10-Q 1 pura10q_6302018.htm

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For Quarter Ended:   June 30, 2018
 
Commission File Number 000-54888
 
PURA NATURALS, INC.
(Exact name of registrant as specified in its charter)
 
Colorado
 
20-8496798
(State or other jurisdiction
 
(I.R.S. Employer
of incorporation or organization)
 
Identification No.)
 
23101 Lake Center Drive, Suite 100
Lake Forest, CA 92630
 (Address of principal executive offices) (Zip Code)
 
(855) 326-8537
  (Registrant's telephone number, including area code)

Yummy Flies, Inc.
(Former name, former address and former fiscal year, if change 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:   Yes    No .
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      Yes    No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer 
 
Accelerated filer 
 
 
 
Non-accelerated filer 
 
Smaller reporting company 
(Do not check if a smaller reporting company)
   
   
Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act .

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No
 
The number of shares of the registrant's only class of common stock issued and outstanding as of August 14, 2018 was 112,117,115 shares.
 
 


 
 
 
 
TABLE OF CONTENTS
 
PART I
FINANCIAL INFORMATION
 
 
TABLE OF CONTENTS
 
 
 
 
 
 
 
Page No.
 
 
 
Item 1.
Financial Statements
3
 
 
 
 
Condensed Consolidated Balance Sheets as of June 30, 2018 (Unaudited) and December 31, 2017
3
 
 
 
 
Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2018 and 2017
4
 
 
 
 
Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2018 and 2017
5
 
 
 
 
Notes to Condensed Consolidated Financial Statements (Unaudited)
6
 
 
 
Item 2. 
Management's Discussion and Analysis of Financial Condition and Results of  Operations 
 23
 
 
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
23
 
 
 
Item 4.
Controls and Procedures.
23
 
 
 
 
PART II
 
 
OTHER INFORMATION
 
 
 
 
Item 1.
Legal Proceedings
30
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
31
 
 
 
Item 3.
Defaults Upon Senior Securities
33
 
 
 
Item 4.
Mine Safety Disclosures
33
 
 
 
Item 5.
Other Information
33
 
 
 
Item 6.
Exhibits
33
 
 
 
 
Signatures
34
 
 
 
 
 
 
 
- 2 -






PURA NATURALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
   
June 30,
   
December 31,
 
   
20 18
   
2017
 
     
(Unaudited)
       
ASSETS
           
CURRENT ASSETS
           
 Cash
 
$
9,971
   
$
67,422
 
Accounts receivable
   
60,994
     
66,427
 
Due from related parties
   
29,390
     
11,890
 
Inventory
   
148,939
     
105,087
 
Prepaid expenses and other current assets
   
22,519
     
109,430
 
Total Current Assets
   
271,813
     
360,256
 
OTHER ASSETS
               
Intangible assets, net
   
707,422
     
755,682
 
Total Other Assets
   
707,422
     
755,682
 
TOTAL ASSETS
 
$
979,235
   
$
1,115,938
 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
                 
CURRENT LIABILITIES
               
Accounts payable
 
$
440,397
   
$
321,250
 
Accrued expenses
   
684,557
     
226,273
 
Due to related parties
   
483,991
     
392,037
 
Deferred revenues
   
72,808
     
72,808
 
Note payable
   
25,484
     
-
 
Convertible note payable, net of discount of $308,833 and $506,237 as of June 30, 2018
   
936,767
     
781,901
 
and December 31, 2017, respectively
               
Derivative liabilities
   
1,097,379
     
897,968
 
Total Current Liabilities
   
3,741,383
     
2,692,237
 
TOTAL LIABILITIES
   
3,741,383
     
2,692,237
 
                 
COMMITMENTS AND CONTIGENCIES
               
                 
STOCKHOLDERS' DEFICIT
               
Common stock: par value $0.001, 500,000,000 shares authorized;
               
70,947,390 and 39,114,709 shares issued and outstanding, respectively, as of June 30, 2018 and December 31, 2017.
   
70,947
     
39,115
 
Additional paid-in capital
   
6,931,245
     
5,710,270
 
Accumulated deficit
   
(9,764,340
)
   
(7,325,684
)
TOTAL STOCKHOLDERS' DEFICIT
   
(2,762,149
)
   
(1,576,299
)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
 
$
979,235
   
$
1,115,938
 
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
 



- 3 -

 
 
PURA NATURALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
   
For the Three Months Ended
   
For the Six Months Ended
 
   
June 30,
   
June 30,
 
   
2018
   
2017
   
2018
   
2017
 
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
                         
Sales
 
$
76,308
   
$
99,381
   
$
145,372
   
$
166,450
 
Cost of goods sold
   
48,789
     
59,752
     
92,682
     
106,557
 
GROSS PROFIT
   
27,519
     
39,629
     
52,690
     
59,893
 
                                 
OPERATING EXPENSES
                               
Selling expense
   
50,155
     
91
     
90,900
     
11,464
 
General and administrative
   
504,761
     
457,510
     
1,284,304
     
972,298
 
Total Operating Expenses
   
554,916
     
457,601
     
1,375,204
     
983,762
 
LOSS FROM OPERATIONS
   
(527,397
)
   
(417,972
)
   
(1,322,514
)
   
(923,869
)
OTHER INCOME (EXPENSE)
                               
Interest expense
   
(342,043
)
   
(92,523
)
   
(654,853
)
   
(191,434
)
Gain on debt extinguishment
   
-
     
43,120
     
-
     
43,120
 
Change in fair value of derivative liabilities
   
862,086
     
85,292
     
(461,289
)
   
71,130
 
Total Other Income (Expense)
   
520,043
     
35,889
     
(1,116,142
)
   
(77,184
)
LOSS BEFORE INCOME TAX PROVISION
   
(7,354
)
   
(382,083
)
   
(2,438,656
)
   
(1,001,053
)
Income tax provision
   
-
     
-
     
-
     
-
 
NET LOSS
 
$
(7,354
)
 
$
(382,083
)
   
(2,438,656
)
   
(1,001,053
)
                                 
NET LOSS PER COMMON SHARE
                               
Net loss per share
                               
BASIC AND DILUTED
 
$
(0.00
)
 
$
(0.01
)
 
$
(0.05
)
 
$
(0.03
)
                                 
Weighted average common
                               
  shares outstanding
                               
BASIC AND DILUTED
   
55,961,833
     
33,855,244
     
48,773,984
     
33,808,784
 
                                 

 
 

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


- 4 -





PURA NATURALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 
      
For the Six Months Ended
 
   
June 30,
 
   
2018
     2017  
      
(Unaudited)
   
(Unaudited)
 
OPERATING ACTIVITIES:
           
Net loss
 
$
(2,438,656
)
 
$
(1,001,053
)
Adjustments to reconcile net loss to net cash used
               
  in operating activities:
               
Imputed interest
   
-
     
4,572
 
Amortization of intangible assets
   
49,835
     
49,818
 
Amortization of debt discount and original issue discount
   
529,407
     
98,854
 
Penalty interest resulted in principal increase
     49,250        -  
Change in fair value of derivative instruments
   
461,289
     
(71,130
)
Fair value of options vested
   
160,628
     
-
 
Common stock issued for services
   
32,400
     
324,702
 
Common shares issued for convertible note due date extension
   
25,500
     
-
 
Gain on debt extinguishment
   
-
     
43,120
 
Changes in operating assets and liabilities:
               
Accounts receivable
   
5,433
     
(34,065
)
Inventory
   
(43,852
)
   
(145,724
)
Due from related parties
   
(17,500
)
   
20,018
 
Due to related parties
   
91,954
     
70,672
 
Prepaid expenses and other current assets
   
86,911
     
6,876
 
Accounts payable
   
142,487
     
41,146
 
Accrued expenses
   
458,284
     
2,061
 
Cash Used in Operating Activities
   
(406,360
)
   
(590,133
)
                 
INVESTING ACTIVITIES:
               
Payments for intangible assets
   
(1,575
)
   
(5,705
)
Cash Used in Investing Activities
   
(1,575
)
   
(5,705
)
                 
FINANCING ACTIVITIES:
               
Advance from related party
   
-
     
10,000
 
Proceeds from note payable-related party
   
-
     
50,000
 
Payment on note payable
   
(3,016
)
   
(14,773
)
Proceeds from the issuance of convertible debt
   
320,000
     
278,000
 
Proceeds from sale of common stock for cash
   
5,000
     
224,500
 
Proceeds from note payable
   
28,500
     
-
 
Debt financing costs
   
-
     
34,436
 
    Net Cash Provided by Financing Activities
   
350,484
     
582,163
 
NET CHANGE IN CASH
   
(57,451
)
   
(13,675
)
CASH AT BEGINNING OF PERIOD
   
67,422
     
14,386
 
CASH AT END OF PERIOD
 
$
9,971
   
$
711
 
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
               
Interest paid
 
$
1,561
   
$
168,788
 
Income tax paid
 
$
-
   
$
-
 
                 
Non-Cash Investing and Financing Activities:
               
Expense & debt paid by third party on behalf of Company
 
$
-
   
$
8,000
 
Original Issue Discount
 
$
-
   
$
25,000
 
Common stock to be issued in settlement of related party note
 
$
-
   
$
871,000
 
Common stock issued for convertible note payable
 
$
424,061
   
$
-
 
Debt discount for new issuances due to derivative feature of convertible note
 
$
320,000
   
$
279,914
 
Derivative liability extinguished on conversion
 
$
581,878
   
$
-
 
                 

 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
 
 
- 5 -





PURA NATURALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017


NOTE 1 — MANAGEMENT'S REPRESENTATION
 
The accompanying condensed consolidated financial statements of Pura Naturals, Inc. (the "Company," "Pura," "we," or "our"), were prepared in accordance with accounting principles generally accepted in the United States, or "US GAAP". In the opinion of the Company's management, the unaudited condensed consolidated financial statements were prepared on the same basis as the audited consolidated financial statements ("CFS") in the Annual Report on Form 10-K/A ("Form 10-K/A") for the year ended December 31, 2017, and include all normal recurring adjustments necessary for the fair presentation of the Company's statement of financial position as of June 30, 2018, and its results of operations for the three and six months ended June 30, 2018 and 2017 and cash flows for the six months ended June 30, 2018 and 2017. The condensed consolidated balance sheet as of December 31, 2017 was derived from the December 31, 2017 audited financial statements. The interim financial information for the six months ended June 30, 2018 is not necessarily indicative of the results to be expected for any other interim period or for the entire year ending December 31, 2018.

We suggest these condensed CFS be read in conjunction with the audited CFS and notes thereto for the year ended December 31, 2017 included in the Company's Form 10-K/A. The report of the Company's independent registered public accounting firm on the CFS included in Form 10-K/A contains a qualification regarding the substantial doubt about the Company's ability to continue as a going concern.
 
NOTE 2 - ORGANIZATION AND SUMMARY SIGNIFICANT ACCOUNTING POLICIES

Organization and Line of Business
 
We were incorporated on December 26, 2005, in the State of Colorado under the name "Yummieflies.com Inc."  In March 2010, we filed an amendment to our Articles of Incorporation changing our name to "Yummy Flies, Inc."  In November 2016, we filed an amendment to our Articles of Incorporation changing our name to "Pura Naturals, Inc."  In September 2010, we effected in a forward split of our issued and outstanding common stock, par value $0.001 (the "Common Stock") whereby nine (9) shares of Common Stock were issued in exchange for every one (1) share then issued and outstanding.  In addition, in November 2016, we effected in a forward split of our issued and outstanding Common Stock whereby 3.7 shares of Common Stock were issued in exchange for every one (1) share then issued and outstanding.  All references to our issued and outstanding Common Stock in this Report are presented on a post-forward split basis unless otherwise indicated.
 
Effective July 18, 2016, the Company entered into that certain Share Exchange Agreement by and among the Company, Pura Naturals, Inc., a Delaware corporation ("PURA") and the PURA Shareholders.  Pursuant to the Share Exchange Agreement, the Company exchanged the outstanding common and preferred stock of PURA held by the PURA Shareholders for shares of Common Stock of the Company.  At closing, Robert Lee, the holder of 30,536,100 shares of common stock, agreed to cancelation of such shares.  Other than Robert Lee, shareholders of the Company held an aggregate of 7,625,700 shares of Common Stock.  Also at closing, the Company issued 23,187,876 shares of Common Stock to the PURA Shareholders.   In addition, shares issuable under outstanding options of PURA will be exercisable into shares of Common Stock of the Company, pursuant to the terms of such instruments. 

As a result of the Share Exchange Agreement and the other transactions contemplated there under, PURA is now a wholly owned subsidiary of the Company.

The exchange of shares with PURA was accounted for as a reverse acquisition under the purchase method of accounting since PURA obtained control of the Company. Accordingly, the merger of PURA into the Company was recorded as a recapitalization of PURA, PURA being treated as the continuing entity. The historical financial statements presented are the financial statements of PURA.

PURA markets and sells a line of cleaning products based on the BeBetterFoam® platform, a revolutionary and proprietary bio-based foam, for consumer kitchen and bathroom, with additional products for outdoor hobbies (fishing and boating, spas and pools), pet care, infant care and industrial use currently under development. BeBetterFoam® is a unique, proprietary polymer process technology that is protected by a trade secret, completely owned by Advanced Recovery Technologies, Inc ("AIRTech") and sold to PURA, and is incapable of being reverse engineered.

 

- 6 -




PURA NATURALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017

The Bath & Body line and household (including kitchen) sponges are Oleophilic which means, among other things, that it absorbs oil, grease and grime, removes impurities from skin (cleansing and applying/removing make- up), and is latex-free.  PURA products are also non-toxic, contain plant-based/ renewable resources, have a carbon-negative footprint (removes more carbon than is created), contain no petroleum by-products, use no adhesives or glues, and are infused with soap that is 100% natural, bio-degradable, sustainable, vegan, gluten-free, contains botanicals and essential oils; SLS-, Sulfate, Paraben-, and BPA- Free.  The BeBetterFoam® is hydrophobic, which means it resists and does not support bacteria.  PURA believes that the BeBetterFoam® also is up to 40 times stronger than the leading kitchen sponge brand.

Pura Marine, the Marine Division of Pura Naturals, offers biologically-based oil-absorbent technologies to the commercial and consumer markets. Working alongside industrial partners, Pura Marine has developed environmentally sustainable oil spill prevention products and solutions targeted towards the marine oil transport, oil refining and trucking industries. Pura Marine also provides plant-based foam products to the recreational boating and fishing industries.
 
Basis of Presentation

The Company's significant accounting policies are summarized in Note 2 of the Form 10-K/A. These accounting policies conform to U.S.GAAP and have been consistently applied in the preparation of the interim unaudited condensed consolidated financial statements. There were no significant changes to these accounting policies during the six months ended June 30, 2018, and the Company does not expect the adoption, as applicable, of other recent accounting pronouncements will have a material impact on its financial statements.

Reclassification
 
Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses.

Revenue Recognition

ASU No. 2014-09Revenue from Contracts with Customers ("Topic 606"), became effective for us on January 1, 2018. Our disclosure within the below sections to this footnote reflects our updated accounting policies that are affected by this new standard. We applied the "modified retrospective" transition method for open contracts for the implementation of Topic 606. As sales are and have been primarily through distributors, and we have no significant post-delivery obligations, this did not result in a material recognition of revenue on our accompanying CFS for the cumulative impact of applying this new standard. We made no adjustments to our previously-reported total revenues, as those periods continue to be presented in accordance with our historical accounting practices under Topic 605, Revenue Recognition.

Required Elements of Our Revenue Recognition: Revenue from our product sales is recognized under Topic 606 in a manner that reasonably reflects the delivery of our goods to customers in return for expected consideration and includes the following elements:

·
we ensure we have an executed contract(s) with our customers that we believe is legally enforceable;
·
we identify the "performance obligation in the respective contract;
·
we determine the "transaction price" for each performance obligation in the respective contract;
·
we allocate the transaction price to each performance obligation; and
·
we recognize revenue only when we satisfy each performance obligation.

 

 
- 7 -




PURA NATURALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017

    These five elements, as applied to each of our revenue category, is summarized below:

·
Product sales - we sell our products to retail stores and wholesalers/distributors (i.e., our customers). Our wholesalers/distributors in turn sell our products directly to retail stores and outlets. Revenue from our product sales is recognized as physical delivery of product occurs (when our customer obtains control of the product), in return for agreed-upon consideration.

·
Product Returns Allowances - Our customers are contractually permitted to return if found defective. Returns outside of this aforementioned criteria are not customarily allowed. We estimate expected product returns for our allowance based on our historical return rates. Returned product is typically destroyed, since substantially all returns are due to defects and cannot be resold.

Basic and Diluted Earnings (Loss) Per Share

Earnings per share is calculated in accordance with Accounting Standards Codification ("ASC") Topic 260, Earnings Per Share. Basic earnings per share ("EPS") is based on the weighted average number of common shares outstanding. Diluted EPS is based on the assumption that all dilutive convertible shares and stock warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. 

In periods of losses from operations, basic and diluted income per share from operations are also the same, as ASC 260-10 requires the use of the denominator used in the calculation of loss per share from operations in all other calculations of earnings per share presented, despite the dilutive effect of potential common shares.

Based on the conversion prices in effect, the potentially dilutive effects of 8,193,750 and 1,156,250 options were not considered in the calculation of EPS as the effect would be anti-dilutive on June 30, 2018 and June 30, 2017, respectively.

Based on the conversion prices in effect, the potentially dilutive effects of 154,137,853 and 616,920 due to convertible debt were not considered in the calculation of EPS as the effect would be anti-dilutive on June 30, 2018 and June 30, 2017, respectively.
 
Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases, which will amend current lease accounting to require lessees to recognize (i) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
 
Management has considered all recent accounting pronouncements issued since and their potential effect on our financial statements.

The Company's management believes that these recent pronouncements will not have a material effect on the Company's CFS.
 
 

- 8 -




PURA NATURALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017


NOTE 3 - GOING CONCERN AND MANAGEMENT PLANS
 
The accompanying condensed CFS were prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

The Company incurred losses from operations of $1,322,514 for the six months ended June 30, 2018 and $4,269,673 for the year ended December 31, 2017, and had an accumulated deficit of $9,764,340 at June 30, 2018. In addition, the Company used cash in operating activities of $406,360 for the six months ended June 30, 2018. The Company will continue to incur costs that are necessary for it to remain an active public company. As of June 30, 2018, the Company has approximately $10,000 in cash. 

These factors raise substantial doubt about the Company's ability to continue as a going concern.  

While the Company is attempting to establish an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern, the Company's cash position may not be adequate to support the Company's daily operations. Management intends to raise additional funds by seeking equity and/or debt financing; however there can be no assurances that it will be successful in those efforts. The ability of the Company to continue as a going concern is dependent upon the Company's ability to obtain financing, further implement its business plan, and generate revenues.
 
There are significant risks and uncertainties which could negatively affect the Company's operations. These are principally related to (i) the absence of a distribution network for the Company's products, (ii) the absence of any significant commitments or firm orders for the Company's products. The Company's limited sales to date for the Company's products make it impossible to identify any trends in the Company's business prospects. Accordingly, there can be no assurance that we will be able to pay obligations which we may incur in the future.  Furthermore, if our current indebtedness is not restructured or converted into equity, which is at the debt holder's discretion, our current operations do not generate sufficient cash to pay interest and principal on these obligations when they become due.  Accordingly, there can be no assurance that we will be able to pay these or other obligations which we may incur in the future.   In the event we are unable to restructure or convert into equity the balance of our outstanding indebtedness, the holders may obtain judgments against us and seek to enforce such judgments against our assets, in which event we will be required to cease our business activities and the equity of our stockholders will be effectively wiped out.

The Company's only sources of additional funds to meet continuing operating expenses, fund additional development and fund additional working capital are through the sale of securities and/or debt instruments. We are actively seeking additional debt or equity financing, but no assurances can be given that such financing will be obtained or what the terms thereof will be. The Company may need to discontinue a portion or all of our operations if the Company is unsuccessful in generating positive cash flow or financing for the Company's operations through the issuance of securities.

An event of default exists under our April Note, July Note and July Note #2.

The Company was unable to repay amounts due for the April Note, July Note and July Note #2 (See Note 9).  The inability to repay represents an event of default. The holders of the notes have not declared a default. If they were to do so, however, they would be entitled to immediate payment of amounts far in excess of our ability to pay. Under the worst scenario, a declaration of default by the holders of the April Note, July Note and/or July Note #2 could result in a liquidation of the Company and elimination of any value in our common stock.

The condensed CFS do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. 
 


- 9 -




PURA NATURALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017



NOTE 4 – Intangible Assets

The following are the details of intangible assets at June 30, 2018 and December 31, 2017:
 
 
June 30,
   
December 31,
 
   
2018
   
2017
 
License
 
$
996,346
   
$
996,346
 
Trademarks
   
12,105
     
10,530
 
     
1,008,451
     
1,006,876
 
Less accumulated amortization
   
(301,029
)
   
(251,194
)
   
$
707,422
   
$
755,682
 
                 
 
Amortization expense for the six months ended June 30, 2018 and 2017 was $49,835 and $49,818, respectively.
 
The following summarizes estimated future amortization expense as of June 30, 2018 related to intangible assets:
 
 
 
Years ending December 31,
     
 2018
 
$
50,423
 
 2019
   
100,845
 
 2020
   
100,845
 
 2021
   
100,845
 
 2022
   
100,845
 
Thereafter
   
253,619
 
      
$
707,422
 
           
 

NOTE 5 – Due from Related Parties/Due to Related Parties

The Company has balances outstanding due from and payable to affiliated companies and related parties.  These amounts are payable upon demand and are non-interest bearing.  At June 30, 2018 and December 31, 2017, the amounts due from related parties were $29,390 and $11,890, respectively.  At June 30, 2018 and December 31, 2017, the amounts due to related parties were $483,991 and $392,037, respectively.


NOTE 6 - Note Payable

The Company entered into a merchant agreement on May 21, 2018.  The loan amount is $28,500 and the Company is required to make 245.27 daily payments of $165 each starting from May 24, 2018 through May 4, 2019. Total payments for the note payable is $40,470, which included $28,500 principal payment and $11,970 interest payment. Each daily repayment is allocated between principal and interest. The outstanding balance was $25,484 and $0 at June 30, 2018 and December 31, 2017, respectively
 

NOTE 7 - Fair Value Measurement

Financial Accounting Standards Board ("FASB") ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value ("FV") of financial instruments held by the Company. FASB ASC Topic 825, Financial Instruments, defines FV, and establishes a three-level valuation hierarchy for disclosures of FV measurement that enhances disclosure requirements for FV measures. The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their FVs because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
 
 
 

- 10 -





PURA NATURALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017
 

· Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
 
·
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
·
·
Level 3 inputs to the valuation methodology us one or more unobservable inputs which are significant to the FV measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic 480, Distinguishing Liabilities from Equity, and FASB ASC Topic 815, Derivatives and Hedging

The Company uses Level 3 inputs for its valuation methodology for its derivative liability as its FV was determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company's derivative liability is adjusted to reflect FV at each period end, with any increase or decrease in the FV being recorded in results of operations as adjustments to FV of derivatives.
 
The Company held certain financial instruments that are measured at fair value on a recurring basis. These consisted of convertible debt totaling $1,245,597 and $1,288,138 at June 30, 2018 and December 31, 2017 respectively, with a derivative liability totaling $1,097,379 and $897,968 at June 30, 2018 and December 31, 2017, respectively, which are categorized as Level 3.

Liabilities measured at fair value on a recurring basis are summarized as follows:
 
                   
 
June 30, 2018
 
December 31, 2017
 
Level 1
Level 2
Level 3
Total
 
Level 1
Level 2
Level 3
Total
                   
Conversion feature embedded within Convertible Note
-
-
  1,097,379
  1,097,379
 
-
-
     897,968
     897,968
 
- -    1,097,379   1,097,379  
-
      897,968      897,968
 
The related gain on change in fair value of derivatives totaled $862,086 for the three months ended June 30, 2018 and a related gain on the change in fair value of derivatives of $85,292 for the three months ended June 30, 2017.
 
The related loss on change in fair value of derivatives totaled $461,289 for the six months ended June 30, 2018 and a related gain on the change in fair value of derivatives of $71,130 for the six months ended June 30, 2017.

 
NOTE 8 - Derivative liabilities

During the six months ended June 30, 2018, the Company identified conversion features embedded within its convertible debt.

The Company determined the conversion feature of the convertible note represents an embedded derivative since the convertible debt is convertible into a variable number of shares upon conversion. Accordingly, the convertible debt is not considered to be conventional debt and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability.
 
Therefore, the FV of the derivative instruments was recorded as liabilities on the balance sheet with the corresponding amount recorded as discounts to the notes. Such discounts will be accreted from the issuance date to the maturity date of the notes. The change in the FV of the derivative liabilities will be recorded in other income or expenses in the statement of operations at the end of each period, with the offset to the derivative liabilities on the balance sheet. The FV of the embedded derivative liabilities on the convertible notes were determined using the Black-Scholes valuation model on the issuance dates with the assumptions in the table below.


- 11 -





PURA NATURALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017


The FV of the derivative liabilities was calculated using a Black-Scholes valuation model.
 
The FV of the Company's derivative liabilities at and during the six months ended June 30, 2018 is as follows:
 
Derivative liability balance, December 31, 2017
 
$
897,968
 
Debt Discount
   
320,000
 
Derivative liability related to debt converted into common shares
   
(581,878
)
Change in derivative liability
   
461,289
 
Derivative liability balance, June 30, 2018
 
$
1,097,379
 
         
 
The FV's at the commitment dates and re-measurement dates for the convertible debt and warrants treated as derivative liabilities are based upon the following estimates and assumptions made by management for the six months ended June 30, 2018:

       
Risk free rate
   
2.11% - 2.33%
 
Volatility
   
175% - 202%
 
Conversion/Exercise Price
 
 
$0.0031 - $.0149
 
Dividend rate
   
0%
 
Term (Years)
   
0.22 - 0.70
 

The carrying amounts of the Company's cash, accounts payable and accrued expenses approximate their estimated FVs due to the short term maturities of those financial instruments. The Company believes the carrying amount of its promissory note, net of discount approximates its FV based on rates and other terms currently available to the Company for similar debt instruments.


NOTE 9 - Convertible Note Payable

Convertible Promissory Note

On April 7, 2017, the Company issued to an accredited investor an unsecured Convertible Promissory Note (the "April Note") of $570,000 that matured on January 7, 2018.  The failure to pay principal and interest as scheduled represents an event of default under the terms of the Note.  However, the holder of the Note has not declared a default.

Due to the potential adjustment in the conversion price associated with this April note payable based on the Company's stock price, the Company determined the conversion feature is considered a derivative liability.  The embedded conversion feature was initially calculated to be $273,266 which is recorded as a derivative liability as of the date of issuance.  The derivative liability was recorded as a debt discount to the April Note payable up to the face amount of the April Note. The debt discount of $273,266 is being amortized over the term of the April Note.  The Company recognized interest expense of $8,549 and $48,398 during the six months ended June 30 2018 and June 30, 2017, respectively for the amortization of the debt discount.  The unamortized balance of the debt discount was $0 and $8,549 at June 30, 2018 and December 31, 2017, respectively.
 
 
 

- 12 -



PURA NATURALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017
 
During the quarters ended June 30, 2018 and 2017 the Company recognized interest expense in the amount of $1,539 and $8,553 relating to the amortization of the original issue discount and debt issuance costs. The unamortized balance of original issue discount and debt issuance costs totaled $0 and $1,539 at June 30, 2018 and December 31, 2017, respectively. 

The holder of the April Note payable converted the following amounts during the six months ended June 30, 2018:


Conversion Date
Number of Shares of Common Stock
 
Principal and Amount Converted
 
Price per Share
January 17, 2018
                     500,000
 
                       31,875
 
            0.0638
January 31, 2018
                     500,000
 
                       31,875
 
            0.0638
March 16, 2018
                     500,000
 
                       20,325
 
            0.0407
April 19, 2018
                     500,000
 
                       11,250
 
            0.0225
May 7, 2018
                     936,640
 
                       17,562
 
            0.0188
May 22, 2018
                  1,000,000
 
                       12,225
 
            0.0122
June 5, 2018
                  1,000,000
 
                       11,700
 
            0.0117
June 18, 2018
                  1,000,000
 
                       11,800
 
            0.0118
Total
                  5,936,640
 
                     148,612
   

The outstanding principal balance of the April note was $134,026 and $282,638 at June 30, 2018 and December 31, 2017, respectively.

8% Promissory Note

On July 5, 2017, the Company issued an 8% unsecured Promissory Note ("July Note") in the amount of $220,000, with an Original Issue Discount of $20,000 and Debt Issuance Costs of $20,000 to an accredited investor. This promissory note was originally due and payable on January 6, 2018, plus the one-time interest charge of on the principal of 8%. The holder has the right to convert all or any part of the outstanding amount due under this Note into fully paid and non-assessable shares of Common Stock upon an event of default.

In connection with the July Note, the Company granted 85,000 shares of Common Stock to the investor as inducement shares. These shares were issued on February 5, 2018.  These Common Stock were valued at the market share price of $0.739 per share and recorded interest expense of $62,815.

Due to the potential adjustment in the conversion price associated with this promissory note payable based on the Company's stock price, the Company determined the conversion feature is considered a derivative liability.  The embedded conversion feature was initially calculated to be $230,656 which is recorded as a derivative liability as of the date of issuance.  The derivative liability was recorded as a debt discount to the convertible note payable up to the face amount of the convertible note with the excess of $50,656 being recorded as a financing cost.  The debt discount of $180,000 is being amortized over the term of the convertible note.  The Company recognized interest expense of $5,837 and $0 during the six months ended June 30 2018 and June 30, 2017 for the amortization of the debt discount. The unamortized balance of the debt discount was $0 and $5,837 at June 30, 2018 and December 31, 2017, respectively.

 
 
 

- 13 -




PURA NATURALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017


On January 17, 2018, the Company entered into an agreement with the holder to amend terms of the July Note.  The due date of the July Note was amended to February 6, 2018 from the original due date of January 6, 2018,  In exchange for the amendment the Company delivered 300,000 shares of Common Stock. These Common Stock were valued at the market share price of $0.085 per share and recorded interest expense of $25,500. If, on the date that is the six-month anniversary of the date of the second amendment ("True-Up Date"), the volume weighted average price of the Common Stock on the day immediately preceding the True-Up Date as reported on the Company's Principal Market is less than the closing price of the Common Stock on the date of the second amendment, the Company shall, within three trading days of the holder's provision of written notice, issue and deliver an additional number of duly and validly issued, fully paid and non-assessable shares of Common Stock equal to the quotient of $25,000 divided by the subsequent share price multiplied by 1.5, less the extension shares.  If the true-up date was June 30, 2018, the estimated number of shares to be issued is approximately 2,585,000 with a fair value of $33,600 using the stock price on June 30, 2018.

On January 31, 2018, the Company entered into an agreement with the holder to further amend terms of the July Note.   The due date of the July Note was extended to March 6, 2018 from the original due date of January 6, 2018.  In exchange for the amendment the holder converted $50,000 of the outstanding balance of the July Note.

The holder of the July Note converted the following during the six months ended June 30, 2018:

Conversion Date
 
Number of Shares of Common Stock
   
Principal and Amount Converted
   
Price per Share
 
January 31, 2018
   
1,388,889
   
$
50,000
     
0.0360
 
March 8, 2018
   
1,428,571
     
50,000
     
0.0350
 
April 18, 2018
   
2,000,000
     
21,000
     
0.0105
 
June 12, 2018
   
2,750,000
     
21,725
     
0.0079
 
Total
   
7,567,460
   
$
142,725
         

 
The Company has not paid the balance due of the Note by the amended due date.   In accordance with the provision of the Note, On March 7, 2018, the balance of the note was increased by $37,520 due to an occurrence of an event of default. The $37,520 increase in principal was recorded as interest expense.

The outstanding principal balance of the July note was $114,795 and $220,000 at June 30, 2018 and December 31, 2017, respectively.

During the quarters ended June 30, 2018 and June 30, 2017 the Company recognized interest expense in the amount of $1,298 and $0 relating to the amortization of the original issue discount and debt issuance costs. The unamortized balance of original issue discount and debt issuance costs totaled $0 and $1,298 at June 30, 2018 and December 31, 2017, respectively.

The Company recorded interest expense in connection with the July Note in the amount of $63,591 (including the $37,520 penalty interest for occurrence of event of default and $25,500 for Amendment) and $0, for the quarters ended June 30, 2018 and June 30, 2017, respectively. Accrued interest due under the promissory note totaled $17,600 and $17,029 as of June 30, 2018 and December 31, 2017, respectively. 

Convertible Promissory Note-Commitment Fee

On July 14, 2017, the Company issued an unsecured convertible promissory note ("July Note #2") of $330,000, with an original issue discount of $30,000 to an accredited investor for commitment fee related to the July Note #2. This July Note #2 is due and payable on April 17, 2018.  The holder has the right to convert all or any part of the outstanding amount due under this July Note #2 into fully paid and non-assessable shares of Common Stock, at a conversion price per share of 65% of the low trade price of the Common Stock during thirty days preceding the date of the applicable conversion notice.
 

- 14 -





PURA NATURALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017


Pursuant to the terms of the July Note #2, the Company is not required to make any payments on the Note until maturity, and no interest shall accrue except in default.

Due to the potential adjustment in the conversion price associated with this convertible note payable based on the Company's stock price, the Company determined the conversion feature is considered a derivative liability.  The embedded conversion feature was initially calculated to be $369,485 which is recorded as a derivative liability as of the date of issuance. 

The derivative liability was recorded as a debt discount to the convertible note payable up to the face amount of the July Note #2 with the excess of $69,485 being recorded as a financing cost.  The debt discount of $300,000 is being amortized over the term of the July Note #2. 

The Company recognized interest expense of $113,868 and $0 during the six months ended June 30, 2018 and June 30, 2017, respectively for the amortization of the debt discount. The unamortized balance of the debt discount was $0 and $113,868 at June 30, 2018 and December 31, 2017, respectively.

During the six months ended June 30, 2018 and June 30, 2017 the Company recognized interest expense in the amount of $11,387 and $0 relating to the amortization of the original issue discount. The unamortized balance of original issue discount totaled $0 and $11,387 at June 30, 2018 and December 31, 2017, respectively.

As of the August 15, 2018, the Company has not paid the balance of the Note.  The failure to pay principal as scheduled represents an event of default under the terms of the Note.  However, the holder of the Note has not declared a default.

The outstanding principal balance of the July Note #2 was $330,000 at June 30, 2018 and December 31, 2017.

12 % Convertible Promissory Note

On September 12, 2017, the Company issued a 12% unsecured Convertible Promissory Note of $160,500 ("September Note #1"), with debt issuance costs of $10,500 to an accredited investor. This September Note #1 is due and payable on September 12, 2018. The holder is entitled to convert all of the outstanding and unpaid principal and accrued interest of this September Note #1 into fully paid and non-assessable shares of Common Stock in accordance with the stated conversion price commencing on the date that is 180 days from the issuance date.

Due to the potential adjustment in the conversion price associated with this convertible note payable based on the Company's stock price, the Company determined the conversion feature is considered a derivative liability.  The embedded conversion feature was initially calculated to be $251,454 which is recorded as a derivative liability as of the date of issuance.  The derivative liability was recorded as a debt discount to the convertible note payable up to the face amount of the convertible note with the excess of $101,454 being recorded as a financing cost.  The debt discount of $150,000 is being amortized over the term of the convertible note. 

The holder of the September Note #1 converted the following during the six months ended June 30, 2018:
 
Conversion Date
 
Number of Shares of Common Stock
   
Principal and Amount Converted
   
Price per Share
 
March 23, 2018
   
1,000,000
   
$
25,750
     
0.0258
 
April 19, 2018
   
2,141,249
     
22,804
     
0.0106
 
Total
   
3,141,249
   
$
48,554
         
 
The Company recognized interest expense of $81,523 and $0 during the six months ended June 30, 2018 and June 30, 2017, respectively for the amortization of the debt discount and release of debt discount due to conversions.  The unamortized balance of the debt discount was $23,271 and $104,794 at June 30, 2018 and December 31, 2017, respectively.
 


- 15 -





PURA NATURALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017
 

 
During the six months ended June 30, 2018 and June 30, 2017 the Company recognized interest expense of $5,207 and $0 relating to the amortization of the original issue discount and debt issuance costs of the September Note #1. The unamortized balance of debt issuance costs totaled $2,129 and $7,336 at June 30, 2018 and December 31, 2017, respectively.
 
The Company recorded interest expense in connection with the September Note #1 of $9,551 and $0, for the six months ended June 30, 2018 and June 30, 2017, respectively. Accrued interest due under the September Note #1 totaled $15,356 and $5,805 as of June 30, 2018 and December 31, 2017, respectively.

The outstanding principal balance of the September Note #1 was $111,946 and $160,500 at June 30, 2018 and December 31, 2017, respectively.

12 % Convertible Note

On September 20, 2017, the Company issued an unsecured 12% Convertible Note of $75,000 ("September Note #2"), with an original issue discount of $4,500 and Debt Issuance Costs of $3,000 to an accredited investor. This September Note #2 is due and payable on September 20, 2018. The holder has the right to convert all or any part of the outstanding amount due under this September Note #2 into fully paid and non-assessable shares of Common Stock.

Due to the potential adjustment in the conversion price associated with this September Note #2 payable based on the Company's stock
price, the Company determined the conversion feature is considered a derivative liability.  The embedded conversion feature was initially calculated to be $100,798 which is recorded as a derivative liability as of the date of issuance.  The derivative liability was recorded as a debt discount to the September Note #2 payable up to the face amount of the September Note #2 with the excess of $33,298 being recorded as a financing cost.  The debt discount of $67,500 is being amortized over the term of the September Note #2. 

The Company recognized interest expense of $39,371 and $0 during the six months ended June 30, 2018 and June 30, 2017, respectively for the amortization of the debt discount and release of debt discount due to conversions for the September Note #2.  The unamortized balance of the debt discount was $9,266 and $48,637 at June 30, 2018 and December 31, 2017, respectively.

During the six months ended June 30, 2018 and June 30, 2017 the Company recognized interest expense in the amount of $3,719 and $0 relating to the amortization of the original issue discount and debt issuance costs. The unamortized balance of original issue discount and debt issuance costs totaled $1,685 and $5,404 at June 30, 2018 and December 31, 2017, respectively.

The Company recorded interest expense in connection with the September Note #2 in the amount of $19,763 (including the $12,000 penalty interest as discussed below and $3,300 in conversion fees) and $0, for the six months ended June 30, 2018 and June 30, 2017, respectively. Accrued interest due under the September Note #2 totaled $6,978 and $2,515 as of June 30, 2018 and December 31, 2017, respectively.

The holder of the September Note #2 converted the following during the six months ended June 30, 2018:
 
Conversion Date
 
Number of Shares of Common Stock
   
Principal and Amount Converted
   
Fees
   
Price per Share
 
April 17, 2018
   
1,000,000
   
$
3,510
     
750
     
0.0043
 
May 2, 2018
   
2,300,000
     
8,973
     
825
     
0.0043
 
May 23, 2018
   
2,700,000
     
7,977
     
825
     
0.0033
 
June 18, 2018
   
3,100,000
     
8,710
     
900
     
0.0031
 
Total
   
9,100,000
   
$
29,170
     
3,300
         
 
 
 
 
- 16 -





PURA NATURALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017

The fees represent the costs of obtaining a Rule 144 opinion and transfer agent fees.

The principal balance of the note was increased by $12,000 which represent a penalty of $1,000 per day for not delivering common stock within three business days after the receipt of the conversion notice.  The $12,000 increased the principal amount of the Note and was accounted for as interest expense.

The outstanding principal balance of the September Note #2 was $57,830 and 75,000 at June 30, 2018 and December 31, 2017, respectively.

8 % Convertible Secured Redeemable Note

On October 23, 2017, the Company issued an 8% Convertible Secured Redeemable Note of $95,000 ("October Note"), with original issuance discount of $2,250 to an accredited investor. This October Note is due and payable on October 23, 2018. The holder is entitled at any time to convert all of the unpaid principal of this October Note into shares of Common Stock.

Due to the potential adjustment in the conversion price associated with this October Note payable based on the Company's stock price, the Company determined the conversion feature is considered a derivative liability.  The embedded conversion feature was initially calculated to be $129,589 which is recorded as a derivative liability as of the date of issuance.  The derivative liability was recorded as a debt discount to the October Note payable up to the face amount of the October note with the excess of $50,839 being recorded as a financing cost.  The debt discount of $78,750 is being amortized over the term of the October Note. 

 
The Company recognized interest expense of $53,416 and $0 during the six months ended June 30, 2018 and June 30, 2017, respectively for the amortization of the debt discount and release of debt discount due to conversions.  The unamortized balance of the debt discount was $10,447 and $63,863 at June 30, 2018 and December 31, 2017, respectively.

During the six months ended June 30, 2018 and June 30, 2017 the Company recognized interest expense of $8,058 and $0 relating to the amortization of the original issue discount and debt issuance costs. The unamortized balance of debt issuance costs totaled $5,120 and $13,178 at June 30, 2018 and December 31, 2017, respectively.

The Company recorded interest expense in connection with the October Note of $3,769 and $0, for the six months ended June 30, 2018 and June 30, 2017, respectively. Accrued interest due under the October Note totaled $5,206 and $1,437 as of June 30, 2018 and December 31, 2017, respectively.

The holder of the October Note converted the following during the six months ended June 30, 2018:
 
Conversion Date
 
Number of
Shares of
Common Stock
   
Principal and Amount
Converted
   
Price per
 Share
 
May 10, 2018
   
1,380,379
     
20,000
     
0.0145
 
June 7, 2018
   
2,065,291
     
18,000
     
0.0087
 
June 22, 2018
   
2,058,329
     
17,000
     
0.0083
 
Total
   
5,503,999
     
55,000
         

The outstanding principal balance of the October Note was $40,000 at June 30, 2018 and $95,000 at December 31, 2017.
 
 
 

- 17 -




PURA NATURALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017


4.25 % Convertible Promissory Note

On December 18, 2017, the Company issued a 4.25% Convertible Secured Redeemable Note of $125,000 ("December Note"), with debt issuance costs of $16,250 and original issue discount of $750 to an accredited investor. This December Note is due and payable on October 23, 2018.

Due to the potential adjustment in the conversion price associated with this December Note payable based on the Company's stock price, the Company determined the conversion feature is considered a derivative liability. The embedded conversion feature was initially calculated to be $143,675 which is recorded as a derivative liability as of the date of issuance.  The derivative liability was recorded as a debt discount to the December Note payable up to the face amount of the December Note with the excess of $35,675 being recorded as a financing cost. The debt discount of 108,000 is being amortized over the term of the December Note.

The Company recognized interest expense of $53,556 and $0 during the six months ended June 30, 2018 and June 30, 2017, respectively for the amortization of the debt discount.  The unamortized balance of the debt discount was $50,597 and $104,153 at June 30, 2018 and December 31, 2017, respectively.

During the three months ended June 30, 2018 and June 30, 2017 the Company recognized interest expense of $8,430 and $0 relating to the amortization of the original issue discount and debt issuance costs. The unamortized balance of debt issuance costs and original issue discount totaled $7,964 and $16,395 at June 30, 2018 and December 31, 2017, respectively.

The Company recorded interest expense in connection with the December Note of $2,634 and $0, for the six months ended June 30, 2018 and June 30, 2017, respectively.  Accrued interest due under the December Note totaled $2,823 and $189 as of June 30, 2018 and December 31, 2017, respectively.

The outstanding principal balance of the December Note was $125,000 at June 30, 2018 and December 31, 2017.

12 % Convertible Promissory Note #1

On February 8, 2018, the Company issued a 12% unsecured Convertible Promissory Note #1 of $103,000 ("2018 Note #1"), with debt issuance costs of $3,000 to an accredited investor.  Net of debt issuance costs, the Company received $100,000. This 2018 Note #1 note is due and payable on November 20, 2018. The holder has the right from time to time, and at any time during the period beginning on the date which is 180 days following the date of the note and ending on the later of: (i) the maturity date and (ii) the date of payment of the default amount, each in respect of the remaining outstanding principal amount of this Note to convert all or any amount of the outstanding and unpaid principal amount of the 2018 Note #1 into fully paid and non-assessable shares of common stock.

Due to the potential adjustment in the conversion price associated with this 2018 Note #1convertible note payable based on the Company's stock price, the Company determined the conversion feature is considered a derivative liability. The embedded conversion feature was initially calculated to be $227,338 which is recorded as a derivative liability as of the date of issuance.  The derivative liability was recorded as a debt discount to the 2018 Note #1 payable up to the face amount of the 2018 Note #1 Note convertible note with the excess of $127,338 being recorded as a change in fair value of derivative liability. The debt discount of $100,000 is being amortized over the term of the convertible note.

The Company recognized interest expense of $49,825 and $0 during the six months ended June 30, 2018 and June 30, 2017, respectively for the amortization of the debt discount.  The unamortized balance of the debt discount was $50,175 and $0 at June 30, 2018 and December 31, 2017, respectively.

During the six months ended June 30, 2018 and June 30, 2017 the Company recognized interest expense of $1,495 and $0 relating to the amortization of the debt issuance costs. The unamortized balance of debt issuance costs and original issue discount totaled $1,505 and $0 at June 30, 2018 and December 31, 2017, respectively.

The Company recorded interest expense in connection with the 2018 Note #1 of $4,132 and $0, for the six months ended June 30, 2018 and June 30, 2017, respectively. Accrued interest due under the 2018 Note #1 totaled $4,132 and $0 as of June 30, 2018 and December 31, 2017, respectively.
 
 
 

- 18 -




PURA NATURALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017

The outstanding principal balance of the 2018 Note #1 was $103,000 and $0 at June 30, 2018 and December 31, 2017, respectively.

12 % Convertible Promissory Note #2

On March 5, 2018, the Company issued a 12% unsecured Convertible Promissory Note #2 of $103,000 ("2018 Note #2), with debt issuance costs of $3,000 to an accredited investor. Net of the debt issuance costs, the Company received $100,000.  This 2018 Note #2 is due and payable on December 15, 2018. The holder has the right from time to time, and at any time during the period beginning on the date which is 180 days following the date of the note and ending on the later of: (i) the maturity date and (ii) the date of payment of the default amount, each in respect of the remaining outstanding principal amount of this 2018 Note #2 to convert all or any amount of the outstanding and unpaid principal amount of the 2018 Note #2 into fully paid and non-assessable shares of Common Stock. The conversion price is 61% of the average of the lowest two trading prices for the Common Stock during the ten trading day period ending on the latest complete trading day prior to the conversion date.

Due to the potential adjustment in the conversion price associated with this 2018 Note #2 payable based on the Company's stock price, the Company determined the conversion feature is considered a derivative liability. The embedded conversion feature was initially calculated to be $114,305 which is recorded as a derivative liability as of the date of issuance.  The derivative liability was recorded as a debt discount to the 2018 Note #2 payable up to the face amount of the 2018 Note #2 with the excess of $14,305 being recorded as a change in fair value of derivative liabilities. The debt discount of $100,000 is being amortized over the term of the convertible note.

The Company recognized interest expense of $41,053 and $0 during the six months ended June 30, 2018 and June 30, 2017, respectively for the amortization of the debt discount.  The unamortized balance of the debt discount was $58,947 and $0 at June 30, 2018 and December 31, 2017, respectively.

During the six months ended June 30, 2018 and June 30, 2017 the Company recognized interest expense of $1,232 and $0 relating to the amortization of the debt issuance costs. The unamortized balance of debt issuance costs totaled $1,768 and $0 at June 30, 2018 and December 31, 2017, respectively.

The Company recorded interest expense in connection with the 2018 Note #2 of $3,962 and $0, for the six months ended June 30, 2018 and June 30, 2017, respectively.  Accrued interest due under the 2018 Note #2 totaled $3,962 and $0 as of June 30, 2018 and December 31, 2017, respectively.

The outstanding principal balance of the 2018 Note #2 was $103,000 and $0 at June 30, 2018 and December 31, 2017, respectively.

8 % Convertible Redeemable Note

On March 6, 2018, the Company issued a 8% unsecured Convertible Redeemable Note of $126,000 ("2018 Note #3"), with debt issuance costs of $6,000 to an accredited investor. Net of debt issuance costs, the Company received $120,000.  This 2018 Note #3 is due and payable on March 6, 2019. The holder is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of Common Stock. The conversion price is 60% of the lowest trading prices for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date.

Due to the potential adjustment in the conversion price associated with this 2018 Note #3 payable based on the Company's stock price, the Company determined the conversion feature is considered a derivative liability. The embedded conversion feature was initially calculated to be $149,491 which is recorded as a derivative liability as of the date of issuance.  The derivative liability was recorded as a debt discount to the 2018 Note #3 payable up to the face amount of the 2018 Note #3 with the excess of $29,491 being recorded as a change in fair value of derivative liabilities. The debt discount of 120,000 is being amortized over the term of the 2018 Note #3.

The Company recognized interest expense of $38,137 and $0 during the six months ended June 30, 2018 and June 30, 2017, respectively for the amortization of the debt discount.  The unamortized balance of the debt discount was $81,863 and $0 at June 30, 2018 and December 31, 2017, respectively.
 
 

 
- 19 -




PURA NATURALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017


During the six months ended June 30, 2018 and June 30, 2017 the Company recognized interest expense of $1,907 and $0 relating to the amortization of the debt issuance costs. The unamortized balance of debt issuance costs totaled $4,093 and $0 at June 30, 2018 and December 31, 2017, respectively.

The Company recorded interest expense in connection with the 2018 Note #3 of $3,203 and $0, for the six months ended June 30, 2018 and June 30, 2017, respectively.  Accrued interest due under the Convertible Note totaled $3,203 and $0 as of March 31, 2018 and December 31, 2017, respectively.
The outstanding principal balance of the 2018 Note #3 was $126,000 and $0 at June 30, 2018 and December 31, 2017, respectively.


 NOTE 10 – Stockholders' Deficit

Common stock
 
During the six months ended June 30, 2018, the Company issued shares of common stock as follows:

·
300,000 shares valued at $25,500 for extension of due date for the July Note (See Note 9)
·
31,249,348 shares in payment of convertible note (See Note 9)
·
Sale of 83,333 shares for $5,000 cash
·
200,000 shares valued at $32,400 for employment agreement
 
Stock options

The following is a summary of stock option activity:
 
   
Options Outstanding
   
Weighted Average Exercise Price
   
Weighted Average Remaining Contractural Life
   
Aggregate Intrinsic Value
 
Outstanding. December 31, 2017
   
7,193,750
   
$
0.001
     
4.58
   
$
-
 
Granted
   
1,000,000
     
0.001
     
4.59
     
-
 
Forfeited
   
-
     
-
     
-
     
-
 
Exercised
   
-
     
-
     
-
     
-
 
Outstanding. June 30, 2018
   
8,193,750
   
$
0.001
     
4.20
   
$
-
 
                                 
Exercisable and vested at June 30, 2018
   
2,198,750
   
$
0.001
     
4.12
   
$
26,385
 


As part of the employment agreement with Daniel Kryger,  the Compensation Committee of the Board of Directors has granted Mr. Kryger on February 1, 2018 ("Effective Date"), 1,000,000 stock options at a purchase price of $.001 per share with a vesting schedule as follows: (1) 25% of the options shall vest immediately upon the effective date, (2) 25% of the options shall vest upon the Company reaching $1,000,000 in aggregate total sales revenue earned after the effective date, (3) 25% of the options shall vest upon the Company reaching $2,000,000 in aggregate total sales revenue earned after the effective date, and the remaining unvested shares shall vest upon the Company reaching $3,000,000 in sales revenue earned after the effective date.  Management believes that the Company will reach the $1,000,000 aggregate total sales revenue in the year 2020, reach the $2,000,000 aggregate sales revenue in the year 2021 and the $3,000,000 aggregate sales revenue in 2022.
 


- 20 -




PURA NATURALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017


The FV of the options was calculated using a Black-Scholes valuation model.

The FV's at the effective date was based upon the following estimates and assumptions made by management:
 
Risk free rate
   
2.26
%
Volatility
   
182
%
Conversion/Exercise Price
 
$
0.001
 
Dividend rate
   
0
%
Term (Years)
   
5
 

The total value of the options was $161,701, of which $40,425 was expensed as payroll costs for the six months ended June 30, 2018.

The fair value of the stock options is being amortized to stock option expense over the vesting period. The Company recorded stock option expense of $160,628 and $120,202, during the six months ended June 30, 2018 and June 30, 2017, respectively. At June 30, 2018, the unamortized stock option expense was $240,405 which will be amortized to expense through June 30, 2019.


NOTE 11 – COMMITMENTS AND CONTINGENCIES

From time to time, the Company may become involved in routine litigation that arises in the ordinary course of business. There are no pending significant legal proceedings to which the Company is a party for which management believes the ultimate outcome would have a material adverse effect on the Company's financial position.
 
The Company maintains a head office at 23101 Lake Center Drive, Suite 100, Lake Forest, CA 92630. This property is leased until March 31, 2017 at $ 2,636 per month. . Effective February 21, 2018, the lease was extended to March 31, 2019. The basic rent is abated for April 2018 with rent of $3,494.25 from May 1, 2018 to March 31, 2019.

The following summarizes estimated future lease expense as of June 30, 2018 related to the office:
 
Years Ending December 31,
Amount
2018
20,966
2019
10,483
2020
-
2021
-
2022
-
Thereafter
-
 
31,449
 

NOTE 12 - Concentrations

The Company had certain customers whose accounts receivable balances individually represented 10% or more of the Company's total accounts receivable, as follows:

As of June 30, 2018 one customers accounted for 22%, one customer accounted for 19%, one customer accounted for 15% and one customer for accounted 12% of accounts receivable.   As of December 31, 2017 one customer accounted for 30%, one customer accounted for 14% and one customer accounted for 15% of accounts receivable. 

The Company had certain vendors whose accounts payable balances individually represented 10% or more of the Company's total accounts payable, as follows:

As of June 30, 2018, one vendor accounted for 12% of accounts payable. As of December 31, 2017, one vendor accounted for 10% or more of the Company's accounts payable.
 

- 21 -




PURA NATURALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017


NOTE 13 – SUBSEQUENT EVENTS

On July 3, 2018, the holder of the July Note converted $21,313 of the outstanding balance of the July Note.  The Company issued 2,750,000 shares of its common stock upon the conversion of the July Note.

On July 6, 2018, the holder of the April Note converted $9,500 of the outstanding balance of the April Note.  The Company issued 1,000,000 shares of its common stock upon the conversion of the September Note.
 
On July 6, 2018, the holder of the September Note #1 converted $17,095 of the outstanding balance of the September Note #1.  The Company issued 2,205,759 shares of its common stock upon the conversion of the September Note #1

On July 11, 2018, the holder of the April Note converted $10,260 of the outstanding balance of the April Note.  The Company issued 1,900,000 shares of its common stock upon the conversion of the April.

On July 16, 2018, the holder of the September Note #2 converted $4,495 of the outstanding balance of the September Note #2.  The Company issued 3,800,000 shares of its common stock upon the conversion of the September Note #2.

On July 16, 2018, the holder of the October Note converted $10,000 of the outstanding balance and $352 of accrued interest of the October Note.  The Company issued 2,650,973 shares of its common stock upon the conversion of the October Note.

On July 20, 2018, the holder of the July Note converted $12,250 of the outstanding balance of the July Note.  The Company issued 3,500,000 shares of its common stock upon the conversion of the July Note.

On July 20, 2018, the holder of the September Note #1 converted $14,241 of the outstanding balance of the July Note.  The Company issued 4,068,841 shares of its common stock upon the conversion of the September Note #1.

On July 23, 2018, the holder of the October Note converted $13,000 of the outstanding balance and $479 of accrued interest of the October Note.  The Company issued 3,501,049 shares of its common stock upon the conversion of the October Note.

On August 1, 2018, the holder of the July Note converted $10,500 of the outstanding balance of the July Note.  The Company issued 3,500,000 shares of its common stock upon the conversion of the July Note.

On August 9, 2018, the holder of the 2018 Note #1 converted $7,990 of the outstanding balance of the 2018 Note #1.  The Company issued 2,755,172 shares of its common stock upon the conversion of the 2018 Note #1.  On the same date, the holder of the 2018 Note #1 converted $9,170 of the outstanding balance of the 2018 Note #1.  The Company issued 3,162,069 shares of its common stock upon the conversion of the 2018 Note #1.

On August 10, 2018, the holder of the 2018 Note #1 converted $8,960 of the outstanding balance of the 2018 Note #1.  The Company issued 3,089,655 shares of its common stock upon the conversion of the 2018 Note #1.

On August 13, 2018, the holder of the 2018 Note #1converted $9,530 of the outstanding balance of the 2018 Note #1.  The Company issued 3,286,207 shares of its common stock upon the conversion of the 2018 Note #1.
 
 
 

- 22 -

 

 Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the "safe harbor"   provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward looking statements.

Overview and History

Pura Naturals, Inc., ("we," "our" or the "Company") was incorporated on December 26, 2005, in the State of Colorado under the name "Yummieflies.com Inc."  In March 2010, we filed an amendment to our Articles of Incorporation changing our name to "Yummy Flies, Inc."  In November 2016, we filed an amendment to our Articles of Incorporation changing our name to "Pura Naturals, Inc."  In September 2010, we effected in a forward split of our issued and outstanding common stock whereby nine shares of our common stock were issued in exchange for every one share of common stock then issued and outstanding.  In addition, in November 2016, we effected another forward split of our issued and outstanding common stock whereby 3.7 shares of our common stock were issued in exchange for every one share of common stock then issued and outstanding.  All references to our issued and outstanding common stock in this Report are presented on a post-forward split basis unless otherwise indicated.
 
Effective July 18, 2016, the Company entered into a Share Exchange Agreement (the "Share Exchange Agreement") by and among the Company, Pura Naturals, Inc., a Delaware corporation ("PURA - DE") and certain shareholders of PURA – DE  (the "PURA Shareholders").  Pursuant to the Share Exchange Agreement, the Company exchanged the outstanding common and preferred stock of PURA - DE held by the PURA Shareholders for shares of common stock of the Company.  At the closing, Robert Lee, the holder of 30,536,100 shares of common stock, cancelled such shares.  Other than Robert Lee, shareholders of Company's common stock held 7,625,700 shares of common stock.  At closing, the Company issued 23,187,876 shares of common stock to the PURA shareholders.   In addition, shares issuable under outstanding options of PURA – DE will be exercisable into shares of common stock of the Company, pursuant to the terms of such instruments. 

As a result of the Share Exchange Agreement and the other transactions contemplated there under, PURA – DE became a wholly owned subsidiary of the Company.

The exchange of shares with Pura - DE was accounted for as a reverse acquisition under the purchase method of accounting since Pura - DE obtained control of the Company. Accordingly, the merger of Pura - DE into the Company was recorded as a recapitalization of Pura - DE, Pura - DE being treated as the continuing entity. The historical financial statements presented are the financial statements of Pura - DE. The Share Exchange Agreement was treated as a recapitalization and not as a business combination; therefore, no pro forma information is disclosed. At the date of this transaction, the net liabilities of the legal acquirer, Pura - CO, were $20,040.

PURA - DE, a Delaware corporation, was formed in 2013. PURA – DE partnered with Advanced Innovative Recovery Technology, Inc. ("AIRTech"), to create a revolutionary and proprietary bio-based foam called BeBetterFoam® that is made from renewable resources instead of petroleum. PURA- DE markets and sells a line of cleaning products based on the BeBetterFoam® platform for consumer kitchen and bathroom, with additional products for outdoor hobbies (fishing and boating, spas and pools), pet care, infant care and industrial use currently under development.  The Bath & Body line and household (including kitchen) sponges are Oleophilic which means, among other things, that it absorbs oil, grease and grime, removes impurities from skin (cleansing and applying/removing make-up), and is latex-free.  PURA - DE products are also non-toxic, contain Plant-Based/renewable resources, have a carbon-negative footprint (removes more carbon than is created), contain no petroleum by-products, use no adhesives or glues, and are infused with soap that is 100% Natural, bio-degradable, sustainable, Vegan, gluten-free, contains botanicals and essential oils; SLS-, Sulfate, Paraben-, and BPA- free.   The BeBetterFoam® is hydrophobic, which means it resists and does not support bacteria.  PURA - DE believes that the BeBetterFoam® also is up to 40 times stronger than the leading kitchen sponge brand.
 
 
- 23 -


Pura Marine, the Marine Division of Pura Naturals, offers biologically-based oil-absorbent technologies to the commercial and consumer markets. Working alongside industrial partners, Pura Marine developed environmentally sustainable oil spill prevention products and solutions targeted towards the marine oil transport, oil refining and trucking industries. Pura Marine also provides plant-based foam products to the recreational boating and fishing industries.

BeBetterFoam® is a unique, proprietary polymer process technology that is protected by a trade secret, completely owned by Pura through an acquisition transaction with AIRTech in May 2017, and we believe this technology is incapable of being reverse engineered. Previously, those formulations and been exclusively licensed to from AIRTech to PURA – DE. 

The Company has evolved it's marketing strategy in 2017 to integrate a robust direct to consumer model which will incorporate digital marketing and media to effectively promote our products directly towards our targeted demographics. This strategy is an ongoing process which could take several years to complete.

We separated and defined our products by product line for better market segmentation. In addition, several products in our Home and Health & Beauty lines are being rebranded to deliver more consumer appeal and benefit. We hope this model will dramatically improve our capacity to best achieve our goals of telling the Pura story to the right consumers yielding a higher conversion rate with a greatly reduced cost of acquisition.  Furthermore, we have embarked on the support of a few key strategic marketing partners with proven expertise in creating brand awareness, product positioning and consumer engagement strategies and tactics to reach our near-term growth and profitability objectives.

Our Strategy

Today, the global economy continues to encourage manufacturers toward adopting an environmentally conscious effort in the development of industrial and consumer products. Countries like China and the U.S. have taken the lead in this global effort by proposing criteria for businesses to become more "green."  As "going green" is continuing to be a major focal point among the business environment, the demand for earth conscious products and businesses continue to grow and be more desirable.

In the past, we expanded our earth conscious strategy throughout all aspects of our business practices. This provided us with a competitive advantage by allowing ourselves to establish a presence among the environmentally conscious market space. In order to increase our market share regarding the environmentally conscious market space, we will have to increase our product awareness within the space we have already captured as a means to gain market expansion.

Our Products

We offer a diverse line of cleaning products with applications across several sectors, and are increasing our market presence in the eco-conscious cleaning product market. We operate in four business segments: Health & Beauty, Household and Kitchen, Marine, and Oil Spill Prevention.

The Bath & Body line and household (including kitchen) sponges are Oleophilic which means, among other things, that it absorbs oil, grease and grime, removes impurities from skin (cleansing and applying/removing make- up), is latex-free. PURA products are also non-toxic, contain Plant-Based/renewable resources, have a carbon-negative footprint (removes more carbon than is created), contain no petroleum by-products, use no adhesives or glues, and are infused with soap that is 100% natural, bio-degradable, sustainable, vegan, glutenfree, contains botanicals and essential oils; SLS-, Sulfate, Paraben-, and BPA- Free.

Due to the formulation of the foam, it's durability, oil absorbing and antibacterial properties, we believe our cleaning sponge technologies surpass the industry's standard for foam products. Thus, we plan to introduce new products using our foam technologies that will target industries in which we have never before held a market share. In this regard, we plan to introduce our infused sponge products to the automobile, equine, and furniture industries to reach new customers and to increase our overall market share of the cleaning products market during 2018.

In March, 2018, a new line of health and beauty products with Cannabidiol ("CBD") and hemp seed oils was launched in the expanding industry surrounding the benefits of CBD oils in topical applications.
   
Six Months Ended,
 
Sales by Product Line:
 
June 30, 2018
   
June 30, 2017
 
  Household and Kitchen
 
$
85,778
   
$
93,478
 
  Health and Beauty
   
49,447
     
63,597
 
  Marine Products
   
10,147
     
9,375
 
   
$
145,372
   
$
166,450
 
 
 

- 24 -



Recent Events

Launch of the Grease Beast Product Line

When the Company launched the Grease Beast product line with its grease attracting/cleaning capability and sought to expand the potential application of the BeBetterFoam at the National Hardware show in May 2018.  Since the show, the Company was approved as a supplier to six hardware chains and one grocery store chain.  In addition, a major hardware chain agreed to place the entire Grease Beast product family on their website with store evaluation and potential placement being negotiated.  The first shipment to the grocery store chain has been shipped and will be on the shelves mid-August.

The Company is attending the Ace 2018 Fall Convention as a qualified supplier and the True Value Fall Reunion to further show case the Grease Beast product line.

Amazon

Pura Naturals strongly believes in on line sales and developed a detailed strategy to increase it's on line presence by expanding the products offered on Amazon from six to eight products and create incentive to purchase multiple products.  The Company has seen steady sales growth on Amazon, with sales increasing in the month of July compared to June 2018 and we anticipate this trend to continue.  The Grease Beast product line will be offered on Amazon by the end of the third quarter.

Pura Marine

The Marine division is building a loyal customer base and the Fisherman Cleansing bar is gaining sales momentum with placement in over 15 fishing products related stores.  Products are also carried at three major fuel docks in Long Beach and Orange County, California. The products under Pura Marine are going through a rebranding and relabeling phase which will, when complete, better convey the attributes of the product line.  The strategic relationship with Anglers Chronicles is growing and support continues with promotions airings on Anglers Chronicles weekly cable television shows and their radio AM830 Anglers Chronicles radio show.  A meeting is set for September with a major marine distribution company to review our entire product line for store placement.

CBD Product Line

A new product line of hemp derived CBD products was developed and launched.  Products include sponge infused face products and bars of soap. Additionally, a partnership was formed with Noreen Taylor of The Organic Face make-up line and Pura Naturals.  Under a new brand, Pura is launching a new make-up line infused with hemp derived CBD. Discussions are underway with a major distribution network to private label the CBD cleansing line and create a bar soap line.

Private Label Sales and Manufacturing

The Company's private label venture with Permatex remains steady, with regular reorders.  The Company's bio-degreaser private label partnership with Laguna 3P continues with anticipated sales to police departments across the USA.  The Company has been contacted by a major barbeque related product supplier to private label the Grease Beast degreaser.  Three additional products are under development for a complete suite of products for private labeling.

We have never been subject to any bankruptcy proceeding.

Our executive offices are located at 23101 Lake Center Drive, Suite 100, Lake Forest, CA 92630, telephone (855) 326-8537.
 
 

- 25 -

 
Results of Operations

Comparison of Results of Operations for the Three Months Ended June 30, 2018 and June 30, 2017
 
 
Three Months ended June 30, 
 
2018
2017
Dollar
Change
Percentage
Change
Sales
        76,308
             99,381
             (23,073)
(23.22)%
Cost of Goods Sold
        48,789
             59,752
             (10,963)
(18.35)%
Gross Profit
        27,519
             39,629
             (12,110)
(30.56)%
OPERATING EXPENSES
       
  Selling expenses
        50,155
                    91
               50,064
55,015.00%
  General and administrative
      504,761
           457,510
               47,251
10.33%
Total Operating Expenses
      554,916
           457,601
               97,314
21.27%
LOSS FROM OPERATIONS
     (527,397)
         (417,972)
           (109,424)
26.18%
OTHER INCOME (EXPENSES)
       
  Interest (expense)
     (342,043)
           (92,523)
           (249,520)
269.68%
  Gain on debt extinguishment
                  -
             43,120
             (43,120)
(100.00)%
  Change in fair value of derivative liabilities
      862,086
             85,292
             776,794
910.75%
Total Other Income (Expense)
         (7,354)
         (382,083)
             417,850
(109.36)%
 
During the three months ended June 30, 2018, we incurred a net loss of $7,354 compared to a net loss of $382,083 for the three months ended June 30, 2017.

Sales decreased to $76,308 during the three months ended June 30, 2018 as compared to $99,381 during the three months ended June 30, 2017.

The decrease in sales was due to a loss of certain customers and lack of brand awareness of the Company's products.  The changes being implemented involve tactics and strategies to engage consumers and build brand awareness. We continue to reevaluate our distribution model to focus on a more effective and efficient strategic model to grow sales and increase shareholder value.  We anticipate this strategy, implemented during the quarter ended June 30, 2018, will improve sales and free up limited resources to be repurposed towards the integration of more effective sales channels.  

To advance this strategy, the Company also has retained sales personnel with specific skills to further promote the Company's products.

The Company has developed a specific growth strategy for Amazon's business to business segment.  The Company began to offer larger ordering quantities for the business to business segment. The Company will also begin to offer more products in the Amazon Market place.  The Company anticipates that due to the strategy implemented, the Company anticipates continued growth on the Amazon marketplace.

Cost of goods sold for the three months June 30, 2018 was $48,789 a decrease of $10,963 or 18.35% from $59,752 for the three months ended June 30, 2017 period.  The decrease in cost of goods sold was due to the decrease in sales.  Cost of goods sold as a percentage of sales was 63.94% for the three months ended June 30, 2018 compared to 60.12% for the three months ended June 30, 2017. This increase was due to increased costs from suppliers and due to inefficiencies of manufacturing in small batches. The Company has begun manufacturing the soap used in the product manufacturing process, which has the potential of reducing the cost of soap by as much as 25%.
 
 
 
- 26 -



Selling expense increased to $50,155 during the three months ended June 30, 2018, an increase of $50,064 from $91 for the three months ended June 30, 2017.  This increase was primarily due to the expensing of the value of stock given to three consultants to provide consultation services in connection with the Company's effort to strengthen product promotion, develop cost efficient strategies to claim product efficacy and/or product safety, improve current product formulations, develop new formulations and strategies to highlight research data and advocacy position statements during marketing, regulatory agency, legal, fundraising, investor and celebrity spokesperson presentation in a manner that can be valuable in strategies designed to widen name recognition, broaden corporate and product credibility, enhance consumer image, attract celebrity sponsors, justify expanding funding needs.

There have been fluctuations in certain expenses in the three months ended June 30, 2018, as compared to the three months ended June 30, 2017. In the three months ended June 30, 2018, general and administrative expenses increased $47,251 for the three months ended June 30, 2018 as compared to the comparable prior period mainly due to the following changes:

   
Three months ended June 30,
 
   
2018
   
2017
   
Change
 
Payroll and payroll related expense
 
$
347,653
   
$
172,695
   
$
174,958
 
Overhead allocation
   
30,000
     
30,000
     
-
 
Amortization expense
   
25,210
     
24,909
     
301
 
Insurance
   
23,579
     
12,215
     
11,364
 
Printing and Reproduction
   
1,261
     
11,653
     
(10,392
)
Professional fees:
   
-
     
-
     
-
 
  Accountants
   
6,613
     
72,000
     
(65,387
)
  Edgar preparation
   
-
     
1,025
     
(1,025
)
  Media/Website
   
10,119
     
54,765
     
(44,646
)
  Legal
   
-
     
9,441
     
(9,441
)
  Investor and public relations
   
12,968
     
42,038
     
(29,070
)
  OTC Marketplace
   
-
     
-
     
-
 
  Transfer Agent
   
3,295
     
-
     
3,295
 
Business consultants
   
3,000
     
-
     
3,000
 
Samples
   
-
     
1,660
     
(1,660
)
Other General and administrative expense
   
41,063
     
25,109
     
15,954
 
   
$
504,761
   
$
457,510
   
$
47,251
 
                         
Payroll increased by $174,958 from $172,695 for the three months ended June 30, 2017 to $347,653 for the three months ended June 30, 2018 due to the following:

·
Salary accrual, expensing of stock options and stock awards granted in accordance with the employment agreements to certain management individuals and a member of the Board of Directors;
·
Expensing stock granted for services;
·
Increased number of employees;

These expenses were offset by a decrease in the payroll allocation from a related party.

Insurance expense increased by $11,364 from $12,215 for the three months ended June 30, 2017 to $23,579 for the three months ended June 30, 2018 due to changes in insurance rates.

The above increases were offset by:

·
A decrease in printing and reproduction of $10,392 was due to a reduced need for labels and promotional material;
·
Accounting and auditing expense decreased by $65,387due to the retention of additional accounting staff and less time required by the independent auditors in previous period due to the transition of audit firms.
·
Media/website expense decrease by $44,646 due to completion of the engagement surrounding the Company's website and digital market place work on the Company's website was completed.
·
Investor and public relations decreased by $29,070 due to non-renewal of contracts.


- 26 -



Interest expense increased by $248,520 for the three months ended June 30, 2018 to $342,043 for the three months ended June 30, 2018 from $92,523 for the three months ended June 30, 2017 due to interest accrual and amortization of debt discount for the convertible debt.
 
Gain on debt extinguishment decreased by $43,120 from $43,120 during the three months ended June 30, 2017 to $0 for the three months ended June 30, 2018. This was due to the settlement of the related party note payable.

Gain on the change in fair value of derivative liabilities was significant, increasing to $862,086 for the three months ended June 30, 2018 as compared to $85,292 for the comparable prior period due to a significant decrease in the price per share of our common stock and the fair value adjustments in connection with the convertible notes in the current three month period.

Comparison of Results of Operations for the Six Months Ended June 30, 2018 and June 30, 2017
 
   
Six Months ended June 30, 
 
   
2018
   
2017
   
Dollar Change
   
Percentage Change
 
Sales
 
$
145,372
   
$
166,450
   
$
(21,078
)
 
$
(12.66
%)
Cost of Goods Sold
   
92,682
     
106,557
     
(13,875
)
   
(13.02
%)
Gross Profit
   
52,690
     
59,893
     
(7,203
)
   
(12.03
)%
OPERATING EXPENSES
                               
  Selling expenses
   
90,900
     
11,464
     
79,436
     
692.91
%
  General and administrative
   
1,284,304
     
972,298
     
312,006
     
32.09
%
Total Operating Expenses
   
1,375,204
     
983,762
     
391,442
     
39.79
%
LOSS FROM OPERATIONS
   
(1,322,514
)
   
(923,869
)
   
(398,645
)
   
43.15
%
OTHER EXPENSES
                               
  Interest (expense)
   
(654,853
)
   
(191,434
)
   
(463,419
)
   
242.08
%
  Gain on debt extinguishment
   
-
     
43,120
     
(43,120
)
   
(100.00
)%
  Change in fair value of derivative liabilities
   
(461,289
)
   
71,130
     
(532,419
)
   
(48.52
)
Net Loss
   
(2,438,656
)
   
(1,001,053
)
   
(1,437,603
)
   
143.61
%
                                 
During the six months ended June 30, 2018, we incurred a net loss of $2,438,656 compared to a net loss of $1,001,053 for the six months ended June 30, 2017.

Sales decreased to $145,372 during the six months ended June 30, 2018 as compared to $166,450 during the six months ended June 30, 2017.  The decrease in sales was due to a lack of brand awareness of the Company's products.  The changes being implemented involve tactics and strategies to engage consumers and build brand awareness. We continue to reevaluate our distribution model to focus on a more effective and efficient strategic model to grow sales.  We anticipate this strategy will improve sales and free up limited resources to be repurposed towards the integration of more effective sales channels. 

To advance this strategy, the Company has also has retained sales personnel with specific skills to further promote the Company's products.
 
The Company has developed a specific growth strategy for Amazon's business to business segment.  The Company began to offer larger ordering quantities for the business to business segment.  As a result, we have seen an increase in sales from Amazon's Business to Business segment from June to July 2018.  The Company will also begin to offer more products in the Amazon Market place.  The Company anticipates that due to the strategy implemented, the Company anticipates continued growth on the Amazon marketplace.

The Company continues to review its sales and marketing strategies.  The sales and gross profit over the last few quarters, resulted from the reliance on an ineffective sales distribution model defined by inelastic price points and slow brand recognition and engagement.  The Company continues to integrate a direct to consumer model which will incorporate digital marketing and media to effectively promote our products directly towards our targeted demographics.   The Company continues to separate and define our products by product line for better market segmentation. In addition, several products in our Home and Health & Beauty lines are being rebranded and relabeled to deliver more consumer appeal and benefit. We believe this model will dramatically improve our capacity to best achieve our goals of telling the Pura story to the right consumers yielding a higher conversion rate with a greatly reduced cost of acquisition.  Furthermore, we have embarked on the support of a few key strategic marketing partners with proven expertise in creating brand awareness, product positioning and consumer engagement strategies and tactics to reach our near-term growth and profitability objectives.
 
 
- 27 -



 
Cost of goods sold for the six months June 30, 2018 was $92,682 a decrease of $13,875 or 13.02% from $106,557 for the six months ended June 30, 2017 period.  The decrease in cost of goods was due to the decrease in sales.  Cost of goods sold as a percentage of sales was 63.76% for the six months ended June 30, 2018 compared to 64.02% for the six months ended June 30, 2017. 

Selling expenses for the six months ended June 30, 2018 was $90,900 an increase of $79,436 from $11,464 for the six months ended June 30, 2017.  The increase was due to the expensing of the value of stock given to three consultants to strengthen product claims and/or related product literature.

General and administrative expenses for the six months ended June 30, 2018 were $1,284,304 an increase of $312,006 from $972,298 for the six months ended June 30, 2017.  General and administrative expenses increased $312,006 for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017 due to the following changes:
   
Six months ended June 30,
 
   
2018
   
2017
   
Change
 
Payroll and payroll related expense
 
$
764,938
   
$
538,248
   
$
226,690
 
Overhead allocation
   
50,000
     
60,000
     
(10,000
)
Amortization expense
   
49,836
     
49,818
     
18
 
Insurance
   
28,446
     
23,932
     
4,514
 
Printing and Reproduction
   
10,624
     
12,880
     
(2,256
)
Professional fees:
                       
  Accountants
   
26,613
     
101,750
     
(75,137
)
  Edgar preparation
   
3,000
     
1,025
     
1,975
 
  Media/Website
   
11,520
     
62,484
     
(50,964
)
  Legal
   
153,867
     
16,431
     
137,436
 
  Investor and public relations
   
47,063
     
43,830
     
3,233
 
  OTC Marketplace
   
6,500
     
-
     
6,500
 
  Transfer Agent
   
5,660
     
5,038
     
622
 
Business consultants
   
3,000
     
8,431
     
(5,431
)
Samples
   
20,546
     
3,196
     
17,350
 
Other General and administrative expense
   
102,691
     
45,235
     
57,456
 
   
$
1,284,304
   
$
972,298
   
$
312,006
 
 
Payroll increased by $226,690 from $538,248 for the six months ended June 30, 2017 to $764,938 for the three months ended June 30, 2018 due to the following:

·
Salary accrual, expensing of stock options and stock awards granted in accordance with the employment agreements to certain management individuals and a member of the Board of Directors;
·
Expensing stock granted for services;
·
Increased number of employees;

These expenses were offset by a decrease in the payroll allocation from a related party.

The overhead allocation from AirTech decreased $10,000 from $60,000 for the six month period Ending June 30, 2017 to $50,000 for the six months ended June 30, 2018 as the Company is assuming additional responsibilities in-house.

Insurance expense decreased $4,514to $28,446 for the six months ended June 30, 2018 from $23,932 due to a decrease in premiums.

Printing and reproduction expense decreased by $2,256 during the six months ended June 30, 2018 as compared to the six months ended June 30, 2017 due to the less printing services required for the Company's new and existing products.

Accounting expenses decreased $75,137 from $101,750 for the six months ended June 30, 2017 to $26,613 for the six months ended June 30, 2018 due to the retention of additional accounting staff and less time required by the independent auditors in previous period due to the transition of audit firms to not requiring additional audit services.
Media/website expense decrease $50,964 from $62,484 for the period ended June 30, 2017 to $11,520 for the period ended June 30, 2018 due to completion of the engagement surrounding the Company's website and digital market place work on the Company's website was completed.

Legal expenses increased $137,436 from $16,431 for the six months ended June 30, 2017 to $153,867 for the six months ended June 30, 2018 due to the defense of the Company's trademarks and continued activity in the lawsuit with the former CEO.

Business consultant expenses decreased by $5,431 during the six months ended June 30, 2018 as compared to the six months ended June 30, 2017 due to the services being performed in-house.
 

- 28 -



Samples expenses increased by $17,350 during the six months ended June 30, 2018 as compared to the six months ended June 30, 2017 due to the Company's effort to increase brand awareness by offering samples of products at trade events and the introduction of the Grease Beast product line.

Interest expense increased to $654,853 for the six months ended June 30, 2018 as compared to $191,434 for the six months ended June 30, 2017 due to interest accrual and amortization of debt discount for the convertible debt.
 
Gain on debt extinguishment decreased by $43,120 from $43,120 during the six months ended June 30, 2017 to $0 for the three months ended June 30, 2018. This was due to the settlement of the related party note payable.

Derivatives loss increased $532,419 to $461,289 for the six months ended June 30, 2018 as compared to derivative income of $71,130 for the six months ended June 30, 2017 due to the fair value adjustments in connection with the convertible notes in the current three month period.

Liquidity and Capital Resources
 
As of June 30, 2018, we had $9,971 in cash as compared to $67,422 at December 31, 2017.
 
At June 30, 2018, we had current assets of $271,813 and current liabilities of $3,741,383 resulting in a working capital deficit of $3,469,570 as compared to current assets of $360,256 and current liabilities of $2,692,237, resulting in a working capital deficit of $2,331,981 at December 31, 2017. 
  
The net cash used on our operations was $406,360 during the six months ended June 30, 2018, compared to $590,133 during the six months ended June 30, 2017 period.

At June 30, 2018, we had stockholders' deficit of approximately $2,762,000 as compared to a deficit of approximately $1,576,000 at December 31, 2017.

Cash flows used in investing activities were $1,575 during the six months ended June 30, 2018 compared to $5,705 for the six months ended June 30, 2017.  The change is principally due to a decrease in payment for intangible assets.
 
Cash flows provided by financing activities were $350,484 and $582,163 during the six months ended June 30, 2018 and the six months ended June 30, 2017, respectively.  The increase in cash provided by financing activities is due to the sale of common stock, the issuance of a note payable, and the issuance of convertible notes payable.

Convertible Note Payable

On February 8, 2018, the Company issued a 12% Convertible Promissory Note #1 of $103,000, with debt issuance costs of $3,000 to an accredited investor. This convertible note is due and payable on November 20, 2018. The holder has the right from time to time, and at any time during the period beginning on the date which is 180 days following the date of the note and ending on the later of: (i) the maturity date and (ii) the date of payment of the default amount, each in respect of the remaining outstanding principal amount of this note to convert all or any amount of the outstanding and unpaid principal amount of the note into fully paid and non-assessable shares of common stock. The conversion price is 58% of the average of the lowest two trading prices for the common stock during the ten trading day period ending on the latest complete trading day prior to the conversion date.
 
 On March 5, 2018, the Company issued a 12% Convertible Promissory Note #2 of $103,000, with debt issuance costs of $3,000 to an accredited investor. This convertible promissory note #2 is due and payable on December 15, 2018. The holder has the right from time to time, and at any time during the period beginning on the date which is 180 days following the date of the note and ending on the later of: (i) the maturity date and (ii) the date of payment of the default amount, each in respect of the remaining outstanding principal amount of this note to convert all or any amount of the outstanding and unpaid principal amount of the note into fully paid and non-assessable shares of common stock. The conversion price is 61% of the average of the lowest two trading prices for the common stock during the ten trading day period ending on the latest complete trading day prior to the conversion date.

On March 6, 2018, the Company issued an 8% Convertible Redeemable Note of $126,000, with debt issuance costs of $6,000 to an accredited investor. This convertible note is due and payable on March 6, 2019. The holder is entitled, at its option, at any time after six months, to convert all or any amount of the principal face amount of this note then outstanding into shares of common stock. The conversion price is 60% of the lowest trading prices for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date.
 
- 29 -




Sale of Common Stock

On January 18, 2018, the Company sold $5,000 of common stock to an accredited investor. The total amount of common stock sold was 83,333 shares at $0.06 per share.

Note Payable

The Company entered into a merchant agreement on May 21, 2018.  The loan amount is $28,500 and the Company is required to make 245.27 daily payments of $165 each starting from May 24, 2018 through May 4, 2019.

To date, our operations have not generated any profits.  We have funded our operating to date through the sales of common stock and issuance of notes payable and convertible notes payable.  Our ability to continue as a going concern is dependent upon use raising sufficient debt or equity capital to sustain operations until such time as we can generate a profit from our operations.    We are currently working with investors to provide us with the necessary funding, but there can be no assurances we will obtain such funding in the future.  Failure to obtain this additional financing will have a material negative impact on our ability to generate profits in the future.  We anticipate sales will increase in the third quarter of 2018.  As such, our anticipated cash needs to fund operations and pay our notes for the next 12 months is approximately $500,000.
 
Off-Balance Sheet Arrangements
 
We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial condition or results of operations.

 
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.

 
ITEM 4.  CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures    As of the end of period covered by this report, the Company carried out an evaluation, with the participation of the Company's Chief Executive Officer and Principal Financial Officer, of the effectiveness of the Company's disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Company's Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934, as amended ("Exchange Act") Rule 13a15(e)) as of June 30, 2018, are not effective, due to lack of segregation of duties and ineffective controls over period end financial disclosures and reporting processes, based on the evaluation of these controls and procedures required by paragraph (b) of Rule 13a15. 

Changes in Internal Control over Financial Reporting   –   There were no changes in our internal control over financial reporting during the quarter ended June 30, 2018, which were identified in conjunction with management's evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 

PART II. OTHER INFORMATION
 
ITEM 1.  LEGAL PROCEEDINGS
 
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business.

In the litigation involving James Kordenbrock, the status has not changed since the Form 10-K/A for the year ended December 31, 2017.

On May 25, 2018, a Petition to Cancel Trademarks (Registration Numbers 5228749, 5156967, and 5228748) was filed by Nxt Generation Pet, Inc. against the Company in the United States Patent and Trademark Office, Trademark Trial and Appeal Board (Petition 92068609).  On or about July 4, 2018, the Company filed an Answer to the Petition denying the allegations made in the Petition and asserted several affirmative defenses therein.  The matter is in a very early stage of litigation.   The Company is unable to fully assess the likelihood of success of the Petition at this time, though the Company intends to vigorously defend the trademarks that were duly awarded by the United States Patent and Trademark office to the Company.
 

 
- 30 -

 
 
 
ITEM 1A.  RISK FACTORS
 
We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.

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

The following table sets forth the sales of unregistered securities since the Company's last-filed report on Form 8-K covering sales of unregistered securities or on Form 10-Q filed under this item. 
 
Date
 
Title and Amount (1)
 
Purchaser
 
Principal Underwriter
 
Total Offering Price/Underwriting Discount
                     
January 2, 2018
 
83,334 shares of Common stock
 
Private Investor
 
N/A
 
$5,000/NA
January 17, 2018
 
Convertible Promissory Note, in the principal amount of $350,000 issued to Mammoth Corporation. due January 7, 2018.
 
Private Investor
 
N/A
 
$31,875/NA
January 31, 2018
 
Convertible Promissory Note, in the principal amount of $350,000 issued to Mammoth Corporation. due January 7, 2018.
 
Private Investor
 
N/A
 
$31,875/NA
January 31, 2018
 
Convertible Promissory Note, in the principal amount of $220,000 issued to Vista Capital Investments, LLC due March 6, 2018.
 
Private Investor
 
N/A
 
$50,000/NA
February 8, 2017
 
Common shares for extension of due date of Convertible Promissory Note, in the principal amount of $220,000 issued to Vista Capital Investments, LLC Corporation. due March 6, 2018.
 
Private Investor
 
N/A
 
$25,500/NA
March 8, 2018
 
Convertible Promissory Note, in the principal amount of $220,000 issued to Vista Capital Investments, LLC Corporation. due March 6, 2018.
 
Private Investor
 
N/A
 
$50,000/NA
March 8, 2018
 
Inducement shares in connection with Convertible Promissory Note, in the principal amount of $220,000 issued to Vista Capital Investments, LLC Corporation. due March 6, 2018.
 
Private Investor
 
N/A
 
$62,815/NA
March 16, 2018
 
Convertible Promissory Note, in the principal amount of $350,000 issued to Mammoth Corporation. due January 7, 2018.
 
Private Investor
 
N/A
 
$20,325/NA
March 23, 2018
 
Convertible Promissory Note, in the principal amount of $160,500 issued to JSJ Investments Inc.. due September 12, 2018.
 
Private Investor
 
N/A
 
$27,750/NA
April 17, 2018
 
Convertible Promissory Note, in the principal amount of $75,000 issued to EMA Financial, LLC Corporation. due September 20, 2018.
 
Private Investor
 
N/A
 
$4,260/NA
April 18, 2018
 
Convertible Promissory Note, in the principal amount of $220,000 issued to Vista Capital Investments, LLC due March 6, 2018.
 
Private Investor
 
N/A
 
$21,000/NA
April 19, 2018
 
Convertible Promissory Note, in the principal amount of $350,000 issued to Mammoth Corporation. due January 7, 2018.
 
Private Investor
 
N/A
 
$11,250/NA
April 19, 2018
 
Convertible Promissory Note, in the principal amount of $160,500 issued to JSJ Investments Inc.. due September 12, 2018.
 
Private Investor
 
N/A
 
$22,804/NA
May 2, 2018
 
Convertible Promissory Note, in the principal amount of $75,000 issued to EMA Financial, LLC Corporation. due September 20, 2018.
 
Private Investor
 
N/A
 
$9,798/NA
May 7, 2018
 
Convertible Promissory Note, in the principal amount of $350,000 issued to Mammoth Corporation. due January 7, 2018.
 
Private Investor
 
N/A
 
$17,562/NA
May 10, 2018
 
Convertible Promissory Note, in the principal amount of $95,000 issued to GS Capital Partners, LLC. due October 23, 2018.
 
Private Investor
 
N/A
 
$20,499/NA
May 22, 2018
 
Convertible Promissory Note, in the principal amount of $350,000 issued to Mammoth Corporation. due January 7, 2018.
 
Private Investor
 
N/A
 
$12,225/NA
May 23, 2018
 
Convertible Promissory Note, in the principal amount of $75,000 issued to EMA Financial, LLC Corporation. due September 20, 2018.
 
Private Investor
 
N/A
 
$8,802/NA
 
 
 
 
- 31 -

 
 
June 5, 2018
 
Convertible Promissory Note, in the principal amount of $350,000 issued to Mammoth Corporation. due January 7, 2018.
 
Private Investor
 
N/A
 
$11,700/NA
June 7, 2018
 
Convertible Promissory Note, in the principal amount of $95,000 issued to GS Capital Partners, LLC. due October 23, 2018.
 
Private Investor
 
N/A
 
$18,515/NA
June 12, 2018
 
Convertible Promissory Note, in the principal amount of $220,000 issued to Vista Capital Investments, LLC due March 6, 2018.
 
Private Investor
 
N/A
 
$21,725/NA
June 18, 2018
 
Convertible Promissory Note, in the principal amount of $350,000 issued to Mammoth Corporation. due January 7, 2018.
 
Private Investor
 
N/A
 
$11,800/NA
June 18, 2018
 
Convertible Promissory Note, in the principal amount of $75,000 issued to EMA Financial, LLC Corporation. due September 20, 2018.
 
Private Investor
 
N/A
 
$9,610/NA
June 22, 2018
 
Convertible Promissory Note, in the principal amount of $95,000 issued to GS Capital Partners, LLC. due October 23, 2018.
 
Private Investor
 
N/A
 
$17,547/NA
July 3, 2018
 
Convertible Promissory Note, in the principal amount of $220,000 issued to Vista Capital Investments, LLC due March 6, 2018.
 
Private Investor
 
N/A
 
$21,313/NA
July 6, 2018
 
Convertible Promissory Note, in the principal amount of $350,000 issued to Mammoth Corporation. due January 7, 2018.
 
Private Investor
 
N/A
 
$9,500/NA
July 6, 2018
 
Convertible Promissory Note, in the principal amount of $160,500 issued to JSJ Investments Inc.. due September 12, 2018.
 
Private Investor
 
N/A
 
$17,095/NA
July 11. 2018
 
Convertible Promissory Note, in the principal amount of $350,000 issued to Mammoth Corporation. due January 7, 2018.
 
Private Investor
 
N/A
 
$10,260/NA
July 16, 2018
 
Convertible Promissory Note, in the principal amount of $75,000 issued to EMA Financial, LLC Corporation. due September 20, 2018.
 
Private Investor
 
N/A
 
$4,495/NA
July 16, 2018
 
Convertible Promissory Note, in the principal amount of $95,000 issued to GS Capital Partners, LLC. due October 23, 2018.
 
Private Investor
 
N/A
 
$10,352/NA
July 20, 2018
 
Convertible Promissory Note, in the principal amount of $220,000 issued to Vista Capital Investments, LLC Corporation. due March 6, 2018.
 
Private Investor
 
N/A
 
$12,250/NA
July 20, 2018
 
Convertible Promissory Note, in the principal amount of $160,500 issued to JSJ Investments Inc.. due September 12, 2018.
 
Private Investor
 
N/A
 
$14,241/NA
July 23, 2018
 
Convertible Promissory Note, in the principal and interest amount of $95,000 issued to GS Capital Partners, LLC. due October 23, 2018.
 
Private Investor
 
N/A
 
$13,479/NA
August 1, 2018
 
Convertible Promissory Note, in the principal amount of $220,000 issued to Vista Capital Investments, LLC Corporation. due March 6, 2018.
 
Private Investor
 
N/A
 
$10,500/NA
August 9, 2018
 
Convertible Promissory Note, in the principal amount of $103,000 issued to Geneva Roth Remark Holdings, Inc. due November 20, 2018.
 
Private Investor
 
N/A
 
$7,990/NA
August 10, 2018
 
Convertible Promissory Note, in the principal amount of $103,000 issued to Geneva Roth Remark Holdings, Inc. due November 20, 2018.
 
Private Investor
 
N/A
 
$8,960/NA
August 13, 2018
 
Convertible Promissory Note, in the principal amount of $103,000 issued to Geneva Roth Remark Holdings, Inc. due November 20, 2018.
 
Private Investor
 
N/A
 
$9,530/NA
 
The above issuances in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), as set forth in Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder.
 
 
- 32 -

 
 
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
 
None.
 
 
ITEM 4.  MINE SAFETY DISCLOSURES
 
Not applicable.
 
 
ITEM 5.  OTHER INFORMATION

None.
 
 
ITEM 6.  EXHIBITS
 
EXHIBIT NUMBER
DESCRIPTION
   
*
Filed herewith
**
Furnished herewith
   
 
Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.
 
SEC Ref. No
Title of Document
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Labels Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
   

 
 
- 33 -





SIGNATURES
 
Pursuant to the requirements of Section 12 of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on August 20, 2018.
 
 
 
 
PURA NATURALS, INC.
 
 
 
 
 
 
 
 By:  
/s/ Robert Doherty  
 
 
Robert Doherty , Principal Executive Officer
 
 
 
 
 
 By: 
/s/ Akio Ariura  
 
 
 Akio Ariura , Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- 34 -