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Note 5 - Acquisition
 6 Months Ended
Jun. 30, 2012
Business Combination Disclosure [Text Block]

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. The Company also moved its operations to a 5,000 square foot facility owned by one of the sellers in Scottsdale Arizona. The Company has been using the facility rent free on a short term basis but expects to negotiate a lease on fair market terms.


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 option 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 – Intellectual Property   $ 659,440  
Goodwill     2,637,760  
Total assets acquired     3,297,200  
Aggregate purchase price   $ 3,297,200  

The assets acquired were recorded at preliminary estimates of fair values determined by management, based on information currently available and on current assumptions as to future operations, and are subject to change upon the completion of acquisition accounting, including the finalization of asset valuations.


For the six months ended June 30, 2012, amortization expense and accumulated amortization of the intangible asset- intellectual property was $54,953.


The following unaudited pro forma financial information presents the combined results of operations of the Company and Cornerstone as if the acquisition had occurred as of January 1, 2012. The pro forma information is not necessarily indicative of what the financial position or results of operations actually would have been had the acquisition been completed as of January 1, 2012. In addition, the unaudited pro forma financial information is not indicative of, nor does it purport to project, the future financial position or operating results of PowerVerde. The unaudited pro forma financial information excludes acquisition and integration costs and does not give effect to any estimated and potential cost savings or other operating efficiencies that could result from the acquisition.


UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS INFORMATION


    For the Six Months Ended June 30  
    2012       2011  
Revenue   $ 58,965     $ 242,352  
                 
Net loss attributable to common shareholders of the Company   $ (1,417,922 )   $ (1,633,803 )
Basic and diluted net loss per common share attributable to common shareholders of PowerVerde   $ (0.05 )   $ (0.06 )