10-Q: Pineapple Express Cannabis Reports Q3 Loss, Going Concern

Pineapple Express Cannabis Company reported a significant net loss for the nine months ended October 31, 2025, and disclosed substantial doubt about its ability to continue as a going concern.

Summary

• Net loss for the nine months ended October 31, 2025, was $622,176, a significant increase from $572 in the prior year.
• Revenue for the nine months ended October 31, 2025, was $0, down from $16,168 in the same period last year.
• The company has accumulated losses totaling $1,295,822 as of October 31, 2025.
• Total liabilities surged to $8,344,100 as of October 31, 2025, from $2,079 at January 31, 2025, primarily due to convertible notes payable, accrued interest, and derivative liabilities.
• All convertible notes payable, totaling $1,860,907 in principal, are in default, triggering a 200% repayment clause.
• Acquired a controlling interest in GROOVY Company, Inc. on March 5, 2025, integrating its AI-powered cannabis data analytics platform.
• Management concluded that disclosure controls and procedures were not effective, citing material weaknesses including the lack of an independent audit committee, inadequate cash controls, and insufficient IT controls.
• The company has a working capital deficit of $8,344,100 and $0 cash and cash equivalents.

Sentiment

Score: 2

Explanation: The company faces severe financial distress with zero revenue, substantial losses, a significant working capital deficit, and a 'going concern' warning. All convertible notes are in default, and internal controls are deemed ineffective. While the Groovy acquisition offers a strategic direction, the current financial state is highly precarious.

Positives

• Net cash provided by operating activities for the nine months ended October 31, 2025, was $938,654, a significant improvement from a net cash used of $11,763 in the prior year.
• Acquisition of GROOVY Company, Inc. provides an AI-powered data analytics platform for the legal cannabis industry, leveraging blockchain technology and cryptocurrency incentives.
• The GROOVY platform's architecture, including Hyperledger Fabric and NFT-based product authentication, offers secure and comprehensive data collection.
• The company's business model aims to monetize market intelligence through AI-powered marketing analysis, creating sustainable competitive advantages.

Negatives

• Reported a net loss of $622,176 for the nine months ended October 31, 2025, significantly higher than the $572 loss in the prior year.
• Generated $0 revenue for the nine months ended October 31, 2025, a decrease from $16,168 in the same period of 2024.
• Accumulated deficit reached $1,295,822 as of October 31, 2025.
• Total liabilities increased dramatically to $8,344,100 from $2,079, driven by substantial convertible notes payable, accrued interest, and derivative liabilities.
• All convertible notes payable, with a principal of $1,860,907, are in default, potentially requiring repayment at 200% of the principal plus interest and fees.
• The company has $0 cash and cash equivalents, indicating severe liquidity issues.
• Management concluded that disclosure controls and procedures were not effective, identifying material weaknesses in internal controls.

Risks

• Substantial doubt about the company's ability to continue as a going concern due to insufficient revenue and need for additional capital.
• Risks associated with the evolving cannabis market, including regulatory uncertainties and changes in laws.
• Competitive pressures within the cannabis sector.
• Technological disruptions impacting operational efficiency.
• Fluctuations in market demand and variations in product pricing.
• Risks relating to the volatile nature of the cryptocurrency market, potential security breaches, fluctuations in token values, and changes in investor sentiment.
• Regulatory classification of digital assets (meme tokens) remains subject to ongoing interpretation and potential changes, which could require tokens to be registered as securities or lead to enforcement actions.
• PINYA meme tokens are subject to extreme price volatility and speculative trading, with values potentially declining to zero.
• The company maintains 40-60% of PINYA token supply for rewards redemption, creating exposure to token price fluctuations.
• Business model depends on continued legal cannabis market growth, consumer adoption of QR-scanning technology, and compliance with evolving state cannabis regulations.
• Material weaknesses in internal control over financial reporting, including lack of an independent Audit Committee, inadequate cash controls, and insufficient information technology controls.
• The company's ability to offset future taxable income with net operating loss carryforwards may be limited due to non-filing of tax returns and potential changes in ownership (Section 382).

Future Outlook

The company's future depends on obtaining adequate capital to fund operating losses until it becomes profitable. Management plans to secure resources from management and significant stockholders. Success is also contingent on continued legal cannabis market growth, consumer adoption of QR-scanning technology, and compliance with evolving state cannabis regulations. The platform aims for network effects where increased participation creates exponentially greater value.

Management Comments

• Management believes that current trends toward lower capital investment in start-up companies pose the most significant challenge to the Company's success over the next year and in future years.
• The Company's management will have to spend additional time on policies and procedures to make sure it is compliant with various regulatory requirements, especially that of Section 404 of the Sarbanes-Oxley Act of 2002. This additional corporate governance time required of management could limit the amount of time management has to implement its business plan and impede the speed of its operations.
• Management has concluded that these conditions raise substantial doubt about our ability to continue as a going concern.

Industry Context

The company operates in the rapidly evolving legal cannabis industry, characterized by complex regulatory frameworks and fragmented market conditions. It aims to address information asymmetries through an AI-powered data analytics platform, integrating blockchain and cryptocurrency incentives. The use of utility and meme tokens positions it within the broader Web3 and decentralized finance ecosystems, which are also subject to significant regulatory and market volatility risks.

Comparison to Industry Standards

• The company's financial performance, marked by zero revenue and significant losses, is substantially below industry standards for established or even early-stage growth companies in the cannabis or tech sectors.
• The explicit 'going concern' warning and material weaknesses in internal controls indicate a highly distressed financial and operational state, far from global benchmarks for robust corporate governance or financial health.
• No specific comparable companies or projects are mentioned in the filing to provide a direct comparison, but the reported metrics suggest a company struggling to establish a viable business model and financial stability within its industry.

Management Changes

Corporate Governance

Legal Proceedings

• No material pending legal proceedings to which the company is a party.

Related Party Transactions

• On January 31, 2025, the company sold its remaining 25% ownership interest in Pineapple Consolidated, Inc. (PCI) to Matthew Feinstein, then-President, CEO, and Director, in exchange for a $3,000,000 reduction in a promissory note from PCI.
• On January 30, 2025, Matthew Feinstein and Shawn Credle sold 16,000,000 common shares to Franjose Frank Yglesias for $335,000, resulting in a change in control.
• Franjose Yglesias, the new CEO, President, Director, and Chairman, is also the CEO and controlling shareholder of GROOVY Company, Inc., making the acquisition of GROOVY a related party transaction.
• Employment agreements with Franjose Yglesias, Kevin Jodrey, and Marc Williams for annual salaries of $150,000 each.
• Upon resignation, Kevin Jodrey and Marc Williams had $112,500 in accrued management fees canceled, and their preferred stock (500 shares Preferred A, 2,000,000 shares Preferred C) was canceled and returned to treasury.

Stakeholder Impact

• Shareholders face significant dilution from stock issuances (5,000,000 for acquisition, 1,782,609 for debt conversion, 3,252,948 for services) and a high risk of capital loss due to 'going concern' issues, zero revenue, and massive liabilities.
• Creditors, particularly convertible note holders, are impacted by all convertible notes being in default, triggering a 200% repayment clause, while the company has $0 cash, raising questions about its ability to repay.
• Employees may face instability due to management changes and resignations.
• Customers of the GROOVY platform face uncertainty regarding the company's ability to continue operations and develop services given its severe financial distress.
• Regulatory authorities may scrutinize the company's non-compliance with internal control effectiveness and the cautionary statements regarding token classification.

Next Steps

• Obtain additional capital from management and significant stockholders to fund operating losses.
• Implement improvements to address material weaknesses in internal control over financial reporting, including establishing an independent Audit Committee, improving cash controls, and formalizing IT controls.
• Continue development and marketing of the AI-powered cannabis data analytics platform.
• Address compliance with various regulatory requirements, particularly Section 404 of the Sarbanes-Oxley Act of 2002.

Key Dates

Recommendation

The company is in a highly precarious financial position, evidenced by zero revenue, substantial net losses, a massive working capital deficit, and $0 cash. The explicit 'going concern' warning, coupled with all convertible notes being in default (triggering a 200% repayment clause), indicates severe liquidity and solvency issues. Furthermore, management has identified material weaknesses in internal controls, raising significant concerns about financial reporting reliability and corporate governance. While the acquisition of the GROOVY platform presents a strategic direction, the company's ability to execute on this vision is severely hampered by its current financial distress and operational deficiencies. Investors face an extremely high risk of capital loss.

Keywords

Cannabis, AI, Blockchain, Cryptocurrency, Meme Token, Data Analytics, Market Intelligence, SEC Filing, 10-Q, Financial Report, Going Concern, Convertible Notes, Corporate Governance, Internal Controls, PINYA XP, GROOVY Platform