CITRINE GLOBAL, CORP. - Annual Report: 2014 (Form 10-K)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-K
________________________________
ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
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: (212) 400-7198
Securities Registered Pursuant to Section 12(g) of The Act: Common Stock, $0.0001
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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best of the
registrant's knowledge, in the definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
On June 30, 2014, the aggregate market value of the 66,538,512 common stock held by non-affiliates of the registrant was approximately $26,615,404 based on the closing price of $0.40 per share of the Registrants common stock on June 30, 2014. On March 30, 2015, the Registrant had 95,967,210 shares of common stock outstanding.
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 |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Cautionary Statement regarding Forward-Looking Statements
This Annual Report contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Act") and Section 21E of the
Securities Exchange Act of 1934 (the "Exchange Act"). These forward-looking
statements relate to future events or our future financial performance. In
some cases, you can identify forward-looking statements by terminology such
as "may," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," or "continue" or the negative of these
terms or other comparable terminology. These forward-looking statements are
only predictions and involve known and unknown risks, uncertainties and
other factors, including the risks set out in the section hereof entitled
"Risk Factors" and the risks set out below, any of which may cause our or
our industry's 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 include, by way of example
and not in limitation:
- risks related to our ability to continue as a
going concern;
- the uncertainty of profitability based upon our history
of losses;
- risks related to failure to obtain adequate financing on a
timely basis and on acceptable terms for our projects;
- risks related
to our ability to fund our sales and marketing costs;
- risks related to
conducting business internationally due to our operations in Israel;
-
risks related to our ability to commercially exploit our IDSS technology
into commercial products;
- risks related to our ability to successfully
prosecute and protect our intellectual property;
- risks related to tax
assessments; and
- other risks and uncertainties related to our
prospects, properties, and business strategy.
The above list is not
an exhaustive list of the factors that may affect any of our forward-looking
statements. These and other risks described in this report should be
considered carefully and readers should not place undue reliance on our
forward-looking statements.
Forward-looking statements are made based
on management's beliefs, estimates and opinions on the date the
forward-looking statements are made, and we undertake no obligation to
update forward-looking statements should these beliefs, estimates, and
opinions or other circumstances change. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance, or
achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the
forward-looking statements to conform these forward-looking statements to
actual results.
Our financial statements are stated in United States
dollars ("US$") and are prepared in accordance with United States generally
accepted accounting principles ("GAAP"). In this Annual Report, unless
otherwise specified, all dollar amounts are expressed in United States
dollars and all references to "common stock" refer to the shares of our
common stock. As used in this Annual Report, the terms "we," "us," "our," "BreedIT,"
the "Company" and the "Registrant" mean BreedIT Corp. unless the context
clearly requires otherwise.
PART I
ITEM 1. DESCRIPTION OF BUSINESS Back to Table of Contents
Formation and Background
We were incorporated on May 26,
2010, in the State of Delaware. Our authorized capital consists of
500,000,000 shares of our common stock (the "Common Shares"), par value of
$0.0001. Our principal executive offices are currently located at the
following address: 40 Wall Street, 28th Floor, New York, NY 10005-1313. Our
telephone number is 1 (866) 483-9414. Our website is http://www.ibreedit.us
We were organized for the purpose of developing and marketing software
for an online gaming platform and entering into licensing agreements with
online game service providers world-wide. Our gaming platform enabled our
customers to offer games of skill using our platform as part of their member
services. During our year ended December 31, 2011, we generated revenues of
approximately $93,000, virtually all of which was from the sale of a single
license to one customer. During our year ended December 31, 2012, our
revenues declined to approximately $6,000. This decline and our inability to
successfully market our online gaming platform led our management and
principal shareholders to reevaluate our business plan during 2013. As part
of management's reevaluation, the Company conducted discussions with certain
of its principal shareholders and other persons in Israel, during which the
Company was introduced to Dr. Oded Sagee, the founder of BreedIT Ltd,
organized under the laws of the State of Israel ("BreedIT Israel").
Recent Corporate Developments
In our current report on Form
8-K filed August 19, 2013, we disclosed that we had entered into a
preliminary agreement (the "Preliminary Agreement") with BreedIT Israel and
its founder, Dr. Oded Sagee, pursuant to which we agreed 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.
In connection with the Preliminary
Agreement, we agreed with Dr. Sagee that prior to the execution of any
definitive agreement, certain conditions had to be satisfied, including, but
not limited to: (i) completion of due diligence reviews; (ii) obtaining
requisite regulatory approvals; and (iii) the execution of the binding
agreement by and between BreedIT Israel and a leading Israeli university
granting BreedIT Israel 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").
On October 21, 2013, we filed our
Form 8-K report disclosing that the Registrant, BreedIT Israel and Dr. Sagee
executed the definitive Share Purchase Agreement (the "SPA") which provided
that we inject an initial investment of US$245,000 (the "Initial
Investment") which the parties agreed should be sufficient to fund BreedIT
Israel's operations during the ensuing twelve-month period. The Registrant
and BreedIT Israel further agreed that the remaining US$755,000 of the
US$1,000,000 investment amount be funded from time to time, based upon
BreedIT Israel's financial needs during the twelve-month period. The closing
of the SPA was subject to the execution of the binding License Agreement
between BreedIT Israel and the leading Israeli academic institution (the
"Licensor"), which closed on October 24, 2013.
Consideration for the
purchase was paid by us through issuance of BreedIT Corp. Common Stock and
Class A/B Options, the fair market value of the Tangible/Intangible Assets
acquired, as of the valuation date, was determined to be $849,671 and the
excess fair value of the assets over the fair value of the identifiable
assets owned at closing of $630,880 was booked as goodwill. As the company
is not generating income from the software sales yet and to ensure the asset
is carried at no more than the recoverable amount, $630,880 or entire
goodwill amount was impaired to expense during Q4 of 2013.
On
November 8, 2013, our board of directors authorized the filing with the
State of Delaware of a Certificate of Amendment to its Certificate of
Incorporation changing our name from Progaming Platforms Corp. to BreedIT
Corp. On January 14, 2014, Mr. Yoel Yogev, the Registrant's newly-appointed
Chief Executive Officer, accepted his appointment to become a member of the
Registrant's Board of directors. The Registrant's Board of directors is now
comprised of Mr. Itschak Shrem, Chairman, Dr. Ben-Zion Weiner, director, Mr.
Erez Zino, director, and Mr. Yoel Yogev, director. On February 27, 2014, the
Company announced that it had successfully completed the raise of the
US$1,000,000 required under its agreements with BreedIT Israel.
The
Registrant and BreedIT Israel believed and continue to believe that the IDSS
Software has significant commercial applications for the advancement of
successful agricultural breeding programs world-wide.
Seed
Development and the Breeding Process
In order to enhance
agricultural production on a continuing basis, increasing yield and
developing disease-resistant crops, many series of steps are taken in the
modern breeding process, including the following:
- Development of
functional markers: DNA components of genes are analyzed and recognized as
markers that breeders can use to determine which plants should be used to
breed the next generation of high-performing plants;
- Development of
parental stock: With improved parental stock, an offspring plant will be
more resilient against insect and disease damage, while improving growth and
yield;
- Quality control: Breeders realize the process of growing crops
differs between seed and food production. Therefore, they maintain the
highest standards for quality and germination of their seed production; and
- Back office support: This is a critical part of the process where an
inventory of a plant's genes is created to track and log the activity of
those genes.
The problem that breeders often confront is that data is
created at a pace more quickly than it can be analyzed and properly
utilized. As a result, seed companies have become increasingly dependent
upon third-party technology and software so as to provide them with the
ability to analyze, interpret and apply the significant amount of data they
collect and/or is provided to them by third parties. Notwithstanding the
forgoing, many of the computational tools utilized by the companies and
academic institutions engaged in agricultural breeding and research often
lack requisite information, industry standard design principles,
scalability. In addition the information and other tools available to
breeders and researchers often are not sustainable beyond the specific
project they were meant to support. This results in many persons and
entities engaged in the breeding industry lacking effective data, planning,
reporting and intelligent decision making support systems to effectively
support their breeding operations and business as well as foster their
growth and profitability.
We believe that breeders and researchers
need modern integrative and cost effective solutions to enable them to
reduce their product development time and expense and improve their success
ratio. For seed companies and public breeding programs, it is
well-established that information technology can increase efficiency and
success by enhancing the management and analysis of existing plant breeding
data, thereby facilitating correct decision making processes.
Our
IDSS Software
BreedIT's agro-breeding technology, developed at
The Robert H. Smith Faculty of Agriculture, Food & Environment of the Hebrew
University of Jerusalem by a team led by Professor Haim Rabinowitch, was
found to be suitable for integration with the Company's current software
technology. Designed by breeders and software engineers for the purpose of
optimizing their breeding procedures, we believe that BreedIT's
state-of-the-art Intelligent Decision Support System (IDSS) for
agro-breeding is equal to the most advanced technology solutions for plant
breeders and researchers available in the market today.
With our
transition 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.
It is well-known in the agriculture
industry that breeders devote significant amounts of time and resources into
developing new and improved plant breeds the process can be data intensive,
time consuming, costly and complex. We firmly believe that our IDSS Software
provides breeders with a cost-effective and environmentally friendly
software solution for plant breeding that will facilitate the development of
improved genotypes used for floriculture, forestry and medicinal plants
among other uses.
BreedIT further believes that its state-of-the-art
IDSS Software system will materially assist professional breeders throughout
the breeding process, from the initial selection of the most suitable
genetic resources to the selection of the most promising and compatible
parent lines required for sophisticated and successful hybrid production of
plants with increased tolerance to biotic and abiotic stress. IDSS can be
customized to meet the needs of virtually any breeder according to the
nature of their crop and breeding goals. IDSS is designed to reduce breeder
product development efforts, time and expense by providing services from the
simple review of the breeder's historical data, planning, design, field
work, collection of information and data analyses by, among other things,
facilitating communication between all parties involved in the breeding
process, including specialists in Phytopathology, Molecular Biology,
Agronomy, and field or laboratory trials in the service of the breeders.
BreedIT's proprietary IDSS Software platform has been tested and
implemented at a number of international seed companies with operations in
Israel. Our management believes that IDSS provides an established platform
solution. IDSS a single software package providing seed breeders with the
ability to manage variety and pedigree information, design trials, as well
as aid in field operations, and analyze and store data eliminating time lost
from transferring data between applications. This relational database allows
researchers to quickly summarize variety performance across locations and
time, permitting virtually instant retrieval of all data recorded for a
specific genotype, rather than manually searching through hundreds or even
thousands of individual files.
As a result, researchers using IDSS
can be far more productive and effective by being able to devote their time
and effort to the critical extraction and interpretation of data. This, in
turn, should improve the likelihood of successfully developing and releasing
new and/or improved breed varieties capable of generating revenues in a more
expeditious manner than previously available.
The advanced
features of BreedIT's IDSS Software include:
Plant modules:
Based on the BreedIT group experience, plant modules create new and improved
varieties exhibiting quality traits. These varieties are being developed
using our IDSS Software with both traditional and advanced breeding methods,
employing techniques such as marker-assisted selections, plant physiology,
biochemistry and phytopathology;
Phytopathology: Our research team is able to identify and make available to breeders using IDSS new sources of resistance to fungal pathogens, viruses and pests, as well as develop new techniques for the efficient evaluation of plant response to inoculation by diseases and pests. Research encompasses bacterial, fungal and viral diseases, as well as nematodes and Bemisia (white fly);
Plant Biology: IDSS assists breeders or scientists utilizing our advanced technologies to create new traits and produce new plant varieties or animal types with valuable properties, both through classical genetic methods and by marker-assisted breeding. Based on tools developed by our breeding team and breeders using IDSS, the genetic base of the product development pipeline can be increased. Our team using IDSS has developed an array of molecular markers for more rapid identification of desired traits in individual plants;
Breeding Trials: Breeders conduct scores of trials each year to select parent and hybrid combinations that best meet the growers' and the seed companies' needs, with many trials taking place on-site in customers' fields in Israel, Turkey , Spain, France, Holland, Italy, Belgium and Mexico, all assisted by BreedIT's IDSS Software; and
Breeding Projects: Future directions of the breeding team which will be added annually to the BreedIT IDSS Software include:
(i) Development of tomato, or
other vegetable varieties displaying: increased anti-oxidative agents,
improved flavor of high-yielders, heat-tolerance in greenhouses,
disease-resistant and adaptation to specific regions;
(ii)
Development of rootstocks for grafting;
(iii) Breeding indeterminate
hybrids: characterized by large, high quality, Roma-shaped fruit with long
shelf-life; and
(iv) Breeding of cluster (truss) tomatoes or other
vegetables with tasty fruits of different sizes, shapes and colors.
Our Target Markets
We seek to become a worldwide leading provider of a state-of-the-art software program for breeders, providing agro-breeding information technologies and decision support in an integrated system. We believe our IDSS Software provides a complete solution for seed or breeding companies with ongoing knowledge and support using the following IDSS features and capabilities:
- Knowhow- Breeding based on the
information and technology developed by Rabinowitch Group and our Licensor;
- IDSS IT Software;
- IDSS Software support and system maintenance;
-
Preliminary analysis consisting of IDSS configuration, system installation
and training;
- Breeding support consisting of agriculture consultation,
software adaptation;
- Marketers who assist in selling, testing,
analyzing, statistics and consulting services;
- Professional courses;
and
- Remote learning services
We intend to sell our IDSS Software
to seed breeders, government agencies and researchers, together with o
ongoing enhancement, maintenance and knowledge support including cloud
capabilities and pay-per-use availability. Based on our experiences in
selling our IDSS Software in Israel, we expect that our IDSS Software
solution will permit us to penetrate significant markets world-wide,
providing users with an additional module for their existing software.
Alliances: BreedIT plans to enter into agreements with breeders
to facilitate the cultivation of new and improved seed breeds and
participate through royalties from the sale of seeds. We also plan to
establish national and international alliances with major seed companies
providing them with access to knowledge and proprietary technology developed
by our Licensor, for which we have exclusive, world-wide rights.
BreedIT Learning Center (CITLC): We plan to offer our clients/customers
with a total customer support package which will include, among other
services, the following:
- Consultation support for our breeder and
researcher customers - Our CITLC service group is designed to maintain close
and continuing support with our customers, enhancing our ability to identify
and resolve their requirements/needs and provide appropriate remedial
computerized solutions that are practical for our customers to apply to
satisfy their respective needs.
Academic courses: CITLC will
offer courses on "Plant Varieties Breeding Information Technologies"
utilizing our BreedIT Software as a model for our customers breeding
programs, management by taking into consideration both theoretical and
practical issues related to breeding program management. - Workshops and
lectures: We plan on offering on a periodic basis workshops and lectures to
our customers and prospective customers for the purpose of updating
customers/users, which shall primarily include breeders and researchers,
providing new and emerging technical advancements in breeding programs
generally and in our IDSS Software specifically. Our workshops and lectures
will address database management and handling and the advanced
computer-based technology system offered by IDSS to support both basic
genetic research and applied plant breeding.
Medical Cannabis:
BreedIT will expand its capabilities to include medical plants, initially
commencing with improved breeding of Medical cannabis. Medical cannabis
traits that can be developed using our IDSS Software include:
General Traits
1. Size and Yield
2. Vigor
3.
Adaptability
4. Hardiness
5. Disease and Pest Resistance
6.
Maturation
7. Root Production
8. Branching
9. Sex
Floral Traits
1. Shape
2. Form
3. Calyx Size
4. Color
5. Cannabinoid
Level
6. Taste and Aroma
7. Persistence of Aromatic Principles and
Cannabinoids
8. Trichome Type
9. Resin Quantity and Quality
10.
Resin Tenacity
11. Drying and Curing Rate
12. Ease of Manicuring
13. Seed Characteristics
14. Maturation
15. Flowering
16. Ripening
17. Cannabinoid Profile
Marketing/Advertising Strategy
We plan to market our IDSS Software and services through a sophisticated
sales and marketing strategy designed to identify key potential customers
that meet our specific customer profile. Following initial review and
approval by our sales and marketing team, we intend to make direct contact
with the appropriate departments and personnel at said prospective
customers, we also plan to attend industry trade shows in Israel and
world-wide, presenting our IDSS Software in order to generate new customers
and potential customers. Part of our sales and marketing plan is to enter
into license agreements with established seed companies, as sub-licensees
having sufficient resources and professional commitment to be able to
successfully implement and apply our IDSS Software.
Competition
Competition in the seed monitoring software industry in the US and
internationally is intense. We face direct competition from other seed
companies, specialized software companies as well as subsidiaries or other
affiliates of chemical, pharmaceutical and biotechnology companies.
Virtually all of our competitors have far longer operating histories with
far greater resources, both financial and personnel, and established
customer bases. There can be no assurance that we will be able to
successfully establish and maintain a significant customer base, if at all.
At present, there are six large multinational corporations,
Monsanto, DuPont, Bayer, Dow, Syngenta and BASF that dominate the seed
market applying their proprietary seed breeding monitoring software
solutions which are tailored for their specific needs. While we believe that
our competitors proprietary breeding monitoring software solutions are
out-dated, are not suitable to be marketed to third- party use and lack the
advanced features of our IDSS Software, their can be no assurance that we
will be able to successfully compete with these six large multinational
corporations.
Other than the major multi-nationals, and to a lesser
extent our other competitors are represented by a few software companies
including: Doriane, Agronomix, Agriconnection and Phenome, as well as
breeding monitoring software solutions offered by various academic
institutions. We believe that none of these competitors offer comprehensive
integrated solutions represented by IDSS that includes solutions that can be
delivered on an online and interactive basis with the ability to transfer
specifically designed solutions with our breeding know-how and ongoing
customer support.
Our Competitive Advantage
Our IDSS
Software technology is based on 30 years of research conducted in one of the
world's leading academic institutions, the Robert H. Smith Faculty of
Agriculture, Food & Environment of the Hebrew University of Jerusalem by a
team led by Professor Haim Rabinowitch, an agriculture department that has
is recognized for having generated some of the world's finest and best sold
seeds used in breeding tomatoes.
We believe that our unique IDSS
Software system will allow small breeders to compete with much larger
corporations through access to a cloud-based breeding monitor system. Our
system should significantly improve the efficiencies and productive
capabilities of smaller breeders and allow them to compete more effectively
with the dominant entities presently dominating the market of breeding
seeds.
We provide software for the management of plant breeding that
includes the management of seed related information of companies and
institutions working with many seed varieties. This
horticultural-specialized management software performs maintenance,
evaluation and characterization of genetic material for plant breeding
processes. We believe that our IDSS Software provides an efficient, advanced
and expert data-management tool for dispensing specifically designed
breeding information and knowledge to our customers.
Our IDSS
Software product includes the following competitive components and features:
(i) Software Modules with the following features: Parent's Pool, Field
Outlay, Genetic Markers, Breeding Planning, Introductions, Hybrids,
Resistances, Gene Pool, Report; and (ii) Modules under development such as:
Statistics, Images, Barcodes, Genetically Modified Genes, Additional Input
Devices Interfaces.
Dependence on One or a Few Major Customers
Due to the nature of our IDSS Software system and the size of its
potential market, we do not anticipate that we will become dependent on one
or a few major customers. We expect that our IDSS platform will be used by a
wide variety of breeders across the agriculture breeding industry.
Employees
Other than our current directors and officers, we
employ consultants to provide technical R&D and software development
services.
ITEM 1A. RISK FACTORS Back to Table of Contents
Risks Relating to Our Lack of Operating History and Industry.
Our
business is at an early stage of development and we may not be able to
successfully commercialize our IDSS Software.
The success of our business
is dependent on our ability to continue to develop and successfully market
our IDSS Software, and to secure and maintain licensing agreements with
customers in the US and internationally. Our ability to achieve these goals
is unproven, and the lack of operating history makes it difficult to
validate our business plan. In addition, the success of our business plan is
dependent upon acceptance of our platform by the seed industry. Should the
target markets not be as responsive as we anticipate, we will not have in
place alternate services or products that we can offer to ensure our
continuing as a going concern.
Management believes that it currently
has sufficient funds to continue our planned activities at least through the
first half of 2015, evidenced by our ability to raise capital from private
investors to fund our acquisition of 66.67% of BreedIT Israel. We also
expect to continue to incur operating losses in future periods. These losses
will occur because we do not yet have revenues to offset the expenses
associated with the continuing development and marketing of our software and
the administrative costs associated with being a public company with
reporting obligations under the Exchange Act. There can be no assurance that
we will ever be successful in generating significant revenues in the future.
We recognize that if we are unable to generate significant revenues, we will
not be able to earn profits or continue operations.
We have only a
limited operating history which includes operating losses; we may not ever
achieve revenues or operating profits.
We have a limited operating
history and have only generating operating losses from inception to date. We
anticipate generating losses until we are able to generate significant
revenues from the sale or license of our IDSS Software. We do not anticipate
generating significant revenues before the second half of 2015 or early
2016. Therefore, we may be unable to continue operations in the future as a
going concern. No adjustment has been made in the accompanying financial
statements to the amounts and classification of assets and liabilities which
could result should we be unable to continue as a going concern. If we
cannot continue as a viable entity, our stockholders may lose some or all of
their investment in us.
We have a going concern note indicating the
possibility that we may not be able to continue to operate.
Our
audited financial statements for the year-ended December 31, 2014 contained
in this Annual Report include a going concern note, which raises a
substantial doubt about the Company's ability to continue as a going
concern. As a result, notwithstanding our ability to raise capital to fund
the purchase of our interest in BreedIT Israel, we may nevertheless face
difficulty in obtaining additional funding, if and when necessary, at terms
satisfactory to the Company, if at all. There can be no assurance that we
will ever achieve any significant revenues or profitability. The revenue and
income potential of our proposed business and operations are unproven, and
the lack of operating history makes it difficult to evaluate the future
prospects of our business.
We have a limited operating history on
which investors may evaluate our operations and prospects for profitable
operations.
We were incorporated on May 26, 2010 and completed our
acquisition of 66.67% of our operating subsidiary, BreedIT Israel on October
24, 2013. We currently have no agreements to sell our IDSS Software in order
to generate revenues. There is no history upon which to base any assumption
as to the likelihood that we will prove successful, and we can provide
investors with no assurance that we will generate any significant operating
revenues or ever achieve profitable operations. If we are unsuccessful in
addressing these risks, our business will most likely fail.
Our
business plan may be unsuccessful.
The success of our business plan
is dependent on our ability to develop successfully and market our IDSS
Software as well as securing licensing agreements with seed breeding
companies. Our ability to develop software for this market is unproven, and
the lack of operating history makes it difficult to validate our business
plan. In addition, the success of our business plan is dependent upon
acceptance of our software by seed breeders. Should the target market not be
as responsive as we anticipate, we will not have in place alternate services
or products that we can offer to ensure our continuing as a going concern.
Our revenues may be sensitive to fluctuations in demand for our
products.
Our revenues earnings can be negatively impacted by
declining demand brought on by varying factors, many of which are out of our
control. In addition, demand for our software could be influenced by supply
and quality issues or for any other reason, including products of
competitors that might be considered superior by end users.
Because
our potential clients operate in the seed business which is highly seasonal,
our revenues, cash flows from operations and operating results may fluctuate
on a seasonal and quarterly basis.
We expect that the majority of our
revenues will be generated from clients who operate in the seed business.
The seed business is highly seasonal. Our business may therefore be
considered seasonal in nature which may result in significant fluctuations
in our working capital during the growing and selling cycles. We expect to
experience, significant variability in net sales, operating cash flows and
net income on a quarterly basis.
We face intense competition, and our
inability to compete effectively for any reason could adversely affect our
business.
The seed market is highly competitive, and our IDSS
Software program may face competition from a number of small companies, as
well as large agricultural and biotechnology companies. We compete primarily
on the basis of the advanced features that we believe are incorporated in
our IDSS Software as well as online and interactive customer service and
price advantages. Many of our competitors are, or are affiliated with, large
diversified companies that have substantially greater marketing and
financial resources than we have. These resources give our competitors
greater operating flexibility that, in certain cases, may permit them to
respond better or more quickly to changes in the industry or to introduce
new products more quickly and with greater marketing support. Increased
competition could result in lower profit margins, substantial pricing
pressure, and lower operating cash flows. Price competition, together with
other forms of competition, could have a material adverse effect on our
business, financial position, results of operations and operating cash
flows.
We may depend on third-party distributors who may not
effectively distribute our IDSS Software products.
We may depend, in
part on, third-party distributors and strategic relationships for the
marketing and selling of our IDSS product. We may depend on these
distributors' efforts to market our product, yet we are unable to control
their efforts completely. In addition, we are unable to ensure that our
distributors comply with all applicable laws regarding the sale of our
product. If our distributors fail to effectively market and sell our
product, and in full compliance with applicable laws, our operating results
and business may suffer.
The demand for our IDSS Software may not
develop as we anticipate, and therefore our continued research and
development activities with respect to our software may be adversely
affected.
There are a number of challenges to market acceptance of
our IDSS Software. Demand for our software might never materialize and we
may not be able to profit from our continued research and development
activities relating to our software or any commercial applications that we
expect to derive therefrom. Even if our IDSS Software conforms to applicable
quality standards, potential sales could be adversely affected if customers
in our target markets lose confidence in the safety, efficacy and quality of
our software. Adverse publicity, if any, about our software may discourage
seed breeders from utilizing our unproven software. Any of these
developments could adversely impact the future amount of our revenues, which
would adversely impact our results of operations.
The loss of key
employees or the failure to attract qualified personnel could have a
material adverse effect on our ability to run our business.
The loss
of any of our current executives, key employees or key advisors, or the
failure to attract, integrate, motivate and retain additional key employees,
could have a material adverse effect on our business. Any employee could
leave our employ at any time if he chose to do so. We do not carry "key
person" insurance on the lives of any of our management team. As we develop
additional capabilities, we may require more skilled personnel who must be
highly skilled and have a sound understanding of our industry, business or
processing requirements. Recruiting skilled personnel is highly competitive.
Although to date we have been successful in recruiting and retaining
qualified personnel, there can be no assurance that we will continue to
attract and retain the personnel needed for our business. The failure to
attract or retain qualified personnel could have a material adverse effect
on our business.
We may not be able to manage expansion of our
operations effectively.
We expect our operations to grow rapidly in
the future because of our belief in the advantages of our IDSS Software, of
which there can be no assurance. We may also be required to expand our
business through acquisition of synergistic companies and technologies.
These efforts, to the extent necessary, will, in all likelihood, require the
addition of employees, expansion of facilities and greater oversight,
perhaps in diverse locations. If we are unable to manage our growth
effectively, we may not be able to take advantage of market opportunities,
execute on our business strategies or respond to competitive pressures, and
we may have difficulties maintaining and updating the internal procedures
and the controls necessary to meet the planned expansion of our overall
business.
Our management will also be required to maintain and expand
our relationships with customers as well as attract new customers. We expect
that our sales and marketing costs will increase as we grow and increase our
sales efforts in new and existing markets. Our current and planned
operations, personnel, systems and internal procedures and controls may not
be adequate to support our future growth.
We may need to raise
additional capital in the future.
We believe our current cash and
cash equivalents on hand will be sufficient to finance anticipated capital,
financing and operating requirements for the next twelve months. However, if
we elect to aggressively pursue our growth strategies, whether through
acquisitions or organic growth, we may need additional capital to fund these
strategies.
If we are required to raise additional capital in the
future, such additional financing may not be available on favorable terms,
or available at all, may be dilutive to our existing stockholders if such
funding is in the form of equity financing or, if in the form of debt
financing, may contain restrictions on the operation of our business or
conversion features that are also dilutive to our existing stockholders. If
we fail to obtain additional capital as and when required, such failure
could have a material adverse impact on our business, results of operations
and financial condition.
Changes in government policies and laws
could adversely affect US and international sales and therefore our
financial results.
Our financial results could be affected by changes
in trade, monetary and fiscal policies, laws and regulations, or other
activities of U.S. and non-U.S. governments, agencies and similar
organizations. These conditions include but are not limited to changes in a
country's or region's economic or political conditions, trade regulations
affecting production, pricing and marketing of agriculture products
generally and medical cannabis in particular, changing climate conditions,
local labor conditions and regulations, reduced protection of intellectual
property rights in some countries, changes in the regulatory or legal
environment, burdensome taxes and tariffs and other trade barriers.
International risks and uncertainties, including changing social and
economic conditions as well as terrorism, political hostilities and war,
which could lead to reduced distribution of our IDSS Software or reduced
demand from customers and potential customers in such affected areas,
resulting in reduced profitability or losses associated with such sales.
We are subject to risks associated with doing business globally.
Our
operations, both inside and outside the United States, are subject to risks
inherent in conducting business globally and under the laws, regulations and
customs of various jurisdictions and geographies. Although we intent to sell
our software to various regions of the world. Our operations are subject to
special risks and restrictions, including: fluctuations in currency values
and foreign-currency exchange rates; exchange control regulations; changes
in local political or economic conditions; governmental pricing directives;
import and trade restrictions; import or export licensing requirements and
trade policy; restrictions on the ability to repatriate funds; and other
potentially detrimental domestic and foreign governmental practices or
policies affecting U.S. companies doing business abroad, including the
Foreign Corrupt Practices Act and the trade sanctions laws and regulations
administered by the U.S. Department of the Treasury's Office of Foreign
Assets Control. Acts of terror or war may impair our ability to operate in
particular countries or regions, and may impede the flow of goods and
services between countries. Customers in weakened economies may be unable to
purchase our products, or it could become more expensive for them to
purchase imported products in their local currency, or sell their commodity
at prevailing international prices, and we may be unable to collect
receivables from such customers. Further, changes in exchange rates may
affect our net income, the book value of our assets outside the United
States, and our shareholders' equity. Failure to comply with the laws and
regulations that affect our global operations could have an adverse effect
on our business, financial condition or results of operations.
Environmental regulation could negatively impact our business.
As a
Company providing software solutions almost exclusively to agricultural
breeders, we may be indirectly subject to evolving environmental laws and
regulations by federal and state governments in the US and governments
internationally. As a software company, we do not believe that we are or
will become subject to environmental laws and regulations, the following
federal laws and regulations applicable to the agriculture industry include,
among others, the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act, the Federal Insecticide, Fungicide and
Rodenticide Act, the Comprehensive Environmental Response, Compensation and
Liability Act, the Federal Seed Act, and current and potentially new
regulations of the FDA.
Risks Relating to Our Business
Our executive
officers and directors have significant voting power and may take actions
that may be different than actions sought by our other stockholders.
Our officers and directors own approximately 18% of the outstanding shares
of our common stock. These stockholders will be able to exercise significant
influence over all matters requiring stockholder approval. This influence
over our affairs might be adverse to the interest of our other stockholders.
In addition, this concentration of ownership could delay or prevent a change
in control and might have an adverse effect on the market price of our
common stock.
Our officers and directors are located in Israel and
our assets may also be held from time to time outside of the United States.
Since all of our officers and directors are currently located in and/or
are residents of Israel, any attempt to enforce liabilities upon such
individuals under the U.S. federal securities and bankruptcy laws may be
difficult. In accordance with the Israeli Law on Enforcement of Foreign
Judgments, 5718-1958, and subject to certain time limitations (the
application to enforce the judgment must be made within five years of the
date of judgment or such other period as might be agreed between Israel and
the United States), an Israeli court may declare a foreign civil judgment
enforceable if it finds that:
- the judgment was rendered by a court
which was, according to the laws of the State in which the court is located,
competent to render the judgment;
- the judgment may no longer be
appealed;
- the obligation imposed by the judgment is enforceable
according to the rules relating to the enforceability of judgments in Israel
and the substance of the judgment is not contrary to public policy; and
- the judgment is executory in the State in which it was given.
An
Israeli court will not declare a foreign judgment enforceable if:
- the
judgment was obtained by fraud;
- there is a finding of lack of due
process;
- the judgment was rendered by a court not competent to render
it according to the laws of private international law in Israel;
- the
judgment is in conflict with another judgment that was given in the same
matter between the same parties and that is still valid; or
- the time
the action was instituted in the foreign court, a suit in the same matter
and between the same parties was pending before a court or tribunal in
Israel.
Furthermore, Israeli courts may not adjudicate a claim based
on a violation of U.S. securities laws if the court determines that Israel
is not the most appropriate forum in which to bring such a claim. Even if an
Israeli court agrees to hear such a claim, it may determine that Israeli
law, not U.S. law, is applicable to the claim. If U.S. law is found to be
applicable, the content of applicable U.S. law must be proven as a fact,
which can be a time-consuming and costly process.
Our assets may also
be held from time to time outside of the United States. Since our directors
and executive officers are foreign citizens and do not reside in the United
States, it may be difficult for courts in the United States to obtain
jurisdiction over our foreign assets or persons, and as a result, it may be
difficult or impossible for you to enforce judgments rendered against us or
our directors or executive officers in United States courts. Thus, investing
in us may pose a greater risk because should any situation arise in the
future in which you would have a cause of action against these persons or
against us, you may face potential difficulties in bringing lawsuits or, if
successful, in collecting judgments against these persons or against the
Company.
We may not be able to raise the required capital to conduct
our operations and develop and commercialize our IDSS Software product.
We were incorporated on May 26, 2010. We have not generated any
significant revenues. Although we have commenced our new business plan to
sell our IDSS Software, we may not be able to execute our business plan. If
we do not generate any significant revenues during the remainder of 2015 and
into 2016, we will undoubtedly require additional financing in order to
establish and maintain profitable operations. Such additional financing, if
required, may not be forthcoming. Even if additional financing is available,
it may not be available on terms we find favorable. Failure to secure any
needed additional financing may have a serious effect on our company's
ability to survive. At this time, there are no anticipated additional
sources of funds in place.
If we continue to suffer losses, investors
may not receive any return on their investment and may lose their entire
investment. Our prospects must be considered speculative in light of the
risks, expenses, and difficulties frequently encountered by companies in
their early stages of development, particularly in light of the
uncertainties relating to the new, competitive and rapidly evolving markets
in which we anticipate we will operate. To attempt to address these risks,
we must, among other things, further develop our technology and product,
successfully implement our development, marketing and commercialization
strategies, respond to competitive developments, and attract, retain, and
motivate qualified personnel. A substantial risk is involved in investing in
us because, as an early stage company we have fewer resources than an
established company, our management may be more likely to make mistakes at
such an early stage, and we may be more vulnerable operationally and
financially to any mistakes that may be made as well as to external factors
beyond our control.
We expect to continue to incur operating losses
in future periods. These losses will occur because we do not yet have any
significant revenues to offset the expenses associated with the development
and promotion of our platform. We cannot guarantee that we will ever be
successful in generating significant revenues in the future. We recognize
that if we are unable to generate significant revenues, we will not be able
to earn profits or continue operations.
Our lack of business
diversification could result in the loss of your investment if revenues from
our primary product decrease.
Currently, our business is focused on
the development and marketing of our IDSS Software. We do not have any other
lines of business or other sources of revenue if we are unable to
successfully implement our business plan. Our lack of business
diversification could cause you to lose all or some of your investment if we
are unable to generate revenues by the operation of the gaming platform
since we do not have any other lines of business or alternative revenue
sources.
We need to retain key personnel to support our activities
and ongoing operations, and a loss of certain key personnel could
significantly hinder our ability to move forward with our business plan.
The development, promotion, and operation of our online gaming platform
will continue to place a significant strain on our limited personnel,
management, and other resources. Our future success depends upon the
continued services of our executive officers and other needed key employees
and contractors who have critical industry experience and relationships that
we will rely on to implement our business plan. The loss of the services of
any of our officers or the lack of availability of other skilled personnel
would negatively impact our ability to market and sell our product, which
could adversely affect our financial results and impair our growth.
Since our officers and directors may work or consult for other companies,
their other activities could slow down our operations.
Our officers
and directors are not required to work exclusively for us and do not devote
all of their time to our operations. Presently, our officers and directors
allocate only a portion of their time to the operation of our business.
Since our officers and directors are currently employed full-time elsewhere,
they are each able to commit to us only up to 20-25 hours a week. Therefore,
it is possible that their pursuit of other activities may slow our
operations and reduce our financial results because of the slow-down in
operations.
The commercialization of our IDSS Software will be
delayed if third parties fail to enter into sales and/or licensing
agreements with us.
We intend to enter into sales and/or licensing
agreements for our IDSS Software. We have not yet entered into any sales or
licensing agreements. We may not be successful in entering into any sales
and/or licensing agreement. If we are unable to enter into sales and/or
licensing agreements, we may not be able to commercialize our IDSS Software
product and therefore not generate any revenues.
We depend on market
acceptance of our IDSS Software product. If our platform does not gain
market acceptance, our ability to compete will be adversely affected.
Our success will depend in large part on our ability to successfully
market our IDSS Software. Although we intend to highlight the distinction
between our software and that of our competitors, no assurances can be given
that we will be able successfully to promote our software or achieve
acceptance from the seed breeders that are our target market. Moreover,
failure successfully to commercialize our software on a timely and
cost-effective basis will have a material adverse effect on our ability to
compete in our targeted market.
We are a small company with limited
resources compared to some of our current and potential competitors and we
may not be able to compete effectively and increase market share.
Most of our competitors have longer operating histories, significantly
greater resources, name recognition and a larger base of customers than we
have. As a result, these competitors have greater credibility with our
potential customers. They also may be able to adopt more aggressive
licensing policies and devote greater resources to the development,
enhancement, promotion, and sale of their products and services than we can
to ours.
Failure to meet customers' expectations or deliver expected
performance could result in losses and negative publicity, which would harm
our business.
If our software fails to perform in the manner expected
by our licensees, then our revenues may be delayed or lost due to adverse
customer reaction. In addition, negative publicity about us and our software
product could adversely affect our ability to attract or retain licensees.
Furthermore, disappointed customers may initiate claims for damages against
our licensees and us, regardless of our responsibility for their
disappointment.
Regulatory Risks
We face risks related to compliance
with corporate governance laws and financial reporting standards.
The
Sarbanes-Oxley Act of 2002, as well as related new rules and regulations
implemented by the Securities and Exchange Commission and the Public Company
Accounting Oversight Board, require changes in the corporate governance
practices and financial reporting standards for public companies. These new
laws, rules and regulations, including compliance with Section 404 of the
Sarbanes-Oxley Act of 2002 relating to internal control over financial
reporting, have materially increased the legal and financial compliance
costs of small companies and have made some activities more time-consuming
and more burdensome.
We may not have effective internal controls.
In connection with Section 404 of the Sarbanes-Oxley Act of 2002, we
need to assess the adequacy of our internal control, remedy any weaknesses
that may be identified, validate that controls are functioning as documented
and implement a continuous reporting and improvement process for internal
controls. We may discover deficiencies that require us to improve our
procedures, processes and systems in order to ensure that our internal
controls are adequate and effective and that we are in compliance with the
requirements of Section 404 of the Sarbanes-Oxley Act. If the deficiencies
are not adequately addressed, or if we are unable to complete all of our
testing and any remediation in time for compliance with the requirements of
Section 404 of the Sarbanes-Oxley Act and the SEC rules under it, we would
be unable to conclude that our internal controls over financial reporting
are designed and operating effectively, which could adversely affect
investor confidence in our internal controls over financial reporting.
Risks Relating to Operating in Israel.
We conduct our operations
in Israel and therefore our results may be adversely affected by political,
economic and military instability in Israel or the Middle East.
ITEM 1B. UNRESOLVED STAFF
COMMENTS Back to Table of Contents None. ITEM 2. PROPERTIES
Back to Table of Contents Our corporate office is at 40
Wall Street, 28th Floor New York, NY 10005 and our subsidiary's office is
maintained at the Hebrew University, Faculty of Agriculture, Suite 220,
Rehovot Israel. These space are sufficient until we actively commence our
sales and marketing efforts. At such time, we believe that adequate
facilities will be available at terms satisfactory to the Company. ITEM 3. LEGAL PROCEEDINGS Back to Table of Contents
PART II
ITEM 5.
MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTER Back to Table of Contents Market Information Fiscal 2014 Fiscal 2013 Fiscal 2012 High Low High Low High Low First Quarter ended
March 31 $
0.88 $
0.11 $ 0.10 $ 0.03 $
0.35 $
0.13 Second Quarter ended
June 30 $
0.68 $
0.31 $
0.06 $ 0.01 $
0.28 $
0.16 Third Quarter ended
September 30 $
0.41 $
0.18 $
0.06 $ 0.01 $
0.17 $
0.15 Fourth Quarter ended
December 31 $
0.18 $
0.07 $
0.19 $ 0.04 $
0.16 $
0.10 Holders of our Common Shares From October 16, 2013 through December 30, 2013, the Company
sold to 22 non-US private accredited investors, a total of 15,750,260 units
for cash consideration of $787,513 at a price of $0.05 (the "Units"), each
unit comprised of one share of common stock, one class A warrant with 18
months term and one class B warrant with 24 month term, exercisable at a
price of $0.055 and $0.065 respectively; of this total 4,500,000 units were
sold to directors and officers. The relative fair value of the stock with
embedded warrants was $246,084 for the common stock, $266,967 for class A
warrants and $274,462 for class B warrants. On November 1, 2013 the Company issued 300,000 restricted
shares of common stock in consideration for investor relations (IR) services
provided to the Company. The shares were valued at $19,500 based on the
closing price of the Company's common stock on the date of grant. On November 18, 2013 the Company issued 1,000,000 restricted
shares of common stock and 1,000,000 warrants with a term of 18 months,
exercisable at $0.05 per share in consideration for investor relations (IR)
services provided to the Company. The shares were valued at $112,000 based
on the closing price of the Company's common stock on the date of grant. The
warrants were valued using the Black-Scholes model with 117% volatility and
0.22% discount rate for a total of $78,861. On November 19, 2013 the Company issued 1,600,000 restricted
shares of common stock and 600,000 warrants with a term of 18 months,
exercisable at $0.05 per share in consideration for investor relations (IR)
services provided to the Company. The shares were valued at $182,400 based
on the closing price of the Company's common stock on the date of grant. The
warrants were valued using the Black-Scholes model with 117% volatility and
0.22% discount rate for a total of $47,316. On December 10, 2013 the Company issued 350,000 restricted
shares of common stock in consideration for investor relations (IR) services
provided to the Company. The shares were valued at $42,000 based on the
closing price of the Company's common stock on the date of grant. On November 18, 2013 the Company issued 375,000 warrants
with a term of 18 months, exercisable at $0.05 per share in consideration
for investor relations (IR) services provided to the Company. The warrants
were valued using the Black-Scholes model with 117% volatility and 0.22%
discount rate for a total of $29,573. During 2013 three shareholders converted $18,200 of debt and
$2,972 of accrued interest to 1,058,602 shares at a conversion price of
$0.02 per share. The conversion occurred within the terms of the convertible
note agreements with no gain or loss recorded. On March 3, 2014 the Company issued 1,000,000 restricted
shares of common stock in consideration for investor relations (IR) services
provided to the Company. The shares were valued at $480,000 based on the
closing price of the Company's common stock on the date of grant. From January 23, 2014 to September 30, 2014 the Company sold
to 10 non-US private accredited investors a total of 6,461,666 shares for
cash consideration of $923,000 at an average price of $0.143. From March 10, 2014 through September 30, 2014, the Company
sold to 12 non-US private accredited investors, a total of 3,270,000 units
for cash consideration of $667,750 at an average price of $0.204 (the
"Units"), each unit comprised of one share of common stock, one class C
warrant with 24 months term exercisable at a price of $0.35; The relative
fair value of the stock with attached warrants was $189,300 for the common
stock, $478,450 for class C warrants. On February 24, 2014 and March 13, 2014 3 share and warrant
holders exercised warrants and were issued 1,144,262 shares for cash
consideration of $48,000. During the period from February 19, 2014 to March 4, 2014,
the Company granted a total of 5,050,000 stock options (the "Options") to 4
Company directors and officers who are also minatory owners. The Options,
which are fully vested, are exercisable at a price of $0.05 per Share.
1,400,000 options were valued using the Black-Scholes model with 128%
volatility and 2.17% discount rate and 3,650,000 were valued using the
Black-Scholes model with 154% volatility and 2.17% discount rate for a total
of $2,594,210. On March 12, 2014 the Company issued 30,000 warrants with
term of 36 months, exercisable at $0.60 per share to 1 entity in
consideration for public relations services provided to the company. The
warrants were valued using the Black-Scholes model with 117% volatility and
0.22% discount rate for a total of $16,134. On April 1, 2014 and April 7, 2014 the Company sold to 2
private accredited investors, a total of 1,215,000 units for cash
consideration of $250,150 at an average price of $0.206 (the "Units"), each
unit comprised of one share of common stock, one class C warrant with 24
months term exercisable at a price of $0.35; The relative fair value of the
stock with attached warrants was $61,984 for the common stock, $188,166 for
class C warrants. On October 2, 2014 850,000 stock options (the "Options") to
1 Company officer who is also a minority owner. 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 with $52,185 expensed during Q4 2014 and
$12,596 to be expenses over 8 additional quarters. 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. On March 1, 2012, the Company filed a Certificate of
Amendment to its Certificate of Incorporation effecting a forward stock
split of the Company's issued and outstanding shares of Common Stock at a
ratio of ten-to-one (the "Forward Split"). The Certificate of Amendment
provides that each outstanding share of the Company's Common Stock, par
value $0.0001 per share, will be split and converted, automatically, without
further action, into ten (10) shares of Common Stock of $0.00001 par value
per share. The Forward Split has been reflected in the Company's financial
statements for year ended December 31, 2013 and 2012. The Company believes that the issuances and sale of the
restricted shares were exempt from registration pursuant to Section 4(2) of
the Act as privately negotiated, isolated, non-recurring transactions not
involving any public solicitation. The recipients in each case represented
their intention to acquire the securities for investment only and not with a
view to the distribution thereof. Appropriate restrictive legends are
affixed to the stock certificates issued in such transactions. All
recipients of restricted shares either received adequate information about
the Company or had access, through employment, relation and/or business
relationships with the Company to such information. On October 16, 2013 the Company sold to Yoel Yogev, CEO, a
total of 2,000,000 units for cash consideration of $100,000 at a price of
$0.05 (the "Units"), each unit comprised of one share of common stock, one
class A warrant and one class B warrant, exercisable at a price of $0.055
and $0.065 respectively. The relative fair value of the stock with embedded
warrants was $44,394 for the common stock, $27,128 for class A warrants and
$28,478 for class B warrants. On December 5, 2013 the Company sold to Oded Gilboa, CFO, a
total of 500,000 units for cash consideration of $25,000 at a price of $0.05
(the "Units"), each unit comprised of one share of common stock, one class A
warrant and one class B warrant, exercisable at a price of $0.055 and $0.065
respectively. The relative fair value of the stock with embedded warrants
was $7,119 for the common stock, $8,838 for class A warrants and $9,043 for
class B warrants. On November 10 and December 29, 2013 the Company sold to
Itschak Shrem, Chairman, a total of 2,000,000 units for cash consideration
of $100,000 at a price of $0.05 (the "Units"), each unit comprised of one
share of common stock, one class A warrant and one class B warrant,
exercisable at a price of $0.055 and $0.065 respectively. The relative fair
value of the stock with embedded warrants was $19,768 for the common stock,
$39,928 for class A warrants and $40,305 for class B warrants. On December 30, 2013 the Company sold to Ben Zion Weiner,
Director a total of 1,000,000 units for cash consideration of $50,000 at a
price of $0.05 (the "Units"), each unit comprised of one share of common
stock, one class A warrant and one class B warrant, exercisable at a price
of $0.055 and $0.065 respectively. The relative fair value of the stock with
embedded warrants was $10,258 for the common stock, $19,781 for class A
warrants and $19,961 for class B warrants. On November 24, 2013 the Company sold to Yahali Sherman, CTO
of BreedIT Ltd. a total of 1,400,000 units for cash consideration of $70,000
at a price of $0.05 (the "Units"), each unit comprised of one share of
common stock, one class A warrant and one class B warrant, exercisable at a
price of $0.055 and $0.065 respectively. The relative fair value of the
stock with embedded warrants was $16,822 for the common stock, $26,395 for
class A warrants and $26,784 for class B warrants. During the period from February 19, 2014 to March 4, 2014,
the Company granted a total of 5,050,000 stock options (the "Options") to 4
Company directors and officers who are also minatory owners. The Options,
which are fully vested, are exercisable at a price of $0.05 per Share.
1,400,000 options were valued using the Black-Scholes model with 128%
volatility and 2.17% discount rate and 3,650,000 were valued using the
Black-Scholes model with 154% volatility and 2.17% discount rate for a total
of $2,594,210. On January 23, 2014 to September 30, 2014 the Company sold
to 1 non-US private accredited investor who is also an affiliated party
300,000 shares for total cash consideration of $30,000 at price of $0.10. On February 18, 2014 the Company issued to Dr. Oded Sagee
minority owner and founder of BreedIT Ltd., 2,200,000 shares of our common
stock valued based on the closing market price on the acquisition date at
$151,800; 2,200,000 Class A options for the purchase of 2,200,000 shares of
our common stock at $0.055 per share valued using the black-scholes model
with volatility of 122% and a discount rate of 0.23% for a total value of
$84,967; and 2,200,000 Class B options for the purchase of 2,200,000 shares
of our common stock at $0.065 per share valued using the black-scholes model
with volatility of 122% and a discount rate of 0.23% for a total value of
$84,680. ITEM 6. SELECTED FINANCIAL DATA Back to Table of Contents 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. 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. The Company intends to
conduct additional capital formation activities through the issuance of its
common stock in 2014 unless and until we begin to generate revenues from our
IDSS Software. Critical Accounting Policies
Our significant
accounting policies are described in the notes to our financial statements for the years
ended December 31, 2014and 2013, and are included elsewhere in this annual report.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Back to Table of Contents We have not entered
into, and do not expect to enter into, financial instruments for trading or hedging
purposes.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Back to Table of Contents INDEX TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors We have audited the accompanying balance sheets of BreedIt
Corp. as of December 31, 2014 and 2013 and the related statements of
operations, stockholders' deficit and cash flows for the years then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits in accordance with standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express
no such opinion. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion. In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of BreedIt
Corp. as of December 31, 2014 and 2013 and the results of its operations and
cash flows for the periods described above in conformity with accounting
principles generally accepted in the United States of America. The
accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company suffered a net loss from operations and
has a net capital deficiency, which raises substantial doubt about its
ability to continue as a going concern. Management's plans regarding those
matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty. /s/ M&K CPAS, PLLC
6,873 168 $ 1,788,625 $ 656,278 LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT) $
123,826 $ 59,574 5,800 5,800
18,000 2,305
40,910 15,565 201,000 76,808 389,536 160,052 2,852 8,676 392,388 168,728
921 723 (300) (300)
7,646,699 2,015,172 (6,262,264) (1,896,675) 1,396,237 487,550 $ 1,788,625 $ 656,278
For the year ended For the year ended December 31, 2014 December 31, 2013 Revenues $ 5,824 $ 5,800
(207,246)
(21,087) (4,139,929) (1,483,140) (4,331,175) (1,504,227) (4,325,351) (1,498,427) (86,442) 7,867 (239,979) (182,803) - - $ (4,565,330) $ (1,681,230) $ (4,365,589) $ (1,445,529) $ (0.05) $ (0.03) 87,665,395 54,418,837
For the year ended
For the year ended December 31, 2014 December 31, 2013 (199,741) (235,701) (4,569,269) (1,681,570) $ (4,369,528) $ (1,445,869)
Additional Stock Stock
Total Common Paid-in Subscription Subscription Accumulated stockholders' 52,197,055 522 $ 513,538 $ - (300) $ (451,146) - $ 62,614 - - - - - (1,445,529) - (1,681,230)
72,255,917 723 $
2,015,172 $ 321,447 (300) $ (1,896,675)
(340) $
487,550 - - - - - (4,365,589) - (4,565,330)
92,049,512
921 $
7,646,699 $
169,647 (300) $ (6,262,264)
(4,279) $
1,396,237
Operating
Activities: $ (4,565,330) $ (1,681,230) - -
64,252
14,312
15,695 -
(5,824) (5,800) - - (639,936) 3,991 (1,806,298) (352,942) (14,075) - (9,022) - - 63,545 (23,097) 63,545 2,040,901 787,512 2,280,401 924,412
441,005
634,675 656,067 21,392 $ 1,101,164 $ 656,067
BREEDIT CORP.
BreedIt Corp. ("BreedIt" or the "Company") is a Delaware corporation and has
thus far very limited sales activity. 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.
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 December 31, 2014 and 2013, we had cash and cash equivalents of
$1,101,164 and $656,067, respectively.
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.
Restricted Cash
Cash and cash items which are restricted as to withdrawal or usage.
Restricted cash includes legally restricted deposits held as compensating
balances against credit cards. As of December 31, 2014 and 2013, we had
restricted cash of $0 and $43 respectively.
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 December 31, 2014 and 2013, 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%
For the year ended December 31, 2014 total additions to Property and
equipment were $8,838, total accumulated depreciation is $2,912 and total
depreciation expense for the year is $2,317.
Following is a summary of Property and Equipment, net for the years ended
December 31, 2014 and 2013. December 31, 2014
December 31, 2013 (2,912) (779) $6,873 $168
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 December 31, 2014, no events or circumstances occurred
for which an evaluation of the recoverability of long-lived assets was
required.
Financial Income (expense)
For the year ended December 31, 2014 financial income (expense) includes
$82,706 loss from exchange differences due to BreedIt Corp holding
significant cash amounts denominated in ILS and the ILS significant
weakening against the USD during the second half of 2014.
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 December 31, 2014 and 2013,
and expenses for the year ended December 31, 2013,and the periods from
inception to December 31, 2013. Actual results could differ from those
estimates made by management.
Fair Value Measurements
As defined in ASC 820-10, Fair Value Measurements and Disclosures ("ASC
820-10"), fair value is based on the price that would be received to sell an
asset or pay to transfer a liability in an orderly transaction between
market participants at the measurement date. In order to increase
consistency and comparability in fair value measurements, ASC 820-10
establishes a fair value hierarchy that prioritizes observable and
unobservable inputs used to measure fair value into three broad levels,
which are described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at
the measurement date for assets or liabilities. The fair value hierarchy
gives the highest priority to Level 1 inputs.
In determining fair value, the Company utilizes valuation techniques in its
assessment that maximize the use of observable inputs and minimize the use
of unobservable inputs. Fair Value Measurements at December 31, 2014 Quoted Prices
in Active Significant
Other Significant Markets for
Identical Assets Observable
Inputs Unobservable
Inputs Gains Total (Level 1) (Level 2) (Level 3) (Losses) $ - $ $ - $ - $ - $ - $ $ - $ - $ - Fair Value Measurements at December 31, 2013 Quoted Prices
in Active Significant
Other Significant Markets for
Identical Assets Observable
Inputs Unobservable
Inputs Gains Total (Level 1) (Level 2) (Level 3) (Losses) $ - $ $ - $ - $ (114,752) $ - $ $ - $ - $ (114,752)
Impact of Recently Issued Accounting Standards
On November 2014, The Financial Accounting Standards Board (FASB) issued
Accounting Standard Update No. 2014-16 - Derivatives and Hedging (Topic 815):
Determining Whether the Host Contract in a Hybrid Financial Instrument
Issued in the Form of a Share Is More Akin to Debt or to Equity (a consensus
of the FASB Emerging Issues Task Force). The amendments in this Update do
not change the current criteria in GAAP for determining when separation of
certain embedded derivative features in a hybrid financial instrument is
required. That is, an entity will continue to evaluate whether the economic
characteristics and risks of the embedded derivative feature are clearly and
closely related to those of the host contract, among other relevant
criteria. The amendments clarify how current GAAP should be interpreted in
evaluating the economic characteristics and risks of a host contract in a
hybrid financial instrument that is issued in the form of a share. The
effects of initially adopting the amendments in this Update should be
applied on a modified retrospective basis to existing hybrid financial
instruments issued in the form of a share as of the beginning of the fiscal
year for which the amendments are effective. Retrospective application is
permitted to all relevant prior periods.
Goodwill and Intangible Assets
Goodwill is tested for impairment at a minimum on an annual basis. Goodwill
is tested for impairment at the reporting unit level by first performing a
qualitative assessment to determine whether it is more likely than not that
the fair value of the reporting unit is less than its carrying value. If the
reporting unit does not pass the qualitative assessment, then the reporting
unit's carrying value is compared to its fair value. The fair values of the
reporting units are estimated using market and discounted cash flow
approaches. Goodwill is considered impaired if the carrying value of the
reporting unit exceeds its fair value. The discounted cash flow approach
uses expected future operating results. Failure to achieve these expected
results may cause a future impairment of goodwill at the reporting unit. We
conducted our annual impairment tests of goodwill as of December 31, 2013.
As a result of these tests, we recorded impairment charges to our goodwill
during the year ended December 31, 2013 of $630,880.
Note (2) 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 (3) Common Stock
From October 16, 2013 through December 30, 2013, the Company sold to 22
non-US private accredited investors, a total of 15,750,260 units for cash
consideration of $787,513 at a price of $0.05 (the "Units"), each unit
comprised of one share of common stock, one class A warrant with 18 months
term and one class B warrant with 24 month term, exercisable at a price of
$0.055 and $0.065 respectively; of this total 4,500,000 units were sold to
directors and officers. The relative fair value of the stock with embedded
warrants was $246,084 for the common stock, $266,967 for class A warrants
and $274,462 for class B warrants.
On November 1, 2013 the Company issued 300,000 restricted shares of common
stock in consideration for investor relations (IR) services provided to the
Company. The shares were valued at $19,500 based on the closing price of the
Company's common stock on the date of grant.
On November 18, 2013 the Company issued 1,000,000 restricted shares of
common stock and 1,000,000 warrants with a term of 18 months, exercisable at
$0.05 per share in consideration for investor relations (IR) services
provided to the Company. The shares were valued at $112,000 based on the
closing price of the Company's common stock on the date of grant. The
warrants were valued using the Black-Scholes model with 117% volatility and
0.22% discount rate for a total of $78,861.
On November 19, 2013 the Company issued 1,600,000 restricted shares of
common stock and 600,000 warrants with a term of 18 months, exercisable at
$0.05 per share in consideration for investor relations (IR) services
provided to the Company. The shares were valued at $182,400 based on the
closing price of the Company's common stock on the date of grant. The
warrants were valued using the Black-Scholes model with 117% volatility and
0.22% discount rate for a total of $47,316.
On December 10, 2013 the Company issued 350,000 restricted shares of common
stock in consideration for investor relations (IR) services provided to the
Company. The shares were valued at $42,000 based on the closing price of the
Company's common stock on the date of grant.
On November 18, 2013 the Company issued 375,000 warrants with a term of 18
months, exercisable at $0.05 per share in consideration for investor
relations (IR) services provided to the Company. The warrants were valued
using the Black-Scholes model with 117% volatility and 0.22% discount rate
for a total of $29,573.
During 2013 three shareholders converted $18,200 of debt and $2,972 of
accrued interest to 1,058,602 shares at a conversion price of $0.02 per
share. The conversion occurred within the terms of the convertible note
agreements with no gain or loss recorded.
On March 3, 2014 the Company issued 1,000,000 restricted shares of common
stock in consideration for investor relations (IR) services provided to the
Company. The shares were valued at $480,000 based on the closing price of
the Company's common stock on the date of grant.
From January 23, 2014 to September 30, 2014 the Company sold to 10 non-US
private accredited investors a total of 6,461,666 shares for cash
consideration of $923,000 at an average price of $0.143.
From March 10, 2014 through September 30, 2014, the Company sold to 12
non-US private accredited investors, a total of 3,270,000 units for cash
consideration of $667,750 at an average price of $0.204 (the "Units"), each
unit comprised of one share of common stock, one class C warrant with 24
months term exercisable at a price of $0.35; The relative fair value of the
stock with attached warrants was $189,300 for the common stock, $478,450 for
class C warrants.
On February 24, 2014 and March 13, 2014 3 share and warrant holders
exercised warrants and were issued 1,144,262 shares for cash consideration
of $48,000.
On February 18, 2014 the Company issued to Dr. Oded Sagee minority owner and
founder of BreedIT Ltd., 2,200,000 shares of our common stock valued based
on the closing market price on the acquisition date at $151,800; 2,200,000
Class A options for the purchase of 2,200,000 shares of our common stock at
$0.055 per share valued using the black-scholes model with volatility of
122% and a discount rate of 0.23% for a total value of $84,967; and
2,200,000 Class B options for the purchase of 2,200,000 shares of our common
stock at $0.065 per share valued using the black-scholes model with
volatility of 122% and a discount rate of 0.23% for a total value of
$84,680.
During the period from February 19, 2014 to March 4, 2014, the Company
granted a total of 5,050,000 stock options (the "Options") to 4 Company
directors and officers who are also minatory owners. The Options, which are
fully vested, are exercisable at a price of $0.05 per Share. 1,400,000
options were valued using the Black-Scholes model with 128% volatility and
2.17% discount rate and 3,650,000 were valued using the Black-Scholes model
with 154% volatility and 2.17% discount rate for a total of $2,594,210.
On March 12, 2014 the Company issued 30,000 warrants with term of 36 months,
exercisable at $0.60 per share to 1 entity in consideration for public
relations services provided to the company. The warrants were valued using
the Black-Scholes model with 117% volatility and 0.22% discount rate for a
total of $16,134.
On April 1, 2014 and April 7, 2014 the Company sold to 2 private accredited
investors, a total of 1,215,000 units for cash consideration of $250,150 at
an average price of $0.206 (the "Units"), each unit comprised of one share
of common stock, one class C warrant with 24 months term exercisable at a
price of $0.35; The relative fair value of the stock with attached warrants
was $61,984 for the common stock, $188,166 for class C warrants.
On May 8, 2014 the Company sold to 1 private accredited investor, a total of
666,667 units for cash consideration of $200,000 at a price of $0.30 (the
"Units"), each unit comprised of one share of common stock, one class H
warrant with 3 months term exercisable at a price of $0.30 and one class I
warrant with 18 month term exercisable at price of $0.45; The relative fair
value of the stock with attached warrants was $69,916 for the common stock,
$130,085 for warrants.
On April 12, 2014 the Company issued 1,000,000 warrants, vesting over 12
quarters in equal amounts starting July 1, 2014 with term of 36 months from
vesting date, exercisable at $0.35 per share to 1 entity in consideration
for serving on the company's scientific advisory board. The warrants were
valued using the Black-Scholes model with 284% volatility and 1.10% discount
rate for a total of $71,885 of this amount $26,957 was expensed during the
quarter with balance to be expensed over the remaining term.
On April 14, 2014 and on June 22, 2014 2 share and warrant holders exercised
warrants for cash consideration of $140,000, in return 2,600,000 shares were
issued.
During Q2 2014 one shareholder converted $4,000 of debt and accrued interest
to 200,000 shares at a conversion price of $0.02 per share. The conversion
occurred within the terms of the convertible note agreements with no gain or
loss recorded.
Between September 9, 2014 and October 1, 2014 2 share and warrant holders
exercised warrants for cash consideration of $51,500, in return 900,000
shares were issued.
On August 17, 2014 and October 28, 2014 the Company issued 136,000
restricted shares of common stock in consideration for investor relations (IR)
services provided to the Company. The shares were valued at $26,040 based on
the closing price of the Company's common stock on the date of grant.
On October 2, 2014 850,000 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 with $52,185 expensed during Q4 2014 and $12,596 to
be expenses over 8 additional quarters.
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.
On March 1, 2012, the Company filed a Certificate of Amendment to its
Certificate of Incorporation effecting a forward stock split of the
Company's issued and outstanding shares of Common Stock at a ratio of
ten-to-one (the "Forward Split"). The Certificate of Amendment provides
that each outstanding share of the Company's Common Stock, par value $0.0001
per share, will be split and converted, automatically, without further
action, into ten (10) shares of Common Stock of $0.00001 par value per
share. The Forward Split has been reflected in the Company's financial
statements for year ended December 31, 2014 and 2013.
Following is a table of warrant and options still outstanding and
exercisable along with exercise price and range of remaining term.
Note (4) 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 December 31, 2014 and 2013, the Company recognized a total sum of
$5,800 and $5,816, 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 $5,800 was recorded as revenues 2013 and $5,816 in 2014; the
remaining sum of $8,652 was deferred on the Company's balance sheet, $5,800
as current and $2,852 as long term liabilities, and is expected to be
recognized over the remaining period of the agreements.
As of December 31, 2014 and 2013, no royalties have been paid by or
recognized in connection with the aforementioned agreements.
Note (5) Acquisitions during Fiscal Year Ended December 31, 2013
We completed the acquisition of 66.6% of BreedIT Ltd. in furtherance of our
strategy to acquire small, privately owned enterprises in the software
sector through asset purchase structures. We made the acquisitions to expand
our market presence and product offerings in areas that complement our
experience in software platforms.
The purchase consideration for the acquisition was allocated to the tangible
assets and identifiable intangible assets acquired and liabilities assumed
based on their estimated fair values on the acquisition date, with the
remaining unallocated consideration recorded as goodwill. An independent
valuation expert assisted us in determining these fair values.
We have included the financial results of these acquisitions in our
consolidated financial statements from the date of acquisition.
BreedIT Ltd.
We acquired 66.67% of BreedIT Ltd, in October 2013 pursuant to an asset
purchase agreement. The assets acquired consisted of all application
software, licensing agreement with academic institution for marketing the
software and brands. We assumed some liabilities in the transaction as
described below. BreedIT Ltd. was established on July 4th, 2013 by Dr. Oded
Sagee.
The purchase consideration for 66.67% totaling $566,447 consisted of: (1)
$245,000 in cash; (2) 2,200,000 shares of our common stock valued based on
the closing market price on the acquisition date at $151,800; (3) 2,200,000
Class A options for the purchase of 2,200,000 shares of our common stock at
$0.055 per share valued using the black-scholes model with volatility of
122% and a discount rate of 0.23% for a total value of $84,967; and (4)
2,200,000 Class B options for the purchase of 2,200,000 shares of our common
stock at $0.065 per share valued using the black-scholes model with
volatility of 122% and a discount rate of 0.23% for a total value of
$84,680. The total net assets of the company including the non controlling
interest was $849,671 on the date of acquisition.
The allocation of the purchase consideration to the assets and liabilities
acquired was as follows: 245,000 (26,209) 630,880
(6) Goodwill, Investments and Intangible Assets
Goodwill
The following table presents goodwill and impairment for the years ended
December 31, 2014 and 2013: Goodwill - 630,880
(630,880) - - - -
We conducted our annual impairment test of goodwill as of December 31, 2013,
which resulted in impairment charges of $630,880.
Investment accounted for using equity method
During Q4 2014 BreedIT Ltd recorded a 50% investment in KanaboSeed Ltd.,
amount invested by BreedIt Ltd. in KanaboSeed Ltd. during the period was
$14,075. The remaining 50% of KanaboSeed Ltd is held by Seach Ltd.
KanaboSeed was formed to research and develop new breeds of medical Cannabis
to meet the requests of physicians and other medical practitioners. Strains
developed under the KanaboSeed brand will be commercialized directly, while
those created for third parties will generate royalty payments.
As of December 31, 2014 accumulated deficit for KanaboSeed Ltd is of $7,472,
of this amount BreedIt Ltd.'s portion of the loss is $3,736 and resulting
balance on balance sheet is investment accounted for using equity method of
$10,339.
Note (7) Income Taxes
The provision (benefit) for income taxes for the year ended December 31,
2014 and 2013, was as follows (assuming a 35% effective tax rate):
2014 2013 - - - - 655,137 221,880 (655,137) (221,880) - -
The Company had deferred income tax assets as of December 31, 2014 and 2013,
as follows: 2014 2013 655,137 221,880 (655,137) (221,880) - -
The Company provided a valuation allowance equal to the deferred income tax
assets for the year ended December 31, 2014 and 2013, because it is not
presently known whether future taxable income will be sufficient to utilize
the loss carryforwards.
As of December 31, 2014 and 2013, the Company had approximately 1,871,820
and $633,943 respectively, in tax loss carryforwards that can be utilized in
future periods to reduce taxable income, and expire by the year 2030.
Note (8) Related Party Transactions
On October 16, 2013 the Company sold to Yoel Yogev, CEO, a total of
2,000,000 units for cash consideration of $100,000 at a price of $0.05 (the
"Units"), each unit comprised of one share of common stock, one class A
warrant and one class B warrant, exercisable at a price of $0.055 and $0.065
respectively. The relative fair value of the stock with embedded warrants
was $44,394 for the common stock, $27,128 for class A warrants and $28,478
for class B warrants.
On December 5, 2013 the Company sold to Oded Gilboa, CFO, a total of 500,000
units for cash consideration of $25,000 at a price of $0.05 (the "Units"),
each unit comprised of one share of common stock, one class A warrant and
one class B warrant, exercisable at a price of $0.055 and $0.065
respectively. The relative fair value of the stock with embedded warrants
was $7,119 for the common stock, $8,838 for class A warrants and $9,043 for
class B warrants.
On November 10 and December 29, 2013 the Company sold to Itschak Shrem,
Chairman, a total of 2,000,000 units for cash consideration of $100,000 at a
price of $0.05 (the "Units"), each unit comprised of one share of common
stock, one class A warrant and one class B warrant, exercisable at a price
of $0.055 and $0.065 respectively. The relative fair value of the stock with
embedded warrants was $19,768 for the common stock, $39,928 for class A
warrants and $40,305 for class B warrants.
On December 30, 2013 the Company sold to Ben Zion Weiner, Director a total
of 1,000,000 units for cash consideration of $50,000 at a price of $0.05
(the "Units"), each unit comprised of one share of common stock, one class A
warrant and one class B warrant, exercisable at a price of $0.055 and $0.065
respectively. The relative fair value of the stock with embedded warrants
was $10,258 for the common stock, $19,781 for class A warrants and $19,961
for class B warrants.
On November 24, 2013 the Company sold to Yahali Sherman, CTO of BreedIT Ltd.
a total of 1,400,000 units for cash consideration of $70,000 at a price of
$0.05 (the "Units"), each unit comprised of one share of common stock, one
class A warrant and one class B warrant, exercisable at a price of $0.055
and $0.065 respectively. The relative fair value of the stock with embedded
warrants was $16,822 for the common stock, $26,395 for class A warrants and
$26,784 for class B warrants.
During 2013 forgiveness of Accrued Debt by related parties was recorded in
the amount of $49,000.
In 2013, $2,305 accrued liability was recorded for consulting fees due to a
related party.
During the period from February 19, 2014 to March 4, 2014, the Company
granted a total of 5,050,000 stock options (the "Options") to 4 Company
directors and officers who are also minatory owners. The Options, which are
fully vested, are exercisable at a price of $0.05 per Share. 1,400,000
options were valued using the Black-Scholes model with 128% volatility and
2.17% discount rate and 3,650,000 were valued using the Black-Scholes model
with 154% volatility and 2.17% discount rate for a total of $2,594,210.
On January 23, 2014 to September 30, 2014 the Company sold to 1 non-US
private accredited investor who is also an affiliated party 300,000 shares
for total cash consideration of $30,000 at price of $10 per share.
On February 18, 2014 the Company issued to Dr. Oded Sagee minority owner and
founder of BreedIT Ltd., 2,200,000 shares of our common stock valued based
on the closing market price on the acquisition date at $151,800; 2,200,000
Class A options for the purchase of 2,200,000 shares of our common stock at
$0.055 per share valued using the black-scholes model with volatility of
122% and a discount rate of 0.23% for a total value of $84,967; and
2,200,000 Class B options for the purchase of 2,200,000 shares of our common
stock at $0.065 per share valued using the black-scholes model with
volatility of 122% and a discount rate of 0.23% for a total value of
$84,680.
On April 14, 2014 1 share and warrant holder who is an affiliate party
exercised warrants for cash consideration of $110,000, in return 2,000,000
shares were issued.
On October 2, 2014 850,000 stock options (the "Options") to 1 Company
officer who is also a minority owner. 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 with $52,185 expensed during Q4 2014 and $12,596 to
be expenses over 8 additional quarters.
As of December 31, 2014 the Company has $18,000 in fees due and payable,
$9,000 payable to one advisory board member and $9,000 payable to one Board
of director members for services rendered in 2014.
Note (9) Convertible and Non-Convertible Notes Payable
During the year ended December 31, 2014, a convertible note of $3,200 along
with $800 of accrued interest was converted to 200,000 shares of common
stock at $0.02 per share. The conversion occurred within the terms of the
convertible note agreement with no gain or loss recorded on the conversion.
The Company recorded amortization expenses related to the beneficial
conversion features of $128,192 during the year ended December 31, 2014.
Remaining debt discount as of December 31, 2014 and 2013 is $0 and $128,192
respectively.
The Company recorded interest expense in the amount of $25,345 during the
year ended December 31, 2014.
During the year ended December 31, 2013, we received $6,900 through the
issuance of two convertible notes, bearing interest at the rate of 15% per
annum, have a maturity date of 12 months and are convertible into common
stock at $0.02 per share. The $6,900 of debt along with $729 of accrued
interest was converted to 381,453 shares of common stock at $0.02 per share.
The conversion occurred within the terms of the convertible note agreements
with no gain or loss recorded on the conversion.
During the year ended December 31, 2013, a convertible note of $11,300 along
with $2,243 of accrued interest was converted to 677,149 shares of common
stock at $0.02 per share. The conversion occurred within the terms of the
convertible note agreement with no gain or loss recorded on the conversion.
During the year ended December 31, 2013, we received $130,000 through the
issuance of two convertible notes, bearing interest at the rate of 10% per
annum, have a maturity date of 12 months and are convertible into common
stock at $0.05 per share. A debt discount of $130,000 was calculated on the
beneficial conversion feature in 2013. The remaining unamortized debt
discount at 12/31/2013 for these two notes was $127,507.
The Company recorded amortization expenses related to the beneficial
conversion features of $62,244 during the year ended December 31, 2013.
The Company recorded interest expense in the amount of $13,674 during the
year ended December 31, 2013.
During the year ended December 31, 2013, we received $10,020 through the
issuance of non-convertible notes bearing interest at a rate of one (1%) per
annum and which have maturity date of 12 months.
Note (10) Investments
Investments in Trading Securities As of December 31, 2014 and 2013 are
summarized below:
Note (11) 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.
During Q1 2015, the Company issued an additional 1,000,000 shares for
services provided to the company.
During Q1 2015, $130,000 of convertible debt was converted to 2,917,698
company shares.
During Q1 2015, the Company issued 6,000,000 additional options to officers
and directors.
The Company evaluated all other events and transactions 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 the Company
determined that no such events or transactions necessitated disclosure.
None. ITEM 9 A. CONTROLS AND
PROCEDURES Back to Table of Contents Evaluation of Disclosure Controls and Procedures
As of December 31, 2014, 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/chief financial officer
concluded that our disclosure controls and procedures were not effective as
of the end of the fiscal year 2014. Management's Annual Report on
Internal Control over Financial Reporting Management is
responsible for establishing and maintaining adequate internal control over
financial reporting and for the assessment of the effectiveness of those
internal controls. As defined by the SEC, internal control over financial
reporting is a process designed by our principal executive officer and
principal financial officer, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of the financial
statements in accordance with U.S. generally accepted accounting principles. Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Management has assessed the effectiveness of our internal control over
financial reporting as of December 31, 2014. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework. Based on our assessment and those criteria, we
have concluded that our internal control over financial reporting had
material weaknesses including lack of sufficient internal accounting
personnel in order to ensure complete documentation of complex transactions
and adequate financial reporting during the year ended December 31, 2014.
Management has identified corrective actions for the weakness and has begun
implementation during the second quarter of 2015. This annual report
does not include an attestation report of the Company's registered public
accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
Management's report in this annual report. Changes in Internal
Control over Financial Reporting There were no changes in our
internal control over financial reporting or in other factors identified in
connection with the evaluation required by paragraph (d) of Exchange Act
Rules 13a-15 or 15d-15 that occurred during the fourth quarter ended
December 31, 2014 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION Back to Table of Contents None.
PART III
Our
subsidiary offices and our officers and directors are located in
Israel. Accordingly, political, economic and military conditions in Israel
and the Middle East may directly affect our business. Since the
establishment of the State of Israel in 1948, a number of armed conflicts
have taken place between Israel and its Arab neighbors. Any hostilities
involving Israel or the interruption or curtailment of trade within Israel
or between Israel and its trading partners could adversely affect our
operations and could make it more difficult for us to raise capital. Since
September 2000, terrorist violence in Israel has increased significantly and
negotiations between Israel and Palestinian representatives have not
achieved a peaceful resolution of the conflict. The establishment in 2006
of a government in Gaza by representatives of the Hamas militant group has
created additional unrest and uncertainty in the region.
Further,
Israel is currently engaged in an armed conflict with Hamas, which until
Operation Cast Lead in January 2009 had involved thousands of missile
strikes and had disrupted most day-to-day civilian activity in southern
Israel. The missile attacks by Hamas did not target Tel Aviv, the location
of our principal executive offices; however, any armed conflict, terrorist
activity or political instability in the region may negatively affect
business conditions and could significantly harm our results of operations.
We know of no
material, active or pending legal proceedings against our Company, nor of
any proceedings that a governmental authority is contemplating against us.
We know of no material proceedings to which any of our directors, officers,
affiliates, owner of record or beneficially of more than 5 percent of our
voting securities or security holders is an adverse party or has a material
interest adverse to our interest.
ITEM 4. MINE SAFETY DISCLOSURES
Back to Table of Contents
Not Applicable.
Our Common Shares are traded on
the over-the-counter market and quoted on the OTCQB under the symbol "BRDT." On
March 30, 2015, the closing price for our shares of common stock as reported on
the OTCQB was $0.6. The high and the low bid prices for our shares of common
stock are based on inter-dealer prices, without retail mark-up, markdown, or
commission, and may not represent actual transactions. The table below sets
forth the range of high and low bid information for our shares of common shares
as quoted on the OTCQB for each of the quarters during the fiscal year ended
December 31, 2014, 2013 and 2012. This information has been adjusted to reflect
the 10-for-1 forward stock split that was effective March 2, 2012.
As of
March 30, 2015, there were 44 registered stockholders holding 95,967,210 common
shares.
Dividends
Since our inception, we have not declared
nor paid any cash dividends on our capital stock and we do not anticipate paying
any cash dividends in the foreseeable future. Our current policy is to retain
any earnings in order to finance our operations. Our Board of directors will
determine future declarations and payments of dividends, if any, in light of the
then-current conditions it deems relevant and in accordance with applicable
corporate law.
Securities Authorized for Issuance under Equity
Compensation Plans
As of year-end, we did not have an equity
compensation plan. The company intends to adopt a plan during the first quarter
of 2015.
Recent Sales of Unregistered Securities; Use of Proceeds
from Sale of Registered Securities
On February 18, 2014 the Company issued to
Dr. Oded Sagee minority owner and founder of BreedIT Ltd., 2,200,000 shares
of our common stock valued based on the closing market price on the
acquisition date at $151,800; 2,200,000 Class A options for the purchase of
2,200,000 shares of our common stock at $0.055 per share valued using the
black-scholes model with volatility of 122% and a discount rate of 0.23% for
a total value of $84,967; and 2,200,000 Class B options for the purchase of
2,200,000 shares of our common stock at $0.065 per share valued using the
black-scholes model with volatility of 122% and a discount rate of 0.23% for
a total value of $84,680.
On May 8, 2014 the Company sold to 1 private
accredited investor, a total of 666,667 units for cash consideration of
$200,001 at a price of $0.30 (the "Units"), each unit comprised of one share
of common stock, one class H warrant with 3 months term exercisable at a
price of $0.30 and one class I warrant with 18 month term exercisable at
price of $0.45; The relative fair value of the stock with attached warrants
was $69,916 for the common stock, $130,085 for warrants.
On April 12,
2014 the Company issued 1,000,000 warrants, vesting over 12 quarters in
equal amounts starting July 1, 2014 with term of 36 months from vesting
date, exercisable at $0.35 per share to 1 entity in consideration for
serving on the company's scientific advisory board. The warrants were valued
using the Black-Scholes model with 284% volatility and 1.10% discount rate
for a total of $71,885 of this amount $26,957 was expensed during the year
with balance to be expensed over the remaining term.
On April 14,
2014 and on June 22, 2014 2 share and warrant holders exercised warrants for
cash consideration of $140,000, in return 2,600,000 shares were issued.
During Q2 2014 one shareholder converted $4,000 of debt and accrued
interest to 200,000 shares at a conversion price of $0.02 per share. The
conversion occurred within the terms of the convertible note agreements with
no gain or loss recorded.
Between September 9, 2014 and October 1,
2014 2 share and warrant holders exercised warrants for cash consideration
of $51,500, in return 900,000 shares were issued.
On August 17, 2014
and October 28, 2014 the Company issued 136,000 restricted shares of common
stock in consideration for investor relations (IR) services provided to the
Company. The shares were valued at $26,040 based on the closing price of the
Company's common stock on the date of grant.
Purchases of
Equity Securities by the Issuer and Affiliated Purchases
During
the fourth quarter of the fiscal year ended December 31, 2014, neither we
nor any "affiliated purchaser," as that term is defined in Rule 10b-18(a)(3)
under the Exchange Act, repurchased any of our common stock or other
securities.
During the years ended December 31, 2013 and 2014, the
Company issued the following restricted securities to "affiliated
purchasers":
On April 14, 2014 1 share and warrant holder who is an
affiliate party exercised warrants for cash consideration of $110,000, in
return 2,000,000 shares were issued.
On October 2, 2014 850,000 stock
options (the "Options") to 1 Company officer who is also a minority owner.
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 with
$52,185 expensed during Q4 2014 and $12,596 to be expenses over 8 additional
quarters.
None.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATION Back to Table of Contents
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.
In April 2011, we raised $40,000 and issued 400,000 shares of our common
stock to two non-US investors. These transactions did not involve any
underwriters, underwriting discounts or commissions, nor any public
offering. We believe these transactions were exempt from registration
pursuant to Regulation S of the Securities Act.
On August 19, 2013,
we disclosed that we had entered into a preliminary agreement (the
"Preliminary Agreement") with BreedIT Israel and its founder, Dr. Oded Sagee,
pursuant to which we agreed 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.
In connection with the Preliminary Agreement, we agreed with Dr. Sagee
that prior to the execution of any definitive agreement, certain conditions
had to be satisfied, including, but not limited to: (i) completion of due
diligence reviews; (ii) obtaining requisite regulatory approvals; and (iii)
the execution of the binding agreement by and between BreedIT Israel and a
leading Israeli university granting BreedIT Israel 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").
On October 21, 2013, we filed our Form 8-K report disclosing that the
Registrant, BreedIT Israel and Dr. Sagee executed the definitive Share
Purchase Agreement (the "SPA") which provided that we inject an initial
investment of US$245,000 (the "Initial Investment") which the parties agreed
should be sufficient to fund BreedIT Israel's operations during the ensuing
twelve-month period. The Registrant and BreedIT Israel further agreed that
the remaining US$755,000 of the US$1,000,000 investment amount be funded
from time to time, based upon BreedIT Israel's financial needs during the
twelve-month period. The closing of the SPA was subject to the execution of
the binding License Agreement between BreedIT Israel and the leading Israeli
academic institution (the "Licensor"), which closed on October 24, 2013.
Consideration for the purchase was paid by us through issuance of
BreedIT Corp. Common Stock and Class A/B Options, the fair market value of
the Tangible/Intangible Assets acquired, as of the valuation date, was
determined to be $849,671 and the excess fair value of the assets over the
fair value of the identifiable assets owned at closing of $630,880 was
booked as goodwill. As the company is not generating income from the
software sales and to ensure the asset is carried at no more than the
recoverable amount, $630,880 or entire goodwill amount was impaired to
expense during Q4 of 2013.
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.
We
have begun to sell and/or license our IDSS Software to potential customers
in the seed breeding market. We initially intend to sign agreements and to
establish alliances with national and international major seed companies by
providing them with access to knowledge and proprietary technology developed
by researchers of various Universities.
Results of Operations
during the year ended December 31, 2014 as compared to the year ended
December 31, 2013
During 2014 we generated revenues of $5,824
compared to revenues of $5,800. Our research and development expenses
increased to $207,246 during 2014 compared to $21,087 during the same period
in the prior year. The increase was due to increased software development
costs of the iBreedIt IDSS system at BreedIT Ltd. Our general and
administrative expenses during 2014 were $4,123,929 as compared to
$1,483,140 during 2013. The significant increase was due to office and staff
expenses at our subsidiary, BreedIT Israel, and increased non-cash
compensation. We incurred a net loss of $4,365,589 attributable to BreedIT
Corp during 2014 compared to a net loss of $1,445,529 in 2013.
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 December 31, 2014 reflects
assets of $1,788,625 consisting of cash and cash equivalents of $1,101,164,
certificates of deposit of $639,979, other receivables of $30,270,
investment accounted for using equity method of $10,339 and fixed assets of
6,873. As of December 31, 2013, we had total assets of $656,278 consisting
of cash and cash equivalents of $656,067 and restricted cash of $43 and
fixed assets of 168.
As of December 31, 2014, we had total current
liabilities of $389,536 consisting of $123,826 in accounts payable and
accrued liabilities, $40,910 accrued interest payable, $18,000 due to
related parties, $5,800 in deferred revenues and $201,000 in convertible
notes payable, net of discount. As of December 31, 2014, we had $2,852 in
long-term deferred revenues.
As of December 31, 2013, we had total
current liabilities of $160,052 consisting of $59,574 in accounts payable
and accrued liabilities, $2,305 due to related parties, $5,800 in deferred
revenues, $15,565 accrued interest payable and $76,808 in convertible notes
payable, net of discount. As of December 31, 2013, we had $8,676 in
long-term deferred revenues.
We had positive working capital of
$1,381,877 as of December 31, 2014 compared to positive working capital of
$496,058 at December 31, 2013. Such working capital has been sufficient to
sustain our operations to date. Our total liabilities as of December 31,
2014 were $392,388 compared to $168,728 at December 31, 2013.
During
2014, we used $1,806,298 in our operating activities. This resulted from a
net loss of $4,581,311, increase to other assets of $639,936, increase in
current assets of $30,270, decrease in deferred revenues of $5,824 and
offset principally by $3,195,525 related to non-cash compensation, $128,192
amortization expenses related to debt discount, $89,597 increase in accounts
payable and accrued liabilities and $15,695 increase related parties
payable.
During 2013, we used $352,942 in our operating activities.
This resulted from a net loss of $1,681,230, increase in accounts payable of
$14,312, increase in current assets of $4,063, decrease in deferred revenues
of $5,800 and offset principally by impairment of goodwill of $630,880, loss
on trading securities of $114,752, amortization expenses related to debt
discount of $62,244, decrease in other assets of $3,991 and $511,651 related
to non-cash compensation.
During the year ended December 31, 2014, we
used $23,097 from investing activities which resulted from $14,075 cash paid
for investment and $9,022 purchases of equipment, as compared to $63,545
produced from investing activities during 2013 which resulted from sale of
trading securities.
During the year ended December 31, 2014, we
financed our negative cash flow from sale of common stock in the amount of
$2,040,900 and proceeds from exercise of warrants in the amount of $239,500.
During the year ended December 31, 2013, we financed our negative cash flow
from operations through the issuance of convertible debt in the amount of
$146,920 and from sale of common stock in the amount of $787,512 offset by
principal payment on debt in the amount of $10,020.
Our ability to create sufficient working capital to
sustain us over the next twelve month period, and beyond, is dependent on
our entering into additional licensing agreement and on our success in
issuing additional debt or equity, or entering into strategic arrangement
with a third party. There can be no assurance that sufficient capital will
be available to us. We currently have no agreements, arrangements or
understandings with any person to obtain funds through bank loans, lines of
credit or any other sources.
Going Concern Consideration
There is substantial doubt about our ability to continue as a going
concern. Our financial statements contain additional note disclosures with
respect to this matter.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Report of Independent
Registered Public Accounting Firm
24
Financial Statements for the Years Ended December 31, 2014 and 2013
Balance Sheets
25
Statements
of Operations
26
Statement of Stockholders' Deficit
27
Statements
of Cash Flows
28
Notes to
Financial Statements
29
Back to
Table of Contents
BreedIt Corp.
Tel Aviv, Israel
www.mkacpas.com
Houston, Texas
March 31, 2015
BREEDIT CORP.
(Formerly
Progaming Platforms Corp.)
Balance Sheets
As of December 31, 2014 and 2013
Back to
Table of Contents
December
31, 2014
December
31, 2013
ASSETS
Current assets:
Cash and cash equivalents
$
1,101,164
$
656,067
Certificate of deposit
639,979
-
Restricted cash
-
43
Other receivables
30,270
-
Total current assets
1,771,413
656,110
Investment accountant for using equity method
10,339
-
Property and
equipment, net
Total assets
Current liabilities:
Accounts payable
and accrued liabilities
Deferred revenues
Related parties
payable
Accrued interest
payable
Convertible notes
payable, net of discount
Total
current liabilities
Long-term
deferred revenues
Total liabilities
Stockholders' equity
(deficit)
Common stock, par
value $0.0001 per share, 500,000,000 shares authorized:
92,049,512 and 72,255,917 shares issued and outstanding at December 31,
2014 and 2013, respectively
Stock payable
169,647
321,447
Accumulated other
comprehensive income
(4,279)
(340)
Non-controlling
interest
(154,187)
47,523
Stock subscription
receivable
Additional paid-in
capital
(Deficit) accumulated
during the development stage
Total stockholders' equity (deficit)
Total liabilities and
stockholders' equity (deficit)
The accompanying notes are an integral part of these financial statements.
BREEDIT CORP.
(Formerly
Progaming Platforms Corp.)
Statements of Operations
For
the Years December 31, 2014 and 2013
Back to
Table of Contents
Expenses
Research and development
General and administrative
Total operating expenses
(Loss) from operations
Interest expense
(153,537)
(75,918)
Loss on trading
securities
-
(114,752)
Other income / (expense)
Financial income (expense)
Provision for
income taxes
Net loss
Less: loss
attributable to non-controlling interest
199,741
235,701
Net loss
attributable to BreedIT Corp.
Net loss per common share -
basic and diluted
Weighted average number of
common shares outstanding - basic
The accompanying
notes are an integral part of these financial statements.
Foreign currency
translation gain (loss)
(3,939)
(340)
Add: loss
attributable to non-controlling interest
Total comprehensive loss
Less:
comprehensive loss attributable to non-controlling interest
199,741
235,701
Comprehensive loss attributable to BreedIT Corp.
The accompanying
notes are an integral part of these financial statements.
BREEDIT CORP.
(Formerly Progaming Platforms Corp.)
Statement of Changes in Stockholders' Equity
For
the Years December 31, 2014 and 2013
Back to
Table of Contents
Shares
Amount
Capital
Payable
Receivable
Deficit
OCI
NCI
equity
Balance
as of December 31, 2012
-
Shares issued for cash
15,750,260
158
787,355
-
-
-
-
-
787,513
Debt converted payable
converted to shares
1,058,602
11
21,161
-
-
-
-
-
21,172
Warrants issued for
services
-
-
155,750
-
-
-
-
-
155,750
Shares issued for services
3,250,000
32
355,868
-
-
-
-
-
355,900
Debt discount
-
-
132,500
-
-
-
-
-
132,500
Forgiveness of accrued
debt by related party
-
-
49,000
-
-
-
-
-
49,000
Acquisition of BreedIT
subsidiary 66.67%
-
-
-
321,447
-
-
-
283,224
604,671
Foreign currency
adjustment
-
-
-
-
-
-
(340)
-
(340)
Net
loss for the year
(235,701)
Balance
as of December 31, 2013
47,523
Shares issued for cash
11,613,333
116
2,040,784
-
-
-
-
-
2,040,900
Debt converted payable
converted to shares
200,000
2
3,998
-
-
-
-
-
4,000
Options issued to
employees
-
-
2,646,394
-
-
-
-
-
2,646,394
Warrants issued for
services
-
-
43,091
-
-
-
-
-
43,091
Warrants exercised
4,644,262
46
239,454
-
-
-
-
-
239,500
Shares issued for services
1,136,000
12
506,028
-
-
-
-
-
506,040
Debt discount
-
-
-
-
-
-
-
-
-
Acquisition of BreedIT
subsidiary 66.67%
2,200,000
22
151,778
(151,800)
-
-
-
-
-
Foreign currency
adjustment
-
-
-
-
-
-
(3,939)
(1,969)
(5,908)
Net
loss for the year
(199,741)
Balance
as of December 31, 2014
(154,187)
The accompanying
notes are an integral part of these financial statements.
BREEDIT CORP.
(Formerly
Progaming Platforms Corp.)
Statements of Cash Flows
For
the Years Ended December 31, 2014 and 2013
For
the Year Ended
For
the Year Ended
December 31, 2014
December 31, 2013
Net loss
Adjustments to reconcile net
(loss) to net cash (used in) operating activities:
Loss on trading
securities
-
114,752
Depreciation
2,317
321
Amortization of
debt discount
128,192
62,244
Shares issued for
services
506,040
355,901
Warrants issued for
services
43,091
155,750
Options issued for
services
2,646,394
-
Investment accountant for using equity method
3,736
-
Impairment of
goodwill
-
630,880
Changes in net assets and
liabilities:
Decrease (increase)
in accounts receivable
-
-
Decrease (increase)
in other current assets
(30,270)
(4,063)
Decrease (increase)
in prepaid expenses
(Decrease) increase
in accounts payable
(Decrease) increase
in accrued expenses
25,345
-
(Decrease) increase
in related parties payable
-
Investment in trading securities
-
(Decrease) increase
in deferred revenue
Contribution of
services from shareholder
Other assets
Net cash used in operating
activities
Investing activities:
Cash paid for investment
Purchases of
property and equipment
Cash received from
sale of trading securities
Net cash
provided by (used in) investing
activities
Financing activities:
Issuance of non-convertible note
-
146,920
Proceeds from
exercise of warrants
239,500
-
Principal payments
on debt
-
(10,020)
Proceeds from sale
of common stock (net of issuance expenses)
Net cash provided by
financing activities
Foreign
currency adjustment
(5,908)
(340)
Net increase (decrease)
in cash
Cash and cash equivalents
-
beginning of period
Cash and cash equivalents
-
end of period
Non cash transactions:
Conversion of debt
to equity
$
4,000
$
-
Shares issued from
stock payable
$
151,800
$
-
Cashless
exercise of warrants
$
3
$
-
Additional information:
Cash paid for
interest expenses
$
-
$
-
Cash paid for
income taxes
$
-
$
-
The accompanying
notes are an integral part of these financial statements.
(formerly Progaming Platforms Corp.)
Notes to Financial Statements
December 31, 2014
Back to
Table of Contents
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 financial statements of the Company were
prepared from the accounts of the Company under the accrual basis of
accounting.
Computers
$9,785
$947
Accumulated
depreciation
Property and
Equipment, net
Level 2: Other inputs that
are observable, directly or indirectly, such as quoted prices for similar
assets and liabilities or market corroborated inputs.
Level 3:
Unobservable inputs are used when little or no market data is available,
which requires the Company to develop its own assumptions about how market
participants would value the assets or liabilities. The fair value hierarchy
gives the lowest priority to Level 3 inputs.
Investment in Trading
Securities
-
Total assets at fair value
-
Investment in Trading
Securities
-
Total assets at fair value
-
On November 2014, The
Financial Accounting Standards Board (FASB) issued Accounting Standard
Update No. 2014-17 - Business Combinations (Topic 805): Pushdown Accounting (a
consensus of the FASB Emerging Issues Task Force). The amendments in this
Update provide an acquired entity with an option to apply pushdown
accounting in its separate financial statements upon occurrence of an event
in which an acquirer obtains control of the acquired entity. The amendments
in this Update are effective on November 18, 2014. After the effective date,
an acquired entity can make an election to apply the guidance to future
change-in-control events or to its most recent change-in-control event.
However, if the financial statements for the period in which the most recent
change-in-control event occurred already have been issued or made available
to be issued, the application of this guidance would be a change in
accounting principle.
On August 2014, The Financial Accounting
Standards Board (FASB) issued Accounting Standard Update No. 2014-15,
Presentation of Financial Statements - Going Concerns (Subtopic 205-40):
Disclosures of Uncertainties about an Entity's Ability to Continue as a
Going Concern. The amendments require management to assess an entity's
ability to continue as a going concern by incorporating and expanding upon
certain principles that are currently in U.S. auditing standards.
Specifically, the amendments (1) provide a definition of the term
substantial doubt, (2) require an evaluation every reporting period
including interim periods, (3) provide principles for considering the
mitigating effect of management's plans, (4) require certain disclosures
when substantial doubt is alleviated as a result of consideration of
management's plans, (5) require an express statement and other disclosures
when substantial doubt is not alleviated, and (6) require an assessment for
a period of one year after the date that the financial statements are issued
(or available to be issued). The amendments in this Update are effective for
the annual period ending after December 15, 2016, and for annual periods and
interim periods thereafter. Early application is permitted.
In June
2014, the Financial Accounting Standards Board ("FASB") issued Accounting
Standards Update ("ASU") 2014-10, "Development Stage Entities". The
amendments in this update remove the definition of a development stage
entity from the Master Glossary of the ASC thereby removing the financial
reporting distinction between development stage entities and other reporting
entities from U.S. GAAP. In addition, the amendments eliminate the
requirements for development stage entities to (1) present inception-to-date
information in the statements of income, cash flows, and shareholder equity,
(2) label the financial statements as those of a development stage entity,
(3) disclose a description of the development stage activities in which the
entity is engaged, and (4) disclose in the first year in which the entity is
no longer a development stage entity that in prior years it had been in the
development stage. The amendments in this update are applied
retrospectively. The adoption of ASU 2014-10 removed the development stage
entity financial reporting requirements from the Company.
In June
2014, the Financial Accounting Standards Board (FASB) issued Accounting
Standards Update (ASU) No. 2014-12, Compensation - Stock Compensation (Topic
718): Accounting for Share-Based Payments When the Terms of an Award Provide
That a Performance Target Could Be Achieved after the Requisite Service
Period. The new guidance requires that share-based compensation that require
a specific performance target to be achieved in order for employees to
become eligible to vest in the awards and that could be achieved after an
employee completes the requisite service period be treated as a performance
condition. As such, the performance target should not be reflected in
estimating the grant-date fair value of the award. Compensation costs should
be recognized in the period in which it becomes probable that the
performance target will be achieved and should represent the compensation
cost attributable to the period(s) for which the requisite service has
already been rendered. If the performance target becomes probable of being
achieved before the end of the requisite service period, the remaining
unrecognized compensation cost should be recognized prospectively over the
remaining requisite service period. The total amount of compensation cost
recognized during and after the requisite service period should reflect the
number of awards that are expected to vest and should be adjusted to reflect
those awards that ultimately vest. The requisite service period ends when
the employee can cease rendering service and still be eligible to vest in
the award if the performance target is achieved. This new guidance is
effective for fiscal years and interim periods within those years beginning
after December 15, 2015. Early adoption is permitted. Entities may apply the
amendments in this Update either (a) prospectively to all awards granted or
modified after the effective date or (b) retrospectively to all awards with
performance targets that are outstanding as of the beginning of the earliest
annual period presented in the financial statements and to all new or
modified awards thereafter. The adoption of ASU 2014-12 is not expected to
have a material impact on our financial position or results of operations.
In June 2014, the FASB issued ASU No. 2014-10: Development Stage
Entities (Topic 915): Elimination of Certain Financial Reporting
Requirements, Including an Amendment to Variable Interest Entities Guidance
in Topic 810, Consolidation , to improve financial reporting by
reducing the cost and complexity associated with the incremental reporting
requirements of development stage entities. The amendments in this update
remove all incremental financial reporting requirements from U.S. GAAP for
development stage entities, thereby improving financial reporting by
eliminating the cost and complexity associated with providing that
information. The amendments in this Update also eliminate an exception
provided to development stage entities in Topic 810, Consolidation, for
determining whether an entity is a variable interest entity on the basis of
the amount of investment equity that is at risk. The amendments to eliminate
that exception simplify U.S. GAAP by reducing avoidable complexity in
existing accounting literature and improve the relevance of information
provided to financial statement users by requiring the application of the
same consolidation guidance by all reporting entities. The elimination of
the exception may change the consolidation analysis, consolidation decision,
and disclosure requirements for a reporting entity that has an interest in
an entity in the development stage. The amendments related to the
elimination of inception-to-date information and the other remaining
disclosure requirements of Topic 915 should be applied retrospectively
except for the clarification to Topic 275, which shall be applied
prospectively. For public companies, those amendments are effective for
annual reporting periods beginning after December 15, 2014, and interim
periods therein. Early adoption is permitted. The adoption of ASU 2014-10 is
not expected to have a material impact on our financial position or results
of operations.
In July 2013, FASB issued ASU No. 2013-11, "Presentation
of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a
Similar Tax Loss, or a Tax Credit Carryforward Exists." The provisions
of ASU No. 2013-11 require an entity to present an unrecognized tax benefit,
or portion thereof, in the statement of financial position as a reduction to
a deferred tax asset for a net operating loss carryforward or a tax credit
carryforward, with certain exceptions related to availability. ASU No.
2013-11 is effective for interim and annual reporting periods beginning
after December 15, 2013. The adoption of ASU No. 2013-11 is not expected to
have a material impact on the Company's Consolidated Financial Statements.
In February 2013, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income
(Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other
Comprehensive Income, to improve the transparency of reporting these
reclassifications. Other comprehensive income includes gains and losses that
are initially excluded from net income for an accounting period. Those gains
and losses are later reclassified out of accumulated other comprehensive
income into net income. The amendments in the ASU do not change the current
requirements for reporting net income or other comprehensive income in
financial statements. All of the information that this ASU requires already
is required to be disclosed elsewhere in the financial statements under U.S.
GAAP. The new amendments will require an organization to:
- Present
(either on the face of the statement where net income is presented or in the
notes) the effects on the line items of net income of significant amounts
reclassified out of accumulated other comprehensive income - but only if the
item reclassified is required under U.S. GAAP to be reclassified to net
income in its entirety in the same reporting period; and
-
Cross-reference to other disclosures currently required under U.S. GAAP for
other reclassification items (that are not required under U.S. GAAP) to be
reclassified directly to net income in their entirety in the same reporting
period. This would be the case when a portion of the amount reclassified out
of accumulated other comprehensive income is initially transferred to a
balance sheet account (e.g., inventory for pension-related amounts) instead
of directly to income or expense.
The amendments apply to all
public and private companies that report items of other comprehensive
income. Public companies are required to comply with these amendments for
all reporting periods (interim and annual). The amendments are effective for
reporting periods beginning after December 15, 2012, for public companies.
Early adoption is permitted. The adoption of ASU No. 2013-02 is not expected
to have a material impact on our financial position or results of
operations.
In January 2013, the FASB issued ASU No. 2013-01,
Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about
Offsetting Assets and Liabilities, which clarifies which instruments and
transactions are subject to the offsetting disclosure requirements
originally established by ASU 2011-11. The new ASU addresses preparer
concerns that the scope of the disclosure requirements under ASU 2011-11 was
overly broad and imposed unintended costs that were not commensurate with
estimated benefits to financial statement users. In choosing to narrow the
scope of the offsetting disclosures, the Board determined that it could make
them more operable and cost effective for preparers while still giving
financial statement users sufficient information to analyze the most
significant presentation differences between financial statements prepared
in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU
2011-11, the amendments in this update will be effective for fiscal periods
beginning on, or after January 1, 2013. The adoption of ASU 2013-01 is not
expected to have a material impact on our financial position or results of
operations.
Intangible
assets consist of patents and trademarks, purchased customer contracts,
purchased customer and merchant relationships, purchased trade names,
purchased technology, and non-compete agreements. Intangible assets are
amortized over the period of estimated benefit using the straight-line
method and estimated useful lives ranging from two to twenty years. No
significant residual value is estimated for intangible assets.
Type
Quantity
Exercise Price
Term
Consultant Warrants
1,000,000
$0.05
2 Months
Warrants Class A
14,100,260
$0.055
1-5 Months
Warrants Class B
16,100,260
$0.065
7-11 Months
Warrants Class C
1,395,000
$0.35
12 Months
Warrants Class I
666,667
$0.45
14 Months
ESOP options
11,900,000
$0.05
9 - 10 years
Total
45,162,187
One of the
aforementioned Licensees is beneficially owned by an individual who holds
25,000 shares of the Company's common stock.
Cash
$
Net
Liabilities
Goodwill
Total assets
acquired
$
849,671
December 31, 2012
$
Acquired
Impairment
December 31, 2013
Acquired
Impairment
December 31, 2014
$
Current
tax provision:
Federal
Taxable
income
$
$
Total
current tax provision
$
$
Deferred
tax provision
Federal
Loss
carryforwards
$
$
Change
in valuation allowance
$
$
Loss
carryforwards
$
$
Less-
Valuation allowance
Total
net deferred tax assets
$
$
The Company did not identify any material uncertain tax positions that will
be filed. The Company did not recognize any interest or penalties for
unrecognized tax benefits during the year ended December 31, 2014 and 2013.
The Company will file income tax returns in the United States. All tax
years are closed by expiration of the statute of limitations. The year ended
December 31, 2014 and 2013.
Unrealized
Realized
Unrealized
Cost Basis
Gains
Cost Basis
Losses
Fair Value
December 31, 2014 Trading
Securities
-
-
-
-
-
December 31, 2013 Trading Securities
$
-
$
-
$
114,752
$
-
$
-
Our directors hold office until the next annual general meeting of the stockholders or until their successors are elected and qualified. Our officers are appointed by our Board of Directors and hold office until the earlier of their death, retirement, resignation, or removal.
The following table sets forth the names and ages of the members of our Board of Directors and our executive officers and the positions held by each.
| Name | Age |
Title | ||
| Yoel Yogev | 62 |
CEO and Director | ||
| Oded Gilboa | 41 |
CFO | ||
| Itschak Shrem | 67 |
Chairman | ||
| Erez Zino |
42 |
Director | ||
| Dr,. Be-Zion Weiner | 69 |
Director |
Yoel Yogev, 62, was appointed to the Registrant's board of directors on January 7, 2014 and became the Company's CEO on January 14, 2014. Mr. Yogev has been Chairman of the board of directors of BreedIT Ltd, an entity organized under the laws of Israel that is a sixty-seven (67%) percent owned subsidiary of the Registrant. From 1987 to the present, Mr. Yogev has served as Chairman and CEO of El-Gev Electronics Ltd., a leading Israeli sales representative/distributor for OEMs of Electronics, Fiber-Optics and RF/Microwave components/modules as well as T&M systems and Embedded Computer Solutions. Mr. Yogev has also been an investor in many private "start-up" companies in Israel, principally in the technology sector. Mr. Yogev is a graduate of The Technion Israel Institute of Technology with a Bsc.E.E. Degree.
Oded Gilboa, 41, was appointed to be the Company's CFO on December 4, 2013. He is a licensed CPA in the United States and Israel. Prior to his appointment as CFO, Mr. Gilboa served as the Registrant's finance and accounting consultant. Mr. Gilboa has over 16 years of experience in finance and public accounting, having served as a senior finance executive in the technology and biotech industries with responsibilities in corporate finance, accounting, strategic planning and operational and financial management. From 2010 through 2012, Mr. Gilboa served as the Revenue Accounting and Finance Manager of Mylan Specialty, a subsidiary of Mylan Inc. (NASDAQ: MYL), a global company focused on the development, manufacturing and marketing of prescription drug products. From 2007 through 2009, Mr. Gilboa was the Executive director of Finance and US Controller of Taro Pharmaceuticals (NASDAQ:TAROF), a global pharmaceutical company. From 1998 through 2007 Mr. Gilboa held various financial positions with IDT Corporation (NYSE:IDT), a world-wide provider of telecommunications and media services, where in his most recent role he served as director of Finance. Mr. Gilboa Mr. Gilboa began his career in public accounting, auditing both public and private companies and holds a B.A in Economics and Accounting from Tel-Aviv University and an M.B.A. from Recanati Business School at Tel-Aviv University.
Itschak Shrem, 67, was appointed to the board and became Chairman of the board on December 31, 2013, Mr. Shrem, is an entrepreneur with over twenty-five years of professional business experience in the fields of investment banking, venture capital, finance, insurance and technology, among others, involving both public and private entities.
From 1995 to the present, Mr. Shrem has served as Managing director of
Yaad Consulting 1995 Ltd., which was organized in 1995 and provides business
development, marketing and investment banking services to a wide variety of
Israeli companies. Mr. Shrem has held several positions with S R Accord Ltd.
(formerly, The Shrem Fudim Group Ltd): from April 1991 until December 1999,
Mr. Shrem served as Vice Chairman; from December 1999 until June 2013 Mr.
Shrem served as a chairman of the board; and from June 2013 to present, he
as served as a member of the board of directors. S R Accord was founded by
Mr. Shrem in 1991, is listed on the Tel-Aviv Stock Exchange ("TASE") and is
engaged in investment banking in Israel. From 1991 to 2010, Mr. Shrem served
as the Chairman of Leader Holdings and Investments Ltd. and Polar
Communications Ltd., both TASE-listed companies engaged in investment
banking and venture capital, the latter of which specializes in the media
and telecommunications industries. From 2007 until 2012, Mr. Shrem served as
a director of Retalix, (NASDAQ:RTLX). In 1993, Mr. Shrem founded Pitango
Venture Capital Fund, which has investments in over 120 companies,
principally in the technology industry and presently has approximately $1.5
billion under management. Mr. Shrem presently holds positions as partner in
the GP of Pitango I, II and III. Since October 2010, Mr. Shrem has served as
an independent director of Eden Springs Ltd, TASE-listed Company and a
leading Israeli mineral water company with operations, through a subsidiary,
in 16 countries throughout Europe. Mr. Shrem spent over 15 years with Clal
Israel Ltd, serving in various capacities including Chief Operating Officer,
responsible for Clal's capital markets and insurance businesses until March,
1991. Mr. Shrem holds a B.A. in Economics from Bar-Ilan University, Israel,
and an M.B.A. from Tel-Aviv University, Israel.
Erez Zino, 42, a founder
the principal stockholder of the Company, became our CEO in May 2012 and
became our acting CFO in January 2013. In connection with our acquisition of
66.67% of BreedIT Israel, Mr. Zino resigned as an executive officer of the
Company but continues to serve as a director. During the past five years,
Mr. Zino has been the owner and managing director of Ozicom Communication
Ltd., a private company that provides internet marketing support. Mr. Zino
is a trained computer programmer and specializes in internet marketing.
Dr. Ben-Zion Weiner, 69, was appointed to the Registrant's board
of directors on January 7, 2014 and resigned from the board of directors on
August 22, 2014. From 1975 to 2012, Dr. Weiner has held executive positions
with Teva Pharmaceutical Industries Ltd (NYSE:TEVA) and its subsidiaries ("Teva"),
as follows: , Dr. Weiner was Vice President, Global Products of Teva; from
2005 until 2011, Dr. Weiner served as Group Vice President, Global Products
of Teva, responsible for Global Generic Research and Development, Global
Innovative Research and Development. Dr. Weiner was also a Member of the
Teva Core Management Committee. From 2012 until the present, Dr. Weiner has
served as an independent non-executive director of Mesoblast Limited, (MSB.AX),
an Australian company publicly-traded on the Melbourne Stock Exchange that
is engaged in the research and development of its propriety stem cell
technologies for use in the treatment of multiple major disease states and
other medical conditions. Dr. Wiener presently serves as a lecturer in Tel
Aviv University School for business administration.
In 1968, Dr.
Weiner received a B.Sc. Degree in General Chemistry and Biochemistry,
graduating with distinction at the Hebrew University, Jerusalem. In 1970 Dr.
Weiner received a M.Sc. Degree in Organic Chemistry, graduating with
distinction at the Hebrew University of Jerusalem. Thesis: "Synthesis of
Polymers with Potential Biological Activity" under the supervision of Prof.
A. Zilkha. In 1974 Dr. Weiner received his Ph.D. Degree at the Hebrew
University, Jerusalem. Thesis: "Synthesis of Polymers with Potential
Biological Activity" under the supervision of Prof. A. Zilkha and from 1974
to 1975, Dr. Weiner did Post-Doctorate studies at Schering Plough
Corporation, Bloomfield, New Jersey, on: "Exploratory work of new drugs,
research in organic chemistry, and pharmacology."
Dr. Weiner received
the Rothschild Prize for Innovation/Export for the development of Copaxone(R)
for Multiple Sclerosis. Previously, in 1989, Dr. Weiner received the
Rothschild Prize for Innovation/Export for the development of alpha D3 for
Dialysis and Osteoporosis.
Committees of the Board of Directors
We do not presently have a separately constituted audit committee, compensation committee, nominating committee, executive committee or any other committees of our Board of directors. As such, our entire Board of directors acts as our audit committee.
Involvement in Legal Proceedings
None of our directors, nominees for directors, or officers has appeared as a party during the past ten years in any legal proceedings that may bear on his ability or integrity to serve as a director or officer of the Company.
Code of Ethics
We do not currently have a Code of Ethics applicable to our principal
executive, financial and accounting officers. However, we intend to adopt
such a code in or about the second quarter of 2015.
Potential Conflict of
Interest
Since we do not have an audit or compensation committee comprised of independent directors, the functions that would have been performed by such committees are performed by our Board of directors. Thus, there is a potential conflict of interest in that our directors have the authority to determine issues concerning management compensation, in essence their own, and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of our executives or directors.
Board's Role in Risk Oversight
The Board assesses on an ongoing basis the risks faced by the Company. These risks include financial, technological, competitive, and operational risks. The Board dedicates time at each of its meetings to review and consider the relevant risks faced by the Company at that time. In addition, since the Company does not have an Audit Committee, the Board is also responsible for the assessment and oversight of the Company's financial risk exposures.
Section 16(a) Compliance
Section 16(a) of the Securities and Exchange Act of 1934 requires the Registrant's directors and executive officers, and persons who own beneficially more than ten percent (10%) of the Registrant's Common Stock, to file reports of ownership and changes of ownership with the Securities and Exchange Commission. Copies of all filed reports are required to be furnished to the Registrant pursuant to Section 16(a). Based solely on the reports received by the Registrant and on written representations from reporting persons, the Registrant was informed that its officers and directors and ten percent (10%) shareholders have not filed reports required to be filed under Section 16(a).
ITEM 11. EXECUTIVE COMPENSATION Back to Table of Contents
The following table sets forth information concerning the total compensation that we have paid or that has accrued on behalf of our chief executive officer and other executive officers with annual compensation exceeding $100,000 during the fiscal years ending December 31, 2014, 2013 and 2012.
Summary Compensation Table /font> |
||||||||
Long Term |
||||||||
Annual Compensation |
Compensation Awards |
|||||||
| Other | Restricted | Securities | ||||||
| Annual | Stock | Underlying | All Other | |||||
Salary |
Bonus |
Compensation | Award(s) | Options | Compensation | |||
| Name and Principal Position | Year |
($) |
($) |
($) |
($) |
($) |
($) |
|
| Yoel Yogev, CEO and Director (1) | 2014 | 46,000 | --- | --- | --- | --- | --- | |
| 2013 | --- | --- | --- | --- | --- | --- | ||
| Oded Gilboa, CFO (2) | 2014 | 44,000 | --- | --- | --- | --- | --- | |
| 2013 | 4,840 | --- | --- | --- | --- | --- | ||
| Erez Zino, Director, former CEO, CFO (3) | 2013 | --- | --- | --- | --- | --- | --- | |
| 2012 | --- | --- | --- | --- | --- | --- | ||
(1) Mr. Yogev was appointed to the board on January 7, 2014
and became the Company's CEO on January 14, 2014.
(2) Mr. Gilboa was
appointed to be CFO of the Company on December 4, 2013.
(3) Mr. Zino
became our CEO in July 2012 and acting CFO in January 2013. He resigned as
CFO on December 4, 2013 and as CEO on January 7, 2014 and remains a
director.
Option/SAR Grants
We do not currently have a
stock option plan. No individual grants of stock options, whether or not in
tandem with stock appreciation rights known as SARs or freestanding SARs
have been made to any executive officer or any director since our inception;
accordingly, no stock options have been granted or exercised by any of the
officers or directors since we were founded.
Long-Term Incentive
Plans and Awards
We do not have any long-term incentive plans
that provide compensation intended to serve as incentive for performance. No
individual grants or agreements regarding future payouts under non-stock
price-based plans have been made to any executive officer or any director or
any employee or consultant since our inception; accordingly, no future
payouts under non-stock price-based plans or agreements have been granted or
entered into or exercised by any of the officers or directors or employees
or consultants since we were founded.
Compensation of Directors
There are no current arrangements pursuant to which directors are or
will be compensated in the future for any services provided as a director.
Employment Contracts, Termination of Employment, Change-in-Control
Arrangements
There are no employment contracts in place, no
employees were terminated and no change in control arrangements have been
signed with the company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS Back to Table of Contents
The following table sets forth information regarding the beneficial ownership of our common stock as of March 30, 2015. The information in this table provides the ownership information for: each person known by us to be the beneficial owner of more than 5% of our common stock; each of our directors; each of our executive officers; and our executive officers and directors as a group.
| Name of Beneficial Owner | Common Stock Beneficially Owned (1) | Percentage of Common Stock Owned (1) | ||
| Yoel Yogev, CEO and Director | 4,250,000 | 4.6% | ||
| c/o Elgev Ltd. Bareket Bldg. | ||||
| Airport City, Israel | ||||
| Oded Gilboa, CFO | 500,000 | 0.5% | ||
| 23/14 Rabbi Akiva Street | ||||
| Raanana, Israel | ||||
| Itschak Shrem, Chairman | 2,000,000 | 2.1% | ||
| 21 Ha'Arba'h Street | ||||
| Tel Aviv, Israel | ||||
| Erez Zino, Director | 9,625,000 | 10.1% | ||
| 40 Meri Ya'Ari Street | ||||
| Tel Aviv, Israel | ||||
| Doran Uziel, affiliate | 7,500,000 | 7.9% | ||
| 9 Hazehevit Street | ||||
| Rishon Lezion, Israel | ||||
| Directors and Officers (4 persons) | 16,375,000 | 25.1% |
(1) Applicable percentage ownership is based on 95,967,210 shares of common stock outstanding as of March 30, 2015. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock that are currently exercisable or exercisable within 60 days of March 30, 2015 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTORS INDEPENDENCE Back to Table of Contents
During the last two fiscal years the Company had the following related party transactions:
During 2013, the company received a total of $16,900 as convertible notes from two shareholders. The notes are convertible into common stock par value $0.001 per share. The notes were converted on December 26, 2013. Company recorded interest expense on the amount of $13,674 during 2013 and interest expense on the amount of $4,863 during 2012.
In addition as described in Note 3, From October 16, 2013
through December 30, 2013, the Company sold to 22 non-US private investor, a
total of 15,750,260 million units for cash consideration of $787,513 at a
price of $0.05 (the "Units"), each unit comprised of one share of common
stock, one class A warrant and one class B warrant, exercisable at a price
of $0.055 and $0.065 respectively; of this total 4,500,000 units were sold
to directors and officers for $225,000 subscriptions receivable. The
relative fair value of the stock with embedded warrants was $219,707 for the
common stock, $280,826 for class A warrants and $286,981 for class B
warrants.
During 2013 forgiveness of Accrued Debt by related parties
was recorded in the amount of $49,000.
In 2013 $2,305 accrued liability was recorded for
consulting fees due to a related party.
During the period from
February 19, 2014 to March 4, 2014, the Company granted a total of 5,050,000
stock options (the "Options") to 4 Company directors and officers who are
also minatory owners. The Options, which are fully vested, are exercisable
at a price of $0.05 per Share. 1,400,000 options were valued using the
Black-Scholes model with 128% volatility and 2.17% discount rate and
3,650,000 were valued using the Black-Scholes model with 154% volatility and
2.17% discount rate for a total of $2,594,210.
On January 23, 2014
to September 30, 2014 the Company sold to 1 non-US private accredited
investor who is also an affiliated party 300,000 shares for total cash
consideration of $30,000 at price of $0.10.
On February 18, 2014 the
Company issued to Dr. Oded Sagee minority owner and founder of BreedIT Ltd.,
2,200,000 shares of our common stock valued based on the closing market
price on the acquisition date at $151,800; 2,200,000 Class A options for the
purchase of 2,200,000 shares of our common stock at $0.055 per share valued
using the black-scholes model with volatility of 122% and a discount rate of
0.23% for a total value of $84,967; and 2,200,000 Class B options for the
purchase of 2,200,000 shares of our common stock at $0.065 per share valued
using the black-scholes model with volatility of 122% and a discount rate of
0.23% for a total value of $84,680.
On April 14, 2014 1 share and
warrant holder who is an affiliate party exercised warrants for cash
consideration of $110,000, in return 2,000,000 shares were issued.
On October 2, 2014 850,000 stock options (the "Options") to 1 Company
officer who is also a minority owner. 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 with $52,185 expensed during Q4 2014 and $12,596 to
be expenses over 8 additional quarters.
As of December 31, 2014 the
Company has $18,000 in fees due and payable, $9,000 payable to one advisory
board member and $9,000 payable to one Board of director members for
services rendered in 2014.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Back to Table of Contents
Independent Public Accountants
The Registrant's Board of Directors has appointed McConnell & Jones, LLP as independent public accountant for the fiscal years ended December 31, 2014 and 2013.
Principal Accounting Fees
The following table presents the fees for professional audit services rendered by M&K CPAS PLLC for the audit of the Registrant's annual financial statements for the year ended December 31, 2014 and fees for professional audit services rendered by McConnell & Jones, LLP for the audit of the Registrant's annual financial statements for the years ended December 31, 2013, and fees billed for other services rendered by M&K CPAS PLLC and McConnell & Jones, LLP during those periods.
| Year Ended | Year Ended | ||||
| December 31, 2014 | December 31, 2013 | ||||
Audit fees (1) |
$ | 9,600 | $ | 9,600 | |
Audit-related fees (2) |
--- | --- | |||
Tax fees (3) |
525 | 525 | |||
All other fees |
--- | --- | |||
| (1) Audit fees consist of audit and review services, consents and review of documents filed with the SEC. | |||||
| (2) Audit-related fees consist of assistance and discussion concerning financial accounting and reporting standards and other accounting issues. | |||||
| (3) Tax fees consist of preparation of federal and state tax returns, review of quarterly estimated tax payments, and consultation concerning tax compliance issues. | |||||
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES Back to Table of Contents
(a) The following documents are filed as exhibits to this report on Form 10-K 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/ Yoel Yogev
Yoel Yogev
Chief Executive Officer and Director
(Principal Executive Officer)
Date: March 31, 2015
By: /s/ Oded Gilboa
Oded Gilboa
Chief Financial Officer
(Principal Financial and Principal Accounting Officer)
Date: March 31, 2015
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/ Yoel Yogev
Yoel Yogev
Chief Executive Officer and Chairman
(Principal Executive Officer)
Date: March 31, 2015
By: /s/ Oded Gilboa
Oded Gilboa
Chief Financial Officer
(Principal Financial and Principal Accounting Officer)
Date: March 31, 2015
By: /s/ Itschak Shrem, Chairman
Itschak Shrem
Chairman
Date: March 31, 2015