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EX-31 - EXHIBIT 31.2 - CITRINE GLOBAL, CORP.exh31_2.htm
EX-31 - EXHIBIT 31.1 - CITRINE GLOBAL, CORP.exh31_1.htm
EX-32 - EXHIBIT 32.2 - CITRINE GLOBAL, CORP.exh32_2.htm
EX-32 - EXHIBIT 32.1 - CITRINE GLOBAL, CORP.exh32_1.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________

FORM 10-Q
___________________

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

 

For the quarterly period ended March 31, 2016

  

Commission file number: 333-168527

 

BREEDIT CORP.
(Exact Name Of Registrant As Specified In Its Charter)

Delaware 68-0080601
(State of Incorporation) (I.R.S. Employer Identification No.)
   
40 Wall Street, 28th Floor, New York, NY 10005
(Address of Principal Executive Offices) (ZIP Code)

Registrant's Telephone Number, Including Area Code: +(972) 54-222-9702

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 past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act) or a smaller reporting company .

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

On May 13, 2016, the Registrant had 145,919,173 shares of common stock outstanding.


TABLE OF CONTENTS

Item
Description
Page
 

PART I - FINANCIAL INFORMATION

 
ITEM 1. FINANCIAL STATEMENTS - UNAUDITED. 3
     Balance Sheets 3
     Statements of Operations 4
     Statements of Comprehensive Income (Loss) 5
     Statements of Cash Flows 6
     Notes to Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS. 14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 16
ITEM 4. CONTROLS AND PROCEDURES. 16
   

PART II - OTHER INFORMATION

   
ITEM 1. LEGAL PROCEEDINGS. 16
ITEM 1A. RISK FACTORS. 16
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. 16
ITEM 3. DEFAULT UPON SENIOR SECURITIES. 17
ITEM 4. MINE SAFETY DISCLOSURE. 17
ITEM 5. OTHER INFORMATION. 17
ITEM 6. EXHIBITS. 17

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS Back to Table of Contents

 

BREEDIT CORP.
Balance Sheets
As of March 31, 2016 (Unaudited) and December 31, 2015
Back to Table of Contents
March 31, 2016 (Unaudited) December 31, 2015
Assets
Current assets:
   Cash and cash equivalents $ 149,602 $ 356,037
   Certificate of deposit 662,222 640,418
   Prepaid assets 53,975 62,926
       Total assets

$

865,799

$

1,059,381

 
Liabilities and Stockholders' Equity
Current liabilities:
   Deferred revenues

1,430

2,804

     Total current liabilities

1,430

2,804

       Total liabilities

1,430

2,804

  
Stockholders' equity:
   Common stock, par value $0.0001 per share, 500,000,000 shares authorized:
   144,419,173 shares issued and outstanding at March 31, 2016 and Dec. 31, 2015

1,446

1,446

   Stock payable 169,662 169,647
   Stock subscription receivable

(300)

(300)

   Additional paid-in capital

8,710,274

8,681,637

   Accumulated deficit

(8,016,713)

(7,795,853)

       Total stockholders' equity

864,369

1,056,577

Total liabilities and stockholders' equity

$

865,799

$

1,059,381

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

 


BREEDIT CORP.
Statements of Operations
For The Three Months Ended March 31, 2016 and 2015 (Unaudited)
Back to Table of Contents
For the three For the three
months ended months ended
March 31, 2016 March 31, 2015
  
Revenues $ 1,374 $ 1,462
 
Expenses
Research and development

-

(30,311)

General and administrative (247,730) (414,537)
Total operating expenses (247,730) (444,848)
 
(Loss) from operations (246,356) (443,386)
 
Interest expense 70 (5,262)
Other income (expense) 25,426 81,834
   Financial income (expense) 25,496 76,572
 
Provision on income taxes - -
 
Net loss from continuing operations

$

(220,860)

$

(366,814)
 
Less: loss (income) attributable to non-controlling interest - 47,465
 
Net loss attributable to BreedIT Corp. continuing operations $ (220,860) $ (319,349)
 
Net loss from discontinuing operations $ - $ (153,046)
 
Net loss

$

(220,860)

$

(472,395)
         
Net loss per common share - basic and diluted

$

(0.00)

$

(0.01)
 
Weighted average number of common shares outstanding - basic 144,419,173 93,117,103
  
The accompanying notes are an integral part of these financial statements.

 

BREEDIT CORP.
Statements of Comprehensive Income (Loss)
For The Three Months Ended March 31, 2016 and 2015 (Unaudited)
Back to Table of Contents
  For the three For the three
months ended months ended
March 31, 2016 March 31, 2015
Net loss (220,860) (472,395)
   Loss attributable to foreign currency translation - (16,226)
   Loss attributable to non-controlling interest - (47,465)
   Total Comprehensive loss

$

(220,860)

$

(536,086)

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

 


BREEDIT CORP.
Statements of Cash Flows
For The Three Months Ended March 31, 2016 and 2015 (Unaudited)
Back to Table of Contents
For the three For the three
months ended months ended
March 31, 2016 March 31, 2015
Operating Activities:
Net (loss) $ (220,860) $ (519,860)
Adjustments to reconcile net (loss) to net cash (used in) operating activities:
   Investment accounted for using equity method - 6,742
   Warrants issued for services 1,407 -
   Options issued for services 12,245 170,585
   Shares issued for services - 114,600
   Depreciation expense - 795
Changes in net assets and liabilities:
   Decrease (increase) in prepaid assets 8,951 -
   Decrease (increase) in current assets (21,804) -
   Decrease (increase) in accounts receivable - (8,739)
   Decrease (increase) in accounts payable - (85,505)
   (Decrease) increase in related party payables - 1,072
   (Decrease) increase in accrued expenses - 5,263
   (Decrease) increase in deferred revenue (1,374) (1,462)
   Other assets - 9,765
Net cash used in operating activities (221,435) (306,744)
  
Investing activities:
   Purchases of property and equipment - (625)
Net cash used in investing activities - (625)
 
Financing activities:
   Proceeds from sale of common stock 15,000 -
Net cash provided by financing activities 15,000 -
   Foreign currency adjustment - (16,226)
Net increase (decrease) in cash (206,435) (323,595)
Cash and cash equivalents at beginning of period 356,037 1,101,164
Cash and cash equivalents at end of period $ 149,602 $ 777,569
 
Non cash transactions:
   Conversion of convertible note payable and accrued interest to common stock $ - $ 148,856
  
The accompanying notes are an integral part of these financial statements.

BREEDIT CORP.
Notes to Financial Statements
March 31, 2016 (Unaudited)

Back to Table of Contents

Note (1) Summary of Significant Accounting Policies

Basis of Presentation and Organization

BreedIt Corp. ("BreedIt" or the "Company") is a Delaware corporation. The Company was incorporated under the laws of the State of Delaware on May 26, 2010. On October 24, 2013 we entered into an agreement to acquire 66.67% of BreedIT Israel's capital stock. Subsequently, we were issued 200 shares of BreedIT Israel's capital stock ("Ordinary Shares") which represent 66.67% of BreedIT's outstanding Ordinary Shares with the founder, Dr. Oded Sagee owning the remaining 100 Ordinary Shares, representing 33.33% of the outstanding Ordinary Shares.

On August 28, 2015, the Company entered into a separation agreement with BreedIT Ltd., the Company's majority-owned subsidiary ("BreedIT Israel"), BreedIT Israel's founder and minority stockholder, Dr. Oded Sagee ("Dr. Sagee") and Star Biotech Ltd, an Israeli company controlled by Dr. Sagee ("SB"). the Company and Dr. Sagee agreed to enter into the Separation Agreement based upon the determination by the Company that it had fulfilled its obligation to fund up to but not more than $1 million on behalf of BreedIT Israel but was not willing to continue to fund BreedIT Israel as a result of the financial condition and result of operations of BreedIT Israel and the estimate of future revenues presented by Dr. Sagee. The company agreed that its Equity Interest shall be diluted from sixty-six and two-thirds (66 2/3%) percent to nineteen (19%) percent. SB shall have the option to acquire the company's shares for the sum of $50,000 and in the event that the option is not exercised, SB shall pay the Company an amount equal to ten (10%) percent of BreedIT Israel's gross profits, for a period of three (3) years.

BreedIT Ltd. signed a binding agreement with a leading Israeli university granting BreedIT Ltd. the exclusive, world-wide license for a unique and highly sophisticated decision making software used for the purpose of advanced agriculture breeding (the "IDSS Software"). The business plan of the Company through its BreedIT Ltd subsidiary is to further develop and market the IDSS Software system globally to the agricultural breeding industry.

The accompanying unaudited financial statements of the Company are presented in accordance with the requirements of Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") have been condensed or omitted pursuant to such SEC rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for an air presentation have been made. The results for these interim periods are not necessarily indicative of the results for the entire year. The accompanying financial statements should be read in conjunction with the Company's audited financial statements for the year ended December 31, 2015 and the notes thereto included in the Company's Report on Form 10-K filed with the SEC on March 31, 2016.

Cash and Cash Equivalents

For purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents. As of March 31, 2016 and December 31, 2015, we had cash equivalents of $662,222 and $640,418 respectively in the form of a certificate of deposit. The certificates of deposit bear an interest rate of 0.02%, mature every 7 days and renew automatically at end of every period.

Revenue Recognition

The Company recognizes revenue from licensing its software to customers for contractually defined periods of time. The Company recognizes revenue ratably over the term of the contract in accordance with ASC 605 (1) when the price is fixed and determinable, (2) persuasive evidence of an arrangement exists, (3) delivery has occurred or services have been provided, and (4) collectability is assured.

Loss per Common Share

Basic loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the period. Fully diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.

The Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company's financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carryforward period under the Federal tax laws.

Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.

Fair Value of Financial Instruments

The Company estimates the fair value of financial instruments using the available market information and valuation methods. Considerable judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be indicative of the amounts the Company could realize in a current market exchange. As of March 30, 2015 and 2014, the carrying value of accounts payable and accrued liabilities approximated fair value due to the short-term nature and maturity of these instruments.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets. The annual depreciation rates are as follows:

Computers and electronic equipment: 33%

Deferred Offering Costs

The Company defers as other assets the direct incremental costs of raising capital until such time as the offering is completed. At the time of the completion of the offering, the costs are charged against the capital raised. Should the offering be terminated, deferred offering costs are charged to operations during the period in which the offering is terminated. 

Impairment of Long-Lived Assets

The Company evaluates the recoverability of long-lived assets and the related estimated remaining lives when events or circumstances lead management to believe that the carrying value of an asset may not be recoverable. As of March 31, 2016, no events or circumstances occurred for which an evaluation of the recoverability of long-lived assets was required.

Estimates

The financial statements are prepared on the basis of accounting principles generally accepted in the United States. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of March 31, 2016 and December 31, 2015, and expenses for the three months ended March 31, 2016 and 2015. Actual results could differ from those estimates made by management.

Impact of Recently Issued Accounting Standards

In September, 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805) ("ASU 2015-16"). Topic 805 requires that an acquirer retrospectively adjust provisional amounts recognized in a business combination, during the measurement period. To simplify the accounting for adjustments made to provisional amounts, the amendments in the Update require that the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same period's financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition an entity is required to present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for fiscal years beginning December 15, 2015. The adoption of ASU 2015-016 is not expected to have a material effect on the Company's consolidated financial statements.

In August, 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date ("ASU 2015-14"). The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods with that reporting period.

In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30) ("ASU 2015-03"), which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. It is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The new guidance will be applied retrospectively to each prior period presented. The Company is currently in the process of evaluating the impact of adoption of ASU 2015-03 on its balance sheets.

Note (2) Discontinued Operation and Deconsolidation of Held Subsidiary

The Company follows the policy of segregating the assets and liabilities of subsidiaries or lines of business on its Balance Sheet from the assets liabilities of continuing subsidiaries or lines of businesses when it is decided to close or dispose of a subsidiary or line of business. The Company also, follows the policy of separately disclosing the assets and liabilities and the net operations of a subsidiary or line of business in its financial statements when it is decided to close or dispose of a subsidiary or line of business.

On August 28, 2015, the Company entered into a separation agreement with BreedIT Ltd., the Company's majority-owned subsidiary ("BreedIT Israel"), in which the company agreed that its Equity Interest shall be diluted from sixty-six and two-thirds (66 2/3%) percent to nineteen (19%) percent. Accordingly BreedIt Ltd. is no longer consolidated, a $6,780 gain was recorded on deconsolidation and the remaining 19% of investment written off during deconsolidation.

As a result of entering into the Separation Agreement, the operations of BreedIt Ltd. have been classified as Discontinued Operations on the Statement of Operations. The components of Discontinued Operations summarized on the Statement of Operations arising from the decision to separate from BreedIt Ltd. are as follows:

For the three For the three
months ended months ended
March 31, 2016 March 31, 2015
  
Revenues $ - $ 41,762
 
Expenses
Research and development

-

5,161

General and administrative

-

(199,969)
Total operating expenses

-

(153,046)
 
(Loss) from operations

-

(153,046)
 
Other income (expense) - -
   Financial income (expense) - -
 
Net loss

$

-

$

(153,046)
 
Assets:        
Cash   -   17,906
Other assets   -   49,309
   Total assets held for sale

 

-

 

67,215
  
Liabilities:
Accounts payable   -   39,393
   Total liabilities related to assets held for sale - 39,393
  
The accompanying notes are an integral part of these financial statements.

Note (3) Going Concern

The Company has limited operations. The business plan of the Company transitioned from being a provider of online gaming software to the developer and provider of an intelligent decision support system ("IDSS") utilized by the agriculture breeding industry, we were able to utilize our software programming expertise. Our business efforts are now being directed toward offering our IDSS Software program to a wide variety of users engaged in plant breeding, primarily within the seed industry. We plan on marketing our IDSS Software to agro-breeders, providing them with the ability to better plan, manage and analyze their breeding data and to perform research activities quickly and effectively so as to significantly increase production and plant quality. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not established any source of revenue to cover its operating costs, and as such, has incurred an operating loss since inception. These and other factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

Note (4) Property and Equipment

For the three months ended March 31, 2016 total additions to Property and equipment were $0, total accumulated depreciation is $947 and total depreciation expense for the three months ended March 31, 2016 and 2015 was $0 and $795, respectively.

Following is a summary of Property and Equipment, net as of March 31, 2016 and December 31, 2015.

March 31, 2016

December 31, 2015

Computers $947 $947
Accumulated depreciation (947) (947)
Property and Equipment, net $- $-

Note (5) Common Stock

During the three months ended March 31, 2016 and 2015, the Company expensed $12,245 and $170,585, respectively, related to options previously granted.

On January 25, 2015, the company granted a total of 6,000,000 stock options (the "Options") to 3 Company officers who are also minority owners and 1 employee. The Options, vest over 2 quarters and are exercisable at a price of $0.10 per Share. The options were valued using the Black-Scholes model with 241% volatility and 1.33% discount rate for a total value of $429,679 of this amount $209,094 and $358,448 was expensed during the three months ended September 30, 2015, respectively, with $71,230 to be expenses over 1 additional quarters.

On February 24, 2015 and March 31, 2015 the Company issued 1,900,000 restricted shares of common stock in consideration for investor relations (IR) services provided to the Company. The shares were valued at $114,600 based on the closing price of the Company's common stock on the date of grant.

On March 15, 2015 two note holders converted $145,886 of debt and accrued interest to 2,917,698 shares at a conversion price of $0.05 per share. The conversion occurred within the terms of the convertible note agreements with no gain or loss recorded.

On April 27, 2015 one share and warrant holders exercised warrants for cash consideration of $110,000, in return 2,000,000 shares were issued.

On August 10, 2015 five note holders converted $103,150 of debt and accrued interest to 8,251,963 shares at a conversion price of $0.0125 per share. The conversion price per share was amended from $0.02 to $0.0125 by the board of directors and a $60,182 loss was recorded related to the change in conversion price. Following the change in conversion price the conversion occurred within the terms of the amended agreement so no gain or loss was recorded on the conversion.

From November 25, 2015 through December 2, 2015, the Company sold to 11 non-US private accredited investors, a total of 26,500,000 units for cash consideration of $265,000 at a price of $0.01 (the "Units"), each unit comprised of one share of common stock.

Between November 10, 2015 and December 1, 2015 the Company issued 10,800,000 restricted shares of common stock in consideration for services provided to the Company. The shares were valued at $157,320 based on the closing price of the Company's common stock on the date of grant.

On February 16, 2016 the company received share subscription funds for the purchase of 1,500,000 units for cash consideration of $15,000 at a price of $0.01 (the "Units"), each unit comprised of one share of common stock. These shares were subsequently issued during Q2 2016.

Share based payment transactions were accounted for in accordance with the requirements of ASC 505-50 Equity Based Payments to Non Employees. Paragraph 505-50-30-6 establishes that share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The Company measured share-based payment transactions at the fair value of the shares issued at date of grant, the Company believes that the value of the shares is more reliably measurable.

Following is a table of warrant and options still outstanding and exercisable along with exercise price and range of remaining term.

Type Quantity Exercise Price Remaining Term
Warrants Class I 666,667 $0.45 1-3 Months
ESOP Oprions 5,900,000 $0.05 8-9 years
ESOP Options 6,000,000 $0.10 9 years
Total 12,566,667    

Note (6) Deferred Revenue and Revenue Recognition

On July 1 2011 and on July 10, 2011, the Company signed license agreements with two separate corporations in Israel and Luxemburg (the "Licensees"). Subject to the terms and condition of each agreement the Company granted each Licensee a license to use the Company's proprietary online gaming platform in certain parts of the world.  Each license is, in general, non-exclusive, except for certain countries specified within each agreement.  The agreements grant each Licensee the right to develop and operate websites offering online games based on the Company's proprietary technology for a period of 5 years as of the respective agreement's effective date. In the event that by the eighteenth-month anniversary of the each agreement's effective date the respective Licensee fails to have at least one active website in each of the countries that comprise the exclusive territory of the agreement, the Company shall be entitled to either terminate exclusivity for these countries or terminate the entire agreement. In consideration of these agreements, and of support services to be provided by the Company through the license period, the Licensees have paid the Company non-refundable, one-time license fees totaling $119,000. In addition to such license fees, once each Licensee realizes revenues at a certain level specified in its respective agreement from its use of the Company's platform, it shall pay the Company a royalty in the amount of 50% of gross revenues realized from its use of this platform.

On December 26, 2011, the corporation from Luxemburg announced the termination of the agreement due to the economic situation in Europe. As a result, the entire license fee in the amount of $90,000 was recognized immediately as revenues.

As of March 31, 2016 and 2015, the Company recognized a total sum of $1,374 and $1,462 respectively, in revenues out of the total $119,000 license fees paid for both of the aforementioned agreements. The contract in the amount of $90,000 was canceled by the client; therefore we recognized the whole sum as revenues according to the terms of the agreement. The second contract grants the client licenses for a period of 5 years, accordingly $1,374 and $1,462 were recorded as revenues in the three months ended March 31, 2016 and 2015 respectively; the remaining sum of $1,430 was deferred on the Company's balance sheet as current liabilities, and is expected to be recognized over the remaining period of the agreements.

As of March 31, 2016 and 2015, no royalties have been paid by or recognized in connection with the aforementioned agreements.

One of the aforementioned Licensees is beneficially owned by an individual who holds 25,000 shares of the Company's common stock.

Note (7) Related Party Transactions

On October 2, 2014, 850,000 the company granted a total stock options (the "Options") to 1 Company officer who is also minority owners. The Options, vest over 9 quarters and are exercisable at a price of $0.05 per Share. The options were valued using the Black-Scholes model with 281% volatility and 0.23% discount rate for a total value of $152,955 of this amount $12,245 and $24,490 was expensed during the three months ended March 31, 2016 and 2015, respectively, and $73,472 to be expenses over 6 additional quarters.

On January 25, 2015 the company granted a total of 6,000,000 stock options (the "Options") to 3 Company officers who are also minority owners and 1 employee. The Options, vest over 2 quarters and are exercisable at a price of $0.10 per Share. The options were valued using the Black-Scholes model with 241% volatility and 1.33% discount rate for a total value of $429,679 with $429,629 expensed during the nine months ended September 30, 2015.

During 2015 BreedIt Ltd, the company's subsidiary, received $13,020 for use of its software from KanaboSeed Ltd, a related company. Accordingly $13,020 were included as donated capital, BreedIT Ltd holds 50% of KanaboSeed Ltd.

Note (8) Convertible and Non-Convertible Notes Payable

On March 15, 2015, two note holders converted $145,886 of debt and accrued interest to 2,917,698 shares at a conversion price of $0.05 per share. The conversion occurred within the terms of the convertible note agreements with no gain or loss recorded.

During the three months ended March 31, 2016 and 2015, the Company recorded amortization expenses related to the beneficial conversion feature of $0 and $32,671 respectively.

For the three months ended March 31, 2016 and 2015, the Company recorded interest expense related in the amounts of $0 and $5,262 respectively.

Remaining debt discount as of March 31, 2016 and December 31, 2015 is $0 and $0, respectively.

Note (9) Subsequent Events

As defined in FASB ASC 855-10, "Subsequent Events", subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued or available to be issued.

The company issued 1,500,000 shares to one investor as discussed in the note 5.

The company evaluated all transactions and events that occurred subsequent to the balance sheet date and prior to the date on which the financial statements contained in this report were issued and determined that no such events or transactions necessitated disclosure.

 


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION Back to Table of Contents

Forward-Looking Statements

Certain statements that the Company may make from time to time, including all statements contained in this report that are not statements of historical fact, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and the safe harbor provisions set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may be identified by words such as "plans," "expects," "believes," "anticipates," "estimates," "projects," "will," "should," and other words of similar meaning used in conjunction with, among other things, discussions of future operations, financial performance, product development and new product launches, market position and expenditures. The Company assumes no obligation to update any forward-looking statements. Additional information concerning factors which could cause differences between forward-looking statements and future actual results is discussed under the heading "Risk Factors" in the Company’s Annual Report on Form 10-K, as filed with the SEC.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help you understand our historical results of operations during the periods presented and our financial condition. This MD&A should be read in conjunction with our consolidated financial statements and the accompanying notes to consolidated financial statements, and contains forward-looking statements that involve risks and uncertainties.  See section entitled "Forward-Looking Statements" above.

Executive Overview

We are a company with limited operations and no significant revenues from our business operations. There is substantial doubt that we can continue as an on-going business for the next twelve months. We do not anticipate that we will generate significant revenues until we enter into licensing agreements with additional online gaming servers, or web advertisers, to permit them to offer games of skill on our platform as part of their member services, or as part of their advertising campaign. Accordingly, we must raise cash from sources other than our operations in order to implement our marketing plan.

In our management's opinion, there is a potential demand for our technology which will enable online game service providers, and websites engaged in marketing efforts designed to increase traffic, to provide a platform offering financial rewards to winners of online competitive games of skill.

On July 10, 2011, we executed a license agreement with GT-SAT International S.A.R.L ("GT-SAT"), a corporation organized under the laws of Luxemburg.  Such license agreement granted GT-SAT a non-exclusive right to develop websites and offer online games based on our proprietary gaming platform in Europe, with an exclusive license to develop websites and offer online games based on our proprietary gaming platform in Luxembourg, Belgium, and Holland.  In consideration of such license, GT-SAT made an upfront, non-refundable, payment of $90,000 and has agreed to pay us royalties on future revenues. On December 26, 2011, GT-SAT terminated this agreement. The stated reason for termination was the economic situation in Europe.

On July 1, 2011, we executed a license agreement with Yanir Levin Ltd., an Israeli corporation. Such license agreement granted the licensee a non-exclusive right to develop websites and offer online games based on our proprietary gaming platform in Asia, with an exclusive license to develop websites and offer online games based on our proprietary gaming platform in Israel.  In consideration of the license granted to the licensee, the licensee made an upfront, non-refundable, payment of $29,000 and has agreed to pay us royalties on future revenues.

We believe that we have sufficient cash on hand to allow us to market our IDSS Software to potential clients and remain in business throughout 2015. If after that we are unable to generate significant revenues for any reason, or if we are unable to make a reasonable profit, we may have to suspend or cease operations.

Results of Operations during the three months ended March 31, 2016 as compared to the three months ended March 31, 2015.

During the three months ended March 31, 2016 and 2015 we generated revenues of $1,374 and $1,462.

Our research and development expenses decreased to $0 during the three ended March 31, 2016 compared to $30,311 during the same period in the prior year. The decrease during the three months ended March 31, 2016 was due to deconsolidation of our former subsidiary, BreedIt Ltd.

Our general and administrative expenses during the three months ended March 31, 2016 were $247,730 as compared to $414,537 during the same period in the prior year. The significant decrease was due to deconsolidation the BreedIT Ltd. subsidiary.

We incurred a net loss of $220,860 and $319,349 attributable to BreedIT Corp during the three months ended March 31, 2016 and 2015.

Purchase or Sale of Equipment

Other than the purchase of servers, work stations and relevant literature, we do not expect to purchase or sell any plant or significant equipment.

Liquidity and Capital Resources

Our balance sheet as of March 31, 2016 reflects current assets of $865,799 consisting of cash and cash equivalents of $811,824 and prepaid assets of $53,975. As of December 31, 2015, we had current assets of $1,059,381 consisting of cash and cash equivalents of $996,455 and prepaid assets of $62,926.

As of March 31, 2016, we had total current liabilities of $1,430 consisting of deferred revenues.

As of December 31, 2015, we had total current liabilities of $2,804 consisting of deferred revenues.

We had positive working capital of $864,369 as of March 31, 2016 compared to positive working capital $1,056,577 at December 31, 2015. Such working capital has been sufficient to sustain our operations to date. Our total liabilities as of March 31, 2016 were $1,430 compared to $2,804 at December 31, 2015.

During the three months ended March 31, 2016, we used $221,435 in our operating activities. This resulted from a net loss of $220,860, decrease in other current assets of $21,804 and decrease in deferred revenue of $1,374 offset by decrease in prepaid assets of $8,951, increase in option expense of $12,245 and warrants expense of $1,407.

During the three months ended March 31, 2016, we partially financed our negative cash flow from operations through the proceeds from sale of stock $15,000.

During the three months ended March 31, 2015, we used $306,744 in our operating activities. This resulted from a net loss of $519,860, decrease in accounts payable of $85,505, increase in accounts payable of $8,739, increase in accrued expenses of $5,263 and decrease in deferred revenues of $1,462 and offset principally by $285,185 non-cash compensation, decrease in other assets of $9,765, depreciation expense of $795, increase in related parties payable of $1,072 and investment accounted for using the equity method of $6,742.

During the three months ended March 31, 2015 we used $625 for the purchase of property plant and equipment.

During the three months ended March 31, 2015, $148,856 of convertible notes and accrued interest were converted to common shares.

While management of the Company believes that the Company will be successful in its current and planned operating activities, there can be no assurance that the Company will be successful in the achievement of sales of its products that will generate sufficient revenues to earn a profit and sustain the operations of the Company.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Back to Table of Contents

None.

ITEM 4. CONTROLS AND PROCEDURES Back to Table of Contents

Evaluation of disclosure controls and procedures. As of March 31, 2016, the Company's chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.

Changes in internal controls. During the quarterly period covered by this report, no changes occurred in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS Back to Table of Contents

We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. However, from time to time, we may become a party to certain legal proceedings in the ordinary course of business.

ITEM 1A. RISK FACTORS  Back to Table of Contents

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, "Item 1. Description of Business, subheading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2015, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Back to Table of Contents

On January 25, 2015 the company granted a total of 6,000,000 stock options (the "Options") to 3 Company officers who are also minority owners and 1 employee. The Options, vest over 2 quarters and are exercisable at a price of $0.10 per Share. The options were valued using the Black-Scholes model with 241% volatility and 1.33% discount rate for a total value of $429,679 of this amount $209,094 and $358,448 was expensed during the three months ended March 31, 2016, respectively, with $71,230 to be expenses over 1 additional quarters.

On February 24, 2015 and June 30, 2015 the Company issued 1,900,000 restricted shares of common stock in consideration for investor relations (IR) services provided to the Company. The shares were valued at $114,600 based on the closing price of the Company's common stock on the date of grant.

On March 15, 2015 two note holders converted $145,885 of debt and accrued interest to 2,917,698 shares at a conversion price of $0.05 per share. The conversion occurred within the terms of the convertible note agreements with no gain or loss recorded.

On April 27, 2015 one share and warrant holders exercised warrants for cash consideration of $110,000, in return 2,000,000 shares were issued.

On August 10, 2015 five note holders converted $103,150 of debt and accrued interest to 8,251,963 shares at a conversion price of $0.0125 per share. The conversion occurred within the terms of the convertible note agreements with $60,182 loss recorded on debt extinguishment relating to these note conversion.

From November 25, 2015 through December 2, 2015, the Company sold to 11 non-US private accredited investors, a total of 26,500,000 units for cash consideration of $265,000 at a price of $0.01 (the "Units"), each unit comprised of one share of common stock.

Between November 10, 2015 and December 1, 2015 the Company issued 10,800,000 restricted shares of common stock in consideration for services provided to the Company. The shares were valued at $157,320 based on the closing price of the Company's common stock on the date of grant.

On February 16, 2016 the company received share subscription funds for the purchase of 1,500,000 units for cash consideration of $15,000 at a price of $0.01 (the "Units"), each unit comprised of one share of common stock. These shares were subsequently issued during Q2 2016.

Share based payment transactions were accounted for in accordance with the requirements of ASC 505-50 Equity Based Payments to Non Employees. Paragraph 505-50-30-6 establishes that share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The Company measured share-based payment transactions at the fair value of the shares issued at date of grant, the Company believes that the value of the shares is more reliably measurable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES Back to Table of Contents

None.

ITEM 4. MINE SAFETY DISCLOSURE. Back to Table of Contents

Not applicable.

ITEM 5. OTHER INFORMATION Back to Table of Contents

Not applicable.

ITEM 6. EXHIBITS Back to Table of Contents

(a) The following documents are filed as exhibits to this report on Form 10-Q or incorporated by reference herein. Any document incorporated by reference is identified by a parenthetical reference to the SEC filing that included such document. 

Exhibit No. Description
31.1 Certification of CEO pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of CFO pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of CEO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 


SIGNATURES

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

BREEDIT CORP.

By: /s/ Itschak Shrem
Itschak Shrem
Chief Executive Officer and Director
(Principal Executive Officer)
Date: May 13, 2016

By: /s/ Oded Gilboa
Oded Gilboa
Chief Financial Officer
(Principal Financial and Principal Accounting Officer)
Date: May 13, 2016

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

By: /s/ Itschak Shrem
Itschak Shrem
Chief Executive Officer and Chairman
(Principal Executive Officer)
Date: May 13, 2016

By: /s/ Oded Gilboa
Oded Gilboa
Chief Financial Officer
(Principal Financial and Principal Accounting Officer)
Date: May 13, 2016