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, 2013

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.)

420 S. Dixie Highway Suite 4-B

Coral Gables, FL 33146

(Address of principal executive offices)

(305) 666-0024

(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). x 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.

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

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 9, 2013 the issuer had 27,500,106 shares of common stock outstanding.

Index to Form 10-Q

		Page
PART I	FINANCIAL INFORMATION	1
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets at June 30, 2013 and December 31, 2012	1
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2013 and 2012	2
	Consolidated Statements of Changes in Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2013 and 2012	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	19
Item 4.	Controls and Procedures	19
PART II	OTHER INFORMATION	21
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults upon Senior Securities	21
Item 4.	(Removed and Reserved)	21
Item 5.	Other Information	21
Item 6.	Exhibits	22
SIGNATURES		23

PART I FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

PowerVerde, Inc. and Subsidiary
(A Development Stage Company)
Condensed Consolidated Balance Sheets
June 30, 2013 and December 31, 2012 (Unaudited)

	2013			2012
Assets
Current Assets:
Cash and cash equivalents	$	106,861		$	45,283
Accounts receivable		109,416			115,687
Employee advances		19,292			—
Prepaid expenses		40,020			46,641
Total Current Assets		275,589			207,611
Property and Equipment
Property and equipment, net of accumulated depreciation of $30,289 and $26,771, respectively		61,946			9,559
Other Assets
Intellectual Property, net of accumulated amortization of $274,767 and $164,860, respectively		384,673			494,580
Total Assets	$	722,208		$	711,750
Liabilities and Stockholders’ Equity (Deficiency)
Current Liabilities
Accounts payable and accrued expenses	$	258,166		$	109,568
Payable to related parties		172,498			170,764
Total Current Liabilities		430,664			280,332
Long-Term Liabilities
Derivative liability		40,000			68,250
Payable to related parties		247,428			184,367
Total Long-Term Liabilities		287,428			252,617
Total Liabilities		718,092			532,949
Stockholders’ Equity
Common stock:
100,000,000 common shares authorized, par value $0.0001 per share, 26,900,106  common shares issued and outstanding at June 30, 2013 and 26,011,565 common shares issued and outstanding at December 31, 2012		3,497			3,414
Additional paid-in capital		10,875.735			10,278,331
Treasury stock, 8,550,000 shares at cost on June 30, 2013 and December 31, 2012		(491,139	)		(491,139	)
Deficit accumulated in the development stage		(10,383,977	)		(9,611,805	)
Total Stockholders’ Equity		4,116			178,801
Total Liabilities and Stockholders’ Equity	$	722,208		$	711,750

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

1

PowerVerde, Inc. and Subsidiary
(A Development Stage Company)
Condensed Consolidated Statements of Operations
For the three and six months ended June 30, 2013 and 2012, and the
period from March 9, 2007 (Date of Inception) to June 30, 2013
(Unaudited)

	Three months ended						Six months ended						Cumulative from
	June 30,						June 30,						inception through
	2013			2012			2013			2012			June 30, 2013
Revenue, Net	$	109,416		$	29,922		$	180,903		$	44,357		$	659,352
Cost of Goods Sold		—			—			—			—			136,925
Gross Profit		109,416			29,922			180,903			44,357			522,427
Operating Expenses
Research and development		77,405			295,251			313,562			872,287			3,642,456
General and administrative		189,827			271,433			642,504			492,672			4,292,934
Goodwill impairment		—			—			—			—			2,637,760
Total Operating Expenses		267,232			566,684			956,066			1,364,959			10,573,150
Loss from Operations		(157,816	)		(536,762	)		(775,163	)		(1,320,602	)		(10,050,723	)
Other Income (Expenses)
Interest income		—			—			—			—			2,401
Interest expense		(22,021	)		(3,717	)		(41,759	)		(7,361	)		(399,666	)
Other income (expenses)		4,000			—			44,750			—			64,011
Total Other Income (Expense)		(18,021	)		(3,717	)		2,991			(7,361	)		(333,254	)
Loss before Income Taxes		(175,837	)		(540,479	)		(772,172	)		(1,327,963	)		(10,383,977	)
Provision for Income Taxes		—			—			—			—			—
Net Loss	$	(175,837	)	$	(540,479	)	$	(772,172	)	$	(1,327,963	)	$	(10,383,977	)
Net Loss per Share - Basic and Diluted	$	(0.01	)	$	(0.02	)	$	(0.03	)	$	(0.05	)
Weighted Average Common Shares Outstanding - Basic and Diluted		26,416,590			28,154,620			26,220,721			27,015,795

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

2

PowerVerde, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders’ Equity
For the six months ended June 30, 2013
(Unaudited)

	Common Shares		Common Stock		Additional Paid in Capital		Treasury Stock			Deficit Accumulated during the Development Stage			Total Stockholders’ Equity
Balances, December 31, 2012		26,011,565	$	3,414	$	10,278,331	$	(491,139	)	$	(9,611,805	)	$	178,801
Sale of common stock at $.25 per share		500,000		51		124,949								125,000
Common stock issued for services		325,000		32		124,718								124,750
Stock-based compensation						121,237								121,237
Warrants issued for services						210,000								210,000
Warrants issued in connection with Notes payable to related party						16,500								16,500
Common stock issued on conversion of debt		44,791
Cashless exercise of options		18,750
Net loss for the six months ended June 30, 2013											(772,172	)		(772,172	)
Balances, June 30, 2013		26,900,106	$	3,497	$	10,875,735	$	(491,139	)	$	(10,383,977	)	$	4,116

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

3

PowerVerde, Inc. and Subsidiary
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 2013 and 2012, and the
period from March 9, 2007 (Date of Inception) to June 30, 2013
(Unaudited)

	2013			2012			Cumulative from inception through June 30, 2013
	(Unaudited)
Cash Flows from Operating Activities
Net loss	$	(772,172	)	$	(1,327,963	)	$	(10,383,977	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		113,424			58,468			305,055
Amortization of discount		21,061			7,361			374,274
Stock based compensation		121,237			233,454			1,302,767
Common stock issued for services		124,750			—			124,750
Goodwill impairment		—			—			2,637,760
Warrants issued for services		210,000			—			822,150
Warrants issued for settlement		—			262,700			262,700
Gain on re-measurement of derivative liability		(44,750	)		—			(48,000	)
Changes in operating assets and liabilities:
Accounts receivable and prepaid expenses		12,892			(41,446	)		(149,436	)
Employee advances		(19,292	)		—			(19,292	)
Accounts payable and accrued expenses		148,598			179,447			27,634
Payable to related parties		1,734			—			161,345
Cash Used in Operating Activities		(82,518	)		(627,979	)		(4,582,270	)
Cash Flows From Investing Activities
Purchase of property and equipment		(55,904	)		—			(92,234	)
Cash acquired in business acquisition		—			—			872
Cash Used in Investing Activities		(55,904	)		—			(91,362	)
Cash Flows from Financing Activities
Proceeds from issuance of common stock		125,000			835,000			5,175,281
Proceeds from notes payable to related parties		75,000			—			700,000
Payment of line of credit		—			—			(50,000	)
Payment of note payable to related parties		—			—			(271,206	)
Purchase of treasury stock		—			(31,000	)		(320,381	)
Payment of stock issuance costs		—			(83,500	)		(453,201	)
Cash Provided by Financing Activities		200,000			720,500			4,780,493
Net Increase in Cash and Cash Equivalents		61,578			92,521			106,861
Cash and Cash Equivalents at Beginning of Period		45,283			7,530		$	—
Cash and Cash Equivalents at End of Period	$	106,861		$	100,051		$	106,861
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest	$	20,705		$	—		$	20,705
Cash paid during the period for income taxes	$	—		$	—		$	24,221
Supplemental Schedule of Non-Cash Financing Activities
Common stock issued for convertible debt	$	—		$	—		$	189,261
Common stock issued for services	$	11,458		$	—		$	67,608
Common stock issued for acquisition of Cornerstone Conservation Group, LLC	$	—		$	3,096,200		$	3,096,200
Warrants issued in connection with acquisition of Cornerstone Conservation group, LLC	$	—		$	201,000		$	201,000
Purchase of treasury stock with long-term related party payable	$	—		$	70,000		$	242,758
Warrants issued in connection with debt	$	—		$	—		$	299,984
Issuance of warrants as part of notes payable to related party of which $88,000 ($16,500 in Q1 2013) was classified as additional paid in capital and $88,000 ($16,500 in Q1 2013) was classified as a derivative liability	$	33,000		$	—		$	176,000
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.

4

PowerVerde, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2013

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, 2012. The results of operations for the three and six months ended June 30, 2013, are not necessarily indicative of the results to be expected for the full year or for future periods. 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 condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Note 3 – Summary of Significant Accounting Policies

Principles of Consolidation

The condensed consolidated financial statements include the accounts of PowerVerde, Inc. and its wholly-owned subsidiary, PowerVerde Systems, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

Development Stage Company

The Company is a development stage company as defined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 915, “Development Stage Entities”. The Company is devoting substantially all of its present efforts to establish a new business and none of its planned principal operations have commenced. All losses accumulated since inception has been considered as part of the Company’s development stage activities.

Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable

Accounts receivable consist of balances due from sales and royalties. The Company monitors accounts receivable and provides allowances when considered necessary. At June 30, 2013, accounts receivable were considered to be fully collectible. Accordingly, no allowance for doubtful accounts was provided.

5

Employee Advances

The employee advances represent the payroll taxes due on the issuance of common stock as compensation.

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.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Expenditures for major betterments and additions are capitalized, while replacement, maintenance and repairs, which do not extend the lives of the respective assets, are expensed as incurred.

Intellectual Property and Goodwill

The Company reviews intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company uses an estimate of the undiscounted cash flows over the remaining life of its long-lived assets, or related group of assets where applicable, in measuring whether the assets to be held and used will be realizable. In the event of impairment, the Company would discount the future cash flows using its then estimated incremental borrowing rate to estimate the amount of the impairment.

The Company assesses goodwill for potential impairment at the end of each fiscal year, or during the year if an event or other circumstance indicates that the Company may not be able to recover the carrying amount of the asset. In evaluating goodwill for impairment, first qualitative factors are assessed to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount. If it is concluded that it is not more likely than not that the fair value of a reporting unit is less than its carrying value, then no further testing of the goodwill assigned to the reporting unit is required. However, if it is concluded that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then a two-step goodwill impairment test is performed to identify potential goodwill impairment and measure the amount of goodwill impairment to be recognized, if any.

In the first step of the review process, the estimated fair value of the reporting unit is compared with its carrying value. If the estimated fair value of the reporting unit exceeds its carrying amount, no further analysis is needed.

If the estimated fair value of the reporting unit is less than its carrying amount, a second step of the review process is performed in order to calculate the implied fair value of the reporting unit goodwill in order to determine whether any impairment is required. The implied fair value of the reporting unit goodwill is then calculated by allocating the estimated fair value of the reporting unit to all of the assets and liabilities of the reporting unit as if the reporting unit had been acquired in a business combination. If the carrying value of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, the Company then recognizes an impairment loss for that excess amount. During the year ended December 31, 2012, the Company determined that the goodwill it had recognized in connection with its previous acquisition of Cornerstone Conservation Group LLC had been impaired and accordingly recognized an impairment charge of $2,637,760 to reduce its carrying amount to zero.

6

Stock-based Compensation

The Company has accounted for stock-based compensation under the provisions of ASC Topic 718 – “Stock Compensation” which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (stock options and common stock purchase warrants). The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. Expected volatilities are based on historical volatility of peer companies and other factors estimated over the expected term of the stock options. The expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term.

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 follows the provisions of ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes” 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. This topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Research and Development Costs

The Company’s research and development costs are expensed in the period in which they are incurred.

Earnings (Loss) Per Share

Earnings (loss) per share is computed in accordance with FASB ASC Topic 260, “Earnings per Share”. Basic earnings (loss) per share is computed by dividing net income (loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. Certain common stock equivalents were not included in the earnings (loss) per share calculation as their effect would be anti-dilutive. Warrants exercisable for 7,339,333 shares and options for 2,750,000 shares were excluded from weighted average common shares outstanding on a diluted basis.

Financial instruments

The Company carries cash and cash equivalents, accounts receivable, accounts payable and accrued expenses at historical costs. The respective estimated fair values of these assets and liabilities approximate carrying values due to their current nature. The Company also carries notes payable to related parties at historical cost less discounts from warrants issued as loan financing costs.

7

Fair value of financial assets and liabilities

The Company measures the fair value of financial assets and liabilities in accordance with GAAP which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. GAAP describes three levels of inputs that may be used to measure fair value:

Level 1 – quoted prices in active markets for identical assets or liabilities

Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

The Company generally does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, the Company has entered into certain other financial instruments and contracts, such as debt financing arrangements and freestanding warrants with features that are either (i) not afforded equity classification, (ii) embody risks not clearly and closely related to host contracts, or (iii) may be net-cash settled by the counterparty. These instruments are required to be carried as derivative liabilities, at fair value.

The Company uses the Black-Scholes valuation technique because it embodies all of the requisite assumptions (including trading volatility, estimated terms and risk free rates) necessary to measure the fair value of these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective inputs that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the Company’s trading market price and the trading market price of various peer companies, which have historically had high volatility. Since derivative financial instruments are initially and subsequently carried at fair value, the Company’s income will reflect the volatility in these estimate and assumption changes.

The Company reports its derivative liabilities at fair value on the accompanying condensed consolidated balance sheets.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

Note 4 – Recent Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-11 “Disclosures about offsetting Assets and Liabilities” requiring additional disclosure about offsetting and related arrangements. ASU 2011-11 is effective retrospectively for periods beginning on or after January 1, 2013. The adoption of ASU 2011-11 did not have a material impact on the Company’s future financial position, results of operations or liquidity.

Note 5 – Acquisition

On March 30, 2012, the Company purchased 100% of the membership interests of Cornerstone Conservation Group LLC (“Cornerstone”) pursuant to a Membership Interest Purchase Agreement (the “Agreement”). Cornerstone’s main asset is its proprietary Combined Cooling, Heating and Power (“CCHP”) technology, which utilizes waste heat from commercial and residential heating, ventilation air conditioning and refrigeration (“HVACR”) systems.

8

Cornerstone also has substantial experience and technology relating to geothermal or ground source heat pumps. In January 2012, the Company moved its operations to a 5,000 square foot facility in Scottsdale, Arizona, owned by one of the sellers, who became an officer and director in connection with the Cornerstone transaction. The Company used the facility rent free of charge for two months. Since March 2012, the Company has been using the facility at a cost of $700 per month which covers overhead costs.

In consideration for the 100% membership interests in Cornerstone, the Company issued 2,260,000 shares of the Company’s common stock (valued at $1.37 per share, the closing price on March 30, 2012) to the selling members of Cornerstone and issued to the sellers fully vested three–year warrants to purchase an aggregate of 300,000 shares of the Company’s common stock as follows:

(i) 100,000 shares at an exercise price of $2.00 per share, exercisable beginning January 1, 2012, through December 31, 2016;

(ii) 100,000 shares at an exercise price of $3.00 per share, exercisable beginning July 1, 2012, through June 30, 2017; and

(iii) 100,000 shares at an exercise price of $4.00 per share, exercisable beginning January 1, 2013, through December 31, 2017.

The estimated fair value of the total warrants issued in connection with the acquisition of Cornerstone was $201,000 which was calculated using the Black-Scholes valuation method with the following assumptions: a risk free interest rate of 1.04 percent, an estimated volatility of 79.1 percent and no dividend yield.  The total present value of all consideration expected to be paid as part of this agreement was $3,297,200.

The following summarizes the fair values of the assets acquired:

Intangible asset - Research and Development	$	659,440
Goodwill		2,637,760
Total assets acquired	$	3,297,200
Aggregate purchase price	$	3,297,200

The assets acquired were recorded based on estimates of their fair values determined by management, based on information then available and on assumptions as to future operations.

Due to the departure of a key employee and as part of the Company’s annual impairment analysis, the goodwill associated with this acquisition was determined to be impaired at December 31, 2012 and accordingly, it was written off in that period.

For the six months ended June 30, 2013, amortization expense was $109,907 and accumulated amortization of the intangible asset- intellectual property was $274,767 at June 30, 2013.

Future amortization of the intangible asset – intellectual property was as follows as of June 30, 2013:

Year ending December 31:
2013	$	109,907
2014		219,813
2015		54,953
Total	$	384,673

9

Note 6 – Stockholders’ Equity

Warrants

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 June 30, 2013, 286,666 of these warrants had expired.

During January through December 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 June 30, 2013, none of these warrants were exercised or had expired.

The Company 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 the Black Scholes pricing model to determine the fair value of each warrant. As of June 30, 2013, all of these warrants were outstanding.

On February 3, 2012, The Company issued warrants to purchase 500,000 unregistered shares of the Company’s common stock at an exercise price of $1.00 per share with a five-year term for settlement of certain disputed amounts (See Note 10). These share-based payments have been accounted for in accordance with ASC 815-40 using the Black-Scholes pricing model to determine the fair value of each warrant. As of June 30, 2013, all of these warrants were outstanding.

In connection with the acquisition of Cornerstone (See Note 5), on March 30, 2012, the Company issued warrants to purchase 300,000 unregistered shares of common stock at exercise prices ranging from $2.00 to $4.00 per share. These warrants expire at various dates through December 2017. As of June 30, 2013, all of these warrants were outstanding.

During the second quarter of 2012, the Company issued warrants to purchase 335,000 unregistered shares of the Company’s common stock at an exercise price of $3.00 per share in association with stock subscription agreements. These warrants expire on various dates through 2015. As of June 30, 2013, all of these warrants were outstanding.

During the third quarter of 2012, the Company issued warrants to purchase 71,000 unregistered shares of the Company’s common stock at an exercise price of $3.00 per share in association with stock subscription agreements. These warrants expire July 30, 2015. As of June 30, 2013, all of these warrants were outstanding.

During the fourth quarter of 2012, the Company issued warrants to purchase 225,000 unregistered shares of the Company’s common stock at an exercise price of $1.00 per share in association with stock subscription agreements. These warrants expire October 31, 2015. As of June 30, 2013, all of these warrants were outstanding.

In December 2012, the Company issued warrants to purchase 325,000 unregistered shares of the Company’s common stock at an exercise price of $.41 per share in association with the Secured Promissory Note (See Note 8). These warrants expire December 31, 2015. As of June 30, 2013, all of these warrants were outstanding.

During January 2013, the Company issued three-year warrants to purchase 75,000 unregistered shares of the Company’s common stock at an exercise price of $.41 per share in association with the Secured Promissory Note (See Note 8). These warrants expire December 31, 2015. As of June 30, 2013, all of these warrants were outstanding.

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During March 2013, the Company issued its Chief Executive Officer and Chief Financial Officer five –year warrants to purchase common stock at an exercise price of $.30 per share (market price on date of grant) in the amounts of 1,000,000 and 500,000 shares, respectively. The Company recognized $210,000 in compensation expense. As of June 30, 2013, all of these warrants were outstanding.

Expenses related to warrants issued in conjunction with settlement of certain disputes for the six months ended June 30, 2013 and 2012 were $0 and $262,700, respectively.

A summary of warrants issued, exercised and expired during the six months ended June 30, 2013 is as follows:

	Shares			Weighted Average Exercise Price
Balance at December 31, 2012		6,050,999		$	1.12
Issued		1,575,000			.30
Expired		(286,666	)		(.75	)
Balance at June 30, 2013		7,339,333		$	.96

The weighted average grant date fair value of warrants issued during the six month period ended June 30, 2013 amounted to $0.11 to $0.14 per warrant. The fair value of each warrant granted as compensation for services was determined using the Black-Scholes pricing model and the following assumptions:

	June 30, 2013
Risk Free interest rate		0.36% to 0.84%
Expected term		3-5 years
Annualized volatility		72.3%
Expected dividends		—

The expected term of warrants granted is based on the contractual terms of the agreement and represents the period of time that warrants granted are expected to be outstanding.

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.

Common Stock Issued for Services

In the first quarter of 2013, the Company issued 125,000 common shares to a third party for six months consulting services and 200,000 common shares were issued to an employee as part of his compensation package. The expense for the period of $124,750 is included in the general and administrative expenses on the condensed consolidated statements of operations.

Private Placement of Common Stock

In February 2012, the Company raised $500,000 exclusively from accredited European investors (including $275,000 from a Newton affiliate) pursuant to a private placement of 500,000 shares of common stock at a price of $1.00 per share. There were no warrants issued pursuant to this round; however, simultaneously Newton affiliates received three-year warrants to purchase 500,000 shares at $1.00 per share in connections with the settlement of certain claims by and between the Company and Newton.

In the second quarter of 2012, the Company raised gross proceeds of $335,000 through the private placement of 335,000 unregistered shares of common stock to accredited investors at $1.00 per share. Each investor received a three-year warrant to purchase shares of common stock at $3.00 per share for a number of shares equal to the number of shares purchased by the investor in this offering. The Company paid a 10% commission on the gross proceeds of this offering to its placement agent.

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In the third quarter of 2012, the Company raised gross proceeds of $71,000 through the private placement of 71,000 unregistered shares of common stock to accredited investors at $1.00 per share. Each investor received a three-year warrant to purchase shares of common stock at $3.00 per share for a number of shares equal to the number of shares purchased by the investor in this offering. The Company paid a 10% commission on the gross proceeds of this offering to its placement agent.

In the fourth quarter of 2012, the Company raised gross proceeds of $492,030 through the private placement of 396,000 unregistered shares of common stock to accredited investors at $.43 per share and 450,000 shares at $.715 per share. Each investor who purchased the common stock at $.715 per share received a three-year warrant to purchase additional shares of common stock at $1.00 per share for a number of shares equal to one-half of the number of shares purchased by the investor in this offering. The Company paid a 10% commission on the gross proceeds of this offering to its placement agent.

In the second quarter of 2013, the Company raised gross proceeds of $125,000 through private placement of 500,000 unregistered shares of common stock to accredited investors at $.25 per share. No commissions are payable for this offering.

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 interest-free note payable due in April 2013. The note payable is reported as note payable to related party on the accompanying condensed consolidated balance sheets. In accordance with GAAP, the Company has discounted this obligation at an imputed rate of 8%. The balance was settled on October 16, 2012 with the surrender of 3,000,000 shares of the Company’s stock to Treasury in exchange for $530,000 as discussed below.

In April 2012, the Company purchased 100,000 shares of common stock from an affiliate at a price of $.25 per share. Of the $25,000 purchase price, $14,000 was paid in 2011 and the balance in April 2012. The shares have been held as treasury stock from the date of closing.

In May 2012, the Company purchased 450,000 shares of its common stock from an affiliate at a price of $0.20 per share. Of the $90,000 purchase price, $10,000 was paid at closing and the balance is payable $10,000 per month through January 2013. The payable has a balance of $26,500 at June 30, 2013 and is included in “Payable to related parties” in the accompanying condensed consolidated balance sheets. The shares have been held as treasury stock from the date of closing.

On October 16, 2012, 3,000,000 shares of the Company’s stock were surrendered to Treasury in exchange for $530,000, $100,000 of which is due in six equal monthly installments, beginning on November 16, 2012. The payable had a balance of $100,000 as of December 31, 2012 and is included in the “Payable to related parties” in the accompanying consolidated balance sheets. In the event that any amount due remains unpaid, some or all amounts can be converted into shares of the Company’s stock at a price of $.0667 per share. The shares have been held as treasury stock from the date of closing. As of June 30, 2013, approximately $83,000 remained outstanding. In accordance with ASC 470-20, “Debt with Conversion and Other Options,” the Company determined that the non-mandatory conversion feature represents a beneficial conversion feature that should be recorded as equity based on intrinsic value. The offset will be recorded as a discount and netted against the payable during the fourth quarter of 2013 (See Note 12).

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Note 7 – Stock Options

Stock option activity for the six months ended June 30, 2013, is summarized as follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Options outstanding at December 31, 2012		2,750,000	$	0.78		10.00
Granted		—		—		—
Options outstanding at June 30, 2013		2,750,000	$	0.78		10.00

Total stock option compensation for the six months ended June 30, 2013 was $121,237 and $233,454 for the same period in 2012.

Note 8 – Notes Payable to Related Parties

In the fourth quarter of 2012, in an effort to raise capital, the Company entered into various Secured Promissory Note agreements with accredited investors, who are also existing stockholders of the Company. As of June 30, 2013, $400,000 was raised, of which $75,000 was raised in the first quarter 2013. Upon closing, the Company issued to the investors three-year warrants for the purchase of 400,000 shares (in the aggregate) of the Company’s common stock at a price of $.41 per share. On December 1, 2013, the Company will issue additional three-year warrants for 400,000 shares to the investors at an exercise price equal to the average price of the common stock during the 10 trading days prior to December 1, 2013.

The promissory notes bear interest at the rate of 10% per annum based on a 365-day year. Accrued interest will be paid semi-annually on June 30, 2013, December 31, 2013, June 30, 2014, and December 31, 2014. The entire principal balance of the Note, together with all unpaid interest accrued thereon, shall be due and payable on December 31, 2014. In the event the Company defaults on interest and/or principal payments, the Company will use all accounts receivable obtained now or hereafter existing, pursuant to the License Agreement from VDF FutureCeuticals Inc. (the “Licensee”), as collateral. Accrued interest of $20,705 through June 30, 2013 was paid to the investors in the second quarter of 2013.

The Company analyzed the terms of the warrants based on the provisions of ASC 480, “Distinguishing Liabilities from Equity,”  and determined that the warrants issued in conjunction with the closing of the notes payable qualified for equity accounting. The warrants that will be issued on December 1, 2013 have been determined to qualify as a derivative liability (see Note 9).

Under guidance in ASC 470, the Company allocated the $400,000 in proceeds proportionately between the Secured Promissory Note and the common stock warrants issued to the note holders based on their relative fair values. The relative fair value of the common stock warrants of $176,000, of which $88,000 ($16,500 in Q1 2013) was recorded as additional paid in capital and $88,000 ($16,500 in Q1 2013) was recorded as a derivative liability. The Secured Promissory Note was recorded at the principal amount of $400,000 less a discount of $176,000. This discount is being amortized to interest expense over the term of the Secured Promissory Note to related parties using the effective interest method. The fair value of the common stock warrants issued in conjunction with the Secured Promissory Notes was determined using the Black-Scholes pricing model. The Company determined the fair value of its common stock warrants to be $0.22 per warrant issued with an exercise price of $0.41 per warrant.  

Upon payment in full of the notes, a $25,000 fee will be paid by the Company to its placement agent, Martinez-Ayme Securities, Inc. As of June 30, 2013, $20,000 has been accrued and is included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheets.

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Note 9 – Derivative liabilities

The Company does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, the Company has entered into certain other financial instruments and contracts, such as debt financing arrangements with features that are either (i) not afforded equity classification, (ii) embody risks not clearly and closely related to host contracts, or (iii) may be net-cash settled by the counterparty. These instruments are required to be carried as derivative liabilities, at fair value.

The following table discloses the fair value of the Company’s derivative liabilities as of June 30, 2013 and December 31, 2012. The Company held no asset derivatives at either reporting date.

	Liability Derivatives
	June 30, 2013				December 31, 2012
	Balance Sheet Location		Fair Value		Balance Sheet Location		Fair Value
Derivatives not designated as hedging instruments
Secured Promissory Notes Warrants		Derivative Liabilities	$	40,000		Derivative Liabilities	$	68,250

The following table summarizes liabilities measured at fair value on a recurring basis for the periods presented:

	June 30, 2013								December 31, 2012
Fair Value Measurements Using:	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Liabilities
Derivative Liabilities	$	—	$	40,000	$	—	$	40,000	$	—	$	68,250	$	—	$	68,250

Note 10 – Commitments and Contingencies

On September 29, 2011, the Company entered into a license agreement (the “License Agreement”) with Newton Investments BV. Pursuant to the License Agreement, Newton will, for a period of 10 years, hold the exclusive manufacturing and distribution rights for the Systems in the 27 countries which are currently members of the European Union, subject to Newton’s achieving minimum sales of at least 100 Systems per year beginning in the second year of the License Agreement, payment of a royalty equal to 20% of the gross sales price of each System sold, and other terms and conditions set forth in the License Agreement. Due to ongoing technical problems with the Company’s Systems, the Company has deferred commencement of the minimum sales requirement until the problems are resolved.

On October 25, 2012, the Company entered into a consulting agreement with Hank Leibowitz, the principal of Waste Heat Solutions, LLC, an expert with 40 years’ experience in the field of advanced energy systems. Pursuant to this consulting agreement, which is terminable by either party on 30 days’ notice, the Company pays Waste Heat Solutions, $5,000 per month through February 2013 and $7,500 per month thereafter. In connection with this consulting agreement, the Company issued to Waste Heat Solutions (i) a fully vested 10-year option to purchase 500,000 shares of common stock at $.56 per share and (ii) a 10-year option, vesting six months from the contract date, i.e., on April 25, 2013, to purchase an additional 500,000 shares at $.56 per share. The fair value of the fully vested option was approximately $182,000 and was recorded as general and administrative expenses in the consolidated statements of operations during 2012. The fair value of the option vesting six months from the contract date was approximately $182,000 of which approximately $91,000 was recorded as research and development expense in the condensed consolidated statements of operations for the first quarter 2013. The remaining $30,300 was recognized in the second quarter of 2013 and is included in research and development expense in the accompanying condensed consolidated statements of operations.

This consulting agreement contains standard confidentiality provisions, as well as standard non-competition and non-soliciting provisions which survive for two years following termination of the consultancy.

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On May 19, 2013, the Company issued a Promissory Note with Edward Gomez for $30,000 to evidence his $30,000 loan to the Company. The promissory note bears interest at the rate of 10% per annum based on a 365-day year. The entire principal balance, along with the accrued interest shall be paid by May 19, 2014.

Note 11 – Related Party Transactions

See Notes 6 and 8 for discussion of transactions with the Company’s Co-Founders, George Konrad and Fred Barker.

Since January 1, 2012, the Company has been using a 5,000 square foot Scottsdale, Arizona, facility owned by Bryce Johnson, the principal Cornerstone seller, who became an officer and director of the Company in connection with the Cornerstone Acquisition. The Company used the facility free of charge for two months. Since March 2012, it has been paying Mr. Johnson $700 per month which covers overhead costs for use of the facility on a month-to-month basis. Mr. Johnson resigned as an officer and director of the Company in March 2013; however, the Company continues to use his facility and expects to continue doing so for at least the next year on the existing terms.

Note 12 – Subsequent Events

In the third quarter of 2013, the Company raised gross proceeds of $150,000 through the private placement of 600,000 unregistered shares of common stock to accredited investors at $.25 per share. No commissions are payable in connection with this offering.

In August 2013, the Company and its Co-Founder George Konrad entered into an extension agreement whereby the due date of the $83,000 convertible debt owed to him was extended to October 16, 2013, in exchange for an increase in the amount due to $95,000. See Note 6.

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 2012 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.

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Accounting for Uncertainty in Income Taxes

The Company follows the provisions of ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes” 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. This topic 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 condensed consolidated financial statements. Our evaluation was performed for the tax years ended December 31, 2010, 2011 and 2012, the tax years which remain subject to examination by major tax jurisdictions as of June 30, 2013.

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 condensed consolidated financial statements as general and administrative expense.

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.

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).

Intellectual Property and Goodwill

The Company reviews intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company uses an estimate of the undiscounted cash flows over the remaining life of its long-lived assets, or related group of assets where applicable, in measuring whether the assets to be held and used will be realizable. In the event of impairment, the Company would discount the future cash flows using its then estimated incremental borrowing rate to estimate the amount of the impairment.

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Goodwill is evaluated for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable. The impairment analysis involves a two step process. Step one involves the comparison of the fair value of the reporting unit to which goodwill relates (the Company’s enterprise value) to the carrying value of the reporting unit. If the fair value exceeds the carrying value, there is no impairment. If the carrying value exceeds the fair value of the reporting unit, the Company determines the implied fair value of goodwill and records an impairment charge for any excess of the carrying value of goodwill over its implied fair value.

 For those reporting units with zero or negative carrying amounts, an entity must evaluate whether it is more likely than not that a goodwill impairment exists, regardless of the mathematical results of the Step 1 test. In making that determination, the entity should consider whether there are any adverse qualitative factors that could impact the amount of goodwill.

Stock-based compensation.

We account for stock-based compensation based on ASC Topic 718-Stock Compensation which requires expensing of stock options and other share-based payments based on the fair value of each stock option awarded. The fair value of each stock option is estimated on the date of grant using the Black-Scholes valuation model. This model requires management to estimate the expected volatility, expected dividends, and expected term as inputs to the valuation model.

Derivative instruments—Fair value of financial assets and liabilities.

We measure the fair value of financial assets and liabilities in accordance with GAAP, which defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements.

GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. GAAP describes three levels of inputs that may be used to measure fair value:

Level 1 – quoted prices in active markets for identical assets or liabilities.

Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable.

Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions).

We generally do not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, we and our consolidated subsidiaries have entered into certain other financial instruments and contracts, such as debt financing arrangements and freestanding common stock purchase warrants with features that are either (i) not afforded equity classification, (ii) embody risks not clearly and closely related to host contracts, or (iii) may be net-cash settled by the counterparty. These instruments are required to be carried as derivative liabilities, at fair value.

We estimate fair values of all derivative instruments, such as free-standing common stock purchase warrants, and embedded conversion features utilizing Level 2 inputs. We use the Black-Scholes option valuation technique because it embodies all of the requisite assumptions (including trading volatility, estimated terms and risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective inputs that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in our trading market price and the trading market price of various peer companies, which have historically had high volatility. Since derivative financial instruments are initially and subsequently carried at fair value, our income will reflect the volatility in these estimate and assumption changes.

We report our derivative liabilities at fair value on the accompanying condensed consolidated balance sheets as of June 30, 2013.

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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, 2013 as Compared to Three Months Ended June 30, 2012

Since inception, we have focused on the development, testing and commercialization of our clean energy electric power generation systems. We had no revenues from sales in the second quarter of 2013 and 2012, but in those quarters we recorded $109,416 and $29,922 in Biotech IP licensing fees, respectively. In both years, we had substantial expenses due to our ongoing research and development activities and efforts to commercialize our systems, as well as substantial administrative expenses associated with our status as a public company. Our research and development expenses decreased by $217,846 (73.8%) in the second quarter of 2013 as compared to 2012. This decrease is because in 2013, unlike 2012, we are in the process of testing and are not currently designing new generator systems. Our general and administrative expenses decreased by $81,606 (30.1%) in the second quarter of 2013 as compared to 2012, due mainly to decreased expenses in 2013 for employee/consultant compensation, including the value of stock-based compensation vested and issued. Our net loss was $175,837 in the second quarter of 2013, a 67.5% decrease from the net loss of $540,479 in the second quarter of 2012. Substantial net losses will continue until we are able to successfully commercialize and market our systems, as to which there can be no assurance.

Six Months Ended June 30, 2013, as Compared to Six Months Ended June 30, 2012

Since inception, we have focused on the development, testing and commercialization of our clean energy electric power generation systems. We had no revenues from sales in the first six months of 2013 and 2012, but in those periods we recorded $180,903 and $44,357 in Biotech IP licensing fees, respectively. In both years, we had substantial expenses due to our ongoing research and development activities and efforts to commercialize our systems, as well as substantial administrative expenses associated with our status as a public company. Our research and development expenses decreased by $558,725 (64.1%) in the first six months of 2013 as compared to 2012. This decrease is because in 2013, unlike 2012, we are in the process of testing and are not currently designing new generator systems. Our general and administrative expenses increased by $149,832 (30.4%) in the first six months of 2013. This increase is due mainly to increased expenses in the first quarter of 2013 for employee/consultant compensation, including the value of stock-based compensation vested and issued. Our net loss was $772,172 in the first six months of 2013, a 41.9% decrease from the net loss of $1,327,963 in the first six months of 2012. The decrease in our net loss in the first six months of 2013 was due to our vigorous cost control efforts and because we are in the process of testing and are not currently designing new generator systems. Substantial net losses will continue until we are able to successfully commercialize and market our systems, as to which there can be no assurance.

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Liquidity and Capital Resources

We have financed our operations since inception through the sale of debt and equity securities. As of June 30, 2013, we had a working capital deficit of $155,075 compared to a working capital deficit of $72,721 at December 31, 2012.

In the first quarter of 2013, we raised gross proceeds of $75,000 through the private placement of secured promissory notes to existing stockholders. See Note 8 of Notes to Unaudited Condensed Consolidated Financial Statements.

In the second and third quarters of 2013, we raised gross proceeds of $275,000 through private placement of 1,100,000 unregistered shares of common stock to accredited investors at $.25 per share. No commissions were payable in connection with this offering.

We expect 2013 Biotech IP revenues to exceed the 2012 levels; however, there can be no assurance that this revenue level will be achieved.

We continue to seek funding from private debt and equity investors, as we need to promptly raise substantial additional capital in order to finance our plan of operations. There can be no assurance that we will be able to promptly raise the necessary funds on commercially acceptable terms if at all. If we do not raise the necessary funds, we may be forced to cease operations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 4. Controls and Procedures.

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 not effective.

Management’s Annual Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of financial statements.

All internal controls over financial reporting, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding of controls. Therefore, even effective internal control over financial reporting can provide only reasonable, and not absolute, assurance with respect to financial statement preparation and presentation. Further, because of changes in conditions, the effectiveness of internal controls over financial reporting may vary over time. Because of its inherent limitations, internal controls over financial reporting may also fail to prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

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Our chief executive officer and chief financial officer assessed the effectiveness of our internal control over financial reporting as of December 31, 2012. In connection with this assessment, we identified the following material weaknesses in internal control over financial reporting as of December 31, 2012.  A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—An Integrated Framework (September 1992). Because of the material weaknesses described below, management concluded that, as of December 31, 2012, our internal control over financial reporting was not effective.

We did not maintain an effective control environment. The control environment, which is the responsibility of senior management, sets the tone of the organization, influences the control consciousness of its people, and is the foundation for all other components of internal control over financial reporting. Each of the following control environment material weaknesses also contributed to the material weaknesses discussed below. Our control environment was ineffective because of the following material weaknesses:

(a)   Monitoring of internal control over financial reporting—we did not maintain effective monitoring controls to determine the adequacy of our internal control over financial reporting and related policies and procedures because of the following material weakness:

(i)   Our policies and procedures with respect to the review, supervision and monitoring of our accounting operations throughout the organization were either not designed, in place or operating effectively.

No Attestation Report

This quarterly report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this quarterly report.

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, 2013 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except as set forth above regarding the material weaknesses discovered which continued in the first quarter.

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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 2012 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.

All of our sales of unregistered securities since inception have been made pursuant to private offerings to accredited investors. Our sales of unregistered securities in the six months ended June 30, 2013 were made pursuant to an exemption from registration requirements under Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended. We paid a placement agent fee of 10% of the gross price of the offering to Martinez-Ayme Securities. Net proceeds were used for working capital.

In the first quarter of 2013, we raised gross proceeds of $75,000 through the private placement of secured promissory notes to existing stockholders. See Note 8 of Notes to Unaudited Condensed Consolidated Financial Statements.

In the second and third quarters of 2013, we raised gross proceeds of $275,000 through private placement of 1,100,000 unregistered shares of common stock to accredited investors at $.25 per share. No commissions were payable in connection with this offering.

Item 3. Defaults Upon Senior Securities.

              None.

Item 4. Mine Safety Disclosures.

              Not applicable.

Item 5. Other Information.

              Not applicable.

21

Item 6. Exhibits.

           (a) Exhibits

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.

101.INS XBRL INSTANCE DOCUMENT

101.SCH XBRL TAXONOMY EXTENSION SCHEMA

101.CAL XBRL TAXONOMY EXTENSION CALCULATION LINKBASE

101.DEF XBRL TAXONOMY EXTENSION DEFINITION LINKBASE

101.LAB XBRL TAXONOMY EXTENSION LABEL LINKBASE

101.PRE XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

22

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 9, 2013	By:	/s/ Richard H. Davis
		Richard H. Davis
		Chief Executive Officer
Dated: August 9, 2013	By:	/s/ John L. Hofmann
		John L. Hofmann
		Chief Financial Officer

23

Exhibit Index

Exhibit No.	Description
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
101.INS	XBRL INSTANCE DOCUMENT
101.SCH	XBRL TAXONOMY EXTENSION SCHEMA
101.CAL	XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF	XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB	XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.PRE	XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

24

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 9, 2013	/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 9, 2013	/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, 2013, 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 9, 2013

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, 2013, 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 9, 2013

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Note 9 - Derivative liabilities

6 Months Ended

Jun. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative liabilities

Note 9 – Derivative liabilities

The Company does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, the Company has entered into certain other financial instruments and contracts, such as debt financing arrangements with features that are either (i) not afforded equity classification, (ii) embody risks not clearly and closely related to host contracts, or (iii) may be net-cash settled by the counterparty. These instruments are required to be carried as derivative liabilities, at fair value.

The following table discloses the fair value of the Company’s derivative liabilities as of June 30, 2013 and December 31, 2012. The Company held no asset derivatives at either reporting date.

	Liability Derivatives
	June 30, 2013				December 31, 2012
	Balance Sheet  Location		Fair Value		Balance Sheet Location		Fair  Value
Derivatives not designated as hedging instruments
Secured Promissory Notes Warrants		Derivative Liabilities	$	40,000		Derivative Liabilities	$	68,250

The following table summarizes liabilities measured at fair value on a recurring basis for the periods presented:

	June 30, 2013								December 31, 2012
Fair Value Measurements Using:	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Liabilities
Derivative Liabilities	$	—	$	40,000	$	—	$	40,000	$	—	$	68,250	$	—	$	68,250

XML

Condensed Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended		6 Months Ended		76 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013
Income Statement [Abstract]
Revenue, Net	$ 109,416	$ 29,922	$ 180,903	$ 44,357	$ 659,352
Cost of Goods Sold					136,925
Gross Profit	109,416	29,922	180,903	44,357	522,427
Operating Expenses
Research and development	77,405	295,251	313,562	872,287	3,642,456
General and administrative	189,827	271,433	642,504	492,672	4,292,934
Goodwill impairment					2,637,760
Total Operating Expenses	267,232	566,684	956,066	1,364,959	10,573,150
Loss from Operations	(157,816)	(536,762)	(775,163)	(1,320,602)	(10,050,723)
Other Income (Expenses)
Interest income					2,401
Interest expense	(22,021)	(3,717)	(41,759)	(7,361)	(399,666)
Other income (expenses)	4,000		44,750		64,011
Total Other Income (Expense)	(18,021)	(3,717)	2,991	(7,361)	(333,254)
Loss before Income Taxes	(175,837)	(540,479)	(772,172)	(1,327,963)	(10,383,977)
Provision for Income Taxes
Net Loss	$ (175,837)	$ (540,479)	$ (772,172)	$ (1,327,963)	$ (10,383,977)
Net Loss per Share - Basic and Diluted (in dollars per share)	$ (0.01)	$ (0.02)	$ (0.03)	$ (0.05)
Weighted Average Common Shares Outstanding - Basic and Diluted (in shares)	26,416,590	28,154,620	26,220,721	27,015,795

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Note 2 - Going Concern

6 Months Ended

Jun. 30, 2013

Going Concern Note [Abstract]

Going Concern

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 condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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Note 7 - Stock Options (Tables)

6 Months Ended

Jun. 30, 2013

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Schedule of stock option activity

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Options outstanding at December 31, 2012		2,750,000	$	0.78		10.00
Granted		—		—		—
Options outstanding at June 30, 2013		2,750,000	$	0.78		10.00

XML

Note 10 - Commitments and Contingencies

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 10 – Commitments and Contingencies

On September 29, 2011, the Company entered into a license agreement (the “License Agreement”) with Newton Investments BV. Pursuant to the License Agreement, Newton will, for a period of 10 years, hold the exclusive manufacturing and distribution rights for the Systems in the 27 countries which are currently members of the European Union, subject to Newton’s achieving minimum sales of at least 100 Systems per year beginning in the second year of the License Agreement, payment of a royalty equal to 20% of the gross sales price of each System sold, and other terms and conditions set forth in the License Agreement. Due to ongoing technical problems with the Company’s Systems, the Company has deferred commencement of the minimum sales requirement until the problems are resolved.

On October 25, 2012, the Company entered into a consulting agreement with Hank Leibowitz, the principal of Waste Heat Solutions, LLC, an expert with 40 years’ experience in the field of advanced energy systems. Pursuant to this consulting agreement, which is terminable by either party on 30 days’ notice, the Company pays Waste Heat Solutions, $5,000 per month through February 2013 and $7,500 per month thereafter. In connection with this consulting agreement, the Company issued to Waste Heat Solutions (i) a fully vested 10-year option to purchase 500,000 shares of common stock at $.56 per share and (ii) a 10-year option, vesting six months from the contract date, i.e., on April 25, 2013, to purchase an additional 500,000 shares at $.56 per share. The fair value of the fully vested option was approximately $182,000 and was recorded as general and administrative expenses in the consolidated statements of operations during 2012. The fair value of the option vesting six months from the contract date was approximately $182,000 of which approximately $91,000 was recorded as research and development expense in the condensed consolidated statements of operations for the first quarter 2013. The remaining $30,300 was recognized in the second quarter of 2013 and is included in research and development expense in the accompanying condensed consolidated statements of operations.

This consulting agreement contains standard confidentiality provisions, as well as standard non-competition and non-soliciting provisions which survive for two years following termination of the consultancy.

On May 19, 2013, the Company issued a Promissory Note with Edward Gomez for $30,000 to evidence his $30,000 loan to the Company. The promissory note bears interest at the rate of 10% per annum based on a 365-day year. The entire principal balance, along with the accrued interest shall be paid by May 19, 2014.

XML

Note 9 - Derivative liabilities (Detail 1) -(Table 2) (Fair Value, Measurements, Recurring [Member], USD $)	Jun. 30, 2013	Dec. 31, 2012
Level 1
Liabilities
Derivative Liabilities
Level 2
Liabilities
Derivative Liabilities	40,000	68,250
Level 3
Liabilities
Derivative Liabilities
Fair Value Measurements
Liabilities
Derivative Liabilities	$ 40,000	$ 68,250

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Note 5 - Acquisition (Detail) - (Table 1) Cornerstone Acquisition - Purchase Price Allocation (USD $)	Jun. 30, 2013
Business Combinations [Abstract]
Intangible asset - Research and Development	$ 659,440
Goodwill	2,637,760
Total assets acquired	3,297,200
Aggregate purchase price	$ 3,297,200

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Note 3 - Summary of Significant Accounting Policies (Details 1) (USD $)	12 Months Ended	6 Months Ended
	Dec. 31, 2012	Jun. 30, 2013 Warrant	Jun. 30, 2013 Stock Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number of warrants and options excluded from weighted average common shares outstanding		7,339,333	2,750,000
Goodwill and Intangible Asset Impairment	$ 2,637,760

XML

Note 7 - Stock Options (Detail) (USD $)	1 Months Ended	6 Months Ended
	Mar. 31, 2013	Jun. 30, 2013	Jun. 30, 2012
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]
Share-based Compensation	$ 210,000	$ 121,237	$ 233,454

XML

Note 10 - Commitments and Contingencies (Details 1) (USD $)	Jun. 30, 2013	May 19, 2013 Edward Gomez
Commitments And Contingencies [Line Items]
Promissory note issued with Edward Gomez	$ 400,000	$ 30,000
Loan amount due to Edward Gomez		$ 30,000
Interest bearing rate of promissory note on annual basis	10.00%	10.00%

XML

Note 6- Stockholders' Equity (Detail) - (Table 2) Fair Value Assumptions, Warrants	6 Months Ended
	Jun. 30, 2013
Stockholders Equity Note [Line Items]
Annualized volatility	72.30%
Minimum
Stockholders Equity Note [Line Items]
Risk free interest rate	0.36%
Expected term	3 years
Maximum
Stockholders Equity Note [Line Items]
Risk free interest rate	0.84%
Expected term	5 years

XML

Note 9 - Derivative liabilities (Tables)

6 Months Ended

Jun. 30, 2013

Derivative Liabilities [Abstract]

Schedule of fair value of derivative liabilities

	Liability Derivatives
	June 30, 2013				December 31, 2012
	Balance Sheet  Location		Fair Value		Balance Sheet Location		Fair  Value
Derivatives not designated as hedging instruments
Secured Promissory Notes Warrants		Derivative Liabilities	$	40,000		Derivative Liabilities	$	68,250

Schedule of summarizes liabilities measured at fair value on a recurring basis

	June 30, 2013								December 31, 2012
Fair Value Measurements Using:	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Liabilities
Derivative Liabilities	$	—	$	40,000	$	—	$	40,000	$	—	$	68,250	$	—	$	68,250

XML

Consolidated Statement of Changes in Stockholders' Equity (Unaudited) (Parentheticals) (Common Stock, USD $)	6 Months Ended
	Jun. 30, 2013
Common Stock
Sale of 500,000 shares of common stock	$ 0.25

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) (Parentheticals) (USD $)	3 Months Ended	6 Months Ended
	Mar. 31, 2013	Jun. 30, 2013
Statement Of Cash Flows [Abstract]
Fair value of the common stock warrants recorded as additional paid in capital	$ 16,500	$ 16,500
Fair value of the common stock warrants recorded as derivative liability	16,500	16,500
Fair value of the common stock warrants recorded as additional paid in capital till date		88,000
Fair value of the common stock warrants recorded as derivative liability till date		$ 88,000

XML

Note 3 - Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 3 – Summary of Significant Accounting Policies

Principles of Consolidation

The condensed consolidated financial statements include the accounts of PowerVerde, Inc. and its wholly-owned subsidiary, PowerVerde Systems, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

Development Stage Company

The Company is a development stage company as defined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 915, “Development Stage Entities”. The Company is devoting substantially all of its present efforts to establish a new business and none of its planned principal operations have commenced. All losses accumulated since inception has been considered as part of the Company’s development stage activities.

Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable

Accounts receivable consist of balances due from sales and royalties. The Company monitors accounts receivable and provides allowances when considered necessary. At June 30, 2013, accounts receivable were considered to be fully collectible. Accordingly, no allowance for doubtful accounts was provided.

Employee Advances

The employee advances represent the payroll taxes due on the issuance of common stock as compensation.

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.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Expenditures for major betterments and additions are capitalized, while replacement, maintenance and repairs, which do not extend the lives of the respective assets, are expensed as incurred.

Intellectual Property and Goodwill

The Company reviews intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company uses an estimate of the undiscounted cash flows over the remaining life of its long-lived assets, or related group of assets where applicable, in measuring whether the assets to be held and used will be realizable. In the event of impairment, the Company would discount the future cash flows using its then estimated incremental borrowing rate to estimate the amount of the impairment.

The Company assesses goodwill for potential impairment at the end of each fiscal year, or during the year if an event or other circumstance indicates that the Company may not be able to recover the carrying amount of the asset. In evaluating goodwill for impairment, first qualitative factors are assessed to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount. If it is concluded that it is not more likely than not that the fair value of a reporting unit is less than its carrying value, then no further testing of the goodwill assigned to the reporting unit is required. However, if it is concluded that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then a two-step goodwill impairment test is performed to identify potential goodwill impairment and measure the amount of goodwill impairment to be recognized, if any.

In the first step of the review process, the estimated fair value of the reporting unit is compared with its carrying value. If the estimated fair value of the reporting unit exceeds its carrying amount, no further analysis is needed.

If the estimated fair value of the reporting unit is less than its carrying amount, a second step of the review process is performed in order to calculate the implied fair value of the reporting unit goodwill in order to determine whether any impairment is required. The implied fair value of the reporting unit goodwill is then calculated by allocating the estimated fair value of the reporting unit to all of the assets and liabilities of the reporting unit as if the reporting unit had been acquired in a business combination. If the carrying value of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, the Company then recognizes an impairment loss for that excess amount. During the year ended December 31, 2012, the Company determined that the goodwill it had recognized in connection with its previous acquisition of Cornerstone Conservation Group LLC had been impaired and accordingly recognized an impairment charge of $2,637,760 to reduce its carrying amount to zero.

Stock-based Compensation

The Company has accounted for stock-based compensation under the provisions of ASC Topic 718 – “Stock Compensation” which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (stock options and common stock purchase warrants). The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. Expected volatilities are based on historical volatility of peer companies and other factors estimated over the expected term of the stock options. The expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term.

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 follows the provisions of ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes” 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. This topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Research and Development Costs

The Company’s research and development costs are expensed in the period in which they are incurred.

Earnings (Loss) Per Share

Earnings (loss) per share is computed in accordance with FASB ASC Topic 260, “Earnings per Share”. Basic earnings (loss) per share is computed by dividing net income (loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. Certain common stock equivalents were not included in the earnings (loss) per share calculation as their effect would be anti-dilutive. Warrants exercisable for 7,339,333 shares and options for 2,750,000 shares were excluded from weighted average common shares outstanding on a diluted basis.

Financial instruments

The Company carries cash and cash equivalents, accounts receivable, accounts payable and accrued expenses at historical costs. The respective estimated fair values of these assets and liabilities approximate carrying values due to their current nature. The Company also carries notes payable to related parties at historical cost less discounts from warrants issued as loan financing costs.

Fair value of financial assets and liabilities

The Company measures the fair value of financial assets and liabilities in accordance with GAAP which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. GAAP describes three levels of inputs that may be used to measure fair value:

Level 1 – quoted prices in active markets for identical assets or liabilities

Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

The Company generally does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, the Company has entered into certain other financial instruments and contracts, such as debt financing arrangements and freestanding warrants with features that are either (i) not afforded equity classification, (ii) embody risks not clearly and closely related to host contracts, or (iii) may be net-cash settled by the counterparty. These instruments are required to be carried as derivative liabilities, at fair value.

The Company uses the Black-Scholes valuation technique because it embodies all of the requisite assumptions (including trading volatility, estimated terms and risk free rates) necessary to measure the fair value of these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective inputs that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the Company’s trading market price and the trading market price of various peer companies, which have historically had high volatility. Since derivative financial instruments are initially and subsequently carried at fair value, the Company’s income will reflect the volatility in these estimate and assumption changes.

The Company reports its derivative liabilities at fair value on the accompanying condensed consolidated balance sheets.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

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Note 1 - Condensed Consolidated Financial Statements

6 Months Ended

Jun. 30, 2013

Organization, Consolidation and Presentation Of Financial Statements [Abstract]

Condensed Consolidated Financial Statements

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, 2012. The results of operations for the three and six months ended June 30, 2013, are not necessarily indicative of the results to be expected for the full year or for future periods. 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.

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Note 11- Related Party Transactions (Detail) (USD $)	Mar. 30, 2012	Jun. 30, 2013 Officer and director sqft
Area of Real Estate Property		5,000
Facility charges	$ 700

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Note 5 - Acquisition (Details) - (Table 2) Future amortization of the intangible asset-intellectual property (USD $)	Jun. 30, 2013
Year ending December 31:
2013	$ 109,907
2014	219,813
2015	54,953
Total	$ 384,673

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Note 6- Stockholders' Equity (Detail) (USD $)	1 Months Ended		3 Months Ended			6 Months Ended		76 Months Ended			3 Months Ended	6 Months Ended		1 Months Ended	3 Months Ended				0 Months Ended		1 Months Ended		12 Months Ended		1 Months Ended			10 Months Ended		0 Months Ended	12 Months Ended	0 Months Ended	6 Months Ended		1 Months Ended			3 Months Ended			1 Months Ended	3 Months Ended		1 Months Ended
	Mar. 31, 2013	Feb. 29, 2012	Jun. 30, 2013	Mar. 31, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Dec. 31, 2012	Oct. 16, 2012	Mar. 31, 2013 General and Administrative Expense	Jun. 30, 2013 Minimum	Jun. 30, 2013 Maximum	Feb. 29, 2012 February 2012 Private Placement	Jun. 30, 2012 Second Quarter 2012 Private Placement	Sep. 30, 2012 Third Quarter Private Placement	Dec. 31, 2012 Fourth Quarter 2012 Private Placement	Jun. 30, 2013 Second Quarter 2013 Private Placement	Oct. 16, 2012 Treasury Stock Transaction April 2011	Apr. 07, 2011 Treasury Stock Transaction April 2011	May 31, 2012 Treasury Stock Transaction, April 2012	Apr. 30, 2012 Treasury Stock Transaction, April 2012	Dec. 31, 2011 Treasury Stock Transaction, April 2012	Jun. 30, 2013 Treasury Stock Transaction, April 2012	Feb. 29, 2012 Newton Affiliate February 2012 Private Placement	Mar. 31, 2013 Chief Financial Officer	Mar. 31, 2013 Chief Executive Officer	Dec. 31, 2010 Warrants Issued In 2010, Stock Subscription Agreements	Jun. 30, 2013 Warrants Issued In 2010, Stock Subscription Agreements	Jun. 03, 2011 Warrants Issued in 2011, For Services Provided	Dec. 31, 2011 Warrants Issued in 2011, For Services Provided	Feb. 03, 2012 Warrants For Settlement With Newton	Jun. 30, 2013 Warrants For Settlement With Newton	Jun. 30, 2012 Warrants For Settlement With Newton	Mar. 30, 2012 Warrants For Cornerstone Acquisition	Mar. 30, 2012 Warrants For Cornerstone Acquisition Minimum	Mar. 30, 2012 Warrants For Cornerstone Acquisition Maximum	Dec. 31, 2012 Warrants Issued In 2012, Stock Subscription Agreements	Sep. 30, 2012 Warrants Issued In 2012, Stock Subscription Agreements	Jun. 30, 2012 Warrants Issued In 2012, Stock Subscription Agreements	Dec. 31, 2012 Warrants Issued 2012 Stock Secured Promissory Note	Dec. 31, 2012 Common Stock Issue At 0.43 Exercise Price Fourth Quarter 2012 Private Placement	Dec. 31, 2012 Common Stock Issue At 0.715 Exercise Price Fourth Quarter 2012 Private Placement	Jan. 31, 2013 Warrants Issued 2013 Stock Secured Promissory Note
Warrants issued														500,000														439,999		1,855,000	2,000,000	500,000			300,000			225,000	71,000	335,000	325,000			75,000
Exercise price of warrants issued (in Dollars per share)						0.3								1.00	3.00	3.00										0.30	0.30	0.75		1.05	0.75	1.00				2.00	4.00	1.00	3.00	3.00	0.41			0.41
Warrants expired (in Shares)																													286,666
Exercise period of warrants (in years)														three	three		three													five		five												three
Litigation settlement, expense (in Dollars)																																	$ 0	$ 262,700
Grant date fair value warrants granted												$ 0.11	$ 0.14
Proceeds from issuance of private placement (in Dollars)		500,000													335,000	71,000	492,030	125,000							275,000
Common stock issued for cash, net of stock issuance costs (in shares)															335,000	71,000		500,000																								396,000	450,000
Price per share of equity issued (in Dollars per share)		$ 1.00													$ 1.00	$ 1.00	$ 1.00	$ 0.25	$ 0.0667						$ 1.00																	$ 0.43	$ 0.715
Private Placement Fee Paid (Percentage of Gross Proceeds)															10.00%	10.00%	10.00%
Treasury stock (in shares)																			3,000,000	4,500,000	450,000	100,000
Proceeds from notes payable (in Dollars)				75,000		75,000		700,000												200,000
Debt instrument, interest rate, effective percentage																			8.00%
Treasury stock acquired, average cost per share																					$ 0.20	$ 0.25
Treasury stock, value, acquired, cost method																			530,000		(90,000)	25,000
Purchase of treasury stock							31,000	320,381													10,000		14,000
Monthly payments to repurchase common stock (in Dollars)																			100,000
Monthly payments to repurchase common stock due amount (in Dollars)																			100,000
Due to related parties (in Dollars)																								26,500
Treasury stock value payable to related parties										83,000
Number of warrants issued to purchase common stock			7,339,333			7,339,333		7,339,333	6,050,999																	500,000	1,000,000
Share-based Compensation	210,000					121,237	233,454
Common stock issued for services (in shares)				125,000
Number of common stock issued to employees (in shares)				200,000
General and administrative			189,827		271,433	642,504	492,672	4,292,934			124,750
Prepaid expenses			$ 40,020			$ 40,020		$ 40,020	$ 46,641

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Note 9 - Derivative liabilities (Detail)- (Table 1) (Derivative Liabilities, Derivatives not designated as hedging instruments, USD $)	Jun. 30, 2013	Dec. 31, 2012
Derivative Liabilities | Derivatives not designated as hedging instruments
Secured Promissory Notes Warrants	$ 40,000	$ 68,250

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Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Statement Of Financial Position [Abstract]
Accumulated depreciation of property and equipment (in Dollars)	$ 30,289	$ 26,771
Accumulated amortization of intellectual property (in Dollars)	$ 274,767	$ 164,860
Common stock, shares authorized	100,000,000	100,000,000
Common stock, par value (in Dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares issued	26,900,106	26,011,565
Common stock, shares outstanding	26,900,106	26,011,565
Treasury stock, shares	8,550,000	8,550,000

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Note 6 - Stockholders' Equity

6 Months Ended

Jun. 30, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Note 6 – Stockholders’ Equity

Warrants

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 June 30, 2013, 286,666 of these warrants had expired.

During January through December 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 June 30, 2013, none of these warrants were exercised or had expired.

The Company 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 the Black Scholes pricing model to determine the fair value of each warrant. As of June 30, 2013, all of these warrants were outstanding.

On February 3, 2012, The Company issued warrants to purchase 500,000 unregistered shares of the Company’s common stock at an exercise price of $1.00 per share with a five-year term for settlement of certain disputed amounts (See Note 10). These share-based payments have been accounted for in accordance with ASC 815-40 using the Black-Scholes pricing model to determine the fair value of each warrant. As of June 30, 2013, all of these warrants were outstanding.

In connection with the acquisition of Cornerstone (See Note 5), on March 30, 2012, the Company issued warrants to purchase 300,000 unregistered shares of common stock at exercise prices ranging from $2.00 to $4.00 per share. These warrants expire at various dates through December 2017. As of June 30, 2013, all of these warrants were outstanding.

During the second quarter of 2012, the Company issued warrants to purchase 335,000 unregistered shares of the Company’s common stock at an exercise price of $3.00 per share in association with stock subscription agreements. These warrants expire on various dates through 2015. As of June 30, 2013, all of these warrants were outstanding.

During the third quarter of 2012, the Company issued warrants to purchase 71,000 unregistered shares of the Company’s common stock at an exercise price of $3.00 per share in association with stock subscription agreements. These warrants expire July 30, 2015. As of June 30, 2013, all of these warrants were outstanding.

During the fourth quarter of 2012, the Company issued warrants to purchase 225,000 unregistered shares of the Company’s common stock at an exercise price of $1.00 per share in association with stock subscription agreements. These warrants expire October 31, 2015. As of June 30, 2013, all of these warrants were outstanding.

In December 2012, the Company issued warrants to purchase 325,000 unregistered shares of the Company’s common stock at an exercise price of $.41 per share in association with the Secured Promissory Note (See Note 8). These warrants expire December 31, 2015. As of June 30, 2013, all of these warrants were outstanding.

During January 2013, the Company issued three-year warrants to purchase 75,000 unregistered shares of the Company’s common stock at an exercise price of $.41 per share in association with the Secured Promissory Note (See Note 8). These warrants expire December 31, 2015. As of June 30, 2013, all of these warrants were outstanding.

During March 2013, the Company issued its Chief Executive Officer and Chief Financial Officer five –year warrants to purchase common stock at an exercise price of $.30 per share (market price on date of grant) in the amounts of 1,000,000 and 500,000 shares, respectively. The Company recognized $210,000 in compensation expense. As of June 30, 2013, all of these warrants were outstanding.

Expenses related to warrants issued in conjunction with settlement of certain disputes for the six months ended June 30, 2013 and 2012 were $0 and $262,700, respectively.

A summary of warrants issued, exercised and expired during the six months ended June 30, 2013 is as follows:

	Shares			Weighted Average Exercise Price
Balance at December 31, 2012		6,050,999		$	1.12
Issued		1,575,000			.30
Expired		(286,666	)		(.75	)
Balance at June 30, 2013		7,339,333		$	.96

The weighted average grant date fair value of warrants issued during the six month period ended June 30, 2013 amounted to $0.11 to $0.14 per warrant. The fair value of each warrant granted as compensation for services was determined using the Black-Scholes pricing model and the following assumptions:

	June 30, 2013
Risk Free interest rate		0.36% to 0.84%
Expected term		3-5 years
Annualized volatility		72.3%
Expected dividends		—

The expected term of warrants granted is based on the contractual terms of the agreement and represents the period of time that warrants granted are expected to be outstanding.

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.

Common Stock Issued for Services

In the first quarter of 2013, the Company issued 125,000 common shares to a third party for six months consulting services and 200,000 common shares were issued to an employee as part of his compensation package. The expense for the period of $124,750 is included in the general and administrative expenses on the condensed consolidated statements of operations.

Private Placement of Common Stock

In February 2012, the Company raised $500,000 exclusively from accredited European investors (including $275,000 from a Newton affiliate) pursuant to a private placement of 500,000 shares of common stock at a price of $1.00 per share. There were no warrants issued pursuant to this round; however, simultaneously Newton affiliates received three-year warrants to purchase 500,000 shares at $1.00 per share in connections with the settlement of certain claims by and between the Company and Newton.

In the second quarter of 2012, the Company raised gross proceeds of $335,000 through the private placement of 335,000 unregistered shares of common stock to accredited investors at $1.00 per share. Each investor received a three-year warrant to purchase shares of common stock at $3.00 per share for a number of shares equal to the number of shares purchased by the investor in this offering. The Company paid a 10% commission on the gross proceeds of this offering to its placement agent.

In the third quarter of 2012, the Company raised gross proceeds of $71,000 through the private placement of 71,000 unregistered shares of common stock to accredited investors at $1.00 per share. Each investor received a three-year warrant to purchase shares of common stock at $3.00 per share for a number of shares equal to the number of shares purchased by the investor in this offering. The Company paid a 10% commission on the gross proceeds of this offering to its placement agent.

In the fourth quarter of 2012, the Company raised gross proceeds of $492,030 through the private placement of 396,000 unregistered shares of common stock to accredited investors at $.43 per share and 450,000 shares at $.715 per share. Each investor who purchased the common stock at $.715 per share received a three-year warrant to purchase additional shares of common stock at $1.00 per share for a number of shares equal to one-half of the number of shares purchased by the investor in this offering. The Company paid a 10% commission on the gross proceeds of this offering to its placement agent.

In the second quarter of 2013, the Company raised gross proceeds of $125,000 through private placement of 500,000 unregistered shares of common stock to accredited investors at $.25 per share. No commissions are payable for this offering.

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 interest-free note payable due in April 2013. The note payable is reported as note payable to related party on the accompanying condensed consolidated balance sheets. In accordance with GAAP, the Company has discounted this obligation at an imputed rate of 8%. The balance was settled on October 16, 2012 with the surrender of 3,000,000 shares of the Company’s stock to Treasury in exchange for $530,000 as discussed below.

In April 2012, the Company purchased 100,000 shares of common stock from an affiliate at a price of $.25 per share. Of the $25,000 purchase price, $14,000 was paid in 2011 and the balance in April 2012. The shares have been held as treasury stock from the date of closing.

In May 2012, the Company purchased 450,000 shares of its common stock from an affiliate at a price of $0.20 per share. Of the $90,000 purchase price, $10,000 was paid at closing and the balance is payable $10,000 per month through January 2013. The payable has a balance of $26,500 at June 30, 2013 and is included in “Payable to related parties” in the accompanying condensed consolidated balance sheets. The shares have been held as treasury stock from the date of closing.

On October 16, 2012, 3,000,000 shares of the Company’s stock were surrendered to Treasury in exchange for $530,000, $100,000 of which is due in six equal monthly installments, beginning on November 16, 2012. The payable had a balance of $100,000 as of December 31, 2012 and is included in the “Payable to related parties” in the accompanying consolidated balance sheets. In the event that any amount due remains unpaid, some or all amounts can be converted into shares of the Company’s stock at a price of $.0667 per share. The shares have been held as treasury stock from the date of closing. As of June 30, 2013, approximately $83,000 remained outstanding. In accordance with ASC 470-20, “Debt with Conversion and Other Options,” the Company determined that the non-mandatory conversion feature represents a beneficial conversion feature that should be recorded as equity based on intrinsic value. The offset will be recorded as a discount and netted against the payable during the fourth quarter of 2013 (See Note 12).

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Consolidated Statement of Changes in Stockholders' Equity (Unaudited) (USD $)	Common Stock	Additional Paid in Capital	Treasury Stock	Deficit Accumulated during the Development Stage	Total
Balances at Dec. 31, 2012	$ 3,414	$ 10,278,331	$ (491,139)	$ (9,611,805)	$ 178,801
Balances (in Shares) at Dec. 31, 2012	26,011,565				26,011,565
Sale of common stock at $.25 per share	51	124,949			125,000
Sale of common stock at $.25 per share (in shares)	500,000
Common stock issued for services	32	124,718			124,750
Common stock issued for services (in shares)	325,000
Stock-based compensation		121,237			121,237
Warrants issued for services		210,000			210,000
Warrants issued in connection with Notes payable to related party		16,500			16,500
Common stock issued on conversion of debt (in shares)	44,791
Cashless exercise of options (in shares)	18,750
Net loss for the six months ended June 30, 2013				(772,172)	(772,172)
Balances at Jun. 30, 2013	$ 3,497	$ 10,875,735	$ (491,139)	$ (10,383,977)	$ 4,116
Balances (in Shares) at Jun. 30, 2013	26,900,106				26,900,106

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Condensed Consolidated Balance Sheets (Unaudited) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Current Assets:
Cash and cash equivalents	$ 106,861	$ 45,283
Accounts receivable	109,416	115,687
Employee advances	19,292
Prepaid expenses	40,020	46,641
Total Current Assets	275,589	207,611
Property and Equipment
Property and equipment, net of accumulated depreciation of $30,289 and $26,771, respectively	61,946	9,559
Other Assets
Intellectual Property, net of accumulated amortization of $274,767 and $164,860, respectively	384,673	494,580
Total Assets	722,208	711,750
Current Liabilities
Accounts payable and accrued expenses	258,166	109,568
Payable to related parties	172,498	170,764
Total Current Liabilities	430,664	280,332
Long-Term Liabilities
Derivative liability	40,000	68,250
Payable to related parties	247,428	184,367
Total Long-Term Liabilities	287,428	252,617
Total Liabilities	718,092	532,949
Common stock:
100,000,000 common shares authorized, par value $0.0001 per share, 26,900,106 common shares issued and outstanding at June 30, 2013 and 26,011,565 common shares issued and outstanding at December 31, 2012	3,497	3,414
Additional paid-in capital	10,875,735	10,278,331
Treasury stock, 8,550,000 shares at cost on June 30, 2013 and December 31, 2012	(491,139)	(491,139)
Deficit accumulated in the development stage	(10,383,977)	(9,611,805)
Total Stockholders' Equity	4,116	178,801
Total Liabilities and Stockholders' Equity	$ 722,208	$ 711,750

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Note 5 - Acquisition (Detail) (USD $)	6 Months Ended		1 Months Ended
	Jun. 30, 2013	Mar. 30, 2012 sqft	Mar. 30, 2012 Cornerstone Acquisition	Mar. 30, 2012 Warrants For Cornerstone Acquisition Exercisable January 1, 2012 - December 31, 2016	Mar. 30, 2012 Warrants for Cornerstone Acquisition Exercisable July 1, 2012 through June 30, 2017	Mar. 30, 2012 Warrants For Cornerstone Acquisition Exercisable January 1, 2013 through December 31, 2017	Mar. 30, 2012 Warrants For Cornerstone Acquisition
Percentage of membership interests purchased			100.00%
Area of land owned by sellers in Scottsdale Arizona		5,000
Facility cost		$ 700
Stock issued during period, shares, acquisitions			2,260,000
Share price (in Dollars per share)			$ 1.37
Exercise period of warrants (in years)			three
Warrants issued			300,000	100,000	100,000	100,000	300,000
Exercise price of warrants issued in transaction (in Dollars per share)				$ 2.00	$ 3.00	$ 4.00
Issuance of warrants in business acquisition, Value (in Dollars)							201,000
Risk free interest rate							1.04%
Expected volatility rate							79.10%
Equity issued in business combination, fair value (in Dollars)							3,297,200
Amortization of acquired intangible assets (in Dollars)	274,767
Amortization expenses	$ 109,907

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Note 6 - Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2013

Stockholders' Equity Note [Abstract]

Schedule of summary of warrants issued, exercised and expired

	Shares			Weighted Average Exercise Price
Balance at December 31, 2012		6,050,999		$	1.12
Issued		1,575,000			.30
Expired		(286,666	)		(.75	)
Balance at June 30, 2013		7,339,333		$	.96

Schedule of fair value of each warrant granted for equity and debt raises

	June 30, 2013
Risk Free interest rate		0.36% to 0.84%
Expected term		3-5 years
Annualized volatility		72.3%
Expected dividends		—

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Note 10 - Commitments and Contingencies (Detail) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended	76 Months Ended	1 Months Ended				3 Months Ended	6 Months Ended	12 Months Ended
	Sep. 29, 2011	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012	Jun. 30, 2013	Oct. 25, 2012 Waste Heat Solutions	Oct. 25, 2012 Shares 500,000 Waste Heat Solutions	Mar. 31, 2013 Consulting Agreement	Feb. 28, 2013 Consulting Agreement	Mar. 31, 2013 Consulting Agreement	Jun. 30, 2013 Consulting Agreement	Dec. 31, 2012 Consulting Agreement
Intercompany agreements, description	On September 29, 2011, the Company entered into a license agreement (the "License Agreement") with Newton Investments BV. Pursuant to the License Agreement, Newton will, for a period of 10 years, hold the exclusive manufacturing and distribution rights for the Systems in the 27 countries which are currently members of the European Union, subject to Newton's achieving minimum sales of at least 100 Systems per year beginning in the second year of the License Agreement, payment of a royalty equal to 20% of the gross sales price of each System sold, and other terms and conditions set forth in the License Agreement. Due to ongoing technical problems with the Company's Systems, the Company has deferred commencement of the minimum sales requirement until the problems are resolved.
Intercompany agreement royalty rate	20.00%
Consulting fee										$ 7,500	$ 5,000
Period of option in year											10 years
Number of warrants issued in connection with this consulting agreement								500,000
Exercise price of warrants								$ 0.56
Fair value of the fully vested option recorded as general and administrative expenses		189,827	271,433	642,504	492,672		4,292,934							182,000
Fair value of the fully vested option recorded as research and development expense		$ 77,405	$ 295,251	$ 313,562	$ 872,287		$ 3,642,456					$ 91,000	$ 30,300	$ 182,000
Consulting agreement and terms									On October 25, 2012, the Company entered into a consulting agreement with Hank Leibowitz, the principal of Waste Heat Solutions, LLC, an expert with 40 years' experience in the field of advanced energy systems. Pursuant to this consulting agreement, which is terminable by either party on 30 days' notice, the Company pays Waste Heat Solutions, $5,000 per month through February 2013 and $7,500 per month thereafter. In connection with this consulting agreement, the Company issued to Waste Heat Solutions (i) a fully vested 10-year option to purchase 500,000 shares of common stock at $.56 per share and (ii) a 10-year option, vesting six months from the contract date, i.e., on April 25, 2013, to purchase an additional 500,000 shares at $.56 per share. The fair value of the fully vested option was approximately $182,000 and was recorded as general and administrative expenses in the consolidated statements of operations during 2012. The fair value of the option vesting six months from the contract date was approximately $182,000 of which approximately $91,000 was recorded as research and development expense in the condensed consolidated statements of operations for the first quarter 2013. The remaining $30,300 was recognized in the second quarter of 2013

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Note 8 - Notes Payable to Related Parties (Detail) (USD $)	3 Months Ended		6 Months Ended	76 Months Ended
	Jun. 30, 2013	Mar. 31, 2013	Jun. 30, 2013	Jun. 30, 2013
Notes Payable [Abstract]
Proceeds from notes payable till date	$ 400,000		$ 400,000	$ 400,000
Proceeds from notes payable to related parties		75,000	75,000	700,000
Additional warrants issuable for purchase of common stock	400,000		400,000	400,000
Number of trading days used for calculation of exercise price of additional warrant			10 days
Interest rate of promissory note	10.00%		10.00%	10.00%
Fair value of the common stock warrants recorded as additional paid in capital		16,500	16,500
Fair value of the common stock warrants recorded as derivative liability		16,500	16,500
Principal amount of secured promissory note	400,000		400,000	400,000
Discount on issue of secured promissory note	176,000		176,000	176,000
Fair value of common stock per share (in dollars per share)			$ 0.41
Fair value of the common stock warrants recorded as additional paid in capital till date	88,000		88,000	88,000
Fair value of the common stock warrants recorded as derivative liability till date	88,000		88,000	88,000
Fair value of common stock warrants issued (in dollars per share)			$ 0.22
Accrued interest paid	$ 20,705		$ 20,705	$ 20,705

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Note 8 - Notes Payable to Related Parties (Detail 1) (USD $)	6 Months Ended
	Jun. 30, 2013
Notes Payable [Abstract]
Fees payable to placement agent	$ 25,000
Accrued fees payable	$ 20,000

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Note 5 - Acquisition

6 Months Ended

Jun. 30, 2013

Business Combinations [Abstract]

Acquisition

Note 5 – Acquisition

On March 30, 2012, the Company purchased 100% of the membership interests of Cornerstone Conservation Group LLC (“Cornerstone”) pursuant to a Membership Interest Purchase Agreement (the “Agreement”). Cornerstone’s main asset is its proprietary Combined Cooling, Heating and Power (“CCHP”) technology, which utilizes waste heat from commercial and residential heating, ventilation air conditioning and refrigeration (“HVACR”) systems.

Cornerstone also has substantial experience and technology relating to geothermal or ground source heat pumps. In January 2012, the Company moved its operations to a 5,000 square foot facility in Scottsdale, Arizona, owned by one of the sellers, who became an officer and director in connection with the Cornerstone transaction. The Company used the facility rent free of charge for two months. Since March 2012, the Company has been using the facility at a cost of $700 per month which covers overhead costs.

In consideration for the 100% membership interests in Cornerstone, the Company issued 2,260,000 shares of the Company’s common stock (valued at $1.37 per share, the closing price on March 30, 2012) to the selling members of Cornerstone and issued to the sellers fully vested three–year warrants to purchase an aggregate of 300,000 shares of the Company’s common stock as follows:

(i) 100,000 shares at an exercise price of $2.00 per share, exercisable beginning January 1, 2012, through December 31, 2016;

(ii) 100,000 shares at an exercise price of $3.00 per share, exercisable beginning July 1, 2012, through June 30, 2017; and

(iii) 100,000 shares at an exercise price of $4.00 per share, exercisable beginning January 1, 2013, through December 31, 2017.

The estimated fair value of the total warrants issued in connection with the acquisition of Cornerstone was $201,000 which was calculated using the Black-Scholes valuation method with the following assumptions: a risk free interest rate of 1.04 percent, an estimated volatility of 79.1 percent and no dividend yield.  The total present value of all consideration expected to be paid as part of this agreement was $3,297,200.

The following summarizes the fair values of the assets acquired:

Intangible asset - Research and Development	$	659,440
Goodwill		2,637,760
Total assets acquired	$	3,297,200
Aggregate purchase price	$	3,297,200

The assets acquired were recorded based on estimates of their fair values determined by management, based on information then available and on assumptions as to future operations.

Due to the departure of a key employee and as part of the Company’s annual impairment analysis, the goodwill associated with this acquisition was determined to be impaired at December 31, 2012 and accordingly, it was written off in that period.

For the six months ended June 30, 2013, amortization expense was $109,907 and accumulated amortization of the intangible asset- intellectual property was $274,767 at June 30, 2013.

Future amortization of the intangible asset – intellectual property was as follows as of June 30, 2013:

Year ending December 31:
2013	$	109,907
2014		219,813
2015		54,953
Total	$	384,673

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Note 6- Stockholders' Equity (Detail) - (Table 1) Warrant Activity, Current Period (USD $)	6 Months Ended
	Jun. 30, 2013
Stockholders' Equity Note [Abstract]
Balance at December 31, 2012	6,050,999
Balance at December 31, 2012	1.12
Issued	1,575,000
Issued	0.3
Expired	(286,666)
Expired	$ (0.75)
Balance at March 31, 2013	7,339,333
Balance at March 31, 2013	0.96

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Note 12 - Subsequent Events (Details) (USD $)	1 Months Ended		1 Months Ended	3 Months Ended
	Feb. 29, 2012	Jun. 30, 2013	Aug. 31, 2013 Subsequent Event Extension agreement George Konrad Convertible debt	Sep. 30, 2013 Subsequent Event Third quarter 2013 private placement
Subsequent Event [Line Items]
Proceeds from Issuance of Private Placement (in Dollars)	$ 500,000			$ 150,000
Common stock issued for cash, net of stock issuance costs (in shares)				600,000
Price per share of equity issued (in Dollars per share)	$ 1.00			$ 0.25
Convertible debt amount to be paid		400,000	83,000
Increase in amount of convertible debt to be paid			$ 95,000

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Note 8 - Notes Payable to Related Parties

6 Months Ended

Jun. 30, 2013

Notes Payable [Abstract]

Notes Payable to Related Parties

Note 8 – Notes Payable to Related Parties

In the fourth quarter of 2012, in an effort to raise capital, the Company entered into various Secured Promissory Note agreements with accredited investors, who are also existing stockholders of the Company. As of June 30, 2013, $400,000 was raised, of which $75,000 was raised in the first quarter 2013. Upon closing, the Company issued to the investors three-year warrants for the purchase of 400,000 shares (in the aggregate) of the Company’s common stock at a price of $.41 per share. On December 1, 2013, the Company will issue additional three-year warrants for 400,000 shares to the investors at an exercise price equal to the average price of the common stock during the 10 trading days prior to December 1, 2013.

The promissory notes bear interest at the rate of 10% per annum based on a 365-day year. Accrued interest will be paid semi-annually on June 30, 2013, December 31, 2013, June 30, 2014, and December 31, 2014. The entire principal balance of the Note, together with all unpaid interest accrued thereon, shall be due and payable on December 31, 2014. In the event the Company defaults on interest and/or principal payments, the Company will use all accounts receivable obtained now or hereafter existing, pursuant to the License Agreement from VDF FutureCeuticals Inc. (the “Licensee”), as collateral. Accrued interest of $20,705 through June 30, 2013 was paid to the investors in the second quarter of 2013.

The Company analyzed the terms of the warrants based on the provisions of ASC 480, “Distinguishing Liabilities from Equity,”  and determined that the warrants issued in conjunction with the closing of the notes payable qualified for equity accounting. The warrants that will be issued on December 1, 2013 have been determined to qualify as a derivative liability (see Note 9).

Under guidance in ASC 470, the Company allocated the $400,000 in proceeds proportionately between the Secured Promissory Note and the common stock warrants issued to the note holders based on their relative fair values. The relative fair value of the common stock warrants of $176,000, of which $88,000 ($16,500 in Q1 2013) was recorded as additional paid in capital and $88,000 ($16,500 in Q1 2013) was recorded as a derivative liability. The Secured Promissory Note was recorded at the principal amount of $400,000 less a discount of $176,000. This discount is being amortized to interest expense over the term of the Secured Promissory Note to related parties using the effective interest method. The fair value of the common stock warrants issued in conjunction with the Secured Promissory Notes was determined using the Black-Scholes pricing model. The Company determined the fair value of its common stock warrants to be $0.22 per warrant issued with an exercise price of $0.41 per warrant.  

Upon payment in full of the notes, a $25,000 fee will be paid by the Company to its placement agent, Martinez-Ayme Securities, Inc. As of June 30, 2013, $20,000 has been accrued and is included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheets.

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Note 4 - Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2013

New Accounting Pronouncements and Changes In Accounting Principles [Abstract]

Recent Accounting Pronouncements

Note 4 – Recent Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-11 “Disclosures about offsetting Assets and Liabilities” requiring additional disclosure about offsetting and related arrangements. ASU 2011-11 is effective retrospectively for periods beginning on or after January 1, 2013. The adoption of ASU 2011-11 did not have a material impact on the Company’s future financial position, results of operations or liquidity.

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	6 Months Ended		76 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013
Cash Flows from Operating Activities
Net loss	$ (772,172)	$ (1,327,963)	$ (10,383,977)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	113,424	58,468	305,055
Amortization of discount	21,061	7,361	374,274
Stock based compensation	121,237	233,454	1,302,767
Common stock issued for services	124,750		124,750
Goodwill impairment			2,637,760
Warrants issued for services	210,000		822,150
Warrants issued for settlement		262,700	262,700
Gain on re-measurement of derivative liability	(44,750)		(48,000)
Changes in operating assets and liabilities:
Accounts receivable and prepaid expenses	12,892	(41,446)	(149,436)
Employee advances	(19,292)		(19,292)
Accounts payable and accrued expenses	148,598	179,447	27,634
Payable to related parties	1,734		161,345
Cash Used in Operating Activities	(82,518)	(627,979)	(4,582,270)
Cash Flows From Investing Activities
Purchase of property and equipment	(55,904)		(92,234)
Cash acquired in business acquisition			872
Cash Used in Investing Activities	(55,904)		(91,362)
Cash Flows from Financing Activities
Proceeds from issuance of common stock	125,000	835,000	5,175,281
Proceeds from notes payable to related parties	75,000		700,000
Payment of line of credit			(50,000)
Payment of note payable to related parties			(271,206)
Purchase of treasury stock		(31,000)	(320,381)
Payment of stock issuance costs		(83,500)	(453,201)
Cash Provided by Financing Activities	200,000	720,500	4,780,493
Net Increase in Cash and Cash Equivalents	61,578	92,521	106,861
Cash and Cash Equivalents at Beginning of Period	45,283	7,530
Cash and Cash Equivalents at End of Period	106,861	100,051	106,861
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest	20,705		20,705
Cash paid during the period for income taxes			24,221
Supplemental Schedule of Non-Cash Financing Activities
Common stock issued for convertible debt			189,261
Common stock issued for services	11,458		67,608
Common stock issued for acquisition of Cornerstone Conservation Group, LLC		3,096,200	3,096,200
Warrants issued in connection with acquisition of Cornerstone Conservation group, LLC		201,000	201,000
Purchase of treasury stock with long-term related party payable		70,000	242,758
Warrants issued in connection with debt			299,984
Issuance of warrants as part of notes payable to related party of which $88,000 ($16,500 in Q1 2013) was classified as additional paid in capital and $88,000 ($16,500 in Q1 2013) was classified as a derivative liability	33,000		176,000
Common stock issued in connection with debt forgiveness and services rendered			$ 250,000

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Note 7 - Stock Options (Detail) - (Table 1) Stock Option Activity, Current Period (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]
Shares, Options outstanding	2,750,000	2,750,000
Shares, Granted
Options outstanding, Weighted Average Exercise Price (in Dollars per share)	$ 0.78	$ 0.78
Options Granted, Weighted Average Exercise Price (in dollars per share)
Options outstanding, Weighted Average Remaining Contractual Life (Years)	10 years	10 years

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Note 11 - Related Party Transactions

6 Months Ended

Jun. 30, 2013

Related Party Transactions [Abstract]

Related Party Transactions

Note 11 – Related Party Transactions

See Notes 6 and 8 for discussion of transactions with the Company’s Co-Founders, George Konrad and Fred Barker.

Since January 1, 2012, the Company has been using a 5,000 square foot Scottsdale, Arizona, facility owned by Bryce Johnson, the principal Cornerstone seller, who became an officer and director of the Company in connection with the Cornerstone Acquisition. The Company used the facility free of charge for two months. Since March 2012, it has been paying Mr. Johnson $700 per month which covers overhead costs for use of the facility on a month-to-month basis. Mr. Johnson resigned as an officer and director of the Company in March 2013; however, the Company continues to use his facility and expects to continue doing so for at least the next year on the existing terms.

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Note 7 - Stock Options

6 Months Ended

Jun. 30, 2013

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Stock Options

Note 7 – Stock Options

Stock option activity for the six months ended June 30, 2013, is summarized as follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Options outstanding at December 31, 2012		2,750,000	$	0.78		10.00
Granted		—		—		—
Options outstanding at June 30, 2013		2,750,000	$	0.78		10.00

Total stock option compensation for the six months ended June 30, 2013 was $121,237 and $233,454 for the same period in 2012.

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Note 5 - Acquisition (Tables)

6 Months Ended

Jun. 30, 2013

Business Combinations [Abstract]

Schedule of fair values of assets acquired

Intangible asset - Research and Development	$	659,440
Goodwill		2,637,760
Total assets acquired	$	3,297,200
Aggregate purchase price	$	3,297,200

Schedule of future amortization of the intangible asset

Year ending December 31:
2013	$	109,907
2014		219,813
2015		54,953
Total	$	384,673

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Note 12 - Subsequent Events

6 Months Ended

Jun. 30, 2013

Subsequent Events [Abstract]

Subsequent Events

Note 12 – Subsequent Events

In the third quarter of 2013, the Company raised gross proceeds of $150,000 through the private placement of 600,000 unregistered shares of common stock to accredited investors at $.25 per share. No commissions are payable in connection with this offering.

In August 2013, the Company and its Co-Founder George Konrad entered into an extension agreement whereby the due date of the $83,000 convertible debt owed to him was extended to October 16, 2013, in exchange for an increase in the amount due to $95,000. See Note 6.

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Document And Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 09, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	POWERVERDE, INC.
Entity Central Index Key	0000933972
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		27,500,106
Document Type	10-Q
Document Period End Date	Jun. 30, 2013
Amendment Flag	false
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2

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Note 3 - Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

The condensed consolidated financial statements include the accounts of PowerVerde, Inc. and its wholly-owned subsidiary, PowerVerde Systems, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

Development Stage Company

Development Stage Company

The Company is a development stage company as defined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 915, “Development Stage Entities”. The Company is devoting substantially all of its present efforts to establish a new business and none of its planned principal operations have commenced. All losses accumulated since inception has been considered as part of the Company’s development stage activities.

Cash Equivalents

Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable

Accounts Receivable

Accounts receivable consist of balances due from sales and royalties. The Company monitors accounts receivable and provides allowances when considered necessary. At June 30, 2013, accounts receivable were considered to be fully collectible. Accordingly, no allowance for doubtful accounts was provided.

Employee Advances

Employee Advances

The employee advances represent the payroll taxes due on the issuance of common stock as compensation.

Revenue Recognition

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.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Expenditures for major betterments and additions are capitalized, while replacement, maintenance and repairs, which do not extend the lives of the respective assets, are expensed as incurred.

Intellectual Property and Goodwill

Intellectual Property and Goodwill

The Company reviews intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company uses an estimate of the undiscounted cash flows over the remaining life of its long-lived assets, or related group of assets where applicable, in measuring whether the assets to be held and used will be realizable. In the event of impairment, the Company would discount the future cash flows using its then estimated incremental borrowing rate to estimate the amount of the impairment.

The Company assesses goodwill for potential impairment at the end of each fiscal year, or during the year if an event or other circumstance indicates that the Company may not be able to recover the carrying amount of the asset. In evaluating goodwill for impairment, first qualitative factors are assessed to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount. If it is concluded that it is not more likely than not that the fair value of a reporting unit is less than its carrying value, then no further testing of the goodwill assigned to the reporting unit is required. However, if it is concluded that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then a two-step goodwill impairment test is performed to identify potential goodwill impairment and measure the amount of goodwill impairment to be recognized, if any.

In the first step of the review process, the estimated fair value of the reporting unit is compared with its carrying value. If the estimated fair value of the reporting unit exceeds its carrying amount, no further analysis is needed.

If the estimated fair value of the reporting unit is less than its carrying amount, a second step of the review process is performed in order to calculate the implied fair value of the reporting unit goodwill in order to determine whether any impairment is required. The implied fair value of the reporting unit goodwill is then calculated by allocating the estimated fair value of the reporting unit to all of the assets and liabilities of the reporting unit as if the reporting unit had been acquired in a business combination. If the carrying value of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, the Company then recognizes an impairment loss for that excess amount. During the year ended December 31, 2012, the Company determined that the goodwill it had recognized in connection with its previous acquisition of Cornerstone Conservation Group LLC had been impaired and accordingly recognized an impairment charge of $2,637,760 to reduce its carrying amount to zero.

Stock-based compensation

Stock-based Compensation

The Company has accounted for stock-based compensation under the provisions of ASC Topic 718 – “Stock Compensation” which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (stock options and common stock purchase warrants). The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. Expected volatilities are based on historical volatility of peer companies and other factors estimated over the expected term of the stock options. The expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term.

Common Stock Purchase Warrants

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

Accounting for Uncertainty in Income Taxes

The Company follows the provisions of ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes” 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. This topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Research and Development Costs

Research and Development Costs

The Company’s research and development costs are expensed in the period in which they are incurred.

Earnings (Loss) Per Share

Earnings (Loss) Per Share

Earnings (loss) per share is computed in accordance with FASB ASC Topic 260, “Earnings per Share”. Basic earnings (loss) per share is computed by dividing net income (loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. Certain common stock equivalents were not included in the earnings (loss) per share calculation as their effect would be anti-dilutive. Warrants exercisable for 7,339,333 shares and options for 2,750,000 shares were excluded from weighted average common shares outstanding on a diluted basis.

Financial instruments

Financial instruments

The Company carries cash and cash equivalents, accounts receivable, accounts payable and accrued expenses at historical costs. The respective estimated fair values of these assets and liabilities approximate carrying values due to their current nature. The Company also carries notes payable to related parties at historical cost less discounts from warrants issued as loan financing costs.

Fair value of financial assets and liabilities

Fair value of financial assets and liabilities

The Company measures the fair value of financial assets and liabilities in accordance with GAAP which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. GAAP describes three levels of inputs that may be used to measure fair value:

Level 1 – quoted prices in active markets for identical assets or liabilities

Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

The Company generally does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, the Company has entered into certain other financial instruments and contracts, such as debt financing arrangements and freestanding warrants with features that are either (i) not afforded equity classification, (ii) embody risks not clearly and closely related to host contracts, or (iii) may be net-cash settled by the counterparty. These instruments are required to be carried as derivative liabilities, at fair value.

The Company uses the Black-Scholes valuation technique because it embodies all of the requisite assumptions (including trading volatility, estimated terms and risk free rates) necessary to measure the fair value of these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective inputs that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the Company’s trading market price and the trading market price of various peer companies, which have historically had high volatility. Since derivative financial instruments are initially and subsequently carried at fair value, the Company’s income will reflect the volatility in these estimate and assumption changes.

The Company reports its derivative liabilities at fair value on the accompanying condensed consolidated balance sheets.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.