year option to purchase 100,000 shares of the Company’s common stock at a price of $2.00 per share. In each case, one-fourth of the option shares, i.e., 25,000 shares, vested as of the date of the employment agreement, and the balance vests in equal installments every six months thereafter until fully vested, provided that Mr. Prinz is still employed by the Company at the time and subject to the Company achieving certain operational targets. Additionally, in connection with this employment agreement, Mr. Prinz assigned certain intellectual property rights to the Company.The employment agreement contains standard confidentiality provisions, as well as standard non-competition and non-solicitation provisions which survive for two years following termination of employment.

Effective June 15, 2011, the Company entered into an employment agreement with Patrick Orr, pursuant to which Mr. Orr serves as a Project Engineer of the Company. Pursuant to this agreement, the Company pays Mr. Orr a salary of $11,250 per month, and paid him a one-time signing bonus of $5,000. This agreement is terminable by either party without cause upon 30 days’ prior written notice. In connection with this employment agreement, the Company granted Mr. Orr (i) a 10-year option to purchase 100,000 shares of the Company’s common stock at a price of $1.23 per share; and (ii) a 10-year option to purchase 100,000 shares of the Company’s common stock at a price of $2.00 per share. In each case, one-fourth of the option shares, i.e., 25,000 shares, vested as of the date of the employment agreement, and the balance vests in equal installments every six months thereafter until fully vested, provided that Mr. Orr is still employed by the Company at the time and subject to the Company achieving certain operational targets. Additionally, in connection with this employment agreement, Mr. Orr assigned certain intellectual property rights to the Company.The employment agreement contains standard confidentiality provisions, as well as standard non-competition and non-solicitation provisions which survive for two years following termination of employment.

Effective June 15, 2011, the Company amended and restated the Company’s employment agreement with Keith Johnson, dated as of January 1, 2011 (the “Original Employment Agreement”). Pursuant to this amended and restated employment agreement (the “Amended Employment Agreement”), the Company continues to provide Mr. Johnson the compensation and benefits provided in the Original Employment Agreement, except that the Company (i) increased Mr. Johnson’s salary from $10,000 to $12,500 per month; and (ii) granted Mr. Johnson (A) a 10-year option to purchase 100,000 shares of the Company’s common stock at a price of $1.23 per share; and (B) a 10-year option to purchase 100,000 shares of the Company’s common stock at a price of $2.00 per share. In each case, one-fourth of the option shares, i.e., 25,000 shares, vested as of the date of the employment agreement, and the balance vests in equal installments every six months thereafter until fully vested, provided that Mr. Johnson is still employed by the Company at the time and subject to the Company achieving certain operational targets. As with the Original Employment Agreement, under the Amended Employment Agreement, Mr. Johnson assigned certain intellectual property rights to the Company, and theAmended Employment Agreement contains standard confidentiality provisions, as well as standard non-competition and non-solicitation provisions which survive for two years following termination of employment.

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Note 9 – Subsequent Events

On August 19, 2011, the Company’s Board of Directors (i) accepted the resignation of George Konrad as the Company’s Chief Executive Officer and Chief Financial Officer, although Mr. Konrad remains as the Company’s President; and (ii) elected Richard H. Davis and John L. Hofmann as the Company’s Chief Executive Officer and Chief Financial Officer, respectively, to fill the vacancies created by such resignations.

On August 19, 2011, the Company amended its agreement with George Konrad dated as of April 7, 2011, relating to Mr. Konrad’s surrender to the Company’s treasury of 4,500,000 shares of common stock (the “Original Agreement”). Pursuant to such amendment, the Company extended the timing of payments to be made to Mr. Konrad’s company, Arizona Research and Development (“ARD”), under the Original Agreement to on or before April 7, 2013, except that such payment shall be fully made within 30 days following the earlier of (i) a closing of a financing transaction by the Company which involves gross proceeds equal to or greater than $2 million; (ii) a closing of a Sale Transaction (as defined below); or (iii) a determination by the Company’s Board of Directors, in its sole and absolute discretion, that the Company has sufficient cash available for operations and appropriate reserves after making such payment to ARD. The term “Sale Transaction” as used herein means (i) a sale of all or substantially all of the assets of the Company; or (ii) any merger or consolidation of the Company with or into another entity or any other transaction or series of transactions, the result of which is that the holders of the Company’s voting stock immediately prior to such transaction or series of transactions continue to hold less than 50% of such stock following such transaction or series of transactions.

The Company’s initial System was delivered to Newton in July 2011, pursuant to the terms of the BLOI, as described above, and the balance of the purchase price was received upon delivery in July 2011. The full $130,000 sale was recorded as revenue in the third quarter.

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

Forward Looking Statements

Readers are cautioned that the statements in this Report that are not descriptions of historical facts may be forward-looking statements that are subject to risks and uncertainties. This Report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are based on the beliefs of our management, as well as on assumptions made by and information currently available to us as of the date of this Report. When used in this Report, the words “plan,” “will,” “may,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “project” and similar expressions are intended to identify such forward-looking statements. Although we believe these statements are reasonable, actual actions, operations and results could differ materially from those indicated by such forward-looking statements as a result of the risk factors included in our 2010 Annual Report, or other factors. We must caution, however, that this list of factors may not be exhaustive and that these or other factors, many of which are outside of our control, could have a material adverse effect on us and our ability to achieve our objectives. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above.

The following discussion and analysis should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein.

Critical Accounting Policies

The condensed consolidated financial statements of PowerVerde, Inc. are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these condensed consolidated financial statements requires our management to make estimates and assumptions about future events that effect the amounts reported in the financial statements and related notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. We believe the following critical accounting policies affect its more significant judgments and estimates used in the preparation of financial statements.

Revenue Recognition

Sales revenues and associated cost of sales are recognized when title of the goods sold pass to the buyer, when shipped, and when accounts receivable are determined to be reasonably collectable. Certain sales agreements also require installation and training by PowerVerde once goods are received and accepted by the customer. The Company does not consider these agreements multiple elements arrangements as defined by ASC 605-25 Revenue Recognition, as the Company does not offer installation or training as services separate from the sale of its products, at this time, and therefore a “best estimate of selling price” or individual pricing in accordance with ASC 605-25 is undeterminable. The Company defers all revenues and costs of sales until the agreement is 100% complete.

Licensing and royalty revenue from royalty agreements is recognized in accordance with the terms of the specific agreement.

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Stock-based Compensation

We account for share-based compensation in accordance with ASC Topic 718 Share-Based Payments. We have used the Black-Scholes option pricing model to estimate the fair value of stock options on the date of grant.

Common Stock Purchase Warrants

The Company accounts for common stock purchase warrants in accordance with ASC Topic 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity (“ASC 815-40”). Based on the provisions of ASC 815-40, the Company classifies as equity any contracts that (i) require physical settlement or net-share settlement, or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), or (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).

Overview

From January 1991 until October 2005, the Company devoted substantially all of its efforts and resources to research and development related to its unsuccessful Biotech Business, in particular the study of biological oxidation and antioxidation directed to the development of potential therapeutic products for the treatment of various diseases and conditions. In the most recent years, the Company’s research focused mainly on targeted antioxidant therapeutics and nutraceuticals. The Company is a development stage company, has generated only limited revenue from product sales and has relied primarily on equity financing, licensing revenues, and various debt instruments for its working capital. The Company has been unprofitable since its inception.

Following the cessation of material Biotech Business operations in October 2005, the Company turned its primary focus to seeking an appropriate merger partner for its public shell. This resulted in the February 2008 merger with Vyrex (the “Merger”). In March 2009, we assigned our Biotech IP to an investor in exchange for his agreement to pay all future expenses relating to the Biotech IP and to pay us 20% of any net proceeds received from sale and/or licensing of the Biotech IP. We do not expect this arrangement to generate material revenues.

Since the Merger, we have focused on the development, testing and commercialization of our electric power systems, in particular, their applicability to thermal and natural gas pipeline operations. Our business is subject to significant risks, including the risks inherent in our research and development efforts, uncertainties associated with obtaining and enforcing patents and intense competition.

Except as specifically noted to the contrary, the following discussion relates only to PowerVerde since, as a result of the Merger, the only historical financial statements presented for the Company in periods following the Merger are those of the operating entity, PowerVerde.

Results of Operations

Three Months Ended June 30, 2011 as Compared to Three Months Ended June 30, 2010

Since inception, we have focused on the development, testing and commercialization of our clean energy electric power generation systems. We had no material revenues in the second quarter of 2011 or 2010 – just $20,553 of revenues in 2011, consisting of $7,221 from our current business and $13,332 in Biotech IP licensing fees and $5,640 in Biotech IP licensing fees, in 2010 -- while we had substantial expenses due to our ongoing research and development and commercialization activities, as well as substantial administrative expenses, including the cost of warrants and options issued and expenses associated with our status as a public company. Our net loss during the second quarter of 2011 and 2010 was $1,022,481 and $76,211, respectively. This substantially increased loss was due primarily to a $612,150 (100%) increase, the value of warrants issued to outside service providers in the second quarter, and a $153,000 (100%) increase in the value of stock options issued in the second quarter of 2011.

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Six Months Ended June 30, 2011 as Compared to Six Months Ended June 30, 2010

Since inception, we have focused on the development, testing and commercialization of our clean energy electric power generation systems. We had no material revenues in the first six months of 2011 or 2010 – just $30,991 of revenues in 2011, consisting of $7,221 from our current business and $23,770 in Biotech IP licensing fees, and $18,687 in Biotech IP licensing fees in 2010 — while we had substantial expenses due to our ongoing research and development activities, as well as substantial administrative expenses, including the cost of warrants and options issued and expenses associated with our status as a public company. Our net loss during the first six months of 2011 and 2010 was $1,645,271and $171,519, respectively. This substantially increased loss was due primarily to a $612,150 (100%) increase in the value of warrants issued to outside service providers in the six-month period, and a $284,454 increase in the value of stock options issued in the six-month period.

Liquidity and Capital Resources

We have financed our operations since inception through the sale of debt and equity securities. As of June 30, 2011, we had working capital of $464,146 compared to a working capital deficit of $132,895 at December 31, 2010.

During January through June 2011, we raised gross proceeds of $1,500,000 through the private placement of 2,000,000 unregistered shares of our common stock to accredited investors at $0.75 per share. Each investor received a three-year warrant to purchase stock at $0.75 per share for a number of shares of common stock equal to the number of shares purchased by the investor in this offering. The $1,500,000 included a $250,000 investment by a Newton affiliate in conjunction with the Newton BLOI, as referred to in Note 8 - Commitments of the footnotes to the Unaudited Condensed Consolidated Financial Statements. We paid a 10% commission on the gross proceeds of this offering to our placement agent, Martinez-Ayme Securities.

In February 2011, we received $30,000 from Newton as a deposit on the $130,000 purchase price for the initial System. See Note 8 - Commitments of the footnotes to the Unaudited Condensed Consolidated Financial Statements. The balance of the purchase price was received upon delivery in July 2011, and the $130,000 full purchase price was recorded as revenue in the third quarter.

We believe that our current level of working capital will be sufficient to sustain our current operations through at least approximately the next six months. However, we continue to seek more funding from private equity investors, as well as governmental sources, as we will need to raise substantial additional capital in order to finance our plan of operations. There can be no assurance that we will be able to raise the necessary funds. If we do not raise the necessary funds, we will be forced to cease operations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company, under the supervision and with the participation of its management, including the Chief Executive Officer and President, evaluated the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no significant changes in internal control over financial reporting during the six months ended June 30, 2011 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

There are no material changes to the risk factors set forth in Part I, Item 1A, “Risk Factors,” of the 2010 Annual Report. Please refer to that section for disclosure regarding the risks and uncertainties related to our business.

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

During May and June 2011, we raised gross proceeds of $500,000 through the private placement of 666,667 shares of our common stock to accredited investors at $0.75 per share. Each investor received a three-year warrant to purchase stock at $0.75 per share for a number of shares of common stock equal to the number of shares purchased by the investor in this offering. We paid a 10% commission on the gross proceeds of this offering to our placement agent, Martinez-Ayme Securities.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. (Removed and Reserved).

Item 5. Other Information.

Effective June 15, 2011, we entered into an employment agreement with Mark P. Prinz, pursuant to which Mr. Prinz serves as a Project Engineer of the Company. Pursuant to this agreement, we pay Mr. Prinz a salary of $11,250 per month, and paid him a one-time signing bonus of $5,000. This agreement is terminable by either party without cause upon 30 days’ prior written notice. In connection with this employment agreement, we granted Mr. Prinz (i) a 10-year option to purchase 100,000 shares of our common stock at a price of $1.23 per share; and (ii) a 10-year option to purchase 100,000 shares of our common stock at a price of $2.00 per share. In each case, one-fourth of the option shares, i.e., 25,000 shares, vested as of the date of the employment agreement, and the balance vests in equal installments every six months thereafter until fully vested, provided that Mr. Prinz is still employed by us at the time and subject to the Company achieving certain operational targets. Additionally, in connection with this employment agreement, Mr. Prinz assigned certain intellectual property rights to the Company.The employment agreement contains standard confidentiality provisions, as well as standard non-competition and non-solicitation provisions which survive for two years following termination of employment.

Effective June 15, 2011, we entered into an employment agreement with Patrick Orr, pursuant to which Mr. Orr serves as a Project Engineer of the Company. Pursuant to this agreement, we pay Mr. Orr a salary of $11,250 per month, and paid him a one-time signing bonus of $5,000. This agreement is terminable by either party without cause upon 30 days’ prior written notice. In connection with this employment agreement, we granted Mr. Orr (i) a 10-year option to purchase 100,000 shares of our common stock at a price of $1.23 per share; and (ii) a 10-year option to purchase 100,000 shares of our common stock at a price of $2.00 per share. In each case, one-fourth of the option shares, i.e., 25,000 shares, vested as of the date of the employment agreement, and the balance vests in equal installments every six months thereafter until fully vested, provided that Mr. Orr is still employed by us at the time and subject to the Company achieving certain operational targets. Additionally, in connection with this employment agreement, Mr. Orr assigned certain intellectual property rights to the Company.The employment agreement contains standard confidentiality provisions, as well as standard non-competition and non-solicitation provisions which survive for two years following termination of employment.

Effective June 15, 2011, we amended and restated our employment agreement with Keith Johnson, dated as of January 1, 2011 (the “Original Employment Agreement”). Pursuant to this amended and restated employment agreement (the “Amended Employment Agreement”), we continue to provide Mr. Johnson the compensation and benefits provided in the Original Employment Agreement, except that we (i) increased Mr. Johnson’s salary from $10,000 to $12,500 per month; and (ii) granted Mr. Johnson (A) a 10-year option to purchase 100,000 shares of our common stock at a price of $1.23 per share; and (B) a 10-year option to purchase 100,000 shares of our common stock at a price of $2.00 per share. In each case, one-fourth of the option shares, i.e., 25,000 shares, vested as of the date of the employment agreement, and the balance vests in equal installments every six months thereafter until fully vested, provided that Mr. Johnson is still employed by us at the time and subject to the Company achieving certain operational targets. As with the Original Employment Agreement, under the Amended Employment Agreement, Mr. Johnson assigned certain intellectual property rights to the Company, and theAmended Employment Agreement contains standard confidentiality provisions, as well as standard non-competition and non-solicitation provisions which survive for two years following termination of employment.

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On August 19, 2011, our Board of Directors (i) accepted the resignation of George Konrad as our Chief Executive Officer and Chief Financial Officer, although Mr. Konrad remains as our President; and (ii) elected Richard H. Davis and John L. Hofmann as our Chief Executive Officer and Chief Financial Officer, respectively, to fill the vacancies created by such resignations.

Since 2008, Richard H. Davis has served, and continues to serve, as a Director of the Company. On June 3, 2011, we granted to Mr. Davis a three-year warrant to purchase 600,000 unregistered shares of our common stock at an exercise price of $1.05 per share, in consideration for his service as a Director and for his substantial consulting services since inception. Our Board of Directors will determine an appropriate compensation package for Mr. Davis in consideration of his serving as our Chief Executive Officer.

John L. Hofmann is president of J L Hofmann & Associates, P.A., Coral Gables, Florida (“JLHA”), which has provided financial consulting and accounting services to select clientele since 1990. Mr. Hofmann also serves as Operating Partner of Taft Street Partners I, Ltd., providing consulting services and capital for commercial and residential real estate projects. Mr. Hofmann started his career working with multinational companies for ten years as a Senior Manager for PricewaterhouseCoopers LLP (“PWC”). While at PWC, he traveled extensively primarily working on international tax matters and issues concerning the Internal Revenue Service. Locally, Hofmann has worked with the Miami Dolphins, Carnival Cruise Line, Royal Caribbean Cruise Line, Resorts International and Terremark Worldwide. Mr. Hofmann earned his Bachelor of Science in Accounting at the University of Florida and obtained his Master of Science in Taxation from Florida International University. Mr. Hofmann became a Certified Public Accountant through the Florida Board of Accountancy in 1982. He is a member of the Florida Institute of CPAs. Since July 2010, we have paid to JLHA monthly fees ranging from $0 to $10,350 for a total of $36,717 in partial consideration for financial consulting and accounting services provided by JLHA and Mr. Hofmann. On June 3, 2011, we granted to Mr. Hofmann a three-year warrant to purchase 200,000 unregistered shares of our common stock at an exercise price of $1.05 per share, as further consideration for such services. Our Board of Directors will determine an appropriate compensation package for Mr. Hofmann in consideration for his serving as our Chief Financial Officer.

On August 19, 2011, we amended our agreement with George Konrad dated as of April 7, 2011, relating to Mr. Konrad’s surrender to the Company’s treasury of 4,500,000 shares of common stock (the “Original Agreement”). Pursuant to such amendment, we extended the timing of payments to be made to Mr. Konrad’s company, Arizona Research and Development (“ARD”), under the Original Agreement to on or before April 7, 2013, except that such payment shall be fully made within 30 days following the earlier of (i) a closing of a financing transaction by the Company which involves gross proceeds equal to or greater than $2 million; (ii) a closing of a Sale Transaction (as defined below); or (iii) a determination by our Board of Directors, in its sole and absolute discretion, that the Company has sufficient cash available for operations and appropriate reserves after making such payment to ARD. The term “Sale Transaction” as used herein means (i) a sale of all or substantially all of the assets of the Company; or (ii) any merger or consolidation of the Company with or into another entity or any other transaction or series of transactions, the result of which is that the holders of the Company’s voting stock immediately prior to such transaction or series of transactions continue to hold less than 50% of such stock following such transaction or series of transactions.

Item 6. Exhibits.

(a) Exhibits

10.1	Employment Agreement dated as of June 15, 2011, between the Company and Mark P. Prinz.
10.2	Employment Agreement dated as of June 15, 2011, between the Company and Patrick Orr.
10.3	Amended and Restated Employment Agreement dated as of June 15, 2011, between the Company and Keith Johnson.
10.4	Amendment to Agreement dated August 19, 2011, between the Company and George Konrad.
31.1	Certification of Principal Executive Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

In accordance with Section 13(a) or 15(d) of the Exchange Act, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	POWERVERDE, INC.
Dated: August 22, 2011	By:	/s/ Richard H. Davis
		Richard H. Davis
		Chief Executive Officer
Dated: August 22, 2011	By:	/s/ John L. Hofmann
		John L. Hofmann
		Chief Financial Officer

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Exhibit Index

Exhibit No.	Description
10.1	Employment Agreement dated as of June 15, 2011, between the Company and Mark P. Prinz.
10.2	Employment Agreement dated as of June 15, 2011, between the Company and Patrick Orr.
10.3	Amended and Restated Employment Agreement dated as of June 15, 2011, between the Company and Keith Johnson.
10.4	Amendment to Agreement dated August 19, 2011, between the Company and George Konrad.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of the 15th day of June, 2011 (the “Effective Date”), and is by and between POWERVERDE, INC., a Delaware corporation (the “Company”), and MARK P. PRINZ, an individual (the “Employee”).

R E C I T A L S

A.	The Employee possesses knowledge and skills which the Company believes will be of substantial benefit to its operations and success, and the Company desires to employ the Employee on the terms and conditions set forth below.
B.	The Employee is willing to make the Employee’s services available to the Company on the terms and conditions set forth below.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, the parties agree as follows:

1.Employment. The Company hereby agrees to employ the Employee and the Employee hereby agrees to serve the Company on the terms and conditions set forth herein.

2.Duties of Employee. During the Employment Period (as defined in Section 3, below), the Employee shall serve as a “Project Engineer” of the Company.  The Employee shall diligently perform all services as may be assigned to the Employee by the President of the Company, and shall exercise such power and authority as may from time to time be delegated to the Employee by the President of the Company.  The Employee’s duties will be described in a Company job description, or will otherwise be determined by the Company with consultation with the Employee.  During the Employment Period, the Employee will faithfully carry out his responsibilities and provide services to the Company at such hours as may be necessary for the Employee to perform effectively the responsibilities of the position.  In addition, the Employee shall act in accordance with (i) standing instructions for the position which may be issued by the Company from time to time; (ii) all reasonable and lawful requests, directions and/or restrictions imposed by the Company; and (iii) all policies of the Company as prescribed from time to time.  Upon termination of employment, the Employee shall return all Company equipment and other Company property in the Employee’s possession, custody or control.

During the Employment Period, the Employee shall devote all of the Employee’s business time, attention and energies to the business of the Company; provided, however, that this provision shall not be construed as preventing the Employee from investing savings or other assets in such form or manner as will not require any services on the part of the Employee, nor shall it be construed as preventing the Employee from engaging in any charity or civic work approved in writing by the Company.

3.Term. The Employee shall be employed by the Company commencing on the Effective Date of this Agreement.  The Employee’s employment by the Company shall continue for a period of two years (the “Initial Term”), unless this Agreement is terminated first pursuant to Article 6.  If not previously terminated, at the end of the Initial Term the Agreement shall be automatically renewed for an additional term of one year, and it shall similarly be renewed on future one-year anniversary dates (“Renewal Terms”) until the Agreement is terminated pursuant to Article 6.  The entire term of the Agreement (comprised of that part of the Initial Term, and any Renewal Terms, prior to termination) shall be referred to in this Agreement as the “Employment Period.”  For all purposes of the Agreement, no termination of the Employee’s employment shall be deemed to have occurred if the Employee is transferred during the Employment Period to any business entity which is an Affiliate of the Company.  As used in this Agreement, the term “Affiliate” means, with respect to any specified person or entity (“Person”), any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.

4. Compensation.

(a)          Base Compensation. The Employee shall receive compensation of $11,250.00 per month by the Company during the Initial Term (the “Compensation”), with such Compensation payable in installments consistent with the Company’s normal payroll schedule, subject to applicable withholding and other taxes as shall be required by applicable law.  Thereafter the Company may increase the Employee’s Compensation, in its sole discretion.

(b)          Bonuses.

(i)           The Company shall pay to the Employee a one-time signing bonus of $5,000.00 upon execution of this Agreement.

(ii)           During the Term of Employment, the Employee shall be eligible to receive further bonuses pursuant to the bonus program of the Company then in effect, and in such amounts and at such times as the Company shall determine in its sole discretion pursuant to the terms of such program.

(c)          Stock Grant. The Company hereby grants to the Employee 100,000 shares of common stock, par value $0.0001 per share, of the Company (“Common Stock”).

(d)          Stock Options.

(i)           The Employee shall be granted an option (the “First Option”) to purchase from the Company 100,000 shares of Common Stock, at an exercise price of $1.23 per share. The parties shall execute a separate Stock Option Agreement (the “First Stock Option Agreement”) as of the Effective Date, and the First Stock Option Agreement will more fully describe the Employee’s stock option rights.  The shares of stock that may be purchased upon the exercise of the First Option are referred to in this Agreement as the “First Option Shares.”  The First Option will be exercisable with respect to all or a portion of the First Option Shares (in full shares) (i) as of the date upon which the last of both of the following events has occurred: (A) the Liberator system is functioning and producing at least 50kw; and (B) the next generation of the Liberator system has been designed, built and operational; and (ii) subject to the Vesting Schedule (as defined in Section 4(d)(iii), below) and assuming compliance with and upon the terms and conditions of the First Stock Option Agreement.

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(ii)           The Employee shall be granted an option (the “Second Option”) to purchase from the Company 100,000 shares of Common Stock, at an exercise price of $2.00 per share. The parties shall execute a separate Stock Option Agreement (the “Second Stock Option Agreement”) as of the Effective Date, and the Second Stock Option Agreement will more fully describe the Employee’s stock option rights.  The shares of stock that may be purchased upon the exercise of the Second Option are referred to in this Agreement as the “Second Option Shares.”  The Second Option will be exercisable with respect to all or a portion of the Second Option Shares (in full shares) (i) as of the date upon which the first Combined Cooling Heating and Power (CCHP) system has been designed and built and is operational; and (ii) in accordance with the Vesting Schedule (as defined in Section 4(c)(iii), below) and assuming compliance with and upon the terms and conditions of the Second Stock Option Agreement.

(iii)           Subject to the provisions of Sections 4(d)(i) and (ii) above, as applicable, the First Option and Second Option will be exercisable with respect to all or a portion of the First Option Shares and Second Option Shares, respectively (each of such option shares are sometimes hereinafter referred to as the “Option Shares”) (in full shares) in accordance with the following vesting schedule (“Vesting Schedule”):

(1)	25% of the Option Shares, i.e., 25,000 shares, shall vest as of the date of execution of both this Agreement and the relevant Stock Option Agreement;
(2)	an additional 25% thereof shall vest as of the six-month anniversary of the Effective Date;
(3)	an additional 25% thereof shall vest as of the first anniversary of the Effective Date; and
(4)	the remaining 25% thereof shall vest as of the 18-month anniversary of the Effective Date.

There shall be acceleration of all vesting in the event of a Change of Control, as that term is defined in, and pursuant to the terms and conditions of, the relevant Stock Option Agreement.  Each of the First Option and Second Option shall lapse immediately upon Employee’s voluntary termination of employment with the Company or termination of employment with the Company for Cause.  As used in this Agreement, the term “Cause” means:

(i)          the continued failure by Employee to satisfactorily perform Employee’s duties (other than any such failure resulting from Employee’s disability), as set forth in this Agreement or in the Employee’s job description following receipt by the Employee of 30 days’ written notice thereof from the Company;

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(ii)          any serious act of misconduct in connection with work by the Employee, including, but not limited to, the following acts or omissions: falsification of Company or its Affiliate’s documents; dishonesty in connection with Company or its Affiliate’s business; misrepresentations to the Employee’s direct supervisor, or to any officer of the Company, or to the Board of Directors of the Company; breach of the Employee’s duty of loyalty to the Company through appropriation or attempted appropriation of corporate opportunities for the Employee’s own advantage, or through other conflicts of interest where the Employee acts for the Employee’s own personal benefit, instead of for the benefit of the Company or its Affiliates; conduct by the Employee that adversely affects, or could reasonably be expected to adversely affect, the business or reputation of the Company or any of its Affiliates; or any act or omission which is a material violation of any law, regulation or ordinance applicable to the Company or any of its Affiliates, or which otherwise constitutes a  material violation of any Code of Ethics promulgated by the Company or any of its Affiliates;

(iii)          an act or omission by Employee which would be either a felony under applicable law, or a misdemeanor involving moral turpitude under applicable law, regardless of whether or not the Employee is prosecuted for this crime, and if prosecuted, regardless of the eventual disposition of the case, as long as there is sufficient evidence, admissible in a court of law in the forum jurisdiction identified in Section 10 of this Agreement, to prove, by a preponderance of the evidence, that the Employee committed such crimes; or

(iv)          the Employee’s inability to perform duties assigned by the Company due to physical or mental disability following receipt by the Employee of 30 days’ written notice thereof from the Company, but only after all leaves of absence provided to the Employee by the Company, or required by federal or state law, have been exhausted.

5. Expense Reimbursement and Other Benefits.

(a)          Reimbursement of Expenses. Subject to such reasonable rules and guidelines as the Company may from time to time adopt for its employees generally, the Company shall reim­burse the Employee for all reasonable expenses actually paid or incurred by the Employee during the Term of Employment in the course of and pursuant to the business of the Company.  The Employee shall account to the Company in writing for all expenses for which reimbursement is sought and shall supply to the Company copies of all relevant invoices, receipts or other evidence reasonably requested by the Company.

(b)          Compensation/Benefit Programs.  During the Term of Employment but no earlier than following the expiration of the 18-month period following the Effective Date (unless otherwise provided by the Company in its sole discretion), the Employee shall be entitled to participate in all employee benefit plans as are presently or here­after offered by the Company to its executive-level employees, including, without limitation, and to the extent existing, the Company’s group health insurance plan and any bonus, option or similar incentive compensation plan, 401(k) plan, group life and short- and long-term disability plans and automobile allowance program, subject to the general eligibility and participation provisions set forth in such plans and required by applicable law.

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(c)          Vacation.  The Employee shall be entitled to such days of vacation during the Term of Employment as are reasonable and customary and in accordance with the Company’s existing policies, or as otherwise mutually agreed to by the parties.

6. Termination of Employment.

(a)          Termination.  The Company and/or Employee shall have the right to terminate this Agreement, and the Employee’s employment hereunder, at any time without Cause immediately upon 30 days’ prior written notice thereof. The Company shall have the right to terminate this Agreement, and the Employee’s employment hereunder, at any time for Cause (as defined above) without prior notice thereof.  The Employee’s employment and the Employment Period shall terminate automatically upon the Employee’s death, as of the date of death.

(b)          Payment(s) to Employee Following Termination. Upon the termination of Employee’s employment hereunder for any reason, the Company shall only be obligated to pay to the Employee (i) on the date of such termination, the Employee’s Compensation through the date of termination;and (ii) within 30 days after the date of such termination, any pro rated bonus, if applicable, pursuant to Section 4(b) based on that portion of the relevant period during which the Employee was employed, if applicable, through the Initial Term.  The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a), above).

(c)          Resignation.  Upon any notice of termination of employment pursuant to this Article 6, the Employee shall automatically and without further action be deemed to have resigned as an officer, and if the Employee was then serving as a director of the Company, and if required by the Company, the Employee hereby agrees to immediately execute a resignation letter to the Company.

(d)          Survival.  The provisions of this Article 6 shall survive the termination of this Agreement, as applicable.

7. Restrictive Covenants.

 (a)         Confidentiality.  Except as required in the performance of Employee’s work for the Company, Employee will not directly or indirectly use or disclose any Trade Secret Information (as defined below), either during or after employment with the Company for so long as such information remains Trade Secret Information as defined herein.  Except as required in the performance of Employee’s work for the Company, during the period of Employee’s employment with the Company and for a period of two years thereafter (the “Restrictive Period”), Employee will not directly or indirectly use or disclose any Confidential Information (as defined below), and will not circumvent, avoid, bypass, or obviate, directly or indirectly, the intent of this Agreement. The Employee further agrees that the Confidential Information is the exclusive property of the Company and in furtherance thereof, the Employee covenants with the Company not to engage in any conversations, negotiations, correspondence or any transactions with respect to the Confidential Information, or take any other actions involving the Confidential Information, whether directly or indirectly, or whether on the account of the Employee or not, which will not be in the best interests of the Company or will not be within the intent of this Agreement, without express written consent of the Company, which consent shall be in the sole discretion of the Company and which consent may be unreasonably withheld.

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As used herein, “Trade Secret Information” means any information possessed by the Company which derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.  For purposes of this Agreement, “Trade Secret Information” includes both information disclosed to Employee by the Company, or by its other employees, agents or representatives, and information otherwise acquired or developed by Employee in the course of his employment with the Company.  As used herein, “Confidential Information” means any information possessed by the Company which is not readily ascertainable by proper means by other persons, regardless of whether such Confidential Information has independent economic value.  Any information that Employee can demonstrate is publicly available through no fault of Employee or others with a duty or other obligation of confidentiality to the Company (contractual or otherwise), is not Trade Secret Information or Confidential Information within the meaning of this Agreement.

Notwithstanding anything else in this Agreement, Trade Secret Information shall include, but is not limited to: (i) information concerning the Company’s management, financial condition, financial operation, purchasing activities, pricing formulas, existing and contemplated products and services, sales activities, marketing research, marketing plans, marketing activities, and business plans; (ii) information acquired or compiled by the Company concerning actual or prospective customers, including, but not limited to, their identities, their business operations, their finances, the identity and quantity of products or services purchased from the Company, and other unpublished information furnished by or about them to the Company; (iii) the Company’s software (including source code, object code and related documentation), its software requirements and design documentation, its product development plans, its security procedures, methods and vulnerabilities (including, without limitation, all passwords and user ids), the algorithms, methods and procedures used within the Company’s software, and all ideas and proposals, whether generated internally or not, relating to the design, operation, implementation, use and maintenance of the Company’s software; (iv) all Inventions (as defined in Section 7(c)(2), below), regardless of whether such Inventions have been reduced to practice or are subject to patent protection; and (v) all other types and categories of information (in whatever form) with respect to which, under all the circumstances, Employee knows or has reason to know that the Company intends or expects secrecy to be maintained and as to which the Company has made reasonable efforts to maintain secrecy.

The Company may, from time to time, inform Employee of restrictions upon the use or disclosure of specified information which has been licensed or otherwise disclosed to the Company by third parties pursuant to license or confidential disclosure agreements which contain restrictions upon the use or disclosure of such information.  Employee agrees that such information shall be treated as Confidential Information under this Agreement, and, in addition, Employee agrees to abide by the restrictions upon use and/or disclosure contained in such agreements.

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Employee will not use or disclose to the Company any confidential or proprietary information belonging to others, and Employee represents that his employment by the Company does not and will not require the use or disclosure of such information or the violation of any confidential relationship with any third party.

(b)          Other Property of the Company. All documents, encoded media, and other tangible items provided or made accessible to Employee by the Company, or by its other employees, agents or representatives, or prepared, generated or created by Employee or others in connection with any business activity of the Company, are and shall remain the property of the Company.

Upon termination of his employment with the Company, Employee will promptly deliver to the Company all such documents, media, and other items in Employee’s possession, including all complete or partial copies, recordings, abstracts, notes or reproductions of any kind made from or about such documents, media, items or information contained therein.

Employee will neither have nor claim any right, title, or interest in any Invention, patent, copyright, trademark, service mark or trade name (or any application released thereto) owned or used by the Company.

(c)          Ownership of Developments.

(1)           Work Product. All work, writing, material, copyrights, patents, trade secrets, or other intellectual property rights associated with any ideas, concepts, techniques, Inventions (as defined below), processes, or works of authorship developed or created by Employee during the course of performing work for the Company or its clients, including, but not limited to, CHP, CCHP, waste heat systems, Rankin cycle technologies, renewable technologies and power consumption technologies(collectively, “Work Product”) shall belong exclusively to the Company and shall, to the extent possible, be considered a work made by the Employee for hire for the Company within the meaning of Title 17 of the United States Code.  To the extent the Work Product may not be considered work made by the Employee for hire for the Company, the Employee hereby assigns all right title and interest the Employee has or may have in such Work Product to the Company, and Employee further agrees to execute any assignments or similar documents requested by the Company in the future to further evidence and document the Company’s rights in and to any Work Product, and to do so without any requirement of further consideration, even if such request is made after this Agreement expires or terminates.

For the purposes of this Section 7(c), “Work Product” shall include, without limitation, all work relating in any way to the business of the Company that is conceived or created, in whole or in part, by the Employee during the term of Employment, regardless of whether such creation is performed during normal working hours or with the use of Company equipment, all copies of such work in any medium whatsoever in the Employee’s control or possession, and all derivative works of such work authored in whole or in part by the Employee.

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(2)           Inventions. As used herein, “Invention” means any discovery, improvement, innovation, idea, formula, or shop right (whether or not patentable, whether or not put into writing, and whether or not put into practice) made, generated, or conceived by Employee (whether alone or with others, whether or not patentable, whether or not put into writing, and whether or not reduced to practice) while employed with the Company that relates in any way to the Company’s products, services, market, employees, business methods, operations or product plans.  For purposes of this Agreement, any Invention relating to the business of the Company or to the Company’s actual or demonstrably anticipated research or development with respect to which Employee files a patent application within one year after termination of employment with the Company shall be presumed to be an Invention conceived by Employee during the period of his employment with the Company, rebuttable only by accurate, written and duly corroborated evidence that such Invention was not first conceived by Employee until after the termination of his employment with the Company.

Employee further agrees that all Inventions generated, made or conceived by Employee during the period of his employment with the Company shall also be solely owned by the Company, and Employee hereby irrevocably assigns to the Company all of his right, title and interest in and to any and all Inventions. Employee agrees to and shall promptly disclose all Inventions to the Company in writing.

Employee further agrees to execute any assignments or similar documents requested by the Company to further evidence and document the Company’s rights in and to any Inventions, and to cooperate with Company, at the Company’s expense, in obtaining letters patent or equivalent protection for such Inventions in any and all locations and jurisdictions Company may choose in its sole discretion throughout the world, and to do so without any requirement of further consideration, even if such request is made after this Agreement expires or terminates.

(3)           Preexisting IP. In addition to the foregoing, Employee agrees to execute the Assignment in the form attached hereto as Exhibit A, assigning to the Company all right, title and interest Employee has or may have in and to any and all United States Patent Applications filed with the United States Patent and Trademark Office, including, without limitation, United States Patent Application _______________ filed on _________________ (collectively, the “Existing Patents”), and all Inventions disclosed or claimed therein.

Employee further agrees that any and all right, title and interest Employee has or may have in any works of authorship, discoveries, improvements, innovations, ideas, or formulas, (whether or not patentable, whether or not put into writing, and whether or not put into practice) made, generated, or conceived by Employee (whether alone or with others) prior to the Effective Date that relate in any way to the Company’s products, services, market, employees, business methods, operations or product plans, including, but not limited to, CHP, CCHP, waste heat systems, Rankin cycle technologies, renewable technologies and power consumption technologies (collectively, the “Preexisting IP”) are hereby irrevocably assigned to the Company.

Employee agrees to execute any assignments or similar documents requested by the Company to further evidence and document the Company’s rights in and to the Existing Patents and/or any Preexisting IP, and to cooperate with Company, at the Company’s expense, in obtaining letters patent or equivalent protection for such Existing Patents and/or Preexisting IP in any and all locations and jurisdictions Company may choose in its sole discretion throughout the world, and to do so without any requirement of further consideration, even if such request is made after this Agreement expires or terminates.

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(d)          Definition of Company.  Solely for purposes of this Article 7, the term “Company” also shall include any existing or future subsidiaries of the Company.

(e)          Covenant Not to Compete.  (i) During the period of Employee’s employment with the Company and for a period of two years thereafter (the “Restrictive Period”), Employee will not, as an employee, officer, director, contractor, broker, distributor, advisor, consultant, or owner, or in any other capacity, directly or indirectly participate or assist in: (A) the design, development, production, marketing or sales of any product or service competitive with any product or service which the Company markets or plans to market at the time of termination of Employee’s employment with the Company; or (B) the management or financing of a business enterprise engaged in any such activities.  The geographic territory within which Employee will refrain from such activities shall be the United States of America, the countries which are members of the European Union and any other geographic territory within which the Company or any Company agent or representative markets or plans to market any such products or services at the time of termination of Employee’s employment (“Restricted Area”)

(f)          Non-Solicitation of Customers.  During the two-year period after the date of termination of Employee’s employment with the Company, Employee will not, directly or indirectly, either (i) solicit, divert, take away or accept, or attempt to solicit, divert, take away or accept, the business of any Restricted Customer (as defined below) for any product or service offered by the Company within the Restricted Area; or (ii) attempt or seek to cause any Restricted Customer to refrain, in any respect, from acquiring from or through the Company any product or services offered by the Company within the Restricted Area. As used herein, the term “Restricted Customer” means any customer to whom or to which goods or services were provided by the Company during the two-year period prior to the date of Employee’s employment, and any potential customer of the Company that the Company solicited during the one-year period prior to the date of termination of Employee’s employment with the Company.

(g)          Non-Solicitation of Employees.  During the two-year period after the date of termination of the Employee’s employment with the Company, Employee will not, as to work within the Restricted Area, directly or indirectly solicit, request or induce any employee of the Company to terminate employment with the Company and seek employment with another firm other than the Company; provided, however, that a general advertisement in a medium of general public circulation with respect to a particular employment position that is not targeted at any one or more the employees of the Company will not violate the covenants of this Section.

(h)          Duty of Loyalty.  Employee agrees that during the time that Employee is employed by the Company, Employee will owe the Company a duty of loyalty, and that as part of this duty of loyalty, Employee shall not engage in any form of business activity representing competition against the Company.  Similarly, Employee, while employed by the Company, shall not appropriate for Employee’s own use any business opportunity of the Company, or otherwise engage in conduct where Employee’s own business interests are developed instead of the Company’s business interests.

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(i)           Requests for Clarification.  In the event Employee is uncertain as to the meaning of any provision of this Agreement or its application to any particular information, item or activity, Employee will inquire in writing to the President of the Company, specifying any areas of uncertainty.  The Company will respond in writing within a reasonable time and will endeavor to clarify any subject of uncertainty, including such things as whether it considers particular information to be its Trade Secret Information or whether it considers any particular activity or employment to be in violation of this Agreement.

(j)           Notice to Subsequent Employers.  For a period of two years after termination of his employment with the Company, Employee will inform any prospective new employer (before accepting employment) of the terms of this Agreement.  In addition, it is agreed that the terms of this Agreement are not confidential, and that the Company may disclose the provisions of this Agreement, without any liability whatsoever, to any person, including, without limitation, one that is engaged in a business relationship with Employee, and may indicate that it is believed that Employee is in violation of this Agreement.

(k)          Acknowledgment by Employee. The Employee acknowledges and confirms that (i) the restrictive covenants contained in this Article 7 are reasonably necessary to protect the legitimate business interests of the Company; and (ii) the restrictions contained in this Article 7 (including, without limitation, the length of the term of the provisions of this Article 7) are not overbroad, overlong, or unfair and are not the result of overreaching, duress or coercion of any kind.

(l)           Reformation by Court.  In the event that a court of competent jurisdiction shall determine that any provision of this Article 7 is invalid or more restrictive than permitted under the governing law of such jurisdiction, then only as to enforcement of this Article 7 within the jurisdiction of such court, such provision shall be interpreted and enforced as if it provided for the maximum restriction permitted under such governing law.

(m)         Survival.  The provisions of this Article 7 shall survive the termination of this Agreement, as applicable.

8. Injunction.  It is recognized and hereby acknowl­­edged by the parties hereto that a breach by the Employee of any of the covenants contained in Article 7 of this Agreement will cause irreparable harm and damage to the Company, the monetary amount of which may be virtually impossible to ascertain.  As a result, the Employee recognizes and hereby acknowledges that the Company shall be entitled to seek an injunction from any court of competent juris­diction enjoining and restraining any violation of any or all of the covenants contained in Article 7 of this Agree­ment by the Employee or any of the Employee’sAffiliates, associates, partners or agents, either directly or indirectly, and that such right to injunction shall be cumulative and in addition to whatever other remedies the Company may possess.

9.            Assignment.  Neither party shall have the right to assign or delegate the Employee’s rights or obligations hereunder, or any portion thereof, to any other person.

10.Governing Law.  This Agreement is to be construed and enforced according to the laws of the State of Florida. The parties agree to accept any service of process by mail and to the exclusive venue of courts of competent jurisdiction located in Miami-Dade County, Florida in any dispute arising out of the employment by the Company of the Employee, compensation or any damages in respect thereof.

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11.Entire Agreement; Amendment.  This Agreement and the relevant Stock Option Agreements referred to herein constitute the entire agreement between the parties hereto with respect to the subject matter hereof and, upon its effectiveness, shall supersede all prior agreements, understandings and arrangements, both oral and written, between the Employee and the Company (or any of its Affiliates) with respect to such subject matter.  This Agreement may not be modified in any way unless by a written instrument signed by both the Company and the Employee.

12.Notices.  All notices required or permitted to be given hereunder shall be in writing and shall be personally delivered by courier, sent by registered or certified mail, return receipt requested or sent by confirmed facsimile transmission addressed as set forth herein.  Notices personally delivered, sent by facsimile or sent by overnight courier shall be deemed given on the date of delivery and notices mailed in accordance with the foregoing shall be deemed given upon the earlier of receipt by the addressee, as evidenced by the return receipt thereof, or three days after deposit in the U.S. mail.  Notice shall be sent: (i) if to the Company, addressed to PowerVerde, Inc., 23429 N. 35th Drive, Glendale, Arizona, Attention: George Konrad, President, and (ii) if to the Employee, to the Employee’s address as reflected on the payroll records of the Company, or to such other address as either party hereto may from time to time give notice of to the other.

13.Benefits; Binding Effect.  This Agreement shall be for the benefit of and binding upon the parties hereto and their respective heirs, personal representatives, legal representa­tives, successors and, where applicable, assigns, including, without limitation, any successor to the Company, whether by merger, consolidation, sale of stock, sale of assets or otherwise.

14.Severability.  The invalidity of any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall not affect the enforceability of the remain­ing portions of this Agreement or any part thereof, all of which are inserted conditionally on their being valid in law.

15.Waivers.  The waiver by either party hereto of a breach or violation of any term or provision of this Agreement shall not operate nor be construed as a waiver of any subsequent breach or violation.

16.Damages.  Nothing contained herein shall be con­strued to prevent the Company or the Employee from seeking and recover­ing from the other damages sustained by either or both of them as a result of its or his or her breach of any term or provision of this Agreement.  In the event that either party hereto brings suit for the collection of any damages resulting from, or the injunction of any action constituting, a breach of any of the terms or pro­visions of this Agreement, then each party shall pay its own court costs and attorneys’ fees related thereto.

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17.Section Headings.  The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 [Signatures Begin on Following Page.]

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

COMPANY:
POWERVERDE, INC.
By:	/s/ George Konrad
	George Konrad, President

EMPLOYEE:

/s/ Mark P. Prinz

Mark P. Prinz

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EXHIBIT A

ASSIGNMENT

(See attached.)

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EX-10.2

Exhibit 10.2

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of the 15th day of June, 2011 (the “Effective Date”), and is by and between POWERVERDE, INC., a Delaware corporation (the “Company”), and PATRICK ORR, an individual (the “Employee”).

R E C I T A L S

A.	The Employee possesses knowledge and skills which the Company believes will be of substantial benefit to its operations and success, and the Company desires to employ the Employee on the terms and conditions set forth below.
B.	The Employee is willing to make the Employee’s services available to the Company on the terms and conditions set forth below.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, the parties agree as follows:

1.Employment. The Company hereby agrees to employ the Employee and the Employee hereby agrees to serve the Company on the terms and conditions set forth herein.

2.Duties of Employee. During the Employment Period (as defined in Section 3, below), the Employee shall serve as a “Project Engineer” of the Company.  The Employee shall diligently perform all services as may be assigned to the Employee by the President of the Company, and shall exercise such power and authority as may from time to time be delegated to the Employee by the President of the Company.  The Employee’s duties will be described in a Company job description, or will otherwise be determined by the Company with consultation with the Employee.  During the Employment Period, the Employee will faithfully carry out his responsibilities and provide services to the Company at such hours as may be necessary for the Employee to perform effectively the responsibilities of the position.  In addition, the Employee shall act in accordance with (i) standing instructions for the position which may be issued by the Company from time to time; (ii) all reasonable and lawful requests, directions and/or restrictions imposed by the Company; and (iii) all policies of the Company as prescribed from time to time.  Upon termination of employment, the Employee shall return all Company equipment and other Company property in the Employee’s possession, custody or control.

During the Employment Period, the Employee shall devote all of the Employee’s business time, attention and energies to the business of the Company; provided, however, that this provision shall not be construed as preventing the Employee from investing savings or other assets in such form or manner as will not require any services on the part of the Employee, nor shall it be construed as preventing the Employee from engaging in any charity or civic work approved in writing by the Company.

3.Term. The Employee shall be employed by the Company commencing on the Effective Date of this Agreement.  The Employee’s employment by the Company shall continue for a period of two years (the “Initial Term”), unless this Agreement is terminated first pursuant to Article 6.  If not previously terminated, at the end of the Initial Term the Agreement shall be automatically renewed for an additional term of one year, and it shall similarly be renewed on future one-year anniversary dates (“Renewal Terms”) until the Agreement is terminated pursuant to Article 6.  The entire term of the Agreement (comprised of that part of the Initial Term, and any Renewal Terms, prior to termination) shall be referred to in this Agreement as the “Employment Period.”  For all purposes of the Agreement, no termination of the Employee’s employment shall be deemed to have occurred if the Employee is transferred during the Employment Period to any business entity which is an Affiliate of the Company.  As used in this Agreement, the term “Affiliate” means, with respect to any specified person or entity (“Person”), any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.

4. Compensation.

(a)          Base Compensation. The Employee shall receive compensation of $11,250.00 per month by the Company during the Initial Term (the “Compensation”), with such Compensation payable in installments consistent with the Company’s normal payroll schedule, subject to applicable withholding and other taxes as shall be required by applicable law.  Thereafter the Company may increase the Employee’s Compensation, in its sole discretion.

(b)          Bonuses.

(i)           The Company shall pay to the Employee a one-time signing bonus of $5,000.00 upon execution of this Agreement.

(ii)           During the Term of Employment, the Employee shall be eligible to receive further bonuses pursuant to the bonus program of the Company then in effect, and in such amounts and at such times as the Company shall determine in its sole discretion pursuant to the terms of such program.

(c)          Stock Grant. The Company hereby grants to the Employee 100,000 shares of common stock, par value $0.0001 per share, of the Company (“Common Stock”).

(d)          Stock Options.

(i)           The Employee shall be granted an option (the “First Option”) to purchase from the Company 100,000 shares of Common Stock, at an exercise price of $1.23 per share. The parties shall execute a separate Stock Option Agreement (the “First Stock Option Agreement”) as of the Effective Date, and the First Stock Option Agreement will more fully describe the Employee’s stock option rights.  The shares of stock that may be purchased upon the exercise of the First Option are referred to in this Agreement as the “First Option Shares.”  The First Option will be exercisable with respect to all or a portion of the First Option Shares (in full shares) (i) as of the date upon which the last of both of the following events has occurred: (A) the Liberator is up and running and producing at least 50kw, and (B) the next generation of the Liberator has been designed, built and operational; and (ii) subject to the Vesting Schedule (as defined in Section 4(d)(iii), below) and assuming compliance with and upon the terms and conditions of the First Stock Option Agreement.

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(ii)           The Employee shall be granted an option (the “Second Option”) to purchase from the Company 100,000 shares of Common Stock, at an exercise price of $2.00 per share. The parties shall execute a separate Stock Option Agreement (the “Second Stock Option Agreement”) as of the Effective Date, and the Second Stock Option Agreement will more fully describe the Employee’s stock option rights.  The shares of stock that may be purchased upon the exercise of the Second Option are referred to in this Agreement as the “Second Option Shares.”  The Second Option will be exercisable with respect to all or a portion of the Second Option Shares (in full shares) (i) as of the date upon which the first Combined Cooling Heating and Power (CCHP) system has been designed and built and is operational; and (ii) in accordance with the Vesting Schedule (as defined in Section 4(d)(iii), below) and assuming compliance with and upon the terms and conditions of the Second Stock Option Agreement.

(iii)           Subject to the provisions of Sections 4(d)(i) and (ii) above, as applicable, the First Option and Second Option will be exercisable with respect to all or a portion of the First Option Shares and Second Option Shares, respectively (each of such option shares are sometimes hereinafter referred to as the “Option Shares”) (in full shares) in accordance with the following vesting schedule (“Vesting Schedule”):

(1)	25% of the Option Shares, i.e., 25,000 shares, shall vest as of the date of execution of both this Agreement and the relevant Stock Option Agreement;
(2)	an additional 25% thereof shall vest as of the six-month anniversary of the Effective Date;
(3)	an additional 25% thereof shall vest as of the first anniversary of the Effective Date; and
(4)	the remaining 25% thereof shall vest as of the 18-month anniversary of the Effective Date.

There shall be acceleration of all vesting in the event of a Change of Control, as that term is defined in, and pursuant to the terms and conditions of, the relevant Stock Option Agreement.  Each of the First Option and Second Option shall lapse immediately upon Employee’s voluntary termination of employment with the Company or termination of employment with the Company for Cause.  As used in this Agreement, the term “Cause” means:

(i)          the continued failure by Employee to satisfactorily perform Employee’s duties (other than any such failure resulting from Employee’s disability), as set forth in this Agreement or in the Employee’s job description following receipt by the Employee of 30 days’ written notice thereof from the Company;

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(ii)          any serious act of misconduct in connection with work by the Employee, including, but not limited to, the following acts or omissions: falsification of Company or its Affiliate’s documents; dishonesty in connection with Company or its Affiliate’s business; misrepresentations to the Employee’s direct supervisor, or to any officer of the Company, or to the Board of Directors of the Company; breach of the Employee’s duty of loyalty to the Company through appropriation or attempted appropriation of corporate opportunities for the Employee’s own advantage, or through other conflicts of interest where the Employee acts for the Employee’s own personal benefit, instead of for the benefit of the Company or its Affiliates; conduct by the Employee that adversely affects, or could reasonably be expected to adversely affect, the business or reputation of the Company or any of its Affiliates; or any act or omission which is a material violation of any law, regulation or ordinance applicable to the Company or any of its Affiliates, or which otherwise constitutes a  material violation of any Code of Ethics promulgated by the Company or any of its Affiliates;

(iii)          an act or omission by Employee which would be either a felony under applicable law, or a misdemeanor involving moral turpitude under applicable law, regardless of whether or not the Employee is prosecuted for this crime, and if prosecuted, regardless of the eventual disposition of the case, as long as there is sufficient evidence, admissible in a court of law in the forum jurisdiction identified in Section 10 of this Agreement, to prove, by a preponderance of the evidence, that the Employee committed such crimes; or

(iv)          the Employee’s inability to perform duties assigned by the Company due to physical or mental disability following receipt by the Employee of 30 days’ written notice thereof from the Company, but only after all leaves of absence provided to the Employee by the Company, or required by federal or state law, have been exhausted.

5. Expense Reimbursement and Other Benefits.

(a)          Reimbursement of Expenses. Subject to such reasonable rules and guidelines as the Company may from time to time adopt for its employees generally, the Company shall reim­burse the Employee for all reasonable expenses actually paid or incurred by the Employee during the Term of Employment in the course of and pursuant to the business of the Company.  The Employee shall account to the Company in writing for all expenses for which reimbursement is sought and shall supply to the Company copies of all relevant invoices, receipts or other evidence reasonably requested by the Company.

(b)          Compensation/Benefit Programs.  During the Term of Employment but no earlier than following the expiration of the 18-month period following the Effective Date (unless otherwise provided by the Company in its sole discretion), the Employee shall be entitled to participate in all employee benefit plans as are presently or here­after offered by the Company to its executive-level employees, including, without limitation, and to the extent existing, the Company’s group health insurance plan and any bonus, option or similar incentive compensation plan, 401(k) plan, group life and short- and long-term disability plans and automobile allowance program, subject to the general eligibility and participation provisions set forth in such plans and required by applicable law.

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(c)          Vacation.  The Employee shall be entitled to such days of vacation during the Term of Employment as are reasonable and customary and in accordance with the Company’s existing policies, or as otherwise mutually agreed to by the parties.

6. Termination of Employment.

(a)          Termination.  The Company and/or Employee shall have the right to terminate this Agreement, and the Employee’s employment hereunder, at any time without Cause immediately upon 30 days’ prior written notice thereof. The Company shall have the right to terminate this Agreement, and the Employee’s employment hereunder, at any time for Cause (as defined above) without prior notice thereof.  The Employee’s employment and the Employment Period shall terminate automatically upon the Employee’s death, as of the date of death.

(b)          Payment(s) to Employee Following Termination. Upon the termination of Employee’s employment hereunder for any reason, the Company shall only be obligated to pay to the Employee (i) on the date of such termination, the Employee’s Compensation through the date of termination;and (ii) within 30 days after the date of such termination, any pro rated bonus, if applicable, pursuant to Section 4(b) based on that portion of the relevant period during which the Employee was employed, if applicable, through the Initial Term.  The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a), above).

(c)          Resignation.  Upon any notice of termination of employment pursuant to this Article 6, the Employee shall automatically and without further action be deemed to have resigned as an officer, and if the Employee was then serving as a director of the Company, and if required by the Company, the Employee hereby agrees to immediately execute a resignation letter to the Company.

(d)          Survival.  The provisions of this Article 6 shall survive the termination of this Agreement, as applicable.

7. Restrictive Covenants.

 (a)         Confidentiality.  Except as required in the performance of Employee’s work for the Company, Employee will not directly or indirectly use or disclose any Trade Secret Information (as defined below), either during or after employment with the Company for so long as such information remains Trade Secret Information as defined herein.  Except as required in the performance of Employee’s work for the Company, during the period of Employee’s employment with the Company and for a period of two years thereafter (the “Restrictive Period”), Employee will not directly or indirectly use or disclose any Confidential Information (as defined below), and will not circumvent, avoid, bypass, or obviate, directly or indirectly, the intent of this Agreement. The Employee further agrees that the Confidential Information is the exclusive property of the Company and in furtherance thereof, the Employee covenants with the Company not to engage in any conversations, negotiations, correspondence or any transactions with respect to the Confidential Information, or take any other actions involving the Confidential Information, whether directly or indirectly, or whether on the account of the Employee or not, which will not be in the best interests of the Company or will not be within the intent of this Agreement, without express written consent of the Company, which consent shall be in the sole discretion of the Company and which consent may be unreasonably withheld.

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As used herein, “Trade Secret Information” means any information possessed by the Company which derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.  For purposes of this Agreement, “Trade Secret Information” includes both information disclosed to Employee by the Company, or by its other employees, agents or representatives, and information otherwise acquired or developed by Employee in the course of his employment with the Company.  As used herein, “Confidential Information” means any information possessed by the Company which is not readily ascertainable by proper means by other persons, regardless of whether such Confidential Information has independent economic value.  Any information that Employee can demonstrate is publicly available through no fault of Employee or others with a duty or other obligation of confidentiality to the Company (contractual or otherwise), is not Trade Secret Information or Confidential Information within the meaning of this Agreement.

Notwithstanding anything else in this Agreement, Trade Secret Information shall include, but is not limited to: (i) information concerning the Company’s management, financial condition, financial operation, purchasing activities, pricing formulas, existing and contemplated products and services, sales activities, marketing research, marketing plans, marketing activities, and business plans; (ii) information acquired or compiled by the Company concerning actual or prospective customers, including, but not limited to, their identities, their business operations, their finances, the identity and quantity of products or services purchased from the Company, and other unpublished information furnished by or about them to the Company; (iii) the Company’s software (including source code, object code and related documentation), its software requirements and design documentation, its product development plans, its security procedures, methods and vulnerabilities (including, without limitation, all passwords and user ids), the algorithms, methods and procedures used within the Company’s software, and all ideas and proposals, whether generated internally or not, relating to the design, operation, implementation, use and maintenance of the Company’s software; (iv) all Inventions (as defined in Section 7(c)(2), below), regardless of whether such Inventions have been reduced to practice or are subject to patent protection; and (v) all other types and categories of information (in whatever form) with respect to which, under all the circumstances, Employee knows or has reason to know that the Company intends or expects secrecy to be maintained and as to which the Company has made reasonable efforts to maintain secrecy.

The Company may, from time to time, inform Employee of restrictions upon the use or disclosure of specified information which has been licensed or otherwise disclosed to the Company by third parties pursuant to license or confidential disclosure agreements which contain restrictions upon the use or disclosure of such information.  Employee agrees that such information shall be treated as Confidential Information under this Agreement, and, in addition, Employee agrees to abide by the restrictions upon use and/or disclosure contained in such agreements.

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Employee will not use or disclose to the Company any confidential or proprietary information belonging to others, and Employee represents that his employment by the Company does not and will not require the use or disclosure of such information or the violation of any confidential relationship with any third party.

(b)          Other Property of the Company. All documents, encoded media, and other tangible items provided or made accessible to Employee by the Company, or by its other employees, agents or representatives, or prepared, generated or created by Employee or others in connection with any business activity of the Company, are and shall remain the property of the Company.

Upon termination of his employment with the Company, Employee will promptly deliver to the Company all such documents, media, and other items in Employee’s possession, including all complete or partial copies, recordings, abstracts, notes or reproductions of any kind made from or about such documents, media, items or information contained therein.

Employee will neither have nor claim any right, title, or interest in any Invention, patent, copyright, trademark, service mark or trade name (or any application released thereto) owned or used by the Company.

(c)          Ownership of Developments.

(1)           Work Product. All work, writing, material, copyrights, patents, trade secrets, or other intellectual property rights associated with any ideas, concepts, techniques, Inventions (as defined below), processes, or works of authorship developed or created by Employee during the course of performing work for the Company or its clients, including, but not limited to, CHP, CCHP, waste heat systems, Rankin cycle technologies, renewable technologies and power consumption technologies(collectively, “Work Product”) shall belong exclusively to the Company and shall, to the extent possible, be considered a work made by the Employee for hire for the Company within the meaning of Title 17 of the United States Code.  To the extent the Work Product may not be considered work made by the Employee for hire for the Company, the Employee hereby assigns all right title and interest the Employee has or may have in such Work Product to the Company, and Employee further agrees to execute any assignments or similar documents requested by the Company in the future to further evidence and document the Company’s rights in and to any Work Product, and to do so without any requirement of further consideration, even if such request is made after this Agreement expires or terminates.

For the purposes of this Section 7(c), “Work Product” shall include, without limitation, all work relating in any way to the business of the Company that is conceived or created, in whole or in part, by the Employee during the term of Employment, regardless of whether such creation is performed during normal working hours or with the use of Company equipment, all copies of such work in any medium whatsoever in the Employee’s control or possession, and all derivative works of such work authored in whole or in part by the Employee.

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(2)           Inventions. As used herein, “Invention” means any discovery, improvement, innovation, idea, formula, or shop right (whether or not patentable, whether or not put into writing, and whether or not put into practice) made, generated, or conceived by Employee (whether alone or with others, whether or not patentable, whether or not put into writing, and whether or not reduced to practice) while employed with the Company that relates in any way to the Company’s products, services, market, employees, business methods, operations or product plans.  For purposes of this Agreement, any Invention relating to the business of the Company or to the Company’s actual or demonstrably anticipated research or development with respect to which Employee files a patent application within one year after termination of employment with the Company shall be presumed to be an Invention conceived by Employee during the period of his employment with the Company, rebuttable only by accurate, written and duly corroborated evidence that such Invention was not first conceived by Employee until after the termination of his employment with the Company.

Employee further agrees that all Inventions generated, made or conceived by Employee during the period of his employment with the Company shall also be solely owned by the Company, and Employee hereby irrevocably assigns to the Company all of his right, title and interest in and to any and all Inventions. Employee agrees to and shall promptly disclose all Inventions to the Company in writing.

Employee further agrees to execute any assignments or similar documents requested by the Company to further evidence and document the Company’s rights in and to any Inventions, and to cooperate with Company, at the Company’s expense, in obtaining letters patent or equivalent protection for such Inventions in any and all locations and jurisdictions Company may choose in its sole discretion throughout the world, and to do so without any requirement of further consideration, even if such request is made after this Agreement expires or terminates.

(3)           Preexisting IP. In addition to the foregoing, Employee agrees to execute the Assignment in the form attached hereto as Exhibit A, assigning to the Company all right, title and interest Employee has or may have in and to any and all United States Patent Applications filed with the United States Patent and Trademark Office, including, without limitation, United States Patent Application _______________ filed on _________________ (collectively, the “Existing Patents”), and all Inventions disclosed or claimed therein.

Employee further agrees that any and all right, title and interest Employee has or may have in any works of authorship, discoveries, improvements, innovations, ideas, or formulas, (whether or not patentable, whether or not put into writing, and whether or not put into practice) made, generated, or conceived by Employee (whether alone or with others) prior to the Effective Date that relate in any way to the Company’s products, services, market, employees, business methods, operations or product plans, including, but not limited to, CHP, CCHP, waste heat systems, Rankin cycle technologies, renewable technologies and power consumption technologies (collectively, the “Preexisting IP”) are hereby irrevocably assigned to the Company.

Employee agrees to execute any assignments or similar documents requested by the Company to further evidence and document the Company’s rights in and to the Existing Patents and/or any Preexisting IP, and to cooperate with Company, at the Company’s expense, in obtaining letters patent or equivalent protection for such Existing Patents and/or Preexisting IP in any and all locations and jurisdictions Company may choose in its sole discretion throughout the world, and to do so without any requirement of further consideration, even if such request is made after this Agreement expires or terminates.

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(d)           Definition of Company.  Solely for purposes of this Article 7, the term “Company” also shall include any existing or future subsidiaries of the Company.

(e)           Covenant Not to Compete.  (i) During the period of Employee’s employment with the Company and for a period of two years thereafter (the “Restrictive Period”), Employee will not, as an employee, officer, director, contractor, broker, distributor, advisor, consultant, or owner, or in any other capacity, directly or indirectly participate or assist in: (A) the design, development, production, marketing or sales of any product or service competitive with any product or service which the Company markets or plans to market at the time of termination of Employee’s employment with the Company; or (B) the management or financing of a business enterprise engaged in any such activities.  The geographic territory within which Employee will refrain from such activities shall be the United States of America, the countries which are members of the European Union and any other geographic territory within which the Company or any Company agent or representative markets or plans to market any such products or services at the time of termination of Employee’s employment (“Restricted Area”)

(f)           Non-Solicitation of Customers.  During the two-year period after the date of termination of Employee’s employment with the Company, Employee will not, directly or indirectly, either (i) solicit, divert, take away or accept, or attempt to solicit, divert, take away or accept, the business of any Restricted Customer (as defined below) for any product or service offered by the Company within the Restricted Area; or (ii) attempt or seek to cause any Restricted Customer to refrain, in any respect, from acquiring from or through the Company any product or services offered by the Company within the Restricted Area. As used herein, the term “Restricted Customer” means any customer to whom or to which goods or services were provided by the Company during the two-year period prior to the date of Employee’s employment, and any potential customer of the Company that the Company solicited during the one-year period prior to the date of termination of Employee’s employment with the Company.

(g)          Non-Solicitation of Employees.  During the two-year period after the date of termination of the Employee’s employment with the Company, Employee will not, as to work within the Restricted Area, directly or indirectly solicit, request or induce any employee of the Company to terminate employment with the Company and seek employment with another firm other than the Company; provided, however, that a general advertisement in a medium of general public circulation with respect to a particular employment position that is not targeted at any one or more the employees of the Company will not violate the covenants of this Section.

(h)          Duty of Loyalty.  Employee agrees that during the time that Employee is employed by the Company, Employee will owe the Company a duty of loyalty, and that as part of this duty of loyalty, Employee shall not engage in any form of business activity representing competition against the Company.  Similarly, Employee, while employed by the Company, shall not appropriate for Employee’s own use any business opportunity of the Company, or otherwise engage in conduct where Employee’s own business interests are developed instead of the Company’s business interests.

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(i)           Requests for Clarification.  In the event Employee is uncertain as to the meaning of any provision of this Agreement or its application to any particular information, item or activity, Employee will inquire in writing to the President of the Company, specifying any areas of uncertainty.  The Company will respond in writing within a reasonable time and will endeavor to clarify any subject of uncertainty, including such things as whether it considers particular information to be its Trade Secret Information or whether it considers any particular activity or employment to be in violation of this Agreement.

(j)           Notice to Subsequent Employers.  For a period of two years after termination of his employment with the Company, Employee will inform any prospective new employer (before accepting employment) of the terms of this Agreement.  In addition, it is agreed that the terms of this Agreement are not confidential, and that the Company may disclose the provisions of this Agreement, without any liability whatsoever, to any person, including, without limitation, one that is engaged in a business relationship with Employee, and may indicate that it is believed that Employee is in violation of this Agreement.

(k)           Acknowledgment by Employee. The Employee acknowledges and confirms that (i) the restrictive covenants contained in this Article 7 are reasonably necessary to protect the legitimate business interests of the Company; and (ii) the restrictions contained in this Article 7 (including, without limitation, the length of the term of the provisions of this Article 7) are not overbroad, overlong, or unfair and are not the result of overreaching, duress or coercion of any kind.

(l)           Reformation by Court.  In the event that a court of competent jurisdiction shall determine that any provision of this Article 7 is invalid or more restrictive than permitted under the governing law of such jurisdiction, then only as to enforcement of this Article 7 within the jurisdiction of such court, such provision shall be interpreted and enforced as if it provided for the maximum restriction permitted under such governing law.

(m)         Survival.  The provisions of this Article 7 shall survive the termination of this Agreement, as applicable.

8. Injunction.  It is recognized and hereby acknowl­­edged by the parties hereto that a breach by the Employee of any of the covenants contained in Article 7 of this Agreement will cause irreparable harm and damage to the Company, the monetary amount of which may be virtually impossible to ascertain.  As a result, the Employee recognizes and hereby acknowledges that the Company shall be entitled to seek an injunction from any court of competent juris­diction enjoining and restraining any violation of any or all of the covenants contained in Article 7 of this Agree­ment by the Employee or any of the Employee’sAffiliates, associates, partners or agents, either directly or indirectly, and that such right to injunction shall be cumulative and in addition to whatever other remedies the Company may possess.

9.            Assignment.  Neither party shall have the right to assign or delegate the Employee’s rights or obligations hereunder, or any portion thereof, to any other person.

10.Governing Law.  This Agreement is to be construed and enforced according to the laws of the State of Florida. The parties agree to accept any service of process by mail and to the exclusive venue of courts of competent jurisdiction located in Miami-Dade County, Florida in any dispute arising out of the employment by the Company of the Employee, compensation or any damages in respect thereof.

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11.Entire Agreement; Amendment.  This Agreement and the relevant Stock Option Agreements referred to herein constitute the entire agreement between the parties hereto with respect to the subject matter hereof and, upon its effectiveness, shall supersede all prior agreements, understandings and arrangements, both oral and written, between the Employee and the Company (or any of its Affiliates) with respect to such subject matter.  This Agreement may not be modified in any way unless by a written instrument signed by both the Company and the Employee.

12.Notices.  All notices required or permitted to be given hereunder shall be in writing and shall be personally delivered by courier, sent by registered or certified mail, return receipt requested or sent by confirmed facsimile transmission addressed as set forth herein.  Notices personally delivered, sent by facsimile or sent by overnight courier shall be deemed given on the date of delivery and notices mailed in accordance with the foregoing shall be deemed given upon the earlier of receipt by the addressee, as evidenced by the return receipt thereof, or three days after deposit in the U.S. mail.  Notice shall be sent: (i) if to the Company, addressed to PowerVerde, Inc., 23429 N. 35th Drive, Glendale, Arizona, Attention: George Konrad, President, and (ii) if to the Employee, to the Employee’s address as reflected on the payroll records of the Company, or to such other address as either party hereto may from time to time give notice of to the other.

13.Benefits; Binding Effect.  This Agreement shall be for the benefit of and binding upon the parties hereto and their respective heirs, personal representatives, legal representa­tives, successors and, where applicable, assigns, including, without limitation, any successor to the Company, whether by merger, consolidation, sale of stock, sale of assets or otherwise.

14.Severability.  The invalidity of any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall not affect the enforceability of the remain­ing portions of this Agreement or any part thereof, all of which are inserted conditionally on their being valid in law.

15.Waivers.  The waiver by either party hereto of a breach or violation of any term or provision of this Agreement shall not operate nor be construed as a waiver of any subsequent breach or violation.

16.Damages.  Nothing contained herein shall be con­strued to prevent the Company or the Employee from seeking and recover­ing from the other damages sustained by either or both of them as a result of its or his or her breach of any term or provision of this Agreement.  In the event that either party hereto brings suit for the collection of any damages resulting from, or the injunction of any action constituting, a breach of any of the terms or pro­visions of this Agreement, then each party shall pay its own court costs and attorneys’ fees related thereto.

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17.Section Headings.  The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 [Signatures Begin on Following Page.]

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

COMPANY:
POWERVERDE, INC.
By:	/s/ George Konrad
	George Konrad, President

EMPLOYEE:

/s/ Patrick Orr

Patrick Orr

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EXHIBIT A

ASSIGNMENT

(See attached.)

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EX-10.3

Exhibit 10.3

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of the 15th day of June, 2011 (the “Effective Date”), and is by and between POWERVERDE, INC., a Delaware corporation (the “Company”), and KEITH JOHNSON, an individual (the “Employee”).

RECITALS:

WHEREAS, the Company and the Employee entered into that certain Employment Agreement, effective as of January  1, 2011 (the “Original Employment Agreement”); and

WHEREAS, the Company and the Employee wish to amend the Original Employment Agreement as provided herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree that the foregoing Recitals are true and accurate and are incorporated herein and further agree as follows:

AGREEMENT

NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, the parties agree as follows:

1. Employment. The Company hereby agrees to employ the Employee and the Employee hereby agrees to serve the Company on the terms and conditions set forth herein.

2. Duties of Employee. During the Employment Period (as defined in Section 3, below), the Employee shall serve as the “Chief Technical Officer” of the Company.  The Employee shall diligently perform all services as may be assigned to the Employee by the President of the Company, and shall exercise such power and authority as may from time to time be delegated to the Employee by the President of the Company.  The Employee’s duties will be described in a Company job description, or will otherwise be determined by the Company with consultation with the Employee.  During the Employment Period (as defined in Section 3, below), the Employee will faithfully carry out his responsibilities, and provide services to the Company at least four days a week and for at least 10 hours each day (unless otherwise mutually-agreed to by the Company and Employee), and as otherwise may be necessary for the Employee to perform effectively the responsibilities of the position. In addition, the Employee shall act in accordance with (i) standing instructions for the position which may be issued by the Company from time to time; (ii) all reasonable and lawful requests, directions and/or restrictions imposed by the Company; and (iii) all policies of the Company as prescribed from time to time.  Upon termination of employment, the Employee shall return all Company equipment and other Company property in the Employee’s possession, custody or control.

During the Employment Period, the Employee shall devote all of the Employee’s business time, attention and energies to the business of the Company; provided, however, that while employed by the Company, the Employee may be engaged in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage so long as such activity does not reasonably interfere or otherwise compete with the Company; provided, further, that this provision shall not be construed as preventing the Employee from investing savings or other assets in such form or manner as will not require any services on the part of the Employee, nor shall it be construed as preventing the Employee from engaging in any charity or civic work approved in writing by the Company.

3. Term. The Employee shall be employed by the Company commencing on the Effective Date of this Agreement.  The Employee’s employment by the Company shall continue for a period of two years (the “Initial Term”), unless this Agreement is terminated first pursuant to Article 6.  If not previously terminated, at the end of the Initial Term the Agreement shall be automatically renewed for an additional term of one year, and it shall similarly be renewed on future one-year anniversary dates (“Renewal Terms”) until the Agreement is terminated pursuant to Article 6.  The entire term of the Agreement (comprised of that part of the Initial Term, and any Renewal Terms, prior to termination) shall be referred to in this Agreement as the “Employment Period.”  For all purposes of the Agreement, no termination of the Employee’s employment shall be deemed to have occurred if the Employee is transferred during the Employment Period to any business entity which is an Affiliate of the Company.  An “Affiliate” shall mean any corporation or other entity that, directly or indirectly, controls, is controlled by, or is under common control with, the Company.

4. Compensation.

(a)          Base Compensation. The Employee shall receive compensation of $12,500.00 per month by the Company during the Initial Term (the “Compensation”), with such Compensation payable in installments consistent with the Company’s normal payroll schedule, subject to applicable withholding and other taxes as shall be required by applicable law.  Thereafter the Company may increase the Employee’s Compensation, in its sole discretion.

(b)          Existing Stock Option.  The parties agree and acknowledge that, as of January 1, 2011, the Employee has been granted an option (the “First Option”) to purchase from the Company 1,350,000 shares of common stock, $0.0001 par value per share, of the Company, in accordance with the terms and conditions set forth in Section 4(b) of the Original Employment Agreement.

(c)          Additional Stock Options.

(i)           As of the date hereof, the Employee shall be granted an option (the “Second Option”) to purchase from the Company 100,000 shares of common stock, $0.0001 par value per share, of the Company (“Common Stock”), at an exercise price of $1.23 per share. The parties shall execute a separate stock option agreement (the “Second Stock Option Agreement”) as of the Effective Date, and the Second Stock Option Agreement will more fully describe the Employee’s stock option rights.  The shares of stock that may be purchased upon the exercise of the Second Option are referred to in this Agreement as the “Second Option Shares.”  The Second Option will be exercisable with respect to all or a portion of the Second Option Shares (in full shares) (i) as of the date upon which the last of all of the following events has occurred: (A) the Liberator is up and running and producing at least 50kw, and (B) the next generation of the Liberator has been designed, built and operational; and (ii) in accordance with the Vesting Schedule (as defined in Section 4(c)(iii), below) and assuming compliance with and upon the terms and conditions of the Second Stock Option Agreement.

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(ii)           As of the date hereof, the Employee shall be granted an option (the “Third Option”) to purchase from the Company 100,000 shares of Common Stock, at an exercise price of $2.00 per share. The parties shall execute a separate stock option agreement (the “Third Stock Option Agreement”) as of the Effective Date, and the Third Stock Option Agreement will more fully describe the Employee’s stock option rights.  The shares of stock that may be purchased upon the exercise of the Third Option are referred to in this Agreement as the “Third Option Shares.”  The Third Option will be exercisable with respect to all or a portion of the Third Option Shares (in full shares) (i) as of the date upon which the first Combined Cooling Heating and Power (CCHP) system has been designed and built and is operational; and (ii) in accordance with the Vesting Schedule (as defined in Section 4(c)(iii), below) and assuming compliance with and upon the terms and conditions of the Third Stock Option Agreement.

(iii)           The Second Option and Third Option will be exercisable with respect to all or a portion of the Second Option Shares and Third Option Shares, respectively (each of such option shares are sometimes hereinafter referred to as the “Additional Option Shares”) (in full shares) in accordance with the following vesting schedule (“Vesting Schedule”):

(1)	25% of the Additional Option Shares, i.e., 25,000 shares, shall vest as of the date of execution of both this Agreement and the relevant stock option agreement;
(2)	an additional 25% thereof shall vest as of the six-month anniversary of the Effective Date;
(3)	an additional 25% thereof shall vest as of the first anniversary of the Effective Date; and
(4)	the remaining 25% thereof shall vest as of the 18-month anniversary of the Effective Date.

There shall be acceleration of all vesting in the event of a Change of Control, as that term is defined in, and pursuant to the terms and conditions of, the Employee’s relevant stock option agreement.  Each of the Second Option and Third Option shall lapse immediately upon Employee’s voluntary termination of employment with the Company or termination of employment with the Company for Cause. As used in this Agreement, the term “Cause” means:

(i)           the continued failure by Employee to satisfactorily perform Employee’s duties (other than any such failure resulting from Employee’s disability), as set forth in this Agreement or in the Employee’s job description following receipt by the Employee of 30 days’ written notice thereof from the Company;

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(ii)           any serious act of misconduct in connection with work by the Employee, including, but not limited to, the following acts or omissions:  falsification of Company or its affiliate’s documents; dishonesty in connection with Company or its affiliate’s business; misrepresentations to the Employee’s direct supervisor, or to any officer of the Company, or to the Board of Directors of the Company; breach of the Employee’s duty of loyalty to the Company through appropriation or attempted appropriation of corporate opportunities for the Employee’s own advantage, or through other conflicts of interest where the Employee acts for the Employee’s own personal benefit, instead of for the benefit of the Company or its Affiliates; conduct by the Employee that adversely affects, or could reasonably be expected to adversely affect, the business or reputation of the Company or any of its Affiliates; or any act or omission which is a material violation of any law, regulation or ordinance applicable to the Company or any of its affiliates, or which otherwise constitutes a  material violation of any Code of Ethics promulgated by the Company or any of its affiliates;

(iii)           an act or omission by Employee which would be either a felony under applicable law, or a misdemeanor involving moral turpitude under applicable law, regardless of whether or not the Employee is prosecuted for this crime, and if prosecuted, regardless of the eventual disposition of the case, as long as there is sufficient evidence, admissible in a court of law in the forum jurisdiction identified in Section 10 of this Agreement, to prove, by a preponderance of the evidence, that the Employee committed such crimes; or

(iv)           the Employee’s inability to perform duties assigned by the Company due to physical or mental disability following receipt by the Employee of 30 days’ written notice thereof from the Company, but only after all leaves of absence provided to the Employee by the Company, or required by federal or state law, have been exhausted.

(d)          Bonuses.  The Company shall pay to the Employee a one-time bonus of $20,000.00 payable at a time and in a manner as determined by the Company.  Additionally, during the Term of Employment, the Employee shall be eligible to receive bonuses pursuant to the bonus program of the Company then in effect, and in such amounts and at such times as the Company shall determine in its sole discretion pursuant to the terms of such program.

5. Expense Reimbursement and Other Benefits.

(a)          Reimbursement of Expenses. Subject to such reasonable rules and guidelines as the Company may from time to time adopt for its employees generally, the Company shall reim­burse the Employee for all reasonable expenses actually paid or incurred by the Employee during the Term of Employment in the course of and pursuant to the business of the Company.  The Employee shall account to the Company in writing for all expenses for which reimbursement is sought and shall supply to the Company copies of all relevant invoices, receipts or other evidence reasonably requested by the Company.

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(b)          Compensation/Benefit Programs.  During the Term of Employment but no earlier than following the expiration of the 18-month period following the Effective Date (unless otherwise provided by the Company in its sole discretion), the Employee shall be entitled to participate in all employee benefit plans as are presently or here­after offered by the Company to its executive-level employees, including, without limitation, and to the extent existing, the Company’s group health insurance plan and any bonus, option or similar incentive compensation plan, 401(k) plan, group life and short- and long-term disability plans and automobile allowance program, subject to the general eligibility and participation provisions set forth in such plans and required by applicable law.

(c)          Vacation.  The Employee shall be entitled to such days of vacation during the Term of Employment as are reasonable and customary and in accordance with the Company’s existing policies, or as otherwise mutually agreed to by the parties.

6. Termination of Employment.

(a)          Termination.  The Company and/or Employee shall have the right to terminate this Agreement, and the Employee’s employment hereunder, at any time without Cause immediately upon 30 days’ prior written notice thereof. The Company shall have the right to terminate this Agreement, and the Employee’s employment hereunder, at any time for Cause (as defined above) without prior notice thereof.  The Employee’s employment and the Employment Period shall terminate automatically upon the Employee’s death, as of the date of death.

(b)          Payment(s) to Employee Following Termination. Upon the termination of Employee’s employment hereunder for any reason and subject to Section 7(e), below, the Company shall only be obligated to pay to the Employee (i) on the date of such termination, the Employee’s Compensation through the date of termination;and (ii) within 30 days after the date of such termination, any pro rated bonus, if applicable, pursuant to Section 4(d) based on that portion of the relevant period during which the Employee was employed, if applicable, through the Initial Term.  The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a), above).

(c)          License of Employee’s Existing Patent. If, and to the extent that, Employee is terminated by the Company without Cause, then the Company shall be deemed to have granted to Employee as of the date of such termination a perpetual, non-exclusive, non-transferable, royalty-free license to use Employee’s Existing Patent and the Preexisting IP, as provided in Section 7(c)(3), below; provided, however, that Employee’s use thereof shall not be for any purpose that is, in any way, competitive with, or otherwise serves to the detriment of, the Company or is otherwise in violation of the terms and conditions set forth in this Agreement.

(d)          Resignation.  Upon any notice of termination of employment pursuant to this Article 6, the Employee shall automatically and without further action be deemed to have resigned as an officer, and if the Employee was then serving as a director of the Company, and if required by the Company, the Employee hereby agrees to immediately execute a resignation letter to the Company.

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(e)          Survival.  The provisions of this Article 6 shall survive the termination of this Agreement, as applicable.

7. Restrictive Covenants.

(a)          Confidentiality.  Except as required in the performance of Employee’s work for the Company, Employee will not directly or indirectly use or disclose any Trade Secret Information (as defined below), either during or after employment with the Company for so long as such information remains Trade Secret Information as defined herein.  Except as required in the performance of Employee’s work for the Company, Employee will not directly or indirectly use or disclose any Confidential Information (as defined below), either during employment with the Company or for a period of two years thereafter.

As used herein, “Trade Secret Information” means any information possessed by the Company which derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.  For purposes of this Agreement, “Trade Secret Information” includes both information disclosed to Employee by the Company, or by its other employees, agents or representatives, and information otherwise acquired or developed by Employee in the course of his employment with the Company.  As used herein, “Confidential Information” means any information possessed by the Company which is not readily ascertainable by proper means by other persons, regardless of whether such Confidential Information has independent economic value.  Any information that Employee can demonstrate is publicly available through no fault of Employee or others with a duty or other obligation of confidentiality to the Company (contractual or otherwise), is not Trade Secret Information or Confidential Information within the meaning of this Agreement.

Notwithstanding anything else in this Agreement, Trade Secret Information shall include, but is not limited to: (i) information concerning the Company’s management, financial condition, financial operation, purchasing activities, pricing formulas, existing and contemplated products and services, sales activities, marketing research, marketing plans, marketing activities, and business plans; (ii) information acquired or compiled by the Company concerning actual or prospective customers, including but, not limited to, their identities, their business operations, their finances, the identity and quantity of products or services purchased from the Company, and other unpublished information furnished by or about them to the Company; (iii) the Company’s software (including source code, object code and related documentation), its software requirements and design documentation, its product development plans, its security procedures, methods and vulnerabilities (including, without limitation, all passwords and user ids), the algorithms, methods and procedures used within the Company Software, and all ideas and proposals, whether generated internally or not, relating to the design, operation, implementation, use and maintenance of the Company’s software, (iv) all Inventions (as defined in Section 7(c) below), regardless of whether such Inventions have been reduced to practice or are subject to patent protection, and (v) all other types and categories of information (in whatever form) with respect to which, under all the circumstances, Employee knows or has reason to know that the Company intends or expects secrecy to be maintained and as to which the Company has made reasonable efforts to maintain secrecy.

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The Company may, from time to time, inform Employee of restrictions upon the use or disclosure of specified information which has been licensed or otherwise disclosed to the Company by third parties pursuant to license or confidential disclosure agreements which contain restrictions upon the use or disclosure of such information.  Employee agrees that such information shall be treated as Confidential Information under this Agreement, and, in addition, Employee agrees to abide by the restrictions upon use and/or disclosure contained in such agreements.

Employee will not use or disclose to the Company any confidential or proprietary information belonging to others, and Employee represents that his employment by the Company does not and will not require the use or disclosure of such information or the violation of any confidential relationship with any third party.

(b)          Other Property of the Company. All documents, encoded media, and other tangible items provided or made accessible to Employee by the Company, or by its other employees, agents or representatives, or prepared, generated or created by Employee or others in connection with any business activity of the Company, are and shall remain the property of the Company.

Upon termination of his employment with the Company, Employee will promptly deliver to the Company all such documents, media, and other items in Employee’s possession, including all complete or partial copies, recordings, abstracts, notes or reproductions of any kind made from or about such documents, media, items or information contained therein.

Employee will neither have nor claim any right, title, or interest in any Invention, patent, copyright, trademark, service mark or trade name (or any application released thereto) owned or used by the Company.

(c)          Ownership of Developments.

(1)           Work Product. All work, writing, material, copyrights, patents, trade secrets, or other intellectual property rights associated with any ideas, concepts, techniques, Inventions (as defined below), processes, or works of authorship developed or created by Employee during the course of performing work for the Company or its clients (collectively, “Work Product”) shall belong exclusively to the Company and shall, to the extent possible, be considered a work made by the Employee for hire for the Company within the meaning of Title 17 of the United States Code.  Subject to the limitations set forth in Section 6(c), above, to the extent the Work Product may not be considered work made by the Employee for hire for the Company, the Employee hereby assigns all right title and interest the Employee has or may have in such Work Product to the Company, and Employee further agrees to execute any assignments or similar documents requested by the Company in the future to further evidence and document the Company’s rights in and to any Work Product, and to do so without any requirement of further consideration, even if such request is made after this Agreement expires or terminates.

For the purposes of this Section 7(c), “Work Product” shall include, without limitation, all work relating in any way to the business of the Company that is conceived or created, in whole or in part, by the Employee during the term of Employment, regardless of whether such creation is performed during normal working hours or with the use of Company equipment, all copies of such work in any medium whatsoever in the Employee’s control or possession, and all derivative works of such work authored in whole or in part by the Employee.

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(2)           Inventions. As used herein, “Invention” means any discovery, improvement, innovation, idea, formula, or shop right (whether or not patentable, whether or not put into writing, and whether or not put into practice) made, generated, or conceived by Employee (whether alone or with others, whether or not patentable, whether or not put into writing, and whether or not reduced to practice) while employed with the Company that relates in any way to the Company’s products, services, market, employees, business methods, operations or product plans.  For purposes of this Agreement, any Invention relating to the business of the Company or to the Company’s actual or demonstrably anticipated research or development with respect to which Employee files a patent application within one (1) year after termination of employment with the Company shall be presumed to be an Invention conceived by Employee during the period of his employment with the Company, rebuttable only by accurate, written and duly corroborated evidence that such Invention was not first conceived by Employee until after the termination of his employment with the Company.

Employee further agrees that all Inventions generated, made or conceived by Employee during the period of his employment with the Company shall also be solely owned by the Company, and Employee hereby irrevocably assigns to the Company all of his right, title and interest in and to any and all Inventions. Employee agrees to and shall promptly disclose all Inventions to the Company in writing.

Employee further agrees to execute any assignments or similar documents requested by the Company to further evidence and document the Company’s rights in and to any Inventions, and to cooperate with Company, at the Company’s expense, in obtaining letters patent or equivalent protection for such Inventions in any and all locations and jurisdictions Company may choose in its sole discretion throughout the world, and to do so without any requirement of further consideration, even if such request is made after this Agreement expires or terminates.

(3)           Preexisting IP. In addition to the foregoing, the parties agree and acknowledge that, as of January 1, 2011, Employee executed an Assignment, attached hereto as Exhibit A, assigning to the Company all right, title and interest Employee has or may have had in and to United States Patent Application 61/424,249 filed on December 17, 2010 (the “Existing Patent”), and all Inventions disclosed or claimed therein.

Employee further agrees that any and all right, title and interest Employee has or may have in any works of authorship, discoveries, improvements, innovations, ideas, or formulas, (whether or not patentable, whether or not put into writing, and whether or not put into practice) made, generated, or conceived by Employee (whether alone or with others) prior to the Effective Date that relate in any way to the Company’s products, services, market, employees, business methods, operations or product plans (the “Preexisting IP”) are hereby irrevocably assigned to the Company.

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Employee agrees to execute any assignments or similar documents requested by the Company to further evidence and document the Company’s rights in and to the Existing Patent and/or any Preexisting IP, and to cooperate with Company, at the Company’s expense, in obtaining letters patent or equivalent protection for such Existing Patent and/or Preexisting IP in any and all locations and jurisdictions Company may choose in its sole discretion throughout the world, and to do so without any requirement of further consideration, even if such request is made after this Agreement expires or terminates.

(d)          Definition of Company.  Solely for purposes of this Article 7, the term “Company” also shall include any existing or future subsidiaries of the Company.

(e)          Covenant Not to Compete.  (i) During the period of Employee’s employment with the Company and for a period of two years thereafter (the “Non-Compete Period”), Employee will not, as an employee, officer, director, contractor, broker, distributor, advisor, consultant, or owner, or in any other capacity, directly or indirectly participate or assist in: (A) the design, development, production, marketing or sales of any product or service competitive with any product or service which the Company markets or plans to market at the time of termination of Employee’s employment with the Company; or (B) the management or financing of a business enterprise engaged in any such activities; provided, however, that if, and to the extent that, the Employee’s employment with the Company is terminated for any reason other than due to Employee’s voluntary termination of employment with the Company or termination of employment with the Company for Cause, then during such Non-Compete Period, the Company shall continue to pay the Compensation to Employee, unless and until such time as the Company unilaterally agrees to release the Employee from the non-competition obligations set forth in this Section 7(e).  The geographic territory within which Employee will refrain from such activities shall be the United States of America, the countries which are members of the European Union and any other geographic territory within which the Company or any Company agent or representative markets or plans to market any such products or services at the time of termination of Employee’s employment (“Restricted Area”)

(f)           Non-Solicitation of Customers.  During the two-year period after the date of termination of Employee’s employment with the Company, Employee will not, directly or indirectly, either (i) solicit, divert, take away or accept, or attempt to solicit, divert, take away or accept, the business of any Restricted Customer (as defined below) for any product or service offered by the Company within the Restricted Area; or (ii) attempt or seek to cause any Restricted Customer to refrain, in any respect, from acquiring from or through the Company any product or services offered by the Company within the Restricted Area. As used herein, the term “Restricted Customer” means any customer to whom or to which goods or services were provided by the Company during the two-year period prior to the date of Employee’s employment, and any potential customer of the Company that the Company solicited during the one-year period prior to the date of termination of Employee’s employment with the Company.

(g)          Non-Solicitation of Employees.  During the two-year period after the date of termination of the Employee’s employment with the Company, Employee will not, as to work within the Restricted Area, directly or indirectly solicit, request or induce any employee of the Company to terminate employment with the Company and seek employment with another firm other than the Company; provided, however, that a general advertisement in a medium of general public circulation with respect to a particular employment position that is not targeted at any one or more the employees of the Company will not violate the covenants of this Section.

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(h)          Duty of Loyalty.  Employee agrees that during the time that Employee is employed by the Company, Employee will owe the Company a duty of loyalty, and that as part of this duty of loyalty, Employee shall not engage in any form of business activity representing competition against the Company.  Similarly, Employee, while employed by the Company, shall not appropriate for Employee’s own use any business opportunity of the Company, or otherwise engage in conduct where Employee’s own business interests are developed instead of the Company’s business interests.

(i)           Requests for Clarification.  In the event Employee is uncertain as to the meaning of any provision of this Agreement or its application to any particular information, item or activity, Employee will inquire in writing to the President of the Company, specifying any areas of uncertainty.  The Company will respond in writing within a reasonable time and will endeavor to clarify any subject of uncertainty, including such things as whether it considers particular information to be its Trade Secret Information or whether it considers any particular activity or employment to be in violation of this Agreement.

(j)           Notice to Subsequent Employers.  For a period of two years after termination of his employment with the Company, Employee will inform any prospective new employer (before accepting employment) of the terms of this Agreement.  In addition, it is agreed that the terms of this Agreement are not confidential, and that the Company may disclose the provisions of this Agreement, without any liability whatsoever, to any person, including, without limitation, one that is engaged in a business relationship with Employee, and may indicate that it is believed that Employee is in violation of this Agreement.

(k)           Acknowledgment by Employee. The Employee acknowledges and confirms that (i) the restrictive covenants contained in this Article 7 are reasonably necessary to protect the legitimate business interests of the Company; and (ii) the restrictions contained in this Article 7 (including, without limitation, the length of the term of the provisions of this Article 7) are not overbroad, overlong, or unfair and are not the result of overreaching, duress or coercion of any kind.

(l)           Reformation by Court.  In the event that a court of competent jurisdiction shall determine that any provision of this Article 7 is invalid or more restrictive than permitted under the governing law of such jurisdiction, then only as to enforcement of this Article 7 within the jurisdiction of such court, such provision shall be interpreted and enforced as if it provided for the maximum restriction permitted under such governing law.

(m)         Survival.  The provisions of this Article 7 shall survive the termination of this Agreement, as applicable.

8. Injunction.  It is recognized and hereby acknowl­­edged by the parties hereto that a breach by the Employee of any of the covenants contained in Article 7 of this Agreement will cause irreparable harm and damage to the Company, the monetary amount of which may be virtually impossible to ascertain.  As a result, the Employee recognizes and hereby acknowledges that the Company shall be entitled to seek an injunction from any court of competent juris­diction enjoining and restraining any violation of any or all of the covenants contained in Article 7 of this Agree­ment by the Employee or any of the Employee’saffiliates, associates, partners or agents, either directly or indirectly, and that such right to injunction shall be cumulative and in addition to whatever other remedies the Company may possess.

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9.             Assignment.  Neither party shall have the right to assign or delegate the Employee’s rights or obligations hereunder, or any portion thereof, to any other person.

10.Governing Law.  This Agreement is to be construed and enforced according to the laws of the State of Arizona. The parties agree to accept any service of process by mail and to the exclusive venue of courts of competent jurisdiction located in Maricopa County, Arizona in any dispute arising out of the employment by the Company of the Employee, compensation or any damages in respect thereof.

11.Entire Agreement; Amendment.  This Agreement and the relevant stock option agreements referred to herein constitute the entire agreement between the parties hereto with respect to the subject matter hereof and, upon its effectiveness, shall supersede all prior agreements, understandings and arrangements, both oral and written, between the Employee and the Company (or any of its affiliates) with respect to such subject matter.  This Agreement may not be modified in any way unless by a written instrument signed by both the Company and the Employee.

12.Notices.  All notices required or permitted to be given hereunder shall be in writing and shall be personally delivered by courier, sent by registered or certified mail, return receipt requested or sent by confirmed facsimile transmission addressed as set forth herein.  Notices personally delivered, sent by facsimile or sent by overnight courier shall be deemed given on the date of delivery and notices mailed in accordance with the foregoing shall be deemed given upon the earlier of receipt by the addressee, as evidenced by the return receipt thereof, or three days after deposit in the U.S. mail.  Notice shall be sent: (i) if to the Company, addressed to PowerVerde, Inc., 23429 N. 35th Drive, Glendale, Arizona, Attention: George Konrad, President, and (ii) if to the Employee, to the Employee’s address as reflected on the payroll records of the Company, or to such other address as either party hereto may from time to time give notice of to the other.

13.Benefits; Binding Effect.  This Agreement shall be for the benefit of and binding upon the parties hereto and their respective heirs, personal representatives, legal representa­tives, successors and, where applicable, assigns, including, without limitation, any successor to the Company, whether by merger, consolidation, sale of stock, sale of assets or otherwise.

14.Severability.  The invalidity of any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall not affect the enforceability of the remain­ing portions of this Agreement or any part thereof, all of which are inserted conditionally on their being valid in law.

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15.Waivers.  The waiver by either party hereto of a breach or violation of any term or provision of this Agreement shall not operate nor be construed as a waiver of any subsequent breach or violation.

16.Damages.  Nothing contained herein shall be con­strued to prevent the Company or the Employee from seeking and recover­ing from the other damages sustained by either or both of them as a result of its or his or her breach of any term or provision of this Agreement.  In the event that either party hereto brings suit for the collection of any damages resulting from, or the injunction of any action constituting, a breach of any of the terms or pro­visions of this Agreement, then each party shall pay its own court costs and attorneys’ fees related thereto.

17.Section Headings.  The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

18.No Violation; Release. As of the date hereof, there exists no violation or default by Employee (or any event which with the giving of notice, or lapse of time or both, would result in a violation or become a default by Employee) under the Original Employment Agreement. The Employee acknowledges and agrees that no claim or objection exists in favor of the Company arising out of or with respect to the Original Employment Agreement and the Employee hereby releases and discharges the Company and its affiliates, officers, managers, members, employees, agents, attorneys, representatives, successors and assigns from any and all claims, demands, actions and causes of action, whether at law or in equity, whether now accrued or hereafter maturing, and whether known or unknown, which the Employee now or hereafter may have by reason of any manner, cause or things with respect to matters arising out of or with respect to the Original Employment Agreement.

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

COMPANY:
POWERVERDE, INC.
By:	/s/ George Konrad
	George Konrad, President

EMPLOYEE:

/s/ Keith Johnson

Keith Johnson

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EXHIBIT A

ASSIGNMENT

(See attached.)

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EX-10.4

Exhibit 10.4

AMENDMENT TO AGREEMENT

THIS AMENDMENT TO AGREEMENT, effective as of August 19, 2011 (the “Amendment”), is entered into by and between POWERVERDE, INC., a Delaware corporation (the “Company”) and GEORGE KONRAD, an individual (the “Konrad”).

RECITALS:

WHEREAS, the Company and Konrad entered into that certain Agreement, effective as of April 7, 2011, relating to Konrad’s surrender to the Company’s treasury of 4,500,000 shares of the Company’s common stock (the “Original Agreement”); and

WHEREAS, the Company and Konrad wish to amend the Original Agreement as provided herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree that the foregoing Recitals are true and accurate and are incorporated herein and further agree as follows:

AGREEMENT:

1. Amendment.   Section 3 of the Original Agreement is hereby deleted in its entirety and shall be replaced with the following new Section 3:

“3.  ARD Payment. The Company hereby agrees to pay to ARD the ARD Payment on or before April 7, 2013; provided, however, that the Company shall pay the ARD Payment within 30 days following the earlier of a (i) closing of a financing transaction by the Company which involves gross proceeds equal to or greater than $2 million; (ii) closing of a Sale Transaction (as defined below); or (iii) determination by the Board of Directors of the Company, in its sole and absolute discretion, that the Company has sufficient cash available for operations and appropriate reserves after the ARD payment. The term “Sale Transaction” as used herein means (i) a sale of all or substantially all of the assets of the Company; or (ii) any merger or consolidation of the Company with or into another entity or any other transaction or series of transactions, the result of which is that the holders of the Company’s voting stock immediately prior to such transaction or series of transactions continue to hold less than 50% of such stock following such transaction or series of transactions.”

2. Miscellaneous.

(a)The Original Agreement is reaffirmed and ratified in all respects, except as expressly provided herein.

(b)In the event of any conflict between the terms or provisions of this Amendment and the Original Agreement, then this Amendment shall prevail in all respects.

(c)The parties shall execute and deliver any other instruments or documents and take any further actions after the execution of this Amendment, which may be reasonably required for the implementation of this Amendment and the transactions contemplated hereby.

[Signatures Begin on Following Page.]

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IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first above written.

COMPANY:
POWERVERDE, INC.
By:	/s/ Richard H. Davis
	Richard H. Davis, Director

KONRAD:

/s/ George Konrad

George Konrad

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard H. Davis, certify that:

1.	I have reviewed this Form 10-Q of PowerVerde, Inc.
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 22, 2011	/s/ Richard H. Davis
	Richard H. Davis, Chief Executive Officer

EX-31.2

 Exhibit 31.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John L. Hofmann, certify that:

1.	I have reviewed this Form 10-Q of PowerVerde, Inc.
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:  August 22, 2011	/s/ John L. Hofmann
	John L. Hofmann, Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard H. Davis, certify as follows:

1.	To the best of my knowledge, the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, fully complies in all material respects with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and
2.	To the best of my knowledge, based upon a review of the report, the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Richard H. Davis
	Richard H. Davis
	Chief Executive Officer August 22, 2011

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, John L. Hofmann, certify as follows:

1.	To the best of my knowledge, the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, fully complies in all material respects with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and
2.	To the best of my knowledge, based upon a review of the report, the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ John L. Hofmann
	John L. Hofmann
	Chief Financial Officer August 22, 2011