United States securities and exchange commission logo
September 28, 2022
Shubha Dasgupta
Chief Executive Officer
Pineapple Financial Inc.
Unit 200, 111 Gordon Baker Road
North York, Ontario M2H 3R1
Re: Pineapple Financial
Inc.
Draft Registration
Statement on Form S-1
Submitted on
September 1, 2022
CIK No. 0001938109
Dear Mr. Dasgupta:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1
General
1. Please revise your
cover page, summary, and risk factors sections to disclose your
multiple class share
structure (Common Shares, Class A Shares, Class B Shares, and Class
C Shares) and explain
the nature of the disparate voting rights and the risks the structure
presents to investors.
Prospectus Summary
Our Company, page 1
2. We note the statements
that you are "dedicated to driving growth," through "innovative
data-driven systems,"
offer a "progressive" network that works "seamlessly." We also
Shubha Dasgupta
Pineapple Financial Inc.
September 28, 2022
Page 2
note the statements that your Brokerage Services are "distinct and
cutting-edge" and
MyPineapple was built to create long-term "competitive advantage
relative to traditional
service providers." Please substantiate those claims to us or revise
to state those as your
beliefs.
3. In one of the opening paragraphs, please include your revenue and net
losses for your
most recent audited period and interim stub to provide a financial
snapshot of your
company, and to balance the disclosure in the summary.
Implications of Being an Emerging Growth Company, page 5
4. We note disclosure that as an emerging growth company you have elected
to take
advantage of the extended transition period provided in Section
7(a)(2)(B) of the
Securities Act for complying with new or revised accounting standards.
However, you
also disclose on the cover page of your filing that you have elected
not to use the extended
transition period. Please revise your filing accordingly.
Risk Factors, page 8
5. Please revise your subheadings to adequately describe the risks,
expanding upon the short
phrases you have currently, such as "Additional Funding" or "Limited
Operating
History." Succinctly state in your subheadings the risks that result
from the facts or
uncertainties discussed in the risk factor.
6. Please add a separately captioned risk factor addressing the currency
exchange rate
fluctuations and risks to investors. In this regard we note your
disclosure in the financial
statements that your functional currency is Canadian Dollars, but your
presentation
currency is US Dollars.
Changes in Interest Rates, page 12
7. Please revise your discussion in the risk factor, as well as the
subheading, to clarify where
in the cycle interest rates are and the effect on your business, so
that investors may assess
the risk.
Repurchase Obligations and Breach of Representations, page 13
8. Please revise to briefly clarify what you mean by the statement that
you "place the
mortgages that [you] originate."
We are subject to general economic conditions, page 13
FirstName LastNameShubha Dasgupta
9. Please update this risk factor if recent inflationary pressures have
materially
Comapany NamePineapple
impacted Financial
your operations. Inc.regard, identify the types of
inflationary pressures you
In this
are facing
September andPage
28, 2022 how2your business has been affected.
FirstName LastName
Shubha Dasgupta
FirstName LastNameShubha Dasgupta
Pineapple Financial Inc.
Comapany 28,
September NamePineapple
2022 Financial Inc.
September
Page 3 28, 2022 Page 3
FirstName LastName
Use of Proceeds, page 22
10. We note the different Use of Proceeds discussed. Please disclose the
approximate amount
intended to be used for each listed purpose. If any material amounts
of other funds are
needed to accomplish the specified purposes for which the proceeds are
to be obtained,
state the amounts of such other funds needed and the sources thereof.
We also note that
funding potential mergers and acquisitions is discussed. Please
identify the businesses or
nature of businesses sought, the status of any negotiations, and a
brief description of the
businesses. Refer to Instruction 6 to Item 504 of Regulation S-K.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Revenue Model, page 26
11. We note your disclosure on page 27 that you "have seen positive growth
in all key
performance indicators including revenue, funded mortgage volume and
EBITDA."
Please balance this disclosure by also quantifying your losses in the
most recent fiscal
year and interim stub. In addition, when you refer to "organic growth
of the number of
Users engaged by the Company" here and the fact that your "active
users increased at a
rate of approximately 85%" on page 38, please quantify the growth,
disclose the number
of active users you currently have, and how you define active users.
Business, page 33
12. Please revise your business section to include a discussion of your
services' distribution
methods, the fee structure for each business line, the number of field
agents, and the
number of total and full-time employees. Refer to Item 101(h) of
Regulation S-K.
Insurance Products, page 35
13. Please include risk factor disclosure regarding your insurance
products, to the extent
applicable, including any risks related to developing this business.
In that regard, please
clarify here how far along in development you are with your insurance
business, as we
note the discussion seems to indicate that Pineapple Insurance Inc. is
to serve insurance
needs of your brand mortgage brokers and agents across Canada. Please
also discuss any
regulations related to the insurance aspect of your business.
InsurTech, page 36
14. We note your disclosure here that MyPineapple was built "in order to
streamline and
manage the customer flow of insurance products" and that the "process
is designed to
create a unique synchronicity between the client obtaining a mortgage
approval and
insurance approval." We also note your disclosure on pages 35-36 where
you list the
insurance products you offer as the following: life insurance,
accident and disability
insurance, critical illness insurance and credit insurance. Please
tell us if you offer any
other types of insurance. If not, explain how the enumerated list of
insurance products is
Shubha Dasgupta
Pineapple Financial Inc.
September 28, 2022
Page 4
related to obtaining a mortgage.
Executive and Director Compensation
Summary Compensation Table, page 52
15. Consistent with your disclosure on pages 56 and F-27, please include
in the summary
compensation table the 245,000 options granted to Mr. Shah in fiscal
year 2021.
Certain Relationships and Related Party Transactions, page 57
16. We note your disclosure on page F-38 that you have entered into an
arrangement with
Gravitas Securities Inc., a related party and shareholder. Please
disclose this transaction
here or tell us why it is not required to be disclosed.
Principal Shareholders, page 58
17. It appears based on your disclosure on page F-38 that Gravitas
received a significant
number of shares for services provided in the 2021 Private Placement
and should be
included as a beneficial shareholder in the table on page 58. Please
tell us what
percentage of your common shares Gravitas currently holds or has a
right to
acquire within 60 days. If that percentage is five percent or higher,
include Gravitas'
holdings in the beneficial ownership table. In addition, update the
table to provide
ownership as of the most recent practicable date.
Description of Securities, page 59
18. Please include a section describing the rights of Common Shares. In
this regard, we note
that you only describe Class A, Class B and Class C shares here. In
addition, revise
the Dividends, Redemption, Dissolution, Purchase for Cancellation,
Dissent and
Participation in Profits subsections to cover each of the four classes
of shares.
19. We note your description of dividend rates to be paid to each class of
common stock.
Please revise to clearly explain the following:
list the order in which you will pay dividends to each of your
shareholders,
include sample calculations that will allow investors to
understand what dividends
each type of common stock is entitled to, and
clarify if any class of common stock is guaranteed to receive
dividends.
Warrants, page 61
20. We note that you have two types of warrants, Compensation Warrants and
Warrants.
Please include separate subheadings and describe characteristics of each
type of warrant in
FirstName LastNameShubha Dasgupta
more detail. In addition, you disclose that Common Shares are excisable
into common
Comapany NamePineapple
shares Financial
at a price ranging Inc.
from $0.75-$1.87. Please explain briefly how
the exercise price
is calculated.
September 28, 2022 Page 4
FirstName LastName
Shubha Dasgupta
FirstName LastNameShubha Dasgupta
Pineapple Financial Inc.
Comapany 28,
September NamePineapple
2022 Financial Inc.
September
Page 5 28, 2022 Page 5
FirstName LastName
Independent Auditor's Report, page F-3
21. Please revise to include the independent auditor's report.
Note 6. Share Capital, page F-17
22. We note your disclosure surrounding the 2021 private placement and
that the allocation of
proceeds between common shares and warrants was made when the equity
instruments
were issued using a relative fair value method. Your disclosure on
page F-31 appears to
indicate that you have allocated $6.1 million of the relative fair
value to the common
shares and $1.4 million to the warrants as paid-in capital. We further
note that the
allocation of proceeds to warrants will typically create a discount in
the associated equity
instrument, which should be recognized as interest expense or as a
dividend in some
cases. Please tell us, and revise your filing to disclose, whether
there is any such discount
associated with this transaction and if so, how it is accounted for in
your financial
statements. Refer to ASC 470-20-25-2.
23. Please tell us and revise your filing to explain what the $3.043
million of issuance costs
paid by issuance of warrants represents, how this amount was
determined and accounted
for, and the authoritative accounting literature relied upon to
support your conclusions.
Exhibits
24. Please file your affiliation agreemetns with certain licensed mortgage
brokers, as
referenced on pages 1, 26 and 33, and describe their material terms or
advise why you are
not required to file them.
You may contact John Spitz at (202) 551-3484 or Ben Phippen at (202)
551-3697 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Susan Block at (202) 551-3210 or Tonya Aldave at (202) 551-3601 with
any other
questions.
Sincerely,
Division of
Corporation Finance
Office of
Finance
cc: Darrin Ocasio, Esq.