WHITE FOX VENTURES, INC. - FORM 10-Q/A

Attached files

file	filename
EX-31.1 - WHITE FOX VENTURES, INC.	ex31-1.htm
EX-32.2 - WHITE FOX VENTURES, INC.	ex32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————

FORM 10-Q/A

———————

Amendment No. 1

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

For the quarterly period ended: June 30, 2015

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

For the transition period from: _____________ to _____________

BREATHE ECIG CORP.

(Exact name of registrant as specified in its charter)

———————

Nevada	333-178624	37-1640902
(State or Other Jurisdiction	(Commission	(I.R.S. Employer
of Incorporation)	File Number)	Identification No.)

322 Nancy Lynn Lane, Suite 7, Knoxville, TN 37919

(Address of Principal Executive Office) (Zip Code)

(865) 337-7549

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

———————

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.

þ Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date 354,320,482 shares of common stock were issued and outstanding as of August 6, 2015.

Table of Contents

EXPLANATORY NOTE

We are filing this Amendment No. 1 on Form 10-Q/A to amend and restate in their entirety the following items of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 as originally filed with the Securities and Exchange Commission on August 14, 2015 (the “Original Form 10-Q”): (i) Item 1 of Part I “Financial Information,” (ii) Item 2 of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” (iii) Item 4 of Part I, “Controls and Procedures,” and (iii) Item 6 of Part II, “Exhibits”, and we have also updated the signature page, the certifications of our Chief Executive Officer and Chief Financial Officer in Exhibits 31.1 and 32.1, and our financial statements formatted in Extensible Business Reporting Language (XBRL) in Exhibits 101. No other sections were affected, but for the convenience of the reader, this report on Form 10-Q/A restates in its entirety, as amended, our Original Form 10-Q. This report on Form 10-Q/A is presented as of the filing date of the Original Form 10-Q and does not reflect events occurring after that date, or modify or update disclosures in any way other than as required to reflect the restatement described below.

We have determined that our previously reported results for the quarter ended June 30, 2015 required adjustments to the correction of an error to properly account for its accounting for the acquisition of Breathe eCigs Corp. (formerly Breathe LLC) on January 16, 2015 as a reverse merger for accounting purposes. The consolidated financial statements for the quarter ended June 30, 2015 included in this Form 10-Q/A have been restated to reflect this correction. Specifically, the three-month period ended June 30, 2015 as well as the June 30, 2015 consolidated balance sheet have been restated to properly reflect the activity of only Breathe eCigs Corp. (formerly Breathe LLC). All references to DNA Precious Metals, Inc. and the activity of DNA Precious Metals, Inc. have been excluded from the restated presentation. The effect of this restatement adjustment on the net loss for the six and three months ended June 30,, 2015 was a decrease in the net loss from $6,696,333 to $6,675,780 for the six months ended June 30,, 2015 and a decrease in the net loss from $5,696,029 to $5,675,476, a change in both periods of $20,553. The change in stockholders’ deficit was $9,050,606, from $8,708,513 to ($342,093), the result of the removal of goodwill in the original business combination. A summary of the effects of the restatement are contained in the footnotes to the financial statements on page 35 of this Form 10-Q/A. We have made necessary conforming changes in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” resulting from the correction.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS	1

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	36

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK.	46

ITEM 4.	CONTROLS AND PROCEDURES.	46

PART II - OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	48

ITEM 1A.	RISK FACTORS.	48

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	48

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES.	48

ITEM 4.	MINE SAFETY DISCLOSURE.	48

ITEM 5.	OTHER INFORMATION.	48

ITEM 6.	EXHIBITS.	49

SIGNATURES		50


Exhibit 31.1	CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1	CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EX-101.INS	XBRL INSTANCE DOCUMENT
EX-101.SCH	XBRL TAXONOMY EXTENSION SCHEMA
EX-101.CAL	XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
EX-101.DEF	XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
EX-101.LAB	XBRL TAXONOMY EXTENSION LABEL LINKBASE
EX-101.PRE	XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

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PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

BREATHE ECIG CORP.
(FORMERLY DNA PRECIOUS METALS, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(in US$)

	(UNAUDITED)
	JUNE 30,				DECEMBER 31,
	2015				2014
	(RESTATED)				(RESTATED)
ASSETS
CURRENT ASSETS
Cash		$	62,415		$	13,346
Prepaid expenses			892,604			-
Inventory			141,384			-
Total current assets			1,096,403			-

Other Asset
Deferred financing fees, net			6,008			-
Commercialization fees, net			87,551			-
Investment			100,000			-
			193,559			-

TOTAL ASSETS		$	1,289,962		$	13,346


LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
Accounts payable and accrued expenses		$	402,259		$	45,606
Deferred revenue and fees			100,000			-
Derivative liability - warrants			257,233			-
Notes payable - current portion, reduced by original issue discount of $33,042			773,958			-
Liability for stock to be issued			98,605			-
Notes payable - related parties			-			5,000
Total current liabilities			1,632,055			50,606

TOTAL LIABILITIES			1,632,055			50,606

STOCKHOLDERS' DEFICIT
Preferred stock, $0.001 par value, 10,000,000 shares authorized
Nil shares issued and outstanding			-			-
Common stock, $0.001 par value, 500,000,000 shares authorized
342,237,149 shares issued and outstanding			342,237			-
Additional paid in capital			6,028,710			-
Accumulated deficit			(6,713,040	)		(37,260	)
Accumulated other comprehensive income (loss)			-			-
Total stockholders' deficit			(342,093	)		(37,260	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	1,289,962		$	13,346
			-			-
* represents members equity of Breathe LLC prior to reverse merger

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

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BREATHE ECIG CORP.
(FORMERLY DNA PRECIOUS METALS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014
(in US$)
(UNAUDITED)

	SIX MONTHS ENDED						THREE MONTHS ENDED
	JUNE 30,						JUNE 30,
	2015			2014			2015			2014
	(RESTATED)			(RESTATED)			(RESTATED)			(RESTATED)
REVENUE	$	6,000			-		$	6,000			-

COST OF GOODS SOLD		7,057			-			7,057			-

GROSS LOSS		(1,057	)		-			(1,057	)		-

OPERATING EXPENSES
Research and development		2,178			-			1,648			-
Marketing, advertising and promotion		438,233			-			424,458			-
Salaries and related expenses, including stock-based compensation		114,150			-			97,649			-
Professional fees		5,615,043			-			4,736,115			-
Rent		1,187			-			1,187			-
Depreciation and amortization		12,449			-			9,195			-
General and administrative		253,616			4,760			202,551			2,788
Total operating expenses		6,436,856			4,760			5,472,803			2,788

OTHER (INCOME) EXPENSE
Interest expense, net		177,674			-			174,813			-
FV adjustment on derivative liability		60,193			-			26,803			-
Total other (income) expense		237,867			-			201,616			-

Net loss before provision for income taxes		(6,675,780	)		(4,760	)		(5,675,476	)		(2,788	)

Provision for income taxes		-			-			-			-

NET LOSS	$	(6,675,780	)	$	(4,760	)	$	(5,675,476	)	$	(2,788	)


WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING		275,215,740						315,607,057

NET LOSS PER SHARE	$	(0.01	)				$	(0.01	)

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

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FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014
(in US$)
(UNAUDITED)

	SIX MONTHS ENDED
	JUNE 30,
	2015			2014
	(RESTATED)			(RESTATED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the period	$	(6,675,780	)	$	(4,760	)

Adjustments to reconcile net (loss) to net cash (used in) operating activities:
Depreciation and amortization		12,449			-
Amortization of deferred financing fees		6,358			-
Non-cash interest charges		-			-
Amortization of original issue discount		6,958			-
Legal fees incurred deducted from proceeds of notes payable		24,250			-
Shares and options issued for compensation		-			-
Fair value adjustment in derivative liabilities		60,193			-
Common stock/stock options issued or to be issued for services rendered		5,891,495			-

Change in assets and liabilities
(Increase) decrease in prepaid expenses and deposits		(865,528	)		-
(Increase) decrease in sales tax receivable		-			-
(Increase) in in inventory		(120,072	)		-
Increase (decrease) in accounts payable and accrued expenses		262,226			3,690
Total adjustments		5,278,329			3,690
Net cash (used in) operating activities		(1,397,451	)		(1,070	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds received from convertible notes		770,250			-
Repayments of notes payable		(32,500	)		-
Net member contributions					400
Proceeds received for common stock and liability for stock to be issued		708,770			-
Net cash provided by financing activities		1,446,520			400

Effect of foreign currency		-			-

NET INCREASE (DECREASE) IN CASH		49,069			(670	)

CASH - BEGINNING OF PERIOD		13,346			670

CASH - END OF PERIOD	$	62,415		$	-


SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	5,278			-
Income taxes		-			-

Reverse Merger of Breathe LLC
Accumulated deficit	$	7,733,077
Prepaid expenses		191,584			-
Fixed assets		138,049			-
Mining rights		1,035,818			-
Accounts payable		(111,275	)		-
Asset retirement obligation		(107,749	)		-
Note payable		(125,451	)		-
Accumulated comprehensive income		114,446
Due to Company		221,159			-
Adjustment to APIC	$	9,089,658			-

Shares received in TAUG for commercialization of product	$	100,000			-
Common shares issued for investment in Tauriga	$	100,000			-
Original issue discount netted from convertible notes	$	40,000			-
Inventory purchased through issuance of common stock	$	22,500			-

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

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BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 1-

ORGANIZATION AND BASIS OF PRESENTATION

The unaudited financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial statements and notes are presented as permitted on Form 10-Q/A and do not contain certain information included in the Company’s annual statements and notes. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the December 31, 2014 Form 10-K filed with the SEC, including the audited financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year.

These unaudited financial statements reflect all adjustments, including normal recurring adjustments which, in the opinion of management, are necessary to present fairly the operations and cash flows for the periods presented.

On June 2, 2006, Celtic Capital, Inc. was incorporated in the State of Nevada. On October 20, 2008, Celtic Capital, Inc. changed its name to Entertainment Educational Arts Inc. On May 12, 2010, the Company changed its name to DNA Precious Metals, Inc. (the “Company”). On October 29, 2010, the Company formed DNA Canada Inc., a Canadian (Province of Quebec) incorporated company, as a wholly-owned subsidiary. The Company operated all of its exploration operations through this Canadian entity.

The Company was in the business of identifying mineral claim rights in Canada and the United States. The Company had conducted minimal business of this nature.

The Company had acquired certain mining claims on June 9, 2011 located in the Montauban and Chavigny townships near Grondines-West in the Portneuf County of Quebec, Canada (“Montauban Mine Property” or “Property”).

On October 30, 2013 and November 27, 2013, the Company entered into binding agreements for the asset acquisitions of an undivided one hundred percent (100%) interest in certain mineral claims and mining assets located in the Province of Quebec’s Montauban and Chavigny townships near Grondines West, in the county of Portneuf, specifically Mining Lease BM 748 and Mining Concession Miniere CM 410. The purchase price was CDN$75,000 together with the issuance of 1,050,000 common shares of the Company. The common shares for the acquisition were valued at their fair market value on the day they were issued which totaled $496,860. In connection with the asset purchase, the Company also issued 40,000 shares of common stock to a former supplier of the vendor for mining related information of the assets purchased valued at $20,000 along with cash consideration of CDN$20,000. The Company had been awaiting confirmation of the contemplated transaction from a bankruptcy court in Montreal, Quebec overviewing the financial restructuring of the vendor. The bankruptcy court approved the transaction on April 17, 2014.

On January 10, 2014, the Company entered into an asset purchase agreement for an undivided one hundred percent (100%) interest in certain mineral claims located in the Province of Quebec’s Montauban and Chavigny townships near Grondines West, in the county of Portneuf, including claims, rights, concessions and leases. The purchase price was CDN$70,000, 1,000,000 common shares of the Company and a one percent (1%) net smelter return (“NSR”). The Company paid CDN$10,000 upon the signing of the asset purchase agreement with the cash balance due, along with the common shares, upon the closing of the asset purchase agreement and transfer of the mineral claims in the name of the Company. The transfer of the mineral claims was completed in February 2014 whereby the remaining cash balance due andthe common shares were released to the vendor.

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BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 1-

ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)

The common shares for the acquisition were valued at their fair market value on the day they were issued which totaled $340,000. The total cost of the acquisition amounted to $403,840.

On April 14, 2014, the Company entered into an asset purchase agreement for an undivided one hundred percent (100%) interest in fifty seven (57) mining claims located in the Province of Quebec’s Montauban and Chavigny townships near Grondines West, in the county of Portneuf. The purchase price was CDN$5,000 (US $4,547). The transfer of the mining claims was completed by the Province of Quebec in the name of the Company.

On December 4, 2014, the Company presented a renewal request with the Government of the Province of Quebec to renew all 122 claims and this was granted through a decision dated February 23, 2015, which was after the spin-off of DNA Canada Inc. by the Company on February 3, 2015.

On January 16, 2015, Breathe eCigs Corp., a Tennessee corporation (“Breathe”), entered into a Share Exchange Agreement (the “Exchange Agreement”) with the Company, whereby the Company acquired all of the issued and outstanding shares of common stock of Breathe in consideration for the issuance of 150,000,000 shares of common stock.

As a result of the transaction effected by the Exchange Agreement, the former Breathe shareholders owned approximately 56% of the then issued and outstanding common stock of the Company. As a result, the Company accounted for this transaction as a reverse merger whereby Breathe was the accounting acquirer and the comparative period figures are those of Breathe.

The Company declared a stock dividend to its shareholders of record as of February 3, 2015 of its wholly owned subsidiary, DNA Canada, Inc. Each shareholder of record on this date will receive one share of DNA Canada, Inc. for every two shares of DNA Precious Metals Inc. owned by the shareholder on this date. All stock dividends will be rounded down to the next whole number. With the completion of the stock dividend, the Company, no longer has an equity interest in DNA Canada, Inc.

The former shareholders of Breathe participating in the stock dividend were required to tender for redemption any shares of DNA Canada, Inc. common stock received pursuant to the stock dividend in accordance with the Exchange Agreement.

With the acquisition of Breathe, management determined that it would be in the best interest of the Company and its shareholders to operate each company separate and independently of each other. The operation of DNA Canada, Inc. and Breathe were inconsistent. Breathe is a manufacturer and distributor of e-cigarette and related products while DNA Canada, Inc. is an exploration stage mining company. The spin-off of DNA Canada, Inc. will allow each company to focus on its principal business activity and facilitate capital formation.

On March 5, 2015, the Company and Breathe entered into an Agreement and Plan of Merger pursuant to which the Company merged with, Breathe. Upon the consummation of the Merger on March 11, 2015, the separate existence of Breathe ceased, and the shareholders of the Company became shareholders of the surviving company, named Breathe eCig Corp. As permitted under Nevada law, the sole purpose of the Merger was to effect a change to the Company’s name from DNA Precious Metals, Inc. to Breathe eCig Corp. This change to the Amended Articles of Incorporation and name change took effect on March 11, 2015.

The Company in March 2015 entered into Distribution Agreements with various distributors for the distribution of the Company’s products.

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BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 1-

ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)

On May 11, 2015 the Company formed two wholly owned subsidiaries to conduct non-eCigarette related business by way of holding medical device and other related intellectual property for the future development of for-profit activates and/or partnerships. Currently these entities are inactive, and neither holds any assets, carry any liabilities nor hold any intellectual property.

Going Concern

The Company in the three months ended March 31, 2015 completed a reverse merger with Breathe and spun-off DNA Canada, Inc. in an effort to generate profitable operations moving forward. The Company anticipates that distribution of their products will occur in 2015. The Company’s continuation as a going concern is dependent upon, amongst other things, distribution of the products as well as continued financial support from its shareholders and lenders, attaining a satisfactory revenue level, attainment of profitable operations and the generation of cash from operations and the ability to secure new financing arrangements and new capital to carry out its business plan. These matters are dependent on a number of items outside of the Company’s control and there exists material uncertainties that may cast significant doubt about the Company’s ability to continue as a going concern.

The Company can give no assurance that it will achieve profitability or be capable of sustaining profitable operations in its new business of Breathe. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of the carrying amounts of assets or the amount and classification of liabilities that might result if the Company is unable to continue as a going concern. These factors raise substantial doubt regarding the ability of the Company to continue as a going concern.

The Company recently raised $770,250 in net debt proceeds and $782,375 of equity proceeds during the six months ended June 30, 2015, to commence production of the Company’s products and pay for distribution.

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BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 2-

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

These consolidated financial statements are prepared in conformity with United States generally accepted accounting principles (“U.S. GAAP”) and are presented in U.S. dollars.

Exploration Stage Company

The Company was an exploration stage company as defined in ASC 915 prior to the acquisition of Breathe and spin-off of DNA Canada Inc.

The Company had made significant capital investments on a processing mill and related infrastructure pertaining to a mining site described earlier. The construction of the processing mill structure was commenced in the fourth quarter of fiscal 2012 and completed in the first quarter of fiscal 2013. Also, significant infrastructure work related to the processing mill has been completed.

The infrastructure construction included the foundation, a 16,000 sq./ft. steel structure building and water and power supply installations. DNA Canada Inc. completed all the access infrastructural work to the future site where the milling facilities will be located. Due to SEC requirements, the land, building and mill equipment were charged to impairment expense at December 31, 2014 since these assets were not put into production since their acquisition.

On September 14, 2012, DNA Canada Inc. received a Certificate of Authorization, from the Quebec Provincial Government, with respect to operating a gravimetric circuit to process the mining residues, or tailings, located on the Montauban Mine Property. On March 13, 2014, DNA Canada Inc. received another Certificate of Authorization, also from the Quebec Provincial Government, with respect to operating a cyanization circuit to process the mining residues located on the Montauban Mine Property. Previously, on February 28, 2014, DNA Canada Inc. received approval, from the Quebec Provincial Government, for the Restoration Plan on the Montauban Mine Property which will be implemented subsequent to DNA Canada Inc.’s processing of the mining residues (tailings) on the site.

The two (2) Certificates of Authorization issued to DNA Canada Inc. will allow for the construction and installation of equipment facilities to recuperate mica (muscovite) and precious metals (gold and silver) from the mining residues (tailings) located on the Montauban Mine Property.

Consequently, the primary objective was to recuperate the mica and precious metals (gold and silver) from the mining residues. The recuperation of the precious metals from the mining residues would be less expensive than traditional mining operations primarily because the mining residues had already been crushed and grinded by prior mining companies.

In accordance with ASU 2014-10 (see Recent Accounting Pronouncements), the Company had elected early adoption whereby, amounts and disclosures of the Company’s exploration stage activities commencing with the period June 30, 2014 are no longer required to be presented. As a result, the Company removed this information.

On February 3, 2015, with the spin-off of DNA Canada Inc., the Company exited the exploration stage.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Estimates include but are not limited to stock-based compensation, impairment of long-lived assets, criteria utilized in the calculation of derivative liabilities and tax valuation allowances.

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BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 2-

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Principles of Consolidation

The consolidated financial statements included the accounts of the Company and Breathe as the acquisition of Breathe was accounted for as a reverse merger and Breathe is the accounting acquirer, from the date that the Merger occurred between the Company and Breathe eCigs Corp. All intercompany transactions and accounts had been eliminated on consolidation. Effective March 11, 2015, the financial statements were no longer consolidated until April 2015 and the establishment of two new wholly-owned subsidiaries (see Subsequent Events).

Business Combination

On January 16, 2015, Breathe entered the Exchange Agreement with the Company, whereby the Company acquired all of the issued and outstanding shares of common stock of Breathe in consideration for the issuance of 150,000,000 shares of common stock. This business combination was accounted for as a reverse merger whereby Breathe is the accounting acquirer as the former Breathe shareholders now control greater than 50% of the voting control of the Company.

In November 2014, the FASB issued ASU No. 2014-17, “Business Combination.” The provisions of ASU No. 2014-17 require management to determining whether and at what threshold an acquiree (acquired entity) can reflect the acquirer’s accounting and reporting basis (pushdown accounting) in its separate financial statements. The entities of the transaction were under common control from January 16, 2015 until February 3, 2015. Since neither unit of this business combination is in the development stage, nor had recognizable revenues during this period the application of push down accounting would not be of significant value to the readers of these condensed consolidated financial statements. The Company has not elected to apply pushdown accounting in its separate financial statements upon occurrence of this event.

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BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 2-

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Stock Options-Based Compensation

The Company estimates the fair value of stock options-based payment awards made to officers and directors related to the Company’s stock incentive plan, on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense ratably over the requisite service periods. The Company uses the Black-Scholes option pricing model to determine the fair value of the stock-based compensation that it grants to officers and directors. The Company is required to make certain assumptions in connection with this determination, the most important of which involves the calculation of volatility with respect to the price of its common stock. The computation of volatility is intended to produce a volatility value that is representative of the Company’s expectations about the future volatility of the price of its common stock over an expected term. The Company used an estimate of its future share price to determine volatility and cannot predict how the price of its common shares of common stock will react on the open market in the future. Shares of the Company commenced trading on August 22, 2013. As a result, the volatility value that the Company calculated may differ from the future volatility of the price of its shares of common stock.

Upon the exercise of stock options, any consideration received and the amounts previously recorded under stock-based compensation are credited to share capital. Upon the issuance of shares resulting from share awards, amounts previously recorded under stock options-based compensation are credited to share capital.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments and other short-term investments with maturity of three months or less, when purchased, to be cash equivalents.

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BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 2-

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fixed Assets

Fixed assets are stated at cost, less accumulated depreciation. Depreciation will be provided using the straight-line method over the estimated useful lives of the related assets when those assets are placed into service. Costs of maintenance and repairs will be charged to expense as incurred.

Trade and Other Payables

Trade and other payables and accrued liabilities are obligations to pay for goods or services that have been acquired in the normal course of business. Trade and other payables and accrued liabilities are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

Recoverability of Long-Lived Assets

Although the Company does not have any long-lived assets at this point, for any long-lived assets acquired in the future, the Company will review their recoverability on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment will be based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets. Fixed assets to be disposed of by sale will be carried at the lower of the then current carrying value or fair value less estimated costs to sell.

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 2-

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fair Value of Financial Instruments

The carrying amount reported in the consolidated balance sheets for cash and cash equivalents, accounts payable, and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments.

Income Taxes

The Company uses the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted or substantially enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as part of the provision for income taxes in the period that includes the enactment date. Deferred tax liabilities are always provided for in full. Deferred tax assets are recognized to the extent that it is probable that they will be able to be utilized against future taxable income. Deferred tax assets and liabilities are offset only when the Company has a right and intention to set off current tax assets and liabilities from the same taxation authority. Valuation allowances are established, when necessary, to reduce deferred tax assets to amounts that are expected to be realized.

The Company accounts for income taxes pursuant to the provision of ASC 740-10, “Accounting for Income Taxes” (“ASC 740-10”) which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.

The Company follows the provision of ASC 740-10 related to Accounting for Uncertain Income Tax Position. When tax returns are filed, there may be uncertainty about the merits of positions taken or the amount of the position that would be ultimately sustained.

In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.

Tax positions that meet the more likely than not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes (Continued)

The Company has adopted ASC 740-10-25, “Definition of Settlement”, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purposes of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion and examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities generally for three years after they were filed.

Revenue Recognition

The Company will generate revenues from the sale of the Company’s products when the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred; (iii) the price to the customer is fixed or determinable; and (iv) collection of the sales price is reasonably assured. Delivery occurs when goods are shipped and title and risk of loss have passed to the customer. Revenue is deferred in all instances where the earnings process is incomplete. Payments received before all of the relevant criteria for revenue recognition are satisfied will be recorded as deferred revenue. Revenues and costs of revenues from consulting contracts will be recognized during the period in which the service will be performed. All revenues will be reported net of any sales discounts or taxes.

Trade Receivables and Allowance for Doubtful Accounts

The Company is engaged in the sales and distribution in the consumer products market through sales to distributors, wholesalers and direct to consumers via e-commerce sales of eCigarettes for use by consumers. Trade receivables consist primarily of amounts due to us from our normal business activities whereby approved distributors and wholesalers are extended terms after down payments on orders. We control credit risk related to our trade receivables through credit approvals, credit limits and monitoring procedures, and perform ongoing credit evaluations of our customers. In assessing the carrying value of its trade receivables, the Company estimates the recoverability by making assumptions based on factors such as current overall and industry-specific economic conditions, historical and anticipated customer performance, historical write-off and collection experience, the level of past-due amounts, and specific risks identified in the accounts receivable portfolio. Additional changes to the allowance could be necessary in the future if a customer’s creditworthiness deteriorates, or if actual defaults are higher than the Company’s historical experience. Any difference could result in an increase or decrease in the allowance for doubtful accounts.

Inventory

Finished Goods Inventories - Finished goods inventories is stated at the lower of cost or market determined by the first-in, first-out method, and include salable eCigarette product items and supplies that are sale ready to ship to wholesalers or distributers. Shipping and handling costs (consisting of all costs to warehouse, pick, pack and deliver inventory to customers) will be included in cost of goods sold. Samples are included in marketing expenses which are a component of general and administrative costs. The Company in March 2015 entered into Distribution Agreements with various distributors for the distribution of the Company’s products. The Company placed an initial order for merchandise in the amount of $437,750 on March 27, 2015. The Company has outsourced the assembly and production of its products held for resale and will not hold any of the product in its possession. The Company’s inventory is received, housed and distributed by a third party fulfillment provider. As of June 30, 2015 the inventory held by the third party fulfillment provider has a value of $141,384. Included in prepaid expenses is $397,363 paid for merchandise not yet received by the fulfillment center.

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Loss Per Share of Common Stock

Basic net loss per share (“Basic EPS”) is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding for the period.

Diluted earnings per share is computed by dividing adjusted net income available to common shareholders by the weighted average number of common shares outstanding adjusted for the effects of all dilutive common share issuances. Dilutive common share issuances shall be deemed to have been converted into ordinary shares at the beginning of the period.

For the purpose of calculating diluted earnings per share, the Company shall assume the exercise of dilutive stock options and warrants. The assumed proceeds from these instruments shall be regarded as having been received from the issue of common shares at the average market price of common shares during the period. Dilutive common share issuances are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive for the periods presented.

The following is a reconciliation of the computation for basic and diluted EPS:

	Six Months Ended
	June 30,			June 30,
	2015			2014

Net loss	$	(6,675,780	)	$	(4,760	)

Weighted-average common shares outstanding (Basic)		275,215,740

Weighted-average common shares
Equivalent
Stock options		200,000			N/A
Warrants		1,540,625			N/A

Weighted-average common shares outstanding (Diluted)		276,956,365			N/A

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Derivative Financial Instruments (Continued)

The accounting treatment of derivative financial instruments requires that the Company record the conversion option and related warrants at their fair values as of the inception date of the agreements, and at fair value as of each subsequent balance sheet date.

As a result of entering into the convertible notes, the Company is required to classify certain non-employee warrants as derivative liabilities and record them at their fair values at each balance sheet date. Any change in fair value was recorded as a change in the fair value of derivative liabilities for each reporting period at each balance sheet date. The Company reassesses the classification at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.

The fair value of conversion options at a fixed number of shares are recorded using the intrinsic value method. Conversion options at variable rates and any options and warrants with ratchet provisions are deemed to contain a “down-round protection”. Accordingly, they do not meet the scope exception for treatment as a derivative under ASC 815 since “down-round protection” is not an input into the calculation of the fair value of the equity instruments and cannot be considered “indexed to the Company’s own stock”, which is a requirement for the scope exception as outlined under ASC 815.

The Company signed convertible notes and warrants and has determined that a conversion option is embedded in the note and it is required to bifurcate the conversion option from the host contract under ASC 815 and account for the derivatives at fair value. The estimated fair value of the conversion option was determined using the binomial model. The fair value of the conversion option will be classified as a liability until the debt is converted by the note holders or paid back by the Company. The fair value will be affected by changes in inputs to that model including our stock price, expected stock price volatility, the contractual term, and the risk-free interest rate. The Company will continue to classify the fair value of the conversion option as a liability until the conversion option is exercised, expires or is amended in a way that would no longer require these conversion options to be classified as a liability, whichever comes first. The Company has adopted a sequencing policy that reclassifies contracts (from equity to assets or liabilities) with the most recent inception date first. Thus any available shares are allocated first to contracts with the most recent inception date.

For the binomial lattice options pricing model, the Company used the following assumptions and weighted average fair value ranges as at the transaction date, April 28, 2014, and for the period ended June 30, 2015:

Convertible Notes:	April 28, 2014		June 30, 2015
Risk free interest rate		0.0577%		0.04%
Dividend yield		N/A		N/A
Volatility		86.31%		225.00%

Warrants:	April 28, 2014		June 30, 2015
Risk free interest rate		0.144%		0.04%
Dividend yield		N/A		N/A
Volatility		97.33%		225.00%

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation. The reclassifications had no effect on the net loss or cash flows of the Company.

Recent Issued Accounting Standards

In November 2014, the FASB issued ASU No. 2014-17, “Business Combination.” The provisions of ASU No. 2014-17 require management to determining whether and at what threshold an acquiree (acquired entity) can reflect the acquirer’s accounting and reporting basis (pushdown accounting) in its separate financial statements. Since neither unit of this business combination is in the development stage, nor had recognizable revenues during this period the application of push down accounting would not be of significant value to the readers of these condensed consolidated financial statements. The Company has not elected to apply pushdown accounting in its separate financial statements upon occurrence of this event.

During August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements—Going Concern.” The provisions of ASU No. 2014-15 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 ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently assessing the impact of this ASU on the Company’s consolidated financial statements.

During June 2014, the FASB issued an Accounting Standards Update 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 ("ASU 2014-10")". The objective of ASU 2014-10 is to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements for development stage entities. ASU 2014-10 is effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. The Company has elected early implementation, as permitted by the standard, for the interim period ending June 30, 2014. All exploration stage language disclosures and amounts have been removed as a result of the adoption of ASU 2014-10.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (Topic 606) (ASU 2014-09), which supersedes the revenue recognition requirements in ASC Topic 605, “Revenue Recognition”, and most industry-specific guidance. ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The amendments in ASU 2014-09 will be applied using one of two retrospective methods. The effective date will be the first quarter of our fiscal year ended December 31, 2018. We have not determined the potential effects on our financial statements.

During July 2013, the FASB issued an Accounting Standards Update No. 2013-11, “Income Taxes (Topic 740) - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry forward, a Similar Tax Loss, or a Tax Credit Carry forward Exists (“ASU 2013-11”)”. The objective of ASU 2013-11 is to clarify the financial presentation of an unrecognized tax benefit when a net operating loss carry forward, a similar tax loss, or a tax credit carry forward exists. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. ASU 2013-11 is effective for fiscal years, and interim periods within those years beginning after December 15, 2013.

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Issued Accounting Standards (continued)

The Company does not expect that the adoption of ASU 2013-11 will have a significant impact on the presentation of its financial statements.

In July 2012, the FASB issued ASU 2012-02, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, on testing for indefinite-lived intangible assets for impairment. The new guidance provides an entity to simplify the testing for a drop in value of intangible assets such as trademarks, patents, and distribution rights. The amended standard reduces the cost of accounting for indefinite-lived intangible assets, especially in cases where the likelihood of impairment is low.

The changes permit businesses and other organizations to first use subjective criteria to determine if an intangible asset has lost value. The amendments to U.S. GAAP will be effective for fiscal years starting after September 15, 2012. The Company’s adoption of this accounting guidance does not have a material impact on the consolidated financial statements and related disclosures.

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

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 3- ACQUISITION

Breathe Acquisition and Spin-off of DNA Canada, Inc.

As a result of the transaction effected by the Exchange Agreement, at closing Breathe became a wholly owned subsidiary of the Company, with the former Breathe shareholders owning approximately 56% of the then issued and outstanding common stock of the Company. The Company accounted for this acquisition as a reverse merger, whereby Breathe became the accounting acquirer. As a result, the comparative figures are those of Breathe.

On March 5, 2015, the Company and Breathe entered into an Agreement and Plan of Merger pursuant to which the Company merged with its wholly owned subsidiary, Breathe. Upon the consummation of the Merger on March 11, 2015, the separate existence of Breathe ceased, and the shareholders of the Company became shareholders of the surviving company, named Breathe eCig Corp. As permitted under Nevada law, the sole purpose of the Merger was to effect a change to the Company’s name from DNA Precious Metals, Inc. to Breathe eCig Corp. This change to the Amended Articles of Incorporation and name change took effect on March 11, 2015.

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 4- CONVERTIBLE NOTES AND DERIVATIVE LIABILITIES

The following summary of convertible notes payable and the related derivative liabilities associated with the convertible notes payable prior to the date of the reverse merger relate to the predecessor entity DNA Precious Metals, Inc. As a result of the reverse merger, Breathe assumed responsibility of these DNA Precious Metals, Inc. notes, which were paid off prior to the reverse merger, and any related derivative liability that exists under these notes related to the warrant agreements. Therefore, a full discussion has been provided for clarification.

On August 6, 2014, the Company entered into an agreement with a U.S.-based private equity fund (“Investor”) under which the Company issued an unsecured Convertible Note (“Convertible Note”) in the principal amount of $250,000. The funds to be issued under the Convertible Note is $225,000 (“Consideration”). The Convertible Note includes an original issue discount of $25,000 (“OID”), calculated at 10% of the principal amount ($250,000). The initial Consideration paid to the Company on August 6, 2014 was $66,000. The Investor could pay additional Consideration to the Company in such amounts and at such dates as the Investor may choose in its sole discretion. The principal sum due to the Investor shall be prorated based on the Consideration actually paid by the Investor plus a 10% OID, as well as any other interest or fees, such that the Company is only required to repay the amounts funded and the Company is not required to repay any unfunded portions of the Convertible Note. The Company may repay the Convertible Note at any time on or before 90 days from the transaction date after which the Company may not make further payments on the Convertible Note prior to the Maturity Date without written approval from the Investor. If the Company makes a payment of Consideration on or before 90 days from the transaction date, the interest rate on that payment of Consideration shall be zero percent (0%). If the Company does not repay a payment of Consideration on or before 90 days from the transaction date, a one-time interest charge of 12% shall be applied to the principal amount. Any interest payable is in addition to the OID and that OID (or prorated OID, if applicable) remains payable regardless of time and manner of payment by the Company. The maturity date is two years from the transaction date of each payment ("Maturity Date") and is the date upon which the principal amount of the Convertible Note, as well as any unpaid interest and other fees, shall be due and payable. The Investor had the right, at any time after the transaction date, at its election, to convert all or part of the outstanding and unpaid principal amount and accrued interest (and any other fees) into fully paid and non-assessable shares of common stock of the Company.

The conversion price was the lesser of $0.16 or 60% of the lowest trade price in the 25 trading days prior to the conversion. Unless otherwise agreed in writing by both parties, at no time will the Investor convert any amount of the Convertible Note into common stock that would result in the Investor owning more than 4.99% of the common stock outstanding of the Company. At all times that this Convertible Note is outstanding, the Company agrees to reserve at least 10,000,000 shares of common stock for conversion. On October 30, 2014, the Company and the Investor entered into an amendment (“Amendment #1”), whereby the Company paid a partial note repayment in the amount of $33,333 on November 5, 2014 which equals 50% of the note balance which includes $3,333 in interest, with the remaining balance due by January 6, 2015, which was repaid on December 29, 2014.

On April 28, 2014, the Company entered into a Securities Purchase Agreement (“SPA”), with a U.S.-based private equity fund, under which the Company issued a Secured Convertible Promissory Note (the “Convertible Note”) in the amount of $552,500. The Convertible Note includes an original issue discount of $50,000 (“OID”), calculated at 10% of the principal amount ($500,000), plus an additional $2,500 (“Transaction Expense Amount”) to cover the investor’s due diligence and legal fees in connection therewith. The principal amount was to be paid to the investor in six (6) tranches of an initial amount under the Convertible Note of $250,000 and five (5) additional amounts of $50,000, with each of the additional amounts represented by Investor Notes (the Convertible Note and the Investor Notes are collectively referred to herein as the “Notes”). The initial $250,000 in cash was paid to the Company on April 29, 2014. Payment of the Notes will be made on a monthly basis, beginning six months after the issue date when the Company received the initial $250,000, in the amount of $34,531 per month plus all accrued but unpaid interest and other costs, fees or charges payable, for sixteen (16) months until the balance is paid in full. The Notes are convertible into common stock, at the option of the investor, at a price of $0.40 per share subject to adjustment in the case of a default, reorganization or recapitalization. In the event the Company elects to prepay all or any portion of the Notes, the Company is required to pay to the investor an amount in cash equal to 125% of the outstanding balance of the Notes, plus accrued interest and any other amounts owing. Interest accrues at the rate of 10% per annum. If the Company failed to repay the Notes when due, or if other events of default thereunder apply, a default interest rate of 22% per annum would apply. In addition, if the Company failed to issue stock to the investor within three trading days of receipt of a notice of conversion, the Company must pay a penalty equal to the greater of greater of $500 per day and 2% of the applicable conversion amount or installment amount, as applicable (but, in any event, the cumulative amount of such late fees shall not exceed the applicable conversion amount or installment amount). The Notes were secured by an interest in all right, title, interest, claims and demands of the Company in and to the property described in the Security Agreement, and all replacements, proceeds, products, and accessions thereof.

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 4- CONVERTIBLE NOTES AND DERIVATIVE LIABILITIES (CONTINUED)

The Notes were convertible into shares of our common stock in six tranches, consisting of (i) an initial tranche in an amount equal to $277,500 and any interest, costs, fees or charges accrued thereon or added thereto under the terms of this Note and the other Transaction Documents (as defined in the Securities Purchase Agreement), and (ii) five (5) additional tranches, each in the amount of $55,000, plus any interest, costs, fees or charges accrued thereon or added thereto under the terms of this Note and the other Transaction Documents. Except in the case of a Company default, the Notes are convertible by the investor at a price of $.40 per share. Concurrently with the Securities Purchase Agreement, the Company also issued to the investor warrants (the "Warrants") to purchase 690,625 shares of the Company’s common stock at an exercise price of $.75 per share subject to adjustment as more fully set forth in the warrant agreement. The Warrants also contains a cashless exercise provision. The Warrants are for a term of two (2) years. In accordance with the warrant agreement as described in Note 5, the warrant price will be reset to equal the conversion price associated with these new debt agreements from the stated strike price of $0.75.

On May 18, 2015, Typenex Co-Investment, LLC (“Typenex”) filed a binding arbitration notice against the Company in the State of Utah regarding a certain Warrant to Purchase Shares of Common Stock (the “Warrant”) issued by the Company to Typenex on April 28, 2014 (the “Arbitration”) in connection with a Convertible Promissory Note of the same date (the “Note”). On April 29, 2015, Typenex sent a Notice of Exercise to the Company for the issuance of 7,541,511 shares of the Company’s common stock along with an opinion letter indicating the shares should be issued without restrictive legend pursuant to Rule 144 under the Securities Act of 1933, as amended. The Company immediately filed for an emergency injunction in the State of New Jersey, the location of the Company’s transfer agent. The injunction was granted and Typenex and the Company subsequently agreed no shares would be issued until the resolution of the Arbitration. The Arbitration hearing is currently scheduled for November 11 and 12, 2015 in the State of Utah. The Company has filed a response and counterclaim to the Arbitration notice alleging, among other things, that Typenex did not fulfill its obligations under the original Note and failed to disclose material matters regarding Typenex and its principal to the Company and has requested damages and attorneys’ fees be paid by Typenex to the Company. Further, the Company is challenging the number of shares that may be subject to the Warrant. Although the Company believes it will prevail on the merits, there can be no guaranty that it will do so.

On February 4, 2015, the Company entered into a convertible note in an amount up to $250,000 with an investor. The initial funding was in the gross amount of $27,500, with net proceeds received of $25,000. The $2,500 represents Original Issue Discount. The maturity date of this note is two years from the date that each tranche is paid. The note was convertible at the lesser of $0.065 or 60% of the lowest trade price in the 25 trading days previous to the conversion.

The Company may repay this note at any time on or before 90 days from the effective date (the date the Company receives the cash) of the note at no additional interest charge. If the note remains outstanding beyond the 90 days, there will be a one-time 12% interest charge applied in addition to the Original Issue Discount recognized at the onset of the note. The investor has the right to convert at any time after the effective date of this note. The Company repaid this note along with all accrued interest on April 22, 2015.

On April 22, 2015 the Company repaid a 10% convertible note to an investor in the amount of $27,778. The note was issued on February 4, 2015. The initial funding was in the gross amount of $27,500, with net proceeds received of $25,000. The $2,500 represented Original Issue Discount. The maturity date of this note was two years from the date that each tranche is paid. The note was convertible at the lesser of $0.065 or 60% of the lowest trade price in the 25 trading days previous to the conversion.

The Company repaid this note within 90 days from the effective date (the date the Company received the cash) of the note at no additional interest charge. The investor had the right to convert at any time after the effective date of this note. The addition $2,778 payment was calculated as a proration of the total original issue discount sum of all tranches of the loan ($25,000) multiplied by the total net proceeds available ($225,000) divided by total principal sum of all tranches ($250,000).

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 4- CONVERTIBLE NOTES AND DERIVATIVE LIABILITIES (CONTINUED)

On February 9, 2015, the Company entered into a convertible note in an amount of $110,000 with an investor. The gross amount of the note is $110,000, with net proceeds received of $100,000. The $10,000 represents Original Issue Discount. The note will also bear interest at 8%, compounded annually. The maturity date of this note is one year from execution. The note may be converted, in whole or in part, into shares of the Company’s common stock. The conversion price will be 60%, equivalent to a 40% discount, of the lowest trading price of the Company’s common stock during the 25 trading days prior to conversion. For defaults, the note is immediately due and payable and subject to a penalty interest rate of 20%. On May 7, 2015 this note was assigned to M Capital Partners LLC in consideration for a payment of $145,000 by M Capital Partners LLC to the original note holder. The Company still owes the entire $110,000 note, however, the noteholder is M Capital Partners LLC. As a result of this assignment, the Company as noted above issued 300,000 shares of common stock to Iconic.

The note may be prepaid according to the following schedule: Between 1 and 45 days from the date of execution, the note may be prepaid for 105% of face value plus accrued interest. Between 46 and 90 days from the date of execution, the note may be prepaid for 110% of face value plus accrued interest. Between 91 and 135 days from the date of execution, the note may be prepaid for 125% of face value plus accrued interest. Between 136 and 180 days from the date of execution, the note may be prepaid for 135% of face value plus accrued interest. After 180 days from the date of execution, the note may not be prepaid without written consent from the investor.

On March 6, 2015, the Company entered into an 8% convertible redeemable note with an investor in the amount of $31,500. The gross amount of the note is $31,500, with net proceeds received of $30,000. The $1,500 represents legal fees. This note matures on March 6, 2016. The investor is entitled, at its option, at any time, to convert all or any amount of the principal face amount of the note, then outstanding into shares of the Company’s common stock at a price for each share of common stock equal to 58% of the lowest trading price of the Company’s common stock as reported on the OTCQB for the fifteen prior trading days including the day upon which a notice of conversion is delivered.

The note may be prepaid according to the following schedule: Between 1 and 30 days from the date of execution, the note may be prepaid for 110% of face value plus accrued interest. Between 31 and 60 days from the date of execution, the note may be prepaid for 116% of face value plus accrued interest. Between 61 and 90 days from the date of execution, the note may be prepaid for 122% of face value plus accrued interest. Between 91 and 120 days from the date of execution, the note may be prepaid for 128% of face value plus accrued interest. Between 121 and 150 days from the date of execution, the note may be prepaid for 134% of face value plus accrued interest. Between 151 and 180 days from the date of execution, the note may be prepaid for 135% of face value plus accrued interest. After 180 days from the date of execution, the note may not be prepaid.

On March 11, 2015, the Company entered into an 8% convertible redeemable note with an investor in the amount of $52,500. The gross amount of the note is $52,500, with net proceeds received of $50,000. The $2,500 represents legal fees. This note matures on March 11, 2016. The investor is entitled, at its option, at any time, to convert all or any amount of the principal face amount of the note, then outstanding into shares of the Company’s common stock at a price for each share of common stock equal to 55% of the lowest trading price of the Company’s common stock as reported on the OTCQB for the fifteen prior trading days including the day upon which a notice of conversion is delivered.

The note may be prepaid according to the following schedule: Between 1 and 30 days from the date of execution, the note may be prepaid for 105% of face value plus accrued interest. Between 31 and 60 days from the date of execution, the note may be prepaid for 115% of face value plus accrued interest. Between 61 and 90 days from the date of execution, the note may be prepaid for 120% of face value plus accrued interest. Between 91 and 120 days from the date of execution, the note may be prepaid for 130% of face value plus accrued interest. Between 121 and 150 days from the date of execution, the note may be prepaid for 135% of face value plus accrued interest. Between 151 and 180 days from the date of execution, the note may be prepaid for 140% of face value plus accrued interest. After 180 days from the date of execution, the note may not be prepaid.

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 4- CONVERTIBLE NOTES AND DERIVATIVE LIABILITIES (CONTINUED)

On March 13, 2015, the Company entered into an 8% convertible redeemable note with an investor in the amount of $52,500. The gross amount of the note is $52,500, with net proceeds received of $50,000. The $2,500 represents legal fees. This note matures on March 13, 2016.

The investor is entitled, at its option, at any time, to convert all or any amount of the principal face amount of the note, then outstanding into shares of the Company’s common stock at a price for each share of common stock equal to 55% of the lowest trading price of the Company’s common stock as reported on the OTCQB for the fifteen prior trading days including the day upon which a notice of conversion is delivered.

On March 31, 2015, the Company entered into an 8% convertible redeemable note with an investor in the amount of $105,000. The gross amount of the note is $105,000, with net proceeds received of $100,000. The $5,000 represents legal fees. This note matures on March 31, 2016.

On April 8, 2015, the Company entered into a 10% convertible redeemable note payable with an investor in the amount of $53,000. The gross amount of the note is $53,000, with net proceeds received of $50,000. The $3,000 represents legal fees. This note matures on April 8, 2016.

The investor is entitled, at its option, at any time, to convert all or any amount of the principal face amount of the note, then outstanding into shares of the Company’s common stock at a price for each share of common stock equal to 60% of the lowest trading price of the Company’s common stock as reported on the OTCQB for the twenty prior trading days including the day upon which a notice of conversion is delivered.

The note may be prepaid at any time during the period beginning on the Issue Date and ending on the date which is three (3) months following the Issue Date (“Prepayment Termination Date”), Borrower shall have the right, exercisable on not less than five (5) Trading Days prior written notice to the Holder of this Note, to prepay the outstanding balance on this Note (principal and accrued interest), in full.

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 4- CONVERTIBLE NOTES AND DERIVATIVE LIABILITIES (CONTINUED)

After the Prepayment Termination Date, the Borrower shall have no right to prepay this Note. For purposes hereof, the “Prepayment Factor” shall equal one hundred and fifty percent (150%), provided that such Prepayment factor shall equal one hundred and twenty percent (120%) if the Optional Prepayment Date occurs on or before the date which is three (3) months following the Issue Date hereof.

On May 22, 2015, the Company entered into an 8% convertible redeemable note payable with an investor in the amount of $137,500. The gross amount of the note is $137,500, with net proceeds received of $118,750. The $18,750 represents legal fees of $6,250 and Original Issue Discount of $12,500. This note matures on May 22, 2016. The note will also bear interest at 8%, compounded annually. The maturity date of this note is one year from execution. The note may be converted, in whole or in part, into shares of the Company’s common stock. The conversion price will be 68%, equivalent to a 32% discount, of the lowest trading price of the Company’s common stock during the 15 trading days prior to conversion. For defaults, the note is immediately due and payable and subject to a penalty interest rate of 24%.

The note may be prepaid according to the following schedule: Between 1 and 30 days from the date of execution, the note may be prepaid for 105% of face value plus accrued interest. Between 31 and 60 days from the date of execution, the note may be prepaid for 115% of face value plus accrued interest. Between 61 and 90 days from the date of execution, the note may be prepaid for 120% of face value plus accrued interest. Between 91 and 120 days from the date of execution, the note may be prepaid for 135% of face value plus accrued interest. Between 121 and 180 days from the date of execution, the note may be prepaid for 140% of face value plus accrued interest. After 180 days from the date of execution, the note may not be prepaid.

On May 22, 2015, the Company entered into a 12% convertible redeemable note payable with an investor in the amount of $82,500. The gross amount of the note is $82,500, with net proceeds received of $75,000. The $7,500 represents an Original Issue Discount. This note matures on May 22, 2016. The note will also bear interest at 12%, compounded annually. The maturity date of this note is one year from execution. The note may be converted, in whole or in part, into shares of the Company’s common stock. The conversion price will be the lower of 60%, equivalent to a 40% discount, of the lowest trading price of the Company’s common stock as of the date of conversion notice or $0.10 per share. For defaults, the note is immediately due and payable and subject to a penalty interest rate of 18%.

The note may be prepaid according to the following schedule: Between 1 and 30 days from the date of execution, the note may be prepaid for 125% of face value plus accrued interest. Between 31 and 180 days from the date of execution, the note may be prepaid for 135% of face value plus accrued interest. After 180 days from the date of execution, the note may be prepaid for 145% of face value plus accrued interest.

As consideration for the holder’s commitment to purchase this debenture, borrower issued to holder 400,000 shares of the Company’s common stock. These commitment fee shares have been earned in full upon holder’s purchase of this debenture; none of the commitment fee shares will be returned in the event of prepayment of the note.

On June 8, 2015, the Company entered into a 10% convertible redeemable note payable with an investor in the amount of $100,000. The gross amount of the note is $100,000, with net proceeds received of $96,500. The $3,500 represents legal fees. This note matures on June 8, 2016. The note will also bear interest at 10%, compounded annually. The maturity date of this note is one year from execution. The note may be converted, in whole or in part, into shares of the Company’s common stock. The conversion price will be the lower of closing price of the common stock on the principle market on the training day immediately preceding the closing date or 35%, equivalent to a 65% discount, of the lowest trading price of the Company’s common stock during the 20 trading days prior to conversion. For defaults, the note is immediately due and payable and subject to a penalty interest rate of 24%.

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 4- CONVERTIBLE NOTES AND DERIVATIVE LIABILITIES (CONTINUED)

The note may be prepaid according to the following schedule: Between 1 and 90 days from the date of execution, the note may be prepaid for 120% of face value plus accrued interest. Between 91 and 180 days from the date of execution, the note may be prepaid for 140% of face value plus accrued interest. After 180 days from the date of execution, the note may not be prepaid.

On June 10, 2015, the Company entered into a 12% convertible redeemable note payable with an investor in the amount of $82,500. The gross amount of the note is $82,500, with net proceeds received of $75,000. The $7,500 represents an Original Issue Discount. This note matures on May 22, 2016. The note will also bear interest at 12%, compounded annually. The maturity date of this note is one year from execution. The note may be converted, in whole or in part, into shares of the Company’s common stock. The conversion price will be the lower of 60%, equivalent to a 40% discount, of the lowest trading price of the Company’s common stock as of the date of conversion notice or $0.06 per share. For defaults, the note is immediately due and payable and subject to a penalty interest rate of 18%.

As consideration for the holder’s commitment to purchase this debenture, borrower issued to holder 600,000 shares of the Company’s common stock. These commitment fee shares have been earned in full upon holder’s purchase of this debenture; none of the commitment fee shares will be returned in the event of prepayment of the note.

All convertible notes payable are due within one year and are reflected as current liabilities in the condensed consolidated balance sheet at June 30, 2016.

As of June 30, 2015, the Company has $33,042 remaining in discount of the original issue discount with respect to these notes. Amortization of the original issue discount for the six months ended June 30, 2015 was $6,958, and interest expense on the convertible notes for the six months ended June 30, 2015 was $13,762. Accrued interest on these convertible notes at June 30, 2015 was $13,483.

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 4- CONVERTIBLE NOTES AND DERIVATIVE LIABILITIES (CONTINUED)

Derivative Liability - Warrants

In accordance with Financial Accounting Standards Board (“FASB”) ASC 815, Derivatives and Hedging, the embedded conversion option in the Convertible Note, as well as the Warrants issued by the Company, are required to be accounted for as derivative instrument liabilities. Such liabilities are initially and continuously carried at fair value with changes in their fair value reported in income in each reporting period. Accounting for the conversion option in the Convertible Note and for the Warrants as derivative instruments is required because both the Convertible Note and the Warrants have down-round anti-dilution protection, or ratchet exercise prices, whereby the conversion or exercise price is reduced if the Company subsequently issues common stock, convertible securities or stock options or stock warrants at a lower price or with a lower exercise or conversion price. Such a provision is inconsistent with the “fixed for fixed” nature of an equity option and therefore the instruments do not meet one of the required tests for equity classification. In addition, because the Convertible Note and the Warrants are denominated in a currency (U.S. dollars) that is different from the Company’s functional currency (Canadian dollars), they do not meet the test of being indexed only to the Company’s common stock. When one or more instruments are accounted for as derivative liabilities at fair value, the proceeds received are first allocated to the initial fair value of those derivative instruments, with any remaining proceeds allocated to the initial carrying value of the Convertible Note, which is accounted for at amortized cost. Interest is accrued on the initial carrying value of the Convertible Note at whatever effective interest rate is required in order to equate the present value of the expected future cash flows associated with the Convertible Note with their initial carrying value. Stated interest on the Note (10% per annum) is not accrued separately but is included in the effective interest rate on the Convertible Note.

The fair value of the embedded conversion option in the Note and the fair value of the Warrants have been calculated using the call option value output from a binomial Lattice model. A binomial Lattice model assumes that the price of the stock that underlies an option follows a probability distribution in which the underlying event only has one of two possible outcomes - the market price of the stock can either go up or go down in the future.

The Lattice valuation model takes into account all of the assumptions that market participants would likely consider in negotiating the transfer of the embedded conversion option and the Warrants, namely, stock price, exercise price, time to expiration, volatility, risk-free rate and dividends.

The Company between November 26, 2014 and December 31, 2014, repaid the entire convertible note balance of $277,500 thus extinguishing the note. Upon the initial recording of the convertible note and warrants associated with the convertible note, a derivative liability was recorded as the convertible note and warrant each contained embedded derivatives as determined under ASC 815. Since the warrants associated with the convertible note remain outstanding as of June 30, 2015, the derivative liability associated with the warrants remain. The Company recognized a loss on the fair value of the derivative liabilities of $60,193 during the six months ended June 30, 2015 bringing the derivative liability balance to $257,233 at June 30, 2015.

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 5- STOCKHOLDERS’ DEFICIT

Preferred Stock

The Company was established on June 2, 2006 with 10,000,000 shares of preferred stock authorized with a par value of $0.001. The Company has not issued any preferred stock.

Common Stock

The Company was established on June 2, 2006 with 100,000,000 shares of common stock authorized with a par value of $0.001. On December 8, 2011, the Company amended the authorized stock to 150,000,000 shares. On March 17, 2014, the Company amended the authorized stock to 500,000,000 shares.

In 2014, the Company issued:

●	During November and December 2014, 14,310,000 private placement shares were issued to investors for an amount totaling $715,500 ($0.05 per share).

●	On January 10, 2014, the Company issued 1,000,000 common shares in connection with an asset purchase valued at $340,000.

●	50,000 shares of common stock upon the exercise of 50,000 stock options by a Director of the Company, at an exercise price of $0.25, for total proceeds of $12,500.

●	400,000 shares were issued for services rendered evaluated at an amount of $121,500.

Also, 4,250,000 shares previously issued to directors or administrators were cancelled.

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 5- STOCKHOLDERS’ DEFICIT (CONTINUED)

Common Stock (Continued)

In 2015, the Company issued:

●	On January 20, 2015 150,000,000 shares were issued in the acquisition of Breathe which was accounted for as a reverse merger.

●

During January 2015, the Company issued 400,000 shares for $20,000, which represented the last of the issuance of shares related to the equity raise that occurred in November and December 2014. The Company also issued 9,150,000 shares for $457,500 in consulting services in January 2015 ($0.05 per share)

●

On March 31, 2015 the Company issued 2,666,667 shares for $100,000 in an investment into Tauriga Sciences, Inc (“TAUG”). The Company entered into a commercialization/license agreement with TUAG to jointly develop a new line of business involving CBD oil cartridges in on March 31, 2015. The Company received from TAUG 10,869,565 shares of TAUG common stock (with a value of $100,000) in exchange for their shares (reflected as an investment).

●	During the three months ended March 31, 2015 the Company issued 7,550,000 shares for $314,375 in consulting services rendered (prices ranging between $0.0375 and $0.05 per share)

●	On April 23, 2015 the Company issued 1,666,667 shares for $50,000 at $0.03 per share in March 2015 under a subscription agreement.

●

On May 10, 2015 the Company issued a supplier 750,000 shares of common stock at a value of $22,500 for the payment of inventory ($0.03 per share) and 300,000 shares of common stock valued at $9,000 ($0.03 per share) to a former noteholder ("Iconic") as part of an Assignment and Assumption Agreement dated May 7, 2015.

●	On May 18, 2015 the Company canceled shares in the amount of 3,150,000 shares due to services never provided at a value of $157,500 ($0.05 per share.)

●

On June 2, 2015 the Company issued 3,625,000 at a share price of $0.081 per share with a value of $293,625 to and investor that was assigned a note with the Company originating February 9, 2015. The Company entered into a convertible note in an amount of $110,000 with an investor. The gross amount of the note is $110,000, with net proceeds received of $100,000. The $10,000 represents Original Issue Discount. The note will also bear interest at 8%, compounded annually. The maturity date of this note is one year from execution. The note may be converted, in whole or in part, into shares of the Company’s common stock. The conversion price will be 60%, equivalent to a 40% discount, of the lowest trading price of the Company’s common stock during the 25 trading days prior to conversion.

●	During the six months ended June 30, 2015 the Company issued 1,550,000 shares of common stock in association with securing debt financing in the amount of $141,450 (average price of $0.09 per share.)

●

During the three months ended June 30, 2015 the Company issued 44,058,817 shares for $4,759,440 in consulting services rendered and to be rendered (average price of $0.107 per share) including an agreement with Maxim Group LLC ("Maxim") to provide general financial advisory and investment banking services in exchange for 2.5% of the then issued and outstanding stock at the date of execution. The number of shares of common stock issued and outstanding at the time of this agreement was 276,352,667. At that date 2.5% of the issued and outstanding common stock equaled 6,908,817 shares.

●	During the three months ended June 30, 2015 the Company issues 17,083,998 shares for cash through private placement in the amount of $613,770 (average per sale price of $0.036 per share.)

As of June 30, 2015, the Company has 342,237,149 shares of common stock issued and outstanding. As of June 30, 2015 the Company had a liability for stock to be issued for services rendered of $98,605.

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 5- STOCKHOLDERS’ DEFICIT (CONTINUED)

Stock Options

On August 12, 2013, the Company approved and enacted the 2013 Stock Incentive Plan (the “Plan”). Under the 2013 Stock Incentive Plan, the Company may grant options or share awards to its full-time employees, executive officers, directors and consultants up to a maximum of 8,000,000 common shares. Under the Plan, the exercise price of each option has been established at $0.25. Stock options vest as stipulated in the stock option agreement and their maximum term is 8 years.

The following table summarizes information about the Company’s stock options:

	June 30, 2015				December 31, 2014
	Number of Options		Weighted Average exercisable Price		Number of Options			Weighted Average exercisable Price
Options outstanding, beginning of period		200,000	$	0.25		1,283,000		$	0.25
Granted		-		-		-			-
Exercised		-		-		(50,000	)		(0.25	)
Forfeited		-		-		(1,033,000	)		(0.25	)
Expired		-		-		-			-

Options outstanding, end of period		200,000		0.25		200,000			0.25

The following table summarizes the ranges of exercise prices of outstanding and exercisable options held by officers and directors as of June 30, 2015:

June 30, 2015						June 30, 2015
Options Outstanding						Options Exercisable
Number of options		Weighted average remaining life (years)		Weighted average exercise price		Number of options		Weighted average remaining life (years)		Weighted average exercise price

	200,000		6.40	$	0.25		200,000		6.40	$	0.25

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 5- STOCKHOLDERS’ DEFICIT (CONTINUED)

Stock Options (Continued)

There were no stock options issued in 2015 or 2014 by the Company. The latest options issued in 2013 were determined using the Black-Scholes option–pricing model using the following weighted-average assumptions:

Risk-free interest rate		0.32	%
Dividend yield		-
Volatility		152.50	%
Expected life in years	2 years
Exercise price	$	0.25

Stock options-based compensation expense included in the consolidated statements of operations for the six and three months ended June 30, 2015 and 2014 were $0.

Warrants

The following table summarizes the Company’s share warrants outstanding as of June 30, 2015 and December 31, 2014:

	June 30, 2015						December 31, 2014
			Weighted		Weighted				Weighted		Weighted
			average		average				average		average
	Number of		remaining		exercise		Number of		remaining		exercise
	warrants		life (years)		price		warrants		life (years)		price

Warrants outstanding, beginning of year		1,540,625		1.5	$	0.66		600,000		2	$	0.71
Granted		-		-				940,625		1.6		0.63
Exercised		-		-				-		-
Expired		-		-		-		-		-		-
Warrants outstanding, end of period		1,540,625		1.25	$	$0.66		1,540,625		1.5	$	0.66

The following table summarizes the ranges of exercise prices of outstanding warrants as of June 30, 2015

June 30, 2015
Warrants Outstanding
		Weighted average		Weighted average
Number of warrants		remaining life (years)		exercise price

	250,000		0.5	$	0.30
	100,000		1		0.50
	1,190,625		1.3		0.75
	1,540,625		1.25	$	0.66

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 6- LICENSE AGREEMENT AND INVESTMENT

On March 31, 2015, BVAP and TAUG entered into a non-exclusive license agreement, whereby TAUG will provide CBD oil cartridges to be used in the BVAP e-cigarette. In accordance with the agreement, TAUG will receive a royalty of 50% of the net revenues associated with the sale of specified list of products listed in the agreement. In addition, there was a share swap between TAUG and BVAP to equate to $100,000. BVAP issued 2,666,667 shares at $0.0375 for the commercialization of the products. TAUG issues 10,869,565 shares of its stock to acquire the license agreement (investment).

Description	Amount

License Agreement / Commercialization Fees - 2 years dated 3/31/15
Stock issued	$	100,000

Total	$	100,000
Less: Accumulated Amortization		12,449
Net June 30, 2015	$	87,551


Issued 2,666,667 shares of Company common stock		2,666,667
at $0.01 per share.	$	0.0375

Share value	$	100,000

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 7- DEFERRED FINANCING FEES

Deferred financing fees result from the issuance of share warrants as finders’ fees in connection with flow-through financing completed on December 23, 2013 and described in Note 3. The fair value of the warrants amounted to $25,431 and was determined using the Black-Scholes option–pricing model. The deferred financing fees are being amortized over the life of the warrants which is 2 years. Amortization of deferred financing fees for the six and three months ended June 30, 2015 and 2014 was $6,358 and $3,179, respectively. Breathe assumed this asset as part of the reverse merger.

NOTE 8- PROVISION FOR INCOME TAXES

As of June 30, 2015 there is no provision for income taxes, current or deferred.

Net operating losses carryforward	$	2,282,434
Valuation allowance		(2,282,434	)
	$	-

The Company has approximately $6,700,000 in net operating losses as of June 30, 2015. A reconciliation of the Company’s effective tax rate as a percentage of income before taxes and the statutory rate for six months ended June 30, 2015 is summarized below:

Federal rate	34	%
State rate	-

Combined Tax Rate	34	%
Valuation allowance	(34	%)
	0	%

NOTE 9- COMMITMENTS

The Company had the following financial commitments, represented by rental lease agreements, as of June 30, 2015:

Year ending December 31,
2015	$	7,396
2016		13,066
2017		13,400
2018		6,761
Total		40,622

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Table of Contents

BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 9- COMMITMENTS (CONTINUED)

Rent expense under the lease agreements for the six and three months ended June 30, 2015 was $1,187 and $0.

On March 15, 2015 the Company entered into a 38 month lease agreement for office space 322 Nancy Lane, Suite 7, Knoxville, Tennessee. This office will be the operational headquarters for the Company.

NOTE 10- CURRENT LITIGATION

Typenex Dispute

On May 18, 2015, Typenex Co-Investment, LLC (“Typenex”) filed a binding arbitration notice against the Company in the State of Utah regarding a certain Warrant to Purchase Shares of Common Stock (the “Warrant”) issued by the Company to Typenex on April 28, 2014 (the “Arbitration”) in connection with a Convertible Promissory Note of the same date (the “Note”). On April 29, 2015, Typenex sent a Notice of Exercise to the Company for the issuance of 7,541,511 shares of the Company’s common stock along with an opinion letter indicating the shares should be issued without restrictive legend pursuant to Rule 144 under the Securities Act of 1933, as amended. The Company immediately filed for an emergency injunction in the State of New Jersey, the location of the Company’s transfer agent. The injunction was granted and Typenex and the Company subsequently agreed no shares would be issued until the resolution of the Arbitration. The Arbitration hearing is currently scheduled for November 11 and 12, 2015 in the State of Utah. The Company has filed a response and conterclaim to the Arbitration notice alleging, among other things, that Typenex did not fulfill its obligations under the original Note and failed to disclose material matters regarding Typenex and its principal to the Company and has requested damages and attorneys’ fees be paid by Typenex to the Company. Further, the Company is challenging the number of shares that may be subject to the Warrant. Although the Company believes it will prevail on the merits, there can be no guaranty that it will do so.

NOTE 11- CUSTOMER RISK

During the three months ended June 30, 2015 the Company realized its first sale to a distributor customer. Being that this was a single sale, all of the Company's current revenue is derived from one distribution relationship. This total sale was for $6,000. The sale was an attempt to launch the Company’s product and gain market share. The sale had associated cost of good sold in the amount of $7,057. As part of the Company’s sales channel development plan it continues to develop this channel as well as the wholesale channel and its ecommerce segments. Being that there was only a single transaction made being the first sale and that the Company is in the initial phase of business development there is a very strong risk that the Company will not be able to gain sufficient market penetration to generate enough revenue to support continuing operations. Management believes that through strategic partnership and marketing alliances it will be able to successfully gain market share. The Company's failure to maintain this relationship in the future would materially and adversely impact future operating results. In the second fiscal quarter of 2015, although management continues to add new distribution relationships and points of sales, there is no guaranty that these efforts will be successful and if the current distributor becomes dissatisfied with the Company's performance or its products, operating results would be negatively and materially impacted.

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BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 12- FAIR VALUE MEASUREMENTS

The Company adopted certain provisions of ASC Topic 820. ASC 820 defines fair value, provides a consistent framework for measuring fair value under generally accepted accounting principles and expands fair value financial statement disclosure requirements. ASC 820’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into the following hierarchy:

Level 1 inputs: Quoted prices for identical instruments in active markets.

Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 inputs: Instruments with primarily unobservable value drivers.

The following table represents the fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2015:

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	62,415		-		-	$	62,415
Investment		-		100,000		-		100,000
Derivative liabilities		-		-		257,233		257,233

The derivative liabilities associated with the convertible notes that were repaid were measured at fair value using the binomial lattice options pricing model, and were classified within Level 3 of the valuation hierarchy. The Company recognized a loss of $60,193 on the fair value of the derivative liabilities for the six months ended June 30, 2015.

NOTE 13- SUBSEQUENT EVENTS

On July 1, 2015, the Company issued 1,400,000 shares to a consultant under an agreement to provide Business development and consulting services with corporate initiatives for services rendered for the months of April through July 2015.

On July 14, 2015, the Company issued 333,333 common shares to IBH Capital LLC through private placement funds in the amount of $25,000 received in June 2015 ($.075 cents per share.)

On July 14, 2015, the Company issued 2,000,000 shares of common stock to Anthony Danieli for consulting services to be rendered and over a 24-month period in association with his appointment as a member to the board of directors. The shares had a value of $119,200 ($0.0596 per share.)

On July 14, 2015, the Company issued 4,000,000 common shares of its stock at $0.06 per share subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the common stock that occur after the date of agreement. Final purchase price is subject to adjustment based on the closing price of the common stock on first adjustment date that is six (6) months immediately following the closing date (or if such date is not a trading day, the trading day immediately preceding such six (6) month period). Final purchase price is also subject to adjustment based on the second adjustment date based on the closing price of the common stock on thirty (30) days following the first adjustment date (or if such date is not a trading day, the Trading Day immediately preceding such date).

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BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 13- SUBSEQUENT EVENTS (CONTINUED)

Under the first tranche of a July 2, 2015 securities purchase agreement where by 240,000 was committed for purchase of common stock and warrants. Under the second tranche of this agreement the amount to be funded will be $200,000. Second tranche closing date will be a trading date no later than five (5) Business Days following the effective date of the Registration Statement on which all of the transaction documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount for the Second Tranche and (ii) the Company’s obligations. The Company may, in its sole discretion, to terminate and cancel the second tranche upon written notice to the purchasers, and any funds paid the company by any purchaser in connection with the second tranche shall be returned immediately to such purchase or without interest.

Cashless warrants under this agreement total 4,000,000 at an exercise price of $0.20 per share and will proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged if the Company at any time while this Warrant is active pays a stock dividend or otherwise makes a distribution or distributions on shares of its common stock or any other equity or equity equivalent securities payable in shares of common stock; subdivides outstanding shares of common stock into a larger number of shares, combines (including by way of reverse stock split) outstanding shares of common stock into a smaller number of shares or issues by reclassification of shares of the common stock any shares of capital stock of the Company.

Under the agreement, at any time while warrants are outstanding, if the the Company sells or grants any option to purchase, or sell or any common stock or common stock equivalents, at an effective price per share less than the exercise price then in effect but greater than $0.10 (price adjusted) will be considered a “dilutive issuance” and the holder of the warrant will be entitled to receive shares of common stock at an effective price per share that is less than the exercise price.

Cashless warrants registered in the name of such purchaser to purchase up to a number of shares of common stock equal to 100% of such purchaser shares for the first tranche, with an exercise price equal to $0.20, subject to adjustments whereby the Company may issue without further consideration. In the event that the first adjusted price is higher than the per-share purchase price but lower than $.08 cents per share, 10% of the aggregate number of shares issued or issuable or 15% if equal to or lower than the per-share price. The Company must file Form S-1 with the SEC under terms of this agreement.

Under this agreement, the Company reserved 25 million shares of common stock to provide for the issuance of common shares, the adjustment shares and warrant shares. In the event that the company’s stock falls below $0.04 per share for three consecutive training days the company will immediately add an additional 15 million shares to this reserve. In the event that the stock falls below $.02 per share the three consecutive trading days the company will immediately add an additional 20 million shares of the reserve.

On July 23, 2015, the Company issued 1,500,000 shares of common stock for consulting services rendered and accrued as of June 30, 2015 in the amount of $74,100 ($0.494 per share.)

On August 5, 2015 the Company issued 350,000 share for services rendered under a consulting agreement for a value of $17,500 ($0.05 per share)

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BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 13- SUBSEQUENT EVENTS (CONTINUED)

On August 5, 2015, the Company received a notice from Breathe, LLC, a Florida limited liability company (“Breathe LLC”), that the Company was violating Breathe LLC’s trademark rights under U.S. Trademark Registration No. 4,633,887 for the name “Breathe” and a demand for the Company to immediately cease and desist from such use. The Company believes that it has rights of prior use to the name “Breathe” under the federal trademark laws. As such, on August 10, 2015 , the Company filed (i) a Petition for Cancellation with the United States Patent and Trademark Office regarding U.S. Trademark Registration No. 4,633,887 and (ii) a Complaint against Breathe LLC in the United States District Court of Eastern District of Tennessee, Civil Action No. 3:15-cv-00345 requesting a declaratory judgment regarding the Company’s rights to use the trademark. Although the Company believes it will prevail on the merits, there can be no guaranty that it will do so. If the Company is unable to prevail, it may be required to market its products under a different name.

On August 6, 2015 the Company issued 2,500,000 share for services rendered under a consulting agreement for a value of $125,500 ($0.05 per share).

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BREATHE ECIG CORP.

(FORMERLY DNA PRECIOUS METALS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

NOTE 14-

RESTATEMENT OF PRIOR FINANCIAL STATEMENTS

The Company has restated its financial statements for the six and three months ended June 30, 2015 for the correction of an error to properly account for its accounting for the acquisition of Breathe eCigs Corp. (formerly Breathe LLC) as a reverse merger. As a result of the reverse merger, the accounting acquirer was Breathe eCigs Corp. (formerly Breathe LLC), and therefore, the historical financial statements (2014) are those of Breathe eCigs Corp (formerly Breathe LLC). In addition, the six and three months ended June 30, 2015 as well as the June 30, 2015 consolidated balance sheet have been restated to properly reflect the activity of only Breathe eCigs Corp. (formerly Breathe LLC). All references to DNA Precious Metals, Inc. and the activity of DNA Precious Metals, Inc. have been excluded from the restated presentation. The effect of this restatement adjustment on the net loss for the six and three months ended June 30, 2015 was a decrease in the net loss from $6,696,333 to $6,675,780 for the six months ended June 30, 2015 and a decrease in the net loss from $5,696,029 to $5,675,476, a change in both periods of $20,553. The change in stockholders’ deficit was $9,050,606, from $8,708,513 to ($342,093), the result of the removal of goodwill in the original business combination.

The following charts reflect the changes of the individual line items changed in the consolidated financial statements.

	Six Months			Three Months
	June 30, 2015			June 30, 2015
Net loss prior to restatement	$	(6,696,333	)	$	(5,696,029	)

(1)		20,553			20,553

Net loss after restatement	$	(6,675,780	)	$	(5,675,476	)

Accumulated deficit - prior to restatement	$	8,708,513

(2)		(9,050,606	)

Accumulated deficit - after restatement	$	(342,093	)

(1) Reflects removal of the former discontinued operations related to the DNA Precious Metals, Inc. business
(2) Reflects correction of an error related to the business combination accounting

Six Months Ended June 30, 2015
	Previously
Statement of Operations	Reported			Restated			Change
Loss from discontinued operations		(20,553	)		-			(20,553	)
Net loss		(6,696,333	)		(6,675,780	)		20,553

Balance Sheet
Goodwill		9,050,606			-			(9,050,606	)
Additional paid in capital		(22,832,946	)		(6,028,710	)		16,804,236
Accumulated deficit		14,466,670			6,713,040			(7,753,630	)

Statement of Cash Flow
Net loss		(6,696,333	)		(6,675,780	)		20,553
Depreciation and amortization		12,524			12,449			(75	)
Change in prepaid expenses		(866,717	)		(865,528	)		1,189
Change in inventory		(118,884	)		(120,072	)		(1,188	)
Change in accounts payable		245,420			262,226			16,806
Repayments of notes payable		(29,573	)		(32,500	)		(2,927	)
Effect on foreign currency		(6,109	)		-			6,109
Cash - Beginning of the year		53,813			13,346			(40,467	)

Three Months Ended June 30, 2015
	Previously
Statement of Operations	Reported			Restated			Change

Net loss		(5,696,029	)		(5,675,476	)		20,553

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The discussion of the financial condition and results of operations of the Company set forth below should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Form 10-Q/A. This Form 10-Q/A contains forward-looking statements that involve risks and uncertainties. The statements contained in this Form 10-Q/A that are not purely historical are forward-looking statements within the meaning of Section 27a of the Securities Act and Section 21e of the Exchange Act. When used in this Form 10-Q/A, or in the documents incorporated by reference into this Form 10-Q/A, the words “anticipate,”“believe,”“estimate,”“intend” and “expect” and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements include, without limitation, the statements regarding the Company’s strategy, future sales, future expenses, future liquidity and capital resources. All forward-looking statements in this Form 10-Q/A are based upon information available to the Company on the date of this Form 10-Q/A, and the Company assumes no obligation to update any such forward-looking statements. The Company’s actual results could differ materially from those discussed in this Form 10-Q/A. Factors that could cause or contribute to such differences (“Cautionary Statements”) include, but are not limited to, those discussed in Item 1. Business — “Risk Factors” and elsewhere in the Company’s Annual Report on Form 10-K, which are incorporated by reference herein and in this report. All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on the Company’s behalf, are expressly qualified in their entirety by the Cautionary Statements.

Corporate History

Breathe eCig Corp. is a Nevada corporation organized June 2, 2006. Our original name was Celtic Capital, Inc. On October 20, 2008, we changed our name to Entertainment Education Arts Inc. On May 12, 2010, we changed our name to DNA Precious Metals, Inc. On March 5, 2015 pursuant to an agreement and plan of merger, the Company changed its name to Breathe eCig Corp. (Breathe eCig Corp. may also be referred to as “Breathe”, “we”, “us” or the “Company”).

From May 2010 through February 3, 2015, we were an exploration stage mining company. The Company’s focus was the development of the Montauban Mining Project, located in the Montauban and Chavigny townships near Grondines-West in Portneauf County, Quebec, Canada (“Montauban Mine Property” or “Property”). Recognizing the need to secure significant additional capital to put the Property into production, management began to focus its attention on other business opportunities which would not require the significant capital required to expand the Property. In furtherance thereof, on January 16, 2015 the Company entered into a share exchange agreement with Breathe LLC, a Tennessee limited liability company, whereby the Company acquired all of the issued and outstanding membership interests in Breathe LLC in consideration for the issuance of 150,000,000 shares of the Company’s common stock to the members of Breathe, LLC

In connection with the acquisition of Breath LLC, on March 5, 2015 we entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which the Company merged with its wholly owned subsidiary, Breathe eCig Corp., the sole purpose of the Merger was to effect a change of the Company's name from DNA Precious Metals, Inc. to Breathe eCig Corp. This name change more accurately reflects the Company’s current operations.

With the acquisition of Breathe LLC, it was contemplated that the Company would spin-off the operations of its mining operations which were being conducted through the Company’s wholly owned subsidiary, DNA Canada, Inc (“DNAC”). Effective February 3, 2015, we declared a stock dividend whereby each of the Company’s shareholders on the record date (February 3. 2015) would receive one share of DNAC for every two shares of the Company’s common stock owned on the record date.

On February 3, 2015, the Company declared a stock dividend of its wholly owned subsidiary, DNA Canada, Inc. (“DNAC”) to the shareholders of record on February 3, 2015 whereby each shareholder of record received one share of DNAC for every two shares of DNA owned as of the record date. The former members of Breathe LLC tendered their shares of DNAC for redemption by the Company.

With the completion of the spin-off, the Company is no longer in the mining field and its sole and exclusive business operations will be marketing its electronic cigarettes and related vapor devices.

Breathe Acquisition and Spin-off of DNA Canada, Inc.

On January 16, 2015 the Company entered into a share exchange agreement with Breathe LLC, a Tennessee limited liability company, whereby the Company acquired all of the issued and outstanding membership interests in Breathe LLC in consideration for the issuance of 150,000,000 shares of the Company’s common stock to the members of Breathe, LLC.

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As a result of the transaction effected by the Exchange Agreement, the former Breathe shareholders members owned approximately 56% of the then issued and outstanding common stock of the Company. As a result, the Company accounted for this transaction as a reverse merger whereby the accounting acquirer and the comparative figures are those of Breathe.

The operations of Breathe :

ABOUT BREATHE SMART CIGARETTE

Breathe, LLC was formed in October 2013 and Breathe eCigs. Corp. was formed on March 31, 2015. On March 31, 2015, Breathe, LLC entered into a Bill of Sale to transfer 100% of the assets to Breathe eCigsCorp.

Since formation, Breathe has operated as a development stage company, with the intentions of designing marketing and distributing electronic cigarettes (“E-cigarettes”), vaporizers, e-liquids (i.e., liquid nicotine) and related accessories. As of June 30, 2015 Breathe had nominal revenues and limited assets.

E-cigarettes and vaporizers are replacements for traditional cigarettes allowing smokers to reproduce the smoking experience. Although they do contain nicotine, E-cigarettes and vaporizers do not burn tobacco and are not smoking cessation devices.

Breathe’s initial line of products will focus on E-cigarettes. The present day E-Cigarette is a smokeless, battery-powered device that vaporizes liquid nicotine for delivery via inhalation by the user. The E-Cigarette does not contain tobacco, only nicotine derived from the tobacco plant and trace amounts of secondary chemical ingredients. The component parts of an E-Cigarette are the nicotine cartridge; the atomizer (which vaporizes the liquid nicotine); the rechargeable battery that powers it; and a light-emitting diode (LED) indicator at the end that is activated when the user draws in air (collectively referred to as the “Component Parts”). Breathe will partner with manufacturers in the United States who will be responsible for producing the liquid nicotine filling the nicotine cartridge with liquid nicotine; thereby ensuring a safe and high standard process for producing a consumer product.

Market Opportunity For E-Cigarettes

Breathe operates within the rapidly growing and global e-cigarette industry, an emerging product category that is taking market share from the $783 billion global tobacco industry. The American Cancer Society estimates that there are 1.3 billion tobacco smokers in the world, consuming approximately 6 trillion cigarettes per year, or 190 thousand cigarettes per second. Tobacco use is the leading cause of preventable illness and death, causing more than 5 million annual deaths across the globe according to the CDC. We believe e-cigarettes offer an alternative for current smokers of traditional cigarettes.

Still in the early stages of its market penetration, the e-cigarette industry is highly fragmented with approximately 250 brands worldwide according to the CDC. Primarily propelled by the cannibalization of the traditional tobacco industry, the global e-cigarette industry has recently experienced dramatic growth. According to Euromonitor, e-cigarettes accounted for approximately $3.5 billion in 2013 global retail sales, with approximately 40% of sales generated in the U.S., 30% of sales generated in Europe, and 30% of sales generated in the rest of the world. Euromonitor estimated that significant market growth was achieved from 2012 to 2013 with the U.S., Europe and the rest of the world generating growth rates of 180%, 160%, and 150%, respectively. Euromonitor also projects e-cigarette sales to represent approximately $51 billion, or 4% of the global tobacco and tobacco alternatives market by 2030. We believe that we are well positioned to benefit from, and take advantage of, these attractive market trends in the coming years.

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Source: Euromonitor International 2013.

Below is a table presenting the market shares in the United States of various e-cigarette brands for the 52 weeks ended August 30, 2014:

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BUSINESS STRATEGY

Breathe’s strategic goal is to profitably expand its operations. The business strategies employed by Breathe to achieve this goal are defined succinctly through the Company’s mission statement of creating Socially Responsible Innovation in the E-Cigarette and Vaporizer industries and by fulfilling the following objectives:

Building a strong brand through a concentration of operational focus on the design, market and distribution of exceptional quality electronic cigarettes and vaporizers.

Specializing in the development of great tasting proprietary organic and naturally flavored e-liquids with nicotine from Tennessee-sourced Tobacco plants.

Exceptional Packaging – The Company’s high-end products will comprise high quality packaging, unique and customizable labeling for specific customers and retailers.

Age Verification A commitment to verifying and ensuring that all Breathe customers are at least 21 years old, through specific product labeling and marketing efforts focused on the adult population age 21 and older.

Environmentally Conscious Production and Disposal Process A commitment to establishing an environmentally aware production and disposal process, which shall include a special recycling program for eligible retailers where (a) said retailers will be provided with a self-mailer option to ship expended lithium batteries and other recyclables to a designated facility and (b) where proceeds from these eligible recyclables will then be shared with the respective retailers.

Developing Our Organizational Capability Continuing to develop our organizational capability through recruiting, retaining and rewarding highly capable people and through performance management.

Pursuing Growth Opportunities Focusing on pursuing growth opportunities after launching our current product offerings and seeking brands, other products, and partnerships to complement our high-end quality products.

Maximizing our financial performance Continuing to drive our business activities to deliver improved financial performance.

Developing a global distribution platform with the emphasis of serving customers throughout the entire world.

License to Intellectual Property and Brand Portfolio

Breathe has the exclusive licensing rights to sell the following product lines:

Mini e-cigarette Pack – a standard e-cigarette pack designed for vending machines and convenience stores.

Original non CP – a standard rechargeable single unit without the child protective device.

Original with CP - a standard rechargeable single unit with the child protective device.

Smart e-cigarette PCC – Smart e-cigarette carrying case, 2 rechargeable mini-e-cigarettes with 5 cartridges and iPhone chargeable connections.

5 Pack mini Ref – 5 mini cartridges for the mini size e-cigarette.

5 pack Standard Ref – 5 refillable cartridges for the mini-size e-cigarettes.

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Pricing, Sales Model; e-Commerce and Retail

Breathe plans to offer its Products at prices, determined based on pricing strategies that are developed by the Company from time to time and which management believes to be best suited to achieve the Company’s goals at such time. These pricing strategies are expected to be developed based on a number of factors, including the needs and behaviors of customers, purchase volumes, market specific criteria, and the Company’s costs of goods.

The price of the brand portfolio of products are broken down as follows, with prices varying based on product type and distribution channel (e-commerce vs. retail):

Product	Mini e-Cig Pack		Original non CP		Original with CP		Smart E-Cig PCC		5 Pack mini Ref.		5 pack Standard Ref.
E-Commerce Price		19.95		19.95		19.95		38.00		19.95		19.95
Retail Price		10.00		10.00		10.50		25.00		10.50		10.50

Management believes that the elegant design of the packaging, along with high quality products which feature excellent tasting, proprietary and handcrafted flavors justifies the costs and increases the margins.

Production and Supply for e-cigarette Lines

The launch of a new E-Cigarette line involves input from many different sources, from the manufacturer to the customer.

The stages of the development, manufacturing, production and distribution process of the E-cigarette can be summarized as follows:

·	Discussions with designers and creators (includes analysis and factory trends, target clientele and market communication);

·	Concept choice;

·	Produce mock-ups for final acceptance of unit device, packaging and flavoring;

·	Receive bids from component suppliers;

·	Choose suppliers;

·	Schedule production and packaging;

·	Issue component part purchase orders;

·	Follow quality control procedures for incoming components;

·	Follow packaging and inventory control procedures;

·	Engage U.S. based FDA certified e-liquid manufacturer to produce and fill nicotine cartridges after receiving Component Parts; and

·	Production specialists who carry out packaging or logistics for storage, order preparation and shipment.

Procurement and Distribution

In launching E-Cigarette lines, the Company must be able to coordinate procuring the Component Parts, manufacturing the product, packaging the product, storage, distribution and order processing. The Company has been in discussions with a Canadian-based and Chinese based manufacturer who will produce the pen devices. The Company has been in discussions with a U.S. based manufacturer who will produce the e-liquids and who will also fill the cartridges with the e-liquids, which in turn will allow all of the Company’s consumables to be U.S. oriented. Therefore, after the pen devices are manufactured overseas, the e-liquid filled cartridges will be inserted in the U.S. and ready for distribution.

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The Company has been in discussions with a distribution center and warehouse located in Knoxville, TN who will procure the component goods from the manufacturers and other suppliers, package the Company’s products for distribution, manage purchase orders and the electronic data interchange.

Additionally, the distribution partner, under the supervision of the Company’s leadership, will be responsible for negotiate pricing and payment terms with suppliers, manufacture and package the products and coordinate payment to the suppliers.

Finally, the Company’s experienced leadership team will be responsible for all component costs, transportation, assembly costs and a management fee paid to the Distribution and Manufacturer.

Market Opportunity

The e-cigarette industry is booming – approximately 3.5 million Americans regularly use e-cigarettes, according to a 2013 study done by Mary Diduch. The Centers for Disease Control show that e-cigarette use quadrupled in a single year from 2009 to 2010. Based on 2011 numbers alone, 21% of adult smokers in the United States have used e-cigarettes, 6% of all adults have tried e-cigarettes, and general awareness of e-cigarettes rose to 60% of all adults, up from 40% from 2010 according to a 2013 study published by the CDC. The co-founder of the Tobacco Vapor Electronic Cigarette Association stated in March 2012 that nearly 20 million e-cigarette cartridges are sold in the United States, per week.

Moreover, there is currently a favorable regulatory environment with certain federal, local and state regulation focused at advertising, age verification and use bans in public areas.

Marketing and Growth Strategies

In order to increase brand awareness, the Company began to focus its marketing initiatives and efforts through the development of a proprietary system that has accumulated over 20 million individuals that have the potential to see very advertisement and social media post produced by the Company. In addition to hosting a secure web portal, www.breathecig.com , that promotes the Company’s products and will handle orders, the Company has also been marketed on major social media platforms: LinkedIn, Facebook, Twitter, Instagram, Google and Pinterest. Because of this successful initial marketing effort:

The Company has already received hundreds of requests for more information on its products.

These initial efforts have been cost effective and have not involved a substantial drive to promote sales.

The Company’s website has received over 600,000 visitors during the last 18 months.

The Company has received numerous requests from customers interested in purchasing Breathe’s products including but not limited to major retail groups, Hotel Chains, Restaurants and Club Owners.

Retail and Wholesale Distribution :

The Company is developing unique and distinct brands for its E-cigarette Products for purposes of marketing and selling such branded E-cigarette Products, initially in North America, China, Africa, and Europe, through retail and wholesale distribution channels, including convenience stores, retail chains, wholesale trade, pharmacies, gas stations, hotels, industrial customers, clubs, casinos and duty free stores.

In addition, the Company intends to enter into exclusive agreements with various distributors providing them with exclusivity on certain brands of Product in defined territories and markets worldwide.

E-Commerce:

The Company intends to distribute its branded Products through its website, www.breathecig.com, and other online sales platforms. Through its e-commerce sales initiatives, the Company hopes to generate recurring purchases of its exclusive brands of E-cigarettes from customers who are legally allowed to purchase cigarettes in the United States and other regions. Management expects that its marketing strategy will include various forms of social media as a key element in its marketing strategies and in further establishing and growing the Company’s business.

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White Label/Private Brand Distribution:

The Company is actively pursuing opportunities and relationships to develop and offer its Products on a “white label”, private branded basis. Management of the Company believes that there is an opportunity to supply Products on a custom branded basis to a variety of customers for purposes of resale. These potential customers may include wholesale and retail customers that have or wish to develop a private customizable label.

Government Regulations

A recent United States Federal Court decision permits the United States Food and Drug Administration to regulate electronic cigarettes as “tobacco products” under the Family Smoking Prevention and Tobacco Control Act of 2009 and the United States Food and Drug Administration has indicated that it intends to do so.

Based on the December 2010 U.S. Court of Appeals for the D.C. Circuit’s decision in Sottera, Inc. v. Food & Drug Administration , 627 F.3d 891 (D.C. Cir. 2010), the United States Food and Drug Administration (the “FDA”) is permitted to regulate electronic cigarettes as “tobacco products” under the Family Smoking Prevention and Tobacco Control Act of 2009 (the “Tobacco Control Act”).

Under this Court decision, the FDA is not permitted to regulate electronic cigarettes as “drugs” or “devices” or a “combination product” under the Federal Food, Drug and Cosmetic Act unless they are marketed for therapeutic purposes.

Because we do not market our electronic cigarettes for therapeutic purposes, our electronic cigarettes are subject to being classified as “tobacco products” under the Tobacco Control Act. The Tobacco Control Act grants the FDA broad authority over the manufacture, sale, marketing and packaging of tobacco products, although the FDA is prohibited from issuing regulations banning all cigarettes or all smokeless tobacco products, or requiring the reduction of nicotine yields of a tobacco product to zero. Among other measures, the Tobacco Control Act (under various deadlines):

	·	Increases the number of health warnings required on cigarette and smokeless tobacco products, increases the size of warnings on packaging and in advertising, requires the FDA to develop graphic warnings for cigarette packages and grants the FDA authority to require new warnings;
	·	Requires practically all tobacco product advertising to eliminate color and imagery and instead consist solely of black text on white background;

	·	Imposes new restrictions on the sale and distribution of tobacco products, including significant new restrictions on tobacco product advertising and promotion as well as the use of brand and trade names;
	·	Bans the use of “light,” “mild,” “low” or similar descriptors on tobacco products;

	·	Gives the FDA the authority to impose tobacco product standards that are appropriate for the protection of the public health (by, for example, requiring reduction or elimination of the use of particular constituents or components, requiring product testing, or addressing other aspects of tobacco product construction, constituents, properties or labeling);
	·	Requires manufacturers to obtain FDA review and authorization for the marketing of certain new or modified tobacco products;

	·	Requires pre-market approval by the FDA for tobacco products represented (through labels, labeling, advertising, or other means) as presenting a lower risk of harm or tobacco-related disease;
	·	Requires manufacturers to report ingredients and harmful constituents and requires the FDA to disclose certain constituent information to the public;

	·	Mandates that manufacturers test and report on ingredients and constituents identified by the FDA as requiring such testing to protect the public health, and allows the FDA to require the disclosure of testing results to the public;
	·	Requires manufacturers to submit to the FDA certain information regarding the health, toxicological, behavioral or physiologic effects of tobacco products;

	·	Prohibits use of tobacco containing a pesticide chemical residue at a level greater than allowed under federal law;
	·	Requires the FDA to establish “good manufacturing practices” to be followed at tobacco manufacturing facilities;

	·	Requires tobacco product manufacturers (and certain other entities) to register with the FDA; and
	·	Grants the FDA the regulatory authority to impose broad additional restrictions.

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The Tobacco Control Act also requires establishment, within the FDA’s new Center for Tobacco Products, of a Tobacco Products Scientific Advisory Committee to provide advice, information and recommendations with respect to the safety, dependence or health issues related to tobacco products. As indicated above, the Tobacco Control Act imposes significant new restrictions on the advertising and promotion of tobacco products. For example, the law requires the FDA to finalize certain portions of regulations previously adopted by the FDA in 1996 (which were struck down by the Supreme Court in 2000 as beyond the FDA’s authority). As written, these regulations would significantly limit the ability of manufacturers, distributors and retailers to advertise and promote tobacco products, by, for example, restricting the use of color, graphics and sound effects in advertising, limiting the use of outdoor advertising, restricting the sale and distribution of non-tobacco items and services, gifts, and sponsorship of events and imposing restrictions on the use for cigarette or smokeless tobacco products of trade or brand names that are used for non-tobacco products. The law also requires the FDA to issue future regulations regarding the promotion and marketing of tobacco products sold or distributed over the internet, by mail order or through other non-face-to-face transactions in order to prevent the sale of tobacco products to minors.

It is likely that the Tobacco Control Act could result in a decrease in tobacco product sales in the United States, including sales of our electronic cigarettes.

While the FDA has not yet mandated electronic cigarettes be regulated as tobacco products, the FDA issued proposed regulations on April 25, 2014 seeking to regulate electronic cigarettes as tobacco products. Under these proposed rules, products meeting the statutory definition of “tobacco products,” except accessories of a proposed deemed tobacco product, would be subject to the Federal Food, Drug, and Cosmetic Act (the FD&C Act), as amended by the Family Smoking Prevention and Tobacco Control Act (Tobacco Control Act). The Tobacco Control Act provides FDA authority to regulate cigarettes, cigarette tobacco, roll-your-own tobacco, smokeless tobacco, and any other tobacco products that the Agency by regulation deems to be subject to the law. Option 1 of the proposed rule would extend the Agency's “tobacco product” authorities in the FD&C Act to all other categories of products, except accessories of a proposed deemed tobacco product, that meet the statutory definition of “tobacco product” in the FD&C Act. Option 2 of the proposed rule would extend the Agency's “tobacco product” authorities to all other categories of products, except premium cigars and the accessories of a proposed deemed tobacco product, that meet the statutory definition of “tobacco product” in the FD&C Act. FDA also is proposing to prohibit the sale of “covered tobacco products” to individuals under the age of 18 and to require the display of health warnings on cigarette tobacco, roll-your own tobacco, and covered tobacco product packages and in advertisements. Further, the FDA proposed to extend its authority to cover additional products that meet the definition of a tobacco product under the proposed rule: Tobacco Products Deemed To Be Subject to the Food, Drug & Cosmetic Act (Deeming). Currently FDA regulates cigarettes, cigarette tobacco, roll-your-own tobacco and smokeless tobacco. Proposed newly “deemed” products would include: electronic cigarettes, cigars, pipe tobacco, certain dissolvables that are not “smokeless tobacco,” gels and water pipe tobacco.

If electronic cigarettes are regulated as proposed, the FDA will implement new rules to govern the labeling of electronic cigarettes, including smokeless tobacco product warning labels and “light,” “low,” “mild” or similar descriptors for tobacco products. These new laws are expected to have a significant public health impact by decreasing the number of people using tobacco products, resulting in lives saved, increased life expectancy, and lower medical costs. In addition, the FDA will also restrict the way electronic cigarette manufacturers, retailers, and distributers can advertise and promote cigarettes and smokeless tobacco products, especially marketing efforts designed to appeal to youth. Such restrictions relating to marketing, advertising, and promotion will include: prohibiting tobacco brand name sponsorship of any athletic, musical, or other social or cultural event, or any team or entry in those events, requiring that audio ads use only words with no music or sound effects, prohibiting the sale or distribution of items, such as hats and tee shirts, with cigarette and smokeless tobacco brands or logos and requiring that manufacturers receive a written order from FDA permitting the legal marketing of a new tobacco product. The FDA’s traditional “safe and effective” standard for evaluating medical products does not currently apply to tobacco. FDA evaluates new tobacco products based on a public health standard that considers the risks and benefits of the tobacco product on the population as a whole, including users and non-users. To legally market new tobacco products, a written order from FDA must be received permitting its marketing in the United States.

The application of the Tobacco Control Act to electronic cigarettes could impose, among other things, restrictions on the content of nicotine in electronic cigarettes, the advertising, marketing and sale of electronic cigarettes, the use of certain flavorings and the introduction of new products. We cannot predict the scope of such regulations or the impact they may have on our company specifically or the electronic cigarette industry generally, though if enacted, they could have a material adverse effect on our business, results of operations and financial condition.

In this regard, total compliance and related costs are not possible to predict and depend substantially on the future requirements imposed by the FDA under the Tobacco Control Act. Costs, however, could be substantial and could have a material adverse effect on our business, results of operations and financial condition. In addition, failure to comply with the Tobacco Control Act and with FDA regulatory requirements could result in significant financial penalties and could have a material adverse effect on our business, financial condition and results of operations and ability to market and sell our products. At present, we are not able to predict whether the Tobacco Control Act will impact us to a greater degree than competitors in the industry, thus affecting our competitive position.

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Competition

Competition in the electronic cigarette industry is intense. We compete with other sellers of electronic cigarettes, most notably Lorillard, Inc., Altria Group, Inc. and Reynolds American Inc., big tobacco companies, through their electronic cigarettes business segments; the nature of our competitors is varied as the market is highly fragmented and the barriers to entry into the business are low.

We compete primarily on the basis of product quality, brand recognition, brand loyalty, service, marketing, advertising and price. We are subject to highly competitive conditions in all aspects of our business. The competitive environment and our competitive position can be significantly influenced by weak economic conditions, erosion of consumer confidence, competitors’ introduction of low-priced products or innovative products, cigarette excise taxes, higher absolute prices and larger gaps between price categories, and product regulation that diminishes the ability to differentiate tobacco products.

Our principal competitors are “big tobacco”, U.S. cigarette manufacturers of both conventional tobacco cigarettes and electronic cigarettes like Altria Group, Inc., Lorillard, Inc. and Reynolds American Inc. We compete against “big tobacco” who offers not only conventional tobacco cigarettes and electronic cigarettes but also smokeless tobacco products such as “snus” (a form of moist ground smokeless tobacco that is usually sold in sachet form that resembles small tea bags), chewing tobacco and snuff. Furthermore, we believe that “big tobacco” will devote more attention and resources to developing and offering electronic cigarettes as the market for electronic cigarettes grows. Because of their well-established sales and distribution channels, marketing expertise and significant resources, “big tobacco” is better positioned than small competitors like us to capture a larger share of the electronic cigarette market. We also compete against numerous other smaller manufacturers or importers of cigarettes. There can be no assurance that we will be able to compete successfully against any of our competitors, some of whom have far greater resources, capital, experience, market penetration, sales and distribution channels than us. If our major competitors were, for example, to significantly increase the level of price discounts offered to consumers, we could respond by offering price discounts, which could have a materially adverse effect on our business, results of operations and financial condition.

DISCUSSION OF RESULTS OF OPERATIONS

The following discussion should be read in conjunction with, and is qualified in its entirety by, our financial statement, and certain other financial information included elsewhere in this prospectus.

From May 2010 through February 3, 2015 the Company was exploratory stage-mining corporation. The Company did not commence mining operations nor did we generate revenues. With the acquisition of Breathe in January 2015, our sole business objective is the eCigarette industry. The mining operations were divested pursuant to a stock dividend received by the shareholders of the Company.

As a result of the Exchange Agreement, the Company accounted for this transaction as a reverse merger whereby Breathe was the accounting acquirer and the comparative period figures are those of Breathe.

We are an Emerging Growth Company:

We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and

disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation.

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In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

Management’s Discussion and Analysis

Results of Operations for Six and Three Months Ended June 30, 2015 and 2014

We are currently developing our business and as a result we have not developed a material or consistent pattern of revenue generation. For the six and three months ended June 30, 2015, we generated revenue and gross loss of $6,000 and $1,057, respectively, compared to no revenue for the same period the prior year. Operating expenses for the six and three months ended June 30, 2015 totaled $6,436,856 and $5,472,803, respectively compared to $4,760 and $2,788 for same period the prior year. Our Net Loss for six and three months ended June 30, 2015 totaled $6,675,780 and $5,675,476 compared to $4,760 and $2,788 for the same period the prior year. Our Accumulated Deficit since Inception to June 30, 2015 totaled $6,713,040. Our single largest expense for the six and three months ended June 30, 2015 was $5,615,043 and $4,736,115 in professional fees. The fees were primarily related to consulting fees in connection with our business development. Additionally, for the six and three months end June 30, 2015 $5,387,106 and $4,615,231, respectively, of such fees were attributable to stock grants to various consultants. Professional fees for the six and three months ended June 30, 2014 were 0. General and administrative expenses totaled $253,616 and $202,551 for the three and six months ended June 30, 2015 as compared to $4,760 and $2,788 for the same period the prior year.

Liquidity and Capital Resources

Assets and Liabilities.

To date, our operations have been primarily funded through debt and equity financing. During the six months ended June 30, 2015, we raised $770,250 through the issuance of various convertible notes and $708,770 through the sale of our common stock.

At June 30, 2015 we had cash of $62,415 and prepaid expenses of $892,604. Total current assets were $1,096,403. Our deferred financing fees were $6,008 and our investment in Tauriga Sciences, Inc. totaled $100,000. Total assets were $1,289,962 as of June 30, 2015.. At December 31, 2014, we had cash totaling $13,346 which comprised our total assets.

Current liabilities at June 30, 2015 totaled $1,632,055 as compared to $45,606 at December 31, 2014. Of our current liabilities as of June 30, 2015, we had a derivative liability of $257,233 related to issued and outstanding warrants and $773,958 related to current notes payable. We had no long- term liabilities at June 30, 2015 or December 31, 2014.

We do not believe that our cash on hand at June 30, 2015 will be sufficient to fund our current working capital requirements. We will continue to seek additional equity financing. However, there is no assurance that we will be successful in our equity private placements or if we are that the terms will be beneficial to our shareholders.

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Going Concern Qualifications

The consolidated financial statements have been prepared on a going concern basis. The going concern basis of presentation assumes that the Company will continue in operation for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business. The Company has generated very little revenues since inception and has generated losses totaling $6,675,780 and $5,675,476 from continuing operations for the six and three months ended June 30, 2015, respectively. The Company in the three months ended March 31, 2015 completed a business combination with Breathe and spun-off DNA Canada, Inc. in an effort to generate profitable operations moving forward. The Company anticipates that distribution of their products will occur in 2015. The Company’s continuation as a going concern is dependent upon, amongst other things, distribution of the products as well as continued financial support from its shareholders and lenders, attaining a satisfactory revenue level, attainment of profitable operations and the generation of cash from operations and the ability to secure new financing arrangements and new capital to carry out its business plan. These matters are dependent on a number of items outside of the Company’s control and there exists material uncertainties that may cast significant doubt about the Company’s ability to continue as a going concern. The Company can give no assurance that it will achieve profitability or be capable of sustaining profitable operations in its new business of Breathe. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of the carrying amounts of assets or the amount and classification of liabilities that might result if the Company is unable to continue as a going concern. These factors raise substantial doubt regarding the ability of the Company to continue as a going concern. The Company recently raised $770,250 in net debt proceeds and $782,375 of equity proceeds during the six months ended June 30, 2015, to commence production of the Company’s products and pay for distribution.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK.

Not applicable

ITEM 4.

CONTROLS AND PROCEDURES.

As of the end of the period covered by this quarterly report on Form 10-Q/A , the Company’s Chief Executive Officer and Chief Financial Officer conducted an evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934). Based upon this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are not effective, specifically as a result of the required restatement of this Form 10-Q/A .

Changes in Internal Control over Financial Reporting

We regularly review our system of internal control over financial reporting to ensure we maintain an effective internal control environment. There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q/A that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

Typenex Dispute

Trademark Dispute

On August 5, 2015, the Company received a notice from Breathe, LLC, a Florida limited liability company (“Breathe LLC”), that the Company was violating Breathe LLC’s trademark rights under U.S. Trademark Registration No. 4,633,887 for the name “Breathe Intellegent Cigarette and Design” and a demand for the Company to immediately cease and desist from such use. The Company believes that it has rights of prior use to the name “Breathe” under the federal trademark laws. As such, on August 10, 2015, the Company filed (i) a Petition for Cancellation with the United States Patent and Trademark Office regarding U.S. Trademark Registration No. 4,633,887 and (ii) a Complaint against Breathe LLC in the United States District Court of Eastern District of Tennessee, Civil Action No. 3:15-cv-00345 requesting a declaratory judgment regarding the Company’s rights to use the trademark. Although the Company believes it will prevail on the merits, there can be no guaranty that it will do so. If the Company is unable to prevail, it may be required to market its products under a different name and possibly be subject to monetary penalties.

ITEM 1A.

RISK FACTORS.

All of our current revenue is derived from one distribution relationship. Our failure to maintain this relationship in the future would materially and adversely impact our future operating results.

In the second fiscal quarter of 2015, we generated revenue of $6,000. This was the first time we have generated revenue during our operating history. However, all of this revenue is derived from one distribution relationship. Although we continue to add new distribution relationships and points of sales, there is no guaranty that these efforts will be successful and if our current distributor becomes dissatisfied with our performance or our products, our operating results would be negatively and materially impacted.

Typenex Dispute

On May 18, 2015, Typenex Co-Investment, LLC (“Typenex”) filed a binding arbitration notice against the Company in the State of Utah regarding a certain Warrant to Purchase Shares of Common Stock (the “Warrant”) issued by the Company to Typenex on April 28, 2014 (the “Arbitration”) in connection with a Convertible Promissory Note of the same date (the “Note”). On April 29, 2015, Typenex sent a Notice of Exercise to the Company for the issuance of 7,541,511 shares of the Company’s common stock along with an opinion letter indicating the shares should be issued without restrictive legend pursuant to Rule 144 under the Securities Act of 1933, as amended. The Company immediately filed for an emergency injunction in the State of New Jersey, the location of the Company’s transfer agent. The injunction was granted and Typenex and the Company subsequently agreed no shares would be issued until the resolution of the Arbitration. The Arbitration hearing is currently scheduled for November 11 and 12, 2015 in the State of Utah. The Company has filed a response to the Arbitration notice alleging, among other things, that Typenex did not fulfill its obligations under the original Note and failed to disclose material matters regarding Typenex and its principal to the Company and has requested damages and attorneys’ fees be paid by Typenex to the Company. Although the Company believes it will prevail on the merits, there can be no guaranty that it will do so.

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Trademark Dispute

On August 5, 2015, the Company received a notice from Breathe, LLC, a Florida limited liability company (“Breathe LLC”), that the Company was violating Breathe LLC’s trademark rights under U.S. Trademark Registration No. 4,633,887 for the name “Breathe” and a demand for the Company to immediately cease and desist from such use. The Company believes that it has rights of prior use to the name “Breathe” under the federal trademark laws. As such, on August 10, 2015, the Company filed (i) a Petition for Cancellation with the United States Patent and Trademark Office regarding U.S. Trademark Registration No. 4,633,887 and (ii) a Complaint against Breathe LLC in the United States District Court of Eastern District of Tennessee, Civil Action No. 3:15-cv-00345 requesting a declaratory judgment regarding the Company’s rights to use the trademark. Although the Company believes it will prevail on the merits, there can be no guaranty that it will do so. If the Company is unable to prevail, it may be required to market its products under a different name.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

For the quarterly period ended June 30, 2015, the Company issued the following unregistered shares:

On April 23, 2015 the Company issued 1,666,667 shares for $50,000 at $0.03 per share in March 2015 under a subscription agreement.  

On May 18, 2015 the Company canceled shares in the amount of 3,150,000 shares due to services never provided at a value of $157,500 ($0.05 per share.)  

During the three months ended June 30, 2015 the Company issued 1,550,000 shares of common stock in association with securing debt financing in the amount of $141,450 (average price of $0.09 per share.)  

The Company issued 44,058,817 shares for $4,759,440 in consulting services rendered and to be rendered (average price of $0.107 per share) including an agreement with Maxim Group LLC ("Maxim") to provide general financial advisory and investment banking services in exchange for 2.5% of the then issued and outstanding stock at the date of execution. The number of shares of common stock issued and outstanding at the time of this agreement was 276,352,667. At that date 2.5% of the issued and outstanding common stock equaled 6,908,817 shares.  

The Company issues 17,083,998 shares for cash through private placement in the amount of $613,770 (average per sale price of $0.036 per share.)  

All foregoing issuances were exempt from registration requirements under Section 4(2) and/or Rule 506 of Regulation D of the Securities Act of 1933, as amended.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.

MINE SAFETY DISCLOSURE.

Not applicable.

ITEM 5.

OTHER INFORMATION.

None.

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ITEM 6.

EXHIBITS.

(a) Exhibits.

Exhibit
Number		Description
31.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*


101.INS		XBRL Instance Document.**
101.SCH		XBRL Taxonomy Extension Schema Document.**
101.CAL		XBRL Taxonomy Calculation Linkbase Document.**
101.LAB		XBRL Taxonomy Label Linkbase Document.**
101.PRE		XBRL Taxonomy Presentation Linkbase Document.**
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document. **

________________________________

*	filed or furnished herewith
**	submitted electronically herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 10, 2015

	BREATHE ECIG CORP.

	By:	/s/ Joshua Kimmel
		Joshua Kimmel
		Chief Executive Officer

	By:	/s/ Joshua Kimmel
		Joshua Kimmel
		Chief Financial Officer

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WHITE FOX VENTURES, INC. - FORM 10-Q/A - November 10, 2015

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WHITE FOX VENTURES, INC. Reports