Pineapple Express Inc (OTCMKTS:PNPL) On A Runaway Train

Like any runaway train, it's just a matter of time before Pineapple Express Inc (OTCMKTS:PNPL) crashes. It's not a question of if, but when. Shares of PNPL have embarked on an epic short squeeze after the company released the news last week that Hustler owner Larry Flynt had invested a whopping $100,000.00 for 100,000 restricted shares of common stock. While Mr. Flynt is up over 20-fold on his investment on paper, PNPL now has a market cap of over $1 billion. How can a company with just $729k in assets, $914k in current liabilities, total stockholder's deficit of $185k, and a net loss of $4.5 million last year be worth this kind of money?Pineapple Express describes itself as "a publicly traded company that invests in, expands, and brands existing and newly established canna-businesses through expert consulting and cutting-edge technology. We provide capital to our canna-business clientele, lease real properties to canna-businesses, and provide consulting and technology to operators within the cannabis industry. We intend to create a nationally branded chain of company-owned cannabis retail stores under the "Pineapple Express" name, as soon as federal laws allow. As long as cannabis remains federally illegal, our operations will be limited to consulting, product licensing, leasing to and investing in existing and new canna-businesses, selling industry specific technology and branding/retail concept support services. Home to some of the most experienced and well-connected minds in the business, Pineapple Express is at the forefront of the legal cannabis industry."Among the companies ventures include a management and consulting agreement with the company’s consulting client, Nature’s Treatment of Illinois, Inc. (“NTI”). NTI was awarded one of approximately 60 possible medical cannabis dispensary licenses in Illinois. After the company assisted with conditional registration approval process and recent inspection, NTI is now able to engage in the distribution of cannabis for medical use in Illinois and will be the only one in Illinois’ District 7. The client will pay the company a consulting fee equal to the lesser of 5% of NTI’s gross profit or 15.18% of the after-tax distributable income of NTI and Nature’s Treatment of the Quad Cities, LLC.PNPL is also expanding its Desert Hot Springs footprint by purchasing an additional 1.26 acres of land directly abutting the 7.56 acres currently in escrow or already purchased. The company is interviewing tenants to fill the 9 vacant spaces and anticipates filling all vacancies within the next 6 months. PNPL will then commence the process of expanding the Conditional Use Permit held by the current tenant client and applying for separate regulatory permits for its tenants from the City of Desert Hot Springs. The new plan envisions 150,000 square feet of rentable warehouse space over 8.82 acres.Pineapple Express has also acquired the business and assets of THC Industries, Inc. (“THC”), the web domain www.thc.com, and the trademark THC^®. THC has been an operating business and was incorporated in California since 1996, making THC one of the first internet based cannabis related businesses in the nation. The acquisition included the THC.com URL address, the THC branded clothing line, use of a clothing distribution facility, and the rights to sell clothing, namely T-shirts, hats, beanies, pants, shorts, baseball jerseys, jackets, sweatshirts, polo shirts, and sweat pants displaying the THC trademarked name and logo. The terms were (i) a cash payment in the amount of $1,000,000, (ii) $4,000,000 of the Company’s common stock, or 2,275,133 shares based on the closing stock price on December 3, 2015, the date the parties entered into a letter of intent and (iii) a $600,000 note (part of the $1,000,000 cash payment) secured by all of the purchased intellectual property that is payable in two equal installments on the 60 day and 90 day anniversaries of closing.Perhaps most alarming about PNPL is the company's co-founder Vincent Mehdizadeh. PNPL is the second marijuana related company that Mr. Mehdizadeh has been able to take to a $1 billion market valuation. He previously founded Medbox Inc, which is now Notis Global Inc (OTCMKTS:NGBL). The damage was so great that the company had to change its name. If anyone is wondering how shareholders of Medbox fared, have a look.Sirf-online had a great expose on Vincent Mehdizadeh back in 2013. The site said:

A search of Los Angeles area criminal records databases shows that from 1997 to 2007, Mehdizadeh was arrested or pleaded no contest for breaking and entering, solicitation, trespassing and credit card fraud. He declared bankruptcy in July 2010, after landing up to his neck in back taxes owed to the Internal Revenue Service. Earlier this year, he wound up in the middle of the aforementioned consumer affairs investigation.

Certainly some unnamed parties are getting very rich in PNPL. According to filings:

On September 14, 2015, the Company issued an aggregate of 3,350,000 shares of its common stock in settlement of $335,000 convertible notes payable. On October 12, 2015, the Company issued an aggregate of 347,333 shares of its common stock for services valued at $538,366. On October 14, 2015, the Company sold 1,804,000 shares of its common stock for net proceeds of $451,000. On October 19, 2015, the Company sold 40,000 shares of its common stock for net proceeds of $10,000.

The reason behind Larry Flynt's investment is that his daughter Theresa is the company's VP of Business Development. A $100k investment is a drop in the bucket for Larry Flynt. He's been known to gamble more than that out in Las Vegas. The amazing thing is that PNPL is now worth more than Larry Flynt. We have not seen him on any billionaire lists.For us at Insider Financial, PNPL reminds us of Broke Out Inc (OTCMKTS:BRKO), which was halted by the SEC earlier this month. We think there's a risk the same could happen to PNPL as its current valuation has nothing to do with reality. Proceed with caution and get off the train before it crashes! We will be updating Insider Financial as soon as we know more. For continuing coverage on PNPL, sign up for our free newsletter today and get our next hot stock pick!Disclosure: We have no position in PNPL and have not been compensated for this article.