Notes to Unaudited Consolidated Financial
Statements
For the Three Months ended March 31, 2019
Note 1 – Organization and Basis of Presentation
Organization and Line of Business
Pura Naturals, Inc. (formerly Yummy Flies,
Inc.) (The "Company" or "Pura - CO") was incorporated under the laws of the State of Colorado on December 26,
2005. On November 17, 2016, the Company changed its name from Yummy Flies, Inc. to Pura Naturals, Inc.
Pura Naturals, Inc., ("Pura - DE")
was incorporated on April 20, 2015 under the laws of the state of Delaware. Prior to incorporating in Delaware, the Company
was incorporated on October 21, 2013 under the laws of the state of Nevada as a limited liability company. On June 30, 2015,
the Company exchanged membership interests in the Nevada Corporation for common stock of the Pura - DE.
Effective July 18, 2016, the Company entered
into that certain share exchange agreement by and among the Company, 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
date, Robert Lee, the holder of 30,536,100 shares of common stock, agreed to cancelation of such shares. Other than Robert
Lee, shareholders of Company common stock held 7,625,700 shares. Also on the closing date, 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 Company is engaged in the marketing and
sales of consumer products through the use of direct sales, brokers and distributors to wholesalers, mass merchandisers, retail
stores and on the internet.
The unaudited financial statements were
prepared by the Company, pursuant to the rules and regulations of the Securities Exchange Commission ("SEC"). The information
furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of
management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures
normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United
States of America ("U.S. GAAP") were omitted pursuant to such rules and regulations. These financial statements should
be read in conjunction with the audited financial statements and footnotes included in the Company's Annual Report on Form 10-K
filed with the SEC on July 24, 2019. The results for the three months ended March 31, 2019, are not necessarily indicative of the
results to be expected for the year ending December 31, 2019.
Pura Naturals, Inc.
Notes to Unaudited Consolidated Financial
Statements
For the Three Months ended March 31, 2019
Note 2 - Summary of Significant Accounting Policies
Revenue Recognition
The Company recognizes revenue from sales of
consumer products to wholesalers, mass merchandisers and retail stores . In May 2014, the FASB issued Accounting Standards Update
No. 2014-09 (Topic 606) “Revenue from Contracts with Customers.” Topic 606 supersedes the revenue recognition requirements
in Topic 605 “Revenue Recognition” (Topic 605). The new standard’s core principal is that an entity will recognize
revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring good
or services to a customer. The principals in the standard are applied in five steps: 1) Identify the contract(s) with a customer;
2) Identify the performance obligations in the contract; 3) Determine the transaction price; 4) Allocate the transaction price
to the performance obligations in the contract; and 5) Recognize revenue when (or as) the entity satisfies a performance obligation.
ASU No. 2014-09, Revenue from Contracts with
Customers ("Topic 606"), became effective for us on January 1, 2018. 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
consolidated financial statements 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.
Stock-Based Compensation
The Company records stock-based compensation
in accordance with FASB ASC Topic 718, Compensation – Stock Compensation . FASB ASC Topic 718 requires companies to
measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over
the employee's requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock
options and other equity-based compensation issued to employees and non-employees. There were 8,193,750 and 8,193,750 options outstanding
as of March 31, 2019 and December 31, 2018, respectively.
Basic and Diluted Earnings (Loss) Per Share
Earnings per share is calculated in accordance
with 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. The following potentially-dilutive shares were
excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive.
Pura Naturals, Inc.
Notes to Unaudited Consolidated Financial
Statements
For the Three Months ended March 31, 2019
|
|
March 31,
|
|
March 31,
|
|
|
2019
|
|
2018
|
Options
|
|
|
8,193,750
|
|
|
|
8,193,750
|
|
Warrants
|
|
|
5,000,000
|
|
|
|
-
|
|
Convertible notes
|
|
|
473,436,176
|
|
|
|
102,953,201
|
|
Total
|
|
|
486,629,926
|
|
|
|
111,146,951
|
|
Reclassification
Certain amounts in the prior period financial
statements were reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses.
Recent Accounting Pronouncements
In June 2018, the FASB issued Accounting Standards
Update (“ASU”) ASU 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,
which simplifies the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the
guidance on such payments to nonemployees with the requirements for share-based payments granted to employees. ASU 2018-07 is effective
on January 1, 2019. Early adoption is permitted. The adoption of this ASU did not have a material impact on the Company’s
consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842). ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet
and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December
15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The adoption
of this ASU did not have a material impact on the Company’s consolidated financial statements as the Company did not have
any leases covered by this new ASU.
Management does not believe that any recently
issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new
accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
Note 3 – Going Concern
The Company's consolidated financial statements
were prepared on a going concern basis which contemplates the realization of assets and settlement of liabilities and commitments
in the normal course of business. The Company has incurred losses from operations since its change of ownership, management and
line of business on July 18, 2016. Management recognizes successful business operations and the Company's transition to attaining
profitability are dependent upon obtaining additional financing and achieving a level of revenue adequate to support its cost structure.
These conditions raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements
do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the
amounts and classification of liabilities that may result from the outcome of uncertainties.
Pura Naturals, Inc.
Notes to Unaudited Consolidated Financial
Statements
For the Three Months ended March 31, 2019
The Company incurred losses from operations
of $792,387 for the three months ended March 31, 2019 and $3,394,068 for the year ended December 31, 2018, and had an accumulated
deficit of $14,304,134 at March 31, 2019. In addition, the Company used cash in operating activities of $108,546 for the three
months ended March 31, 2019. 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.
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.
The financial statements 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.
Note 4 – Intangible Assets
The following are the details of intangible
assets at March 31, 2019 and December 31, 2018:
|
|
March 31,
|
|
December 31,
|
|
|
2019
|
|
2018
|
Licenses
|
|
$
|
996,346
|
|
|
$
|
996,346
|
|
Trademarks
|
|
|
13,055
|
|
|
|
13,055
|
|
|
|
|
1,009,401
|
|
|
|
1,009,401
|
|
Less accumulated amortization
|
|
|
(376,359
|
)
|
|
|
(351,451
|
)
|
|
|
$
|
633,042
|
|
|
$
|
657,950
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for the three months
ended March 31, 2019 and 2018 was $24,908 and $24,625, respectively.
Pura Naturals, Inc.
Notes to Unaudited Consolidated Financial
Statements
For the Three Months ended March 31, 2019
The following summarizes estimated future amortization
expense as of March 31, 2019 related to intangible assets:
Twelve months ending March 31:
|
|
|
2020
|
|
$ 100,883
|
2021
|
|
100,883
|
2022
|
|
100,883
|
2023
|
|
100,883
|
2024
|
|
100,883
|
Thereafter
|
|
128,627
|
|
|
$ 633,042
|
|
|
|
Note 5 –Related Party Transactions
The Company has balances outstanding that are
due from affiliated companies and payable to affiliated companies. These amounts are payable upon demand and are non-interest
bearing.
Due to Related Parties - Advanced Innovative
Recovery Technologies, Inc.
During the three months ended March 31, 2019
and 2018, the overhead allocation charged to the Company from Advanced Innovative Recovery Technologies, Inc. a stockholder of
the Company, was $30,000 and $30,000, respectively for office space provided and other items such as minor warehouse space, office
/ warehouse supplies and resource function allocation. During 2017 and 2018, the amounts charged from Advanced Innovative Recovery
Technologies, Inc, included in cost of goods sold was $41,226 and $18,562 of the total cost of goods sold the three months ended
March 31, 2019 and 2018, respectively. Amounts owed to Advanced Innovative Recovery Technologies, Inc as of March 31, 2019 and
December 31, 2018 was $666,535 and $588,916, respectively.
Due to Related Parties – B3 LLC
B3, LLC is an inactive subsidiary of Advanced Innovative Recovery
Technologies, Inc. Amount due to B3, LLC as of March 31, 2019 and December 31, 2018 was $5,507 and $5,507 respectively.
Due to Related Parties - Officers
As March 31, 2019 and December 31, 2018, the Company had $41,382and
$479,937 (which had been netted against $56,269 notes receivable and advances to the officers that the Company) of accrued salaries
due to four officers which is included in accrued expenses.
Note 6 - Fair Value Measurement
Fair Value of Financial Instruments
For certain of the Company’s financial
instruments, including cash and equivalents, restricted cash, accounts receivable, advances to suppliers, accounts payable, accrued
liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities.
Pura Naturals, Inc.
Notes to Unaudited Consolidated Financial
Statements
For the Three Months ended March 31, 2019
FASB ASC Topic 820, Fair Value Measurements
and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC Topic 825, Financial
Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement
that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets
for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values
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:
|
·
|
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 fair value 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 derivative liabilities as their fair values were determined by using the Black-Scholes pricing model based on various
assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase
or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. At March 31,
2019 and December 31, 2018, the Company identified the following liabilities that are required to be presented on the balance sheet
at fair value:
|
|
Fair Value
|
|
Fair Value Measurements at
|
|
|
As of
|
|
March 31, 2019
|
Description
|
|
March 31, 2019
|
|
Using Fair Value Hierarchy
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Conversion feature on convertible notes and warrants
|
|
$ 538,803
|
|
$ -
|
|
$ -
|
|
$ 538,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Fair Value Measurements at
|
|
|
As of
|
|
December 31, 2018
|
Description
|
|
December 31, 2018
|
|
Using Fair Value Hierarchy
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Conversion feature on convertible notes and warrants
|
|
$ 1,209,150
|
|
$ -
|
|
$ -
|
|
$ 1,209,150
|
|
|
|
|
|
|
|
|
|
The related gain (loss) on change in fair value
of derivatives totaled $653,817 and $(1,323,375) for the three months ended March 31, 2019 and 2018, respectively.
Pura Naturals, Inc.
Notes to Unaudited Consolidated Financial
Statements
For the Three Months ended March 31, 2019
Note 7 - Derivative Liabilities
The Company identified conversion features
embedded within its convertible debt. The Company has determined that the conversion feature of the convertible note represents
an embedded derivative since the notes are convertible into a variable number of shares upon conversion. Accordingly, the notes
are 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. Due to the lack of available common shares for all conversions, convertible notes with a fixed conversion
price as well as warrants were categorized as a derivative.
Therefore, the fair value 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 fair value 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 fair value 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.
The change in the fair value of the Company's
derivative liabilities from December 31, 2018 to March 31, 2019 is as follows:
Derivative liability balance, December 31, 2018
|
|
$
|
1,209,150
|
|
Discount on debt
|
|
|
116,000
|
|
Reclass to equity due to conversions
|
|
|
(132,530
|
)
|
Fair value mark to market adjustments
|
|
|
(653,817
|
)
|
Derivative liability balance, March 31, 2019
|
|
$
|
538,803
|
|
|
|
|
|
|
The fair value'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 at March 31, 2019 and December 31, 2018:
|
|
|
|
March 31,
|
|
|
|
December 31,
|
|
|
|
|
2019
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
Stock price
|
|
|
$
|
|
|
|
0.003 – 0.008
|
|
|
|
$
|
|
|
|
0.003 - 0.043
|
|
Risk free rate
|
|
|
|
|
|
|
2.21% -2.59%
|
|
|
|
|
|
|
|
1.96% - 2.70%
|
|
Volatility
|
|
|
|
|
|
|
0% - 323%
|
|
|
|
|
|
|
|
93% - 455%
|
|
Conversion/ Exercise price
|
|
|
$
|
|
|
|
0.0015 - 0.005
|
|
|
|
$
|
|
|
|
.0016 - 0.0093
|
|
Terms (years)
|
|
|
|
|
|
|
0.0027-2.67
|
|
|
|
|
|
|
|
0.0027-2.92
|
|
Dividend rate
|
|
|
|
|
|
|
0
|
%
|
|
|
|
|
|
|
0
|
%
|
Pura Naturals, Inc.
Notes to Unaudited Consolidated Financial
Statements
For the Three Months ended March 31, 2019
Note 8 – Convertible Notes Payable
Convertible notes payable at March 31, 2019 and December 31,
2018 are as follows:
|
|
March 31,
|
|
December 31,
|
|
|
2019
|
|
2018
|
Dated April 7, 2017 for $570,000; accrues interest at 0% per annum; due January 7, 2018 (the holder of the note has not declared a default); secured by 500,000 shares of the Company's common stock; convertible into common stock at 75% of the average of the 3 lowest trading prices 5 days prior to conversion (currently in default).
|
|
$
|
74,754
|
|
|
$
|
97,256
|
|
Dated July 14, 2017 for $330,000 with debt issuance costs of $30,000; accrues interest at 0% per annum; due April 17, 2018; convertible into common stock at 65% of the lowest trading price 30 days prior to conversion (currently in default).
|
|
|
330,000
|
|
|
|
330,000
|
|
Dated July 5, 2017 for $220,000 with debt issuance costs of $20,000; accrues interest at 8% per annum; due January 6, 2018; convertible into common stock at 60% of the average of the 3 lowest trading prices 5 days prior to conversion (currently in default).
|
|
|
5,458
|
|
|
|
5,458
|
|
Dated September 12, 2017 for $160,500 with debt issuance costs of $10,500; accrues interest at 12% per annum; due September 12, 2018; convertible into common stock at 50% of the lowest trading price 20 days prior to conversion (currently in default).
|
|
|
11,024
|
|
|
|
48,335
|
|
Dated December 18, 2017 for $125,000 with debt issuance costs of $16,250; accrues interest at 4.25% per annum; due October 23, 2018; convertible into common stock at 61% of the lowest trading price 15 days prior to conversion (currently in default).
|
|
|
40,000
|
|
|
|
98,674
|
|
Dated March 6, 2018 for $126,000 with debt issuance costs of $6,000; accrues interest at 8% per annum; due March 6, 2019; convertible into common stock at 60% of the lowest trading price 20 days prior to conversion (currently in default).
|
|
|
-
|
|
|
|
18,600
|
|
Dated October 8, 2018 for $50,000 with debt issuance costs of $1,000; accrues interest at 8% per annum; due April 8, 2019; convertible into common stock at the lower of 80% of the lowest trading price 5 days prior to conversion or $0.0065 (currently in default).
|
|
|
50,000
|
|
|
|
50,000
|
|
Pura Naturals, Inc.
Notes to Unaudited Consolidated Financial
Statements
For the Three Months ended March 31, 2019
|
|
March 31,
|
|
December 31,
|
|
|
2019
|
|
2018
|
Dated October 8, 2018 for $50,000 with debt issuance costs of $1,000; accrues
interest at 8% per annum; due April 8, 2019; convertible into common stock at the lower of 80% of the lowest trading price 5
days prior to conversion or $0.0065 (currently in default).
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
Dated October 8, 2018 for $200,000; accrues interest at 0% per annum; due April 8, 2019; convertible into common stock at 90% of the lowest trading price 5 days prior to conversion (currently in default).
|
|
|
200,000
|
|
|
|
200,000
|
|
Dated November 15, 2018 for $150,000 with debt issuance costs of $20,000; accrues interest at 0% per annum; due August 15, 2019; convertible into common stock at $0.005 per share. The Company also issued the investor 5,000,000 warrants in connection with this convertible note (currently in default).
|
|
|
128,571
|
|
|
|
150,000
|
|
Dated January 22, 2019 for $63,000; accrues interest at 12% per annum; due November 15, 2019; convertible into common stock at 61% of the average of the 2 lowest trading prices 10 days prior to conversion.
|
|
|
63,000
|
|
|
|
-
|
|
Dated March 4, 2019 for $53,000; accrues interest at 12% per annum; due December 31, 2019; convertible into common stock at 61% of the average of the 2 lowest trading prices 10 days prior to conversion.
|
|
|
53,000
|
|
|
|
-
|
|
|
|
|
1,005,807
|
|
|
|
1,048,323
|
|
Less debt discount
|
|
|
(184,623
|
)
|
|
|
(272,633
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
821,184
|
|
|
$
|
775,690
|
|
|
|
|
|
|
|
|
|
|
The discounts on convertible notes payable
arise from the conversion features of certain convertible notes being treated as derivative liabilities (see Note 7). In addition,
the discounts also includes debt issuance costs. The discounts are being amortized over the terms of the convertible notes payable.
Amortization of debt discounts during the three months ended March 31, 2019 and 2018 amounted to $204,010 and $274,389, respectively,
and is recorded as interest expense in the accompanying consolidated statements of operations. The unamortized discount balance
for these notes was $184,623 as of March 31, 2019, which is expected to be amortized over the next 12 months.
Pura Naturals, Inc.
Notes to Unaudited Consolidated Financial
Statements
For the Three Months ended March 31, 2019
A summary of the activity in the Company's
convertible notes payable is provided below:
Balance, December 31, 2018
|
|
$
|
775,690
|
|
Issuance of new convertible notes
|
|
|
116,000
|
|
Repayment of convertible notes in cash
|
|
|
(21,431
|
)
|
Converted into shares of common stock
|
|
|
(137,085
|
)
|
Debt discount on new notes
|
|
|
(116,000
|
)
|
Amortization of debt discounts
|
|
|
204,010
|
|
Balance, March 31, 2019
|
|
$
|
821,184
|
|
|
|
|
|
|
Note 9 – Notes Payable
Notes payable at March 31, 2019 and December 31, 2018 are as
follows:
|
|
March 31,
|
|
December 31,
|
|
|
2019
|
|
2018
|
Dated August 10, 2018; accrues interest at 0% per annum; unsecured; due on November 10, 2018 (currently in default).
|
|
$
|
52,500
|
|
|
$
|
52,500
|
|
Dated July 10, 2018; accrues interest at 30% per annum; unsecured; due on January 10, 2019 (currently in default).
|
|
|
25,000
|
|
|
|
40,000
|
|
Dated May 21, 2018; secured by virtually all the Company's assets; daily repayments of $165 for 246 days.
|
|
|
1,142
|
|
|
|
11,222
|
|
Dated March 26, 2019; daily repayments of $170 for 248 days; guaranteed by an officer of the Company
|
|
|
21,880
|
|
|
|
-
|
|
|
|
$
|
100,522
|
|
|
$
|
103,722
|
|
Note 10 – Stockholders' Equity
Common stock
On January 31, 2019, the Company held an Annual Meeting of Stockholders
(the "Annual Meeting"), at which the Company's stockholders approved an amendment to the Company's articles of incorporation
( the "Certificate of Incorporation") and adopted Company's Amended and Restated Articles of Incorporation (the "Certificate
of Amendment") to increase the authorized shares of the Company's common stock from 500,000,000 to 1,500,000,000 and to authorize
a reverse split of the Company's commons stock in a ratio of between 1 to 5 and 1 to 50 at the Board's discretion.
Pura Naturals, Inc.
Notes to Unaudited Consolidated Financial
Statements
For the Three Months ended March 31, 2019
During three months ended March 31, 2019, the
Company issued shares of common stock as follows:
|
·
|
75,383,269 shares for
the conversion of $137,085 of convertible notes payable and $5,894 of accrued interest; and
|
|
·
|
220,143,169 shares for
executive compensation of $667,615 of which $211,250 was for services rendered in 2019 and $456,365 was for services rendered prior
to 2019 that was previously accrued. The value of the shares were determined based on a 25% discount to the closing stock price
on the grant date.
|
During the three months ended March 31, 2018, the Company issued
shares of common stock as follows:
|
|
|
|
|
300,000 shares valued at $25,500
for extension of due date;
|
|
|
5,317,460 shares for the conversion of $209,825
of convertible notes payable;
in payment of convertible notes (See
Note 8)
|
|
|
83,333 shares for $5,000 cash; and
|
|
|
200,000 shares valued at $32,400 for employment agreement.
|
Stock options
The following is a summary of stock option activity:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
Average
|
|
|
|
|
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
Options
|
|
Exercise
|
|
Contractual
|
|
Intrinsic
|
|
|
Outstanding
|
|
Price
|
|
Life
|
|
Value
|
|
Outstanding, December 31, 2018
|
|
|
|
8,193,750
|
|
|
$
|
0.001
|
|
|
|
3.70
|
|
|
|
|
|
|
Granted
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, March 31, 2019
|
|
|
|
8,193,750
|
|
|
$
|
0.001
|
|
|
|
3.45
|
|
|
|
|
|
|
Exercisable, March 31, 2019
|
|
|
|
2,476,250
|
|
|
$
|
0.001
|
|
|
|
3.26
|
|
|
$
|
3,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 $235,190 and $120,567 during
three months ended March 31, 2019 and 2018, respectively. At March 31, 2019, the unamortized stock option expense was $947,424
which will be amortized to expense through October 1, 2021 and when certain milestone are met.
Pura Naturals, Inc.
Notes to Unaudited Consolidated Financial
Statements
For the Three Months ended March 31, 2019
Warrants
In connection with note issued in 2018, 5,000,000
warrants were issued on November 15, 2018. The warrants have a 3 year life and have an exercise price of $0.01. In addition, if
the market price of one warrant share is greater than the exercise price, the holder may elect to receive warrant shares, in lieu
of a cash exercise, equal to the value of the warrant determined as follows:
X = Y (A-B)/A
where X = the number of warrant shares to be issued to holder;
Y = the number of warrant shares that the holder
elects to purchase under this warrant
A = the market price
B = exercise price
The warrants were valued for $23,347 and recorded
as derivative and debt discount as the warrants were tainted by other convertible notes with variable conversion price. The intrinsic
value of the 5,000,000 warrants as of March 31, 2019 is $0.
Note 11 - Concentrations
The Company had certain
customers whose accounts receivable balances individually represented 10% or more of the Company's total accounts receivable, as
follows:
At March 31, 2019,
four customer accounted for 20%, 19% 18% and 16% of accounts receivable. At December 31, 2018, two customers accounted for 38%
and 14% of accounts receivable.
The Company had certain
vendors whose accounts payable balances individually represented 10% or more of the Company's total accounts payables.
At March 31, 2019,
one vendor accounted for 14% of accounts payable. At December 31, 2018, no vendor accounted for 10% of accounts payable.
Note 12 – Commitments and Contingencies
From time to time, the Company is 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.
In lieu of cash of $60,345 for outstanding
attorney invoices, 6,611,200 common shares are to be issued. A liability of $60,345 was recorded as of March 31, 2019 and December
31, 2018 which will be offset when common shares are issued.
Note 13 - Subsequent Events
Subsequent to March 31, 2019 the Company had the following
:
|
·
|
Issued 75,760,000 shares of common stock for the
conversion of $75,195 of convertible notes;
|
|
·
|
Issued 65,000,000 shares of common stock to employees
for services rendered.
|