Pineapple Express : , INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

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Forward-Looking Statements

Our Management’s Discussion and Analysis of Financial Condition and Results of
Operations section contains not only statements that are historical facts, but
also statements that are forward-looking. Forward-looking statements are, by
their very nature, uncertain and risky. These risks and uncertainties include
international, national, and local general economic and market conditions; our
ability to sustain, manage, or forecast growth; our ability to successfully make
and integrate acquisitions; new product development and introduction; existing
government regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; the loss of significant customers
or suppliers; fluctuations and difficulty in forecasting operating results;
change in business strategy or development plans; business disruptions; the
ability to attract and retain qualified personnel; the ability to protect
technology; the risk of foreign currency exchange rate; and other risks that
might be detailed from time to time in our filings with the SEC.

Although the forward-looking statements in this Annual Report reflect the good
faith judgment of our management, such statements can only be based on facts and
factors currently known by them. Consequently, and because forward-looking
statements are inherently subject to risks and uncertainties, the actual results
and outcomes may differ materially from the results and outcomes discussed in
the forward-looking statements. You are urged to carefully review and consider
the various disclosures made by us in this report as we attempt to advise
interested parties of the risks and factors that may affect our business,
financial condition, and results of operations and prospects. We do not
undertake any obligation to update forward-looking statements as a result of new
information, future events or developments or otherwise.

The following discussion of our financial condition and results of operations
should be read in conjunction with our financial statements and the related
notes, and other financial information included in this Annual Report.

The independent registered public accounting firms’ reports on the Company’s
financial statements as of December 31, 2020, and 2019, and for the years then
ended, includes a “going concern” explanatory paragraph that describes
substantial doubt about the Company’s ability to continue as a going concern.

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, and 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.”

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ln addition to having stakes in the foregoing business ventures, the Company was
also assigned a patent for the proprietary Top Shelf Safe Display System (“SDS”)
for use in permitted cannabis dispensaries and delivery vehicles across the
United States
and internationally (where permitted by law), on July 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 anticipated beginning
sales of the Top Shelf SDS system in the second quarter of 2021.

In 2019 the Company entered into a Share Exchange Agreement, as amended (the
“PVI Agreement”), with Pineapple Ventures, Inc. (“PVI”) and PVI’s stockholders.
In connection with the PVI Agreement, the Company acquired a total of 50,000
shares of PVI’s outstanding capital stock, equaling 50% of the outstanding
shares of PVI. The Company’s ownership interest in PVI was reduced to
approximately 45% in January 2020. As a result of the investment in PVI, the
Company entered the cannabis cultivation, production and distribution sector
throughout California. PVI has several leased properties that are currently
being developed to provide these cannabis-related services.

During 2019, PVI took preliminary business steps towards a project with Nordhoff
Leases, LLC
(“Nordhoff”), a related party, in which Nordhoff subleased 38,875
square feet in a building to three 15% owned entities by PVI; however, the
contemplated project never matriculated and the planned contribution of Nordhoff
to PVI was nullified. In June and July of 2020 PVI sold its 15% investments in
three entities, including the cannabis licenses associated with them for $2.87
million
to support its operations and assigned its three 15% owned entities’
subleases with Nordhoff to the buyer as part of the sale. PVI received 15% of
the proceeds of the sale of the entities and their cannabis licenses.

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 provides 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. 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.
Pineapple’s strategic asset integration has provided it with the infrastructure
to support its subsidiaries with cost-effective access to all segments of the
vertical: from cultivation and processing, to distribution, retail and delivery.
With its headquarters in Los Angeles, CA, Pineapple’s portfolio company, PVI, is
rapidly increasing its footprint throughout the state and looking to scale into
underdeveloped markets. While PVI is generating revenues from the
above-mentioned means, PEC is currently still in development and is currently
not generating revenues. The Company receives monthly dividends equal to
approximately 45% of PVI’s income that provide regular operating cash flows.

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In October 2020, PNPXPRESS, Inc. (an entity managed by PVI) secured three
cannabis licenses, including consumer delivery and statewide distribution, from
the City of Los Angeles for a retail storefront location at the intersection of
Hollywood & Vine (1704 N. Vine Street). The lease was signed in October 2020.
This 3460 square foot dispensary will be called Pineapple Express and is
scheduled to open by June of 2021, pending inspections from the city. PVI has
received 30% equity and will receive a management fee of 10% of sales of this
entity.


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.

Year Ended December 31, 2020, as compared to Year Ended December 31, 2019

Revenue


Revenue from operations for the fiscal year ended December 31, 2020, was $0,
which represents a decrease of $15,000, or 100% from $15,000 during the fiscal
year ended December 31, 2019. The decrease in revenue was related to generating
3 months of consulting revenue from PVI in 2019 with no such revenue generated
in 2020.

Operating Loss from Continuing Operations

Operating loss from continuing operations for the fiscal year ended December 31,
2020
, was $668,418, a decrease of $947,756, or 58.6%, from an operating loss
from continuing operations of $1,616,174 during the fiscal year ended December
31, 2019
. We noted that general and administrative expenses were significantly
higher for the fiscal year ended December 31, 2019, compared to the fiscal year
ended December 31, 2020, resulting in a decrease of the operating loss.

General and Administrative


General and administrative expenses for the fiscal year ended December 31, 2020,
were $661,557, a decrease of $960,988, or 59.2%, from $1,622,545 during the
fiscal year ended December 31, 2019. The most significant changes include a
decrease in legal and professional fees of approximately $576,000, a decrease in
consultant fees by approximately $387,000, a decrease in rent expense by
approximately $102,000, offset by an increase in directors consulting fees by
approximately $150,000.

Depreciation


Depreciation expense for the fiscal years ended December 31, 2020, and 2019 was
$6,861 and $8,629, respectively. The decrease comes from an asset which became
fully depreciated in 2020.

Other Income/Expense


During the fiscal year ended December 31, 2020, the Company has total other
expense of $480,410, consisting of $53,821 in interest expense, $388,099 in
losses from the Company’s equity method investment, $25,000 gain from debt
settlement, and $63,490 of liquidated damages on litigations settlement.

During the fiscal year ended December 31, 2019, the Company has total other
income of $447,712, consisting of $631,360 of other income from a mutual release
agreement, net of $104,775 in losses on settlements of debt, $17,588 in interest
expense and $61,285 in losses from the Company’s equity method investment.

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Net Loss


As a result of the foregoing, the Company recorded a net loss of $1,148,828 for
the fiscal year ended December 31, 2020, as compared to a net loss of $1,168,462
for the fiscal year ended December 31, 2019.

Liquidity and Capital Resources

As of December 31, 2020, the Company had a working capital deficit of
$2,773,936, and $0 in cash. As of December 31, 2020, the Company’s current
liabilities included $869,911 in accounts payable and accrued liabilities,
$615,000 in settlement payable, $52,408 in accrued interest payable, $857,175 in
related party notes payable, $19,838 in other notes payable, $169,000 in
advances on agreements and $100,048 in contingent liabilities. The Company has
funded its operations since inception primarily through the issuance of its
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,
consultants, and travel. Management expects that cash from operating activities
will not provide sufficient cash to fund normal operations, support debt
service, or undertake certain investments the Company anticipates prosecuting
for its business proposition both in the near and intermediate terms. The
Company will continue to rely on financing provided under notes from related and
third- party sources, as well as sale of shares of its common stock in private
placements, to fund its expected cash requirements.

We intend to continue raising additional capital through related party loans.
Additionally, in 2021 the Company is planning to apply to have its common stock
quoted on the OTC Markets, at which point the Company plans to raise money
through issuances of debt and/or equity securities in private placements to
accredited investors. 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.

Our consolidated financial statements included elsewhere in this Annual 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 consolidated
financial statements, we had an accumulated stockholders’ deficit of
$14,567,489, and had a net loss of $1,148,828 and utilized net cash of $543,624
in operating activities as of and for the year ended December 31, 2020. 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, 2020, and 2019, 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 consolidated financial statements included elsewhere in
this Annual 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-K. 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.

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Cash Flows Used In Operating Activities

Operating Activities


During the fiscal year ended December 31, 2020, we used $543,624 of cash in
operating activities, primarily as a result of our net loss of $1,148,828,
offset by amortization of right-of-use asset of $40,775, $66,303 in stock-based
compensation, depreciation expense of $6,861, and a loss from the Company’s
equity method investment of $388,099.

Operating assets and liabilities increased by $138,457 primarily due to an
increase in accrued interest payable of $53,117, an increase in due to
affiliates of $51,508, and an increase in accounts payable and accrued
liabilities of $25,888.

During the fiscal year ended December 31, 2019, we used $353,867 of cash in
operating activities, primarily as a result of our net loss of $1,168,462,
offset by amortization of right-of-use asset of $101,973, depreciation expense
of $8,629, $631,360 in income from a debt mutual release agreement, net of
$104,775 in losses on settlement of debts, $293,900 in stock-based compensation,
and a loss from the Company’s equity method of $61,285.

Operating assets and liabilities generated an increase in cash of $972,874,
primarily due to an increase in accounts payable and accrued liabilities of
$398,526, an increase of $447,320 in stock subscription receivable, an increase
of $69,517 in contingent liabilities and an increase of $39,148 in due to
affiliate.


Investing Activities



During the fiscal years ended December 31, 2020, and 2019, we had no cash flows
from investing activities.

Financing Activities


During the fiscal year ended December 31, 2020, we received $551,824 in cash
from financing activities, primarily from the proceeds of related party notes
payable. During the fiscal year ended December 31, 2020, the Company repaid
$8,200 of related party notes payable.

During the fiscal year ended December 31, 2019, we received $353,867 in cash
from financing activities, primarily from $387,367 in proceeds from related
party notes payable, offset by $30,000 repayment of advances on agreements and
$1,000 repayment of related party notes payable.

Off-Balance Sheet Arrangements

During the fiscal year ended December 31, 2020, the Company did not have any
transactions, obligations or relationships that could be considered off-balance
sheet arrangements.


Critical Accounting Policies



Use of Estimates


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, fair value of right-of-use
assets and lease liabilities, assessment of legal accruals, the fair value of
our stock, stock-based compensation and the valuation allowance related to
deferred tax assets. Actual results may differ from these estimates.

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Stock-based Compensation


The Company periodically issues restricted stock and warrants to employees and
non-employees in non-capital raising transactions for services and for financing
costs. The Company accounts for restricted stock and warrant grants issued and
vesting to employees based on the authoritative guidance provided by the
Financial Accounting Standards Board (“FASB”) where the value of the award is
measured on the date of grant and recognized as stock-based compensation expense
on the straight-line basis over the vesting period.

The Company accounts for restricted stock and warrant grants issued and vesting
to non-employees in accordance with the authoritative guidance of the FASB where
the value of the stock compensation is based upon the measurement date as
determined at either a) the date at which a performance commitment is reached,
or b) at the date at which the necessary performance to earn the equity
instruments is complete. In certain circumstances where there are no future
performance requirements by the non-employee, restricted stock and warrants
grants are immediately vested and the total stock-based compensation charge is
recorded in the period of the measurement date.

The fair value of the Company’s warrant grants, including the put obligation
liability from the THC Merger, are estimated using the Black-Scholes-Merton and
Binomial Option Pricing models, which use certain assumptions related to
risk-free interest rates, expected volatility, expected life of the stock
options or warrants, and future dividends. Compensation expense is recorded
based upon the value derived from the Black-Scholes-Merton and Binomial Option
Pricing models and based on actual experience. The assumptions used in the
Black-Scholes-Merton and Binomial Option Pricing models could materially affect
compensation expense recorded in future periods. In light of the very limited
trading of our common stock, market value of the shares issued was determined
based on the then most recent price per share at which we sold common stock in a
private placement during the periods then ended. As of the fiscal year ended
December 31, 2020, and 2019, there were no outstanding warrants or options.

Investments - Equity Method


The Company accounts for equity method investments 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
investments for other than temporary declines in fair value below cost and more
frequently when events or changes in circumstances indicate that the carrying
value of an asset may not be recoverable. As of December 31, 2020, the Company
believes the carrying value of its equity method investments were recoverable in
all material respects.

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