UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 29, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-41738

PINEAPPLE FINANCIAL INC.

(Exact name of registrant as specified in its charter)

Canada

Not applicable

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

Unit 200, 111 Gordon Baker Road

North York, Ontario M2H 3R1

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (416) 669-2046

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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. Yes ☐ No ☒

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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated Filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging Growth Company	☒

If an emerging growth company, indicate by check mark 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 ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading symbol		Name of each exchange on which registered
Common Shares, no par value		PAPL		NYSE American

The number of shares of the registrant’s common stock issued and outstanding, as of April 15, 2024 was 7,181,979.

PINEAPPLE FINANCIAL INC.

TABLE OF CONTENTS FOR FORM 10-Q

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	2
	Consolidated Balance Sheets (unaudited)	3
	Consolidated Statements of Operations and Comprehensive Loss(unaudited)	4
	Consolidated Statements of Shareholders’ Equity (unaudited)	5
	Consolidated Statements of Cash Flows (unaudited)	6
	Notes to Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	34

	SIGNATURES	35

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, or the “Securities Act,” and Section 21E of the Securities Exchange Act of 1934 or the “Exchange Act.” These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results.

In some cases, you can identify forward-looking statements by terms such as “may,” “intend,” “might,” “will,” “should,” “could,” “would,” “expect,” “believe,” “anticipate,” “estimate,” “predict,” “potential,” or the negative of these terms. These terms and similar expressions are intended to identify forward-looking statements. The forward-looking statements in this report are based upon management’s current expectations and beliefs, which management believes are reasonable. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor or combination of factors, or factors we are aware of, may cause actual results to differ materially from those contained in any forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements. These statements represent our estimates and assumptions only as of the date of this report. Except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including:

●	the timing of the development of future services,

●	projections of revenue, earnings, capital structure and other financial items,

●	statements regarding the capabilities of our business operations,

●	statements of expected future economic performance,

●	statements regarding competition in our market, and

●	assumptions underlying statements regarding us or our business.

Other risks and uncertainties include such factors, among others, as market acceptance and market demand for our products and services, pricing, the changing regulatory environment, the effect of our accounting policies, industry trends, adequacy of our financial resources to execute our business plan, our ability to attract, retain and motivate key personnel, and other risks described from time to time in periodic and current reports we file with the United States Securities and Exchange Commission, or the “SEC.” You should consider carefully the statements under this report, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements and could materially and adversely affect our business, operating results and financial condition. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements.

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

Pineapple Financial Inc.

Condensed Interim Consolidated Financial Statements (Unaudited)

For the six month period ended February 29, 2024

(Expressed in US Dollars)

Pineapple Financial Inc.

Condensed Interim Consolidated Balance Sheets (Unaudited)

For the six month period ended February 29, 2024

(Expressed in US Dollars)

		February 29, 2024 (Unaudited)			August 31, 2023
As at:

Assets
Current assets
Cash		$	1,339,618		$	720,365
Trade and other receivables	Note 13		690,366			758,988
Prepaid expenses and deposits			387,255			218,150
Total current assets			2,417,239			1,697,503

Investments	Note 4		9,984			10,013
Right-of-use asset	Note 10		890,757			960,377
Property and equipment	Note 5		195,373			242,091
Intangible assets	Note 6		2,058,420			1,718,954
Total Assets		$	5,571,773		$	4,628,938

Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable and accrued liabilities		$	500,188		$	605,319
Loan	Note 17		532,900			430,098
Current portion of lease liability	Note 10		155,078			138,372
Total current liabilities			1,188,166			1,173,790

Deferred government incentive	Note 13		503,258			699,627
Lease liability	Note 10		896,006			969,589
Warrant liability	Note 8		35,903			-
Total liabilities		$	2,623,333		$	2,843,005

Shareholders’ Equity
Common shares, no par value; unlimited authorized; 7,181,979 issued and outstanding shares as of February 29, 2024 and 6,306,979 as at August 31, 2023.	Note 7		7,606,685			4,903,031
Additional paid-in capital	Note 8,9		2,955,944			2,955,944
Accumulated other comprehensive loss			(428,178	)		(417,727	)
Accumulated deficit			(7,186,011	)		(5,655,315	)
Total stockholders’ equity			2,948,440			1,785,933
		$	5,571,773		$	4,628,938

*Description of business (note 1)*
*Contingencies and commitments (note 15)*
*Subsequent events (note 18)*
Approved on behalf of Board of Directors

“Shuba Dasgupta”	“Drew Green”

The accompanying notes are an integral part of these condensed interim consolidated financial statements

Pineapple Financial Inc.

Condensed Interim Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

For the three month and six month ended February 29, 2024

(Expressed in US Dollars)

		February 29, 2024			February 28, 2023			February 29, 2024			February 28, 2023
		Three months ended						Six months ended
		February 29, 2024			February 28, 2023			February 29, 2024			February 28, 2023
For the period ended		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

Revenue	Note 16	$	784,869			493,491		$	1,352,858			1,334,692

Expenses
Selling, general and administrative	Note 11		592,202			444,226			1,031,947			1,104,082
Advertising and Marketing			150,597			354,680			404,017			469,321
Salaries, wages and benefits			541,062			654,683			1,186,316			1,274,549
Interest expense and bank charges			28,450			19,164			49,881			39,391
Depreciation	Note 5,6,10		160,999			127,642			315,184			210,975
Share-based compensation	Note 9		-			(28,892	)		-			33,041
Government Incentive	Note 13		(29,109	)		(392,919	)		(80,334	)		(392,919	)
Total expenses		$	1,444,201			1,178,584		$	2,907,011			2,738,440

Loss from operations			(659,332	)		(685,093	)		(1,554,153	)		(1,403,748	)
Foreign exchange gain (loss)			-						10,772			-
Gain (loss) on change in fair value of warrant liability	Note 8		1,876			-			12,685			-
Loss before income taxes		$	(657,456	)		(685,093	)	$	(1,530,696	)		(1,403,748	)

Income taxes (recovery) expense						-

Net loss		$	(657,456	)		(685,093	)	$	(1,530,696	)		(1,403,748	)
Foreign currency translation adjustment			1,727			61,846			(10,451	)		(135,078	)

Net loss and comprehensive loss		$	(655,729	)		(623,247	)	$	(1,541,147	)		(1,538,826	)

Loss per share - basic and diluted ($)			(0.10	)		(0.10	)		(0.24	)		(0.24	)

Weighted average number of common shares outstanding - basic and diluted			6,475,300			6,306,979			6,475,300			6,306,979

The accompanying notes are an integral part of these condensed interim consolidated financial statements

Pineapple Financial Inc.

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

For the six month period ended February 29, 2024

(Expressed in US Dollars)

	Common Shares (note 7)			Additional Paid in Capital (note 8 and 9)		Accumulated other comprehensive loss			Accumulated (deficit)			Total shareholders’ equity
	Common Shares (note 7)			Additional Paid in Capital (note 8 and 9)		Accumulated other comprehensive loss			Accumulated (deficit)			Total shareholders’ equity
	$			$		$			$			$
Balance, August 31, 2022		4,903,031			2,922,853		(353,218	)		(2,846,278	)		4,626,388
Share-based compensation		-			33,091		-			-			33,091
Foreign exchange translation		-			-		(135,078	)		-			(135,078	)
Net loss		-			-		-			(1,403,748	)		(1,403,748	)
Balance, February 28, 2023		4,903,031			2,955,944		(488,296	)		(4,250,026	)		3,120,653

Balance, August 31, 2023		4,903,031			2,955,944		(417,727	)		(5,655,315	)		1,785,933
Balance		4,903,031			2,955,944		(417,727	)		(5,655,315	)		1,785,933

Shares issued on Initial Public offering on November 3, 2023		2,751,937											2,751,937
Warrants issued related to Initial Public Offering		(48,283	)		-		-			-			(48,283	)
Foreign exchange translation		-			-		(10,451	)		-			(10,451	)
Net loss		-			-					(1,530,696	)		(1,530,696	)
Balance, February 29, 2024		7,606,685			2,955,944		(428,178	)		(7,186,011	)		2,948,440
Balance		7,606,685			2,955,944		(428,178	)		(7,186,011	)		2,948,440

The accompanying notes are an integral part of these condensed interim consolidated financial statements

Pineapple Financial Inc.

Condensed Interim Consolidated Statements of Cash Flow (Unaudited)

For the six months ended February 29, 2024

(Expressed in US Dollars)

For the period ended:		February 29, 2024 (Unaudited)			February 28, 2023 (Unaudited)
		Six Months Ended
For the period ended:		February 29, 2024 (Unaudited)			February 28, 2023 (Unaudited)
		$			$
Cash provided by (used for) the following activities

Operating activities
Net loss for the period			(1,530,696	)		(1,403,748	)
Adjustments for the following non-cash items:
Depreciation of property and equipment	Note 5		43,406			29,283
Depreciation of intangible assets	Note 6		204,786			128,807
Depreciation on right of use asset	Note 10		66,992			52,885
Interest expense on lease liability	Note 10		32,215			29,424
Share-based compensation	Note 9		-			33,041
Change in fair value of warrant liability	Note 8		(12,685	)		-
Net changes in non-cash working capital balances:
Trade and other receivables			68,622			(703,706	)
Prepaid expenses and deposits			(169,105	)		(29,590	)
Accounts payable and accrued liabilities			(73,808	)		(132,460	)
Deferred government incentive			(196,369	)		-
Income taxes receivable			-			71,078
Net cash used in operating activities			(1,566,642	)		(1,924,986	)

Financing activities
Proceeds from the loan	Note 17		71,479			-
Share capital issuance	Note 7		2,751,937			-
Repayment of lease obligations	Note 10		(86,024	))		(32,051	)
			2,737,392			(32,051	)

Investing activities
Additions to intangible assets	Note 6		(557,970	)		(608,858	)
Additions to property and equipment	Note 5		(4,632	)		(51,193	)
Net cash used in investing activity			(562,602	)		(660,051	)

Net change in cash			608,148			(2,617,088	)
Effect of changes in foreign exchange rates			11,105			(99,775	)
Cash, beginning of period			720,365			3,896,839
Cash, end of period			1,339,618			1,179,976

The accompanying notes are an integral part of these condensed interim consolidated financial statements

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

For the six month period ended February 29, 2024

(Expressed in US Dollars)

1. Description of business

Pineapple Financial Inc. (the” Company”) is a leader in the Canadian mortgage industry, breaking the mold by focusing on both the long-term success of agents and brokerages, as well as the overall experience of homeowners. With over 600 brokers within the network, the Company utilizes cutting-edge cloud-based tools and AI-driven systems to enable its brokers to help Canadians realize their ultimate dream, owning a home.

The Company was incorporated in 2006, under the Ontario Business Corporations Act. The Company’s head office is located at 200-111 Gordon Baker Road, Toronto, Ontario, M2H 3R1 Canada and its securities are publicly listed on the New York Stock Exchange American (NYSEAmerican) under ticker “PAPL”. The Company completed an Initial Public Offering on October 31, 2023 for gross proceeds of $3,500,000 and the first day of trading was November 1, 2023.

Impact from the global inflationary pressures leading to higher interest rates

During the second quarter of 2024, due to inflationary pressures that were felt around the globe, central banks all over the world increased interest rates steadily to reduce these pressures. The impact on the real estate market has been to reduce the price wars, bidding, and control over the runaway prices. This has led to modifications in all businesses associated with real estate including the Company. With the interest rates increases which reduces prices has led to reduced volume for the Company. It is unknown how long the increased interest rates will last. The Company determined that there were no material expectations of increased credit losses, and no material indicators of impairment of long-term assets.

2. Significant accounting policies

Basis of Presentation

The Company’s condensed interim consolidated financial statements have been prepared in accordance with US Generally Accepted Accounting Principles (“GAAP”) and Securities and Exchange Commission (“SEC”) rules and regulations and include the accounts of the Company and its consolidated subsidiaries. These unaudited condensed interim consolidated financial statements do not include all disclosures normally provided in annual financial statements and should be read in conjunction with the Company’s audited consolidated financial statements for the year ended August 31, 2023. Accordingly, accounting policies, estimates, and judgements applied are the same as those applied in the Company’s financial statements for the year ended August 31, 2023, unless otherwise indicated. The Company assesses its accounting estimates and judgements every reporting period.

The condensed interim consolidated financial statements were authorized for issue by the Board of Directors on April 15, 2024.

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

For six months period ended February 29, 2024

(Expressed in US Dollars)

2. Significant accounting policies (continued)

Basis of preparation, functional and presentation currency

The condensed interim consolidated financial statements have been prepared in accordance with GAAP applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business on the historical cost basis except for certain financial instruments that are measured at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

All financial information is presented in US Dollars (“USD”) as the Company’s presentation currency and functional currency is in Canadian Dollars (“CAD”). The interim financial statements are condensed and should be read in conjunction with the Company’s latest annual year-end consolidated financial statements for the year ended August 31, 2023. It is management’s opinion that all adjustments necessary for a fair statement of the results for the interim period has been made, and all adjustments are of a recurring nature or a description of the nature of and any amount of any adjustments other than normal recurring nature has been stated. Sufficient disclosures have been so as to not make the interim financial information misleading. There are no prior-period adjustments in these condensed interim consolidated financial statements.

Operating segments

The Company operates as one operating segment which is reported in a manner consistent with the internal reporting provided to the chief operating decision-makers. The chief operating decision-makers are responsible for the allocation of resources and assessing the performance of the consolidated operating segment and have been identified as the CEO and CFO of the Company.

Basis of consolidation

The condensed interim consolidated financial statements include the accounts of the Company, and its wholly owned subsidiary, Pineapple Insurance Inc and Pineapple National Inc. All transactions with the subsidiary and any intercompany balances, gains or losses have been eliminated upon consolidation. The subsidiaries have a CAD functional currency and accounting policies have been applied consistently to the subsidiaries.

3. Significant accounting judgments, estimates and assumptions

The preparation of financial statements requires the directors and management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and revenue and expenses. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the critical estimates and judgments applied by management that most significantly affect the Company’s financial statements. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Investments (level 3)

Where the fair values of financial assets and financial liabilities recorded on the statements of financial position, cannot be derived from active markets, they are determined using a variety of valuation techniques. The inputs to these models are derived from observable market data where possible; where observable market data is not available, Management’s judgment is required to establish fair values.

Share based compensation

Management is required to make certain estimates when determining the fair value of stock options awards, and the number of awards that are expected to vest. These estimates affect the amount recognized as stock-based compensation in the statements of income and comprehensive income based on estimates of volatility, forfeitures and expected lives of the underlying stock options which are at a maximum of 36 months vesting period.

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (unaudited)

For period six month period ended February 29, 2024

(Expressed in US Dollars)

3. Significant accounting judgments, estimates and assumptions (continued)

Useful life of Assets

Significant judgement is involved in determination of useful life for the property plant and equipment and intangible assets. Management assesses the reasonability of the useful life on an annual basis to record the depreciation of the intangibles and property plant and equipment.

4. Investments

During the year ended August 31, 2021, the Company purchased an investment in a private company. The Company holds a 5% interest with no significant influence. The investment is recorded at FVTPL using level 3 inputs. The valuation of the Company’s investment is determined based on the most recent private placement financing completed. As at February 29, 2024, the Company recognized a $Nil change in fair value (2022- $nil). Change in fair value during the current period due to foreign exchange translation.

5. Property and equipment

The Company’s property and equipment consist of laptops, furniture and office equipment.

Schedule of Property and Equipment

	Property and equipment
Cost
Balance, August 31, 2022	$	296,999
Additions		62,073
Translation adjustment		(9,789	)
Balance, August 31, 2023	$	349,283
Additions		4,632
Translation adjustment		(741	)
Balance, February 29, 2024	$	353,174

Accumulated depreciation
Balance, August 31, 2022	$	49,334
Depreciation		67,674
Translation adjustment		(9,816	)
Balance, August 31, 2023	$	107,192
Depreciation		43,406
Translation adjustment		7,203
Balance, February 29, 2024	$	157,801

Net carrying value
February 29, 2024	$	195,373
August 31, 2023	$	242,091

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

For the six month period ended February 29, 2024

(Expressed in US Dollars)

6. Intangible assets

The intangible assets additions in the current period are related to development costs capitalized for internally generated software with a useful life of 5 years.

	Intangible assets
Cost
Balance, August 31, 2022	$	779,490
Additions		1,300,225
Translation adjustment		(22,190	)
Balance, August 31, 2023	$	2,057,525
Additions		557,970
Translation adjustment		(14,982	)
Balance, February 29, 2024	$	2,600,513

Accumulated depreciation
Balance, August 31, 2022	$	77,102
Depreciation		265,150
Translation adjustment		(3,681	)
Balance, August 31, 2023	$	338,571
Depreciation		204,786
Translation adjustment		(1,264	)
Balance, February 29, 2024	$	542,093

Net carrying value
February 29, 2024	$	2,058,420
August 31, 2023	$	1,718,954

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

For the six month period ended February 29, 2024

(Expressed in US Dollars)

7. Share capital

Authorized share capital

The authorized share capital of the Company consists of an unlimited number of common shares with a nominal par value.

Schedule of Authorized Share Capital

	#		$
Balance, August 31, 2022 and 2023		6,306,979		4,903,031

Issuance of Common Shares on Initial Public Offering		875,000		3,500,000
Share Issuance Costs				(748,063	)
Warrants issued				(48,283	)

Balance, February 29, 2024		7,181,979		7,606,685

On November 3, 2023, the Company completed was listed on the New York Stock Exchange (NYSE) under the ticker PAPL. The Company issued 875,000 shares on the initial public offering and received gross proceeds of $3,500,000 on closing of the public offering. The Company incurred $796,346 in share issue costs related to underwriter fee and legal cost fees. The share issue cost balance includes the fair value of $48,284 related to 26,250 representative warrants that were issued on November 3, 2023 to the underwriters for an exercise price of $4 and expiring on October 31, 2028.

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

For the six month period ended February 29, 2024

(Expressed in US Dollars)

8. Warrants

Common Share purchase warrant

	#		$
Balance, August 31, 2022		1,652,988		2,922,853
Share-based compensation expense		-		33,091
Balance, August 31, 2023 and February 29, 2024		1,652,988		2,955,944

Warrant Liability

As noted in Note 7 above on November 3, 2023, the Company issued 26,250 warrants at an exercise price of $4 with an expiry date of October 31, 2028. As per ASC 815 the instruments did not meet the criteria to be classified as equity instruments as such were classified as a financial liability. Below is the continuity of the warrant liability valuation.

The warrants were valued using the Black-Scholes method with the share price of $1.86, exercise price of $4, term of 5 years, risk free rate of 4.62% and volatility of 251% at issuance and share price of $1.50, exercise price of $4, term of 5 years, risk free rate of 4.42% and volatility of 179.75% as at February 29, 2024.

	#		$
Balance at August 31, 2023		-		-
Issuance of warrants		26,250		48,283
Change in fair value of warrant liability				(12,685	)
Fair Value of Warrants at February 29, 2024		26,250		35,903

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

For the six month period ended February 29, 2024

(Expressed in US Dollars)

9. Share-based benefits reserve

The Company has a share option plan (the “Plan”) to attract, retain and motivate qualified directors, officers, employees and consultants whose present and future contributions are important to the success of the Company by offering them an opportunity to participate in the Company’s future performance through the award of share options.

Each share option converts into one common share of the Company. on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry.

In 2017, the Plan was amended such that the total number of common shares reserved and available for grant and issuance pursuant to the Plan is to equal 10% of the issued and outstanding common shares of the Company.

Options granted on June 14, 2021, vest over a 2-year period whereby 25% of the options granted vested on the date of grant, and the remaining unvested options vest in equal instalments every 6-months thereafter. The fair value of stock options granted was $1,317,155. A total stock-based compensation expense was recognized of $Nil for six months ended February 29, 2024 (February 28, 2023 - $33,041).

The Chief Financial Officer was granted 63,821 Stock options on November 15, 2021 as part of his compensation package. The options vest over a 3-year period whereby 8,974 of the options granted vested on the grant date and the remaining unvested options vest in equal instalments every 6-months thereafter. The fair value of the stock options granted was $141,885. The Chief Financial Officer options were forfeited during the year ended August 31, 2023. For period ended February 29, 2024, stock-based compensation expense of $nil (February 28, 2023 - $48,458) was recognized.

The following reconciles the options outstanding at the beginning and end of the period that were granted to eligible participants pursuant to the Plan:

Schedule of Options Outstanding Granted

	February 29, 2024				August 31, 2023
	Number of Options		Weighted Average Exercise Price		Number of Options			Weighted Average Exercise Price
	#		$		#			$
Balance, as at beginning of period		565,689		3.72		628,510			3.71
Forfeited during period		-		-		(62,821	)		3.82
Balance as at period end		565,689		3.72		565,689			3.72
Exercisable as at period end		565,689		3.72		565,689			3.72

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

For the six month period ended February 29, 2024

(Expressed in US Dollars)

10. Right-of-use asset and lease liability

The Company leases all its office premises in Ontario and British Columbia, Canada. The Company extended the current Ontario premises of 4,894 sq. ft. lease to January 1, 2030, and acquired additional premises of 8,368 square feet adjacent to the current office premises with the same landlord. The additional premises lease also expires on January 1, 2030. The total area of use by The Company is 13,262 sq. ft. The Company acquired a 1,454 square feet premise lease in British Columbia commencing August 1, 2023 and expiring on July 31, 2028. The Company recognized a right-of-use asset and corresponding lease liability in respect of this lease. The lease liability was measured at the present value of the remaining lease payments, discounted using the Company’s estimated incremental borrowing rate as at September 1, 2017 (date of initial application), estimated to be 6%. The right-of-use asset was measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the interim condensed balance sheet immediately before the date of initial application.

The following schedule shows the movement in the Company’s right-of-use asset:

Schedule of Right-Of-Use Asset

	Right-of-use asset

Cost
Balance, August 31, 2022	$	1,084,523
Additions		141,799
Translation adjustment		(48,601	)
Balance, August 31, 2023		1,177,721
Translation adjustment		(42,737	)
Balance, February 29, 2024	$	1,134,984

The right-of-use asset is being depreciated on a straight-line basis over the remaining lease term.

Accumulated Depreciation
Balance, August 31, 2022	$	130,432
Depreciation		108,335
Translation adjustment		(21,423	)
Balance, August 30, 2023	$	217,344
Depreciation		66,992
Translation adjustment		(40,109	)
Balance, February 29, 2024	$	244,227

Carrying Amount
February 29, 2024	$	890,757
August 31, 2023	$	960,377

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

For the six month period ended February 29, 2024

(Expressed in US Dollars)

10. Right-of-use asset and lease liability (continued)

The following schedule shows the movement in the Company’s lease liability during the period:

Schedule of Lease Liability

	February 29, 2024			August 31, 2023

Balance, beginning of period	$	1,107,961		$	1,020,585
Additions		-			141,799
Interest Expense		32,215			56,316
Lease payments		(86,024	)		(81,090	)
Translation Adjustment		(3,068	)		(29,649	)
Balance, end of period	$	1,051,084		$	1,107,961

Current		155,078			138,372
Non-Current		896,006			969,589
	$	1,051,084		$	1,107,961

The following table provides a maturity analysis of the Company’s lease liability. The amounts disclosed in the maturity analysis are the contractual undiscounted cash flows before deducting interest or finance charges:

Schedule of Maturity Lease Liability


2024	$	125,651
2025		216,008
2026		217,196
2027		214,640
2028		227,992
2029		200,179
2030		16,682
Total Lease liability	$	1,218,348

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

For the six month period ended February 29, 2024

(Expressed in US Dollars)

11. Expenses

The following table provides a breakdown of the selling, general and administrative :

	February 29, 2024		February 28, 2023
	Six Months ended
	February 29, 2024		February 28, 2023
	$		$
Software Subscription		402,289		455,639
Office and general		34,155		47,305
Professional fees		192,405		215,149
Dues and Subscriptions		152,441		118,568
Rent		98,078		78,884
Consulting fees		24,474		112,547
Travel		86,049		36,255
Donations		4,646		15,771
Lease expense		6,333		22,232
Insurance		31,078		1,732
Selling, general and administrative		1,031,947		1,104,082

12. Related party transactions

Compensation of key management personnel includes the CEO, COO, CSO, and CFO:

Schedule of Related Party Transactions

	February 29, 2024		February 28, 2023
	$		$
Salaries and Wages		364,450		366,183
Share-based compensation		-		28,946

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

For the six month period ended February 29, 2024

(Expressed in US Dollars)

13. Deferred government incentive

The Company was eligible for the Government of Canada SRED program up to November 3, 2023. The Company has accrued $634,481 of SRED receivable as at February 29, 2024, which is recognized in trades and other receivables in the consolidated balance sheet. A portion of the funds received is related to costs that have been capitalized for the development of internally generated software recognized as intangible asset in Note 6 as such $503,258 of the balance received and accrued is recognized as deferred government incentive balance and will be recognized as recovery in the condensed interim consolidated statement of operations and comprehensive loss over the useful life of the intangible assets. As at February 29, 2024, $80,334 was recognized as reversal of recovery of operating expenses in the condensed interim consolidated statement of operations and comprehensive loss. As at February 28, 2023 $392,919 was recognized as recovery of operating expenses in the condensed interim consolidated statement of operations and comprehensive loss over the useful life of the intangible assets.

14. Risk management arising from financial instruments

a)	Credit risk

Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. The Company’s principal financial assets that expose it to credit risk are cash and trade receivables. The Company mitigates this risk by monitoring the credit worthiness of its customers and holding cash at financial institutions.

The maximum credit exposure at February 29, 2024 is the carrying amount of cash and trade receivables. The Company’s exposure to credit risk is considered to be low, given the size and nature of the various counterparties involved and their history of performance.

The Company has not historically incurred any significant credit loss in respect of its trade receivables. Based on consideration of all possible default events over the assets’ contractual lifetime, the expected credit loss in respect of the Company’s trade receivables was minimal as at February 29, 2024 and August 31, 2023.

b)	Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company does not have any variable interest-bearing debt.

c)	Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach in managing liquidity is to ensure, to the extent possible, that it will have sufficient liquidity to meet its liabilities when due, by continuously monitoring actual and forecasted cash flows.

d)	Management of capital

The Company’s objective of managing capital, comprising of shareholders’ equity, is to ensure its continued ability to operate as a going concern. The Company manages its capital structure and makes changes to it based on economic conditions.

Management and the Board of Directors review the Company’s capital management approach on an ongoing basis and believe this approach, given the relative size of the Company, is reasonable. The Company is not subject to externally imposed capital requirements. The Company’s capital management objectives, policies and processes have remained unchanged during the period ended February 29, 2024.

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the six month period ended February 29, 2024

(Expressed in US Dollars)

15. Commitments and contingencies

In the ordinary course of operating, the Company may from time to time be subject to various claims or possible claims. Management believes that there are no claims or possible claims that if resolved would either individually or collectively result in a material adverse impact on the Company’s financial position, results of operations, or cash flows. These matters are inherently uncertain, and management’s view of these matters may change in the future.

See note 10 related to lease commitments.

16. Disaggregation of revenue

Schedule of Disaggregation of Revenue

	February 29, 2024		February 28, 2023
	Six months ended
	February 29, 2024		February 28, 2023
	$		$
Sales revenue		7,358,172		7,938,884
Commission expense		6,740,307		7,129,867
Net sales revenue		617,864		809,017

Subscription revenue		378,632		361,192
Sponsorship revenue		139,859		-
Other revenue		142,722		-
Underwriting revenue		73,781		164,483
Total revenue		1,352,858		1,334,692

17. Loan

The Company entered into a loan on July 31, 2023, with a one-year term and maturity date of July 31, 2024. The Company obtained a loan of $430,098 with an annual compounded interest rate of 12% per annum. The Company paid a 2% advance fee to obtain the loan as at August 31, 2023. The Company received an additional advance of $71,479 related to the Loan during the six-month period ended February 29, 2024. The Company obtained the loan based on the qualified SRED amount to be obtained for fiscal year 2023 and six-month period ended February 29, 2024, noted in Note 13. The loan was subsequently settled in full during March 2024.

18. Subsequent events

The only subsequent event the company determined was the loan repayment in March 2024.

Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS .

Please read the following management’s discussion and analysis of our financial condition and results of operations, along with our unaudited condensed interim consolidated financial statements and the related notes and other information. It is important to note that this discussion and analysis contain forward-looking statements with certain risks and uncertainties. These risks and uncertainties could cause our results to differ materially from what was anticipated in these forward-looking statements. You can find more information about these risks and uncertainties under “Special Note Regarding Forward-Looking Statements” in Part I and this Form 10Q.

Special Note Regarding Forward-Looking Statements

This Form 10-Q includes forward-looking statements that entail potential risks and uncertainties. These statements are usually identified by the use of specific terminology such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and other comparable terminology. All the statements in this Form 10-Q that are not about historical facts, including those related to our future operations, financial position, revenue, projected costs, strategy, plans, management objectives, and expected market growth, are forward-looking. While reading this Form 10-Q, you should know that these statements do not guarantee our performance or results. They include known and unknown risks, uncertainties, and assumptions, as mentioned under the “Risk Factors” section in Form 10-Q. We believe that these forward-looking statements are based on reasonable assumptions. Still, you must be aware that many factors, including those mentioned under the “Risk Factors” section in this Form 10-Q, could affect our financial results or operations and cause actual results to differ from those stated in the forward-looking statements. These statements were made as of the date of this Form 10-Q, and we are not obligated to update or revise any forward-looking statements made here to reflect any change in our expectations or any change in events, conditions, or circumstances on which these statements are based. All written or oral forward-looking statements made by us or on our behalf are qualified by the cautionary statements mentioned in this Form 10-Q.

Objective

In this section, we provide an analysis of the Company’s financial condition, cash flows, and results of operations from management’s perspective. We recommend you read this with the unaudited condensed interim consolidated financial statements and notes in Part II, Item 8 of this Annual Report on Form 10-Q.

Executive Summary

We are a fintech company based in Ontario, Canada. Our tech-driven businesses are focused on mortgages and insurance. Our goal is to provide clients with an industry-leading experience through our trusted digital solutions that are simple and fast.

Recent Developments

Business Trends

The Bank of Canada kept the prime interest rate high during 2023 to control high inflation. This resulted in high mortgage interest rates. Consequently, the mortgage interest rates increased significantly, leading to a considerable shrinkage in the mortgage origination market from 2022 to 2023 to 2024. The rise in mortgage interest rates, alongside the economic uncertainty, has resulted in a reduced demand for mortgage originations.

The mortgage business is aligned with the real estate industry, which is a seasonal business. The peak season is normally May to September of each year. Our quarterly results mostly fall in the off-peak season.

Summary of six months ended February 29, 2024.

During the period under review, we generated $697.411 million in residential mortgage loans compared to $650.664 million in the previous corresponding period, which ended on February 28, 2023. This amount represents an increase of $46.747 million or 7.18% compared to the same period that ended on February 28, 2023. Our Net Loss stood at $1.531 million, as compared to the $1.404 million recorded in the same period on February 28, 2023. We also generated a loss of $1.112 million of Adjusted EBITDA, which represents a increase of$1.045 million, or 1,555.37%, compared to the $0.067 million generated in the same period on February 28, 2023. For more information on Adjusted EBITDA, please refer to the “Non-GAAP Financial Measures” section.

Summary of three months ended February 29, 2024.

During the period under review, we generated $314.963 million in residential mortgage loans compared to $267.901 million in the previous corresponding period, which ended on February 28, 2023. This amount represents an increase of $47.062 million or 17.567% compared to the same period that ended on February 28, 2023. Our Net Loss stood at $0.657 million, as compared to the $0.685 million recorded in the same period on February 28, 2023. We also generated a loss of $0.527 million of Adjusted EBITDA, which represents a increase of $0.497 million, or 1,649.78%, compared to the $0.030 million generated in the same period on February 28, 2023. For more information on Adjusted EBITDA, please refer to the “Non-GAAP Financial Measures” section.

Non-GAAP Financial Measures

We provide investors with additional information in addition to our GAAP results. We do this by disclosing our non-GAAP financial measures: Adjusted Revenue, adjusted net (Loss) income, adjusted diluted (Loss) earnings per share, and adjusted EBITDA. These measures, which GAAP does not calculate, are believed to be useful by management in providing investors with useful information regarding the performance and value of our business. Our non-GAAP financial measures serve as performance indicators unaffected by fluctuations in certain costs or other items. While other companies may define these measures differently, they allow for better comparisons of general operating performance from period to period. It is important to note that our non-GAAP financial measures should not be viewed as substitutes for Revenue, net Income, or any other operating performance measure calculated by GAAP. Finally, we rely on these non-GAAP financial measures to plan and forecast for future periods.

Our definition of “Adjusted Revenue” is the sum of all gross revenues. Similarly, we define “Adjusted Net (Loss) Income” as pre-tax earnings before accounting for share-based compensation expense, impairment loss on investments, accrual of legal fees and deferred tax accrual, and the applicable tax effects of these adjustments. We add back Salesforce expenses and capitalize them with a 20% depreciation rate. We added deferred government incentive to the current Income to arrive at Adjusted EBITDA. Lastly, our definition of “Adjusted Diluted (Loss) Earnings Per Share” is derived after adjusting for the abovementioned items.

Our definitions of each non-GAAP financial measure allow us to add back certain cash and non-cash charges and deduct certain gains included in calculating total revenues, net, and net Income attributable to Pineapple Financial Inc. or net Income. However, these expenses and gains vary greatly and are difficult to predict. From time to time in the future, we may include or exclude other items if we believe that doing so is consistent with providing useful information to investors.

Although we use non-GAAP financial measures to evaluate our business performance, it’s important to note that they do not include certain necessary costs to operate our business. These measures can help demonstrate the long-term impact of our strategies. Still, they should not be considered an indication that our future results will be unaffected by unusual or non-recurring items. It’s important to note that non-GAAP financial measures have limitations as analytical tools and should not be used in isolation or as a substitute for analyzing our results as reported under U.S. GAAP. These measures cannot be relied upon as a measure of discretionary cash available to invest in the growth of our business or as a measure of money available to us to meet our obligations.

Limitations to our non-GAAP financial measures included, but are not limited to:

	(a)	they do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments;

	(b)	Adjusted EBITDA does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payment on our debt;

	(c)	although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and Adjusted Revenue, Adjusted Net Income (Loss) and Adjusted EBITDA do not reflect any cash requirement for such replacements or improvements; and

	(d)	they are not adjusted for all non-cash income or expense items reflected in our Consolidated Statements of Cash Flows.

To better evaluate our operating performance, we utilize non-GAAP financial measures and other comparative tools, in addition to U.S. GAAP measurements, which address certain limitations. The reconciliation of our non-GAAP financial measures to their corresponding U.S. GAAP measures can be found below. Furthermore, our U.S. GAAP-based measures are available in the consolidated financial statements and related notes, which are included in Form 10-Q.

Reconciliation of Adjusted Revenue to Total Revenue, net

	Three months ended
	February 29, 2024		February 28, 2023
Total revenue, net		784,869		493,491
Commission expense		3,135,578		3,374,690
Gross Revenue		3,920,447		3,868,181

Reconciliation of Adjusted Net (Loss) Income to Net Income Attributable to Pineapple Financial Inc.

	Three months ended
	February 29, 2024			February 28, 2023
Net Income attributable to Pineapple Financial		(657,456	)		(685,093	)
Share-based compensation		-			(28,892	)
Government based incentive		(29,109	)		556,200
Depreciation		160,999			127,642
Change in fair value of warrant liability		(1,876	)		-
Adjusted EBITDA		(527,442	)		(30,143	)

Reconciliation of Adjusted Diluted Weighted Average Shares Outstanding to Diluted Weighted Average Shares Outstanding

	Three months Ended
	February 29, 2024			February 28, 2023
Weighted average common shares outstanding		6,475,300			6,306,979

Adjusted Diluted (Loss)) Earning per share		(0. 08	)		(0.004	)
Adjusted EBITDA		(527,442	)		(30,143	)

Key Performance Indicators

As part of our business operations, we closely track several key performance indicators (KPIs) that help us measure our performance. We can evaluate our ability to generate revenue by monitoring our loan production KPIs and comparing our performance to the mortgage origination market. Additionally, we use KPIs related to our technology setup and underwriting processes to assess our performance further.

	Three months ended
	February 29, 2024		February 28, 2023
Mortgage volume		314,963,000		267,901,000
Sales revenue		3,478,883		3,581,771
Commission expense		3,135,578		3,374,690
Net sales revenue		343,305		207,081
Sponsorship revenue		140,884		-
Underwriting revenue		34,512		102,399
Subscription revenue		195,410		184,011
Other Income		70,758		-

Reconciliation of Adjusted Revenue to Total Revenue, net

	Six months ended
	February 29, 2024		February 28, 2023
Total revenue, net		1,352,858		1,334,692
Commission expense		6,740,307		7,129,867
Gross Revenue		8,093,165		8,464,559

Reconciliation of Adjusted Net (Loss) Income to Net Income Attributable to Pineapple Financial Inc.

	Six months ended
	February 29, 2024			February 28, 2023
Net Income attributable to Pineapple Financial		(1,530,695	)		(1,403,747	)
Share-based compensation		-			33,041
Government based incentive		116,035			1,092,546
Depreciation		315,184			210,975
Change in fair value of warrant liability		(12,685	)		-
Adjusted EBITDA		(1,112,161	)		(67,185	)

Reconciliation of Adjusted Diluted Weighted Average Shares Outstanding to Diluted Weighted Average Shares Outstanding

	Six months Ended
	February 29, 2024			February 28, 2023
Weighted average common shares outstanding		6,475,300			6,306,979

Adjusted Diluted (Loss)) Earning per share		(0. 17	)		(0.011	)
Adjusted EBITDA		(1,112,161	)		(67,185	)

Key Performance Indicators

	Six months ended
	February 29, 2024		February 28, 2023
Mortgage volume		697,411,000		650,664,000
Sales revenue		7,358,172		7,938,884
Commission expense		6,740,307		7,129,867
Net sales revenue		617,864		809,017
Sponsorship revenue		139,860
Underwriting revenue		73,781		164,692
Subscription revenue		378,632		361,193
Other Income		73,781		-

Description of Certain Components of Financial Data

Components of Revenue

Our sources of revenue include commissions from lenders, underwriting revenue, membership fees from mortgage agents, and other Income.

Sales revenue

Sales revenue is commission collected from financial institutions with contracts in place. The Company earns revenue based on a percentage of mortgage amount funded between individuals referred by the Company and financial institutions funding the mortgage. We are an agent in these deals as we provide the platform for other parties to provide services to the end-user. For each contract with a customer, the Company identifies the contract with a customer, identifies the performance obligations in the contract, and determines the transaction price to the separate performance obligations based on the relative stand-alone selling price of each distinct good or service to be delivered; and recognizes revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. The Company acknowledges revenue when a contract exists with a lender party and an agent broker, the contract identifies the use of the platform service to close a mortgage deal, the mortgage deal has been closed with the lending financial institution, and commissions are paid by the lending financial institution based on various criteria of the mortgage deal including but not limited to interest rates available at that time, term, seasonality, collateral, Income, purpose, etc. Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business. Upon completing all the actions listed above, revenue is recognized at the end of the deal. A typical transaction attracts a commission fee payable to Pineapple Financial Inc.

Subscription Revenue:

Users access and use our technology platform, MyPineapple, for a flat monthly service fee of $118. In exchange for this fee, users of MyPineapple have access to a network management system that allows them to perform back-office procedures more efficiently and effectively. This platform will enable them to process the deal described above and prepare and complete the package for submission to be funded by the financial institution. We have a strong user base, which has experienced significant growth since our inception. Revenue is recognized at the beginning of the month when a User is invoiced and pays the fee.

Underwriting Fee:

Users can optionally use our expert risk pre-assessment service, which assists them in pre-underwriting their loans before submission to a lender for approval and funding. This service significantly reduces the time the lender partners take to assess the deal. For mortgages of $197,475 and less, we charge an underwriting fee of $276; for mortgages greater than $197,475, the Company charges an underwriting fee of $395. The Company has undertaken a special program to educate and inform Users of this service in further detail. Approximately 40% of the deals originated by users using this service. This program intends to increase the number of deals further and improve the services offered.

Other Income:

Other Income includes a technology setup fee and sponsorship fee.

Components of operating expenses

Our operating expenses, as presented in the statement of operations data, include salaries, commissions and team member benefits, general and administrative expenses, marketing and advertising expenses, and others.

Salaries and commissions and team member benefits

All payroll expenses include our team members’ salaries, commissions, and benefits.

Selling, general and administrative expenses

Selling, general and administrative expenses include software subscriptions, license fees, professional services, marketing expenses, and other operating expenses.

Share-based compensation

Share-based compensation comprises equity awards and is measured and expensed accordingly under Accounting Standards Codification (“ASC”) 718 Compensation-Stock Compensation.

Comparison of six months ended February 29, 2024 and February 28, 2023

	Six months ended									Percentage of
	February 29, 2024			February 28, 2023			Increase/ (decrease)			Increase/ (Decrease)
Description	$			$			$			%
Sales revenue		8,093,165			8,464,559			(371,394	)		(4.39	)
Commission		6,740,307			7,129,867			(389,560	)		(5.46	)
Net Revenue		1,352,858			1,334,692			18,166			1.36
Selling, general and administrative		1,031,947			1,104,082			(72,135	)		(6.53	)
Advertising and marketing		404,017			469,321			(65,304	)		(13.92	)
Salaries, wages and benefits		1,186,316			1,274,549			(88,233	)		(6.92	)
Interest expense and bank charges		49,881			39,390			10,491			26.63
Depreciation		315,184			210,975			104,209			49.39
Share-based compensation		-			33,041			(33,041	)		(100.00	)
Government based incentive		(80,334	)		(392,919	)		(312,585	)		(79.55	)
Total expenses		2,767,151			2,738,439			28,712			1.05
Foreign exchange gain (loss)		10,773			-			10,772			100.00
Change in fair value of warrant liability		12,682			-			12,682			100.00
Loss before income taxes		(1,530,695	)		(1,403,747	)		126,949			9.04
Income tax		-			-
Net loss		(1,530,695	)		(1,403,747	)		126,949			9.04
Foreign currency translation adjustment		(10,451	)		(135,078	)
Net loss and comprehensive loss		(1,541,146	)		(1,538,825	)

Revenue

Sales Revenue decreased from $8,465 million in the six months ending February 29, 2024, to $8.093 million in the six months ending February 28, 2023, representing a 4.39% decrease from period to period. To control high inflation, The Bank of Canada increased the interest rate from 3.75% as of December 01, 2022, to 5.00% as of February 29, 2024. This resulted in decreased real estate transactions and, eventually, in the mortgage business.

Net revenue

Pineapple Financials’ net revenue increased 1.36% during the six months ending February 29, 2024. This increase was due to more volume by low-volume agents with low margins in second quarter of the financial year.

Cost of Revenue

During the six months ending February 29, 2024, the cost of revenue decreased to $6.74 million from $7.130 million during the six months ending February 28, 2023. The decrease in the cost of revenue is due to the decline in revenue.

Selling, General and Administrative Expenses.

The breakdown of selling, general and administrative expenses are as follows:

	Six months ending
	February 29, 2024		February 28, 2023		Increase/ (Decrease)			Increase/ (Decrease)
Description	($)		($)		($)			(%)
Software subscription		402,289		455,639		(53,350	)		(11.71	)
Office and general		34,154		47,305		(13,151	)		(27.80	)
Professional fee		192,405		215,149		(22,744	)		(10.57	)
Dues and subscriptions		152,441		118,568		33,873			28.57
Rent		98,078		78,884		19,194			24.33
Consulting fee		24,474		112,547		(88,073	)		(78.25	)
Travel		86,049		36,255		49,794			137.35
Donations		4,646		15,771		(11,125	)		(70.54	)
Lease expense		6,333		22,232		(15,899	)		(71.51	)
Insurance		31,078		1,732		29,346			1,694.34
		1,031,947		1,104,082		(72,135	)		(6.53	)

General and administrative expenses decreased by $72,135 from $1,104,082 during the six months ending February 28, 2023, to $1,031,947 during the six months ending February 29, 2024. This decrease represents 6.53% from six months ended February 28, 2023, to February 29, 2024.

Software subscriptions decreased by $53,350, representing 11.71%, from $455,639 during the six months ended February 28, 2023, to $402,289 during the six months ended February 29, 2024. This is due to the usage of more in-house developed software.

Office and general expenses decreased to $13,151 during the six months ending February 29, 2024, from $47,305 during the six months ended February 28, 2023. This represents a decrease of 27.80%. This decrease represents control of the expenses.

Dues and subscriptions increased from $118,568 during the six months ended February 28, 2023, to $152,441 for the six months ended February 29, 2024, representing a 28.57% increase. This increase is due to Initial Public Offering on November 03, 2023.

Advertising and Marketing

	Six months ended
	February 29, 2024		February 28, 2023		Increase/ (Decrease)			Increase/ (Decrease)
Description	($)		($)		($)			(%)
Advertising and marketing		404,017		469,321		(65,304	)		(13.92	)

Advertising and marketing decreased to $404,017 during the six months ending February 29, 2024, compared to $469,321 during the previous six months ending February 28, 2023. This 13.92% decrease was due to fewer advertisement and marketing expenses during the depressed real estate market.

Salaries, Wages and benefits

	Six months ended
	February 29, 2024		February 28, 2023		Increase/ (Decrease)			Increase/ (Decrease)
Description	($)		($)		($)			(%)
Salaries, wages and benefits		1,186,316		1,274,549		(88,233	)		(6.92	)

Salaries, wages, and benefits decreased by $88,233, or 6.92%, from $1,274,549 during the six months ended February 28, 2023, to $1,186,316. This is due to management’s cost-cutting efforts.

Depreciation

	Six months ended
	February 29, 2024		February 28, 2023		Increase/ (Decrease)		Increase/ (Decrease)
Description	($)		($)		($)		(%)
Depreciation		315,184		210,975		104,209		49.39

Pineapple Financial is actively investing in the development of its software. During the six months under review, $0.558 million was added to intangible assets. This addition mostly represents the salaries, wages, and benefits of our staff working on intangible assets. These additions are the main cause of the depreciation increase during the six months that ended on February 29, 2024.

Government based incentive

	Six months Ended
	February 29, 2024			February 28, 2023			Increase/ (Decrease)			Increase/ (Decrease)
Description	($)			($)			($)			(%)
Government based incentive		(80,334	)		(392,919	)		(312,585	)		(79.55	)

The Company is no longer eligible for SR&ED incentives after its IPO.

Comparison of three months ended February 29, 2024, and February 28, 2023

	Three ended									Percentage of
	February 29, 2024			February 28, 2023			Increase/ (decrease)			Increase/ (Decrease)
Description	$			$			$			%
Sales revenue		3,920,447			3,868,181			52,266			1.35
Commission		3,135,578			3,374,690			(239,112	)		(7.09	)
Net Revenue		784,869			493,491			291,378			59.04
Selling, general and administrative		592,202			444,226			147,976			33.31
Advertising and marketing		150,597			354,680			(204,083	)		57.54
Salaries, wages and benefits		541,062			654,683			(113,621	)		(17.36	)
Interest expense and bank charges		28,450			19,164			9,286			48.46
Depreciation		160,999			127,642			33,357			26.13
Share-based compensation		-			(28,892	)		28,892			100.00
Government based incentive		(29,109	)		(392,919	)		(363,810	)		92.60
Total expenses		1,444,201			1,178,584			265,617			22.54
Foreign exchange gain (loss)		-			-
Change in fair value of warrant liability		1,876			-			1,876			100.00
Loss before income taxes		(657,456	)		(685,093	)		(27,637	)		(4.03	)
Income tax		-			-
Net loss		(657,456	)		(685,093	)
Foreign currency translation adjustment		1,727			61,846
Net loss and comprehensive loss		(655,729	)		(623,247	)

Revenue

Sales Revenue increased from $3.868 million in the three months ending February 29, 2024, to $3.920 million in the three months ending February 28, 2023, representing a 1.35% increase from period to period. Bank of Canada halted the interest rate hike, and the inflation is under control. This resulted in a better real estate market at the start of the year. The hope for interest rate cuts by the Bank of Canada led to an increase in volume.

Net Revenue

Pineapple Financials’ net revenue increased to $291,378 during the three months ending February 29, 2024. This represents a 59.04% increase as compared to the previous corresponding quarter ended February 28, 2023.

Cost of Revenue

During the three months ending February 29, 2024, the cost of revenue decreased by $0.239 million from $3.375 million during the three months ended February 28, 2023 to $3.375 million during the three months ended February 29, 2024. The decrease in the cost of revenue is due to the improved real estate market, which resulted in business by agents with low margins.

Selling, General and Administrative Expenses.

	Three months ended
	February 29, 2024		February 28, 2023		Increase/ (Decrease)		Increase/ (Decrease)
Description	($)		($)		($)		(%)
Selling, general and administrative		592,202		444,226		147,976		33.31

Selling, general and administrative expenses increased by $147,976 from $444,226 during the three months ending February 28, 2023, to $592,202 during the three months ending February 29, 2024. This increase represents 33.31%. This is due to expansion in other areas and travelling costs.

Advertising and Marketing

	Three months ended
	February 29, 2024		February 28, 2023		Increase/ (Decrease)			Increase/ (Decrease)
Description	($)		($)		($)			(%)
Advertising and marketing		150,597		354,680		(204,083	)		(57.54	)

Advertising and marketing decreased to $150,597 during the three months ending February 29, 2024, as compared to $354,680 during the previous corresponding three months ending February 28, 2023. Last year, our Horizon expense was booked in February 2023 as compared to the expense in March 2024. This is the reason for the decrease.

Salaries, Wages and benefits

Three months ended

February 29,