Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this offering. Some of the information contained in this discussion and analysis, including information regarding the strategy and plans for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

Ketona is a revolutionary dry dog food with 75% less carbohydrate than other leading "grain-free" brands. It is a truly first-of-its-kind product, with 5% of the carbohydrate content typical of an expensive raw diet but with the cost and convenience of kibble. After a successful Kickstarter campaign, we've begun selling Ketona through our website and are producing the first batches of our salmon recipe while ramping up our efforts to educate pet owners on the dangers of carbohydrate consumption.

As the scientific benefits of ketogenic diets become more well-known, we'll extend our core formula to at least 5 different recipes in two different product lines for both dogs and cats. We plan to complete at least Series A and B fundraising rounds, in addition to this seed round, to fuel aggressive, benefits-driven marketing. We have the fierce loyalty of pet food consumers, first-mover status, and a unique and valuable product.

Milestones

KetoNatural Pet Foods, Inc. was incorporated in the State of Delaware in April 2017.

Since then, we have:

• Raised $127,500 in equity investment prior to proof of concept.
• Granted regulatory approval for two dry dog food formulations with less than 5% carbohydrate.
• Completed 2nd most successful pet food Kickstarter campaign in history for our "minimum viable product," with more than $11,000 in funding raised from 100 new customers.
• Founded by Daniel Schulof, the Dr. Atkins of the pet world and author of the only book ever devoted to the scientific benefits of a low-carb diet for pets.
• The founding team grew our sister company (Varsity Pets) to more than $1M in revenue and more than 20,000 paying customers without any third-party investment.
• In the two months since our "soft launch" -- operating with a limited budget, essentially no paid marketing, and selling only our minimum viable product --  our total revenues already exceed $15,000 and monthly subscriptions already exceed $1,000/month. 

Historical Results of Operations

Our company was organized in April 2017 and has limited operations upon which prospective investors may base an evaluation of its performance.

• Revenues & Gross Margin. For the period ended December 31, 2018, the Company had revenues of $269,669.55 compared to the year ended December 31, 2017, when the Company had revenues of $11,087.87. Our gross margin was 45.88% in fiscal year 2018, compared to 51.83% in 2017.
• Assets. As of December 31, 2018, the Company had total assets of $120,367.31, including $6,593.19 in cash. As of December 31, 2017, the Company had $50,790.16 in total assets, including $7,936 in cash.
• Net Loss. The Company has had net losses of $260,954.38 and net income of $97,203.18 for the fiscal years ended December 31, 2018 and December 31, 2017, respectively.
• Liabilities. The Company's liabilities totaled $136,187.49 for the fiscal year ended December 31, 2018 and $20,493.43 for the fiscal year ended December 31, 2017.

Related Party Transaction

Refer to Question 26 of this Form C for disclosure of all related party transactions.

Liquidity & Capital Resources

To-date, the company has been financed with $50,000 in debt, $30,000 in equity, and $327,500 in SAFEs.

After the conclusion of this Offering, should we hit our minimum funding target, our projected runway is 18 months before we need to raise further capital.

We plan to use the proceeds as set forth in this Form C under "Use of Funds". We don’t have any other sources of capital in the immediate future.

We will likely require additional financing in excess of the proceeds from the Offering in order to perform operations over the lifetime of the Company. We plan to raise capital in 1 months. Except as otherwise described in this Form C, we do not have additional sources of capital other than the proceeds from the offering. Because of the complexities and uncertainties in establishing a new business strategy, it is not possible to adequately project whether the proceeds of this offering will be sufficient to enable us to implement our strategy. This complexity and uncertainty will be increased if less than the maximum amount of securities offered in this offering is sold. The Company intends to raise additional capital in the future from investors. Although capital may be available for early-stage companies, there is no guarantee that the Company will receive any investments from investors.

Runway & Short/Mid Term Expenses

KetoNatural Pet Foods, Inc. cash in hand is $37,034.28, as of April 2018. Over the last three months, revenues have averaged $50,124.50/month, cost of goods sold has averaged $22,032.04/month, and operational expenses have averaged $54,460.23/month, for an average burn rate of $26,367.77 per month. Our intent is to be profitable in 10 months.

No material changes. All trends remain stable and consistent with those expressed in the financials.

We expect all revenue and expense trends to remain stable and consistent with those expressed in the financials.