UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-K /A
Amendment No. 1



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



For the Fiscal Year Ended:December 31, 2013



or



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



|POWER OF THE DREAM VENTURES, INC.                     
|------------------------------------------------------
|(Exact name of registrant as specified in its charter)



|Delaware                                                               | 001-52289                | 51-0597895                                     
|---------------------------------------------------------------------- | ------------------------ | -----------------------------------------------
|(State or other jurisdiction of
        incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification
        Number)



|1095 Budapest, Soroksari, ut 94-96, Hungary                 
|------------------------------------------------------------
|(Address of principal executive offices, including zip code)



|+36-1-456-6061                                      
|----------------------------------------------------
|(Registrant’s telephone number, including area code)



Securities registered pursuant to Section 12(b)
of the Act:  None



Securities registered pursuant to Section 12(g)
of the Act: Common Stock, $0.001 par value



Indicate by check mark if the registrant is
a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes  ̈
No þ



Indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes þ
No  ̈



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

Yes þ
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). Yes þ
No  ̈



Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained,
to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. Yes  ̈ No þ



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



1







|Large Accelerated Filer  ̈ | Accelerated Filer  ̈        
|------------------------- | ---------------------------
|                          |                            
|Non-Accelerated Filer  ̈   | Smaller reporting company þ



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



Issuer’s revenues for its most recent
fiscal year were approximately $0.



The aggregate market value of the voting and
non-voting common equity held by non-affiliates of the registrant on June 29, 2013, based on a closing price of $0.10 was approximately
$3,500,000 As of April 14, 2014, the registrant had 46,500,896 shares of its common stock, par value $0.001 per share, outstanding.



Documents Incorporated By Reference: None.



EXPLANATORY NOTE



This Amendment No.1  on Form 10-K/A amends the
Registrant’s Annual Report on Form 10-K filed by the Registrant on April 14, 2014 with the Securities and
Exchange Commission. Amendment No. 1 is being filed for the sole purpose of revising the Report of Independent Registered
Public Accounting Firm to include signatures which were inadvertently omitted. All other items remain unchanged.







2





POWER OF THE DREAM VENTURES, INC.

FOR THE FISCAL YEAR ENDED

DECEMBER 31, 2012



TABLE OF CONTENTS



|         |                                                                                                               | Page
|-------- | ------------------------------------------------------------------------------------------------------------- | ----
|PART I   |                                                                                                               |     
|         |                                                                                                               |     
|Item 1.  | Business.                                                                                                     | 5   
|Item 1A. | Risk Factors.                                                                                                 | 36  
|Item 1B. | Unresolved Staff Comments.                                                                                    | 56  
|Item 2.  | Properties.                                                                                                   | 56  
|Item 3.  | Legal Proceedings.                                                                                            | 56  
|Item 4.  | Mine Safety Disclosures.                                                                                      | 56  
|         |                                                                                                              
|PART II  |                                                                                                              
|         |                                                                                                               |     
|Item 5.  | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. | 57  
|Item 6.  | Selected Financial Data.                                                                                      | 58  
|Item 7.  | Management’s Discussion and Analysis of Financial Condition and Results Of Operations.                        | 58  
|Item 7A. | Quantitative And Qualitative Disclosures About Market Risk.                                                   | 61  
|Item 8.  | Financial Statements and Supplementary Data.                                                                  | 61  
|Item 9.  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.                         | 61  
|Item 9A. | Controls and Procedures.                                                                                      | 61  
|Item 9B. | Other Information.                                                                                            | 63  
|         |                                                                                                               |     
|PART III
|         |                                                                                                               |     
|Item 10. | Directors, Executive Officers and Corporate Governance.                                                       | 63  
|Item 11. | Executive Compensation.                                                                                       | 64  
|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.               | 65  
|Item 13. | Certain Relationships and Related Transactions, and Director Independence.                                    | 66  
|Item 14. | Principal Accounting Fees and Services.                                                                       | 66  
|         |                                                                                                               |     
|PART IV 
|         |                                                                                                               |     
|Item 15. | Exhibits, Financial Statement Schedules.                                                                      | 67  





3





FORWARD LOOKING STATEMENTS



Included in this Form 10-K are “forward-looking”
statements, as well as historical information. Although we believe that the expectations reflected in these forward-looking statements
are reasonable, we cannot assure you that the expectations reflected in these forward-looking statements will prove to be correct.
Our actual results could differ materially from those anticipated in forward-looking statements as a result of certain factors,
including matters described in the section titled “Risk Factors.” Forward-looking statements include those that use
forward-looking terminology, such as the words “anticipate,” “believe,” “estimate,” “expect,”
“intend,” “may,” “project,” “plan,” “will,” “shall,” “should,”
and similar expressions, including when used in the negative. Although we believe that the expectations reflected in these forward-looking
statements are reasonable and achievable, these statements involve risks and uncertainties and we cannot assure you that actual
results will be consistent with these forward-looking statements. We undertake no obligation to update or revise these forward-looking
statements, whether to reflect events or circumstances after the date initially filed or published, to reflect the occurrence of
unanticipated events or otherwise.















4





PART I



Item 1. Business.



Power of the Dream Ventures, Inc., a Delaware
corporation (“PDV”, “We” or the “Company”) is a Hungarian-based holding company focused on
technology acquisition and development enabling the delivery of revolutionary concepts and ready to market products to the international
market place. We develop, acquire, license, or co-develop technologies that typically originate in Hungary that are in prototype
stage based on existing patents; in prototype stage prior to patenting; existing products that require expansion capital to commercialize;
emerging science and high-technology research projects that require help in patenting, developing the product and marketing, university
spin-off technologies and ideas from the very early stages of what represents “disruptive technologies.”

We were incorporated in Delaware on
August 17, 2006, under the name Tia V, Inc. Since inception, and prior to our acquisition of Vidatech on April 10, 2007, we were
engaged solely in organizational efforts and obtaining initial financing. Our sole business purpose was to identify, evaluate and
complete a business combination with an operating company.

On April 10, 2007, we completed our
acquisition of Vidatech, Kft. (also known as Vidatech Technological Research and Development LLC) a limited liability company formed
under the laws of the Republic of Hungary. Vidatech is a company formed for the purpose of investing in, acquiring, developing,
licensing, and commercializing technologies developed in Hungary. In furtherance of its business, Vidatech provides research and
development services to the companies from which it acquires technologies or participation interests in such technologies.

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



On September 28, 2012, the Company entered
into an Acquisition Agreement and Plan of Merger, by and among the Company, as parent, Power of the Dream Ventures Acquisition
Corp., a Delaware corporation and wholly-owned subsidiary of Parent (the “Merger Sub”) and Genetic Immunity, Inc.,
a Delaware corporation (“Genetic Immunity”), whereby, the Merger Sub merged with Genetic Immunity, and Genetic Immunity
shall continue as a wholly-owned subsidiary of the Company (the “Merger”). The Merger became effective upon the filing
of the Certificate of Merger with the Secretary of the State of Delaware on October 2, 2012.



OVERVIEW



The Company currently focuses on the operations
of its wholly-owned subsidiary, Genetic Immunity, which is a clinical-stage biotechnology company focusing on the discovery, development
and commercialization of a new class of immunotherapeutic biologics ("Immune Therapies" or "Therapeutic Vaccines")
for the treatment of chronic viral infections, cancer and allergy. Our Immune Therapies are designed to intensify or boost specific
immune responses to modify or control these presently incurable diseases. The Company’s main focus is completing Genetic
Immunity’s clinical trials program and on commercialization tasks related to the Company’s lead product candidate DermaVir
therapeutic HIV vaccine.



PRODUCTS



Our Lead Product Candidate – DermaVir
HIV-specific Immune Therapy

| | 1. | Summary of DermaVir Development Milestones
| | -- | ------------------------------------------



We have been developing DermaVir for
the treatment of HIV/AIDS.DermaVir is a patented Immune Therapy which, based on the Food and Drug Administration (“FDA”)
classification, is a combination of our original biologic product (DermaVir) and our medical device (DermaPrep).DermaVir
is administered topically with DermaPrep. DermaVir’s Active Pharmaceutical Ingredient (“API”) is a pDNA expressing
the broadest HIV antigen repertoires and Virus-like Particles (“VLP”).



5





We demonstrated in Phase I and Phase
II clinical tirals that DermaVir exhibits its specific pharmacologic effects by intensifying the patient’s own immune system
to kill HIV-infected cells. Our clinical trials in approximate 70 HIV-infected patients demonstrated an excellent safety and tolerability
in all doses. We found the optimal DermaVir dose for boosting HIV-specific T cell immune responses and demonstrated killing of
HIV-infected cells by showing a statistically significant reduction of HIV-RNA in DermaVir treated patients compared to placebo.



DermaVir has a novel immunological
mechanism of action different from antiretroviral drugs that kill the virus but cannot kill the infected cells. During effective
Highly Active Antiretroviral Therapy (“HAART”), HIV-infected cells remain in the reservoirs. Even HAART intensification
could not eliminate infected cells, decrease reservoirs or improve the immune system to fight against the virus. We believe that
DermaVir treatments will reduce the amount of HIV-infected cells remaining in the reservoirs of HAART petients. This could provide
additional treatment benefits by reducing the number of antiretroviral drugs that patients must take.



“Proof of concept” for
the immunological and antiretroviral activities of our products was demonstrated in non-human primates with AIDS. This data showed
that repeated DermaVir immunization resulted in a cumulative boosting of the HIV-specific cellular immunity without causing significant
toxicities or adverse effects. After successful reconstitution of the monkey’s SIV-specific immune system, DermaVir immunized
monkeys controlled their virus after interruption of HAART.



Among our animal studies, the non-human
primate model is superior to other commonly used animal models (e.g., mice, rats, rabbits) because the disease progression
and response to treatments in non-human primates is similar to the human disease. We believe that DermaVir has the potential to
be the first Immune Therapeutic agent designed for the immune mediated control of viral replication by cytotoxic killing of HIV-infected
cells. Currently, there are no approved Immune Therapy products on the market for HIV.



DermaVir was found to be safe and
well tolerated at all doses in all clinical studies. A single treatment with DermaVir takes 20 minutes to apply, and left on the
skin for three hours after which the patches are removed.. Our Phase I clinical results indicated an increase in the number of
long-lived HIV-specific precursor T cells in all treated individuals in a dose-dependent manner. DermaVir-induced T cells remained
in the body even after a one-year follow up, albeit at a lower level. These findings suggest that DermaVir boosted HIV-specific
T cells similarly to that seen in primates. A separate Phase I/II study conducted by our collaborators in the US further confirmed
the safety of repeated DermaVir vaccinations in combination with HAART (ACTG5176). We have recently completed Phase II clinical
trial with DermaVir in Germany on a drug naïve patient population (36 HIV-infected individuals). These trials demonstrated
excellent safety, immunogenicity and antiretroviral efficacy and have shown clinically significant median 70% viral load reduction
in patients treated, as compared to placebo. This viral load reduction is the result of killing of HIV-infected cells that we could
demonstrate even in the absence of HAART. Viral load suppression by DermaVir vaccinations occurs slowly, similarly to cancer vaccines
as predicted by its mechanism of action, and that is different from antiretroviral drugs that kill the virus but do not kill HIV-infected
cells. Consistent with our primate results, DermaVir immunizations alone did not suppress viral load to an undetectable level and
did not increase CD4 T cell counts. These human clinical data appear to have confirmed and extended our pre-clinical results.



Although our clinical development
program is not yet final, and the marketing approval has not yet been obtained, we believe that our preclinical and human studies
performed to date support the Proof of Concept, which is a relationship between DermaVir-induced antiretroviral immune responses
and clinical benefit. We believe that DermaVir may be most effective if it is initially administered every six weeks to intensify
HIV-specific immunity then at every regular doctor’s visit (every three months) to maintain the immunity.



6





| | 2. | Our DermaVir Family for Personalized Treatment
| | -- | ----------------------------------------------



DermaVir is based on HIV subtype-B
that represents the majority of HIV infection within the major marketplaces including North America and Western Europe. In addition,
we have developed an initial DermaVir Product Portfolio to provide optimal treatment for every HIV-infected patient by considering
the diversity of the infected population.

HIV is a highly variable virus.
We found that the therapeutic effectiveness of DermaVir depends on the HIV sequence replicating in the patient and the patient’s
genetic background. DermaVir contains related HIV-specific antigen sequences characteristic for the different Clades (subtypes)
of the virus. To ensure the optimal therapeutic benefit for every patient, the treating physician will enter the information on
the patient’s HIV sequences and genetic background (HLA) into our eMINER software. After analyzing the data, eMINER will
select the optimal DermaVir product from the DermaVir Product Family and also calculate the specific T cell epitopes that will
play a role in the immune boosting of the individual patient. The treating physician can then make an educated decision for personalized
treatment of the patient and could also prescribe the proper immune monitoring based on the predicted T cell epitopes.

The targeted epidemics and our
initial Product Portfolio are summarized in the Table below. According to UNAIDS, subtype-B represents approximately four million
individuals (Europe, North, Central and South America, Caribbean, Australia). Our other product candidates can provide optimized
treatment options for an additional 24.7 million HIV-infected individuals (2009 UNAIDS Report and HIV-1 Global Distribution, IAVI
report Aug 2003).

|Present DermaVir Product Family | Targeted epidemics                    | Infected population
|------------------------------- | ------------------------------------- | -------------------
|DermaVir B                      | Europe, America, Caribbean, Australia | 4 million          
|DermaVir C                      | Sub-Saharan Africa, South-Asia        | 22.5 million       
|DermaVir BC                     | China                                 | 0.77 million       
|DermaVir BF                     | South-America                         | 1.4 million        
|DermaVir AB                     | Eastern Europe                        | 10,000             



We are pursuing the development of a DermaVir Product
Family based on subtypes for the following reasons:

| | · | DermaVir Product Family provides an individually-optimized Immune Therapy to boost the immune system
against the specific HIV replicating in the patients. The availability of subtype-specific products permits “personalized
treatment” with DermaVir Product Family. HIV subtype of the infected individual is diagnosed with available sequencing of
the virus. The patient’s genetic background (HLA type) can also be diagnosed with routine methods. The subtype or recombinant
form (HIV diversity) plus the patient’s genetic background for antigen processing (patient diversity) together define the
best-matching Product from the Family. Based on these data our eMINER can suggest the personalized treatment for the patient.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | DermaVir Product Family also supports different pricing in the various markets. Differential pricing
of drugs manufactured by the same company has resulted in the illegal re-importation of the cheaper products to North America and
Western Europe. The subtype-optimized DermaVir products will, by medical necessity, differ in HIV subtypes by geographical
markets, product supplied to developing countries should not be diverted to other markets.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





7







| | · | We intend to seek additional patent protection for the API in our subtype-specific DermaVir Product
Family and method for treatment, also within the target regions. This will allow the granting of manufacturing and marketing licenses
to specific countries based on unmet medical needs while providing additional protection against re-importation of third country-manufactured
products to the United States and E.U.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Based on our technology platform, manufacturing and control of the DermaVir Product Family will
not require additional methods or technology. The same manufacturing technology, control methods and facility can be used for cGMP
manufacturing of all our products.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | i. | Non-Clinical Studies
| | -- | --------------------



Prior to human trials, regulatory
agencies require the demonstration of their quality, safety and efficacy initially in appropriate animal models. To demonstrate
the mechanism of action, first we established in human primary cells in vitro and in macaques ex vivo that DermaVir-expressing
dendritic cells prime naïve T cells and induce both HIV-specific helper and cytotoxic T cells. Preclinical animal studies
conducted in mice, rabbits and macaques consistently demonstrated that in vivo DermaVir immunization targets the pDNA immunogen
to the dendritic cells of the lymph nodes that express the pDNA-encoded antigens. Importantly, immune responses following in
vivo DermaVir immunization were shown to be similar to ex vivo immunization with cultured dendritic cells “DCs”.
Both ex vivo and in vivo DermaVir immunizations employed lymph node dendritic cells, expressed similar amounts of
pDNA-derived antigens, and induced Th1-type antigen-specific CD4 T helper and CD8 cytotoxic T cells. The induction of Th1-type
cellular immune responses by DermaVir was also confirmed by delayed-type hypersensitivity skin reaction (DTH) tests. Additional
experiments showed that in vivo DermaVir immunization leads to the induction of antigen-specific memory/precursor T cells.
Recent animal studies have demonstrated that generation of highly protective immunity against smallpox required a live virus delivered
via skin scarification. For DermaVir we used our platform technology, the modern version of the smallpox vaccination approach by
employing a pDNA nanomedicine expressing complex VLP+ instead of a live virus and DermaPrep administration instead of
skin scarification.

To study the safety of DermaVir
vaccination, repeated immunization studies in good laboratory practice “GLP” were performed in swine and rabbits. These
preclinical studies demonstrated that the major side effect of DermaVir vaccinations was erythema caused primarily by the DermaPrep
administration. The erythema was transient and provided a mild inflammation, a desired side effect resulting in the activation
of the Langerhans cells to seek and capture DermaVir nanoparticles applied under the patch.

To study the reproductive toxicity
of DermaVir another repeated dose study GLP was performed in Wistar rats from the premating period through implantation. No significant
differences between DermaVir treated and control animals were observed in body weights, food consumption, estrus cycle, fertility
and mating index, or mating days until Day 0 postcoitus. Because no adverse effects were seen, the Maximum Tolerated Dose (MTD)
cannot be determined, but is considered to be greater than 0.33 mg pDNA.

We have assessed the in vivo
stability of our nanomedicine product. We could visualize the nanoparticles in the epidermis by two-photon microscopy over 120
minutes and demonstrate that DermaPrep skin preparation is essential for the effective penetration of the nanomedicine into the
epidermis. The half-life of the nanomedicine in the lymph nodes was 11-12 days. The half-life of the nanoparticles in the lymph
nodes depends on the migration of nanoparticle-containing Langerhans cells to the lymph nodes, intracellular degradation of pDNA,
cytotoxic killing of antigen-presenting dendritic cells and clearance of dendritic cells.

The immunogenicity of
DermaVir was investigated in uninfected and Simian Immunodeficiency Virus (“SIV”)-infected rhesus macaques with a
DermaVir product formulated with a relevant plasmid DNA construct based on Simian Human Immunodeficiency Virus. The API of
DermaVir used in all macaque studies expresses a VLP+ with the gag and pol genes homologous to SIV and an HIV env. The method
for topical administration and the dose per skin surface in the macaque studies were similar to human trials. Proof of
Concept efficacy studies in chronically SIV-infected macaques, some of them with AIDS, suggested that repeated DermaVir
immunizations, alone or in combination with antiretroviral drugs, result in viral load reduction and survival benefit (see
data in Lisziewicz et al AIDS 2005). DermaVir administered in combination with HAART boosted SIV-specific T cells that
possessed significant antiretroviral activity demonstrated by maintenance of undetectable viral load after interruption of
HAART in both chronically infected and late stage macaques. DermaVir treatment alone doubled the median survival time of
infected macaques. These primate experiments provided the rationale to investigate repeated DermaVir immunizations in
combination with HAART in HIV-infected human subjects.



8







| | ii. | Summary of the Clinical Trials to Date
| | --- | --------------------------------------



As DermaVir associated clinical
benefits were first seen in primates receiving HAART, the first two human studies were designed for the treatment of HIV-infected
subjects receiving stable, fully suppressive HAART.

GIHU004 Trial to Evaluate
the Tolerability and Safety of DermaVir in HIV-Infected Subject Currently Under Treatment with HAART (EudraCT Number 2004-001585-41,
ClinicalTrials.gov ID NCT00712530).

The objective of the trial was to
provide data on the safety, tolerability and immunogenicity of one DermaVir treatment in individuals with chronic HIV-1 infection
treated with fully suppressive HAART.

This Phase I clinical study demonstrates
that DermaVir was found to be safe and well tolerated at all doses. Vaccination did not affect HIV RNA (all subjects remained less
than 50 copies/mL) and CD4+ counts. However, this therapeutic vaccination broadened and significantly increased the HIV-specific
memory/precursor T cell pool, measured as the PHPC count, in a dose-dependent manner. The durability of vaccine-induced T cell
responses was demonstrated after one year following a single vaccination in all treated individuals, albeit in significantly lower
quantities (Lisziewicz et al. CROI2008 - Poster #715). These findings suggest that DermaVir boosted HIV-specific T cells similarly
to that seen in primates.

Trial ACTG A5176. A Phase
I/II, Randomized, Double-Blind Study to Evaluate the Safety, Tolerability, and Immunogenicity of DermaVir, in HIV-1-Infected Subjects
Currently Under Treatment with HAART. (ClinicalTrials.gov ID NCT00270205 ).

The trial, conducted under a US
Investigational New Drug “IND” application was sponsored by the US government (NIAID, NIH) enrolled 26 HIV-infected
individuals on fully suppressive HAART to three cohorts in four leading HIV clinics located in the US. Based on the design, dose
escalation to the last cohort implied that no subject in the current or lower dose cohort experienced a primary safety endpoint
(i.e., no more than one subject in any cohort exhibited an adverse event greater than Grade 3).

The primary objective of this randomized,
double-blind, placebo-controlled trial was to evaluate the safety and tolerability of multiple DermaVir treatments. Secondary objectives
were to explore the immunogenicity of DermaVir for the treatment of individuals with chronic HIV-1 infection and HAART-induced
durable reduction of viral replication.

The trial population comprised 26
HIV-infected men and women 18 to 50 years of age. HAART regimens were fully reduced within the 12 weeks prior to trial entry (Screening
plasma HIV-1 level of less than 50 copies/mL,and CD4+ cell count greater than 350 cells/mm3 within 12 weeks prior to trial
entry and nadir CD4+ cell count greater than 250 cells/mm3). The total treatment duration was 61 weeks. Each cohort’s treatment
schedule was administered over a 13-week period, with an additional 48 weeks of follow-up for safety evaluations.

Twenty-six subjects were enrolled
in the study. The primary endpoint was any possibly or definitely vaccine-related grade ≥3 adverse event (AE) appearing up
to 28 days after the final study vaccination. No primary safety endpoints or AE-related study treatment changes / discontinuations
have occurred. AE incidence was similar across groups (Rodriguez B. et al. XVIII International AIDS Conference, 2010 - Abstract
# A-240-0111-10145).

DermaVir
administration was associated with a trend toward greater HIV-specific, predominantly central memory T-cell responses. The intermediate
DermaVir dose tended to show the greatest immunogenicity, consistent with previous studies in different HIV-infected patient populations.

Phase
II Trial

Repeated DermaVir
immunizations in chronically infected macaques in the absence of HAART transiently suppressed virus replication leading to
improvement of median survival time from 18 to 38 weeks compared to no treatment. These primate experiments provided the
rationale to investigate repeated DermaVir immunizations prior to initiation of HAART in HIV-infected individuals. As
DermaVir immunizations in combination with HAART did not show any product- or administration-related AEs higher than grade 2,
we developed a Phase II protocol to evaluate the safety and to test the immunogenicity and antiretroviral efficacy of
repeated DermaVir immunizations.



9







GIEU-006: Randomized, Placebo-Controlled,
Multi-Center Trial to Evaluate the Safety, Tolerability, Immunogenicity, and Antiretroviral Activity of DermaVir in Treatment-Naïve
HIV-1-Infected Patients (EudraCT number: 2007-001955-20, ClinicalTrials.gov ID NCT00711230)

This study was conducted in Germany
in accordance with European Medicines Agency (“EMA”) approval and Current Good Clinical Practices “cGCP”.
GIEU-006, a Phase II randomized, placebo-controlled, dose-finding, double-blinded study was conducted to assess the safety, tolerability,
immunogenicity, and antiretroviral activity of DermaVir therapeutic vaccine, for the treatment of antiretroviral therapy naïve
adults with HIV-infection.

The study population comprised
of 36 antiretroviral treatment naïve HIV-infected men and women 18-50 years of age. The patients were randomized into one
of the six treatment arms to receive either DermaVir or placebo. Four immunizations were administered over an 18-week period with
an identical follow up schedule continuing until week 24; patients were followed for an additional 24 weeks for safety and immunogenicity
evaluations. An additional 234-week safety follow up is being performed (every 26 weeks) including virology, immunology, chemistry
and hematology assessments and physical examinations.

Immunizations were done on days
0, 42, 84, and 126. The total number of patches that a patient received throughout the study is 8, 16, or 32 in the low, medium,
and high dose arms, respectively. The same skin sites were used for all immunizations.

The primary endpoint of the study
was safety at week 24. Adverse events solely attributed to DermaPrep and were analyzed separately in the Local Reaction Assessment.

Out of the 36, 34 subjects have
reached week 24 (visit 10), the time point of the analysis of primary and secondary endpoints of the study. The data of the two
subjects that did not reach visit 10 were used according to the statistical section of the protocol. One of the subjects got arrested
after visit 7 and discontinued from the study; the other subject decided to start antiretroviral therapy despite a stable CD4 count
greater than 600/μl.

We did not observe any greater
than grade 2 adverse events including signs/symptoms, lab toxicities, and/or clinical events possibly or definitely related to
study treatment any time from the first day of study treatment until 42 days after the last DermaVir administration. There was
no premature discontinuation of immunizations at the patient’s request for reasons having to do with the effects, or the
perceived effects, of DermaVir or the DermaPrep administration procedure.

No patients required termination
from any further immunizations due to toxicity attributable to DermaVir product, or due to tolerability failure. No patients experienced
Grade 3 or higher toxicity to be discussed regardless of study treatment attribution.

The overall adverse event profile
of the treatment was found to be consisting of grade 1 and grade 2 events. Most of the events were judged by the investigators
to be not related to the study treatment. Only one grade 2 adverse events judged as possibly related to treatment (Positive Gaenslen's
Test) in the 0.2 mg DermaVir group. We did not find any significant differences between study arms and treatment groups.

10





The Figure above demonstrates
the efficacy results of the Phase II trial



| | iii. | Pivotal Trials
| | ---- | --------------



Phase IV trials following marketing
approval will be necessary if we intend to further study the efficacy of DermaVir in different patient populations. Presentations
and publications of such trials are essential to successful marketing of DermaVir. Therefore, our strategy will be to obtain marketing
approval within the shortest period of time and consequently continue the clinical trials for the establishment of a large safety
and efficacy database. Please note that such a database on DermaVir is expected to facilitate the approval of pipeline products
since the differences between products will be only in the sequence of the plasmid DNA.

| | iv. | Our DermaVir Product Development and Registration Strategy
| | --- | ----------------------------------------------------------



Our clinical development and
market approval strategy is focusing on immune intensification with DermaVir in Conditional Marketing Approval. We believe
that patients treated with such Immune Intensification will maintain an undetectable HIV-RNA level and have an increased
HIV-specific T cell frequency. Achieving optimal T cell responses and elimination the majority of HIV-infected cells from the
reservoir might lead to remission (functional cure) in some HIV-infected people. These people would stop their antiretroviral
drug treatment (if any) and receive only immune boosting DermaVir treatments during regular doctor visits.



11







In addition to the foregoing reasons,
we believe that the treatment for HIV/AIDS with DermaVir may be desirable to physicians and patients for the following reasons:

| | · | Effectiveness based upon boosted natural immunity;
| | - | --------------------------------------------------

| | · | Delayed disease progression;
| | - | ----------------------------

| | · | No interference with current or future drug-treatment options;
| | - | --------------------------------------------------------------

| | · | No systemic toxicities;
| | - | -----------------------

| | · | Infrequent administration of a patch (only for three hours) during regular office visits;
| | - | -----------------------------------------------------------------------------------------

| | · | No fear of the side effects and acquiring resistance of anti-HIV drugs; and
| | - | ---------------------------------------------------------------------------

| | · | Reimbursement by insurance.
| | - | ---------------------------

According to Datamonitor (Future
of HIV Market 2011), some patients may prefer a once-monthly administration (even intravenous drug infusion in the doctor’s
office) over daily oral HIV treatment, which makes topical DermaVir treatment very attractive.

We believe that DermaVir, when
approved, may meet the needs of these market opportunities due to favorable safety, tolerability and efficacy characteristics in
comparison to currently prescribed drugs. The major toxicities of DermaVir are not systemic, but limited to local skin reactions.
It is conveniently administered during regular doctor visits. The efficacy is based on the induction of HIV specific precursor
T cells that are long lasting. DermaVir is expected to be introduced to the market for the treatment of HIV in combination with
the presently available drugs since none of them can reconstitute HIV-specific immunity.

DermaVir has the potential to be
the first Immune Therapy registered for the treatment of HIV/AIDS. To reach this objective we will use a strategy combining the
experiences of registration of antiretroviral drugs and biologics. We have worked closely with the FDA on studies required for
both the Biologics Master File “BMF” and the Investigational New Drug “IND” applications and will continue
this effort. The FDA has expressed the desire to work with the pharmaceutical industry in the development of useful immune-based
therapies for HIV/AIDS that may contribute to the body’s own defense against HIV and improve clinical outcome over drug therapy
alone. We intend to develop effective and safe Immune Therapy products to delay HIV disease in HIV infected individuals not treated
with antiretroviral drugs.

We had a preliminary meeting with
the European Medicines Agency (“EMA”) to discuss the clinical development plan of DermaVir. EMA ensured us to fully
support the development of DermaVir and suggested to organize an official Scientific Advisory Meeting to obtain approval for our
clinical development and Chemistry, Manufacturing and Controls (“CMC”) strategy. We intend to propose the development
of DermaVir for immune intensification in frame of a Conditional Marketing Approval. During the treatments we intend to use eMINER
to match the patient with the best vaccine selected from our DermaVir Product Portfolio. After the DermaVir induction phase (3
treatments every 6 weeks) we expect DermaVir boosting of HIV-specific immunity compared to placebo. This is followed by the DermaVir
maintenance phase (4 treatments every year). We believe that the maintenance not only maintains the high immune responses in the
patients but also decreases the number of infected cells in the reservoir. This will be clinically demonstrated by maintenance
of undetectable HIV-RNA after decreasing the number of drugs used in the HAART regimen. The primary endpoint of the pivotal trial
will be non-inferiority between DermaVir + 1 Drug and HAART (standard of care). Additional treatment benefits include less toxicity
in the DermaVir arm and lower pill burden.

We believe that we will get
approval for our DermaVir Product Family together with our biomarker strategy and that regulatory agencies will not ask us to
conduct separate clinical development programs with the different members in our DermaVir Product Family. The size of
DermaVir Product Family initially will be less than 10, which is less than we envision to be expanded after emergence of new
HIV variants, because it will provide optimal immunogenicity for selected HIV-infected patients, no difference in toxicities
and all members in the DermaVir Product Family is produced by the same manufacturing and control methods. The future of HIV
therapy, similar to several other indications, is already moving to personalized treatment. Pharmacogenetics screening is
already used prior to initiation of some drug treatment in the US and EU (Datamonitor, Future of HIV Market 2011). We
envision that our personalized DermaVir Immune Therapy will combine the scientific knowledge and our product portfolio to
select the safest and most effective treatment of all HIV-infected patients.



12







According to EMA regulations, investigational
drugs treating HIV infection with appropriate phase II clinical results, a favorable toxicity profile and good rationale for efficacy
may receive Conditional Marketing Approval. Based on our clinical results with DermaVir parallel to the Conditional Marketing Approval
process, we are planning to apply for Breakthrough Therapy Designation at the FDA.

Our Immune Therapy Technology Platform

The human immune system is well prepared
to fight against diseases and most of the time does it successfully. In people with chronic diseases the immune system fights against
such diseases but often cannot prevail. To live a better and longer life people boost their immune systems with vitamins, dietary
supplements and herbs. We designed our Immune Therapy technology to specifically boost the patients’ own the immune system
to focus on the target disease and win the battle.

The disease-modifying efficacy of our
Immune Therapeutic products is based on the intensification or boosting of Th1-type cellular immunity. Based on the available preclinical
and clinical data, we expect from this type of immune intensification to provide a therapeutic benefit that cannot be achieved
by traditional drugs in patients with chronic infectious diseases, cancer or allergies.

There are four principal components
that comprise our comprehensive Immune Therapy platform technology which are designed to work in conjunction to treat and/or control
chronic infectious diseases, cancer and allergy, as follows:

| | · | Our proprietary Active Pharmaceutical Ingredients (“API”):We have been
designing (ANTIGENeering) our APIs to be specific, safe and effective. It consists of a single plasmid DNA (pDNA) immunogen ANTIGENeered
to express several antigens, to contain molecular safety features and to release Virus Like Particles (VLP+) in the body of the
patients. API with these crucial properties is not feasible with protein or peptide antigens.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Nanomedicine - our proprietary product platform:Our products are referred here as
the “nanomedicine” according to their unique biophysical and biological features. Our APIs are formulated with our
novel polymer excipient to synthetic “pathogen-like” nanoparticles. The nanomedicine formulation is essential to achieve
potent antigen expression from the pDNA and antigen presentation by dendritic cells. This is critical for the intensification of
antigen-specific immune responses in people with chronic diseases.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | DermaPrep - our topical administration platform: We have developed the DermaPrep
medical device for targeted in vivo delivery of our nanomedicine products to the dendritic cells of the lymph nodes via
the Langerhans cells. We obtained the marketing approval in the European Union (CE Mark) for our DermaPrep device.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | IT - Applied information technology:IT innovations have been supporting the discovery,
development, manufacturing, and personalized treatment processes of Genetic Immunity. These include the rational antigen design,
clinical trial and data management and matching the patients with the optimal Immune Therapy Product.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Each of these components, as well as
our lead product DermaVir, which has been developed using this platform technology, is described below in detail.

Our Proprietary Active Pharmaceutical
Ingredients (“API”)

We have been designing
(ANTIGENeering) our APIs to be specific, safe and effective. It consists of a single plasmid DNA (pDNA) immunogen
ANTIGENeered to express several antigens, to contain molecular safety features and to release Virus Like Particles
(“VLP+”) in the body of the patients. API with these crucial properties is not feasible with protein or peptide
antigens.



13







In all our products, the specificity
of immune boosting is determined by the nucleotide sequence of the pDNA that encodes several antigens. These antigens are specific
to the causative agent of the disease. For chronic infectious diseases the recombinant antigens are derived from the target virus
or intracellular bacteria to boost the immune system to eliminate the infected cells. For cancer, the antigens are derived from
genes that specifically expressed in the cancer cells to boost the immune system to kill the cancer cells. For allergy, the antigens
are derived from recombinant allergens to boost the immune system and balance the pathogenic immune responses.

We refer to our proprietary process
for designing, preparing and testing pDNA-encoded antigens as “ANTIGENeering”. The API discovery program with ANTIGENeering
technology supports a large proprietary product portfolio with long patent life.

Our Immune Therapies elicit potent Th1-type
antigen-specific CD8 and CD4 T cell responses. The broadest antigen repertoire needs to be ANTIGENeered to boost polyclonal antigen-specific
T cells to successfully fight the target disease.

Main steps of the ANTIGENeering process are:



| | · | Establishment of an in silico database by collecting relevant scientific and patent information
for the target disease;
| | - | -----------------------------------------------------------------------------------------------------------------------

| | · | Safety profile design of the API to completely eliminate antigen-related dangerous features (e.g.,
viral integration and replication) by molecular modifications using our proprietary ANTIGENeering software;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Immunological profile design of the API to express broad specificity CD4 and CD8 T cell epitopes
using our proprietary eMINER software; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------

| | · | In vitro testing of the new API candidates for antigen expression and antigen characterization
with our standardized methods.
| | - | -----------------------------------------------------------------------------------------------------------------------------

The first example is the API in our lead
DermaVir product. It is a single pDNA immunogen representing the broadest antigen repertoire among HIV vaccine candidates. This
pDNA was ANTIGENeered for the regulated expression of thirteen complete and two non-functional HIV protein antigens. These proteins
self-assemble into VLP+ structurally resembling the wild type HIV. We have introduced multiple irreversible safety features
by genetic modifications including the complete impairment of integration, reverse transcription, the function of Nef and the 3’LTR.
Our epitope analysis, validated with experimentally proven epitopes, predicted that DermaVir Product could present over 3,000 high-affinity
T cell epitopes. In silico prediction of high-affinity epitopes revealed the importance of encoding multiple antigens in
the pDNA.

The Figure below illustrate the mechanism
of action of our API in the DermaVir (from Somogyi et al. Vaccine 2011)

14













We developed an in silico antigen-specific
T cell epitope prediction method for reliable modeling of the immunological potential of our API candidates. Our analysis demonstrated
that HIV protein antigens have important differences in the ability to boost CD4 and CD8 T cell responses and revealed the importance
of including both structural and regulatory proteins in an HIV vaccine. The other unique advantage of encoding the above mentioned
broad antigen repertoire is the formation of VLP+ that further boosts the immune responses.



We have also developed the specification
and validated quality control methods for the API. We have licensed a pDNA manufacturing process suitable for in house API manufacturing
(1g scale) and also identified several contract manufacturers capable of producing cGMP quality API according to our specification.
We have also built our own GMP certified facility to manufacture our API and excipients to mitigate the dependency from the Contract
Manufacturing Organization (“CMO”) and to deliver the necessary material for preclinical and clinical trials.



Nanomedicine – Our Proprietary
Product Platform

Our products are referred here
as the “nanomedicines” according to their unique biophysical and biological features. Our APIs are formulated with
a novel polymer excipient to synthetic “pathogen-like” nanoparticles. The nanomedicine formulation is essential to
achieve potent antigen expression from the pDNA (“API”) and antigen presentation by dendritic cells. This is critical
for the intensification of antigen-specific immune responses in people with chronic diseases.

Our nanomedicine products consist
of a pDNA (API) core that covered with a synthetic polymer (polyethylenimine mannose, PEIm). These synthetic “pathogen-like”
nanoparticles have the size and the shape of spherical viruses that naturally evolved to deliver nucleic acids to the cells. These
nanoparticles deliver the pDNA to the cells similarly to viruses, but much safer because replication cannot occur. The nanoparticles
mimic the size, surface properties, cellular entry by endocytosis, endosomal escape, and gene expression of pathogens (eg, viruses),
thus allowing direct targeting of the antigen presenting cells of the immune system. The table below compares the properties of
our nanoparticles to one of the pathogens (viruses):



15







|Features                                            | Our “pathogen-like” nanomedicines                                                                                                                                                                         | Pathogens (virus)                                                                                                        
|--------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------
|Structure                                           | Synthetic polymer coat (PEIm) and pDNA                                                                                                                                                                    | Protein coat and genetic material                                                                                        
|Size                                                | 70 to 300 nm                                                                                                                                                                                              | 50 to 500 nm                                                                                                             
|Surface properties                                  | Sugar residues                                                                                                                                                                                            | Glycoproteins                                                                                                            
|Entry into the cell                                 | Endocytosis                                                                                                                                                                                               | Endocytosis and other mechanisms                                                                                         
|Delivery of genetic
        material to the nucleus | 1.Efficient endosomal escape promoted by PEIm
        buffering capacity (acts as proton sponge)
        2.Intra-cytoplasmic trafficking determined by the
        degree of association of PEIm and pDNA | Viral protein-mediated mechanisms
        1. efficient endosomal escape
        
        2. intra-cytoplasmic trafficking
|Gene expression                                     | Authentic protein expression profile, Virus-like
        Particle (VLP+) assembly                                                                                                                         | Authentic virus protein expression profile,
        virion assembly                                                      



The formation of “pathogen-like”
nanoparticles is required not only for the targeting of dendritic cells, but also to protect the API from cellular degradation.
These properties are essential for the efficient expression of the pDNA in dendritic cells of the lymphoid organs, which is required
for the boosting of antigen specific T-cells and directing the immune responses to Th1-type. A naked pDNA without formulation to
nanoparticles is susceptible to degradation both in extra- and intracellular space. Therefore, the biological activity of our nanomedicines
is superior to the technologies which use pDNA without protection. Furthermore, to increase the efficiency of our nanomedicines
we have inserted in our technology some targeting elements to ensure that the nanomedicines are targeted to the Langerhans/dendritic
cells (mannosylation) and the API arrives at the place of antigen expression (nuclear targeting).



We have identified the key steps of
the mechanism of action, supported by in vitro and in vivo experiments and developed a nanomedicine formulation that
is optimal for both the intracellular stability and shelf life of our products. We have discovered a new biophysical property,
the degree of association (measured by hyperchromicity) that determines the ability of the nanomedicine to escape from the endosome
and to release the pDNA at the nuclear site. This parameter, which is in direct relation with the biological activity of the nanomedicine,
can be controlled by the means of CMC methods like choosing the optimal ionic strength or pH. Optimizing the structure of these
nanomedicines was warranted to improve their biological activity, develop stable formulations, and design an efficient, reproducible
manufacturing technology.



The Figure below illustrates the
experimentally-proven mechanism of action of our nanomedicine products inside the cells.





We have performed the detailed physico-chemical
characterization of the nanomedicine according to the regulatory guidelines using our validated assays, and systematically investigated
the variability of nanomedicine components and their relationship with the structure, in vitro biological activity and stability
of nanomedicine (Tőke et al. IJP 2010).

16





The potent antigen expression of
the nanoparticles depends on their size, their entry through endocytosis, their ability to escape from the endosome and the release
of the plasmid DNA cargo at the nucleus.

We have not only exploited this
novel formulation but also implemented “Quality-by-Design” (“QbD”) in our biologic product development,
manufacturing and control processes. The FDA encourages companies to implement the concept of QbD into their processes. The focus
of QbD is that quality should be built into a product with thorough characterization of the product and understanding the processes
by which it is developed and manufactured along with a knowledge of the risks involved in manufacturing and how best to mitigate
those risks. We have been developing commercial manufacturing processes and validated quality control methods based on our QbD
processes and thorough knowledge on our nanomedicine.

DermaPrep – Our Topical
Administration Platform

We have developed the DermaPrep
medical device for targeted in vivo delivery of our nanomedicine products to the dendritic cells of the lymph nodes via
the Langerhans cells. We obtained the Marketing Approval in the European Union (CE Mark) for our DermaPrep medical device.

Provenge of Dendreon Corporation
(“Provenge”) is the only antigen-specific Immune Therapy that is approved by the FDA. Provenge employs dendritic cells
for antigen presentation to boost cellular immunity and eliminate prostate cancer cells. A prostate cancer-specific antigen is
targeted to the patient’s own dendritic cells during the ex vivo manufacturing processes that Provenge developed for
personalized treatment. Earlier, we have successfully utilized a similar ex vivo technology to target our nanomedicine into
dendritic cells and boosted potent cellular immunity.

Dendritic cell targeting is very
important for the efficacy of antigen-specific Immune Therapies. To improve the above described logistically cumbersome ex vivo
immunization approach we developed DermaPrep the first dendritic cell-targeting administration device. Unlike that ex vivo
technology, our Immune Therapy products can be manufactured in sizeable batches and administered topically with DermaPrep. One
immunization procedure takes about 20 minutes and after three hours the patch is removed by the patient. Our filed patent application
covers the new medical device for topical administration of liquid formulations. The figure below illustrates our in vivo
Immune Therapy compared to the ex vivo technology of our competitors:

17









DermaPrep employs a skin preparation
method that interrupts the stratum corneum facilitating the epidermal penetration of our nanomedicine product applied on the skin
surface under our specially designed patch. The Langerhans cells, located in the skin under our patch, then look for pathogens
and 800,000 of them has the chance to capture our “pathogen-like” nanomedicine and travel to the local lymph nodes.
Here Langerhans cells mature to antigen-presenting dendritic cells. These cells secrete cytokines to induce Th1-polarized antigen-specific
precursor/memory T cells that further differentiate into circulating effector or killer cells.

Several preclinical and clinical
trials consistently demonstrated that DermaPrep administration was safe, well-tolerated, no greater than grade 2 events ever occurred.
The main adverse event of DermaPrep vaccination is mild and transient erythema. The efficiency and reproducibility of the DermaPrep
administration procedure was proven in the biodistribution study conducted on different cohorts of rabbits, where more than 50%
of the absorbed nanomedicine was targeted to the lymph nodes.

Based on communication with the
EMA and the FDA, we understood that there are currently no similar topical administration devices on the market. We obtained the
Marketing Approval in the European Union (CE Mark) for our DermaPrep device.

IT - Applied Information Technology

IT innovations have been supporting
the discovery, development, manufacturing, and personalized treatment processes of Genetic Immunity. These include the rational
antigen design, clinical trial and data management, and matching the patients with the optimal Immune Therapy Product. We utilize
the latest IT and physics including semantic web tools, ultrafast femtosecond laser technologies and embed the gathered knowledge
in a broad portfolio of innovative, patient tailored therapeutics.

Our clinical development processes
are supported by e-CRF solutions for managing Clinical Trials and eCTD conform solutions to optimize the clinical development processes,
minimize the errors and time to submit different applications and reports to regulatory agencies word-wide.	Our IT team also
provides logistic support for the clinical trials by auditing the sites and identifying potential errors of measurements’
methods and errors in data collection and evaluation.

An electronic Labor Management System
(“e-LMS”) supporting our processes in CMC provides a competitive advantage in product development by saving time and
manpower. e-LMS supports our quality control tests using computerized Standard Operating Procedures (“SOP”). We electronically
select the SOP and the required materials

18





and equipment from our storage.
In some cases, experimental data are captured directly from the equipment and stored in our databases. Deviations from protocols
are registered and the results are calculated and summarized in a table format. Detailed reports, required by regulatory agencies,
can be either printed and filed or stored electronically. Our IT team continuously improves the software solutions to meet our
emerging requirement.

The API discovery and documentation
process is presently supported by two of our proprietary softwares. The ANTIGENeering software ‘collect and mine’
research data from different sources and publications to support the pre-decision making and to ensure safe and specific antigen
design. The eMINERsoftware is utilized for the determination of the immunological potential (high affinity epitopes) on
different human leukocyte antigen (“HLA”) alleles. With greater than 85% probability, we can in silico predict
the cellular immune responses of patients treated with our Immune Therapeutic products. We envision that the eMINER will help
doctors to match patients with optimal Products and design specific immune diagnostic tools.





Using the above-described tools
we have established a DermaVir Product Family to provide every HIV-infected individual an optimal Immune Therapy. HIV is a highly
variable virus. We found that the therapeutic effectiveness of DermaVir depends on HIV sequence replicating in the patients and
the patients’ genetic background. Our DermaVir Product Portfolio is a family of products containing related HIV-specific
antigen sequences characteristic for the different Clades (subtypes) of the virus. To ensure the optimal therapeutic benefit for
every patient the treating physician will enter the diagnostic information on the patient’s HIV sequences and genetic background
(HLA) into our eMINER software. After analyzing the data the eMINER will select the optimal DermaVir product from the DermaVir
Product Family and also calculate the specific T cell epitopes that will play a role in the immune boosting of the individual
patient. This way the treating physician can then make an educated decision for selecting the optimal Product for personalized
treatment for the patient and could also prescribe the immune monitoring.

Our competitive IT team consists of informaticians
and mathematicians who are dedicated to support our business agenda. They are essential part of our patient-driven technology platform,
providing us innovative solution to daily challenges including data capture, evaluation and storage of experimental data, website
design, literature search, 3D visualization of the skin penetration of our nanomedicines based on fiber-integrated 2-photon microscopy
and auditing the data management and data quality on clinical sites. We believe that our integration of bioinformatics and mathematics
into our everyday workflow will significantly improve competitiveness because it provides efficient, accessible and high quality
data and information collection and distribution throughout the entire research and development and commercialization processes.
Our IT team develops project-based, customized services to improve upon the efficiency of our work being performed and to save
time and eliminate errors caused by insufficient data management.



Pipeline Product Candidate

Our pipeline product candidate
with animal proof of concept, for the treatment of Human Papilloma Virus (“HPV”) infection, is referred to as
“HuPaDerm” and our allergen-specific immunotherapy is referred to as “DermAll”. We partnered with the
German Cancer Research Center located in Heidelberg (“DKFZ”) to develop HuPaDerm. DKFZ is a world leading
research center in tumor virology and Harald zur Hausen was awarded the Nobel Medicine Prize for his work on HPV caused
cancer of the cervix. HuPaDerm animal trials are performed in Heidelberg. DermAll has decreased the allergic symptoms by
balancing allergen-specific immune responses in mice experiments.



19







DermAll

Allergic diseases are caused by an immune
response induced by different allergens. We believe that our DermAll products will suppress pathogenic immune responses in allergic
people by boosting allergen-specific immune responses. This new mechanism is expected to restore a balanced immune response that
is normally characteristic for people who do not have any allergic disease. The DermAll Product Portfolio will target several different
allergies. The first target will be Egg Allergy (“EA”), since we have already collected preclinical animal data in
this DermAll indication suggesting that DermAll-EA treatment can suppress allergic sneezing by balancing immunity. We expect clinical
efficacy of specific Immune Therapy that not only suppress allergic rhinitis symptoms but also prevent progression to asthma or
atopic dermatitis.

For allergic diseases Immune Therapy
offers a vastly different treatment option with disease-modifying potential to traditional symptomatic treatments. In 2009, Grazax
became the first Immune Therapy in Europe to gain approval as a ‘disease modifying treatment,’ representing a significant
step towards the possibility of a cure. The major limitations of present Immune Therapy approaches include serious safety concerns
and cost of treatment, therefore conventional symptomatic treatments continue to be the more popular option (Datamonitor 2010).
DermAll Immune Therapy addresses both limitations using our proprietary API design to obtain products with clinically proven excellent
safety features, and cost effective manufacturing technology.

HuPaDerm

Development of HuPaDerm Product Portfolio
is targeting the treatment of the leading cause of cervical cancer as well as papillomatosis, genital warts and later cancer caused
by the different HPVs. Our development strategy for the HuPaDerm Product Portfolio has already been discussed with the EMA. We
partnered with DKFZ to develop the HuPaDerm product. DKFZ is a world leading research center in tumor virology. Harald zur Hausen
was awarded the Nobel Medicine Prize for his work on HPV caused cancer of the cervix. Zur Hausen, former Scientific Director of
DKFZ, is recognized for finding that cervical cancer is caused by viral infections. His research made it possible to develop a
vaccine against one of the most frequent cancers in women. Zur Hausen shared the Nobel Prize for Medicine with Françoise
Barré-Sinoussi and Luc Montagnier for discovering HIV, the virus that causes AIDS. HuPaDerm animal trials are performed
in Heidelberg. DermAll decreased the allergic symptoms by balancing allergen-specific immune responses in mice experiments.

20





Immune Therapy for Cancer

ProstaDerm
Immune Therapy against virus-based prostate cancer

We
have also considered developing ProstaDerm Immune Therapy to provide an in vivo alternative to Provenge that is manufactured
ex vivo from the patient’s blood. Xenotropic murine leukemia virus-related virus (“XMRV”) is an authentic,
newly recognized human retrovirus first identified in prostate cancer tissue. Studies have detected XMRV at different rates in
prostate cancer cases (up to 27%) and in patients with chronic fatigue syndrome (CFS; up to 67%) (Silverman et al. Nature 2010).
Therefore a pDNA developed for expressing XMRV antigens might effectively be used for the treatment of XMRV-associated prostate
cancer.

Immune
Therapy against melanoma

Melanoma
is a malignanttumorof melanocytes,
pigment producing skin cells. Melanoma is less common than other skin cancers. However,
it is much more dangerous and causes the majority (75%) of deaths related to skin cancer (Jerant et al. AAFP 2000). This cancer
has well characterized and specific biomarker proteins (melanoma-associated antigens, MAGE) therefore melanoma is a possible target
indication for our Immune Therapy Platform Technology. ANTIGENeering of a pDNA specific for these antigens could result in a product
candidate for patients suffering from melanoma.

Immune Therapies for Emerging Infectious
Diseases



A potential extension of our technology
could be utilized to develop treatments for infectious diseases like Chlamydia, hepatitis C and B viruses and West Nile Virus
where T-cell responses can be directed against cells harboring the intracellular pathogens. Opportunities are under consideration
for initiating the development of some of these products at a later stage.

Immune Therapy against West Nile Virus

We are working together with a European
Consortium (WINGs) to develop a prophylactic and therapeutic vaccine against the West Nile virus. The project is led by the Fraunhofer
Institute IZI in Leipzig, Germany, and is funded from a $3.5M European Union grant.

Our role in the project is to provide
the nanoformulation technology for the vaccine candidates and the transdermal delivery technology for the administration of the
vaccine. As industrial partner of the consortium we are also responsible for the clinical development and the commercialization
if the animal studies are successful.

GRANTS

In 2005 we received a $1 million grant
from the EU, which funded Phase I clinical trials of DermaVir in Hungary. Since being awarded a $7 million grant from the Hungarian
government in 2005, we have been applying the funds to develop product manufacturing technology in Hungary, build a pilot manufacturing
facility and develop pipelines in collaboration with Hungarian academic institutions pursuant to a Consortium Agreement establishing
the Vaccine Therapy Cluster, a collaboration between the Company and the University of Szeged. As a result, our product development,
manufacturing, information technology, and clinical operations have been established in Budapest. The business, financial and commercial
operations remain in the U.S. In 2009, the DVCLIN01 consortium we lead received an additional grant of $4.5 million to perform
a Phase II clinical study with DermaVir in Germany. The results of this study were presented at the AIDS International Conference
in Vienna July, 2010. In 2010, the FIBERSCN consortium led by R&D Ultrafast Lasers Kft. received a grant of $3 million to investigate
DermaVir immunization technology with fiber integrated 2-photon microscopy. We investigated the penetration of DermaVir to the
skin and uptake by epidermal Langerhans cells. The West Nile Shield project (“Wings”) consortium led by Fraunhofer
Institute won a $3.5 million grant to develop novel approach for prophylactic and therapeutic vaccines against West Nile Virus.
As an active member of this consortium we provide nanomedicine formulation and our DermaPrep device for transdermal delivery of
potential West Nile Virus vaccine candidates.

Using the above funding, we have
developed improved formulation and scalable manufacturing technology for our biological product portfolio; conducted
preclinical animal studies to demonstrate that our proprietary technology is suitable for additional product development
including DermAll and ChlamyDerm; developed regulatory strategy for obtaining Marketing Approval for our DermaVir Product
Portfolio as personalized Immune Therapy; and designed an allergen-specific Immune Therapy Product Portfolio.



21







INTELLECTUAL PROPERTY



Protection
of our intellectual property and proprietary technology is a strategic priority for our business. We rely on a combination of license
agreements and patent, trademark, copyright and trade secret laws along with institutional know-how and continuing technological
advancement to develop and maintain our competitive position. Our ability to protect and use our intellectual property rights in
the continued development and commercialization of our technologies and products, operate without infringing the rights of others,
and prevent others from infringing our rights, is crucial to our continued success. We will be able to protect our products and
technologies from unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents,
trademarks or copyrights, or are effectively maintained as trade secrets, know-how or other proprietary information. Our policy
is to seek U.S. and international patent protection for technological developments that we believe will enhance the market position
of our product candidates and methods of using our product candidates.

Present
patents protect DermaVir until 2020.Ourfilingsrepresent(1)ourHIVplasmidDNAmaterial;(2)theformulationofDermaVir;(3)thetopical deliveryofgenesintoantigen-presentingcellsoftheskin;and(4)thebroadertechnologyrelatedtoraisingan immuneresponseviaexpressionoftheDNA-encodedantigensinantigenpresentingcells.Thefirstofourpatents expiresin2020.

For
subtype-specific DermaVir Product Family we plan to file a new patent application for the API that would protect our DermaVir Products
until 2031 when it is issued. Filing the new patent application on API designed with our ANTIGENeering technology is our strategy
for all the pipeline products.

Tosupplementourpatentportfolio,wealsodependontheskill,knowledgeandexperienceofourscientific andtechnicalpersonnel,aswellasthatofouradvisors,consultants,andothercontractors.Tohelpprotectour proprietaryknow-howandinventionsforwhichpatentsmaybedifficulttoenforce,werelyontradesecret protectionandconfidentialityagreementstoprotectourinterests.Werequireallemployees,
consultants,advisors, andothercontractorstoenterintoconfidentialityagreementsthatprohibitdisclosureofconfidentialinformation
and,whereapplicable,requiredisclosureandassignmenttousofideas,developments,discoveriesandinventions importanttoourbusiness.



WehaveaU.S.federaltrademarkregistrationfor“GeneticImmunity.”

MARKET OPPORTUNITIES

Therapeutic Vaccine Market for HIV/AIDS



According to the Joint United Nations
Programme on HIV/AIDS (“UNAIDS”), about 33.3 million people are living with HIV/AIDS in the world, including 2.5 million
children, with 2.3 million of them in North America and Europe. During 2009, 100,000 patients were newly infected and 35,000 patients
were reported to have died from AIDS in North America and Europe. The rise in prevalence has been driven by a number of factors,
including a growing number of heterosexual transmissions, immigration from countries with a high HIV prevalence, and a growth in
high-risk sexual behavior. There is strong evidence of resurgent HIV epidemics among men who have sex with men in North America
and in Western Europe. Immigrants living with HIV have become a growing feature of the epidemics in several countries in Europe.
Heterosexual transmission accounts for about half of the people newly infected with HIV in Central Europe (2010 UNAIDS Report).
There are significant emerging markets including Eastern Europe, Russia, India and China with significant income and are expected
to take actions to slow down their fast growing HIV epidemics. Therefore, additional market opportunities for HIV/AIDS treatments
are projected to emerge.

The patient population on HAART is already
demanding simplification of treatment that can be achieved by combining several drugs into one pill. The development of novel original
antiretroviral drugs will be more and more expensive and more difficult to get approved. In 2009, the HIV market generated sales
of about $12 billion and is expected to grow up to $15.6 billion in 2015 (Datamonitor HIV market forecast (06/2010)). This growth
has been driven by the launch of several new fixed-dose combinations such as Truvada and EpzicomTM, and a new class of antiretrovirals
known as the entry inhibitors. The combination of several drugs in one pill improves the tolerability of HAART.

When DermaVir enters the market,
there will be greater than 28 generic antiretroviral drugs on the market providing treating physicians a diverse source of
inexpensive and potent drugs for managing their patients. According to recent treatment recommendations, doctors will start
treating their patients earlier with HAART and as a result, more HIV-infected patients will live a longer life. We expect
that by 2016 a significantly larger patient population will be treated with HAART due to the inexpensive and potent generics.
These patients will be eligible for DermaVir immune intensification and that might further increase the potential market for
DermaVir.



22







Market opportunity for DermaVir



Market demand for DermaVir will be driven
by the demand for (1) a cure and (2) simplified treatment options by HIV-infected patients. Such patients seek safe drug sparing
treatment options that fully control their virus, decrease of toxicities, immune boosting and cure of HIV disease. We believe that
the DermaVir immune intensification will be the first on the market offering significant therapeutic benefit over HAART and a potential
cure (remission) for some of the patients who achieved the maximal immune intensification to control HIV disease. Due to decreasing
costs and better access to generic HAART, the treated patient population will significantly grow. The new state of the art treatment
will be DermaVir in combination with generic HAART. Doctors will use our eMINER to match patients with their optimally effective
DermaVir selected from our product portfolio and prescribe the personalized diagnostic assay to monitor when the HAART can be simplified
by dropping one, two or even all three components. We believe that the new, potent and expensive antiretroviral drugs will be very
important for salvage and will be used for patients failing generic HAART.

We believe that after market entry, DermaVir
Immune Therapy will be the new state of the art treatment. Since HIV drugs decrease immune responses and do not provide a cure,
DermaVir immune boosting could be added to every HAART-treated patients. The minimum effect of DermaVir would be to boost the patients’
own immune system’s responses to eliminate infected cells from the body. But additional benefits expected for DermaVir treated
patients are the decrease in the number of drugs and consequently such patient will suffer less toxicity. DermaVir treatment
will provide a hope for cure; in some DermaVir-treated patients, immune boosting can result in remission allowing the patient to
lead a healthy life in the absence of HIV drug treatment (for some years). If the HIV rebounds because the immune system cannot
fight any longer, the patient resume to take the drugs and his/her life will not be in danger.

As a new state of the art immune boosting
therapy, DermaVir treatment should be cost effective. Saving on drugs and cost of treatment could support insurance reimbursement.
It is conservative to estimate that annual DermaVir treatment will be lower than the cost of HAART.  We believe this can represent
up to over $5 billion DermaVir sales for the seven major markets per year, based on 30% market penetration. In the event competitors
for a cure enter into the market this figure will decrease. DermaVir is one of the best-characterized HIV therapeutic vaccine product
candidates (solid randomized and controlled Phase II clinical data, commercial manufacturing methods and controls) and may have
the highest chance to obtain first marketing approval.

We believe that in the not too distant
future DermaVir will have significant sales outside of the major markets based on the high unmet need. These markets include the
22 million people, including children, in sub-Saharan Africa. However, developing countries such as Brazil, China, India and Russia
could become significant markets.

The global HIV drug market size is expected
to grow to $15.6 billion by 2015 with approximately 35 million people infected with the virus. Of this amount, Europe represents
approximately 2.3 million HIV infected people. Russia, our next potential approval target, represents another 1 million infected
people.

Initially we will aim to treat 5% of
the European population, or approximately 130,000 individuals (of the 2.3 million total infected.) Current HAART based treatments
cost approximately 12,000 EURO a year per patient. Based on our initial pricing model, and assuming a 5% market penetration, this
represents a EURO 1 billion market opportunity per year for DermaVir in Europe alone.

Competition



In the field of HIV treatment, several
immune therapies are under development because there is a substantial unmet medical need to find new treatment options for patients
who have developed resistance to the current antiviral drugs and for patients who cannot tolerate life-long daily drug treatment.
A description of such immune therapies follows:

| | i. | Broad-Spectrum Immune Therapies
| | -- | -------------------------------



The rationale of
broad-spectrum Immune Therapy originated from the successful use of interferon-alpha for the treatment of another chronic
infectious disease, hepatitis C. The best available current treatment for chronic hepatitis C (peg-interferon alpha plus
ribavirin) leads to an overall sustained response rate of approximately 70%. In HIV infection, however, no viral load
suppression after current drug treatment interruption can be achieved. The current, broad-spectrum immune therapies described
below are not specific to any disease:



23







| | · | Hemispherx Biopharma is evaluating the safety and activity of orally administered low dose interferon
alfa to modulate general, nonspecific immune responses in subjects infected with HIV who have not yet demonstrated clinical symptoms
of immune suppression.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Interleukin-2 (IL-2, Aldesleukin, Proleukin) is made by Novartis (Chiron) and Amgen. This drug
is currently approved for the treatment of certain types of blood cell cancers (e.g., specific types of leukemia). It is
considered an experimental drug for HIV-related therapy because the FDA has not yet evaluated it for the HIV indication. Two large
efficacy trials in HIV patients (SILCAAT and ESPRIT) were conducted recently. However, despite a substantial and sustained increase
in the CD4+ cell count, as compared with antiretroviral therapy alone, Interleukin-2 plus antiretroviral therapy yielded no clinical
benefit in either study.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | CYT107, Cytheris’s recombinant human Interleukin-7 developed as a general immune system booster.
The company has four ongoing Phase I/II or Phase II studies with CYT107. According to the company’s latest press release,
dated March 1, 2011, which reported the results of INSPIRE2 Phase IIa study, CYT107 was able to reconstitute CD4 T-cells in chronically
HIV-1 infected patients whose CD4 T-cell counts remained low despite treatment with anti-retroviral-therapies (HAART).
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Inovio has been developing a new DNA administration technology, called Electroporation, for the
intracellular delivery of various immunotherapeutic DNA solutions. Resultant gene expression matched or exceeded that achieved
using viral or lipid delivery methods, without side effects that hamper these approaches. The device is being tested in Phase I/II
and Phase II trials.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | ii. | HIV-Specific Immune Therapies
| | --- | -----------------------------



The rationale for HIV-specific
immune therapies is to amplify HIV-specific immune responses present during chronic infection to control viral replication. Such
antiviral immune responses provide the balance between infection and the immune system and in some cases the immune system wins
over the infection (e.g., most of the non-progressors), but in the majority of the cases, HIV overwhelms the immune system
resulting in disease progression and AIDS. Immune Therapies have been developed for viral, parasitic, cancer, and allergic diseases.
Antigen-specific immune therapeutic approaches are (1) based on antibodies that specifically bind the target antigens, and (2)
T-cells that can eliminate HIV-infected cells from the body. Our competitors are the most promising therapeutic vaccines according
to the Datamonitor report: R&D Trends: HIV (Reference Code: HC00083-007), published in March 2011. Each of our competitor’s
products described below are ex vivo or injected by needle and not topically delivered like DermaVir:

Phase II Immune Therapy candidates

| | · | Vical, in collaboration with the NIH and Merck & Co., is developing a DNA vaccine, VRC DNA/rA,
for the treatment and prevention of HIV using its naked DNA gene delivery technology. The vaccine is currently in Phase II clinical
development (NCT00865566, 2011; www.clinicaltrials.gov) (Vical, 2011)
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | FIT-06 is a DNA vaccine consisting of the Clade B HIV nef gene, under development by FIT Biotech
using its GTU nuclear anchoring technology, for the treatment and prophylaxis of HIV/AIDS. It has completed Phase II trials in
South Africa (Fit Biotech, 2010)
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | AGS-004 is one of a series of autologous dendritic cell vaccines under development by Argos Therapeutics
for the treatment of HIV infection. The vaccines are pulsed with amplified mRNA from infected cells to stimulate an immune response.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | The Vaccine Research Center at the US NIAID is collaborating with GenVec on the development of
an HIV DNA vaccine (VRC-HIVADV014-00VP). The vaccine consists of an adenovirus-5 vector expressing modified HIV-1 genes. It is
being evaluated alone and in combination with a plasmid DNA vaccine prime. 
Vaccine candidates are evaluated
as therapeutic and prophylactic AIDS vaccines (GenVec, 2011a). It has been evaluated in several Phase I/II clinical trials (GenVec,
2011b)
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



24







| | · | In October 2010 Bionor Pharma reported that the primary endpoints of the placebo-controlled study
of Vacc-4x (NCT 00659789, 2010, www.clinicaltrials.gov) had not been met. However, the decision was made to resume the development
of the vaccine candidate due to a statistical significant treatment difference regarding viral load, the secondary endpoint (Bionor
Pharma 2010). Bionor Pharma is currently seeking partnering opportunities. It is also developing a follow-up vaccine Vacc-C5, targeting
immune activation associated with HIV infection that is expected to enter clinical trials in 2011 (Bionor Pharma 2011).
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | V-1 Immunitor (V1) is a therapeutic AIDS vaccine formulated as an oral pill comprising heat-inactivated
HIV antigens derived from pooled blood of HIVpositive donors that is being developed in Russia and Thailand (Bourinbaiar et al.,
2010)
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Phase I/II Immune Therapy candidates

| | · | TUTI-16 is a water-soluble, fully synthetic, self-adjuvanting lipopeptide vaccine developed by
Thymon (Goldstein and Chicca, 2010). A US Phase I/II clinical trial was completed in February 2011 (NCT00848211, 2011; www.clinicaltrials.gov).
A second Phase I/II clinical trial, NCT01144026, is currently recruiting participants
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | A dendritic cell vaccine is developed by Esteve, consisting of autologous monocyte-derived dendritic
cells pulsed with heat inactivated autologous HIV-1. Phase I/II results were reported in 2011 (Garcia et al., 2011)
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Virax’s HIV program is focused on the development of a therapy for early stage HIV infection
using an immunotherapeutic approach. VIR201 is a recombinant fowl pox-virus technology designed to co-express genes for immunogenic
but highly conserved parts of the HIV in conjunction with interferon gamma. The objective is to amplify the T-cell-mediated immune
response of the human immune system to the HIV virus. Results from a Phase I/IIa trial were reported in October 2010 (Virax, 2010)
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Phase I Immune Therapy Candidates

| | · | PENNVAX-B is an HIV env clade B-specific/gag/pol DNA vaccine for the prevention and treatment of
HIV/AIDS. The vaccine was licensed from the University of Pennsylvania. As part of the deal Inovio has worldwide commercialization
rights for vaccine and delivery technology. Pennvax-B has completed a US Phase Ib study (NCT00775424, 2011; www.clinicaltrials.gov)
(Inovio, 2011)
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | A pDNA vaccine delivered via electroporation in a co-formulation with a plasmid containing IL-12,
which acts as a molecular adjuvant is developed by Profectus BioSciences. The vaccine is currently in a US Phase I clinical trial
(NCT01266616, 2011; www.clinicaltrials.gov)
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | EP-1090 is a DNA vaccine developed by Inovio and VaxOnco in In Phase I clinical trial since 2007
(NCT00532974, 2007; www.clinicaltrials.gov)
| | - | --------------------------------------------------------------------------------------------------------------------------------------------

| | · | GX-120 is a DNA vaccine developed by Dong-A Pharmaceuticals and Genexine. GX-120 contains four
plasmids expressing gag, pol, env and a mutant IL-12 (IL-12N222L). It is in a Korean Phase I trial (Genexine, 2010)
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | NAcGM3/VSSP is a Ganglioside-based vaccine developed by the Center of Molecular Immunology Havanna,
Cuba and Recombio. The N-acetylated ganglioside GM3 vaccine (NGcGM3) is combined with Neisseria OMP vesicle-based very small proteoliposomes
(VSSP) as carrier. It is in two Phase I trials in Argentina and Cuba for the treatment of HIV/AIDS (Recombio, 2011)
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Advantages of DermaVir Over Antiretroviral
Drugs



HAART requires the combination of three
drugs selected from minimum two different classes. It has been effective in decreasing morbidity and mortality associated with
HIV infection. However, full life expectancy of HIV-infected people cannot be restored even with optimal care. It has been demonstrated
that HIV-infected people treated with optimal HAART live 12 years shorter than those without HIV.



25







HAART does not provide a cure for HIV/AIDS.
Several recent studies demonstrated that HAART intensification with drugs of additional classes (e.g. integrase inhibtor) leads
to no change of viremia or reservoirs measured by HIV DNA. In addition, long-term HAART decreases HIV-specific immune responses
that could negatively affect the clearance of the reservoir. Viremia persist in the reservoirs even after 7 year of fully suppressive
HAART (ABBOTT 720 study), therefore eradication of HIV with HAART does not seems to be feasible.

An alternative strategy to cure HIV disease
would be to induce remission, similar to cancer model. A recently completed study has demonstrated (presented at CROI2010)an inverse
correlation between the frequency of HIV-specific T cells in the gut and the size of the reservoir. This is the first evidence
suggesting that boosting of the patients’ own immune system might decrease the number of HIV-infected cells in the reservoirs.

We have shown that DermaVir boosts cellular
immunity to kill HIV-infected cells and functions differently from antiretroviral drugs that kill the virus. We believe that DermaVir
treatment can reduce the amount of HIV-infected cells remaining in the reservoirs in patients treated by HAART. This novel activity
of DermaVir could provide additional treatment benefits by reducing the number of antiretroviral drugs that patients must take
daily. We envision that after successful reconstitution of the HIV-specific immune system by DermaVir, immune control of HIV might
be achieved. DermaVir could change the HIV treatment paradigm by giving patients an option for a safe interruption of life-long
drug treatment by boosting their own immune system.

Achieving optimal T cell responses and
elimination the majority of HIV-infected cells from the reservoirs could lead to remission in some HIV-infected people. These people
would be able to stop their antiretroviral drug treatment and receive immune boosting DermaVir treatments during regular doctor
visits.

In contrast to antiretroviral drugs,
DermaVir treatment provides a hope for patients for a functional cure. We do not believe that eradication of integrated
HIV can be achieved by any treatments. However, several viruses are successfully controlled by a healthy immune system, including
HIV in some exceptional people; therefore remission (functional cure) is an achievable treatment objective. Based on our findings,
we believe that DermaVir, by boosting HIV-specific cellular immunity in patients treated with HAART, could effectively kill HIV-infected
cells and decrease the size of the reservoirs. After repeated DermaVir treatments a significant intensification of HIV-specific
immunity and the elimination of the majority of infected cells from the reservoirs could be achieved. We believe that the hope
for a cure that HAART cannot provide for HIV-infected people will be an option with DermaVir when used initially in combination
with HAART to eliminate both the virus and the infected cells.

DermaVir sales could be favored and not
limited by Generic Antiretroviral Drugs, which would be a significant competitive advantage compared to original or new antiretrovirals.
These original drugs could be more expensive than the generics and as a result their sales could be limited to patients who are
not responding to generic drugs. Therefore, effective generic treatment options could limit the profit of a new HIV drugs entering
into the market. In contrast, we believe that DermaVir sales will be independent of original or generic drugs used in HAART.

We believe that the DermaVir Immune Therapy
might be used for immune intensification of most of the HAART treated people. According to recent treatment recommendations, doctors
will start treating their patients with HAART earlier and consequently more HIV-infected patients will have a longer life expectancy.
We believe that a significantly larger patient population will be treated with HAART and DermaVir due to the market entry of inexpensive
and potent generics.

An additional benefit of DermaVir will
be what we believe to be a favorable price. We believe that the cost of DermaVir manufacturing will be manageable on a per dose
level and that will allow us to sell the product for a competitive price. We estimate that the price of DermaVir in the seven major
markets might be similar to original antiretrovirals (e.g. $12,000 per year). The cheapest price of DermaVir might be in sub-Saharan
Africa (e.g. $500 per year), which is similar to generic HAART.

We believe that DermaVir immune intensification
will be the first option on the market offering a significant therapeutic benefit over HAART and a potential functional cure (remission)
for some of the patients who achieve maximal immune intensification to control the HIV disease. We believe DermaVir will be used
in conjunction with generic HAART. We believe that doctors will use our eMINER application to match patients with their optimally
effective DermaVir selected from our product portfolio and prescribe the personalized diagnostic assay to monitor when HAART can
be simplified by dropping one, two or even all three components. We believe that the new, potent and expensive antiretroviral
drugs will be very important for salvage therapy and will be used for patients failing generic HAART.



26







OUR BUSINESS STRATEGY



Our business objective is to develop
and commercialize DermaVir and our pipeline products in order to become one of the leading Immune Therapy companies. We believe
that our unique combination of product candidates, our preclinical and clinical Proof of Concept and our nanomedicine manufacturing
technology that beside the patents provides additional long-term protection against genetic competitors, supports such an ambitious
objective. It is our intention to obtain the funding required for the growth of the Company from the public market.

Up to date we have focused on R&D
and proof of concept for our Technology Platform. From now on, besides adding to our team talents and experts essential to develop
our products, we intend to expand our internal management and business development team.

SALES AND MARKETING



We currently have no internal sales
or distribution capabilities. In order to successfully commercialize any of our products, we must either internally develop sales,
marketing and distribution capabilities, or make arrangements with third parties to perform such services. For the foreseeable
future, we may not be able to establish marketing and sales capabilities internally or hire a large enough number of sales personnel
with appropriate expertise to market and sell our products, if the products are approved by appropriate regulatory authorities.
Therefore, we may need to enter into an alliance with a major pharmaceutical company or other third party to market and sell our
products, which we may be unable to do.

EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL
REGULATION



Weplantomarketourproductsfollowingapprovalonaglobalbasis.Theapprovalandsellingofour productsaresubjecttovariousregulatoryandgovernmentaloversightbodies.Dependingontheregulatorycategory ofeachproduct,suchasbiologicalproduct,medicaldeviceordrug,separateregulationsapplyandcouldvaryona market-by-marketbasis.

FDARegulation

Webelievethatourproductsaredefinedascombinationproductsconsistingoftwoormoreregulated components,abiologicandamedicaldevice.IntheU.S.,acombinationproductusuallyisassignedbytheFDAto oneoftheagency’scenters,suchasthe Center for Biologics Evaluation & Research (“CBER”)ortheCenter for Device and Radiological
Health (“CDRH”),withthechosencentertaking
theleadinpre-marketing
reviewandapprovalofthecombinationproduct.OtherFDAcentersalsomayreviewtheproductinregardto mattersthatarewithintheirexpertise.TheFDAselectstheleadcenterbasedonanassessmentofthecombination
product’s“primarymodeofaction.”Someproductsalsomayrequireapprovalorclearancefrommorethanone FDAcenter.

TodeterminewhichFDAcenterorcenterswillreviewacombinationproductsubmission,companiesmay submitarequestforassignmenttotheFDA.Thoserequestsmaybehandledformallyorinformally.Insomecases, jurisdictionmaybedeterminedinformallybasedonFDAexperiencewithsimilarproducts.However,informal jurisdictionaldeterminationsarenotbindingon theFDA. Companies
alsomaysubmitaformalRequestfor Designation totheFDA’sOfficeofCombination
Products.TheOfficeofCombination
Productswillreviewthe requestandmakeitsjurisdictionaldeterminationwithin60daysofreceivingaRequestforDesignation. Weare currentlydiscussingthepotentialregulatory pathwayforDermaVirwiththeFDA. Basedonthose discussionstodate,webelievethattheproductwillbereviewedbytheCBERandthattheDermaPrepmaybe reviewedbytheCDRHeitherinconsultationwithCBERaspartoftheBiologics License Application(“BLA”)orseparatelyasamedicaldevice.

DomesticRegulationofOurProductsandBusiness

Thetesting,manufacturing,andpotentiallabeling,advertising,
promotion,distribution,importand
marketingofourproductcandidatesaresubjecttoextensiveregulationbygovernmental
authoritiesintheU.S.and
inothercountries.In the
U.S.,the FDA,underthe
PublicHealthServiceAct,
the Federal
Food,DrugandCosmetic
Act,and
its implementingregulations,
regulates
biologicsandmedical
deviceproducts.



27







Thelabeling,advertising,promotion,marketinganddistributionofbiopharmaceuticals,orbiologicsand
medicaldevicesalsomustbeincompliancewiththeFDAandU.S.FederalTradeCommission(“FTC”) requirementswhichinclude,amongothers,standardsandregulationsforoff-labelpromotion,industrysponsored
scientificandeducationalactivities,promotional
activitiesinvolvingtheinternet,anddirect-to-consumer advertising.TheFDAandFTChaveverybroadenforcementauthority,andfailuretoabidebytheseregulationscan resultinpenalties,includingtheissuanceofawarningletterdirectingustocorrectdeviationsfromregulatory standardsandenforcementactionsthatcanincludeseizures,injunctionsandcriminal prosecution.Recently, promotionalactivitiesforFDA-regulated productsofothercompanieshavebeenthesubjectofenforcementaction broughtunderhealthcarereimbursement lawsandconsumerprotectionstatutes. Inaddition,underthefederal
LanhamActandsimilarstatelaws,competitorsandotherscaninitiatelitigationrelatingtoadvertisingclaims. In addition,wearerequiredtomeetregulatoryrequirementsincountriesoutsidetheU.S.,whichcanchangerapidly withrelativelyshortnotice.

TheFDAhasbroadpost-marketandregulatoryenforcementpowers.Manufacturersofbiologicsand medicaldevicesaresubjecttounannouncedinspectionsbytheFDAtodeterminecompliancewithapplicable regulations,andtheseinspectionsmayincludethemanufacturingfacilitiesofsomeofoursubcontractors.
Failure bymanufacturers ortheirsupplierstocomplywithapplicableregulatoryrequirementscanresultinenforcement actionbytheFDAorotherregulatoryauthorities. PotentialFDAenforcementactionsinclude:

- warning letters;
- civilorcriminalpenalties,finesand/orinjunctions;
- productseizuresordetentions;
- importorexport
bansor
restrictions;
- voluntary
ormandatory
productrecallsandrelatedpublicityrequirements;
- suspensionorwithdrawalofregulatoryapprovals;
- totalorpartialsuspension
ofproduction;
and
- refusaltoapprovependingapplications
formarketingapprovalofnewproductsor supplements
to approvedapplications.



Inaddition,othergovernmentauthoritiesinfluencethesuccessofourbusiness,includingtheavailabilityof adequatereimbursementfromthirdpartypayors,includinggovernmentprogramssuchasMedicareandMedicaid. MedicareandMedicaidreimbursementpoliciescanalsoinfluencecorrespondingpoliciesofprivateinsurersand managedcareproviders,whichcanfurtheraffectourbusiness.



BiologicsRegulation



BiologicalproductsmustsatisfytherequirementsofthePublicHealthServicesActanditsimplementing
regulations.InorderforabiologicproducttobelegallymarketedintheU.S.,theproductmusthaveaBLA approvedbytheFDA.



TheBLAApprovalProcess



ThestepsforobtainingFDAapprovalofaBLAtomarketabiopharmaceutical,orbiologicproductinthe U.S.include:



| | · | completionofpreclinicallaboratorytests,animalstudiesandformulationstudiesundertheFDA’s GLPregulations;
| | - | ------------------------------------------------------------------------------------------------------

| | · | submissiontotheFDAofanINDapplication,forhumanclinicaltesting,whichmustbecomeeffective beforehumanclinicaltrialsmaybeginandwhichmustincludeInstitutional Review Board (“IRB”)approvalateachclinicalsite beforethetrialsmaybeinitiated;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | performanceofadequateandwell-controlledclinicaltrialsinaccordancewithGCPtoestablishthe safety,purity,andpotencyoftheproductforeachindication;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------

28





| | · | submissiontotheFDAofaBLA,whichcontainsdetailedinformationaboutthechemistry,
manufacturingandcontrolsfortheproduct,reportsoftheoutcomesoftheclinicaltrials,andproposed labelingandpackagingfortheproduct;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | theFDA’sacceptanceoftheBLAforfiling;
| | - | ------------------------------------

| | · | foranybiologicalproductcontaininganactiveingredientnotpreviouslyapproved,automaticreferral toanappropriateadvisorycommitteeforreviewpriortoapproval,unlesstheFDAdecidesotherwise;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | satisfactoryreviewofthecontentsoftheBLAbytheFDA,includingthesatisfactoryresolutionofany questionsraisedduringtherevieworbytheadvisorycommittee,ifapplicable;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | satisfactorycompletionofanFDAinspectionofthemanufacturingfacilityorfacilitiesatwhichthe productisproducedtoassesscompliancewithcGMPregulations,toassurethatthefacilities,methods andcontrolsareadequateto ensuretheproduct’sidentity,strength,qualityandpurity;and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | FDAapprovaloftheBLA.
| | - | --------------------



Preclinicalstudiesincludelaboratoryevaluationsofproductchemistry,toxicityandformulation,aswellas animalstudies.Wesubmittedtheresultsofthesepreclinicalstudies,togetherwithmanufacturinginformationand analyticaldatatotheFDAinourBiologicMasterFile(BB-MF12518),Title:HIVtypeIDNAPlasmid(expressing
multipleregulatoryandstructuralgenes,E.coli,LC002,DermaVir)Vaccine,TopicalAdministration;Dateof SubmissionJune15,2005.



AnINDwillautomaticallybecomeeffective30daysafterreceiptbytheFDA,unlessbeforethattimethe FDAraisesconcernsorquestionsaboutissuessuchastheconductofthetrialsasoutlinedintheIND.Inthatcase, theINDsponsorandtheFDAmustresolveanyoutstandingFDAconcernsorquestionsbeforeclinicaltrialscan proceed.



Clinicaltrialsaresubjecttoextensivemonitoring,recordkeepingandreportingrequirements.Clinicaltrials mustbeconductedundertheoversightofanIRBfortherelevantclinicaltrialsitesandmustcomplywithFDA regulations,includingbutnotlimitedtothoserelatingtoGCP.Adverseeventsmustbereportedandinvestigated timely.
Toconductaclinicaltrial,acompanyisalsorequiredtoobtainthepatients’informedconsentinformand substancethatcomplieswithbothFDArequirementsandstateandfederalprivacyandhumansubjectprotection regulations.
Thesponsor,theFDAortheIRBcouldsuspendaclinicaltrialatanytimeforvariousreasons, includingabeliefthattheriskstotrialsubjectsoutweightheanticipatedbenefits.
Aprotocolforeachclinicaltrial andanysubsequentprotocolamendmentsmustbesubmittedtotheFDAaspartoftheIND. Inaddition,anIRBat eachsiteatwhichthetrialisconductedmustapprovetheprotocolandanyamendments.
Foreignstudiesperformed underanINDmustmeetthesamerequirementsthatapplytoU.S.studies. TheFDAwillacceptaforeignclinical trialnotconductedunderanINDonlyifthetrialiswell-designed,
well-conducted, performedbyqualified investigatorsinaccordancewithinternationalprinciplesforGCP,andconformstotheethicalprinciplescontainedin theDeclarationofHelsinki,orwiththelawsandregulationsofthecountryinwhichtheresearchwasconducted, whicheverprovidesgreaterprotectionofthehumansubjects.
TheFDA,however,hassubstantialdiscretionin decidingwhethertoacceptdatafromforeignnon-INDclinicaltrials.



Clinicaltrialsinvolvingbiopharmaceuticalproductsaretypicallyconductedinthreesequentialphases. Thephasesmayoverlaporbecombined.Afourth,orpost-approval,phasemayincludeadditionalclinicaltrials. Thesephasesgenerallyincludethefollowing:



| | · | PhaseI.PhaseIclinicaltrialsinvolvetheinitialintroductionofthemedicineintohumansubjectsto
determinetheadverseeffectsassociatedwithincreasingdoses.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------

| | · | PhaseII.PhaseIIclinicaltrialsusuallyinvolvestudiesinalimitedpatientpopulationtoevaluatethe
efficacyofthemedicineforspecific,targetedindications,todeterminedosagetoleranceandoptimal dosage,andtoidentifypossibleadverseeffectsandsafetyrisks.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | PhaseIII.Ifthemedicineisfoundtobepotentiallyeffectiveandtohaveanacceptablesafetyprofile inPhaseII(orsometimesPhaseI)trials,theclinicaltrialprogramwillbeexpandedtofurther demonstrateclinicalefficacy,optimaldosageandsafetywithinanexpandedpatientpopulationat geographicallydispersedclinicaltrialsites.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Post-Approval(PhaseIV).Post-approvalclinicaltrialsarerequiredoforagreedtobyasponsorasa conditionof,orsubsequenttomarketingapproval.Further,iftheFDAbecomesawareofnewsafety informationaboutanapprovedproduct,itisauthorizedtorequirepostapprovaltrialsofthebiological product.Thesetrialsareusedtogainadditionalexperiencefromthetreatmentofpatientsinthe intendedtherapeuticindicationandtodocumentaclinicalbenefitinthecaseofbiologicsapproved underacceleratedapprovalregulations.IftheFDAapproves
aproductwhileacompanyhasongoing clinicaltrialsthatwerenotnecessaryforapproval,acompanymaybeabletousethedatafromthese clinicaltrialstomeetallorpartofanyPhaseIVclinicaltrialrequirement.Theseclinicaltrialsare oftenreferredtoasPhaseIII/IVpostapprovalclinicaltrials.FailuretopromptlyconductPhaseIV clinicaltrialscouldresultinwithdrawalofapprovalforproductsapprovedunderacceleratedapproval regulations.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

29









Clinicaltestingmaynotbecompletedsuccessfullywithinanyspecifiedtimeperiod,ifatall.TheFDA closelymonitorstheprogressofeachofthethreephasesofclinicaltrialsthatareconductedunderanINDandmay, atitsdiscretion,reevaluate,alter,suspend,orterminatethetestingbaseduponthedataaccumulatedtothatpointand theFDA’sassessmentoftherisk/benefitratio tothepatient.TheFDAorthesponsormaysuspendorterminate
clinicaltrialsatanytimeforvariousreasons,includingafindingthatthesubjectsorpatientsarebeingexposedtoan unacceptablehealthrisk.TheFDAcanalsorequestthatadditionalpre-clinicalstudiesorclinicaltrialsbeconducted
asaconditiontoproductapproval.Additionally,newgovernmentrequirementsmaybeestablishedthatcoulddelay orpreventregulatoryapprovalofourproductsunderdevelopment.
Furthermore,IRBshavetheauthoritytosuspend
clinicaltrialsintheirrespectiveinstitutionsatanytimeforavarietyofreasons,includingsafetyissues.



Certaininformationaboutclinicaltrials,includingadescriptionofthetrial,participationcriteria,location oftrialsites,andcontactinformation,isrequiredtobesenttotheNIHforinclusioninapublicly-assessable database.Sponsorsalsoaresubjecttocertainstatelawsimposingrequirementstomakepubliclyavailablecertain informationonclinicaltrialresults.Inaddition,theFDAAmendmentsActof2007directstheFDAtoissue regulationsthatwillrequiresponsorstosubmittotheNIHtheresultsofcertaincontrolledclinicaltrials,otherthan PhaseIstudies.



Assumingsuccessfulcompletionoftherequiredclinicaltesting,theresultsofthepreclinicalstudiesandof theclinicaltrials,togetherwithotherdetailedinformation,includinginformationonthechemistry,manufactureand compositionoftheproduct,aresubmittedtotheFDAintheformofaBLArequestingapprovaltomarketthe productforoneormoreindications.Inmostcases,theBLAmustbeaccompaniedbyasubstantialuserfee.The FDAwillinitiallyreviewtheBLAforcompletenessbeforeitacceptstheBLAforfiling. Therecanbenoassurance
thatthesubmissionwillbeacceptedforfilingorthattheFDAmaynotissueaRefuse to File (“RTF”).
IfaRTFisissued,thereis opportunityfordialoguebetweenthesponsorandtheFDAinanefforttoresolveallconcerns.IftheBLA submissionisacceptedforfiling,theFDAwillbeginanin-depthreviewoftheBLAtodetermine,amongother things,whetheraproductissafeandeffectiveforitsintendeduseandwhethertheproductisbeingmanufacturedin accordancewithcGMPtoassureandpreservetheproduct’sidentity,strength,qualityandpurity. Ifthebiological productcontainsanewactiveingredientnotpreviouslyapproved,theBLAautomaticallywillbereferredtoan appropriateadvisorycommitteeforreviewpriortoapprovalofthebiologicalproduct,unlesstheFDAdecides otherwiseandspecifiessuch reasonsinacompleteresponselettertothesponsor. TheFDA,however,isnotbound bytheopinionoftheadvisorycommittee.



Companiesalsomayseekfasttrackdesignationfortheirproducts.Fasttrackproductsarethosethatare
intendedforthetreatmentofa seriousorlife-threateningconditionandthatdemonstratethepotentialtoaddress unmetmedicalneedsforsuchacondition.Ifawarded,thefasttrackdesignationappliestotheproductonlyforthe indicationforwhichthedesignationwasreceived. Fasttrack productsareeligiblefortwomeansofpotentially expeditingproductdevelopmentandFDAreviewofBLAs. First,afasttrackproductmaybeapprovedonthebasis
ofeitheraclinicalendpointorasurrogateendpointthatisreasonablylikelytopredictclinicalbenefit.Approvalsof thiskindmaybesubjecttorequirementsforappropriatepost-approvalstudiestovalidatethesurrogateendpointor otherwiseconfirmtheeffectontheclinicalendpoint,andtocertainotherconditions. Second,iftheFDAdetermines afterreviewofpreliminaryclinicaldatasubmittedbythesponsorthatafasttrackproductmaybeeffective,itmay beginreviewofportionsofaBLAbeforethesponsorsubmitsthecompleteBLA,therebyacceleratingthedateon whichreviewofaportionoftheBLAcanbegin. Therecanbenoassurancethatanyofourotherproductcandidates willreceivedesignationasfasttrackproducts. Andeveniftheyaredesignatedasfasttrackproducts,wecannot
assureyouthatourproductcandidateswillbereviewedorapprovedmoreexpeditiouslyfortheirfasttrack indicationsthanwouldotherwisehavebeenthecaseorwillbeapprovedpromptly,oratall. Furthermore,theFDA canrevokefasttrackstatusatanytime.



Inaddition,
productsstudiedfortheirsafetyandeffectivenessintreating
seriousorlife-threatening
illnessesandthat
providemeaningfultherapeutic
benefitoverexistingtreatments mayreceiveacceleratedapproval
andmaybeapproved onthebasisof
adequate andwell-controlledclinicaltrials
establishingthatthedrugproduct
hasaneffect
onasurrogateendpoint
thatisreasonablylikely
topredict clinicalbenefit
oronthebasis
ofaneffect
onaclinical
endpointotherthan
survival orirreversiblemorbidity.
Asacondition
ofapproval, theFDAmay
requirethat
asponsor
ofadrugreceiving
acceleratedapproval
perform adequateandwell-controlled
post-approval clinicaltrialstoverify
andfurtherdefine
thedrug’sclinical
benefitand
safetyprofile.
Therecan
benoassurance
thatanyofour
productcandidates
willreceiveacceleratedapproval.
Evenifacceleratedapproval
isgranted,the
FDAmay
withdrawsuchapprovalif
thesponsorfailsto
conduct
therequired
post-approvalclinicaltrials,
orifthe
post-approval clinicaltrialsfailto
confirmtheearly
benefits
seenduring
theaccelerated
approvalprocess.





30









Fast-Trackdesignationandacceleratedapprovalshouldbedistinguishedfrompriorityreviewalthough productsawardedfasttrackstatusmayalsobeeligibleforpriorityreview.ProductsregulatedbytheCBERmay
receivepriorityreviewiftheyprovidesignificantimprovementinthesafetyoreffectivenessofthetreatment,
diagnosis,orpreventionofaseriousorlife-threatening
disease.Productsawardedpriorityreviewaregiven abbreviatedreviewgoalsbytheagency.
UnderthePrescriptionDrugUserFeeActof2007,theagencyhasagreed totheperformancegoalofreviewingproductsawardedpriorityreviewwithinsixmonths,whereasproductsunder standardreviewreceiveaten-monthtarget.Thereviewprocess,however,isoftensignificantlyextendedbyFDA requestsforadditional
informationorclarificationregardinginformation
alreadyprovidedinthesubmission.
PriorityreviewisrequestedatthetimetheBLAissubmitted,andtheFDAmakesadecisionaspartoftheagency’s reviewoftheapplicationforfiling.WeplantoseekpriorityreviewforDermaVirbutcannotguaranteethatthe FDAwillgrantthedesignationandcannotpredictifawarded,whatimpact,ifany,itwillhaveonthereviewtime forapprovalofourproduct.



Ifgranted,Fast-Trackdesignation,acceleratedapproval,andpriorityreviewmayexpeditetheapproval process,buttheydonotchangethestandardsforapproval.



BeforeapprovingaBLA,theFDAwillgenerallyinspectthefacilityorthefacilitiesatwhichthefinished productanditscomponentsaremanufacturedtoensurecompliancewithcGMP.IftheFDAdeterminesthe application,manufacturingprocessormanufacturingfacilitiesarenotacceptable,itwilleitherissue“not approvable”letteroran“approvable”letter.A“notapprovable”lettermeans
thattheFDArefusestoapprovethe applicationbecausetheBLAormanufacturingfacilitiesdonotsatisfytheregulatorycriteriaforapproval. An “approvable”lettermeansthattheFDAconsiderstheBLAandmanufacturingfacilitiestobefavorable,butthe letterwilloutlinethedeficienciesandprovidetheapplicantwithanopportunitytosubmitadditionalinformationor datatoaddressthedeficiencies. IfandwhenthoseconditionshavebeenmettotheFDA’ssatisfaction,theFDA willtypicallyissueanapprovalletter. Notwithstandingthesubmissionofanyrequestedadditionalinformation,the FDAultimatelymaydecidethattheapplicationdoesnotsatisfytheregulatorycriteriaforapproval. Separate approvalisrequiredforeachproposedindication. Ifwewanttoexpandtheuseofanapprovedproduct,wewill havetodesignadditionalclinicaltrials,submitthetrialdesignstotheFDAforreviewandcompletethosetrials successfully.



Thetestingandapprovalprocessrequiressubstantialtime,effortandfinancialresources,andeachmay
takeseveralyearstocomplete.Dataobtainedfromclinicalactivitiesarenotalwaysconclusive,whichcoulddelay, limitorpreventregulatoryapproval.TheFDAmaynotgrantapprovalonatimelybasis,oratall.Wemay
encounterdifficultiesorunanticipated costsinoureffortstosecurenecessarygovernmental
approvals,whichcould
delayorprecludeusfrommarketingourproducts.TheFDAmaylimittheindications foruseorplaceother conditions,suchaspostapprovalstudies,onanyapprovalsthatcouldrestrictthecommercialapplicationofthe products. Afterapproval,sometypesofchangestotheapprovedproduct, suchasaddingnewindications, manufacturing
changesandadditionallabelingclaims,aresubjecttofurthertestingrequirementsandFDAreview andapproval.



Post-ApprovalRequirements



Afterregulatoryapprovalofaproductisobtained,companiesarerequired
tocomplywithanumber
of post-approvalrequirements
relatingtomanufacturing,
labeling,packaging,adverseevent reporting,storage,
advertising,promotion,distributionandrecordkeeping.Forexample,
asaconditionofapprovalofaBLA,the
FDA mayrequirepost-approvaltestingandsurveillancetomonitor theproduct’ssafety
orefficacy. Inaddition,holders
ofanapprovedBLAarerequiredtokeepextensive
records,toreportcertainadversereactionsandproduction
deviationsandproblemstotheFDA,toprovideupdatedsafetyandefficacyinformation
andtocomply
with requirementsconcerning advertisingandpromotionallabeling
fortheirproducts. Ifwefailtocomplywiththe
regulatoryrequirementsoftheFDAandother
applicableU.S.andforeignregulatoryauthorities,
orpreviously unknownproblemswithany approved commercial products,manufacturers
ormanufacturing
processesare
discovered, wecouldbesubject
toadministrative
orjudicially
imposedsanctions
orother
setbacks.
Accordingly,
manufacturers must
continue toexpend
time,moneyandeffort
inthe
areaofproductionand
qualitycontrolto
maintaincompliance
withcGMPandotheraspectsofregulatorycompliance.



31









Specifically,ourproductscouldbesubjecttovoluntaryrecallifweortheFDAdetermine,foranyreason,
thatourproductsposeariskofinjuryorareotherwisedefective.Moreover,theFDAcanorderamandatoryrecall ifthereisareasonableprobabilitythatourdevicewouldcauseseriousadversehealthconsequencesordeath.In addition,theFDAcouldsuspendthemarketingoforwithdrawapreviouslyapprovedproductfromthemarketupon receiptofnewlydiscoveredinformationregardingthedrug’ssafetyoreffectiveness.



MedicalDeviceRegulation



Withrespecttomedicaldevices,theFDAhasimplementednumerousregulationstoensurethatmedical productsdistributeddomesticallyorinternationallyaresafeandeffectivefortheirintendeduses.Theseinclude:



| | · | productlistingandestablishmentregistration,whichhelpsfacilitateFDAinspectionsandother regulatoryaction;
| | - | -------------------------------------------------------------------------------------------------------

| | · | theFDA’sQSR,whichrequiresmanufacturers,includingthirdpartymanufacturers,tofollowstringent design,testing,control,documentationandotherqualityassuranceproceduresduringallaspectsofthe manufacturingprocess;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | labelingregulationsandFDAprohibitionsagainstthepromotionofproductsforuncleared, unapprovedoroff-labeluseorindications;
| | - | ----------------------------------------------------------------------------------------------------------------------

| | · | clearanceorapprovalofproductmodificationsthatcouldsignificantlyaffectsafetyorefficacyorthat wouldconstituteamajorchangeinintendeduse;
| | - | -------------------------------------------------------------------------------------------------------------------------------------

| | · | medicaldevicereportingregulations,whichrequirethatmanufacturerscomplywithFDArequirements toreportiftheirdevicemayhavecausedorcontributedtoadeathorseriousinjury,orhas malfunctionedinawaythatwouldlikelycauseorcontributetoadeathorseriousinjuryifthe malfunctionofthedeviceorasimilardeviceweretorecur;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | post-approvalrestrictionsorconditions,includingpost-approvaltrialcommitments;
| | - | -----------------------------------------------------------------------------

| | · | post-marketsurveillanceregulations,whichapplywhennecessarytoprotectthepublichealthorto provideadditionalsafetyandeffectivenessdataforthedevice;and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------

| | · | noticesofcorrectionorremovalandrecallregulations.
| | - | -------------------------------------------------



FDA’sPremarket
Clearanceand
ApprovalRequirements

Unlessanexemptionapplies,oriftheFDAdeterminesotherwise,beforewecancommerciallydistribute medicaldevicesintheU.S.,wemustobtain,dependingonthetypeofdevice,eitherprior510(k)clearanceorPremarket Approval (“PMA”)
fromtheFDA.TheFDAclassifiesmedicaldevicesintooneofthreeclasses:



| | · | ClassIdevices(e.g.,lowriskdevices),whicharesubjecttoonlygeneralregulatoryoversight(e.g., labeling,medicaldevicesreporting,andprohibitionsagainstadulterationandmisbranding)and,in somecases,tothe510(k)premarketclearancerequirements;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | ClassIIdevices(e.g.,greaterriskdevices),generallyrequiring510(k)premarketclearancebeforethey maybecommerciallymarketedintheU.S.;and
| | - | -----------------------------------------------------------------------------------------------------------------------------------

| | · | ClassIIIdevices(e.g.,greatestriskdevices),consistingofdevicesdeemedbytheFDAtoposethe greatestrisk,suchaslife-sustaining,life-supportingorimplantabledevices,ordevicesdeemednot substantiallyequivalenttoapredicatedevice,generallyrequiringsubmissionofaPMAsupportedby clinicaltrialdata.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Allofourproductcandidatesarecurrentlyinthedevelopmentstage.DermaVir,ourlead candidate,iscurrentlyundergoingclinicalevaluation.Wearecurrentlydevelopingourregulatorystrategieswith respecttowhichregulatorypathwaywillbenecessarytoobtainclearanceorapprovaloftheDermaPrepcomponent,
ifmedicaldeviceclearanceorapprovalisrequiredatall.



32





510(k)ClearancePathway



Whena510(k)clearanceisrequired,wemustsubmitapremarketnotificationdemonstratingthatour proposeddeviceissubstantiallyequivalenttoapreviouslycleared510(k)deviceoradevicethatwasincommercial distributionbeforeMay28,1976forwhichtheFDAhasnotyetcalledforthesubmissionofPMAs.Byregulation, theFDAisrequiredtoclearordenya510(k)premarketnotificationwithin90daysofsubmissionoftheapplication. Asapracticalmatter,clearancemaytakelonger.TheFDAmayrequirefurtherinformation,includingclinicaldata, tomakeadeterminationregardingsubstantialequivalence.



Anymodificationtoa510(k)-cleareddevicethatwouldconstituteamajorchangeinitsintendeduse,or anychangethatcouldsignificantlyaffectthesafetyoreffectivenessofthedevice,requiresanew510(k)clearance andmayeven,insomecircumstances,requireaPMA,ifthechangeraisescomplexornovelscientificissuesorthe producthasanewintendeduse.TheFDArequireseverymanufacturertomakethedeterminationregardingthe needforanew510(k)submissioninthefirstinstance,buttheFDAmayreviewanymanufacturer’sdecision. We havemodifiedourdevicessincetheyreceivedtheFDAclearance.
IftheFDAweretodisagreewithanyofour determinationsthatchangesdidnotrequireanew510(k),itcouldrequireustoceasemarketinganddistribution and/orrecallthemodifieddeviceuntil510(k)clearanceorPMAapprovalisobtained. IftheFDArequiresusto seek510(k)clearanceorPMAapprovalforanymodifications,wemayberequiredtoceasemarketingand/orrecall themodifieddevice,ifalreadyindistribution,
until510(k)clearanceorPMAapprovalisobtainedandwecouldbe subjecttosignificantregulatoryfinesorpenalties.



ThereisnoguaranteethattheFDAwillgrant510(k)clearanceorPMAapprovalofourfutureproducts,if necessary,andfailuretoobtainnecessaryclearancesorapprovalsforourfutureproductswouldadverselyaffectour abilitytogrowourbusiness.Delaysinreceiptorfailuretoreceiveclearancesorapprovals,thelossofpreviously receivedclearancesorapprovals,orthefailuretocomplywithexistingorfutureregulatoryrequirementscould reduceoursales,profitabilityandfuturegrowthprospects.



PMAPathway



APMAmustbesubmittedtotheFDAifthedevicecannotbeclearedthroughthe510(k)process.APMA mustbesupportedbyextensivedata,includingbutnotlimitedto,technical,preclinical,clinicaltrials, manufacturingandlabelingtodemonstratetotheFDA’ssatisfactionthesafetyandeffectivenessofthedevicefor its intendeduse.Nodevicethatwearemarketingtodatehasrequiredpremarketapproval. Duringthereviewperiod, theFDAwilltypicallyrequestadditionalinformationorclarificationoftheinformationalreadyprovided.
Also,an advisorypanelofexpertsfromoutsidetheFDAmaybeconvenedtoreviewandevaluatetheapplicationand providerecommendations totheFDAastotheapprovabilityofthedevice.
TheFDAmayormaynotacceptthe panel’srecommendation. Inaddition,theFDAwillgenerallyconductapre-approvalinspectionofthe manufacturingfacilityorfacilitiestoensurecompliancewiththeFDA’sQSR.



NewPMAsorPMAsupplementsarerequiredformodificationsthataffectthesafetyoreffectivenessofthe device,including,forexample,certaintypesofmodificationstothedevice’sindicationforuse,manufacturing
process,labelinganddesign.PMAsupplementsoftenrequiresubmissionofthesametypeofinformationasa PMA,exceptthatthesupplementislimited
toinformationneededtosupportanychangesfromthedevicecovered bytheoriginalPMAandmaynotrequireasextensiveclinicaldataortheconveningofanadvisorypanel. Thereis noguaranteethattheFDAwillgrantPMAapprovalofourfutureproducts,ifnecessary,andfailuretoobtain necessaryapprovalsforourfutureproductswouldadversely affectourabilitytogrowourbusiness.
Delaysin receiptorfailuretoreceiveapprovals,thelossofpreviouslyreceivedapprovals,orthefailuretocomplywith existingorfutureregulatoryrequirementscouldreduceoursales,profitabilityandfuturegrowthprospects.



ClinicalTrials



ClinicaltrialsaregenerallyrequiredtosupportaPMAapplicationandaresometimesrequiredfor510(k)
clearance.Suchtrialsgenerally
requireaninvestigational
deviceexemptionapplication(“IDE”),
approvedin advancebytheFDA
foraspecified
numberofpatientsandtrialsites,unlesstheproductisdeemedanonsignificant
riskdeviceeligibleformore abbreviatedIDErequirements.
Clinicaltrialsaresubjectto
extensivemonitoring,
recordkeepingandreportingrequirements.
Clinicaltrialsmust
beconductedundertheoversightofanIRBforthe
relevant clinicaltrialsitesandmust
comply
withFDAregulations,includingbutnotlimited
tothoserelatingto
GCPs. Toconductaclinicaltrial,we arealso
requiredto obtainthe
patients’informed
consentin formand
substancethat
complieswithbothFDA
requirements andstate
andfederal
privacyandhumansubject
protection regulations. We,the
FDAor the
IRBcouldsuspenda
clinicaltrialatany
timefor various
reasons,includingabelief
thattherisksto
trialsubjectsoutweighthe
anticipatedbenefits.
Evenif atrialis
completed,the
resultsof clinical
testingmaynot
adequatelydemonstrate
the safetyandefficacy
of thedevice
or mayotherwisenotbesufficientto
obtainFDA approval to
marketthe product
in the U.S. Similarly,in
Europethe clinicaltrial
must be approvedby
a localethicscommittee
andin somecases,including
studieswithhigh-risk
devices,by
theministry
of healthin
the applicablecountry.



33









PervasiveandContinuingRegulation



Afteradeviceisplacedonthemarket,medicaldevicecompaniesarerequiredtocomplywithregulations relatingtomanufacturing,labeling,packaging,adverseeventreporting,storage,advertising,promotion,distribution andrecordkeeping.IfwefailtocomplywiththeregulatoryrequirementsoftheFDAandotherapplicableU.S.and foreignregulatoryauthorities,orpreviously
unknownproblemswithanyapprovedcommercialproducts,
manufacturersormanufacturingprocessesarediscovered,wecouldbesubjecttoadministrative
orjudicially imposedsanctionsorothersetbacks.
Accordingly,manufacturers
mustcontinuetoexpendtime,moneyandeffort intheareaofproductionandqualitycontroltomaintaincompliancewithQSRandotheraspectsofregulatory compliance.



Specifically,ourproductscouldbesubjecttovoluntaryrecallifweortheFDAdetermine,foranyreason,
thatourproductsposeariskofinjuryorareotherwisedefective.Moreover,theFDAcanorderamandatoryrecall ifthereisareasonableprobabilitythatourdevicecouldcauseseriousadversehealthconsequencesordeath.In addition,theFDAcouldsuspendthemarketingoforwithdrawapreviouslyclearedorapprovedproductfromthe marketuponreceiptofnewlydiscoveredinformationregardingthedrug’ssafetyoreffectiveness.



HealthCareRegulation



FraudandAbuse



Othergovernmentauthoritiesinfluencethesuccessofourbusiness,includingtheavailabilityofadequate
reimbursementfromthirdpartypayors,includinggovernmentprogramssuchasMedicareandMedicaid.Medicare andMedicaidreimbursementpoliciescanalsoinfluencecorrespondingpoliciesofprivateinsurersandmanaged
careproviders,whichcanfurtheraffectourbusiness.



Wemaydirectlyorindirectlybesubjecttovariousfederalandstatelawspertainingtohealthcarefraudand abuse,includinganti-kickbacklaws.Inparticular,thefederalhealthcareprogramsanti-kickbackstatuteprohibits personsfromknowinglyandwillfullysoliciting,offering,receivingorprovidingremuneration,directlyor indirectly,inexchangeforortoinduceeitherthereferralofanindividual
foragoodorservice,orthefurnishing,
arrangingfororrecommendingagoodorservice,forwhichpaymentmaybemadeinwholeorpartunderfederal healthcareprograms,suchastheMedicareandMedicaidprograms.Theanti-kickbackstatuteisbroadandprohibits orrestrictsmanyarrangementsandpracticesthatarelawfulinbusinessesoutsideofthehealthcareindustry. In implementingthestatute,theU.S.DepartmentofHealthandHumanServices’OfficeofInspectorGeneralhas issuedaseriesofregulations,knownasthe“safeharbors,”whichbeganinJuly1991. Thesesafeharborssetforth provisionsthat,ifalltheirapplicablerequirementsare met,willassurehealthcareprovidersandotherpartiesthat theywillnotbeprosecutedunderthefederalanti-kickbackstatute.Thefailureofatransactionorarrangementtofit preciselywithinoneormoresafeharborsdoesnotnecessarilymeanthatitisillegalorthatprosecutionwillbe pursued.
However,conductandbusinessarrangementsthatdonotfullysatisfyallrequirementsofanapplicable safeharbormay resultinincreasedscrutinybygovernmentenforcementauthoritiessuchastheOfficeofInspector General.
Penaltiesforviolationsofthefederalanti-kickbackstatuteincludecriminalpenaltiesandcivilsanctions suchasfines,imprisonmentandpossibleexclusionfromMedicare,Medicaidandotherfederalhealthcareprograms.



TheFederal
FalseClaims
Actprohibitspersons
fromknowingly
filingorcausing tobefiledafalseclaim
to,ortheknowinguseoffalsestatementstoobtainpayment
from,thefederalgovernment.
Certaintypesoflawsuits
filedundertheFalseClaimsAct,knownas“quitam”actions,canbebroughtbyany
individualonbehalfofthe
government. Theseindividuals,sometimes
knownas“relators”or,more
commonly,as“whistleblowers,” may
shareinanyamountspaidbytheentitytothegovernmentinfinesorsettlement.Thenumberoffilingsofquitam
actionshasincreased
significantlyinrecentyears,causingmore
healthcarecompaniestohavetodefend
aFalse Claimaction.
Ifanentityisdeterminedto haveviolated
the federalFalseClaims
Act,itmaybe
requiredto payup
to threetimesthe
actualdamagessustained
by the government, pluscivil
penaltiesranging
from$5,500to
$11,000 for each separate
falseclaim. Various
stateshavealsoenacted
similarlawsmodeledafter
the federal FalseClaims
Actwhich applyto
itemsandservices
reimbursedunder
Medicaidandotherstate
programs,or,
in several states, applyregardless
of thepayor.





34









HIPAAcreatedtwonewfederalcrimes:healthcarefraudandfalsestatementsrelatingtohealthcare matters.Thehealthcarefraudstatuteprohibitsknowinglyandwillfullyexecutingaschemetodefraudany healthcarebenefitprogram,includingprivatepayors.Aviolationofthisstatuteisafelonyandmayresultinfines, imprisonmentorexclusionfromgovernment
sponsoredprograms. Thefalsestatements
statuteprohibitsknowingly andwillfullyfalsifying,concealingorcoveringupamaterialfactormakinganymateriallyfalse,fictitiousor fraudulentstatementinconnectionwiththedeliveryoforpaymentforhealthcarebenefits,items,orservices.A violationofthisstatuteisafelonyandmayresultinfinesorimprisonment.



Ifanyofouroperationsarefoundtohaveviolatedorbeinviolationofanyofthelawsdescribedaboveand otherapplicablestateandfederalfraudandabuselaws,wemaybesubjecttopenalties,amongthembeingciviland criminalpenalties,damages,fines,exclusionfromgovernmenthealthcareprograms,andthecurtailment or restructuringofouroperations.



HealthInformation



U.S.federalandstatelawsprotecttheconfidentialityofcertainhealthinformation,inparticular individuallyidentifiableinformationsuchasmedicalrecords,andrestricttheuseanddisclosureofthatprotected information.Atthefederallevel,HIPAAprotectshealthinformationbyregulatingitsuseanddisclosure,including forresearchpurposes.FailureofaHIPAA“coveredentity”(suchasahospitaloracademic medicalcenter)to complywithHIPAAcouldconstituteaviolationoffederallaw,subjecttocivilandcriminalpenalties.Wearenot directlysubjecttotheHIPAArulesasa“coveredentity,”however,
andunderHIPAAwewouldbepermittedto obtaininformationfromourcustomersundercertainconditions,suchaswhenrelevanttoourresponsibilitiesfor overseeingthequality,safety,oreffectivenessofourproducts.
Nevertheless,becauseconductbyapersonthatmay notbeprosecuteddirectlyunderHIPAA’scriminalprovisionscouldpotentiallybeprosecutedunderaidingand abettingorconspiracylaws,weareunabletodeterminewhetherouractionscouldbesubjecttoprosecutioninthe eventofanimpermissible
disclosureofdatatous.



Inaddition,manystatelawsapplytotheuseanddisclosureofhealthinformation,whichcouldaffectthe
mannerinwhichweconductourresearchanddevelopment,aswellasotheraspectsofouroperations.Moreover, suchlawsarenotnecessarilypreemptedbyHIPAAanditsrules,inparticularthosestatelawsthataffordgreater privacyprotectiontotheindividualthan
HIPAAand/orthatprotectcertaincategoriesofinformation,suchas HIV/AIDS-relatedinformation. Suchstatehealthinformationconfidentiality lawstypicallyhavetheirownpenalty provisions,whichcouldbeappliedintheeventofanunlawfulactionregardinghealthinformation.



International GovernmentRegulation



Internationalsalesofbiologicalsubstancesandmedicaldevicesaresubjecttoforeigngovernment regulations,whichvarysubstantiallyfromcountrytocountry.Thetimerequiredtoobtainapprovalbyaforeign countrymaybelongerorshorterthanthatrequiredforFDAlicensureclearanceorapproval,andtherequirements
maydiffer.



TheE.U.,whichconsistsof25ofthemajorcountriesinEurope,
hasadoptednumerous
directivesand
standardsregulatingthedesign,manufacture,clinicaltrials,labeling,
andadverseeventreportingformedical devices.Other
countries,such
asSwitzerland,havevoluntarily
adoptedlawsand
regulationsthatmirrorthoseofthe E.U.with respecttomedicaldevices.Devicesthatcomplywiththerequirements
ofarelevantdirectivewillbe
entitledtobearCEconformitymarking and,accordingly,can
becommercially
distributedthroughoutthemember
statesoftheE.U.,andothercountries thatcomply
withormirror
thesedirectives.Themethodofassessing
conformity variesdepending
onthetypeandclassofthe
product,butnormallyinvolves
acombinationofself-
assessment bythemanufacturerandathirdpartyassessmentbya“NotifiedBody,”anindependentand
neutral institutionappointedtoconductconformity
assessment.This
thirdpartyassessmentconsistsofanaudit
ofthe manufacturer’s
qualitysystemandtechnicalreviewandtestingofthemanufacturer’s
product. Anassessmentbya
NotifiedBodyinonecountrywithinthe
E.U.isrequired
inorderforamanufacturer
tocommercially
distributethe
productthroughout
theE.U. Inaddition,compliancewithvoluntaryharmonizing
standardsInternationalStandards
Organization9001andInternationalStandards
Organization 13845
issuedbytheInternational
Organization
for Standardsestablishesthepresumption
ofconformity
withtheessential
requirements
foraCEmarking.





35









ESTIMATE OF THE AMOUNT SPENT ON RESEARCH
AND DEVELOPMENT



Research and development expenses were $0 and
$0 in 2013 and 2012, respectively. We are focused on regulatory issues, including the deliver of data from all clinical trials
to data. Currently no research and development is required.



COSTS AND EFFECTS OF ENVIRONMENTAL COMPLIANCE



The Company has not spent any sums on environmental
compliance and does not expect to be required to spend any sums on environmental compliance in the future.



EMPLOYEES



We currently have eight (8) employees, of which
five (5) are full-time and three (3) are part-time.



AVAILABLE INFORMATION



We file electronically with the U.S. Securities
and Exchange Commission (SEC) our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. We make
available on our website at www.powerofthedream.com, free of charge, copies of these reports as soon as reasonably practicable
after filing these reports with, or furnishing them to, the SEC.  The public can also obtain materials that we file with
the SEC through the SEC’s website at http://www.sec.gov or at the SEC’s Public Reference Room at 100 F Street, NE,
Washington, DC 20549.  Information on the operation of the Public Reference Room is available by calling the SEC at 800-SEC-0330.



Item 1A. Risk Factors.



You should carefully consider the risks described
below, together with all of the other information included in this report, in considering our business and prospects. The risks
and uncertainties described below are not the only ones facing the Company. Additional risks and uncertainties not presently known
to us or that we currently deem immaterial also may impair our business operations. The occurrence of any of the following risks
could harm our business, financial condition or results of operations.



Risks Related to the Our Business and Industry

WE
HAVE A LIMITED OPERATING HISTORY, WHICH MAKES YOUR EVALUATION OF OUR BUSINESS DIFFICULT. WE HAVE INCURRED LOSSES IN RECENT PERIODS
FOR START-UP EFFORTS AND MAY INCUR LOSSES IN THE FUTURE.

Our
future is dependent upon our ability to obtain financing and upon future profitable operations from the commercialization of our
product candidates. Oursuccessandabilitytogeneraterevenueorbe profitablewilldependonourabilityto,amongotherthings,undertakepre-clinicaldevelopmentstudiesandclinical trials;applyforandreceiveregulatoryapprovalsforconductofclinicaltrialsandformarketingofourproducts whendevelopmenthasbeencompleted;formulateandmanufactureproducts;andconductsalesandmarketing activities.These factors raise
substantial doubt that we will be able to continue as a going concern. From April 26, 2006 (inception) through December 31, 2013,
we incurred aggregate losses of $12,817,575 and anticipate incurring additional losses for at least the next twelve (12) months.

Our auditors have expressed substantial
doubt about our ability to continue as a going concern.

As of December 31, 2013, we had
$22,922 of cash and $8,240,680 in current obligations. In addition, we anticipate our new operating expenses to be between
$2,000,000 - $3,000,000 for year 2014. We do not have sufficient resources to satisfy our current obligations nor to fund our
planned operations for the next 12 months. We will require additional financing to sustain our operations and without it we
will not be able to continue operations.



36







Our ability to obtain additional funding
will determine our ability to continue as a going concern. Our financial statements do not include any adjustments that might result
from the outcome of this uncertainty.

Management believes the Company has
enough existing cash and cash equivalent and can raise adequate capital to keep the Company functioning through December 31, 2014.
However, the need may arise, to raise additional capital if we want to supportour
futuredevelopmentprograms,includingthecompletionofadditionalclinicaltrials.Ourfundingrequirementsmayalso increaseorchangeasaresultofmanyfactors,includingdelaysindevelopmentactivities,underestimatesofbudget items,unanticipatedcashrequirements,limitationofdevelopmentofnewpotentialproducts,futureproduct opportunitieswithcollaborators,futurelicensingopportunitiesandfuturebusinesscombinations.
No assurance can be given that the Company can obtain additional working capital, or if obtained, that such funding will not cause
substantial dilution to shareholders of the Company. If the Company is unable to raise additional funds, if needed, it may notbeableto(i)complete plannedpre-clinicalstudiesandclinicaltrials,(ii)completeconstructionofamanufacturingfacility,or(iii)obtain conditional marketingapprovalfor
DermaVirfromtheEMAand/orotherregulatoryauthorities. Being a development stage company, the Company is subject to all the risks inherent in the establishment of
a new enterprise and the marketing and manufacturing of a new product, many of which risks are beyond the control of the Company.
All of the factors discussed above raise substantial doubt about the Company’s ability to continue as a going concern.



Our future is dependent upon our
ability to obtain financing. If we do not obtain such financing, we maybeforcedtodiscontinueproductdevelopment,curtailoperations,reduceorforegosalesandmarketingefforts
andloseattractivebusinessopportunities. We have no arrangements or agreements with any person regarding any potential future financings.

WE
CURRENTLY DO NOT HAVE, AND MAY NEVER DEVELOP OR ACQUIRE ANY COMMERCIALIZED PRODUCTS FOR DISTRIBUTION AND SALE.

We currently
do not have any commercialized product(s) or any significant source of revenue. We havedevoted significantfinancialresourcestoresearchanddevelopmentofourproductcandidates,buthavenotyet commercializedanyofthem.Asaresult,wehavenevergeneratedanyrevenuefromproductsales.Untiland unlesswereceiveapprovalfromtheEMA,FDAandforeignregulatoryauthoritiestomarketaproductcandidate,we cannotsellanyproductandwillhavenoproduct
revenues.



PhysiciansandpatientsmaynotacceptanduseourImmuneTherapies.



EveniftheEMA/FDAand/orforeignagenciesapproveoneofourImmuneTherapiesformarketing,physiciansand patientsmaynotacceptanduseit.Acceptanceanduseofourproductswilldependuponanumberoffactors, includingperceptionsbythehealthcarecommunity,includingphysicians,abouttheirsafetyandeffectiveness,their cost-effectivenessrelativetocompetingproducts,availabilityofreimbursementforourproductsfromgovernment
orotherhealthcarepayors,andtheeffectivenessofmarketinganddistributioneffortsbyus,ourlicenseesand distributors,ifany.



Becauseweexpectsalesofourcurrentleadproductcandidate,ifapprovedformarketing,togenerate substantiallyallofourproductrevenuesfortheforeseeablefuture,thefailureofthisproducttofindmarket acceptancewouldharmourbusinessandcouldrequireustoseekadditionalfinancingortakeothermeasures, possiblyretrenching.



Ourabilitytogenerateproductrevenueswillbediminishedifourproductssellforinadequatepricesor patientsareunabletoobtainadequatereimbursement.



Ourabilitytocommercializeourproducts,aloneorwithcollaborators,willdependinpartontheextentto whichreimbursementwillbeavailablefromgovernmentandhealthadministrationauthorities,privatehealth
maintenanceorganization,healthinsurers,andotherpayors.

37





Significantuncertaintyexistsastothereimbursementstatusofnewlyapprovedhealthcareproducts. Healthcarepayors,includingMedicare,routinelychallengepricescharged.Governmentandotherhealthcare payorsincreasinglyattempttocontainhealthcarecostsbylimitingbothcoverageandreimbursement.IntheU.S., therehavebeenanumberoflegislativeandregulatoryproposalstochangethehealthcaresysteminwaysthatcould affectourabilitytomarketandsellourproductcandidatesprofitably. Althoughwecannotpredictthefulleffecton ourbusinessoftheimplementation
ofanylegislation,webelievethatlegislationthatreducesreimbursementforour productscouldadverselyimpacthowmuchorunderwhatcircumstanceshealthcareproviderswillprescribeor administerourproducts. Thiscouldmateriallyandadverselyimpactourbusinessbyreducingourabilityto generaterevenue,raisecapital,obtainadditionalcollaboratorsandmarketourproducts.Inaddition,webelievethe increasingemphasisonmanagedcareintheU.S.hasandwillcontinuetoputpressureonthepriceandusageof pharmaceuticalproducts,whichmayadverselyimpactproductsales.



Ourproductdevelopmentprogramsdependuponthirdpartyresearchersandwecannotcontrolthe amountoftimingorresourcestheydevotetoourprogramsorthequalityoftheirperformance.



Wedependinlargepartuponindependentinvestigatorsandcollaborators,suchasuniversities,medical institutions,andclinicalresearchorganizations,toconductourbasicresearch,animalstudies,pre-clinicalstudies
andclinicaltrialsand,incertaincases,todevelopaproductforitstargetindication.Althoughwecontractwith thesecollaborators,theyarenotouremployees,andwecannotcontroltheamountortimingofresourcesthey devotetoourprograms.
Theymaynotassignasgreataprioritytoourprogramsorpursuethemasdiligentlyaswe wouldifwewereundertakingthemourselves.Ifoutsidecollaboratorsfailtodevotesufficienttimeandresourcesto ourprograms,oriftheirperformanceissubstandard,theapprovalofourFDAandEMAapplications, andour introductionofnewproducts,ifany,willbedelayed. Thesecollaboratorsmayalsohaverelationshipswithother commercialentities,someofwhommaycompetewithus. Ifourcollaboratorsweretoassistourcompetitorsatour expense,ourcompetitivepositionwouldbeharmed.



Wecurrentlyrelyonthirdpartiestomanufactureandsupplyuswiththerawmaterialsthat weassembletomakeupourProductcandidates,andanyinterruptionsinthemanufactureorsupplyoftheseraw materialscouldharmourbusiness.



Wecurrentlyrelyonalimitednumberofvendorstosupplyrawmaterialsforourproduct candidates,andthelossofoneofthesepartiescouldsignificantlyharmourbusiness.For the clinical trials we have conducted up to date wereliedonAlthea Technologies,Inc.,aDNAmanufacturingcompanylocatedintheU.S.,asthesourceforoursupply ofpDNA,theAPIinDermaVir.WehavealsoreliedonPolyPlusTransfectionSA,amanufacturerin France,asthesourceforour clinical supply
of the raw material polyethylenimine mannose (“PEIm”) used in DermaVir. DermaPrep was manufactured by Tapemark, a medical
device manufacturingcompanylocatedintheU.S.The finished DermaVir product was manufactured at the clinical pharmacy prior to DermaVir immunization of patients.



In order to obtain the raw materials in the
required quality and quantity we contacted several alternative CMOs. We tested the quality of pDNAs contract manufactured by Aldevron
and WGX, two DNAmanufacturingcompanieslocatedintheU.S. Both pDNA materials
could fulfill our quality criteria. To mitigate the risk on manufacturing CMOs (1) we licensed pDNA manufacturing technology from
Aldevron for the high quality purification of our pDNA and (2) developed our own chemical synthesis for the manufacturing of PEIm.
We also developed a commercial manufacturing method for our finished products. Therefore, based on our own technology our cGMP
manufacturing facility could be built and we could be independent from any CMO to produce enough material for clinical trials.
However, to build and staff such facility will be costly and time consuming. Therefore, if either of our selected CMO fails to
provide us with sufficient quantities, we may not be able to obtain an alternative supplyonatimelyorcommerciallyacceptablebasis.Evenifweareabletoreachan agreementwithback-upsuppliers,achangeinsuppliermayrequirecomparabilitytesting,includingclinicaltests,to demonstratethatthenewrawmaterialwillnotsubstantiallychangethefinishedProduct.Furthermore,evenifan alternativesourceisavailable,therecanbenoassurancethatsuchalternativesourcewouldbecapableofproducing therawmaterialsinsufficientquantitiestomeetourtotalrequirements.
Anysuchinterruptionwoulddisruptour abilitytomanufacturetheDermaVirandcouldhaveamaterialadverseeffectonourbusiness.



We identified Stokvis Tapes Group a
Hungarian manufacturer with worldwide presence specialized for patches for health industry. Stokvis presented us a sample
batch of DermaPrep to demonstrate their capability to manufacture our DermaPrep medical device. The sample batch fulfilled
our quality criteria. We plan to contract Stokvis to deliver DermaPrep for clinical trials. This company would also have the
capability and capacity to produce our device also in commercial quantity.





38









If thereisasignificantincreaseinthepriceofrawmaterials
or DermaPrep,ourbusinesscouldbeseriouslyharmed.Wecurrently havenosupplycontractsbeyondcurrentclinicaltrials.Wemaynotbeabletocontractwith thirdpartiestoprovidetheAPIand DermaPrepbeyondcurrentclinicaltrialsonacceptabletermsandatcommercially reasonableprices,ifatall.Thenumberofthirdpartieswiththeexpertise,requiredregulatoryapprovals,and facilitiestosupplytheAPIandthe finished Productonacommercialscaleislimited.Evenifwelocatethirdpartiesthatcan providecommercialsupplies,theFDAandcomparableforeignregulatorsmustapprovethesemanufacturers’
facilitiesandprocessespriortoouruse,whichwouldrequirenewtestingandcompliance
inspections. Anyofthese
factorscouldcauseustodelayorsuspendregulatorysubmissions,
requiredapprovalsorcommercialization of DermaVir.Theycouldalsoentailhighercosts,andcouldresultinourbeingunabletocommercialize
DermaVirsuccessfully.
Furthermore, ifourcontractmanufacturers failtodelivertherequiredcommercial quantitiesofbulkrawmaterials onatimelybasisandatcommercially reasonable prices,andifwewereunableto
findoneormorereplacement
manufacturers capableofproductionatasubstantially equivalentcost,insubstantially equivalentvolumesandquality,andonatimelybasis,wearelikelytobeunabletomeetthedemandforDermaVir,ifmarketingapprovalisobtained,andwewouldlosepotentialrevenue.



WE DO NOT CURRENTLY HAVE SALES, MARKETING
AND DISTRIBUTION CAPABILITIES, AND WE MAY BE UNABLE TO EFFECTIVELY SELL, MARKET AND DISTRIBUTE OUR PRODUCT CANDIDATES IN THE FUTURE,
WHICH WOULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS.



Wecurrentlyhavenointernalsalesordistributioncapabilities.Inordertosuccessfullycommercializeany ofourproductcandidates,wemusteitherinternallydevelopsales,marketinganddistributioncapabilitiesormake arrangementswiththirdpartiestoperformtheseservices.Fortheforeseeablefuture,wemaynotbeableto establishmarketingandsalescapabilitiesinternallyorhireasufficientnumberofsalespersonnelwithappropriate expertisetomarketandsellourproductswhentheproductsareapprovedbyappropriateregulatoryauthorities.
Therefore,wemayneedtoenterintoanalliancewithamajorpharmaceuticalcompanyorotherthirdpartyto marketandsellourproducts,whichwemaybeunabletodo.Evenifweareabletoidentifyoneormoreacceptable collaboratorstoperformtheseservicesforus,wemaynotbeabletoenterintocollaborativearrangements on favorableterms,oratall.



Ifweenterintocollaborativearrangementsforthemarketingorsaleofourproducts,ourproductrevenues arelikelytobelowerthanifwedirectlymarketedandsoldourproducts.Inaddition,anyrevenueswereceive woulddependupontheeffortsofourcollaborators,whichmaynotbeadequateduetolackofattentionorresource commitments,
managementturnover,and/orchangeofstrategicfocus,businesscombinationsorotherfactors outsideourcontrol.Dependingonthetermsofourcollaboration,theremedieswehaveagainstanunderperforming
collaboratormaybelimited. Ifweweretoterminatetherelationship,itcouldbedifficultorimpossibletofind a replacementcollaboratoronacceptableterms,ifatall.



Ifwecannotcompetesuccessfullyformarketshareagainstotherdrugcompanies,wemaynotachieve sufficientproductrevenues,andourbusinesswillsuffer.



TheHIV/AIDSmarketforourleadproduct,DermaVir,ischaracterizedbyintensecompetition andrapidtechnologicaladvances.Ifanyofourproductcandidatesreceivemarketingapproval,itwillcompetewith anumberofexistingandfuturedrugsandImmuneTherapiesdeveloped,manufacturedandmarketedbyothers.The
extenttowhichDermaViroranyofourother
Productcandidatesachievesmarketacceptancewilldepend inpartonourabilitytocompetewiththeseothercompanies.Competition inthepharmaceuticalandbiotechnology industriesisintenseandhasbeenaccentuated
bytherapidpaceoftechnologydevelopment. Ifourcompetitors
developandcommercializeproductsfasterthanwedo,ordevelopandcommercializeproducts thataresuperiorto ourproductcandidates,ourcommercialopportunitieswillbereducedoreliminated. Existingorfuturecompeting
productsmayprovidegreatertherapeutic convenienceorclinicalorotherbenefitsforaspecificindicationthanour products,ormayoffercomparable performance atalowercost.Ifourproductsfailtocaptureandmaintainmarket
share,wemaynotachievesufficientproductrevenues,andourbusinesswillsuffer.

39







Wecompeteagainstlarger,fullyintegratedpharmaceuticalcompanies,smallercompaniesthatcollaborate withlargerpharmaceuticalcompanies,academicinstitutions,governmentagenciesandotherpublicandprivate researchorganizations.CompaniesthatcurrentlysellHIV/AIDSproductsincludeBristol-MyersSquibbCompany,
F.Hoffmann-LaRocheLtd.,GileadSciences,Inc.,GlaxoSmithKlineplc.,Merck&Co., Inc.,Novartis AG,PfizerInc.,Sanofi-AventisU.S.LLC.
Alternativetechnologiesarebeingdeveloped
toimproveuponorreplacecurrentproductsforthetreatmentofHIV/AIDS,severalofwhichareinclinicaltrialsor areawaitingmarketingapproval. Inaddition,companiespursuingdifferentbutrelatedfieldsrepresentsubstantial competition.Manyofthesecompetitors,eitheraloneortogetherwiththeircollaborative
partners,operatelarger researchanddevelopmentprogramsandhavesubstantiallygreaterfinancialresourcesthanwedo. Additionally, theyhavesignificantlygreaterexperienceindevelopingdrugs,undertakingpre-clinicalstudiesandhumanclinical trials,obtainingEMA andFDAandotherregulatoryapprovalsandformulating,manufacturing,launching,marketingand
sellingdrugs. Theseorganizationsalsocompete
withustoattractqualifiedpersonnel,licenseproprietary technologythatiscompetitivewiththetechnologywearedeveloping,attractfunding,andattractpartiesfor acquisitions,jointventuresorothercollaborations.



Wemaybeexposedtoliabilityclaimsassociatedwithusinghazardousmaterialsandchemicals.



Ourresearchanddevelopmentactivitiesinvolvethecontrolleduseofhazardousmaterialsandchemicals.
Althoughwebelieveoursafetyproceduresforusing,storing,handling,anddisposingofthesematerialscomply
with applicableenvironmentallawsandregulations,wecannoteliminatetheriskofaccidentalinjuryor contaminationfromthesematerials.Intheeventofsuchanaccident,wecouldbeheldliableforresultingdamages,
whichcouldmateriallyadverselyaffectourbusiness,financialconditionandresultsofoperations.Inaddition,laws andregulationsgoverningtheuse,manufacture,storage,handling,anddisposalofhazardousorradioactive
materialsandwasteproductsmayrequireustoincursubstantialcompliancecoststhatcouldmateriallyadversely affectourbusiness,financial
conditionandresultsofoperations.



Wemayincursubstantialliabilitiesandberequiredtolimitcommercializationofourproductsin responsetoproductliabilitylawsuits.



Ourproposedproductscouldbethesubjectofproductliabilityclaims.Afailureofourproductcandidates tofunctionasanticipated,whetherasaresultofthedesignoftheseproducts,unanticipatedhealthconsequencesor sideeffects,ormisuseormishandlingbythirdpartiesofsuchproducts,couldresultininjury.Wemaybeheld liableifseriousadversereactionsfromtheuseofourproductcandidatesoccureitherinclinicaltrialsorin subsequentmarketing.Ifwecannotsuccessfully defendourselvesagainstproductliabilityclaims,wemayincur substantialliabilitiesorberequiredtolimitcommercialization
ofourproductcandidates. Ourinabilitytoobtain sufficientproductliabilityinsuranceatacceptablecostagainstclaimscouldpreventorinhibitthecommercialization
ofbiopharmaceutical
productswedevelop,alone orwithcollaborators.
Wecurrentlycarryclinicaltrialinsurance butdonotcarryproductliabilityinsurance. We,oranycollaborators,maynotbeabletoobtaininsuranceat reasonablecost,ifatall. Agreements
withfuturecollaborators entitlingustoindemnification againstlossesmaynot beadequateifclaimsarise. Wemayalsoberequiredtoindemnify
collaborators againstlossesarisingoutof productliabilityclaims.

THERE
ARE RISKS ASSOCIATED WITH OUR PROPOSED OPERATIONS IN HUNGARY.

Special risks may be associated with
our efforts to undertake operations in the Republic of Hungary. Such operations will be subject to political, economic and other
uncertainties, including among other things, import, export and transportation regulations, tariffs, taxation policy, including
royalty and tax increases and retroactive tax claims, exchange controls, currency fluctuations and other uncertainties arising
out of the Republic of Hungary’s sovereignty over our operations.



40







FLUCTUATION
IN THE VALUE OF THE HUNGARIAN FORINT RELATIVE TO OTHER CURRENCIES MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND/OR AN INVESTMENT
IN OUR SHARES.

We maintain our books in local
currency: U.S. dollars for Power of the Dream and for Genetic Immunity, Inc. in the United States and the Hungarian Forint
for Vidatech and Genetic Immunity, Kft in Hungary. Our operations are conducted primarily outside of the United States
through Vidatech and Genetic Immunity, Kft., our wholly-owned subsidiaries. As a result, fluctuations in currency exchange
rates may significantly affect our sales, profitability and financial position when the foreign currencies, primarily the
Hungarian Forint, of our international operations are translated into U.S. dollars for financial reporting. During 2013, the
Hungarian Forint has fluctuated between HUF 240 and HUF 205 to the U.S. dollar. In addition, we are also subject to currency
fluctuation risk with respect to certain foreign currency denominated receivables and payables. Although we cannot predict
the extent to which currency fluctuations may or will affect our business and financial position, there is a risk that such
fluctuations will have an adverse impact on our sales, profits and financial position. Because differing portions of our
revenues and costs are denominated in foreign currency, movements could impact our margins by, for example, decreasing our
foreign revenues when the dollar strengthens and not correspondingly decreasing our expenses. We do not currently hedge our
currency exposure. In the future, we may engage in hedging transactions to mitigate foreign exchange risk.

OUR
MANAGEMENT TEAM HAS LIMITED EXPERIENCE IN PUBLIC COMPANY MATTERS, WHICH COULD IMPAIR OUR ABILITY TO COMPLY WITH LEGAL AND REGULATORY
REQUIREMENTS.

Our management team has had limited
experience managing a U.S. public company, which could impair our ability to comply with legal and regulatory requirements, such
as the Sarbanes-Oxley Act of 2002 and applicable federal securities laws, including filing on a timely basis required reports and
other required information. Our management may not be able to implement programs and policies in an effective and timely manner
that adequately responds to increased legal or regulatory compliance and reporting requirements imposed by such laws and regulations.
Our failure to comply with such laws and regulations could lead to the imposition of fines and penalties and further result in
the deterioration of our business.

INVESTOR
CONFIDENCE AND THE MARKET PRICE OF OUR SHARES MAY BE ADVERSELY IMPACTED IF WE ARE UNABLE TO ISSUE AN UNQUALIFIED OPINION ON THE
ADEQUACY OF OUR INTERAL CONTROLS OVER OUR FINANCIAL REPORTING.



We are subject to the
reporting requirements of the U.S. Securities and Exchange Commission, or SEC. The SEC, as directed by Section 404 of the U.S.
Sarbanes-Oxley Act of 2002, adopted rules requiring public companies to include a report of management on their internal control
structure and procedures for financial reporting in their annual reports on Form 10-K that contain an assessment by management
of the effectiveness of their internal controls over financial reporting. These requirements first applied to our annual report
on Form 10-KSB for the fiscal year ending on December 31, 2007. Our management may conclude that our internal controls over financial
reporting are not effective. Any failure to implement effective controls, or difficulties encountered in their implementation,
could harm our operating results or cause us to fail to meet our reporting obligations. Even if our management concludes that our
internal controls over financial reporting are effective, our independent registered public accounting firm may issue a report
that is qualified if it is not satisfied with our controls or the level at which our controls are documented, designed, operated
or reviewed, or if it interprets the relevant requirements differently from us. In the event that we are unable to have effective
internal controls, investors and others may lose confidence in the reliability of our financial statements and our ability to obtain
equity or debt financing as needed could suffer.

CONCENTRATION
OF OWNERSHIP AMONG OUR DIRECTORS, EXECUTIVE OFFIERS AND PRINCIAPL SHAREHOLDERS MAY PRESENT NEW INVESTORS FROM INFLUENCE SIGNIFICANT
CORPORATE DECISIONS.

Based upon beneficial ownership
as of December 31, 2013, our directors, executive officers and holders of more than 5% of our common stock, alone or together
with their affiliates own, in the aggregate, approximately 12.% of our outstanding shares of common stock. Our executive
officer, Viktor Rozsnyay, and Peter Boros, Chief Executive Officer of iGlue, Inc., own 100% of our Series A Preferred Stock,
which gives them majority voting power. As a result, these shareholders, will be able to exercise a controlling influence
over matters requiring shareholder approval, including the election of directors and approval of significant corporate
transactions, and will have significant control over our management and policies. Some of these persons or entities may have
interests that are different from yours. For example, these shareholders may support proposals and actions with which you may
disagree or which are not in your interests. The concentration of ownership could delay or prevent a change in control of our
company or otherwise discourage a potential acquirer from attempting to obtain control of our company, which in turn could
reduce the price of our common stock. In addition, these shareholders, some of whom have representatives sitting on our Board
of Directors, could use their voting influence to maintain our existing management and directors in office, delay or prevent
changes of control of our company, or support or reject other management and board proposals that are subject to stockholder
approval, such as amendments to our employee stock plans and approvals of significant financing transactions.



41







WE DEPEND ON KEY EMPLOYEES,
AND IF WE FAIL TO ATTRACT AND RETAIN EMPLOYEES WITH EXPERTISE REQUIRED FOR OUR BUSINESS, WE CANNOT GROW OR ACHIEVE PROFITABILITY.

Wearedependentonourexecutiveofficers and key employees,primarily
Viktor Rozsnyay, our Chief Executive Officer of Power of the Dream, Ildiko Rozsa, Chief Financial Officer of Power of the Dreamand Peter Boros a member of the board of directors.Wedonothave“keyperson”lifeinsurancepoliciesforanyof ourofficers.Thelossofthetechnicalknowledgeandmanagementandindustryexpertiseofanyofourkey personnelcouldresultindelaysinproductdevelopment,lossofcustomersand sales,ifany,anddiversionof managementresources,whichcouldadverselyaffectouroperatingresults. Inaddition,werelyonclinicalandregulatoryadvisorstoassistusinformulatingthedevelopmentstrategy. Ouradvisorshaveotherjobsandcommitments,andmaybesubjecttonon-disclosureobligationsthatmaylimit
theiravailabilitytoworkwithus.





Ifweareunabletohirequalifiedpersonnel,ourabilitytogrowourbusinessmaybeharmed.Wemust hireandretainskilledemployeesinatightlabormarket.



Attractingandretainingqualifiedpersonneliscriticaltooursuccess.Weneedtohireadditionalqualified personnelwithexpertiseinbasicandclinicalresearch,governmentregulation,formulationandmanufacturing,and salesandmarketing.Wewillrequireadditionalscientificpersonnelinmanyfields,someofwhichareaddressedby relativelyfewcompanies. Asaresult,dependinguponthesuccessandthetimingofclinicaltrials,wemay experiencedifficultyinhiringandretaininghighlyskilledemployees.



Wecompeteforqualifiedindividualswithnumerouspharmaceuticalandbiotechnologycompanies, universitiesandotherresearchinstitutions,someofwhicharemoreestablishedthanweareandhavetheabilityto paymorecashcompensationthanwedo.Competitionforsuchindividuals,particularlyinBudapest,Hungary,isintense,andwecannot becertainthatoursearchforsuchpersonnelwillbe successful. Ifweareunabletohireandretainskilledscientists,ourbusiness,financialcondition,operatingresults andfuture prospectscouldbemateriallyadverselyaffected.

42







Ifweareunabletoobtainadequateinsurance,ourfinancialconditioncouldbeadverselyaffectedinthe eventofuninsuredorinadequatelyinsuredlossordamage.Ourabilitytoeffectivelyrecruitandretainqualified officersanddirectorscouldalsobeadverselyaffectedifweexperiencedifficultyinobtainingadequatedirectors’ andofficers’liabilityinsurance.



Wemaynotbeabletoobtaininsurancepoliciesontermsaffordabletousthatwouldadequatelyinsureour businessandpropertyagainstdamage,lossorclaimsbythirdparties.Totheextentourbusinessorpropertysuffers
anydamages,lossesorclaimsbythirdparties,whicharenotcoveredoradequatelycoveredbyinsurance,
our financialconditionmaybemateriallyadverselyaffected.



Wemaybeunabletomaintainsufficientinsuranceasapubliccompanytocoverliabilityclaimsmade againstourofficersanddirectors.Ifweareunabletoadequatelyinsureourofficersanddirectors,wemaynotbe abletoretainorrecruitqualifiedofficersanddirectorstomanageus.

OUR
COMPLIANCE WITH CHANGING LAWS AND RULES REGARDING CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE MAY RESULT IN ADDITIONAL EXPENSES
TO US WHICH, IN TURN, MAY ADVERSELY AFFECT OUR ABILITY TO CONTINUE OUR OPERATIONS.

Keeping abreast of, and in compliance
with, changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley
Act of 2002, new SEC regulations and, in the event we are ever approved for listing on either NASDAQ or a registered exchange,
NASDAQ and stock exchange rules, will require an increased amount of management attention and external resources. We intend to
continue to invest all reasonably necessary resources to comply with evolving standards, which may result in increased general
and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.
This could have a materially adverse effect on our ongoing operations.



Risks Related to Regulatory Environment



NONE OF OUR PRODUCT CANDIDATES HAVE BEEN
APPROVED BY E.U., U.S., AND/OR WORLDWIDE REGULATORY AUTHORITIES FOR COMMERCIAL SALE, AND WE MAY NEVER RECEIVE SUCH APPROVALS. OBTAINING
AND MAINTAINING THE NECESSARY E.U. OR U.S. AND/OR WORLDWIDE MARKETING APPROVALS FOR OUR PRODUCT CANDIDATES MAY BE TIME CONSUMING,
DIFFICULT, COMPLEX AND COSTLY, PARTICULARLY SINCE OUR LEAD PRODUCT AND OTHER PRODUCT CANDIDATES ARE COMBINATION PRODUCTS BASED
ON NOVEL MECHANISMS OF ACTION. IF WE FAIL TO OBTAIN AND MAINTAIN THE NECESSARY APPROVALS, WE WILL BE UNABLE TO COMMERCIALIZE OUR
PRODUCT CANDIDATES.



Noneofourproductcandidateshavebeenapprovedbythe E.U. orU.S.orworldwideregulatoryauthoritiesfor commercialsale,andwemayneverreceivesuchapprovals.Allofourproductcandidatesareinpre-commercial
stages,andwedonotexpectanyofourproductcandidatestobecommerciallyavailableforseveralyears, ifatall. Governmentregulationsinthe E.U. or theU.S.andothercountrieshaveasignificantimpactonourbusinessandaffectresearch
anddevelopment,manufactureandmarketingofourproducts.WewillneedEMA andFDAapprovaltocommercialize our productcandidatesintheE.U, theU.S.,andapprovalsfromsimilarforeignregulatoryauthoritiestocommercialize our productcandidatesinothersuchjurisdictions.InordertoobtainEMA andFDAmarketingapprovalofaproductcandidate, wemustsubmittothe EMA and theFDAaBiologicsLicenseApplication(a“BLA”)demonstrating,
tothesatisfactionofthe EMA and the FDAandotherregulatoryauthorities,thattheproductcandidateissafeforhumansandeffectiveforitsintended use. Thisdemonstrationrequiressignificantlaboratoryresearchandanimal
tests,whicharereferredtoaspre- clinicalstudies,aswellasadequateandwell-controlled humantests,whicharereferredtoasclinicaltrials. These studiesandtrialsmaybetimeconsuming,difficultandcostly,andwecannotpredictwhetherourresearchand clinicalapproacheswillresultinproductsthe
EMA, theFDAandotherregulatoryauthoritiesconsidersafeforhumansand effectiveforindicateduses. The EMA and theFDAhassubstantialdiscretion,tobeexercisedinthepublicinterest,inthe approvalprocess,andmayeitherrefusetoacceptourapplication,ormaydecideafterreviewthatourdataare insufficienttoallowapproval.



43





CertainclinicaltrialsforDermaVirwillbeconductedinEurope. AlthoughtheFDAmayacceptaforeignclinicaltrialtosupportapprovalofaBLA,thetrialmustbewell- designed,well-conducted,performedbyqualifiedinvestigatorsinaccordancewithinternationalprinciplesforGood ClinicalPractice(“GCP”),andmustconformtotheethicalprinciplescontainedintheDeclarationofHelsinki,or withthelawsandregulationsofthecountryinwhichtheresearchwasconducted,whicheverprovidesgreater protectionofthehumansubjects.TheEMA and theFDAhassubstantialdiscretionindecidingwhethertoacceptdatafromour foreignclinicaltrials,andiftheagencydoesnotacceptsuchdata,ourproductdevelopmentand commercializationeffortsfor theDermaVirorourotherproductcandidatescouldbecurtailedorsignificantly delayed.



OncewesubmitourBLA,therecanbenoassurancethattheBLAwillbeacceptedforfilingorthatthe FDAmaynotissueaRefusaltoFile(“RTF”),ifitbelievesthefilingisinadequateorincomplete.EveniftheFDA acceptstheBLAforfiling,dataobtainedfrompre-clinicalstudiesandclinicaltrialsaresusceptibletovarying interpretations.IftheFDAdisagreeswithourinterpretationanddoesnotacceptorapproveourapplication,itmay requireustoconductadditionalpre-clinicalstudies,clinicaltrials,ormanufacturingstudiesandsubmitthatdata beforeitwillreconsiderourapplication,orrequireustoperformpost-approvalstudies. Delaysinobtaining regulatoryapprovalswillmostlikelydelaycommercialization
of,andourabilitytoderiveproductrevenuesfrom, ourproductcandidates,impose costlyproceduresonus,anddiminishthecompetitiveadvantagesthatwemay otherwiseenjoy.



Ourleadproductcandidate,DermaVir,andourotherproductcandidates,areimmunetherapies,
whichutilizeanovelmechanismofaction.Therefore,regulatoryagenciesmaylackexperiencewiththem,which maylengthentheregulatoryreviewprocess,increaseourdevelopmentcostsanddelayorpreventour commercializationofDermaVirandourotherImmuneTherapyProductsunderdevelopment.Todate,the EMA nor the FDAhasnotapprovedforcommercialsaleintheU.S.anyImmuneTherapyproductdesignedtostimulatean immuneresponseagainstHIV. Consequently,thereisnoprecedentforthesuccessfulcommercialization of productsbasedonourtechnologiesinthisarea.

Forourleadcandidate,weintendtoseekfasttrackdesignation,and conditional marketingapproval,and
priorityreviewdesignation,allofwhicharevariousregulatoryprocessesintendedtoacceleratedrugdevelopment,
review,orapprovalforanyProductcandidates.Fasttrackdesignationisaregulatorymechanismintendedto facilitatethedevelopmentandexpeditethereviewofproductsintendedforthetreatmentofseriousorlife- threateningconditionsandthatdemonstratethepotentialtoaddressanunmetmedicalneedforsuchacondition. Acceleratedmarketingapprovalisreservedforaproductthatdemonstratesameaningfultherapeuticadvantageover existingtreatmentsorshowsthepotentialtoaddressanunmetmedicalneedinaseriousorlife-threatening condition. Insomecases,aproductreceivingacceleratedapprovalmaybeapprovedonthebasisofasurrogate measureofbenefit,inwhichcasefurtherclinicaltrials(aspost-approvalcommitments)
aregenerallyrequiredto furtherdefinethesafetyandefficacyoftheproduct.PriorityreviewdesignationwouldallowDermaVirto
bereviewedinashortertimeframe. Therecanbenoassurance,however,thattheFDAwillgrantDermaVir fasttrackdesignationoracceleratedapprovalorwillawardtheBLApriorityreview. Further,theseregulatory processesdonotchangethestandardsforapprovalanddonotguaranteethatourproductwillbeapproved.



WehavelimitedexperienceindevelopingourImmuneTherapyproducts,whichconsistofnanoparticles
assembledfromplasmidDNAandapolymerwithspecialproperties.Duetotheirspecialproperties,nanomedicine formulationsmayposedifferentissuesthannon-nanoscaleproducts.Itisunknownwhetherthenanoscalesizeof theseproductsmaymagnifysafetyandeffectivenessissues.Wealsodonotknowwhethertheuseofnanoscale
materialsmaychangetheregulatorystatusofourproducts.TheFDAmayrequireustoconductadditional toxicologytestsandclinicaltrialstoconfirmthesafetyandeffectivenessofournanomedicineProductcandidates, whichwouldimpactourdevelopmentplan.



EvenifwecomplywithallEMA andFDArequestsfordataandinformation,theEMA or theFDAmayultimatelydetermine, underitsstatutoryauthority,torejectoneormoreofourBLAs.Wecannotbecertainthatwewilleverobtain regulatoryapprovalorclearanceforanyproductcandidate.FailuretoobtainEMA and/orFDAapprovalorclearanceofanyof ourprincipalproductcandidateswillseverelyundermineourbusinessbyreducingournumberofsaleableproducts and,therefore,correspondingproductrevenues. Evenifourproductcandidatesobtainmarketingapproval,theEMA and theFDA mayimposerestrictionsontheapprovedindicationsordistributionoftheproduct.
Also,theEMA and theFDAmightapprove
oneormoreofourproductcandidatesfor marketingbutmayalsoapprovecompetitors’productswith characteristics
thatoffertheirowntreatmentadvantages.

44







Ourleadproductalsoisacombinationproductandincludesanewmedicaldevicethatmayrequiremedical
deviceclearanceorapprovalseparatefromthebiologicsapproval.Thisclearanceorapprovalwillneedtobe obtainedfromagroupwithintheEMA and theFDA,whichmay bedifferentfromthegroupactingontheBLA.Thismakesthe approvalprocessmorecomplexandcoulddelayapproval.



Inforeignjurisdictions,approvalfromtheappropriateregulatory,pricingandreimbursementauthorities mustbeobtainedbeforecommercializationandmarketingofourProductscanbegin.Theseprocessesgenerally includealloftherisksassociatedwithEMA andFDAprocedures. Pursuingforeignapprovalswillbetime-consuming and expensive.
Regulationsvaryamongcountries,andforeignauthoritiesmayrequiredifferentoradditionalclinical trialsthanthose
requiredtoobtain EMA andFDAapproval.



OurProductcandidates,includingourleadProductcandidate,arecombinationproductscomprisedofa biologicandmedicaldevicecomponent.Wecannotbesurehowthe EMA and theFDAwillregulateourproductcandidates. TheEMA and theFDAmayrequireustoobtainmarketingclearanceandapprovalfromtwodifferentEMA andFDAcenters.The reviewofcombinationproductsisoftenmorecomplexandmoretimeconsumingthanthereviewofproduct candidatesunderthejurisdictionofonlyonecenterwithintheEMA and theFDA.



Ourproductcandidates requireEMA andFDAauthorizationbymeansofanapprovalorclearancepriortomarketing. Someofourproductcandidates,includingDermaVir,willlikelyberegulatedascombinationproducts. Foracombinationproduct,theEMA and theFDAmustdeterminewhichcenterorcenterswithintheEMA and theFDAwillreviewtheproduct candidateandunderwhatlegalauthoritytheproductcandidate
willbereviewed.Wearecurrentlydevelopingour regulatorystrategieswithrespecttowhichregulatorypathwaywillbenecessarytoobtainclearanceorapprovalof theDermaPrepcomponentofDermaVir,ifmedicaldeviceclearanceorapprovalisrequiredatall. Based ondiscussionswiththeFDAwebelievethatthebiologiccomponentofDermaVirwillbereviewedbythe CenterforBiologicsEvaluationandResearch(“CBER”)andthattheDermaPrepdevicemaybereviewedbythe CenterforDevicesandRadiologicalHealth(“CDRH”)eitherinconsultationwithCBERaspartoftheBLAor separatelyasamedicaldevice. TheprocessofobtainingFDAmarketingclearanceorapprovalislengthy,
expensive,anduncertain,andwecannotbesurethatourbiologic-devicecombinationproductcandidates,orany
otherproductcandidates,willbeclearedorapprovedinatimelyfashion,oratall. Inaddition,thereviewof combinationproductsisoftenmorecomplexandmoretimeconsumingthanthereviewofaproductcandidateunder
thejurisdictionofonlyonecenterwithintheFDA. Wecannotbe surethattheFDAwillnotselecttohaveour combinationproductsreviewedandregulatedbyonlyoneFDAcenterand/ordifferentlegalauthority,inwhichcase thepathtoregulatoryapprovalwouldbedifferentandcouldbemorelengthyandcostly.
IftheFDAdoesnot approveorclearourproductcandidatesinatimelyfashionoratall,ourbusinessandfinancialconditionwillbe adverselyaffected.



Wehaveonlylimitedexperienceinregulatoryaffairs,andsomeofourproductcandidatesarebasedon novelmechanismsofaction.Thesefactorsmayaffectourabilityorthetimewerequiretoobtainnecessary marketingapprovals.



Wehaveonlylimitedexperienceinpreparingandfilingtheapplicationsnecessarytogainmarketing approvals.Moreover,someofourproductcandidatesarebasedonnovelmechanismsofactionthathavenotbeen
extensivelytestedinhumans.Theregulatoryrequirementsgoverningthesetypesofproductcandidatesmaybeless welldefinedormorerigorousthanforconventionalproducts.Asaresult,wemayexperiencealongerregulatory processinconnectionwithobtainingmarketingapprovalsofanyproductsthatwedevelop.



Ourproductcandidateswillremainsubjecttoongoingregulatoryrequirementseveniftheyreceive marketingapproval,andifwefailtocomplywiththeserequirements,wecouldlosetheseapprovals,andthesales ofanyapprovedcommercialproductscouldbesuspended.



45







Evenifwereceiveapprovaltomarketaparticular
productcandidate, theproductwillremainsubjectto
extensive regulatoryrequirements,including
requirementsrelatingtomanufacturing,labeling,packaging, adverse
eventreporting, storage,advertising,
promotion,
productdeviation
reporting,distributionand
recordkeeping.Even
ifmarketing
approvalisgranted,itmaycontain
requirementsforcostly
post-approvaltestingandsurveillance
tomonitorthesafety
orefficacy
oftheproduct,
whichcould
negatively impact
usorourcollaboration
partnersby
reducing revenues orincreasing
expenses,and
causetheapprovedproduct
candidatenotto
becommerciallyviable.
Inaddition, asclinicalexperience
withabiologic,
drugormedicaldevice
expandsafterapprovalor
clearance, typicallybecauseitis
usedbya
greaternumberandmore
diverse groupofpatients
afterapprovalthan
during clinicaltrials,side
effectsand
otherproblemsmay
beobservedafterapproval
thatwere
notseenoranticipated
duringpre-approval
clinicaltrialsorother
studies.
Anyadverseeffectsobservedaftermarketing
ofaproductcould
resultinlimitations
onthe
useoforwithdrawal
ofsuch
productfromthemarketplace.
Absence oflong-termsafety
datamay
alsolimit
theapproved usesofour
products,ifany.
Ifwefail
tocomply
withthe
regulatoryrequirements
oftheEMA and theFDAand
otherapplicable E.U.,
U.S.andforeign
regulatory authorities,
orpreviously unknownproblems
withany approvedcommercial
products,manufacturers
ormanufacturing
processes
arediscovered,
wecould
besubjectto
administrative orjudicially
imposed sanctions
orother
setbacks,including
thefollowing:



| | · | restrictionsontheproducts,manufacturersormanufacturingprocess;
| | - | --------------------------------------------------------------

| | · | civilorcriminalpenalties,finesand/orinjunctions;
| | - | ------------------------------------------------

| | · | unanticipatedexpenditurestoaddressordefendsuchactions;
| | - | ------------------------------------------------------

| | · | productseizuresordetentions;
| | - | ----------------------------

| | · | ordersforphysiciannotificationordevicerepair,replacementorrefund;
| | - | -----------------------------------------------------------------

| | · | importorexportbansorrestrictions;
| | - | ---------------------------------

| | · | voluntaryormandatoryproductrecallsandrelatedpublicityrequirements;
| | - | ------------------------------------------------------------------

| | · | suspensionorwithdrawalofregulatoryclearancesandapprovals;
| | - | ---------------------------------------------------------

| | · | totalorpartialsuspensionofproduction;and
| | - | ----------------------------------------

| | · | refusaltoapprovependingapplicationsformarketingapprovalorclearanceofnewproductsor supplementstoapprovedapplications.
| | - | --------------------------------------------------------------------------------------------------------------------



Ifanyoftheseactionsweretooccuritwouldharmourreputationandcauseourproductsalesand profitabilitytosufferandmightpreventusfromgeneratingrevenue.Furthermore,ourkeycomponentsuppliers maynotcurrentlybeormightnotcontinuetobeincompliancewithallapplicableregulatoryrequirements,which couldresultinourfailuretoproduceourproductsonatimelybasisandintherequiredquantities,ifatall.



Inaddition,iftheEMA and theFDAbecomesawareofnewpost-approvalsafetyinformation,theEMA andFDAisauthorizedto requireustoconductpostapprovalstudies,includingclinicaltrialstoinvestigateknownseriousrisksorsignalsof seriousrisks,oridentifyingunexpectedseriousrisks.Ifwearerequiredtoconductsuchstudies,wemustsubmit
periodicstatusreportstothe
EMA andFDA.Failuretoconductsuchpost-approvalstudiesinatimelymannermayresultin substantialcivilfines.



Ifweorourcollaboratorsareslowtoadapt,orareunabletoadapt,tochangesinexistingregulatory requirementsoradoptionofnewregulatoryrequirementsorpolicies,marketingapprovalforourproductcandidates maybelostorceasetobeachievable,resultingindecreasedrevenuefrommilestones,productsalesorroyalties, whichwouldhaveamaterialadverseeffect onourresultsofoperations.



Wemaybesubjecttofines,penaltiesorinjunctionsifwearedeterminedtobepromotingtheuseofour productsforunapprovedor“off-label”uses.



OurpromotionalmaterialsandtrainingmethodsmustcomplywithEMA andFDAandotherapplicablelawsand regulations.IftheEMA andFDAdeterminesthatourpromotionalmaterialsortrainingconstitutespromotionofan unapproveduseofourproductcandidates,itcouldrequestthatwemodifyourtrainingorpromotionalmaterialsor subjectustoregulatoryorenforcementactions,including
theissuanceofanuntitledletter,awarningletter, injunction,seizure,civilfineandcriminalpenalties.Itisalsopossiblethatotherfederal,stateorforeign enforcementauthoritiesmighttakeactioniftheyconsiderourpromotionalortrainingmaterialstoconstitute promotionofanunapproved
use,whichcouldresultinsignificantfinesorpenalties underotherstatutoryauthorities,
suchaslawsprohibitingfalseclaimsforreimbursement.
Inthatevent,ourreputationcouldbedamagedand adoptionoftheproductswouldbeimpaired.



46





Ifthethirdpartiesonwhichwerelytoconductourclinicaltrialsandtoassistuswithpre-clinical developmentdonotperformascontractuallyrequiredorexpected,wemaynotbeabletoobtainregulatory
approvalfororcommercializeourproducts.



Wedonothavetheabilitytoindependentlyconductsomeofourpre-clinicalstudiesandclinicaltrialsfor ourproductsandwemustrelyonthirdparties,contractresearchorganizations,medicalinstitutions,clinical investigatorsandcontractlaboratoriestoconductsuchstudies.Althoughwerelyonthirdpartiestoconductourpre- clinicalstudiesandclinicaltrials,wearenotrelievedfromtheresponsibilityofensuringthatsuchstudiesandtrials areconductedinaccordancewithregulatoryrequirements.Somepre-clinicalstudiesmustcomplywithcurrent GoodLaboratoryPractice(“cGLP”)requirements.Clinicaltrialsmustbeconductedinaccordancewiththe investigational planandprotocol,aswellascurrentGoodClinicalPractice(“cGCP”)requirementsforconducting, monitoring,maintainingrecords,and reportingadverseeventsandtheresultsofclinicaltrialstoensure,among
otherthings,thatthedataandresultsarescientificallycredibleandaccurateandthatthetrialsubjectsareadequately informedofthepotentialrisksofparticipatinginclinicaltrials. Ourrelianceonthirdpartiestoconductpre-clinical studiesandclinicaltrialsdoesnotrelieveusoftheresponsibilityforcomplyingwithregulatoryobligations.Ifthese
thirdpartiesdonotsuccessfullycarryouttheircontractualdutiesorregulatoryobligationsormeetexpected deadlines,ifthesethirdpartiesneedtobereplaced,orifthequalityoraccuracyofthedatatheyobtainis
compromisedduetothefailuretoadheretoourclinicalprotocolsorregulatoryrequirementsorfor
otherreasons,
ourpre-clinicaldevelopmentactivitiesorclinicaltrialsmaybeextended,delayed,suspendedorterminated,andwe maynotbeabletoobtainregulatoryapprovalfor,orsuccessfully commercialize, ourproductsonatimelybasis,if atall,andourbusiness,operatingresultsandprospectsmaybeadverselyaffected.Furthermore,ourthirdparty clinicaltrialinvestigatorsmaybedelayedinconductingourclinicaltrialsforreasonsoutsideoftheircontrol.



Weandourcontractmanufacturersaresubjecttosignificantregulationwithrespecttomanufacturing ofourproducts.



Allofthoseinvolvedinthepreparationofabiologicormedicaldeviceforclinicaltrialsorcommercial
sale,includingourexistingthirdpartysuppliersandmanufacturers,aresubjecttoextensiveregulation.Thefinishedproductanditscomponentsusedforcommercialsaleorinclinicaltrialsmustbemanufacturedin accordancewithcurrentGoodManufacturingPractices(“cGMP”),aseriesofcomplexregulationsand recommendations
inguidancedocuments.ThemedicaldevicecGMPsarecodifiedintheQualitySystem Regulation(“QSR”)promulgatedbytheFDA.
ThecGMPandQSRrequirementsgovernmanufacturing
processes andproceduresandtheimplementation
andoperationofqualitysystems tocontrolandassurethequalityof investigational productsandproductsapprovedforcommercialdistribution. Ourfacilitiesandqualitysystemsand thefacilitiesandqualitysystemsofourthirdpartysuppliersandmanufacturersmaybesubjecttoapre-approval inspectionforcompliancewiththeapplicableregulationsasaconditionofFDAapprovalofDermaViror anyofourotherpotentialproducts. Inaddition, theFDAortheEuropean MedicinesAgency(“EMA”)may,atanytime,auditorinspectamanufacturing facilityinvolvedwiththepreparationofour products,itscomponents,orourotherproductcandidatesortheassociatedqualitysystemsforcompliancewiththe regulationsapplicabletotheactivitiesbeingconducted.Ifanysuchinspection
orauditidentifiesafailuretocomply
withapplicableregulationsorifaviolationofourproductspecificationsorapplicableregulationoccursindependent
ofsuchaninspectionoraudit,weortheFDAmayrequireremedialmeasuresthatmaybecostlyand/ortime consumingforusorathirdpartytoimplementandthatmayincludethetemporaryorpermanentsuspensionofa clinicaltrialorcommercialsalesorthetemporaryorpermanentclosureofafacility. MaterialviolationsofcGMP orQSRrequirementscouldresultinregulatorysanctionsand,inseverecases,couldresultinamandatedclosureof ourorourthirdparty’sfacilities. Anysuchremedialmeasures imposeduponusorthirdpartieswithwhomwe contractcouldharmourbusiness.



Ourproductsmayinthefuturebesubjecttoproductrecallsthatcouldharmourreputation,business andfinancialresults.



TheEMA,FDAandsimilarforeigngovernmental
authoritieshavetheauthority
torequiretherecallof
commercialized productsintheevent
ofmaterialdeficiencies,safetyissues,ordefectsindesignormanufacture. Manufacturersmay,
undertheirowninitiative,recallaproductifanymaterial
deficiency,orsafetyissueina
productisfound.Recallsofanyofourproductswoulddivert managerialandfinancialresourcesandhavean
adverseeffect
onourfinancial
conditionand
resultsofoperations.
Afuturerecallannouncement
couldharmour reputationwithcustomersand negatively
affectour sales. In
addition,the
EMA and FDAcould
take enforcementaction
againstusifsuchrecall
istheresultoffailure(s)
tocomply
withapplicableregulatoryrequirements,
orifwefail
to reportthe
recallswithinrequired
timeframes.





47









FAILURE TO OBTAIN MARKETING APPROVAL
IN ADDITIONAL FOREIGN JURISDICTIONS WILL PREVENT US FROM EXPANDING THE COMMERCIALIZATION OF OUR PRODUCTS ABROAD.



Weintendtomarketourproductsinanumberofinternationalmarkets.Inordertomarketourproductsin foreignjurisdictionswemustobtainseparateregulatoryapprovals.Theapprovalprocedurevariesamong jurisdictionsandcaninvolvesubstantialadditionaltesting.ApprovalorclearancebytheEMA and theFDAdoesnotensure approvalbyregulatoryauthoritiesinotherjurisdictions,andapprovalbyoneforeignregulatoryauthoritydoesnot ensureapproval byregulatoryauthoritiesinotherforeignjurisdictions orbytheFDA. Theforeignregulatory approvalprocessmayincludealloftherisksassociatedwithobtainingEMA orFDAapprovalinadditiontootherrisks. In addition,thetimerequiredtoobtainforeignapprovalmaydifferfromthatrequiredtoobtain EMA andFDAapprovalandwe maynotobtainforeignregulatoryapprovalsonatimelybasis,ifatall.



FEDERAL REGULATORY REFORMS MAY
ADVERSELY AFFECT OUR ABILITY TO SELL OUR PRODUCTS PROFITABLY.



Fromtimetotime,legislationisdraftedandintroducedintheEuropean Union and in theUnited
StatesCongress(“Congress”)thatcould significantlychangethestatutoryprovisionsgoverningthemarketingapproval,manufactureandmarketingofa regulatedproduct.Inaddition,EMA andFDAregulationsandguidanceareoftenrevisedorreinterpretedbytheagencyin waysthatmaysignificantlyaffectourbusinessandourproducts.Itisimpossibletopredictwhetherlegislative
changeswillbeenactedor EMA andFDAregulations,guidanceorinterpretations changed,andwhattheimpactofsuch changes,ifany,maybe.



Withoutlimitingthegeneralityoftheforegoing,Congresshasrecentlyenacted,andthePresidenthas signedintolaw,theFoodandDrugAdministrationAmendmentsActof2007(the“FDAAmendments”).TheFDA Amendmentsrequirecertaininformationaboutclinicaltrialsforbiologicalproducts,including adescriptionofthe trial,participationcriteria,locationoftrialsites,andcontactinformation,tobesenttotheNationalInstitutesof Health(“NIH”)forinclusioninapublicly-assessable
database. WealsowillberequiredtosubmittotheNIHthe
resultsofcertainclinicaltrials,otherthanPhaseIstudies,forourbiologicalproducts. Onceimplemented,
compliancewiththoseregulationsmayrequireus totakeadditionalstepsinthedevelopmentandmanufactureof ourproductsandlabeling. Thesestepsmayrequireadditionalresourcesandcouldbecostly.



Inaddition,Congresscouldtakeactiontocreateanabbreviatedregulatorypathwayforbiologicalproducts. Ifthisweretooccur,thenourProductsmaybesubjecttocompetitionfromfollow-onversions.



Theregulatoryclimateforfollow-onversionsofbiologicalproductsapprovedunderaBLAintheU.S. remainsuncertain.Currently,thereisnoestablishedstatutoryorregulatorypathwayfortheabbreviatedapprovalof follow-onor“generic”versionsofbiologicalproductsapprovedunderaBLA.However,membersofCongress recentlyintroducedlegislationtoestablishalegalpathwaytoapprovefollow-onversionsofapprovedBLA products.Weareuncertainastowhenanysuchprocessmaybeadoptedorhowsuchaprocesswouldrelatetoour intellectualpropertyrights,butanysuchprocesscouldhaveamaterialeffectontheprospectsofourproducts.



Risks Related to Biologics Regulation



TheDermaViristheonlyProductwearecurrentlytestinginclinicaltrialsanditmayneverbe successfullycommercializediftheseclinicaltrialsarenotsuccessful.



Ourleadproductcandidate,DermaVir,istheonlyproductwearetestinginclinicaltrials anditmayneverbesuccessfullycommercializediftheseclinicaltrialsarenotsuccessful.Theclinicaltrials requiredbytheEMA and theFDAforDermaVirarelongandcomplex.Currently,thisproductcandidateiscompleted Phase IIclinicaltestingonalimitednumberofsubjectsasdescribedbelow.

48







ItalsoispossibletheFDAortheEMAwillrequireustoconductmoreextensivenon-clinicalstudiesthan wecurrentlyanticipatebeforetheywillconsiderourproductsformarketingapproval.Someofourfuturetrialsalsomayinvolvetreatmentfordurationsthataresignificantlylongerthanthose wehavetestedthusfar.Thelonger-termtrialscouldrevealsafetyorotherissuesthatcouldadverselyaffect marketingapproval.Wemayneedtocommitsubstantialtimeandadditionalresourcesinordertoconductfurther
clinicaltrialsbeforewecansubmitaBLAwithrespecttoanyoftheseproductcandidates.Wecannotpredictwith anycertaintyiforwhenwemightsubmitaBLAforregulatoryapproval
ofanyofourproductcandidates.



CLINICAL TRIALS ARE TIME-CONSUMING,
DIFFICULT AND COSTLY TO DESIGN AND IMPLEMENT.



Beforewecanobtainmarketingapprovalforthecommercialsaleofanyofourproductcandidates,weand
ourcollaboratorsarerequiredtocompleteextensivehumanclinicaltrialstodemonstrate,tothesatisfactionofthe EMA, the FDAandotherregulatoryauthorities,thatourproductcandidatesaresafeandeffectiveforuseinhumans.In addition,ifwechoosetomakeclaimsofsuperiorityovercurrentlymarketed competitiveproducts,wemust
substantiatethoseclaimswithscientificevidencefromprospectivelydesignedhead-to-headclinicaltrials.Human clinicaltrialsareexpensiveanddifficulttodesignandimplement,inpartbecausethesciencebehindthemis complexandtheyarethereforesubjecttorigorousregulatoryrequirements.Intheeventweincorrectlydesignor carryoutclinicaltrialsorthoseclinicaltrialsfailtodemonstratestatisticallyclinicalsignificance,wearenotlikely tobeabletoobtain EMA andFDAapprovalforourproductcandidates.
Further,themedical,regulatoryandcommercial
environmentforbiopharmaceutical
products,orbiologics,changesquicklyandofteninwayswemaynotbeableto accuratelypredict.
Theclinicaltrialprocessisalsotime-consuming.
Weestimatethatclinicaltrialsofourlead
productcandidate,theDermaVir,willtakeatleastseveralmoreyearstocomplete.
Furthermore,asfailure canoccuratanystage,wecouldencounterproblemsthatcauseustoabandonorrepeatclinicaltrials.The commencement
andcompletionofclinicaltrialsmaybedelayedorsuspendedbythesponsor,regulatoryauthorities,
andethicscommitteesbasedonmanyfactors,includingthefollowing:



| | · | changes in regulatory requirements;
| | - | -----------------------------------

| | · | delays in obtaining regulatory authorizations to commence a clinical trial;
| | - | ---------------------------------------------------------------------------

| | · | delays in identifying and reaching agreement on acceptable terms with prospective
clinical trial sites;
| | - | -------------------------------------------------------------------------------------------------------

| | · | delay or failure in obtaining Institutional Review Board (“IRB”)
review and approval of the clinical trial protocol;
| | - | --------------------------------------------------------------------------------------------------------------------

| | · | unforeseen safety issues and side effects;
| | - | ------------------------------------------

| | · | determination of dosing issues;
| | - | -------------------------------

| | · | lack of effectiveness in clinical trials;
| | - | -----------------------------------------

| | · | slower than expected patient recruitment;
| | - | -----------------------------------------

| | · | inability to monitor patients adequately during or after treatment;
| | - | -------------------------------------------------------------------

| | · | inability or unwillingness of medical investigators to follow our clinical
protocols and current cGCP requirements;
| | - | -------------------------------------------------------------------------------------------------------------------

| | · | inability to maintain a sufficient supply of the investigational product to
support the trials;
| | - | -----------------------------------------------------------------------------------------------

| | · | suspension or termination of clinical trials for noncompliance with regulatory
requirements; and
| | - | ------------------------------------------------------------------------------------------------

| | · | changes in clinical care protocols and standards of care within the institutions
in which our trials take place.
| | - | ----------------------------------------------------------------------------------------------------------------



Anumberofcompaniesinthebiologicsandmedicaldeviceindustryhavesufferedsignificantsetbacksin
advancedclinicaltrialsdespitepromisingresultsinearliertrials.Forthesamereason,wemaybeunabletodevelop
marketableproducts.





Delaysinpatientenrollmentforclinicaltrialscouldincreasecostsanddelayanyregulatoryapprovals.



Therateofcompletion
ofourclinical
trialswilldepend
ontherateofpatientenrollment.
Theremaybe
substantialcompetition
toenrollpatientsinclinicaltrialsforourproducts
indevelopment.
Thiscompetition
has delayedclinicaltrialsofother
biopharmaceuticalanddrugdevelopment companies.
Inaddition,recent improvements
inexistingdrug therapy,
particularlyformedical
productsforthetreatment
of HIV/AIDS,maymake
itmore
difficultfor
usto enrollpatientsin
ourclinical trials asthe
patientpopulationmay
chooseto
(i) remainwith
existingdrugtherapies,
(ii)enroll
inclinicaltrials
sponsoredby other
companies,
or (iii)switchtoalternative
therapies. Delays
in patientenrollment
canresult inincreaseddevelopment
costsand
delaysinregulatory
approvals.





49









TheresultsofourclinicaltrialsmaynotsupportourProductcandidateclaimsormayresultinthe discoveryofadversesideeffects.



Evenifourclinicaltrialsarecompletedasplanned,wecannotbecertainthattheirresultswillsupportour Productcandidateclaimsorthatthe EMA,FDAorforeignauthoritieswillagreewithourconclusionsregardingthem. Successinpre-clinicalstudiesandearlyclinicaltrialsdoesnotensurethatlaterclinicaltrialswillbesuccessful,and wecannotbesurethatthelatertrialswillreplicatetheresults ofpriortrialsandpre-clinicalstudies.Theclinical trialprocessmayfailtodemonstratethatourproductcandidatesaresafeforhumansorthattheyareeffectiveforthe proposedindicateduses,whichcouldcauseustoabandonaproductcandidateandmaydelaydevelopmentof others.Anydelayorterminationofourclinicaltrialswilldelaythefilingof ourBLAsand,ultimately,ourabilityto commercializeourproductcandidatesandgeneraterevenues.Itisalsopossiblethatpatientsenrolledinclinical trialswillexperienceadversesideeffectsthatarenotcurrentlypartoftheproductcandidate’sprofile.Inaddition, ourclinicaltrialsfortheDermaVirinvolvearelativelysmallpatientpopulation.Becauseofthesmallsample
size,theirresultsmay notbeindicativeoffutureresults.



Inanydrugdevelopmentprogram,itistypicallyduringthepivotallargePhaseIIIclinicaltrials,whenlarge numbersofpatientsaretested,thatthemostreliableinformationonsideeffectsiscollected.Wehavenotreached
thisdevelopmentstageyet,andwecannotaccuratelypredictifpivotalclinicaltrialswithourleadProduct DermaVir,willrevealunexpectedsideeffects.Occurrenceofanyside effectcoulddelayorterminatefurther developmentandhamperorpreventregulatoryapprovalormarketingofourproduct.



WewillneedtodemonstratethattheDermaVirPRODUCTmanufacturedatourownfacilityiscomparableto theProductusedinclinicaltrials.



Inadditiontoincreasedproductionefforts,wemaymakemanufacturingchangestothecomponentsorto themanufacturingprocessforDermaVir.Thesechangescouldresultindelaysinthedevelopmentor marketingapprovaloftheDermaVirandinreductionorinterruptionofcommercialsales,iftheproductis approved,anyofwhichcouldmateriallyharmourbusiness.
Wewillberequiredtodemonstrateproduct comparabilityforeachmanufacturingsite. TheFDAandEMAmayrequireadditionaltestingbeyondwhatwe propose.



Weintendtorelyonresultsofpre-clinicalstudiesandclinicaltrialsperformedusingtheformofthe Productcandidateproducedusingthepriorformulationorproductionmethodoratthepriorscale.Dependingupon thetypeanddegreeofdifferencesbetweenmanufacturingprocessesorcomponentsubstitutionsforaProduct candidate,wemayberequiredto conductadditionalstudiesorclinicaltrialstodemonstratethatthenewmethod(s), substitutecomponentorproductcandidateissufficientlysimilartothepreviouslyproducedmaterial.



Wehavenocommercialorotherlarge-scalemanufacturingexperience,andifweareunsuccessfulin developingcommercially viabletechnologiestoenableustomanufacturethefinishedProductourselvesinsufficient qualitiesandquantitiesatacompetitivepricetomeetprojectedcommercialdemand,ourbusinesswouldbe harmed.



Tobesuccessful,ourproductcandidatesmust
becapable
ofbeingmanufactured
insufficientquantities,in
compliance withregulatoryrequirements
andatamarketablecost.Wehavenocommercialorotherlarge-scale manufacturing
experience.Wecurrentlyrelyonthird
partiesforcertainaspectsoftheclinical
trialmanufacture
of DermaViranditscomponents andfor
ourotherProductcandidates.
Weareintheprocessofdeveloping
andimplementing manufacturing methodsandbuilding
apilotcGMPcompliantfacilityinHungarytomanufacture largerquantitiesofourImmune
TherapyProducts. Wemust
hireandtrain
asignificantnumber
ofemployeesand
complywithapplicableregulations
forourfacilities,whichareextensive.
Therecurrentlyarenocontract manufacturers
that have alreadymanufactured the
finalDermaVirproduct
orany otherproductcandidate.
Therefore,ifweencounter
delaysor difficulties
withoursuppliersand/or
cannotmanufacturethe
finishedProduct
ourselves,we
may not beable toconductclinicaltrials
asplanned
ortomeetdemand
forDermaVir,ifitis
approved,
anyofwhich
could harmourbusiness.





50









TheEMA,FDAandregulatoryagenciesinothercountriesperiodicallyinspectmanufacturingfacilities,including thirdpartieswhomanufactureourrawmaterialsforus.TheFDAorEMAmaybelievethatneitherwenorour suppliershaveenoughexperiencemakingtheseProductsortherawmaterials,andmaysubjectthosemanufacturers and/orustoincreasedscrutiny.Biopharmaceuticalmanufacturing facilitiesmustcomplywithcGMPstandards,
requiringusuallyaninvestmentofsubstantialfunds,timeandefforttoensurefullcompliance
withthesestandards andmakequalityproducts. Wedonothavecontroloveroursuppliers’compliancewiththeserequirements. Failure
tocomplywithregulatoryrequirements
canresultinsanctions,fines,delays,suspensionsofapprovals,seizuresor recallsofproducts,operatingrestrictions,manufacturinginterruptions,
costlycorrectiveactions,injunctions,adverse publicityagainstusandourproducts,andcriminalprosecution.



Ifanyofourproductcandidatesreceivesmarketingapproval,weexpecttomanufacturethefinalproduct usingourtechnologyandourproductionfacilityinHungary.IfweareunabletocomplywithcGMPstandardsand othergovernmentregulations,thequalificationofourfacilitycouldbealengthyprocess,andtheremaynotbe adequatealternativestomeetourneeds.Asaresult,wemaynotbeableto
obtainthenecessaryrawmaterialsor finalproductinthefutureonatimelybasis,ifat all. Thiswouldnegativelyaffectourbusiness.



Risks Related to Medical Device Regulations



Ifwefailtoobtainregulatoryapprovalsandclearances,orexperiencesignificantdelaysinobtaining, FDAclearancesorapprovalsforfutureproductsorproductenhancements,ourabilitytocommerciallydistribute andmarkettheseproductscouldsuffer.



IfrequiredbytheFDAtoobtaina510(k)clearanceorapprovalofaPremarketApproval(“PMA”),the processofobtainingregulatoryclearancesorapprovalstomarketamedicaldevicecanbecostlyandtime consuming,andwemaynotbeabletoobtaintheseclearancesorapprovalsonatimelybasis,ifatall.Inparticular, theFDApermitscommercialdistributionofanewmedicaldeviceonlyafterthedevicehasreceivedclearanceunder Section510(k)oftheFederalFood,DrugandCosmeticAct,oristhesubjectofanapprovedPMAunlessthedevice isspecificallyexemptfromthoserequirements.TheFDAwillclearmarketingofalowerriskmedicaldevice throughthe510(k)processifthemanufacturerdemonstrates thatthenewproductissubstantiallyequivalenttoother 510(k)-clearedproducts. Highriskdevicesdeemedtoposethegreatestrisk,suchaslife-sustaining,life-supporting, orimplantabledevices,ordevicesnotdeemedsubstantiallyequivalenttoapreviouslycleareddevice,requirethe
approvalofaPMA. ThePMAprocessismorecostly,lengthyanduncertainthanthe510(k)clearanceprocess. A PMAapplicationmustbesupported byextensivedata,including,butnotlimitedto,technical,preclinical,clinical trial,manufacturingandlabelingdata,todemonstratetotheFDA’ssatisfactionthesafetyandefficacyofthedevice foritsintendeduse.



Wearecurrentlydevelopingourregulatorystrategieswithrespecttowhichregulatorypathwaywillbe necessarytoobtainclearanceorapprovaloftheDermaPrepcomponentofDermaVir,ifmedicaldevice clearanceorapprovalisrequiredatall.DermaVir,aswellasourotherproductcandidates,areImmune
Therapies,whichutilizeanovelmechanismofaction.Todate,theFDAhasnotclearedorapprovedforcommercial saleintheU.S.anyImmuneTherapyproductdesignedtostimulateanimmuneresponseagainstHIV.Consequently,
thereisnoprecedentforthesuccessfulcommercialization ofproductsbasedonourtechnologiesinthisarea.Ifthe
FDArequiresustosubmita510(k)orPMAforDermaPrep,wemayexperiencesignificantdelaysinobtaining
marketingapprovalofourproductcandidates,ifatall. Ifwefailtoobtainsuchapprovals,orexperiencesignificant delaysinobtaining,suchapprovalsforfutureproductsorproductenhancements,
ourabilitytocommercially
distributeandmarkettheseproductscouldsuffer.



If
ourmedicaldeviceproductscauseorcontribute
toadeath
oraserious
injury,or malfunctionin
certainways,wewillbesubjecttomedicaldevicereportingregulations,
whichcanresultinvoluntarycorrective
actionsoragencyenforcementactions.



Under
theFDA’smedicaldevicereportingregulations, medicaldevicemanufacturers
arerequired
toreport totheFDA information
thatadevice
has ormayhave
caused orcontributed
toadeathor
seriousinjuryor
has malfunctionedinaway
thatwould
likely cause or contribute to death or serious injury ifthemalfunctionof
the deviceor one ofour
similar deviceswereto
recur.If wefailto
reportthese
eventstothe
FDA within the required
timeframes,
or atall,theFDA
could takeenforcement
actionagainst
us.Anysuchadverseeventinvolving
our productsalsocould
result infuture
voluntary
correctiveactions,such
asrecalls
orcustomer
notifications,oragency
action,such
asinspectionorenforcement
action.Anycorrective
action, whethervoluntary
orinvoluntary,
aswellas
defendingourselves inalawsuit,will
requirethededication
ofourtime
andcapital,distractmanagement
from operatingour
business,andmayharmour
reputationandfinancial
results.



Risks Related to Health Care Regulations



WE MAY BE SUBJECT, DIRECTLY OR INDIRECTLY,
TO FEDERAL AND STATE HEALTHCARE FRAUD AND ABSUSE LAWS AND REGULATIONS AND COULD FACE SUBSTANTIAL PENALITIES IF WE ARE UNABLE TO
FULLY COMPLY WITH SUCH LAWS.



WhilewedonotcontrolreferralsofhealthcareservicesorbilldirectlytoMedicare,Medicaidorotherthird
partypayors,manyhealthcarelawsandregulationsapplytoourbusiness.Forexample,wecouldbesubjectto healthcarefraudandabuseandpatientprivacyregulationandenforcementbyboththefederalgovernmentandthe
statesinwhichweconductourbusiness.Thehealthcarelawsandregulationsthatmayaffectourabilitytooperate include:



| | · | thefederalhealthcareprograms’Anti-KickbackLaw,whichprohibits,amongotherthings,personsor entitiesfromsoliciting,receiving,offeringorprovidingremuneration,directlyorindirectly,inreturn forortoinduceeitherthereferralofanindividualfor,orthepurchaseorderorrecommendationof, anyitemorservicesforwhichpaymentmaybemadeunderafederalhealthcareprogramsuchasthe MedicareandMedicaidprograms;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | federalfalseclaimslawswhichprohibit,amongotherthings,individualsorentitiesfromknowingly presenting,orcausingtobepresented,claimsforpaymentfromMedicare,Medicaid,orotherthird partypayorsthatarefalseorfraudulent,andwhichmayapplytoentitieslikeustotheextentthatour interactionswithcustomersmayaffecttheirbillingorcodingpractices;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | thefederalHealthInsurancePortabilityandAccountabilityActof1996(“HIPAA”)whichestablished newfederalcrimesforknowinglyandwillfullyexecutingaschemetodefraudanyhealthcarebenefit programormakingfalsestatementsinconnectionwiththedeliveryoforpaymentforhealthcare benefits,itemsorservices,aswellasimposingcertainrequirementsrelatingtotheprivacy,security andtransmissionofindividuallyidentifiablehealthinformation;and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | statelawequivalentsofeachofthefederallawsmentionedontheprecedingpage,suchasanti- kickbackandfalseclaimslawswhichmayapplytoitemsorservicesreimbursedbyanythirdparty payor,includingcommercialinsurers,andstatelawsgoverningtheprivacyofhealthinformationin certaincircumstances,manyofwhichdifferfromeachotherinsignificantwaysandoftenarenot preemptedbyHIPAA,thuscomplicatingcomplianceefforts.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Thebiopharmaceuticalsindustryis,andinrecentyearshasbeen,underheightenedscrutinyasthe subject of governmentinvestigationsandenforcementactionsinvolvingmanufacturerswhoallegedlyofferedunlawful inducementstopotentialorexistingcustomersinanattempttoprocuretheirbusiness,includingarrangementswith physicianconsultants.
Ifouroperationsarefoundtobeinviolationofanyofthelaws describedaboveoranyother governmentalregulationsthatapplytous,wemaybesubjecttopenalties,includingcivilandcriminalpenalties, damages,fines,exclusionfromtheMedicareandMedicaidprograms,andthecurtailmentorrestructuringofour operations. Anypenalties,damages,fines,exclusions,curtailmentorrestructuringofouroperationscouldadversely affectourabilitytooperateourbusinessandourfinancialresults. Theriskofourbeingfoundinviolationofthese lawsisincreasedbythefactthatmanyoftheselawsarebroadandtheirprovisionsareopentoavarietyof interpretations.
Anyactionagainstusforviolationoftheselaws,evenifwesuccessfullydefendagainst
it,could causeustoincursignificantlegalexpensesanddivertourmanagement’sattentionfromtheoperationof our business.



51





Risks Related to Intellectual Property



Ifwe,orthethirdpartiesfromwhomwelicenseintellectualproperty,areunabletosecureandmaintain patentorotherintellectualpropertyprotectionfortheintellectualpropertycontainedinourProducts,ourability tocompetewillbeharmed.



Ourcommercialsuccessdepends,inpart,onobtainingpatentandotherintellectualpropertyprotectionfor ourproducts,methods,processesandothertechnologies.Thepatentpositionsofbiopharmaceuticalcompanies,
includingours,canbehighlyuncertainandinvolvecomplexandevolvinglegalandfactualquestions.Ifwe,orthe thirdpartiesfromwhomwelicenseintellectualproperty,failtoobtainadequatepatentorotherintellectualproperty protectionforintellectualpropertycontainedinourproducts,methods,processesandothertechnologiesorifany protectionisreducedoreliminated,otherscoulduseourintellectualproperty,resultinginharmtoourcompetitive businessposition.Inaddition,patentandotherintellectualpropertyprotectionmaynotprovideuswitha competitiveadvantageagainstcompetitorsthatdevisewaysofmakingcompetitiveproductswithoutinfringingany patentsthatweownorhaverightsto.



Asof
December 31,2012,wehavefiled28patentapplications,including
U.S.and
E.U.patentapplications, aswellasrights
underforeign
patentsandpatent
applications,andhave20issuedpatents,
includingU.S. andEuropeanPatent
Officepatent.U.S.patents
andpatentapplications
maybesubjectto
interference proceedingsandU.S.patentsmaybe subject
toreexaminationproceedingsintheU.S.Patent
andTrademark
Office. Foreignpatents
maybesubjecttooppositionorcomparable
proceedingsin
thecorresponding
foreignpatentoffices. Anyoftheseproceedings
couldresult
ineitherloss
ofthepatentordenialofthepatentapplication,orlossor reductioninthescopeofoneormore
oftheclaims
of thepatentorpatentapplication.Changesineitherpatentlaws orininterpretations
ofpatentlawsmayalsodiminishthevalueofourintellectual
property
ornarrow
thescopeof ourprotection.Interference, reexamination
andoppositionproceedingsmaybecostlyandtime-consuming,
andwe, orthethirdpartiesfromwhomwelicenseintellectualproperty,
maybeunsuccessfulindefendingagainst
such proceedings.
Thus,any
patentsthatweownorlicensemayprovidelimited
ornoprotection
againstcompetitors.
In addition,ourpendingpatentapplicationsandthosewemayfileinthefuturemayhaveclaims
narrowedduring prosecution
ormaynotresultinpatentsbeingissued.
Evenifanyofourpendingorfuture
applicationsareissued,
they may
notprovide
uswithadequateprotection
orany
competitive
advantages.
Ourability
todevelop
additional patentableproducts,methods,
processesand
othertechnologies
isalsouncertain.



Non-paymentordelayinpaymentofpatentfeesorannuities,whetherintentionalorunintentional,may alsoresultinthelossofpatentsorpatentrightsimportanttoourbusiness.Manycountries,includingcertain countriesinEurope,havecompulsorylicensinglawsunderwhichapatentownermaybecompelledtogrant licensestothirdparties.Inaddition,manycountrieslimit theenforceabilityofpatentsagainstthirdparties, includinggovernmentagenciesorgovernmentcontractors. Inthesecountries,thepatentownermayhavelimited remedies,whichcouldmateriallydiminishthevalueofthepatent. Inaddition,thelawsofsomeforeigncountries donotprotectintellectualpropertyrightstothesameextentasdothelawsoftheU.S.,particularlyinthefieldof biopharmaceuticals.



Ifweareunabletopreventunauthorizeduseordisclosureofourproprietarytradesecretsand unpatentedknow-how,ourabilitytocompetewillbeharmed.



Proprietarytradesecrets,copyrights,
trademarksandunpatented
know-howarealsovery important
toour business.
Werelyonacombination
oftradesecrets,copyrights,trademarks,
confidentialityagreements
andother contractual
provisionsand measures
toprotectcertainaspects
ofourproducts, methods,processesandother
technologies,especially where
wedonotbelievethatpatentprotectionisappropriateorobtainable.Tothis end,we requireallofouremployees,
consultants,advisorsandcontractorstoenterintoconfidentiality
and,where applicable,grant-backagreements.
However,these measuresmaynotbeadequateto
safeguardourproprietary
intellectualproperty. Ouremployees,consultants,advisorsandcontractors mayunintentionally
orwillfullydisclose ourconfidential
informationto competitors.
Inaddition,confidentialityagreementsmaybeunenforceableormay notprovideanadequateremedyintheevent
ofunauthorized
disclosure.Enforcingaclaim
thatathirdparty
illegallyobtained
andisusingour
trade-secrets
isexpensive
andtime
consuming,
andthe outcome
isunpredictable.
Moreover,ourcompetitorsmayindependently
developequivalent
knowledge,methodsand
know-how. Unauthorizedpartiesmayalsoattempttocopyorreverseengineer
certainaspectsofproductsdeveloped
byour employees,consultants,advisorsandcontractorsthatweconsider proprietary.
Asaresult,
thirdpartiesmaybeable
touseourproprietary
employees,consultants,
advisorsand
contractors,andourability
tocompete
inthemarket would
beharmed.



52









Wecouldbecomesubjecttopatentandotherintellectualpropertylitigationthatcouldbecostly,resultin thediversionofmanagement’sattention,requireustopaydamagesandforceustodiscontinuesellingour products.



Thebiopharmaceuticalindustryischaracterizedbycompetingintellectualpropertyanda substantial amount
oflitigationoverpatentandotherintellectualpropertyrights.Determiningwhetheraproductinfringesa patentinvolvescomplexlegalandfactualissues,andtheoutcomeofapatentlitigationactionisoftenuncertain.We havenotconductedanextensivesearchofpatentsissuedtothirdparties,andnoassurancecanbegiventhatthird
partypatentscontainingclaimscoveringourproducts,partsofourproducts,technologyormethodsdonotexist,
havenotbeenfiled,orcouldnotbefiledorissued.Becauseofthenumberofpatentsissuedandpatentapplications
filedinourareas,ourcompetitors
orotherthirdpartiesmayassertthatourproductsandthemethodsweemployin theuseofourproductsarecoveredbyU.S.orforeignpatentsheldbythem. Inaddition,becausepatentapplications cantakemanyyearstoissueandbecausepublicationschedulesforpendingapplications varybyjurisdiction,there
maybeapplications nowpendingofwhichweareunaware, andwhichmayresultinissuedpatentswhichour currentorfutureproductsinfringe.
Also,becausetheclaimsofpublishedpatentapplicationscanchangebetween publicationandpatentgrant,theremaybepublishedpatentapplicationsthatmayultimatelyissuewithclaimsthat weinfringe.
Therecouldalsobeexisting
patentsthatoneormoreofourproductsorpartsmayinfringeandof whichweareunaware. Incertainsituations,weorthirdpartiesfromwhomwelicenseintellectualpropertymay determinethatitisinourbestinterestsortheirbestintereststovoluntarilychallengeathirdparty’sproductsor patentsinlitigationorotherproceedings,includingpatentinterferencesorreexaminations.
Asaresult,wemay becomeinvolvedinunwantedlitigationsandactionsthatcouldbecostly,resultindiversionofmanagements’ attention,requireustopaydamagesandforceustodiscontinuesellingourproducts.



Infringementactionsandotherintellectualpropertyclaimsandproceedings,whetherwithorwithoutmerit,
maycauseustoincursubstantialcostsandcouldplaceasignificantstrainonourfinancialresources,divertthe attentionofmanagementfromourbusinessandharmourreputation.Someofourcompetitorsmaybeableto sustainthecosts
ofcomplexpatentorintellectualpropertylitigationmoreeffectivelythanwecanbecausetheyhave substantiallygreaterresources.



Wecannotbecertainthatwewillsuccessfullydefendagainstallegationsofinfringementofthirdparty patentsandintellectualpropertyrights.Intheeventthatwebecomesubjecttoapatentinfringementorother intellectualpropertylawsuitandiftheotherparty’spatentsorotherintellectualpropertywereupheldasvalidand
enforceableandwewere foundtoinfringetheotherparty’spatentsorviolatethetermsofalicensetowhichweare
aparty,wecouldberequiredtopaydamages.Wecouldalsobepreventedfromsellingourproductsunlesswe couldobtainalicensetousetheproducts,methods,processesorothertechnologiescoveredbysuchpatentsor were
abletoredesignourproducts,methods,processesandothertechnologiestoavoidinfringement.Alicensemaynot beavailableatalloroncommerciallyreasonabletermsorwemaynotbeabletoredesignourproducts,methods, processesandothertechnologiestoavoidinfringement. Modificationofourproductsordevelopment
ofnew productscouldrequireustoconductclinicaltrialsandtoreviseourfilingswiththeFDAandotherregulatory bodies,whichwouldbetime-consuming
andexpensive. Inthesecircumstances,
wemaybeunabletosellour productsatcompetitivepricesoratall,ourbusinessandoperatingresultscouldbeharmedandourstockpricemay decline.Inaddition,anyuncertaintiesresultingfromtheinitiationandcontinuation ofanylitigationcouldhavea materialadverseeffectonourabilitytoraisethefundsnecessarytocontinueouroperations.



Wemaybesubjecttodamagesresultingfromclaimsthatouremployeesorwehavewrongfullyusedor disclosedallegedtradesecretsoftheirformeremployers.



Some
ofouremployees
werepreviouslyemployedatuniversities
orother
enterprises.Wecould, inthe future,besubjecttoclaimsthattheseemployees,orwe,haveinadvertently
orotherwise
usedordisclosedtrade
secretsorother
proprietaryinformation
oftheirformeremployers.
Litigationmaybenecessarytodefendagainst
theseclaims. Ifwefailindefending
againstsuch
claims,acourtcould
orderustopaysubstantialdamagesand
prohibitusfromusingproducts,methods,
processesand
othertechnologies
thatareessential
toourproducts,
ifsuch products,methods,
processesand other
technologiesarefoundtoincorporate
orbederived
fromthetrade
secrets or otherproprietaryinformation
oftheformer
employers.Inaddition,
wemaylose
valuable intellectualproperty
rights orpersonnel.
Aloss ofkey
researchpersonnel
ortheir
work productcould
hamper
orpreventourability
to commercializecertainpotential
products,whichcould
severely harmourbusiness.
Evenifwe
aresuccessfulindefending
against
theseclaims,such
litigation
could
resultinsubstantial
costsandbe
adistractiontomanagement.





53









Wemaybeunabletoprotecttheintellectualpropertyrightsofthethirdpartiesfromwhomwelicense certainofourintellectualpropertyorwithwhomwehaveenteredintootherstrategicrelationships.



Certainofourintellectualpropertyrights,includingtheHIVclade“B”plasmidDNAutilizedinDermaVirforthetreatmentofHIV/AIDS,arecurrentlylicensedfromRIGHTand,inthefuture,wemay licenseadditionalintellectualpropertyfromRIGHTand/orotherkeystrategicpartners.Weare,andwillcontinue tobe,reliantuponsuchthirdpartiestoprotecttheirintellectualpropertyrightstoanylicensedtechnology.Such thirdpartiesmaydeterminenottoprotecttheintellectualpropertyrightsthatwelicensefromthemandwemaybe unabletodefendsuchintellectualpropertyrightsonourownorwemayhavetoundertakecostlylitigationtodefend theintellectualpropertyrightsofsuchthirdparties.Therecanbenoassurancesthatwewillcontinuetohaverights
toanyof theintellectualpropertythatwelicensefromsuchthirdpartiesorotherwisehavetherighttousethrough similarstrategicrelationships. Anylossorlimitationsonusewithrespecttoourrighttousesuchintellectual propertylicensedfromthirdpartiesorotherwiseobtainedfromthirdpartieswithwhomwehaveenteredinto strategicrelationshipscouldhaveamaterialadverseeffectonourbusiness,operatingresultsandfinancialcondition.





Risks Related to Our Common Stock



Our
common stock is quoted on the OTCBB which may have an unfavorable impact on our stock price and liquidity.



Our common stock is quoted on the OTCBB. The
OTCBB is a significantly more limited market than the New York Stock Exchange or the NASDAQ Stock Market. The quotation of our
shares on the OTCBB may result in a less liquid market available for existing and potential stockholders to trade shares of our
common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise
capital in the future.

BECAUSE
OUR BUSINESS ASSETS, DIRECTORS AND OFFICERS ARE LOCATED OUTSIDE OF THE UNITED STATES, OUR SHAREHOLDERS MAY BE LIMITED IN ABILITY
TO ENFORCE CIVIL ACTIONS AGAINST OUR ASSETS OR OUR DIRECTORS AND OFFICERS.

We are incorporated under the laws
of Delaware but because we are headquartered in Hungary, all of our officers and members of the Board reside in Hungary. Therefore
our shareholders may have difficulty enforcing civil liabilities under the U.S. federal securities laws against our officers and
directors. Because some of our assets are located outside the U.S., it may be difficult for an investor to succeed in an action,
for any reason, against us or any of our directors or officers through U.S. jurisdictions. If an investor was able to obtain a
judgment against us or any of our directors or officers in a U.S. court based on U.S. securities or other laws, it may be difficult
to enforce such judgment in Hungary. We are uncertain as to the enforceability, in original actions in Hungarian courts, of liability
based upon the U.S. federal securities laws and as to the enforceability in Hungarian courts of judgments of U.S. courts obtained
in actions based upon the civil liability provisions of the U.S. federal securities laws.

WE
MAY CONDUCT FURTHER OFFERINGS IN THE FUTURE, IN WHICH CASE YOUR PERCENTAGE INTEREST IN OUR COMPANY WILL BE DILUTED.

Since inception, we have relied on
sales of our common stock to fund our operations. We may conduct further offerings in the future to finance our current projects
or to finance subsequent projects that we decide to undertake. If common stock is issued in return for additional funds, the price
per share could be lower than that paid by our current shareholders. We anticipate continuing to rely on equity sales of our common
stock in order to fund our business operations. If we issue additional stock, your percentage interest in us will be diluted and
the value of your stock could be reduced.

54





WE
MAY ISSUE PREFERRED STOCK WHICH MAY HAVE GREATER RIGHTS THAN OUR COMMON STOCK.

We are permitted in our Certificate
of Incorporation to issue up to 10,000,000 shares of preferred stock. We currently have 2,000,000 shares of Series A Preferred
Shares, 1,000,000 shares of Series B Preferred Shares, 1,000,000 shares of Series C Preferred Shares, 1,000,000 shares of Series
D Preferred Shares and 250,000 shares of Series E Preferred Shares issued and outstanding; however, we can issue shares of our
preferred stock in one or more series and can set the terms of the preferred stock without seeking any further approval from our
common shareholders. Any preferred stock that we issue may rank ahead of our common stock in terms of dividend priority or liquidation
premiums and may have greater voting rights than our common stock. In addition, such preferred stock may contain provisions allowing
it to be converted into shares of common stock, which could dilute the value of common stock to current shareholders and could
adversely affect the market price, if any, of our common stock.





THE APPLICATION OF THE “PENNY STOCK”
RULES COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON SHARES AND INCREASE YOUR TRANSACTION COSTS TO SELL THOSE SHARES.



The Securities and Exchange Commission (the
“SEC”) has adopted rule 3a51-1 which establishes the definition of a “penny stock,” for the purposes relevant
to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00
per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires:



- that a broker or dealer approve a person’s
account for transactions in penny stocks;



- the broker or dealer receive from the investor
a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased; and



- that a broker or dealer approve a person’s
account for transactions in penny stocks.



In order to approve a person’s account
for transactions in penny stocks, the broker or dealer must:



- obtain financial information and investment
experience objectives of the person; and



- make a reasonable determination that the transactions
in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be
capable of evaluating the risks of transactions in penny stocks.



The broker or dealer must also deliver, prior
to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in
highlight form:



- sets forth the basis on which the broker or dealer made
the suitability determination; and



- that the broker or dealer received a signed, written
agreement from the investor prior to the transaction.



Generally, brokers may be less willing to execute
transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose
of our common stock and cause a decline in the market value of our stock.



AS AN ISSUER OF “PENNY STOCK,”
THE PROTECTION PROVIDED BY THE FEDERAL SECURITIES LAWS RELATING TO FORWARD LOOKING STATEMENTS DOES NOT APPLY TO US.



Although federal securities laws provide
a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws,
this safe harbor is not available to issuers of penny stocks. As a result, the Company will not have the benefit of this safe
harbor protection in the event of any legal action based upon a claim that the material provided by the Company contained a
material misstatement of fact or was misleading in any material respect because of the Company’s failure to include any
statements necessary to make the statements not misleading. Such an action could hurt our financial condition.





55









WE HAVE NOT PAID DIVIDENDS IN THE PAST
AND DO NOT EXPECT TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE. ANY RETURN ON INVESTMENT MAY BE LIMITED TO THE VALUE OF OUR COMMON
STOCK.



No cash dividends have been paid on the Company’s
common stock. We expect that any income received from operations will be devoted to our future operations and growth. The Company
does not expect to pay cash dividends in the near future. Payment of dividends would depend upon our profitability at the time,
cash available for those dividends, and other factors as the Company’s board of directors may consider relevant. If the Company
does not pay dividends, the Company’s common stock may be less valuable because a return on an investor’s investment
will only occur if the Company’s stock price appreciates.



Item 1B. Unresolved Staff Comments.



Not applicable.



Item 2. Property.



The Company currently leases a 1,000 square
foot office located at1095
Budapest, Soroksari ut 94-96, Hungary, for approximately $1,100 per month. We also lease research and development facilities for
Genetic Immunity, consisting of approximately 6,500 square feet, for approximately $12,500 a month, located at 1045 Budapest, Berlini
ut 47-49.



Item 3. Legal Proceedings.



The Company’s wholly-owned subsidiary,
Genetic Immunity, has initiated a lawsuit against the National Development Agency of Hungary. In 2009, Genetic Immunity successfully
applied for and won an 800 million Hungarian forint (approximately $4,000,000) research grant to conduct dust mite allergy vaccine
research. Subsequently, the agency refused to sign the grant and denied payment of funds. The company initiated a lawsuit to request
that the court reinstate the contract that resulted in a grant award. On February 13, 2013, an appeals court ruled that the court
could not reinstate the contract between Genetic Immunity and the National Development Agency as the contract has been validly
in existence since its original execution in 2009. As such Genetic Immunity was ordered to pay 52,500,000 HUF (approximately $250,000)
in lawsuit costs. However, simultaneously, the judgment stated that the company is entitled to receive the original grant amount,
interest payment and/or damages since the original grant contract is valid. On February 18, 2013, we filed a new petition to have
the courts establish the damages and awards that Genetic Immunity can receive based on the appeals court’s ruling. We are
currently seeking 4,800,000,000 HUF (approximately $20 million) for damages sustained. ON November 18, 2013 we have entered into
a six month suspension of said lawsuit, as agreed with the government, in hopes of negotiating an out of court settlement. If these
negotiations are unsuccessful we will resume the law suite in the court of law on or before May 18, 2014.



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



Item 4. Mine Safety Disclosures.



Not applicable.



56





PART II



Item 5. Market for Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.



(a) Market Information



The Company’s Common Stock is quoted
on the OTCBB under the under the symbol “PWRV.” The following table sets forth the quarterly high and low sale prices
for our common shares for the last two completed fiscal years and the subsequent interim periods. Quotations on the OTCBB reflect
bid and ask quotations, may reflect inter-dealer prices, without retail markup, markdown or commission, and may not represent actual
transactions.



|Quarter ended      |  | High |      | Low
|------------------ |  | ---- | ---- | ---
|March 31, 2014     |  | $    | 0.10 |    
|                   |  |      |      |    
|December 31, 2013  |  | $    | 0.12 |    
|September 30, 2013 |  | $    | 0.10 |    
|June 30, 2013      |  | $    | 0.16 |    
|March 31, 2013     |  | $    | 0.33 |    
|                   |  |      |      |    
|December 31, 2012  |  | $    | 0.35 |    
|September 30, 2012 |  | $    | 0.16 |    
|June 30, 2012      |  | $    | 0.21 |    
|March 31, 2012     |  | $    | 0.25 |    



(b) Holders



As of April 14, 2014, there were approximately
90 holders of record of our common stock. The common stock figure does not take into account those shareholders whose certificates
are held in the name of broker-dealers or other nominees.





(c) Dividends



The Company issued a dividend to our shareholders
of record on December 23, 2011, in the form of restricted common stock of iGlue, Inc. (“iGlue”). Each shareholder received
0.05 shares of restricted common stock of iGlue. A total of 3,115,015 shares of iGlue’s common stock were distributed on
February 15, 2012. The Company still holds 2,884,986 shares of iGlue’s common stock and warrants to purchase shares of iGlue’s
common stock.



We have never paid any cash dividends on our
common shares, and we do not anticipate that we will pay any dividends with respect to those securities in the foreseeable future.
Our current business plan is to retain any future earnings to finance the expansion development of our business.



(d) Securities Authorized for Issuance
under Equity Compensation Plan



We currently have no Equity Compensation Plan
in effect.



Transfer Agent



Our transfer agent is Fidelity Transfer Company,
8915 S. 700 E. Suite 102, Sandy, UT 84070.



Recent Sales of Unregistered Securities



On November 1, 2013, pursuant to a private placement under Regulation
S of the Securities Act of 1933, as amended, the Company sold 1,000,000 shares of its Series D preferred stock to one affiliated
private investor, Peter Boros, Director of the company, for aggregate proceeds of $337,653. This amount was previously provided
to the company by Mr. Boros as a loan, and on November 1 Mr. Boros elected to convert this loan into aforementioned preferred stock.

57







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



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



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



Other than the above, there are no recent sales
of unregistered securities that were not previously disclosed in a Current Report on Form 8-K or
a Quarterly Report on Form 10-Q.



Rule 10B-18 Transactions



During the years ended December 31, 2012, there
were no repurchases of the Company’s common stock by the Company.



Item 6. Selected Financial Data.



Not applicable.



Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations.



THE FOLLOWING DISCUSSION OF OUR PLAN OF OPERATION
AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND RELATED NOTES TO THE FINANCIAL STATEMENTS
INCLUDED ELSEWHERE IN THIS REPORT.  THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT RELATE TO FUTURE EVENTS
OR OUR FUTURE FINANCIAL PERFORMANCE. THESE STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY
CAUSE OUR ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, LEVELS
OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS. THESE RISKS AND OTHER FACTORS
INCLUDE, AMONG OTHERS, THOSE LISTED UNDER “FORWARD-LOOKING STATEMENTS” AND “RISK FACTORS” AND THOSE INCLUDED
ELSEWHERE IN THIS REPORT.



Overview



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



We are looking to generate revenue through
the sale of Genetic Immunity’s therapeutic vaccines upon US, European and global marketing approvals, and through the sale
of our equity interest in iGlue.



Since inception through December 31,
2013, we had a deficit accumulated during the development stage of $12,817,575 and net cash used in operations of
$2,486,088. To date all of our funding has been provided through the sale of our common and preferred stock. We
believe we can raise sufficient additional financing through the sale of our common stock to allow us to continue operations
and execute our business plan to the end of 2014. The Company also anticipates receiving a minimum of $4 million and a
maximum of $22 million from a lawsuit initiated against the National Development Agency in Hungary for breach of contract for
a previously awarded grant.  Should the need arise, we plan to raise additional funds, both from U.S. and international
investors. We believe that through the acquisition of Genetic Immunity and the company’s lead product candidate
DermaVir, we will be in a position to start generating revenue in 2015. We believe that our ownership of one of the
world’s first, clinically proven, therapeutic HIV vaccine will prove attractive to both private and institutional
investors, making fundraising a less strenuous process than before. We also believe that as Hungary’s only US public
company that is actively engaged in Hungarian intellectual property acquisition (like Genetic Immunity and iGlue,) we are an
even more attractive investment candidate.



58









If necessary, we will raise additional capital
in a manner that is the least dilutive to our shareholders yet at the same time serves our development, commercialization and operating
needs. We anticipate one round of fundraising in 2014 as we move closer to commercializing DermaVir. By the end of 2014, we will
seek conditional marketing approval for DermaVir in the European Union.



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



In 2014 we anticipate spending approximately
$2,000,000 - $3.000.000 on DermaVir’s regulatory approval, commercialization and general administrative expenses. We believe
these funds will become available to us from proceeds obtained from our lawsuit against the Hungarian Development Agency as described
above in Item 3.



Being a development stage company, we are subject
to all the risks inherent in the establishment of a new enterprise and the marketing and manufacturing of new products, many of
which risks are beyond the control of the Company.



Over the course of the next 12 months we will
focus on accelerating the development and potential commercialization of Genetic Immunity’s DermaVir HIV vaccine. We plan
on applying for a Conditional Marketing Authorization (“CMA”) with the EMA, and pursuing similar available venues in
the United States. We believe given DermaVir’s safety and efficacy profile and recent changes in the regulatory landscape,
the time is ripe for these initiatives.



Although we believe that DermaVir can become
a significant new product in the treatment of HIV, there can be no assurance that we will be able to complete the required regulatory
processes. If we are unable to complete regulatory permits within the next 12 months we will be required to raise additional capital
to support our operations until such time when we can maintain operations from revenue(s) realized upon marketing authorization.



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



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





Results of Operations



For the Year Ended December 31, 2013
Compared to the Year Ended December 31, 2012



|                                     |  | For the Year Ended December 31,
|------------------------------------ |  | -------------------------------
|                                     |  | 2013                           
|Net sales                            |  | $                              
|Gross profit                         |  | $                              
|General and administrative expenses  |  | $                              
|Loss from operations                 |  | $                              
|Interest Expenses and Exchange Gains |  | $                              
|Net loss                             |  | $                              

59







Revenues



During the years ended December 31, 2013 and
2012, respectively, the Company had no revenue.



Research and development

For the year ended December 31, 2013,
research and development expenses were $41,812 as compared to $0 for the year ended December 31, 2012. The increase of $41,812
in research and development expenses is attributed to the Fiberscan grant activities.



General, selling and administrative expenses

For the year ended December 31, 2013,
general, selling and administrative expenses were $738,975 as compared to $797,189 for the year ended December 31, 2012. The decrease
in general, selling and administrative expenses is attributable to lower stock based employee compensation.

Loss from Operations

Loss from operations for the year ended
December 31, 2013, was $1,794,718, as compared to $1,679,052 for the year ended December 31, 2012. The primary increase in loss
from operations is attributable to the acquisition of Genetic Immunity and fulfillment of Grant related expenditures.

Net Loss



Net loss for year ended December 31, 2013,
was $1,794,718 or loss per share of $0.04, as compared to $1,679,052 or loss per share of $0.04, for the comparable year ended
December 31, 2012.



Liquidity and Capital Resources



The following table summarizes total current
assets, liabilities and working capital at December 31, 2013, compared to December 31, 2012:



|                          |  | December 31, 2013 |            | December 31, 2012 |  | Increase/Decrease
|------------------------- |  | ----------------- | ---------- | ----------------- |  | -----------------
|Current Assets            |  | $                 | 262,992    |                   |  | $                
|Current Liabilities       |  | $                 | 8,240,680  |                   |  | $                
|Working Capital (Deficit) |  | $                 | (7,977,688 | )                 |  | $                



At December 31, 2013, we had a working capital
deficit of $7,977,688, as compared to a working capital deficit of $7,341,197, at December 31, 2012, an increase of $636,491. The
increase in deficit is mainly attributed due to the increase in accrued interest.



Net cash used in operating activities for the
year ended December 31, 2013 and 2012 was $(175,521) and $7,772, respectively. The net loss for the years ended December 31, 2013
and 2012 was $1,794,718 and $1,679,052, respectively. The Company’s cash used in operations increased due to financing from
accounts payable.



Net cash obtained through all financing activities
for the years ended December 31, 2013 was $500,326, as compared to $79,841 for the year ended December 31, 2012. The company raised
$500,326 through private placements of our common and preferred stock.



Off-Balance Sheet Arrangements



60





We have no significant known off balance sheet
arrangements.



Critical Accounting Policies



We prepare our consolidated financial statements
in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial
statements require the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during
the reporting period. Our management periodically evaluates the estimates and judgments made. Management bases its estimates and
judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results
may differ from these estimates as a result of different assumptions or conditions.



The methods, estimates, and judgment we use
in applying our most critical accounting policies have a significant impact on the results we report in our financial statements.
The SEC has defined “critical accounting policies” as those accounting policies that are most important to the portrayal
of our financial condition and results, and require us to make our most difficult and subjective judgments, often as a result of
the need to make estimates of matters that are inherently uncertain. Based upon this definition, our most critical estimates relate
to the fair value of warrant liabilities. We also have other key accounting estimates and policies, but we believe that these other
policies either do not generally require us to make estimates and judgments that are as difficult or as subjective, or it is less
likely that they would have a material impact on our reported results of operations for a given period. For additional information
see Note 2, “Summary of Significant Accounting Policies” in the notes to our reviewed financial statements appearing
elsewhere in this report. Although we believe that our estimates and assumptions are reasonable, they are based upon information
presently available, and actual results may differ significantly from these estimates.



Going Concern



We have limited working capital and no revenues
from sales of products, services, or licensing. During the fiscal year ended December 31, 2013, our operating expenses continued
to be greater than our revenues. These factors have caused our accountants to express substantial doubt about our ability to continue
as a going concern. The accompanying financial statements do not include any adjustment that might be necessary if we are unable
to continue as a going concern.



Our ability to continue as a going concern
has caused the Board of Directors to continue to look for sources of investment capital, and investigate merger and acquisition
opportunities. We will look to further diversify our holdings and sources of cash flow until we can support our operation from
revenue.



Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.



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



Item 8. Financial Statements and Supplementary Data.



Our financial statements are contained in pages F-1 through F-24
which appear at the end of this Annual Report.



Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.



None.



Item 9A. Controls and Procedures.



(a) Evaluation of Disclosure and Control
Procedures



Based on their evaluation as of the end
of the period covered by this Annual Report on Form 10-K, our principal executive officer and principal financial officer
have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(c) and 15d-15(e) under the Exchange
Act) are not effective to ensure that information required to be disclosed by us in report that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and
Exchange Commission’s rules and forms and to ensure that information required to be disclosed by us in the reports that
we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive
officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure due to material
weakness in our internal control over financial reporting discussed more fully below...





61







(b) Management’s Assessment of Internal
Control over Financial Reporting



Management is responsible for establishing
and maintaining adequate internal control over financial reporting, as such term is defined in the Exchange Act Rules 13a-15(f).
A system of internal control over financial reporting is a process designed 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.



Under the supervision and with the participation
of management, including the principal executive officer and the principal financial officer, the Company’s management has
evaluated the effectiveness of its internal control over financial reporting as of December 31, 2013, based on the criteria established
in a report entitled “Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission” and the interpretive guidance issued by the Commission in Release No. 34-55929. Based on this evaluation,
the Company’s management has evaluated and concluded that as of December 31, 2013, the Company’s internal control over
financial reporting was not effective due to the existence of material weakness as described below.



A material weakness is a control deficiency,
or combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility
that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis.
As of December 31, 2013, we have concluded that our internal control over financial reporting was ineffective. The Company’s
assessment identified certain material weaknesses which are set forth below:



Functional Controls and Segregation of Duties



Because of the company’s limited resources,
there are limited controls over information processing, and no internal controls over the accuracy, completeness and authorization
of transactions.



There is an inadequate segregation of duties
consistent with control objectives. Our Company’s management is composed of a small number of individuals resulting in a
situation where limitations on segregation of duties exist. In order to remedy this situation we would need to hire additional
staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation
of duties. Management will reassess this matter in the following year to determine whether improvement in segregation of duty is
feasible.



There is a lack of top level reviews in place
to review targets, product development, joint ventures or financing. All major business decisions are carried out by the officers
with board of director approval when needed.



Accordingly, as the result of identifying the
above material weaknesses we have concluded that these control deficiencies resulted in a reasonable possibility that a material
misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the Company’s
internal controls.



Management believes that the material weaknesses
set forth above were the result of the scale of our operations and are intrinsic to our small size. Management believes these weaknesses
did not have a material effect on our financial results and intends to take remedial actions upon receiving funding for the Company’s
business operations.



This annual report does not include an attestation
report of our registered public accounting firm regarding internal control over financial reporting. Management’s report
was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit the
Company to provide only management’s report herein.





(c) Changes in Internal Control over Financial
Reporting

62







There were no changes in our internal control
over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed
fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.



Item 9B. Other Information.



None.



PART III



Item 10. Directors, Executive Officers,
and Corporate Governance.



The following table and biographical summaries
set forth information, including principal occupation and business experience, about our directors and executive officers at April
15, 2013:



|Name            |  | Age |  | Position                                     |  | Officer and/or Director Since
|--------------- |  | --- |  | -------------------------------------------- |  | -----------------------------
|                |  |     |  |                                              |  |                              
|Viktor Rozsnyay |  | 43  |  | Chairman, Chief Executive Officer, President |  | April 2007                   
|                |  |     |  |                                              |  |                              
|Ildiko Rozsa    |  | 37  |  | Chief Financial Officer                      |  | October 2007                 
|                |  |     |  |                                              |  |                              
|Peter Boros     |  | 37  |  | Director                                     |  | May 2013                     



Viktor Rozsnyay, age 43

Viktor Rozsnyayhas served
as the Chairman, President and Chief Executive Officer of the Company since April 5, 2007. From April 2006 to present, Mr. Rozsnyay
has been a Manager of Vidatech Kft., a Hungarian company focused on the acquisition of technologies developed in Hungary, of which
he was a founder; Vidatech is now our wholly owned Hungarian subsidiary. From 2004 to 2006 Mr. Rozsnyay was engaged in researching
and establishing the foundation of Vidatech. From 2001 to 2004, he was the Founder and Chief Operating Officer of 10Charge, Inc.,
an ISSO R&D spin-off company formed to commercialize 10 minute battery charging technology, a product Mr. Rozsnyay and his
former partners invented and patented. 10Charge, Inc. was a full SEC reporting company until it was acquired by US investors. Mr.
Rozsnyay was the primarily person responsible for organizing and completing a reverse merger for 10Charge, Inc. Prior thereto,
Mr. Rozsnyay was the Founder and Managing Director of ISSO R&D Kft., an aerospace research company based in the Republic of
Hungary, pursuing advanced aerospace propulsion research. Mr. Rozsnyay attended the Jozsef Katona Technical College in Budapest,
graduating in 1989.

Mr. Rozsnyay’s unique expertise
in Hungary of US public company operations and requirements and as our Founder and CEO make him the perfect and only choice to
fulfill the Chairman of the Board position.

Ildiko Rozsa, age 37

Ildiko Rozsa has served as the
Chief Financial Officer of the Company since October 24, 2007. Mrs. Rozsa is a qualified statutory accountant, currently
completing her PhD studies at the Budapest Technical and Economic University in Business Science. Ms. Rozsa graduated at the
College of Finance and Accountancy, later obtaining her mastered degree (MBA) at the Budapest University of Economics. From
1995 through 1996 she was audit assistant at Price Waterhouse’s Budapest Audit Department, where she gained experience
in IAS and HAS audits. From 1997 through 2002 Ms. Rozsa was Finance and Accounting Director at Vivendi Telecom Hungary. Ms.
Rozsa was responsible for the production of Vivendi Group Consolidated Financial Statements for 23 companies including
foreign companies in accordance with IFRS, US GAAP and the related statutory requirements; definition of the accounting
policy and procedures of the group, and controlling of their application. Management of the related audits and Managing the
Accounting Department, the Reporting and Consolidation Department and the Payroll Department of Vivendi Group which consists
of approximately 60 persons. From 2002 through 2004 Ms. Rozsa was Chief Financial Officer at Bacardi-Martini Hungary Kft.,
where she was responsible for Managing the finance and administration team of the company. Responsible for financial,
accounting, controlling, IT, customs and payroll activities. In 2004 she founded and became Managing Director, RIBZ
Consulting where she works for multinational clients on IFRS and US GAAP projects, on privatization engagements. Ildiko is a
tutor at the Budapest Technical University, Economic Faculty.



63







Peter Boros, age 37



Mr. Peter Boros, age 37, currently serves as
Chief Executive Officer of iGlue, Inc., a Hungarian-based development stage software company, where he is responsible for the day
to day operations of the company. Since July 1, 2007, Mr. Boros has served as the Commercial Director of Co-Op Inc., a retail chain
in Hungary. From 2000 to 2007, Mr. Boros was the manager of the Sales and Marketing Department of Co-Op Inc. Additionally, since
2006, Mr. Boros was the owner and operator of Co-Op Gyor, Inc., a grocery chain which was sold in 2011. Mr. Boros currently serves
as member of the board of directors of iGlue, Inc.



Family Relationships



There are no family relationships among our
directors, executive officers, or persons nominated or chosen by the Company to become directors or executive officers. None of
our directors or executive officers or their respective immediate family members or affiliates are indebted to us.



Committees of the Board of Directors



We have not established any committees, including
an audit committee, a compensation committee or a nominating committee.The Board currently acts as our audit committee.
At the present time, we believe that our Board is capable of analyzing and evaluating our financial statements and understanding
internal controls and procedures for financial reporting.



Legal Proceedings



There are no material proceedings to which
any director or officer, or any associate of any such director or officer, is a party that is adverse to our Company or any of
our subsidiaries or has a material interest adverse to our Company or any of our subsidiaries. No director or executive officer
has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy petition filed
against it during the past ten years. No director or executive officer has been convicted of a criminal offense or is the subject
of a pending criminal proceeding during the past ten years. No director or executive officer has been the subject of any order,
judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking activities during the past ten years. No director or officer has been found by a
court to have violated a federal or state securities or commodities law during the past ten years.



Compliance with Section 16(A) of the Exchange
Act



Section 16(a) of the Exchange Act requires
the Company’s directors, executive officers and persons who beneficially own 10% or more of a class of securities registered
under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in beneficial ownership with the SEC.
Directors, executive officers and greater than 10% stockholders are required by the rules and regulations of the SEC to furnish
the Company with copies of all reports filed by them in compliance with Section 16(a).



Based solely on our review of certain reports
filed with the Securities and Exchange Commission pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended,
the reports required to be filed with respect to transactions in our common stock during the fiscal year ended December 31, 2012,
were not timely.



Code of Ethics



We have not yet adopted a code of ethics because
we wanted to complete our constitution of the Board prior to adopting such code of ethics to allow the entire Board to review and
approve our code of ethics.



Item 11. Executive Compensation.



The following summary compensation table sets
forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the periods ended December
31, 2013, 2012 and 2011.



|                                    |  |  |      |   |  |   |           |  |  |   |          |  |  |   |                |  |  |   |                 |  |  |   |                                          |  |  |   |                                              |  |  |   |           | 
|----------------------------------- |  |  | ---- | - |  | - | --------- |  |  | - | -------- |  |  | - | -------------- |  |  | - | --------------- |  |  | - | ---------------------------------------- |  |  | - | -------------------------------------------- |  |  | - | --------- | 
|Name AndPrincipal Position          |  |  | Year |   |  |   | Salary($) |  |  |   | Bonus($) |  |  |   | StockAwards($) |  |  |   | OptionAwards($) |  |  |   | Non-EquityIncentivePlanCompen-sation ($) |  |  |   | All Other
        Compen-
        sation ($) |  |  |   | Total ($) | 
|Viktor Rozsnyay                     |  |  | 2013 |   |  | $ | 8,400     |  |  | $ | 0        |  |  | $ | 0              |  |  | $ | 0               |  |  | $ | 0                                        |  |  | $ | 0                                            |  |  | $ | 8,400     | 
|Chief Executive Officer & President |  |  | 2012 |   |  | $ | 8,400     |  |  | $ | 0        |  |  | $ | 0              |  |  | $ | 0               |  |  | $ | 0                                        |  |  | $ | 0                                            |  |  | $ | 8,400     | 
|                                    |  |  | 2011 |   |  | $ | 8,400     |  |  | $ | 0        |  |  | $ | 0              |  |  | $ | 0               |  |  | $ | 0                                        |  |  | $ | 0                                            |  |  | $ | 8,400     | 
|                                    |  |  |      |   |  |   |           |  |  |   |          |  |  |   |                |  |  |   |                 |  |  |   |                                          |  |  |   |                                              |  |  |   |           | 
|Ildiko Rozsa                        |  |  | 2012 | 3 |  | $ | 0         |  |  | $ | 0        |  |  | $ | 0              |  |  | $ | 0               |  |  | $ | 0                                        |  |  | $ | 0                                            |  |  | $ | 0         | 
|Chief Financial Officer             |  |  | 2011 | 2 |  |   | 0         |  |  |   | 0        |  |  |   | 0              |  |  |   | 0               |  |  |   | 0                                        |  |  |   | 0                                            |  |  | $ | 0         | 
|                                    |  |  | 2010 | 1 |  |   | 0         |  |  |   | 0        |  |  |   | 15,000         |  |  |   | 0               |  |  |   | 0                                        |  |  |   | 0                                            |  |  | $ | 15,000    | 
|                                    |  |  |      |   |  |   |           |  |  |   |          |  |  |   |                |  |  |   |                 |  |  |   |                                          |  |  |   |                                              |  |  |   |           | 





64







Outstanding Equity Awards at December 31, 2013



As of December 31, 2013, there were no outstanding equity awards.





Director Compensation



During the year, ended December 31, 2013, the Company did not pay
any cash fees or expenses to our directors for serving on the Board.



Employment Agreements



We currently do not have any employee agreements.



Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters.



The following table sets forth, as of April
14, 2014, the number of shares of our common stock owned by (i) each person who is known by us to own of record or beneficially
five percent (5%) or more of our outstanding shares, (ii) each of our directors, (iii) each of our executive officers and (iv)
all of our directors and executive officers as a group. Unless otherwise indicated, each of the persons listed below has sole voting
and investment power with respect to the shares of our common stock beneficially owned.



|Name and Address                              | Beneficial
        Relationship to Company   |  | Outstanding
        Common Stock |           |  | Percentage of
        Ownership of
        Common Stock
        (1) | 
|--------------------------------------------- | -------------------------------------------- |  | -------------------------------- | --------- |  | ------------------------------------------------------------------- | 
|                                              |                                              |  |                                  |           |  |                                                                     | 
|                                              |                                              |  |                                  |           |  |                                                                     | 
|Directors and Named Executive Officers        |                                              |  |                                  |           |  |                                                                     | 
|Viktor Rozsnyay(3)                            | Chief Executive Officer, President, Chairman |  |                                  | 1,874,300 |  |                                                                     | 
|                                              |                                              |  |                                  |           |  |                                                                     | 
|                                              |                                              |  |                                  |           |  |                                                                     | 
|Ildiko Rozsa (4)                              | Chief Financial Officer                      |  |                                  | 570,000   |  |                                                                     | 
|                                              |                                              |  |                                  |           |  |                                                                     | 
|                                              |                                              |  |                                  |           |  |                                                                     | 
|Peter Boros (5)                               | Director                                     |  |                                  | 1,159,907 |  |                                                                     | 
|                                              |                                              |  |                                  |           |  |                                                                     | 
|Officers and Directors as a Group (3 persons) |                                              |  |                                  | 2,444,300 |  |                                                                     | 

65











* less than 1%



| | (1) | Based on 46,500,896 shares of common stock outstanding as of April 14, 2014.
| | --- | ----------------------------------------------------------------------------



| | (2) | This percentage does not include shares of Preferred Stock.
| | --- | -----------------------------------------------------------



| | (3) | Mr. Rozsnyay owns 1,000,000 shares of our Series A Preferred Stock and 1,874,300 shares of our common stock. His mailing address is 2049 Diosd, Ligetszepe ut 54, Hungary.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | Ms. Rozsa owns 570,000 shares of our common stock. Ms. Rozsa’s mailing address is 1066 Budapest, Terez Krt. 22, Hungary.                                                                                          
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (5) | Peter Boros owns 1,000,000 shares of our Series A Preferred stock, 1,000,000 shares of our Series D Preferred stock and 1,159,907 shares of our common stock. Mr. Boros’s address is Gyor, Ybl seteny 23, Hungary.



Securities Authorized for Issuance under
Equity Compensation Plans



The Company currently does not have an equity
compensation plans in effect.



Changes in Control



We are not aware of any arrangements that may
result in “changes in control” as that term is defined by the provisions of Item 403(c) of Regulation S-K.



Item 13. Certain Relationships and Related
Transactions, and Director Independence.



Related Transactions



During the year ended December 31, 2013, there
were no related transactions required to be reported under Item 404 of Regulation S-K.



Director Independence



On an annual basis, each director and executive
officer will be obligated to disclose any transactions with the Company in which a director or executive officer, or any member
of his or her immediate family, have a direct or indirect material interest in accordance with Item 407(a) of Regulation S-K.  Following
completion of these disclosures, the Board will make an annual determination as to the independence of each director using the
current standards for “independence” that satisfy both the criteria for the Nasdaq and the American Stock Exchange.



As of December 31, 2013, the Board determined that none of our directors
are independent under these standards.



Item 14. Principal Accounting Fees and Services.



The following table sets forth the aggregate
fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit
of the Company's annual financial statements and review of financial statements included in the Company's Form 10-Q quarterly reports
or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for
those fiscal years.



|                   |  | 2013 |        | 2012
|------------------ |  | ---- | ------ | ----
|                   |  |      |        |     
|Audit Fees         |  | $    | 40,290 |     
|Audit-Related Fees |  | $    | 0      |     
|Tax Fees           |  | $    | 0      |     
|All Other Fees     |  | $    | 0      |     
|TOTAL              |  | $    | 40,290 |     
|                   |  |      |        |     



We do not have an audit committee. Our entire
board of directors pre-approves all services provided by our independent auditors.

66





PART IV



Item 15. Exhibits, Financial Statement Schedules.



|Exhibit No. |  | Description                                                                                                                                                   
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                               
|23.1        |  | Consent of BDO Hungary, Ltd.*                                                                                                                                 
|            |  |                                                                                                                                                               
|31.1        |  | Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). *
|            |  |                                                                                                                                                               
|31.2        |  | Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). *
|            |  |                                                                                                                                                               
|32.1        |  | Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *           
|            |  |                                                                                                                                                               
|32.2        |  | Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *           
|            |  |                                                                                                                                                               
|            |  |                                                                                                                                                               
|101.INS     |  | XBRL Instance Document **                                                                                                                                     
|            |  |                                                                                                                                                               
|101.SCH     |  | XBRL Taxonomy Extension Schema **                                                                                                                             
|            |  |                                                                                                                                                               
|101.CAL     |  | XBRL Taxonomy Extension Calculation Linkbase **                                                                                                               
|            |  |                                                                                                                                                               
|101.DEF     |  | XBRL Taxonomy Extension Definition Linkbase **                                                                                                                
|            |  |                                                                                                                                                               
|101.LAB     |  | XBRL Taxonomy Extension Label Linkbase **                                                                                                                     
|            |  |                                                                                                                                                               
|101.PRE     |  | XBRL Taxonomy Extension Presentation Linkbase **                                                                                                              
|            |  |                                                                                                                                                               



* filed herewith



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

67





SIGNATURES



Pursuant to the requirements of Section 13
or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.





|                          |  |     | POWER OF THE DREAM VENTURES, INC.
|------------------------- |  | --- | ---------------------------------
|                          |  |     |                                  
|                          |  |     |                                  
|Date:  September 19, 2014 |  | By: | /s/ Viktor Rozsnyay              
|                          |  |     |                                  
|                          |  |     |                                  





|Date: September 19, 2014 |  | By: | /s/ Ildiko Rozsa |                                                             
|------------------------ |  | --- | ---------------- | ------------------------------------------------------------
|                         |  |     |                  | Name: Ildiko Rozsa                                          
|                         |  |     |                  | Title: Chief Financial Officer
(Principal Financial Officer)







Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.



|Name                |  | Position                                        |  | Date              
|------------------- |  | ----------------------------------------------- |  | ------------------
|                    |  |                                                 |  |                   
|/s/ Viktor Rozsnyay |  | Chief Executive Officer, President and Chairman |  | September 19, 2014
|Viktor Rozsnyay     |  |                                                 |  |                   
|                    |  |                                                 |  |                   
|/s/ Ildiko Rozsa    |  | Chief Financial Officer                         |  | September 19, 2014
|Ildiko Rozsa        |  |                                                 |  |                   
|                    |  |                                                 |  |                   
|/s/ Peter Boros     |  | Director                                        |  | September 19, 2014
|Peter Boros         |  |                                                 |  |                   
|                    |  |                                                 |  |                   
|                    |  |                                                 |  |                   



















68









Index to Financial Statements





|                                                                                                              | Page No.    
|------------------------------------------------------------------------------------------------------------- | ------------
|Report of Independent Registered Public Accounting Firm                                                       | F-2         
|Consolidated Balance Sheet at December 31, 2013                                                               | F-3 to F-4  
|Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2013 and 2012 | F-5         
|Consolidated Statements of Deficiency in Stockholders’ Equity for the two years ended December 31, 2013       | F-6 to F-11 
|Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012                          | F-12        
|Notes to Consolidated Financial Statements                                                                    | F-13 to F-41











F-1



















F-2





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

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEET

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012



Amounts in USD



|                                                   |  |                   |            |                  
|-------------------------------------------------- |  | ----------------- | ---------- | -----------------
|                                                   |  | December 31, 2013 |            | December 31, 2012
|                                                   |  |                   |            |                  
|ASSETS                                             |  |                   |            |                  
|                                                   |  |                   |            |                  
|Current Assets                                     |  |                   |            |                  
|Cash                                               |  | $                 | 22,922     |                  
|Other receivables                                  |  |                   | 217,419    |                  
|Inventories                                        |  |                   | 22,651     |                  
|Total Current Assets                               |  |                   | 262,992    |                  
|                                                   |  |                   |            |                  
|Intangibles                                        |  |                   | 30,055,381 |                  
|Fixed assets, net                                  |  |                   | 189,194    |                  
|Total Assets                                       |  |                   | 30,507,567 |                  
|                                                   |  |                   |            |                  
|LIABILITIES                                        |  |                   |            |                  
|                                                   |  |                   |            |                  
|Current Liabilities                                |  |                   |            |                  
|Accounts payable and accrued and other liabilities |  | $                 | 4,083,294  |                  
|Grants received                                    |  |                   | 1,432,042  |                  
|Capital leases payable, current portion            |  |                   | 55,784     |                  
|Short term loans from related parties              |  |                   | 86,899     |                  
|Liability from warrants                            |  |                   | 87,502     |                  
|Note payable                                       |  |                   | 154,000    |                  
|Short term loans                                   |  |                   | 2,341,159  |                  
|Total Current Liabilities                          |  |                   | 8,240,680  |                  
|                                                   |  |                   |            |                  
|Long term liabilities                              |  |                   |            |                  
|Capital leases payable, less current portion       |  |                   | 35,692     |                  
|Total Long Term Liabilities                        |  |                   | 35,692     |                  
|                                                   |  |                   |            |                  
|                                                   |  |                   |            |                  



F-3





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

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEET

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012



Amounts in USD



|Stockholders’ Equity                                                                                                  |  |  |                                   |  |  |  |                                  |  
|--------------------------------------------------------------------------------------------------------------------- |  |  | --------------------------------- |  |  |  | -------------------------------- | -
|Preferred stock, $0.001 par value, 10,000,000 shares authorized, 4,900,000 and 3,000,000 issued                       |  |  |                                   |  |  |  |                                  |  
|of which Series “A”                                                                                                   |  |  | 2,000                             |  |  |  | 2,000                            |  
|of which Series “B”                                                                                                   |  |  | 1,000                             |  |  |  | 1,000                            |  
|of which Series “C”                                                                                                   |  |  | 900                               |  |  |  | —                                |  
|of which Series “D”                                                                                                   |  |  | 1,000                             |  |  |  | —                                |  
|                                                                                                                      |  |  |                                   |  |  |  |                                  |  
|Common stock, $.001 par value; 100,000,000 shares authorized, 46,500,896 and 42,495,244 shares issued and outstanding |  |  | 46,501                            |  |  |  | 42,495                           |  
|Additional Paid-In Capital Deficit accumulated during development stage Other Comprehensive Income                    |  |  | 35,403,285 (13,018,339) (205,152) |  |  |  | 34,480,163 (11,223,621) (45,499) |  
|Unearned Compensation                                                                                                 |  |  | —                                 |  |  |  | (76,924                          | )
|Total Stockholders’ Equity                                                                                            |  |  | 22,231,195                        |  |  |  | 23,179,614                       |  
|                                                                                                                      |  |  |                                   |  |  |  |                                  |  
|Total liabilities and stockholders’ equity                                                                            |  |  | 30,507,567                        |  |  |  | 31,015,984                       |  



F-4





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

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012



Amounts in USD



|                                                                                                                                                                                                  | Notes |  | For the
        year ended December 31, 2013                                    |  | For the
        year ended December 31, 2012                                    |  | For the
        Period from April 26, 2006 (date of inception) to December 31, 2013 | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----- |  | ------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------- | 
|                                                                                                                                                                                                  |       |  |                                                                                 |  |                                                                                 |  |                                                                                     | 
|Net Sales                                                                                                                                                                                         |       |  | $ -                                                                             |  | $ -                                                                             |  | $  5,833                                                                            | 
|Cost of Sales                                                                                                                                                                                     |       |  | -                                                                               |  | -                                                                               |  | (3,711)                                                                             | 
|                                                                                                                                                                                                  |       |  |                                                                                 |  |                                                                                 |  |                                                                                     | 
|Gross margin                                                                                                                                                                                      |       |  | -                                                                               |  | -                                                                               |  | 2,122                                                                               | 
|Material expenses                                                                                                                                                                                 |       |  | 34,073                                                                          |  | 17,437                                                                          |  | 145,674                                                                             | 
|General administration                                                                                                                                                                            | 12    |  | 738,975                                                                         |  | 797,189                                                                         |  | 8,895,232                                                                           | 
|Research and development                                                                                                                                                                          | 4     |  | 41,812                                                                          |  | -                                                                               |  | 866,619                                                                             | 
|Personnel expenses                                                                                                                                                                                |       |  | 271,114                                                                         |  | 213,823                                                                         |  | 965,604                                                                             | 
|Depreciation and amortization                                                                                                                                                                     | 5     |  | 145,219                                                                         |  | 108,099                                                                         |  | 707,281                                                                             | 
|Grants received                                                                                                                                                                                   | 10    |  | (150,196)                                                                       |  | (126,783)                                                                       |  | (276,979)                                                                           | 
|Other expenses, net                                                                                                                                                                               | 13    |  | 83,335                                                                          |  | 615,376                                                                         |  | 713,958                                                                             | 
|Operating expenses                                                                                                                                                                                |       |  | 1,164,332                                                                       |  | 1,625,141                                                                       |  | 12,017,389                                                                          | 
|Loss from operations                                                                                                                                                                              |       |  | (1,164,332)                                                                     |  | (1,625,141)                                                                     |  | (12,015,267)                                                                        | 
|Interest expense and losses                                                                                                                                                                       |       |  | (629,625)                                                                       |  | (51,927)                                                                        |  | (798,356)                                                                           | 
|Loss before income taxes                                                                                                                                                                          |       |  | (1,793,957)                                                                     |  | (1,677,068)                                                                     |  | (12,813,623)                                                                        | 
|Income taxes                                                                                                                                                                                      |       |  | (761)                                                                           |  | (1,984)                                                                         |  | (3,952)                                                                             | 
|Net loss                                                                                                                                                                                          |       |  | (1,794,718)                                                                     |  | (1,679,052)                                                                     |  | $ (12,817,575)                                                                      | 
|Basic loss per share
        Diluted loss per share
        Weighted
        average number of shares outstanding – Basic
        Weighted
        average number of shares outstanding – Diluted |       |  | $(0.04)
        $(0.04)
        
        44,909,013
        
        44,909,013 |  | $(0.04)
        $(0.04)
        
        39,018,009
        
        39,018,009 |  |                                                                                     | 



F-5







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

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’
EQUITY AND COMPREHENSIVE LOSS

Amounts in USD

|                                                                            |  | Common Shares |            | Stocks Amount |  | Accumulated Deficit During Developmental Stage |       | Additional Paid In Capital |  | Other Comprehensive Income |            | Unearned Compensation |  | Total |           | Comprehensive Income/ (Loss)
|--------------------------------------------------------------------------- |  | ------------- | ---------- | ------------- |  | ---------------------------------------------- | ----- | -------------------------- |  | -------------------------- | ---------- | --------------------- |  | ----- | --------- | ----------------------------
|                                                                            |  |               |            |               |  |                                                |       |                            |  |                            |            |                       |  |       |           |                             
|Issuance of common stock                                                    |  |               | 33,300,000 |               |  | $                                              | 3,330 |                            |  |                            |            |                       |  | $     | 10,670    |                             
|Contributed Capital                                                         |  |               |            |               |  |                                                |       |                            |  |                            |            |                       |  |       | 96,100    |                             
|Currency Translation Adjustment                                             |  |               |            |               |  |                                                |       |                            |  |                            |            |                       |  |       |           |                             
|Net loss for the period                                                     |  |               |            |               |  |                                                |       |                            |  | $                          | (35,100    | )                     |  |       |           |                             
|Balance at December 31, 2006                                                |  |               | 33,300,000 |               |  |                                                | 3,330 |                            |  |                            | (35,100    | )                     |  |       | 106,770   |                             
|Contributed Capital                                                         |  |               |            |               |  |                                                |       |                            |  |                            |            |                       |  |       | 53,735    |                             
|Recapitalization upon Reverse Merger on April 10, 2007 (See Note 1)         |  |               | 2,500,000  |               |  |                                                | 250   |                            |  |                            | (250,763   | )                     |  |       |           |                             
|Private placement of shares at $0.34 per share (See Note 10)                |  |               | 2,250,000  |               |  |                                                | 225   |                            |  |                            |            |                       |  |       | 764,775   |                             
|Shares issued for services at $0.34 per share (See Note 10)                 |  |               | 1,875,000  |               |  |                                                | 188   |                            |  |                            |            |                       |  |       | 637,313   |                             
|Shares issued for research and development at $0.34 per share (See Note 10) |  |               | 100,000    |               |  |                                                | 10    |                            |  |                            |            |                       |  |       | 33,990    |                             
|Private placement at $2.5 per share (See Note 10)                           |  |               | 104,000    |               |  |                                                | 10    |                            |  |                            |            |                       |  |       | 259,990   |                             
|Shares issued for stock based compensation at $2.5 per share (See Note 10)  |  |               | 1,036,000  |               |  |                                                | 104   |                            |  |                            |            |                       |  |       | 2,589,896 |                             
|Amortization of Unearned Compensation                                       |  |               |            |               |  |                                                |       |                            |  |                            |            |                       |  |       |           |                             
|Currency Translation Adjustment                                             |  |               |            |               |  |                                                |       |                            |  |                            |            |                       |  |       |           |                             
|Net loss for the period                                                     |  |               |            |               |  |                                                |       |                            |  |                            | (1,992,472 | )                     |  |       |           |                             
|Balance at December 31, 2007                                                |  |               | 41,165,000 |               |  | $                                              | 4,117 |                            |  | $                          | (2,278,335 | )                     |  | $     | 4,446,469 |                             



F-6





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

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’
EQUITY AND COMPREHENSIVE LOSS

Amounts in USD

|                                                                          |  | Common Shares |            | Stocks Amount |  | Accumulated Deficit During Developmental Stage |       | Additional Paid In Capital |  | Other Comprehensive Income |            | Unearned Compensation |  | Total |           | Comprehensive Income/ (Loss)
|------------------------------------------------------------------------- |  | ------------- | ---------- | ------------- |  | ---------------------------------------------- | ----- | -------------------------- |  | -------------------------- | ---------- | --------------------- |  | ----- | --------- | ----------------------------
|Balance at December 31, 2007                                              |  |               | 41,165,000 |               |  | $                                              | 4,117 |                            |  | $                          | (2,278,335 | )                     |  | $     | 4,446,469 |                             
|Private placement of shares at $3.25 per share (See Note 10)              |  |               | 32,500     |               |  |                                                | 3     |                            |  |                            |            |                       |  |       | 105,622   |                             
|Shares issued for services at $0.7 per share (See Note 10)                |  |               | 306,570    |               |  |                                                | 31    |                            |  |                            |            |                       |  |       | 214,568   |                             
|Shares issued for services at $0.75 per share (See Note 10)               |  |               | 1,500,000  |               |  |                                                | 150   |                            |  |                            |            |                       |  |       | 1,124,850 |                             
|Shares issued for services at $1.35 per share (See Note 10)               |  |               | 111,111    |               |  |                                                | 11    |                            |  |                            |            |                       |  |       | 149,989   |                             
|Private placement of shares at $0.4 per share (See Note 10)               |  |               | 2,500,000  |               |  |                                                | 250   |                            |  |                            |            |                       |  |       | 999,750   |                             
|Shares issued for Standby Equity Distribution Agreement at $0.4 per share |  |               | 2,000,000  |               |  |                                                | 200   |                            |  |                            |            |                       |  |       | (200      | )                           
|Amortization of Unearned Compensation                                     |  |               |            |               |  |                                                |       |                            |  |                            |            |                       |  |       |           |                             
|Currency Translation Adjustment                                           |  |               |            |               |  |                                                |       |                            |  |                            |            |                       |  |       |           |                             
|Net loss for the period                                                   |  |               |            |               |  |                                                |       |                            |  |                            | (3,958,212 | )                     |  |       |           |                             
|Balance at December 31, 2008                                              |  |               | 47,615,181 |               |  | $                                              | 4,762 |                            |  | $                          | (6,236,547 | )                     |  | $     | 7,041,048 |                             
|Shares issued for stock based compensation at $0.4 per share (See Note 8) |  |               | 700,000    |               |  |                                                | 70    |                            |  |                            |            |                       |  |       | 279,930   |                             
|Private placement for $0.20 per share                                     |  |               | 111,110    |               |  |                                                | 11    |                            |  |                            |            |                       |  |       | 22,211    |                             
|Private placement for $0.16 per share                                     |  |               | 175,000    |               |  |                                                | 18    |                            |  |                            |            |                       |  |       | 27,982    |                             
|Shares issued for services at $0.4 per share (See Note 8                  |  |               | 250,000    |               |  |                                                | 25    |                            |  |                            |            |                       |  |       | 99,975    |                             
|Amortization of Unearned Compensation                                     |  |               |            |               |  |                                                |       |                            |  |                            |            |                       |  |       |           |                             
|Currency Translation Adjustment                                           |  |               |            |               |  |                                                |       |                            |  |                            |            |                       |  |       |           |                             
|Net loss for the period                                                   |  |               |            |               |  |                                                |       |                            |  |                            | (1,518,077 | )                     |  |       |           |                             
|Balance at December 31, 2009                                              |  |               | 48,851,291 |               |  | $                                              | 4,886 |                            |  | $                          | (7,754,624 | )                     |  | $     | 7,471,146 |                             

F-7





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

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’
EQUITY AND COMPREHENSIVE LOSS

Amounts in USD





|                                                                          |  | Common Shares |            | Stocks Amount |  | Accumulated Deficit During Developmental Stage |       | Additional Paid In Capital |  | Other Comprehensive Income |            | Unearned Compensation |  | Total |           | Comprehensive Income/ (Loss)
|------------------------------------------------------------------------- |  | ------------- | ---------- | ------------- |  | ---------------------------------------------- | ----- | -------------------------- |  | -------------------------- | ---------- | --------------------- |  | ----- | --------- | ----------------------------
|Balance at December 31, 2009                                              |  |               | 48,851,291 |               |  | $                                              | 4,886 |                            |  | $                          | (7,754,624 | )                     |  | $     | 7,471,146 |                             
|Private placement for $0.12 and $0.1 per share                            |  |               | 1,597,500  |               |  |                                                | 159   |                            |  |                            |            |                       |  |       | 159,542   |                             
|Private placement for $0.5 per share (See Note 8)                         |  |               | 70,000     |               |  |                                                | 7     |                            |  |                            |            |                       |  |       | 34,993    |                             
|Shares issued for services at $0.5 per share (See Note 8)                 |  |               | 1,027,000  |               |  |                                                | 100   |                            |  |                            |            |                       |  |       | 513,400   |                             
|Shares issued for stock based compensation at $0.1 per share (See Note 8) |  |               | 540,000    |               |  |                                                | 54    |                            |  |                            |            |                       |  |       | 53,946    |                             
|Shares issued for services at $0.1 per share (See Note 8)                 |  |               | 20,000     |               |  |                                                | 2     |                            |  |                            |            |                       |  |       | 1,998     |                             
|Exercise of warrant                                                       |  |               | 3,226      |               |  |                                                | 3     |                            |  |                            |            |                       |  |       | 1,613     |                             
|Amortization of Unearned Compensation                                     |  |               |            |               |  |                                                |       |                            |  |                            |            |                       |  |       |           |                             
|Currency Translation Adjustment                                           |  |               |            |               |  |                                                |       |                            |  |                            |            |                       |  |       |           |                             
|Net loss for the period                                                   |  |               |            |               |  |                                                |       |                            |  |                            | (588,910   | )                     |  |       |           |                             
|Balance at December 31, 2010                                              |  |               | 52,109,017 |               |  | $                                              | 5,211 |                            |  | $                          | (8,343,534 | )                     |  |       | 8,236,638 |                             











F-8





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

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’
EQUITY AND COMPREHENSIVE LOSS



Amounts in USD

|                                                                           |  | Preferred Shares |           | Common Shares |  | Stocks Amount |             | Accumulated Deficit During Developmental Stage |  | Additional Paid In Capital |       | Other Comprehensive Income |  | Unearned Compensation |            | Total
|-------------------------------------------------------------------------- |  | ---------------- | --------- | ------------- |  | ------------- | ----------- | ---------------------------------------------- |  | -------------------------- | ----- | -------------------------- |  | --------------------- | ---------- | -----
|Balance at December 31, 2010                                               |  |                  | —         |               |  |               | 52,109,017  |                                                |  | $                          | 5,211 |                            |  | $                     | (8,343,534 | )    
|                                                                           |  |                  |           |               |  |               |             |                                                |  |                            |       |                            |  |                       |            |      
|Private placement at $0.29 per share (see Note 8)                          |  |                  |           |               |  |               | 196,489     |                                                |  |                            | 20    |                            |  |                       |            |      
|Conversion of note at $0.29 per share                                      |  |                  |           |               |  |               | 2,400,000   |                                                |  |                            | 240   |                            |  |                       |            |      
|Private placement at $0.16 per share (see Note 8)                          |  |                  |           |               |  |               | 1,727,013   |                                                |  |                            | 172   |                            |  |                       |            |      
|Private placement at $0.12 per share (see Note 8)                          |  |                  |           |               |  |               | 17,825      |                                                |  |                            | 2     |                            |  |                       |            |      
|Shares issued for services per share (See Note 8)                          |  |                  |           |               |  |               | 1,970,000   |                                                |  |                            | 197   |                            |  |                       |            |      
|Shares issued for stock based compensation at $0.15 per share (See Note 8) |  |                  |           |               |  |               | 540,000     |                                                |  |                            | 54    |                            |  |                       |            |      
|Private placement at $0.16 per share (see Note 8)                          |  |                  |           |               |  |               | 27,700      |                                                |  |                            | 3     |                            |  |                       |            |      
|Conversion of note at $0.01 per share                                      |  |                  |           |               |  |               | 3,500,000   |                                                |  |                            | 350   |                            |  |                       |            |      
|Cancellation of common stock (and issue of preferred stock)                |  |                  | 2,000,000 |               |  |               | (24,000,000 | )                                              |  |                            |       |                            |  |                       |            |      
|Amortization of Unearned Compensation                                      |  |                  |           |               |  |               |             |                                                |  |                            |       |                            |  |                       |            |      
|Currency Translation Adjustment                                            |  |                  |           |               |  |               |             |                                                |  |                            |       |                            |  |                       |            |      
|Net loss for the period                                                    |  |                  |           |               |  |               |             |                                                |  |                            |       |                            |  |                       | (1,251,035 | )    
|Balance at December 31, 2011                                               |  |                  | 2,000,000 |               |  |               | 38,488,044  |                                                |  | $                          | 6,249 |                            |  | $                     | (9,594,569 | )    
|                                                                           |  |                  |           |               |  |               |             |                                                |  |                            |       |                            |  |                       |            |      







F-9





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

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’
EQUITY AND COMPREHENSIVE LOSS





Amounts in USD

|                                                                  |  | Preferred Shares |           | Common Shares |  | Stocks Amount |            | Accumulated Deficit During Developmental Stage |  | Additional Paid In Capital |        | Other Comprehensive Income |  | Unearned Compensation |             | Total
|----------------------------------------------------------------- |  | ---------------- | --------- | ------------- |  | ------------- | ---------- | ---------------------------------------------- |  | -------------------------- | ------ | -------------------------- |  | --------------------- | ----------- | -----
|Balance at December 31, 2011                                      |  |                  | 2,000,000 |               |  |               | 38,488,044 |                                                |  | $                          | 6,249  |                            |  | $                     | (9,594,569  | )    
|                                                                  |  |                  |           |               |  |               |            |                                                |  |                            |        |                            |  |                       |             |      
|Conversion of common shares to preferred shares (change in value) |  |                  |           |               |  |               |            |                                                |  |                            | (2,200 | )                          |  |                       |             |      
|Shares issued for services                                        |  |                  |           |               |  |               | 135,000    |                                                |  |                            | 14     |                            |  |                       |             |      
|Private placement at $0.30 per share (see Note 8)                 |  |                  |           |               |  |               | 42,200     |                                                |  |                            | 4      |                            |  |                       |             |      
|Amortization of Unearned Compensation                             |  |                  |           |               |  |               |            |                                                |  |                            |        |                            |  |                       |             |      
|Change of par value from $0.0001 to $0.001                        |  |                  |           |               |  |               |            |                                                |  |                            | 36,598 |                            |  |                       |             |      
|Shares issued for services                                        |  |                  |           |               |  |               | 1,930,000  |                                                |  |                            | 1,930  |                            |  |                       |             |      
|Conversion of loan to stocks                                      |  |                  |           |               |  |               | 1,900,000  |                                                |  |                            | 1,900  |                            |  |                       |             |      
|Acquisition of Genetic Immunity                                   |  |                  | 1,000,000 |               |  |               |            |                                                |  |                            | 1,000  |                            |  |                       | 50,000      |      
|Currency Translation Adjustment                                   |  |                  |           |               |  |               |            |                                                |  |                            |        |                            |  |                       |             |      
|Net loss for the period                                           |  |                  |           |               |  |               |            |                                                |  |                            |        |                            |  |                       | (1,679,052  | )    
|Balance at December 31, 2012                                      |  |                  | 3,000,000 |               |  |               | 42,495,244 |                                                |  | $                          | 45,495 |                            |  | $                     | (11,223,621 | )    
|                                                                  |  |                  |           |               |  |               |            |                                                |  |                            |        |                            |  |                       |             |      











F-10





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

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’
EQUITY AND COMPREHENSIVE LOSS





Amounts in USD

|                                      |  | Preferred Shares |           | Common Shares |  | Stocks Amount |            | Accumulated Deficit During Developmental Stage |  | Additional Paid In Capital |        | Other Comprehensive Income |  | Unearned Compensation |             | Total
|------------------------------------- |  | ---------------- | --------- | ------------- |  | ------------- | ---------- | ---------------------------------------------- |  | -------------------------- | ------ | -------------------------- |  | --------------------- | ----------- | -----
|Balance at December 31, 2012          |  |                  | 3,000,000 |               |  |               | 42,495,244 |                                                |  | $                          | 45,495 |                            |  | $                     | (11,223,621 | )    
|                                      |  |                  |           |               |  |               |            |                                                |  |                            |        |                            |  |                       |             |      
|Cancellation of shares for services   |  |                  |           |               |  |               | (250,000   | )                                              |  |                            | (250   | )                          |  |                       |             |      
|Amortization of Unearned Compensation |  |                  |           |               |  |               |            |                                                |  |                            |        |                            |  |                       |             |      
|Shares issued for services            |  |                  |           |               |  |               | 100,000    |                                                |  |                            | 100    |                            |  |                       |             |      
|Shares issued to prior owner          |  |                  |           |               |  |               | 1,000,000  |                                                |  |                            | 1,000  |                            |  |                       |             |      
|Issuance of shares to settle payable  |  |                  |           |               |  |               | 655,652    |                                                |  |                            | 656    |                            |  |                       |             |      
|Private placement                     |  |                  |           |               |  |               | 2,500,000  |                                                |  |                            | 2,500  |                            |  |                       |             |      
|Private placement                     |  |                  | 900,000   |               |  |               |            |                                                |  |                            | 900    |                            |  |                       |             |      
|Private Placement                     |  |                  | 1,000,000 |               |  |               |            |                                                |  |                            | 1000   |                            |  |                       |             |      
|Currency Translation Adjustment       |  |                  |           |               |  |               |            |                                                |  |                            |        |                            |  |                       |             |      
|Net profit for the period             |  |                  |           |               |  |               |            |                                                |  |                            |        |                            |  |                       | (1,794,718  | )    
|Balance at December 31, 2013          |  |                  | 4,900,000 |               |  |               | 46,500,896 |                                                |  | $                          | 51,401 |                            |  | $                     | (13,018,339 | )    
|                                      |  |                  |           |               |  |               |            |                                                |  |                            |        |                            |  |                       |             |      







F-11





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

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF CASH FLOWS

Amounts in USD

|                                                                                |  | For the
        year
        ended
        December 31,
        2013 |  | For the
        year ended
        December
        31, 2012 |  | Cumulative from April 26, 2006 (date of inception) to 
December 31, 
2013
|------------------------------------------------------------------------------- |  | -------------------------------------------------------------------- |  | ------------------------------------------------------------ |  | -------------------------------------------------------------------------
|CASH FLOWS FROM OPERATING ACTIVITIES                                            |  |                                                                      |  |                                                              |  |                                                                          
|Net loss                                                                        |  | $(1,794,718)                                                         |  | $(1,679,052)                                                 |  | $(12,817,575)                                                            
|Adjustments
    to reconcile net loss to net cash used in operating activities: |  |                                                                      |  |                                                              |  |                                                                          
|Amortization of stock-based compensation                                        |  | 256,824                                                              |  | 197,328                                                      |  | 6,308,238                                                                
|Recapitalization under reverse merger                                           |  | -                                                                    |  | -                                                            |  | (250,763)                                                                
|Issue of shares for services                                                    |  | -                                                                    |  | -                                                            |  | 210,000                                                                  
|Issue of shares for research and development                                    |  | -                                                                    |  | -                                                            |  | 34,000                                                                   
|Liability from warrant                                                          |  | (521,038)                                                            |  | 608,540                                                      |  | 87,502                                                                   
|Reversal of grant accrual                                                       |  | (114,732)                                                            |  | (130,574)                                                    |  | (245,306)                                                                
|Depreciation and amortization                                                   |  | 145,219                                                              |  | 108,099                                                      |  | 707,281                                                                  
|                                                                                |  | (2,028,445)                                                          |  | (895,659)                                                    |  | (5,966,623)                                                              
|Changes in operating assets and liabilities:                                    |  |                                                                      |  |                                                              |  |                                                                          
|(Increase) Decrease in other current assets                                     |  | 114,599                                                              |  | (31,016)                                                     |  | (217,419)                                                                
|(Decrease) Increase
        in accounts payable
        and accrued liabilities |  | 1,842,136                                                            |  | 934,447                                                      |  | 3,676,631                                                                
|                                                                                |  |                                                                      |  |                                                              |  |                                                                          
|Net cash provided by (used in) operating activities                             |  | (71,710)                                                             |  | 7,772                                                        |  | (2,507,411)                                                              
|                                                                                |  |                                                                      |  |                                                              |  |                                                                          
|CASH FLOWS FROM INVESTING ACTIVITIES                                            |  |                                                                      |  |                                                              |  |                                                                          
|Purchase of fixed assets                                                        |  | (206,216)                                                            |  | (15,303)                                                     |  | (702,413)                                                                
|Net cash used in investing activities                                           |  | (206,216)                                                            |  | (15,303)                                                     |  | (702,413)                                                                
|                                                                                |  |                                                                      |  |                                                              |  |                                                                          
|CASH FLOWS FROM FINANCING ACTIVITIES                                            |  |                                                                      |  |                                                              |  |                                                                          
|Proceeds from stockholders                                                      |  | (4,985)                                                              |  | 67,183                                                       |  | 212,033                                                                  
|Exercise of warrant                                                             |  | -                                                                    |  | -                                                            |  | 1,616                                                                    
|Proceeds from sale of preferred stock                                           |  | 269,000                                                              |  |                                                              |  | 269,000                                                                  
|Proceeds from sale of common stock                                              |  | 132,500                                                              |  | 12,658                                                       |  | 2,885,249                                                                
|Proceeds from issuance of notes                                                 |  | -                                                                    |  | -                                                            |  | 70,000                                                                   
|Net cash from financing activities                                              |  | 396,515                                                              |  | 79,841                                                       |  | 3,437,898                                                                
|                                                                                |  |                                                                      |  |                                                              |  |                                                                          
|Effect of exchange rate changes on cash                                         |  | (159,653)                                                            |  | (37,272)                                                     |  | (205,152)                                                                
|                                                                                |  |                                                                      |  |                                                              |  |                                                                          
|Net (decrease) increase in cash                                                 |  | (41,064)                                                             |  | 35,038                                                       |  | 22,922                                                                   
|Cash at beginning of period                                                     |  | 63,986                                                               |  | 28,948                                                       |  | -                                                                        
|Cash at end of period                                                           |  | $22,922                                                              |  | $63,986                                                      |  | $22,922                                                                  
|                                                                                |  |                                                                      |  |                                                              |  |                                                                          
|Supplemental disclosure of cash flow information:                               |  |                                                                      |  |                                                              |  |                                                                          
|Non-cash investing and financing transactions                                   |  |                                                                      |  |                                                              |  |                                                                          
|Issuance of shares for services                                                 |  | $19,900                                                              |  | $201,770                                                     |  | $4,256,158                                                               
|Issuance of shares for liabilities assumed
        under reverse merger         |  | -                                                                    |  | -                                                            |  | $250,513                                                                 
|Issuance of stock based compensation shares                                     |  | -                                                                    |  | -                                                            |  | $2,590,000                                                               
|Purchase of fixed assets through the assumption of capital lease obligations    |  | 406,558                                                              |  | 406,558                                                      |  | $406,558                                                                 
|                                                                                |  |                                                                      |  |                                                              |  |                                                                          
|Cash paid for:                                                                  |  |                                                                      |  |                                                              |  |                                                                          
|Interest                                                                        |  | -                                                                    |  | -                                                            |  | 40,980                                                                   
|Taxes                                                                           |  | -                                                                    |  | -                                                            |  | -                                                                        

F-12





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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012



NOTE 1 -	GENERAL INFORMATION

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

Reverse merger

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

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

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



Genetic Immunity



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



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



The Company filed an 8-K with the SEC disclosing
this transaction on October 4, 2012.



The acquisition of Genetic Immunity, Inc. has
been accounted for as a business combination whereby the purchase price was allocated to intangible assets based on their fair
values of the acquisition date. A summary of the purchase price consideration and related purchase price allocation are shown below:



Purchase price (at par value)		$1.000

Fair value adjustment of shares	 25,072,621

Total purchase price	 25,073,621



The fair value of the shares equals the fair
value of Genetic Immunity, Inc. at the acquisition date. The fair value of the company was estimated by an independent valuation
company and the valuation was carried out on a discounted cash flow basis. The Company issued 1,000,000 shares of Series B Preferred
stock which is not traded publicly and no market price could be estimated. As a result of this, the fair value of the shares was
evaluated by a valuation company. The value of the shares is $25.07362 per share.





F-13









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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012



NOTE 1 -	GENERAL INFORMATION
(Continued)



Purchase price allocation



|                                         |            
|---------------------------------------- | -----------
|Cash                                     | $357,276   
|Inventories                              | 13,843     
|Other receivables                        | 306,731    
|Intangibles                              | 30,111,909 
|Fixed assets                             | 418,483    
|Accounts payable and accrued liabilities | (1,893,833)
|Grants received                          | (1,677,348)
|Short term loans to related parties      | (154,631)  
|Bridge loan                              | (2,334,326)
|Other liabilities                        | (73,483)   
|Total purchase price                     | 25,074,621 
|                                         |            
|                                         |            

Unaudited pro forma operation results for the
year ended December 31, 2012 as though the Company acquired Genetic Immunity on January 1, 2012 are set forth below:

|                                   |  |            
|---------------------------------- |  | -----------
|Net Sales                          |  | $ -        
|Cost of Sales                      |  | -          
|                                   |  |            
|Gross margin                       |  | -          
|Material expenses                  |  | 68,406     
|General administration             |  | 1,482,366  
|Research and development           |  | -          
|Personnel expenses                 |  | 724,264    
|Depreciation and amortization      |  | 191,427    
|Grants received                    |  | (518,631)  
|Other expenses, net                |  | 347,448    
|Operating expenses                 |  | 2,295,280  
|Loss from operations               |  | (2,295,280)
|Interest income and exchange gains |  | (279,982)  
|Loss before income taxes           |  | (2,575,262)
|Income taxes                       |  | (1,985)    
|Net loss                           |  | (2,577,247)





On February 23, 2009 the Company entered into
a consultation agreement with Genetic Immunity, a Hungarian biotechnology research and development company working on immune amplification
nanomedicine products, including a HIV vaccine currently in Phase 2 clinical trials.



F-14





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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012





According to the terms of the agreement PDV
will provide Genetic Immunity business development expertise, will facilitate the publication, via internationally distributed
press releases, of Genetic Immunity’s past, present and future news items, and will advise Genetic Immunity on going public
in the United States based on Power of the Dream Ventures’ own experience in achieving public states.



In addition, PDV was granted rights to acquire
equity in Genetic Immunity in one or several tranches for total consideration of USD $10 million in exchange for 20% equity in
the Company, if all options are exercised.



Exact terms of this equity purchase option
were: PDV is to acquire 2% of the Company via a USD 1,000,000 investment by April 30, 2009 in exchange for 72 units of the Genetic
Immunity’s Class B stock; Company is to acquire an additional 2% of the Genetic Immunity via a USD 1,000,000 investment by
August 30, 2009 in exchange for 72 units of the Genetic Immunity’s Class B stock. PDV is also granted an option to acquire
an additional 16% of the Genetic Immunity via an $8,000,000 investment by February 20, 2010, in tranches or in whole, in exchange
for 578 units of the Genetic Immunity’s Class B stock. If the Company misses the first deadline of April 30, 2009 this agreement
shall immediately terminate. If the Company completes the first investment but missed the second date of August 30, 2009 this agreement
shall terminate, but the Company will retain the Class B units already acquired. Any portion of the optional 16% equity purchase
that is not exercised and closed by February 23, 2010 shall terminate. The option was extended for an unlimited period.



On March 7, 2011 we entered into an extension
of this agreement for the purpose of assisting Genetic Immunity in becoming a publicly traded corporation in the United States.
The new agreement gives the Company rights to invest up to $1,400,000 into Genetic Immunity, to be completed by December 31, 2011
in one or more payment. The investment buys Genetic Immunity LLC Series B units that are convertible into common stock once the
company becomes publicly traded in the United States. As of June 30, 2011 we have invested $50,000 of this amount. We anticipate
raising additional capital to complete the entire investment. In exchange for the investment we are to receive 14% of Genetic Immunity
once $500,000 dollars has been invested, and warrant to purchase Genetic Immunity common stock, including one million shares at
$20 dollars, one million shares at $30 dollars and one million shares at $40 dollars once Genetic immunity becomes a public company.



On September 28, 2011 we signed a termination
letter with Genetic Immunity whereby our option to invest in and receive warrant in Genetic Immunity have been terminated. In consideration
for the $50,000 we have invested in Genetic Immunity we have received 10 Series B Units of Genetic Immunity. These units were accounted
for in the Genetic Immunity acquisition in 2012.

Business

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

From inception through December 31,
2013, the Company primarily focused on the raising of capital. As of December 31, 2013, the Company originally managed seven technologies:
RiverPower, the Buresch Inventions (Desalination and H2O gas technology,) the Kalmar inventions (FireSAFE fire-proofing liquid;
technology for utilizing communal waste as a concrete additive; technology for repairing potholes with the use of recycled plastics;
technology for neutralizing red mud; biodegradable deicing solution and PVC shielded electric cable recycling technology), and
an equity interest in ‘iGlue, Inc (Ticker: IGLU)’, a company formed to develop next generation semantic internet based
search engine and content organizer applications. As of December 31, 2013 the Company has discontinued efforts to develop the Buresch
inventions, the Kalmar inventions, RiverPower and the Toth Telescope. (see Note 4). As of December 31, 2013, the Company has only
realized limited revenues from the now discontinued TothTelescope project and has not realized any revenues from the other, now
discontinued inventions. As a result, the accompanying consolidated financial statements have been presented on a development stage
basis.

F-15





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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012



The Kalmar Inventions: FireSAFE,
HardCrete concrete from communal waste additive; Recycled plastic pothole filler; PVC covered electrical cable and radial tire
recycling technology; red mud neutralization; and environmentally friendly salt free de-icing solution.

As of December 31, 2011 the Company
elected to discontinue development work on all of these technologies. The rational behind this decision rests with availability
of resources, the time that would be needed to develop said inventions, the potential return the Company could realize on a partial
or full exit from these investments and international completion.

TothTelescope

On July 15, 2009 the Company’s
exclusive distributor agreement expired with Attila Toth, Inventor of the TothTelescope. After extensive review of the technology,
the available market and hurdles associated with manufacturing and distributing the TothTelescope, we have elected not to renew
the distribution agreement and discontinue the project. Since inception only 10 telescopes were sold. Overall invested capital
was returned from commissions earned on these sales.



Yorkville SEDA



On October 8, 2008, Power of the Dream Ventures,
Inc. (the “Company”) entered into a Standby Equity Distribution Agreement (the “Standby Equity Distribution Agreement”)
with YA Global Investments, L.P. (the “Investor”). Pursuant to the terms of the Standby Equity Distribution Agreement,
the Company (a) agreed to issue and sell to the Investor up to $5,000,000 of shares of the Company’s common stock, par value
$0.0001 per share (the “Common Stock”) in tranches of equity, based upon a specified discount to the market price of
the Common Stock, calculated over the five trading days following notice by the Company of an election to sell shares; and (b)
issued to the Investor a warrant (the “Warrant”) to purchase 4,027,386 shares of Common Stock at the exercise price
per share of $0.29. The Warrant is not part of the commitment shares issued by the company to the investor. The investor must purchase
the shares underlying the Warrant. The Warrant price was determined based upon the highest Bid price on the day of the closing
of the agreement.



In connection with the Standby Equity Distribution
Agreement, the Company entered into a Registration Rights Agreement with the Investor (the “Registration Rights Agreement”)
pursuant to which the Company agreed to register for resale the shares of Common Stock that may be purchased by the Investor pursuant
to the Standby Equity Distribution Agreement, the shares of Common Stock issuable upon exercise of the Warrant and 2,000,000 shares
of Common Stock (the “Commitment Shares”) issued to the Investor as a commitment fee pursuant to the terms of the Standby
Equity Distribution Agreement. The commitment fee is recorded by decreasing additional paid in capital.



Financing from this transaction will be used
by the Company for the continued development of its current technologies, commercialization of same, the acquisition of new technologies
and for general corporate expenses.



The Company filed the details of this transaction
on Form 8-K with the Commission on October 14, 2008.



On September 24, 2010 the Company notified
YA Global Investments in writing of its intention to terminate the Standby Equity Distribution Agreement (SEDA).



In response to this letter YA Global informed
the company in a letter dated October 5, 2010 that the SEDA agreement will terminate on or about October 15, 2010. YA Global also
informed the company that even though the SEDA agreement is terminated its associated Warrant to purchase 4,027,386 shares of Our
common stock remains in effect until it expires on October 8, 2013.



On October 18, 2010 the company received notice
from YA global for the exercise of 50,000 warrant shares on a cashless basis. This cashless exercise resulted in the issuance of
3,226 shares of Common stock to YA Global. Following this exercise YA Global has 3,977,386 warrant shares available for purchase.

F-16







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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2012 AND
2011

iGlue Software via Equity position
in iGlue, Inc.



From 2007 to 2011 we funded the development
of iGlue, the cornerstone of the current technology portfolio. The financial commitment to in4, Ltd, the company behind iGlue,
amounted to a total of approximately $600,000 for years 2007 through 2010. The total chronological events of iGlue are:



- On August 2, 2007 Vidatech Kft., the Company’s wholly owned Hungarian
subsidiary, entered into a joint development agreement with the inventors/creators of iGlue, an online content organization and
search application based on semantic web technology. In the transaction Vidatech received 30% equity in the newly formed in4 Kft
(http://www.in4.hu), the owner and exclusive developer of iGlue (http://www.iglue.com), for HUF 900 thousand (approximately USD
5,000). Up until May 31, 2009, Vidatech was expected to provide up to HUF 48 million (approximately USD 271,000) in member loans
to in4 Kft. to cover the development expense of iGlue.
- As of December 31, 2008 the Company has provided this amount to in4, Ltd.
- As part of the agreement, Vidatech had the option of converting its HUF 48
million member loan into an additional 10% equity in in4 Kft. on or before the end of May, 2009. As of January 8, 2009 the Company
has elected to covert our member loan into the additional 10% equity in in4, Ltd., resulting in Vidatech owning 40% of equity.
- On May 17th, 2010, the Company transferred its equity ownership from its Hungarian
subsidiary Vidatech, Kft. to Power of the Dream Ventures. The transfer was initiated to prepare for its eventual exit from iGlue.
- Also on May 17th, 2010, the Company arranged for a new investor to provide
further funds for the continued development of iGlue, in the amount of HUF 110 million (approximately USD 550,000.) Prior to this
event, up to May 17th, 2010 the Company has provided an additional HUF 64million ($310,000) as member loan to in4 Ltd. to finance
development work, bringing our total investment to date to HUF 112,000,000 (approximately $600,000). As part of the new round
of fund raising the Company agreed to convert its HUF 60 million in member loan into 3% equity. Following this conversion the
new investor received 10% in in4, Ltd., of which the Company provided 1.5% and Peter Vasko, Founder of in4 limited provided 8.5%.
Following the fund raising the new equity positions in in4 changed to Peter Vasko owning 51.5% (down from the pre-transaction
60%), Power of the Dream Ventures owning 38.5% (down from the pre-transaction 40%) and the new investor owning 10% equity.
- On May 19 of 2011 a new member joined in4, Ltd, Zoltan Siklosi who received
3% equity in the company for services rendered. Following his entry the new equity structure of the company changed to Peter Vasko
owning 48.5% percent, Gyorgy Markos owning 10%, Zoltan Siklosi owning 3% and Power of the Dream Ventures owning 38.5%.
- Subsequently, to take iGlue to the next level, the Company organized a going
public roadmap for the company. As part of this process, on November 3, 2011, in4, Ltd signed a Definitive Share Exchange Agreement
to merge with Hardwired Interactive (HDWR) a fully reporting public company. As part of this agreement all holders of in4, Ltd
equity received common and preferred stock in the newly public entity. As part of the transaction we received 600,000 shares of
Series B Hardwired Interactive common stock convertible into 6,000,000 shares of common stock upon a reverse stock split. The
Company also received warrants to purchase a total of three million shares of post split common stock, one million shares each
at $5 dollars, $7 dollars and $9 dollars per share.
- On November 23, 2011 the Company announced plans to provide a dividend, in
the form of iGlue common stock, to PWRV shareholders of record on December 23, 2011. Each PWRV share was to receive 0.05 share
of iGlue common stock in the dividend. Upon approval from FINRA this dividend was paid out to PWRV shareholders on February 15,
2012. Following this distribution the Company still holds 2,884,986 shares of iGlue common stock and warrants to purchase a total
of three million addition shares.







F-17





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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013
AND 2012

Basis of presentation

The accompanying consolidated financial
statements have been prepared by the Company pursuant to the rules and regulations of the SEC. Certain information and footnote
disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the
United States of America for financial information have been condensed or omitted pursuant to such rules and regulations. In the
opinion of management, the accompanying financial statements include all adjustments (consisting of normal recurring accruals)
considered necessary to make the financial statements not misleading as of and for the period ended December 31, 2013 and for the
period from April 26, 2006 (date of inception) to December 31, 2013.

Going Concern and Management’s
Plan

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

Since inception through December 31,
2013, the Company had an accumulated deficit of $13,018,339 and net cash used in operations of $2,507,411. However, management
of the Company believes that future funding from the private placement of the Company’s common shares will allow them to
continue operations and execute its business plan.

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

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



On July 19, 2011 the Company entered into a
Convertible Promissory Note with Infinite Funding LLC whereby Infinite Funding provided $49,000 dollars in loans to the Company.
The note bears interest at 12%.











F-18





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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013
AND 2012

Management believes the Company has
adequate capital to keep the Company functioning through December 31, 2014. As discussed in contingencies, the Company anticipates
receiving funds from the Hungarian state pursuant to the lawsuit it has filed to recover the awards granted to the Company plus
damages. Also, additional fund raisings are in progress. However, the Company cannot guarantee that any amount from the lawsuit
will be recoverable nor that any fund raising activities will be successful. The need may arise, in the normal course of business,
to raise additional capital if we want to accelerate development work, for the acquisition of additional technologies, or to meet
unforeseen financial needs. No assurance can be given that the Company can obtain additional working capital, or if obtained, that
such funding will not cause substantial dilution to shareholders of the Company. If the Company is unable to raise additional funds,
if needed, it may be forced to change or delay its contemplated marketing and business plan. Being a development stage company,
the Company is subject to all the risks inherent in the establishment of a new enterprise and the marketing and manufacturing of
a new product, many of which risks are beyond the control of the Company. All of the factors discussed above raise substantial
doubt about the Company’s ability to continue as a going concern.

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

NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES

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

Principles of Consolidation

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

Use of Estimates:

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

Revenue Recognition:

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

Accounts Receivable and Allowance
for Doubtful Accounts:

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





F-19







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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012

Inventories:

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

Fixed assets:

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

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

Pensions and Other Post-retirement
Employee benefits:

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

Product warranty:

The Company accrues for warranty obligations
for products sold based on management estimates, with support from sales, quality and legal functions, of the amount that eventually
will be required to settle such obligations. At December 31, 2013, the Company had no warranty obligations in connection with products
sold.

Advertising costs:

Advertising and sales promotion expenses
are expensed as incurred.

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

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

Income taxes:

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



F-20







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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012

Comprehensive Income (Loss):

ASC 220-10-25, “Accounting for
Comprehensive Income,” establishes standards for reporting and disclosure of comprehensive income and its components (including
revenues, expenses, gains and losses) in a full set of general-purpose financial statements. The items of other comprehensive income
that are typically required to be disclosed are foreign currency items, minimum pension liability adjustments, and unrealized gains
and losses on certain investments in debt and equity securities. Accumulated other comprehensive loss, at December 31, 2013 is
$205,152.

Translation of Foreign Currencies:

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

Loss per Share:

Under ASC 260-10-45, “Earnings
Per Share”, basic loss per common share is computed by dividing the loss applicable to common stockholders by the weighted
average number of common shares assumed to be outstanding during the period of computation. Diluted loss per common share is computed
using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Accordingly,
the weighted average number of common shares outstanding for the years ended December 31, 2013 and 2012, respectively, is the same
for purposes of computing both basic and diluted net income per share for such years. For the years ended December 31, 2013 and
2012, all potential shares of common stock were excluded from diluted EPS as their effect would be anti-dilutive.

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

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

| | - | 900,000 Shares of our Series C Preferred Stock convertible into 20 shares of common stock per each
Series C preferred, or a total of 18,000,000 common stock on a fully converted basis.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

Business Segment:

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

F-21





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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012

Share-Based Payments:

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

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

Recent Accounting Pronouncements:

In September 2011, the FASB issued Accounting
Standards Update 2011-08 Intangibles—Goodwill and Other (Topic 350), Testing Goodwill for Impairment. The objective of this
update is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the update permit
an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting
unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment
test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. The
amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after
December 15, 2011. The adoption of this standard did not have a material impact on its financial position, results of operations
or cash flows.

In June 2011, the FASB issued Accounting
Standards Update 2011-05 - Comprehensive Income (Topic 220): Presentation of Comprehensive Income. Under the amendments to Topic
220, Comprehensive Income, an entity has the option to present the total of comprehensive income, the components of net income,
and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate
but consecutive statements. The amendments do not change the option for an entity to present components of other comprehensive
income either net of related tax effects or before related tax effects, with one amount shown for the aggregate income tax expense
or benefit related to the total of other comprehensive income items. In both cases, the tax effect for each component must be disclosed
in the notes to the financial statements or presented in the statement in which other comprehensive income is presented. The amendments
in this update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15,
2011. The adoption of this standard did not have a material impact on its financial position, results of operations or cash flows.

In May 2011, the FASB issued Accounting
Standards Update 2011-04—Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs. The amendments in this update result in common fair value measurement and disclosure requirements
in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP
for measuring fair value and for disclosing information about fair value measurements. The FASB does not intend for the amendments
in this update to result in a change in the application of the requirements in Topic 820. Some of the amendments clarify the application
of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair
value or for disclosing information about fair value measurements. The amendments in this update are effective for fiscal years,
and interim periods within those fiscal years, beginning on or after December 15, 2011. The adoption of this standard did not have
a material impact on its financial position, results of operations or cash flows.



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

F-22







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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012



NOTE 3 -	OTHER RECEIVABLES



|                  |  | December 31, 2013 |         | December 31, 2012
|----------------- |  | ----------------- | ------- | -----------------
|                  |  |                   |         |                  
|Taxes reclaimable |  | $                 | 10,940  |                  
|Advances given    |  |                   | 178,075 |                  
|Other             |  |                   | 28,404  |                  
|Total             |  | $                 | 217,419 |                  



Given advances contain advances to lawyers
on the legal case of Genetic Immunity on its legal case in progress. The Company accounted for impairment on advances given in
the amount of $92,721 during 2013.

NOTE 4 - 	RESEARCH AND DEVELOPMENT
(“R&D”)



In August, 2008, the Company entered into an
agreement with a Hungarian individual to establish FireLESS Kft (FireLESS). FireLESS’s business is focused on acquiring the
appropriate licenses and certificates to internationally market FireSAFE and will work with local and international fire agencies
to test and establish usability baselines for FireSAFE. The Company is a minority shareholder in FireLESS with 30% voting rights,
which operates under independent management.



In August, 2007, the Company entered into an
agreement with two Hungarian individuals to establish In4 Kft (“in4). in4’s business is focused on software development
and information technology purposes. Originally the Company was a minority shareholder in in4 with 30% voting rights. In4 Ltd.
operates under independent management.



In August, 2007, the Company also entered into
a loan commitment agreement with in4. According to the agreement the Company has committed a loan of approximately $271,000 to
in4. The loan amount has been provided by May 31, 2009. In November of 2008 the Company transferred to in4 the entire loan amount,
upon which the Company elected to covert the loan into an additional 10% equity in in4. As of January 15, 2009 the Company maintains
a minority 40% equity in in4 Ltd. Since capitalization of the loan to equity, as of December 31, 2009 the Company has provided
an additional $310,000 loan to in4. During 2010 a new investor entered in4 Ltd, and the share of the Company decreased to 38.5%.

Since the repayment of loans, advances
and other investment is contingent on the results of the R&D of iGlue having future economic benefit, management
has expensed the Company's investment in in4 and in FireLESS of approximately $5,000 and $900, respectively, and loans
to in4 of approximately $310,000 as R&D in the accompanying condensed consolidated statements of operations, in accordance
with ASC 730-10-25 "Research and Development Arrangements".









F-23





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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012



NOTE 5 - 	INTANGIBLES AND FIXED
ASSETS

Intangibles and Net property and equipment
consisted of the followings at December 31, 2013 and 2012:



|                                          |  |  | Intangibles |   |  |  | Machinery and other equipments |   |  |  | Vehicles |   |  |  | Total Net property and equipment |  
|----------------------------------------- |  |  | ----------- | - |  |  | ------------------------------ | - |  |  | -------- | - |  |  | -------------------------------- | -
|Gross book value                          |  |  |             |   |  |  |                                |   |  |  |          |   |  |  |                                  |  
|at December 31, 2011                      |  |  | —           |   |  |  | 166,284                        |   |  |  | 377,139  |   |  |  | 543,423                          |  
|Genetic Immunity acquisition              |  |  | 30,111,909  |   |  |  | 418,483                        |   |  |  | —        |   |  |  | 418,483                          |  
|Additions                                 |  |  | 274,986     |   |  |  | —                              |   |  |  | —        |   |  |  | —                                |  
|Disposals                                 |  |  | —           |   |  |  | —                              |   |  |  | (90,369  | ) |  |  | (90,369                          | )
|Change in FX rates                        |  |  | (271,780    | ) |  |  | 14,998                         |   |  |  | 33,063   |   |  |  | 48,061                           |  
|                                          |  |  |             |   |  |  |                                |   |  |  |          |   |  |  |                                  |  
|at December 31, 2012                      |  |  | 30,115,115  |   |  |  | 599,765                        |   |  |  | 319,833  |   |  |  | 919,598                          |  
|Corrections                               |  |  | 480,491     |   |  |  | 376,769                        |   |  |  |          |   |  |  | 376,769                          |  
|Additions                                 |  |  | 11,329      |   |  |  | 1,471                          |   |  |  | —        |   |  |  | 1,471                            |  
|Disposals                                 |  |  | —           |   |  |  | (324,837                       | ) |  |  | —        |   |  |  | (324,837                         | )
|Change in FX rates                        |  |  | 5,251       |   |  |  | 24,266                         |   |  |  | 7,948    |   |  |  | 32,214                           |  
|                                          |  |  |             |   |  |  |                                |   |  |  |          |   |  |  |                                  |  
|at December 31, 2013                      |  |  | 30,612,186  |   |  |  | 677,434                        |   |  |  | 327,781  |   |  |  | 1,005,215                        |  
|                                          |  |  |             |   |  |  |                                |   |  |  |          |   |  |  |                                  |  
|Accumulated depreciation and amortization |  |  |             |   |  |  |                                |   |  |  |          |   |  |  |                                  |  
|at December 31, 2011                      |  |  | —           |   |  |  | 127,002                        |   |  |  | 220,650  |   |  |  | 347,652                          |  
|Additions                                 |  |  | 22,268      |   |  |  | 36,881                         |   |  |  | 48,950   |   |  |  | 85,831                           |  
|Disposals                                 |  |  | —           |   |  |  | —                              |   |  |  | (58,608  | ) |  |  | (58,608                          | )
|Change in FX rates                        |  |  | 6           |   |  |  | 8,839                          |   |  |  | 32,715   |   |  |  | 41,554                           |  
|                                          |  |  |             |   |  |  |                                |   |  |  |          |   |  |  |                                  |  
|at December 31, 2012                      |  |  | 22,274      |   |  |  | 172,722                        |   |  |  | 243,707  |   |  |  | 416,429                          |  
|Corrections                               |  |  | 480,491     |   |  |  | 376,770                        |   |  |  |          |   |  |  | 376,770                          |  
|Additions                                 |  |  | 50,914      |   |  |  | 79,744                         |   |  |  | 18,489   |   |  |  | 98,233                           |  
|Disposals                                 |  |  | —           |   |  |  | (95,121                        | ) |  |  | —        |   |  |  | (95,121                          | )
|Change in FX rates                        |  |  | 3,126       |   |  |  | 13,654                         |   |  |  | 6,056    |   |  |  | 19,710                           |  
|                                          |  |  |             |   |  |  |                                |   |  |  |          |   |  |  |                                  |  
|at December 31, 2013                      |  |  | 556,805     |   |  |  | 547,769                        |   |  |  | 268,252  |   |  |  | 816,021                          |  
|                                          |  |  |             |   |  |  |                                |   |  |  |          |   |  |  |                                  |  
|Net book values at                        |  |  |             |   |  |  |                                |   |  |  |          |   |  |  |                                  |  
|December 31, 2011                         |  |  | —           |   |  |  | 39,282                         |   |  |  | 156,489  |   |  |  | 195,771                          |  
|December 31, 2012                         |  |  | 30,092,841  |   |  |  | 427,043                        |   |  |  | 76,126   |   |  |  | 503,169                          |  
|December 31, 2013                         |  |  | 30,055,381  |   |  |  | 129,665                        |   |  |  | 59,529   |   |  |  | 189,194                          |  





F-24







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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012



NOTE 5 - 	INTANGIBLES AND FIXED
ASSETS

The net book value of fixed assets under
capital lease amount to $59,529 and $76,126 at December 31, 2013 and at December 31, 2012, respectively.

The
Company owns the following patents as intangible assets:



- Re: PCT US97/02933 publication No. WO9731119A1, corresp to USSN 08/803,484
'Methods and Compositions for Therapeutic and Genetic Immunization' filed 20 February 1997 by J. Lisziewicz and F. Lori, Atty.
Docket No. RGT 100A PCT



- Re: PCT/US98/19498 publication No. WO9913915A1 'Method of Delivering Genes
into Antigen Presenting Cells of the skin' corresp. to USSN 09/153,198 filed 15 September 1998 by Lisziewicz & Lori, Atty
Docket No. RGT 9771 PCT



- Re: PCT US 04/000746 publication No. WO 2004/065575, corresp. to USSN 10/757,343
“Plasmid DNA and Uses therefor” filed 14 January 2004, based on prov’l appln 60/440,245 filed 15 January, 2003,
by Lisziewicz, et al., Atty Docket No. RGT 7033
- Above the patents, the following trademark is owned by:
- Trademark “Genetic Immunity” Serial No. 75153267, filed January
22, 1999, 1st use at least Jan 13, 1999, Reg. No. 2657301 on December 3, 2002





During
the acquisition of Genetic Immunity, the Company has received the valuation of the patents from an independent valuation
company. According to the valuation, the Company entered the acquired intangibles to the consolidated balance sheet. The acquired
intangibles have indefinite useful life and annual impairment test is carried out on a discounted cash flow basis. According to
the latest valuation carried out at the end of December 2013, no impairment losses are to be recognized.

NOTE 6 - 	NOTE PAYABLE



Mary Passalaqua



On October 20, 2011 the Company was presented
with an Amended Convertible Promissory Note by Mary Passalaqua. In the revised agreement Ms. Passalaqua requested that the outstanding
portion of the Promissory Note be paid in shares in such quantity that will satisfy the debt of $125,000 owned. As second step
in this conversion process Mary Passalaqua requested the conversion of $20,000 dollars into shares of common stock. To satisfy
this request the Company instructed its transfer agent to issue Mary Passalaqua 3,500,000 shares of common. Upon conversion of
the $20,000 our outstanding Promissory Note balance will be $105,000 plus accrued interest.

On August 5, 2011 the company was presented
with an Amended Convertible Promissory Note by Mary Passalaqua. In the revised agreement Ms. Passalaqua requested that the outstanding
portion of the Promissory Note be paid in shares in such quantity that will satisfy the debt of $195,000 owned. As first step in
this conversion process Mary Passalaqua requested the conversion of $70,000 dollars into shares of common stock. To satisfy this
request the Company instructed its transfer agent to issue Mary Passalaqua 2,400,000 shares of common. Upon conversion of the $70,000
outstanding Promissory Note balance will be $125,000 plus accrued interest.





F-25







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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012

NOTE 6 - 	NOTE PAYABLE (Continued)

On October 20, 2011 the Company was
presented with an Amended Convertible Promissory Note by Mary Passalaqua. In the revised agreement Ms. Passalaqua requested that
the outstanding portion of the Promissory Note be paid in shares in such quantity that will satisfy the debt of $125,000 owned.
As second step in this conversion process Mary Passalaqua requested the conversion of $20,000 dollars into shares of common stock.
To satisfy this request the Company instructed its transfer agent to issue Mary Passalaqua 3,500,000 shares of common. Upon conversion
of the $20,000 our outstanding Promissory Note balance will be $105,000 plus accrued interest.

On April 10, 2007, in connection with
reverse merger (See Note 1), the Company assumed a note payable of $250,000 to a former stockholder, Mary Passalaqua originally
with one year maturity at April 5, 2008. The note has been expanded by one year to April 5, 2009 with the same conditions. As such
note payable was issued immediately prior to the reverse merger, such issuance was recorded as additional compensation by the Company
prior to the reverse merger. Accordingly, such compensation is reflected in the accompanying consolidated balance sheet as the
accumulated deficit of the Company, and will not be reflected in the Statement of operations, as such compensation expense was
structured as an expense prior to the recapitalization.

In November, 2008 the Company settled
$35,000 from the outstanding liability, and in May of 2009 the Company settled another $20,000 from the liability. The note payable
bears interest at the prime rate (3.25% at December 31, 2013). Interest expense in connection with such note amounted to $52,417
and $49,004 for the year ended at December 31, 2013 and at December 31, 2012, respectively, and was accrued and included in accounts
payable and accrued liabilities in the accompanying consolidated balance sheet.



Infinite Funding

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

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



NOTE 7 - 	CAPITAL LEASES PAYABLE

In August, 2007, the Company entered
into capital lease agreements on 3 vehicles for management purposes. The maturity of the lease is 60 months and is denominated
in CHF. Installments and interest is due on a monthly basis. In December, 2007, the Company entered into additional capital lease
agreements on 2 vehicles for management purposes. The maturity of the lease is 72 months and is denominated in CHF. Installments
and interest is due on a monthly basis.

In December 2008, the Company settled
the capital lease agreements on 2 vehicles and replaced them with new agreements for additional 2 vehicles, totaling 5 capital
lease agreements at December 31, 2008. The maturity of the new leases varies from 60 to 72 months and are denominated in EUR and
CHF. Installments and interests are due on a monthly basis.

In September 2009, the Company closed
a capital lease agreement for one vehicle. The related asset has been sold.



F-26







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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012



NOTE 7 - 	CAPITAL LEASE PAYABLE
(Continued)

The following is a schedule by years
of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of December
31, 2013:



|For the year ending December 31, 2013       |  | Amounts
|------------------------------------------- |  | -------
|                                            |  |        
|2014                                        |  | 71,897 
|2015                                        |  | 23,058 
|                                            |  |        
|Total minimum lease payments                |  | 94,955 
|                                            |  |        
|Less: amounts representing interest         |  | 3,479  
|                                            |  |        
|Present value of net minimum lease payments |  | 91,476 
|                                            |  |        
|Less: current portion                       |  | 55,784 
|                                            |  |        
|Long term liability                         |  | $35,692



NOTE 8 - 	STOCKHOLDERS’
EQUITY





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



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



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

F-27





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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012

NOTE 8 - 	STOCKHOLDERS’
EQUITY (Continued)

Private placements



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



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



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



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



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



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



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



On June 13, 2012, pursuant to a private placement
under Regulation S of the Securities Act of 1933, as amended, the Company sold 42,200 shares of its common stock at $0.3 per share
to an unaffiliated private investor for aggregate proceeds of $12,658.



During the first half of 2012, the Company
received stock advance from an unaffiliated private investor for aggregate proceeds of $67,153.



On November 14, 2011, pursuant to a private
placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 27,700 shares of its common stock at $0.16
per share to an unaffiliated private investor for aggregate proceeds of $4,432.



On September 2, 2011, pursuant to a private
placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 1,727,013 shares of its common stock at
$0.16 per share to two unaffiliated private investors for aggregate proceeds of $276,322.



On August 29, 2011, pursuant to a private placement
under Regulation S of the Securities Act of 1933, as amended, the Company sold 17,825 shares of its common stock at $0.12 per share
to one unaffiliated private investor for aggregate proceeds of $2,137.

F-28







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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012

NOTE 8 - STOCKHOLDERS’ EQUITY
(Continued)





During the second quarter of 2011, pursuant
to a private placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 196,489 shares of its common
stock at $0.29 for aggregate proceeds of $56,983.

During the third quarter of 2010, pursuant
to a private placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 70,000 shares of its common
stock at $0.50 for aggregate proceeds of $35,000.

During the first half of 2010, pursuant
to a private placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 1,470,000 shares of its common
stock at $0.10 for aggregate proceeds of $147,000, and sold 62,500 shares of its common stock at $0.08 for proceeds of $5,000.

In February 2010, pursuant to a
private placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 65,000 shares of its common stock
at $0.12 for aggregate proceeds of $7,701.

In November 2009, pursuant to a
private placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 175,000 shares of its common stock
at $0.16 and 111,110 shares of its common stock at $0.20 per share for aggregate proceeds of $50,222.

In October 2008, pursuant to a
private placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 2,500,000 shares of its common
stock at $0.4 per share for aggregate proceeds of $1,000,000.

In February of 2008, shares of common
stock of the Company have been approved by FINRA for quotation and trading on the Over The Counter Bulletin Board (OTCBB) under
the ticker symbol PWRV. Trading commenced in the Company’s securities on the OTCBB beginning on February 21, 2008.

In January 2008, pursuant to a
private placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 32,500 shares of its common stock
at $3.25 per share for aggregate proceeds of $105,625.

In October 2007, pursuant to a
private placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 104,000 shares of its common stock
at $2.50 per share for aggregate proceeds of $260,000. The Company also entered into a Registration Rights Agreement, pursuant
to which it agreed that as soon as practicable from the Offering Termination Date, as defined in the Registration Rights Agreement,
it would file a registration statement with the SEC covering the resale of the shares of the Company’s common stock
that are issuable pursuant to this private placement. There are no stipulated damages outlined in the Registration Rights Agreement
for failure to file within the agreed upon time frame. Under such agreement, the holder is entitled to exercise all rights
granted by law, including recovery of damages under this agreement.

The Company filed Form SB-2 a registration
statement with SEC on November 14, 2007, which was approved on January 30, 2008.

Consulting agreements



During November 2012, the Company entered into
agreements with four unaffiliated professionals for one year business consulting services. According to the agreement the professionals
provide consulting and rental services to the Company for 12 months. In connection with these services, the Company issued to them
1,930,000 shares of the Company’s common stock. These share issuances were recorded at the fair value of contracting date
which is the market price on the commitment date $0.06 and $0.19 per share in the total amount of $180,170 and the related expense
was recorded under general administration.



On April 11, 2012 the Company entered into
a Consultation Services agreement with Stockvest for IR services and issued a total of 135,000 shares. As of May 17, 2012 this
agreement has been terminated.

F-29







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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012



NOTE 8 - STOCKHOLDERS’ EQUITY
(Continued)





During October 2011, the Company entered into
agreements with three unaffiliated professionals for one year business consulting services. According to the agreement the professionals
provide consulting services to the Company for 12 months. In connection with these services, the Company issued to them 640,000
shares of the Company’s common stock. These share issuances were recorded at the fair value of contracting date which is
the market price on the commitment date $0.11 and $0.09 per share in the total amount of $61,200 and the related expense was recorded
under general administration.



On September 27, 2011, the Company entered
into agreements with two unaffiliated professionals for one year business consulting services. According to the agreement the professionals
provide consulting services to the Company for 12 months. In connection with these services, the Company issued to them 100,000
shares of the Company’s common stock. These share issuances were recorded at the fair value of contracting date which is
the market price on the commitment date $0.14 per share in the total amount of $14,000 and the related expense was recorded under
general administration.



During April and May of 2011, the Company entered
into agreements with five unaffiliated professionals for one year business consulting services. According to the agreement the
professionals provide consulting services to the Company for 12 months. In connection with these services, the Company issued to
them 505,000 shares of the Company’s common stock.



These share issuances were recorded at the
fair value of contracting date which is the market price on the commitment date, ranging from $0.34 to $0.48 per share in the total
amount of $190,900 and the related expense was recorded under general administration.



On February 7, 2011 the Company entered into
a one year business consultation agreement with an unaffiliated person who is to provide general business development and incubation
consultation. In exchange for his services the Company issued a onetime payment of 215,000 shares of our common stock, which vested
immediately. These share issuances were recorded at $0.3 per share in the total amount of $64,500 and the related expense was recorded
under general administration.



On February 9, 2011 the Company entered into
a one year business consultation agreement with an unaffiliated person who is to provide services in term of potential business
opportunities in Poland. In exchange for his services we issued a onetime payment of 435,000 shares of our common stock, which
vested immediately. These share issuances were recorded at $0.24 per share in the total amount of $104,400 and the related expense
was recorded under general administration.



On February 24, 2011 the Company entered into
a one year business consultation agreement with an unaffiliated person who is to provide general business development and incubation
consultation. In exchange for his services we issued a onetime payment of 75,000 shares of our common stock, which vested immediately.
These share issuances were recorded at $0.3 per share in the total amount of $22,500 and the related expense was recorded under
general administration.

The consulting agreements are
entered for a 12 months period. According to the agreements the consultants will provide general business consulting
services. As consideration for such services, the Company issued an aggregate of 1,970,000 shares of the Company’s
common stock. These share issuances were recorded at the fair value of commitment date in the total amount of $457,888 in
accordance with measurement date principles prescribed under ASC 505-50 and ASC 718-10. The Company is amortizing the fair
value of the shares over the term of the agreement to stock-based compensation expense, which amounted to $316,098 for the
period ended December 31, 2013, respectively and $316,098 for the period from April 26, 2006 (date of inception) to
December 31, 2013, in accordance with ASC 505-50 and ASC 718-10.



F-30







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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012

NOTE 8 - STOCKHOLDERS’ EQUITY
(Continued)

During the October and November 2010,
the Company entered into agreements with several unaffiliated professionals for consulting services. According to the agreement
the professionals provide consulting services to the Company in 2010. In connection with these services, the Company issued to
them 874,000 shares of the Company’s common stock. These share issuances were recorded at $0.5 per share in the total amount
of $437,000 and the related expense was recorded under general administration.

In September 2010, the Company entered
into an agreement with four unaffiliated professionals for consulting services. According to the agreement the professionals provided
consulting services to the Company in 2010. In connection with these services, the Company issued to them 153,000 shares of the
Company’s common stock. These share issuances were recorded at $0.5 per share in the total amount of $76,500 and the related
expense was recorded under general administration.

The consulting agreements are entered
for a 12 months period. According to the agreements the consultants will provide general business consulting services. As consideration
for such services, the Company issued an aggregate of 1,027,000 shares of the Company’s common stock. These share issuances
were recorded at the fair value of commitment date ($0.5 per share) in the total amount of $513,500 in accordance with measurement
date principles prescribed under ASC 505-50 and ASC 718-10. The Company is amortizing the fair value of the shares over the term
of the agreement to stock-based compensation expense, which amounted to $312,972 and $200,528 for the periods ended December
31, 2013 and 2012, respectively and $513,500 for the period from April 26, 2006 (date of inception) to December 31, 2013, in accordance
with ASC 505-50 and ASC 718-10.

In June 2010, the Company entered into
an agreement with two unaffiliated professionals for consulting services. According to the agreement the professionals provided
consulting services to the Company in 2010. In connection with these services, the Company issued to them 20,000 shares of the
Company’s common stock. These share issuances were recorded at $0.1 per share in the total amount of $2,000 and the related
expense was recorded under general administration.

In April 2009, the Company entered into
an agreement with two unaffiliated professionals for consulting services. According to the agreement the professionals provided
consulting services to the Company in 2009. In connection with these services, the Company issued to them 250,000 shares of the
Company’s common stock. These share issuances were recorded at $0.4 per share in the total amount of $100,000 and the related
expense was recorded under general administration.

In June 2007, pursuant to a private
placement under Regulation S of the Securities Act of 1933, as amended, the Company sold 2,250,000 shares of its common stocks
at $0.34 per share for a total subscription receivable of $765,000. The Company also entered into a Registration Rights Agreement,
pursuant to which it agreed that as soon as practicable from the Offering Termination Date, as defined in the Registration Rights
Agreement, it would file a registration statement with the SEC covering the resale of the shares of the Company’s common
stock that are issuable pursuant to this private placement. There are no stipulated damages outlined in the Registration Rights
Agreement for failure to file within the agreed upon time frame. Under such agreement, the holder is entitled to exercise
all rights granted by law, including recovery of damages under this agreement. In June 2007, the Company entered into five
consulting agreements with five consultants for 12 to 24 month periods. According to the agreements the consultants will provide
general business consulting services. As consideration for such services, the Company issued an aggregate of 1,375,000 shares of
the Company’s common stock. These share issuances were recorded at $0.34 per share in the total amount of $467,501 in accordance
with measurement date principles prescribed under ASC 505-50 and ASC 718-10. The Company is amortizing the fair value of the shares
over the term of the agreement to stock-based compensation expense, which amounted to $0 for the period ended December 31,
2013 and 2012, respectively and $467,501 for the period from April 26, 2006 (date of inception) to December 31, 2013, in accordance
with ASC 505-50 and ASC 718-10.

F-31







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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012

NOTE 8 - STOCKHOLDERS’ EQUITY
(Continued)

In April 2007, the Company entered into
an agreement with two professionals for legal services. According to the agreement the professionals provided legal services to
the Company in 2007. In connection with these services, the Company issued to them 500,000 shares of the Company’s common
stock. These share issuances were recorded at $0.34 per share in the total amount of $170,000 and the related expense was recorded
under general administration.

In connection with the ITA in 2007 (See
Note 4), the Company issued 100,000 shares of the Company’s common stock to the Inventors. These shares issuance were recorded
at fair value of $0.34 per share in the total amount of $34,000. The cost of the related invention was recorded as research and
development expense.

Other agreements

On October 8, 2008, Power of the Dream
Ventures, Inc. (the “Company”) entered into a Standby Equity Distribution Agreement (the “Standby Equity Distribution
Agreement”) with YA Global Investments, L.P. (the “Investor”). Pursuant to the terms of the Standby Equity Distribution
Agreement, the Company (a) agreed to issue and sell to the Investor up to $5,000,000 of shares of the Company’s common stock,
par value $0.0001 per share (the “Common Stock”) in tranches of equity, based upon a 7% discount to the market price
of the Common Stock, calculated over the five trading days following notice by the Company of an election to sell shares; and (b)
issued to the Investor a warrant (the “Warrant”) to purchase 4,027,386 shares of Common Stock at the exercise price
per share of $0.29. The Warrant is not part of the commitment shares issued by the company to the investor.

The investor must purchase the shares
underlying the Warrant. The Warrant price was determined based upon the highest Bid price on the day of the closing of the agreement.
The YA Global is required to exercise the warrant upon notice by PDV of an election to have the warrants exercised at a fix price
of $0.29 per common stock.

In connection with the Standby Equity
Distribution Agreement, the Company entered into a Registration Rights Agreement with the Investor (the “Registration Rights
Agreement”) pursuant to which the Company agreed to register for resale the shares of Common Stock that may be purchased
by the Investor pursuant to the Standby Equity Distribution Agreement, the shares of Common Stock issuable upon exercise of the
Warrant and 2,000,000 shares of Common Stock (the “Commitment Shares”) issued to the Investor as a commitment fee pursuant
to the terms of the Standby Equity Distribution Agreement. The 2,000,000 shares issued as a commitment fee were valued at $0.4
per share or $800,000 based on the fair value at issuance date. The $800,000 commitment fee has been debited against additional
paid in capital in accordance with the provisions of Staff Accounting Bulletin Topic 5A .



On September 24, 2010 the Company notified
YA Global Investments in writing of its intention to terminate the Standby Equity Distribution Agreement (SEDA).



In response to this letter YA Global informed
the company in a letter dated October 5, 2010 that the SEDA agreement will terminate on or about October 15, 2010. YA Global also
informed the company that even though the SEDA agreement is terminated its associated Warrant to purchase 4,027,386 shares of common
stock remains in effect until it expires on October 8, 2013.



On October 18, 2010 the company received notice
from YA global for the exercise of 50,000 warrant shares on a cashless basis. This cashless exercise resulted in the issuance of
3,226 shares of Common stock to YA Global. Following this exercise YA Global has 3,977,386 warrant shares available for purchase.



On September 10, 2012 YA Global notifed the
company that according to the terms of the Warrant Agreement there should have been a proportional reduction in the Warrant’s
exercise price to the the price of a private placement that was completed at a lower price than the $0.29 exercise price. YA Global
and the company have agreed to modify the Warrant exercise price from the original $0.29 cents to $0.10 cents.

F-32









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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012

NOTE 8 - STOCKHOLDERS’ EQUITY
(Continued)





At the same time YA Global also notified the
company of their intention to sell the Warrant in a private transaction to an unaffiliated accredited investor. This transaction
was contemplated on September 10, 2012. The new owner, Bluestar Consulting, now has the right to acquire, on or before October
8, 2013, 3,977,386 share of common stock at a per share exercise price of $0.10. The terms of the warrants are such that the exercise
price was lowered due to a subsequent round of financing, from $0.29 per share to the price the subsequent investors paid, $0.10
per share. This down round protection feature causes the warrant to fail the criteria in ASC 815-40-15-7 (EITF 07-5) which would
permit them to be classified as equity.  Consequently, the warrants are recorded at fair value and classified as liabilities
and marked to fair value each period. The warrant is extended to October 8, 2018.



The fair value of the liability using Black-Scholes
valuation at December 31, 2013 is $87,502, which is classified at short term liabilities. The fair value of the liability is established
as a Level 3 fair value measurement. The following table shows the movement in fair value along with the change of warrant conditions:



|December 31, 2013                                                                              | Book value | Fair value
|---------------------------------------------------------------------------------------------- | ---------- | ----------
|                                                                                               |            |           
|Financial liabilities                                                                          |            |           
|Liabilities
    measured at fair
    value
                                             87,502 | 87,502    





|December 31, 2012                             | Book value | Fair value
|--------------------------------------------- | ---------- | ----------
|                                              |            |           
|Financial liabilities                         |            |           
|Liabilities
    measured at fair value608,540 | 608,540   



|Fair value of warrant per share | December 31, 2013 | December 31, 2012
|------------------------------- | ----------------- | -----------------
|                                |                   |                  
|Per share                       | $0.022            | $0.153           





The inputs used in fair value estimation are:



current share price at December 31, 2013: 	$0.65

exercise price 	$0.1

expected time to expiry (years): 	4.75

risk free rate 	3.25 (FED prime rate)

expected dividend yield: 	0

volatility: 	50%

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

On May 17, 2008 the Company
entered into an agreement with Wakabayashi Fund LLC in order to arrange financing for working capital as an intermediary.
Wakabayashi Fund LLC provided capital funding services including serving as an investment banking liaison and acted as
capital consultant for a six month period. The Company issued 111,111 shares of restricted common stock upfront at $1.35 per
share, the market price of the stock on the commitment date of the agreement. Additionally, the Company agreed to pay for the
capital funding services 7% success fee. These share issuances were recorded at $1.35 per share in the total amount of
$150,000 in accordance with measurement date principles prescribed under ASC 505-50. The Company is amortizing the fair value
of the shares in general and administration expenses over the term of the agreement to stock-based compensation expense,
which amounted to $0 for the period ended December 31, 2013 and $150,000 for the period from April 26, 2006 (date of
inception) to December 31, 2013, in accordance with ASC 505-50. As of November 17, 2008 this agreement has been terminated
without any funds raised.



F-33







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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012

NOTE 8 - STOCKHOLDERS’ EQUITY
(Continued)

On April 18, 2008 the Company entered
an agreement with RedChip Companies Inc. and Partner Media4Equity Inc. for an investor relationship program for a period of 12
months. The Company secured and delivered 306,570 restricted common shares with a market price of $0.70 for a 12 months period
in connection with RedChip investor relationship services. The compensation for Media4Equity services was the delivery of 1,500,000
restricted common shares. These share issuances were recorded at $0.75 per share, the market price of the stock on the commitment
date of the agreement, for a total amount of $1,125,000 in accordance with measurement date principles prescribed under ASC 505-50.
The Company is amortizing the fair value of the shares in general and administration expenses over the term of the agreement to
stock-based compensation expense, which amounted to $0 for the periods ended December 31, 2013 and December 31, 2012, respectively
and $1,339,599 for the period from April 26, 2006 (date of inception) to December 31, 2013, in accordance with ASC 505-50.

Stock based compensations



On January 1, 2011, the Company entered into
a restricted stock agreement with Ildiko Rozsa, who is to serve as the Chief Financial Officer of the Company. As part of the agreement
Ms. Rozsa was granted 100,000 shares of the Company’s restricted common stock of which 25,000 shares will vest quarterly,
at the end of each quarter, so long as Ms. Rozsa is employed by the Company.



On January 1, 2011, the Company entered into
a restricted stock agreement with Szilvia Toth, the Chief Accounting Officer of the Company. As part of the agreement Ms. Toth
was granted 100,000 shares of restricted common stock, of which 25,000 shares will vest quarterly, at the end of each quarter,
so long as Ms. Toth is employed by the Company.



On January 1, 2011, the Company entered into
a restricted stock agreement with Imre Eotvos, the Technology Assistant of the Company. As part of the agreement Mr. Eotvos was
granted 120,000 shares of restricted common stock, which will vest on equal installments of 30,000 shares quarterly, at the end
of each quarter, so long as Mr. Eotvos is employed by the Company.



On January 1, 2011, the Company entered into
a restricted stock agreement with Daniel Kun, Jr., who is to serve as Secretary and Vice President of the company on a going forward
basis. As part of the agreement Mr. Kun was granted 120,000 shares of restricted common stock, which will vest on equal installments
of 30,000 shares quarterly, at the end of each quarter, so long as Mr. Kun is employed by the Company.



On January 1, 2011, the Company entered into
a restricted stock agreement with Gene Guhne, who is to serve as Director of the company on a going forward basis. As part of the
agreement Mr. Guhne was granted 100,000 shares of restricted common stock, which will vest on equal installments of 25,000 shares
quarterly, at the end of each quarter, so long as Mr. Guhne is employed by the Company.



As consideration for the above services, the
Company issued an aggregate of 540,000 shares of the Company’s common stock. These share issuances were recorded at $0.15
per share in the total amount of $81,000 in accordance with measurement date principles prescribed under FAS 123 (R).

During the second quarter of 2010, the
Company entered into a restricted stock agreement with Ildiko Rozsa, who is to serve as the Chief Financial Officer of the Company.
As part of the agreement Ms. Rozsa was granted 100,000 shares of the Company’s restricted common stock of which 25,000 shares
will vest quarterly, at the end of each quarter, so long as Ms. Rozsa is employed by the Company.

During the second quarter of 2010, the
Company entered into a restricted stock agreement with Szilvia Toth, the Chief Accounting Officer of the Company. As part of the
agreement Ms. Toth was granted 100,000 shares of restricted common stock, of which 25,000 shares will vest quarterly, at the end
of each quarter, so long as Ms. Toth is employed by the Company.



F-34







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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012

NOTE 8 - STOCKHOLDERS’ EQUITY
(Continued)

During the second quarter of 2010, the
Company entered into a restricted stock agreement with Imre Eotvos, the Technology Assistant of the Company. As part of the agreement
Mr. Eotvos was granted 120,000 shares of restricted common stock, which will vest on equal installments of 30,000 shares quarterly,
at the end of each quarter, so long as Mr. Eotvos is employed by the Company.

During the second quarter of 2010, the
Company entered into a restricted stock agreement with Daniel Kun, Jr., who is to serve as Secretary and Vice President of the
company on a going forward basis. As part of the agreement Mr. Kun was granted 120,000 shares of restricted common stock, which
will vest on equal installments of 30,000 shares quarterly, at the end of each quarter, so long as Mr. Kun is employed by the Company.

During the second quarter of 2010, the
Company entered into a restricted stock agreement with Gene Guhne, who is to serve as Director of the company on a going forward
basis. As part of the agreement Mr. Guhne was granted 100,000 shares of restricted common stock, which will vest on equal installments
of 25,000 shares quarterly, at the end of each quarter, so long as Mr. Guhne is employed by the Company.

As consideration for the above services,
the Company issued an aggregate of 540,000 shares of the Company’s common stock. These share issuances were recorded at $0.1
per share in the total amount of $54,000 in accordance with measurement date principles prescribed under FAS 123 (R).

On February 5, 2009, the Company entered
into a restricted stock agreement with Ildiko Rozsa, who is to serve as the Chief Financial Officer of the Company. As part of
the agreement Ms. Rozsa was granted 120,000 shares of the Company’s restricted common stock of which 30,000 shares will vest
quarterly, at the end of each quarter, so long as Ms. Rozsa is employed by the Company.

On February 5, 2009, the Company entered
into a restricted stock agreement with Szilvia Toth, the Chief Accounting Officer of the Company. As part of the agreement Ms.
Toth was granted 120,000 shares of restricted common stock, of which 30,000 shares will vest quarterly, at the end of each quarter,
so long as Ms. Toth is employed by the Company.

On February 5, 2009, the Company entered
into a restricted stock agreement with Mihaly Zala, the Chief Technology Officer of the Company. As part of the agreement Mr. Zala
was granted 120,000 shares of restricted common stock, which will vest on equal installments of 30,000 shares quarterly, at the
end of each quarter, so long as Mr. Zala is employed by the Company. As of July 15, 2009 Mr. Zala is no longer employed by the
Company, therefore 60,000 shares of the 120,000 granted to him were cancelled and returned to the authorized and unissued stock
of the company.

On February 5, 2009, the Company entered
into a restricted stock agreement with Imre Eotvos, the Technology Assistant of the Company. As part of the agreement Mr. Eotvos
was granted 200,000 shares of restricted common stock, which will vest on equal installments of 50,000 shares quarterly, at the
end of each quarter, so long as Mr. Eotvos is employed by the Company.

On February 5, 2009, the Company entered
into a restricted stock agreement with Daniel Kun, Jr., who is to serve as Secretary and Vice President of the company on a going
forward basis. As part of the agreement Mr. Kun was granted 200,000 shares of restricted common stock, which will vest on equal
installments of 50,000 shares quarterly, at the end of each quarter, so long as Mr. Kun is employed by the Company.

As consideration for the above services,
the Company issued an aggregate of 700,000 shares of the Company’s common stock. These share issuances were recorded at $0.4
per share in the total amount of $280,000 in accordance with measurement date principles prescribed under FAS 123 (R).





F-35







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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012

NOTE 8 - STOCKHOLDERS’ EQUITY
(Continued)

On October 24, 2007, the Company entered
into a restricted stock agreement with Ildiko Rozsa, who is to serve as the Chief Financial Officer of the Company. As part of
the agreement Ms. Rozsa was granted 250,000 shares of the Company’s restricted common stock of which 100,000 shares are vested
upon grant and 30,000 shares will vest quarterly, at the end of each quarter, so long as Ms. Rozsa is employed by the Company.

On October 1, 2007, the Company entered
into a restricted stock agreement with Szilvia Toth, the Chief Accounting Officer of the Company. As part of the agreement Ms.
Toth was granted 100,000 shares of restricted common stock of which 50,000 shares are vested upon grant and 10,000 shares will
vest quarterly, at the end of each quarter, so long as Ms. Toth is employed by the Company.

On October 24, 2007, the Company entered
into a restricted stock agreement with Mihaly Zala, the Chief Technology Officer of the Company. As part of the agreement Mr. Zala
was granted 150,000 shares of restricted common stock, which will vest on equal installments of 30,000 shares quarterly, at the
end of each quarter, so long as Mr. Zala is employed by the Company.

On October 24, 2007, the Company entered
into a restricted stock agreement with Imre Eotvos, the Technology Assistant of the Company. As part of the agreement Mr. Eotvos
was granted 25,000 shares of restricted common stock, which will vest on equal installments of 5,000 shares quarterly, at the end
of each quarter, so long as Mr. Eotvos is employed by the Company.

On October 1, 2007, the Company entered
into a restricted stock agreement with Sandorne Juhasz, who provides payroll accounting services to the Company on a subcontracting
basis. As part of the agreement Ms. Juhasz was granted 11,000 shares of restricted common stock, of which 8,000 is will vest upon
grant and 750 shares will vest quarterly, at the end of each quarter, so long as Ms. Juhasz is employed by the Company.

On October 24, 2007, the Company entered
into a restricted stock agreement with Daniel Kun, Jr., who is to serve as Secretary and Vice President of the company on a going
forward basis. As part of the agreement Mr. Kun was granted 250,000 shares of restricted common stock, which will vest on equal
installments of 50,000 shares quarterly, at the end of each quarter, so long as Mr. Kun is employed by the Company.

On October 24, 2007, the Company entered
into a restricted stock agreement with Viktor Rozsnyay, who is serving as President and Chief Executive Officer of the Company.
As part of the agreement Mr. Rozsnyay was granted 250,000 shares of restricted common stock, which will vest on equal installments
of 50,000 shares quarterly, at the end of each quarter, so long as Mr. Rozsnyay is employed by the Company.

As consideration for the above services
for the employment of the above 7 persons, the Company issued an aggregate of 1,036,000 shares of the Company’s common stock.
These share issuances were recorded at $2.5 per share in the total amount of $2,590,000 in accordance with measurement date principles
prescribed under ASC 505-50 and ASC 718-10. The Company is amortizing the fair value of the shares over the term of the agreement
to stock-based compensation expense, which amounted to $0 for the period ended December 31, 2013 and $2,590,000 for the period
from April 26, 2006 (date of inception) to December 31, 2013, in accordance with ASC 505-50 and ASC 718-10.

F-36







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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012



NOTE 8 - STOCKHOLDERS’ EQUITY
(Continued)

Reverse merger





On August 5, 2011 the company was presented
with an Amended Convertible Promissory Note by Mary Passalaqua. In the revised agreement Ms. Passalaqua requested that the outstanding
portion of the Promissory Note be paid in shares in such quantity that will satisfy the debt of $195,000 owned. As first step in
this conversion process Mary Passalaqua requested the conversion of $70,000 dollars into shares of common stock. To satisfy this
request the Company instructed its transfer agent to issue Mary Passalaqua 2,400,000 shares of common. On October 20, 2011, Mary
Passalaqua requested the conversion of additional $20,000 dollars into shares of common stock. To satisfy this request the Company
instructed its transfer agent to issue Mary Passalaqua 3,600,000 shares of common.

On October 20, 2011 the Company was
presented with an Amended Convertible Promissory Note by Mary Passalaqua. In the revised agreement Ms. Passalaqua requested that
the outstanding portion of the Promissory Note be paid in shares in such quantity that will satisfy the debt of $125,000 owned.
As second step in this conversion process Mary Passalaqua requested the conversion of $20,000 dollars into shares of common stock.
To satisfy this request the Company instructed its transfer agent to issue Mary Passalaqua 3,500,000 shares of common. Upon conversion
of the $20,000 our outstanding Promissory Note balance will be $105,000 plus accrued interest.

On April 10, 2007, PDV entered into
a reverse merger transaction with Vidatech. In connection with the merger 2,500,000 shares of PDV common stock remained outstanding
and PDV issued 33,300,000 shares of its common stock for all the outstanding common stock of Vidatech. As a result of this transaction,
the former stockholders of Vidatech became the controlling stockholders of PDV. Accordingly, the reverse merger has been accounted
for as a recapitalization of Vidatech.

In May, 2006, the Company entered into
a short term loan agreement with its Chief Executive Officer, Viktor Rozsnyay, for approximately $96,100 with a maturity of April
30, 2007. On December 28, 2006 Mr. Rozsnyay elected to convert the loan into equity, which is recorded as additional paid in capital.

In March, 2007, the Company entered
into a short term loan agreement with its Chief Financial Officer, Daniel Kun Jr., for approximately $53,735 with a maturity of
March 31, 2007. On March 31, 2007 Mr. Kun elected to convert the loan into equity, which is recorded as additional paid in capital.

At December 31, 2013 there are no non-vested
restricted stock awards.

The weighted average grant-date fair
value of restricted stock awards granted for the year ended December 31, 2013 and 2012 were $0. The total fair value of shares
vested during the year ended December 31, 2013 and 2012 was $0.









F-37







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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012



NOTE 9 -	ACCOUNTS PAYABLE, ACCRUED
AND OTHER LIABILITIES



|                                      |  | December 31, 2013 |           | December 31, 2012
|------------------------------------- |  | ----------------- | --------- | -----------------
|                                      |  |                   |           |                  
|Accounts payable and accrued expenses |  | $                 | 1,868,534 |                  
|Interest accruals                     |  |                   | 2,214,760 |                  
|Total                                 |  | $                 | 4,083,294 |                  



In 2007, Genetic Immunity conducted a
US$2.0 million convertible debenture bridge in anticipation of a reverse merger which was not consummated due to then current economic
and market conditions. The debenture was due August 2009. The US$1.1 million in face value of debentures was purchased by a fund
operating under the Small Business Investment Company (“SBIC”) which has since been put into receivership with the
U.S. Small Business Administration (the “SBA”). The SBA is expected to execute a forbearance agreement. The remaining
US$900,000 of face value of the debenture is held by individuals who are considering whether to sign the forbearance agreement.
Conrad Mir, the Company’s Chairman of the Board of Directors, is in dialogue with them. The debenture holders have liens
on certain intellectual property of the Company. Because there is significant know how associated with the intellectual property,
the involvement of the Company's management team and scientific team is necessary to commercialize the intellectual property. As
of the printing of this document, the Company received written consent from the SBA to proceed with the forbearance agreement and
is awaiting similar approval from the aforementioned individuals. If said individuals elect to not accept the terms of the forbearance
agreement as approved by the Company and the SBA, thus keeping the Company in default on its obligations, there is the potential
for litigation by the holders of the debentures.

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

NOTE 10 -	GRANTS RECEIVED



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

DERMAVI_
is successfully closed in 2009. DVCLIN01 supported the Phase II clinical development of DermaVir. This grant was closed at the
end of 2013.. FIBERSC2 supports the investigation of DermaVir mechanism of action with novel fiber integrated microscopy. Originally
scheduled for completion in February of 2014, this grant has been extended to August of 2`14.. WINGS supports the development of
West Nile Virus vaccine with DermaVir technology. The grant ended in February of 2`14, we are no in the process of filing the required
closing documents. We expect full closure to this grant in Q3 of 2014.





F-38







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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012



NOTE 11 - 	SHORT TERM LOANS





|                              |  | December 31, 2013 |           | December 31, 2012
|----------------------------- |  | ----------------- | --------- | -----------------
|                              |  |                   |           |                  
|Bridge Loan                   |  | $                 | 2,000,000 |                  
|Bridge loan payable provision |  |                   | —         |                  
|RIGHT loan                    |  |                   | 311,159   |                  
|Bryan Sanders loan            |  |                   | 30,000    |                  
|Total                         |  |                   | 2,341,159 |                  





Bridge Loan



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





|Name               |  | Bridge Amount
|------------------ |  | -------------
|                   |  |              
|SBIC Investors     |  |              
|Trident            |  | $            
|Non-SBIC Investors |  |              
|Andy Browder       |  |              
|Proto Investments  |  |              
|Ford Sasser        |  |              
|Danny Vela         |  |              
|Steve Walton       |  |              
|Hilton Wilson      |  |              
|Will Wilson        |  |              
|Rodman & Renshaw   |  |              
|                   |  | $            







F-39







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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012



NOTE 11 - 	LONG TERM LIABILITIES
(Continued)

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

As of the printing of this document, the
US$1.1 million in face value of debentures was purchased by a fund operating under the SBIC, which has since been put into receivership
with the U.S. SBA. The SBA is expected to execute a forbearance agreement. The remaining US$900,000.00 of face value of the debenture
is held by individuals who are considering whether to sign the forbearance agreement. Conrad Mir, the Company’s Chairman
of the Board of Directors, is in dialogue with them. The debenture holders have liens on certain intellectual property of the
Company. Because there is significant know how associated with the intellectual property, the involvement of the Company's management
team and scientific team is necessary to commercialize the intellectual property. Most recently, the Company received written
consent from the SBA to proceed with the forbearance agreement and is awaiting similar approval from the aforementioned individuals.
If said individuals elect to not accept the terms of the forbearance agreement as approved by the Company and the SBA, thus keeping
the Company in default on its obligations, there is the potential for litigation by the holders of the debentures.

NOTE 12 - 	GENERAL AND ADMINISTRATION

General and administration expenses
consisted of the followings at December 31, 2013 and at December 31, 2012:



|                                |  | December 31, 2013 |         | December 31, 2012
|------------------------------- |  | ----------------- | ------- | -----------------
|                                |  |                   |         |                  
|Stock based compensation        |  |                   | —       |                  
|Stock based Consultant services |  |                   | 201,899 |                  
|Other                           |  |                   | 537,076 |                  
|Total                           |  |                   | 738,975 |                  

General and administration expenses
include $92,721 on impairment of advances given.





F-40







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

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND
2012



NOTE 13 - 	OTHER EXPENSES

Other expenses include the revaluation
of liability for warrants for Bluestar Consulting in the amount of $521,038.

NOTE 14 - 	SUBSEQUENT EVENTS



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



On February 19, 2014, pursuant to a private
placement under Regulation D of the Securities Act of 1933, as amended, the Company sold a total of 200,000 shares of its Series
E Preferred Stock to two unaffiliated private investors for aggregate proceeds of $200,000.



NOTE 15 - 	CONTINGENCIES



The Company’s wholly-owned subsidiary,
Genetic Immunity, has initiated a lawsuit against the National Development Agency of Hungary. In 2009, Genetic Immunity successfully
applied for and won an 800 million Hungarian forint (approximately $4,000,000) research grant to conduct dust mite allergy vaccine
research. Subsequently, the agency refused to sign the grant and denied payment of funds. The company initiated a lawsuit to request
that the court reinstate the contract that resulted in a grant award. On February 13, 2013, an appeals court ruled that the court
could not reinstate the contract between Genetic Immunity and the National Development Agency as the contract has been validly
in existence since its original execution in 2009. As such Genetic Immunity was ordered to pay 52,500,000 HUF (approximately $250,000)
in lawsuit costs. However, simultaneously, the judgment stated that the company is entitled to receive the original grant amount,
interest payment and/or damages since the original grant contract is valid. On February 18, 2013, the Company filed a new petition
to have the courts establish the damages and awards that Genetic Immunity can receive based on the appeals court’s ruling.
The Company is currently seeking 4,800,000,000 HUF (approximately $20 million) for damages sustained. On November 18, 2013, the
Company has entered into a six month suspension of said lawsuit, as agreed with the government, in hopes of negotiating an out
of court settlement. If these negotiations are unsuccessful the Company will resume the law suite in the court of law on or before
May 18, 2014.







F-41