UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
or
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to ___________
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code)
n/a
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934: None.
Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934:
Common stock, par value $0.0000001
(Title of class)
Indicate
by check mark whether the registrant (1) has 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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large-accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large-accelerated filer,” “accelerated-filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large-accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of September 13, 2023, there were shares of the registrant’s common stock, $0.0000001 par value per share, issued and outstanding.
PINEAPPLE, INC.
Table of Contents
| Page | ||
| PART I - FINANCIAL INFORMATION | ||
| Item 1. | Condensed Consolidated Financial Statements (Unaudited) | F-1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 10 |
| Item 4. | Controls and Procedures | 10 |
| PART II - OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 11 |
| Item 1A. | Risk Factors | 13 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 13 |
| Item 3. | Defaults Upon Senior Securities | 13 |
| Item 4. | Mine Safety Disclosures | 13 |
| Item 5. | Other Information | 13 |
| Item 6. | Exhibits | 14 |
| Signatures | 17 | |
| 2 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:
| ● | our projected financial position and estimated cash burn rate; | |
| ● | our estimates regarding expenses, future revenues and capital requirements; | |
| ● | our ability to continue as a going concern; | |
| ● | our need to raise substantial additional capital to fund our operations; | |
| ● | our ability to compete in the global space industry; | |
| ● | our ability to obtain and maintain intellectual property protection for our current products and services; | |
| ● | our ability to protect our intellectual property rights and the potential for us to incur substantial costs from lawsuits to enforce or protect our intellectual property rights; | |
| ● | the possibility that a third party may claim we have infringed, misappropriated or otherwise violated their intellectual property rights and that we may incur substantial costs and be required to devote substantial time defending against these claims; | |
| ● | our reliance on third-party suppliers and manufacturers; | |
| ● | the success of competing products or services that are or become available; | |
| ● | our ability to expand our organization to accommodate potential growth and our ability to retain and attract key personnel; | |
| ● | the potential for us to incur substantial costs resulting from lawsuits against us and the potential for these lawsuits to cause us to limit our commercialization of our products and services; |
All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.
This Quarterly Report on Form 10-Q may contain estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. We obtained the industry and market data in this annual report on Form 10-Q from our own research as well as from industry and general publications, surveys and studies conducted by third parties. This data involves a number of assumptions and limitations and contains projections and estimates of the future performance of the industries in which we operate that are subject to a high degree of uncertainty, including those discussed in “Risk Factors.” We caution you not to give undue weight to such projections, assumptions, and estimates. Further, industry and general publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that these publications, studies, and surveys are reliable, we have not independently verified the data contained in them. In addition, while we believe that the results and estimates from our internal research are reliable, such results and estimates have not been verified by any independent source.
| 3 |
PART I — FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements.
The following unaudited interim condensed consolidated financial statements of Pineapple, Inc. are included in this Quarterly Report on Form 10-Q:
INDEX TO FINANCIAL STATEMENTS
| F-1 |
PINEAPPLE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| June 30, 2023 | December 31, 2022 | |||||||
(As Adjusted) | ||||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Inventory | ||||||||
| Lease receivable – related parties | ||||||||
| Total Current Assets | ||||||||
| Security deposits | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Accounts payable - related party | ||||||||
| Accrued interest payable | ||||||||
| Settlement payable - related party | ||||||||
| Due to affiliates | ||||||||
| Notes payable-related party | ||||||||
| Notes payable | ||||||||
| Advances on agreements | ||||||||
| Contingent liabilities | ||||||||
| Operating lease liabilities | ||||||||
| Total Current Liabilities | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies (note 13) | ||||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, $par value, shares authorized, shares issued and outstanding | ||||||||
| Series A Convertible Preferred stock, $par value, shares authorized, shares issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized, shares and shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively | ||||||||
| Subscription received – shares to be issued | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-2 |
PINEAPPLE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (As Adjusted) | (As Adjusted) | |||||||||||||||
| Revenue | ||||||||||||||||
| Sublease revenue – related parties | $ | $ | $ | $ | ||||||||||||
| Lease expense | ||||||||||||||||
| ( | ) | ( | ) | |||||||||||||
| Sales revenue | ||||||||||||||||
| Cost of sales | ||||||||||||||||
| Gross Profit (Loss) | ( | ) | ( | ) | ||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Management consulting fees - related parties | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income (Expense) | ||||||||||||||||
| Income from equity-method investment | ||||||||||||||||
| Gain on forgiveness of related party note payable | ||||||||||||||||
| Impairment of inventory | ( | ) | ( | ) | ||||||||||||
| Total Other Income (expense) | ( | ) | ( | ) | ||||||||||||
| Income (Loss) before taxes | ( | ) | ( | ) | ||||||||||||
| Provision for income taxes | ||||||||||||||||
| Net Income (Loss) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Net Income (Loss) Per Share – Basic and Diluted | $ | ) | $ | $ | ) | $ | ||||||||||
| Weighted Average Common Shares – Basic and Diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-3 |
PINEAPPLE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
Six Months Ended June 30, 2023
| Subscriptions | ||||||||||||||||||||||||
| Common Stock | Additional Paid in | Accumulated | received, shares to | Total Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | be issued | Deficit | |||||||||||||||||||
| *Balance as of December 31, 2022 (As Adjusted) | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| Common stock issued on subscription received | ( | ) | ||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| *Balance as of March 31, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| Common stock issued for cash | ||||||||||||||||||||||||
| Common stock issued for acquisition of corporation under common control | ||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| * |
Six Months Ended June 30, 2022
| Subscriptions | ||||||||||||||||||||||||
| Common Stock | Additional Paid in | Accumulated | received, shares to | Total Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | be issued | Equity | |||||||||||||||||||
| *Balance as of December 31, 2021 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Common stock subscription received | - | |||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| *Balance as of March 31, 2022 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Common stock subscription received | - | |||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| *Balance as of June 30, 2022 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| F-4 |
PINEAPPLE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| (As Adjusted) | ||||||||
| Cash Flows from Operating Activities | ||||||||
| Net Income (Loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Impairment of inventory | ||||||||
| Depreciation of property and equipment | ||||||||
| Income from equity-method investment | ( | ) | ||||||
| Gain on forgiveness of related party note payable | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Inventory | ( | ) | ||||||
| Lease receivable – related parties | ( | ) | ||||||
| Security deposits | ( | ) | ||||||
| Right-of-use assets | ||||||||
| Accounts payable and accrued liabilities | ||||||||
| Accounts payable related party | ||||||||
| Operating lease liabilities | ( | ) | ||||||
| Due to affiliates | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from related parties | ||||||||
| Repayment to related parties | ( | ) | ||||||
| Proceeds from issuance of common stock | ||||||||
| Proceeds from stock subscription | ||||||||
| Proceeds from related party notes payable | ||||||||
| Repayments of related party notes payable | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net Change in Cash | ||||||||
| Cash, Beginning of Period | ||||||||
| Cash, End of Period | $ | $ | ||||||
| Supplemental Disclosures of Cash Flow Information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Supplemental Disclosures of Non-Cash Financing Activities | ||||||||
| Recognition of right-of-use assets | $ | $ | ||||||
| Common stock issued on subscription received | $ | $ | ||||||
| Common stock issued for acquisition of subsidiary under common control | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-5 |
PINEAPPLE, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
Note 1 – Organization and Description of Business
Pineapple,
Inc. (“Pineapple” or the “Company”) was originally formed in the State of
On March 19, 2019, the Company entered into a Share Exchange Agreement (the “PVI Agreement”) with Pineapple Ventures, Inc. (“PVI”), the Company’s equity-method investment, and the stockholders of PVI (the “PVI Stockholders”) in which the Company acquired a total of % of the outstanding shares of PVI, in consideration for shares of Series A Convertible Preferred Stock. The Series A Convertible Preferred Stock may, from time to time, be converted by the holder into shares of the Company’s Common Stock, par value $ (the “Common Stock”), in an amount equal to ten () shares of Common Stock for each one share of Series A Convertible Preferred Stock. The PVI Stockholders elected to immediately convert the shares of Series A Convertible Preferred Stock into shares of common stock upon issuance.
On
January 17, 2020, the Company entered into an agreement with Jaime Ortega whereby in exchange for Mr. Ortega cancelling $
On
September 28th, 2022, the Company signed a letter of intent with Jaime Ortega for the sale of
On
March 10, 2023, the Company entered into an Amended Binding Letter of Intent effective as of December 31, 2022 with Mr. Ortega, amending
the prior Letter of Intent executed January 4, 2023, where the Company agreed to sell
On
June 12, 2023, Pineapple, Inc., a Nevada corporation (the “Company”) entered into an Amendment to the Letter of Intent, by
and between the Company and Matthew Feinstein (the “Amended LOI”), which amends the Letter of Intent, dated September 28,
2022. Pursuant to the Amended LOI, the Company shall acquire
| F-6 |
Presently, the Company procures and leases properties to licensed cannabis operators and provides nationwide hemp-derived CBD sales via online and in-store transactions. Through the Company’s operating subsidiary, Pineapple Express Consulting Inc., it also offers cannabis business licensing and consulting services.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”). They do not include all of the information and footnotes required by GAAP for complete financial statements and, accordingly, certain information, footnotes, and disclosures normally included in the annual financial statements, prepared in accordance with GAAP, have been condensed or omitted in accordance with SEC rules and regulations. The accompanying financial information should be read in conjunction with the financial statements and the notes thereto in the Company’s most recent Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the “SEC”) on May 5, 2023. In the opinion of management, the financial data presented includes all adjustments necessary to present fairly the financial position, results of operations, and cash flows for the periods presented. Results of interim periods should not be considered indicative of the results for the full year. These unaudited condensed consolidated financial statements include estimates and assumptions of management that affect the amounts reported in the unaudited condensed consolidated financial statements. Actual results could differ from these estimates.
Basis of Consolidation
The consolidated financial statements include the accounts of Pineapple, Inc. and its wholly owned subsidiaries, THC Industries, LLC and Pineapple Express Consulting, Inc. and Pineapple Wellness, Inc., doing business as Pineapple Wellness. Intercompany accounts and transactions have been eliminated.
The Company’s consolidated subsidiaries and/or entities are as follows:
| Name of Consolidated Subsidiary or Entity | State or Other Jurisdiction of Incorporation or Organization | Date of Incorporation or Formation (Date of Acquisition, if Applicable) | Attributable Interest | |||||
2/16/2016 (acquired by us) | % | |||||||
| % | ||||||||
| % | ||||||||
| F-7 |
Use of Estimates in Financial Reporting
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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 estimates include the recoverability and useful lives of long-lived assets, assessment of legal accruals, the fair value of the Company’s stock, Incremental borrowing rate (“IBR”) used for leases and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.
Reclassifications
Certain prior period amounts have been reclassified to conform with the current period presentation. (Note 12)
Fair Value of Financial Instruments
The Company follows the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for disclosures about fair value of its financial instruments and to measure the fair value of its financial instruments. The FASB ASC establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of fair value hierarchy are described below:
| Level 1- | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
| Level 2- | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
| Level 3- | Pricing inputs that are generally unobservable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The carrying amounts of the Company’s financial assets and liabilities, including cash, accounts payable and accrued liabilities, and other current liabilities, approximate their fair values because of the short maturity of these instruments. The fair value of notes payable approximates their fair values since the current interest rates and terms on these obligations are the same as prevailing market rates.
Acquisition Under Common Control
Under ASC 805-50-30-5, when accounting for a transfer of assets or exchange of shares between entities under common control, the receiving entity recognize the assets and liabilities transferred at their historical cost and combine the accounts under pooling-of interest method on a retroactive basis.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value.
As
of June 30, 2023 and December 31, 2022, the Company has
Security Deposits
As
of June 30, 2023, security deposit relates to security deposit paid for seven office premises of $
Inventory
Inventory is stated at lower of cost or net realizable value, with cost being determined on the first-in, first-out (“FIFO”) method.
During the six
months ended June 30, 2023 and 2022, the Company recorded inventory impairment of $
Property and Equipment
Property and equipment consist of furniture and fixtures and office equipment. They are recorded at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.
The estimated useful lives of the classes of property and equipment are as follows:
| Office equipment | |
| Furniture and fixtures |
| F-8 |
Investment – Equity Method
The
Company accounted for its equity method investment (“PVI”) at cost, adjusted for the Company’s share of the investee’s
earnings or losses, which are reflected in the consolidated statements of operations. The Company periodically reviews the investment
for other than temporary declines in fair value below cost and more frequently when events or changes in circumstances indicate that
the carrying value of an asset may not be recoverable. As of December 31, 2022, management has identified indicators of other-than-temporary
impairment that have led to the conclusion that the carrying value of its equity method investment is not recoverable. As a result, the
Company has recorded an impairment write-down in the consolidated statements of operations for the year ended December 31, 2022. During
the six months ended June 30, 2023 and June 30, 2022, the Company recognized income from equity method investment of $ and $
Related Party Balances and Transactions
The Company follows FASB ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transaction. (Note 8)
Leases
We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities - current, and operating lease liabilities - noncurrent on the balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our balance sheets.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Lease expense is reported under cost of sales in the Consolidated Statements of Operations in line with the Company’s main operation of procuring and leasing properties to licensed cannabis operators.
Sublease
Under ASC 842, income for a sublessor operating lease is recognized as a single lease income item on a straight-line basis over the lease term and reflected in the appropriate income statement line item based on the lease asset’s function. For transactions where the company is considered the sublessor, revenue for operating leases is recognized on a monthly basis over the term of the lease. Sublessor revenue relates to operating leases that the Company is subleasing. The Company recognizes sublease revenue on a gross basis. (see note 9)
Revenue Recognition
The Company’s revenue derives from sublease revenue and sales of CBD products.
The Company recognizes revenue from the sale of CBD products in accordance with ASC 606, “Revenue Recognition” following the five steps procedure:
Step 1: Identify the contract(s) with customers
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to performance obligations
Step 5: Recognize revenue when the entity satisfies a performance obligation
For the
six months ended June 30, 2023 and 2022, the Company recognized revenue from the sale of CBD products of $ and
$
The Company recognizes revenue from subleasing of office premises in accordance with ASC842, “Lease Accounting”. The Company recognizes sublease revenue on monthly straight-line basis over the lease term on gross basis.
For the
six months ended June 30, 2023 and 2022, the Company recognized sublease revenue from related parties of $
Basic income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted income (loss) per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the loss of the Company. In computing diluted income (loss) per share, the treasury stock method assumes that outstanding options and warrants are exercised, and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. At June 30, 2023 and December 31, 2022, the Company had options or warrants outstanding and shares issuable for conversion of notes payable.
| F-9 |
Recently Adopted and Pending Accounting Pronouncements
In June 2022, the FASB issued ASU 2022-03, ASC Subtopic “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. These amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments in this update are effective for public business entities for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.
The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements.
Note 3 – Going Concern
The
Company’s consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which
contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As reflected
in its consolidated financial statements, the Company has an accumulated deficit of $
The Company has incurred net losses during the six months ended June 30, 2023 and in all prior years. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date that the consolidated financial statements are issued. The Company’s consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company’s primary source of operating funds since inception has been cash proceeds from the private placements of its common stock and from issuance of its short-term on demand loans, primarily from related parties. The Company intends to raise additional capital in the short term through addition of demand loans and, once the up listing to a higher exchange is completed, through private placements to sell restricted shares of common stock to investors. There can be no assurance that these funds will be available on terms acceptable to the Company, or at all, or will be sufficient to enable the Company to fully complete its development activities or sustain operations.
If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables, reduce overhead, scale back its current business plan and/or curtail operations until sufficient additional capital is raised to support further operations.
The Company’s ability to continue as a going concern is dependent on its ability to execute its strategy and on its ability to raise additional funds. Management is currently seeking additional funds, primarily through the issuance of equity and/or debt securities for cash to operate the Company’s business. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to it. Even if the Company is able to obtain additional financing, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its stockholders, in the case of equity and/or convertible debt financing.
| F-10 |
Note 4 – Property and Equipment
Property and equipment as of June 30, 2023 and December 31, 2022 is summarized as follows:
| June 30, 2023 | December 31, 2022 | |||||||
| Furniture and fixtures | $ | $ | ||||||
| Office equipment | ||||||||
| Total property and equipment | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
Depreciation
expense for the six months ended June 30, 2023 and 2022 was $
Note 5 – Notes Payable, Related Party
Notes payable-related party, are comprised of the following as of June 30, 2023 and December 31, 2022:
| Noteholder | Due | Interest Rate | Secured | June
30, 2023 | December
31, 2022 | |||||||||||||||
| Rob Novinger | % | $ | $ | |||||||||||||||||
| Neu-Ventures, Inc. | % | $ | $ | |||||||||||||||||
| $ | $ | |||||||||||||||||||
Rob Novinger (shareholder)
Rob
Novinger is a shareholder and creditor to the Company. There was
Neu-Ventures, Inc. (The owner is the largest shareholder of the Company)
Neu-Ventures, Inc. is an entity owned by our former majority shareholder, Mr. Ortega. These advances are due on demand
and do not incur interest. The balance
of the related party note payable is $
Note 6 – Note Payable
The
Company, through our former subsidiary, BBC, entered into a $
Note 7 – Settlement Payable-Related Party
At June 30, 2023 and December 31, 2022, the settlement payable related party balance consists of the following:
| Noteholder | June 30, 2023 | December 31, 2022 | ||||||
| Investor Three | ||||||||
| Settlement payable | $ | $ | ||||||
Investor Three
In
December 2015, the Company entered into a Revenue Share Agreement for $
| F-11 |
Note 8 – Related Party Transactions
During the
six months ended June 30, 2023 and 2022, the Company recognized sublease revenue of $
During the six
months ended June 30, 2023 and 2022, the Company recognized sublease revenue of $
During
the six months ended June 30, 2023 and 2022, the Company incurred management consulting fees of $
During
the six months ended June 30, 2023, Pineapple Consolidated, Inc. (“PCI”), a company controlled by the Director of
Pineapple, Inc., advanced $
During
the six months ended June 30, 2023, Pineapple Ventures, Inc. (“PVI”) made lease payment of $
The loans from the related parties are due on demand and non-interest bearing.
As
of June 30, 2023 and December 31, 2022, the total amount due to affiliates is $
Note 9 – Leases
As of June 30, 2023 and December 31, 2022, the Company had the following lease obligations:
| Discount | June 30, | December 31, | ||||||||||||||
| Rate | Maturity | 2023 | 2022 | |||||||||||||
| Current | % | $ | $ | |||||||||||||
| Non-current | % | |||||||||||||||
| $ | $ | |||||||||||||||
| Balance - December 31, 2022 | $ | |||
| Lease liability additions | ||||
| Repayment of Lease liability | ( | ) | ||
| Imputed interest | ||||
| Balance - June 30, 2023 | $ |
On
January 11, 2023, the Company entered into a lease agreement for an office premise located in 8912 Reseda Blvd, Northridge, CA 91324
under a -year term with two 5-year extension options upon expiry and monthly lease payment of $
On
March 10, 2023, the Company entered into a lease agreement for an office premise located in 8707 Venice Blvd, Los Angeles, CA 90034 under
a -year term with two 5-year extension options upon expiry and monthly lease payment of $
On
May 1, 2023, the Company entered into a lease agreement for an office premise located in 467 S.La Brea Ave., Los Angeles, CA 90036
under a -year
term and monthly lease payment of $
On
April 10, 2023, the Company entered into a lease agreement for an office premise located in 8342-8344 West 3rd St Los Angeles CA 90048
under a -year
term and monthly lease payment of $
| F-12 |
On
April 1, 2023, the Company was assigned from Pineapple Ventures, Inc. (“PVI”) for lease obligation for an office premise
located in 7542-7544 Balboa Blvd. Lake Balboa, CA under monthly lease payment of $
On
May 15, 2023, the Company entered into a lease agreement for an office premise located in 1485 W. Sunset Blvd., Los Angeles, CA
under a
On
June 1, 2023, the Company was assigned from Pineapple Ventures, Inc. (“PVI”) for lease obligation for an office premise located
in 1704 N. Vine St. Unit 102 Hollywood CA 90028 with monthly lease payment of $
The following table summarizes the maturity of our lease liabilities as of June 30, 2023:
| Year Ended December 31, | ||||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less: imputed interests | ( | ) | ||
| Lease liabilities | $ | |||
The following summarizes other supplemental information about the Company’s operating lease as of June 30, 2023:
| Weighted average discount rate | ||
| Weighted average remaining lease term (years) |
As of June 30, 2023, the Company has right-of-use assets as follows:
| Balance - December 31, 2022 | $ | |||
| Additions | ||||
| Less: Amortization | ( | ) | ||
| Balance - June 30, 2023 | $ |
During
the six months ended June 30, 2023, the Company incurred lease expense of $
Sublease
On
January 15, 2023, the Company, the sublessor, entered into a sub-lease agreement with a sublessee for an office premise located in 8912
Reseda Blvd, Northridge, CA 91324 under a -year
term and monthly lease payment of $
On
June 1, 2023, the Company was assigned from Pineapple Ventures, Inc. (“PVI”) sub-lease agreement with a sublessee for an
office premise located in 1704 N.Vine St. Unit 102 Hollywood CA 90028. The sublease agreement will expire on
During
the six months ended June 30, 2023, the Company recognized sublease revenue from related parties of $
| F-13 |
Note 10 – Advances on Agreements
At June 30, 2023 and December 31, 2022, advances on agreements balance consist of the following:
| Noteholder | June 30, 2023 | December 31, 2022 | ||||||
| Investor One and Investor Two | ||||||||
| Advances on Agreements | $ | $ | ||||||
Investor One
On
February 16, 2016, the Company entered into a Binding Letter of Intent (“BLOI1”) with Investor One that the Company deemed
a financing agreement for the purchase of a certain property (APN: 665-030-044), and upon completion of development of the acquired property,
subsequently a revenue share agreement that was for the following considerations: (i) payment by Investor One of $
During
March 2016, the $
Investor Two
On
March 18, 2016, the Company entered into a Binding Letter of Intent (“BLOI2”), subsequently amended by a Real Property Purchase
and Sale Agreement and Joint Escrow Instructions (“Subsequent Land Purchase Agreement”) dated March 21, 2016, both of which
the Company deemed a financing agreement for the purchase of a certain property (APN: 665-030-043) for the following considerations:
(i) payment by Investor Two of $
On
March 22, 2016, Investor Two deposited $
Investment Accounting Treatments for Investors One and Two
The escrow agreement closed and Investor Two took title to property. There is no provision in BLOI2, or in the Subsequent Land Purchase Agreement, that would impose any continuing liability on the Company other than the loss of the Company’s escrow deposit.
As
no terms and conditions were established to characterize the $
| F-14 |
In
February 2019, the Company entered into a settlement agreement with Investor One which required the issuance of shares of the
Company’s common stock and established an additional principal sum for repayment of $
Note 11 – Stockholders’ Equity
The
Company is authorized to issue
During the six months ended June 30, 2023, the Company issued shares common stock for stock subscription of $ received during the year ended December 31, 2022.
During
the six months ended June 30, 2023, the Company issued shares
of common stock for cash proceeds of $
On
June 12, 2023, the Company issued shares of common stock at $ per share to acquire
During
the six months ended June 30, 2022, the Company received proceeds from stock subscriptions of $
As of June 30, 2023 and December 31, 2022, the issued and outstanding common stock was shares and shares, respectively.
Note 12 – Acquisition Under Common Control
On June 12, 2023, the Company issued shares of common stock to acquire Pineapple Wellness, Inc. (“PW”), a California corporation controlled by Matthew Feinstein who serves as the Chief Financial Officer, Director and Shareholder of PW. Pooling-of-interest method was adopted for the merging of PW accounts to the Company’s accounts at historical cost on a retroactive basis commencing from the date of inception at June 24, 2019.
The Company’s Consolidated Balance Sheet as of December 31, 2022, Statement of Operations for the three months and six months ended December 31, 2022, Statement of Cash Flow for the six months ended June 30, 2022 and Statement of Shareholders’ Deficit for the six months ended June 30, 2022 contain retrospective presentation for the consolidation of Pineapple Wellness accounts from its date of inception with the Company’s accounts resulted from the acquisition of the entity under common control on June 12, 2023. (Note 1)
| December 31, 2022 | ||||||||||||
| Acquired Entry Under | ||||||||||||
| Originally Reported | Common Control | As Adjusted | ||||||||||
| Assets | ||||||||||||
| Current Assets: | ||||||||||||
| Cash | $ | $ | $ | |||||||||
| Prepaid expense | ||||||||||||
| Lease receivable | ||||||||||||
| Inventory | ||||||||||||
| Total Current Assets | ||||||||||||
| Security deposits | ||||||||||||
| Property and equipment, net | ||||||||||||
| Operating lease right-of-use assets, net | ||||||||||||
| Total Assets | $ | $ | $ | |||||||||
| Liabilities and Stockholders’ Deficit | ||||||||||||
| Current Liabilities: | ||||||||||||
| Accounts payable and accrued liabilities | $ | $ | $ | |||||||||
| Accounts payable - related party | ||||||||||||
| Accrued interest payable | ||||||||||||
| Settlement payable - related party | ||||||||||||
| Due to affiliates | ||||||||||||
| Notes payable-related party | ||||||||||||
| Notes payable | ||||||||||||
| Advances on agreements | ||||||||||||
| Contingent liabilities | ||||||||||||
| Operating lease liability | ||||||||||||
| Total Current Liabilities | ||||||||||||
| Operating lease liability, non-current | ||||||||||||
| Total Liabilities | ||||||||||||
| Commitments and contingencies (note 13) | ||||||||||||
| Stockholders’ Deficit: | ||||||||||||
| Preferred stock, $ par value, shares authorized, no shares issued and outstanding | ||||||||||||
| Series A Convertible Preferred stock, $ par value, shares authorized, no shares issued and outstanding | ||||||||||||
| Common stock, $ par value, shares authorized, shares issued and outstanding | ||||||||||||
| Subscription received – shares to be issued | ||||||||||||
| Additional paid-in-capital | ||||||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ( | ) | ||||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | $ | |||||||||
| F-15 |
| For the Three Months Ended June 30, 2022 | For the Six Months Ended June 30, 2022 | |||||||||||||||||||||||
| Acquired Entry Under | Acquired Entry Under | |||||||||||||||||||||||
| Originally Reported | Common Control | As Adjusted | Originally Reported | Common Control | As Adjusted | |||||||||||||||||||
| Revenue | ||||||||||||||||||||||||
| Sublease revenue | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Sales revenue | ||||||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||||||
| Gross Profit | ||||||||||||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||
| Lease expense | ||||||||||||||||||||||||
| Management consulting fees - related parties | ||||||||||||||||||||||||
| Depreciation | ||||||||||||||||||||||||
| Total Operating Expenses | ||||||||||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Other Income | ||||||||||||||||||||||||
| Income from equity-method investment | ||||||||||||||||||||||||
| Gain on forgiveness of related party note payable | ||||||||||||||||||||||||
| Impairment of inventory | ||||||||||||||||||||||||
| Total Other Income | ||||||||||||||||||||||||
| Income (Loss) before taxes | ( | ) | ( | ) | ||||||||||||||||||||
| Provision for income taxes | ||||||||||||||||||||||||
| Net Income (Loss) | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net Income (Loss) Per Share – Basic and Diluted | $ | $ | $ | $ | ||||||||||||||||||||
| Weighted Average Common Shares – Basic and Diluted | ||||||||||||||||||||||||
| F-16 |
| For the Six Months Ended June 30, 2022 | ||||||||||||
| Acquired Entry Under | ||||||||||||
| Originally Reported | Common Control | As Adjusted | ||||||||||
| Cash Flows from Operating Activities | ||||||||||||
| Net Income | $ | $ | ( | ) | $ | |||||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||||||
| Depreciation of property and equipment | ||||||||||||
| Income from equity-method investment | ( | ) | ( | ) | ||||||||
| Gain on forgiveness of related party note payable | ( | ) | ( | ) | ||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Inventory | ( | ) | ( | ) | ||||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||||||
| Accounts payable related party | ||||||||||||
| Due to affiliates | ||||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ( | ) | ||||||
| Cash Flows from Financing Activities | ||||||||||||
| Proceeds from stock subscription | ||||||||||||
| Proceeds from related party notes payable | ||||||||||||
| Repayments of related party notes payable | ( | ) | ( | ) | ||||||||
| Net cash provided by financing activities | ||||||||||||
| Net Change in Cash | ||||||||||||
| Cash, Beginning of Period | ||||||||||||
| Cash, End of Period | $ | $ | $ | |||||||||
| Supplemental Disclosures of Cash Flow Information | ||||||||||||
| Cash paid for interest | $ | $ | $ | |||||||||
| Cash paid for taxes | $ | $ | $ | |||||||||
Note 13 – Commitments and Contingencies
From time to time, the Company is party to certain legal proceedings that arise in the ordinary course and are incidental to our business. Future events or circumstances, currently unknown to management, will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on our consolidated financial position, liquidity, or results of operations in any future reporting periods. The following is a list of current litigation:
Hawkeye v. Pineapple Express, Inc., et al.
Los
Angeles Superior Court Case Number: BC708868 was filed June 6, 2018. Plaintiff claimed damages against Defendant in the excess of $
| F-17 |
Sharper, Inc. v. Pineapple Express, Inc., et al.
Los
Angeles Superior Court Case Number: 18SMCV00149 was filed November 1, 2018. Complaint for money with an amount in controversy of $
Cunningham v. Pineapple Express, Inc.
Los
Angeles Superior Court Case Number: BS171779: Judgment, ordered by the Department of Industrial Relations, Labor Commissioner’s
Office was entered by the Court on December 11, 2017. The amount of judgment entered was $
Pineapple Express, Inc. v. Cunningham
Los
Angeles Superior Court Case Number: SC 127731 was filed June 21, 2017. This action arose from certain complaint and cross-complaint which
were both dismissed. Defendant Cunningham pursued a cost judgment against Plaintiff and obtained a judgment in the amount of $
StoryCorp Consulting, dba Wells Compliance Group v. Pineapple Express, Inc.
JAMS
Arbitration Reference Number: 1210037058, filed December 18, 2019. This matter arises from dispute over certain services agreement
entered into between the parties in or about January 31, 2019. In 2020, the parties agreed on a settlement amount of $
Russ Schamun v. Pineapple Express Consulting, Inc.
This
is a small claims matter for $
| F-18 |
SRFF v. Pineapple Express, Inc.
This
matter resulted in a stipulated judgment whereas former SEC counsel claimed approximately $
Novinger v. Pineapple Express, Inc.
Los
Angeles Superior Court Case Number: 20CHLC10510 was filed in or about March 11, 2020. This is a limited jurisdiction action arising from
a claim for monies lent to Pineapple Express, Inc. without specificity as to the judgment debtor’s state of incorporation, for
the total of $
Note 14 – Subsequent Events
Subsequent to June 30, 2023, and through the date that these financials were issued, the Company had the following subsequent events:
On
May 23, 2023, the Company entered into a lease agreement for an office premise located in 19841 Ventura Blvd. Woodland Hills CA 91364
under a
On
June 6, 2023, the Company entered into a lease agreement for an office premise located in 2378 Westwood Boulevard, Los Angeles CA
90064 under a -year
term and monthly lease payment of $
On September
11, 2023, the Company received April 2023 sublease payment of $
SUPPLEMENTARY DATA
The Company is a smaller reporting Company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.
| F-19 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
As used herein, “Pineapple,” the “Company,” “our,” “we” or “us” and similar terms include Pineapple, Inc., unless the context indicates otherwise. The following discussion and analysis of our business and results of operations for the three months ended June 30, 2023, and our financial conditions at that date, should be read in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q (the “Quarterly Report”). US Dollars are denoted herein by “USD,” “$” and “dollars.”
General
This management discussion and analysis of the financial condition and results of operations of the Company is for the three and six months ended June 30, 2023, and 2022. It is supplemental to and should be read in conjunction with the Company’s unaudited condensed consolidated financial statements as of June 30, 2023, and the consolidated financial statements for the year ended December 31, 2022, included in our Annual Report on Form 10-K for the year ended December 31, 2022, and filed with the U.S. Securities and Exchange Commission and the accompanying notes for each respective period. The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Disclaimer Regarding Forward-Looking Statements
Certain statements contained in this Quarterly Report (or otherwise made by us or on our behalf from time to time in other reports, filings with the U.S. Securities and Exchange Commission, news releases, conferences, internet postings or otherwise) that are not statements of historical fact constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, notwithstanding that such statements are not specifically identified. These forward-looking statements relate to expectations or forecasts for future events, including without limitation our earnings, revenues, expenses or other future financial or business performance or strategies, or the impact of legal or regulatory matters on our business, results of operations or financial condition. These statements may be preceded by, followed by or include the words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intent,” “could,” “would,” “should,” “estimate,” “might,” “plan,” “predict” or “continue” or the negative or other variations thereof or comparable terminology intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are based on information available to us as of the date of this Quarterly Report and on our current expectations, forecasts and assumptions, and involve substantial risks and uncertainties. Actual results may vary materially from those expressed or implied by the forward-looking statements herein due to a variety of factors.
This quarterly report contains forward-looking statements, including statements regarding, among other things:
| ● | our ability to continue as a going concern; | |
| ● | our anticipated needs for working capital; | |
| ● | our ability to generate a profit; | |
| ● | our heavy involvement with cannabis, which remains illegal under federal law; | |
| ● | our ability to access the service of banks; | |
| ● | our ability to obtain various insurances for our business; | |
| ● | our ability to remain compliant with changing laws and regulations; | |
| ● | our ability to obtain the relevant state and local licenses; | |
| ● | our ability to successfully manage our growth; | |
| ● | our ability to repay current debt in cash and obtain adequate new financing; | |
| ● | our dependence on third parties for services; | |
| ● | our dependence on key executives; | |
| ● | our ability to control costs; | |
| ● | our ability to successfully implement our expansion strategies; | |
| ● | our ability to obtain and maintain patent protection; | |
| ● | our ability to recruit employees with regulatory, accounting and finance expertise; | |
| ● | the impact of government regulations, including United States Food and Drug Administration (the “FDA”) regulations; | |
| ● | the impact of any future litigation; | |
| ● | the availability of capital; and | |
| ● | changes in economic, business, and competitive conditions. |
Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks and uncertainties discussed in Item 1A. Risk Factors of this quarterly report, section captioned “Risk Factors” of our annual report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 5, 2023 and matters described in this quarterly report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this quarterly report will in fact occur. We caution you not to place undue reliance on these forward-looking statements. In addition to the information expressly required to be included in this quarterly report, we will provide such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading. All subsequent written and oral forward-looking statements attributable to our Company or to persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. All forward-looking statements included in this quarterly report are made only as of the date of this report or as indicated. Except as required by law, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
| 4 |
Introduction
The Company has spent the last several years recasting the direction of the Company. We intend to take advantage of the opportunities that have been identified in the ancillary cannabis sectors. The market opportunities that are opened to a ancillary service provider to the cannabis company include hemp CBD sales, property rentals to cannabis operators at a profit and selling the proprietary Top Shelf System to cannabis dispensaries.
Our Business
Pineapple, Inc. (f/k/a Pineapple Express, Inc). (“Pineapple”, the “Company,” “we,” “us” or “our”) is based in Los Angeles, California and has a web presence of Pineappleinc.com. The Company procures and leases properties to licensed cannabis operators and provides nationwide hemp-derived CBD sales via online and in-store transactions, through Pineapple Wellness, Inc., which the Company acquired on June 12, 2023. The purpose of the acquisition was to have a fully functioning e-commerce platform, brand name of Pineapple Wellness, and domain of pineapplewellness.com to sell hemp-based CBD products. The acquisition also came with the opportunity to lease a CBD focused retail storefront near Beverly Hills, which the Company is currently in the process of making ready for in-store hemp-based CBD transactions. The Company will be assuming the lease on the retail storefront referenced herein as of October 1, 2023.
Through the Company’s operating subsidiary, Pineapple Express Consulting Inc., it also offers cannabis business licensing and consulting services. The Company’s executive team blends enterprise-level corporate expertise with decades of combined experience operating in the tightly-regulated cannabis industry.
ln addition to the foregoing business ventures, the Company was also assigned a patent for the proprietary Top Shelf Safe Display System (“SDS”) for use in permitted cannabis dispensaries and delivery vehicles across the United States and internationally (where permitted by law), on July 20, 2016, by Sky Island, Inc. (the “SDS Patent”) via a Patent Assignment Agreement (the “Patent Assignment Agreement”). The SDS Patent was originally applied for and filed on August 11, 2015, by Sky Island, Inc. and received its notice of allowance from the United States Patent and Trademark Office on March 22, 2017. It is anticipated that the Top-Shelf SDS product shall retail for $30,000 per unit. Pineapple intends to sell the Top-Shelf SDS units for use in retail storefronts and delivery vehicles operated by cannabis retail companies. The Company anticipates beginning sales of the Top Shelf SDS system in the third quarter of 2023.