UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549




**Form
      10-QSB**




x
            Quarterly
                report pursuant section 13 or 15(d) of the Securities Exchange Act
                of
                1934


For
      the
      quarterly period ended June
      30, 2007




o
            Transition
                report pursuant section 13 or 15(d) of the Securities Exchange Act
                of
                1934


For
      the
      transition period from _______ to _______.




Commission
      file number 000-50907




**PURE
      BIOFUELS CORP.**


(Exact
      name of small business issuer as specified in its charter)




**Nevada**
              **(State
                of Incorporation)**
            **47-0930829**
              **(I.R.S.
                Employer Identification No.)**


**9440
      Little Santa Monica Blvd., Suite 401 Beverly Hills, CA
      90210**


**Telephone
      No.: 1-310-402-5916**


**(Address
      and telephone number of Registrant’s principal**


**executive
      offices and principal place of business)**




**N/A**


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




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes x No o




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




As
      of
      June 30, 2007, the Company had 62,619,102 outstanding shares of common
      stock.




Transitional
      Small Business Disclosure Format (Check one): Yes o No
x




1




**TABLE
      OF CONTENTS**


**Page**PART
                  I - FINANCIAL INFORMATION
              3Item
                  1. Unaudited Financial StatementsItem
                  2. Management’s Discussion and Analysis or Plan of
                  Operation
              18Item
                  3. Controls and Procedures
              26PART
                  II - OTHER INFORMATION
              26Item
                  2. Unregistered Sales of Equity Securities and Use of
                  Proceeds
              26Item
                  6. Exhibits
              27SIGNATURES
              28







2


**PART
      I - FINANCIAL INFORMATION**




**Pure
      Biofuels Corp.**


(formerly
      Metasun Enterprises, Inc.)


(A
      Development Stage Company)


(Unaudited)




June
      30,
      2007




IndexConsolidated
                Balance Sheets
            4Consolidated
                Statements of Operations and Other Comprehensive Loss
            5Consolidated
                Statements of Stockholders’ Equity
            6Consolidated
                Statements of Cash Flows
            7Notes
                to the Consolidated Financial Statements
            8







3


**Item
      1. Financial Statements**


**PURE
        BIOFUELS CORP.**


(A
        Development Stage Company)
 **CONSOLIDATED
        BALANCE SHEETS**
  **June
                  30,**
              
              **December
                  31,****2007**
              
              **2006****ASSETS**
              
              (unaudited)CURRENT
                  ASSETSCash
                  and cash equivalents
              
              $
              503,612
              
              $
              1,261,974Accounts
                  receivable, net
              
              
              18,669
              
              
              18Prepaid
                  expenses and deposits
              
              
              119,052
              
              
              51,986Debt
                  issuance costs
              
              
              622,037
              
              
              -TOTAL
                  CURRENT ASSETS
              
              
              1,263,370
              
              
              1,313,978VAT
                  RECEIVABLE
              
              
              572,682
              
              
              192,766PROPERTY
                  PLANT AND EQUIPMENT, net
              
              
              5,881,828
              
              
              4,020,837TOTAL
                  ASSETS
              
              $
              7,717,880
              
              $
              5,527,581**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**CURRENT
                  LIABILITIESAccounts
                  payable and accrued expenses
              
              $
              1,306,705
              
              $
              258,432Due
                  to related parties
              
              
              88,455
              
              
              97,813Current
                  portion of long term debt
              
              
              600,000
              
              
              600,000Convertible
                  debentures, net of discounts of $211,985
              
              
              2,788,015
              
              
              -Convertible
                  promissory note
              
              
              60,000
              
              
              -TOTAL
                  CURRENT LIABILITIES
              
              
              4,843,175
              
              
              956,245LONG
                  TERM DEBT
              
              
              600,000
              
              
              600,000TOTAL
                  LIABILITIES
              
              
              5,443,175
              
              
              1,556,245MINORITY
                  INTEREST
              
              
              -
              
              
              -COMMITMENTS
                  AND CONTINGENCIES
              
              
              -
              
              
              -STOCKHOLDERS'
                  EQUITYPreferred
                  stock; $0.001 par value; 1,000,000 shares authorized, no shares
                  issuedCommon
                  stock; $0.001 par value; 250,000,000 sharesauthorized;
                  62,619,102 and 62,132,419 shares issued and outstanding
              
              
              62,619
              
              
              62,132Additional
                  paid-in capital
              
              
              11,185,383
              
              
              4,888,538Subscriptions
                  received in advance
              
              
              -
              
              
              96,277Accumulated
                  other comprehensive income
              
              
              2,085
              
              
              -Deficit
                  accumulated during the development stage
              
              
              (8,975,382
              )
              
              (1,075,611
              )TOTAL
                  STOCKHOLDERS' EQUITY
              
              
              2,274,705
              
              
              3,971,336TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY
              
              $
              7,717,880
              
              $
              5,527,581


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




4


PURE
        BIOFUELS CORP.
 (A
        Development Stage Company)
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS**




**For
                  the period****from
                  May 10, 2006****Three
                  Months Ended June 30,**
              
              
              **Six
                  Months Ended June 30,**
              
              
              **to
                  June 30, 2007****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**
              
              
              **(Date
                  of Inception)**(unaudited)
              
              
              (unaudited)
              
              
              (unaudited)
              
              
              (unaudited)
              
              
              (unaudited)REVENUE
              
              $
              -
              
              $
              -
              
              $
              
              
              $
              -
              
              $
              -COST
                  OF REVENUE
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              -GROSS
                  PROFIT
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -OPERATING
                  EXPENSESConsulting
                  fees
              
              
              486,906
              
              
              -
              
              
              1,014,761
              
              
              
              
              
              1,632,081General
                  and administrative
              
              
              169,033
              
              
              -
              
              
              306,710
              
              
              
              
              
              468,615Professional
                  fees
              
              
              423,284
              
              
              -
              
              
              523,382
              
              
              
              
              
              589,621Wages
              
              
              2,615,383
              
              
              -
              
              
              2,820,970
              
              
              
              
              
              3,051,117TOTAL
                  OPERATING EXPENSES
              
              
              3,694,606
              
              
              -
              
              
              4,665,823
              
              
              -
              
              
              5,741,434LOSS
                  FROM OPERATIONS
              
              
              (3,694,606
              )
              
              -
              
              
              (4,665,823
              )
              
              -
              
              
              (5,741,434
              )OTHER
                  INCOME (EXPENSES):Interest
                  expense
              
              
              (72,897
              )
              
              -
              
              
              (72,897
              )
              
              -
              
              
              (72,897
              )Other
              
              
              (547
              )
              
              -
              
              
              (547
              )
              
              -
              
              
              (547
              )Amortization
                  of debt discounts and
                debt
                  issuance costs
              
              
              (3,160,504
              )
              
              
              
              
              (3,160,504
              )
              
              -
              
              
              (3,160,504
              )TOTAL
                  OTHER EXPENSE
              
              
              (3,233,948
              )
              
              -
              
              
              (3,233,948
              )
              
              -
              
              
              (3,233,948
              )LOSS
                  BEFORE PROVISION FOR INCOME TAXES
              
              
              (6,928,554
              )
              
              -
              
              
              (7,899,771
              )
              
              -
              
              
              (8,975,382
              )PROVISION
                  FOR INCOME TAXES
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -NET
                  LOSS
              
              $
              (6,928,554
              )
              $
              -
              
              $
              (7,899,771
              )
              $
              -
              
              $
              (8,975,382
              )OTHER
                  COMPREHENSIVE INCOME (LOSS):Foreign
                  currency translation adjustment
              
              
              (356
              )
              
              -
              
              
              2,085
              
              
              -
              
              
              2,085COMPREHENSIVE
                  LOSS
              
              $
              (6,928,910
              )
              $
              -
              
              $
              (7,897,686
              )
              $
              -
              
              $
              (8,973,297
              )NET
                  LOSS PER SHARE - BASIC AND DILUTED
              
              $
              (0.11
              )
              $
              -
              
              $
              (0.13
              )
              $
              -
              
              $
              (0.20
              )WEIGHTED
                  AVERAGE COMMON EQUIVALENTSHARES
                  OUTSTANDING - BASIC AND DILUTED
              
              
              62,568,642
              
              
              1,000
              
              
              62,365,128
              
              
              1,000
              
              
              45,349,300


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


5


**PURE
        BIOFUELS CORP.**
 (A
        Development Stage Company)
 **CONSOLIDATED
        STATEMENT OF STOCKHOLDERS' EQUITY**
 (unaudited)
  **Deficit****Accumulated**
              
              **Accumulated****Additional**
              
              **Susbscriptions**
              
              **Other**
              
              **During
                  the**
              
              **Total****Common
                  Stock**
              
              **Paid-in**
              
              **Received**
              
              **Comprehensive**
              
              **Development**
              
              **Stockholders'****Shares**
              
              **Amount**
              
              **Capital**
              
              **In
                  Advance**
              
              **Income**
              
              **Stage**
              
              **Equity****Balance,
                  May 10, 2006**
              
              
              **1,000**
              
              **$**
              **304**
              
              **$**
              **-**
              
              **$**
              **-**
              
              **$**
              **-**
              
              **$**
              **-**
              
              **$**
              **304**Adustment
                  for change in par value
              
              
              
              
              
              (303
              )
              
              303
              
              
              
              
              
              
              
              
              
              
              
              -Recapitalization
                  transactionsShares
                  of Pure Biofuels Corp.
              
              
              71,359,405
              
              
              71,359
              
              
              1,740,626
              
              
              
              
              
              
              
              
              
              
              
              1,811,985Cancellation
                  of Metasun Software Corp. shares
              
              
              (43,912,167
              )
              
              (43,912
              )
              
              43,912
              
              
              
              
              
              
              
              
              
              
              
              -Recapitalization
                  Adjustment
              
              
              29,999,970
              
              
              29,999
              
              
              (210,526
              )
              
              
              
              
              
              
              
              
              
              
              (180,527
              )Shares
                  acquired by legal parent
              
              
              (1,000
              )
              
              (1
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1
              )Issuance
                  of common stock for cash, October 12, 2006 @ $0.75
              
              
              3,853,547
              
              
              3,854
              
              
              2,886,306
              
              
              
              
              
              
              
              
              
              
              
              2,890,160Issuance
                  of common stock for cash, November 10, 2006 @ $0.75
              
              
              426,666
              
              
              427
              
              
              319,573
              
              
              
              
              
              
              
              
              
              
              
              320,000Issuance
                  of common stock for cash, December 19, 2006 @ $0.75
              
              
              404,998
              
              
              405
              
              
              303,344
              
              
              
              
              
              
              
              
              
              
              
              303,749Finders
                  fee
              
              
              
              
              
              
              
              
              (195,000
              )
              
              
              
              
              
              
              
              
              
              
              (195,000
              )Subscriptions
                  received in advance
              
              
              
              
              
              
              
              
              
              
              
              96,277
              
              
              
              
              
              
              
              
              96,277Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,075,611
              )
              
              (1,075,611
              )**Balance,
                  December 31, 2006**
              
              
              **62,132,419**
              
              
              **62,132**
              
              
              **4,888,538**
              
              
              **96,277**
              
              
              **-**
              
              
              **(1,075,611**
              **)**
              
              **3,971,336**Issuance
                  of common stock for cash, March 23, 2007 @ $0.75
              
              
              303,009
              
              
              303
              
              
              156,440
              
              
              (96,277
              )
              
              
              
              
              
              
              
              60,466Stock
                  compensation expense for options issued to employees
              
              
              
              
              
              
              
              
              2,362,547
              
              
              
              
              
              
              
              
              
              
              
              2,362,547Existing
                  shares transferred to placements for financing
              
              
              
              
              
              
              
              
              2,352,000
              
              
              
              
              
              
              
              
              
              
              
              2,352,000Issuance
                  of common stock for debt issuance costs, April 25, 2007 @
                  $0.98
              
              
              183,674
              
              
              184
              
              
              179,816
              
              
              
              
              
              
              
              
              
              
              
              180,000Fair
                  value of warrants issued for debt issuance costs
              
              
              
              
              
              
              
              
              212,232
              
              
              
              
              
              
              
              
              
              
              
              212,232Fair
                  value of warrants issued to consultant
              
              
              
              
              
              
              
              
              18,516
              
              
              
              
              
              
              
              
              
              
              
              18,516Fair
                  value of warrants issued with convertible debentures
              
              
              
              
              
              
              
              
              507,647
              
              
              
              
              
              
              
              
              
              
              
              507,647Beneficial
                  converstion feature associated with convertible debentures
              
              
              
              
              
              
              
              
              507,647
              
              
              
              
              
              
              
              
              
              
              
              507,647Foreign
                  currency translation adjustment
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,085
              
              
              
              
              
              2,085Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (7,899,771
              )
              
              (7,899,771
              )**Balance,
                  June 30, 2007**
              
              
              **62,619,102**
              
              **$**
              **62,619**
              
              **$**
              **11,185,383**
              
              **$**
              **-**
              
              **$**
              **2,085**
              
              **$**
              **(8,975,382**
              **)**
              **$**
              **2,274,705**


Effective
        August 7, 2006, the Company effected a one and one-quarter (1.25) for one
        (1)
        forward stock split of the authorized, issued and outstanding common stock,
        without a change to the par value. All share amounts
        have been retroactively adjusted for all periods
        persented


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


6


**PURE
        BIOFUELS CORP.**
 (A
        Development Stage Company)
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
  **For
                  the period****from
                  May 10, 2006****Six
                  Months Ended June 30,**
              
              **to
                  June 30, 2007****2007**
              
              **2006**
              
              **(Date
                  of Inception)**(unaudited)
              
              (unaudited)
              
              (unaudited)CASH
                  FLOW FROM OPERATING ACTIVITIES:Net
                  loss
              
              $
              (7,899,771
              )
              $
              -
              
              $
              (8,975,382
              )Adjustment
                  to reconcile net loss to net cashused
                  in operating activities:Accrued
                  consulting fees
              
              
              
              
              
              
              
              
              97,500Depreciation
              
              
              7,819
              
              
              
              
              
              11,956Stock
                  compensation expense for options issued to employees
              
              
              2,362,547
              
              
              
              
              
              2,362,547Fair
                  value of warrants issued for services
              
              
              18,516
              
              
              
              
              
              18,516Amortization
                  of debt discounts and debt issuance costs
              
              
              3,160,504
              
              
              
              
              
              3,160,504Changes
                  in operating assets and liabilities:
              
              
              
              
              
              
              
              
              -Accounts
                  receivable
              
              
              (18,651
              )
              
              
              
              
              (18,651
              )Prepaid
                  expenses and deposits
              
              
              (67,066
              )
              
              
              
              
              (119,070
              )Accounts
                  payable and accrued expenses
              
              
              1,056,533
              
              
              
              
              
              939,524Net
                  cash used in operating activities
              
              
              (1,379,569
              )
              
              -
              
              
              (2,522,556
              )CASH
                  FLOW FROM INVESTING ACTIVITIES:VAT
                  receivable
              
              
              (379,916
              )
              
              
              
              
              (572,682
              )Net
                  cash acquired with acquisition
              
              
              -
              
              
              
              
              
              1,812,202Purchase
                  of propety, plant and equipment
              
              
              (1,868,810
              )
              
              
              
              
              (4,693,784
              )Net
                  cash used in investing activities
              
              
              (2,248,726
              )
              
              -
              
              
              (3,454,264
              )CASH
                  FLOW FROM FINANCING ACTIVITIES:Due
                  to related parties, net
              
              
              (9,358
              )
              
              
              
              
              (9,045
              )Proceeds
                  from subscriptions received in advance
              
              
              -
              
              
              
              
              
              96,277Proceeds
                  from issuance of convertible debt
              
              
              3,000,000
              
              
              
              
              
              3,000,000Payment
                  of offering costs
              
              
              (175,000
              )
              
              
              
              
              (175,000
              )Proceeds
                  from the issuance of common stock
              
              
              60,466
              
              
              
              
              
              3,574,375Net
                  cash provided by financing activities
              
              
              2,876,108
              
              
              -
              
              
              6,486,607Effect
                  of exchange rate changes on cash and cash equivalents
              
              
              (6,175
              )
              
              
              
              
              (6,175
              )NET
                  INCREASE (DECREASE) IN CASH ANDCASH
                  EQUIVALENTS
              
              
              (758,362
              )
              
              -
              
              
              503,612CASH
                  AND CASH EQUIVALENTS, Beginning of period
              
              
              1,261,974
              
              
              -
              
              
              -CASH
                  AND CASH EQUIVALENTS, End of period
              
              $
              503,612
              
              $
              -
              
              $
              503,612SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION:Interest
                  paid
              
              $
              24,000
              
              $
              -
              
              $
              24,000Income
                  taxes paid
              
              $
              -
              
              $
              -
              
              $
              -SUPPLEMENTAL
                  DISCLOSURE OF NON-CASH INVESTING AND FINANCING:Purchase
                  of land through long-term debt
              
              $
              -
              
              $
              -
              
              $
              1,200,000Shares
                  transferred to placements for financing
              
              $
              2,352,000
              
              $
              -
              
              $
              2,352,000Issuance
                  of warrants with convertible debenture
              
              $
              507,647
              
              $
              -
              
              $
              507,647Issuance
                  of warrants for consulting services
              
              $
              18,516
              
              $
              -
              
              $
              18,516Issuance
                  of common stock for debt issuance costs
              
              $
              180,000
              
              $
              -
              
              $
              180,000Issuance
                  of warrants for debt issuance costs
              
              $
              212,232
              
              $
              -
              
              $
              212,232Issuance
                  of convertible promissory note for debt issuance costs
              
              $
              60,000
              
              $
              -
              
              $
              60,000




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




7


**Pure
      Biofuels Corp.**


**(A
      Development Stage Company)**


**Notes
      to Consolidated Financial Statements**




**1.
      Organization and Significant Accounting Polices**





**Basis
      of Presentation**





The
      following unaudited interim consolidated financial statements have been prepared
      in accordance with generally accepted accounting principles for interim
      financial information and with the instructions to Form 10-QSB and Regulation
      S-B as promulgated by the Securities and Exchange Commission (the “SEC”).
      Accordingly, these financial statements do not include all of the disclosures
      required by generally accepted accounting principles for complete financial
      statements. These unaudited interim consolidated financial statements should
      be
      read in conjunction with the Company’s audited consolidated financial statements
      for the year ended December 31, 2006. In the opinion of management, the
      unaudited interim consolidated financial statements furnished herein include
      all
      adjustments, all of which are of a normal recurring nature, necessary for a
      fair
      statement of the results for the interim period presented. Operating results
      for
      the period ended June 30, 2007 are not necessarily indicative of the results
      that may be expected for the year ending December 31, 2007.




The
      preparation of financial statements in accordance with U.S. generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosures of
      contingent assets and liabilities at the date of the consolidated financial
      statements and the reported amounts of revenues and expenses during the period.
      Actual results could differ from those estimates.




These
      unaudited interim consolidated financial statements include the accounts of
      Pure
      Biofuels Corp. and its two 99.99% owned subsidiaries, Pure Biofuels Del Peru
      S.A.C. and Palma Industrial S.A.C. and Pure Biofuels Del Peru S.A.C.’s 95% owned
      subsidiary, Pure Biocarburantes S. A. Minority interest has not been presented
      on the Consolidated Balance Sheet due to accumulated losses which exceed the
      minority stockholders equity. In accordance with APBO No. 18, the minority
      interest has been written down to zero on the accompanying balance
      sheet.




**Basic
      and Diluted Net Loss per Share**





We
      compute net loss per share in accordance with SFAS No. 128, "Earnings per Share"
      which requires presentation of both basic and diluted earnings per share (EPS)
      on the face of the statement of operations. Basic EPS is computed by dividing
      net income (loss) available to common shareholders (numerator) by the weighted
      average number of common shares outstanding (denominator) during the period.
      Diluted EPS gives effect to all dilutive potential common shares outstanding
      during the period including stock options, using the treasury stock method,
      and
      convertible preferred stock, using the if-converted method. In computing diluted
      EPS, the average stock price for the period is used in determining the number
      of
      shares assumed to be purchased from the exercise of stock options or warrants.
      Diluted EPS excludes all potentially dilutive common shares if their effect
      is
      anti-dilutive. At
      June
      30, 2007, the only potential dilutive securities were 14,000,000 and
      4,731,182 common stock options and warrants, respectively. Due to the net loss,
      none of the potentially dilutive securities were included in the calculation
      of
      diluted earnings per share since their effect would be anti-dilutive.





**Stock-based
      Compensation**





On
      April
      27, 2007, our board of directors amended and restated the Company’s stock
      option plan (the “Plan”) to
      increase the number of available options from a total of 18,000,000 to
      21,000,000 options. The Plan will be administered by the Board of Directors
      and enables the
      Company to grant options to employees, including its officers and
      directors, its subsidiaries and other persons who
      contribute to the success of the Company.  The
      Plan
      is subject to shareholder approval, which has not yet been obtained. The
      Company records stock-based compensation in accordance with SFAS No. 123R “Share
      Based Payments”, using the fair value method.




8


The
      Company issued 14,000,000 stock options to employees and directors during the
      six months ended June 30, 2007. The
      fair
      values of employee stock options are calculated using the Black-Scholes
      option-pricing model with the following weighted-average assumptions: expected
      volatility of 92%; average risk-free interest rate of 5.0%; expected life of
      5.0
      years; no expected dividend yield; and amortized over the vesting period of
      three years. The
      Company recognized $2,362,547 in share-based compensation expense for the
      six months ended June 30, 2007.




Research
        and development costs are expensed as incurred. Research and development
        expenses include the costs of material and equipment that are acquired or
        constructed for research and development activities, and have alternative
        future
        uses. Research and development expense amounted to $89,962, $166,952 and
        $166,952 for the three and six months ended June 30, 2007 and from inception
        to
        June 30, 2007, respectively. There no research and development expenses incurred
        during the three or six months ended June 30, 2006.


**2.
      Going Concern Uncertainty**




The
      Company is in the development stage and planned principal activities have
      commenced, but the Company has not generated any significant revenue. In a
      Company, management devotes most of its activities to developing a market for
      its products and services. These financial statements have been prepared on
      a
      going concern basis, which implies the Company will continue to realize its
      assets and discharge its liabilities in the normal course of business. The
      Company is unlikely to pay dividends or generate significant earnings in the
      immediate or foreseeable future. The continuation of the Company as a going
      concern and the ability of the Company to emerge from the development stage
      is
      dependent upon the continued financial support from its stockholders, the
      ability of the Company to obtain necessary equity financing to continue
      operations and to generate sustainable significant revenue. There is no
      guarantee that the Company will be able to raise adequate equity financing
      or
      generate profitable operations. As at June 30, 2007, the Company has a working
      capital deficit of $3,579,805 and has accumulated losses of $8,975,382 since
      inception. These financial statements do not include any adjustments to the
      recoverability and classification of recorded asset amounts and classification
      of liabilities that might be necessary should the Company be unable to continue
      as a going concern. Management intends to raise additional funds through debt
      or
      equity financing.





**3.
      Foreign Currency Translation**





The
      reporting currency of the Company is the US dollar. The Company‘s subsidiaries
      use their local currencies, Peruvian Nuevos Soles (PEN), and the Argentinean
      Peso as their functional currency. Assets and liabilities are translated using
      the exchange rates prevailing at the balance sheet date. Translation adjustments
      resulting from this process are included in accumulated other comprehensive
      income in the statement of stockholders’ equity. Transaction gains and losses
      that arise from exchange rate fluctuations on transactions denominated in a
      currency other than the functional currency are included in the results of
      operations as incurred.





Translation
      adjustments amounted to $2,085 as of June 30, 2007. Asset and liability amounts
      at June 30, 2007 and December 31, 2006 were translated at 3.167 PEN to $1.00
      USD
      and 3.194 PEN to $1.00 USD, respectively. Equity accounts were stated at their
      historical rate. The average translation rates applied to income statement
      accounts for the six months ended June 30, 2007 and the period from inception
      (May 10, 2006) to December 31, 2006 were 3.183 PEN and 3.197 PEN, respectively.
      At June 30, 2007 and for the six months ended June 30, 2007 the exchange rate
      for the Company’s Argentina subsidiary was $3.087 Argentinean Pesos to
      $1.00 USD and $3.084 Argentinean Pesos to $1.00 USD. Cash flows are also
      translated at average translation rates for the period, therefore, amounts
      reported on the statement of cash flows will not necessarily agree with changes
      in the corresponding balances on the balance sheet.





**4.
      Recent Accounting Pronouncements**




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities“. This Statement permits entities to
      choose to measure many financial assets and financial liabilities at fair value.
      Unrealized gains and losses on items for which the fair value option has been
      elected are reported in earnings. SFAS No. 159 is effective for fiscal years
      beginning after November 15, 2007. The Company is currently assessing the impact
      of SFAS No. 159 on its financial position and results of
      operations.




9




In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements“. The
      objective of SFAS No. 157 is to increase consistency and comparability in fair
      value measurements and to expand disclosures about fair value measurements.
      SFAS
      No. 157 defines fair value, establishes a framework for measuring fair value
      in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements. SFAS No. 157 applies under other accounting pronouncements
      that require or permit fair value measurements and does not require any new
      fair
      value measurements. The provisions of SFAS No. 157 are effective for fair value
      measurements made in fiscal years beginning after November 15, 2007. The
      adoption of this statement is not expected to have a material effect on the
      Company‘s future reported financial position or results of
      operations.





In
      June
      2007, the
      FASB
      issued FASB Staff Position No. EITF 07-3, “Accounting for Nonrefundable Advance
      Payments for Goods or Services Received for use in Future Research and
      Development Activities” (“FSP EITF 07-3”), which addresses whether nonrefundable
      advance payments for goods or services that used or rendered for research and
      development activities should be expensed when the advance payment is made
      or
      when the research and development activity has been performed. Management is
      currently evaluating the effect of this pronouncement on the financial
      statements.





**5.
      - VAT Receivable**




At
      June
      30, 2007, the Company recognized a VAT (value added tax) receivable of $572,682
      in Peru. VAT is charged at a standard rate of 19% and the Company obtains income
      tax credits for VAT paid in connection with the purchase of capital equipment
      and other goods and services employed in its operations. The Company is entitled
      to use the credits against its Peruvian income tax liability or to receive
      a
      refund credit against VAT payable or sales. As the Company does not anticipate
      incurring either a Peruvian tax or a VAT liability during the next fiscal year,
      the receivable was classified as a long-term asset.





**6.
      - Property, Plant and Equipment**





The
      cost
      of property and equipment at June 30, 2007 consisted of the following:





Cost
            
            Accumulated
                Amortization
            
            June
                30, 2007 Net Book Value
            
            December
                31, 2006 Net
              Book
                ValueLand
            
            $
            3,146,950
            
            $
            -
            
            $
            3,146,950
            
            $
            3,098,951Plant
                under Construction
            
            
            2,578,289
            
            
            -
            
            
            2,578,289
            
            
            796,200Building
                Improvements
            
            
            27,794
            
            
            (1,621
            )
            
            26,173
            
            
            27,562Computer
                Equipment
            
            
            76,880
            
            
            (7,527
            )
            
            69,353
            
            
            50,774Furniture
                & Miscellaneous
            
            
            63,871
            
            
            (2,808
            )
            
            61,063
            
            
            47,350$
            5,893,784
            
            $
            (11,956
            )
            $
            5,881,828
            
            $
            4,020,837




Depreciation
      expense amounted to $7,819, $4,149, and $11,956 for the six months, three months
      and from inception ending June 30, 2007, respectively. There was no depreciation
      expense for the three or six months ended June 30, 2006.




10





**7.
      - Long Term Debt**




On
      December 21, 2006, the Company entered into a purchase agreement with Tradetex
      International Inc. (“Tradetex“), whereby the Company acquired land located in
      Callao, Peru. The purchase price of $3,008,998 is to be repaid as
      follows:





i)  An
      initial deposit of $150,000 (paid);





ii)  $1,658,998
      upon the transfer of the property (paid); and





iii)  $600,000,
      plus accrued interest at an annual effective rate of 8%, on or before November
      21, 2007.





iv)  $600,000,
      plus accrued interest at an annual effective rate of 8%, on or before November
      21, 2008.





In
      the
      event that the Company is unable to make the two $600,000 payments, Tradetex
      retains the right to recover the amount through the foreclosure and sale of
      the
      land.





At
      June
      30, 2007 the amount owing is $1,200,000 of which $600,000 is recorded as a
      current liability.




Total
      interest expense for the six months and three months ended June 30, 2007 and
      from inception to June 30, 2007 amounted to $48,000, $24,000 and $48,000,
      respectively. The Company capitalized interest costs incurred on funds used
      to
      purchase the land. No interest expense was incurred
      during the three or six months ended June 30, 2006.




**8.
      - Related Party Transactions**




The
      Company incurred the following fees in connection with transactions
      with related parties during the six months ended June 30, 2007:




a) Incurred
      consulting fees of $30,000 for services provided by directors of the
      Company.





b) Incurred
      consulting fees of $38,678 for services provided by a company controlled by
      an
      officer of the Company




c) As
      at
      June 30, 2007 included in due to related parties is $10,327 for which the
      Company is indebted to the President of the Company.




Included
      in due to related parties at June 30, 2007 is $78,128 owing to directors, the
      CEO, the President and an employee related to the President of the Company
      for
      consulting fees and payment of expenses on the Company’s behalf.




These
      transactions were recorded at the exchange amount which is the amount agreed
      to
      by the related parties.





**9.
      - Commitments and Contingencies**




On
      September 15, 2006, the Company entered into the following consulting
      agreements, all of which were cancellable within 28 days of written notice.
      Effective February 28, 2007, the Company terminated these consulting and
      management agreements, which were entered into on September 15, 2006
      with:




a)
            A
                consultant to provide investor relations services. Under the terms
                of the
                agreement, the Company agreed to pay $3,000 per month for an initial
                term
                of three years, and at the election of the Company, can be renewed
                for one
                or more additional one-year terms. The Company agreed to pay a one
                time
                signing bonus of $7,500. During the six month period ended June 30,
                2007,
                consulting fees of $6,000 were incurred. The Company did not incur
                any
                additional expenses during the current quarter ended June 30,
                2007.





11




b)
            Another
                consultant to provide investor relations services. Under the terms
                of the
                agreement, the Company agreed to pay $3,000 per month for an initial
                term
                of three years, and at the election of the Company, can be renewed
                for one
                or more additional one-year terms. The Company agreed to pay a one
                time
                signing bonus of $7,500. During the six month period ended June 30,
                2007
                consulting fees of $6,000 were incurred. The Company did not incur
                any
                additional expenses during the current quarter ended June 30,
                2007.




c)
            A
                director to provide management services. Under the terms of the agreement,
                the Company agreed to pay $7,000 per month for an initial term of
                three
                years, and at the election of the Company, can be renewed for one
                or more
                additional one-year terms. The Company agreed to pay a one time signing
                bonus of $103,500. During the six month period ended June 30, 2007,
                consulting fees of $14,000 were incurred. The Company did not incur
                any
                additional expenses during the current quarter ended June 30,
                2007.




d)
            A
                director to provide accounting services to the Company. Under the
                terms of
                the agreement, the Company agreed to pay $2,000 per month for an
                initial
                term of three years, and at the election of the Company, can be renewed
                for one or more additional one-year terms. The Company agreed to
                pay a one
                time signing bonus of $3,000. During the six month period ended June
                30,  2007, consulting fees of $4,000 were incurred. The Company did
                not incur any additional expenses during the current quarter ended
                June
                30, 2007.





The
      Company also entered into the following agreements:




e)
            On
                June 22, 2007, our Company, Luis Goyzueta, David Clifton, Hiroshi
                Dejaeghere and Joy Clifton (Messrs. Goyzueta, Clifton, Dejaeghere
                and
                Clifton, together, the “Transferring Shareholders”) have entered into an
                escrow agreement with US. Bank National Association, as the escrow
                agent,
                and ARC Investment Partners, LLC, (“Arc”), Tapirdo Enterprises, LLC,
                (“Tapirdo”), and SGM Capital, LLC, (“SGM”), pursuant to which the
                Transferring Shareholders will transfer (i) 3,000,000 shares of our
                Company’s common stock to ARC (ii) 2,000,000 shares of our Company’s
                common stock to Tapirdo and (iii) 1,000,000 shares of our Company’s common
                stock to SGM (collectively, the “Shares”) upon the Company entering into a
                financing transaction or series of transactions pursuant to which
                the
                Company plans to raise gross proceeds of at least $7.5 million. As
                a
                result of the closing of the $ 3 million financing on April 19, 2007,ARC,
                Tapirdo and SGM were entitled to their respective portions of 40%
                of the
                Shares. On July 10, 2007 the escrow agent transferred such shares.
                The
                value of the shares were $2,352,000 has have been recorded as debt
                issuance costs associated with the $3,000,000 convertible
                debenture**.**




f)
            The
                Company is required to pay the remaining $60,000 plus VAT, pursuant
                to an
                engineering contract between the Company and Polindustria. During
                the six
                month period ended June 30, 2007, the Company paid an additional
                $54,264
                to Polindustria, comprised of $45,600 in payments and $8,664 in
                VAT.





g)
            The
                Company is required to pay Capricorn $480,000 upon the delivery of
                the
                designs, as set forth in the License Agreement. During the three
                month
                period ended March 31, 2007, the Company paid an additional $571,200
                to
                Capricorn, comprised of $480,000 in payments and $91,200 in VAT.
                No
                other expenses were incurred during the quarter
                ended June 30, 2007.




Leases




h)
            On
                October 1, 2006, the Company entered into a lease for premises in
                Lima,
                Peru. Under the terms of the lease, the Company is required to make
                monthly payments of $5,113 for the first year. The monthly payment
                will
                increase by 3% annually until September 2009. The office lease contains
                certain rent escalation clauses over the life of the lease. The total
                amount of rental payments due over the lease term is being charged
                to rent
                expense on a straight-line method over the term of the lease. During
                the
                six month and three month period ended June 30, 2007, the Company
                had
                lease expense in the amount of $31,608 and $15,804, respectively.




12


On
      October 10, 2006, the Company entered into a lease for premises in Vancouver,
      British Columbia. Under the terms of the lease, the Company is required to
      make
      monthly payments of $3,000, plus applicable taxes, until October 2008. This
      lease was terminated during the period ended June 30, 2007.





i)
            On
                January 8, 2007, the Company entered into a lease for premises in
                Buenos
                Aires, Argentina. Under the terms of the lease, the Company is required
                to
                make monthly payments of approximately $2,000, plus applicable taxes
                until
                August 2007. The Company for the six month period and three month
                period
                ended June 30, 2007 incurred expenses in the amounts of $1,740 and
                $870,
                respectively.




Contingencies 
 j)
              On
                  June 25, 2007, the Company received a letter from Wharton Capital
                  Partners
                  Ltd ("Wharton") demanding the payment of $240,000, pursuant to
                  the terms
                  of a letter agreement dated April 18, 2007 by and between the Company
                  and
                  Wharton. The Company firmly believes that it has made the required
                  payments pursuant to the April 18, 2007 agreement and that it will
                  be
                  obligated only to pay a convertible promissory note issued on April
                  19,
                  2007 for $60,000 aggregate principal amount and related accrued
                  interest
                  (the "Note") upon the cancellation and delivery to the Company by
                  Wharton of the Note pursuant to the terms of the Note. The Note
                  is shown
                  as a liability on the accompanying consolidated balance
                  sheet.





**10.
      - Stockholders’ Equity**




Common
      Stock




Effective
      August 7, 2006, the Company effected a one and one-quarter (1.25) for one (1)
      forward stock split of the authorized, issued and outstanding common stock,
      without a change to the par value. As a result, the authorized share capital
      increased from 75,000,000 share of common stock with a par value of $0.001
      to
      93,750,000 shares of common stock with a par value of $0.001. On June 11, 2007
      the Company amended its articles of incorporation to increase the number of
      authorized common shares to 250,000,000 and to authorize 1,000,000 shares of
      preferred stock, par value $0.001.




On
      March
      23, 2007, the Company completed a private placement of 303,009 units at $0.75
      per unit for total proceeds of $227,257. Each unit consists of one common share
      and one-half common share purchase warrant. Each whole warrant entitles the
      holder to purchase one common share in the capital of the Company for a period
      of one year at a price of $1.50 per share. The value of the warrants was
      calculated using the Black-Scholes pricing mode with the following assumptions:
      exercise price of $1.50; share price of $1.27; risk free interest rate of 4.69%;
      expected life of 1 year and a volatility rate of 103%.





On
      April
      25, 2007, the Company issued at total of 183,674 share of common stock to the
      placement agent for the Debenture discussed in Note 13. The shares were valued
      at $180,000 and have been capitalized as debt issuance cost and are being
      amortized over the term of the Debenture. For
      the
      three and six months ended June 30, 2007, the Company amortized a total
      of $142,418 of the aforesaid debt issuance costs as other expense in the
      accompanying consolidated statements of operations.





In
      addition, the Company also issued to the placement agent a total of 300,000
      warrants to purchase shares of the Company’s common stock. The Company valued
      these warrants at $212,232 using the Black Scholes model with the following
      factors: market price of $0.98; volatility of 92%; risk free rate of 5%;
      exercise price of $1.01; and an estimated life of 5 years. The fair value of
      the
      warrants has been capitalized as debt issuance cost and are being amortized
      over
      the term of the Debenture. For
      the
      three and six months ended June 30, 2007, the Company amortized a total
      of $167,920 of the aforesaid debt issuance costs as other expense in the
      accompanying consolidated statements of operations.





Financing
      Contingency Escrow Agreement





During
      the six months ended June 30, 2007, certain stockholders of the Company entered
      into a financing contingency escrow agreement with certain entities that will
      attempt to obtain financing for the Company. In accordance with the agreement,
      a
      total of 6,000,000 common shares will be transferred from the individual
      stockholders to the entities that bring financing to the Company if financing
      in
      the amount of $7,500,000 is arranged before August 30, 2007. If less than
      $7,500,000 in financing is raised, a proportionate number of the 6,000,000
      common shares will be transferred. As of June 30, 2007 a total of 2,400,000
      common shares have been transferred as a result of the $3,000,000 in convertible
      debenture financing mentioned below.




13




Stock
      Options





In
      2006,
      the Company adopted a Stock Option and Award Plan (the “Plan”) initially
      reserving an aggregate of 18,000,000 shares of the Company’s common stock (the
“Available Shares”) for issuance pursuant to the exercise of stock options. The
      plan options were increased to 21,000,000 in April 2007, subject to shareholder
      approval.





The
      Plan
      provides for the granting at the discretion of the Board of Directors stock
      options, stock appreciation rights, stock awards, phantom stock, performance
      awards, and other stock-based awards. Participation in the Plan is open to
      all
      employees, officers, and directors of, and other individuals providing bona
      fide
      services to or for the Company.




During
      June 2007, the Company granted, 14,000,000 common stock options exercisable
      at
      $0.98 per share to various employees and directors. The options expire in June
      2017. The Company has recorded wages expense in the amount of $2,362,547 to
      reflect the value of these options for the period ended June 30, 2007. The
      Company valued these options using the Black Scholes model with the following
      factors: market price of $0.93; volatility of 92%; risk free rate of 5%;
      exercise price of $0.98; and an estimated life of 5 years.





The
      following summarizes the stock options transactions for the six months ended
      June 30, 2007:





Number
                of Options
            
            Weighted
                average exercise price
            
            Weighted
                average remaining contractual life (in years)Outstanding,
                December 31, 2006
            
            
            -Granted
            
            
            14,000,000
            
            $
            0.98Outstanding,
                June 30, 2007
            
            
            14,000,000
            
            $
            0.98
            
            
            9.95





**11
      - Warrants**




The
      following summarizes the stock purchase warrant transactions for the six months
      ended June 30, 2007:





Number
                of Warrants
            
            Weighted
                average exercise price
            
            Weighted
                average remaining contractual life (in years)Outstanding,
                December 31, 2006
            
            
            3,550,595
            
            $
            1.50Granted
            
            
            1,180,587
            
            $
            1.06Outstanding,
                June 30, 2007
            
            
            4,731,182
            
            $
            1.41
            
            
            1.30





**12.
      - Segmented Information**




The
      Company’s operations are conducted in three reportable segments, U.S., Peru and
      Argentina. The net loss and net identifiable assets by reportable segments
      are
      as follows:




14





U.S.
            
            Peru
            
            Argentina
            
            Total$
            
            $
            
            $
            
            $Net
                loss
            
            
            6,449,292
            
            
            1,391,404
            
            
            59,075
            
            
            7,899,771Property,
                Plant and equipment
            
            
            477,000
            
            
            5,401,123
            
            
            3,705
            
            
            5,881,828Total
                assets
            
            
            1,135,907
            
            
            6,535,492
            
            
            46,481
            
            
            7,717,880





**13.
      - Convertible Debenture**




On
      April
      19, 2007 the Company entered into a purchase agreement with an accredited
      investor (the “Investor”) pursuant to which the Company agreed to sell up to $3
      million aggregate principal amount of its 12% senior secured convertible
      debentures due July 19, 2007 (the “Debenture”) and warrants to purchase up to
      704,082 shares of common stock (the “Warrants”) in a private placement to the
      Investor. The sale of the Debenture and the Warrants was consummated on April
      19, 2007. In connection with the sale of the Debenture, the Company paid various
      fees in the amount of $175,000 from the proceeds of the sale to the advisor
      of
      the Investor. To
      the
      placement agent, the Company paid $60,000 in cash, signed a $60,000 two month
      note, issued 183,674 shares of common stock and issued 300,000 warrants
      exercisable at $1.078 with a 5 year term.The Debenture is convertible
      into shares of the Company’s common stock at the option of the holder of
      Debenture at any time after April 19, 2007, at an initial conversion rate of
      1,020.408 shares of common stock per $1,000 principal amount of Debenture,
      which
      is equivalent to a conversion price of $0.98 per share. The conversion price
      is
      subject to adjustment in accordance with the terms of the Debenture. Subject
      to
      the conversion and redemption rights under the Debenture, the Company is
      obligated to pay 120% of the principal amount of the Debenture, plus accrued
      and
      unpaid interest, in cash on July 19, 2007 (the “Maturity Date"), provided that
      the Maturity Date shall be extended until October 19, 2007 in the event that
      any
      principal is outstanding under the Debenture as of the Maturity Date due to
      the
      Company’s inability to consummate a financing of at least $3 million and no
      Event of Default then exists. If the Maturity Date is extended, the Investor
      will receive an additional 704,082 warrants and the interest rate is increased
      up to 1.5% per month or 18% per year. On July 23, 2007, the Maturity Date of
      the
      Debenture was extended to October 19, 2007.




On
      April
      19, 2007 the Company entered into a Security Agreement with the Investor and
      Palma Industrial SAC and Pure Biofuels del Peru SAC, 99% owned subsidiaries
      of
      the Company, pursuant to which the obligations under the Debenture were secured
      by liens on substantially all of the assets of the Company and the
      subsidiaries.




The
      Debenture is redeemable by the Company upon the first trading day immediately
      following any of the following events:




(a)
            default





(b)
            the consummation of any future fund raising transaction
              by the Company, or





(c)
            any
                date beyond the maturity date that is mutually agreed upon by the
                Investor
                and the Company at a redemption price equal to 120% of the principal
                amount plus accrued and unpaid interest to, but not including, the
                repayment date.




Upon
      the
      occurrence of any of the preceding events, and assuming the Company has filed
      an
      effective registration statement with the SEC relating to the shares underlying
      the debenture, the Company will also have the option to convert the Debenture
      into shares of common stock at a conversion price equal to the lower of (i)
      $0.98 and (ii) that price which will be computed as 95% of the lowest volume
      weighted average price of the common stock during the sixty consecutive trading
      days immediately preceding the applicable repayment date.





The
      Debenture is a secured obligation of the Company and is senior in right of
      payment to the Company’s future secured indebtedness. The Debentures also
      restrict the Company and its subsidiaries from incurring indebtedness or other
      obligations, including senior secured indebtedness or other secured obligations
      in the future.




If
      there
      is an event of default on the Debentures, the principal amount of the Debenture,
      plus accrued and unpaid interest may be declared immediately due and payable,
      subject to certain conditions set forth in the Debenture. These amounts
      automatically become due and payable in the case of certain types of bankruptcy
      or insolvency events involving the Company. Also upon an event of a default,
      the
      investor will have the right to full recourse against the amounts owed by the
      Company pursuant to the Debenture through the pledge of 5,000,000 shares of
      the
      Company’s common stock by the Company’s CEO.




15


The
      Warrants are exercisable into shares of the Company’s common stock at the option
      of the holder of the Warrants at any time after April 19, 2007, at an initial
      exercise price of $0.98 per share. The exercise price is subject to adjustment
      in accordance with the terms of the Warrants.





The
      Warrants and conversion feature in the above Debenture offerings are not
      considered derivative instruments that need to be bifurcated from the original
      security since the Debenture has a fixed conversion price of $0.98 as long
      as
      the Company is not in default of the terms of the Debenture, which means the
      Company can determine the maximum shares that could be issued upon conversion.
      The Company determined the fair value of the detachable Warrants issued in
      connection with the Debenture to be $507,647, using the Black-Scholes option
      pricing model and the following assumptions:  term of 5 years, a
      risk free interest rate of 5.0%, a dividend yield of 0% and volatility
      of 93%. In addition, the Company determined the value of the beneficial
      conversion feature to be $507,647. The combined total discount for the Debenture
      is $1,015,294 and is being amortized over the term of the Debenture. For
      the three and six months ended June 30, 2007, the Company amortized a total
      of $803,309 of the aforesaid discounts as other expense in the accompanying
      consolidated statements of operations.





In
      connection with the issuance of the Debenture and the Warrants, a cash placement
      fee of $175,000 was paid to the placement agent. In addition, in connection
      with
      a Financing Contingency Escrow Agreement, certain stockholder of the Company
      transferred 2,400,000 common shares valued at $2,352,000 to certain parties
      responsible for arranging the $3,000,000 Debenture. The cash and stock mention
      above have been capitalized as debt issuance costs and are being amortized
      over
      the term of the loan. For the three and six months ended June 30, 2007, the
      Company amortized a total of $1,999,385 of the aforesaid debt issuance
      costs as other expense in the accompanying consolidated statements of
      operations.





The
      Debenture as of June 30, 2007 is as follows:




Face
                value of the Debenture
            
            $
            3,000,000Less
                : Unamortized Discounts
            
            
            211,985Balance
            
            $
            2,788,015





**14.
      - Convertible Promissory Note**




On
      April
      19, 2007, the Company issued a convertible promissory note in the amount of
      $60,000 to the placement agent in the above mentioned Debenture. The note was
      due on June 18, 2007 and the Company has the option of converting the note
      into
      shares of the Company’s common stock at a conversion price of $0.94. The Company
      has currently not issued the 63,830 shares that were due upon the conversion
      of
      the note on June 19, 2007. The $60,000 note has been capitalized as debt
      issuance cost and is being amortized over the term of the Debenture. For
      the
      three and six months ended June 30, 2007, the Company amortized a total
      of $47,473 of the aforesaid debt issuance costs as other expense in the
      accompanying consolidated statements of operations.




**15.
      - Acquisition**




On
      May
      11, 2007, we entered into a binding letter of intent, with Interpacific Oil
      SAC,
      a Peruvian corporation and its stockholders, Luis Goyzueta, Alberto Pinto and
      Patrick Orlando, which provides for the acquisition by us of either all the
      assets or all the capital stock of Interpacific for an aggregate consideration
      of (1) $6.3 million, payable $0.7 million in cash and, a number of shares of
      the
      common stock of our Company equal to $5.6 million (subject to reduction as
      described below) divided by the per share purchase price of our common stock
      used in the first equity or debt financing following the execution of the letter
      of intent or if no such financing occurs within 90 days after the closing of
      the
      acquisition, then the lowest closing market price of our common stock between
      the execution of the definitive agreement and 90 days after the closing of
      the
      definitive agreement and (2) a five year warrant to purchase 2,925,000 shares
      of
      our common stock, at an exercise price equal to the closing bid price of our
      common stock on the trading day immediately preceding the date of the closing
      of
      the acquisition between the parties. Interpacific is related to the Company
      as
      Luis Goyzueta is the CEO, director and majority stockholder of the Company
      and
      Alberto Pinto is COO and director of the Company. This acquisition has not
      yet
      closed.





16


**16.
      - Subsequent Events**




The
      Maturity Date of the Debentures was extended to October 19, 2007. As a result,
      the interest on the note was increased to 18% and 704,082 warrants were issued
      with a exercise price of $0.75 , the trading price of the stock on the date
      the
      loan was extended. The fair value of the warrants pursuant to the Black Scholes
      option pricing model was $403,856 and was accounted for as debt issuance costs,
      which will be amortized over the life of the extension period as additional
      interest expense.




In
      July
      2007, the Company issued options to purchase 50,000 shares of common stock
      pursuant to a consulting agreement.




On
      August 6, 2007,
      the Company entered into an integral service agreement with Ocean Marine SAC,
      a
      company controlled by certain officers of the Company, to provide certain
      services to the Company. The agreement provides for monthly payments of $33,335
      retroactive from September 2006 to June 2007 and $28,335 beginning July
      2007.




17





**Item
      2. Management’s Discussion and Analysis or Plan of
      Operation**




You
      should read the following discussion of our financial condition and results
      of
      operations together with the reviewed financial statements and the notes to
      the
      reviewed financial statements included in this quarterly report. This discussion
      contains forward-looking statements that reflect our plans, estimates and
      beliefs. Our actual results may differ materially from those anticipated in
      these forward-looking statements.





We
      are
      engaged in the business of producing, processing and distributing biodiesel,
      and
      related products, as an alternative fuel for freight and transportation plants
      and the marine, farming, rail and aviation industries.





On
      September 15, 2006, we completed a share exchange agreement with Pure Biofuels
      del Peru, S.A.C. (“Pure Biofuels Peru”). As a result of the share exchange
      agreement, we abandoned our previous software development, website maintenance
      and server administration business and commenced the business of producing,
      processing and distributing biodiesel. Because we are the successor business
      to
      Pure Biofuels Peru and because the operations and assets of Pure Biofuels Peru
      represent our entire business and operations from the closing date of the share
      exchange agreement, our management's discussion and analysis and plan of
      operations are based on Pure Biofuels Peru's intended operations.





On
      September 15, 2006, in connection with the closing of the share exchange
      agreement, we changed our fiscal year end to December 31. The share exchange,
      contemplated by the share exchange agreement, was deemed to be a reverse
      acquisition for accounting purposes. Pure Biofuels Peru, the acquired entity,
      is
      regarded as the predecessor entity as of September 15, 2006. Starting with
      the
      periodic report for the quarter in which the acquisition was consummated, our
      Company will file annual and quarterly reports based on the December 31 fiscal
      year end of Pure Biofuels Peru. Such financial statements will depict the
      operating results of Pure Biofuels Peru, including the acquisition of Pure
      Biofuels Peru by us, from September 15, 2006.





***Plan
      of Operations***





**Overview**





This
      quarterly report contains forward-looking statements that involve significant
      risks and uncertainties. The following discussion, which focuses on our plan
      of
      operation through the commencement of operations of our plant, consists almost
      entirely of forward-looking information and statements. Actual events or results
      may differ materially from those indicated or anticipated, as discussed in
      the
      section entitled “Forward Looking Statements.”





We
      intend
      to construct and operate a 52.5 million gallon biodiesel production plant at
      a
      site near the Callao Port in Lima, Peru. Currently, we are a development stage
      Company with no revenues from operations. To date, our efforts have been devoted
      principally to developing plans for the construction of the plant, engaging
      service providers and related activities.





The
      plant
      will have a design capacity of approximately 52.5 million gallons of biodiesel
      per year. In addition, we expect the plant will produce approximately 9 million
      pounds of crude glycerin each year. The plant will consist principally of a
      materials handling and storage area, a transesterification reactor in which
      the
      biodiesel is produced, a storage and loading area for biodiesel and glycerin,
      truck scales and an administrative office.





We
      will
      not generate revenue until we complete construction of our plant, which we
      are
      targeting for the first quarter of 2008. In order for us to construct the plant
      and commence operations, we will require additional equity or debt financing
      in
      the amount of $27,500,000. We are currently negotiating additional
      financing, the terms of which include the issuance of common stock, convertible
      debt and warrants exercisable into common stock. If we are not able to complete
      the proposed financing, we may not be able to secure replacement financing
      on
      terms favorable to us or at all. If we do not secure financing of approximately
      $27,500,000 by October 19, 2007, we will be unable to repay outstanding debt
      of
      approximately $4,000,000 plus accrued interest which becomes due on that date
      and will be unable to fund our operations going forward. If we are
      successful in obtaining additional equity or debt financing, we intend to
      utilize the proceeds of such financing as follows:




18




Use
                of Proceeds
            
            AmountOrganizational
                and Financing Costs
            
            $
            2,000,000Capital
                Equipment
            
            $
            17,400,000Working
                Capital
            
            $
            6,000,000Growth
                Initiatives: Research and Due Diligence
            
            $
            1,500,000Contingency
            
            $
            600,000Total
            
            $
            27,500,000





***Results
      of Operation***





For
      the
      three and six months ended June 30, 2007, we had no revenues and our operating
      expenses were $3,694,606 and $4,665,823, respectively. Since May 10, 2006 (date
      of inception) until June 30, 2007 we had no revenues and our operating expenses
      were $5,741,434. Included in our operating expenses for the three and six months
      ended and from inception to June 30, 2007 was a charge of $2,362,547 related
      to
      stock options issued to employees and directors in accordance with SFAS No.
      123R. Until our biodiesel plant is operational or we complete the acquisition
      of
      Interpacific Oil SAC, we do not expect to generate any revenues, and we will
      continue to incur expenses relating to the building of our biodiesel
      plant.





**Organizational
      and Financing Costs**





We
      estimate that our organization and financing costs for the next twelve month
      period will be approximately $2,000,000. These costs will primarily consist
      of
      legal, administrative, compliance and other expenses.





**Capital
      Equipment**





We
      are beginning to acquire the process equipment .
      Based
      on our project schedule, site assembly and infrastructure building will commence
      in September 2007
      with completion and startup in the first quarter of 2008. Our planned capital
      expenditures for the next twelve month period in connection with the
      construction of the plant are estimated as follows:





**Infrastructure
                / Activity**
            
            **Cost**Tanks
                - 170,000 MT of storage (installed, including valves, piping,
                etc)
            
            $
            6,300,000Water
                treatment plant
            
            $
            400,000Civil
                works (including administrative building, access road and other
                infrastructure)
            
            $
            900,000Underwater
                pipes
            
            $
            1,800,000Refinery
                (including reactors, piping and pumps)
            
            $
            6,800,000Services
                building (electrical substation, quality control laboratory, boilers,
                water softener etc.)
            
            $
            600,000Miscellaneous/
                Contingency
            
            $
            600,000**Total**
            
            **$**
            **17,400,000**





**Growth
      Initiatives: Research and Due Diligence**





We
      estimate that our research and due diligence costs for the next twelve month
      period will be approximately $1,500,000. These costs will primarily consist
      of
      feasibility studies to start our own plantations of palm oil, canola and
      jatropha in order to be self sufficient in the sourcing of our feedstock. It
      also includes all the costs of engineering and permitting needed for Pure
      Biocarburantes, S.A.





**Contingency**





We
      estimate that our contingency costs for the next twelve month period will be
      approximately $600,000. These costs will primarily consist of increases in
      raw
      materials cost for plant construction such as steel or cement or delays in
      permitting from the local authorities.





19


**Employees**





We
      estimate that our employee and consultant compensation expenses for the next
      twelve month period will be approximately $1,500,000. These costs will primarily
      consist of wages and consulting contracts for hired professionals.





There
      will be 26 employees pre-construction and 45 employees post-construction of
      our
      processing plant. The new employees post-construction will consist of plant
      operators and quality control personnel.





**Trends
      and Uncertainties**





Our
      ability to generate revenues in the future is dependent on whether we
      successfully complete construction of our biodiesel processing plant and
      it
      begins operating. We will not be able to complete construction unless we secure
      additional financing of at least $27,500,000 .
      We
      cannot predict whether or when this may happen and this causes uncertainty
      with
      respect to the continuation and growth of our Company and our ability to
      generate revenues.





**Financing**





To
      date,
      we have had negative cash flows from operations and we have been dependent
      on
      sales of our equity securities and debt financing to meet our cash
      requirements.





On
      April
      19, 2007 we entered into a purchase agreement with an accredited investor,
      pursuant to which we agreed to sell up to $3 million aggregate principal amount
      of our 12% senior secured convertible debentures due July 19, 2007 and warrants
      to purchase up to 704,082 shares of its common stock in a private placement
      to
      an accredited investor within the meaning of Rule 501 of Regulation D under
      the
      Act. The sale of $3 million aggregate principal amount of debentures and
      warrants to purchase an aggregate of up to 704,082 shares of common stock was
      consummated on April 19, 2007. In connection with the sale of the debentures,
      we
      paid various fees in the amount of $175,000 from the proceeds of the sale to
      the
      advisor of the accredited investor.





We
      are
      currently negotiating financing, the terms of which include the issuance of
      common stock, convertible debt and warrants exercisable into common stock.
      If we
      are not able to complete the proposed financing, we may not be able to secure
      replacement financing on terms favorable to us or at all. If we do not secure
      financing of approximately $27,500,000 by October 19, 2007, we will be unable
      to
      repay outstanding debt of approximately $4,000,000 plus accrued interest which
      becomes due on that date and will be unable to fund our operations going
      forward .





Given
      that we are a development stage company and have not generated any revenues
      to
      date, our cash flow projections are subject to numerous contingencies and risk
      factors beyond our control, including our ability to manage our expected growth,
      complete construction of our proposed plant and commence operations. We can
      offer no assurance that our Company will generate cash flow sufficient to meet
      our cash flow projections or that our expenses will not exceed our projections.
      If our expenses exceed estimates, we will require additional monies during
      the
      next twelve months to execute our business plan.





There
      are
      no assurances that we will be able to obtain funds required for our continued
      operation. There can be no assurance that additional financing will be available
      to us when needed or, if available, that it can be obtained on commercially
      reasonable terms. If we are not able to obtain additional financing on a timely
      basis, we will not be able to meet our other obligations as they become due
      and
      we will be forced to scale down or perhaps even cease the operation of our
      business.





There
      is
      substantial doubt about our ability to continue as a going concern as the
      continuation of our business is dependent upon obtaining further long-term
      financing, completion of our proposed plant and successful and sufficient market
      acceptance of our products once developed and, finally, achieving a profitable
      level of operations. The issuance of additional equity securities by us could
      result in a significant dilution in the equity interests of our current
      stockholders. Obtaining commercial loans, assuming those loans would be
      available, will increase our liabilities and future cash
      commitments.





20


**Recent
      Developments**





On
      April
      19, 2007 we entered into a purchase agreement with an accredited investor (the
      "Investor"), pursuant to which we agreed to sell up to $3 million aggregate
      principal amount of our 12% senior secured convertible debentures due July
      19,
      2007 (the "Debentures") and warrants to purchase up to 704,082 shares of
      our common stock (the "Warrants") in a private placement to an accredited
      investor within the meaning of Rule 501 of Regulation D under the Act. The
      sale
      of the Debentures and the Warrants was consummated on April 19, 2007.
      In connection with the sale of the debentures, we paid various fees in the
      amount of $175,000 from the proceeds of the sale to the advisor of the
      Investor.





On
      April
      19, 2007, we entered into a security agreement with an accredited investor,
      Palma Industrial S.A.C. (“Palma Industrial”) and Pure Biofuels Peru, each a
      99%-owned subsidiary of our Company, pursuant to which the obligations under
      the
      debenture were secured by liens on substantially all of the assets of us and
      our
      subsidiaries.





On
      April
      19, 2007, we entered into a registration rights agreement with the
      Investor, pursuant to which we agreed to provide certain registrations rights
      under the Securities Act of 1933, as amended.





On
      April
      19, 2007, we entered into an escrow agreement with Luis Goyzueta, our chief
      executive officer, an accredited investor and U.S. Bank National Association,
      as
      the escrow agent, pursuant to which Mr. Goyzueta and our Company appointed
      the
      escrow agent to accept, hold and deliver pursuant to the terms of the escrow
      agreement, 5,000,000 shares of common stock of our Company registered in the
      name of Mr. Goyzueta to the Investor in the event a default occurs pursuant
      to the Debenture. On that same date, Mr. Goyzueta granted a first priority
      security interest on the shares of common stock hold in escrow pursuant to
      the
      terms of the purchase agreement.





On
      May
      11, 2007, we entered into a binding letter of intent, with Interpacific Oil
      SAC,
      a Peruvian corporation and its shareholders, Luis Goyzueta, Alberto Pinto and
      Patrick Orlando, which provides for the acquisition by us of either all the
      assets or all the capital stock of Interpacific for an aggregate consideration
      of (1) $6.3 million, payable $0.7 million in cash and, a number of shares of
      the
      common stock of our Company equal to $5.6 million (subject to reduction as
      described below) divided by the per share purchase price of our common stock
      used in the first equity or debt financing following the execution of the letter
      of intent or if no such financing occurs within 90 days after the closing of
      the
      acquisition, then the lowest closing market price of our common stock between
      the execution of the definitive agreement and 90 days after the closing of
      the
      definitive agreement and (2) a five year warrant to purchase 2,925,000 shares
      of
      our common stock, at an exercise price equal to the closing bid price of our
      common stock on the trading day immediately preceding the date of the closing
      of
      the acquisition between the parties. The Company is in the process of getting
      this transaction approved by the Peruvian government which approval is required
      before this transaction can close.





On
      June
      22, 2007, our Company, Luis Goyzueta, David Clifton, Hiroshi Dejaeghere and
      Joy
      Clifton (Messrs. Goyzueta, Clifton, Dejaeghere and Clifton, together, the
“Transferring Shareholders”) entered into an escrow agreement with US. Bank
      National Association, as the escrow agent, and ARC Investment Partners, LLC,
      (“Arc”), Tapirdo Enterprises, LLC, (“Tapirdo”), and SGM Capital, LLC, (“SGM”),
      pursuant to which the Transferring Shareholders will transfer (i) 3,000,000
      shares of our Company’s common stock to ARC (ii) 2,000,000 shares of our
      Company’s common stock to Tapirdo and (iii) 1,000,000 shares of our Company’s
      common stock to SGM (collectively, the “Shares”) upon the Company entering into
      a financing transaction or series of transactions pursuant to which the Company
      plans to raise gross proceeds of at least $7.5 million. As a result of the
      closing of the $ 3 million financing on April 19, 2007, ARC, Tapirdo and SGM
      were entitled to their respective portions of 40% of the Shares. On July 10,
      2007 the escrow agent transferred such shares. The value of the shares were
      $2,352,000 has have been recorded as debt issuance costs associated with the
      $3,000,000 convertible debenture **.**





The
      escrow agent will hold the Shares in escrow and will deliver the Shares on
      or
      before August 30, 2007 to ARC, Tapirdo and SGM, accordingly, or will deliver
      the
      Shares back to the Transferring Shareholders, subject to the terms and
      conditions of the escrow agreement. Adam Roseman, the Company’s chairman of the
      board, is a Managing Director of Tapirdo, and Steven Magami, the Company’s
      president, is a Managing Member of SGM. Luis Goyzueta is the chief executive
      officer and a director of our Company.





21


On
        June
        25, 2007, the Company received a letter from Wharton Capital Partners Ltd
        ("Wharton") demanding the payment of $240,000, pursuant to the terms of a
        letter
        agreement dated April 18, 2007 by and between the Company and Wharton. The
        Company firmly believes that it has made the required payments pursuant to
        the
        April 18, 2007 agreement and that it will be obligated only to pay a convertible
        promissory note issued on April 19, 2007 for $60,000 aggregate principal
        amount
        and related accrued interest (the "Note") upon the cancellation and delivery
        to
        the Company by Wharton of the Note pursuant to the terms of the Note. The
        Note is shown as a liability on the accompanying consolidated balance
        sheet.


On
      July 6
      2007, ARC, Tapirdo and SGM, waived the transfer of Shares from the Transferring
      Shareholders until such time our Company has completed a financing or series
      of
      financings which raises gross proceeds of an aggregate of at least $2.0 million.





On
      July
      23, 2007 we entered into an agreement with the Investor, pursuant to the
      Debenture executed on April 19, 2007, whereby the maturity date of the Debenture
      was extended from July 19, 2007 to October 19, 2007 and we issued additional
      warrants to purchase up to 704,082 shares of our common stock pursuant to the
      terms of an amendment to the Debenture and Warrant executed on
      July 26, 2007.





***Liquidity
      and Capital Resources***





As
      of
      June 30, 2007, we had $503,612 in cash and cash equivalents. In addition, for
      the six months ended June 30, 2007, our cash used in operating activities was
      $1,379,569.





We
      began
      construction on our planned 52.5 million gallon biodiesel production plant
      at a
      site near the Callao Port in Lima, Peru. We believe that the plant should begin
      operation during the first quarter of 2008 assuming we raise the necessary
      financing.





We
      are
      seeking a financing through a contemplated private placement of between $15
      million and $30 million of equity or debt securities or a credit facility.
      We
      cannot confirm when a transaction will be completed, if at all. If
      we do
      not obtain additional financing before October 19, 2007, we will be unable
      to
      fulfill our obligations under the Debenture and will not be able to complete
      the
      plant . The
      securities to be sold in the private placement have not been registered under
      the Securities Act of 1933, as amended (the “Securities Act”), and may not be
      offered or sold in the United States unless registered under the Securities
      Act
      or an applicable exemption from registration is available.





There
      are
      no assurances that we will be able to obtain further funds required for our
      continued operations. We intend to pursue various financing alternatives to
      meet
      our immediate and long-term financial requirements. There can be no assurance
      that additional financing will be available to us when needed or, if available,
      that it can be obtained on commercially reasonable terms. If we are not able
      to
      obtain additional financing on a timely basis, we will be unable to conduct
      our
      operations as planned, and we will not be able to meet our other obligations
      as
      they become due. In such event, we will be forced to scale down or perhaps
      even
      cease our operations.





**Going
      Concern**





We
      have
      suffered recurring losses from operations. The continuation of our Company
      as a
      going concern is dependent upon our Company attaining and maintaining profitable
      operations and raising additional capital. The financial statements do not
      include any adjustment relating to the recovery and classification of recorded
      asset amounts or the amount and classification of liabilities that might be
      necessary should our Company discontinue operations.





Due
      to
      the uncertainty of our ability to meet our current operating expenses and the
      capital expenses noted above, in their report on the annual financial statements
      for the year ended December 31, 2006, our independent auditors included an
      explanatory paragraph regarding concerns about our ability to continue as a
      going concern. Our financial statements contain additional note disclosures
      describing the circumstances that lead to this disclosure by our independent
      auditors.





The
      continuation of our business is dependent upon us raising additional financial
      support. The issuance of additional equity securities by us could result in
      a
      significant dilution in the equity interests of our current stockholders.
      Obtaining commercial loans, assuming those loans would be available, will
      increase our liabilities and future cash commitments.





22


***Off-Balance
      Sheet Arrangements***





Our
      Company has no outstanding derivative financial instruments, off-balance sheet
      guarantees, interest rate swap transactions or foreign currency contracts.
      Neither our Company nor our operating subsidiary engages in trading activities
      involving non-exchange traded contracts.





***Critical
      Accounting Policies***





**Basis
      of Presentation**





The
      consolidated financial statements include the accounts of our Company and our
      subsidiaries, Pure Biofuels Peru and Palma Industrial S.A.C. and Pure
      Biocarburantes, S.A. All intercompany transactions and balances have been
      eliminated. We are a development stage Company as defined by Statement of
      Financial Accounting Standard (“SFAS”) No. 7, “Accounting and Reporting for
      Development Stage Enterprises”. Our fiscal year end is December 31.





**Use
      of Estimates**





The
      preparation of financial statements in conformity with U.S. generally accepted
      accounting principles 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.
      Significant areas requiring the use of management estimates relate to the
      determination of depreciation rates for equipment and future tax rates used
      to
      determine future income taxes. Actual results could differ from these
      estimates.





**Financial
      Instruments/Concentrations**





The
      fair
      value of our financial instruments which include cash, accounts payable and
      accrued liabilities, and due to related parties were estimated to approximate
      their carrying value due to the immediate or relatively short maturity of these
      instruments. The fair value of long term debt approximates its carrying value.
      Our operations are substantially located in Peru and we have commenced
      operations in Argentina and virtually all of our assets and liabilities are
      giving rise to market risks from changes in foreign currency rates. The
      financial risk is the risk to our operations that arise from fluctuations in
      foreign exchange rates and the degree of volatility of these rates. Currently,
      we do not use derivative instruments to reduce our exposure to foreign currency
      risk.





**Property,
      Plant and Equipment**





Property,
      plant and equipment are recorded at cost. The Company provides for depreciation
      at the following annual rates:





Computer
                Equipment
            25%
                straight lineFurniture
                & Miscellaneous
            10%
                straight lineBuilding
                Improvements
            10%
                straight line





**Long-lived
      Assets**





In
      accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
      Long-Lived Assets”, the carrying value of intangible assets and other long-lived
      assets is reviewed on a regular basis for the existence of facts or
      circumstances that may suggest impairment. We recognize impairment when the
      sum
      of the expected undiscounted future cash flows is less than the carrying amount
      of the asset. Impairment losses, if any, are measured as the excess of the
      carrying amount of the asset over its estimated fair value.





23


**Foreign
      Currency Translation**





Our
      functional and reporting currency is the United States dollar. Monetary assets
      and liabilities denominated in foreign currencies are translated using the
      exchange rate prevailing at the balance sheet date. Gains and losses arising
      on
      translation or settlement of foreign currency denominated transactions or
      balances are included in the determination of income. Foreign currency
      transactions are primarily undertaken in Peruvian Nuevos Soles and Argentinean
      Pesos. We have not, to the date of these financials statements, entered into
      derivative instruments to offset the impact of foreign currency
      fluctuations.





**Basic
      and Diluted Net Loss per Share**





We
      compute net loss per share in accordance with SFAS No. 128, "Earnings per Share"
      which requires presentation of both basic and diluted earnings per share (EPS)
      on the face of the statement of operations. Basic EPS is computed by dividing
      net income (loss) available to common shareholders (numerator) by the weighted
      average number of common shares outstanding (denominator) during the period.
      Diluted EPS gives effect to all dilutive potential common shares outstanding
      during the period including stock options, using the treasury stock method,
      and
      convertible preferred stock, using the if-converted method. In computing diluted
      EPS, the average stock price for the period is used in determining the number
      of
      shares assumed to be purchased from the exercise of stock options or warrants.
      Diluted EPS excludes all potentially dilutive common shares if their effect
      is
      anti-dilutive.





**Stock-based
      Compensation**





We
      record
      stock-based compensation in accordance with SFAS No. 123R “Share Based
      Payments”, using the fair value method. On November 1, 2006, our board of
      directors approved a stock option plan (the “Plan”) that enables it to
      grant options to employees, including our officers and directors, and our
      subsidiaries and other individuals who contribute to the success of our Company.
      Our board of directors will administer the Plan whereby it may, from time to
      time, grant up to a total of 21,000,000 stock options subject to shareholder
      approval. The stock options granted under the Plan shall vest and become
      exercisable at such time and such terms as our board of directors may determine
      at the time of the grant of the options. On April 27, 2007, our board of
      directors amended and restated the Plan. The Plan is subject to shareholders
      approval, which has not yet been obtained.





The
      Company issued 14,000,000 stock options to employees and directors during the
      six months ended June 30, 2007. The
      fair
      values of employee stock options are estimated for the calculation of the pro
      forma adjustments in the above table at the date of grant using the
      Black-Scholes option-pricing model with the following weighted-average
      assumptions: expected volatility of 92%; average risk-free interest rate of
      5.0%; expected life of 5.0 years; no expected dividend yield; and amortized
      over
      the vesting period of three years. We recognized $2,363,547 in share-based compensation expense for the six
      months ended June 30, 2007.





***Recent
      Accounting Pronouncements***





In
      September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108,
“Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements.” SAB No. 108 addresses how
      the effects of prior year uncorrected misstatements should be considered when
      quantifying misstatements in current year financial statements. SAB No. 108
      requires companies to quantify misstatements using a balance sheet and income
      statement approach and to evaluate whether either approach results in
      quantifying an error that is material in light of relevant quantitative and
      qualitative factors. SAB No. 108 is effective for period ending after November
      15, 2006. The adoption of SAB No. 108 had no effect on our consolidated
      financial statements.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The
      objective of SFAS No. 157 is to increase consistency and comparability in fair
      value measurements and to expand disclosures about fair value measurements.
      SFAS
      No. 157 defines fair value, establishes a framework for measuring fair value
      in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements. SFAS No. 157 applies under other accounting pronouncements
      that require or permit fair value measurements and does not require any new
      fair
      value measurements. The provisions of SFAS No. 157 are effective for fair value
      measurements made in fiscal years beginning after November 15, 2007. The
      adoption of this statement is not expected to have a material effect on our
      future reported financial position or results of operations.





24





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities”. This Statement permits entities to
      choose to measure many financial assets and financial liabilities at fair value.
      Unrealized gains and losses on items for which the fair value option has been
      elected are reported in earnings. SFAS No. 159 is effective for fiscal years
      beginning after November 15, 2007. We are currently assessing the impact of
      SFAS
      No. 159 on its financial position and results of operations.





**Risk
      Factors**




Much
      of
      the information included in this quarterly report includes or is based upon
      estimates, projections or other “forward looking statements”. Such forward
      looking statements include any projections or estimates made by us and our
      management in connection with our business operations. While these
      forward-looking statements, and any assumptions upon which they are based,
      are
      made in good faith and reflect our current judgment regarding the direction
      of
      our business, actual results will almost always vary, sometimes materially,
      from
      any estimates, predictions, projections, assumptions or other future performance
      suggested herein.




Such
      estimates, projections or other “forward looking statements” involve various
      risks and uncertainties as outlined below. We caution the reader that important
      factors in some cases have affected and, in the future, could materially affect
      actual results and cause actual results to differ materially from the results
      expressed in any such estimates, projections or other “forward looking
      statements”.




Our
      common shares are considered speculative during the development of our new
      business operations. Prospective investors should consider carefully the risk
      factors set out below.




In
      addition to the risk factor below, please see our Risk Factors in Item 1 from
      our annual report on Form 10-KSB for the year ended December 31, 2006, filed
      April 13, 2007.




**In
      order to service our debt and financing obligations and complete construction
      of
      our biodiesel production plant, we require additional financing of approximately
      $27,500,000.**




The
      Company is currently negotiating financing, the terms of which include the
      issuance of common stock, convertible debt and warrants exercisable into common
      stock. This financing is necessary for us to repay our outstanding debt which
      becomes due on October 19, 2007 and finance the construction of our biodiesel
      production plant. If the Company is not able to complete the proposed financing,
      it may not be able to secure replacement financing on terms favorable to it
      or
      at all. If the Company does not secure financing by October 19, 2007, the
      Company will be unable to repay outstanding debt of approximately $4,000,000
      which becomes due on that date and will be unable to fund its operations going
      forward.







25


**Item
      3. Controls and Procedures**




Evaluation
      of Disclosure Controls and Procedures




Under
      the
      supervision and with the participation of our management, including the Chief
      Executive Officer and Chief Financial Officer, we have evaluated the
      effectiveness of the design and operation of our disclosure controls and
      procedures pursuant to Exchange Act Rule 13a-15(e) or Rule 15d-15(e) as of
      the
      end of the period covered by this report. Based on that evaluation, the Chief
      Executive Officer and Chief Financial Officer have concluded that these
      disclosure controls and procedures are effective. There were no changes in
      our
      internal control over financial reporting during the quarter ended June 30,
      2007
      that have materially affected, or are reasonably likely to materially affect,
      our internal controls over financial reporting. Potential investors should
      be
      aware that the design of any system of controls and procedures is based in
      part
      upon certain assumptions about the likelihood of future events. There can be
      no
      assurance that any design will succeed in achieving its stated goals under
      all
      potential future conditions, regardless of how remote.




Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed in our Company's reports filed
      or submitted under the Exchange Act is recorded, processed, summarized and
      reported, within the time periods specified in the Securities and Exchange
      Commission's rules and forms. Disclosure controls and procedures include,
      without limitation, controls and procedures designed to ensure that information
      required to be disclosed in our Company's reports filed under the Exchange
      Act
      is accumulated and communicated to management, to allow timely decisions
      regarding required disclosure.





**PART
      II - OTHER INFORMATION**




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




The
      following sets forth certain information regarding sales of equity securities
      that were either not registered under the Securities Act or not previously
      included in a Current Report on Form 8-K during the three months ended June
      30,
      2007.




On
      April
      19, 2007 we entered into a purchase agreement with the Investor, pursuant
      to which we agreed to sell up to $3 million aggregate principal amount of its
      12% senior secured convertible debentures due July 19, 2007 and warrants to
      purchase up to 704,082 shares of our common stock in a private placement to
      an
      accredited investor within the meaning of Rule 501 of Regulation D under the
      Act. The sale of $3 million aggregate principal amount of debentures and
      warrants to purchase an aggregate of up to 704,082 shares of common stock was
      consummated on April 19, 2007. In connection with the sale of the debentures,
      we
      paid various fees in the amount of $175,000 from the proceeds of the sale to
      the
      advisor of the accredited investor.




On
      April
      19, 2007 in connection with the purchase agreement with the Investor, we
      issued to a placement agent a total of 183,674 shares of our common stock and
      warrants to purchase up to 300,000 shares of our common stock.




In
      June
      8, 2007, we entered into a consulting agreement with Integrated Corporate
      Relations (the “Consultant”), whereby among other things, we agreed to issue
      warrants to the Consultant for 25,000 shares of our Company’s common stock at a
      strike price equivalent to the closing market price on the execution date of
      the
      agreement. In addition, commencing July 15, 2007 we agreed to issue warrants
      for
      an additional 15,000 shares each month, at a strike price equivalent to the
      closing market price on the day issued, until the close by our Company of a
      next
      round of financing. All warrants vest immediately upon their issuance. The
      warrants shall be issued in the name of Equity Services, LLC.




26


**Item
      6. Exhibits** ******




**Exhibit
                No.**
            **Description
                of Exhibit**





4.1
            Secured
                Convertible Debenture, dated April 19, 2007, issued by Pure Biofuels
                Corp.
                to Cornell Capital Partners, L.P. in the amount of
                $3,000,000.4.2
            Convertible
              Promissory
              Note, dated April 19, 2007, issued by Pure Biofuels Corp. to Wharton
              Capital Partners, Ltd.4.3
            Warrant to
              purchase
              common stock, dated April 19, 2007, issued by Pure Biofuels Corp. to
              Wharton Capital Partners, Ltd.4.4
            Warrant to
              purchase
              common stock, dated April 19, 2007, issued by Pure Biofuels Corp.
              to Condor Partners, LLC.10.1
            Securities
                Purchase Agreement, dated April 19, 2007, between Pure Biofuels Corp.
                and
                Cornell Capital Partners, L.P.10.2
            Registration
                Rights Agreement, dated April 19, 2007, between Pure Biofuels Corp.
                and
                Cornell Capital Partners, L.P.10.3
            Escrow
                Agreement, dated April 19, 2007, among Pure Biofuels Corp., Luis
                Goyzueta,
                Cornell Capital Partners, L.P. and U.S. Bank National
                Association.10.4
            Pledge
                Agreement, dated April 19, 2007, between Luis Goyzueta and Cornell
                Capital
                Partners, L.P.10.5
            Security
                Agreement, dated April 19, 2007, among Pure Biofuels Corp., Pure
                Biofuels
                Del Peru S.A.C., Palma Industrial S.A.C. and Cornell Capital Partners,
                L.P.10.6
            Binding
                Letter of Intent, dated May 11, 2007, among Pure Biofuels Corp.
                Interpacific Oil S.A.C., Luis Goyzueta, Alberto Pinto, and Patrick
                Orlando.10.7
            Financing
                Contingency Escrow Agreement, dated June 22, 2007, among Pure Biofuels
                Corp. ARC Investment Partners, LLC,TapirdoEnterprises,LLC,
                SGM Capital, LLC, Luis Goyzueta, David Clifton, Hiroshi Dejaeghere,
                Joy
                Clifton and U.S. Bank National Association.10.8
            Employment
                Agreement, dated June 22, 2007, between Pure Biofuels Corp. and Steven
                Magami.10.9
            Pure
                Biofuels Corp. Stock Incentive Plan, approved by the Board of Directors
                on
                June 11, 2007, and pending shareholders’ approval (incorporated by
                reference to Exhibit 4.3 to our Form S-8 (Commission File No. 333-144577,
                filed on July 13, 2007).31.1
            Certifications
                of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.31.2
            Certifications
                of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.32.1
            Certifications
                of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.32.2
            Certifications
                of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.







27


**SIGNATURES**




In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.







**PURE
                BIOFUELS CORP.**Date:
                August 14, 2007
            By:
            /s/
                Luis GoyzuetaLuis
                Goyzueta,
              CEO
                & DirectorDate:
                August 14, 2007
            By:
            /s/
                Gustavo GoyzuetaGustavo
                Goyzueta,
              Chief
                Financial Officer






28