NUTRALIFE BIOSCIENCES, INC - Quarter Report: 2018 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the Quarterly Period Ended September 30, 2018

Commission File Number: 000-55144

NUTRAFUELS, INC.

(Exact name of registrant as specified in its charter)

6601 Lyons Road, Suite L-6 Coconut Creek, FL  33073

(Address of principal executive offices)        (Zip Code)

   Telephone 888-509-8901

(Registrant’s telephone number, including area code)

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 periods 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 or a smaller reporting company filer. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in rule 12b-2 of the Exchange Act.

(Do not check if a smaller reporting 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 13(a) of the Exchange Act. ☐ 

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

As of November 1, 2018, we had 90,604,569 shares of common stock outstanding.

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TABLE OF CONTENTS

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INDEX TO FINANCIAL STATEMENTS

F-1

NUTRAFUELS, INC.

Condensed Consolidated Balance Sheets

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

F-2

NUTRAFUELS, INC.

Condensed Consolidated Statements of Operations

 (Unaudited)

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

F-3

NUTRAFUELS, INC.

Condensed Consolidated Statement of Changes in Stockholders’ Equity

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

F-4

NUTRAFUELS, INC.

Condensed Consolidated Statements of Changes in Cash Flows

Nine Months Ended September 30

(Unaudited)

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

F-5

NUTRAFUELS, INC.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 -  NATURE OF OPERATIONS

NutraFuels, Inc. (the “Company”) is the producer and distributor of nutritional supplements that uses micro molecular formulae and a utilization of an oral spray to provide faster and more efficient absorption.

NOTE 2 -  BASIS OF PRESENTATION AND USE OF ESTIMATES

a) Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles ("GAAP") in the United States of America ("U.S.") as promulgated by the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") and with the rules and regulations of the U.S Securities and Exchange Commission ("SEC"). In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments (which are of a normal recurring nature) necessary for a fair presentation. Operating results for the nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.

b) Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and Precision Analytics Testing, LLC (Precision), the Company’s wholly owned subsidiary.  

c) Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

d) Cash and Equivalents

Cash equivalents are highly liquid investments with an original maturity of three months or less.  The Company had no cash equivalents at September 30, 2018 and December 31, 2017.

e) Inventories

Inventories are stated at cost utilizing the weighted average method of valuation and consist of raw materials and finished goods. The Company reduces inventory on hand to its net realizable value on an item-by-item basis when it is apparent that the expected realizable value of an inventory item falls below its original cost. A charge to cost of sales results when the estimated net realizable value of specific inventory items declines below cost. Management regularly reviews the Company's inventories for such declines in value.

f) Allowance for Doubtful Accounts

We establish the existence of bad debts through a review of several factors including historical collection experience, current aging status of the customer accounts, and financial condition of our customers. The allowance for doubtful accounts is $59,210 and $0 for periods ended September 30, 2018 and December 31, 2017, respectively.

F-6

NUTRAFUELS, INC.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 2 -  BASIS OF PRESENTATION AND USE OF ESTIMATES, CONTINUED

g) Property and Equipment

All property and equipment are recorded at cost and depreciated over their estimated useful lives, generally three, seven and twelve years, using the straight-line method.  Upon sale or retirement, the cost and related accumulated depreciation are eliminated from their respective accounts, and the resulting gain or loss is included in the results of operations. Repairs and maintenance charges, which do not increase the useful lives of the assets, are charged to operations as incurred.  Leasehold improvements are amortized over their estimated useful lives or the remaining term of the lease, whichever is shorter.

h) Impairment of Long-Lived Assets

A long-lived asset is tested for impairment whenever events or changes in circumstances indicate that its carrying value amount may not be recoverable. An impairment loss is recognized when the carrying amount of the asset exceeds the sum of the undiscounted cash flows resulting from its use and eventual disposition. The impairment loss is measured as the amount by which the carrying amount of the long-lived assets exceeds its fair value.

Impairment charges would be included with costs and expenses in the Company's condensed consolidated statements of operations, and would result in reduced carrying amounts of the related assets on the Company's condensed consolidated balance sheets. No adjustments were made to long-lived assets during the period ended September 30, 2018, as a result of management's assessments.

i) Advertising

Advertising costs are charged to operations as incurred and are included in operating expenses. The amounts charged for the three month period ended September 30, 2018 and 2017 amounted to $139,800 and $266, respectively. The amounts charged for the nine month period ended September 30, 2018 and 2017 amounted to $178,064 and $51,151 respectively.   

j) Revenue Recognition

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Codification (ASC) 606, Revenue From Contracts With Customers, effective for public business entities with annual reporting periods beginning after December 15, 2017.  This new revenue recognition standard (new guidance) has a five step process: a) Determine whether a contract exists; b) Identify the performance obligations; c) Determine the transaction price; d) Allocate the transaction price; and e) Recognize revenue when (or as) performance obligations are satisfied. The impact of the Company’s initial application of ASC 606 did not have a material impact on its financial statements and disclosures.

The Company’s condensed consolidated financial statements are prepared under the accrual method of accounting. Revenues are recognized when persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured. This occurs only when the product is ordered and subsequently shipped.

F-7

NUTRAFUELS, INC.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 2 -  BASIS OF PRESENTATION AND USE OF ESTIMATES, CONTINUED

k) Income Taxes

The Company follows the provisions of ASC 740-10, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.

Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company has no amounts accrued for interest or penalties as of September 30, 2018 and December 31, 2017, respectively.  The Company is no longer subject to examination by taxing authorities for years before December 31, 2014.  The company does not expect the total amount of unrecognized tax benefits to significantly change in the next 12 months. The Company has received no notice of audit or any notifications from the IRS for any of the open tax years.

l) Net Loss Per Share

Basic loss per share excludes dilution and is computed by dividing the loss attributable to stockholders by the weighted-average number of shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the earnings of the Company.  Diluted loss per share is computed by dividing the loss available to stockholders by the weighted average number of shares outstanding for the period and dilutive potential shares outstanding unless consideration of such dilutive potential shares would result in anti-dilution.

m) Financial Instruments and Fair Value Measurements

The carrying value of the Company’s current consolidated financial instruments, which include cash and cash equivalents, accounts payable and accrued liabilities approximates their fair values because of the short-term maturities of these instruments.

FASB ASC 820 Fair Value Measurement clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:

F-8

NUTRAFUELS, INC.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 2 -  BASIS OF PRESENTATION AND USE OF ESTIMATES, CONTINUED

·

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date.

·

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

·

Level 3: Significant unobservable inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

o) Related Party Transactions

All transactions with related parties are in the normal course of operations and are measured at the exchange amount.

n) Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases which, for operating leases, requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. The ASU is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The adoption of ASU 2016-02 is expected to result in the recognition of right to use assets and associated obligations on its balance sheet.

NOTE 3 -  LIQUIDITY AND GOING CONCERN CONSIDERATIONS

Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. We sustained a net loss of approximately $1,554,000 for the nine months ended September 30, 2018, and have an accumulated deficit of approximately $34,313,000 at September 30, 2018. These conditions raise substantial doubt about our ability to continue as a going concern.

The independent auditors’ report on our consolidated financial statements for the year ended December 31, 2017 contain explanatory paragraphs expressing substantial doubt as to our ability to continue as a going concern.

Failure to successfully continue to grow operational revenues could harm our profitability and adversely affect our financial condition and results of operations. We face all of the risks inherent in a new business, including the need for significant additional capital, management’s potential underestimation of initial and ongoing costs, and potential delays and other problems in connection with establishing sales channels.

F-9

NUTRAFUELS, INC.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 3 -  LIQUIDITY AND GOING CONCERN CONSIDERATIONS, CONTINUED

We are continuing our plan to further grow and expand operations and seek sources of capital to pay our contractual obligations as they come due. Management believes that its current operating strategy will provide the opportunity for us to continue as a going concern as long as we are able to obtain additional financing; however, there is no assurance this will occur. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

NOTE 4 -  CONVERTIBLE NOTE

In January 2017, the Company issued 6,762,942 shares of common stock to convert $1,561,593 of convertible debt and accrued interest.  

On July 31, 2018, the Company entered into a convertible promissory note facility with a third party lender for total proceeds of $2,000,000. The convertible promissory note calls for six funding installments from July 31, 2018 through January 15, 2019.  The convertible promissory note bears interest at 10% and has a maturity date of July 31, 2020.

In July 2018, the Company received the first installment of $250,000 of the convertible promissory note, at which time the Company issued 2,000,000 shares of common stock valued at $190,476 and 625,000 warrants to purchase common stock valued at $59,523. The convertible promissory note is convertible into shares of the Company at a price of $.40 per share.  The terms of the conversion does not give rise to a beneficial conversion feature. The total debt discount from the embedded features amounted to $250,000. Amortization of the debt discount in connection with the first installment amounted to $20,833 for the period ended September 30, 2018.

In August 2018, the Company received the second installment of $130,000 of the convertible promissory note, at which time the Company issued 325,000 warrants to purchase common stock valued at $54,638.  The convertible promissory note is convertible into shares of the Company at a value of $.40 per share.  The terms of the conversion gives rise to a beneficial conversion feature resulting in a fair value of $18,888.  The total debt discount from the embedded features amounted to $73,525. Amortization of the debt discount in connection with the second installment amounted to $3,197 for the period ended September 30, 2018.

The following is a schedule of future minimum payments for all debt held due in years subsequent to September 30, 2018 (excluding debt discount):

F-10

NUTRAFUELS, INC.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 5 -  NOTES PAYABLE - RELATED PARTY

In January 2017, the Company issued 3,367,000 shares of common stock to convert $841,750 of debt and accrued interest to a related party.

During the first quarter 2017, we paid $5,850 in cash to a related party in settlement of a short-term non-interest-bearing advance.

NOTE 6 -  STOCKHOLDERS’ EQUITY

Stock Activity

At September 30, 2018 and December 31, 2017, the Company has 499,990,000 shares of $0.0001 par value common stock authorized and 90,067,069 and 81,448,561 issued and outstanding, respectively.  

In January 2018, the Company issued 900,000 shares of common stock valued at $203,351 for services.

In January 2018, the Company issued 100,000 shares of common stock valued at $47,618 for past services.

In February 2018, the Company issued 169,159 shares of common stock to settle accounts payable of $31,490. The Company recorded a loss on settlement of $18,004 in connection with this settlement.

In February 2018, the Company issued 500,000 shares of common stock valued at $140,000 for services.

In February 2018, the Company issued 2,000,000 shares of common stock valued at $569,200 for the acquisition of production equipment.

In April 2018, the Company issued 449,300 shares of common stock valued at $100,218 for current and on-going services.

In June 2018, the Company issued 1,200,000 shares of common stock valued at $240,000 for services.

In July 2018, the Company issued 437,500 shares of common stock valued at $70,000 for services.

In July 2018, the Company issued 2,000,000 shares of common stock and 625,000 warrants to purchase common stock in exchange for a $250,000 convertible note payable (see Note 4).

In August 2018, the Company issued 260,000 shares of common stock in exchange for $43,332 in cash.

In August 2018, the Company issued 325,000 warrants to purchase common stock in exchange for a $130,000 convertible note payable (see Note 4).

In September 2018, the Company issued 602,549 shares of common stock valued at $124,238 for services.

F-11

NUTRAFUELS, INC.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 6 -  STOCKHOLDERS’ EQUITY, CONTINUED

Options and Warrants

Our warrants and options outstanding are:

NOTE 7 - COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases their office and warehouse facilities located in in Coconut Creek, Florida under a non-cancelable operating lease agreement with an expiration date of February 2019.

In June 2017, the Company entered into a lease for an additional facility located in Deerfield Beach, Florida under a non-cancelable operating lease. The term of the lease is for 84 months and calls for yearly 3% increases to base rent, with monthly payments which commenced in January 2018.  

Capital Leases

During August 2018, the Company entered into a non-cancelable lease agreement for warehouse equipment with a third party vendor which calls for monthly payments of $320 and expires in August 2023.  The lease agreement is collateralized by the respective equipment.

F-12

NUTRAFUELS, INC.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 7 - COMMITMENTS AND CONTINGENCIES, CONTINUED

The following is a schedule of future minimum lease payments under all leases due in periods subsequent to September 30, 2018:

The Company's rental expense for all facilities and equipment amounted to $145,804 and $19,717 for the three month period ended September 30, 2018 and 2017, respectively.  The amounts charged for the nine month period ended September 30, 2018 and 2017 amounted to $185,319 and $58,273 respectively.   

Legal Proceedings

From time to time, the Company is subject to legal proceedings which arise in the ordinary course of the Company's business. Although there can be no assurance as to the ultimate disposition of these matters, the Company's management believes that the final disposition of such matters will not have a material adverse effect on the financial position or results of operations of the Company.

Consulting Agreements

On July 25, 2018, the Company signed a partnership and agency sales agreement (NFSKIN Agreement) with a third party entity (Revenue Sharing Partner).  The agreement provides the Revenue Sharing Partner with a non-exclusive right to sell certain Company products (Protected Accounts) through their worldwide network.  The Company is obligated to pay commissions to the Revenue Sharing Partner on sales made of those Protected Accounts.

The NFSKIN Agreement was given an effective date of January 1, 2017, as a result, a calculation for the commissions owed to the Revenue Sharing Partner was calculated from January 1, 2017 through June 30, 2018. On September 10, 2018, the Company issued shares with value of $106,638 to compensate for the amounts owed from the period from January 1, 2018 through June 30, 2018. The stock liability owed to the Revenue Sharing Partner for the three month period ended September 30, 2018, amounted to $25,637.

Employment Agreements

On July 1, 2018, the Company entered into a three year employment agreement which in addition to the base salary, called for the issuance of 250,000 shares to the employee upon execution of the agreement.  As of September 30, 2018, the shares had not been issued resulting in a stock liability owed to the employee in the amount of $49,000.

F-13

NUTRAFUELS, INC.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 8 - CONCENTRATIONS OF CREDIT RISK

Cash and Cash Equivalents

The Company maintains its cash in bank deposit accounts with high credit quality financial institutions, which may, at times, exceed federally insured limits. The Company had no cash balance in excess of FDIC insured limits at September 30, 2018 or December 31, 2017.

Revenue

The Company’s principal customers are comprised of 5 separate independent private label resellers. Should the Company lose one or more of these resellers, their revenue would decline significantly.

NOTE 9 - SUBSEQUENT EVENTS

On October, 11, 2018, the Company issued 437,500 shares of common stock valued at $80,938 to employees of the Company as part of their compensation.

On October, 11, 2018, the Company issued 100,000 shares of common stock valued at $18,500 to consultants of the Company as part of their payment for services.

F-14

CAUTIONARY NOTE FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of the Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future operations, future cash needs, business plans and future financial results, and any other statements that are not historical facts.

From time to time, forward-looking statements also are included in our other periodic reports on Form 10-K, Forms 10-Q and 8-K, in our press releases, in our presentations, on our website and in other materials released to the public. Any or all of the forward-looking statements included in this Report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements.

In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report. Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

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

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the audited annual and unaudited interim Financial Statements and related notes included in this Form 10 filing, as well as the sections entitled “Risk Factors” in of this filing, as well as other cautionary statements and risks described elsewhere in this filing. Our actual results could differ materially from those discussed in the forward-looking statements

Overview

NutraFuels, Inc, a Florida corporation (“us”, “we” or “our”) was formed as a limited liability company in the state of Florida on April 1, 2010, to engage in the development and distribution of nutritional and dietary oral spray products. On December 3, 2012, we converted from a Limited Liability Company to a Florida Corporation.

We manufacture and distribute oral spray nutritional and dietary products. Our distribution strategy includes selling to private label customers retailers, distributors, and consumers through retail outlets.

Nine Months Ended September 30, 2018 and 2017

We had sales of $2,870,462 and $1,029,727 for the nine months ended September 30, 2018 and 2017, respectively, or a one hundred seventy eight point eight percent (178.8%) increase. This increase resulted from greater acceptance of our products in the marketplace, which led to greater sales.

Cost of sales was $1,503,468 compared to $617,958 for the nine months ended September 30, 2018 and 2017, respectively, or a one hundred forty three point three percent (143.3%) increase. This increase is directly related to our increase in sales.

Gross margin was $1,366,994 and $411,769 for the nine months ended September 30, 2018 and 2017, respectively, or a two hundred thirty two point zero percent (232.0%) increase.

General and administrative expenses were $1,190,180 compared to $815,035 for the nine months ended September 30, 2018 and 2017, respectively, an increase of forty six point zero percent (46.0%).

Stock based compensation was $1,167,290 and $19,134,686 for the nine months ended September 30, 2018 and 2017, respectively, or a ninety three point nine percent (93.9%) decrease. $18,917,777 of the September 30, 2017 expense was due to shares issued to our CEO under his January 2017 employment agreement which had a non-dilutive clause. This non-dilutive clause was removed in an amendment to the employment agreement in October 2017. The Company entered into several sales consulting agreements with third parties and employees in 2018 and an agreement with its now Chief Medical Advisor, which called for shares to be issued.

Our interest expense was $9,937 compared to $224,530 for the nine months ended September 30, 2018 and 2017, respectively, a decrease of ninety five point six percent (95.6%). This decrease is due to the recording of induced conversion charges upon the conversion of our debt to equity at a rate below the then prevailing market price of our stock in 2017, and in 2018 we have no debt for the first two quarters.

We recorded a net loss of ($1,554,233) compared to ($23,202,212) for the nine months ended September 30, 2018 and 2017, respectively.

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Three Months Ended September 30, 2018 and 2017

We had sales of $1,062,146 and $652,385 for the three months ended September 30, 2018 and 2017, respectively, or a sixty two point two eight (62.8%) increase. This increase resulted from greater acceptance of our products in the marketplace during the period, which led to greater sales.

Cost of sales was $775,191 compared to $334,699 for the three months ended September 30, 2018 and 2017, respectively, or a one hundred thirty one point six percent (131.6%) increase. This increase is directly related to our increase in sales.

Gross margin was $286,955 and $317,686 for the three months ended September 30, 2018 and 2017, respectively, or a nine point seven percent (9.7%) decrease.

General and administrative expenses were $547,956 compared to $308,226 for the three months ended September 30, 2018 and 2017, respectively, an increase of seventy seven point eight percent (77.8%).

Stock based compensation was $183,453 and $8,493,180 for the three months ended September 30, 2018 and 2017, respectively, or a ninety seven point eight percent (97.8%) decrease.

Our interest expense was $9,450 compared to $583 for the three months ended September 30, 2018 and 2017, respectively, an increase of one thousand five hundred twenty point nine percent (1,520.9%). This decrease is due to the recording of induced conversion charges upon the conversion of our debt to equity at a rate below the then prevailing market price of our stock in 2017, and in 2018 having minimal debt.

We recorded a net loss of ($717,127) compared to ($8,527,191) for the three months ended September 30, 2018 and 2017, respectively.

Liquidity and Capital Resources Cash Flow Activities

Cash Flow Activities

Our cash increased $37,242 for the nine months ended September 30, 2018. We generated $119,083 of cash in operating activities during the nine month period.

Financing Activities

During the nine months ended September 30, 2018, we funded our working capital requirements through our revenues, working capital, cash on hand, proceeds from lending and proceeds from the issuance of stock.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. We consider our critical accounting policies to be those that require the more significant judgments and estimates in the preparation of financial statements, including the following:

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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Fair Value of Financial Instruments

Our financial instruments consist of cash and cash equivalents, prepaid expenses, payables and accrued expenses. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. We consider the carrying values of our financial instruments in the consolidated financial statements to approximate fair value, due to their short-term nature.

Revenue Recognition

Revenue is recognized when earned, generally at shipment of product. Revenue is recognized on a gross basis in accordance with ASC 606.

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is provided for using straight-line methods over the estimated useful lives of the respective assets.

Valuation of Long-Lived Assets

We periodically evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset were less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.

Derivatives

The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a convertible note containing an embedded derivative instrument, the instrument is marked to fair value at the conversion date and that fair value is reclassified to equity.  The shares issued upon conversion of the note are recorded at their fair value with gain or loss recognition as applicable.

Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4).

Recent Accounting Pronouncements

(See “Recently Issued Accounting Pronouncements” in Note 2 of Notes to the Financial Statements.)

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Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Smaller reporting companies are not required to provide the information required by this item.

Item 4.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s President, Chief Financial Officer, Secretary, Treasurer and Director, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure for the reasons discussed below.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal controls over financial reporting during the nine month period ending September 30, 2018 or in other factors that could significantly affect these controls, that materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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PART II:  OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, the Company may become involved in litigation relating to claims arising out of its operations in the normal course of business.  To the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on the Company.

Item 1A.   Risk Factors

Smaller reporting companies are not required to provide the information required by this item.

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

On February 17, 2015, we sold a promissory note in the amount of $25,000 to Jerry O’Leary.  The note included options to purchase 25,000 of our common shares at the price of $.20 per share or an aggregate of $5,000. On January 4, 2017, Mr. O’Leary converted the amount due of $25,000 into 100,000 of our common shares at the price of $.25 per share. On February 23, 2017, we issued 25,000 shares of our common stock to Jerry O’Leary in exchange for $5,000 for the exercise of the 25,000 options.

On October 4, 2016, we sold 500,000 units to Jerry O’Leary for the aggregate price of $50,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On January 4, 2017, we sold 500,000 units to Jerry O’Leary for the aggregate price of $50,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On April 21, 2015, we sold a promissory note in the amount of $250,000 to William Ferri. The note accrued interest at 10% and included options to purchase 250,000 common shares at the price of $.20 per share. On January 4, 2017, William Ferri converted the principal and accrued interest due in the amount of $275,000 into our common shares at the price of $.25 per share or an aggregate of 1,100,000 shares. On May 12, 2017, Mr. Ferri exercised the 250,000 options at an exercise price of $.20 per share or an aggregate of $50,000.

On April 19, 2016, we sold a promissory note in the amount of $38,000 to Richard Scott Lohan. The note accrued interest at 10% and included warrants to purchase 100,000 common shares at the price of $.00 per share. On May 10, 2016, we repaid the principal due of $38,000. On April 19, 2016, Mr. Lohan exercised the 100,000 warrants at an exercise price of $0.00 per share or an aggregate of $0. On June 22, 2016, we sold an additional promissory note in the amount of $27,000 to Mr. Lohan. The note accrued interest at 10% and included warrants to purchase 70,000 common shares at the price of $.00 per share.  On January 4, 2017, Mr. Lohan converted the principal due of $27,000 into 270,000 common shares and accrued interest of $11,700 into 117,000 common shares at the price of $.10 per share. On June 22, 2016, Mr. Lohan exercised the 100,000 warrants at an exercise price of $0.00 per share or an aggregate of $0.

On January 5, 2017, we sold 243,000 shares to Richard Scott Lohan for the aggregate price of $12,000 or $.05 per share.

Mr. Lohan was issued 700,000 shares instead of 70,000 shares in conjunction with the exercise of the June 22, 2016 cashless warrants. He elected to convert the June 22, 2016 promissory note and accrued interest for 387,000 common shares and pay $12,000 in cash for the remaining 243,000 common shares of the 630,000 over-issuance instead of returning those shares.

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On June 23, 2016, we amended a noted dated June 7, 2013, whereby we are obligated to pay Craig Hetherington the sum of $100,000 plus interest at the rate of 10%. Under the terms of the amended note, the note’s maturity date was July 15, 2017.

On August 27, 2016, we amended an August 26, 2013 promissory note, whereby we are obligated to pay Craig Hetherington the sum of $100,000 plus interest at the rate of 15%. Under the terms of the amended note, the note’s maturity date was July 15, 2016.

On January 4, 2017, Craig Heatherington converted principal and accrued interest due in the amount of $882,235 pursuant to a June 7, 2013 and an August 26, 2013 and a March 26, 2014 and a June 23, 2014 convertible notes into our common shares at the price of $.25 per share or an aggregate of 3,528,940 shares.

On October 22, 2015, we sold 100,000 units to James Laurain for the aggregate price of $10,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On November 13, 2015, we sold 100,000 units to James Laurain for the aggregate price of $10,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On November 25, 2015, we sold 200,000 units to James Laurain for the aggregate price of $20,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On December 10, 2015, we sold 150,000 units to James Laurain for the aggregate price of $15,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On March 9, 2016, we sold 50,000 units to James Laurain for the aggregate price of $5,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On March 18 2016, we sold 450,000 units to James Laurain for the aggregate price of $45,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On May 18, 2016, we sold 50,000 units to James Laurain for the aggregate price of $5,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On June 9, 2016, we sold a promissory note in the amount of $20,000 to James Laurain. The note accrued interest at 10%. On December 7, 2016, Mr. Laurain converted the principal and accrued interest due in the amount of $20,628 into our common shares at the price of $.25 per share or an aggregate of 82,512 shares.

On July 26, 2016, we sold a promissory note in the amount of $20,000 to James Laurain. The note accrued interest at 10%. On December 7, 2016, Mr. Laurain converted the principal and accrued interest due in the amount of $20,367 into our common shares at the price of $.25 per share or an aggregate of 81,468 shares.

On December 8, 2016, we sold 550,000 units to James Laurain for the aggregate price of $55,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

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On January 3, 2017, we sold 75,000 units to James Laurain for the aggregate price of $7,500 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On January 28, 2016, we sold 250,000 units to Michael Farr for the aggregate price of $25,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On June 23, 2016, we sold a promissory note in the amount of $25,000 to Michael Farr. The note accrued interest at 10% and included 70,000 common shares. On August 23, 2016, we repaid the note and accrued interest.

On August 29, 2016, we sold a promissory note in the amount of $35,000 to Michael Farr. The note accrued interest at 10% and included 100,000 common shares. On October 12, 2016, we repaid the note and accrued interest.

On September 21, 2016, we sold a promissory note in the amount of $40,000 to Michael Farr. The note accrued interest at 10% and included 100,000 common shares. On November 21, 2016, we repaid the note and issued 160,400 common shares to Mr. Farr.

On October 13, 2016, we sold a promissory note in the amount of $60,000 to Michael Farr. The note accrued interest at 10% and included 200,000 common shares. On December 28, 2016, Mr. Farr converted the note into 660,000 common shares.

On November 23, 2016, we sold a promissory note in the amount of $65,000 to Michael Farr. The note accrued interest at 10% and included 200,000 common shares. On January 4, 2017, Mr. Farr converted the note into 300,000 common shares.

On January 6, 2017, we sold 1,300,000 units to FMG Holdings LLC for the aggregate price of $130,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On May 18, 2017, we sold 150,000 units to FMG Holdings LLC for the aggregate price of $30,000 or $.20 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On July 28, 2017, we sold 100,000 units to FMG Holdings LLC for the aggregate price of $20,000 or $.20 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On October 15, 2015, we sold 500,000 units to Jerry Thompson for the aggregate price of $50,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On November 19, 2015, we sold 200,000 units to Jerry Thompson for the aggregate price of $20,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On December 16, 2015, we sold 250,000 units to Jerry Thompson for the aggregate price of $25,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On January 21, 2016, we sold 150,000 units to Jerry Thompson for the aggregate price of $15,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

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On February 5, 2016, we sold 200,000 units to Jerry Thompson for the aggregate price of $20,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On February 23, 2016, we sold 65,000 units to Jerry Thompson for the aggregate price of $6,500 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On March 4, 2016, we sold 200,000 units to Jerry Thompson for the aggregate price of $20,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On March 18, 2016, we sold 150,000 units to Jerry Thompson for the aggregate price of $15,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On July 6, 2016, we sold a promissory note in the amount of $15,000 to Jerry Thompson. The note accrued interest at 10% and included 15,000 common shares. On January 4, 2017, Mr. Thompson converted the principal and accrued interest outstanding note into 61,368 common shares.

On December 30, 2016, we sold 100,000 units to Jerry Thompson for the aggregate price of $10,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On January 3, 2017, we sold 195,000 units to Jerry Thompson for the aggregate price of $19,500 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On June 4, 2015, we sold 100,000 Units to G&C Investment Corp, a Florida corporation controlled by Jorge Garrido for the aggregate price of $100,000 or $1.00 per Unit. Each Unit consists of one (1) share of common stock and one (1) warrant which is exercisable into our common shares at the per share price of $.10 or an aggregate of $10,000. The warrants were exercised at the price of $.10 per share at the time of the investment.

On August 14, 2015, we entered into a promissory note, whereby we are obligated to pay Ann Noble the sum of $25,000 plus interest at the rate of 10%. Under the terms of the amended note, the note’s maturity date is August 14, 2016. The note was converted into 250,000 shares of our common stock at the price of $.10 per share on August 14, 2016.

On April 3, 2015, we issued 30,000 shares of our common stock to Barbara Ludwig for an aggregate of $6,000 or the per share price of $.20 per share.

On August 14, 2016, Barbara Ludwig converted principal due in the amount of $20,000 pursuant to an August 14, 2015 convertible note into our common shares at the price of $.10 per share or an aggregate of 200,000 shares.

On March 23, 2017, we sold 114,286 units to Barbara Ludwig for the aggregate price of $40,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On December 1, 2016, Dennis Poland converted principal and accrued interest due in the amount of $55,000 pursuant to a February 20, 2014 convertible note into our common shares at the price of $.10 per share or an aggregate of 550,000 shares.

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On December 1, 2016, James Stewart converted principal and accrued interest due in the amount of $28,849.05 pursuant to an August 14, 2015 convertible note into our common shares at the price of $.10 per share or an aggregate of 287,285 shares.

On January 4, 2017, Neil Catania converted principal and accrued interest due in the amount of $841,750 pursuant to a November 15, 2012 and July 26, 2016 convertible notes and a December 31, 2013 line of credit into our common shares at the price of $.25 per share or an aggregate of 3,367,000 shares. On December 1, 2016, we issued 2,000,000 shares to Neil Catania, VP of the Company, for services rendered. We valued these shares at $.06 per share or an aggregate of $120,000.00.

On January 4, 2017, John Hampton converted principal and accrued interest due in the amount of $147,583 pursuant to an August 27, 2014 and an October 3, 2014 convertible notes into our common shares at the price of $.25 per share or an aggregate of 590,332 shares.

On January 4, 2017, Michael Smyth converted principal and accrued interest due in the amount of $70,680 pursuant to a November 15, 2012 convertible note into our common shares at the price of $.25 per share or an aggregate of 282,720 shares.

On January 4, 2017, Donald Brennick converted principal and accrued interest due in the amount of $28,395 pursuant to an August 26, 2015 convertible note into our common shares at the price of $.10 per share or an aggregate of 283,950 shares.

On January 30, 2017, we issued 250,000 shares to Bernadine Cawley for services rendered to us. We valued these shares at $.40 per share or an aggregate of $100,000.00.

On May 10, 2017, we sold 375,000 units to Bernadine Cawley for the aggregate price of $75,000 or $.20 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $0.50 at any time until the two (2) year anniversary of the date of the investment.

On October 13, 2015, we sold 100,000 units to Tom and Carol Perrine for the aggregate price of $10,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On November 17, 2015, we sold 100,000 units to Tom and Carol Perrine for the aggregate price of $10,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On December 29, 2016, we sold 100,000 units to Tom and Carol Perrine for the aggregate price of $10,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On October 22, 2015, we sold 102,000 units to Alan Maurer for the aggregate price of $10,200 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On October 22, 2015, we sold 50,000 units to Gordon Langston for the aggregate price of $5,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On January 9, 2017, we sold 250,000 units to Gordon Langston for the aggregate price of $25,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

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On November 5, 2015, we sold 50,000 units to Barclay Armitage for the aggregate price of $5,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On January 8, 2016, we sold 75,000 units to Barclay Armitage for the aggregate price of $7,500 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On November 17, 2015, we sold 50,000 units to Michael Ward for the aggregate price of $5,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On December 7, 2015, we sold 50,000 units to David Knudtson for the aggregate price of $5,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On December 15, 2015, we sold 200,000 units to William Rodriguez for the aggregate price of $20,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment. On January 9, 2017, we sold 405,000 units to William Rodriguez for the aggregate price of $40,500 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment. On January 17, 2017, we sold 200,000 units to William Rodriguez for the aggregate price of $20,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On December 15, 2015, we sold 50,000 units to Nathaniel Rodriguez for the aggregate price of $5,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On February 19, 2016, we sold 75,000 units to Kerry McDonald for the aggregate price of $7,500 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On February 23, 2016, we sold 250,000 units to Thomas Jacobsen for the aggregate price of $25,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On April 5, 2016, we sold 100,000 units to Laura & Anthony Suttora for the aggregate price of $10,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On May 2, 2016, we sold 200,000 units to Anthony Monteleone for the aggregate price of $20,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On May 6, 2016, we sold 100,000 units to Leon English for the aggregate price of $10,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment. On January 7, 2017, we sold 100,000 units to Leon English for the aggregate price of $10,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

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On June 1, 2016, we sold 400,000 units to Dominant Holdings LLC, a Massachusetts limited liability company controlled by Kelly Benson, for the aggregate price of $40,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $0.50 at any time until the two (2) year anniversary of the date of the investment.

On July 16, 2016, we sold 400,000 units to Dominant Holdings LLC for the aggregate price of $40,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On August 1, 2016, we sold 300,000 units to Dominant Holdings LLC for the aggregate price of $30,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On August 19, 2016, we sold 300,000 units to Dominant Holdings LLC for the aggregate price of $30,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On July 25, 2016, we sold 150,000 units to John Berning for the aggregate price of $15,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On January 20, 2017, we sold 150,000 units to John Berning for the aggregate price of $15,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On July 27, 2016, we sold 500,000 units to Paul & Cheryl Botts for the aggregate price of $50,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On January 11, 2017, we sold 500,000 units to Paul & Cheryl Botts for the aggregate price of $50,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On January 6, 2017, we sold 500,000 units to Jeff Luccesi for the aggregate price of $50,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On January 6, 2017, we sold 300,000 units to STF Partners, LP, a New York limited partnership controlled by Sharyn Frankel, for the aggregate price of $30,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $0.50 at any time until the two (2) year anniversary of the date of the investment.

On January 6, 2017, we sold 200,000 units to Breadfruit Tree Inc., a Florida corporation, doing business as NF Skin, our distributor, and controlled by F. Bruce Hutson, for the aggregate price of $20,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On January 9, 2017, we sold 300,000 units to Davis Pallen for the aggregate price of $30,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

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On January 9, 2017, we sold 1,500,000 units to Forage Complete LLC, an Idaho limited liability company controlled by Cody Jensen, for the aggregate price of $150,000 or $.10 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On May 17, 2017, we sold 200,000 units to Forage Complete LLC for the aggregate price of $40,000 or $.20 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On July 28, 2017, we sold 100,000 units to Forage Complete LLC for the aggregate price of $20,000 or $.20 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On February 23, 2017, we sold 41,666 units to Patricia Gleason for the aggregate price of $25,000 or $.60 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On February 23, 2017, we sold 83,333 units to David Corcoran for the aggregate price of $50,000 or $.60 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On April 24, 2017, we sold 500,000 units to Gregory Ross for the aggregate price of $100,000 or $.20 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On May 21, 2017, we sold 50,000 units to James Rutledge for the aggregate price of $10,000 or $.20 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On May 24, 2017, we sold 575,000 units to EW Strategies LLC, a Georgia limited liability company controlled by Greg Schantz, for the aggregate price of $115,000 or $.20 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On July 7, 2017, we sold 250,000 units to Wolbers Family Trust, a trust controlled by Jennifer Wolbers, for the aggregate price of $50,000 or $.20 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $0.50 at any time until the two (2) year anniversary of the date of the investment.

On July 19, 2017, we sold 150,000 units to Peter Mazza for the aggregate price of $30,000 or $.20 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On August 1, 2017, we sold 50,000 units to David Dickman for the aggregate price of $10,000 or $.20 per unit. Each unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at the price of $.50 at any time until the two (2) year anniversary of the date of the investment.

On October 1, 2015, we issued 30,000 of our common stock to Peter Cianci in exchange for services rendered. We valued these shares at the price of $.17 per share or an aggregate of $5,100.

On October 1, 2015, we issued 40,000 shares to Five Star Labs, LLC, a Florida limited liability company controlled by Eric Caprarese for services rendered. We valued these shares at $.17 per share or an aggregate of $6,800.

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On October 1, 2015, we issued 1,000,000 shares to Osprey Capital Advisors, LLC a Florida limited liability company controlled by Terence M. Taylor, for services rendered. We valued these shares at $.183 per share or an aggregate of $183,000.00.

On December 1, 2015, we issued 1,000,000 shares to Osprey Capital Advisors, LLC a Florida limited liability company controlled by Terence M. Taylor, for services rendered. We valued these shares at $.122 per share or an aggregate of $122,000.00.

On December 16, 2015 and January 2, 2016, we issued 150,000 shares to WT Consulting, LLC a Florida limited liability company controlled by William Hirschy, for services rendered. We valued these shares at $.3467 per share or an aggregate of $52,000.  

On January 4, 2016, we issued 100,000 shares to Patagonia Global Trading, LLC, a Florida limited liability company controlled by David Zirulnikoff, for services rendered. We valued these shares at $.10 per share or an aggregate of $10,000.00.

On January 2, 2017, we issued 50,000 shares to Patagonia Global Trading, a Florida entity, for services rendered. We valued these shares at $.25 per share or an aggregate of $12,500.00.

On June 9, 2016, we issued Josh Zwagil 244,514 shares for new business development. We valued these shares at $.11 per share, or an aggregate of $26,896.54.

On December 1, 2016, we issued 4,000,000 shares to Edgar Ward, CEO of the Company, for services rendered. We valued these shares at $.06 per share or an aggregate of $240,000.00. On March 3, 2017, we issued 7,220,585 shares to Edgar Ward, CEO of the Company, for services rendered. We valued these shares at $1.45 per share or an aggregate of $10,453,315. On November 27, 2017, we issued 6,674,837 shares to Edgar Ward, CEO of the Company, for services rendered. We valued these shares at $1.27 per share or an aggregate of $8,464,463.

On December 1, 2016, we issued 1,000,000 shares to Nicole Archon for services rendered. We valued these shares at $.06 per share or an aggregate of $60,000.00.

On December 14, 2016, we issued 249,999 shares to Venture Capital Group, LLC a Delaware limited liability company controlled by William Stern, for services rendered. We valued these shares at an aggregate $.0972 per share or an aggregate of $24,300.00.

On January 17, 2017, we issued 100,000 shares to Hamilton & Associates Law Group a Florida law firm controlled by Brenda Hamilton, Esq., for services rendered. We valued these shares at an aggregate $.10 per share or an aggregate of $10,000.00.

On January 30, 2017, we issued 400,000 shares to Anthony Procelli, for services rendered. We valued these shares at $.40 per share or an aggregate of $160,000.00.

On January 30, 2017, we issued 50,000 shares to Patrick Kilcooley, for services rendered. We valued these shares at $.40 per share or an aggregate of $20,000.00.

On January 30, 2017, we issued 300,000 shares to Daniel Ryan, for services rendered. We valued these shares at $.40 per share or an aggregate of $120,000.00.

On February 1, 2017, we issued 50,000 shares to Sylvan Eudes, for services rendered. We valued these shares at $.12 per share or an aggregate of $6,000.00.

On April 10, 2017, we issued 250,000 shares of our restricted common stock to Michael R. Anderson for services rendered. We valued these shares at $.69 per share or an aggregate of $172,500.00.

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On July 17, 2017, we issued 100,000 shares to Kenneth Duchin, for services rendered. We valued these shares at $.80 per share or an aggregate of $80,000.00.

On December 17, 2017, we issued 500,000 shares Hongxiang Hui for services rendered to us. We valued these shares at $.15 and $.10 per share.

On February 15, 2018, we issued 2,000,000 shares to Hall Global LLC, a limited liability controlled by Michael Anderson for equipment provided to us. We valued these shares at $.2846 per share or an aggregate of $569,200.

On January 23, 2018, we issued 200,000 common shares to Randy Avon for services rendered to us. We valued these shares at $.21 per share or an aggregate of $41,446.

On January 23, 2018, we issued 150,000 common shares to Daniel Slane for services rendered to us. We valued these shares at $.21 per share or an aggregate of $31,085.

On January 23, 2018, we issued 100,000 common shares to Michel Lohan for services rendered to us. We valued these shares at $.4762 per share or an aggregate of $47,618.

On January 23, 2018, we issued 350,000 shares David Zirulnikoff for services rendered to us. We valued these shares at $.26 per share or an aggregate of $89,374.

On January 23, 2018, we issued 200,000 common shares to Ronald Silver for services rendered to us. We valued these shares at $.21per share or an aggregate of $41,446.

On February 15, 2018, we issued 500,000 common shares to Hongxiang Hui for services rendered to us. We valued these shares at $.28 per share or an aggregate of $140,000.

On January 5, 2018, February 26, 2018, April 11, 2018, April 20, 2018 and June 2, 2018, we issued 43,759, 125,400, 51,700, 147,600 and 700,000 shares of our common stock to Hamilton & Associates Law Group, P.A. for services rendered which we valued these shares at $.30, $.29, $.18 $.245 and $.20 per share, respectively.

On May 11, 2018, we issued 250,000 common shares to Tony Hunter for services rendered to us. We valued these shares at $.19 per share or an aggregate of $54750 54,750.

On June 1, 2018, we issued 500,000 common shares to Lyons Capital for services rendered to us. We valued these shares at $.20 per share or an aggregate of $100,000.

On July 25, 2018, we issued 62,500 common shares to Mary Ellen Mahon for services rendered to us. We valued these shares at $.16 per share or an aggregate of $10,000.

On July 25, 2018, we issued 62,500 common shares to Anthony Centorani for services rendered to us. We valued these shares at $.16 per share or an aggregate of $10,000.

On July 25, 2018, we issued 250,000 common shares to Michael P. Dulak for services rendered to us. We valued these shares at $.16 per share or an aggregate of $40,000.

On July 25, 2018, we issued 62,500 common shares to Robert Patrick Scott for services rendered to us. We valued these shares at $.16 per share or an aggregate of $10,000.

On July 25, 2018, we entered into an agreement with Breadfruit Tree DBA NFSkin, a Florida corporation where by we agreed to pay them 15% of their net sales of our product. The 15% is payable in up to 3,000,000 shares of our common stock which the number of shares will be calculated based on a value of $.20 per share. On September 10, 2018, we issued 514,549 of the shares issuable under the agreement or an aggregate of $106,638.

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On July 31, 2018, we entered into an agreement with New Leaf Assets, LLC, a Delaware limited liability company whereby New Leaf agreed to purchase the sum of $2,000,000 of convertible promissory notes from us. Each note would bear interest at the rate of 12%. The sums due under the note were convertible into our common shares at the price of $.40 per share at any time prior to maturity. In exchange for the investment of $2,000,000, New Leaf received 2,000,000 shares of our common stock. New Leaf delivered the sum of $250,000 and $130,000 on July 31, 2018 and August 23, 2018, respectively and received 950,000 warrants in connection therewith. As described under Item 5 of this Report on Form 10-Q, our Board of Directors approved the cancellation of the 2,000,000 shares and 950,000 warrants issued to New Leaf due to its breach of the agreement.

On August 24, 2018, we issued 200,000 shares of our common stock to Barrington Jenoure for an aggregate of $33,332 or the per share price of $.167 per share.

On August 28, 2018, we issued 60,000 shares of our common stock to Barrington Jenoure for an aggregate of $10,000 or the per share price of $.167 per share.

On September 20, 2018, we issued 62,000 common shares to John Gross for services rendered to us. We valued these shares at $.20 per share or an aggregate of $12,400.

On September 20, 2018, we issued 26,000 common shares to Ann Mahfood for services rendered to us. We valued these shares at $.20 per share or an aggregate of $5,200.

On October 11, 2018, we issued 250,000 common shares to Nicholas Ward, the son of our Chief Executive Officer, President and Director for services rendered to us. We valued these shares at $.196 per share or an aggregate of $49,000.

On October 11, 2018, we entered into a convertible note agreement in the principal amount of $37,500 with FMG LLC. The note bears interest at the rate of 10% and has a maturity date of November 30, 2018. The principal and interest due under the note are convertible into our common shares at the rate of $.20 in whole or in part at any time until maturity. Mr. Farr received warrants to purchase 1,000,000 of our common shares at the price of $.21 per share any time until October 31, 2021.

On October 11, 2018, we entered into a convertible note agreement in the principal amount of $37,500 with Forage Complete, LLC. The note bears interest at the rate of 10% and has a maturity date of November 30, 2018. The principal and interest due under the note are convertible into our common shares at the rate of $.20 in whole or in part at any time until maturity. Mr. Farr received warrants to purchase 1,000,000 of our common shares at the price of $.21 per share any time until October 31, 2021.

On November 7, 2018, we entered into a convertible note agreement in the principal amount of $25,000 with Paul R. Botts. The note bears interest at the rate of 10% and has a maturity date of December 20, 2018. The principal and interest due under the note are convertible into our common shares at the rate of $.20 in whole or in part at any time until maturity.

Item 3.     Defaults Upon Senior Securities

None.

Item 4.     Mine Safety Disclosures

Not applicable.

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Item 5.    Other Information

On July 1, 2018, we entered into an agreement with Nicholas Ward, the son of our Chief Executive Officer, President and Director to provide us with services for a period of three (1) years. The services consist of providing direction, leadership and training on General Manufacturing Procedures (“GMP”), improving our operational systems processes and policies, managing and increasing the effectiveness and efficiency of our support services and assisting with our long-term planning. Mr. Ward received 250,000 shares of our common stock upon execution of the agreement. Mr. Ward receives a salary of $52,000 annually and shall receive 250,000 shares of the Company’s’ common stock on each July 1, 2019, July 1, 2020 and July 1, 2021 for his services.

On July 31, 2018, we entered into a note agreement with New Leaf Assets, LLC, a Delaware limited liability company (“New Leaf”) whereby New Leaf agreed to invest the sum of $2,000,000 as follows:

For each investment of $250,000 New Leaf would receive 625,000 warrants to purchase our common stock at the price of $.20 per share at any time until July 31, 2021. The note bears interest at the rate of 12% and sums due under the note are convertible at the into our common shares at the price of $.40 per share at any time prior to maturity. In exchange for the investment of $2,000,000, New Leaf received 2,000,000 shares of our common stock. New Leaf delivered the sum of $250,000 and $130,000 on July 31, 2018 and August 23, 2018, respectively and received 950,000 warrants in connection therewith.  On November 7, 2018, we delivered a notice of breach to New Leaf and our Board of Directors approved the cancellation of the 2,000,000 shares and 950,000 warrants.  The Company is presently evaluating causes of action against New Leaf.

On September 17, 2018 the Company amended an agreement dated April 10, 2017, as amended, (the “Agreement”) with Hall Global LLC, Michael R. Anderson and Bill Nicholson (the “Hall Global Parties”). In connection with the agreement, the Hall Global Parties returned 2,000,000 shares of the Company’s common stock to the Company for cancellation and the Company returned a piece of manufacturing equipment to the Hall Global Parties. The parties released one another from their obligations under the Agreement.

Item 6.    Exhibits

Exhibit No.

Description

31.1*

Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of Sarbanes Oxley Act of 2002

32.1*

Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes Oxley Act of 2002

* Filed herewith.

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SIGNATURES

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

NutraFuels, Inc.

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