What changed in Pineapple Financial Inc.'s 10-K — 2023 vs 2024

Pineapple Insurance officially launched in October 2024, marking a significant milestone in Pineapple Financial’s diversification strategy. The costs anticipated for Pineapple Insurance are largely tied to marketing efforts, human capital, and platform development. Human capital costs include a fixed expense for senior leadership, along with variable costs for additional personnel as the business scales.

With the strategic integration of Pineapple Insurance into the MyPineapple platform, our development costs are aimed at ensuring seamless client experiences and operational efficiency. We estimate that approximately 15% of the proceeds from the shares offering will be allocated to support the continued growth and scaling of this business vertical.

The growth timeline for Pineapple Insurance is projected at 12 to 24 months post-launch, reflecting strong initial demand and the effectiveness of our comprehensive go-to-market strategy. This timeline is contingent upon the effectiveness of marketing campaigns, customer adoption of the services offered by Industrial Alliance, and the competitiveness of pricing and premiums.

The early success of our launch indicates promising customer acceptance, supported by focused efforts to educate users on product variations and benefits.

We have also created client segmentations and retention programs to ensure that we can maximize our database of over 150,000 potential clients. Growth Strategy Brokerage Services We aim to gain further market share and consumer adoption by focusing on the following areas of growth: 1.

In alignment with the Canadian government’s commitment to improving housing affordability and accessibility, several new housing measures have been introduced to support homeowners and first-time buyers. These include enabling homeowners to refinance their mortgages to construct secondary rental suites and borrowing up to 90% of their home’s value with a 30-year amortization period.

Additionally, the mortgage insurance price limit has been increased to $2 million, ensuring broader access to financing across Canada’s diverse housing markets. The government has also proposed consultations on taxing vacant land to encourage development and incentivize landowners to build homes. Collaboration with provinces, territories, and municipalities is underway to implement these measures effectively.

Starting December 15, 2024, two key rules will further aid affordability: 30-year mortgage amortizations will become available to all first-time homebuyers and buyers of new-build properties, and the price cap for insured mortgages will rise to $1.5 million from $1 million.

Moreover, the federal government has expanded the Canada Public Land Bank by adding 14 underused federal properties, bringing the total to 70. These properties across major cities are slated for affordable housing developments. This initiative supports the government’s broader plan to unlock public lands for housing and address the growing demand for homes while strengthening Canadian communities.

These measures, alongside the influx of new immigrants and the rising demand for home renovations, refurbishments, and innovative financing solutions, create a favorable environment for Pineapple Financial Inc. to continue expanding its offerings and capitalizing on these growth opportunities.

Pineapple Financial Inc. and Mortgage Market Dependency As of November 2024, Canada’s mortgage market continues to demonstrate resilience despite ongoing challenges. According to the Bank of Canada, the total residential mortgage market is valued at over $1.6 trillion, driven by population growth, increasing borrower demand, and evolving consumer sentiment.

This figure excludes mortgages held by provincially regulated entities such as credit unions and mortgage investment corporations. Mortgage lenders offer a broad range of products, including fixed and variable rates, varying terms, and flexible amortization periods.

Recent interest rate cuts by the Bank of Canada have rejuvenated the market, improving affordability for new buyers and creating opportunities for existing homeowners to refinance or renew at more favorable terms. The practice of negotiating discounted rates remains prevalent, highlighting the importance of mortgage brokers in securing competitive deals for clients.

Mortgage brokers are critical intermediaries, leveraging their volume-based bargaining power to erode lender price discrimination and secure advantageous rates. These professionals are provincially regulated and must meet stringent licensing and training requirements. While the barriers to entry remain relatively low, successful brokers rely on experience, negotiating skills, and technological support to thrive in an increasingly competitive market.

Key trends currently influencing the market include: ● Renewals Surge: Over 30% of Canadian mortgages are expected to renew within the next 12 months, a significant driver of market activity. ● Housing Shortages: A growing population, combined with limited housing supply, has led to increased pressure on the market, with demand consistently outstripping available inventory. ● Government Policies: Recent adjustments, such as the introduction of a 30-year amortization period for insured mortgages and incentives for affordable housing, have bolstered consumer confidence and created new opportunities. ● Consumer Sentiment: Improved confidence, spurred by rate cuts and stabilizing economic conditions, has increased buyer activity despite affordability challenges. ● Technology Adoption: Platforms like MyPineapple are transforming the brokerage landscape by streamlining processes and providing brokers with data-driven tools to enhance efficiency and client satisfaction.

Industry Growth Strategy Our growth strategy focuses on organic expansion , targeting increased market share through: 1. Recruitment: We have successfully recruited a significant number of Field Agents and Users , driving a growth rate higher than many competitors. By leveraging detailed insights into competitive models, we have tailored our value proposition to attract and retain top talent. 2.

Technological Integration: Our proprietary platform, MyPineapple , empowers brokers with tools to increase sales volume, productivity, and efficiency. This system also supports the seamless integration of complementary services, such as insurance products , creating additional revenue streams and enhancing the overall client experience. 3.

Policy Alignment: By aligning our offerings with government initiatives to support housing affordability and address shortages, we have positioned ourselves as a key player in addressing critical market needs. 4.

Focus on Renewals and Refinances: With a large portion of the mortgage market up for renewal in the next year, we have tailored solutions to help brokers optimize their client retention and capitalize on refinancing opportunities.

Our strategy is underpinned by a commitment to delivering superior value, leveraging data and insights to support broker success, and maintaining flexibility to adapt to evolving market conditions. This approach ensures we remain a leader in the Canadian mortgage and brokerage industry.

Recent Development On May 10, 2024, the Company entered into an equity purchase agreement (the “EPA”) with Brown Stone Capital Ltd., a corporation organized under the laws of England and Wales (the “Selling Shareholder”) pursuant to which the Company shall issue and sell to the Selling Shareholder, from time to time as provided herein, and the Selling Shareholder shall purchase up to Fifteen Million Dollars ($15,000,000.00) of the Company’s common shares and issue 200,000 Company’s common shares as a commitment fee under the EPA to the Selling Shareholder (collectively as the “EPA Shares”) at purchase price to be determined as per the terms and conditions of the EPA.

The Company shall have the right, but not the obligation, to direct the Selling Shareholder, by its delivery to the Selling Shareholder of a put notice from time to time, to purchase the EPA Shares (i) in a minimum amount not less than $10,000.00 and (ii) in a maximum amount up to the lesser of (a) $1,000,000 or (b) 150% of the average trading volume of the Company’s common shares on the NYSE American during the five (5) Trading Days immediately preceding the respective put notice date multiplied by the lowest daily volume weighted average price of the Company’s common shares on the NYSE American during the five (5) trading days immediately preceding the respective put notice date.

The Company’s right to issue a put notice for the EPA Shares is subject to general terms and conditions as stipulated under the EPA, including there being an effective registration statement covering the EPA Shares. 7 Pursuant to the EPA, we may issue and sell up to $15 million of Common Shares to the Selling Shareholder.

The price at which we may issue and sell shares will be 95% of the lowest daily volume weighted average price of the Company’s Common Shares on the NYSE American during the five (5) trading days immediately preceding the respective put notice date, in each case as reported by Quotestream or other reputable source designated by the Selling Shareholder (the “Market Price”).

Assuming that (a) we issue and sell the full $15 million of Common Shares under the EPA to the Selling Shareholder, (b) no beneficial ownership limitations, and (c) purchase price for such sales is $0.40 or $0.50 per share, such additional issuances would represent in the aggregate approximately 37,500,000 or 30,000,000 additional Common Shares, respectively, or approximately 81% or 77% of the total number of Common Shares outstanding as of the date hereof, after giving effect to such issuance.

If the beneficial ownership limitation is not waived, we may issue approximately 269,480 Common Shares, or approximately 19.99% of the total number of Common Shares outstanding as of the date hereof. The Market Price of our Common Shares on December 13, 2024, was $0.45.

Assuming this is the Market Price used as a basis for the calculations for the put notice under the EPA, the price per share for sales to the Selling Shareholder would be $0.43 (95% of the Market Price), and we would be able to sell 269,480 shares to the Selling Shareholder (with beneficial ownership limit), and receive gross proceeds of $115,876 such number of shares would comprise approximately 19.99% of our issued and outstanding Common Shares, which would result in additional dilution of our shareholders.

In relation to the EPA Shares the Company has entered into a registration rights agreement dated May 10, 2024 (the “RRA”) with the Selling Shareholder, requiring the Company to register the EPA Shares issued under the EPA.

Pursuant to the RRA, the Company has agreed to file one or more registration statements with the Securities and Exchange Commission covering the registration of the EPA Shares.

Concurrently, on May 10, 2024, the Company entered into a securities purchase agreement (the “SPA” and together with the EPA and the RRA as the “Agreements”) with the Selling Shareholder, pursuant to which the Company has agreed to sell to the Selling Shareholder a convertible promissory note (the “Note”) in the aggregate principal amount of $300,000, with an 8% per annum interest rate and a maturity date of twenty four (24) months from the date of the issuance.

The Note is convertible into the Company’s common shares, no par value, subject to the terms and conditions therein, and a conversion price of equal 75% of the VWAP on the trading day immediately preceding the respective conversion date, subject to adjustment as provided in the Note.

The issuance of the Note is subject to general terms and conditions as stipulated under the SPA, including the requirement of getting shareholder approval for any issuance of common shares beyond the beneficial ownership limit of 19.99%.

As an incentive to buy the Note, the Company had agreed to issue warrants to purchase 1,000,000 common shares (the “2024 Warrants”), with an exercise price of $5 per share and term of nine (9) months from the date of issuance.

As per terms of the agreement, issuer of convertible debt exercise their right and the total principal portion $300,000 plus the interest accrued thoron $4,437 was converted into common shares by issuing 501,874 common shares. The equity line of credit has had no immediate impact on our business.

However, it positions us to draw capital for growth initiatives as our share price increases, enhancing our ability to fund strategic investments and operational expansions. No assurances can be given that the stock price will increase.

Conditions Precedent to the Right of the Company to Deliver a Put Notice Selling Shareholders’ obligation to accept Put Notices that are timely delivered by us under the EPA and to purchase of our Common Shares under the EPA, are subject to satisfaction of the conditions precedent thereto set forth in the EPA, all of which are entirely outside of Selling Shareholders’ control, which conditions include the following: ● the accuracy in all material respects of the representations and warranties of the Company included in the EPA as of the Put Date; ● the Company having paid the cash commitment fee or issued the Commitment Shares to an account designated by Selling Shareholder; ● the registration statement that includes this prospectus (and any one or more additional registration statements filed with the SEC that include Common Shares that may be issued and sold by the Company to Selling Shareholder under the EPA) having been declared effective under the Securities Act by the SEC, and Selling Shareholder being able to utilize this prospectus (and the prospectus included in any one or more additional registration statements filed with the SEC under the RRA) to resell all of the Common Shares included in this prospectus (and included in any such additional prospectuses); 8 ● the Company obtaining all permits and qualifications required by any applicable state for the offer and sale of all Common Shares issuable pursuant to such Put Notice, or will have the availability of exemptions therefrom; ● the Board of Directors approving the transactions contemplated by the EPA and RRA, which approval will remain in full force; ● there will not have occurred any event and there will not exist any condition or state of facts, which makes any statement of a material fact made in the registration statement that includes this prospectus (or in any one or more additional registration statements filed with the SEC that include Common Shares that may be issued and sold by the Company to Selling Shareholder under the EPA) untrue or which requires the making of any additions to or changes to the statements contained therein in order to state a material fact required by the Securities Act to be stated therein or necessary in order to make the statements then made therein (in the case of this prospectus or the prospectus included in any one or more additional registration statements filed with the SEC under the RRA, in the light of the circumstances under which they were made) not misleading; ● the Company performing, satisfying and complying in all material respects with all covenants, agreements and conditions required by the EPA; ● the absence of any statute, regulation, order, decree, writ, ruling or injunction by any court or governmental authority of competent jurisdiction which prohibits the consummation of or that would materially modify or delay any of the transactions contemplated by the EPA or the RRA; ● trading in the Common Shares will not have been suspended by the SEC, Nasdaq or FINRA, the Company will not have received any final and non-appealable notice that the listing or quotation of the Common Shares on Nasdaq will be terminated on a date certain (unless, prior to such date, the Common Shares is listed or quoted on any other Principal Market, as such term is defined in the EPA), and there will be no suspension of, or restriction on, accepting additional deposits of the Common Shares, electronic trading or book-entry services by The Depository Trust Company with respect to the Common Shares; ● the Company will have authorized all of the Common Shares issuable pursuant to the applicable Put Notice by all necessary corporate action of the Company; and ● the accuracy in all material respects of the representations and warranties of the Company included in the applicable Put Notice as of the applicable Put Date.

No Short-Selling or Hedging by Selling Shareholder Selling Shareholder has agreed that none of Selling Shareholder, its sole member, any of their respective officers, or any entity managed or controlled by Selling Shareholder or its sole member will engage in or effect, directly or indirectly, for its own account or for the account of any other of such persons or entities, any short sales of the Common Shares or hedging transaction that establishes a net short position in the Common Shares during the term of the EPA.

Effect of Sales of our Common Shares under the EPA on our Shareholders The Commitment Shares that we issued, and the EPA Shares to be issued or sold by us, to the Selling Shareholder under the EPA that are being registered under the Securities Act for resale by the Selling Shareholder in this offering are expected to be freely tradable.

The resale by the Selling Shareholder of a significant amount of shares registered for resale in this offering at any given time, or the perception that these sales may occur, could cause the market price of our Common Shares to decline and to be highly volatile.

Sales of our Common Shares, if any, to the Selling Shareholder under the EPA will depend upon market conditions and other factors to be determined by us. 9 If and when we do sell Common Shares to the Selling Shareholder pursuant to the EPA, after the Selling Shareholder has acquired such shares, the Selling Shareholder may resell all, some or none of such shares at any time or from time to time in its discretion and at different prices.

As a result, investors who purchase the shares from the Selling Shareholder in this offering at different times will likely pay different prices for those shares, and so may experience different levels of dilution, and in some cases substantial dilution, and different outcomes in their investment results.

Investors may experience a decline in the value of the shares they purchase from the Selling Shareholder in this offering as a result of future sales made by us to the Selling Shareholder at prices lower than the prices such investors paid for their shares in this offering.

In addition, if we sell a substantial number of Common Shares to the Selling Shareholder under the EPA, or if investors expect that we will do so, the actual sales of shares or the mere existence of our arrangement with the Selling Shareholder may make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect such sales.

Because the per share purchase price that the Selling Shareholder will pay for the EPA Shares in any put notice that we may elect to effect pursuant to the EPA will be determined by reference to the VWAP during the applicable commitment period on the applicable put date for such put notice, as of the date of this prospectus, it is not possible for us to predict the number of Common Shares that we will sell to the Selling Shareholder under the EPA, the actual purchase price per share to be paid by the Selling Shareholder for those shares, or the actual gross proceeds to be raised by us from those sales, if any.

As of August 31, 2024, there were 8,425,352 Common Shares outstanding. Company has already issued 741,499 shares against EPA out of the total 13,910,991 shares only 13,169,492 shares can further be offered.

If all of the 13,169,492 shares offered for resale by the Selling Shareholder under this prospectus were issued and outstanding, such shares would represent approximately 150% of the total number of outstanding Common Shares and approximately 249% of the total number of outstanding Common Shares held by non-affiliates of our company, in each case as of August 31, 2024.

Although the EPA provides that we may sell up to $15.0 million of our Common Shares to the Selling Shareholder, only 13,910,991 shares (which includes the 200,000 Commitment Shares, for which we have not and will not receive any cash consideration) are being registered under the Securities Act for resale by the Selling Shareholder under the registration statement that includes this prospectus.

If we were to issue and sell all of such 13,910,991 shares to the Selling Shareholder at an assumed purchase price per share of $0.97 (without taking into account the 19.99% Exchange Cap limitation), representing the closing sale price of our Common Shares on Nasdaq on June 18, 2024, we would only receive approximately $13.4 million in aggregate gross proceeds from the sale of such EPA Shares to the Selling Shareholder under the EPA.

Depending on the market prices of our Common Shares on the put dates on which we elect to sell such EPA Shares to the Selling Shareholder under the EPA, we may need to register under the Securities Act additional Common Shares for resale by the Selling Shareholder in order for us to receive aggregate proceeds equal to the Selling Shareholders’ $15.0 million maximum aggregate purchase commitment available to us under the EPA.

If we elect to issue and sell to the Selling Shareholder more Common Shares than the amount being registered, we must file with the SEC one or more additional registration statements to register such additional shares, which the SEC must declare effective, in each case before we may elect to sell any additional shares to the Selling Shareholder.

For example, if the market price of our Common Shares falls below $0.97, assuming no beneficial ownership limitations, we will be required to issue more shares than are currently being registered, necessitating the filing of a new registration statement.

The issuance of our Common Shares to the Selling Shareholder pursuant to the EPA will not affect the rights or privileges of our existing shareholders, except that the economic and voting interests of each of our existing shareholders will be diluted.

Although the number of Common Shares that our existing shareholders own will not decrease, the Common Shares owned by our existing shareholder will represent a smaller percentage of our total outstanding Common Shares after any such issuance. 10 The following table sets forth the amount of gross proceeds we would receive from the Selling Shareholder from our sale of Common Shares to the Selling Shareholder under the EPA at varying purchase prices and subject to the limitation of the number of shares being registered at this time: Assumed Average Purchase Price Per Share Number of Registered Shares to be Issued if Full Purchase (1) Percentage of Outstanding Shares After Giving Effect to the Issuance to Selling Shareholder (2) Gross Proceeds from the Sale of Shares to Selling Shareholder Under the EPA $ 0.88 (3) 13,169,492 59.93 % $ 11,589,153 $ 1.00 13,169,492 59.93 % $ 13,169,492 $ 1.50 13,169,492 59.93 % $ 19,754,238 $ 2.00 13,169,492 59.93 % $ 26,338,984 $ 2.50 13,169,492 59.93 % $ 32,923,730 (1) Although the EPA provides that we may sell up to $15,000,000 of our Common Shares to the Selling Shareholder, we only registered 13,910,991 shares under the registration statement that includes this prospectus, which may or may not cover all of the shares we ultimately sell to the Selling Shareholder under the EPA.

The number of shares to be issued as set forth in this column is without regard to the Exchange Cap or Beneficial Ownership Limitation, but is limited to the actual number of shares being registered at this time.

Company already issued 741,499 shares under EPA during August 2024 and this includes 200,000 Commitment Shares we issued to the Selling Shareholder only 13,169,492 shares can further be issued.