Pineapple Financial Inc.: Form 10-Q for the period ended Nov 30, 2024

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 raised the prime rate multiple times to combat inflationary pressures, resulting in a significant rise in mortgage interest rates. However, starting in mid-2024, the Bank of Canada reduced the policy rate by 1.75% to stabilize the economy and improve affordability. Despite this adjustment, high mortgage rates and ongoing economic uncertainty continued to suppress demand for mortgage originations in 2024. Although the market is beginning to show signs of recovery due to renewed consumer confidence, the overall mortgage origination market remains constrained compared to levels seen before 2022.

Summary of the three months Ended November 30, 2024.

During the three-month period ending November 30, 2024, we generated $424.076 million in residential mortgage loans, an increase from $386.777 million in the previous three months ending November 30, 2023. This amount reflects an increase of $37.299 million, or 9.64%, compared to the same period ending November 30, 2023. Our net loss was $0.657 million for the three months ending November 30, 2024, compared to a loss of $0.898 million recorded in the corresponding period ending November 30, 2023.

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.

Our revenue sources include lender commissions, underwriting revenue, membership fees from mortgage agents, and other income.

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 $117. 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 $390,000 and less, we charge an underwriting fee of $273; for mortgages greater than $300,000, the Company charges an underwriting fee of $390. 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.

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 three months years ended November 30, 2024 and 2023

Revenue

Gross billings increased from $4.560 million for the three-month period ending November 30, 2023, to $4.791 million for the three-month period ending November 30, 2024, reflecting a year-over-year rise of 5.05%. To address high inflation, the Bank of Canada raised its policy rate from 2.5% on September 1, 2022, to 5.0% by August 31, 2023. However, starting June 5, 2024, the Bank of Canada began to cut rates, decreasing the policy rate by 175 basis points to 3.25%. While this reduction may boost consumer confidence, the real estate market remains sluggish, resulting in fewer real estate transactions and a decline in mortgage activity.

Revenue for the three-month period ending November 30, 2024, increased to $766,074 from $569,355 in the three-month period ending November 30, 2023, representing a 34.55% growth quarter-over-quarter. This increase is primarily driven by the Company’s strategic focus on enhancing profit margins by onboarding high-margin agents. These agents contributed to a favorable shift in the revenue mix, resulting in improved profitability. Moreover, the Company’s efforts to optimize its software offerings have supported customer satisfaction and retention, allowing the business to grow steadily despite challenges in the broader mortgage origination market. This growth underscores the Company’s ability to prioritize high-margin opportunities while maintaining operational resilience.

Cost of gross billing

The cost of revenue rose to $4.025 million for the three months ended November 30, 2024, compared to $3.992 million for the same period ended November 30, 2023. This increase corresponds with gross billing growth and reflects higher transaction volumes. Furthermore, the cost increase results from the company’s strategic emphasis on utilizing high-volume agents to drive business. These agents usually operate at lower margins but produce higher transaction volumes, leading to increased variable costs.

Selling, General and Administrative Expenses.

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

Selling, general, and administrative expenses decreased by $142,745 (25.48%), from $560,151 for the three months ending November 30, 2023, to $417,406 for the three months ending November 30, 2024. This reduction reflects the Company’s targeted efforts to control costs and optimize resource allocation in response to challenging economic conditions. By maintaining essential operational expenditures while streamlining non-critical spending, the Company demonstrates its commitment to financial discipline and efficiency, ensuring ongoing support for core business functions and strategic growth initiatives.

Software subscription expenses increased by $39,988 (21.55%), from $180,920 during the three months ended November 30, 2023, to $219,908 during the three months ended November 30, 2024. This increase was primarily driven by the Company’s ongoing efforts to enhance its proprietary software, which required the integration of third-party subscription tools to ensure compliance with industry standards and meet client expectations. These external subscriptions have played a pivotal role in supporting the development process. As the proprietary software nears completion, the reliance on third-party tools is expected to diminish, resulting in long-term cost optimization and increased operational efficiency.

Office and general expenses decreased by $22,550 (33.10%), from $68,121 during the three months ended November 30, 2023, to $45,571 during the three months ended November 30, 2024. This reduction reflects the Company’s proactive measures to streamline administrative expenses and mitigate the impact of inflationary pressures. These cost-control efforts have allowed the Company to maintain operational efficiency while optimizing resource allocation.

Professional fees increased by $29,275 (100.00%), from $Nil during the three months ended November 30, 2023, to $29,275 during the three months ended November 30, 2024. This increase is primarily driven by post-IPO-related expenses following the Company’s listing on November 3, 2023. The rise in costs reflects higher legal, accounting, and advisory fees incurred to meet public company compliance requirements and support the Company’s ongoing regulatory and operational obligations.

Dues and subscriptions decreased by $8,431 (21.06%), from $40,031 during the three months ended November 30, 2023, to $31,600 during the three months ended November 30, 2024. This decline reflects the Company’s efforts to optimize membership costs and reduce non-essential subscription expenses, ensuring a more efficient allocation of resources.

Consulting fees saw a significant reduction of $156,634 (94.18%), decreasing from $166,313 during the three months ended November 30, 2023, to $9,679 during the three months ended November 30, 2024. This sharp decline is primarily a result of the completion of IPO-related projects in the prior year, which required considerable external consulting support. Additionally, the Company has strategically shifted toward relying on internal resources for post-IPO activities, aligning with its broader objective of streamlining recurring costs and enhancing long-term financial efficiency.

Travel expenses declined by $18,588 (47.45%), from $39,177 during the three months ended November 30, 2023, to $20,589 during the three months ended November 30, 2024. This decrease reflects the Company’s efforts to streamline travel-related activities, focusing on cost optimization and leveraging virtual meetings where possible to minimize expenses while maintaining operational effectiveness.

Expenses

Advertising, marketing, and promotional expenses increased by $139,539 (104.55%), rising from $133,470 for the three months ended November 30, 2023, to $273,009 for the three months ended November 30, 2024. This rise was driven by the Company’s strategic initiatives aimed at enhancing agent retention and maintaining sales performance in the face of challenging economic and real estate market conditions. The Company also ramped up efforts to boost brand recognition and cultivate stronger connections with key stakeholders to safeguard market share during this time of economic uncertainty. These investments are expected to facilitate future growth as market dynamics stabilize and improve.

Salaries, wages, and benefits fell by $207,908 (32.27%), from $644,273 for the three months ending November 30, 2023, to $436,365 for the three months ending November 30, 2024. This drop reflects the Company’s strategic initiative to optimize workforce costs while maintaining essential operations and critical functions. The adjustment aligns compensation structures with current economic conditions and supports long-term financial sustainability. Despite this reduction, the Company remains dedicated to retaining top talent and providing competitive benefits, which are crucial for ensuring business continuity and fostering future growth.

Depreciation

Pineapple Financial remains focused on advancing its proprietary software to enhance its capabilities and align with evolving market needs. During the three months ended November 30, 2024, the Company capitalized $0.351 million as intangible assets, primarily consisting of salaries, wages, and benefits for employees directly involved in the software development process. This intentional investment reflects the Company’s commitment to driving innovation and sustaining long-term growth. The increase in intangible assets has also resulted in higher amortization expenses, illustrating the ongoing integration of these investments into the Company’s operations to deliver enhanced value to its clients and stakeholders.

Government based incentive

During the fiscal year ending August 31, 2023, the Company successfully claimed and received Scientific Research and Experimental Development (SR&ED) tax credits from the CRA for the fiscal years ending August 31, 2022, and August 31, 2021. These claims provided a valuable source of non-dilutive funding to support the Company’s innovation initiatives. However, following our IPO completion on November 3, 2023, the Company no longer qualifies for SR&ED tax credits under CRA regulations, leading to a decrease in credit recognition for the three months ending November 30, 2024. This change reflects the Company’s transition to publicly traded status, and we are actively exploring alternative funding opportunities to support ongoing research and development efforts.

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:

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Net cash flow from (used in) operating activities

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

During the three months period ended November 30, 2024, the Company reported a significant improvement in its financial performance. Net cash used in operating activities decreased to $663,597, compared to $1,022,782 in the prior corresponding period ended November 30, 2023. This reduction in cash outflows was primarily driven by lower operating expenses, as the Company implemented measures to streamline costs and optimize resource allocation.

In addition, revenue for the year saw a notable increase, reflecting the Company’s ability to attract new clients and retain existing ones through enhancements to its service offerings and operational efficiency. These combined efforts demonstrate the Company’s focus on achieving sustainable growth while maintaining disciplined cash management practices.

Net cash flow from (used in) financing activities

During the three months period ended November 30, 2024, the Company raised $1.00 million through the issuance of shares and pre-funded warrants under an S-3 registration statement. In addition, the Company secured a short-term loan of $525,000 from a private party to further strengthen its financial position.

These financing activities have provided critical capital to support the Company’s strategic initiatives, including investments in proprietary software development, expansion of operational capabilities, and enhancing shareholder value. The successful execution of these funding measures positions the Company to pursue its growth objectives and capitalize on emerging opportunities in the market.

Net cash flow from (used in) investing activities

During the three months ended November 30, 2024, the Company allocated $282,298 toward the development of proprietary software aimed at enhancing the efficiency and accuracy of mortgage application processing for field agents. This strategic investment underscores the Company’s dedication to leveraging technology to drive operational improvements and strengthen its competitive position in the mortgage industry. By offering a streamlined and user-friendly platform, the enhanced software is expected to attract new mortgage agents while improving retention rates, thereby positioning the Company for long-term growth in a highly competitive market.

As of November 30, 2024, the Company’s cash balance stood at $619,581, representing a decrease from $2,341,537 as of November 30, 2023. This reduction reflects the Company’s strategic investments in proprietary software development and ongoing efforts to optimize operations.

The Company’s capital structure consists of contributed common shares, accumulated deficit, additional paid-in capital, and other comprehensive losses. Its primary sources of liquidity are cash generated through operations and capital raised from investors through the issuance of common shares. The Company remains committed to meeting all financial and operational obligations as they come due, maintaining a disciplined approach to liquidity management.

Future capital requirements will depend on several factors, including planned investments in technology, market expansion initiatives, and overall growth trajectory. While the Company continues to actively manage controllable factors, external variables such as interest rates and real estate market conditions remain potential challenges. By aligning its financial strategies with operational priorities, the Company is well-positioned to navigate these uncertainties and achieve sustainable long-term growth.

The following table presents our liquidity:

As of November 30, 2024, Pineapple Financial maintained a strong liquidity position, with $957,090 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 increased by $39,225 compared to August 31, 2024, primarily driven by higher revenue generation, disciplined expense management, and additional financing activities.

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.

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.
• 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 November 30, 2024, 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 November 30, 2024.

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 November 30, 2024, 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.

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 November 30, 2024, $37,800 of our trade receivables are greater than 90 days outstanding, as compared to $2,572 for November 30, 2023. 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.

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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.