What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-20 compared with 2023-08-14 · 118 added, 129 removed, 158 unchanged (61% of the section changed)

15 unchanged sentences

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.

Actual results may differ materially

from these expectations due to uncertainties related to the successful completion of our acquisition of Pegasus Specialty Vehicles, LLC,

or our failure to complete such acquisition;

the impact of the pendency of our acquisition on our business and operations;

and expected financing and the merger;

the possibility that any or all of the various conditions to the consummation of the merger may

not be satisfied or waived in a timely manner, if at all;

the possibility of business disruptions due to transaction-related uncertainty;

results may differ materially from these expectations due to uncertainties related to the successful completion of our acquisition of

Pegasus Specialty Vehicles, LLC, or our failure to complete such acquisition;

the impact of the pendency of our acquisition on our business

and operations;

the timing and expected financing and the merger;

the possibility that any or all of the various conditions to the consummation

of the merger may not be satisfied or waived in a timely manner, if at all;

the possibility of business disruptions due to transaction-related

and the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement.

Other factors which could have a material adverse effect on our operations

and future prospects on a consolidated basis include but are not limited to changes in economic conditions, legislative/regulatory changes,

availability of capital, interest rates, competition, and generally accepted accounting principles.

These risks and uncertainties should

also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

We undertake no

obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Further information concerning our business, including additional factors that could materially affect our financial results, is included

herein and in our other filings with the SEC , including the risks

and uncertainties identified under the heading “Risk Factors” in the Company’s most recent Annual Report on Form 10-K .

factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include but are not

limited to changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and

generally accepted accounting principles.

These risks and uncertainties should also be considered in evaluating forward-looking statements

and undue reliance should not be placed on such statements.

We undertake no obligation to update or revise publicly any forward-looking

statements, whether as a result of new information, future events or otherwise.

Further information concerning our business, including

additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC, including

the risks and uncertainties identified under the heading “Risk Factors” in the Company’s most recent Annual Report

on Form 10-K.

History and Experience in the Cannabis Space

43 unchanged sentences

We have a working capital

deficit of $2,118,418 as of June 30, 2023, and we are wholly dependent on capital to fund our business operations.

deficit of $2,118,418 as of September 30, 2023, and we are wholly dependent on capital to fund our business operations.

For these reasons,

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to us in all of its assets on the $500,000 loan, subordinate to other security interests as to the same collateral.

of the Merger is subject to the satisfaction or, if permitted by applicable law, waiver, by us, Pegasus, or both of various conditions.

For Pegasus, these conditions include, without limitation, (i) an agreeable plan to spin out the existing cannabis assets and operations,

(ii) an agreeable plan to transfer the outstanding shares of Series C Preferred Stock of our company to Brian Barrington simultaneously

to the date of the aforementioned spin-out;

of the Merger is subject to the satisfaction or, if permitted by applicable law, waiver, by us, Pegasus, or both of various

For Pegasus, these conditions include, without limitation, (i) an agreeable plan to spin out the existing cannabis

assets and operations, (ii) an agreeable plan to transfer the outstanding shares of Series C Preferred Stock of our company to Brian

Barrington simultaneously to the date of the aforementioned spin-out;

(iii) an agreeable plan to retire the Series E Designation;

(iv) financing by us of $3,000,000

(v) the filing of the Certificate of Designation for the Series AA Preferred Stock with the Secretary of State of Nevada;

(iv) financing by us of $3,000,000 less costs;

(v) the filing of the Certificate of Designation for the Series AA Preferred Stock

with the Secretary of State of Nevada;

and (vi) certain other customary conditions.

For us, these conditions include, without limitation, (i) a secured promissory note issued

by Pegasus to us in the amount of $500,000 with the collateral being a UCC lien subordinate to other lenders;

(ii) the payback by us

of certain advances contributed by corporate officers and others in our company in an amount not to exceed $140,000;

(iii) resolutions

of the equity holders of Pegasus approving the Merger Agreement and the transactions contemplated;

For us, these conditions include, without

limitation, (i) a secured promissory note issued by Pegasus to us in the amount of $500,000 with the collateral being a UCC lien

subordinate to other lenders;

(ii) the payback by us of certain advances contributed by corporate officers and others in our company

in an amount not to exceed $140,000;

(iii) resolutions of the equity holders of Pegasus approving the Merger Agreement and the

transactions contemplated;

and (iv) certain other customary conditions.

5 unchanged sentences

Closing of the Merger is expected to occur as soon as practicable after the satisfaction or waiver of all the conditions to Closing in

the Merger Agreement, which is currently expected to be in the 3rd quarter of calendar year 2023.

the Merger Agreement, which is currently expected to be in the 4th quarter of calendar year 2023.

on June 20, 2023, we signed a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited investor (the “Investor”),

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in favor of Investor for any future offerings not specifically exempted.

on June 20, 2023, we and Pegasus entered into a Loan and Security Agreement in the principal amount of $575,000 whereby we lent to Pegasus funds received from the June 20, 2023 Purchase

Agreement less expenses secured by all of Pegasus’

assets but subordinate to the security interest of Investor and other lenders of Pegasus.

on June 20, 2023, we and Pegasus entered into a Loan and Security Agreement in the principal amount of $575,000 whereby we lent to Pegasus

funds received from the June 20, 2023 Purchase Agreement less expenses secured by all of Pegasus’ assets but subordinate to the

security interest of Investor and other lenders of Pegasus.

is a manufacturer built on an innovative business model and manufacturing architecture providing best-in-class traditional, electric

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The executive telephone number is (571) 888-0009.

of Operation for Three and Six Months Ended June 30, 2023 and 2022

have generated $6,361 and $16,468 in sales for the three and six months ended June 30, 2023, respectively, as compared with $2,836 and

$30,488 in sales for the three and six months ended June 30, 2022, respectively, on our current product line.

anticipate some increased revenues on our seven Cordials including our

newly launched Sleep Cordial, for the rest of 2023, but the increase is not expected to be significant as a result the challenging market

conditions we have experienced in the cannabis industry in California, as disclosed above.

There can be no assurances, however, that customers

will positively react to our products.

For these reasons, there are no assurances that we will be successful in this or any of our endeavors

or become financially viable and continue as a going concern.

explained above, we are currently under contract of the Merger Agreement

to enter the electric vehicle (EV) bus and clean energy specialty vehicle sector.

If this opportunity develops, subject to closing conditions

and the availability of financing, we may be revising our business plan and focus over the coming months.

paid $4,685 and $13,257 in cost of revenues for the three and six months ended June 30, 2023, respectively, resulting in a gross profit

of $1,676 and $3,211 for the three six months ended June 30, 2023, respectively.

We paid $2,421 and $15,278 in cost of revenues for the

three and six months ended June 30, 2022, respectively, resulting in a gross profit of $415 and $15,210 for the three and six months

ended June 30, 2022, respectively.

have had little historical data to compare our margins for the sale of

our new products, which were introduced into the retail channel in late Q2 of 2021.

Our gross margin, which is the difference between

our revenues and our cost of revenues, is expected to increase in future quarters as we work to increase our efficiency and lessen costs.

In addition, our gross margin percentage, which was 26% for the three months ended June 30, 2023, and, if we are unable to consummate

the Merger Agreement with Pegasus, we hope our work to continue to penetrate the market and implement cost savings will result in a stabilized

35% to 43% gross margin range for the balance of 2023.

We are also implementing new packaging configurations which we expect to stabilize

our overall gross margin.

operating expenses were $50,231 and $148,652 for the three and six months ended June 30, 2023, respectively, as compared with $290,211

and $945,830 for the three and six months ended June 30, 2022, respectively.

of Operation for Three and Nine Months Ended September 30, 2023 and 2022

have generated $0 and $16,468 in sales for the three and nine months ended September 30, 2023, respectively, as compared with $10,429

and $40,917 in sales for the three and nine months ended September 30, 2022, respectively, on our current product line.

don’t anticipate increased revenues on our seven Cordials including our newly launched Sleep Cordial, for the rest of 2023, due

to the challenging market conditions we have experienced in the cannabis industry in California, as disclosed above.

There can be no

assurances, however, that customers will positively react to our products.

For these reasons, there are no assurances that we will be

successful in this or any of our endeavors or become financially viable and continue as a going concern.

explained above, we are currently under contract of the Merger Agreement to enter the electric vehicle (EV) bus and clean energy specialty

vehicle sector.

If this opportunity develops, subject to closing conditions and the availability of financing, we may be revising our

business plan and focus over the coming months.

paid $0 and $13,257 in cost of revenues for the three and nine months ended September 30, 2023, respectively, resulting in a gross profit

of $0 and $3,211 for the three nine months ended September 30, 2023, respectively.

We paid $9,718 and $24,996 in cost of revenues for

the three and nine months ended September 30, 2022, respectively, resulting in a gross profit of $711 and $15,921 for the three and nine

months ended September 30, 2022, respectively.

have had little historical data to compare our margins for the sale of our new products, which were introduced into the retail channel

in late Q2 of 2021.

If we are unable to consummate the Merger Agreement with Pegasus, we hope our work to continue to penetrate the market.

We are also implementing new packaging configurations which we expect to stabilize our overall gross margin.

operating expenses were $46,975 and $195,627 for the three and nine months ended September 30, 2023, respectively, as compared with $218,876

and $1,164,706 for the three and nine months ended September 30, 2022, respectively.

main drivers for the overall decrease in operating expenses in 2023 were the reduction of legal, professional fees and salaries as well

3 unchanged sentences

as explained above.

spent $221,840 less on advertising for the six months ended June 30, 2023, than for the six months ended June 30, 2022.

We spent more

on advertising for the six months ended June 30, 2022 to introduce our Koan Cordials to the California retail channel, perform Search

Engine Optimization (SEO), conduct Programmatic advertising, hire a professional agency to promote our Cordials on social media channels

and other general advertising methods.

fees decreased by $34,558 for the six months ended June 30, 2023, over the six months ended June 30, 2022.

Our professional fees were

less for this quarter compared to the same quarter last year, but we expect that professional fees will increase in 2023 as we continue

to ramp up operations or if we engage in a business combination with Pegasus as described above.

and administrative expenses increased by $15,068 for the six months ended

June 30, 2023, over the six months ended June 30, 2022.

We expect general and administrative expenses to remain fairly constant throughout

2023, but expenses could increase significantly if we engage in a business combination with Pegasus.

compensation decreased by $319,250 for the six months ended June 30, 2023, over the six months ended June 30, 2022.

Our officer compensation

was less for this quarter compared to the same quarter last year as we suspended payments of officer salaries during 2023, but we expect

that officer compensation will increase in 2023 as we continue to ramp up operations or if we engage in a business combination with Pegasus

as described above.

management fees decreased by $206,462 for the six months ended June 30, 2023, over the six months ended June 30, 2022.

Our non-cash management

fees were less for this quarter compared to the same quarter last year as we did not issue shares for services during 2023, but non-cash

management fees may increase in 2023 as we continue to ramp up operations or if we engage in a business combination with Pegasus as described

spent $316,683 less on advertising for the nine months ended September 30, 2023, than for the nine months ended September 30, 2022.

spent more on advertising for the nine months ended September 30, 2022 to introduce our Koan Cordials to the California retail channel,

perform Search Engine Optimization (SEO), conduct Programmatic advertising, hire a professional agency to promote our Cordials on social

media channels and other general advertising methods.

fees decreased by $73,472 for the nine months ended September 30, 2023, over the nine months ended September 30, 2022.

Our professional

fees were less for this quarter compared to the same quarter last year, but we expect that professional fees will increase in 2023 as

we continue to ramp up operations or if we engage in a business combination with Pegasus as described above.

and administrative expenses decreased by $36,462 for the nine months ended September 30, 2023, over the nine months ended September 30,

We expect general and administrative expenses to remain fairly constant throughout 2023, but expenses could increase significantly

if we engage in a business combination with Pegasus.

compensation decreased by $336,000 for the nine months ended September 30, 2023, over the nine months ended September 30, 2022.

compensation was less for this quarter compared to the same quarter last year as we suspended payments of officer salaries during 2023,

but we expect that officer compensation will increase in 2023 as we continue to ramp up operations or if we engage in a business combination

with Pegasus as described above.

management fees decreased by $206,462 for the nine months ended September 30, 2023, over the nine months ended September 30, 2022.

non-cash management fees were less for this quarter compared to the same quarter last year as we did not issue shares for services during

2023, but non-cash management fees may increase in 2023 as we continue to ramp up operations or if we engage in a business combination

with Pegasus as described above.

Income / Expense

had other expense of $353,755 and $637,821 for the three and six months

ended June 30, 2023, respectively, compared with other income of $501,526 and $1,632,390 for the three and six months ended June 30, 2022,

respectively.

other expense for the six months ended June 30, 2023 was mainly attributable a loss on the change in derivative liability, interest expense

and the amortization of debt issuance costs.

other income for the six months ended June 30, 2022 was mainly attributable the gain on revaluation of derivative liabilities.

had other expense of $181,195 and $819,016 for the three and nine months ended September 30, 2023, respectively, compared with other

income of $280,267 and $1,912,657 for the three and nine months ended September 30, 2022, respectively.

other expense for the nine months ended September 30, 2023 was mainly attributable a loss on the change in derivative liability, interest

expense and the amortization of debt issuance costs.

other income for the nine months ended September 30, 2022 was mainly attributable the gain on revaluation of derivative liabilities.

Income / Loss

had net losses of $402,310 and $783,262 for the three and six months ended

June 30, 2023, respectively, as compared with net income of $211,730 and $701,770 for the three and six months ended June 30, 2022, respectively.

had net losses of $228,170 and $1,011,432 for the three and nine months ended September 30, 2023, respectively, as compared with net income

of $61,102 and $763,872 for the three and nine months ended September 30, 2022, respectively.

and Capital Resources

of June 30, 2023, we had total current assets of $658,279 consisting of $2,260 in cash, $120,000 in other receivables, $435,000 in a

deposit on the acquisition of Pegasus Specialty Vehicles and $101,019 in inventories.

Our total current liabilities as of June 30, 2023

of September 30, 2023, we had total current assets of $941,471 consisting of $588 in cash, $120,000 in other receivables, $720,000 in

a deposit on the acquisition of Pegasus Specialty Vehicles and $100,883 in inventories.

Our total current liabilities as of September

30, 2023 were $2,960,056.

We had a working capital deficit of $2,118,418 as of June 30, 2023 compared with a working capital deficit of $1,170,940

as of December 31, 2022.

We had a working capital deficit of $2,018,585 as of September 30, 2023 compared with a working capital deficit

of $1,170,940 as of December 31, 2022.

Flows Provided by / Used in Operating Activities

activities provided $116,488 in cash for the six months period ended June

30, 2023, compared with cash used of $1,009,564 for the six months period ended June 30, 2022.

Our positive operating cash flow for the

six months period ended June 30, 2023, was largely the result of an increase in accounts payable and accrued expenses.

Our negative operating

cash flow for the six months ended June 30, 2022 was largely the result of our unrealized gain on derivative liability of $1,687,112,

offset by our net income of $701,770.

activities provided $89,816 in cash for the nine months period ended September 30, 2023, compared with cash used of $1,476,854 for the

nine months period ended September 30, 2022.

Our positive operating cash flow for the nine months period ended September 30, 2023, was

largely the result of an increase in accounts payable and accrued expenses.

Our negative operating cash flow for the nine months ended

September 30, 2022 was largely the result of our unrealized gain on derivative liability of $2,213,527, offset by our net income of $763,872.

Flows Used in Investing Activities

For the six months ended June 30, 2023, the company used $435,000 in investing

activities as a deposit on the acquisition of Pegasus Specialty Vehicles.

We did not use cash for investing activities for the six months

ended June 30, 2022.

the nine months ended September 30, 2023, the company used $720,000 in investing activities as a deposit on the acquisition of Pegasus

Specialty Vehicles.

We did not use cash for investing activities for the nine months ended September 30, 2022.

Flows Provided by Financing Activities

flows provided by financing activities during the six months ended June 30, 2023 amounted to $256,353, compared with cash flows

provided by financing activities of $1,031,474 for the six months ended June 30, 2022.

Our positive cash flows for the six months

period ended June 30, 2023, consisted of net proceeds from convertible debentures of $321,200, proceeds from the sale of warrants of

$30,000 offset by the repayment of related party advances of $94,847.

Our positive cash flows for the six months ended June 30,

2022, consisted of proceeds from issuance of common stock of $392,674, proceeds from convertible notes payable of $788,800, offset

by payments of notes payable of $150,000.

flows provided by financing activities during the nine months ended September 30, 2023 amounted to $566,353, compared with cash flows

provided by financing activities of $1,738,781 for the nine months ended September 30, 2022.

Our positive cash flows for the nine months

period ended September 30, 2023, consisted of net proceeds from convertible debentures of $621,200, proceeds from the sale of warrants

of $30,000, proceeds from the sale of common stock of $10,000 offset by the repayment of related party advances of $94,847.

cash flows for the nine months ended September 30, 2022, consisted of proceeds from issuance of common stock of $349,981 and proceeds

from convertible notes payable of $1,388,800.

features of the debt instruments and payables concerning our financing activities are detailed in the footnotes to our financial statements.

5 unchanged sentences

We plan to raise money in the sale of our equity and/or debt securities.

no assurance of funds from these efforts or that any other type of additional financing will be available to us on acceptable terms,

be no assurance of funds from these efforts or that any other type of additional financing will be available to us on acceptable terms,

securities offered will not be or have not been registered under the Securities Act and may not be offered or sold in the United States

absent registration or an applicable exemption from registration requirements.

of June 30, 2023, we have an accumulated deficit of $26,103,686.

Our ability to continue as a going concern is contingent upon the successful

completion of additional financing arrangements and our ability to achieve and maintain profitable operations.

While we are expanding

our best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available

for operations.

of September 30, 2023, we have an accumulated deficit of $26,331,856.

Our ability to continue as a going concern is contingent upon the

successful completion of additional financing arrangements and our ability to achieve and maintain profitable operations.

expanding our best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be

available for operations.

These conditions raise substantial doubt about our ability to continue as a going concern.

These financial statements

do not include any adjustments that might arise from this uncertainty.

These financial

statements do not include any adjustments that might arise from this uncertainty.

Balance Sheet Arrangements

of June 30, 2023, there were no off-balance sheet arrangements.

of September 30, 2023, there were no off-balance sheet arrangements.

Accounting Policies

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis