CITRINE GLOBAL, CORP. - Quarter Report: 2015 June (Form 10-Q)

ITEM 1. FINANCIAL STATEMENTS Back to Table of Contents

BREEDIT CORP.
(formerly Progaming Platforms Corp.)
Notes to Financial Statements
June 30, 2015 (Unaudited)
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Note 1. Summary of Significant Accounting Policies

Basis of Presentation and Organization

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

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

The accompanying unaudited financial statements of the Company are presented in accordance with the requirements of Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") have been condensed or omitted pursuant to such SEC rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for an air presentation have been made. The results for these interim periods are not necessarily indicative of the results for the entire year. The accompanying financial statements should be read in conjunction with the Company's audited financial statements for the year ended December 31, 2014 and the notes thereto included in the Company's Report on Form 10-K filed with the SEC on March 31, 2015.

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 June 30, 2015 and December 31, 2014, we had cash and cash equivalents of $1,203,630 and $1,741,143 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.

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 June 30, 2015 and 2014, the carrying value of accounts payable and accrued liabilities approximated fair value due to the short-term nature and maturity of these instruments.

Property and Equipment

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

Computers and electronic equipment: 33%

Deferred Offering Costs

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

Impairment of Long-Lived Assets

The Company evaluates the recoverability of long-lived assets and the related estimated remaining lives when events or circumstances lead management to believe that the carrying value of an asset may not be recoverable. As of June 30, 2015, no events or circumstances occurred for which an evaluation of the recoverability of long-lived assets was required.

Estimates

The financial statements are prepared on the basis of accounting principles generally accepted in the United States. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of June 30, 2015 and December 31, 2014, and expenses for the six months ended June 30, 2015 and 2014. Actual results could differ from those estimates made by management.

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.

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.

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. Property and Equipment

For the for the six months ended June 30, 2015 total additions to Property and equipment were $790, total accumulated depreciation is $4,046 and total depreciation expense for the six months ended June 30, 2015 and 2014 was $892 and 769, respectively.

Following is a summary of Property and Equipment, net for the six months ended June 30, 2015 and December 31, 2014.

Note 4. Common Stock

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 1,00,000 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 273% volatility and 0.80% discount rate for a total of $391,335 of this amount $1,148 and $10,134, respectively, was expensed during the three and six months ended June 30, 2015 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 the company granted a total stock options (the "Options") to 1 Company officer who is also minority owners. The Options, vest over 9 quarters and are exercisable at a price of $0.05 per Share. The options were valued using the Black-Scholes model with 281% volatility and 0.23% discount rate for a total value of $152,955 of this amount $12,245 and $24,490 was expensed during the three and six months ended June 30, 2015, respectively, and $73,472 to be expenses over 6 additional quarters.

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

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

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

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

During the six months ended June 30, 2015 BreedIt Ltd, the company's subsidiary, received $13,020 for use of its software from KanaboSeed Ltd, a related company. Accordingly $13,020 were included as donated capital, BreedIT Ltd holds 50% of KanaboSeed Ltd.

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 six months ended June 30, 2015 and 2014.

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

Note 5. 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 June 30, 2015 and 2014, the Company recognized a total sum of $1,462 and $1,450, 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 2014 and $2,924 in 2015; the remaining sum of $5,728 was deferred on the Company's balance sheet as current liabilities, and is expected to be recognized over the remaining period of the agreements.

During the six months ended June 30, 2015 BreedIt Ltd, the company's subsidiary signed binding agreements for its BreedIT Mobile™ with Vilmorin & Cie and another thihrd party customer. Revenues under these agreements totaling $40,330 were recognized during the year and revenues were fully collected during period.

As of June 30, 2015 and 2014, no royalties have been paid by or recognized in connection with the aforementioned agreements.

In addition during the six months ended June 30, 2015 BreedIt Ltd, the company's subsidiary, received $13,020 for use of its software from KanaboSeed Ltd, a related company. Accordingly $13,020 were included as donated capital, BreedIT Ltd holds 50% of KanaboSeed Ltd.

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

Note 6. Investments

Investment accounted for using equity method

BreedIT Ltd recorded a 50% investment in KanaboSeed Ltd. made during Q4 2014, 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 June 30, 2015 net loss for KanaboSeed Ltd is $18,156 of this BreedIt Ltd.'s portion of the loss is $9,078 and resulting balance on balance sheet is investment accounted for using equity method of $1,261.

Note 7. Related Party Transactions

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 $10.0.

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 the company granted a total stock options (the "Options") to 1 Company officer who is also minority owners. The Options, vest over 9 quarters and are exercisable at a price of $0.05 per Share. The options were valued using the Black-Scholes model with 281% volatility and 0.23% discount rate for a total value of $152,955 of this amount $12,245 and $24,490 was expensed during the three and six months ended June 30, 2015, respectively, and $73,472 to be expenses over 6 additional quarters.

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

During the six months ended June 30, 2015 BreedIt Ltd, the company's subsidiary, received $13,020 for use of its software from KanaboSeed Ltd, a related company. Accordingly $13,020 were included as donated capital, BreedIT Ltd holds 50% of KanaboSeed Ltd.

Note 8. Convertible and Non-Convertible Notes Payable

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

During the 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.

During the six months ended June 30, 2015 and June 30, 2014 the Company recorded amortization expenses related to the beneficial conversion feature of $0 and $32,671 respectively.

For the three and six months ended June 30, 2015 the Company recorded interest expense related in the amount of $2,655 and $7,917 respectively as compare to $6,398 and $12,795 for the three and six months ended and June 30, 2014 respectively.

Remaining debt discount as of June 30, 2015 and December 31, 2014 is $0 and $0 respectively.

Note 9. Subsequent Events

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

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

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

Evaluation of disclosure controls and procedures. As of June 30, 2015, the Company's chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.

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

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

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

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

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.

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.

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

None.

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

ITEM 5. OTHER INFORMATION Back to Table of Contents

ITEM 6. EXHIBITS Back to Table of Contents

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

SIGNATURES