Pineapple, Inc 10-Q/A for FY2022 Q3
Pineapple, Inc. (PNPL)
About this 10-Q/A
Pineapple, Inc filed this 10-Q/A on January 30, 2023, covering the quarter ended September 30, 2022 (FY2022 Q3).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $9.77M
- compared with a net loss of $356.39K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Amendment No. 1
(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 January 30, 2023, there were shares of the registrant’s common stock, $0.0000001 par value per share, issued and outstanding.
EXPLANATORY NOTE
PINEAPPLE, INC.
Table of Contents
| Page | ||
| PART I - FINANCIAL INFORMATION | ||
| Item 1. | Condensed Consolidated Financial Statements (Unaudited) | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 19 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 26 |
| Item 4. | Controls and Procedures | 26 |
| PART II - OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 27 |
| Item 1A. | Risk Factors | 29 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 29 |
| Item 3. | Defaults Upon Senior Securities | 29 |
| Item 4. | Mine Safety Disclosures | 29 |
| Item 5. | Other Information | 29 |
| Item 6. | Exhibits | 30 |
| Signatures | 33 | |
| 2 |
PART I — FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements.
The following interim condensed consolidated financial statements of Pineapple, Inc. are included in this Quarterly Report on Form 10-Q:
INDEX TO FINANCIAL STATEMENTS
| 3 |
Pineapple, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
September 30, 2022 | December 31, 2021 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Deposit on stock purchase agreement – related party | ||||||||
| Total Current Assets | ||||||||
| Property and equipment (net of depreciation) | ||||||||
| Equity-method investment | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ (Deficit) Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Accounts payable - related party | ||||||||
| Accrued interest payable | ||||||||
| Settlement payable - related party | ||||||||
| Due to related parties | ||||||||
| Notes payable-related party | ||||||||
| Note payable | ||||||||
| Advances on agreements | ||||||||
| Contingent liabilities | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies (note 12) | ||||||||
| Stockholders’ (Deficit) Equity: | ||||||||
| Preferred stock, $ par value, shares authorized, shares issued and outstanding | ||||||||
| Series A Convertible Preferred stock, $ par value, shares authorized, shares issued and outstanding | ||||||||
| Preferred stock value | ||||||||
| Common stock, $ par value, shares authorized, shares issued and outstanding as of September 30, 2022, and December 30, 2021, respectively | ||||||||
| Stock payable | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ (Deficit) Equity | ( | ) | ||||||
| Total Liabilities and Stockholders’ (Deficit) Equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
Pineapple, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income (Expense) | ||||||||||||||||
| Income (loss) from equity method investment | ( | ) | ( | ) | ||||||||||||
| Gain on forgiveness of related party note payable | ||||||||||||||||
| Gain on sale of subsidiary | ||||||||||||||||
| Loss on impairment of equity-method investment | ( | ) | ( | ) | ||||||||||||
| Total Other Income (Expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) from operations before taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net 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.
| 5 |
Pineapple, Inc.
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity
For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)
For the Nine Months Ended September 30, 2022:
| Total | ||||||||||||||||||||||||
| Common Stock | Additional Paid-in- | Accumulated | Stock | Stockholders’ (Deficit) | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Payable | Equity | |||||||||||||||||||
| Balance, January 1, 2022 | $ | | $ | $ | ( | ) | $ | |||||||||||||||||
| Common stock subscription received | ||||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Common stock subscription received | - | |||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
For the Nine Months Ended September 30, 2021:
| Total | ||||||||||||||||||||||||
| Common Stock | Additional Paid-in- | Accumulated | Stock | Stockholders’ (Deficit) | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Payable | Equity | |||||||||||||||||||
| Balance, January 1, 2021 | $ | $ | $ | ( | ) | $ | | |||||||||||||||||
| Common stock subscription received | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of March 31, 2021 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Common stock subscription received | ||||||||||||||||||||||||
| Common stock issued for services | ( | ) | ||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of June 30, 2021 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Cancellation of common stock pursuant to arbitration agreement | ( | ) | ||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Net income (loss) | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
Pineapple, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| For the Nine Months Ended | ||||||||
September 30, 2022 | September 30, 2021 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Stock-based compensation | ||||||||
| Loss (income) from equity-method investment | ( | ) | ||||||
| Gain on forgiveness of related party note payable | ( | ) | ||||||
| Loss on impairment of equity-method investment | ||||||||
| Gain on sale of subsidiary | ( | ) | ||||||
| Changes in operating assets and liabilities (net of amounts disposed of): | ||||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Accounts payable related party | ||||||||
| Due to related parties | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| - | - | |||||||
| Net cash used in investing activities | ||||||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds for stock subscription received | ||||||||
| 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 | $ | $ | ||||||
| For the Nine Months Ended | ||||||||
September 30, 2022 | September 30, 2021 | |||||||
| Supplemental Disclosures of Cash Flow Information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Supplemental Disclosures of Non-Cash Investing and Financing Activities | ||||||||
| Liabilities settled by related parties | $ | $ | ||||||
| Common stock issued for services | $ | $ | ||||||
| Gain on forgiveness of related party note payable | $ | $ | ||||||
| Deposit on stock purchase agreement | $ | $ | ||||||
| Termination of stock purchase agreement | $ | $ | ||||||
| Gain on sale of subsidiary | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 7 |
PINEAPPLE, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2022
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.
| 8 |
On
January 17, 2020, the Company entered into an agreement with Jaime Ortega whereby in exchange for Mr. Ortega cancelling $
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying 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 6, 2022, and further amended and filed with the SEC on May 18, 2022. 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., doing business as Pineapple Express. Intercompany accounts and transactions have been eliminated.
On
September 28th, 2022, the Company signed a letter of intent with Jaime Ortega for the sale of 100% interest of Pineapple Park,
LLC (“PP”), in exchange for forgiveness of $
| 9 |
The Company’s consolidated subsidiaries and/or entities were as follows:
Schedule of Consolidated Subsidiaries and/or Entities
| 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 | ||||
|
% | ||||||
| % | |||||||
On
September 28th, 2022, the Company signed a letter of intent with Mathew Feinstein, a related party and
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, stock-based compensation and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.
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.
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:
Schedule of Estimated Useful Lives Property and Equipment
| Office equipment | ||
| Furniture and fixtures |
| 10 |
Investment – Equity Method
The Company accounts 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 September 30, 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 condensed consolidated statements of operations for the three- and nine-months ended September 30, 2022. Refer to Note 6 for disclosures relating to impairment of the Company’s equity method investment.
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 September 30, 2022, and December 31, 2021, the Company had options or warrants outstanding and shares issuable for conversion of notes payable.
Stock-based Compensation
The value of restricted stock awards is determined using the fair value of the Company’s common stock on the date of grant. The Company accounts for forfeitures as they occur.
Recently Adopted and Pending Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 simplifies the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. In addition, ASU 2020-06 amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. The Amendments also affects the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. The amendments are effective for public entities excluding smaller reporting companies for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods. The Company is still evaluating the effect the adoption will have on its financial statements.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statement presentation or disclosures.
| 11 |
Note 3 – Going Concern
The
Company’s condensed 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 condensed consolidated financial statements, the Company has an accumulated deficit of $
The Company and the Company’s equity-method investment have incurred net losses prior to Q3 2022. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date that the condensed consolidated financial statements are issued. The Company’s condensed 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.
During the nine months ended September 30, 2022, the Company raised approximately $
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.
Note 4 – Deposit on stock purchase agreement – related party
On
August 7, 2021, the Company entered into a Stock Purchase Agreement (the “CGI Agreement”) with Capital Growth Investments,
Inc., a California corporation (“CGI”) and PVI, the Company’s equity-method investee. Pursuant to the Agreement, the
Company can acquire up to shares of CGI (the “Shares”), which comprise of its issued and outstanding capital stock,
from PVI for an aggregate purchase price of $
Within 60 days of execution of the Agreement, the remaining balance of $ is to be paid in exchange for the full of the Shares of the Company. Contemporaneously with the execution of the CGI Agreement, the parties entered into a Shareholder Agreement with CGI (the “Shareholder Agreement”). Pursuant to the Shareholder Agreement, the Company was granted certain anti-dilution rights, as well certain monthly distributions of net cash from the operations of CGI, along with other voting and indemnification rights. Pursuant to an Amendment to Stock Purchase Agreement, dated November 26, 2021, the Company, CGI and PVI have acknowledged that the Purchase Price was to be paid in exchange for the entirety of the Shares on or before March 31, 2022. Should the Company be unable to fund the balance of $ by March 31, 2022, the transaction shall be cancelled and the refundable deposit of $ shall be returned to the Company. In March 2022, all parties agreed to extend the closing to June 30, 2022 (“revised closing date”). Should the Company be unable to fund the balance of $ by September 30, 2022, the transaction will be cancelled, and all deposits would be returned to the Company.
In
June 2022, both parties agreed to extend the closing date to August 5, 2022. On August 8, 2022, both PVI and CGI mutually agreed to
terminate the Stock Purchase Agreement.
| 12 |
Note 5 – Property and Equipment
Property and equipment as of September 30, 2022, and December 31, 2021, is summarized as follows:
Schedule of Property and Equipment
| September 30, 2022 | December 31, 2021 | |||||||
| Furniture and fixtures | $ | $ | ||||||
| Office equipment | ||||||||
| Subtotal | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation
expense for the three and nine months ended September 30, 2022 was $
Note 6 – Equity Method Investment
In March 2019, the Company acquired a % investment in Pineapple Ventures, Inc. (“PVI”) in exchange for shares of the Company’s Series A Preferred stock, which upon issuance were immediately converted into shares of common stock. The investment has been accounted for under the equity method. In addition to having a direct investment, the Company also noted that common ownership with PVI represents an additional variable interest. However, it was determined that the Company does not have the power to direct the activities that most significantly impact PVI’s economic performance, and therefore, the Company is not the primary beneficiary of PVI and PVI has not been consolidated under the variable interest model.
On
January 17, 2020, the Company entered into an agreement with Jaime Ortega whereby in exchange for Mr. Ortega cancelling $
The
investment was recorded at cost, which was determined to be $
In November 2021, PNPL Holdings Inc., was created for the sole purpose of holding direct equity in the Los Angeles cannabis businesses. The City of Los Angeles passed a provision stating that management companies cannot directly hold equity in the operations they manage. As such, PNPL Holdings, Inc. was set up as an affiliate of PVI that is not owned by PVI for PVI’s equity in the operations of dispensaries in the following California locations: Hollywood and Vine, West Los Angeles, South Los Angeles, Northeast Los Angeles, and San Pedro. CGI and UHC remain unaffected since these dispensaries are not in the City of Los Angeles.
Previously, PVI has invested in established cannabis businesses, funded cannabis start-up businesses, managed the aforementioned businesses for a management fee, and in some instances subleased property to these businesses for a profit. However, as of September 1, 2022, PVI shifted its primary focus to being a “non-plant touching” entity through development of cannabis assets and resale of the same for a profit in partnership with its affiliate entities, hemp CBD retail management services for a fee, and leasing and subleasing cannabis retail properties for a profit. PVI no longer operates or partially owns cannabis assets and acts only as a consultant for the purpose of facilitating development of those assets through PNPL Holdings, Inc. PNPL Holdings, Inc. is wholly-owned by Matthew Feinstein and, as such, is a related party to Pineapple, Inc. PVI no longer receives a 10% management fee for these cannabis entities and is now completely a non-plant touching ancillary service provider to the cannabis industry. As of September 30, 2022, PVI carries no ownership of any cannabis assets. However, PVI did own the following cannabis assets as of December 31, 2021 (these portions of ownership were transferred to PNPL Holdings, Inc.):
| ● | Capital
Growth Investments, Inc. (“CGI”): | |
| ● | Universal
Herbal Center, Inc (“UHC”): | |
| ● | PNPLXPRESS,
Inc. (“PXI”): | |
| ● | PNPLXPRESS
II, Inc (“Northeast LA Dispensary”): |
The ownership percentages previously owned by PVI were transferred to PNPL Holdings, Inc. During the nine months ended September 30, 2022, three of the above cannabis assets (CGI, UHC and PXI) generated revenue while PVI held ownership. As noted above, as of September 30, 2022, PVI no longer has any ownership in these entities.
| 13 |
The following represents summarized financial information of PVI as of and for the nine months ended September 30, 2022, and 2021, respectively:
Summary of Financial Information of Subsidiaries
| Income statement | 2022 | 2021 | ||||||
| Revenue | $ | $ | ||||||
| Cost of goods sold | ( | ) | ||||||
| Gross margin | ||||||||
| Operating expenses | ( | ) | ( | ) | ||||
| Gain on dispensary equity sale | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Balance sheet | ||||||||
| Current assets | $ | $ | ||||||
| Non-current assets | $ | $ | ||||||
| Current liabilities | $ | ( | ) | $ | ( | ) | ||
| Non-Current liabilities | $ | ( | ) | $ | ( | ) | ||
The
Company has recorded an income from equity investment of $
Management reviews its equity investment for impairment if and when circumstances indicate that a decline in fair value below its carrying amount may have occurred. PNPL determined that a triggering event occurred in September 2022 with respect to its equity method investment in PVI, due to the change in business strategy as of September 1, 2022 and the general adverse developments in the California cannabis industry, both of which have negatively impacted the investment’s strategic direction. After completing its impairment assessment, management determined that the carrying amount exceeded its estimated fair value and the impairment condition was considered other than temporary. The assumptions that most significantly affected the fair value determination included projected cash flows and the discount rate. The Company-specific inputs for measuring fair value are considered “Level 3” or unobservable inputs that are not corroborated by market data under applicable fair value authoritative guidance, as quoted market prices are not available.
As
such, PNPL has recorded an impairment charge of $
Note 7 – Notes Payable, Related Party
Notes payable-related party, are comprised of the following as of September 30, 2022, and December 31, 2021:
Schedule of Notes Payable Related Party Transactions
| Noteholder | Due | Interest Rate | Secured | September 30, 2022 | December 31, 2021 | ||||||||||||||
| Eric Kennedy | % | ||||||||||||||||||
| Rob Novinger | % | ||||||||||||||||||
| Neu-Ventures, Inc. | | % | |||||||||||||||||
| Total | $ | $ | |||||||||||||||||
Eric Kennedy (former director)
In
May 2019, the Company agreed to a settlement with Eric Kennedy, a Company’s director, related to deferred cash compensation
that had been accrued for in the Company’s accounts payable and accrued liabilities to reduce the amount to $
The
note does not incur interest and was originally to be repaid through an initial $
During
the three and six months ended June 30, 2022, Eric Kennedy forgave the amount due from the Company, as he was not awaiting repayment
for any funding he had provided to the Company during previous years. This settlement has been recorded as a gain on forgiveness of related
party note payable in the Consolidated Statements of Operations. The balance of the former related party notes payable is
| 14 |
Rob Novinger
There
was
Neu-Ventures, Inc. (The owner is the largest shareholder of the Company)
Beginning in April 2019, the Company also began receiving advances from Neu-Ventures, Inc., another entity owned by our majority shareholder, Mr. Ortega. These advances are due on demand and do not incur interest.
Advances
from Neu-Ventures in the three and nine months ended September 30, 2022, totaled $
During
fiscal year 2021, Neu-Ventures also paid $
The
amount payable to Neu Ventures totaled $
Note 8 – Note Payable
The
Company, through our former subsidiary, BBC, entered into a $
Note 9 – Settlement payable-related party
At September 30, 2022, and December 31, 2021, the settlement payable related party balance consists of the following:
Schedule of Settlement Payable Related Party
| Noteholder | September 30, 2022 | December 31, 2021 | ||||||
| Investor Three | ||||||||
| Settlement payable | $ | $ | ||||||
| 15 |
Investor Three
In
December 2015, the Company entered into a Revenue Share Agreement for $
Note 10 – Advances on Agreements
At September 30, 2022, and December 31, 2021, advances on agreements balance consist of the following:
Schedule of Advance on Agreement
| Noteholder | September 30, 2022 |
December
31, 2021 |
||||||
| 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 $
| 16 |
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 $
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’ (Deficit) Equity
The
Company is authorized to issue
During
the three and nine months ended September 30, 2022, the Company did not sell any shares of common stock and did not award any stock compensation
to its officers or directors. During the three and nine months ended September 30, 2021, the Company sold shares of common
stock for total cash consideration of $
Subscription received - shares to be issued
During the nine months ended September 30, 2022, the Company received stock subscriptions totaling $ in cash for shares at $/share during Q1 2022 and shares at $/share during Q2 2022. As of September 30, 2022, the shares were not yet issued, and the Company recorded the shares to be issued of $.
Note 12 – 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:
| 17 |
Pineapple Express v. Ramsey Salem
JAMS Arbitration Reference Number: 1220063897 was filed December 4, 2019. This matter arises from claims of breach of contract, more specifically the confidentiality provisions of certain Agreement and Plan of Merger and Reorganization dated February 12, 2016, entered into between the parties and arising from the disclosure of the interim arbitration award in the matter entitled and above-referenced as: Salem, et al. v. Pineapple Express, Inc., et al. JAMS Arbitration Reference Number: 1210035565, filed July 13, 2018, by Respondent. On April 8, 2021, the parties entered into a settlement agreement and mutual general release, under which the Company withdrew the second arbitration.
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 $
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 $
| 18 |
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 $
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 13 – Subsequent Events
The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and has determined that there have been no events that have occurred that would require adjustments to the disclosures in the condensed consolidated financial statements, other than those described below and the binding letter of intent detailed in Note 2.
On January 2, 2023, Pineapple, Inc. entered into an agreement to sell its
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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.
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 and nine months ended September 30, 2022, 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 nine months ended September 30, 2022, and 2021. It is supplemental to and should be read in conjunction with the Company’s unaudited condensed consolidated financial statements as of September 30, 2022, and the consolidated financial statements for the year ended December 31, 2021, included in our Annual Report on Form 10-K for the year ended December 31, 2021, 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. |
| 20 |
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 6, 2022, and amended on May 18, 2022, 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.
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 cannabis sectors. The market opportunities that are opened to a cannabis company include PVI’s involvement with cannabis delivery, retail, manufacturing, and cultivation. Our main focus has been to receive 45.17% of all net income (loss) generated by PVI from its business ventures, as well as selling the Top Shelf System to cannabis dispensaries.
Our Business
The Company was originally formed in the state of Nevada under the name Global Resources, Ltd. on August 3, 1983. It changed its name to “Helixphere Technologies Inc.” on April 12, 1999, and to “New China Global Inc.” on October 2, 2013. It reincorporated in Wyoming on October 30, 2013, changed its name to “Globestar Industries” on July 15, 2014. On August 24, 2015, the Company entered into a share exchange agreement with Better Business Consultants, Inc. (“BBC” dba “MJ Business Consultants”), a corporation formed in California on January 29, 2015, all of BBC’s shareholders, and the Company’s majority shareholder at that time (the “BBC Share Exchange”). Pursuant to the BBC Share Exchange, BBC became a wholly owned subsidiary of the Company. Upon consummation of the BBC Share Exchange, the Company ceased its prior business of providing educational services and continued the business of BBC as its sole line of business. BBC has three wholly owned subsidiaries, Pineapple Express One LLC, a California limited liability company, Pineapple Express Two LLC, a California limited liability company, and Pineapple Properties Investments, LLC, a Washington limited liability company. Better Business Consultants, Inc. has since been sold by the Company. On September 3, 2015, the Company changed its name to “Pineapple Express, Inc.” from “Globestar Industries.” Currently, the Company is in the process of seeking regulatory approval from the Financial Industry Regulatory Authority (“FINRA”) to change its name to Pineapple, Inc.
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 20th, 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 to PVI for use in retail storefronts and delivery vehicles as well as to sell the Top Shelf SDS technology to other cannabis retail companies. The Company anticipates beginning sales of the Top Shelf SDS system in the third quarter of 2023.
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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 50% of the outstanding shares of PVI, in consideration for 2,000,000 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 $0.0000001 (the “Common Stock”), in an amount equal to ten (10) shares of Common Stock for each one share of Series A Convertible Preferred Stock. The PVI Stockholders elected to immediately convert the 2,000,000 shares of Series A Convertible Preferred Stock into 20,000,000 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 $1,062,000 of existing loans extended to the Company by Jaime Ortega, Neu-Ventures, Inc., and Sky Island, Inc., the Company transferred to Mr. Ortega 10,000 shares of capital stock of PVI. Subsequently, on February 11, 2021, the parties entered into amended agreement pursuant to which the original number of shares sold to Mr. Ortega was reduced from 10,000 shares of capital stock of PVI to 4,827 shares of capital stock of PVI. Accordingly, the Company currently owns 45,173 shares of capital stock of PVI. This amendment was entered into to correct the original agreement and properly reflect the value of the Company’s stock at the time of the initial agreement. As of September 30, 2022, and December 31, 2021, the Company has a 45.17% ownership interest in PVI, its equity-method investment. As of September 30, 2022, this investment has been fully impaired.
Pursuant to an Agreement and Plan of Merger (“Merger Agreement”), dated as of April 6, 2020, by and between, Pineapple Express, Inc., a Wyoming corporation (“Pineapple Express”), and Pineapple, Inc., a Nevada corporation (“Pineapple”) and wholly-owned subsidiary of Pineapple Express, effective as of April 15, 2020 (the “Effective Date”), Pineapple Express merged with and into Pineapple, with Pineapple being the surviving entity (the “Reincorporation Merger”). The Reincorporation Merger was consummated to complete Pineapple Express’ reincorporation from the State of Wyoming to the State of Nevada. The Merger Agreement, the Reincorporation Merger, the Name Change (as defined below) and the Articles of Incorporation and Bylaws of Pineapple were duly approved by the written consent of shareholders of Pineapple Express owning at least a majority of the outstanding shares of Pineapple Express’ common stock. Pursuant to the Merger Agreement, the Company’s corporate name changed from “Pineapple Express, Inc.” to “Pineapple, Inc.”
The Company is based in Los Angeles, California. Through the Company’s operating subsidiary Pineapple Express Consulting, Inc. (“PEC”), as well as its PVI portfolio asset, the Company has historically provided capital to its canna-business clientele, leases properties to those canna-businesses, takes equity positions and manages those operations, and provides consulting and technology to develop, enhance, or expand existing and newly formed infrastructures. As of September 1, 2022, PVI shifted its primary focus to being a “non-plant touching” entity through development of cannabis assets and resale of the same for a profit in partnership with its affiliate entities, hemp CBD retail management services for a fee, and leasing and subleasing cannabis retail properties for a profit. PVI no longer operates or partially owns cannabis assets and acts only as a consultant for the purpose of facilitating development and future equity sales of those assets through PNPL holdings, the sales of which PVI will continue to earn. The cannabis assets are developed under PNPL Holdings, Inc., an affiliate of PVI that is not owned by PVI. PVI no longer receives a 10% management fee for these cannabis entities and is now completely a non-plant touching ancillary service provider to the cannabis industry. Pineapple aims to become the leading portfolio management company in the U.S. cannabis sector. The Company’s executive team blends enterprise-level corporate expertise with a combined three decades of experience operating in the tightly regulated cannabis industry. While PVI is generating revenues from the above-mentioned means, PEC is currently still in development and is currently not generating revenues.
Impact of COVID-19
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic, which continues to spread throughout the United States. As a result, significant volatility has occurred in both the United States and International markets. While the disruption is currently expected to be temporary, there is uncertainty around the duration. To date, the Company has experienced declining revenues, difficulty staffing interpreters, difficulty meeting debt covenants, maintaining consistent service quality with reduced revenue, and a loss of customers. Management expects this matter to continue to impact our business, results of operations, and financial position, but the ultimate financial impact of the pandemic on the Company’s business, results of operations, financial position, liquidity, or capital resources cannot be reasonably estimated at this time.
Recent Developments
None
Recent Accounting Pronouncements
Please see section captioned “Recent Accounting Pronouncements” in Note 1 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a discussion of recently issued and adopted accounting pronouncements.
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Results of Operations
Summary of Results of Operations for the three months ended September 30, 2022, and 2021:
| (In dollars) | September 30, 2022 | September 30, 2021 | ||||||
| Revenue | $ | - | $ | - | ||||
| Operating expenses: | ||||||||
| General and administrative | 125,090 | 127,031 | ||||||
| Depreciation | 933 | 1,541 | ||||||
| Total operating expenses | 126,023 | 128,572 | ||||||
| Operating loss | (126,023 | ) | (128,572 | ) | ||||
| Other income (expense): | ||||||||
| Income (loss) from equity method investment | 757,991 | (227,822 | ) | |||||
| Gain on sale of subsidiary | 386,287 | - | ||||||
| Loss on impairment of equity-method investment | (10,787,652 | ) | - | |||||
| Total other income (expense) | (9,643,374 | ) | (227,822 | ) | ||||
| Income (loss) from operations before taxes | (9,769,397 | ) | (356,394 | ) | ||||
| Provision for income taxes | - | - | ||||||
| Net income (loss) | $ | (9,769,397 | ) | $ | (356,394 | ) | ||
Revenue
Revenue from operations for the three months ended September 30, 2022, and 2021 was $0. The Company has not yet generated any revenue.
General and administrative
General and administrative expenses for the three months ended September 30, 2022, were $125,090, a decrease of $1,941, or 1.5%, from $127,031 during the three months ended September 30, 2021. Management does not consider such decrease as material.
Depreciation
Depreciation expense was $933 and $1,541 in the three months ended September 30, 2022, and 2021, respectively. Management does not consider such decrease as material.
Operating loss
Operating loss for the three months ended September 30, 2022, was $126,023, a decrease of $2,549, or 2% from an operating loss of $128,572 during the three months ended September 30, 2021. Management does not consider such decrease as material.
Other income (expense)
During the three months ended September 30, 2022, the Company has total other expense of $9,643,374 consisting of $757,991 of income from the Company’s equity method investment, $386,287 from gain on the sale of Pineapple Park, and $10,787,652 from loss on impairment of the equity-method investment. The income from the Company’s equity-method investee is primarily comprised of the following: gain of $2,347,653 from the sale of equity interest from previously acquired dispensaries, in excess of the carrying cost of the original acquisition, $177,019 of management fees and rental income, offset by $842,891 of general and administrative expenses and $6,710 of depreciation expense.
| 23 |
During the three months ended September 30, 2021, the Company has total other expense of $227,822, consisting of losses from the Company’s equity method investment. The net loss is primarily comprised of $13,339 of management fees and rental income, offset by $233,303 of general and administrative expenses and $8,475 of depreciation expense.
Net income (loss)
As a result of the foregoing, the Company recorded a net loss of $9,769,397 for the three months ended September 30, 2022, as compared to a net loss of $356,394 for the three months ended September 30, 2021.
Summary of Results of Operations for the nine months ended September 30, 2022, and 2021:
| (In dollars) | September 30, 2022 | September 30, 2021 | ||||||
| Revenue | $ | - | $ | - | ||||
| Operating expenses: | ||||||||
| General and administrative | 380,553 | 448,030 | ||||||
| Depreciation | 4,129 | 4,623 | ||||||
| Total operating expenses | 384,682 | 452,653 | ||||||
| Operating loss | (384,682 | ) | (452,653 | ) | ||||
| Other income (expense): | ||||||||
| Income (loss) from equity method investment | 1,499,355 | (790,126 | ) | |||||
| Gain on forgiveness of related party note payable | 30,000 | - | ||||||
| Gain on sale of subsidiary | 386,287 | - | ||||||
| Loss on impairment of equity-method investment | (10,787,652 | ) | - | |||||
| Total other income (expense) | (8,872,010 | ) | (790,126 | ) | ||||
| Income (loss) from operations before taxes | (9,256,692 | ) | (1,242,779 | ) | ||||
| Provision for income taxes | - | - | ||||||
| Net income (loss) | $ | (9,256,692 | ) | $ | (1,242,779 | ) | ||
Revenue
Revenue from operations for the nine months ended September 30, 2022, and 2021, was $0. The Company has not yet generated any revenue.
General and administrative
General and administrative expenses for the nine months ended September 30, 2022, were $380,553, a decrease of $67,477, or 15.1%, from $448,030 during the nine months ended September 30, 2021. This is primarily attributable to a decrease in legal and professional fees of $25,755, a decrease in accounting fees of $10,622, and a decrease in stock-based compensation of $35,000.
| 24 |
Depreciation
Depreciation expense was $4,129 and $4,623 in the nine months ended September 30, 2022, and 2021, respectively. Management does not consider such decrease as material.
Operating loss
Operating loss for the nine months ended September 30, 2022, was $384,682, a decrease of $67,971, or 15% from an operating loss of $452,653 during the nine months ended September 30, 2021. This is due to the foregoing decrease in general and administrative expenses.
Other income (expense)
During the nine months ended September 30, 2022, the Company has total other expense of $8,872,010, consisting of $1,499,355 of income from the Company’s equity method investment, $30,000 recognized for gain on forgiveness of a related party note payable due to Eric Kennedy, $386,287 from gain on the sale of Pineapple Park, and $10,787,652 from loss on impairment of the equity-method investment. The $1,499,355 of income from the Company’s equity-method investee is primarily comprised of the following: gain of $4,965,510 from the sale of equity interest from previously acquired dispensaries, in excess of the carrying cost of the original acquisition, $487,993 of management fees and rental income, offset by $2,113,324 of general and administrative expenses and $20,130 of depreciation expense.
During the nine months ended September 30, 2021, the Company has total other expense of $790,126 consisting of losses from the Company’s equity method investment. The net loss is primarily comprised of $50,388 of management fees and rental income, offset by $832,896 of general and administrative expenses and $8,475 of depreciation expense.
Net income (loss)
As a result of the foregoing, the Company recorded a net loss of $9,256,692 for the nine months ended September 30, 2022, as compared to a net loss of $1,242,779 for the nine months ended September 30, 2021.
Liquidity and Capital Resources
As of September 30, 2022, we had a working capital deficit of $2,779,311 and no cash. As of September 30, 2022, the Company’s current liabilities included $367,124 in accounts payable and accrued liabilities, $47,500 in accounts payable and accrued liabilities related party, $6,771 in accrued interest payable, $763,739 in related party notes payable, $19,838 in other notes payable, $615,000 in settlement payable related party, $169,000 in advances on agreement, $105,523 in contingent liabilities and $684,816 due to affiliates. We have funded our operations since inception primarily through the issuance of our equity securities in private placements to third parties, and/or promissory notes to related parties for cash. The cash was used primarily for operating activities, including cost of employees, management services, professional fees, consultant fees, and travel. Our management expects that cash from operating activities will not provide sufficient cash to fund normal operations, support debt service, or undertake certain investments we anticipate prosecuting for our business proposition both in the near and intermediate terms. We will continue to rely on financing provided under notes from related and third-party party sources, as well as sale of shares of our common stock in private placements, to fund our expected cash requirements.
We intend to continue raising additional capital through related party loans and future sale of equity interest. There can be no assurance that these funds will be available on terms acceptable to us, if at all, or will be sufficient to enable us to fully complete our development activities or sustain operations. If we are unable to raise sufficient additional funds, we will have to develop and implement a plan to further extend payables, reduce overhead and operations, or scale back our current business plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.
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Our condensed consolidated financial statements included elsewhere in this quarterly report have been prepared assuming that we 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 such condensed consolidated financial statements, we had an accumulated stockholders’ deficit of $24,929,002 and had a net loss of $9,256,692 and utilized net cash of $103,885 in operating activities as of and for the nine months ended September 30, 2022. These factors raise substantial doubt about our ability to continue as a going concern. In addition, our independent registered public accounting firms in their audit reports to our consolidated financial statements for the fiscal years ended December 31, 2021, and 2020, expressed substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern was raised due to our net losses and negative cash flows from operations since inception and our expectation that these conditions may continue for the foreseeable future. In addition, we will require additional financing to fund future operations. Our condensed consolidated financial statements included elsewhere in this quarterly report 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 we be unable to continue as a going concern.
Based on our management’s estimates and expectation to continue to receive short-term debt funding from a related party on as needed basis, we believe that current funds on hand as of the date of issuance and proceeds of such loans will be sufficient for us to continue operations beyond twelve months from the filing of this Form 10-Q. Our ability to continue as a going concern is dependent on our ability to execute our business strategy and in our 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 our business; however, we can give no assurance that any future financing will be available or, if at all, and if available, that it will be on terms that are satisfactory to us. Even if we can obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity and/or convertible debt financing.
Sources and Uses of Cash
Operating Activities
During the nine months ended September 30, 2022, we used $103,885 of cash in operating activities, primarily as a result of our net loss of $9,256,692, net of depreciation expense of $4,129, and income from the Company’s equity-method investment of $1,499,355. Net change in operating assets and liabilities increased by $276,668, primarily due to an increase in balances due to related parties of $154,868 and an increase in accounts payable and accrued liabilities (including related party) of $121,800.
During the nine months ended September 30, 2021, we used $61,375 of cash in operating activities, primarily as a result of our net loss of $1,242,779, net of non-cash operating expenses of $829,749, including depreciation expense of $4,623, stock-based compensation of $35,000, and a loss from the Company’s equity method investment of $790,126. Operating liabilities increased by $351,655, primarily due to an increase in balances due to related parties of $271,571 and increase in accounts payable and accrued liabilities (including related party) of $80,084.
Investing Activities
There were no cash flows from investing activities during the nine months ended September 30, 2022 and 2021.
Financing Activities
During the nine months ended September 30, 2022, we received $150,000 in cash from private placement to third parties for shares to be issued. Advances from related parties totaled $5,885 and repayment amounted to $52,000 in the nine months ended September 30, 2022.
During the nine months ended September 30, 2021, we received $249,000 in cash from private placement to third parties. Advances from related parties totaled $56,325 and repayment amounted to $243,950 in the nine months ended September 30, 2021.
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Going Concern Qualification
The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the entity will continue as a going concern. As discussed in Note 3 to the unaudited condensed consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as of September 30, 2022, and December 31, 2021, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company, we are not required to provide the information by this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) that are designed to reasonably ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 15d-15(e) under the Exchange Act. Management based its controls on the report, “2013 Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
At the end of the period covered by this Quarterly Report, we conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon the foregoing, and to the same extent as reported in our Annual Report on Form 10-K for the year ended December 31, 2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2022, the disclosure controls and procedures of our Company were not effective to ensure that the information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported on a timely basis because of the material weaknesses in internal control over financial reporting described below.
Material Weaknesses and Corrective Actions
To the same extent as reported in our Annual Report on Form 10-K for the year ended December 31, 2021, we identified certain deficiencies relating to our internal control over financial reporting that constitute a material weakness under standards established by the Public Company Accounting Oversight Board (the “PCAOB”). The PCAOB defines a material weakness as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.
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The following material weaknesses in our internal control over financial reporting continued to exist as of September 30, 2022:
| ● | The Company does not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); | |
| ● | Due to the size of the Company and available resources, there are limited personnel to assist with the accounting and financial reporting functions, which results in lack of sufficient segregation of duties within accounting functions, which is a basic internal control. Due to the Company’s limited size and early-stage nature of operations, segregation of all conflicting duties may not always be possible and may not be economically feasible; however, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals; | |
| ● | The Company does not have an audit committee of our board of directors; and | |
| ● | Insufficient monitoring and review controls over the financial reporting closing process, including the lack of individuals with current knowledge of U.S. GAAP. |
To remediate the Company’s internal control weaknesses, management intends to implement the following measures, as finances allow:
| ● | Adding sufficient accounting personnel or outside consultants to properly segregate duties and to affect a timely, accurate preparation of the financial statements. | |
| ● | Developing and maintaining adequate written accounting policies and procedures once additional accounting personnel or outside consultants are engaged. |
The additional hiring is contingent upon our efforts to obtain additional funding and the results of our operations.
Management expects to secure funds before the end of the current fiscal year but provides no assurances that it will be able to do so.
Notwithstanding the material weaknesses discussed above, our management, including the Company’s CEO and CFO, concluded that the condensed consolidated financial statements in this quarterly report fairly present, in all material respects, the Company’s financial condition, results of operations and cash flows for the periods presented, in conformity with GAAP.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the quarter ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
CEO and CFO Certifications
Exhibit 31.1 to this Quarterly Report has the “Certifications” of our Chief Executive Officer and the Chief Financial Officer. These Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act (the “Section 302 Certifications”). This Item 4 of this Quarterly Report contains is the information concerning the Evaluation referred to in the Section 302 Certifications, and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
In the normal course of business, the Company is subject to various claims and litigation. While the outcome of any litigation is inherently unpredictable, the Company believes that it has valid defenses with respect to the legal matters pending against it and that the ultimate resolution of these matters will not have a materially adverse impact on its financial condition, results of operations, or cash flows. The following is a list of current litigation:
Pineapple Express v. Ramsey Salem
JAMS Arbitration Reference Number: 1220063897 was filed December 4, 2019. This matter arises from claims of breach of contract, more specifically the confidentiality provisions of certain Agreement and Plan of Merger and Reorganization dated February 12, 2016, entered into between the parties and arising from the disclosure of the interim arbitration award in the matter entitled and above-referenced as: Salem, et al. v. Pineapple Express, Inc., et al. JAMS Arbitration Reference Number: 1210035565, filed July 13, 2018, by Respondent. On April 8, 2021, the parties entered into a settlement agreement and mutual general release, under which the Company withdrew the second arbitration.
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 $900,000 arising from a series of successive amended and revised revenue sharing agreements pertaining to rental income from certain leasehold for premises more commonly known as 65421 San Jacinto Lane, Desert Hot Springs, CA 92240 which was not realized through no fault of Defendants, nor are Defendants contracting parties to the lease agreement or original revenue sharing agreement for which consideration was paid. Defendants deny all allegations of claims asserted in the Complaint. Notwithstanding, the parties settled the matter pursuant to a confidential settlement agreement in or about January 3, 2020. However, the matter was reduced to an entry of judgment by the court in or about February 21, 2020, for the amount of $615,000, which monies remain due and outstanding and are accrued for in the Company’s settlement payable as of September 30, 2022, and December 31, 2021. The parties are cooperating to resolve this matter pursuant to the terms of the agreed upon settlement.
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 $32,500. The matter arises from certain claim for goods and services rendered beyond the contract claim which is wholly disputed. The court case matter was stayed on February 11, 2019, pending the outcome of Arbitration. Finnegan & Diba was substituted out of the matter on June 14, 2019. The matter was arbitrated through other counsel and the arbitrator issued a final award in favor of Petitioner in or about September 4, 2019, for the principal amount of $15,375, which has been accrued for in the Company’s contingent liabilities as of December 31, 2018. The award was transitioned to an entry of judgment in the total amount of $18,692 on or about February 27, 2020, against Pineapple Express, Inc. without specificity as to the judgment debtor’s state of incorporation, and Pineapple Express Consulting Inc., which remains due and outstanding. The accrual in the Company’s contingent liabilities as of September 30, 2022, and December 31, 2021, is $18,692.
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 $47,674. Enforcement on the Judgment is continuing. Finnegan & Diba was retained to defend enforcement proceedings and substituted out of the matter in March 2019. This claim was accrued for in the Company’s contingent liabilities as of September 30, 2022, and December 31, 2021.
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 $2,367, which remains outstanding to date and since January 22, 2018. This amount has been accrued for in the Company’s contingent liabilities as of September 30, 2022, and December 31, 2021. Enforcement proceedings have ensued and said judgment remains outstanding to date. Finnegan & Diba was not the counsel of record when judgment was entered and only addressed enforcement proceedings until such time it was substituted out as counsel of record in or about June 14, 2019.
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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 $15,000. The parties self-represented in arbitration and a final arbitration award was issued in the amount $23,805 on or about October 27, 2020, against the Company. Claimant has since filed a Petition to Confirm Arbitration Award against Pineapple Express, Inc. a California Corporation, with the Los Angeles Superior Court bearing Case Number 20STCP04003, set for hearing on April 12, 2021. On information and belief, Pineapple Express Inc., a California Corporation, is not affiliated with Pineapple Inc., a Nevada Corporation, formerly known as Pineapple Express, Inc., a Wyoming Corporation. Claimant amended its complaint on or about February 3, 2021, to include Defendant Pineapple Express, Inc., a Wyoming corporation. A default judgement was entered on May 11, 2021, against Pineapple Express, Inc., in the amount of $29,280. Defendant, Pineapple Inc., a Nevada Corporation, is not a party to the pending matter to date. The parties hope to engage in settlement discussions and resolve this matter. The $29,280 has been accrued for as of September 30, 2022, and December 31, 2021, in the Company’s contingent liabilities.
Russ Schamun v. Pineapple Express Consulting, Inc.
This is a small claims matter for $7,500 filed by an independent contractor. There was a hearing date on August 23, 2019, and judgment was awarded to Russ Schamun. This creditor will be satisfied once the Company is in a position to satisfy the judgment. The $7,500 has been accrued for as of September 30, 2022, and December 31, 2021, in the Company’s contingent liabilities.
SRFF v. Pineapple Express, Inc.
This matter resulted in a stipulated judgment whereas former SEC counsel claimed approximately $60,000 in legal work that was not paid for. The Company claimed that the work being charged for (a registration statement to be filed with the SEC) was not completed. Regardless of this fact, the Company signed a payment plan and confession of judgment if the plan was not honored. The result was a judgment entered in favor of SRFF because of the confession. This creditor will be satisfied once the Company is in a position to satisfy the judgment. The settlement amount has been accrued for in the Company’s accounts payable and accrued liabilities balance at September 30, 2022, and December 31, 2021.
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 $30,851, which is accrued for in the Company’s related party notes payable (Note 7) as of September 30, 2022, and December 31, 2021. On September 23, 2020, a default judgment was entered against the Company. The parties are working to resolve the matter or alternatively vacate and set aside the default judgment entered unbeknownst to the Company.
Item 1A. Risk Factors.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
There were no unregistered sales of the Company’s equity securities during the quarter ended September 30, 2022, that were not previously disclosed in a Current Report on Form 8-k or Annual Report on Form 10-K.
Item 3. Defaults Upon Senior Securities.
None.
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Item 4. Mine Safety Disclosures.
There have been no events which are required to be reported under this Item.
Item 5. Other Information.
None.
Item 6. Exhibits.
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| 32 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| PINEAPPLE, INC. | ||
| Dated: January 30, 2023 | By: | /s/ Shawn Credle |
| Name: | Shawn Credle | |
| Title: | Chief Executive Officer (Principal Executive Officer) | |
| By: | /s/ Matthew Feinstein | |
| Name: | Matthew Feinstein | |
| Title: | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | |
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Exhibit 31.1
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Shawn Credle, certify that:
1. I have reviewed this Form 10-Q of Pineapple, Inc. for the period ended September 30, 2022.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report.
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly for the period in which this quarterly report is being prepared; | |
| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; | |
| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
| a) | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and | |
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
| Date: January 30, 2023 | ||
| By: | /s/ Shawn Credle | |
| Shawn Credle | ||
| Chief Executive Officer | ||
Exhibit 31.2
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Matthew Feinstein, certify that:
1. I have reviewed this Form 10-Q of Pineapple, Inc. for the period ended September 30, 2022.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report.
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly for the period in which this quarterly report is being prepared; | |
| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; | |
| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
| a) | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and | |
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
| Date: January 30, 2023 | ||
| By: | /s/ Matthew Feinstein | |
| Matthew Feinstein | ||
| Chief Financial Officer | ||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report of Pineapple, Inc. (the “Company”), on Form 10-Q for the period ended September 30, 2022, as filed with the U.S. Securities and Exchange Commission on the date hereof, I, Shawn Credle, Chief Executive Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | Such Quarterly Report on Form 10-Q for the period ended September 30, 2022, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in such Quarterly Report on Form 10-Q for the period ended September 30, 2022, fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: January 30, 2023 | ||
| By: | /s/ Shawn Credle | |
Shawn Credle Chief Executive Officer |
||
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report of Pineapple, Inc. (the “Company”), on Form 10-Q for the period ended September 30, 2022, as filed with the U.S. Securities and Exchange Commission on the date hereof, I, Matthew Feinstein, Chief Financial Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | Such Quarterly Report on Form 10-Q for the period ended September 30, 2022, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in such Quarterly Report on Form 10-Q for the period ended September 30, 2022, fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: January 30, 2023 | ||
| By: | /s/ Matthew Feinstein | |
| Matthew Feinstein | ||
| Chief Financial Officer | ||