UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
| 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
(Exact name of registrant as specified in its charter)
| Not applicable | ||
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including
area code:
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.
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).
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 | ☐ |
| ☒ | 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 | ||
The number of shares of the registrant’s common stock issued and outstanding, as of April 14, 2025 was .
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 | 21 |
| 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 |
| i |
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.
| 1 |
Pineapple Financial Inc.
Condensed Interim Consolidated Financial Statements (Unaudited)
For the six month period ended February 28, 2025
(Expressed in US Dollars)
| 2 |
Pineapple Financial Inc.
Condensed Interim Consolidated Balance Sheets - Unaudited
(Expressed in US Dollars)
| As at: | February 28, 2025 | August 31, 2024 | ||||||||
| Assets | ||||||||||
| Current assets | ||||||||||
| Cash | $ | $ | ||||||||
| Trade and other receivables | Note 13 | |||||||||
| Prepaid expenses and deposits | ||||||||||
| Investment | Note 4 | |||||||||
| Right-of-use asset | Note 10 | |||||||||
| Property and equipment | Note 5 | |||||||||
| Intangible assets | Note 6 | |||||||||
| $ | $ | |||||||||
| Liabilities and Shareholders’ Equity | ||||||||||
| Current liabilities | ||||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||||
| Deferred revenue | ||||||||||
| Short term loan | Note 17 | |||||||||
| Current portion of lease liability | Note 10 | |||||||||
| Deferred government incentive | Note 13 | |||||||||
| Lease liability | Note 10 | |||||||||
| Warrant liability | Note 8 | |||||||||
| $ | $ | |||||||||
| Shareholders’ Equity | ||||||||||
| Common shares, par value; authorized; issued and outstanding shares as of February 28, 2025 and as at August 31, 2024. | Note 7 | |||||||||
| Additional paid-in capital | Note 8,9 | |||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| $ | $ | |||||||||
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 unaudited condensed interim consolidated financial statements
| 3 |
Pineapple Financial Inc.
Condensed Interim Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
For the three month and six month ended February 28, 2025
(Expressed in US Dollars)
| Three months ended | Six months ended | |||||||||||||||||||
| February 28, 2025 | February 29, 2024 | February 28, 2025 | February 29, 2024 | |||||||||||||||||
| For the period ended | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||
| Revenue | Note 16 | $ | $ | |||||||||||||||||
| Expenses | ||||||||||||||||||||
| Selling, general and administrative | Note 11 | |||||||||||||||||||
| Advertising and Marketing | ||||||||||||||||||||
| Salaries, wages and benefits | ||||||||||||||||||||
| Interest expense and bank charges | ||||||||||||||||||||
| Depreciation | Note 5,6,10 | |||||||||||||||||||
| Share-based compensation | Note 9 | |||||||||||||||||||
| Government Incentive | Note 13 | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
| Total expenses | $ | $ | ||||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Foreign exchange gain (loss) | ( | ) | ||||||||||||||||||
| Gain (loss) on change in fair value of warrant liability | Note 8 | |||||||||||||||||||
| Loss before income taxes | $ | ( | ) | ( | ) | $ | ( | ) | ( | ) | ||||||||||
| Income taxes (recovery) expense | ||||||||||||||||||||
| Net loss | $ | ( | ) | ( | ) | $ | ( | ) | ( | ) | ||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||||||||||
| Net loss and comprehensive loss | $ | ( | ) | ( | ) | $ | ( | ) | ( | ) | ||||||||||
| Loss per share - basic and diluted ($) | ) | ) | ) | ) | ||||||||||||||||
| Weighted average number of common shares outstanding - basic and diluted | ||||||||||||||||||||
The accompanying notes are an integral part of these condensed interim consolidated financial statements
| 4 |
Pineapple Financial Inc.
Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity - Unaudited
(Expressed in US Dollars)
| Common Shares (note 7) | Additional Paid in Capital (note 8 and 9) | Accumulated other comprehensive loss | Accumulated (deficit) earnings | Total shareholders’ equity | ||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
| Balance, August 31, 2023 | ( | ) | ( | ) | ||||||||||||||||
| Shares issued on Initial Public offering on November 3, 2023 | ||||||||||||||||||||
| Warrants issued related to Initial Public Offering | ( | ) | ( | ) | ||||||||||||||||
| Foreign exchange translation | ( | ) | ( | ) | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Balance, February 29, 2024 | ( | ) | ( | ) | ||||||||||||||||
| Balance, August 31, 2024 | ( | ) | ( | ) | ||||||||||||||||
| Shares issued against S3 | ||||||||||||||||||||
| Shares against pre-funded warrants | ||||||||||||||||||||
| Foreign exchange translation | ( | ) | ( | ) | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Balance, February 28, 2025 | ( | ) | ( | ) | ||||||||||||||||
The accompanying notes are an integral part of these consolidated unaudited condensed interim financial statements
| 5 |
Pineapple Financial Inc.
Condensed Interim Consolidated Statements of Cash Flow - Unaudited
(Expressed in US Dollars)
| Six Months Ended | ||||||||||
| February 28, 2025 | February 29, 2024 | |||||||||
| For the period ended: | (Unaudited) | (Unaudited) | ||||||||
| $ | $ | |||||||||
| Cash provided by (used for) the following activities | ||||||||||
| Operating activities | ||||||||||
| Net loss for the three months | ( | ) | ( | ) | ||||||
| Adjustments for the following non-cash items: | ||||||||||
| Depreciation of property and equipment | Note 5 | |||||||||
| Amortization of intangible assets | Note 6 | |||||||||
| Depreciation on right of use asset | Note 10 | |||||||||
| Interest expense on lease liability | Note 10 | |||||||||
| Change in fair value of warrant liability | ( | ) | ||||||||
| Foreign exchange gain (loss) | ( | ) | ||||||||
| Net changes in non-cash working capital balances: | ||||||||||
| Trade and other receivables | ( | ) | ||||||||
| Prepaid expenses and deposits | ( | ) | ( | ) | ||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||||
| Deferred government incentive | ( | ) | ||||||||
| Deferred revenue | ( | ) | ||||||||
| ( | ) | ( | ) | |||||||
| Financing activities | ||||||||||
| Share capital issuance | Note 7 | |||||||||
| Additional share capital issued | ||||||||||
| Proceed from loan | Note 17 | |||||||||
| Repayment of loan | ||||||||||
| Repayment of lease obligations | Note 10 | ( | ) | ( | ) | |||||
| Investing activities | ||||||||||
| Additions to intangible assets | Note 6 | ( | ) | ( | ) | |||||
| Additions to property and equipment | Note 5 | ( | ) | |||||||
| ( | ) | ( | ) | |||||||
| Net change in cash | ( | ) | ||||||||
| Effect of changes in foreign exchange rates | ||||||||||
| Cash, beginning of period | ||||||||||
| Cash, end of the period | ||||||||||
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements
| 6 |
Pineapple Financial Inc.
Notes to the Condensed Interim Consolidated Financial Statements for period ended February 28, 2025 - Unaudited
(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 $
Impact from the global inflationary pressures leading to higher interest rates
During the first quarter of 2025, inflationary pressures were eased to a greater extent, and central banks worldwide started decreasing their interest rates. However, interest rates are still high compared to the year 2022. The real estate market has started showing some improvement, but inflation is down from the year 2022 but still not as per target. This led to uncertainty around the business. The Company determined that there were no material expectations of increased credit losses and no material indicators of impairment of long-term assets.
Economic and Trade Policy Uncertainty
Company continues to monitor the potential impact of evolving trade policies, including the threat of additional tariffs imposed by the United States. While no specific tariffs have been implemented during the reporting period that materially affect the Company’s operations, the potential for future changes in cross-border trade arrangements and import/export duties contributes to broader economic uncertainty. Management has considered these risks in its forward-looking assessments and determined that, as of the reporting date, there are no material adverse effects on the Company’s financial position, results of operations, or estimates related to credit losses or asset impairments.
| 7 |
Going Concern
The Company continues to focus its
efforts predominantly on research and development activities. During this process, it has incurred significant operating losses, a trend
expected to persist for the foreseeable future. As of February 28, 2025, the Company reported an accumulated deficit of $
To sustain its operations during the
six month period end February 28, 2025, the Company raised grossly $
These condensed interim consolidated financial statements do not include adjustments that might be necessary should the Company be unable to continue as a going concern.
The consolidated financial statements were authorized for issue by the Board of Directors on April 14, 2025
2. Significant accounting policies
Basis of preparation, functional and presentation currency
The condensed interim consolidated financial statements have been prepared in accordance with US 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, 2024. 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 determines its reporting units in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280, Segment Reporting. The Company evaluates a reporting unit by first identifying its operating segments under ASC 280. 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 operating segment and have been identified as the CEO and CFO of the Company.
| 8 |
Pineapple Financial Inc.
Notes to the Condensed Interim Consolidated Financial Statements for period ended February 28, 2025 - Unaudited
(Expressed in US Dollars)
2. Significant accounting policies (continued from previous page)
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 subsidiaries and any intercompany balances, gains or losses have been eliminated upon consolidation. The subsidiaries have a USD presentation currency, and the functional currency is in CAD, and accounting policies have been applied consistently to the subsidiaries.
Recently issued and adopted accounting standards:
As an “emerging growth company,” the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act. The adoption dates discussed below reflects this election.
| Recently Adopted | |
| In July 2023, the FASB issued 2023-03 — Presentation of Financial Statements (Topic 205), Income Statement — Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation — Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022, EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 — General Revision of Regulation S-X: Income or Loss Applicable to Common Stock (SEC Update). The adoption of this standard on August 1, 2023, did not result in amended disclosures in the Company’s consolidated financial statements, nor did this standard have a material impact the Company’s results of operations. | |
| In March 2024, the FASB issued ASU 2023-07 — Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The update enhances disclosures by requiring entities to provide more detailed information about significant segment expenses, other segment items, and measures of segment profit or loss used by the chief operating decision maker (CODM). The guidance also requires qualitative descriptions of the methods used to determine segment profit/loss and asset measurement. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements but resulted in expanded disclosures within the segment reporting footnotes. | |
| Not Yet Adopted | |
| 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.
In November 2024, the FASB issued ASU 2024-03: Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosure (Subtopic 220-40) – Disaggregation of Income Statement Expenses. The new guidance requires companies to disclose information about specific expenses at each interim and annual reporting period. The guidance is effective for fiscal years beginning after December 15, 2026 and interim periods with fiscal years beginning after December 15, 2027. The Company is in the process of evaluating the requirements of the update, which may result in expanded disclosures upon adoption. |
| 9 |
Pineapple Financial Inc.
Notes to the Condensed Interim Consolidated Financial Statements for period ended February 28, 2025 - Unaudited
(Expressed in US Dollars)
3. Significant accounting judgments, estimates and assumptions
The preparation of condensed interim consolidated 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 condensed interim consolidated 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 condensed interim consolidated 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.
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 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 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 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.
Going Concern
Preparation of the condensed interim consolidated financial statement on a going concern basis, which contemplates the realization of assets and payments of liabilities in the ordinary course of business. Should the Company be unable to continue as a going concern, it may be unable to realize the carrying value of its assets, including its intangible assets and to meet its liabilities as they become due.
| 10 |
Pineapple Financial Inc.
Notes to the Condensed Interim Consolidated Financial Statements for period ended February 28, 2025 - Unaudited
(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.
The intangible assets were initially
assigned a useful life of
4. Investment
During the year ended August 31, 2021,
the Company purchased an investment in a private company. The Company holds a
5. Property and equipment
The Company’s property and equipment consist of equipment, furniture, IT equipment, leasehold improvements and laptops.
| Property
and equipment | ||||
| Cost | ||||
| Balance, August 31, 2023 | $ | |||
| Additions | ||||
| Translation adjustment | ||||
| Balance, August 31, 2024 | $ | |||
| Translation adjustment | ( | ) | ||
| Balance, February 28, 2025 | $ | |||
| Accumulated depreciation | ||||
| Balance, August 31, 2023 | $ | |||
| Depreciation | ||||
| Translation adjustment | ||||
| Balance, August 31, 2024 | $ | |||
| Depreciation | ||||
| Translation adjustment | ( | ) | ||
| Balance, February 28, 2025 | $ | |||
| Net carrying value | ||||
| February 28, 2025 | $ | |||
| August 31, 2024 | $ |
| 11 |
Pineapple Financial Inc.
Notes to the Condensed Interim Consolidated Financial Statements for period ended February 28, 2025 - Unaudited
(Expressed in US Dollars)
6. Intangible assets
During the current period, the Company capitalized development costs related to internally generated software classified as intangible assets.
Intangible assets | ||||
| Cost | ||||
| Balance, August 31, 2023 | $ | |||
| Additions | ||||
| Translation adjustment | ( | ) | ||
| Balance, August 31, 2024 | $ | |||
| Additions | ||||
| Translation adjustment | ( | ) | ||
| Balance, February 28, 2025 | $ | |||
| Accumulated amortization | ||||
| Balance, August 31, 2023 | $ | |||
| Amortization | ||||
| Translation adjustment | ||||
| Balance, August 31, 2024 | $ | |||
| Amortization | ||||
| Translation adjustment | ( | ) | ||
| Balance, February 28, 2025 | $ | |||
| Net carrying value | ||||
| February 28, 2025 | $ | |||
| August 31, 2024 | $ |
| 12 |
Pineapple Financial Inc.
Notes to the Condensed Interim Consolidated Financial Statements for period ended February 28, 2025 - Unaudited
(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 no par value.
| # | $ | |||||||
| Balance, August 31, 2023 | ||||||||
| Issuance of Common Shares on Initial Public Offering | ||||||||
| Issuance of Common Share against Conversion Note | ||||||||
| Issuance of Common Shares on Equity Purchase Agreement | ||||||||
| Share Issuance Costs | - | ( |
) | |||||
| Warrants issued | - | ( |
) | |||||
| Balance, August 31, 2024 | ||||||||
| Issuance of Common Shares against S3 | ||||||||
| Issuance of Common Shares against Pre-funded warrants | ||||||||
| Shares Issuance Costs | - | ( |
) | |||||
| Balance, February 28, 2025 | ||||||||
During the six months ended February 28, 2025,
the Company issued common shares under its Form S-3 shelf registration. Additionally, the Company issued
In connection with this offering, we also offered
to each purchaser whose purchase of Shares in this offering would otherwise result in the purchaser, together with its affiliates and
certain related parties,
Our common shares are listed on the NYSE American under the symbol “PAPL.” On November 12, 2024, the last reported sale price of our common shares was $ per share.
In assessing our eligibility to use Form S-3,
as of November 12, 2024, the aggregate market value of our outstanding common shares held by non-affiliates was approximately $
| 13 |
Pineapple Financial Inc.
Notes to the Condensed Interim Consolidated Financial Statements for period ended February 28, 2025 - Unaudited
(Expressed in US Dollars)
8. Warrants
| a) | Common Share purchase warrant |
| # | $ | |||||||
| Balance, August 31, 2024 | ||||||||
| Balance, February 28, 2025 | ||||||||
| b) | Pre-funded warrant |
| Pre-funded warrant issued November 13, 2024 | ||||||||
| Shares issued | ( | ) | ( | ) | ||||
| Direct cost | - | ( | ) | |||||
| Balance, February 28, 2025 |
The purchase price of each Pre-Funded Warrant
is $, which is equal to the price per share at which the Shares are being sold, minus $
| c) | Warrant Liability |
As noted in Note 7 above on November 3, 2023,
the Company issued warrants at an exercise price of $
The warrants issued on November 3, 2023 were valued
using the Black-Scholes method with the share price of $, exercise price of $, term of
The warrants issued in May 2024 expired on February 09, 2025.
We have agreed to sell to a certain purchaser
common share warrants to purchase up to
| # | $ | |||||||
| Balance at August 31, 2024 | ||||||||
| Warrants expired | ( | ) | ( | ) | ||||
| Change in fair value of warrant liability | ( | ) | ||||||
| Translation adjustment | ( | ) | ||||||
| Fair Value of Warrants at February 28, 2025 | ||||||||
As at February 28, 2025 the warrants
have
| 14 |
Pineapple Financial Inc.
Notes to the Condensed Interim Consolidated Financial Statements for period ended February 28, 2025 - Unaudited
(Expressed in US Dollars)
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 % of the issued and outstanding common shares of the Company.
Options granted on June 14, 2021, . The fair value of stock options granted was $. A total stock-based compensation expense was recognized of $ for the six months period ended February 28, 2025 (August 31, 2024 - $).
| February 28, 2025 | August 31, 2024 | |||||||||||||||
| Number of Options | Weighted Average Exercise Price | Number of Options | Weighted Average Exercise Price | |||||||||||||
| # | $ | # | $ | |||||||||||||
| Balance, beginning of period | ||||||||||||||||
| Forfeited during the period | ||||||||||||||||
| Balance as at period end | ||||||||||||||||
| Exercisable as at period end | ||||||||||||||||
As at February 28, 2025, the options have intrinsic value (August 31, 2024 – ). As at February 28, 2025, all options are exercisable with a weighted average remaining life of years (August 31, 2024 – years)
| 15 |
Pineapple Financial Inc.
Notes to the Condensed Interim Consolidated Financial Statements for period ended February 28, 2025 - Unaudited
(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 total lease area is
The following schedule shows the movement in the Company’s right-of-use asset:
| Right-of-use asset | ||||
| Cost | ||||
| Balance, August 31, 2023 | $ | |||
| Translation adjustment | ( | ) | ||
| Balance, August 31, 2024 | ||||
| Translation adjustment | ( | ) | ||
| Balance, February 28, 2025 | $ | |||
The right-of-use asset is being depreciated on a straight-line basis over the remaining lease term.
| Accumulated Depreciation | ||||
| Balance, August 31, 2023 | $ | |||
| Depreciation | ||||
| Translation adjustment | ( | ) | ||
| Balance, August 31, 2024 | $ | |||
| Depreciation | ||||
| Translation adjustment | ( | ) | ||
| Balance, February 28, 2025 | $ | |||
| Carrying Amount | ||||
| February 28, 2025 | $ | |||
| August 31, 2024 | $ | |||
| 16 |
Pineapple Financial Inc.
Notes to the Condensed Interim Consolidated Financial Statements for period ended February 28, 2025 - Unaudited
(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:
| February 28, 2025 | August 31, 2024 | |||||||
| Balance, beginning of period | $ | $ | ||||||
| Interest Expense | ||||||||
| Lease payments | ( | ) | ( | ) | ||||
| Translation Adjustment | ( | ) | ||||||
| Balance, end of period | $ | $ | ||||||
| Current | ||||||||
| Non-Current | ||||||||
| $ | $ | |||||||
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:
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| $ |
| 17 |
Pineapple Financial Inc.
Notes to the Condensed Interim Consolidated Financial Statements for period ended February 28, 2025 - Unaudited
(Expressed in US Dollars)
11. Expenses
The following table provides a breakdown of the selling, general and administrative:
| Six months ended | ||||||||
| February 28, 2025 | February 29, 2024 | |||||||
| $ | $ | |||||||
| Software Subscription | ||||||||
| Office and general | ||||||||
| Professional fees | ||||||||
| Dues and Subscriptions | ||||||||
| Rent | ||||||||
| Consulting fees | ||||||||
| Travel | ||||||||
| Donations | ||||||||
| Lease expense | ||||||||
| Insurance | ||||||||
| Three months ended | ||||||||
| February 28, 2025 | February 29, 2024 | |||||||
| $ | $ | |||||||
| Software Subscription | ||||||||
| Office and general | ||||||||
| Professional fees | ||||||||
| Dues and Subscriptions | ||||||||
| Rent | ||||||||
| Consulting fees | ||||||||
| Travel | ||||||||
| Donations | ||||||||
| Lease expense | ||||||||
| Insurance | ||||||||
12. Related party transactions and balances
Compensation of key management personnel includes the CEO, COO, CSO, and CFO:
| February 28, 2025 | February 29, 2024 | |||||||
| $ | $ | |||||||
| Salaries, Wages and benefits | ||||||||
Un-secured loans received from directors are disclosed in Note 17.
| 18 |
Pineapple Financial Inc.
Notes to the Condensed Interim Consolidated Financial Statements for period ended February 28, 2025 - Unaudited
(Expressed in US Dollars)
13. Deferred government incentive
The Company was eligible for the Government
of Canada Scientific Research and Experimental Development (SRED) program up to November 3, 2023. The Company has accrued $
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 28, 2025 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 28, 2025 and August 31, 2024.
| 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, refer to Going Concern in Note 1.
| 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 28, 2025.
| 19 |
Pineapple Financial Inc.
Notes to the Condensed Interim Consolidated Financial Statements for period ended February 28, 2025 - Unaudited
(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
| Six months ended | ||||||||
| February 28, 2025 | February 29, 2024 | |||||||
| $ | $ | |||||||
| Gross Billing | ||||||||
| Commission expense | ||||||||
| Revenue | ||||||||
| Subscription revenue | ||||||||
| Sponsorship revenue | ||||||||
| Other revenue | ||||||||
| Underwriting revenue | ||||||||
| Total revenue | ||||||||
| Three months ended | ||||||||
| February 28, 2025 | February 29, 2024 | |||||||
| $ | $ | |||||||
| Gross Billing | ||||||||
| Commission expense | ||||||||
| Revenue | ||||||||
| Subscription revenue | ||||||||
| Sponsorship revenue | ||||||||
| Other revenue | ||||||||
| Underwriting revenue | ||||||||
| Total revenue | ||||||||
17. Loan
Company obtained $
The Company entered into a agreement
on October 22, 2024, for short term loan of $
Company also entered into un-secured
line of credit for $
18. Subsequent events
The Company has evaluated subsequent events through the date of filling the 10Q, and has determined that there are no events requiring disclosure or adjustment in the condensed interim consolidated financial statements.
| 20 |
Item 24 Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 condensed interim consolidated financial statements and the related notes and other information included in this Quarter Report on Form 10-Q. 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 anticipated in these forward-looking statements. You can find more information about these risks and uncertainties under the heading “Special Note Regarding Forward-Looking Statements” in Part I and elsewhere in this Form 10- Q.
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 this 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 condensed interim consolidated financial statements and notes in Part II, Item 8 of this Annual Report on Form 10Q.
Executive Summary
We are a fintech company based in Ontario, Canada. Our tech-driven businesses focus on mortgages and insurance. Our goal is to provide clients with an industry-leading experience through our trusted digital solutions, which are simple and fast.
Recent Developments
Business Trends
During 2022 and 2023, the Bank of Canada implemented multiple increases to the prime rate in response to heightened inflationary pressures, resulting in a significant rise in mortgage interest rates. In mid-2024, the Bank of Canada began easing monetary policy, reducing the policy rate by 1.75% in an effort to stabilize the economy and improve housing affordability. While this policy shift has helped improve consumer sentiment, elevated interest rates, coupled with renewed economic uncertainty, including emerging U.S. tariff threats, continue to weigh heavily on the Canadian economy.
These external pressures have heightened market volatility, slowed cross-border investment activity, and increased caution among Canadian businesses and consumers. As a result, Pineapple Financial Inc. has continued to experience suppressed mortgage origination volumes, with overall real estate and lending activity remaining below pre-2022 levels. Although early signs of recovery are evident, future growth remains dependent on macroeconomic stability, interest rate trends, and the resolution of international trade uncertainties.
Summary of the Six months Ended February 28, 2025
Financial and Operational Highlights
During the six-month period ended February 28, 2025, we originated $690.002 million in residential mortgage loans, representing an increase of $121.481 million or 17.61% compared to the $568.521 million originated during the same period in the prior year.
Our net loss for the period was $1.166 million, reflecting an improvement of $0.375 million, or 24.33%, compared to a net loss of $1.541 million in the six months ended February 29, 2024. The improvement in net results is primarily attributable to higher loan origination volumes and ongoing cost management initiatives.
The Company’s functional currency is the Canadian dollar (CAD), while its reporting currency is the U.S. dollar (USD). During the reporting period, the CAD depreciated by an average of 3.41% compared to the average CAD/USD exchange rate during the same period in the prior year, which had a modest impact on the translation of financial results.
| 21 |
Key Performance Indicators
As part of our business operations, we closely track several key performance indicators (KPIs) that help us measure our performance. For example, we can evaluate our ability to generate revenue by monitoring our loan production KPIs and comparing our performance to that of the mortgage origination market. Additionally, we use KPIs related to our technology setup and underwriting processes to assess our performance further.
| Six months period Ended February 28, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Mortgage volume | 811,483,270 | 697,411,000 | 650,664,000 | |||||||||
| Gross billing | 8,648,249 | 7,358,172 | 7,938,884 | |||||||||
| Commission expense | 7,813,115 | 6,740,307 | 7,129,867 | |||||||||
| Net sales revenue | 835,134 | 617,864 | 809,017 | |||||||||
| Underwriting revenue | 57,707 | 73,781 | - | |||||||||
| Subscription revenue | 368,119 | 378,632 | 164,692 | |||||||||
| Other income | 251,276 | 282,581 | 361,193 | |||||||||
| Three months ended | ||||||||||||
| February 29, 2025 | February 29, 2024 | February 28, 2023 | ||||||||||
| Mortgage volume | 386,325,122 | 314,963,000 | 267,901,000 | |||||||||
| Gross billing | 4,242,341 | 3,484,852 | 3,581,771 | |||||||||
| Commission expense | 3,821,489 | 3,140,234 | 3,374,690 | |||||||||
| Net sales revenue | 420,852 | 344,618 | 207,081 | |||||||||
| Underwriting revenue | 30,364 | 31,675 | - | |||||||||
| Subscription revenue | 185,939 | 195,387 | 102,399 | |||||||||
| Other income | 106,154 | 213,189 | 184,011 | |||||||||
Gross Billing Revenue:
Gross billing revenue refers to commissions collected from financial institutions with which the Company has contracts. The Company’s gross billing is based on a percentage of the mortgage amount funded between individuals referred by the Company and the financial institutions providing the mortgage. We serve as an agent in these transactions by offering a platform for other parties to deliver services to the end-user. For each contract with a customer, the Company identifies the contract, recognizes the performance obligations, determines the transaction price for each distinct performance obligation based on the relative stand-alone selling price of the goods or services to be delivered, and acknowledges revenue when each performance obligation is fulfilled in a manner that reflects the transfer of goods or services promised to the customer. The Company recognizes revenue when: there is a contract with a lender party and agent broker, the contract specifies the use of the platform service to finalize a mortgage deal, the mortgage deal is completed with the lending financial institution, and commissions are paid by the lending 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, and so forth. Revenue is measured at the fair value of the consideration received or receivable, representing amounts due for services provided in the normal course of business. Revenue is recognized at the end of the transaction upon the completion of all the actions listed above. A typical transaction incurs a commission fee payable to Pineapple Financial Inc.
Subscription Revenue:
Users can access and use our technology platform, MyPineapple, for a flat monthly service fee of $107. In exchange for this fee, MyPineapple users gain access to a network management system that enables them to perform back-office procedures more efficiently and effectively. This platform allows them to process the previously mentioned deal, prepare it, and complete the package for submission to the financial institution for funding. We have a robust user base that has experienced significant growth since our inception. Revenue is recognized at the beginning of the month when users are invoiced and pay 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 for the lender partners’ assessment of the deal. For mortgages of $395,450 and greater, we charge an underwriting fee of $356; for mortgages lesser than $395,450, the Company charges an underwriting fee of $249. The Company has undertaken a special program to educate and inform users of this service in further detail. Approximately 40% of the deals originated by users are using this service. This program is intended to further increase the number of deals and improve the services offered.
Other Income:
Other income includes a technology setup fee and sponsorship fee.
| 22 |
Components of operating expenses
Our operating expenses, as presented in the statement of operations data, include salaries, commissions and team member benefits, general and administrative expenses, marketing and advertising expenses, and others.
Salaries and commissions and team member benefits
All payroll expenses include our team members’ salaries, commissions, and benefits.
Selling, general and administrative expenses
Selling, general and administrative expenses include software subscriptions, license fees, professional services, marketing expenses, and other operating expenses.
Share-based compensation
Share-based compensation comprises equity awards and is measured and expensed accordingly under Accounting Standards Codification (“ASC”) 718 Compensation—Stock Compensation.
Comparison of the six months years ended February 28, 2025 and February 29, 2024
| Period Ended | February 28, 2025 ($) | February 29, 2024 ($) | Increase/ (Decrease) ($) | Increase/ (Decrease) % | ||||||||||||
| Gross Billing | 9,325,350 | 8,093,164 | 1,232,186 | 15.23 | ||||||||||||
| Commission | 7,813,115 | 6,740,307 | 1,072,808 | 15.92 | ||||||||||||
| Revenue | 1,512,236 | $ | 1,352,858 | 159,378 | 11.78 | |||||||||||
| Expenses | ||||||||||||||||
| Selling, general and administrative | 995,190 | 1,031,947 | (36,757 | ) | (3.56 | ) | ||||||||||
| Advertising and Marketing | 326,945 | 404,017 | (77,072 | ) | (19.08 | ) | ||||||||||
| Salaries, wages and benefits | 828,764 | 1,186,316 | (357,552 | ) | (30.14 | ) | ||||||||||
| Interest expense and bank charges | 273,812 | 49,881 | 223,931 | 448..93 | ||||||||||||
| Depreciation | 429,645 | 315,184 | 114,461 | 36.32 | ||||||||||||
| Government Incentive | (48,518 | ) | (80,334 | ) | 31,816 | (39.60 | ) | |||||||||
| Total expense | 2,805,838 | $ | 2,907,011 | (101,173 | ) | (3.48 | ) | |||||||||
| Loss from operations | (1,293,602 | ) | (1,554,153 | ) | 260,551 | (16.76 | ) | |||||||||
| Foreign exchange gain (loss) | 4,021 | 10,772 | (6,751 | ) | (62.67 | ) | ||||||||||
| Gain(loss) on change in fair value of warrant liability | 35,591 | 12,685 | 22,906 | 180.05 | ||||||||||||
| Loss before income taxes | (1,253,990 | ) | $ | (1,530,696 | ) | 276,706 | (18.08 | ) | ||||||||
| Loss after income taxes | (1,253,990 | ) | (1,530,696 | ) | ||||||||||||
Comparison of the three months years ended February 28, 2025 and February 29, 2024
| Period Ended | February 28, 2025 ($) | February 29, 2024 ($) | Increase/ (Decrease) ($) | Increase/ (Decrease) % | ||||||||||||
| Gross Billing | 4,518,505 | 3,779,563 | 738,942 | 19.55 | ||||||||||||
| Commission | 3,775,196 | 3,135,578 | 639,618 | 20.40 | ||||||||||||
| Revenue | 743,309 | $ | 784,869 | (41,560 | ) | (5.30 | ) | |||||||||
| Expenses | ||||||||||||||||
| Selling, general and administrative | 572,853 | 592,202 | (19,349 | ) | (3.27 | ) | ||||||||||
| Advertising and Marketing | 57,101 | 150,597 | (93,496 | ) | (62.08 | ) | ||||||||||
| Salaries, wages and benefits | 391,418 | 541,062 | (149,644 | ) | (27.66 | ) | ||||||||||
| Interest expense and bank charges | 100,005 | 28,450 | 71,555 | 251.51 | ||||||||||||
| Depreciation | 242,181 | 160,999 | 81,182 | 50.42 | ||||||||||||
| Government Incentive | (21,301 | ) | (29,109 | ) | 7,808 | (26.82 | ) | |||||||||
| Total expense | 1,342,257 | $ | 1,444,201 | (101,944 | ) | (7.06 | ) | |||||||||
| Loss from operations | (598,948 | ) | (659,332 | ) | 60,384 | 9.16 | ||||||||||
| Foreign exchange gain (loss) | (969 | ) | (969 | ) | ||||||||||||
| Gain(loss) on change in fair value of warrant liability | 4,468 | 1,876 | 2,592 | 138.14 | ||||||||||||
| Loss before income taxes | (595,449 | ) | $ | (657,456 | ) | 62,007 | (9.43 | ) | ||||||||
| Loss after income taxes | (595,449 | ) | (657,456 | ) | ||||||||||||
Revenue and Cost Analysis
For the six-month period ended February 28, 2025, gross billings increased to $9.33 million, up from $8.09 million for the same period in the prior year, representing a 15.23% year-over-year growth. This increase reflects continued resilience in the Company’s core operations, despite ongoing macroeconomic challenges in the real estate and mortgage sectors. Although the Bank of Canada began reducing policy rates in mid-2024 to counter inflationary pressures, the housing market recovery remains gradual, impacting overall transaction volumes.
| 23 |
Commission expense, which primarily reflects payments to mortgage agents, rose proportionately to $7.81 million, compared to $6.74 million in the prior-year period, increase of 15.92%. The rise is consistent with the increase in gross billings and reflects the Company’s continued engagement with high-volume agents who operate at slightly lower margins but contribute to greater top-line activity.
Revenue for the period increased to $1.51 million, up from $1.35 million, representing an 11.78% increase year-over-year. The increase was driven by a strategic focus on enhancing profitability through selective onboarding of high-margin agents and reallocation of resources to more profitable channels. These efforts supported a favorable shift in the revenue mix and improved gross margin performance.
Margin Improvements and Operational Efficiency
Despite pressure on margins from high-volume agent engagement, the Company successfully maintained a healthy balance between scale and profitability. Gross margin for the six-month period remained stable due to improved internal cost controls, a continued push toward technology-enabled service delivery, and enhanced software tools that support agent productivity and customer retention.
The Company’s ability to generate positive revenue growth while managing commission expenses reflects a disciplined operational approach focused on long-term sustainable growth. Management remains focused on maintaining margin strength while positioning the Company for continued scale as market conditions gradually improve.
Quarterly Revenue Performance
For the three-month period ended February 28, 2025, gross billings increased to $4.52 million, compared to $3.78 million during the same period in the prior year, reflecting a 19.55% year-over-year increase. This growth was largely driven by increased market activity early in the quarter as consumer confidence improved following gradual interest rate reductions by the Bank of Canada. However, the market continued to experience periods of volatility, limiting consistent transaction flow.
Commission Expense
Commission expense, which is directly correlated with transaction volume, increased by 20.40% to $3.78 million, up from $3.14 million in the prior-year quarter. The increase is attributable to the Company’s continued reliance on high-volume agents to drive top-line growth. While this model supports scale, it also results in higher commission costs due to the lower-margin nature of these transactions.
Revenue and Margin Impact
Despite the increase in gross billings, revenue declined by 5.30%, totaling $743,309 for the quarter compared to $784,869 in the same quarter last year. The decline in revenue, despite higher transaction volume, reflects a shift in mix toward lower-margin agents and transactions. The increase in commission costs outpaced the growth in gross billings, compressing margins during the quarter.
The Company continues to evaluate agent performance and is taking strategic steps to balance volume growth with profitability by selectively onboarding high-margin agents and optimizing transaction quality over quantity.
| 24 |
Selling, General and Administrative Expenses.
The breakdown of selling, general and administrative expenses are as follows:
| Six months period ended | ||||||||||||||||
| Period Ended | February 28, 2025 ($) | February 29, 2024 ($) | Increase/ (Decrease) ($) | Increase/ (Decrease) % | ||||||||||||
| Software subscription | 449,845 | 402,289 | 47,556 | 11.82 | ||||||||||||
| Office and general | 82,638 | 34,154 | 48,484 | 141.96 | ||||||||||||
| Professional fee | 60,688 | 192,405 | (131,717 | ) | (68.46 | ) | ||||||||||
| Dues and subscription | 199,336 | 152,441 | 46,895 | 30.76 | ||||||||||||
| Rent | 85,304 | 98,078 | (12,774 | ) | (13.02 | ) | ||||||||||
| Consulting fee | 29,604 | 24,474 | 5,130 | 20.96 | ||||||||||||
| Travel | 23,247 | 86,049 | (62,802 | ) | (72.98 | ) | ||||||||||
| Donations | 784 | 4,646 | (3,862 | ) | (83.13 | ) | ||||||||||
| Lease expense | 1,430 | 6,333 | (4,903 | ) | (77.42 | ) | ||||||||||
| Insurance | 62,314 | 31,078 | 31,236 | 100.51 | ||||||||||||
| 995,190 | 1,031,947 | (36,757 | ) | (3.56 | ) | |||||||||||
Selling, General, and Administrative Expenses
For the six-month period ended February 28, 2025, selling, general, and administrative (SG&A) expenses totaled $995,190, representing a 3.56% decrease compared to $1,031,947 for the same period in the prior year. This decrease reflects the Company’s continued focus on disciplined cost management and operational efficiency, particularly as the business adapts to macroeconomic challenges including slower mortgage origination volumes and broader economic uncertainty.
Software Subscriptions
Software subscription expenses increased by $47,556 (11.82%), rising from $402,289 to $449,845. The increase is attributed to the Company’s ongoing investment in digital infrastructure and third-party platform integrations designed to support automation, compliance, and service enhancement. These investments are expected to improve internal productivity and customer satisfaction over the long term.
Office and General
Office and general expenses rose significantly by $48,484 (141.96%), from $34,155 to $82,638. The increase is mainly due to enhanced administrative operations and infrastructure upgrades to support growth and internal compliance functions, particularly in light of ongoing reporting and public company requirements.
Professional Fees
Professional fees declined by $131,717 (68.46%), from $192,405 in the prior year to $60,688. The decrease primarily reflects reduced reliance on external legal, accounting, and advisory services following the completion of IPO-related activities in the prior fiscal period. The Company continues to optimize external spend by streamlining compliance and legal functions.
Dues and Subscriptions
Dues and subscriptions increased by $46,895 (30.76%), reaching $199,336 from $152,441. The increase reflects broader participation in industry groups and access to platforms and data services aimed at enhancing market insights and maintaining competitive positioning.
Rent
Rent expense decreased modestly by $12,774 (13.02%), from $98,078 to $85,304, reflecting renegotiated lease terms and space optimization initiatives undertaken to align occupancy costs with current headcount and hybrid work arrangements.
Consulting Fees
Consulting fees increased by $5,130 (20.96%), rising from $24,474 to $29,604, reflecting selective use of third-party expertise for strategic initiatives, offsetting the previously higher levels of consulting spend associated with IPO execution.
Travel
Travel expenses declined sharply by $62,802 (72.98%), from $86,049 to $23,247. The decrease is primarily due to the Company’s continued efforts to control discretionary spending and the increased adoption of virtual meetings for internal and external collaboration.
Donations
Donations decreased by $3,862 (83.13%), from $4,646 to $784, in line with the Company’s current cost-reduction strategy and reallocation of funds toward operational priorities.
Lease Expense
Lease expense declined by $4,903 (77.42%), from $6,333 to $1,430, as the Company scaled down leased equipment and transitioned to more cost-effective arrangements where possible.
Insurance
Insurance expenses increased by $31,236 (100.51%), rising from $31,078 to $62,314. The increase reflects adjustments for expanded coverage related to the Company’s public company obligations, including director and officer (D&O) insurance and broader liability protection.
| 25 |
The breakdown of selling, general and administrative expenses are as follows:
| Three months period ended | ||||||||||||||||
| Period Ended | February 28, 2025 ($) | February 29, 2024 ($) | Increase/ (Decrease) ($) | Increase/ (Decrease) % | ||||||||||||
| Software subscription | 228,808 | 221,643 | 7,165 | 3.23 | ||||||||||||
| Office and general | 37,042 | 29,155 | 7,887 | 27.05 | ||||||||||||
| Professional fee | 31,247 | 140,110 | (108,863 | ) | (77.70 | ) | ||||||||||
| Dues and subscription | 164,917 | 62,587 | 102,330 | 163.50 | ||||||||||||
| Rent | 53,124 | 39,602 | 13,522 | 34.14 | ||||||||||||
| Consulting fee | 19,681 | - | 19,681 | 100.00 | ||||||||||||
| Travel | 2,925 | 66,915 | (63,990 | ) | (95.63 | ) | ||||||||||
| Donations | 140 | 4,197 | (4,057 | ) | (96.66 | ) | ||||||||||
| Lease expense | 393 | - | 393 | 100.00 | ||||||||||||
| Insurance | 34,576 | 27,993 | 6,583 | 23.52 | ||||||||||||
| 572,853 | 592,202 | (19,349 | ) | (3.27 | ) | |||||||||||
Selling, General, and Administrative Expenses
For the three-month period ended February 28, 2025, SG&A expenses totaled $572,853, representing a 3.27% decrease compared to $592,202 for the same period in the prior year. The modest reduction in overall SG&A reflects a continued commitment to cost discipline, despite investments in core infrastructure and ongoing compliance obligations.
Professional Fees
Professional fees decreased significantly by $108,863 (77.70%), from $140,110 to $31,247. The decline reflects the normalization of professional service requirements following elevated costs in the prior-year quarter, which included legal, audit, and advisory services tied to the Company’s IPO and related regulatory activities.
Dues and Subscriptions
Dues and subscription expenses increased substantially by $102,330 (163.50%), rising from $62,587 to $164,917. This increase is primarily due to expanded access to industry platforms, market data services, and compliance subscriptions to support operations and reporting requirements as a public company.
Rent
Rent expense rose by $13,522 (34.14%), from $39,602 to $53,124. The increase reflects lease renewals and adjustments in line with expanded office usage and updated space requirements to accommodate business functions.
Consulting Fees
Consulting fees amounted to $19,681, compared to nil in the prior-year quarter. The increase relates to targeted external advisory engagements to support post-IPO corporate initiatives and operational optimization efforts.
Travel
Travel expenses declined by $63,990 (96.63%), from $66,915 to $2,925. The reduction is attributed to continued cost control measures and a strategic shift toward virtual collaboration, limiting the need for discretionary travel.
Insurance
Insurance expense increased by $6,583 (23.52%), rising from $27,993 to $34,576. The increase reflects higher premiums related to expanded coverage for directors and officers, public company liability protection, and other operational risks.
| 26 |
Expenses
| Six months period ended | ||||||||||||||||
| Period Ended | February 28, 2025 ($) | February 29, 2024 ($) | Increase/ (Decrease) ($) | Increase/ (Decrease) % | ||||||||||||
| Advertising and marketing | 326,945 | 404,017 | (77,072 | ) | (19.08 | ) | ||||||||||
| Salaries, wages and benefits | 828,764 | 1,186,316 | (357,552 | ) | (30.14 | ) | ||||||||||
| Interest expense and bank charges | 273,812 | 49,881 | 223,931 | 448.93 | ||||||||||||
| Depreciation | 429,645 | 315,184 | 114,461 | 36.32 | ||||||||||||
| Government incentive | (48,518 | ) | (80,334 | ) | 31,816 | (39.60 | ) | |||||||||
Operating Expenses and Other Income
Advertising and Marketing
Advertising and marketing expenses totaled $326,945 for the six-month period ended February 28, 2025, representing a $77,072 (19.08%) decrease from $404,017 in the prior-year period. The decline reflects the Company’s more targeted and data-driven approach to advertising, as well as a strategic reallocation of marketing budgets toward lower-cost, higher-impact digital channels. While the Company remains focused on agent engagement and brand positioning, this disciplined approach supports cost efficiency without compromising market visibility.
Salaries, Wages, and Benefits
Salaries, wages, and benefits declined to $828,764, down $357,552 (30.14%) from $1,186,316 for the six months ended February 29, 2024. The reduction is the result of cost optimization measures undertaken in response to broader market conditions, including a leaner organizational structure and workforce efficiency improvements. The Company remains focused on retaining critical talent and aligning compensation practices with performance and long-term growth strategies.
Interest Expense and Bank Charges
Interest expense and bank charges increased significantly to $273,812, compared to $49,881 in the prior-year period, reflecting a $223,931 (448.93%) increase. This rise is primarily due to higher borrowing costs associated with the Company’s working capital facilities and interest-bearing debt instruments. The increase also reflects broader interest rate trends in the Canadian financial markets during the reporting period.
Depreciation
Depreciation expense rose to $429,645, an increase of $114,461 (36.32%) compared to $315,184 in the six months ended February 29, 2024. The increase is mainly driven by the capitalization and amortization of internally developed software assets and continued investment in proprietary technology. These enhancements align with the Company’s strategy to strengthen its digital infrastructure and deliver scalable, technology-driven solutions to clients.
Government Incentives
Government incentive income totaled $48,518, down from $80,334 in the prior-year period, representing a $31,816 (39.60%) decrease. The reduction is due to the Company’s transition to public company status following its IPO in November 2023, which impacts its eligibility for certain Canadian innovation-based tax credits, including SR&ED. The Company is actively evaluating alternative funding sources to continue supporting its technology and R&D initiatives.
Liquidity and Capital Resources
Our primary liquidity needs include working capital and capital expenditures, particularly those related to technological enhancements, investments in skilled personnel, and marketing services. These three categories have represented a significant share of our liquidity and capital resource demands throughout the year. We primarily rely on cash on hand and cash flows generated from our operations to satisfy these needs.
The following table summarizes our cash flows from operating, investing and financing activities:
| Six months period ended | ||||||||||||
| Year Ended | February 28, 2025 ($) | February 29, 2024 ($) | Increase/ (Decrease) ($) | |||||||||
| Cash (used) provided in operating activities | (836,228 | ) | (1,566,642 | ) | 730,414 | |||||||
| Cash (used) provided by financing activities | 1,226,321 | 2,751,937 | (1,525,616 | ) | ||||||||
| Cash (used) provided in investing activities | (539,410 | ) | (562,602 | ) | 23,192 | |||||||
| Cash at the end of the period | 493,607 | 1,339,618 | (846,011 | ) | ||||||||
| 27 |
Net cash flow from (used in) operating activities
| Six months period ended | ||||||||
| Description | February 28, 2025 ($) | February 29, 2024 ($) | ||||||
| Operating activities | ||||||||
| Net loss | (1,253,990 | ) | (1,530,696 | ) | ||||
| Adjustments for the following non-cash items: | ||||||||
| Depreciation of property and equipment | 42,553 | 43,406 | ||||||
| Amortization of intangible assets | 270,073 | 204,786 | ||||||
| Depreciation on right of use asset | 117,019 | 66,992 | ||||||
| Interest expense on lease liability | 26,824 | 32,215 | ||||||
| Change in fair value of warrant liability | (35,591 | ) | - | |||||
| Foreign exchange gain (loss) | 4,021 | (12,685 | ) | |||||
| Net changes in non-cash working capital balances: | ||||||||
| Trade and other receivables | (22,557 | ) | 68,622 | |||||
| Prepaid expenses and deposits | (41,552 | ) | (169,105 | ) | ||||
| Accounts payable and accrued liabilities | 103,551 | (73,808 | ) | |||||
| Deferred government incentive | 33,603 | (196,369 | ) | |||||
| Deferred revenue | (80,182 | ) | - | |||||
| (836,228 | ) | (1,566,642 | ) | |||||
Net Cash Flow from (Used in) Operating Activities
For the six-month period ended February 28, 2025, net cash used in operating activities was $836,228, a substantial improvement compared to $1,566,642 in the prior-year period. The reduction in cash outflows reflects improved operational efficiencies, a more disciplined approach to working capital management, and a strategic realignment of cost structures.
The net loss for the period was $1,253,990, compared to $1,530,696 in the six months ended February 29, 2024. This improvement is largely attributable to the Company’s ability to scale operations more efficiently while continuing to invest in revenue-generating activities.
Key non-cash adjustments included:
| ● | Amortization of intangible assets totaling $270,073, up from $204,786 in the prior year, reflecting continued investment in proprietary software development. | |
| ● | Depreciation of property, equipment, and right-of-use assets increased to $159,572 (combined), driven by growth in capitalized assets and office lease commitments. | |
| ● | A change in the fair value of warrant liabilities resulted in a non-cash gain of $35,591, reflecting valuation adjustments consistent with capital market conditions. | |
| ● | A foreign exchange gain of $4,021 was recognized, compared to a loss of $12,685 in the previous period, reflecting the impact of currency fluctuations on USD-denominated balances. |
Net changes in working capital provided additional support for improved operating cash flow:
| ● | Accounts payable and accrued liabilities increased by $103,551, reflecting the timing of expense recognition and payment cycles. | |
| ● | Deferred government incentives increased by $33,603, providing non-dilutive support for innovation-related activities. | |
| ● | Trade and other receivables and prepaid expenses consumed $22,557 and $41,552, respectively, reflecting higher upfront costs and timing differences. | |
| ● | A reduction in deferred revenue of $80,182 reflects revenue recognition against previously collected funds. |
Overall, these results highlight the Company’s strategic focus on managing operating expenses and improving the efficiency of its cash conversion cycle. Management remains committed to aligning its cost structure with revenue-generating opportunities and ensuring adequate liquidity to support long-term growth initiatives.
During the six-month period ended February 28, 2025, the Company reported net cash used in operating activities of $836,228, a significant improvement from $1,566,642 in the prior-year period. The reduction in cash outflows reflects improved working capital management, a decrease in overall operating expenses, and a more efficient allocation of resources across the business.
Net cash provided by financing activities amounted to $1,226,321, compared to $2,751,937 in the same period of the prior year. The decrease of $1,525,616 is attributed to reduced financing proceeds in the current period, despite continued access to capital through equity issuances and short-term loans. During the period, the Company completed equity financing via its shelf registration and secured director loans to support its ongoing operations and strategic initiatives.
Net cash used in investing activities totaled $539,410, slightly down from $562,602 in the comparable prior-year period. The decrease of $23,192 reflects disciplined investment in proprietary software and other technology assets, as the Company continues to enhance its digital infrastructure to drive efficiency and long-term scalability.
As of February 28, 2025, the Company had cash and cash equivalents of $493,607, compared to $1,339,618 at the end of the same period last year. The decrease in the cash position reflects the Company’s investment in technology and working capital, partially offset by equity financing.
Management remains focused on maintaining sufficient liquidity to meet operational needs and support strategic priorities. Future capital requirements will depend on the pace of business expansion, technology investments, and prevailing market conditions. The Company continues to evaluate opportunities for both non-dilutive and equity-based financing, while carefully managing cash flows and costs to support long-term growth and shareholder value.
The following table presents our liquidity:
| As at: |
February 28, 2025 ($) |
August 31, 2024 ($) |
||||||
| Cash | 493,607 | 580,356 | ||||||
| Trade and other receivables | 177,781 | 155,224 | ||||||
| Prepaid expenses and deposit | 199,463 | 157,911 | ||||||
| 870,851 | 893,491 | |||||||
As of February 28, 2025, Pineapple Financial maintained a liquidity position, with $493,607 in cash, complemented by trade and other receivables, prepaid expenses, and deposits. This reflects the Company’s ability to fulfill its short-term obligations effectively. Cash decreased by $86,749 compared to August 31, 2024, primarily driven by higher revenue generation, disciplined expense management, and additional financing activities.
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In the Greater Toronto Area (GTA), home sales increased for the month of October and November 2024 by more than 40 percent year-over-year.
Despite these positive developments, Pineapple Financial continues to prioritize prudent financial management, focusing on optimizing resource allocation to sustain growth initiatives while maintaining adequate liquidity to meet ongoing operational and strategic commitments.
Critical Accounting Policies and Significant Judgments and Estimates
This management’s discussion and analysis of the financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of Revenue and expenses during the reported period. Per U.S. GAAP, we base our estimates on historical experience and various other assumptions we believe to be reasonable under the circumstances. Actual results may differ from these estimates if conditions differ from our assumptions. While our significant accounting policies are more fully described in Note 2 in the “Notes to Financial Statements,” we believe the following accounting policies are critical to making effective judgments and estimates in preparing our financial statements.
Revenue Recognition
The Company has adopted ASC 606, Revenue from Contracts with Customers, which provides a single comprehensive model for revenue recognition. The core principle of the standard is that Revenue should be recognized when goods or services are transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard introduced a new contract- based revenue recognition model with a measurement approach that is based on an allocation of the transaction price. It establishes a five-step model to account for Revenue arising from contracts with customers. Under this standard, Revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The standard requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with customers. Additionally, the standard specifies the accounting for incremental costs of obtaining a contract and the costs directly related to fulfilling a contract.
When the Company transfers goods or services to a customer, Revenue is recognized at an amount that reflects the consideration expected to be received.
The Company operates an online platform powered by Salesforce, that enables brokers and agents to efficiently close deals.
The Company’s subsidiary, Pineapple Insurance Inc., generates Revenue by charging premiums for insurance policies and services. Pineapple Insurance is affiliated with a major insurance company, from which it earns commissions for providing services, primarily mortgage insurance. Mortgage insurance is a requirement for each mortgage. Pineapple Insurance acts as the agent that supplies insurance services to the consumer and is paid a commission from the premiums collected by the insurance company whose products and services it provides to the end consumer. Additionally, Pineapple Insurance has adopted ASC 606.
Basis of presentation, functional and presentation currency
The Company’s headquarters is in Ontario, Canada, and the functional currency is in Canadian Dollars (CAD) with the presentation currency being US Dollars (USD). The Company’s subsidiaries have a functional currency of CAD and presentation currency of USD which have been applied consistently.
There will be a foreign currency translation undertaken to report under US GAAP which will be the basis of presentation.
Lease Accounting
The relevant criteria applicable is ASC 842. We assess at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. We apply a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. We recognize lease liabilities to make lease payments and right-of- use assets representing the right to use the underlying assets.
At the commencement date of the lease, we recognize lease liabilities measured at the present value of lease payments to be made over the lease term. Lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. Lease payments also include the exercise price of a purchase option reasonably certain to be exercised by us and payments of penalties for terminating the lease, if the lease term reflects us exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as expenses in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, we use our incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
We recognize right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
| 29 |
Investments
We invested in MCommercial, a commercial mortgage firm based in Montreal and Toronto, Canada, representing 5% of the total issued and outstanding shares. This strategic partnership allows Pineapple residential mortgage agents to access a leading commercial mortgage firm and experts, which will expand their product offerings, service levels, and corporate Revenue through increased transactions.
The Company entered into a share purchase agreement with 9142-2964 Quebec Inc., pursuant to which it acquired five Class A Shares of 7326904 Canada Inc. (doing business as Mortgage Alliance Corporation) (“Alliance”), representing 5% of the total issued and outstanding shares of Alliance. Alliance is a mortgage brokerage firm based in Ontario, Canada, with locations in Calgary, Vancouver, and Halifax.
The total value of both investments was recorded at fair value, and any impairment loss is recognized in the profit and loss account.
Share Based Compensation
Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718, “Compensation — Stock Compensation” (“ASC 718”), which requires recognition in the financial statements of the cost of employee, non-employee and director services received in exchange for an award of equity instruments over the period the employee, non-employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). ASC 718 also requires measurement of the cost of employee, non- employee, and director services received in exchange for an award based on the grant-date fair value of the award.
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 Pineapple Financial Inc. on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither right 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. These options were fully vested in year ended August 31, 2023.
On July 6, 2023, we completed a 1-for-3.9 reverse stock split, or the Reverse Split, effective immediately. Consequently, all the share numbers, shares prices, and exercise prices have been retroactively adjusted in these condensed interim consolidated financial statements for all periods presented.
Controls and Procedures
While the Company is not currently required to maintain an effective internal controls system, we recognize the importance of strong internal controls and have proactively initiated steps to establish and enhance our control environment. These measures include:
| ● | Employing skilled staff in financial, accounting, and external reporting roles, focusing on segregation of duties. |
| 30 |
| ● | Conducting regular reconciliations to ensure accurate recording, correct classification, and balanced books. | |
| ● | Ensuring timely and accurate recording of expenses, liabilities, and other accounting entries in accordance with the matching principle. | |
| ● | Maintaining a detailed fixed assets register to track users, departments, and assets. | |
| ● | Requiring internal review and approval of accounting transactions by at least two independent personnel. | |
| ● | Documenting processes, assumptions, and conclusions related to significant estimates. | |
| ● | Establishing comprehensive documentation of accounting policies and procedures. |
As of February 28, 2025, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting. Based on this assessment, management concluded that our disclosure controls and procedures were effective as of February 28, 2025.
Improvements made during the year include carrying out independent reviews, establishing approval processes for transactions and reconciliations, and hiring additional personnel to enhance our control environment. Plans are in place to further improve controls by segregating duties and refining processes, thus ensuring robust and effective internal controls that uphold the integrity of our financial reporting.
Financial Instruments
As of February 28, 2025, the Company’s financial instruments include cash, trade and other receivables, investments, accounts payable, and accrued liabilities.
As per ASC 820, Fair value measurement establishes a fair value hierarchy based on the level of independence, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorising within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
i) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
ii) Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
iii) Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The following table provides the fair values of the financial assets in the Company’s consolidated statements of financial position, categorized by hierarchical levels and their related classifications.
| 31 |
| As of February 28, 2025 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Assets: | ||||||||||||||||
| Cash | 493,607 | 493,607 | ||||||||||||||
| Investment | 9,365 | 9,365 | ||||||||||||||
Risks and Uncertainties
The Company’s business is subject to numerous risks and uncertainties, including those described elsewhere in this MD&A, as well as general economic and market risks. These risk factors could materially affect the Company’s future operating results and could cause actual events to differ materially from those described in forward-looking information relating to the Company.
As part of our regular business operations, we face various risks that can impact our profitability and operations. These risks can be broadly categorized as interest rate risk, credit risk, counterparty risk, and risks associated with the pandemics like COVID-19.
Interest rate risk
We do not face interest rate risk as we do not have any variable-rate loans or borrowings.
Credit risk
Credit risk is the risk of financial loss to the Corporation if a counterparty to a financial instrument fails to meet its contractual obligations. The Corporation’s credit risk is mainly attributable to its cash and trade and other receivables.
The Corporation has determined that its exposure to credit risk on its cash is minimal as the Corporation’s cash are held with financial institutions in Canada.
Our primary source of credit risk relates to the possibility of Core Business Operation’s brokerages or other customers not paying receivables. Core Business Operations manages its credit risk by performing credit risk evaluations on its brokerages and agents and monitoring overdue trade and other receivables. As of February 28, 2025, $57,750 of our trade receivables are greater than 90 days outstanding, as compared to $36,740 for February 29, 2024. A decline in economic conditions or other adverse conditions experienced by brokerage and agents could impact the collectability of the Corporation’s accounts receivable.
Our maximum exposure to credit risk approximates the carrying value of the assets on the Corporation’s consolidated statements of financial position.
| As at: | February 28, 2025 ($) | August 31, 2024 ($) | ||||||
| Cash | 493,607 | 580,356 | ||||||
| Trade and other receivables | 177,781 | 155,224 | ||||||
| Prepaid expenses and deposit | 199,463 | 157,911 | ||||||
| 870,851 | 893,491 | |||||||
| 32 |
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As a smaller reporting company, this disclosure is not required.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We are transitioning to and will maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and timely reported as provided in SEC rules and forms and that such information is accumulated and communicated to our management, as appropriate, to allow for timely decisions regarding required disclosure. We will periodically review the design and effectiveness of our disclosure controls and procedures, including compliance with various laws and regulations that apply to our operations. We will make modifications to improve the design and effectiveness of our disclosure controls and procedures and may take other corrective action if our reviews identify a need for such modifications or actions. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we will apply judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1 Legal Proceedings.
To our best knowledge, we are currently not a party to any legal proceedings that, individually or in the aggregate, are deemed to be material to our financial condition or results of operations.
Item 1A Risk Factors.
Smaller reporting companies are not required to provide the information required by this item.
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds.
There were no issuances of unregistered sales of equity securities during the three months ended February 29, 2025.
| 33 |
Item 3 Defaults Upon Senior Securities.
None.
Item 4 Mine Safety Disclosures.
Not applicable.
Item 5 Other Information.
None.
Item 6. EXHIBITS
|
Exhibit No. |
Description | |
| 31.1 * | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a). | |
| 31.2 * | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a). | |
| 32.1 * | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2 * | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS * | Inline XBRL Instance Document. | |
| 101.SCH* * | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL* * | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF* * | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB* * | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE * | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2025, formatted in Inline XBRL (included in Exhibit 101). |
| * | Filed herewith. |
| 34 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| PINEAPPLE FINANCIAL INC. | ||
| Date: April 14, 2025 | By: | /s/ Shubha Dasgupta |
| Shubha Dasgupta | ||
| Chief Executive Officer | ||
| Date: April 14, 2025 | By: | /s/ Sarfraz Habib |
| Sarfraz Habib | ||
| Chief Financial Officer | ||
| 35 |