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 May 31, 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 July 15, 2024 was 7,273,416.

PINEAPPLE FINANCIAL INC.

TABLE OF CONTENTS FOR FORM 10-Q

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	2
	Consolidated Balance Sheets (unaudited)	2
	Consolidated Statements of Operations and Comprehensive Loss(unaudited)	3
	Consolidated Statements of Shareholders’ Equity (unaudited)	4
	Consolidated Statements of Cash Flows (unaudited)	5
	Notes to Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	31

	SIGNATURES	32

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.

Pineapple Financial Inc.

Condensed Interim Consolidated Balance Sheets (Unaudited)

As at May 31, 2024 and August 31, 2023

(Expressed in US Dollars)

		May 31, 2024 (Unaudited)			August 31, 2023
As at:

Assets
Current assets
Cash		$	748,769		$	720,365
Trade and other receivables	Note 13		151,264			758,988
Prepaid expenses and deposits			152,174			218,150
Total current assets			1,052,207			1,697,503

Investments	Note 4		9,935			10,013
Right-of-use asset	Note 10		853,123			960,377
Property and equipment	Note 5		172,869			242,091
Intangible assets	Note 6		2,221,370			1,718,954
Total Assets		$	4,309,504		$	4,628,938

Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable and accrued liabilities		$	530,562		$	605,319
Loan	Note 17		-			430,098
Current portion of lease liability	Note 10		159,210			138,372
Total current liabilities			689,772			1,173,790

Deferred government incentive	Note 13		524,595			699,627
Conversion note payable	Note 18		80,568			-
Conversion feature liability	Note 18		57,299			-
Lease liability	Note 10		847,060			969,589
Warrant liability	Note 8		62,733			-
Total liabilities		$	2,262,027		$	2,843,005

Shareholders’ Equity
Common shares, no par value; unlimited authorized; 7,181,979 issued and outstanding shares as of May 31, 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			(480,393	)		(417,727	)
Accumulated deficit			(8,034,759	)		(5,655,315	)
Total stockholders’ equity			2,047,477			1,785,933
		$	4,309,504		$	4,628,938

*Description of business (note 1)*
*Contingencies and commitments (note 15)*
*Subsequent events (note 19)*
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 nine month periods ended May 31, 2024

(Expressed in US Dollars)

		May 31, 2024			May 31, 2023			May 31, 2024			May 31, 2023
		Three months ended						Nine months ended
		May 31, 2024			May 31, 2023			May 31, 2024			May 31, 2023
For the period ended		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenue	Note 16	$	736,448			603,231		$	1,971,377			1,937,923

Expenses
Selling, general and administrative	Note 11		491,666			698,568			1,545,900			1,617,231
Advertising and Marketing			265,395			169,655			648,197			824,395
Salaries, wages and benefits			593,202			552,819			1,825,786			1,827,369
Interest expense and bank charges			40,373			18,689			42,825			58,079
Depreciation	Note 5,6,10		220,190			91,554			535,575			302,529
Share-based compensation	Note 9		-			(67	)		-			32,974
Government Incentive	Note 13		21,770			(119,753	)		(176,326	)		(512,673	)
Total expenses		$	1,632,596			1,411,465		$	4,421,957			4,149,904

Loss from operations			(896,148	)		(808,234	)		(2,450,580	)		(2,211,981	)
Foreign exchange gain (loss)			-			-			10,751			-
Gain (loss) on change in fair value of warrant liability	Note 8		29,479			-			42,251			-
Gain (loss) on change in fair value of conversion feature liability	Note 18		18,064			-			18,134			-
Loss before income taxes		$	(848,605	)		(808,234	)	$	(2,379,444	)		(2,211,981	)

Net loss		$	(848,605	)		(808,234	)	$	(2,379,444	)		(2,211,981	)
Foreign currency translation adjustment			(41,676	)		(3,658	)		(62,666	)		(131,420	)

Net loss and comprehensive loss		$	(890,281	)		(811,892	)	$	(2,442,110	)		(2,343,401	)

Loss per share - basic and diluted ($)			(0.12	)		(0.13	)		(0.37	)		(0.35	)

Weighted average number of common shares outstanding - basic and diluted			7,181,978			6,306,979			7,181,978			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 nine month period ended May 31, 2024

(Expressed in US Dollars)

				Additional		Accumulated
	Common			Paid in		other			Accumulated			Total
	Shares			Capital		comprehensive			(deficit)			shareholders’
	(note 7)			(note 8 and 9)		loss			earnings			equity
	$			$		$			$			$
Balance, August 31, 2022		4,903,031			2,922,853		(353,218	)		(2,846,278	)		4,626,388
Share-based compensation		-			32,974		-			-			32,974
Foreign exchange translation		-			-		(131,420	)		-			(131,420	)
Net loss		-			-		-			(2,211,981	)		(2,211,981	)
Balance, May 31, 2023		4,903,031			2,955,827		(484,638	)		(5,058,259	)		2,315,961

Balance, August 31, 2023		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		-			-		(62,666	)		-			(62,666	)
Net loss		-			-					(2,379,444	)		(2,379,444	)
Balance, May 31, 2024		7,606,685			2,955,944		(480,393	)		(8,034,759	)		2,047,477

Pineapple Financial Inc.

Condensed Interim Consolidated Statements of Cash Flow (Unaudited)

For the nine months ended May 31, 2024

(Expressed in US Dollars)

For the period ended:		May 31, 2024 (Unaudited)			May 31, 2023 (Unaudited)
		Nine Months Ended
For the period ended:		May 31, 2024 (Unaudited)			May 31, 2023 (Unaudited)
		$			$
Cash provided by (used for) the following activities

Operating activities
Net loss for the period			(2,379,444	)		(2,211,981	)
Adjustments for the following non-cash items:
Depreciation of property and equipment	Note 5		65,300			42,592
Depreciation of intangible assets	Note 6		369,993			180,770
Depreciation on right of use asset	Note 10		100,282			79,167
Interest expense on lease liability	Note 10		47,482			43,946
Share-based compensation	Note 9		-			32,974
Foreign exchange gain (loss)			(10,751	)		-
Change in fair value of warrant liability	Note 8		(42,251	)		-
Change in fair value of conversion feature liability	Note 18		(18,133	)		-

Net changes in non-cash working capital balances:
Trade and other receivables			607,724			(636,309	)
Prepaid expenses and deposits			65,976			267,607
Accounts payable and accrued liabilities			(74,756	)		187,261
Deferred government incentive			(175,032	)		-
Income taxes receivable			-			71,078
			(1,443,610	)		(1,942,895	)

Financing activities
Repayment of loan	Note 17		(430,099	)		-
Share capital issuance	Note 7		2,751,937			-
Note payable proceed	Note 18		300,000			-
Lease payments Repayment of lease obligations	Note 10		(141,032	)		(46,778	)
			2,480,806			(46,778	)

Investing activities
Additions to intangible assets	Note 6		(896,223	)		(910,397	)
Additions to property and equipment	Note 5		(4,962	)		(51,216	)
Net cash used in investing activity			(901,185	)		(961,613	)

Net change in cash			136,011			(2,951,286	)
Effect of changes in foreign exchange rates			(107,607	)		(89,253	)
Cash, beginning of period			720,365			3,896,839
Cash, end of period			748,769			856,300

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 nine month period ended May 31, 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 first quarter of 2022, 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 July 15, 2024.

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

For nine months period ended May 31, 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 nine month period ended May 31, 2024

(Expressed in US Dollars)

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

Warrant Liability:

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC 815. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the unaudited condensed interim consolidated statements of operations and comprehensive loss.

The warrants are not precluded from equity classification and are accounted for as such on the date of issuance and will be on each unaudited condensed interim consolidated balance sheet date thereafter. As the warrants are equity classified, they are initially measured at fair value (or allocated value).

Derivative Financial Instrument:

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”). For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the unaudited condensed interim consolidated statements of operations and comprehensive loss. For derivative instruments that are classified as equity, the derivative instruments are initially measured at fair value (or allocated value), and subsequent changes in fair value are not recognized as long as the contracts continue to be classified in equity.

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.

Recently issued and adopted accounting standards:

In December 2023, the FASB issued ASU 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This standard modifies the rules on income tax disclosures to require entities to disclose specific categories in the rate reconciliation, the income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state, and local jurisdictions. The ASU is effective for years beginning after December 15, 2024, but early adoption is permitted. This ASU should be applied on a prospective basis, although retrospective application is permitted. The Company is currently evaluating the impact of this standard on its financial statements and disclosures.

In March 2024, the FASB issued ASU 2024-01 - Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards. This standard clarifies whether profits interest and similar awards fall within the scope of stock-based compensation guidance as defined in ASC Topic 718, introducing examples to demonstrate this. The ASU includes scenarios where profits interest awards are classified as equity instruments or liability awards and situations where they fall outside ASC Topic 718, being accounted for under ASC Topic 710. The ASU is effective for years beginning after December 15, 2024, but early adoption is permitted. This ASU should be applied on a prospective basis, although retrospective application is permitted. The Company is currently evaluating the impact of this standard on its financial statements and disclosures.

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 May 31, 2024, the Company recognized a $Nil change in fair value (2023- $nil). Change in fair value during the current period due to foreign exchange translation.

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

For the nine month period ended May 31, 2024

(Expressed in US Dollars)

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		4,962
Translation adjustment		(2,458	)
Balance, May 31, 2024	$	351,787

Accumulated depreciation
Balance, August 31, 2022	$	49,334
Depreciation		67,674
Translation adjustment		(9,816	)
Balance, August 31, 2023	$	107,192
Depreciation		65,300
Translation adjustment		6,426
Balance, May 31, 2024	$	178,918

Net carrying value
May 31, 2024	$	172,869
August 31, 2023	$	242,091

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		896,223
Translation adjustment		(28,034	)
Balance, May 31, 2024	$	2,925,714

Accumulated depreciation
Balance, August 31, 2022	$	77,102
Depreciation		265,150
Translation adjustment		(3,681	)
Balance, August 31, 2023	$	338,571
Depreciation		369,993
Translation adjustment		(4,220	)
Balance, May 31, 2024	$	704,344

Net carrying value
May 31, 2024	$	2,221,370
August 31, 2023	$	1,718,954

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

For the nine month period ended May 31, 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, May 31, 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 $48,283 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 and warrants issue for convertible notes as per agreement on May 10, 2024.

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

For the nine month period ended May 31, 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 May 31, 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 and on May 10, 2024 the Company entered into a convertible debt transaction (Note 18) and also issued 1,000,000 warrants at an exercise price of $5 with an expiry date of February 10, 2025. 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 issued on November 3, 2023 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 $1.15, exercise price of $4, term of 4.42 years, risk free rate of 4.69% and volatility of 152.71% as at May 31, 2024.

The warrants issued in May 2024 were valued using the Black-Scholes method with the share price of $1.29, exercise price of $5, term of 6 months, risk free rate of 4.78%, credit spread of 31.46% and volatility of 106.81% at issuance and share price of $1.94, exercise price of $4, term of 6 months, risk free rate of 4.79%, credit spread of 31.55% and volatility of 103.26% as at May 31, 2024.

Schedule of Warrant Liability

	#		$
Balance at August 31, 2023		-		-
Issuance of warrants– November 2023		26,250		48,283
Issuance of warrants – May 2024		1,000,000		56,701
Change in fair value of warrant liability				(42,251	)
Fair Value of Warrants at May 31, 2024		1,026,250		62,733

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

For the nine month period ended May 31, 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 nine months ended May 31, 2024 (May 31, 2023 - $57,140).

The former 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 former Chief Financial Officer options were forfeited during the year ended August 31, 2023. For period ended May 31, 2024, stock-based compensation expense of $nil (May 31, 2023 a recovery of $24,165) 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

	May 31, 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		-		3.82		(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

The weighted average remaining life of the options outstanding as at May 31, 2024 is 2.03 years and the intrinsic value of the options outstanding is $Nil.

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

For the nine month period ended May 31, 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, May 31, 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		100,282
Translation adjustment		(35,763	)
Balance, May 31, 2024	$	281,862

Carrying Amount
May 31, 2024	$	853,123
August 31, 2023	$	960,377

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

For the nine month period ended May 31, 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

	May 31, 2024			August 31, 2023

Balance, beginning of period	$	1,107,961		$	1,020,585
Additions		-			141,799
Interest Expense		47,482			56,316
Lease payments		(141,032	)		(81,090	)
Translation Adjustment		(8,141	)		(29,649	)
Balance, end of period	$	1,006,270		$	1,107,961

Current		159,210			138,372
Non-Current		847,060			969,589
	$	1,006,270		$	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	$	70,996
2025		216,066
2026		217,255
2027		214,698
2028		228,054
2029		200,233
2030		16,686
Total Lease liability	$	1,163,989

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

For the nine month period ended May 31, 2024

(Expressed in US Dollars)

11. Expenses

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

	May 31, 2024		May 31, 2023
	Nine ended
	May 31, 2024		May 31, 2023
	$		$
Software Subscription		663,424		619,703
Office and general		117,213		134,633
Professional fees		157,531		271,916
Dues and Subscriptions		146,964		188,810
Rent		155,628		118,837
Consulting fees		45,167		112,319
Travel		113,940		55,655
Donations		7,406		38,149
Lease expense		54,946		75,396
Insurance		59,681		1,813
Selling, general and administrative		1,545,900		1,617,231

12. Related party transactions

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

Schedule of Related Party Transactions

	May 31, 2024		May 31, 2023
	$		$
Salaries and Wages		554,828		549,275
Share-based compensation		-		28,946

13. Deferred government grant

The Company was eligible for the Government of Canada SRED program up to November 3, 2023. The Company has accrued $105,150 of SRED receivable as at May 31, 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 $524,595 of the balance received and accrued is recognized as deferred government incentive balance and will be recognized as recovery in the consolidated statement of operations and comprehensive loss over the useful life of the intangible assets. As at May 31, 2024, $176,326 (May 31, 2023 $512,673) was recognized as recovery of operating expenses in the consolidated condensed interim statement of operations and comprehensive loss.

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

For the nine month period ended May 31, 2024

(Expressed in US Dollars)

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 May 31, 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 May 31, 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. As on May 10, 2024, company entered into an agreement pursuant to which received access to US $15,000,000 equity line of credit for period of 36 months. As at May 31, 2024 the Company has not accessed the equity line of credit.

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 May 31, 2024.

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 billing

Schedule of Disaggregation of Revenue

	May 31, 2024		May 31, 2023
	Nine months ended
	May 31, 2024		May 31, 2023
	$		$
Gross Billing		11,450,989		11,097,689
Commission expense		10,456,703		10,340,720
Net sales revenue		994,286		756,969

Subscription revenue		560,261		999,932
Other revenue		301,585		-
Underwriting revenue		115,245		181,022
Total revenue		1,971,377		1,937,923

Pineapple Financial Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the nine month period ended May 31, 2024

(Expressed in US Dollars)

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 $430,099 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 $87,369 related to the Loan during the nine-month period ended May 31, 2024. The Company obtained the loan based on the qualified SRED amount to be obtained for fiscal year 2023 and nine-month period ended May 31, 2024, noted in Note 13. The loan was settled in full during March 2024.

18. Convertible Loan

On May 10, 2024, the Company issued an unsecured convertible debt (‘debt”) of $300,000 carrying a two-year term with interest on the outstanding principal amount from the date of issuance accrued at the rate of 8% per annum. The Company also issued 1,000,000 warrants with exercise price of $5 in connection with the convertible debt (Note 8).

The Company has an option to prepay the loan prior to the maturity date subject to a prepayment fee of $75,000.

The conversion price of the debt shall equal to 75% of the volume weighted average price (VWAP) on the trading day immediately preceding the conversion date.

The conversion feature of the note was not clearly and closely related to the debt and should be recognized as a derivative liability. The Company determined that the estimate fair value of the derivative liability is $75,432. The prepayment option was not clearly and closely related to the debt and should have been recognized a derivative liability. The Company determined the estimated fair value of the prepayment option to be $nil.

The company incurred debt issuance cost of $94,687 which was applied against the principal of the debt. The debt component of the convertible debt was valued using the effective interest method, based on an estimated effective interest of 46%.

During the nine months ended May 31, 2024, the Company accrued interest of $1,381 recognized in accounts payable and accrued liabilities in the unaudited condensed interim consolidated balance sheet and incurred accretion expense of $6,655 recognized in the unaudited condensed interim consolidated statement of operations and comprehensive loss.

The following table presents the principal amounts and accrued interest of the convertible debt as at May 31, 2024.

	Amount
Convertible Promissory Note August 31, 2023		-
Issuance of convertible debt	$	73,913
Accretion expense		6,655
Convertible Promissory Note May 31, 2024		80,568

The following table presents the conversion feature liability balance as at May 31, 2024.

	Amount
Balance, issuance date	$	75,432
Change in Fair value of conversion feature liability		(18,133	)
Balance, May 31, 2024		57,299

19. Subsequent events

The Company has performed an evaluation of subsequent events through the time of filing this nine months and has determined the following subsequent events:-

	i)	On July 08, 2024, company issued 91,437 shares against the convertible note as per the convertible debt agreement for $50,000. ($42,372.60 and $7,627.40 interest) on dated July 09, 2024.

	ii)	Company also entered into equity line of credit agreement on May 10, 2024 through equity purchase agreement (“EPA”). The agreement was effective on July 08, 2024. As per the term of the agreement, company shall issue and sell to the Investor, from time to time, and the Investor shall purchase up to Fifteen Million Dollars ($15,000,000) of the Company’s common shares at a purchase price of 95 percent of the market price. The Company shall issue 200,000 Company’s common shares as a commitment fee under the EPA to the Investor. The put notice should be between $10,000 to $1,000,000 or 150 percent of the average daily trading value.

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.

Summary of nine months ended May 31, 2024.

During the period under review, we generated $1,445.028 million in residential mortgage loans compared to $1,288.708 million in the previous corresponding period, which ended on May 31, 2023. This amount represents an increase of $156.32 million or 12.13% compared to the same period that ended on May 31, 2023. Our Net Loss stood at $2.379 million, as compared to the $2.212 million recorded in the same period on May 31, 2023.

Summary of three months ended May 31, 2024.

During the period under review, we generated $503.523 million in residential mortgage loans compared to $ 410.312 million in the previous corresponding period, which ended on May 31, 2023. This amount represents an increase of $93.211 million or 22.72% compared to the same period that ended on May 31, 2023. Our Net Loss stood at $0.848 million, as compared to the $0.808 million recorded in the same period on May 31, 2023.

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
	May 31, 2024		May 31, 2023
Mortgage volume		377,640,286		307,734,120
Gross billing		4,449,848		3,814,083
Commission expense		3,713,400		3,210,852
Sales revenue		736,448		603,231
Underwriting revenue		41,454		16,751
Subscription revenue		181,701		106,572

Reconciliation of Adjusted Revenue to Total Revenue, net

	Nine months ended
	May 31, 2024		May 31, 2023
Total revenue, net		1,971,377		1,937,922
Commission expense		10,456,703		10,340,720
Gross billing		12,428,079		12,278,642

Key Performance Indicators

	Nine months ended
	May 31, 2024		May 31, 2023
Mortgage volume		1,083,771,257		966,531,247
Gross billing		11,450,989		11,097,689
Commission expense		10,456,703		10,340,720
Sales revenue		994,286		756,969
Sponsorship revenue		178,243		-
Underwriting revenue		115,244		181,022
Subscription revenue		560,261		999,932
Other Income		123,342		-

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 nine months ended May 31, 2024 and May 31, 2023

	Nine months ended									Percentage of
	May 31, 2024			May 31, 2023			Increase/ (decrease)			Increase/ (Decrease)
Description	$			$			$			%
Gross billing		12,428,080			12,278,643			149,437			1.22
Commission		10,456,703			10,340,720			115,983			1.12
Net Revenue		1,971,377			1,937,923			33,454			1.73
Selling, general and administrative		1,545,900			1,617,231			(71,331	)		(4.41	)
Advertising and marketing		648,197			824,395			(176,198	)		(21.37	)
Salaries, wages and benefits		1,825,786			1,827,369			(1,583	)		(0.09	)
Interest expense and bank charges		42,825			58,079			(15,254	)		(26.26	)
Depreciation		535,575			302,529			233,046			77.03
Share-based compensation		-			32,974			(32,974	)		(100.00	)
Government based incentive		(176,326	)		(512,673	)		(336,347	)		(65.61	)
Total expenses		4,421,957			4,149,904			272,053			6.56
Foreign exchange gain (loss)		10,751			-			10,751			100.00
Gain (loss) change in fair value of warrant liability		42,251			-			42,251			100.00
Gain (loss) on change in fair value of conversion feature liability		18,134			-			18,134			100.00
Loss before income taxes		(2,379,444	)		(2,211,982	)		167,462			7.57
Net loss		(2,379,444	)		(2,211,982	)		167,462			7.57
Foreign currency translation adjustment		(62,666	)		(131,420	)
Net loss and comprehensive loss		(2,442, 110	)		(2,343,402	)

Revenue

Gross Billing increased from $12.279 million in the nine months ending May 31, 2023, to $12.428 million in the nine months ending May 31, 2024, representing a 1.22% increase 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 May 31, 2024.. This resulted in decreased real estate transactions and, eventually, in the mortgage business. However, on June 05, 2024, BOC has cut the interest rate by 0.25% bringing it down to 4.75%.

Net revenue

Pineapple Financials’ net revenue increased by 1.73% during the nine months ending May 31, 2024. The volume remains consistent with the last year.

Cost of Revenue

During the nine months ending May 31, 2024, the commission expense also increased to $10.457 million from $10.341 million during the nine months ending May 31, 2023. The increase is in line with the increase in gross billing.

Selling, General and Administrative Expenses.

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

	Nine months ending
	May 31, 2024		May 31, 2023		Increase/ (Decrease)			Increase/ (Decrease)
Description	($)		($)		($)			(%)
Software subscription		663,424		619,703		43,721			7.06
Office and general		117,213		134,632		(17,419	)		(12.94	)
Professional fee		157,531		271,916		(114,385	)		(42.06	)
Dues and subscriptions		146,964		188,810		(41,846	)		(22.16	)
Rent		155,628		118,837		36,791			30.96
Consulting fee		45,167		112,319		(67,152	)		(59.79	)
Travel		113,940		55,655		58,285			104.73
Donations		7,406		38,149		(30,743	)		(80.59	)
Lease expense		54,946		75,396		(20,450	)		(27.12	)
Insurance		59,681		1,813		57,868			3,191.84
		1,545,900		1,617,231		(71,331	)		(4.41	)

General and administrative expenses decreased by $71,331 from $1,617,231 during the nine months ending May 31, 2023, to $1,545,900 during the nine months ending May 31, 2024. This decrease represents 4.41% from nine months ended May 31, 2023, to May 31, 2024. This is because of cost-saving measures taken by the company.

Software subscriptions increased by $43,721, representing 7.06%, from $619,703 during the nine months ended May 31, 2023, to $663,424 during the nine months ended May 31, 2024. The increase is due to change in price of the software used.

Office and general expenses decreased to $17,419 during the nine months ending May 31, 2024, from $134,632 during the nine months ended May 31, 2023. This represents a decrease of 12.94%. This decrease is due to control of the expenses.

Dues and subscriptions decreased from $188,810 during the nine months ended May 31, 2023, to $146,964 for the nine months ended May 31, 2024, representing a 22.16% decrease. This decrease represents the cost control efforts by the management.

Advertising and Marketing

	Nine months ended
	May 31, 2024		May 31, 2023		Increase/ (Decrease)			Increase/ (Decrease)
Description	($)		($)		($)			(%)
Advertising and marketing		648,197		824,395		(176,198	)		(21.37	)

Advertising and marketing decreased to $648,197 during the nine months ending May 31, 2024, compared to $824,395 during the previous nine months ending May 31, 2023. This 21.37% decrease was due to fewer advertisement and marketing expenses during the depressed real estate market.

Salaries, Wages and benefits

	Nine months ended
	May 31, 2024		May 31, 2023		Increase/ (Decrease)			Increase/ (Decrease)
Description	($)		($)		($)			(%)
Salaries, wages and benefits		1,825,786		1,827,369		(1,583	)		(0.09	)

Salaries, wages, and benefits decreased by $1,583, or 0.09%, from $1,827,369 during the nine months ended May 31, 2023, to $1,825,786. This is in line with the previous year.

Depreciation

	Nine months ended
	May 31, 2024		May 31, 2023		Increase/ (Decrease)		Increase/ (Decrease)
Description	($)		($)		($)		(%)
Depreciation		535,575		302,529		233,046		77.03

Pineapple Financial is actively investing in the development of its software. During the nine months under review, $0.940 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 nine months that ended on May 31, 2024.

Comparison of three months ended May 31, 2024, and May 31, 2023

	Three months ended									Percentage of
	May 31, 2024			May 31 2023			Increase/ (decrease)			Increase/ (Decrease)
Description	$			$			$			%
Gross billing		4,449,848			3,955,559			494,289			12.50
Commission		3,713,400			3,352,328			361,072			10.77
Revenue		736,448			603,231			133,217			22.08
Selling, general and administrative		491,666			698,568			(206,902	)		(29.62	)
Advertising and marketing		265,395			169,655			95,740			56.43
Salaries, wages and benefits		593,202			552,819			40,383			7.31
Interest expense and bank charges		40,374			18,689			21,685			116.03
Depreciation		220,190			81,554			138,636			169.99
Share-based compensation		-			(67	)		67			100.00
Government based incentive		21,770			(119,753	)		(97,983	)
Total expenses		1,632,596			1,411,465			221,131			15.67
Gain (loss) on change in fair value of conversion feature liability		29,479			-
Gain (loss) on change in fair value of conversion feature liability		18,064			-			18,064			100.00
Loss before income taxes		(848,605	)		(808,234	)		76,939			9.52
Net loss		(848,605	)		(808,234	)		76,939			9.52
Foreign currency translation adjustment		(41,676	)		3,658
Net loss and comprehensive loss		(890,281	)		(811,892	)

Gross Billing

Gross billing increased from $3.955million in the three months ending May 31, 2023, to $4.449 million in the three months ending May 31, 2024, representing a 12.50% 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 in June 2024 will lead to an increase in volume.

Revenue

Pineapple Financials’ revenue increased to $736,448 during the three months ending May 31, 2024 as compared to $603,231 during the three months ended May 31, 2023. This represents a 22.08% increase as compared to the previous corresponding quarter ended May 31, 2023.

Commission

During the three months ending May 31, 2024, the cost of revenue increased by $0.361 million from $3.352 million during the three months ended May 31, 2023 to $3.713 million during the three months ended May 31, 2024. The increase in the commission is due to the business by agents with high margins.

Selling, General and Administrative Expenses.

	Three months ended
	May 31, 2024		May 31, 2023		Increase/ (Decrease)			Increase/ (Decrease)
Description	($)		($)		($)			(%)
Selling, general and administrative		491,666		698,568		(206,902	)		(29.62	)

Selling, general and administrative expenses decreased by $206,902 from $698,568 during the three months ending May 31, 2023, to $491,666 during the three months ending May 31, 2024. This decrease represents 29.62%. This is due to cost control measures adopted by the company.

Advertising and Marketing

	Three months ended
	May 31, 2024		May 31, 2023		Increase/ (Decrease)		Increase/ (Decrease)
Description	($)		($)		($)		(%)
Advertising and marketing		265,395		169,655		95,740		56.43

Advertising and marketing increased to $265,395 during the three months ending May 31, 2024, as compared to $169,655 during the previous corresponding three months ending May 31, 2023. This increase was due to more marketing efforts for the company to keep and increase the market share.

Salaries, Wages and benefits

	Three months ended
	May 31, 2024		May 31, 2023		Increase/ (Decrease)		Increase/ (Decrease)
Description	($)		($)		($)		(%)
Salaries, wages and benefits		593,202		552,819		40,383		7.31

Salaries, wages and benefits increased by $40,383 or 7.31% from $552,819 during the three months ended May 31, 2023, to $593,202. This is in line with the precious quarter.

Liquidity and Capital Resources

Our primary liquidity needs encompass working capital and capital expenditures, specifically those associated with technological enhancements, investments in skilled personnel, and marketing services. These three categories have constituted a significant portion of our liquidity and capital resource demands throughout the year. We primarily utilize cash on hand and cash flows generated from our operations to meet these requirements.

The following table summarizes our cash flows from operating, investing and financing activities:

	Nine months ended
	May 31, 2024			May 31, 2023			Increase/ (Decrease)
Description	$			$			$
Cash (used) provided in operating activities		(1,443,610	)		(1,942,895	)		499,285
Cash (used) provided by financing activities		2,480,806			(46,778	)		2,527,584
Cash (used) provided in investing activities		(901,185	)		(961,613	)		(60,428	)
Cash at the end of the period		748,769			856,300			107,531

Net cash flow from (used in) operating activities

	Nine months ended
	May 31, 2024			May 31, 2023
Description	($)			($)
Operating activities
Net loss		(2,379,444	)		(2,211,981	)
Adjustments for the following non-cash items:
Depreciation of property and equipment		65,300			42,592
Depreciation of intangible assets		369,993			180,770
Depreciation on right of use asset		100,282			79,167
Interest expense on lease liability		47,482			43,946
Share-based compensation		-			32,974
Foreign exchange gain (loss)		(10,751	)		-
Change in fair value of warrant liability		(42,251	)
Change in fair value of conversion feature liability		(18,133	)
Net changes in non-cash working capital balances:
Trade and other receivables		607,724			(636,309	)
Prepaid expenses and deposits		65,976			267,607
Accounts payable and accrued liabilities		(74,756	)		187,261
Deferred government incentive		(175,032	)		-
Income taxes receivable		-			71,078
		(1,443,610	)		(1,942,895	)

Our primary source of cash flow comes from our core business operations.

During the nine-month period that ended on May 31, 2024, the Company’s net cash used in operating activities decreased to $1.444 million from $1.943 million in the previous corresponding period. This decrease in cash outflow is primarily due to accounts payable and accrued liability payments. Additionally increase in trade and other receivables add outflows to operating activities.

Net cash flow from (used in) financing activities

During the nine months ending May 31, 2024, the Company issued 875,000 shares through an initial public offer of $4.00. The Company received $2.752 million after underwriting commission and other initial public offering expenses. Further company issued convertible note payable for $300,000 which carries interest at the rate of 8% p.a. for two year or when the note will be converted into ordinary shares.

Net cash flow from (used in) investing activities

The Company invested $0.901 million to develop software for quick and accurate mortgage application filling by field agents during the nine months ended May 31, 2024. These investments will help the Company acquire more mortgage agents in the future.

SEC Form 10-Q filed by Pineapple Financial Inc.