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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM20-F
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR |
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2023 |
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
OR
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Date of event requiring this shell company report |
Commission file number 001-38409
MOGO INC.
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
British Columbia, Canada
(Jurisdiction of incorporation or organization)
516 - 409 Granville St, Vancouver BC, V6C 1T2, Canada
(Address of principal executive offices)
Gregory Feller, President & Chief Financial Officer
516 - 409 Granville St, Vancouver BC, V6C 1T2, Canada
Tel: 604-659-4380
Fax: 604-733-4944
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Common Shares |
MOGO |
The Nasdaq Stock Market LLC |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 24,515,909 common shares
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
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, or an emerging growth company. See definition of “large accelerated filer,” "accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Emerging growth company ☐
Large accelerated filer ☐ Accelerated filer☐ Non-accelerated filer☒ If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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.☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐ |
International Financial Reporting Standards as issued by the International Accounting Standards Board ☒ |
Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Auditor Firm Id: |
#85 |
Auditor Name: |
KPMG LLP |
Auditor Location: |
Vancouver, British Columbia, Canada |
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INTRODUCTION
Unless otherwise noted or the context indicates otherwise “we”, “us”, “our”, the “Company” or “Mogo” refer to Mogo Inc. and its direct and indirect subsidiaries. This annual report on Form 20-F includes our audited consolidated financial statements for the years ended December 31, 2021, 2022 and 2023 and as of December 31, 2021, 2022 and 2023, which are presented in Canadian dollars. Amounts in this annual report on Form 20-F are stated in Canadian dollars unless otherwise indicated.
On June 21, 2019, we completed our plan of arrangement (the “Arrangement”) with Mogo Finance Technology Inc (“Mogo Finance”). In connection with the Arrangement, the Company was continued into British Columbia and changed its name from Difference Capital Financial Inc. to Mogo Inc. The Arrangement is accounted for as a reverse acquisition of the Company by Mogo Finance under IFRS 3 - Business combinations, and accordingly, beginning with the second quarter of 2019, the Company’s financial statements, management’s discussion and analysis and all other documents filed with securities commissions or similar authorities in each of the provinces and territories of Canada reflect the continuing operations of Mogo Finance. See “Item 4 –A – History and Development of the Company” for more information regarding the Arrangement.
This annual report on Form 20-F may refer to trademarks, trade names and material which is subject to copyright and which are protected under applicable intellectual property laws and are the property of Mogo. Solely for convenience, our trademarks, trade names and copyrighted material referred to in this annual report on Form 20-F may appear without the ® or © symbol, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks, trade names and copyrights. All other trademarks used in this annual report on Form 20-F are the property of their respective owners.
This annual report on Form 20-F is dated April 30, 2024. Except where otherwise indicated, the information contained in this annual report on Form 20-F is stated as of December 31, 2023.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This annual report on Form 20-F contains forward-looking statements that relate to the Company’s current expectations and views of future events. These forward-looking statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. In some cases, these forward-looking statements can be identified by words or phrases such as “may”, “might”, “will”, “expect”, “anticipate”, “estimate”, “intend”, “plan”, “indicate”, “seek”, “believe”, “predict” or “likely”, or the negative of these terms, or other similar expressions intended to identify forward-looking statements. The Company has based these forward-looking statements on its current expectations and projections about future events and financial trends that it believes might affect its financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements relating to:
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. Although we believe that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and we cannot assure that actual results will be consistent with these forward-looking statements.
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Given these risks, uncertainties and assumptions, any investors or users of this document should not place undue reliance on these forward-looking statements. Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors that are discussed in greater detail under “Item 3. Key Information—D. Risk Factors” or elsewhere in this annual report on Form 20-F.
Although the forward-looking statements contained in this annual report on Form 20-F are based upon what our management believes are reasonable assumptions, these risks, uncertainties, assumptions and other factors could cause our actual results, performance, achievements and experience to differ materially from our expectations, future results, performances or achievements expressed or implied by the forward-looking statements. The forward-looking statements made in this annual report on Form 20-F relate only to events or information as of the date of this annual report on Form 20-F and are expressly qualified in their entirety by this cautionary statement. Except as required by law, we do not assume any obligation to update or revise any of these forward-looking statements to reflect events or circumstances after the date of this annual report on Form 20-F, including the occurrence of unanticipated events.
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PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
Not applicable.
Not applicable.
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In addition to any other risks contained in this annual report on Form 20-F, as well as our management’s discussion and analysis and consolidated financial statements and accompanying notes, the risks described below are the principal risks that could have a material and adverse effect on our business, financial condition, results of operations, cash flows, future prospects or the trading price of our Common Shares. This annual report on Form 20-F also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below. See "Cautionary Note Regarding Forward Looking Statements”.
Risk Factors Summary:
The following is a summary of the principal risks that could adversely affect our business, operations and financial results.
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Worsening economic conditions may cause our members' loan default rates to increase and harm our operating results.
Approximately 30% of our assets as of December 31, 2023 consisted of loans to our members. Uncertainty and negative trends in general economic conditions in Canada and abroad, including significant tightening of credit markets, historically have created a difficult environment for companies operating in our industries. Many factors, including factors that are beyond our control, may have a detrimental impact on our operating performance. These factors include short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets, unemployment levels (which are currently low and resulting in staff shortages and upward wage pressure), consumer confidence, energy costs and other general economic conditions, as well as events such as natural disasters, acts of war, terrorism and catastrophes.
There can be no assurance that economic conditions will remain favorable for our business or that default rates on our loans by our members will remain at current levels. Increased default rates by our members on our loans may inhibit our access to capital and negatively impact our profitability. If delinquency or uncollectable rates on our consumer loans exceed certain levels defined in the Credit Facility it could constitute a default under the Credit Facility or other credit facilities, reducing or terminating such facilities. Furthermore, we receive a number of applications from potential members who do not satisfy the requirements for our loans. If an insufficient number of qualified individuals apply for our loans, our growth and revenue could decline.
Our allowance for loan losses is determined based upon both objective and subjective factors and may not be adequate to absorb loan losses.
We face the risk that our members will fail to repay their loans in full. We reserve for such losses by establishing an allowance for loan losses, the increase of which results in a charge to our earnings as a provision for loan losses. We have established an evaluation process designed to determine the adequacy of our allowance for loan losses. While this evaluation process uses historical and other objective information, the classification of loans and the forecasts and establishment of loan losses are also dependent on our subjective assessment based upon our experience and judgment. Actual losses are difficult to forecast, especially if such losses stem from factors beyond our historical experience, and unlike traditional banks, we are not subject to periodic review by bank regulatory agencies of our allowance for loan losses. As a result, there can be no assurance that our allowance for loan losses will be comparable to that of traditional banks subject to regulatory oversight or sufficient to absorb losses or prevent a material adverse effect on our business, financial condition and results of operations.
We rely on our proprietary credit scoring model in the forecasting of loss rates. If we are unable to effectively forecast loss rates, it may negatively impact our operating results.
In deciding whether to extend credit to prospective members, we rely heavily on our credit score generated by our proprietary credit scoring model and decisioning system, an empirically derived suite of statistical models built using third-party data, data from our members and our credit experience gained through monitoring the performance of our members over time. If our proprietary credit scoring model and decisioning system fails to adequately predict the creditworthiness of our members, or if our proprietary cash flow analytics system fails to assess prospective members' financial ability to repay their loans, or if any portion of the information pertaining to the prospective member is false, inaccurate or incomplete, and our systems did not detect such falsities, inaccuracies or incompleteness, or any or all of the other components of the credit decision process described herein fails, we may experience higher than forecasted losses. Furthermore, if we are unable to access the third-party data used in our credit scores, our access to such data is limited or such information is outdated or incorrect, our ability to accurately evaluate potential members will be compromised, and we may be unable to effectively predict probable credit losses inherent in our loan portfolio, which would negatively impact our results of operations.
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Our risk management efforts may not be effective.
We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify, manage, monitor and mitigate financial risks, such as credit risk, interest rate risk, liquidity risk, and other market-related risk, as well as operational risks related to our business, assets and liabilities. To the extent our models used to assess the creditworthiness of potential members do not adequately identify potential risks, the credit scores we produce would not adequately represent the risk profile of such members and could result in higher risk than anticipated. Our risk management policies, procedures, and techniques, including our use of our proprietary credit scoring technology, may not be sufficient to identify all of the risks we are exposed to, mitigate the risks that we have identified or identify concentrations of risk or additional risks to which we may become subject in the future.
We have a history of losses and may not achieve consistent profitability in the future. In addition, if we continue to grow, we may not be able to manage our growth effectively.
Although we had shareholders equity of approximately $94 million as of December 31, 2023, we also had an accumulated deficit of approximately $332 million. We will need to generate and sustain increased revenue levels in future periods to become profitable, and, even if we do so, we may not be able to maintain or increase our level of profitability. We intend to continue to expend significant funds to expand our marketing and sales operations, continue developing our products including further development of our platforms, increase our service and general product servicing capabilities, compensate our growing employee base, and expand into new markets. In addition, our provision for loan losses, net of recoveries, is based on our expectation of future loan losses related to our loans receivable. As we continue to grow our members and loans receivable, we expect the aggregate amount of this expense will also continue to grow.
Our historical growth has placed, and may continue to place, significant demands on our management and our operational and financial resources. Our organizational structure is becoming more complex as we add additional staff, and we will need to improve our operational, financial, management and compliance controls as well as our reporting systems and procedures. Our efforts to grow our business may be costlier than we expect, and we may not be able to increase our revenue enough to offset our higher operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described in this 20-F, and unforeseen expenses, difficulties, complications and delays, and other unknown events. If we are unable to achieve and sustain profitability, the market price of our publicly listed securities may significantly decrease.
Further, the circumstances that accelerated the growth of our business in recent years, including an extended period of general macroeconomic growth in Canada and the U.S., as well as growth in the financial services and technology industries in which we operate, slowed in 2022 and 2023 and may not return in the future. Our membership grew from 2.0 million members as at December 31, 2022 to 2.1 million members as at December 31, 2023, down from our growth of 0.2 million members between December 31, 2021 and December 31, 2022. We may experience declines in the growth of our business (or negative growth) as a result of a number of factors, including slowing demand for our products, insufficient growth in the number of customers that utilize our products, declines in the level of usage of our products by existing members, macroeconomic factors, increasing competition, a decrease in the growth of our overall market or our failure to continue to capitalize on growth opportunities, including as a result of our inability to scale to meet such growth and economic conditions that could reduce financial activity and the maturation of our business, among others.
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If our growth rate declines, our business, operating results, financial condition and prospects could be adversely affected.
Carta's business is reliant on contracts with key customers operating in the payment industry.
There can be no assurance that we will be able to maintain our relationships with these clients or that these client relationships will result in increasing revenue. Given the B2B nature of Carta's operations, the number of clients that are potential users of the Carta platform is concentrated. Our largest clients may not be easily replaced and the loss of any one or more of such clients may have a material adverse impact on the results of operations and financial condition of the Company. In addition, if we are unable to add new clients, we may not realize anticipated levels of growth in the future. While we expect this concentration of revenue to decrease over time, we may continue to depend upon a relatively small number of clients for a significant portion of our revenue in the foreseeable future. The loss of a significant client or failure to attract new clients could materially adversely affect our business, financial condition and results of operations.
We may require additional capital to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances. If capital is not available to us, our business, operating results and financial condition may be harmed.
Since our founding, we have raised substantial equity and debt financing to support the growth of our business. Because we intend to continue to make investments to support the growth of our business, we may require additional capital to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances, including increasing our marketing expenditures to improve our brand awareness, developing new products or services or further improving existing products and services, enhancing our operating infrastructure and acquiring complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. However, additional funds may not be available when we need them, on terms that are acceptable to us, or at all. In addition, our agreements with our lenders contain restrictive covenants relating to our capital raising activities and other financial and operational matters, and any debt financing that we secure in the future could involve further restrictive covenants which may make it more difficult for us to obtain additional capital and to pursue business opportunities. Volatility in the credit markets may also have an adverse effect on our ability to obtain debt financing.
If we raise additional funds through further issuances of equity or convertible debt securities, our existing shareholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our Common Shares. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to pursue our business objectives and to respond to business opportunities, challenges or unforeseen circumstances could be significantly limited, and our business, operating results, financial condition and prospects could be adversely affected.
If new products and platform enhancements do not achieve sufficient market acceptance, our financial results and competitive position will be harmed.
We incur expenses and expend resources upfront to develop, acquire and market new products and platform enhancements to incorporate additional features, improve functionality or otherwise make our platform more desirable to our members. New product or platform enhancements must achieve high levels of market acceptance in order for us to recoup our investment in developing and bringing them to market.
Any new products, including MogoTrade, and changes to our platforms could fail to attain sufficient market acceptance for many reasons, including, without limitation, the following:
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If our new products or platform enhancements do not achieve adequate acceptance in the market or if management decides not to proceed with the launch of new products or platform enhancements if it does not expect to achieve adequate acceptance in the market, our competitive position, revenue and operating results could be harmed. The adverse effect on our financial results may be particularly acute because of the significant development, marketing, sales and other expenses we will have incurred in connection with new products or enhancements.
We may not realize the expected benefits from acquisitions due to challenges associated with integrating the operations, technologies, and personnel of Mogo and the acquired companies.
Acquisitions, strategic investments, or partnerships could divert the attention of key management personnel, disrupt our business, dilute shareholder value and adversely affect our results of operations and financial condition. The anticipated benefits of any acquisition, strategic investment, or partnership may not be realized or we may be exposed to unknown risks or liabilities.
We may seek to acquire or invest in businesses, products, or technologies that we believe could complement our products and services or otherwise offer growth opportunities. The pursuit of potential investments or acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable opportunities, whether or not they are consummated. Any acquisition, investment, or business relationship may result in unforeseen operating difficulties and expenditures.
We may be required to issue equity or increase debt to acquire businesses which could dilute our shareholders or adversely affect our results of operations. In addition, if an acquired business fails to meet our expectations, our business, results of operations, and financial condition may suffer. Further, we may invest in companies that do not succeed, and our investments may lose all or some of their value, which result in us recording impairment charges reflected in of results of operations.
Our business is subject to extensive and evolving regulation and oversight in a variety of areas, all of which are subject to change and uncertain interpretation.
Our business is subject to numerous federal, provincial and other local laws, ordinances and regulations in each of the jurisdictions in which we operate, which are subject to change and which may impose significant costs or limitations on the way we conduct or expand our business. As we develop and introduce new products and services, we may become subject to additional laws and regulations.
Future legislation or regulations may restrict our ability to continue our current methods of operation or expand our operations and may have a negative effect on our business, results of operations, financial condition and the price of our Common Shares. In addition, future legislation or regulations, or amendments to the existing regulatory regime, could require us to modify our platforms and processes, which may cause us to incur additional costs and lead to a reduction in revenue.
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For example, our lending business activities are subject to section 347 of the Criminal Code. Following consultations on predatory lending conducted by the Department of Finance in August 2022, in 2023, the Canadian federal government introduced the Budget Implementation Act, 2023, No 1 ("Budget Act"), to reduce the criminal rate of interest to 35% APR, and replace an effective annual rate of interest calculation with an annual percentage rate of interest calculation. The Budget Act received Royal Assent on June 22, 2023, but the criminal rate of interest amendments are not yet in force, and they will only come into force upon proclamation by an order of the Cabinet, on a date to be determined.
On December 23, 2023, pursuant to its regulation-making authority under the Budget Act, the federal government released the Criminal Interest Rate Regulations ("Interest Rate Regulations") to exempt certain agreements from the criminal rate of interest. The Interest Rate Regulations, which will come into force concurrently with the criminal interest rate amendments, include provisions relating to payday loans, as well as exemptions from the criminal rate of interest for loans that the government views as non-predatory including certain commercial loans and small dollar, non-recourse collateralized loans (pawn loans), none of which are relevant to our current lending activities. The federal government has indicated it may further reduce the criminal rate of interest below 35% APR. A consultation on the further lowering of the criminal rate closed on January 7, 2024. While the criminal interest rate amendments and companion regulations are not yet in force, the Company is in the process of preparing for this change.
In addition to the criminal interest rate restrictions, certain of our MogoMoney products may be subject to new legislation and regulations respecting 'high-cost credit products' which have been implemented in certain provinces in which we operate. Provincial high-cost credit ("HCC") legislation has been implemented in the provinces of Alberta and British Columbia. HCC legislation, which is part of the broader provincial consumer protection regime in these provinces, imposes additional requirements, including licensing and disclosures, on lenders making loans above certain interest rate thresholds. We are currently licensed as an HCC lender in both provinces and comply with all regulatory requirements. We also continue to participate in the regulatory process, monitor the HCC landscape that continues to develop in other provinces, including the province of Newfoundland and Labrador, which has also passed legislation that will implement an HCC regime. This legislation will take effect in June 2024. We are currently in the process of preparing for the changes in that province. The Company will continue to ensure that its business complies with any HCC regulatory changes and is well positioned to respond to any enhanced disclosure requirements.
While we endeavor to operate our business model in compliance with the applicable provincial and federal laws, with respect to certain of our business models, the application of certain law may be subject to evolving interpretation and requirements. As such, there is a risk that regulatory bodies or consumers could assert that certain federal or provincial laws are applicable where we have determined that they are not, or that such laws apply to aspects of our business in a manner that we have not addressed. If it is determined that we have not complied with the requirements of applicable laws, we could be subject to civil actions for nullification of contracts, rebate of some or all payments made by members, and damages, or subject to sanctions, penalties, or other enforcement for violation of the laws, any of which outcomes could have a material adverse effect on the Company.
Further, the laws and regulations applicable to cryptocurrency are evolving and subject to interpretation and change. Mogo has an approximate 13% stake in WonderFi, Canada's leading operator of regulated crypto trading platforms and other digital asset businesses. The value of Mogo's investment in WonderFi may be adversely impacted if WonderFi is unable to comply with regulations or prohibitions applicable to them, faces regulatory or other enforcement actions and potential fines and other consequences.
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As a registrant and member of the Canadian Investment Regulatory Organization, MogoTrade is subject to extensive regulation in Canada.
MogoTrade is registered as an investment dealer in each of the provinces and territories in Canada, and it is also a member of the Canadian Investment Regulatory Organization ("CIRO"). Compliance with many of the regulations applicable to MogoTrade involves a number of risks, particularly in areas where applicable regulations may be subject to interpretation. In the event of non-compliance with an applicable regulation, securities regulators or CIRO may institute administrative or judicial proceedings that may result in censure, fine, civil penalties, issuance of cease-and-desist orders, deregistration or suspension of the non-compliant investment dealer or investment adviser, suspension or disqualification of the investment dealer's officers or employees, or other adverse consequences. The imposition of any such penalties or orders on MogoTrade regardless of duration or any subsequent appellate results could have a material adverse effect on the Company.
Our business may be adversely affected by material changes to the interest rate charged to our members and paid to our lenders.
We earn a substantial portion of our revenues from interest payments on the loans we make to our members. Various financial institutions and other funding sources provide, and may in the future provide, us with the capital to fund these term loans and lines of credit and charge us interest on funds that we draw down. In the event that the spread between the rate at which we lend to our members and the rate at which we borrow from our lenders decreases, our financial results and operating performance will be harmed.
There are a variety of factors that could affect the interest rates we charge to our members and which we pay to our lenders, such as access to capital based on our business performance, the volume of loans we make to our members, competition with other lenders, regulatory requirements. These interest rates may also be affected by variations to the types of products we sell to our members and investors over time and a shift among our channels of member acquisition. Interest rate changes may adversely affect our business forecasts and expectations and are highly sensitive to many macroeconomic factors beyond our control, such as inflation, recession, the state of the credit markets, changes in market interest rates, global economic disruptions, unemployment and the fiscal and monetary policies of the federal government and its agencies. Any material reduction in our interest rate spread could have a material adverse effect on our business, results of operations and financial condition.
Our debt financing sources are highly concentrated, and we may not be able to access additional sources of funding on reasonable terms or at all.
We have obtained debt financing from a limited number of lenders. Our reliance on the Credit Facility for a significant amount of our funding exposes us to funding concentration risks. If the lender decides to terminate the Credit Facility, our business, operating results, financial condition and prospects could be adversely affected. In addition, the Credit Facility must be renewed on a periodic basis. If we were unable to renew the Credit Facility on acceptable terms when it became due there could be a material adverse effect on our financial condition, liquidity and results of operations.
Our agreements with our lenders contain a number of early payment triggers and covenants. A breach of such triggers or covenants or other terms of such agreements could result in an early amortization, default, or acceleration of the maturity date which could materially impact our operations.
Primary funding sources available to support the maintenance and growth of our business include, among others, the Credit Facility. The Credit Facility contains restrictions on the Company's ability to, among other things, pay dividends, sell or transfer assets, incur additional debt, repay other debt, make certain investments or acquisitions, repurchase or redeem shares, and engage in alternate business activities.
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The Credit Facility also contains a number of covenants that require the Company to maintain certain specified financial ratios. Description of these covenants, requirements and events are set out in the Credit Facility agreement.
During the occurrence of an event of default under the Credit Facility, for example, principal collections from our consumer loans would be applied to repay principal under the Credit Facility rather than being available on a revolving basis to fund newly originated loans. During the occurrence of an event of default under any of our debt, including debt owing under the Credit Facility, debt owing to the holders of debentures issued by the Company or debt owing to future facilities we may enter into, the applicable lender could accelerate the repayment of our debt and the lender's commitments to extend further credit would terminate. If we were unable to repay the amounts due and payable under our debt when due, the applicable lender could seek remedies, including against the collateral pledged as security for such debt.
An event of default or other event requiring early repayment of the Credit Facility would negatively impact our liquidity, including our ability to originate new loans, and require us to rely on alternative funding sources, which might increase our funding costs or which might not be available when needed. If we were unable to arrange new or alternative methods of financing on favorable terms, we might have to curtail the origination of loans, which could have a material adverse effect on our business, financial condition, operating results and cash flow, which in turn could have a material adverse effect on our ability to meet our obligations under our facility.
Our levels of indebtedness can have negative implications for our shareholders.
We have, and anticipate having, a significant amount of indebtedness, which totaled $49.4 million on our Credit Facility and $36.8 million in outstanding debentures as of December 31, 2023. Our ability to make payments of principal and interest on our funding debt will depend on our future operating performance and our ability to enter into additional debt and equity financings, which to a certain extent, is subject to economic, financial, competitive and other factors beyond our control. If, in the future, we are unable to generate sufficient cash flow to service our debt, we may be required to refinance all or a portion of our existing debt or obtain additional financing. There can be no assurance that any such refinancing would be possible or that any additional financing could be obtained on terms acceptable to us. The inability to obtain additional financing could have a material adverse effect on our operating performance and any additional equity financing would result in the dilution of shareholders.
Our substantial indebtedness could have significant consequences to shareholders, such as the inability to satisfy our obligations under the Credit Facility and increased vulnerability to adverse general economic and industry conditions. We may find it more difficult to fund future working capital, capital expenditures, general corporate purposes or other purposes and we would have to allocate a substantial portion of our cash resources to the payment on our indebtedness, which would reduce the funds available for operations and for distribution to shareholders.
Our investment in WonderFi may expose us to certain risks, which could have a material adverse effect on our financial conditions and results of operations, including the effects of negative publicity resulting from fraudulent actors in the cryptocurrency space.
Mogo is an approximate 13% shareholder in WonderFi, Canada's leading operator of regulated crypto trading platforms and other digital asset businesses. In 2022, a number of digital asset exchanges filed for bankruptcy proceedings and/or became the subjects of investigation by various governmental agencies for, among other things, fraud, causing a loss of confidence and an increase in negative publicity for the digital asset ecosystem. As a result, many digital asset markets have experienced increased price volatility. The cryptocurrency ecosystem may continue to be negatively impacted and experience long term volatility if public confidence decreases.
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The failure of several crypto platforms has impacted and may continue to impact the broader crypto economy; the full extent of these impacts may not yet be known. WonderFi is part of the cryptocurrency environment and is subject to volatility resulting from financial instability, poor business practices, and fraudulent activities of players in the cryptocurrency market. When investors in cryptocurrency and cryptocurrency-based companies experience financial difficulty as a result of price volatility, poor business practices, and/or fraud, it has, and may cause loss of confidence in the cryptocurrency space, reputational harm to cryptocurrency assets, heightened scrutiny by regulatory authorities and law makers, among other material impacts.
These events are continuing to develop and it is not possible to predict, at this time, every risk that they may pose to us, our service providers, or the digital asset industry as a whole. A perceived lack of stability in the digital asset exchange market and the closure or temporary shutdown of digital asset exchanges due to business failure, hackers or malware, government-mandated regulation, or fraud, may reduce confidence in digital asset networks and result in greater volatility in cryptocurrency values. These potential consequences of a digital asset exchange's failure could adversely affect our investment in WonderFi, which could have a material adverse effect on our financial condition.
We and our partners obtain, store and process a large amount of sensitive data. Any real or perceived improper or unauthorized use of, disclosure of, or access to such data could harm our reputation as a trusted brand, as well as have a material and adverse effect on our business.
We and our third-party partners and service providers, including third-party data centers that we use, obtain and process large amounts of sensitive data, including our members' personal and credit information and other sensitive data relating to our members and their transactions. We face risks, including to our reputation as a trusted brand, in the handling and protection of this data, and these risks will increase as our business continues to expand to include new products and technologies.
We have administrative, technical, and physical security measures in place, and we have policies and procedures in place to contractually require third parties to whom we transfer data to implement and maintain appropriate security measures. However, if our security measures or those of the previously mentioned third parties are inadequate or are breached as a result of third-party action, employee error, malfeasance, malware, phishing, hacking attacks, system error, trickery, or otherwise, and, as a result, someone obtains unauthorized access to funds, or sensitive information, including personally identifiable information, on our systems or our partners' systems, or if we suffer a ransomware or advanced persistent threat attack, or if any of the foregoing is reported or perceived to have occurred, our reputation and business could be damaged. Any perceived or actual breach of security, regardless of how it occurs or the extent of the breach, could have a significant impact on our reputation as a trusted brand, cause us to lose existing members, prevent us from obtaining new members, require us to expend significant funds to remedy problems caused by breaches and to implement measures to prevent further breaches, cease operations, and expose us to legal risk and potential liability including those resulting from governmental or regulatory investigations, class action litigation and costs associated with remediation, such as fraud monitoring. Any actual or perceived security breach at a company providing services to us or our customers could have similar effects.
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The collection, processing, storage, use, and disclosure of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights.
We receive, transmit and store a large volume of personally identifiable information and other sensitive data from members. There are federal, provincial and foreign laws regarding privacy and the storing, sharing, use, disclosure and protection of personally identifiable information and sensitive data. Specifically, personally identifiable information is increasingly subject to legislation and regulations to protect the privacy of personal information that is collected, processed and transmitted. Any violations of these laws and regulations may require us to change our business practices or operational structure, address legal claims and sustain monetary penalties or other harms to our business.
While we have policies and procedures in place to protect personally identifiable information and other sensitive data of our members that comply with applicable laws, the regulatory framework for privacy issues in Canada is constantly evolving and is likely to remain uncertain for the foreseeable future. The interpretation and application of such laws is often uncertain, and such laws may be interpreted and applied in a manner inconsistent with our current policies and practices or require changes to the features of our platforms. If either we or our third-party service providers are unable to address any privacy concerns, even if unfounded, or to comply with applicable laws and regulations, it could result in additional costs and liability, damage our reputation and harm our business.
Cybersecurity incidents and other systems and technology problems may materially and adversely affect our business, operations and financial results.
Cybersecurity incidents and other issues related to our information systems, technology and data may materially and adversely affect us. Cybersecurity incidents and cyberattacks have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency in the future. The digital finance industry is a particular target for cybersecurity incidents, which may occur through intentional or unintentional acts by individuals or groups having authorized or unauthorized access to our systems or our members' or counterparties' information, which may include confidential information. These individuals or groups include employees, vendors and customers, as well as hackers. The information and technology systems used by us and our third-party partners and service providers are vulnerable to damage or interruption from, among other things: hacking, ransomware, malware and other computer viruses; denial of service attacks; network failures; computer and telecommunication failures; phishing attacks; infiltration by unauthorized persons; security breaches; usage errors by their respective professionals; power outages; terrorism; and catastrophic events such as fires, tornadoes, floods, hurricanes and earthquakes.
We may experience cybersecurity incidents in the future. While we take efforts to protect our systems and data, including establishing internal processes and implementing technological measures designed to provide multiple layers of security, and contract with third-party partners and service providers to take similar steps, there can be no assurance that our safety and security measures (and those of our third-party partners and service providers) will prevent damage to, or interruption or breach of, our information systems, data (including personal data) and operations. We may be required to expend significant resources to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.
Nevertheless, it is possible we could suffer an impact or disruption that could materially and adversely affect us. Our operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of our employees, or otherwise, and, as a result, an unauthorized party may obtain access to our members' personally identifiable information and other sensitive data. Additionally, outside parties may attempt to fraudulently induce our employees to disclose sensitive information in order to gain access to our infrastructure.
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As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined event, and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures.
Controls employed by our information technology department and our third-party partners and service providers, including cloud vendors, could prove inadequate. If an actual or perceived breach of any of our information systems occurs, the market perception of our effectiveness could be harmed. Moreover, there could be public announcements regarding any cybersecurity-related incidents and any steps we take to respond to or remediate such incidents, and if securities analysts or investors perceive these announcements to be negative, it could, among other things, have a substantial adverse effect on the price of our Common Shares.
As we rely on our third-party partners and service providers for our operations, the risk of cybersecurity attacks and loss, corruption, or unauthorized access to or publication of our information or the confidential information and personal data of members and employees may be more acute. Third-party risks may include insufficient security measures, data location uncertainty, and the possibility of data storage in inappropriate jurisdictions where laws, security measures or other controls may be inadequate or in which there are uncertainties regarding governmental intervention and use of such data, and our ability to monitor our third-party partners' and service providers' data security practices are limited. Although we generally have agreements relating to cybersecurity and data privacy in place with our third-party service providers, they are limited in nature and we cannot guarantee that such agreements will prevent the accidental or unauthorized access to or disclosure, loss, destruction, disablement or encryption of, use or misuse of or modification of data (including personal data) or enable us to obtain adequate or any reimbursement from our third-party partners or service providers in the event we should suffer any such incidents. Due to applicable laws and regulations or contractual obligations, we may be held responsible for any information security failure or cybersecurity attack attributed to our third-party partners and service providers as they relate to the information we share with them. A vulnerability in or related to a third-party partner or service provider's software or systems, a failure of our third-party partners' or service providers' safeguards, policies or procedures, or a breach of a third-party partner or service provider's software or systems could result in the compromise of the confidentiality, integrity or availability of our systems or the data housed in our third-party platforms.
The security of the information and technology systems used by us and our service providers may continue to be subjected to cybersecurity threats that could result in material failures or disruptions in our business. If these systems are compromised, become inoperable for extended periods of time or cease to function properly, we or a service provider may have to make a significant investment to fix or replace them. The failure of these systems or of disaster recovery plans for any reason could cause significant interruptions in operations and result in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to shareholders (and the beneficial owners of shareholders). Such a failure could harm our reputation, subject to legal claims and otherwise materially and adversely affect our investment and trading strategies and our value.
It may be difficult and costly to protect our intellectual property rights, and we may not be able to ensure their protection.
The success of our platforms depend, in part, upon our intellectual property. We primarily rely on copyright, trade secret and trademark laws, trade secret protection and confidentiality or license agreements with our employees, suppliers and other third parties to protect our intellectual property rights. However, the steps we take to protect our intellectual property rights may be inadequate. We currently do not have any issued patents.
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In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights.
Our failure to secure, protect and enforce our intellectual property rights could seriously harm our brand and adversely affect our business.
We may face claims by third parties for alleged infringement of their intellectual property rights, which could harm our business.
Our competitors, as well as a number of other entities and individuals, may claim that we infringe their intellectual property rights. Claims of infringement are becoming increasingly common as the software industry develops and third parties may assert infringement claims against us in the future. Although we have developed most of our platforms, we do include third-party software in our platforms. In these cases, this software is licensed from the entity holding the intellectual property rights. Although we believe that we have secured proper licenses for all third-party software that is integrated into our platforms, third parties may assert infringement claims against us in the future. Any such assertion may result in litigation or may require us to obtain a license for the intellectual property rights of third parties. Such licenses may not be available, or they may not be available on reasonable terms. In addition, such litigation could be disruptive to our ability to generate revenue or enter into new market opportunities and may result in significantly increased costs as a result of our defense against those claims or our attempt to license the intellectual property rights or rework our platforms to ensure they comply with judicial decisions. Even if we were to prevail, any litigation regarding our intellectual property could be costly and time-consuming and divert the attention of our management and key personnel from our business operations. Any of the foregoing could have a significant adverse effect on our business and operating results as well as our ability to generate future revenue.
Some aspects of our platforms include open-source software, and any failure to comply with the terms of one or more of these open-source licenses could negatively affect our business.
We incorporate open-source software into our proprietary platforms and into other processes supporting our business. Such open-source software may include software covered by licenses like the GNU General Public License and the Apache License. The terms of various open-source licenses have not been interpreted by courts, and there is a risk that such licenses could be construed in a manner that limits our use of the software, inhibits certain aspects of the platforms and negatively affects our business operations. Some open-source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the type of open-source software we use. If portions of our proprietary platforms are determined to be subject to an open-source license, or if the license terms for the open-source software that we incorporate change, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our platforms or change our business activities. In addition to risks related to license requirements, the use of open-source software can lead to greater risks than the use of third-party commercial software, as open-source licensors generally do not provide warranties or controls on the origin of the software. Many of the risks associated with the use of open-source software cannot be eliminated, and could adversely affect our business.
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If our software contains serious errors or defects, we may lose revenue and market acceptance.
Software developed for our proprietary platforms often contains errors, defects, security vulnerabilities or software bugs that are difficult to detect and correct, particularly when first introduced. Despite internal testing, our platforms may contain serious errors or defects, security vulnerabilities or software bugs that we may be unable to successfully correct in a timely manner or at all, which could result in lost revenue, significant expenditures of capital and damage to our reputation and brand, any of which could have an adverse effect on our business, financial condition and results of operations. Since the software we use is a critical component to our proprietary platforms, errors, defects, security vulnerabilities, service interruptions or software bugs in our platforms could result in inappropriate loan decisioning and corresponding credit scores or interest rates or outages that could affect our ability to process some customers' MogoTrade transactions.
Operating risk and insurance coverage.
The Company has insurance to protect its assets, operations and employees. While the Company believes its insurance coverage addresses all material risks to which it is exposed and is adequate and customary in its current state of operations, such insurance is subject to coverage limits and exclusions and may not be available for the risks and hazards to which the Company is exposed. In addition, no assurance can be given that such insurance will be adequate to cover the Company's liabilities or will be generally available in the future or, if available, that premiums will be commercially justifiable. If the Company were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, or if the Company were to incur such liability at a time when it is not able to obtain liability insurance, its business, results of operations and financial condition could be materially adversely affected.
Our success and future growth depend in part on our successful marketing efforts and increased brand awareness. Failure to effectively use our brand to convert sales may negatively affect our growth and our financial performance.
We believe that an important component of our growth will be continued market penetration through our digital marketing channel and leveraging our marketing collaboration agreement with Postmedia. To achieve this growth, we anticipate relying heavily on marketing and advertising to increase the visibility of the Mogo brand with potential members. The goal of this marketing and advertising is to increase the strength, recognition and trust in the Mogo and Moka brands, and drive more unique visitors to open accounts and access our products. We incurred of $3.3 million of marketing expenses in the year ended December 31, 2023.
Our business model relies on our ability to scale rapidly and to decrease incremental member acquisition costs as we grow. If we are unable to recover our marketing costs through increases in website traffic and in our conversion rates, or if we discontinue our broad marketing campaigns, it could have a material adverse effect on our growth, results of operations and financial condition.
Member complaints or negative publicity could result in a decline in our member growth and our business could suffer.
Our reputation is very important to attracting new members to Mogo as well as securing repeat lending and mortgage refinancing to existing members. While we believe that we have a good reputation and that we provide our members with a superior experience, there can be no assurance that we will continue to maintain a good relationship with our members or avoid negative publicity. Any damage to our reputation, whether arising from our conduct of business, negative publicity, regulatory, supervisory or enforcement actions, matters affecting our financial reporting or compliance with securities regulatory authorities and TSX and Nasdaq requirements, security breaches or otherwise could have a material adverse effect on our business.
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Any misconduct or errors by our employees and third-party service providers could harm our business and reputation.
We are exposed to many types of operational risk, including the risk of misconduct and errors by our employees and third-party service providers. Our business depends on our employees and third-party service providers to process a large number of increasingly complex transactions, including transactions that involve significant dollar amounts and loan transactions that involve the use and disclosure of personal and business information. We could be materially adversely affected if transactions are redirected, misappropriated or otherwise improperly executed, if personal and business information is disclosed to unintended recipients or if an operational breakdown or failure in the processing of other transactions occurs, whether as a result of human error, a purposeful sabotage or by means of a fraudulent manipulation of our operations or systems. In addition, the manner in which we store and use certain personal information and interact with members is governed by various federal and provincial laws. If any of our employees or third-party service providers take, convert or misuse funds, documents or data or fail to follow our protocol when interacting with members, we could be liable for damages and subject to regulatory actions and penalties. As a result, we could also be perceived to have facilitated or participated in illegal misappropriation of funds, documents or data, or failed to have followed protocol, and therefore be subject to civil or criminal liability. It is not always possible to identify and deter misconduct or errors by employees or third-party service providers, and the precautions we take to detect and prevent such activities may not be effective in controlling unknown or unmanaged risks or losses. Any of these occurrences could result in our diminished ability to operate our business, potential liability to our members, inability to attract future members, reputational damage, regulatory intervention and financial harm, which could negatively impact our business, financial condition and results of operations.
Our business depends on our ability to collect payments and service the products we make available to our members.
We rely on banks and services providers to facilitate funds transfers within our customer accounts, including among other things, the disbursement of proceeds of newly originated loans to our members and the collection of payments from members. As we are not a bank, we do not have the ability to directly access the electronic funds transfer payment network, and must therefore rely on a service provider to process our transactions. If we cannot continue to obtain such services from our current institution, service provider or elsewhere, or if we cannot transition to another processor quickly, our ability to process transactions will suffer.
We rely on third-party partners, service providers and systems to deliver our products and services and perform key functions. Any disruption of service by such third parties could interrupt or delay our ability to deliver our products and service to our members.
We rely on third-party partners, service providers and systems, including internet service providers, payment services providers, market and third-party data providers, regulatory services providers, clearing systems, market makers, exchange systems, banking systems, payment gateways that link us to the payment card and bank clearing networks to process transactions, co-location facilities, communications facilities, cloud-based and traditional data center facilities, and other third-party facilities, to deliver our products and services, run our platform, facilitate trades by our customers, and support or carry out some regulatory obligations, including with respect to the provision of our products and services, account verification, credit decisioning and transaction processing. In addition, external content providers provide us with financial information, market news, charts, option and stock quotes, research reports, and other fundamental data that we provide to our customers.
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The continuous availability of our service depends on the continued operations of these third-party partners, service providers and facilities. These providers are susceptible to processing, operational, technological and security vulnerabilities, including security breaches, which might impact our business, and our ability to monitor our third-party service providers' data security is limited. We depend on the ability of our third-party partners and service providers to protect their operations and facilities against damage or interruption from security breaches, natural disasters, power or telecommunications failures, criminal acts and similar events. Any failures by our third-party service providers that result in an interruption in service, unauthorized access, misuse, loss or destruction of data or other similar occurrences could interrupt our business, cause us to incur losses, result in decreased customer satisfaction and increase customer attrition, subject us to customer complaints, significant fines, litigation, disputes, claims, regulatory investigations or other inquiries and harm our reputation. Regulators might also hold us responsible for the failures of our providers.
In addition, these third-party service providers might rely on subcontractors to provide services to us that face similar risks. We face a risk that our third-party service providers might be unable or unwilling to continue to provide these services to meet our current needs in an efficient, cost-effective manner or to expand their services to meet our needs in the future.
We designed our system infrastructure and procure and own or lease the computer hardware used for our services. Design and mechanical errors, failure to follow operations protocols and procedures could cause our systems to fail, resulting in interruptions in our platforms. Any such interruptions or delays, whether as a result of third-party error, our own error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with members and cause our revenue to decrease or our expenses to increase. Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. These factors in turn could further reduce our revenue and subject us to liability, which could materially adversely affect our business.
We face increasing competition and, if we do not compete effectively, our operating results could be harmed.
We compete with other companies that provide financial services to individuals. These traditional financial institutions include banks, credit unions, credit card issuers and other consumer finance companies. In addition, other technology companies may begin to focus, or may in the future focus, their efforts on targeting millennials.
In some cases, some competitors may offer a broader range of financial products to our members, and some competitors may offer a specialized set of specific products or services. Many of these competitors have significantly more resources and greater brand recognition than we do and may be able to attract customers more effectively than we do.
When new competitors seek to enter one of our markets, or when existing market participants seek to increase their market share, they sometimes undercut the pricing or credit terms prevalent in that market, which could adversely affect our market share or ability to exploit new market opportunities. Our pricing and credit terms could deteriorate if we act to meet these competitive challenges. All of the foregoing could adversely affect our business, results of operations, financial condition and future growth.
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If the information provided by members to us is incorrect or fraudulent, we may misjudge a member's qualification to receive a loan and our operating results may be harmed.
Our lending decisions are based partly on information provided to us by loan applicants. To the extent that these applicants provide information to us in a manner that we are unable to verify, our credit model may not accurately reflect the associated risk. In addition, data provided by third-party sources is a significant component of our credit model, and this data may contain inaccuracies. Inaccurate analysis of credit data that could result from false loan application information could harm our reputation, business and operating results.
We also use identity and fraud check analyzing data provided by external databases to authenticate each member's identity. There is a risk, however, that these checks could fail, and fraud may occur. We may not be able to recoup funds underlying loans made in connection with inaccurate statements, omissions of fact or fraud, in which case our revenue, operating results and profitability will be harmed. Fraudulent activity or significant increases in fraudulent activity could also lead to regulatory intervention, negatively impact our operating results, brand and reputation and require us to take steps to reduce fraud risk, which could increase our costs.
We rely on our management team and need additional key personnel to grow our business, and the loss of key employees or inability to hire key personnel could harm our business.
We believe our success has depended, and continues to depend, on the efforts and talents of our executives and employees, including David Feller, our Chair and Chief Executive Officer ("CEO"), and Gregory Feller, our President and Chief Financial Officer ("CFO"). Our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand and we may incur significant costs to attract and retain them. In addition, the loss of any of our senior management or key employees could materially adversely affect our ability to execute our business plan and strategy, and despite maintaining a comprehensive succession plan, we may not be able to find adequate replacements on a timely basis, or at all. We do not maintain key person life insurance policies on any of our employees.
Competition for our employees is intense, and we may not be able to attract and retain the highly skilled employees whom we need to support our business.
Competition for highly skilled engineering and data analytics personnel is extremely intense, and we continue to face difficulty identifying and hiring qualified personnel in many areas of our business. We may not be able to hire and retain such personnel at compensation levels consistent with our existing compensation and salary structure. Many of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment. In particular, candidates making employment decisions, specifically in high-technology industries, often consider the value of any equity they may receive in connection with their employment. Any significant volatility in the price of our Common Shares may adversely affect our ability to attract or retain highly skilled technical, financial and marketing personnel.
In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements and the quality of our services and our ability to serve our members could diminish, resulting in a material adverse effect on our business.
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If we cannot maintain our corporate culture, we could lose valuable qualities from our workforce.
We believe that our corporate culture is a critical component of our success, which we believe fosters innovation, encourages teamwork and cultivates creativity. As we evolve, we may find it difficult to maintain these valuable aspects of our corporate culture. Failure to preserve our corporate culture could negatively impact our future success, including our ability to attract and retain employees, encourage innovation and teamwork and effectively focus on and pursue our corporate objectives.
Litigation may adversely affect our business and financial condition.
Our business is subject to the risk of litigation by employees, members, consumers, suppliers, competitors, shareholders, government agencies, or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation. The outcome of litigation, particularly class action lawsuits, regulatory actions and intellectual property claims, is difficult to assess or quantify. Plaintiffs in these types of law suits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to these lawsuits may remain unknown for substantial periods of time. In addition, certain of these lawsuits, if decided adversely to us or settled by us, may result in liability material to our financial statements as a whole or may negatively affect our operating results if changes to our business operations are required. The cost to defend future litigation may be significant. There also may be adverse publicity associated with litigation that could negatively affect consumer perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. As a result, litigation may adversely affect our business and financial condition.
Our business could be negatively affected as a result of actively managing our investment portfolio.
In managing our investment portfolio, we may from time to time take a position as an activist investor and advocate for changes to corporate governance practices, such as management and board composition, executive compensation practices, social issues and other corporate actions. For example, we recently entered into the Voting Agreement with KAOS, whereby we agreed to vote in favour of KAOS’ director nominees and our nominee, as alternatives to the nominees put forth by WonderFi, for election to the board of directors of WonderFi at its 2024 annual general meeting of shareholders. If a proxy contest results from our shareholder action under the Voting Agreement or otherwise, our business could be adversely affected because engaging in proxy contests and other investor activist actions can be costly and time-consuming, disrupting our operations and diverting the attention of management. In addition, perceived uncertainties as to the future of the strategic direction of any of our investments may result in a loss to the value of such investments, which could negatively impact our financial condition.
United States investors may not be able to obtain enforcement of civil liabilities against the Company.
The enforcement by investors of civil liabilities under the United States federal or state securities laws may be affected adversely by the fact that the Company is governed by the BCBCA, that the majority of the Company's officers and directors are residents of Canada, and that all, or a substantial portion of their assets and a portion of the Company's assets, are located outside the United States. It may not be possible for investors to effect service of process within the United States on certain of its directors and officers or enforce judgments obtained in the United States courts against the Company or certain of the Company's directors and officers based upon the civil liability provisions of United States federal securities laws or the securities laws of any state of the United States.
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If we become a passive foreign investment company ("PFIC") for United States federal income tax purposes, certain adverse tax rules may apply to U.S. Holders of our Common Shares.
Based on the market price of our Common Shares and the composition of our income and assets, including goodwill, we do not expect to be treated as a PFIC for U.S. federal income tax purposes for the taxable year ending December 31, 2023. However, this is a factual determination that must be made annually after the close of each taxable year, and the application of the PFIC rules is subject to uncertainty in several respects. Moreover, the value of our assets for the purposes of the PFIC determination will generally be determined by reference to the market price of our Common Shares, which could fluctuate significantly. Therefore, there can be no assurance that we are not a PFIC for the current taxable year or will not be classified as a PFIC in the future.
We will be classified as a PFIC for any taxable year for United States federal income tax purposes if either (i) 75% or more of our gross income in that taxable year is passive income or (ii) the average percentage of our assets by value in that taxable year which produce or are held for the production of passive income (which includes cash) is at least 50%.
If we are a PFIC for any taxable year during which a beneficial owner of Common Shares that, for U.S. federal income tax purposes, is or is treated as any of the following (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or another entity treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof, or the District of Columbia, (iii) an estate, the income of which is subject to U.S. federal income tax regardless of its source, or (iv) a trust that (A) is subject to the supervision of a U.S. court and the control of one or more "United States persons" (within the meaning of Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), or (B) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes (a "U.S. Holder") holds Common Shares, such U.S. Holders could be subject to adverse United States federal income tax consequences whether or not we continue to be a PFIC. For example, U.S. Holders may become subject to increased tax liabilities under United States federal income tax laws and regulations, and will become subject to burdensome reporting requirements. If we are a PFIC during which a U.S. Holder holds Common Shares, such U.S. Holder may be able to make a "mark-to-market" election or a "qualified electing fund" election that could mitigate the adverse United States federal income tax consequences that would otherwise apply to such U.S. Holder. Although upon request of a U.S. Holder, we will provide the information necessary for a U.S. Holder to make the qualified election, no assurance can be given that such information will be available for any lower-tier PFIC that we do not control.
Epidemics, pandemics or other outbreaks of an illness, disease or virus could materially adversely affect our business, financial position and results of operations.
Epidemics, pandemics or other outbreaks of an illness, disease or virus could have, a broad impact across industries and the economy, including impacts on our operations and our employees, partners and members. At the onset of an epidemic, pandemic or other outbreaks of an illness, disease or virus, governments and regulatory bodies in affected areas may impose a number of measures designed to contain the outbreak, including business closures, social distancing protocols, travel restrictions, quarantines, curfews and restrictions on gatherings and events. Future disruptions arising from the ongoing COVID-19 pandemic or a new pandemic could have a material adverse effect on our business, financial condition and results of operations.
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If we fail to maintain effective internal control over financial reporting, as well as required disclosure controls and procedures, our ability to produce timely and accurate consolidated financial statements or comply with applicable regulations could be impaired.
The Sarbanes-Oxley Act of 2002 and related rules of the SEC require, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight. Our current controls and any new controls that we develop could become inadequate because of changes in conditions in our business. In addition, changes in accounting principles or interpretations could also challenge our internal controls and require that we establish new business processes, systems and controls to accommodate such changes. If these new systems, controls or standards and the associated process changes do not give rise to the benefits that we expect or do not operate as intended, it could adversely affect our financial reporting systems and processes, our ability to produce timely and accurate financial reports or the effectiveness of our internal control over financial reporting. Moreover, our business might be harmed if we experience problems with any new systems and controls that result in delays in their implementation or increased costs to correct any postimplementation issues that might arise. Further, weaknesses in our disclosure controls and internal control over financial reporting could be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our business or cause us to fail to meet our reporting obligations and could result in a restatement of our consolidated financial statements for prior periods. Any failure to design, develop or maintain effective controls, or difficulties encountered in implementing, improving or remediation lapses in internal controls may affect our ability to prevent fraud, detect material misstatements, and fulfill our reporting obligations. Ineffective disclosure controls and procedures or internal control over financial reporting could harm our business, cause investors to lose confidence in the accuracy and completeness of our reported financial and other information, and result in us becoming subject to investigations by the stock exchanges on which our securities are listed, the SEC or other regulatory authorities, any of which would likely have a negative effect on the trading price of our shares and have a material and adverse effect on our business, results of operations, financial condition and prospects. In addition, if we are unable to continue to meet these requirements, we might not be able to remain listed on the Nasdaq.
Cost-cutting may adversely affect our business.
In response to challenging macroeconomic conditions, we have taken aggressive cost-cutting steps to accelerate the path to profitability and make us a more efficient company. There can be no guarantee that these cost-cutting measures will be successful. We face a risk that our cost-cutting measures negatively impact. Cost-cutting steps, if managed incorrectly, may have a material and adverse effect on our business, results of operations, financial condition and prospects or our ability to expand our business.
Our insurance coverage might be inadequate or expensive.
While we may have insurance to protect our assets, operations, and employees, such insurance is subject to coverage limits and exclusions and may not be available for the risks and hazards to which we are exposed. No assurance can be given that such insurance will be adequate to cover our liabilities or that it will be available in the future or at all, and that it will be commercially justifiable. We may be subject to liability for risks against which we cannot insure or against which we may elect not to insure due to the high cost of insurance premiums or other factors. The payment of any such liabilities would reduce the funds available for our normal business activities. Payment of liabilities for which we do not carry insurance may have a material adverse effect on our business, financial condition and operations.
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Our flexible remote working model subjects us to heightened operational risks.
We have a flexible remote work policy, under which a large segment of our employees are not required to come into the office on a daily basis. Allowing our employees to work remotely subjects us to heightened operational risks. There is no guarantee that the data security and privacy safeguards we have put in place will be completely effective or that we will not encounter risks associated with employees accessing company data and systems remotely. We also face challenges due to the need to operate with a dispersed and remote workforce, as well as increased costs related to business continuity initiatives. Our flexible remote working model may make it more difficult for us to preserve our corporate culture of innovation and our employees might have decreased opportunities to collaborate in meaningful ways. Further, we cannot guarantee that having a large portion of our workforce continuing to work remotely will not have a negative impact on employee morale or productivity. Any failure to overcome the challenges presented by our flexible remote work policy could harm our future success, including our ability to retain and recruit personnel, innovate and operate effectively, maintain product development velocity, and execute on our business strategy.
If we do not maintain the net capital levels required by regulators, our broker-dealer business may be restricted and we may be fined or subject to other disciplinary or corrective actions.
The SEC, Financial Industry Regulatory Authority ("FINRA"), and various state regulators have stringent rules with respect to the maintenance of specific levels of net capital by securities broker-dealers. Failure to maintain the required net capital levels could result in immediate suspension of securities activities, suspension or expulsion by the SEC or FINRA, restrictions on our ability to expand our existing business or to commence new businesses, and could ultimately lead to the liquidation and/or winding down of our broker-dealer business. If such net capital rules are changed or expanded, if there is an unusually large charge against net capital, or if we make changes in our business operations that increase our capital requirements, operations that require an intensive use of capital could be limited. A large operating loss or charge against net capital could have adverse effects on our ability to maintain or expand our business.
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ITEM 4: INFORMATION ON THE COMPANY
Mogo Finance was incorporated under the Company Act on August 26, 2003 as 675909 B.C. Ltd. and transitioned under the BCBCA on May 4, 2005. Mogo Finance’s name was changed several times, the last of which occurred on June 1, 2012 when its name was changed from "Hornby Management Inc." to the current name, "Mogo Finance Technology Inc." Mogo Finance completed an initial public offering of its common shares on the Toronto Stock Exchange (“TSX”) under the trading symbol “GO” in June 2015.
The Company was incorporated by letters patent under the laws of Canada on January 14, 1972 under the name “Eskimo International Resources Limited.” On August 17, 1972, the Company changed its name to “Natalma Mines Limited” by supplementary letters patent. The Company was continued under the CBCA by articles of continuance dated November 19, 1979. On May 4, 1983 the Company’s name was changed to “Tonka Resources Inc.” The Company underwent several name changes between 1988 and 2013. On June 13, 2013, the Company changed its name to “Difference Capital Financial Inc.” As detailed below, in April of 2019 the Company announced the Arrangement, being a business combination with Mogo Finance by way of a statutory plan of arrangement. On June 21, 2019, the Company changed its name to “Mogo Inc.” and Mogo Finance became a wholly owned subsidiary of the Company following the Arrangement. Prior to completing the Arrangement, the Company was continued in British Columbia under the BCBCA.
On June 21, 2019, Mogo (referred to in this section prior to the Arrangement as “Difference”, and following the Arrangement as the “Combined Entity”) and Mogo Finance combined their businesses pursuant to a statutory plan of arrangement under Section 288 of the BCBCA. The Arrangement became effective at 12:01 a.m. (PST) on June 21, 2019 (the “Effective Time”).
Under the Arrangement, Mogo Finance was amalgamated with a wholly owned subsidiary of Difference and each Mogo Finance common share (each a "Mogo Finance Share") outstanding immediately prior to the Arrangement, other than Mogo Finance Shares held by Difference, was exchanged for one common share of the Combined Entity (each, a “Common Share”). Prior to the Arrangement, Difference continued from a corporation existing under the Canada Business Corporations Act (“CBCA”) to a corporation existing under the BCBCA (the "Continuance"). On completion of the Arrangement, former Mogo Finance shareholders owned approximately 80% of the Combined Entity, on a fully diluted basis and, as discussed below, the former directors of Mogo Finance make up a majority of the directors of the Combined Entity and the former officers of Mogo Finance became officers of the Combined Entity. In connection with the Arrangement, all of Mogo Finance's outstanding convertible securities became exercisable or convertible, as the case may be, for Common Shares in accordance with the provisions thereof.
The Common Shares began trading on the TSX under the trading symbol "MOGO" in place of the Difference common shares at the open of trading on June 25, 2019. In addition, the Combined Entity was treated as a successor in interest to Mogo Finance and, as such, the Combined Entity was listed on the Nasdaq Capital Market (the “Nasdaq”) under the symbol "MOGO". Mogo Finance Shares were delisted from the TSX on the close of trading on June 24, 2019. Mogo Finance Shares and common shares of Difference traded between June 21st and June 25th were automatically settled for common shares of the Combined Entity. On August 10, 2023 the issued and outstanding Common Shares of the Combined Entity were consolidated on a three for one basis.
See “Item 4 – C. Organizational Structure" and “Item 10 – C. Material Contracts” for additional information on our corporate structure, including a list of our major subsidiaries.
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Our principal place of business is located at 516-409 Granville St, Vancouver, BC, V6C 1T2, telephone number (604)-659-4380, and our registered office is located at Suite 1700, 666 Burrard Street, Vancouver, British Columbia V6C 2X8. Our website can be accessed at www.mogo.ca. The information contained on, or accessible through our website is not incorporated by reference into this annual report. Our agent for service of process in the United States is C T Corporation System, located at 28 Liberty Street, New York, NY 10005. Copies of our electronic filings can be accessed on the SEC website at www.sec.gov.
We made capital expenditures of $0.2 million, $0.5 million, and $0.5 million in 2023, 2022, and 2021, respectively. Our capital expenditures were primarily for the purchase of computer equipment.
Mogo is a digital wealth and payments company headquartered in Vancouver, Canada. The Company offers simple digital solutions to help its members dramatically improve their path to wealth-creation and financial freedom. Mogo's stock trading app, MogoTrade, offers commission-free stock trading that helps users thoughtfully invest based on a Warren Buffett approach to long-term investing – while also making a positive impact with every investment. Moka offers Canadians a real alternative to mutual funds and wealth managers that overcharge and underperform with a fully managed investing solution based on the proven outperformance of an S&P 500 strategy, and at a fraction of the cost. Mogo also offers digital loans and mortgages. Through Mogo's wholly owned digital payments subsidiary, Carta Worldwide, the Company offers a low-cost payments platform that power next-generation card programs for companies across Europe and Canada.
Products and Services
MogoTrade
Mogo offers one of the leading digital wealth platforms in Canada led by our newest product MogoTrade, a commission-free stock trading app that helps users thoughtfully invest based on a Warren Buffett approach to long-term investing – while also making a positive impact with every investment. In partnership with Flash Forest, one tree is planted each month on behalf of each user. Mogo is designed to help its members outperform the average investor by following key lessons from Warren Buffett and to provide the behavioral edge they need to build wealth. MogoTrade users can trade stocks on the Nasdaq, TSX, TSX Venture Exchange and New York Stock Exchange, among others.
Our mission is to help Canadians achieve financial freedom while also making a positive impact. MogoTrade is available for download on the App Store and Google Play.
Moka
Moka is a fully managed investment platform that includes a powerful combination of features to help Canadians simplify and automate the wealth-building process. Moka utilizes behavioral science to help users adopt the right habits to achieve financial freedom and specializes in helping members invest strategically in the S&P500. With a low, flat monthly subscription fee for unlimited investing, Moka can help Canadians save hundreds of thousands on their investments over a long-term investment horizon while putting them on track for retiring with millions. There's no minimum contribution to get started and no fee to withdraw funds at any time.
Moka operates through the Moka.ai app, available on the App Store and Google Play.
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MogoMoney
Mogo offers an unsecured open credit product to help consumers meet their short-term cash needs. Loans offered are in amounts up to $5,000 at annual rates up to 47.42%. We've designed MogoMoney to provide an instant no-obligation, pre-approval decision which can be refreshed every 90 days. The pre-approval decision is determined based on our proprietary credit decisioning models. We leverage technology and data to simplify the user experience, and for some users that means a 100% automated loan experience. No dealing with documents or people, simply sign up and get your pre-approval, customize your loan to fit your needs, and digitally sign loan agreements. The money can be received within 30 minutes. On eligible Mogo loans, where permitted by law, we offer a unique Level Up Program which includes giving members an opportunity to increase their available balance through good payment history.
MogoMortgage
Working with some of Canada's top mortgage lenders, Mogo brings a new level of transparency and convenience to the Canadian mortgage experience, and offers the best of both worlds: market-leading rates and the best digital mortgage experience in Canada. In 2017, Mogo won the Canadian Mortgage Award for Best Use of Mobile Technology. Our MogoMortgage solution is intended to simplify the mortgage experience with transparency around interest rates and the entire process of getting a mortgage. Members can apply anywhere with our quick and stress-free online mortgage application. Members enjoy low rates, ongoing guidance from our MogoMortgage team, and the ability to keep track of their mortgage with our digital dashboard after the mortgage funds. The Company is not a lender and therefore does not carry the mortgages on its balance sheet. Mogo earns revenue from brokerage fees.
MogoCard
The MogoCard was designed to help members learn to spend less than they earn in a convenient and engaging way through features such as instant transaction alerts with each purchase and real-time balance alerts delivered to members' phones. For every purchase made on a MogoCard, Mogo's tree planting partners planted one tree on the consumer's behalf, absorbing approximately 500lbs of CO2.This turned every purchase made on the MogoCard into climate action. The MogoCard was Chip/Pin and Paywave enabled, members could transfer funds instantly from most bank accounts in Canada to their MogoCard directly through the Mogo app, and the MogoCard supported Apple Pay, Google Pay and Samsung Pay.
The MogoCard product was wound down in June 2023 and is no longer offered.
Free Credit Score Monitoring and MogoProtect
Until June 2023, when Mogo's legacy app was wound down, when an individual opened an account with Mogo(a "MogoAccount"), they received their Equifax credit score on a monthly basis for free for an initial period of 90 days. Members who signed up and activated a MogoCard, continued to receive this service while their MogoCard was active.
MogoProtect was a product within the MogoAccount that helped individuals protect themselves against identity fraud by monitoring their Equifax credit bureau daily for hard credit inquiries, which can be one of the earliest signs of identity fraud. Members received a push notification and email within 24 hours of the inquiry being reported. If a member identified any suspicious inquiries, Mogo guided them through the next steps to help stop fraudsters in their tracks. In July 2020, MogoProtect became the first free, mobile-first identity fraud protection product in Canada. When an individual opened a MogoAccount, they received MogoProtect for free initially for 90 days and the service continued as long as they remained an active MogoCard or MogoTrade user.
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The MogoProtect product was wound down in June 2023 and is no longer offered.
Carta
Carta is a digital payments software company which provides technology and services that enable financial technology companies, banks, and corporations to issue payment products to consumers via multiple channels, including physical, virtual and tokenized cards, as well as payment switching and routing services.Carta was founded in 2008 with a vision to build a modern issuer processing platform that could enable innovators around the globe to deploy a new wave of payment products. The Carta platform provides the infrastructure to help fintech and payments businesses build and manage their payment systems, and it supports prepaid, debit, and credit card issuer processing. Carta is certified as Visa and MasterCard processor with active card programs in over 30 countries, and annual transaction volume of approximately $9.9 billion.
Mogo Ventures
In March 2022, Mogo announced the formation of Mogo Ventures to manage its existing investments in strategic partners and companies that support Mogo's broader ecosystem. As of December 31, 2023, the Mogo Ventures portfolio is valued at approximately $37.8 million and includes:
Mogo Ventures also manages the Company's portfolio of legacy investments, including Hootsuite,Blue Ant Media and Alida, with a focus on monetizing these investments.
In connection with the formation of Mogo Ventures, Mogo created an investment committee (the "Investment Committee") currently consisting of the following directors of Mogo: Michael Wekerle (Chair), David Feller, and Greg Feller.
General Development of the Business
Mogo has continued its evolution with a series of strategic and financial initiatives throughout 2023 and early 2024 as described in more detail below.
In 2024, Mogo:
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Three Year History
In 2023, Mogo:
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In 2022, Mogo:
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In 2021, Mogo:
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33
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Product Development
We are a product‑focused company that is passionate about developing new and innovative products. Our CEO leads our product team and ensures that all products are aligned with both our brand and our mission to improve the financial health of our members. We value convenience, transparency and simplicity, and create financial products for everyday life that we ourselves would want to use. We constantly monitor member feedback and market trends and strive to remain a market leader by continuing to optimize our user experience and value proposition. We expect to continue to invest in products that we believe meet our ROI criteria such as MogoTrade and Moka.
Our Platform
MogoTrade and Moka Platforms
MogoTrade and Moka are built entirely in the cloud leveraging a mesh of in-house made microservices using RESTful Application Program Interfaces ("APIs"). Application data resides in both Canada as well as the United States. We rely on a vast list of third parties to ensure that customers are making financial decisions based on correct market information and market analysis.
The user interface that customers interact with is designed to minimize the amount of customer inquiries required to be fielded by operations. Trading for MogoTrade is facilitated through Fortification's technology suite, which was acquired in 2021. Extensive amount of application functionality rides on previously made services used in other lines of business at Mogo such as ledger services, funds transfers, account creation, and account management. The platforms take into consideration future customer scaling requirements.
Mogo Platform
We leverage our integrated platform specifically to meet the financial needs of consumers, with a track record of providing a growing and innovative suite of products that address the full credit spectrum of consumers. All functions are designed and built as small services for ease of use and enhanced system reliability.
Our platform is characterized by four key technology strengths:
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The data that we generate through our various processes is monitored and allows us to continually refine and improve our business. This data plays a key role in our credit quality and marketing functions. Since we are able to correlate the performance of our products against these and other metrics, we are able to continuously improve the quality of our credit decisioning. Through the use of analytics, the data we collect also provides valuable marketing insight.
Carta Platform
Carta’s business-to-business (“B2B”) offering is based on a hosted platform with data centers in North America and Europe with direct connectivity to global card payment networks – Visa and MasterCard ("Payment Networks"). The Carta platform maintains data compliance with Payment Card Industry Data Security Standards (PCI DSS Level 1), General Data Protection Regulation (GDPR), and regional and bank partner regulatory requirements.
Carta serves customers seeking to issue payment cards by offering platform connectivity to Payment Networks and client facing interfaces that allow management of the card programs. Carta's customers access the platform through API and client administration portals, which are based on the API services. This allows for the real-time creation and modification of user accounts and issuing of 16 Digit Personal Account Numbers ("PANs"). The core of Carta's platform is the authorization functionality. This functionality allows for real-time authorizations of transactions based on rules within the Carta platform. Additionally, clients can interact with the authorization flow by way of Carta's delegated authorization service called Issuer Link. This provides clients an opportunity to apply business rules that go beyond standard processing rules.
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This enables clients to have a higher level of spend control on each and every authorization and build out products and offerings not possible on legacy platforms.
Platform Maintenance
We maintain our platforms with 66 full‑time technology and credit risk analysis employees (credit risk, product, design, development, business intelligence and information technology) as of December 31, 2023
Principal Markets
Mogo competes in the financial services industry in Canada and in Europe through its payments subsidiary, Carta Worldwide. In particular, we currently operate in all provinces and territories of Canada with some product-specific limitations in certain provinces.
The following table details the breakdown of revenue by category of activity in geographic markets for the years ended December 31:
($000s) |
|
|
|
|
Years ended December 31, |
||
|
2023 |
2022 |
2021 |
Subscription and services revenue: |
|
|
|
Canada |
32,668 |
35,112 |
26,422 |
Europe |
6,117 |
6,531 |
7,287 |
Other |
– |
98 |
699 |
Interest revenue: |
|
|
|
Canada |
26,436 |
27,208 |
23,111 |
Total revenue |
65,221 |
68,949 |
57,519 |
Marketing
Mogo and Moka
Our marketing strategy aims to build the best digital financial brand in Canada, with innovative products designed to help our members improve their financial health while also making a positive impact with their money. Mogo's brand and marketing strategy leverages compelling and creative content to inspire and motivate Canadians to sign up for Mogo to help them improve their financial lives. Mogo targets consumers who are looking for ways to take their money game to the next level.
We use an integrated marketing approach to create a consistent, seamless, multi-dimensional brand experience for our members. Our multi-touchpoint marketing strategy melds all marketing tactics such as advertising, sales promotions, content creation, public relations, direct marketing, and social media.
The main pillars of our integrated marketing approach are as follows:
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Carta
Carta is a business-to-business (“B2B”) platform with sales and marketing activities targeted towards fintechs, banks, and other corporations seeking to issue payment cards. Carta's primary markets are Europe and Canada, with sales and marketing activities delivered through industry generated lead activity, including channel partnerships, web and social lead generation, in-bound inquiries, and direct sales engagement.
Intellectual Property
In accordance with industry practice, we protect our proprietary rights through a combination of copyright, trademark, design patent, trade secret laws and contractual provisions. The source code for our software is protected under Canadian and applicable international copyright laws. We currently have no issued or pending utility patents.
We also seek to avoid disclosure of our intellectual property and proprietary information by requiring employees and consultants to execute non‑disclosure and assignment of intellectual property agreements.
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Such agreements require our employees and consultants to assign to us all intellectual property developed in the course of their employment or engagement. We also utilize non‑disclosure agreements to govern interaction with business partners and prospective business partners and other relationships where disclosure of proprietary information may be necessary.
Our software includes software components licensed from third parties, including open source software. We believe that we follow industry best practices for using open source software and that replacements for third‑party licensed software are available either as open source software or on commercially reasonable terms.
We are the registered owners of trademarks in Canada, the United States, the United Kingdom and the European Union and have a number of pending trademark applications in Canada. We are the authorized user of various social media handles, pages and profiles that reflect the Mogo and Moka brands and we have registered and maintain the registration of a variety of domain names that include "Mogo" or variations of "Mogo", “Moka” or variations of “Moka”, as well as cartaworldwide.com.
The enforcement of our intellectual property rights depends on any legal actions against any infringers being successful, but these actions may not be successful or may be prohibitively expensive, even when our rights have been infringed. See “Item 3. Key Information—D. Risk Factors”.
Specialized Skill and Knowledge
As of December 31, 2023, Mogo had 209 team members. With over ten years of operating experience, we have developed strong competencies across multiple disciplines. In addition to 52 software developers, designers, data scientists, product managers, and marketers, we have all of the traditional roles of a financial services provider including credit risk, finance, customer experience, operations, governance, legal and compliance. Our team contributes to transforming the traditional financial services experience by delivering a digital suite of innovative financial products. Our future success partly depends on our continuing ability to attract, develop, motivate, and retain highly qualified and skilled employees who share Mogo's passion for innovation through our products, platform and brand.
Competitive Conditions
Mogo
The financial services market continues to undergo dramatic changes. Our competitors include other financial technology companies, other consumer finance companies, brokerages, online lenders, mortgage brokerages, traditional financial institutions such as banks, credit unions, and new market entrants. We compete with various financial services companies in each of our main products including financial technology companies such as Wealthsimple, Koho, Questrade, Qtrade and Webull; large Schedule I banks such as TD Canada Trust, Scotiabank, Royal Bank of Canada, Tangerine, Canadian Imperial Bank of Commerce, EQ Bank and Bank of Montreal; credit unions such as Meridian Credit Union and Coast Capital Savings Federal Credit Union; and consumer credit companies such as Capital One, Fairstone Financial Inc., and goeasy.
We believe our innovative online and digital platforms and process automation enable us to operate more efficiently, with more competitive rates and higher customer satisfaction than these competitors. We anticipate that new and established internet, technology and financial services companies, some of whom may possess large, existing customer bases, substantial financial resources and established distribution channels, may enter the market in the future. We believe that our strong brand (enhanced via our Postmedia partnership), scale, 20 years of historical data, talented and diverse team, and performance record provide us with significant competitive advantages over current and future competitors.
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Carta
As an issuer processor, Carta operates in a competitive market landscape that includes established legacy processing platforms as well other modern platforms. Legacy processing platforms, including TSYS, FISERV, FIS, and others historically emerged as an outsourcing of traditional bank credit and debit card processing functions and grew to become incumbent players in the payment card market. Often these platforms are based on legacy technology and were not designed to support the complex and dynamic requirements of modern fintech card issuing ecosystem.
As Carta competes against other modern issuer processors, the business leverages product differentiation, service level, pricing models, and partnership engagement to effectively compete in the market. Modern issuer processing platform competitors include Marqeta and Galileo (a subsidiary of SoFi). In some markets, Carta may also face competition from large fintech platforms such as Stripe, Adyen and Checkout.com, whose core business is not issuer processing but may be expanding to more directly compete with Carta. Competitive dynamics vary across countries and regions where Carta operates as well as within industry verticals, and Carta's B2B sales and marketing approach follows a model that is tailored to optimize growth within target market segmentation.
Government Regulations
Our business is subject to numerous federal, provincial and other local laws, ordinances and regulations in each of the jurisdictions in which we operate, which are subject to change.
The following is an overview of key government regulations applicable to our business:
Privacy
Similarly to all Canadian businesses we are subject, at the federal level, to the Office of the Privacy Commissioner of Canada. The Privacy Commissioner of Canada is an Agent of Parliament whose mission is to protect and promote privacy rights. The Office of the Privacy Commissioner of Canada (OPC) oversees compliance with the Privacy Act, which covers the personal information-handling practices of federal government departments and agencies, and the Personal Information Protection and Electronic Documents Act (PIPEDA), Canada’s federal private-sector privacy law. In addition to the federal regulator, we are also subject to the purview of the equivalent provincial regulator, for provinces that do have such a body.
Consumer Protection
As we operate a business to consumer model, we are subject to the various consumer protection and business practices acts that each of the Canadian provinces legislate and supervise through their respective provincial regulatory bodies for this matter. These regulations impact a variety of matters including marketing, cost of credit disclosure, credit reporting, lending, and collections.
Securities & Investments
Our business is subject to the securities legislations and regulations as developed and enforced by the provincial securities and investment regulators, the Canadian Securities Agency ("CSA") and CIRO is committed to the protection of investors, providing efficient and consistent regulation, and building Canadians’ trust in financial regulation and the people managing their investments and is the primary body overseeing the activities of MogoTrade Inc. which is registered as an Investment Dealer. Furthermore, Mogo Asset Management Inc. ("MAMI") holds registrations as both an Exempt Market Dealer and as a Portfolio Manager. The primary regulatory framework for these activities is governed by National Instrument 31-103, National Instrument 45-106, and their related regulations and enforced by each of the provinces respective securities regulator, with the primary regulator for MAMI being Quebec’s Autorité des Marchés Financiers where MAMI is headquartered.
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Lending
Our lending business activities are subject to section 347 of the Criminal Code. Following consultations on predatory lending conducted by the Department of Finance in August 2022, in 2023, the Canadian federal government introduced the Budget Implementation Act, 2023, No 1 ("Budget Act"), to reduce the criminal rate of interest to 35% APR, and replace an effective annual rate of interest calculation with an annual percentage rate of interest calculation. The Budget Act received Royal Assent on June 22, 2023, but the criminal rate of interest amendments are not yet in force, and they will only come into force upon proclamation by an order of the Cabinet, on a date to be determined.
On December 23, 2023, pursuant to its regulation-making authority under the Budget Act, the federal government released the Criminal Interest Rate Regulations ("Interest Rate Regulations") to exempt certain agreements from the criminal rate of interest. The Interest Rate Regulations, which will come into force concurrently with the criminal interest rate amendments, include provisions relating to payday loans, as well as exemptions from the criminal rate of interest for loans that the government views as non-predatory including certain commercial loans and small dollar, non-recourse collateralized loans (pawn loans), none of which are relevant to our current lending activities. The federal government has indicated it may further reduce the criminal rate of interest below 35% APR. A consultation on the further lowering of the criminal rate closed on January 7, 2024. While the criminal interest rate amendments and companion regulations are not yet in force, the Company is in the process of preparing for this change.
In addition to the criminal interest rate restrictions, certain of our MogoMoney products may be subject to new legislation and regulations respecting 'high-cost credit products' which have been implemented in certain provinces in which we operate. Provincial high-cost credit ("HCC") legislation has been implemented in the provinces of Alberta and British Columbia. HCC legislation, which is part of the broader provincial consumer protection regime in these provinces, imposes additional requirements, including licensing and disclosures, on lenders making loans above certain interest rate thresholds. We are currently licensed as an HCC lender in both provinces and comply with all regulatory requirements. We also continue to participate in the regulatory process, monitor the HCC landscape that continues to develop in other provinces, including the province of Newfoundland and Labrador, which has also passed legislation that will implement an HCC regime. This legislation will take effect in June 2024. We are currently in the process of preparing for the changes in that province. The Company will continue to ensure that its business complies with any HCC regulatory changes and is well positioned to respond to any enhanced disclosure requirements.
Mortgage Brokerage
Our Mortgage Brokerage business line is subject to the specific Mortgage Brokers Acts and regulations governing such activities which are regulated by the provincial legislators and their regulatory bodies, where applicable.
Financial Crime
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As a provider of various types of financial services, we are subject to Proceeds of Crime (Money Laundering) and Terrorist Financing Act ("PCMLTFA") and associated Regulations and must fulfill specific obligations as required by the PCMLTFA to help combat money laundering and terrorist activity financing in Canada. The Financial Transactions and Reports Analysis Centre of Canada ("FINTRAC") has the mandate to ensure the compliance of businesses subject to the PCMLTFA and to generate actionable financial intelligence for police, law enforcement and national security agencies to assist in the investigation of money laundering and terrorist activity financing offences or threats to the security of Canada.
French Language Laws
Our service offerings and operations within the province of Québec are subject to the language legislation of that province, namely the Charter of the French Language and its related legislation and regulations. These are supervised and enforced by the Office québecois de la langue francaise.
Mogo has a number of direct and indirect subsidiaries, each of which is wholly‑owned by Mogo. The following table sets out our significant subsidiaries, including their place of incorporation and our ownership interest, as of December 31, 2023:
Name of Entity |
Place of Incorporation |
Ownership Interest |
Mogo Finance Technology Inc. |
British Columbia |
100% |
Mogo Financial Inc |
Manitoba |
100% |
MogoTrade Inc. |
Canada |
100% |
Mogo Asset Management Inc. |
Canada |
100% |
Moka Financial Technologies Inc |
Canada |
100% |
Carta Solutions Holding Corp. |
Canada |
100% |
Carta Financial Services Ltd |
United Kingdom |
100% |
Reorganization
Our authorized share capital consists of an unlimited number of common shares and an unlimited number of preferred shares of the Company. As at December 31, 2023, there were 24,515,909 common shares and no preferred shares issued and outstanding.
Each common share entitles its holder to notice of and to one vote at all meetings of the Company’s shareholders. Each common share is also entitled to receive dividends if, as and when declared by the Board. Holders of common shares are entitled to participate in any distribution of the Company’s net assets upon liquidation, dissolution or winding-up of the Company on an equal basis per share.
Transfer Agent and Registrar
The transfer agent and registrar for the common shares is Computershare Investor Services Inc. at its principal office in Vancouver, British Columbia.
Experts
The consolidated financial statements of Company which comprise the consolidated statements of financial position as at December 31, 2023 and December 31, 2022, the related consolidated statements of operations and comprehensive income (loss), changes in equity (deficit) and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes, have been included herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.
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The following table summarizes our principal leased properties as of December 31, 2023. The Company does not own any real property and is remote-first with respect to its North America and European operations. We have a leased property in Vancouver for administrative and IT support purposes and leased properties in Morocco, Cyprus and PEI supporting our Carta business operations which are used for data centers, product development, customer service, collections and other related support services including finance, human resources, legal and compliance, marketing and branding, and business intelligence and analytics.
|
Square Footage |
Lease Expiration Date |
Vancouver, BC, Canada |
13,193 sq. ft. |
July 2027 |
Winnipeg, MB, Canada |
10,026 sq. ft. |
July 2025 |
Charlottetown, PEI, Canada |
117 sq. ft. |
December 2024 |
Casablanca, Morocco |
3,900 sq. ft |
August 2024 |
Nicosia, Cyprus |
848 sq. ft. |
October 2024 |
In 2023, we executed an Indenture to Sublease our 13,193 sq ft. Vancouver office to a third-party and entered a lease for a smaller office. Given we have transitioned our Canadian employees to remote work, we currently are seeking to exit the lease of the Winnipeg office before its lease expiration date if a suitable sublease opportunity becomes available. We consider each of the other properties in the table above to be adequate for its purpose. We currently expect to extend the terms of expiring leases or to find replacement sites on commercially acceptable terms. We do not anticipate any environmental issues that may affect the Company’s utilization of the assets. There are no plans to expand or improve the facilities described above.
Our material tangible property and equipment are described in note 8 to the Consolidated Financial Statements in “Item 17. Financial Statements.”
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ITEM 4A: UNRESOLVED STAFF COMMENTS
None.
44
ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and “Item 4. Information on the Company — B. Business Overview”. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Item 3. Key Information—D. Risk Factors" or in other parts of this annual report on Form 20-F.
Please refer to our Annual Report on Form 20-F, filed with the SEC on March 23, 2023, for discussion of financial results for the years ended December 31, 2022 and 2021.
45
Financial Performance Review
The following provides insight on the Company’s financial performance by illustrating and providing commentary on its key performance indicators and operating results.
Key Performance Indicators
The key performance indicators that we use to manage our business and evaluate our financial results and operating performance consist of: Mogo members, revenue, subscription and services revenue, net (loss) income, net cash used in operating activities, adjusted EBITDA(1), adjusted net loss(1) and cash provided by (used in) operating activities before investment in gross loans receivable(1). We evaluate our performance by comparing our actual results to prior period results.
The tables below provide the summary of key performance indicators for the applicable reported periods:
|
|
As at |
|
|
|
|
||||||
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
|||
Key Business Metrics |
|
|
|
|
|
|
|
|
|
|||
Mogo Members (000s) |
|
|
2,110 |
|
|
|
1,993 |
|
|
|
6 |
% |
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Year ended |
|
|
|
|
||||||||||||
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
||||||
IFRS Measures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenue |
|
$ |
17,157 |
|
|
$ |
17,146 |
|
|
|
0 |
% |
|
$ |
65,221 |
|
|
$ |
68,949 |
|
|
|
(5 |
)% |
Subscription and services revenue |
|
|
10,187 |
|
|
|
10,343 |
|
|
|
(2 |
)% |
|
|
38,785 |
|
|
|
41,741 |
|
|
|
(7 |
)% |
Net income (loss) |
|
|
8,511 |
|
|
|
(74,943 |
) |
|
|
(111 |
)% |
|
|
(17,887 |
) |
|
|
(165,678 |
) |
|
|
(89 |
)% |
Net cash used in operating activities |
|
|
(2,199 |
) |
|
|
(1,356 |
) |
|
|
62 |
% |
|
|
(9,167 |
) |
|
|
(27,009 |
) |
|
|
(66 |
)% |
Other Key Performance Indicators(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Adjusted EBITDA |
|
|
2,743 |
|
|
|
248 |
|
|
|
1006 |
% |
|
|
7,669 |
|
|
|
(12,227 |
) |
|
|
(163 |
)% |
Adjusted net loss |
|
|
(2,600 |
) |
|
|
(5,375 |
) |
|
|
(52 |
)% |
|
|
(11,939 |
) |
|
|
(33,977 |
) |
|
|
(65 |
)% |
Cash provided by (used in) operations before investment in gross loans receivable |
|
|
4,676 |
|
|
|
457 |
|
|
|
923 |
% |
|
|
9,488 |
|
|
|
(10,617 |
) |
|
|
(189 |
)% |
46
Mogo members
Our total member base grew to 2,110,000 members as at December 31, 2023, from 1,993,000 members as at December 31, 2022, representing an increase of approximately 6% or 117,000 net members. Quarter over quarter, net members increased by 33,000 in Q4 2023. The growth in our member base reflects the continued adoption of our products by new members.
Revenue
Three months ended Q4 2023 vs Q4 2022
Total revenue increased slightly to $17.2 million for the three months ended December 31, 2023 compared to $17.1 million in the same period last year. This represents a return to growth in the Company’s primary business segments of wealth, payments, and lending, offset by the Company’s previously disclosed decision to narrow its strategic focus and exit certain sub-scale and unprofitable products.
Year ended 2023 vs 2022
Total revenue decreased by 5% to $65.2 million for the year ended December 31, 2023 compared to $68.9 million in the same period last year. The revenue decrease was primarily a result of the previously announced elimination of sub-scale revenue streams and unprofitable products including MogoCrypto, Moka France, and MogoCard.
Subscription and services revenue
Three months ended Q4 2023 vs Q4 2022
Subscription and services revenue decreased by 2% to $10.2 million for the three months ended December 31, 2023 compared to $10.3 million in the same period last year. The decrease was primarily driven by the previously announced elimination of sub-scale and unprofitable products including the wind down of MogoCrypto, Moka France and MogoCard. The decrease due to these products was offset by higher revenues related to wealth and payments.
Year ended 2023 vs 2022
Subscription and services revenue decreased by 7% to $38.8 million for the year ended December 31, 2023 compared to $41.7 million in the same period last year. The decrease in subscription and services revenue was primarily driven by the same reasons noted above.
47
Net income (loss)
Three months ended Q4 2023 vs Q4 2022
Net income was $8.5 million for the three months ended December 31, 2023, which is a decrease in net loss of $83.4 million compared to net loss of $74.9 million in the same period last year.
In 2022, the Company recognized impairment of investment accounted for using the equity method of $31.5 million, and impairment of goodwill and intangible assets of $37.2 million. No such impairment was recognized in the three months ended December 31, 2023. Additionally, the operating efficiency initiatives implemented in 2023 resulted in a $3.7 million reduction in operating expenses. The Company also recognized an unrealized revaluation gain on our investment portfolio of $13.6 million, compared to a loss of $1.2 million in the same period last year.
Year ended 2023 vs 2022
Net loss was $17.9 million for the year ended December 31, 2023, which is a decrease in net loss of $147.8 million compared to net loss of $165.7 million in the same period last year. In 2022, the Company recognized its share of loss in investment accounted for using the equity method of $78.8 million, compared to $8.3 million in 2023. Impairment of goodwill and intangibles of $38.3 million were also recognized in 2022.
Additionally, the operating efficiency initiatives noted above resulted in a $29.3 million decrease in operating expenses, and reductions in non-operating losses including a decrease in other non-operating expenses of $5.1 million. The Company also recognized a revaluation gain on our investment portfolio of $9.6 million in 2023, compared to a loss of $2.4 million in 2022.
Net cash used in operating activities
Three months ended Q4 2023 vs Q4 2022
Net cash used in operating activities was $2.2 million for the three months ended December 31, 2023, which is an increase of $0.8 million compared to $1.4 million in the same period last year. The increase was primarily due to an increase in net issuance of loans receivable of $6.9 million, which was offset by operating expense efficiencies gained in the past year.
Year ended 2023 vs 2022
Net cash used in operating activities was $9.2 million for the year ended December 31, 2023, which is a decrease of $17.8 million compared to $27.0 million in the same period last year. The improvement was primarily attributed to significant operating expense efficiencies gained in the past year, in addition to gross margin improvement.
48
Adjusted EBITDA(1)
Three months ended Q4 2023 vs Q4 2022
Adjusted EBITDA was $2.7 million for the three months ended December 31, 2023, which is a $2.5 million improvement from the adjusted EBITDA of $0.2 million in the same period last year. The improvement in adjusted EBITDA was primarily driven by a 25% reduction in operating expenditures arising from the realization of cost efficiency initiatives implemented in the last twelve months.
Year ended 2023 vs 2022
Adjusted EBITDA was $7.7 million for the year ended December 31, 2023, which is a $19.9 million improvement compared to the adjusted EBITDA loss of $12.2 million in the same period last year. The improvement in adjusted EBITDA was primarily driven by a 37% reduction in operating expenditures arising from the realization of cost efficiency initiatives implemented in the last twelve months. Additionally, overall gross profit increased despite the significant reduction in operating expenses.
Adjusted net loss(1)
Three months ended Q4 2023 vs Q4 2022
Adjusted net loss was $2.6 million for the three months ended December 31, 2023, which is a $2.8 million improvement compared to an adjusted net loss of $5.4 million in the same period last year. The improvement in adjusted net loss was attributed primarily to the same reasons noted above in the adjusted EBITDA variance and partially offset by a $0.2 million increase in credit facility interest expense due to higher interest rates.
Year ended 2023 vs 2022
Adjusted net loss was $11.9 million for the year ended December 31, 2023, which is a decrease in loss of $22.1 million compared to an adjusted net loss of $34.0 million in the same period last year. The improvement in adjusted net loss was attributed primarily to the same reasons noted above in the adjusted EBITDA variance and partially offset by a $1.4 million increase in credit facility interest expense due to higher interest rates and a $1.4 million increase in debentures and other financing expense primarily due to a one-time gain on revaluation of debentures recorded in Q4 2022.
Cash provided by (used in) operating activities before investment in gross loans receivable(1)
Three months ended Q4 2023 vs Q4 2022
Cash provided by operating activities before investment in gross loans receivable was $4.7 million for the three months ended December 31, 2023, which is a $4.2 million improvement compared to $0.5 million in the same period last year. The improvement was primarily attributed to significant operating expense efficiencies gained in the past year.
Year ended 2023 vs 2022
Cash provided by operating activities before investment in gross loans receivable was $9.5 million for the year ended December 31, 2023, which is a $20.1 million improvement compared to negative $10.6 million in the same period last year. The improvement was primarily attributed to the same reasons noted above.
49
Non-IFRS Financial Measures
This MD&A makes reference to certain non-IFRS financial measures. Adjusted EBITDA, adjusted net loss and cash provided by (used in) operating activities before investment in gross loans receivable are non-IFRS financial measures. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS.
We use non‑IFRS financial measures to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We believe that securities analysts, investors and other interested parties frequently use non‑IFRS financial measures in the evaluation of issuers.
Our management also uses non‑IFRS financial measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet our capital expenditure and working capital requirements. These non-IFRS financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results under IFRS. There are a number of limitations related to the use of non‑IFRS financial measures versus their nearest IFRS equivalents. Investors are encouraged to review our financial statements and disclosures in their entirety and are cautioned not to put undue reliance on any non‑IFRS financial measure and view it in conjunction with the most comparable IFRS financial measures. In evaluating these non‑IFRS financial measures, readers should be aware that in the future we will continue to incur expenses similar to those adjusted in these non-IFRS financial measures.
Adjusted EBITDA
Adjusted EBITDA is a non-IFRS financial measure that we calculate as net (loss) income before tax excluding depreciation and amortization, stock-based compensation, credit facility interest expense, debenture and other financing expense, accretion related to debentures, share of (gain) loss in investment accounted for using the equity method, revaluation (gain) loss, impairment of investment accounted for using the equity method, impairment of goodwill, and other non-operating expense. Adjusted EBITDA is a measure used by management and the Board to understand and evaluate our core operating performance and trends.
The following table presents a reconciliation of adjusted EBITDA to net (loss) income before tax, the most comparable IFRS financial measure, for each of the periods indicated:
($000s) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three months ended |
|
|
Year ended |
|
||||||||||
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
||||
Net income (loss) before tax |
|
$ |
8,432 |
|
|
$ |
(75,030 |
) |
|
$ |
(18,287 |
) |
|
$ |
(166,014 |
) |
Depreciation and amortization |
|
|
2,385 |
|
|
|
3,166 |
|
|
|
9,067 |
|
|
|
12,636 |
|
Stock-based compensation |
|
|
580 |
|
|
|
835 |
|
|
|
2,478 |
|
|
|
8,712 |
|
Credit facility interest expense |
|
|
1,595 |
|
|
|
1,363 |
|
|
|
6,064 |
|
|
|
4,640 |
|
Debenture and other financing expense |
|
|
1,141 |
|
|
|
779 |
|
|
|
3,519 |
|
|
|
3,225 |
|
Accretion related to debentures |
|
|
222 |
|
|
|
315 |
|
|
|
958 |
|
|
|
1,249 |
|
Share of loss in investment accounted for using the equity method |
|
|
— |
|
|
|
31,142 |
|
|
|
8,267 |
|
|
|
78,832 |
|
Revaluation (gain) loss |
|
|
(13,600 |
) |
|
|
(2,020 |
) |
|
|
(9,628 |
) |
|
|
2,375 |
|
Impairment of goodwill |
|
|
— |
|
|
|
31,758 |
|
|
|
— |
|
|
|
31,758 |
|
Other non-operating expense |
|
|
1,988 |
|
|
|
7,940 |
|
|
|
5,231 |
|
|
|
10,360 |
|
Adjusted EBITDA |
|
|
2,743 |
|
|
|
248 |
|
|
|
7,669 |
|
|
|
(12,227 |
) |
50
Adjusted net loss
Adjusted net loss is a non-IFRS financial measure that we calculate as net loss before tax excluding stock-based compensation, share of (gain) loss in investment accounted for using equity method, revaluation loss, impairment of investment accounted for using the equity method, impairment of goodwill, and other non-operating expense. This measure differs from adjusted EBITDA in that adjusted net loss includes depreciation and amortization, credit facility interest expense, and debenture and other financing expense, and thus comprises more elements of the Company’s overall net profit or loss. Adjusted net loss is a measure used by management and the Board to evaluate the Company’s core financial performance.
The following table presents a reconciliation of adjusted net loss to net (loss) income before tax, the most comparable IFRS financial measure, for each of the periods indicated:
($000s) |
|
|
|
|
|
|
|
|
|
|||||||
|
|
Three months ended |
|
|
Year ended |
|
||||||||||
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
||||
Net income (loss) before tax |
|
$ |
8,432 |
|
|
$ |
(75,030 |
) |
|
$ |
(18,287 |
) |
|
$ |
(166,014 |
) |
Stock-based compensation |
|
|
580 |
|
|
|
835 |
|
|
|
2,478 |
|
|
|
8,712 |
|
Share of loss in investment accounted for using the equity method |
|
|
— |
|
|
|
31,142 |
|
|
|
8,267 |
|
|
|
78,832 |
|
Revaluation (gain) loss |
|
|
(13,600 |
) |
|
|
(2,020 |
) |
|
|
(9,628 |
) |
|
|
2,375 |
|
Impairment of goodwill |
|
|
— |
|
|
|
31,758 |
|
|
|
— |
|
|
|
31,758 |
|
Other non-operating expense |
|
|
1,988 |
|
|
|
7,940 |
|
|
|
5,231 |
|
|
|
10,360 |
|
Adjusted net loss |
|
|
(2,600 |
) |
|
|
(5,375 |
) |
|
|
(11,939 |
) |
|
|
(33,977 |
) |
51
Cash provided by (used in) operating activities before investment in gross loans receivable
Cash provided by (used in) operating activities before investment in gross loans receivable is a non-IFRS financial measure that we calculate as cash used in operating activities, less net issuance of loans receivables. The Company requires net cash outflows in order to grow its gross loans receivable, which in turn generates future growth in interest revenue. These net cash outflows are presented within the operating activities section of the consolidated statement of cash flows, whereas the economic benefits are realized over the longer term. Consequently, we consider cash provided by operating activities before investment in gross loans receivable to be a useful measure in understanding the cash flow trends inherent to our existing scale of operations, by separating out the portion of cash flows related to investment in portfolio growth.
The following table presents a reconciliation of cash provided by operating activities before investment in gross loans receivable, the most comparable IFRS financial measure, for each of the periods indicated:
($000s) |
|
|
|
|
|
|
|
|
|
|||||||
|
|
Three months ended |
|
|
Year ended |
|
||||||||||
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
||||
Net cash used in operating activities |
|
$ |
(2,199 |
) |
|
$ |
(1,356 |
) |
|
$ |
(9,167 |
) |
|
$ |
(27,009 |
) |
Net issuance of loans receivable |
|
|
(6,875 |
) |
|
|
(1,813 |
) |
|
|
(18,655 |
) |
|
|
(16,392 |
) |
Cash provided by (used in) operations before investment in gross loans receivable |
|
|
4,676 |
|
|
|
457 |
|
|
|
9,488 |
|
|
|
(10,617 |
) |
Mogo members
Mogo members is not a financial measure. Mogo members refers to the number of individuals who have signed up for one or more of our products and services including: MogoMoney, MogoMortgage, MogoTrade, Moka services, our premium account subscription offerings, unique content, or events. People cease to be Mogo members if they do not use any of our products or services for 12 months and have a deactivated account. Reported Mogo members may overstate the number of unique individuals who actively use our products and services within a 12-month period, as one individual may register for multiple accounts whether inadvertently or in a fraudulent attempt. Customers are Mogo members who have accessed one of our revenue generating products, including MogoMoney, MogoMortgage, MogoTrade, Moka services and our premium account subscription offerings. Management believes that the size of our Mogo member base is one of the key drivers of the Company’s future performance. Our goal is to continue to grow and monetize our member base as we build our digital financial platform, launch new products and strive to build the largest digital financial brand in Canada.
52
Results of Operations
The following table sets forth a summary of our results of operations for the three months ended December 31, 2023 and 2022:
($000s, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three months ended |
|
|
Year ended |
|
||||||||||
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
||||
Total revenue |
|
$ |
17,157 |
|
|
$ |
17,146 |
|
|
$ |
65,221 |
|
|
$ |
68,949 |
|
Cost of revenue |
|
|
5,694 |
|
|
|
5,403 |
|
|
|
18,562 |
|
|
|
22,709 |
|
Gross profit |
|
|
11,463 |
|
|
|
11,743 |
|
|
|
46,659 |
|
|
|
46,240 |
|
Technology and development |
|
|
2,196 |
|
|
|
3,139 |
|
|
|
10,591 |
|
|
|
12,973 |
|
Marketing |
|
|
1,101 |
|
|
|
1,035 |
|
|
|
3,340 |
|
|
|
11,208 |
|
Customer service and operations |
|
|
2,376 |
|
|
|
3,040 |
|
|
|
10,602 |
|
|
|
14,089 |
|
General and administration |
|
|
3,047 |
|
|
|
4,281 |
|
|
|
14,457 |
|
|
|
20,197 |
|
Stock-based compensation |
|
|
580 |
|
|
|
835 |
|
|
|
2,478 |
|
|
|
8,712 |
|
Depreciation and amortization |
|
|
2,385 |
|
|
|
3,166 |
|
|
|
9,067 |
|
|
|
12,636 |
|
Total operating expenses |
|
|
11,685 |
|
|
|
15,496 |
|
|
|
50,535 |
|
|
|
79,815 |
|
Loss from operations |
|
|
(222 |
) |
|
|
(3,753 |
) |
|
|
(3,876 |
) |
|
|
(33,575 |
) |
Credit facility interest expense |
|
|
1,595 |
|
|
|
1,363 |
|
|
|
6,064 |
|
|
|
4,640 |
|
Debenture and other financing expense |
|
|
1,141 |
|
|
|
779 |
|
|
|
3,519 |
|
|
|
3,225 |
|
Accretion related to debentures |
|
|
222 |
|
|
|
315 |
|
|
|
958 |
|
|
|
1,249 |
|
Share of loss in investment accounted for using the equity method |
|
|
— |
|
|
|
31,142 |
|
|
|
8,267 |
|
|
|
78,832 |
|
Revaluation (gain) loss |
|
|
(13,600 |
) |
|
|
(2,020 |
) |
|
|
(9,628 |
) |
|
|
2,375 |
|
Impairment of goodwill |
|
|
— |
|
|
|
31,758 |
|
|
|
— |
|
|
|
31,758 |
|
Other non-operating expense |
|
|
1,988 |
|
|
|
7,940 |
|
|
|
5,231 |
|
|
|
10,360 |
|
|
|
|
(8,654 |
) |
|
|
71,277 |
|
|
|
14,411 |
|
|
|
132,439 |
|
Net income (loss) before tax |
|
|
8,432 |
|
|
|
(75,030 |
) |
|
|
(18,287 |
) |
|
|
(166,014 |
) |
Income tax recovery |
|
|
(79 |
) |
|
|
(87 |
) |
|
|
(400 |
) |
|
|
(336 |
) |
Net income (loss) |
|
|
8,511 |
|
|
|
(74,943 |
) |
|
|
(17,887 |
) |
|
|
(165,678 |
) |
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unrealized revaluation loss on digital assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(468 |
) |
Foreign currency transaction reserve (loss) gain |
|
|
(219 |
) |
|
|
(783 |
) |
|
|
(316 |
) |
|
|
101 |
|
Other comprehensive loss |
|
|
(219 |
) |
|
|
(783 |
) |
|
|
(316 |
) |
|
|
(367 |
) |
Total comprehensive income (loss) |
|
|
8,292 |
|
|
|
(75,726 |
) |
|
|
(18,203 |
) |
|
|
(166,045 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted EBITDA(1) |
|
|
2,743 |
|
|
|
248 |
|
|
|
7,669 |
|
|
|
(12,227 |
) |
Adjusted net loss(1) |
|
|
(2,600 |
) |
|
|
(5,375 |
) |
|
|
(11,939 |
) |
|
|
(33,977 |
) |
Basic income (loss) per share |
|
|
0.34 |
|
|
|
(0.99 |
) |
|
|
(0.72 |
) |
|
|
(2.17 |
) |
Diluted income (loss) per share |
|
|
0.34 |
|
|
|
(0.99 |
) |
|
|
(0.72 |
) |
|
|
(2.17 |
) |
53
Key Income Statement Components
Total revenue
The following table summarizes total revenue for the three months and year ended December 31, 2023 and 2022:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Year ended |
|
|
|
|
||||||||||||
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
||||||
Subscription and services revenue |
|
$ |
10,187 |
|
|
$ |
10,343 |
|
|
|
(2 |
)% |
|
$ |
38,785 |
|
|
$ |
41,741 |
|
|
|
(7 |
)% |
Interest revenue |
|
|
6,970 |
|
|
|
6,803 |
|
|
|
2 |
% |
|
|
26,436 |
|
|
|
27,208 |
|
|
|
(3 |
)% |
Total revenue |
|
|
17,157 |
|
|
|
17,146 |
|
|
|
0 |
% |
|
|
65,221 |
|
|
|
68,949 |
|
|
|
(5 |
)% |
Subscription and services revenue – represents Carta transaction processing revenue, Moka subscriptions, MogoMortgage brokerage commissions, premium account revenue, net loan protection premiums, partner lending fees, portfolio management fees, exempt market dealer commission revenue, referral fee revenue, FX revenue and other fees and charges.
Interest revenue – represents interest on our line of credit loan products.
Please refer to the “Item 5 – Operating and Financial Review and Prospects - Key Performance Indicators” section for commentary on total revenue and subscription and services revenue.
Cost of revenue
The following table summarizes the cost of revenue for the three months and year ended December 31, 2023 and 2022:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Year ended |
|
|
|
|
||||||||||||
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
||||||
Provision for loan losses, net of recoveries |
|
$ |
3,862 |
|
|
$ |
3,224 |
|
|
|
20 |
% |
|
$ |
13,208 |
|
|
$ |
14,730 |
|
|
|
(10 |
)% |
Transaction costs |
|
|
1,832 |
|
|
|
2,179 |
|
|
|
(16 |
)% |
|
|
5,354 |
|
|
|
7,979 |
|
|
|
(33 |
)% |
Cost of revenue |
|
|
5,694 |
|
|
|
5,403 |
|
|
|
5 |
% |
|
|
18,562 |
|
|
|
22,709 |
|
|
|
(18 |
)% |
As a percentage of total revenue |
|
|
33 |
% |
|
|
32 |
% |
|
|
|
|
|
28 |
% |
|
|
33 |
% |
|
|
|
||
Cost of revenue consists of provision for loan losses, net of recoveries, and transaction costs. Provision for loan losses, net of recoveries, represents the amounts charged against income during the period to maintain an adequate allowance for loan losses. Our allowance for loan losses represents our estimate of the expected credit losses (“ECL”) inherent in our portfolio and is based on various factors including the composition of the portfolio, delinquency levels, historical and current loan performance, expectations of future performance, and general economic conditions.
Transaction costs are expenses that relate directly to the onboarding and processing of new customers (excluding marketing), including expenses such as loan system transaction fees, transaction processing costs related to the Carta business and other transaction costs related to Moka and MogoTrade.
Cost of revenue was $5.7 million for the three months ended December 31, 2023, an increase of $0.3 million compared to the same period in the prior year. Cost of revenue was $18.6 million for the year ended December 31, 2023, a decrease of $4.1 million compared to the same period last year.
Provision for loan losses, net of recoveries, has increased for the three months and year ended December 31, 2023 compared to the same periods in the prior year. This increase is due to overall growth in loan receivables in the current period, compared to a decrease in loan receivables in the comparative prior year period.
54
Transaction costs have decreased for the three months and year ended December 31, 2023 compared to the same periods in the prior year. This decrease is primarily due to the realization of cost efficiencies implemented in the current periods.
We believe we are adequately provisioned to absorb reasonably possible future material shocks to the loan book as a result of macroeconomic factors such as inflation and the interest rate environment. Please note that IFRS 9 requires the use of forward-looking indicators when measuring ECL, which can result in upfront recognition of expenses prior to any actual occurrence of a default event. We have applied a probability weighted approach in applying these forward-looking indicators to measure incremental ECL. This approach involved multiple stress scenarios and a range of potential outcomes. Factors considered in determining the range of ECL outcomes include varying degrees of possible length and severity of a recession, the effectiveness of collection strategies implemented to assist customers experiencing financial difficulty, and the level of loan protection insurance held by customers within our portfolio. We will continue to revisit assumptions under this methodology in upcoming quarters as economic conditions evolve.
Technology and development expenses
The following table provides the technology and development expenses for the three months and year ended December 31, 2023 and 2022:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Year ended |
|
|
|
|
||||||||||||
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
||||||
Technology and development |
|
$ |
2,196 |
|
|
$ |
3,139 |
|
|
|
(30 |
)% |
|
$ |
10,591 |
|
|
$ |
12,973 |
|
|
|
(18 |
)% |
As a percentage of total revenue |
|
|
13 |
% |
|
|
18 |
% |
|
|
|
|
|
16 |
% |
|
|
19 |
% |
|
|
|
||
Technology and development expenses consist primarily of personnel and related costs of our product development, business intelligence, and information technology infrastructure employees. Associated expenses include hosting costs and software licenses, professional services, expenses related to the development of new products and technologies and maintenance of existing technology assets.
Technology and development expenses were $2.2 million for the three months ended December 31, 2023, which is a decrease of $0.9 million compared to $3.1 million in the same period last year. Technology and development expenses were $10.6 million for the year ended December 31, 2023, which is a decrease of $2.4 million compared to $13.0 million in the same period last year. The decrease is primarily due to cost efficiency initiatives implemented in 2023.
We believe our investments into the development of our digital wealth platform will strengthen Mogo’s product service offerings and drive long-term member and revenue growth.
55
Marketing expenses
The following table provides the marketing expenses for the three months and year ended December 31, 2023 and 2022:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Year ended |
|
|
|
|
||||||||||||
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
||||||
Marketing |
|
$ |
1,101 |
|
|
$ |
1,035 |
|
|
|
6 |
% |
|
$ |
3,340 |
|
|
$ |
11,208 |
|
|
|
(70 |
)% |
As a percentage of total revenue |
|
|
6 |
% |
|
|
6 |
% |
|
|
|
|
|
5 |
% |
|
|
16 |
% |
|
|
|
||
Marketing expenses consist of salaries and personnel‑related costs, direct marketing and advertising costs related to online and offline customer acquisition (paid search advertising, search engine optimization costs, and direct mail), public relations, promotional event programs and corporate communications.
Marketing expenses were $1.1 million for the three months ended December 31, 2023, which is an increase of $0.1 million compared to $1.0 million in the same period last year. Marketing expenses were $3.3 million for the year ended December 31, 2023, which is a decrease of $7.9 million compared to $11.2 million in the same period last year. During the latter half of 2022 and continuing in 2023, there was a significant reduction in marketing expenses to focus on more efficient marketing channels that drive shorter payback periods. We achieved sequential quarterly revenue growth in 2023 despite this significant reduction in marketing spend, which highlights the improvements in efficiency gained.
Customer service and operations expenses
The following table provides the customer service and operations (“CS&O”) expenses for the three months and year ended December 31, 2023 and 2022:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Year ended |
|
|
|
|
||||||||||||
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
||||||
Customer service and operations |
|
$ |
2,376 |
|
|
$ |
3,040 |
|
|
|
(22 |
)% |
|
$ |
10,602 |
|
|
$ |
14,089 |
|
|
|
(25 |
)% |
As a percentage of total revenue |
|
|
14 |
% |
|
|
18 |
% |
|
|
|
|
|
16 |
% |
|
|
20 |
% |
|
|
|
||
CS&O expenses consist primarily of salaries and personnel‑related costs for customer support, payment processing and collections employees. Associated expenses include third-party expenses related to credit data sources and collections.
CS&O expenses decreased for the three months and year ended December 31, 2023. The decrease is primarily due to cost reduction initiatives implemented in 2022 and continuing into 2023.
56
General and administration expenses
The following table provides the general and administration (“G&A”) expenses for the three months and year ended December 31, 2023 and 2022:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Year ended |
|
|
|
|
||||||||||||
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
||||||
General and administration |
|
$ |
3,047 |
|
|
$ |
4,281 |
|
|
|
(29 |
)% |
|
$ |
14,457 |
|
|
$ |
20,197 |
|
|
|
(28 |
)% |
As a percentage of total revenue |
|
|
18 |
% |
|
|
25 |
% |
|
|
|
|
|
22 |
% |
|
|
29 |
% |
|
|
|
||
G&A expenses consist primarily of salary and personnel related costs for our corporate, finance and accounting, credit analysis, underwriting, legal and compliance, fraud detection and human resources employees. Additional expenses include consulting and professional fees, insurance, legal fees, occupancy costs, travel and other corporate expenses.
G&A expenses decreased for the three months and year ended December 31, 2023, compared to the same periods last year. The decrease is due to various cost efficiency initiatives implemented in 2023.
Stock-based compensation and depreciation and amortization
The following table summarizes the stock-based compensation and depreciation and amortization. Expenses for the three months and year ended December 31, 2023 and 2022 were as follows:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Year ended |
|
|
|
|
||||||||||||
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
||||||
Stock-based compensation |
|
$ |
580 |
|
|
$ |
835 |
|
|
|
(31 |
)% |
|
$ |
2,478 |
|
|
$ |
8,712 |
|
|
|
(72 |
)% |
Depreciation and amortization |
|
|
2,385 |
|
|
|
3,166 |
|
|
|
(25 |
)% |
|
|
9,067 |
|
|
|
12,636 |
|
|
|
(28 |
)% |
|
|
|
2,965 |
|
|
|
4,001 |
|
|
|
(26 |
)% |
|
|
11,545 |
|
|
|
21,348 |
|
|
|
(46 |
)% |
As a percentage of total revenue |
|
|
17 |
% |
|
|
23 |
% |
|
|
|
|
|
18 |
% |
|
|
31 |
% |
|
|
|
||
Stock-based compensation represents the fair value of stock options granted to employees and directors measured using the Black-Scholes valuation model and amortized over the vesting period of the options. Depreciation and amortization is principally related to the amortization of intangible assets relating to internally capitalized development costs related to our technology platform, and technology, licenses and customer relationships acquired in the acquisitions of Carta, Moka and Fortification in 2021. Stock-based compensation and depreciation and amortization are all non-cash expenses.
Stock-based compensation decreased to $0.6 million in the three months ended December 31, 2023 compared to $0.8 million in the same period last year. Stock-based compensation decreased to $2.5 million in the year ended December 31, 2023 compared to $8.7 million in the same period last year. The decrease in stock-based compensation is driven by options granted in 2023 having a lower grant date fair value compared to grants in 2022 such that graded vesting of these options has resulted in a decrease in expense.
Depreciation and amortization decreased to $2.4 million in the three months ended December 31, 2023 compared to $3.2 million in the same period last year. Depreciation and amortization decreased to $9.1 million in the year ended December 31, 2023 compared to $12.6 million in the same period last year. The decreases are driven by lower amortization of intangible assets in the current period as a result of the impairment of legacy MogoApp and MogoCard related intangible assets in Q4 2022, along with the impairment of MogoCrypto related intangible assets in Q3 2022.
57
Credit facility interest expense
The following table provides a breakdown of credit facility interest expense for the three months and year ended December 31, 2023 and 2022:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Year ended |
|
|
|
|
||||||||||||
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
||||||
Credit facility interest expense |
|
$ |
1,595 |
|
|
$ |
1,363 |
|
|
|
17 |
% |
|
$ |
6,064 |
|
|
$ |
4,640 |
|
|
|
31 |
% |
As a percentage of total revenue |
|
|
9 |
% |
|
|
8 |
% |
|
|
|
|
|
9 |
% |
|
|
7 |
% |
|
|
|
||
Credit facility interest expense relates to the costs incurred in connection with our Credit Facility. It includes interest expense and the amortization of deferred financing costs.
Credit facility interest expense increased for both the three months and year ended December 31, 2023 compared to the same periods last year. The increase is due to additional advances on the Credit Facility and higher interest rates in 2023.
Other expenses (income)
The following table provides a breakdown of other expenses (income), excluding credit facility interest expense, by type for the three months and year ended December 31, 2023 and 2022:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Year ended |
|
|
|
|
||||||||||||
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
||||||
Debenture and other financing expense |
|
$ |
1,141 |
|
|
$ |
779 |
|
|
|
46 |
% |
|
$ |
3,519 |
|
|
$ |
3,225 |
|
|
|
9 |
% |
Accretion related to debentures |
|
|
222 |
|
|
|
315 |
|
|
|
(30 |
)% |
|
|
958 |
|
|
|
1,249 |
|
|
|
(23 |
)% |
Share of loss in investment accounted for using the equity method |
|
|
— |
|
|
|
31,142 |
|
|
|
(100 |
)% |
|
|
8,267 |
|
|
|
78,832 |
|
|
|
(90 |
)% |
Revaluation (gain) loss |
|
|
(13,600 |
) |
|
|
(2,020 |
) |
|
|
573 |
% |
|
|
(9,628 |
) |
|
|
2,375 |
|
|
|
(505 |
)% |
Impairment of goodwill |
|
|
— |
|
|
|
31,758 |
|
|
|
(100 |
)% |
|
|
— |
|
|
|
31,758 |
|
|
|
(100 |
)% |
Other non-operating expense |
|
|
1,988 |
|
|
|
7,940 |
|
|
|
(75 |
)% |
|
|
5,231 |
|
|
|
10,360 |
|
|
|
(50 |
)% |
Total other (income) expense |
|
|
(10,249 |
) |
|
|
69,914 |
|
|
|
(115 |
)% |
|
|
8,347 |
|
|
|
127,799 |
|
|
|
(93 |
)% |
As a percentage of total revenue |
|
|
(60 |
)% |
|
|
408 |
% |
|
|
|
|
|
13 |
% |
|
|
185 |
% |
|
|
|
||
Total other expenses (income) were income of $10.2 million for the three months ended December 31, 2023, which is a change of $80.1 million compared to an expense of $69.9 million for the same period last year. Total other expenses were $8.3 million for the year ended December 31, 2023, which is a decrease in expense of $119.5 million compared to the same period last year. The decrease in total other expenses was primarily driven by higher non-cash impairment charges on our investment in Coinsquare in 2022 compared to 2023. As well as impairment of goodwill for $31.8 million and impairment of intangible assets of $6.5 million in 2022. Additional decreases are due to the discontinuation of equity accounting for our share of Coinsquare’s net comprehensive loss following the WonderFi Transaction.
Revaluation gains and losses were a $13.6 million gain for the three months ended December 31, 2023 compared to a gain of $2.0 million in the same period last year. The variance is primarily attributable to a gain in investment portfolio of $13.6 million in the current year, compared to a loss of $1.2 million in the same period last year offset by a gain on revaluation of derivative financial liabilities of $1.4 million, a gain on debenture revaluation of $1.1 million and an unrealized exchange gain of $0.8 million.
Revaluation gains and losses were a $9.6 million gain for the year ended December 31, 2023 compared to a $2.4 million loss in the same period last year. The variance is primarily attributable to a gain in investment portfolio of $9.7 million compared to a loss of $8.0 million in the same period last year, as well as a loss on revaluation of derivative financial asset of $7.9 million in the prior period. These losses were offset by a gain on revaluation of derivative financial liabilities of $12.6 million and a gain on debenture revaluation of $1.1 million.
58
Other non-operating expense for the three months and year ended December 31, 2023 primarily consists of restructuring charges incurred due to the wind down of the legacy MogoApp, including MogoCard and MogoCrypto, and impairment of assets related to the sublease of our Vancouver office, and implementation of further restructuring in 2023, and transaction costs related to the WonderFi Transaction.
Debenture and other financing expense primarily consists of interest expense related to our debentures and interest expense related to our lease liabilities resulting from the adoption of IFRS 16. Debenture and other financing expense was lower in the comparative period, as a result of a revaluation gain recognized on the debentures in Q4 2022.
Other comprehensive (loss) income
The following table provides a breakdown of other comprehensive income by type for the three months and year ended December 31, 2023 and 2022:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Year ended |
|
|
|
|
||||||||||||
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
|
December 31, |
|
|
December 31, |
|
|
Change % |
|
||||||
Unrealized revaluation loss on digital assets |
|
$ |
— |
|
|
$ |
— |
|
|
n/a |
|
|
$ |
— |
|
|
$ |
(468 |
) |
|
|
(100 |
)% |
|
Foreign currency transaction reserve (loss) gain |
|
|
(219 |
) |
|
|
(783 |
) |
|
|
(72 |
)% |
|
|
(316 |
) |
|
|
101 |
|
|
|
(413 |
)% |
Other comprehensive loss |
|
|
(219 |
) |
|
|
(783 |
) |
|
|
(72 |
)% |
|
|
(316 |
) |
|
|
(367 |
) |
|
|
(14 |
)% |
Total other comprehensive loss was $0.2 million for the three months ended December 31, 2023 compared to other comprehensive income of $0.8 million in the same period last year. Total other comprehensive loss was $0.3 million for the year ended December 31, 2023 compared to other comprehensive loss of $0.4 million in the same period last year.
Following the financial investment in bitcoin and ether in 2021, the Company recognized digital assets as indefinite lived intangible assets measured under the revaluation model at fair value and recognizes cumulative fair value gains relating to these digital assets through other comprehensive income, and cumulative fair value losses to the extent that they reverse previously recognized cumulative gains through other comprehensive income. See Note 3 of the annual consolidated financial statements for the year ended December 31, 2023 for our detailed accounting policy.
Unrealized revaluation gain (loss) on digital assets impacting other comprehensive income for the three months ended December 31, 2023 is nil compared to nil loss in the same period last year. Unrealized revaluation gain (loss) on digital assets impacting other comprehensive income for the year ended December 31, 2023 is nil compared to a $0.5 million loss in the same period last year. These gains and losses are due to change in the market prices of bitcoin and ether across the periods. The decrease in digital asset market prices in 2022 resulted in a cumulative loss on our digital assets prior to their sale in November 2022.
From the date of the acquisition of Carta in Q1 2021 and Moka in Q2 2021, the Company consolidates foreign operations with functional currencies that are different from the presentation currency of the Company's consolidated financial statements. The assets and liabilities of foreign operations are translated to CAD using exchange rates at the reporting date whilst their income and expenses are translated to CAD using average monthly exchange rates. Foreign currency differences arising are recognized in other comprehensive income.
Foreign currency translation reserve loss was $0.2 million for the three months ended December 31, 2023 compared to a loss of $0.8 million in the same period last year. Foreign currency translation reserve loss was $0.3 million for the year ended December 31, 2023 compared to a gain of $0.1 million in the same period last year. These gains are due to fluctuations in foreign currency exchange rates across the periods.
59
The Company’s objectives when managing capital are to maintain financial flexibility in order to preserve its ability to meet financial obligations and continue as a going concern, and to deploy capital to provide future investment return to its shareholders. A detailed description of the Company’s approach to capital management and risk management policy for managing liquidity risk is outlined in Note 23 and Note 24 in the Company’s annual consolidated financial statements for the year ended December 31, 2023. The Company has assessed that it has adequate resources to continue as a going concern for the foreseeable future, which management has defined as being at least the next 12 months.
To date the Company has funded its lending and investing activities, expenses and losses primarily through the proceeds of its initial public offering which raised $50 million in 2015, subsequent issuances of common shares of the Company, convertible debentures, warrants, prior private placements of preferred shares, placements of debentures, credit facilities, and cash from operating activities. The business combination between the Company and Mogo Finance in the second quarter of 2019 also added to the Company’s capital resources and strengthened its financial position with an investment portfolio which the Company is actively seeking to monetize. Following investments made after the business combination, the value of Mogo’s investments, including our investment in WonderFi, was $37.8 million as at December 31, 2023.
We manage our liquidity by continuously monitoring revenues, expenses and cash flow compared to budget. Our principal cash requirements are for working capital, loan capital and investing activities. Our future financing requirements will depend on many factors including our growth rate, product development investments, increase in marketing activities, investment levels in our gross loans receivables, the macroeconomic conditions and its impact on loan performance, and potential mergers, strategic investments and acquisitions activity. Management expects that they will be able to refinance any outstanding amounts owing under the Credit Facility or our long-term debentures and may at times consider the issuance of shares in satisfaction of amounts owing under debentures, in each case as they become due and payable. The debentures are subordinated to the Credit Facility.
On November 6, 2023, due to the expiry of our previous short-form base shelf prospectus, we filed a new short-form base shelf prospectus with the securities commissions in each of the provinces and territories of Canada, except Quebec. This shelf prospectus allows Mogo to offer common shares, preferred shares, debt securities, and warrants to purchase common shares, preferred shares or debt securities up to an aggregate offering price of USD $250,000,000 for the 25-month period after filing.
In order to support its growth strategy, the Company gives consideration to additional financing options including accessing the capital markets for additional equity or debt, monetization of our investment portfolio, increasing the amount of long-term debt outstanding or increasing availability under existing or new credit facilities.
Although we are not currently party to any material undisclosed agreement and do not have any understanding with any third parties with respect to potential material investments in, or material acquisitions of, businesses or technologies, we may enter into these types of arrangements in the future, which could also require us to seek additional equity or debt financing. Additional funds may not be available on terms favourable to us or at all.
In December 2021, we amended our Credit Facility. The amendments changed the effective interest rate from a maximum of 9% plus LIBOR to 8% plus LIBOR with no floor. In addition, the amendment increases the available loan capital from $50 million to $60 million and extends the maturity date by three years from July 2, 2022 to July 2, 2025. As of July 1, 2023, the Credit Facility's benchmark rate transitioned from the USD LIBOR benchmark rate to the Secured Overnight Financing Rate.
60
Cash Flow Summary
The following table provides a summary of cash inflows and outflows by activity for the three and twelve months ended December 31, 2023 and 2022:
($000s) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three months ended |
|
|
Year ended |
|
||||||||||
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
||||
Cash provided by (used in) operating activities before changes in working capital (1) |
|
$ |
3,470 |
|
|
$ |
(698 |
) |
|
$ |
9,900 |
|
|
$ |
(7,809 |
) |
Other changes in working capital (1) |
|
|
1,206 |
|
|
|
1,155 |
|
|
|
(412 |
) |
|
|
(2,808 |
) |
Cash provided by (used in) operating activities before changes in loans receivable |
|
|
4,676 |
|
|
|
457 |
|
|
|
9,488 |
|
|
|
(10,617 |
) |
Cash invested in loans receivable |
|
|
(6,875 |
) |
|
|
(1,813 |
) |
|
|
(18,655 |
) |
|
|
(16,392 |
) |
Cash used in operating activities |
|
|
(2,199 |
) |
|
|
(1,356 |
) |
|
|
(9,167 |
) |
|
|
(27,009 |
) |
Cash used in investing activities |
|
|
(982 |
) |
|
|
(655 |
) |
|
|
(3,086 |
) |
|
|
(9,149 |
) |
Cash provided by (used in) financing activities |
|
|
1,581 |
|
|
|
(2,718 |
) |
|
|
(861 |
) |
|
|
(3,079 |
) |
Effect of exchange rate fluctuations |
|
|
18 |
|
|
|
(36 |
) |
|
|
(21 |
) |
|
|
743 |
|
Net decrease in cash for the period |
|
|
(1,582 |
) |
|
|
(4,765 |
) |
|
|
(13,135 |
) |
|
|
(38,494 |
) |
The reduction in the net decrease in cash for three months and year ended December 31, 2023 was primarily due to significant improvements to operating efficiency and the profitability of our revenue streams in the current period.
Cash provided by (used in) operating activities
Our operating activities consist of our subscription and services revenue inflows, our cash operating and interest expense outflows, as well as the funding and servicing of our loan products, including the receipt of principal and interest payments from our loan customers, and payment of associated direct costs and receipt of associated fees.
Cash provided by operating activities before investment in gross loans receivables was $4.7 million for the three months ended December 31, 2023, which is a $4.2 million improvement compared to $0.5 million in the same period last year. Cash provided by operating activities before investment in gross loans receivable was $9.5 million for the year ended December 31, 2023, which is a $20.1 million improvement compared to negative $10.6 million in the same period last year. The improvement was primarily attributed to significant operating expense efficiencies gained in the past year, in addition to gross margin improvements.
Cash invested in loans receivable was a $6.9 million outflow in the three months ended December 31, 2023 compared to a $1.8 million outflow in the same period last year. Cash invested in loans receivable was a $18.7 million outflow in the year ended December 31, 2023, compared to a $16.4 million outflow in the same period last year. Management maintains complete discretion over the ability to manage this as either a usage of cash or an inflow of cash from period to period.
Cash used in operating activities increased by $0.8 million or 62% in the three months ended December 31, 2023 compared to the same period last year. Cash used in operating activities improved by $17.8 million or 66% in the year ended December 31, 2023, compared to the same period last year.
Cash provided by (used in) operating activities before changes in working capital was a $3.5 million inflow in the three months ended December 31, 2023 compared to a $0.7 million outflow in the same period last year. Cash provided by operating activities before changes in working capital was a $9.9 million inflow in the year ended December 31, 2023, compared to a $7.8 million outflow in the same period last year. The overall decrease in cash outflows was due to lower operating expenses as a percentage of revenue in the current period relative to the prior period.
61
Other changes in working capital resulted in a $1.2 million inflow in the three months ended December 31, 2023 compared to a $1.2 million inflow in the same period last year. Other changes in working capital resulted in a $0.4 million outflow in the year ended December 31, 2023, compared to a $2.8 million outflow in the same period last year. The changes in cash flows due to working capital are primarily due to the timing of vendor payments.
Cash provided by (used in) investing activities
Our investing activities consist primarily of capitalization of software development costs, purchases of property, equipment and software, investment and sale of our digital assets, cash invested in investment accounted for using the equity method, monetization of our investment portfolio and cash (invested) acquired in a business combination. The cash flow may vary from period to period due to the timing of the expansion of our operations, changes in employee headcount and the development cycles of our internal‑use technology.
Cash used in investing activities in the three months ended December 31, 2023 was $1.0 million compared to $0.7 million in the same period last year. Cash used in investing activities in the year ended December 31, 2023 was $3.1 million compared to $9.1 million in the same period last year. The overall decrease in cash used in investing activities is primarily due to a significant reduction in capital technology expenditures required as a result of our cost efficiency initiatives.
Cash provided by (used in) financing activities
Historically, our financing activities have consisted primarily of the issuance of our common shares, debentures, convertible debentures, and borrowings and repayments on our credit facilities.
Cash provided by financing activities in the three months ended December 31, 2023 was $1.6 million compared to cash used in financing activities of $2.7 million for the same period last year. The net increase in cash provided by financing activities in the current period compared to the prior period is primarily attributable to a $2.4 million increase in advances of the Credit Facility, compared to a $1.4 million repayment of the Credit Facility in the prior period.
Cash used in financing activities in the year ended December 31, 2023 was $0.9 million compared to cash used in financing activities of $3.1 million for the same period last year. The net decrease in cash used in financing activities for the year ended December 31, 2023 relative to the same period in the prior year is primarily attributable a $2.0 million increase in advances on the credit facility in the current period.
62
Contractual Obligations
The following table shows contractual obligations as at December 31, 2023. Management will continue to refinance any outstanding amounts owing under the Credit Facility or our long-term debentures as they become due and payable.
($000s) |
|
2024 |
|
|
2025 |
|
|
2026 |
|
|
2027 |
|
|
2028 |
|
|
Thereafter |
|
||||||
Commitments - operational |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Lease payments |
|
|
1,206 |
|
|
|
1,240 |
|
|
|
1,255 |
|
|
|
872 |
|
|
|
113 |
|
|
|
526 |
|
Trade payables |
|
|
6,448 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Accrued wages and other expenses |
|
|
17,634 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other purchase obligations |
|
|
1,308 |
|
|
|
812 |
|
|
|
584 |
|
|
|
642 |
|
|
|
221 |
|
|
|
— |
|
Interest – Credit Facility |
|
|
6,601 |
|
|
|
3,300 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Interest – Debentures |
|
|
3,197 |
|
|
|
2,252 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
36,394 |
|
|
|
7,604 |
|
|
|
1,839 |
|
|
|
1,514 |
|
|
|
334 |
|
|
|
526 |
|
Commitments – principal repayments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Credit Facility |
|
|
— |
|
|
|
49,405 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Debentures (1) |
|
|
1,924 |
|
|
|
35,096 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
1,924 |
|
|
|
84,501 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total contractual obligations |
|
|
38,318 |
|
|
|
92,105 |
|
|
|
1,839 |
|
|
|
1,514 |
|
|
|
334 |
|
|
|
526 |
|
63
Key Balance Sheet Components
The following table provides a summary of the key balance sheet components as at December 31, 2023 and December 31, 2022:
($000s) |
|
As at |
|
|||||
|
|
December 31, |
|
|
December 31, |
|
||
Cash and cash equivalent |
|
$ |
16,133 |
|
|
$ |
29,268 |
|
Total assets |
|
|
207,763 |
|
|
|
221,494 |
|
Total liabilities |
|
|
114,039 |
|
|
|
110,608 |
|
Total assets decreased by $13.7 million during the year ended December 31, 2023. The decrease is primarily attributable to overall net losses in the business, which decreased significantly compared to the prior year.
Total liabilities increased by $3.4 million during the year ended December 31, 2023. The increase is primarily due to increases in advances on the credit facility.
Loans receivable
The following table provides a breakdown of loans receivable as at December 31, 2023 and December 31, 2022:
($000s) |
|
As at |
|
|||||
|
|
December 31, |
|
|
December 31, |
|
||
Gross loans receivable |
|
$ |
74,272 |
|
|
$ |
69,914 |
|
Allowance for loan losses |
|
|
(12,555 |
) |
|
|
(13,073 |
) |
Net loans receivable |
|
|
61,717 |
|
|
|
56,841 |
|
The gross loans receivable portfolio was $74.3 million as at December 31, 2023, which is an increase of $4.4 million compared to the balance as at December 31, 2022. The increase is primarily due to higher loan originations issued in the second half of 2023.
The following table provides a reconciliation of changes in our loan loss allowance for the year ended December 31, 2023 and the year ended December 31, 2022:
($000s) |
|
As at |
|
|||||
|
|
December 31, |
|
|
December 31, |
|
||
Allowance for loan losses, beginning of period |
|
$ |
13,073 |
|
|
$ |
9,813 |
|
Provision for loan losses |
|
|
13,778 |
|
|
|
15,383 |
|
Loans charged-off |
|
|
(14,296 |
) |
|
|
(12,123 |
) |
Allowance for loan losses, end of period |
|
|
12,555 |
|
|
|
13,073 |
|
The allowance for loan losses is reported on the Company’s balance sheet and is netted against gross loans receivable to arrive at the net loans receivable. The allowance for loan losses represents our estimate of the ECL inherent in our loan portfolio. Refer to Note 4 of the annual consolidated financial statements for a breakdown of gross loans receivable and allowance for loan losses by aging category based on their IFRS 9 ECL measurement stage. The Company assesses its allowance for loan losses at each reporting date. Changes in the provision for loan losses, net of recoveries, are recorded as a cost of revenue in the consolidated statements of operations and comprehensive income (loss).
64
The allowance for loan losses as a percentage of gross loans receivable decreased to 16.9% as at December 31, 2023 from 18.7% as at December 31, 2022. This is primarily due to a better aging of loan portfolio as at Q4 2023 compared to Q4 2022.
As at December 31, 2023, the allowance includes an incremental allowance in respect of potential future losses arising from macroeconomic factors as a result of the requirement under IFRS 9 to account for forward-looking indicators when determining the allowance. We believe that the related allowance is adequate to absorb reasonably possible changes to economic conditions that impact the loan book. It should be noted that this allowance has already been reflected in our provision for loan losses in the consolidated statements of operations and comprehensive income (loss). Refer to the “Cost of revenue” section above for further discussion on the provision for loan losses.
The Company reserves and charges off consumer loan amounts to the extent that there is no reasonable expectation of recovery once the loan or a portion of the loan has been classified as past due for more than 180 consecutive days. Recoveries on loan amounts previously charged off are credited against loans receivable and provision for loan losses when collected.
In the opinion of management, the Company has provided adequate allowances to absorb expected credit losses inherent in its loan portfolio based on available and relevant information affecting the loan portfolio at each balance sheet date. The Company cannot guarantee that delinquency and loss levels will correspond with the historical levels experienced and there is a risk that delinquency and loss rates could change significantly.
Credit facility
The credit facility consists of a $60,000,000 senior secured credit facility maturing on July 2, 2025. The credit facility is subject to variable interest rates that reference the Secured Overnight Financing Rate (“SOFR”), or under certain conditions, the Federal Funds Rate in effect. On December 16, 2021, the Company amended its credit facility to lower the effective interest rate from a maximum of LIBOR plus 9%, to LIBOR plus 8%. In June 2023, this was transitioned to SOFR plus 8% upon the cessation of USD LIBOR. There is a 0.33% fee on the available but undrawn portion of the $60,000,000 facility. The principal and interest balance outstanding for the credit facility as at December 31, 2023 was $49,405,000 (December 31, 2022 – $46,180,000). Refer to Note 24 of the consolidated financial statements for details on the reform of major interest rate benchmarks.
The credit facility is subject to certain covenants and events of default. As at December 31, 2023 and December 31, 2022, the Company was in compliance with these covenants. Interest expense on the credit facility is included in credit facility interest expense in the consolidated statements of operations and comprehensive income (loss).
Interest expense on the credit facility for the year ended December 31, 2023 of $6,064,000 (December 31, 2022 – $4,640,000) is included in credit facility interest expense in the consolidated statements of operations and comprehensive income (loss).
The Company has provided its senior lenders with a general security interest in all present and after acquired personal property of the Company, including certain pledged financial instruments, cash and cash equivalents.
The Company has pledged financial instruments as collateral against its credit facilities. Under the terms of the general security agreement, assets pledged as collateral primarily include loans receivable with a carrying amount equal to $61,717,000 (December 31, 2022 – $56,841,000) and cash and cash equivalents with a balance of $316,000 (December 31, 2022 – $298,000).
65
Debentures
The Company's debentures with maturity dates of July 2, 2025 pay interest at a coupon rate between 8 - 10% per annum. Payments of interest and principal are made to debenture holders on a quarterly basis on the first business day following the end of a calendar quarter, at the Company's option either in cash or Common Shares.
|
|
As at |
|
|||||
($000s) |
|
December 31, |
|
|
December 31, 2022 |
|
||
Principal balance |
|
|
37,020 |
|
|
|
39,658 |
|
Discount |
|
|
(1,000 |
) |
|
|
(2,118 |
) |
|
|
|
36,020 |
|
|
|
37,540 |
|
Interest payable |
|
|
763 |
|
|
|
726 |
|
|
|
|
36,783 |
|
|
|
38,266 |
|
The Debentures are secured by the assets of the Company, governed by the terms of a trust deed and, among other things, are subject to a subordination agreement to the credit facility which effectively extends the individual maturity dates of such debentures between January 2024 and June 2025 to July 2, 2025, being the maturity date of the credit facility.
The debenture principal repayment dates, after giving effect to the subordination agreement referenced above, are as follows:
($000s) |
|
Principal component of quarterly payment |
|
|
Principal due on maturity |
|
|
Total |
|
|||
2024 |
|
|
1,924 |
|
|
|
— |
|
|
|
1,924 |
|
2025 |
|
|
1,543 |
|
|
|
33,553 |
|
|
|
35,096 |
|
|
|
|
3,467 |
|
|
|
33,553 |
|
|
|
37,020 |
|
The debenture principal repayments are payable in either cash or Common Shares at Mogo’s option. The number of Common Shares required to settle the principal repayments is variable based on the Company's share price at the repayment date.
66
The following table should be read in conjunction with “Item 4. Information on the Company – B. Business Overview". The Company continues to invest in the development of its software platform which is captured as an addition to intangible assets in the Consolidated Financial Statements.
($000s) |
December 31, 2023 |
December 31, 2022 |
December 31, 2021 |
Investment in intangible assets |
3,206 |
7,482 |
7,503 |
The information required by this item is set forth above in “Item 5. Operating and Financial Review and Prospects — A. Operating Results,” and “Item 5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources”. Other than as disclosed elsewhere in this annual report on Form 20-F, we are not aware of any trends, uncertainties, demands, commitments or events since December 31, 2023 that are reasonably likely to have a material adverse effect on our revenues, income, profitability, liquidity or capital resources, or that would cause the reported financial information in this annual report on Form 20-F to be not necessarily indicative of future operating results or financial conditions.
These estimates and assumptions are based on management’s historical experience, best knowledge of current events, conditions and actions that the Company may undertake in the future and other factors that management believes are reasonable under the circumstances.
These estimates and assumptions are reviewed periodically, and the effect of a change in accounting estimate or assumption is recognized prospectively by including it in the consolidated statements of operations and comprehensive income (loss) in the period of the change and in any future periods affected.
The areas where estimates and assumptions have the most significant effect on the amounts recognized in the consolidated financial statements include the following:
(i) Allowance for loan losses
The provision for loan losses consists of amounts charged to the consolidated statements of operations and comprehensive income (loss) during the period to maintain an adequate allowance for loan losses. The Company's allowance for loan losses represents its estimate of the expected credit losses expected from its existing loan portfolio and is based on a variety of factors, including the composition and quality of the portfolio, loan-specific information gathered through collection efforts, delinquency levels, historical charge-off and loss experience, the Company's expectations of future loan performance, and general forward-looking macroeconomic conditions. The methodology and assumptions used in setting the loan loss allowance are reviewed regularly to reduce any difference between loss estimates and actual loss experience.
(ii) Fair value of privately held investments
Estimating fair value requires that significant judgment be applied to each individual investment. For privately held investments, the fair value of each investment is measured using the most appropriate valuation methodology or combination of methodologies in the judgment of management in light of the specific nature, facts and circumstances surrounding that investment. This may take into consideration, but not be limited to, one or more of the following: valuations of recent or in-progress funding rounds, forward revenue and earnings projections, comparable peer valuation multiples, and the initial cost base of the investment.
67
Actual results could differ significantly from these estimates.
(iii) Valuation of goodwill acquired in business combinations
The Company is required to assess the recoverability of values assigned to cash generating units that include goodwill on an annual basis. Estimating the recoverable amount requires significant judgment in the determination of appropriate inputs. This may take into consideration the following: forecast period, cash flow projections and discount rates. Actual results could differ significantly from these estimates.
(iv) Impairment of investment in associate
The Company is required to assess the recoverability of its investment in associate when indicators of impairment are identified. Estimating the recoverable amount requires significant judgment in determination of fair value of the investment. The fair value of the investment in associate is measured using the most appropriate valuation methodology or combination of methodologies in the judgement of management in light of the specific nature, facts and circumstances surrounding the investment. Management exercises judgement in determining inputs to the valuation methodology including forward revenue projections and comparable peer valuation multiples. Actual results could differ significantly from these estimates.
68
ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
The following table sets forth information regarding our directors and executive officers as of the date of this annual report on Form 20-F.
Name and Province or State and Country of Residence |
Age |
Position/Title |
Director Since |
David Feller1,6 |
55 |
Chairman of the Board, CEO |
August 26, 2003 |
Gregory Feller1,6 |
55 |
President, CFO and Director |
April 10, 2015 |
|
Michael Wekerle4 Ontario, Canada |
59 |
Director |
June 21, 2019 |
|
Kristin McAlister3 California, United States |
53 |
Director |
June 27, 2023 |
|
Christopher Payne2 Ontario, Canada |
60 |
Director |
January 25, 2021 |
|
Kees Van Winters5 Ontario, Canada |
59 |
Director |
June 27, 2023 |
|
Justin Carter British Columbia, Canada |
43 |
COO |
March 31, 2023 |
David Feller founded Mogo in 2003 and currently serves as the Company’s Chief Executive Officer and Chair of our Board. Over the past 20 years, Mr. Feller has grown Mogo into Canada's leading financial technology and payments company with ~2 million members, annual revenues exceeding $65 million and more than 200 team members. During that time, he led the Company through equity and debt financings totaling more than $500 million, securing two credit facilities with a leading global investment firm, the Company's IPO on the TSX, listing on the Nasdaq and subsequent public offerings. Mr. Feller is passionate about using technology and design to deliver innovative digital solutions that help consumers improve their financial health. He is a former member of the Young Entrepreneurs Organization (YEO) of Canada and is a graduate of the University of Western Ontario with a Bachelor of Arts degree. Mr. Feller’s experience leading the business along with his responsibilities for the strategic direction, product innovation and management of Mogo’s day to day operations, bring broad industry and specific institutional knowledge and experience to the Board.
Gregory Feller is a co-founder of Mogo, has served as the Company’s Chief Financial Officer since August 2011, and has served as a member of our Board of Directors and President of the Company since April 2015. Prior to his appointment, Mr. Feller was a Managing Director and Co-Head of the Technology Investment Banking Group at Citadel Securities, a financial services group. From 2008 to 2010, Mr. Feller was a Managing Director at UBS Investment Bank, a global financial institution. Prior to joining UBS, Mr. Feller was a Managing Director with Lehman Brothers where he worked from 2001 to 2008 and a Vice President at Goldman Sachs & Co.
69
from 1998 to 2000. Mr. Feller has a Bachelor of Administrative and Commercial Studies from the University of Western Ontario and a Masters of Management from the Kellogg School of Management at Northwestern University, where he graduated Beta Gamma Sigma.
Michael Wekerle was a co-founder and partner of Griffiths McBurney & Partners’ sales and trading operations in 1995. He served as Vice Chairman of Institutional Trading at GMP Securities L.P. until August 2011 where he was widely considered a leading investment advisor in Canada. During his time, he helped establish the firm’s hedge fund and institutional trading desk and developed a reputation for assisting clients in profiting from large-scale transactions. Prior to his tenure at GMP, Mr. Wekerle was head of institutional trading at First Marathon Securities Ltd.
Christopher Payne has deep experience in M&A and private equity with a strong focus on the technology sector. He is the Managing Partner and Founder of Hawthorn Equity Partners, a leading middle market private equity firm launched in 2005. Previously, Mr. Payne was a Managing Director within the Merchant Banking Group of CIBC. Prior to CIBC, he was an entrepreneur and investor in Silicon Valley. Mr. Payne co-founded X.com with Elon Musk and other partners in 1999. X.com ultimately merged with another entity to became PayPal. Mr. Payne also worked at BMO Nesbitt Burns in M&A and later helped start BMO Nesbitt Burns Equity Partners, a North American mid-market focused merchant bank. He holds an Honour’s Bachelor’s Degree in Commerce from Queen’s University and an MBA from The Wharton School.
Kristin McAlister is a successful entrepreneur and operator with a background in finance, human behavior and human development. In 2006, Ms. McAlister founded Centennial Montessori School in San Mateo, California, which is one of the top pre-K through elementary schools in the San Francisco Bay area. Ms. McAlister was formerly a financial analyst at Lehman Brothers as well as a researcher at the National Institute of Child Health and Human Development. Her philanthropic efforts focus on opening educational opportunities and financial services to populations without equitable access. Ms. McAlister received a dual honors undergraduate degree from Brown University in Biomedical Ethics and Psychology (Developmental Behavioral Neuroscience), and a master’s with distinction in Urban Education from Kings College, University of London.
Kees Van Winters has been active in the telecom and technology industries since 1986. Mr. Van Winters was Vice-President of Sales and Marketing for Nationwide Cellular Service in New York from 1986 to 1992 and was a consultant to several major telecom companies in Canada and the USA from 1992 to 1996. Since then he has acted as a consultant to a number of small technology companies. Mr. Van Winters previously served on Mogo Inc.’s board of directors between June 2019 and June 2021.
Justin Carter has been with Mogo since the Company was founded. Mr. Carter brings invaluable historical knowledge and experience to the team and has been involved in all aspects of the business with the main focus being on building Mogo’s wealth products, consumer lending, automation and scaling operations. Achievements with Mogo include being the first company in Canada to launch free credit score monitoring via a mobile app, digitizing the mortgage application experience, and the creation of a 100% digital and automated end to end loan approval and funding experience.
As at December 31, 2023, the directors and executive officers of the Company directly or beneficially owned or controlled an aggregate of 3,206,427 common shares, representing approximately 13% of the Company’s issued and outstanding common shares as of December 31, 2023.
Corporate Cease Trade Orders
70
None of our directors or executive officers has, within the 10 years prior to the date of this this Form 20-F, been a director, chief executive officer or chief financial officer of any company (including us) that, while such person was acting in that capacity (or after such person ceased to act in that capacity but resulting from an event that occurred while that person was acting in such capacity) was the subject of a cease trade order, an order similar to a cease trade order, or an order that denied the company access to any exemption under securities legislation, in each case for a period of more than 30 consecutive days.
Corporate Bankruptcies
None of our directors or executive officers has, within the 10 years prior to the date of this this Form 20-F, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, been a director or executive officer of any company, that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets.
Penalties or Sanctions
No director or executive officer of the Company or shareholder holding sufficient securities of the Company to affect materially the control of the Company has:
Conflicts of Interest
To the best of our knowledge, there are no known existing or potential conflicts of interest among us and our directors, officers or other members of management as a result of their outside business interests except that certain of our directors and officers serve as directors and officers of other companies, and therefore it is possible that a conflict may arise between their duties to us and their duties as a director or officer of such other companies.
Interests of Management and Others in Material Transactions
To the best of our knowledge, there are no material interests, direct or indirect, of any of our directors or senior management, any shareholder that beneficially owns, or controls or directs (directly or indirectly), more than 10% of any class or series of our outstanding voting securities, or any associate or affiliate of any of the foregoing persons, in any transaction within the three years before the date hereof that has materially affected or is reasonably expected to materially affect us or any of our subsidiaries.
The following discussion describes the significant elements of our executive compensation program, with particular emphasis on the process for determining compensation payable to our executive officers.
71
Our executive compensation practices are designed to attract and retain the skillsets and experience needed to lead the development and execution of the Company’s strategy and to reward our executives for high performance and their contribution to our long‑term success. The Board seeks to compensate executives by combining short‑term and long‑term cash and equity incentives. It also seeks to reward the achievement of corporate and individual performance objectives, and to align executive officers’ incentives with the Company’s performance.
In order to achieve our aggressive growth objectives, attracting and retaining the right team members is critical. A key part of this is a well‑thought out compensation plan that attracts high performers with specific skillsets and compensates them for continued achievements.
Setting executive compensation in a growth-oriented fintech organization can be challenging as we seek to balance the creation of shareholder value with long-term growth objectives. As a result, elements of our compensation plan evolve from year to year as the Company matures.
Our Board, on recommendations from the CGCNC, makes decisions regarding all forms of compensation, including salaries, bonuses and equity incentive compensation for our executives, as well as approves corporate goals and objectives relevant to our executives’ compensation. Finally, the CGCNC in conjunction with senior management also administers employee incentive compensation, including the Company’s Stock Option Plan (the “Stock Option Plan”) and Restricted Share Unit Plan (the “RSU Plan”).
Compensation Discussion and Analysis
Context of our Executive Compensation Practices
There are several relevant market and business factors that present challenges for the creation of an effective executive compensation program, including the following:
The CGCNC aims to balance these factors with the expectations of our shareholders and their responsibilities around oversight. As the business matures through the execution of our corporate strategy, the CGCNC will continue to evolve our compensation strategies to match.
How Executive Compensation is determined
The CGCNC annually assesses and makes a recommendation to the Board with regard to the competitiveness and appropriateness of the compensation package, including regular, incentive and equity-based compensation of the executive officers. As required, the CGCNC retains independent advice in respect of compensation matters and, if deemed appropriate by the Committee, meets separately with such advisors. Mogo specifically uses salary survey information to benchmark its compensation against the market. Mogo uses a variety of specialized survey data and relies heavily on data from The Mercer HR Tech Group Salary Survey.
72
This survey is based in British Columbia, but the data is relevant for all Canadian high-tech markets. The most recent survey included data provided by over 95 leading technology organizations in the British Columbia market. The survey includes cash, short and long-term incentive information and has executive benchmarks for over 30 functions. Compensation analysis is available by size and type of organization. Additionally, third party consultants have also provided input on our senior leadership and executive compensation.
Summary of Elements of Compensation Program
Our executive compensation consists primarily of three elements: base salary, annual bonus and long‑term equity incentives.
Annual Base Salary
Annual base salary reflects the scope and responsibilities of the role, each executive’s personal experience and performance, and market competitiveness. Base salaries are reviewed annually based on individual performance and/or for market competitiveness. Additionally, base salaries can be adjusted as warranted throughout the year to reflect promotions or other changes in the scope or breadth of an executive’s role or responsibilities, as well as for market competitiveness or in response to economic conditions.
Annual Performance Bonus
Annual performance bonus is expressed as a percentage of annual base salary and is calculated based on achievement levels against a mix of corporate performance goals and individual performance goals and is payable at the discretion of the Board. Historically, the bonus has been paid in cash, stock options or a combination of both. In 2023, the Board and executives made the decision not to pay bonuses in respect of 2022 and any bonus to be paid in respect of 2023 is still to be determined.
Long-Term Incentives
Stock Options - Stock options are awarded annually at the Board’s discretion and typically vest over four years with an eight-year term. Stock options align executive compensation with shareholder interests as the value is dependent on post-vesting share price.
Our Stock Option Plan is in place for the benefit directors, officers, employees and consultants of the Company, including the executive officers. The executive officers and directors have been issued options under such plan.
Our Stock Option Plan was adopted effective November 15, 2013, as amended. Subject to the requirements of the Stock Option Plan, the Board, with the assistance of the CGCNC, has the authority to determine when options will be granted, which eligible persons will be granted options, the number of common shares subject to each option granted and the vesting for each option.
RSUs – We established a RSU Plan to form part of our incentive compensation arrangements which is available for eligible directors, officers and employees of the Company as of April 18, 2018, the closing date of our IPO. Restricted stock units (“RSUs”) are issued in limited amounts and only awarded to senior management, and typically vest over three years. RSUs are aligned with shareholder interests as their value depends on post-vesting share price.
In setting the annual performance objectives and evaluating executive compensation, the Company considers each element carefully against relevant internal and market factors and the Board provides appropriate oversight with regard to the payment of short and long-term incentives to ensure alignment with our shareholders’ long-term interests.
73
Compensation of Executive Officers
The following table sets out information concerning the compensation earned by the executive officers during the year ended December 31, 2023.
Name and Principal Position |
Salary |
Share‑ |
Option‑ |
Non‑Equity Incentive Plan Compensation(3) |
All Other |
Total |
David Feller |
$425,000 |
- |
$437,200 |
$100,000 |
$7,032 |
$969,232 |
|
|
|
|
|
|
|
Gregory Feller(1) |
$506,138 |
- |
$437,200 |
$200,000 |
$55,945 |
$1,199,283 |
|
|
|
|
|
|
|
|
Justin Carter COO |
$216,850 |
- |
$129,814 |
- |
$7,082 |
$353,746 |
Compensation of Directors
The directors’ compensation program is designed to attract and retain qualified individuals to serve on the Board. As non-executive directors, Ms. McAlister, Messrs. Payne, van Winters, and Wekerle are paid an annual retainer fee of $35,000. A non-executive director receives an additional $30,000 annual fee for serving as chair on each of the Audit Committee, CGCNC and Investment Committee. All directors are entitled to reimbursement for expenses incurred by them in their capacity as directors and are eligible to receive stock options and RSUs under the Stock Option Plan and RSU Plan, respectively.
The following table provides information regarding compensation paid to the Company’s non-executive directors during the financial year ended December 31, 2023.
Name |
Fees Earned |
Option-Based Awards(1) |
Share-Based Awards |
Non‑Equity Incentive Plan Compensation(2) |
Total Compensation |
Michael Wekerle |
$89,435 |
$161,728 |
-- |
$200,000 |
$451,163 |
Christopher Payne |
$65,000 |
$104,896 |
-- |
- |
$169,896 |
Kristin McAlister |
$23,356 |
$104,896 |
-- |
- |
$128,252 |
Kees van Winters |
$17,791 |
$104,896 |
-- |
- |
$122,687 |
74
Benefits upon Termination of Employment
Each of the executive officers has entered into an employment agreement with the Company. Those employment agreements include provisions regarding base salary, annual bonuses, eligibility for benefits, confidentiality and ownership of intellectual property, among other things. Upon termination of employment without cause or by the executive for good reason, Mr. David Feller and Mr. Gregory Feller are entitled to twenty-four months’ notice or pay in lieu of notice calculated on base salary. Messrs. Feller employment agreements also provide for continued benefit coverage and option vesting for the duration of the notice period and payment in respect of eligible bonuses. Mr. Carter is entitled to one month of notice or base salary and continued benefits coverage plus an additional month per completed year of service up to a maximum of 18 months.
In addition, Messrs. Feller employment agreements contains a provision entitling them to full acceleration of vesting of any stock options previously granted to them upon a ‘Change in Control’, as defined in the Stock Option Plan. Mr. Carter’s employment agreement contains a change of control provision entitling him to an additional six months of severance, should a good reason arise within the first twelve months of the change of control and twelve months of severance should good reason arise after that, for the duration of his employment with Mogo.
None of the directors have service contracts with the company or any of its subsidiaries providing for benefits upon termination of employment.
Pension Plan Benefits
The Company does not provide a defined benefit pension plan or a defined contribution pension plan for any of its employees, nor does it have a deferred compensation pension plan for any of its employees. There are no amounts set aside or accrued by the Company or its subsidiaries to provide pension, retirement or similar benefits.
Directors are elected each year at the annual meeting of shareholders of the Company to serve until the next annual meeting or until a successor is elected or appointed. The Company has not adopted term limits for directors of the Company. See “Item 6. Directors, Senior Management and Employees – A. Directors and Senior Management" for details for the period during which each director has served in his office.
Board Committees
Audit Committee
Mogo’s Audit Committee consists of three directors, all of whom are independent under applicable Canadian and U.S. standards. They are also all financially literate in accordance with National Instrument 52-110 – Audit Committees (“NI 52-110”) and with Nasdaq Stock Market Rules. The members of the Audit Committee are Christopher Payne (Chair), Kees van Winters and Kristin McAlister.
75
Our Board has adopted a written charter for the Audit Committee. The mandate of the Audit Committee is to assist our Board in fulfilling its financial oversight obligations, including the responsibility: (1) to identify and monitor the management of the principal risks that could impact the financial reporting of the Company, (2) to monitor the integrity of our financial reporting process and our internal accounting controls regarding financial reporting and accounting compliance; (3) to oversee the work, independence, objectivity, and performance of our external auditor; (4) to review with financial management and the external auditors the quarterly unaudited financial statements and management discussion and analysis before release to the public; and (5) to provide an open avenue of communication between the external auditors, our Board and our management.
A copy of the charter of the Audit Committee can be accessed electronically at https://investors.mogo.ca/corporate-governance.
Corporate Governance, Compensation and Nominating Committee
The Board has appointed the CGCNC comprising of three independent directors under applicable Canadian and U.S. standards. The members of the CGCNC are Kristin McAlister (Chair), Christopher Payne and Kees van Winters.
Our Board has determined that the composition of the CGCNC is appropriate, given that all of the members are independent. Pursuant to the charter of the CGCNC, its mandate is to assist our directors in carrying out the Board’s oversight responsibility for (i) overseeing our human resources and compensation policies and processes, (ii) demonstrating to our shareholders that the compensation of the directors who are also our employees is recommended by directors who have no personal interest in the outcome of decisions of the CGCNC and who will have due regard to the interests of all of our shareholders, (iii) ensuring that our strategic direction is reviewed annually, and (iv) ensuring that the Board and each of its committees carry out their respective functions in accordance with an appropriate process.
In addition, the CGCNC is responsible for overseeing and assessing the functioning of the Board, its committees and individual directors, and for the development, recommendation to the Board, implementation and assessment of effective corporate governance principles.
A copy of the charter of the CGCNC can be accessed electronically at https://investors.mogo.ca/corporate-governance.
Investment Committee
The Board has appointed the Investment Committee comprising of directors Michael Wekerle (Chair), David Feller and Gregory Feller.
The Board has adopted a written charter for the Investment Committee. The mandate of the Investment Committee is to assist the Board by reviewing and evaluating potential strategic investments, and divestitures by Mogo and making recommendations to the Board with respect to such potential transactions. Primary responsibilities of the Investment Committee are to (i) review proposed investment or divestiture opportunities identified by or submitted to the Committee for consideration, (ii) ensure the proposed opportunities meet the Company’s investment objectives and strategy, (iii) ensure that environmental, social, and governance factors are considered, (iv) assist and advise on the terms of the transaction, (v) oversee due diligence, (vi) identify and manage potential conflicts of interest; and (vii) review the performance and outlook of the Mogo Ventures portfolio.
76
Board Diversity Matrix:
Country of Principal Executive Offices |
Canada |
|||
Foreign Private Issuer |
Yes |
|||
Disclosure Prohibited under Home Country Law |
No |
|||
Total Number of Directors |
6 |
|||
|
Female |
Male |
Non-Binary |
Did Not Disclose Gender |
Part I: Gender Identity |
|
|
|
|
Directors |
1 |
5 |
|
|
Part II: Demographic Background |
|
|
|
|
Underrepresented Individual in Home Country Jurisdiction |
0 |
|||
LGBTQ+ |
0 |
|||
Two or More Races or Ethnicities |
0 |
|||
As of December 31, 2021, 2022 and 2023, we had 340, 261, and 204 full-time employees, respectively. The following table sets forth the number of our employees categorized by area of operations:
|
As of Dec 31, 2021 |
As of Dec 31, 2022 |
As of Dec 31, 2023 |
General & Administrative |
73 |
65 |
44 |
Customer Service & Operations |
163 |
131 |
105 |
Technology |
104 |
65 |
55 |
TOTAL |
340 |
261 |
204 |
77
The following table summarizes, as of April 26, 2024, share ownership including options and RSUs granted under the Stock Option Plan and RSU Plan to our executive officers and directors.
|
|
|
|
Option-Based Awards |
Share-Based Awards |
||||
Name |
Common Shares |
% Common Shares |
Common Shares Underlying Options Outstanding |
Option Exercise Price |
Grant Date |
Expiration Date |
Common Shares Underlying RSUs that have not vested |
Grant Date |
|
|
David Feller
|
755,030 |
3.1% |
33,333 |
$4.68 |
2016/09/12 |
2024/09/12 |
|
- |
|
|
|
|
33,333 |
$13.32 |
2017/06/07 |
2025/06/07 |
|
|
|
|
|
|
16,667 |
$12.63 |
2017/09/27 |
2025/09/27 |
|
|
|
|
|
|
8,333 |
$11.64 |
2018/05/10 |
2026/05/10 |
|
|
|
|
|
|
8,333 |
$11.64 |
2018/05/10 |
2026/05/10 |
|
|
|
|
|
|
19,619 |
$13.56 |
2019/06/17 |
2027/06/17 |
|
|
|
|
|
|
91,667 |
$4.68 |
2020/06/09 |
2028/06/09 |
|
|
|
|
|
|
100,000 |
$13.74 |
2020/12/18 |
2028/12/18 |
|
|
|
|
|
|
33,333 |
$32.16 |
2021/03/31 |
2029/03/31 |
|
|
|
|
|
|
14,358 |
$11.10 |
2022/03/30 |
2030/03/30 |
|
|
|
|
|
|
33,333 |
$10.83 |
2022/03/31 |
2030/03/31 |
|
|
|
|
|
|
33,333 |
$3.33 |
2022/06/18 |
2030/06/18 |
|
|
|
|
|
|
22,222 |
$3.33 |
2022/06/18 |
2030/06/18 |
|
|
|
|
|
|
166,667 |
$2.49 |
2022/11/21 |
2030/11/21 |
|
|
|
|
|
|
100,000 |
$2.76 |
2023/06/30 |
2031/06/30 |
|
|
|
|
|
|
100,000 |
$2.12 |
2023/09/30 |
2031/09/30 |
|
|
|
|
|
|
50,000 |
$2.43 |
2023/12/31 |
2031/12/31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory Feller |
527,286 |
2.2% |
33,333 |
$4.68 |
2016/09/12 |
2024/09/12 |
|
- |
|
|
|
|
33,333 |
$13.32 |
2017/06/07 |
2025/06/07 |
|
|
|
|
|
|
16,667 |
$12.63 |
2017/09/27 |
2025/09/27 |
|
|
|
|
|
|
8,333 |
$11.64 |
2018/05/10 |
2026/05/10 |
|
|
|
|
|
|
8,333 |
$11.64 |
2018/05/10 |
2026/05/10 |
|
|
|
|
|
|
19,619 |
$13.56 |
2019/06/17 |
2027/06/17 |
|
|
|
|
|
|
91,667 |
$4.68 |
2020/06/09 |
2028/06/09 |
|
|
|
|
|
|
100,000 |
$13.74 |
2020/12/18 |
2028/12/18 |
|
|
|
|
|
|
33,333 |
$32.16 |
2021/03/31 |
2029/03/31 |
|
|
|
|
|
|
14,358 |
$11.10 |
2022/03/30 |
2030/03/30 |
|
|
|
|
|
|
33,333 |
$10.83 |
2022/03/31 |
2030/03/31 |
|
|
|
|
|
|
33,333 |
$3.33 |
2022/06/18 |
2030/06/18 |
|
|
|
|
|
|
22,222 |
$3.33 |
2022/06/18 |
2030/06/18 |
|
|
|
|
|
|
166,667 |
$2.49 |
2022/11/21 |
2030/11/21 |
|
|
|
|
|
|
100,000 |
$2.76 |
2023/06/30 |
2031/06/30 |
|
|
|
|
|
|
100,000 |
$2.12 |
2023/09/30 |
2031/09/30 |
|
|
|
|
|
|
50,000 |
$2.43 |
2023/12/31 |
2031/12/31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Wekerle |
1,694,217 |
6.9% |
6,667 |
$20.10 |
2016/03/14 |
2026/03/14 |
|
- |
|
|
|
|
15,000 |
$7.50 |
2018/11/28 |
2028/11/28 |
|
|
|
|
|
|
45,833 |
$4.68 |
2020/06/09 |
2028/06/09 |
|
|
|
|
|
|
33,333 |
$32.16 |
2021/03/31 |
2029/03/31 |
|
|
78
|
|
|
|
8,333 |
$10.83 |
2022/03/31 |
2030/03/31 |
|
|
|
|
|
|
8,333 |
$3.33 |
2022/06/18 |
2030/06/18 |
|
|
|
|
|
|
16,667 |
$2.49 |
2022/11/21 |
2030/11/21 |
|
|
|
|
|
|
50,000 |
$2.76 |
2023/06/30 |
2031/06/30 |
|
|
|
|
|
|
30,000 |
$2.12 |
2023/09/30 |
2031/09/30 |
|
|
|
|
|
|
10,000 |
$2.43 |
2023/12/31 |
2031/12/31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher Payne |
113,585 |
0.5% |
16,667 |
$32.16 |
2021/03/31 |
2029/03/31 |
- |
- |
|
|
|
|
8,333 |
$10.83 |
2022/03/31 |
2030/03/31 |
|
|
|
|
|
|
8,333 |
$3.33 |
2022/06/18 |
2030/06/18 |
|
|
|
|
|
|
12,500 |
$2.49 |
2022/11/21 |
2030/11/21 |
|
|
|
|
|
|
33,333 |
$2.76 |
2023/06/30 |
2031/06/30 |
|
|
|
|
|
|
20,000 |
$2.12 |
2023/09/30 |
2031/09/30 |
|
|
|
|
|
|
5,000 |
$2.43 |
2023/12/31 |
2031/12/31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Kristin McAlister |
0 |
0% |
33,333 |
$2.76 |
2023/06/30 |
2031/06/30 |
- |
- |
|
|
|
|
20,000 |
$2.12 |
2023/09/30 |
2031/09/30 |
|
|
|
|
|
|
5,000 |
$2.43 |
2023/12/31 |
2031/12/31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Kees van Winters |
107,979 |
0.4% |
33,333 |
$2.76 |
2023/06/30 |
2031/06/30 |
- |
- |
|
|
|
|
20,000 |
$2.12 |
2023/09/30 |
2031/09/30 |
|
|
|
|
|
|
5,000 |
$2.43 |
2023/12/31 |
2031/12/31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Justin Carter
|
7,496 |
0.0% |
515 |
$4.68 |
2017/09/15 |
2025/09/15 |
|
|
|
|
|
|
5,675 |
$4.68 |
2018/05/10 |
2026/05/10 |
|
|
|
|
|
|
5,281 |
$4.68 |
2018/05/10 |
2026/05/10 |
|
|
|
|
|
|
3,114 |
$4.68 |
2019/06/17 |
2027/06/17 |
|
|
|
|
|
|
6,667 |
$4.68 |
2019/12/26 |
2029/12/26 |
|
|
|
|
|
|
15,000 |
$4.68 |
2020/06/09 |
2028/06/09 |
|
|
|
|
|
|
6,667 |
$13.26 |
2021/03/31 |
2029/03/31 |
|
|
|
|
|
|
1,685 |
$11.10 |
2022/03/30 |
2030/03/30 |
|
|
|
|
|
|
33,333 |
$2.70 |
2023/03/31 |
2031/03/31 |
|
|
|
|
|
|
8,000 |
$2.76 |
2023/06/30 |
2031/06/30 |
|
|
|
|
|
|
16,667 |
$2.76 |
2023/06/30 |
2031/06/30 |
|
|
|
|
|
|
10,000 |
$2.43 |
2023/12/31 |
2031/12/31 |
|
|
|
|
|
|
|
|
|
|
|
|
Not applicable.
ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
79
Based on a review of the information provided to us by our transfer agent, as of April 24, 2024, there were 490 record holders, of which 387 record holders holding approximately 76% of our Common Shares had registered addresses in Canada. These numbers are not representative of the number of beneficial holders of our Common Shares nor are they representative of where such beneficial holders reside, since many of these Common Shares are held of record by brokers or other nominees (including one Canadian. nominee company, CDS & Co., which held approximately 71% of our outstanding common shares as of such date).
The following table sets forth information with respect to the beneficial ownership of our common shares as of February 15, 2024, the latest practicable date, by each person known to us to own beneficially more than 5% of our common shares. The calculations in the table below are based on the 24,517,118 Common Shares outstanding as of April 26, 2024.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days from April 29, 2024, including through the exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.
No holder of common shares has different voting rights from any other holders of Common Shares.
|
Shares Beneficially Owned |
|
Principal Shareholder |
Number |
% |
Toroso Investments, LLC |
2,385,659 |
9.7 |
Michael Wekerle |
1,816,765 |
7.4 |
80
Related party transactions during the three months and year ended December 31, 2023 include transactions with debenture holders that incur interest. The related party debentures balance as at December 31, 2023 totaled $0.3 million (December 31, 2022 – $0.3 million). The debentures bear annual coupon interest of 8.0% (December 31, 2022 – 8.0%) with interest expense for the three months and year ended December 31, 2023 totaling $6,000 and $24,000, respectively (December 31, 2022 – $6,000 and $25,000, respectively). The related parties involved in such transactions include shareholders, officers, directors, and management, close members of their families, or entities which are directly or indirectly controlled by close members of their families. The debentures are ongoing contractual obligations that are used to fund our corporate and operational activities.
In the year ended December 31, 2023, the Company incurred $175,000 of sponsorship expenses (December 31, 2022 – $188,000) with a company owned by a director of Mogo.
Not applicable.
81
ITEM 8: FINANCIAL INFORMATION
See “Item 17 Financial Statements” for the Consolidated Financial Statements included in this annual report on Form 20-F.
Legal Proceedings
We are from time to time involved in legal proceedings of a nature considered normal to our business. We believe that none of the litigation in which we are currently involved, or have been involved since the beginning of the most recently completed financial year, individually or in the aggregate, is material to our consolidated financial condition or results of operations.
Regulatory Actions
Neither the Company nor its subsidiaries are involved in any regulatory action which would have a material adverse effect on the Company.
Dividend Policy
The holders of common shares are entitled to receive distributions as and when declared from time to time on the common shares by the Board, acting in its sole discretion, out of the Company’s assets properly available for the payment of dividends.
The Company intends to reinvest all future earnings in order to finance the development and growth of its business. As a result, the Company does not intend to pay dividends on the common shares in the foreseeable future. The declaration of any future dividends by the Board will be dependent on the Company’s earnings, liquidity position, financial condition and capital requirements, as well as any other factors deemed relevant by the Board.
Significant Changes
There have been no significant changes to our business that we believe could reasonably be expected to have a material adverse effect on our business, results of operations and financial condition.
82
ITEM 9: THE OFFER AND LISTING
Not applicable, except for Item 9A(4) and Item 9C.
Our common shares have been listed on the TSX and NASDAQ under the symbol ‘MOGO’ since June 25, 2015 and April 18, 2018, respectively.
Our common shares have been listed on the TSX and NASDAQ under the symbol ‘MOGO’ since June 25, 2015 and April 18, 2018, respectively.
83
ITEM 10: ADDITIONAL INFORMATION
Not applicable.
Incorporation
The Company was originally incorporated by letters patent under the laws of Canada on January 14, 1972 and ultimately continued into British Columbia on June 21, 2019. The Company’s incorporation number is C1213467.
Objects and Purposes
The Articles of the Company do not contain limitations or restrictions on the business of the Company.
Directors
Under the Articles of the Company, a director or senior officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual’s duty or interest as a director or senior officer, must disclose the nature and extent of the conflict as required by the BCA. A director with a disclosable interest in a contract or transaction is not entitled to vote on any directors’ resolution approving the contract or transaction, unless all directors have an interest in the contract or transaction. A director with a disclosable interest in a contract or transaction is entitled to be counted as part of the quorum for the directors’ meeting to consider the contract or transaction. Such director or senior office who holds a disclosable interest in a contract or transaction is liable to account to the Company for any profit that accrues to the director or senior officer under or as a result of the contract or transaction only if and to the extent provided in the BCA.
Under the Articles, the Company, if authorized by the directors, may: (a) borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that the directors consider appropriate; (b) issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as the directors consider appropriate; (c) guarantee the repayment of money by any other person or the performance of any obligation of any other person; and (d) mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company.
Directors are not required to hold a share of the Company as qualification for his or her office but must be qualified as required by the BCA to become, act or continue to act as a director.
The Articles do not specify a retirement age for directors.
Subject to the BCA, the Company must indemnify a director, former director of the Company and his or her heirs and legal personal representatives against all eligible penalties to which such person is or may be liable, and the Company must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by such person in respect of that proceeding.
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Rights, Preferences and Restrictions
The Company’s Notice of Articles provides that the authorized capital of the Company consists of an unlimited number of common shares without par value and an unlimited number of preferred shares of the Company.
Subject to the BCA, the directors may from time to time declare and authorize payment of such dividends as they may consider appropriate. The dividend provisions are subject to the rights, if any, of shareholders holding shares with special rights as to dividends. All dividends on shares of any class or series of shares must be declared and paid according to the number of such shares held.
Subject to any special rights or restrictions attached to any shares and to the restrictions imposed on joint shareholders: (a) on a vote by show of hands, every person present who is a shareholder or proxy holder and entitled to vote on the matter has one vote; and (b) on a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and held by that shareholder and may exercise that vote either in person or by proxy.
At every annual general meeting: (a) the shareholders entitled to vote at the annual general meeting for the election of directors must elect, or in the unanimous resolution appoint, a board of directors consisting of the number of directors for the time being set under the Articles; and (b) all the directors cease to hold office immediately before the election or appointment of directors under paragraph (a), but are eligible for re-election or re-appointment.
Action Needed to Change Shareholder Rights
The Company must not make a payment or provide any other consideration to purchase, redeem or otherwise acquire any of its shares if there are reasonable grounds for believing that: (a) the Company is insolvent; or (b) making the payment or providing the consideration would render the Company insolvent.
Subject to the BCA, the Company may by special resolution make alterations to the authorized share structure and special rights or restrictions to change the rights of the shareholders. The majority of votes required for the Company to pass a special resolution at a meeting of shareholders is two-thirds of the votes cast on the resolution.
Shareholder Meeting
The Company’s Articles provide that (a) the Company must hold an annual general meeting at least once in each calendar year and not more than 15 months after the last annual reference date at such time and place as may be determined by the directors; (b) the directors may, at any time, call a meeting of shareholders to be held at such time and place as may be determined by the directors; (c) the quorum for the transaction of business at a meeting of shareholders is two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 25% of the issued shares entitled to be voted at the meeting; and (d) in addition to those persons who are entitled to vote at a meeting of shareholders, the only other persons entitled to be present at the meeting are the directors, the president (if any), the secretary (if any), the assistant secretary (if any), any lawyer for the Company, the auditor of the Company, any other persons invited to be present at the meeting by the directors or by the chair of the meeting and any persons entitled or required under the BCA or the Company’s Articles to be present at the meeting.
Limitations on Ownership of Securities
Except as provided in the Investment Canada Act, there are no limitations specific to the rights of non-Canadians to hold or vote the common shares under the laws of Canada or British Columbia or in the Company's charter documents.
85
Change in Control
There are no provisions in the Articles or charter documents that would have the effect of delaying, deferring or preventing a change in the control of the Company, or that would operate with respect to any proposed merger, acquisition or corporate restructuring involving its company or any of its subsidiaries.
Ownership Threshold
There are no provisions in the Articles governing the ownership threshold above which shareholder ownership must be disclosed. Securities legislation in Canada, however, requires that shareholder ownership (as well as ownership of an interest in, or right or obligation associated with, a related financial instrument of a security of the Company) must be disclosed once a person beneficially owns or has control or direction over, directly or indirectly, securities of a reporting issuer carrying more than 10% of the voting rights attached to all the reporting issuer’s outstanding voting securities and United States federal securities laws require us to disclose in this our annual report on Form 20-F, holders who own 5% or more of our issued and outstanding shares.
Changes to Capital
There are no conditions imposed by the Articles governing changes in the rights of holders of common shares where such conditions are more significant than is required by the laws of British Columbia.
Description of Capital Structure
There are no conditions imposed by the Articles governing changes in the capital that are more stringent than is required by the laws of British Columbia.
The following are the only material contracts, other than those contracts entered into in the ordinary course of business, to which the Company or any other member of the group is a party, for the two years immediately preceding the date of this annual report on Form 20-F:
86
Canada has no system of exchange controls. There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to non-resident investors. There are no laws of Canada or exchange restrictions affecting the remittance of dividends, interest, royalties or similar payments to non-resident holders of Mogo's securities, although there may be Canadian and other foreign tax considerations. See “Item 10 - Additional Information — E. Taxation”.
Certain Canadian Federal Income Tax Information for Non-Canadian Holders
The following summarizes the principal Canadian federal income tax considerations generally applicable to the holding and disposition of our common shares by a beneficial owner of common shares who, for the purposes of the Income Tax Act (Canada) and the regulations thereto (the “Tax Act”), and at all relevant times, (1) is not, or is deemed not to be, resident in Canada, (2) deals at arm’s length with and is not affiliated with us, (3) holds such shares as capital property and does not use or hold, and is not deemed to use or hold, such shares in the course of carrying on, or otherwise in connection with, a business in Canada and (4) has not entered into and will not enter into, with respect to the common shares a “derivative forward agreement” as that term is defined in the Tax Act (hereinafter, a “Non-Canadian Holder”). Special rules, which are not discussed in this summary, apply to a Non-Canadian Holder that is an insurer carrying on an insurance business in Canada and elsewhere.
This summary is based on the current provisions of the Tax Act, the Canada-United States Tax Convention (1980), as amended (the “Treaty”), all proposed amendments to the Tax Act and the Treaty publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof, and our understanding of the current published administrative policies and assessing practices of the Canada Revenue Agency (“CRA”). It has been assumed that all such proposed amendments will be enacted as proposed and that there will be no other relevant change in any governing law or administrative policy or assessing practice, whether by legislative, administrative or judicial action, although no assurances can be given in this respect. This summary does not take into account Canadian provincial, U.S. federal, state or other foreign income tax law or practice.
Subject to certain exceptions that are not discussed in this summary, for the purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of common shares must be determined in Canadian dollars based on the rate of exchange quoted by the Bank of Canada on the date such amount first arose or such other rate of exchange as may be acceptable to CRA.
87
This summary is of a general nature only and is not, and is not intended to be, legal or tax advice to any particular holder. This summary is not exhaustive of all Canadian federal income tax considerations. Accordingly, holders of common shares are urged to consult their own tax advisors having regard to their own particular circumstances.
Dividends
Dividends paid or credited or deemed to be paid or credited to a Non-Canadian Holder by us will be subject to Canadian withholding tax. The Tax Act imposes withholding tax at a rate of 25%, although such rate may be reduced by virtue of an applicable tax treaty. For example, under the Treaty, where dividends on the common shares are considered to be paid to a Non-Canadian Holder that is the beneficial owner of the dividends and is a U.S. resident for the purposes of, and is entitled to all of the benefits of, the Treaty, or a qualifying person, the applicable rate of Canadian withholding tax is generally reduced to 15% (or to 5% if such Non-Canadian Holder is a qualifying person that is a company that for purposes of Article X(2)(a) of the Treaty owns at least 10% of our voting shares). We will be required to withhold the applicable withholding tax from any dividend and remit it to the Canadian government for the Non-Canadian Holder’s account. A disposition of common shares to us may in certain circumstances result in a deemed dividend.
Disposition
A Non-Canadian Holder will not be subject to Canadian tax under the Tax Act on a capital gain realized on a disposition or deemed disposition of our common shares unless, at the time of disposition, such common shares constitute “taxable Canadian property” to the Non-Canadian Holder for the purposes of the Tax Act and the Non-Canadian Holder is not entitled to relief under an applicable income tax convention between Canada and the country in which the Non-Canadian Holder is resident.
If a common share is listed on a designated stock exchange (which includes the TSX and NASDAQ) at the time it is disposed of, such common share will generally not constitute “taxable Canadian property” to a Non-Canadian Holder unless, at that time or at any particular time within the preceding 60 months,
If a common share is taxable Canadian property to a Non-Canadian Holder that is a qualifying person, any capital gain realized on a disposition or deemed disposition of such share will nevertheless generally not be subject to Canadian federal income tax by virtue of the Treaty if the value of the common share at the time of the disposition or deemed disposition is not derived principally from “real property situated in Canada” for purposes of the Treaty.
A Non-Canadian Holder whose shares may constitute taxable Canadian property is urged to consult with the Non- Canadian Holder’s own tax advisors.
88
United States Federal Income Tax Consequences
The following is a general summary of certain material U.S. federal income tax considerations relevant to a U.S. Holder (as defined below) arising from and relating to the acquisition, ownership, and disposition of common shares.
This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax consequences that may apply to a U.S. Holder arising from and relating to the acquisition, ownership, and disposition of common shares. In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences to such U.S. Holder. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any U.S. Holder. Except as discussed below, this summary does not discuss applicable income tax reporting requirements. This summary does not address the U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non U.S. tax consequences to U.S. Holders of the acquisition, ownership, and disposition of common shares. Each prospective U.S. Holder should consult its own tax advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences relating to the acquisition, ownership, and disposition of common shares.
No legal opinion from U.S. legal counsel or ruling from the Internal Revenue Service (the "IRS") has been requested, or will be obtained, regarding the U.S. federal income tax consequences of the acquisition, ownership, and disposition of common shares. This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, the positions taken in this summary. In addition, because the authorities upon which this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the positions taken in this summary.
Scope of this Summary
Authorities
This summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations (whether final, temporary, or proposed), published rulings of the IRS, published administrative positions of the IRS, the Convention Between Canada and the United States of America with Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended (the "Canada-U.S. Tax Convention"), and U.S. court decisions that are applicable and, in each case, as in effect and available, as of the date of this document. Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive or prospective basis. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted, could be applied on a retroactive or prospective basis.
U.S. Holders
For purposes of this summary, the term "U.S. Holder" means a beneficial owner of common shares acquired pursuant to this Form 20-F that is for U.S. federal income tax purposes:
89
Non-U.S. Holders
For purposes of this summary, a "non-U.S. Holder" is a beneficial owner of common shares that is not a U.S. Holder and is not a partnership for U.S. federal income tax purposes. This summary does not address the U.S. federal income tax consequences to non-U.S. Holders arising from and relating to the acquisition, ownership, and disposition of common shares. Accordingly, a non-U.S. Holder should consult its own tax advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and foreign tax consequences (including the potential application of and operation of any income tax treaties) relating to the acquisition, ownership, and disposition of common shares.
U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed
This summary does not address the U.S. federal income tax considerations applicable to U.S. Holders that are subject to special provisions under the Code, including, but not limited to, the following: (a) U.S. Holders that are tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) U.S. Holders that are financial institutions, underwriters, insurance companies, real estate investment trusts, or regulated investment companies; (c) U.S. Holders that are broker-dealers, dealers, or traders in securities or currencies that elect to apply a mark-to-market accounting method; (d) U.S. Holders that have a "functional currency" other than the U.S. dollar; (e) U.S. Holders that own common shares as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than one position; (f) U.S. Holders that acquired common shares in connection with the exercise of employee stock options or otherwise as compensation for services; (g) U.S. Holders that hold common shares other than as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment purposes); or (h) U.S. Holders that own, have owned or will own (directly, indirectly, or by attribution) 10% or more of the total combined voting power or value of the outstanding shares of the Company. This summary also does not address the U.S. federal income tax considerations applicable to U.S. Holders who are: (a) U.S. expatriates or former long-term residents of the U.S.; (b) persons that have been, are, or will be a resident or deemed to be a resident in Canada for purposes of the Tax Act; (c) persons that use or hold, will use or hold, or that are or will be deemed to use or hold common shares in connection with carrying on a business in Canada; (d) persons whose common shares constitute "taxable Canadian property" under the Tax Act; or (e) persons that have a permanent establishment in Canada for the purposes of the Canada-U.S. Tax Convention. U.S. Holders that are subject to special provisions under the Code, including, but not limited to, U.S. Holders described immediately above, should consult their own tax advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of common shares.
If an entity or arrangement that is classified as a partnership for U.S. federal income tax purposes holds common shares, the U.S. federal income tax consequences to such entity and the partners (or other owners) of such partnership generally will depend on the activities of the partnership and the status of such partners. This summary does not address the tax consequences to any such owner. Partners of entities or arrangements that are classified as partnerships for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences arising from and relating to the acquisition, ownership, and disposition of common shares.
Ownership and Disposition of Common Shares The following discussion is subject in its entirety to the rules described below under the heading “Passive Foreign Investment Company Rules.”
90
Taxation of Distributions
A U.S. Holder that receives a distribution, including a constructive distribution, with respect to a common share will be required to include the amount of such distribution in gross income as a dividend (without reduction for any Canadian or foreign income tax withheld from such distribution) to the extent of the current or accumulated "earnings and profits" of the Company, as computed for U.S. federal income tax purposes. To the extent that a distribution exceeds the current and accumulated "earnings and profits" of the Company, such distribution will be treated first as a tax-free return of capital to the extent of a U.S. Holder's tax basis in the common shares and thereafter as gain from the sale or exchange of such common shares (see "Sale or Other Taxable Disposition of Common Shares" below). However, the Company may not maintain the calculations of earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder should therefore assume that any distribution by the Company with respect to the common shares will constitute ordinary dividend income. Dividends received on common shares generally will not be eligible for the "dividends received deduction" available to U.S. corporate shareholders receiving dividends from U.S. corporations.
Subject to applicable limitations and provided the Company is eligible for the benefits of the Canada - U.S. Tax Convention or the common shares are readily tradable on a United States securities market, dividends paid by the Company to non-corporate U.S. Holders, including individuals, generally will be eligible for the preferential tax rates applicable to long-term capital gains for dividends provided certain holding period and other conditions are satisfied, including that the Company not be classified as a PFIC in the tax year of distribution or in the preceding tax year. The dividend rules are complex, and each U.S. Holder should consult its own tax advisor regarding the application of such rules.
Sale or Other Taxable Disposition of Common Shares
A U.S. Holder will recognize gain or loss on the sale or other taxable disposition of common shares in an amount equal to the difference, if any, between (a) the amount of cash plus the fair market value of any property received and (b) such U.S. Holder's tax basis in such common shares sold or otherwise disposed of. Any such gain or loss generally will be capital gain or loss, which will be long-term capital gain or loss if, at the time of the sale or other disposition, such common shares are held for more than one year.
Preferential tax rates apply to long-term capital gains of non-corporate U.S. Holders. There are currently no preferential tax rates for long-term capital gains of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations under the Code. A U.S. Holder's tax basis in common shares generally will be such U.S. Holder's U.S. dollar cost for such common shares, which if the consideration is paid in Canadian dollars, is determined under the principles described in “Receipt of Foreign Currency” below.
Passive Foreign Investment Company Rules
Based on the market price of our Common Shares and the composition of our income and assets, including goodwill, we do not expect to be treated as a PFIC for U.S. federal income tax purposes for the current taxable year ending December 31, 2023. However, this is a factually determination that must be made annually after the close of each taxable year, and the application of the PFIC rules is subject to uncertainty in several respects. Moreover, the value of our assets for the purposes of the PFIC determination will generally be determined by reference to the market price of our Common Shares, which could fluctuate significantly.
91
Therefore, there can be no assurance that we are not a PFIC for the current taxable year or will not be classified as a PFIC in the future.
For purposes of the PFIC provisions, “gross income” is determined using U.S. federal income tax principles and generally includes sales revenues less cost of goods sold, plus income from investments and from incidental or outside operations or sources and “passive income” generally includes dividends, interest, royalties and rents (other than royalties and rents derived in the active conduct of a trade or business and not derived from a related person). The “value of our assets” generally is determined based on fair value at each quarter. If we own at least 25% (by value) of the stock of another corporation, we will be treated, for purposes of the PFIC tests, as owning our proportionate share of the other corporation’s assets and receiving our proportionate share of the other corporation’s income.
If we are a PFIC for any taxable year during which a U.S. Holder holds our Common Shares, the U.S. Holder will be subject to special tax rules with respect to any “excess distribution” received and any gain realized from a sale or other disposition, including a pledge, of our common shares. Distributions received in a taxable year that are greater than 125% of the average annual distributions received during the shorter of the three preceding taxable years or a U.S. Holder’s holding period for the common shares will be treated as excess distributions. Under these special tax rules:
U.S. Holders will be required to file IRS Form 8621 if they hold our Common Shares in any year in which we are classified as a PFIC.
If we are a PFIC for any year during which a U.S. Holder holds Common Shares, we will generally continue to be treated as a PFIC with respect to such holder for all subsequent years during which such common shares continue to be held, even if we cease to meet the threshold requirements for PFIC status. U.S. Holders should consult with their own tax advisors regarding the availability of a “deemed sale” election that in certain circumstances would allow such holder to terminate PFIC status with respect to such common shares.
If we are a PFIC for any taxable year during which a U.S. Holder holds our Common Shares and any of our non-U.S. subsidiaries is also a PFIC, or a lower-tier PFIC, a U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules on (i) excess distributions by the lower-tier PFIC, and (ii) a disposition of shares of a lower-tier PFIC, in each case as if the U.S. Holder held such shares directly, even though the holders have not received the proceeds of those distributions or dispositions directly. U.S. Holders are urged to consult their tax advisors about the application of the PFIC rules to any of our subsidiaries.
92
In lieu of being subject to the excess distribution rules discussed above with respect to our Common Shares (but not with respect to any lower-tier PFIC), a U.S. Holder may make an election to include gain on the stock of a PFIC as ordinary income under a mark-to-market method, provided that such stock is regularly traded on a qualified exchange. Our common shares will be treated as “regularly traded” in any calendar year in which more than a de minimis quantity of such shares are traded on a qualified exchange on at least 15 days during each calendar quarter of such year. Nasdaq, on which the common shares are traded, is a qualified exchange for this purpose.
If a U.S. Holder makes an effective mark-to-market election, it will include in each year we are a PFIC as ordinary income the excess of the fair market value of such U.S. Holder’s common shares at the end of the year over the U.S. Holder’s adjusted tax basis in the common shares. A U.S. Holder will be entitled to deduct as an ordinary loss in each such year the excess of the U.S. Holder’s adjusted tax basis in the Common Shares over their fair market value at the end of the year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. If a U.S. Holder makes an effective mark-to-market election, any gain the U.S. Holder recognizes upon the sale or other disposition of its common shares of in a year that we are a PFIC we will be treated as ordinary income and any loss will be treated as ordinary loss, but only to the extent of the net amount of previously included income as a result of the mark-to-market election.
A U.S. Holder’s adjusted tax basis in its common shares will be increased by the amount of any income inclusion and decreased by the amount of any deductions under the mark-to-market rules. If a U.S. Holder makes a mark-to-market election, it will be effective for the taxable year for which the election is made and all subsequent taxable years that we are a PFIC unless the common shares are no longer regularly traded on a qualified exchange or the IRS consents to the revocation of the election. U.S. Holders are urged to consult their tax advisors about the availability of the mark-to-market election, and whether making the election would be advisable in their particular circumstances.
Alternatively, a U.S. Holder may avoid the rules described above by electing to treat us (and any lower-tier PFIC) as a “qualified electing fund,” or QEF, under Section 1295 of the Code. A QEF election requires a U.S. Holder to include currently in income each year its pro rata share of a PFIC’s ordinary earnings and net capital gains, regardless of whether or not such ordinary earnings and gains are actually distributed. Thus, a U.S. Holder could have a tax liability with respect to such ordinary earnings or gains without a corresponding receipt of cash. A U.S. Holder’s basis in the shares of a QEF will be increased to reflect the amount of the taxed but undistributed income. Distributions of income that had previously been taxed will result in a corresponding reduction of basis in the shares and will not be taxed again as a distribution to the U.S. Holder. In addition, a U.S. Holder will recognize capital gain or loss on the disposition of common shares in an amount equal to the difference between the amount realized and the holder’s adjusted tax basis in the Common Shares. To make a QEF election, a U.S. Holder will need to have an annual information statement from the PFIC setting forth the earnings and capital gains for the year. U.S. Holders should consult their own tax advisors as to the consequences of making a protective QEF election or other consequences of the QEF election. Upon request of a U.S. Holder, we will provide the information necessary for a U.S. Holder to make the QEF election. However, no assurance can be given that such QEF information will be available for any lower-tier PFIC that we do not control. U.S. Holders are urged to consult their tax advisors concerning the United States federal income tax consequences of holding our common shares if we are considered a PFIC in any taxable year.
Additional Considerations
Additional Tax on Passive Income
93
Individuals, estates and certain trusts whose income exceeds certain thresholds will be required to pay a 3.8% Medicare surtax on "net investment income" including, among other things, dividends and net gain from disposition of property (other than property held in certain trades or businesses). Special rules apply to PFICs. U.S. Holders should consult with their own tax advisors regarding the effect, if any, of this tax on their ownership and disposition of Common Shares.
Receipt of Foreign Currency
The amount of any distribution paid in Canadian dollars to a U.S. Holder in connection with the ownership of the Common Shares, or on the sale, exchange or other taxable disposition of Common Shares, will be included in the gross income of a U.S. Holder as translated into U.S. dollars calculated by reference to the exchange rate prevailing on the date of actual or constructive receipt of the payment, regardless of whether the Canadian dollars are converted into U.S. dollars at that time. If the Canadian dollars received are not converted into U.S. dollars on the date of receipt, a U.S. Holder will have a basis in the Canadian dollars equal to their U.S. dollar value on the date of receipt. Any U.S. Holder who receives payment in Canadian dollars and engages in a subsequent conversion or other disposition of the Canadian dollars may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally will be U.S. source income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method with respect to foreign currency. Each U.S. Holder should consult its own U.S. tax advisor regarding the U.S. federal income tax consequences of receiving, owning, and disposing of Canadian dollars, including the possibility for an accrual taxpayer to make an election to recognize foreign currency gain or loss on the purchase or sale of common shares on the settlement date of such purchase or sale.
Foreign Tax Credit
Subject to the PFIC rules discussed above, a U.S. Holder that pays (whether directly or through withholding) Canadian income tax with respect to dividends paid on the Common Shares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such Canadian income tax paid. Generally, a credit will reduce a U.S. Holder's U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holder's income subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.
Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder's U.S. federal income tax liability that such U.S. Holder's "foreign source" taxable income bears to such U.S. Holder's worldwide taxable income. In applying this limitation, a U.S. Holder's various items of income and deduction must be classified, under complex rules, as either "foreign source" or "U.S. source." Generally, dividends paid by a foreign corporation should be treated as foreign source for this purpose, and gains recognized on the sale of stock of a foreign corporation by a U.S. Holder should be treated as U.S. source for this purpose, except as otherwise provided in an applicable income tax treaty, and if an election is properly made under the Code. However, the amount of a distribution with respect to the common shares that is treated as a "dividend" may be lower for U.S. federal income tax purposes than it is for Canadian federal income tax purposes, resulting in a reduced foreign tax credit allowance to a U.S. Holder. In addition, this limitation is calculated separately with respect to specific categories of income. Certain Treasury Regulations that apply to non-U.S. income taxes paid or accrued in taxable years beginning on or after December 28, 2021 further restrict the ability of any such credit based on the nature of the tax imposed by the non-U.S. jurisdiction, although the IRS has provided temporary relief from the application of certain aspects of these regulations until new guidance or regulations are issued. The foreign tax credit rules are complex, and each U.S. Holder should consult its own U.S. tax advisor regarding the foreign tax credit rules.
94
Special rules apply to the amount of foreign tax credit that a U.S. Holder may claim on a distribution from a PFIC. Subject to such special rules, non-U.S. taxes paid with respect to any distribution in respect of stock in a PFIC are generally eligible for the foreign tax credit. The rules relating to distributions by a PFIC and their eligibility for the foreign tax credit are complex, and a U.S. Holder should consult its own tax advisor regarding their application to the U.S. Holder.
Backup Withholding and Information Reporting
Under U.S. federal income tax law and Treasury Regulations, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a non-U.S. corporation. For example, U.S. return disclosure obligations (and related penalties) are imposed on U.S. Holders that hold certain specified foreign financial assets in excess of certain threshold amounts. The definition of "specified foreign financial assets" includes not only financial accounts maintained in foreign financial institutions, but also, if held for investment and not in an account maintained by certain financial institutions, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person and any interest in a foreign entity. U.S. Holders may be subject to these reporting requirements unless their common shares are held in an account at certain financial institutions. Penalties for failure to file certain of these information returns are substantial. U.S. Holders should consult with their own tax advisors regarding the requirements of filing information returns on IRS Form 8938, and, if applicable, filing obligations relating to the PFIC rules, including possible reporting on IRS Form 8621.
Payments made within the U.S. or by a U.S. payor or U.S. middleman of (a) distributions on the common shares, and (b) proceeds arising from the sale or other taxable disposition of common shares generally will be subject to information reporting. In addition, backup withholding, currently at a rate of 24% for the 2018 to 2025 tax years (increasing to 28% for tax years after 2025), may apply to such payments if a U.S. Holder (a) fails to furnish such U.S. Holder's correct U.S. taxpayer identification number (generally on IRS Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding. Certain exempt persons generally are excluded from these information reporting and backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the U.S. backup withholding rules will be allowed as a credit against a U.S. Holder's U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS in a timely manner. The information reporting and backup withholding rules may apply even if, under the Canada-U.S. Tax Convention, payments are exempt from the dividend withholding tax or otherwise eligible for a reduced withholding rate.
This discussion of reporting requirements set forth above is not intended to constitute an exhaustive description of all reporting requirements that may apply to a U.S. Holder. A failure to satisfy certain reporting requirements may result in an extension of the time period during which the IRS can assess a tax, and under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting requirements. Each U.S. Holder should consult its own tax advisor regarding the information reporting and backup withholding rules.
THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL U.S. TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE OWNERSHIP AND DISPOSITION OF COMMON SHARES. U.S. HOLDERS SHOULD
95
CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR PARTICULAR CIRCUMSTANCES.
Not applicable.
Not applicable.
Any statement in this annual report on Form 20-F about any of our contracts or other documents is not exhaustive. If the contract or document is filed as an exhibit to this annual report on Form 20-F or is incorporated herein by reference thereto, the contract or document is deemed to modify our description. You must review the exhibits themselves for a complete description of the contract or document. This means that we can disclose important information to you by referring you to a document included as an exhibit or another document filed separately with the SEC. The information incorporated by reference is considered to be part of this annual report on Form 20-F.
You may access this annual report on Form 20-F, including exhibits and schedules, on our website at www.mogo.ca or request a copy by email to Legal@mogo.ca. You may also read and copy reports, statements or other information that we file with or furnish to the SEC, including exhibits and schedules filed with this annual report on Form 20-F at the SEC's public reference facilities in Room 1580, 100 F Street, N.E., Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. You may access the documents we file with or furnish to the SEC at that website. These SEC filings are also available to the public from commercial document retrieval services.
We also file reports, statements and other information with the CSA through SEDAR, and these can be accessed electronically at www.sedar.com.
You may access other information about Mogo on our website at www.mogo.ca.
Information provided on our website is not part of this report, and is not incorporated herein by reference unless otherwise specifically referenced as such in this report.
Not applicable.
96
ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments that could be affected by market risk include cash, investment portfolio, credit facilities, debentures, derivative financial assets and derivative financial liabilities.
Interest rate risk
Changes in market interest rates may have an effect on the cash flows associated with some financial assets and liabilities, known as cash flow risk, and on the fair value of other financial assets or liabilities, known as price risk. The Company is exposed to interest rate risk primarily relating to its credit facility that bear interest fluctuating with the Secured Overnight Financing Rate (“SOFR”). The credit facility does not have a SOFR floor. As at December 31, 2023, SOFR is 5.38% (December 31, 2022 – LIBOR 4.32%). For the year ended December 31, 2023, a 100-basis point change in SOFR would increase or decrease credit facility interest expense by $386,000 (December 31, 2022 – $515,000). The debentures have fixed rates of interest and are not subject to variability in cash flows due to interest rate risk.
A fundamental reform of major interest rate benchmarks (the "Reform") was undertaken in 2023. The USD LIBOR ceased to be published in June 2023 for all USD LIBOR tenors. Management has performed an assessment on the impact of the Reform and has determined that the Company only has exposure to the Reform through its credit facility and the nature of the risks are operational and financial. Operational risk includes ensuring proper contractual terms are in place and engagement with the credit facility lender on the progress and impact of their own transition. Financial risk includes the impact on the economics of the financial instruments.
Currency risk
Currency risk is the risk that changes in foreign exchange rates may have an effect on future cash flows associated with financial instruments. The Company is primarily exposed to foreign currency risk on the following financial instruments denominated in U.S. dollars. As at December 31, 2023, a 5% increase or decrease in the U.S. dollar exchange rate would increase or decrease the unrealized exchange gain (loss) by $123,000 (December 31, 2022 – $314,000).
|
|
As at |
|
|||||
($000 USD) |
|
December 31, |
|
|
December 31, |
|
||
Cash |
|
|
38 |
|
|
|
3,553 |
|
Investment portfolio |
|
|
5,813 |
|
|
|
5,958 |
|
Derivative financial liabilities |
|
|
(26 |
) |
|
|
(310 |
) |
Debentures |
|
|
(3,971 |
) |
|
|
(4,562 |
) |
Other price risk
Other market price risk is the risk that the fair value of the financial instrument will fluctuate as a result of changes in market prices (other than those arising from interest rate risks or currency risk), whether caused by factors specific to an individual investment or its issuers or factors affecting all instruments traded in the market.
97
The investment portfolio comprises of non-listed closely held equity instruments which have minimal exposure to market prices. The valuation of the investment portfolio is conducted on a quarterly basis.
ITEM 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
Not applicable.
Not applicable.
None.
98
PART II
ITEM 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14: MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
A.-E.
Not applicable
99
ITEM 15: CONTROLS AND PROCEDURES
Our management, with the participation of our CEO and CFO, has performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as required by Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our management has concluded that, as of the end of the period covered by this annual report, our disclosure controls and procedures were effective in ensuring that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act was recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms, and that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosures.
The Company’s management is responsible for establishing and maintain adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Our internal control over financial reporting includes those policies and procedures that:
● pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
● provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with IFRS, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors;
● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.
All internal controls over financial reporting, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023 using the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2023.
This annual report does not include an attestation report of the company’s registered public accounting firm as the Company is not an accelerated or large accelerated filer.
Not applicable.
100
Management has evaluated, with the participation of our CEO and CFO, whether any changes in our internal control over financial reporting that occurred during our last fiscal year have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. There have been no material changes to the internal controls over financial reporting during the period covered by the annual report.
101
ITEM 16: [RESERVED]
The Board has considered the extensive financial experience of Ms. McAlister, Mr. Payne and Mr. van Winters and has determined that each is (i) financially literate in accordance with NI 52-110 and Rule 10A-3 under the Exchange Act, and (ii) an independent director as that term is defined by the applicable Canadian and SEC rules and in the Nasdaq Stock Market Rules.
Specifically, for the purposes of NI 52‑110, an individual is financially literate if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the issuer’s financial statements. Additionally, at least one member of the Audit Committee must be an “audit committee financial expert” as defined by the SEC. All members of the Audit Committee have experience reviewing financial statements and dealing with related accounting and auditing issues. See “Item 6. Directors, Senior Management and Employees – A. Directors and Senior Management" for the education and experience of each member of the Audit Committee relevant to the performance of his duties as a member of the Audit Committee.
Mogo has adopted a Code of Business Conduct and Ethics that applies to all officers, employees, contractors, and members of the Board (the “Code of Conduct”) that complies with Nasdaq Stock Market Rules. The Code of Conduct includes, among other things, written standards for the Company’s principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions, which are required by the SEC for a code of ethics applicable to such officers. A copy of the Code of Conduct can be accessed electronically at https://investors.mogo.ca/corporate-governance.
The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by KPMG LLP in 2023 and 2022, for the periods indicated. We did not pay any other fees to our auditors during the periods indicated below.
|
Year ended |
|
|
December 31, 2023 |
December 31, 2022 |
Audit Fees1 |
$1,235,850 |
$1,472,220 |
Audit Related Fees2 |
– |
– |
Tax Fees3 |
$155,492 |
$187,547 |
All Other Fees4 |
$30,896 |
– |
Total Fees Paid5 |
$1,422,238 |
$1,659,767 |
(1) “Audit fees” means the aggregate fees billed for professional services rendered by our principal auditors for the annual audit of our consolidated financial statements.
(2) “Audit related fees” represents the aggregate fees billed for assurance and related services by our principal auditors that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported as audit fees.
(3) “Tax fees” of 2023 and 2022 were for services rendered by our principal accountants for tax compliance, tax advice and tax planning.
(4) “All other fees” refers to the routine consulting services.
102
(5) "Total fees paid" are inclusive of GST Under its charter, the Audit Committee is required to pre‑approve all audit and non‑audit services to be performed by the external auditors in relation to the Company, including audit services, audit-related services, tax services and other services as described above, other than those for de minimis services or routine advisory work as required by management during the year. The Audit Committee is also required to approve the engagement letter for all non‑audit services and estimated fees thereof, other than those for de minimis services or routine advisory work as required by management during the year. The pre‑approval process for non‑audit services will also involve a consideration of the potential impact of such services on the independence of the external auditors. The Audit Committee has also established an External Auditor Hiring Policy.
Not applicable.
Mogo’s Board of Directors approved a share repurchase program in March 2022 with authorization to purchase up to US$10 million of common shares. Mogo may repurchase shares from time to time through open market purchases, in privately negotiated transactions or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The actual timing and amount of future repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors. The share repurchase program does not obligate Mogo to acquire any particular amount of common stock, and the program may be suspended or terminated at any time by Mogo at any time at its discretion without prior notice.
Issuer purchase of equity securities
Period |
(a) Total Number of Common Shares purchased |
(b) Average Price Paid per Common Share |
(c) Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs |
(d) Maximum Number (or Approximate Dollar Value) of Common Shares that May Yet Be Purchased Under the Plans or Programs |
January 1 – 31, 2023 |
- |
- |
- |
- |
February 1 – 28, 2023 |
- |
- |
- |
- |
March 1 – 31, 2023 |
- |
- |
- |
- |
April 1 – 30, 2023 |
- |
- |
- |
- |
May 1 – 31, 2023 |
8,261 |
US$2.11 |
8,261 |
US$8,793,382 |
June 1– 30, 2023 |
111,693 |
US$2.11 |
111,693 |
US$8,548,804 |
July 1 – 31, 2023 |
- |
- |
- |
- |
August 1 – 31, 2023 |
106,902 |
US$1.84 |
106,902 |
US$8,349,317 |
September 1 – 30, 2023 |
27,600 |
US$1.53 |
27,600 |
US$8,306,284 |
October 1 – 31, 2023 |
- |
- |
- |
- |
November 1 – 30, 2023 |
115,853 |
US$1.27 |
115,853 |
US$8,157,067 |
December 1 – 31, 2023 |
104,044 |
US$1.66 |
104,044 |
US$7,982,185 |
103
Not applicable.
As a British Columbia corporation listed on Nasdaq, we are not required to comply with certain Nasdaq corporate governance standards. Section 5615(a)(3) of the Nasdaq Stock Market Rules permits Nasdaq to grant exemptions to a foreign private issuer for certain provisions of the Rule 5600 series, Rule 5250(b)(3) and Rule 5250(d). We are organized under the laws of British Columbia, Canada and our Common Shares are listed for trading on the TSX. We comply with the applicable laws of Canada and rules and regulations of the TSX, including rules related to corporate governance practices. A description of the significant ways in which our corporate governance practices differ from those followed by U.S. domestic companies pursuant to the Nasdaq Stock Market Rules is as follows:
Shareholder Meeting Quorum Requirement
The Nasdaq minimum quorum requirement for a shareholder meeting under Section 5620(c) of the Nasdaq Stock Market Rules is one-third of the outstanding shares of common voting stock. In addition, a company listed on Nasdaq is required to state a quorum requirement in its by-laws. Our quorum requirement is set forth in our articles. A quorum for our shareholder meeting is two persons, who are, or who represent by proxy, shareholders who, in the aggregate hold at least 25% of the issued shares of the Company entitled to be voted at the meeting (subject to the special rights or restrictions attached to the shares of any class or series of our shares).
Shareholder Approval Exemption
Section 5635 of the Nasdaq Stock Market Rules sets forth circumstances under which shareholder approval is required prior to certain types of security issuances. Pursuant to the Nasdaq Stock Market Rules, a company must receive prior shareholder approval for transactions involving: (1) the sale, issuance or potential issuance by a listed company of its common stock (or securities convertible into or exercisable for its common stock) (i) at a price less than the greater of book value or market value, and (ii) which together with sales by officers, directors, or substantial stockholders, is equal to 20% or more of the company’s shares of common stock or 20% or more of the voting power outstanding before the issuance; or (2) the sale, issuance or potential issuance by a listed company of common stock (or securities convertible into or exercisable common stock) (i) at a price less than the greater of book value or market value, and (ii) is equal to 20% or more of the company’s shares of common stock or 20% or more of the voting power outstanding before the issuance. In the event of an issuance meeting the criteria set forth above, we may not be required to seek prior shareholder approval under applicable Canadian law and the rules of the TSX, and, if that is the case, we will submit a certification to Nasdaq from independent Canadian counsel to such effect.
The foregoing is consistent with the applicable laws in Canada and the rules of the TSX.
Not applicable.
Not applicable.
104
Not Applicable. Pursuant to applicable SEC transition guidance, the disclosure required by Item 16J will be applicable to Mogo starting the fiscal year ending December 31, 2024.
Risk Management and Strategy
Mogo has established an information security framework that includes policies, procedures and mechanisms to protect against and minimize the impact of a cyberattack. Our strategy includes, but is not limited to, cyber security risk assessment and information security governance programs, information technology safeguards and controls, use of encryption, managing risks related to third-party service providers, vulnerability tests and compliance monitoring, employee training and awareness, and incident response plans.
The Company’s IT & Compliance departments manage the security monitoring and incident program, coordinating with Company engineers, compliance team members and senior management, along with third parties as needed, across our operating companies. All company employees undergo mandatory annual cybersecurity awareness training, which includes topics on the Company’s policies and procedures for reporting potential incidents. The Company evaluates emerging risks, regulations, and compliance matters and updates the policies and procedures accordingly on an ongoing basis.
The Company has a vendor management program that evaluates and oversees cybersecurity risks related to third party vendors providing services to the Company. Security reviews are conducted on third-party service providers with access to personal, confidential, or proprietary information to ensure they meet our security standards.
Third-party consultants and service providers are engaged, where appropriate, to test or otherwise assist with the protection of our information and IT systems and network. The Company is also subject to examinations by applicable regulators.
There can be no assurance that our cyber security risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our systems and information.
Although Mogo has implemented the cybersecurity processes described above and we have not identified any cybersecurity incidents or threats that have materially affected us or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, we remain exposed to cybersecurity incidents which could have a material adverse affect on our business, operations and financial results (see “Item 3. Key Information — D. Risk Factors”).
Cybersecurity Governance
Our board of directors has overall oversight responsibility for our cyber risk management. Mogo’s Chief Operating Officer in charge of operations, oversees the Company’s cybersecurity program and personnel and Mogo’s senior management team is engaged as appropriate in assessing Mogo’s cyber risk tolerance and are informed about and monitor the prevention, detection, mitigation and remediation of cybersecurity incidents.
105
Mogo’s Audit Committee and Board of Directors are informed of cybersecurity matters through quarterly reports from the senior management team.
106
PART III
ITEM 17: FINANCIAL STATEMENTS
Please refer to Exhibit 20.1 for Consolidated Financial Statements for the years ended December 31, 2023, 2022 and 2021 included as part of this Annual Report.
ITEM 18: FINANCIAL STATEMENTS
See “Item 17. Financial Statements."
107
ITEM 19: EXHIBITS
Exhibit Number |
|
Document Description |
1.1 |
|
|
|
|
|
1.2 |
|
|
|
|
|
2.1 |
|
|
|
|
|
2.2 |
|
|
|
|
|
2.3 |
|
|
|
|
|
4.1 |
|
|
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|
|
4.2 |
|
|
|
|
|
4.3 |
|
|
|
|
|
4.4 |
|
|
|
|
|
4.5 |
|
|
|
|
|
8.1 |
|
|
|
|
|
12.1 |
|
108
|
|
|
12.2 |
|
|
|
|
|
13.1 |
|
|
|
|
|
13.2 |
|
|
|
|
|
15.1 |
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20.1 |
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Annual consolidated financial statements for the years ended December 31, 2023, 2022 and 2021 |
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97 |
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109
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
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Mogo Inc. |
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Date: April 30, 2024 |
By: |
/s/ Gregory Feller |
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Name: Gregory Feller |
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Title: President and Chief Financial Officer |
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110
Exhibit 2.1
DESCRIPTION OF REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12(b) OF THE
SECURITIES EXCHANGE ACT OF 1934
As of December 31, 2023, Mogo, Inc. (“Mogo,” the “Company,” “we,” “us” and “our”) had the following series of securities registered pursuant to Section 12(b) of the Securtities and Exchange Act of 1934.
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Common Shares |
MOGO |
The NASDAQ Stock Market LLC |
Description of Common Shares
The following description may not be complete and is subject to, and qualified in its entirety by reference to, the terms and provisions of our articles ("Articles").
Our authorized share capital consists of an unlimited number of Common Shares.
Dividend Policy
The holders of Common Shares are entitled to receive distributions as and when declared from time to time on the Common Shares by Mogo’s board of directors (the “Board”), acting in its sole discretion, out of the Company's assets properly available for the payment of dividends.
The Company intends to reinvest all future earnings in order to finance the development and growth of its business. As a result, the Company does not intend to pay dividends on the Common Shares in the foreseeable future. The declaration of any future dividends by the Board will be dependent on the Company's earnings, liquidity position, financial condition and capital requirements, as well as any other factors deemed relevant by the Board.
Voting
Each Common Share entitles its holder to notice of and to one vote at all meetings of the Company's shareholders. Each Common Share is also entitled to receive dividends if, as and when declared by the Board. Holders of Common Shares are, subject to the rights and priorities of holders of Preferred Shares, entitled to participate in any distribution of the Company's net assets upon liquidation, dissolution or winding-up of the Company on an equal basis per Common Share.
Advance Notice Provisions
We have included certain advance notice provisions with respect to the election of our directors in our Articles (the "Advance Notice Provisions").
The Advance Notice Provisions are intended to: (i) facilitate orderly and efficient annual general meetings or, where the need arises, special meetings; (ii) ensure that all shareholders receive adequate notice of Board nominations and sufficient information with respect to all nominees; and (iii) allow shareholders to register an informed vote. Only persons who are nominated by shareholders in accordance with the Advance Notice Provisions will be eligible for election as directors at any annual meeting of shareholders, or at any special meeting of shareholders if one of the purposes for which the special meeting was called was the election of directors.
Under the Advance Notice Provisions, a shareholder wishing to nominate a director would be required to provide us notice, in the prescribed form, within the prescribed time periods. These time periods include, (i) in the case of an annual meeting of shareholders (including annual and special meetings), not less than 30 days and not more than 65 days prior to the date of the annual meeting of shareholders; provided, that if the first public announcement of the date of the annual meeting of shareholders (the "Notice Date") is less than 50 days before the meeting date, not later than the close of business on the 10th day following the Notice Date; and (ii) in the case of a special meeting (which is not also an annual meeting) of shareholders called for any purpose which includes electing directors, not later than the close of business on the 15th day following the Notice Date.
Right to Receive Liquidation Distributions.
In the event of the liquidation or dissolution of the Company, holders of Common Shares are entitled to receive pro rata all of the assets of the Company remaining for distribution after the distribution to the holders of the Preference shares, in accordance with the preference on liquidation, dissolution or winding-up accorded to the holders of the Preference shares.
No Preemptive or Similar Rights.
Holders of Common Shares have no conversion, preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to the Common Shares.
Exhibit 4.1
‑ 1 ‑
AMENDED AND RESTATED SUBORDINATION AGREEMENT
(THURLOW GUARANTEE)
THIS AMENDED AND RESTATED SUBORDINATION AGREEMENT is made as of the 30th day of September, 2020 between DB FSLF 50 LLC, as agent for and on behalf of itself and each of the other Lenders (as defined below) (the “Agent”), DALE MATHESON CARR-HILTON LABONTE LLP, as trustee for and on behalf of the Holders (as hereafter defined) (the “Trustee”), and MOGO FINANCE TECHNOLOGY INC. (the “Borrower”);
WHEREAS the Agent, the Trustee and the Borrower and entered into a subordination agreement dated as of September 25, 2017 (the “Original Subordination Agreement”);
AND WHEREAS the parties desire to amend and restate the Original Subordination Agreement with effect from the date hereof;
NOW THEREFORE for good and valuable consideration, the receipt and sufficiency of which is hereby irrevocably acknowledged, the parties hereto make the following covenants, acknowledgments and agreements.
Terms used but not defined elsewhere in this Agreement (including the recitals hereto) shall have the following meanings:
30479426.3
‑ 2 ‑
30479426.3
‑ 3 ‑
in each case, on account of the Debentures paid to the Subordinate Parties in accordance with the terms and conditions provided in Section 10 and the Indenture;
30479426.3
‑ 4 ‑
Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. References herein to any Section or Annex shall be to a Section or Annex hereof unless otherwise specifically provided. The use herein of the word “include” or “including,” when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not no limiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. The words “hereof’, “herein”, “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless the context requires otherwise (a) reference to any Person include that Person’s successors and assignees, (b) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements, or modifications set forth herein or therein), and (c) any reference to any law or regulation herein shall refer to such law or regulation as amended, modified or supplemented from time to time.
The Borrower and the Trustee, for itself and on behalf of each other Subordinate Party, hereby covenant and agree that all Subordinate Debt is hereby unconditionally and irrevocably deferred, postponed and subordinated in all respects to the prior indefeasible repayment in full by the Borrower of all the Senior Debt. The Borrower and the Trustee, for itself and on behalf of each other Subordinate Party, hereby covenant and agree that all Subordinate Security is hereby unconditionally and irrevocably deferred, postponed and subordinated in all respect to the Senior Security. Without limiting the generality of the foregoing, the deferment, postponement and subordination of the Subordinate Debt and the Subordinate Security contained herein shall be effective notwithstanding:
30479426.3
‑ 5 ‑
Until the Senior Debt has been indefeasibly paid in full and the Credit Agreement has been terminated, other than Permitted Payments, no direct or indirect distribution, payment (including, but not limited to, principal, interest, premiums and fees), prepayment or repayment on account of, or other distribution in respect of, the Subordinate Debt shall be made by, or on behalf of, the Borrower or received by, or on behalf of, any Subordinate Party. Any such payment made shall constitute an immediate “Event of Default” (as defined in the Credit Agreement) and shall be subject to the trust provisions of Section 11 hereof.
No Subordinate Party shall take any steps whatsoever to enforce the Subordinate Security or to enforce payment of the Subordinate Debt (including, without limitation, notice of default, demand for payment, rights of set-off, commencement of bankruptcy proceedings, foreclosure, sale, power of sale, taking of possession, giving in payment, appointing or making application to a court for an order appointing an agent or a receiver or receiver-manager by any other means of enforcement thereof) unless, prior to the taking of any such steps, the Senior Debt has been indefeasibly paid in full and the Credit Agreement has been terminated.
The Trustee, for itself and on behalf of each other Subordinate Party, covenants in favour of the Senior Parties that during the term of this Agreement it will not take or accept from the Borrower or rely upon any security for the payment of or performance of the Subordinate Debt other than the Subordinate Security delivered to the Trustee prior to the date hereof. The Borrower covenants in favour of the Senior Parties that during the term of this Agreement it will not provide to any Subordinate Party any security for the payment of or performance of the Subordinate Debt other than the Subordinate Security provided to the Trustee prior to the date hereof. The Trustee, for itself and on behalf of each other Subordinate Party, represents and warrants that as of the date hereof the only security that the Subordinate Parties have received from the Borrower is attached at Annex A.
No Subordinate Party shall take, or cause or permit any other Person to take on its behalf, any steps whatsoever whereby the priority, perfection or validity of any of the Senior Security or the rights of the Senior Parties hereunder, under the Credit Agreement or under any other Credit Document shall be delayed, defeated, impaired or diminished, and without limiting the generality of the foregoing, no Subordinate Party shall challenge, object to, compete with or impede in any manner any act taken or proceeding commenced by any of the Senior Parties in connection with the enforcement by the Agent or the Lenders of the Senior Security.
30479426.3
‑ 6 ‑
The Trustee, for itself and on behalf of each other Subordinate Party, and the Borrower acknowledge that all and every part of the Senior Security is held by the Agent or the Lenders as security for all and every part of the Senior Debt and the Senior Parties may apply as a permanent reduction any monies received, whether from the enforcement of and realization upon any or all of the Senior Security or otherwise, to any part of the Senior Debt as the Senior Parties, in their sole discretion, may determine appropriate in accordance with the provisions of the Credit Agreement.
30479426.3
‑ 7 ‑
Notwithstanding any other provisions of this Agreement, the parties agree that the Borrower may make and the Subordinate Parties may receive Permitted Payments on account of the Debentures in accordance with the terms thereof, provided that if the Agent has provided notice to each of the Trustee and the Borrower confirming that the Borrower has defaulted in respect of or breached any of its obligations under Section 6.13, 7.1(a), 7.1(o) or 7.1(p) of the Credit Agreement or that such a default or breach would result from the payment of any Permitted Payment (regardless of whether a cure period exists in respect of such default or breach), then the Borrower will not make, and the Subordinate Parties will not accept, any payment to the Subordinate Parties as contemplated in this Section 10 unless and until the Agent, in its absolute discretion, notifies the Trustee and the Borrower that the Borrower may resume such interest payments, or the applicable default of breach has been cured to the satisfaction of the Agent acting in good faith. Any payment received by the Subordinate Parties in contravention of this Section 10 shall be received in trust for the Agent and shall be paid over to the Agent forthwith upon receipt.
30479426.3
‑ 8 ‑
If, prior to the indefeasible payment in full of the Senior Debt, any Subordinate Party or any Person on its behalf shall receive any payment from or distribution of assets of the Borrower or on account of the Subordinate Debt, other than Permitted Payments, then such Subordinate Party shall, and shall cause such other Person to, receive and hold such payment or distribution in trust for the benefit of the Senior Parties and promptly pay the same over or deliver to the Agent in precisely the form received by such Subordinate Party or such other Person on its behalf (except for any necessary endorsement or assignment) and such payment or distribution shall be applied by the Agent to the repayment of the Senior Debt.
The Senior Parties shall be entitled to deal with the Senior Security as they see fit and nothing herein shall prevent, restrict or limit the Agent or the Lenders in any manner from exercising all or any part of their rights and remedies otherwise permitted by applicable law upon any default under the Senior Security. Without limiting the generality of the foregoing:
30479426.3
‑ 9 ‑
30479426.3
‑ 10 ‑
Each Subordinate Party agrees that the Senior Parties have made no representations or warranties with respect to the due execution, legality, validity, completeness or enforceability of any agreement or instrument relating to the Credit Agreement or the Senior Debt or the collectability of the Senior Debt, that the Senior Parties shall be entitled to manage and supervise their loans and other financial accommodation to the Borrower in accordance with applicable law and their usual practices, modified from time to time as they deem appropriate in their sole discretion, or otherwise, without regard to the existence of any rights that any Subordinate Party may now or hereafter have in or to any of the assets of the Borrower, and that the Senior Parties shall have no liability to the Subordinate Parties for, and the Trustee, for itself and on behalf of each other Subordinate Party, hereby waives any claims which any Subordinate Party may now or hereafter have against the Senior Parties out of, any and all actions which the Agent or the Lenders take or omit to take (including, without limitation, actions with respect to the creation, perfection or continuation of liens or security interest in any assets at any time securing payment of the Senior Debt, actions with respect to the occurrence of any default under any agreement or instrument relating to the Senior Debt, action with respect to the release or depreciation of, or failure to realize upon, any assets securing payment of the Senior Debt and actions with respect to the collection of any claims or all or any part of the Senior Debt from any account debtor, guarantor or any other Person) with respect to the Senior Debt and any agreement or instrument related thereto or with respect to the collection of the Senior Debt or the valuation, use, protection or release of any assets securing payment of the Senior Debt.
This Agreement shall remain in full force and effect without regard to, and the obligations of the Subordinate Parties hereunder shall not be released or otherwise affected or impaired by:
30479426.3
‑ 11 ‑
Each of the Trustee and the Borrower represents and warrants that attached hereto as Annex A are true and complete copies of the Indenture, Debentures, the Guarantee and Subordinate Debt Security. Without the prior written consent of the Agent, neither the Indenture nor any Debentures or Subordinate Security shall be amended, supplemented or otherwise modified. Each of the Trustee and the Borrower represents and warrants that as of the date hereof, the aggregate principal amount, with accrued interest, of the Subordinated Debt is CDN $18,175,174.00 and that no default exists in respect of the Subordinated Debt.
The Trustee hereby represents and warrants to the Senior Parties that it has been authorized and directed by extraordinary resolution of the Holders and has the power and capacity under the terms of the Indenture to execute and deliver this Agreement for and on behalf of the Holders.
30479426.3
‑ 12 ‑
For purposes of this Agreement, the Senior Debt shall be considered to be paid in full when no further amounts are owing to the Senior Parties and all obligations of the parties under the Credit Agreement and each other Credit Document have been terminated.
The Borrower covenants in favour of the Senior Parties that it will promptly deliver to the Agent a certified copy of any instrument evidencing the Subordinate Debt to which it becomes a party.
Nothing in this Agreement shall create any rights in favour of the Borrower and the covenants and agreements of the Senior Parties and the Subordinate Parties shall not be enforceable by the Borrower. No consent of the Borrower shall be necessary for any amendment to this Agreement by the Senior Parties and the Subordinate Parties in order to have effect as between the Senior Parties and the Subordinate Parties.
Until payment in full to the Senior Parties of the Senior Debt and the Credit Agreement has been terminated, the Trustee, for itself and on behalf of each other Subordinate Party, hereby irrevocably waives any claim or other rights which the Subordinate Parties may now have or may hereafter acquire against the Borrower that arise from the existence, payment, performance or enforcement of the Borrower’s obligations under the Subordinate Debt, including any right of subrogation, reimbursement, exoneration or indemnification, any right to participate in any claim or remedy of the Senior Parties against the Borrower which any Senior Party now has or hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including the right to take or receive from the Borrower, directly or indirectly, in cash or other property or by set-off or in any manner, payment of security on account of such claim or other rights. If any amount shall be paid to any Subordinate Party in violation of the preceding sentence and the Senior Debt shall not have been paid in cash in full, such amount shall be deemed to have been paid to such Subordinate Party for the benefit of, and held in trust for the Senior Parties, and shall forthwith be paid to the Agent to be credited and applied against the Senior Debt, whether matured or unmatured. The Borrower and each of the Subordinate Parties acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Credit Agreement and that the waiver set forth in this paragraph is knowingly made in contemplation of such benefits.
The Subordinate Parties hereby waive any right that they may have to require the Senior Parties to marshal in its favour.
30479426.3
‑ 13 ‑
The parties hereto shall forthwith, and from time to time, execute and do all deeds, documents and things which may be necessary or advisable, in the opinion of the Senior Parties and their counsel, to give full effect to the postponement and subordination of the rights and remedies of the Subordinate Parties in respect to the Subordinate Debt and the Subordinate Security to the rights and remedies of the Senior Parties in respect to the Senior Debt and the Senior Security, all in accordance with the intent of this Agreement. Notwithstanding the delivery for registration or filing of specific postponements or subordinations, this Agreement shall govern the priority between the Senior Security and the Subordinate Security and shall be paramount in that regard.
This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of the Senior Parties. None of the rights or obligations of any Subordinate Party or of the Borrower hereunder nor any interest thereof herein may be assigned or delegated without:
This Agreement contains the entire agreement among the parties hereto with respect to the obligations, liabilities and assets of the Borrower. If any of the provisions of this Agreement shall be held invalid or unenforceable by any court having jurisdiction, this Agreement shall be construed as if not containing those provisions, and the rights and obligations of the parties hereto should be construed and enforced accordingly.
This Agreement shall be governed and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein.
This Agreement shall terminate upon the earlier of:
30479426.3
‑ 14 ‑
This Agreement may be executed in any number of counterparts, which when taken together shall constitute one and the same agreement.
Any notice to be given under this Agreement may be effectively given by delivering (whether by courier or personal delivery) such notice at the address set forth in the signature pages of this Agreement, by sending such notice by prepaid registered mail to such address set out on the signature pages of this Agreement or by electronic mail to the email address set forth in the signature pages of this Agreement. Any notice delivered shall be deemed to have been received upon delivery. Any notice mailed shall be deemed to have been received on the 5th day next following the registered mailing of such notice. Any email notice shall be deemed to have been received on transmission if sent before 4:00 p.m. Toronto time on a Business Day, and, if not, on the next Business Day following transmission.
This Agreement amends and restates in full the Original Subordination Agreement, with effect as of the date hereof. The parties hereto intend the amendments contained herein to be amendments to the Original Subordination Agreement and not to give rise to any novation or rescission of the Original Subordination Agreement, and the parties hereto intend to be governed by the Original Subordination Agreement as amended and not by a new agreement.
[Remainder of Page Intentionally Left Blank]
30479426.3
S‑1
IN WITNESS WHEREOF the parties hereto have executed this agreement as of the date first written above.
DB FSLF 50 LLC, as Agent |
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Address: [Redacted – Personal Information] |
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By: |
/s/Scott Silvers |
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Name: Title: |
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Signature Page to Subordinated Lender Intercreditor Agreement (Thurlow)
30479426.3
S‑2
DALE MATHESON CARR-HILTON LABONTE LLP, as Agent for itself and the Holders |
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Address: [Redacted – Personal Information] |
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By: |
/a/Rakesh Patel |
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Name: Title: |
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Signature Page to Subordinated Lender Intercreditor Agreement (Thurlow)
30479426.3
S‑3
MOGO FINANCE TECHNOLOGY INC., as Borrower |
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Address: [Redacted – Personal Information] |
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By: |
/s/Gregory Feller |
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Name: Title: |
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Signature Page to Subordinated Lender Intercreditor Agreement (Thurlow)
30479426.3
[Redacted]
DOCPROPERTY "CUS_DocIDString" 41685914.1
30479426.3
Exhibit 4.2
‑ 1 ‑
AMENDED AND RESTATED SUBORDINATION AGREEMENT
THIS AMENDED AND RESTATED SUBORDINATION AGREEMENT is made as of the 30th day of September, 2020 between DB FSLF 50 LLC, as agent for and on behalf of itself and each of the other Lenders (as hereafter defined) (the “Agent”), DALE MATHESON CARR-HILTON LABONTE LLP, as trustee for and on behalf of the Holders (as hereafter defined) (the “Trustee”), and MOGO FINANCE TECHNOLOGY INC. (the “Borrower”), and MOGO MORTGAGE TECHNOLOGY INC., MOGO FINANCIAL INC., MOGO FINANCIAL (B.C.) INC., MOGO FINANCIAL (ALBERTA) INC., MOGO FINANCIAL (ONTARIO) INC., HORNBY LOAN BROKERS (OTTAWA) INC., HORNBY LEASING INC., THURLOW MANAGEMENT INC., THURLOW CAPITAL (BC) INC., THURLOW CAPITAL (ALBERTA) INC., THURLOW CAPITAL (ONTARIO) INC., THURLOW CAPITAL (MANITOBA) INC., THURLOW CAPITAL (OTTAWA) INC. AND MOGO TECHNOLOGY INC.
WHEREAS the Agent, the Trustee, the Borrower and Subsidiaries of the Borrower entered into a subordination agreement dated as of September 25, 2017 (the “Original Subordination Agreement”);
AND WHEREAS the parties desire to amend and restate the Original Subordination Agreement with effect from the date hereof;
NOW THEREFORE for good and valuable consideration, the receipt and sufficiency of which is hereby irrevocably acknowledged, the parties hereto make the following covenants, acknowledgments and agreements.
Terms used but not defined elsewhere in this Agreement (including the recitals hereto) shall have the following meanings:
30543752.4
‑ 2 ‑
30543752.4
‑ 3 ‑
in each case, on account of the Debentures paid to the Subordinate Parties in accordance with the terms and conditions provided in Section 10 and the Indenture;
30543752.4
‑ 4 ‑
Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. References herein to any Section or Annex shall be to a Section or Annex hereof unless otherwise specifically provided. The use herein of the word “include” or “including,” when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not no limiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. The words “hereof’, “herein”, “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless the context requires otherwise (a) reference to any Person include that Person’s successors and assignees, (b) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements, or modifications set forth herein or therein), and (c) any reference to any law or regulation herein shall refer to such law or regulation as amended, modified or supplemented from time to time.
The Borrower and each of its Subsidiaries and the Trustee, for itself and on behalf of each other Subordinate Party, hereby covenant and agree that all Subordinate Debt is hereby unconditionally and irrevocably deferred, postponed and subordinated in all respects to the prior indefeasible repayment in full by the Borrower and each of its Subsidiaries of all the Senior Debt. The Borrower and each of its Subsidiaries and the Trustee, for itself and on behalf of each other Subordinate Party, hereby covenant and agree that all Subordinate Security is hereby unconditionally and irrevocably deferred, postponed and subordinated in all respect to the Senior Security. Without limiting the generality of the foregoing, the deferment, postponement and subordination of the Subordinate Debt and the Subordinate Security contained herein shall be effective notwithstanding:
30543752.4
‑ 5 ‑
Until the Senior Debt has been indefeasibly paid in full and the Credit Agreement has been terminated, other than Permitted Payments, no direct or indirect distribution, payment (including, but not limited to, principal, interest, premiums and fees), prepayment or repayment on account of, or other distribution in respect of, the Subordinate Debt shall be made by, or on behalf of, the Borrower or any of its Subsidiaries or received by, or on behalf of, any Subordinate Party. Any such payment made shall constitute an immediate “Event of Default” (as defined in the Credit Agreement) and shall be subject to the trust provisions of Section 11 hereof.
No Subordinate Party shall take any steps whatsoever to enforce the Subordinate Security or to enforce payment of the Subordinate Debt (including, without limitation, notice of default, demand for payment, rights of set-off, commencement of bankruptcy proceedings, foreclosure, sale, power of sale, taking of possession, giving in payment, appointing or making application to a court for an order appointing an agent or a receiver or receiver-manager by any other means of enforcement thereof) unless, prior to the taking of any such steps, the Senior Debt has been indefeasibly paid in full and the Credit Agreement has been terminated.
The Trustee, for itself and on behalf of each other Subordinate Party, covenants in favour of the Senior Parties that during the term of this Agreement it will not take or accept from the Borrower or any of its Subsidiaries or rely upon any security for the payment of or performance of the Subordinate Debt other than the Subordinate Security delivered to the Trustee prior to the date hereof. The Borrower and each of its Subsidiaries covenants in favour of the Senior Parties that during the term of this Agreement it will not provide to any Subordinate Party any security for the payment of or performance of the Subordinate Debt other than the Subordinate Security provided to the Trustee prior to the date hereof. The Trustee, for itself and on behalf of each other Subordinate Party, represents and warrants that as of the date hereof the only security that the Subordinate Parties have received from the Borrower or any of its Subsidiaries is attached at Annex A.
No Subordinate Party shall take, or cause or permit any other Person to take on its behalf, any steps whatsoever whereby the priority, perfection or validity of any of the Senior Security or the rights of the Senior Parties hereunder, under the Credit Agreement or under any other Credit Document shall be delayed, defeated, impaired or diminished, and without limiting the generality of the foregoing, no Subordinate Party shall challenge, object to, compete with or impede in any manner any act taken or proceeding commenced by any of the Senior Parties in connection with the enforcement by the Agent or the Lenders of the Senior Security.
30543752.4
‑ 6 ‑
The Trustee, for itself and on behalf of each other Subordinate Party, and the Borrower and each of its Subsidiaries acknowledge that all and every part of the Senior Security is held by the Agent or the Lenders as security for all and every part of the Senior Debt and the Senior Parties may apply as a permanent reduction any monies received, whether from the enforcement of and realization upon any or all of the Senior Security or otherwise, to any part of the Senior Debt as the Senior Parties, in their sole discretion, may determine appropriate in accordance with the provisions of the Credit Agreement.
30543752.4
‑ 7 ‑
Notwithstanding any other provisions of this Agreement, the parties agree that the Borrower and each of its Subsidiaries may make and the Subordinate Parties may receive Permitted Payments on account of the Debentures in accordance with the terms thereof, provided that if the Agent has provided notice to each of the Trustee and the Borrower confirming that the Borrower or any of its Subsidiaries has defaulted in respect of or breached any of its obligations under Section 6.13, 7.1(a), 7.1(o) or 7.1(p) of the Credit Agreement or that such a default or breach would result from the payment of any Permitted Payment (regardless of whether a cure period exists in respect of such default or breach), then the Borrower will not make, and the Subordinate Parties will not accept, any payment to the Subordinate Parties as contemplated in this Section 10 unless and until the Agent, in its absolute discretion, notifies the Trustee and the Borrower that the Borrower or any of its Subsidiaries may resume such interest payments, or the applicable default of breach has been cured to the satisfaction of the Agent acting in good faith. Any payment received by the Subordinate Parties in contravention of this Section 10 shall be received in trust for the Agent and shall be paid over to the Agent forthwith upon receipt.
If, prior to the indefeasible payment in full of the Senior Debt, any Subordinate Party or any Person on its behalf shall receive any payment from or distribution of assets of the Borrower or any of its Subsidiaries or on account of the Subordinate Debt, other than Permitted Payments, then such Subordinate Party shall, and shall cause such other Person to, receive and hold such payment or distribution in trust for the benefit of the Senior Parties and promptly pay the same over or deliver to the Agent in precisely the form received by such Subordinate Party or such other Person on its behalf (except for any necessary endorsement or assignment) and such payment or distribution shall be applied by the Agent to the repayment of the Senior Debt.
30543752.4
‑ 8 ‑
The Senior Parties shall be entitled to deal with the Senior Security as they see fit and nothing herein shall prevent, restrict or limit the Agent or the Lenders in any manner from exercising all or any part of their rights and remedies otherwise permitted by applicable law upon any default under the Senior Security. Without limiting the generality of the foregoing:
30543752.4
‑ 9 ‑
30543752.4
‑ 10 ‑
Each Subordinate Party agrees that the Senior Parties have made no representations or warranties with respect to the due execution, legality, validity, completeness or enforceability of any agreement or instrument relating to the Credit Agreement or the Senior Debt or the collectability of the Senior Debt, that the Senior Parties shall be entitled to manage and supervise their loans and other financial accommodation to the Borrower and each of its Subsidiaries in accordance with applicable law and their usual practices, modified from time to time as they deem appropriate in their sole discretion, or otherwise, without regard to the existence of any rights that any Subordinate Party may now or hereafter have in or to any of the assets of the Borrower and each of its Subsidiaries, and that the Senior Parties shall have no liability to the Subordinate Parties for, and the Trustee, for itself and on behalf of each other Subordinate Party, hereby waives any claims which any Subordinate Party may now or hereafter have against the Senior Parties out of, any and all actions which the Agent or the Lenders take or omit to take (including, without limitation, actions with respect to the creation, perfection or continuation of liens or security interest in any assets at any time securing payment of the Senior Debt, actions with respect to the occurrence of any default under any agreement or instrument relating to the Senior Debt, action with respect to the release or depreciation of, or failure to realize upon, any assets securing payment of the Senior Debt and actions with respect to the collection of any claims or all or any part of the Senior Debt from any account debtor, guarantor or any other Person) with respect to the Senior Debt and any agreement or instrument related thereto or with respect to the collection of the Senior Debt or the valuation, use, protection or release of any assets securing payment of the Senior Debt.
This Agreement shall remain in full force and effect without regard to, and the obligations of the Subordinate Parties hereunder shall not be released or otherwise affected or impaired by:
30543752.4
‑ 11 ‑
Each of the Trustee and the Borrower and each of its Subsidiaries represents and warrants that attached hereto as Annex A are true and complete copies of the Indenture, Debentures and Subordinate Debt Security. Without the prior written consent of the Agent, neither the Indenture nor any Debentures or Subordinate Security shall be amended, supplemented or otherwise modified. Each of the Trustee and the Borrower represents and warrants that as of the date hereof, the aggregate principal amount of the Subordinated Debt is CDN $26,060,659.00 and that no default exists in respect of the Subordinated Debt.
The Trustee hereby represents and warrants to the Senior Parties that it has been authorized and directed by extraordinary resolution of the Holders and has the power and capacity under the terms of the Indenture to execute and deliver this Agreement for and on behalf of the Holders.
For purposes of this Agreement, the Senior Debt shall be considered to be paid in full when no further amounts are owing to the Senior Parties and all obligations of the parties under the Credit Agreement and each other Credit Document have been terminated.
The Borrower and each of its Subsidiaries covenants in favour of the Senior Parties that it will promptly deliver to the Agent a certified copy of any instrument evidencing the Subordinate Debt to which it becomes a party.
30543752.4
‑ 12 ‑
Without limiting any rights or benefits provided to the Senior Parties under this Agreement, each of the Subordinate Parties acknowledges and confirms that the Senior Debt is “Senior Indebtedness” as contemplated in the Indenture and that the Senior Parties have all the rights and benefits as holders of “Senior Indebtedness” as contemplated in the Indenture. The Subordinate Parties confirm that there is no limitation on the amount of Senior Debt that may outstanding from time to time.
Nothing in this Agreement shall create any rights in favour of the Borrower and the covenants and agreements of the Senior Parties and the Subordinate Parties shall not be enforceable by the Borrower or any of its Subsidiaries. No consent of the Borrower or any of its Subsidiaries shall be necessary for any amendment to this Agreement by the Senior Parties and the Subordinate Parties in order to have effect as between the Senior Parties and the Subordinate Parties.
Until payment in full to the Senior Parties of the Senior Debt and the Credit Agreement has been terminated, the Trustee, for itself and on behalf of each other Subordinate Party, hereby irrevocably waives any claim or other rights which the Subordinate Parties may now have or may hereafter acquire against the Borrower or any of its Subsidiaries that arise from the existence, payment, performance or enforcement of the Borrower’s or any of its Subsidiaries’ obligations under the Subordinate Debt, including any right of subrogation, reimbursement, exoneration or indemnification, any right to participate in any claim or remedy of the Senior Parties against the Borrower or any of its Subsidiaries which any Senior Party now has or hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including the right to take or receive from the Borrower or any of its Subsidiaries, directly or indirectly, in cash or other property or by set-off or in any manner, payment of security on account of such claim or other rights. If any amount shall be paid to any Subordinate Party in violation of the preceding sentence and the Senior Debt shall not have been paid in cash in full, such amount shall be deemed to have been paid to such Subordinate Party for the benefit of, and held in trust for the Senior Parties, and shall forthwith be paid to the Agent to be credited and applied against the Senior Debt, whether matured or unmatured. The Borrower and each of its Subsidiaries and each of the Subordinate Parties acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Credit Agreement and that the waiver set forth in this paragraph is knowingly made in contemplation of such benefits.
The Subordinate Parties hereby waive any right that they may have to require the Senior Parties to marshal in its favour.
30543752.4
‑ 13 ‑
The parties hereto shall forthwith, and from time to time, execute and do all deeds, documents and things which may be necessary or advisable, in the opinion of the Senior Parties and their counsel, to give full effect to the postponement and subordination of the rights and remedies of the Subordinate Parties in respect to the Subordinate Debt and the Subordinate Security to the rights and remedies of the Senior Parties in respect to the Senior Debt and the Senior Security, all in accordance with the intent of this Agreement. Without limiting the generality of the foregoing, if following the date hereof the Borrower shall acquire an interest in a Subsidiary that is not party to this Agreement, it shall cause such Subsidiary to execute a joinder to this Agreement in form and substance satisfactory to the Agent Notwithstanding the delivery for registration or filing of specific postponements or subordinations, this Agreement shall govern the priority between the Senior Security and the Subordinate Security and shall be paramount in that regard.
This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of the Senior Parties. None of the rights or obligations of any Subordinate Party or of the Borrower or any of its Subsidiaries hereunder nor any interest thereof herein may be assigned or delegated without:
This Agreement contains the entire agreement among the parties hereto with respect to the obligations, liabilities and assets of the Borrower and each of its Subsidiaries. If any of the provisions of this Agreement shall be held invalid or unenforceable by any court having jurisdiction, this Agreement shall be construed as if not containing those provisions, and the rights and obligations of the parties hereto should be construed and enforced accordingly.
This Agreement shall be governed and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein.
This Agreement shall terminate upon the earlier of:
30543752.4
‑ 14 ‑
This Agreement may be executed in any number of counterparts, which when taken together shall constitute one and the same agreement.
Any notice to be given under this Agreement may be effectively given by delivering (whether by courier or personal delivery) such notice at the address set forth in the signature pages of this Agreement, by sending such notice by prepaid registered mail to such address set out on the signature pages of this Agreement or by electronic mail to the email address set forth in the signature pages of this Agreement. Any notice delivered shall be deemed to have been received upon delivery. Any notice mailed shall be deemed to have been received on the 5th day next following the registered mailing of such notice. Any email notice shall be deemed to have been received on transmission if sent before 4:00 p.m. Toronto time on a Business Day, and, if not, on the next Business Day following transmission.
This Agreement amends and restates in full the Original Subordination Agreement, with effect as of the date hereof. The parties hereto intend the amendments contained herein to be amendments to the Original Subordination Agreement and not to give rise to any novation or rescission of the Original Subordination Agreement, and the parties hereto intend to be governed by the Original Subordination Agreement as amended and not by a new agreement.
[Remainder of Page Intentionally Left Blank]
30543752.4
IN WITNESS WHEREOF the parties hereto have executed this agreement as of the date first written above.
DB FSLF 50 LLC, as Agent |
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Address: [Redacted – Personal Information] |
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By: |
/s/ Scott Silvers |
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Name: Title: |
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DALE MATHESON CARR-HILTON LABONTE LLP, as Agent for itself and the Holders |
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Address: [Redacted – Personal Information] |
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By: |
/s/ Rakesh Patel |
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Name: Title: |
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MOGO FINANCE TECHNOLOGY INC., as Borrower |
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Address: [Redacted – Personal Information] |
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By: |
/s/ Gregory Feller |
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Name: Title: |
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MOGO TECHNOLOGY INC. |
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Address: [Redacted – Personal Information] |
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By: |
/s/ David Feller |
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Name: Title: |
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Signature Page to Subordinated Lender Intercreditor Agreement (Mogo)
30543752.4
‑ 2 ‑
MOGO FINANCIAL INC. |
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Address: [Redacted – Personal Information] |
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By: |
/s/ Erin Feller |
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Name: Title: |
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MOGO FINANCIAL (B.C.) INC. |
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Address: [Redacted – Personal Information] |
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By: |
/s/ Erin Feller |
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Name: Title: |
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MOGO FINANCIAL (ALBERTA) INC. |
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Address: [Redacted – Personal Information] |
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By: |
/s/ Erin Feller |
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Name: Title: |
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MOGO FINANCIAL (ONTARIO) INC. |
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Address: [Redacted – Personal Information] |
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By: |
/s/ Erin Feller |
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Name: Title: |
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Signature Page to Subordinated Lender Intercreditor Agreement (Mogo)
30543752.4
‑ 3 ‑
HORNBY LOAN BROKERS (OTTAWA) INC. |
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Address: [Redacted – Personal Information] |
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By: |
/s/ Erin Feller |
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Name: Title: |
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HORNBY LEASING INC. |
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Address: [Redacted – Personal Information] |
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By: |
/s/ Erin Feller |
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Name: Title: |
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THURLOW MANAGEMENT INC. |
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Address: [Redacted – Personal Information] |
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By: |
/s/ Erin Feller |
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Name: Title: |
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THURLOW CAPITAL (BC) INC. |
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Address: [Redacted – Personal Information] |
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By: |
/s/ Erin Feller |
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Name: Title: |
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Signature Page to Subordinated Lender Intercreditor Agreement (Mogo)
30543752.4
‑ 4 ‑
THURLOW CAPITAL (ALBERTA) INC. |
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Address: [Redacted – Personal Information] |
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By: |
/s/ Erin Feller |
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Name: Title: |
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THURLOW CAPITAL (ONTARIO) INC. |
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Address: [Redacted – Personal Information] |
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By: |
/s/ Erin Feller |
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Name: Title: |
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THURLOW CAPITAL (MANITOBA) INC. |
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Address: [Redacted – Personal Information] |
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By: |
/s/ Erin Feller |
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Name: Title: |
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THURLOW CAPITAL (OTTAWA) INC. |
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Address: [Redacted – Personal Information] |
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By: |
/s/ Erin Feller |
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Name: Title: |
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Signature Page to Subordinated Lender Intercreditor Agreement (Mogo)
30543752.4
‑ 5 ‑
MOGO MORTGAGE TECHNOLOGY INC. |
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Address: [Redacted – Personal Information] |
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By: |
/s/ Erin Feller |
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Name: Title: |
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Signature Page to Subordinated Lender Intercreditor Agreement (Mogo)
30543752.4
[Redacted]
DOCPROPERTY "CUS_DocIDString" 41666902.3
30543752.4
Exhibit 4.3
SEVENTH AMENDMENT AGREEMENT AND WAIVER
dated as of January 10, 2022
among
MOGO FINANCE TECHNOLOGY INC.
as Borrower
Mogo Financial Inc., Mogo Financial (B.C.) Inc., Mogo Financial (Alberta) Inc. and Mogo Financial (Ontario) Inc.
as Originating Subsidiaries
Carta Solutions Holdings Corporation, as a Guarantor
Mogo Inc.
as Parent
ADDITIONAL INDEMNITORS
34277673.5
SEVENTH AMENDMENT AGREEMENT AND WAIVER
DB FSLF 50 LLC as Administrative Agent, Collateral Agent and Sole Lead Arranger This SEVENTH AMENDMENT AGREEMENT (this “Amendment and Waiver”), dated as of January 10, 2022, is entered into by and among MOGO FINANCE TECHNOLOGY INC. (the “Borrower”), MOGO FINANCIAL INC. (“MOGO Financial”), MOGO FINANCIAL (B.C.) INC. (“MOGO B.C.”), MOGO FINANCIAL (ALBERTA) INC. (“MOGO Alberta”) and MOGO FINANCIAL (ONTARIO) INC. (“MOGO Ontario”, and collectively with MOGO Financial, MOGO B.C. and MOGO Alberta, the “Originating Subsidiaries”), CARTA SOLUTIONS HOLDINGS CORPORATION (“Carta”), MOGO INC. (“Parent”) and DB FSLF 50 LLC (“DB FSLF”), as Administrative Agent (in such capacity, the “Administrative Agent”), Collateral Agent (in such capacity, the “Collateral Agent”), and as sole Lead Arranger (in such capacity, the “Arranger”) and the Additional Indemnitors.
RECITALS:
WHEREAS, pursuant to that certain Amended and Restated Revolving Credit and Guarantee Agreement dated as of July 16, 2019 among the Borrower, the Parent, the Originating Subsidiaries, the Administrative Agent, the Collateral Agent, the Arranger, the Additional Indemnitors and the lenders party thereto from time to time (the “Lenders”), as amended by that First Amendment Agreement dated as of December 31, 2019, as further amended by that Second Amendment Agreement dated as of March 30, 2020, as further amended by that Third Amendment Agreement dated as of April 15, 2020, as further amended by that Fourth Amendment Agreement dated as of June 29, 2020, as further amended by that Fifth Amendment Agreement dated as of January 25, 2021, as further amended by that Sixth Amendment Agreement dated as of December 16, 2021, as may be further amended, modified or restated from time to time (the “Credit Agreement”) the Lenders agreed to make certain financial accommodations available to the Borrower;
WHEREAS the Borrower has advised the Lenders of an Event of Default pursuant to (i) Section 7.1(k) of the Credit Agreement as a result of David Feller and Greg Feller ceasing to collectively beneficially own and control greater than 7% on a fully diluted basis of the economic and voting interest in the Capital Stock of the Parent (the “Change of Control Default”) and (ii) Section 7.1(d) of the Credit Agreement as a result of Parent’s completion of a USD$500,000 investment in LB-Alpha LLC on or about December 21, 2021, which is prohibited pursuant to Section 6.3(c) and 6.4(iii) of the Credit Agreement (collectively with the Change of Control Default, the ”Existing Defaults”);
WHEREAS the Lenders have agreed to waive the Existing Defaults;
WHEREAS the parties hereto desire to enter into this Amendment and Waiver to modify certain of the terms and provisions of the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:
34277673.5
- 2 -
WAIVER
““Change of Control” means, (a) in respect of any Originating Subsidiary, the Borrower shall cease to directly beneficially own and control 100% on a fully diluted basis of the economic and voting interest in the Capital Stock of such Originating Subsidiary, (b) in respect of the Borrower, any event, transaction or occurrence as a result of which (i) a Person who on the date hereof is a Control Person of the Borrower ceases to be a Control Person of the Borrower, (ii) a Person who on the date hereof is not a Control Person of the Borrower becomes a Control Person of the Borrower, or (iii) [Redacted – Personal Information] and [Redacted – Personal Information] shall cease to collectively beneficially own and control greater than 6% on a fully diluted basis of the economic and voting interest in the Capital Stock of the Parent, or (c) in respect of the Borrower or any Originating Subsidiary, the Key Employees shall cease to collectively have primary responsibility for the operations of the Borrower or such Originating Subsidiary, provided, however, that if any Key Employee ceases to have primary responsibility for the operations of the Borrower or such Originating Subsidiary due to his termination, resignation, incapacity or death, the Borrower shall be afforded a period of sixty (60) days to procure a satisfactory replacement as determined by the Administrative Agent, provided, however, that if the Borrower is diligently engaged in the process of procuring a replacement Key Employee and requires an additional period to effect same, such sixty (60) day period shall be further extended by an additional sixty (60) days if consented to by the Administrative Agent.”
34277673.5
- 3 -
AFFIRMATION/REPRESENTATION
Each of the Borrower, the Parent, Carta, each Originating Subsidiary and each Additional Indemnitor hereby expressly affirms all of its obligations and liabilities as set forth in the Credit Agreement and the other Credit Documents and agrees to be bound by and abide by and operate and perform under and pursuant to and comply fully with all of the terms, conditions, provisions, agreements, guarantees, representations, undertakings, warranties, indemnities, grants of security interests and covenants contained in the Credit Agreement and the other Credit Documents, as such obligations and liabilities may be modified by this Amendment and Waiver, as though the Credit Agreement and the other Credit Documents were being re-executed on the date hereof by each of the Borrower, the Parent, Carta, each Originating Subsidiary and each Additional Indemnitor, except to the extent that such terms expressly relate to an earlier date. Each of the Borrower, the Parent, Carta, each Originating Subsidiary and each Additional Indemnitor hereby represents and warrants that, upon effecting the amendments contemplated by this Amendment and Waiver, each of the representations and warranties set forth in Section 4 of the Credit Agreement are true and correct as if made on the date hereof and that neither the Borrower, the Parent, Carta, nor any Originating Subsidiary or Additional Indemnitor is in breach or default of any of its covenants, undertakings or other obligations under the Credit Agreement (as amended hereby).
This Amendment and Waiver shall become effective as of the first date on which each of the following conditions precedent shall have been satisfied or duly waived:
34277673.5
- 4 -
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34277673.5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Waiver to be duly executed and delivered as of the date first written above.
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MOGO FINANCE TECHNOLOGY INC., as Borrower
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MOGO FINANCIAL INC., as an Originating Subsidiary
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By: |
/s/ Gregory Feller |
By: |
/s/ Erin Feller |
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Name: |
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Name: |
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Title: |
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Title: |
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By: |
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By: |
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Name: |
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Name: |
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Title: |
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Title: |
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MOGO FINANCIAL (B.C.) INC., as an Originating Subsidiary |
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MOGO FINANCIAL (ALBERTA) INC., as an Originating Subsidiary |
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By: |
/s/ Erin Feller |
By: |
/s/ Erin Feller |
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Name: |
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Name: |
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Title: |
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Title: |
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By: |
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By: |
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Name: |
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Name: |
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Title: |
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Title: |
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MOGO FINANCIAL (ONTARIO) INC., as an Originating Subsidiary
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MOGO INC., as Parent
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By: |
/s/ Erin Feller |
By: |
/s/ Gregory Feller |
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Name: |
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Name: |
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Title: |
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Title: |
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By: |
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By: |
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Name: |
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Name: |
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Title: |
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Title: |
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CARTA SOLUTIONS HOLDINGS CORPORATION, as a Guarantor
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By: |
/s/ Gregory Feller |
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Name: |
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Title: |
By: |
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Name: |
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Title: |
Signature Page to Amending Agreement
- 2 -
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DB FSLF 50 LLC, as Collateral Agent and Administrative Agent on behalf of itself and the Lenders
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FORTRESS LENDING I HOLDINGS L.P., as a Lender By: Fortress Lending Advisors LLC, its investment manager
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By: |
/s/ Constantine M. Dakolias |
By: |
/s/ Constantine M. Dakolias |
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Name: |
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Name: |
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Title: |
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Title: |
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By: |
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By: |
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Name: |
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Name: |
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Title: |
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Title: |
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DB FSLF 50 LLC, as a Lender
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By: |
/s/ Constantine M. Dakolias |
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Name: |
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Title: |
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By: |
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Name: |
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Title: |
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Signature Page to Amending Agreement
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SIGNED, SEALED & DELIVERED
/s/ Alice Davidson |
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Witness |
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David Feller |
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SIGNED, SEALED & DELIVERED
/s/ Alice Davidson |
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/s/ Gregory Feller |
Witness |
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Gregory Feller |
Signature Page to Amending Agreement
34277673.5
Exhibit 8.1
LIST OF SUBSIDIARIES OF MOGO INC.
Entity |
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Jurisdiction of Incorporation |
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Mogo Finance Technology Inc. |
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British Columbia |
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Mogo Financial Inc. |
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Manitoba |
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MogoTrade Inc. |
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Canada |
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Moka Financial Technologies Inc. |
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Canada |
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Mogo Asset Management Inc. |
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Canada |
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Carta Solutions Holding Corp. |
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Canada |
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Carta Financial Services Ltd. |
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United Kingdom |
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Exhibit 12.1
CERTIFICATION
I, David Feller, Chief Executive Officer of Mogo Inc., certify that:
1. |
I have reviewed this annual report on Form 20-F of Mogo Inc. |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report; |
4. |
The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have: |
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) |
Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) |
Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and |
5. |
The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions): |
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and |
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting. |
Date: April 30, 2024
/s/ David Feller
David Feller Chief Executive Officer I, Gregory Feller, Chief Financial Officer of Mogo Inc., certify that:
Exhibit 12.2
CERTIFICATION
1. |
I have reviewed this annual report on Form 20-F of Mogo Inc. |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report; |
4. |
The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have: |
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) |
Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) |
Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has |
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materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and |
5. |
The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions): |
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and |
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting. |
Date: April 30, 2024
/s/ Gregory Feller
Gregory Feller Chief Financial Officer The undersigned, as the Chief Executive Officer of Mogo Inc. certifies that, to the best of his knowledge and belief, the annual report on Form 20-F for the fiscal year ended December 31, 2023, which accompanies this certification:
Exhibit 13.1
CERTIFICATION
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The foregoing certification is made pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350) and shall not be relied upon for any other purpose. The undersigned expressly disclaims any obligation to update the foregoing certification except as required by law.
Date: April 30, 2024
By: _/s/ David Feller_____________________
David Feller
Chief Executive Officer
(principal executive officer)
Exhibit 13.2
CERTIFICATION
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, as the Chief Financial Officer of Mogo Inc. certifies that, to the best of his knowledge and belief, the annual report on Form 20-F for the fiscal year ended December 31, 2023, which accompanies this certification, Mogo Inc.
The foregoing certification is made pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350) and shall not be relied upon for any other purpose. The undersigned expressly disclaims any obligation to update the foregoing certification except as required by law.
Date: April 30, 2024
By: /s/ Gregory Feller_____________________
Gregory Feller
Chief Financial Officer
(principal financial officer)
Exhibit 15.1
Consent of Independent Registered Public Accounting Firm
The Board of Directors
We consent to the use of our report dated March 20, 2024, with respect to the consolidated financial statements of Mogo Inc. (the “Entity”), which comprise the consolidated statements of financial position as of December 31, 2023 and December 31, 2022, the related consolidated statements of operations and comprehensive income (loss), changes in equity (deficit) and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements), which report is included in the Annual Report on Form 20-F of Mogo Inc. for the fiscal year ended December 31, 2023.
We also consent to the incorporation by reference in the registration statement (No. 333-225733) on Form S-8 and registration statement (No. 333-254791) on Form F-10 of the Entity.
/s/ KPMG LLP
Chartered Professional Accountants
Vancouver, Canada
April 30, 2024
Exhibit 20.1
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Page |
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F-2 |
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Consolidated Statements of Financial Position as at December 31, 2023 and December 31, 2022 |
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F-6 |
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F-7 |
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F-8 |
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F-10 |
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F-11 |
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KPMG LLP PO Box 10426 777 Dunsmuir Street Vancouver BC V7Y 1K3 Canada Telephone (604) 691-3000 Fax (604) 691-3031 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
Mogo Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Mogo Inc. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income (loss), changes in equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated
with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP.
F-2
Mogo Inc.
Page 3
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Assessment of the Allowance for Loan Losses
As discussed in Note 4 to the consolidated financial statements, the Company’s allowance for loan losses (ALL) as of December 31, 2023 was $12,555 thousand. As discussed in Notes 3c and 3p(i) to the consolidated financial statements, the Company applies a three-stage approach to measure the ALL, using an expected credit loss (ECL) approach. The ALL calculation reflects a probability-weighted approach that considers multiple scenarios based on the Company’s expectations of future loan performance, and general forward-looking macroeconomic conditions. The Company measures the ALL using the historical loss rates, post-charge off recoveries, current conditions and forward-looking indicators to determine loss given default, the expected probability of a default event occurring based on the historical loss rates and ECL resulting from such default events.
We identified the assessment of the ALL as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment due to measurement uncertainty. Specifically, the assessment encompassed the evaluation of the ALL methodology, including the selection of the forward-looking indicators and the periods used to determine the expected probability of a default event, which impact certain inputs and assumptions. In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design of certain internal controls related to the Company’s ALL process. This included internal controls related to the determination of the methodology and assumptions used in the ECL model, including the time periods used to determine the expected probability of a default event, and the forward-looking information used. We involved credit risk professionals with specialized skills, industry knowledge and relevant experience, who assisted in evaluating the (1) key modelled inputs for the expected probability of a default, being historical loss rates, post-charge off recoveries and the ALL methodology, and (2) economic variables and probability weighting of scenarios used in the calculation of forward-looking information by assessing the variables and scenarios against external economic data. We also assessed the sufficiency of the audit evidence obtained related to the ALL by evaluating the cumulative results of the audit procedures, qualitative aspects of the Company’s accounting practices, and potential bias in the accounting estimates.
F-3
Mogo Inc.
Page 4
Assessment of the Measurement of the Fair Value of Privately Held Investments
As discussed in Note 23(c)(i) to the consolidated financial statements, the Company’s investment portfolio includes certain privately held investments amounting to $11,436 thousand as of December 31, 2023, which are measured at fair value. As discussed in Note 3c and 3(p)(ii) to the consolidated financial statements, the Company determines fair value of such investments using models that use significant unobservable inputs. Estimating fair value requires use of significant judgments. Some of the significant unobservable inputs used in the valuation of such investments are revenue multiples, third-party transactions, equity volatility, time to exit events and discount for lack of marketability.
We identified the assessment of the measurement of the fair value of privately held investments as a critical audit matter. Subjective auditor judgment was required because there was a high degree of measurement uncertainty in the significant unobservable inputs. Significant auditor attention and complex auditor judgment was required to evaluate the results of audit procedures on significant unobservable inputs used in the valuation of privately held investments. Further, specialized skills and knowledge, including experience in the industry, were required to apply audit procedures and evaluate the results of those procedures.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design of certain internal controls over the Company’s process for determining the fair value of privately held investments. This included controls related to the determination of the significant unobservable inputs and assumptions used in the models. For a selection of such investments, we compared the input data used in the valuation model to external information. For a selection of such investments, we involved valuation professionals with specialized skills and knowledge to assist in the testing of the fair value by assessing the appropriateness of the valuation model, including assessing the reasonability of revenue multiples, third-party transactions, equity volatility, time to exit, and discount for lack of marketability. We also assessed the sufficiency of the audit evidence obtained related to the fair value of privately held investments by evaluating the cumulative results of the audit procedures, qualitative aspects of the Company’s accounting practices, and potential bias in the accounting estimates.
Valuation of Goodwill
As discussed in Note 22 to the consolidated financial statements, the goodwill balance as of December 31, 2023 was $38,355 thousand, of which $24,315 thousand related to the Carta cash generating unit (CGU) and $14,040 thousand related to the Mogo related entities CGU. As discussed in Note 3p(iii) to the consolidated financial statements, the Company performs goodwill impairment testing on an annual basis by comparing the carrying value of net assets within the CGU to the recoverable amount of that CGU. The recoverable amount of the CGUs was determined based on a value in use assessment using unobservable inputs in a discounted cash flow analysis.
We identified the evaluation of the recoverability of the carrying value of goodwill for the Carta CGU and the Mogo related entities CGU as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the evaluation of the recoverable amount of the CGUs due to significant measurement uncertainty relating to specific assumptions used in the valuation. Specifically, these assumptions included the forecasted revenue growth rates, the terminal value growth rates, and the pre-tax discount rates. Changes to the assumptions could have had a significant effect on the Company’s assessment of the recoverable amount of each CGU.
F-4
Mogo Inc.
Page 5
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design of certain internal controls over the Company’s goodwill impairment process. This included controls related to the determination of the forecasted revenue growth rates, terminal growth rates, and discount rates. We evaluated the appropriateness of the Company’s forecasted revenue growth rates for both CGUs, by comparing these to historical performance. We compared the Company’s historical revenue forecasts to actual results to assess the Company’s ability to accurately forecast. We involved valuation professionals with specialized skills and knowledge, who assisted in, testing the accuracy of the terminal value growth rates by comparing them to publicly available inflation expectations adjusted for Company-specific factors and evaluating the discount rates by comparing them against a range of discount rates that was independently developed using publicly available market data for comparable entities.
Assessment of the Going Concern
As discussed in Note 2(a) to the consolidated financial statements, the Company prepares its consolidated financial statements on a going concern basis. The Company believes it has sufficient financial resources available to continue as a going concern for a period of twelve months from the date these consolidated financial statements were authorized for issuance. In arriving at this judgment, management has considered cash flow projections of the Company, which incorporates a rolling forecast and detailed cashflow modeling through the next twelve months from the date of approval of these consolidated financial statements. As discussed in Note 3(p) to the consolidated financial statements, based on cash flow forecasts, the Company believes that it will have sufficient liquidity to operate and discharge its liabilities as they become due. Development of the forecast required management to make subjective estimates and assumptions related to forecasted revenue and loan growth rates, and access to undrawn funds under existing credit facilities for financing new loans.
We identified the assessment of the Company’s ability to continue as a going concern as a critical audit matter. There is uncertainty associated with the future outcome of events and circumstances underlying significant assumptions. In addition, a high degree of subjective auditor judgment was required to assess management’s forecast, specifically the assumptions for forecasted revenue and loan growth rates, and access to undrawn funds under existing credit facilities for financing new loans.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design of the internal control relating to management’s going concern assessment in relation to forecast of cash flows. We evaluated the projected cash flows, specifically the forecasted revenue and loan growth rates, by comparing the Company’s historical revenue forecasts and growth rates to actual results to assess the Company’s ability to accurately forecast. We also obtained and assessed new or renewed contracts impacting revenue forecasts. We also evaluated the Company’s ability to access undrawn funds under the existing credit facilities for financing new loans, by comparing to available undrawn funds under existing credit facilities and assessing compliance with debt covenants. We assessed the sensitivity of reasonably possible changes to the key assumptions and judgments used to determine management’s forecasts of cash flows for the Company.
/s/ KPMG LLP
Chartered Professional Accountants
We have served as the Company’s auditor since 2019.
Vancouver, Canada
March 20, 2024
F-5
Mogo Inc.
Consolidated Statements of Financial Position
(Expressed in thousands of Canadian Dollars)
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Note |
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December 31, |
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December 31, |
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||
Assets |
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|
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|
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Cash and cash equivalent |
|
|
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16,133 |
|
|
|
29,268 |
|
Restricted cash |
|
|
|
|
1,737 |
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|
|
1,578 |
|
Loans receivable, net |
|
4 |
|
|
61,717 |
|
|
|
56,841 |
|
Prepaid expenses, and other receivables and assets |
|
5 |
|
|
13,067 |
|
|
|
12,391 |
|
Investment portfolio |
|
6,23 |
|
|
37,768 |
|
|
|
12,520 |
|
Investment accounted for using the equity method |
|
18 |
|
|
— |
|
|
|
24,989 |
|
Property and equipment |
|
7 |
|
|
526 |
|
|
|
1,101 |
|
Right-of-use assets |
|
9 |
|
|
670 |
|
|
|
2,622 |
|
Investment in sublease, net |
|
9 |
|
|
1,228 |
|
|
|
— |
|
Intangible assets |
|
8 |
|
|
36,562 |
|
|
|
41,829 |
|
Goodwill |
|
22 |
|
|
38,355 |
|
|
|
38,355 |
|
Total assets |
|
|
|
|
207,763 |
|
|
|
221,494 |
|
|
|
|
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
|
|
||
Accounts payable, accruals and other |
|
10 |
|
|
24,082 |
|
|
|
20,982 |
|
Lease liabilities |
|
9 |
|
|
2,709 |
|
|
|
3,280 |
|
Credit facility |
|
11 |
|
|
49,405 |
|
|
|
46,180 |
|
Debentures |
|
12 |
|
|
36,783 |
|
|
|
38,266 |
|
Derivative financial liabilities |
|
13 |
|
|
34 |
|
|
|
419 |
|
Deferred tax liability |
|
19 |
|
|
1,026 |
|
|
|
1,481 |
|
Total liabilities |
|
|
|
|
114,039 |
|
|
|
110,608 |
|
|
|
|
|
|
|
|
|
|
||
Equity |
|
|
|
|
|
|
|
|
||
Share capital |
|
25a |
|
|
389,806 |
|
|
|
391,243 |
|
Contributed surplus |
|
|
|
|
35,503 |
|
|
|
33,025 |
|
Foreign currency translation reserve |
|
|
|
|
243 |
|
|
|
559 |
|
Deficit |
|
|
|
|
(331,828 |
) |
|
|
(313,941 |
) |
Total equity |
|
|
|
|
93,724 |
|
|
|
110,886 |
|
Total equity and liabilities |
|
|
|
|
207,763 |
|
|
|
221,494 |
|
Approved on Behalf of the Board
Signed by “Greg Feller” , Director
Signed by “Christopher Payne” , Director Consolidated Statements of Operations and Comprehensive Income (Loss)
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Mogo Inc.
(Expressed in thousands of Canadian Dollars, except per share amounts)
|
|
|
|
Year ended |
|
|||||||||
|
|
Note |
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|||
Subscription and services |
|
|
|
|
38,785 |
|
|
|
41,741 |
|
|
|
34,408 |
|
Interest revenue |
|
|
|
|
26,436 |
|
|
|
27,208 |
|
|
|
23,111 |
|
|
|
14a |
|
|
65,221 |
|
|
|
68,949 |
|
|
|
57,519 |
|
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|||
Provision for loan losses, net of recoveries |
|
4 |
|
|
13,208 |
|
|
|
14,730 |
|
|
|
7,540 |
|
Transaction costs |
|
|
|
|
5,354 |
|
|
|
7,979 |
|
|
|
3,940 |
|
|
|
|
|
|
18,562 |
|
|
|
22,709 |
|
|
|
11,480 |
|
Gross profit |
|
|
|
|
46,659 |
|
|
|
46,240 |
|
|
|
46,039 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|||
Technology and development |
|
|
|
|
10,591 |
|
|
|
12,973 |
|
|
|
10,667 |
|
Marketing |
|
|
|
|
3,340 |
|
|
|
11,208 |
|
|
|
15,629 |
|
Customer service and operations |
|
|
|
|
10,602 |
|
|
|
14,089 |
|
|
|
13,214 |
|
General and administration |
|
|
|
|
14,457 |
|
|
|
20,197 |
|
|
|
17,642 |
|
Stock-based compensation |
|
25c, 25e |
|
|
2,478 |
|
|
|
8,712 |
|
|
|
11,683 |
|
Depreciation and amortization |
|
7,8,9 |
|
|
9,067 |
|
|
|
12,636 |
|
|
|
12,736 |
|
Total operating expenses |
|
15 |
|
|
50,535 |
|
|
|
79,815 |
|
|
|
81,571 |
|
Loss from operations |
|
|
|
|
(3,876 |
) |
|
|
(33,575 |
) |
|
|
(35,532 |
) |
Other expenses (income) |
|
|
|
|
|
|
|
|
|
|
|
|||
Credit facility interest expense |
|
11 |
|
|
6,064 |
|
|
|
4,640 |
|
|
|
4,109 |
|
Debenture and other financing expense |
|
12,26 |
|
|
3,519 |
|
|
|
3,225 |
|
|
|
3,841 |
|
Accretion related to debentures |
|
12 |
|
|
958 |
|
|
|
1,249 |
|
|
|
1,252 |
|
Share of loss in investment accounted for using the equity method |
|
18 |
|
|
8,267 |
|
|
|
78,832 |
|
|
|
278 |
|
Revaluation (gain) loss |
|
16 |
|
|
(9,628 |
) |
|
|
2,375 |
|
|
|
(15,671 |
) |
Impairment of goodwill |
|
22 |
|
|
— |
|
|
|
31,758 |
|
|
|
— |
|
Other non-operating expense |
|
17 |
|
|
5,231 |
|
|
|
10,360 |
|
|
|
4,100 |
|
|
|
|
|
|
14,411 |
|
|
|
132,439 |
|
|
|
(2,091 |
) |
Net loss before tax |
|
|
|
|
(18,287 |
) |
|
|
(166,014 |
) |
|
|
(33,441 |
) |
Income tax recovery |
|
|
|
|
(400 |
) |
|
|
(336 |
) |
|
|
(232 |
) |
Net loss |
|
|
|
|
(17,887 |
) |
|
|
(165,678 |
) |
|
|
(33,209 |
) |
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|||
Items that will not be reclassified subsequently to profit or loss: |
|
|
|
|
|
|
|
|
|
|
|
|||
Unrealized revaluation (loss) gain on digital assets |
|
|
|
|
— |
|
|
|
(468 |
) |
|
|
468 |
|
Items that are or may be reclassified subsequently to profit or loss: |
|
|
|
|
|
|
|
|
|
|
|
|||
Foreign currency transaction reserve (loss) gain |
|
|
|
|
(316 |
) |
|
|
101 |
|
|
|
458 |
|
Other comprehensive loss |
|
|
|
|
(316 |
) |
|
|
(367 |
) |
|
|
926 |
|
Total comprehensive loss |
|
|
|
|
(18,203 |
) |
|
|
(166,045 |
) |
|
|
(32,283 |
) |
Net loss per share |
|
20 |
|
|
|
|
|
|
|
|
|
|||
Basic loss per share |
|
|
|
|
(0.72 |
) |
|
|
(2.17 |
) |
|
|
(0.53 |
) |
Diluted loss per share |
|
|
|
|
(0.72 |
) |
|
|
(2.17 |
) |
|
|
(0.53 |
) |
Weighted average number of basic common shares (in 000s) |
|
|
|
|
24,853 |
|
|
|
25,442 |
|
|
|
21,002 |
|
Weighted average number of fully diluted common shares (in 000s) |
|
|
|
|
24,853 |
|
|
|
25,442 |
|
|
|
21,002 |
|
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Mogo Inc.
Consolidated Statements of Changes in Equity (Deficit)
(Expressed in thousands of Canadian Dollars, except share amounts)
|
|
Number of |
|
|
|
Share |
|
|
Contributed |
|
|
Revaluation reserve |
|
|
Foreign currency translation reserve |
|
|
Deficit |
|
|
Total |
|
|||||||
Balance, December 31, 2022 |
|
|
24,892 |
|
|
|
|
391,243 |
|
|
|
33,025 |
|
|
|
— |
|
|
|
559 |
|
|
|
(313,941 |
) |
|
|
110,886 |
|
Net loss |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(17,887 |
) |
|
|
(17,887 |
) |
Purchase of common shares for cancellation (Note 25a) |
|
|
(474 |
) |
|
|
|
(1,193 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,193 |
) |
Cancellation of replacement awards |
|
|
(3 |
) |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Foreign currency translation reserve |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(316 |
) |
|
|
— |
|
|
|
(316 |
) |
Stock-based compensation (Note 25c) |
|
|
— |
|
|
|
|
— |
|
|
|
2,457 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,457 |
|
Warrants issued (Note 25e) |
|
|
— |
|
|
|
|
— |
|
|
|
21 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
21 |
|
Treasury shares reserve (Note 25b) |
|
|
(90 |
) |
|
|
|
(244 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(244 |
) |
Balance, December 31, 2023 |
|
|
24,325 |
|
|
|
|
389,806 |
|
|
|
35,503 |
|
|
|
— |
|
|
|
243 |
|
|
|
(331,828 |
) |
|
|
93,724 |
|
|
|
Number of |
|
|
|
Share |
|
|
Contributed |
|
|
Revaluation reserve |
|
|
Foreign currency translation reserve |
|
|
Deficit |
|
|
Total |
|
|||||||
Balance, December 31, 2021 |
|
|
25,464 |
|
|
|
|
392,628 |
|
|
|
24,486 |
|
|
|
468 |
|
|
|
458 |
|
|
|
(148,263 |
) |
|
|
269,777 |
|
Net loss |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(165,678 |
) |
|
|
(165,678 |
) |
Purchase of common shares for cancellation |
|
|
(600 |
) |
|
|
|
(1,627 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,627 |
) |
Cancellation of replacement awards |
|
|
(1 |
) |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Foreign currency translation reserve |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
101 |
|
|
|
— |
|
|
|
101 |
|
Revaluation reserve |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
(468 |
) |
|
|
— |
|
|
|
— |
|
|
|
(468 |
) |
Stock-based compensation (Note 25c) |
|
|
— |
|
|
|
|
— |
|
|
|
8,712 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,712 |
|
Options and RSUs exercised or converted |
|
|
29 |
|
|
|
|
242 |
|
|
|
(173 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
69 |
|
Balance, December 31, 2022 |
|
|
24,892 |
|
|
|
|
391,243 |
|
|
|
33,025 |
|
|
|
— |
|
|
|
559 |
|
|
|
(313,941 |
) |
|
|
110,886 |
|
The accompanying notes are an integral part of these consolidated financial statements.
F-8
Mogo Inc.
Consolidated Statements of Changes in Equity (Deficit)
(Expressed in thousands of Canadian Dollars, except share amounts)
|
|
Number of |
|
|
|
Share |
|
|
Contributed |
|
|
Revaluation reserve |
|
|
Foreign currency translation reserve |
|
|
Deficit |
|
|
Total |
|
|||||||
Balance, December 31, 2020 |
|
|
10,910 |
|
|
|
|
106,730 |
|
|
|
13,560 |
|
|
|
— |
|
|
|
— |
|
|
|
(115,054 |
) |
|
|
5,236 |
|
Net loss |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(33,209 |
) |
|
|
(33,209 |
) |
Treasury shares reserve (Note 25b) |
|
|
(107 |
) |
|
|
|
(2,364 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
(2,364 |
) |
|||
Foreign currency translation reserve |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
458 |
|
|
|
— |
|
|
|
458 |
|
Revaluation reserve |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
468 |
|
|
|
— |
|
|
|
— |
|
|
|
468 |
|
Stock-based compensation (Note 25c) |
|
|
— |
|
|
|
|
— |
|
|
|
11,683 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
11,683 |
|
Options and RSUs exercised or converted |
|
|
280 |
|
|
|
|
2,674 |
|
|
|
(1,140 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,534 |
|
Shares issued – ATM arrangement, net |
|
|
508 |
|
|
|
|
16,804 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
16,804 |
|
Shares issued – Registered direct offerings |
|
|
3,820 |
|
|
|
|
71,475 |
|
|
|
777 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
72,252 |
|
Shares issued on acquisition of Carta |
|
|
3,333 |
|
|
|
|
54,800 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
54,800 |
|
Shares issued on acquisition of Moka |
|
|
1,545 |
|
|
|
|
47,207 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
47,207 |
|
Shares issued – Replacement awards |
|
|
122 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Shares issued on acquisition of Fortification |
|
|
25 |
|
|
|
|
396 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
396 |
|
Shares issued on investment accounted for using the equity method |
|
|
2,756 |
|
|
|
|
77,780 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
77,780 |
|
Shares issued – Convertible debentures |
|
|
1,060 |
|
|
|
|
8,783 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,783 |
|
Equity settled share-based payment |
|
|
6 |
|
|
|
|
164 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
164 |
|
Warrants issued for broker services |
|
|
— |
|
|
|
|
— |
|
|
|
1,410 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,410 |
|
Warrants exercised |
|
|
1,206 |
|
|
|
|
8,179 |
|
|
|
(1,804 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,375 |
|
Balance, December 31, 2021 |
|
|
25,464 |
|
|
|
|
392,628 |
|
|
|
24,486 |
|
|
|
468 |
|
|
|
458 |
|
|
|
(148,263 |
) |
|
|
269,777 |
|
The accompanying notes are an integral part of these consolidated financial statements.
F-9
Mogo Inc.
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian Dollars)
|
|
|
|
Year ended |
|||||||||||
Cash provided by (used in) the following activities: |
|
Note |
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Net loss |
|
|
|
|
(17,887 |
) |
|
|
(165,678 |
) |
|
|
(33,209 |
) |
|
Items not affecting cash and other items: |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization |
|
7,8,9 |
|
|
9,067 |
|
|
|
12,636 |
|
|
|
12,736 |
|
|
Provision for loan losses |
|
4 |
|
|
13,778 |
|
|
|
15,383 |
|
|
|
8,476 |
|
|
Credit facility interest expense |
|
11 |
|
|
6,064 |
|
|
|
4,640 |
|
|
|
4,109 |
|
|
Debenture and other financing expense |
|
12,26 |
|
|
3,518 |
|
|
|
3,225 |
|
|
|
3,841 |
|
|
Accretion related to debentures |
|
12 |
|
|
958 |
|
|
|
1,249 |
|
|
|
1,252 |
|
|
Share of loss in investment accounted for using the equity method |
|
18 |
|
|
8,267 |
|
|
|
78,832 |
|
|
|
278 |
|
|
Stock-based compensation expense |
|
25c |
|
|
2,478 |
|
|
|
8,712 |
|
|
|
11,683 |
|
|
Revaluation (gain) loss |
|
16 |
|
|
(9,628 |
) |
|
|
2,375 |
|
|
|
(15,671 |
) |
|
Impairment of goodwill |
|
22 |
|
|
— |
|
|
|
31,758 |
|
|
|
— |
|
|
Other non-operating expense |
|
17 |
|
|
3,408 |
|
|
|
7,509 |
|
|
|
1,954 |
|
|
Income tax recovery |
|
19 |
|
|
(400 |
) |
|
|
(336 |
) |
|
|
(285 |
) |
|
|
|
|
|
|
19,623 |
|
|
|
305 |
|
|
|
(4,836 |
) |
|
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Net issuance of loans receivable |
|
|
|
|
(18,655 |
) |
|
|
(16,392 |
) |
|
|
(17,081 |
) |
|
Prepaid expenses, and other receivables and assets |
|
5 |
|
|
(2,167 |
) |
|
|
(2,003 |
) |
|
|
(2,537 |
) |
|
Accounts payable, accruals and other |
|
10 |
|
|
1,901 |
|
|
|
(805 |
) |
|
|
2,784 |
|
|
Restricted cash |
|
|
|
|
(159 |
) |
|
|
(132 |
) |
|
|
(1,446 |
) |
|
Net investment in sub-lease |
|
|
|
|
13 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
556 |
|
|
|
(19,027 |
) |
|
|
(23,116 |
) |
|
Interest paid |
|
|
|
|
(9,668 |
) |
|
|
(7,906 |
) |
|
|
(7,974 |
) |
|
Income taxes paid |
|
|
|
|
(55 |
) |
|
|
(76 |
) |
|
|
— |
|
|
Net cash used in operating activities |
|
|
|
|
(9,167 |
) |
|
|
(27,009 |
) |
|
|
(31,090 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Investment in intangible assets |
|
8 |
|
|
(3,206 |
) |
|
|
(7,482 |
) |
|
|
(7,503 |
) |
|
Cash invested in investment portfolio |
|
6,23 |
|
|
— |
|
|
|
(1,837 |
) |
|
|
(3,698 |
) |
|
Proceeds from sale of (investment in) digital assets |
|
|
|
|
— |
|
|
|
625 |
|
|
|
(1,250 |
) |
|
Proceeds from sale of investments |
|
|
|
|
334 |
|
|
|
— |
|
|
|
4,878 |
|
|
Purchases of property and equipment |
|
7 |
|
|
(214 |
) |
|
|
(455 |
) |
|
|
(464 |
) |
|
Cash invested in investment using the equity method |
|
|
|
|
— |
|
|
|
— |
|
|
|
(32,396 |
) |
|
Cash acquired upon acquisition of subsidiary |
|
|
|
|
— |
|
|
|
— |
|
|
|
839 |
|
|
Net cash used in investing activities |
|
|
|
|
(3,086 |
) |
|
|
(9,149 |
) |
|
|
(39,594 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Lease liabilities – principal payments |
|
9 |
|
|
(571 |
) |
|
|
(668 |
) |
|
|
(660 |
) |
|
Repayments on debentures |
|
12 |
|
|
(2,393 |
) |
|
|
(2,050 |
) |
|
|
(2,053 |
) |
|
Advances on credit facility |
|
11 |
|
|
5,344 |
|
|
|
2,548 |
|
|
|
7,507 |
|
|
Repayments on credit facility |
|
11 |
|
|
(2,119 |
) |
|
|
(1,351 |
) |
|
|
(168 |
) |
|
Proceeds from issuance of common shares, net |
|
|
|
|
— |
|
|
|
— |
|
|
|
113,329 |
|
|
Repurchase of common shares |
|
25a |
|
|
(1,122 |
) |
|
|
(1,627 |
) |
|
|
— |
|
|
Proceeds from exercise of warrants |
|
|
|
|
— |
|
|
|
— |
|
|
|
6,375 |
|
|
Proceeds from exercise of options |
|
|
|
|
— |
|
|
|
69 |
|
|
|
1,534 |
|
|
Net cash provided by (used in) financing activities |
|
|
|
|
(861 |
) |
|
|
(3,079 |
) |
|
|
125,864 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Effect of exchange rate fluctuations on cash and cash equivalents |
|
|
|
|
(21 |
) |
|
|
743 |
|
|
|
463 |
|
|
Net (decrease) increase in cash and cash equivalent |
|
|
|
|
(13,135 |
) |
|
|
(38,494 |
) |
|
|
55,643 |
|
|
Cash and cash equivalent, beginning of period |
|
|
|
|
29,268 |
|
|
|
67,762 |
|
|
|
12,119 |
|
|
Cash and cash equivalent, end of period |
|
|
|
|
16,133 |
|
|
|
29,268 |
|
|
|
67,762 |
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-10
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
Mogo Inc. (“Mogo” or the "Company") was continued under the Business Corporations Act (British Columbia) on June 21, 2019 following the combination with Mogo Finance Technology Inc. The address of the Company's registered office is Suite 1700, Park Place, 666 Burrard Street, Vancouver, British Columbia, Canada, V6C 2X8. The Company’s common shares (the “Common Shares”) are listed on the Toronto Stock Exchange (“TSX”) and the Nasdaq Capital Market under the symbol “MOGO”.
Mogo, one of Canada’s leading digital finance companies, is empowering its members with simple digital solutions to help them build wealth and achieve financial freedom. Mogo’s stock trading app, MogoTrade, offers Canadians the simplest and lowest cost way to invest while making a positive impact with every investment. Together with Moka, Mogo’s wholly-owned subsidiary bringing automated, fully-managed flat-fee investing to Canadians, they form the heart of Mogo’s digital wealth platform. Mogo also offers digital loans and mortgages. Through Mogo’s wholly-owned subsidiary, Carta Worldwide, the Company also offer a digital payments platform that powers next-generation card programs for both established global corporations and innovative fintech companies in Europe and Canada. To learn more, please visit mogo.ca.
On August 14, 2023, the Company completed a share consolidation of its share capital on the basis of one post-consolidation common share of Mogo for each three pre-consolidation common shares of Mogo (the "Share Consolidation"). Outstanding stock options and outstanding warrants were similarly adjusted by the Share Consolidation ratio. The Share Consolidation resulted in 74,610,924 pre-consolidation common shares issued and outstanding on August 11, 2023, being consolidated into 24,870,308 post-consolidation common shares on August 14, 2023. In accordance with the Share Consolidation, all common shares and per-share amounts disclosed herein reflect the post-Share Consolidation shares unless otherwise specified.
Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. The policies applied in these consolidated financial statements were based on International Financial Reporting Standards as issued by the International Accounting Standards Board issued and applicable at December 31, 2023.
The Company presents its consolidated statements of financial position on a non-classified basis in order of liquidity.
These consolidated financial statements were authorized by the Board of Directors (the “Board”) to be issued on March 20, 2024.
These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the payment 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 and to meet its liabilities as they become due in the normal course.
Management routinely plans future activities which includes forecasting future cash flows. Management has reviewed their plan and has collectively formed a judgment that the Company has adequate resources to continue as a going concern for the foreseeable future, which management has defined as being at least 12 months from the date of approval of these consolidated financial statements. In arriving at this judgment, management has considered the following: (i) cash flow projections of the Company, which incorporates a rolling forecast and detailed cash flow modeling through the next 12 months from the date of approval of these consolidated financial statements, and (ii) the base of investors and debt lenders historically available to the Company.
F-11
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
The expected cash flows have been modeled based on anticipated revenue and profit streams with debt programmed into the model. Refer to Note 24 for details on amounts that may come due in the next 12 months. For these reasons, the Company continues to adopt a going concern basis in preparing the consolidated financial statements.
Basis of consolidation
The Company has consolidated the assets, liabilities, revenues and expenses of all its subsidiaries and its structured entity. The consolidated financial statements include the accounts of the Company, and its direct and indirect wholly-owned subsidiaries, Mogo Finance Technology Inc., Mogo Financial (Alberta) Inc., Mogo Financial (B.C.) Inc., Mogo Financial Inc., Mogo Financial (Ontario) Inc., Mogo Mortgage Technology Inc., Mogo Technology Inc. (a US subsidiary), Mogo Blockchain Technology Inc., Mogo Wallet Inc. (formerly Mogo Wealth Technology Inc.), Thurlow Management Inc., Carta Solutions Holding Corp., Carta Solutions Processing Services (Cyprus) Ltd., Carta Financial Services Ltd. (a UK subsidiary), Carta Solutions Processing Services Corp., Carta Solutions Processing Services Corp. (a Morocco subsidiary), Carta Solutions Singapore PTE. Ltd. (a Singapore subsidiary), Carta Worldwide Inc., Carta Americas Inc. (a US subsidiary), Moka Financial Technologies Inc., Moka Financial Technologies Europe (a France subsidiary), Mogo Asset Management Inc. (formerly Tactex Asset Management Inc.), Tactex Advisors Inc. (a US subsidiary), NumberJacks Services Inc., and MogoTrade Inc. (formerly known as Fortification). The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies.
Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
An entity is consolidated if the Company concludes that it controls the entity. The following circumstances may indicate a relationship in which, in substance, Mogo controls and therefore consolidates the entity:
All inter‑company balances, income and expenses and unrealized gains and losses resulting from inter‑company transactions are eliminated in full.
F-12
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
The Company has consistently applied the following accounting policies to all periods presented in these consolidated financial statements, unless mentioned otherwise. The Company adopted Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) from January 1, 2023. The amendments require the disclosure of ‘material’, rather than ‘significant’, accounting policies. Although the amendments did not result in any changes to the accounting policies themselves, they impacted the accounting policy information disclosed in this note in certain instances. The material accounting policies used in the preparation of these consolidated financial statements are set out below.
Revenue is comprised of subscription and services revenue and interest revenue.
Subscription and services revenue
Subscription and services revenue is comprised of service revenue, trading revenue, transaction processing revenue, management fee revenue, commission revenue and brokerage revenue. Subscription and services revenue is measured based on the consideration specified in a contract with customers. The Company recognizes revenue when control of the services is transferred to the customer.
Service revenue
The Company earns service revenue through its subscription-based offerings including its long-term savings and investing products, loan protection services, and premium account services. The Company’s service revenues are derived from contracts with individual users. The Company recognizes service revenue from the performance obligations on a straight-line basis, over the length of the contract, on a recurring basis.
Transaction processing revenue
The Company’s transaction processing revenue is derived from long-term processing contracts with financial and non-financial institutions. Transaction processing revenue is generated primarily from fees charged to set up a customer on the Company’s processing platform and processing charges, including maintenance fees on cards on the Company’s processing platform, determined by the number of transactions processed and/or cards boarded by the Company for its customers.
Transaction processing revenue typically includes a performance obligation to provide processing services to its customers. The Company has determined that transaction processing services represent a stand-ready series of distinct daily services that are substantially the same, with the same pattern of service performed for the customer. As a result, the Company has determined that transaction processing revenue arrangements represent an individual performance obligation.
The Company recognizes set-up fees with a portion recognized upon customer acceptance and the remaining portion over the contract period, on a straight-line basis, commencing when services to set up a customer have been completed. The Company recognizes transaction processing charges, including maintenance fees, on a monthly basis based on the greater of the monthly minimum contracted revenue or the total actual transaction fees due based on the number of transactions processed.
F-13
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
Management fee revenue
Revenue from management services consists of management fees earned through investment advisory services and from investment fund management. The Company recognizes management fee revenue as the management services are delivered.
Commission revenue
Commission revenue is comprised of MogoMortgage brokerage commissions and Exempt Market Dealer commission revenue. The Company earns a commission based on the rate set out within the agreement and is recognized upon completion of the services outlined in the agreement.
Brokerage revenue
Brokerage revenue arising from negotiating or participating in the negotiation of a transaction on behalf of a third party, such as an agreement to acquire shares or other securities or to buy or sell businesses, is recognized at the closing of the underlying transaction. Fee revenue or components thereof that are related to execution are recognized when the related criteria are met.
Interest revenue
Interest revenue represents interest on the Company's loan products. Interest is recognized on an effective interest basis during the period, and fees are recognized when assessed to the customer.
Cost of revenue consists of provision for loan losses and transaction costs. Transaction costs include commissions and fees paid to third parties, and expenses that relate directly to the acquisition and processing of new customers (excluding marketing) and include expenses such as data aggregation costs, payment facilitation costs, credit scoring fees, loan system transaction fees, and certain fees related to the MogoProtect program.
F-14
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred, and the Company has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognized when the obligation specified in the contract is discharged, cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the consolidated statements of operations and comprehensive income (loss).
Classification and measurement of financial assets and financial liabilities
At initial recognition, the Company measures a financial asset at its fair value. For financial assets not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset, are added to its initial carrying value. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. Financial liabilities are recognized initially at fair value and are classified as amortized cost or as fair value through profit or loss (“FVTPL”). A financial liability is classified as at FVTPL if it is classified as held-for trading, it is a derivative or it is designated as such on initial recognition.
The Company classifies its financial assets between those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and those to be measured at amortized cost. Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as FVTPL:
A debt investment is measured at fair value through other comprehensive income (“FVOCI”) if it meets both of the following conditions and is not designated as at FVTPL:
All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL.
Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense is recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.
F-15
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
The Company’s financial instruments measured at amortized cost include cash and cash equivalent, restricted cash, loans receivable, other receivables, accounts payable and accruals, client liabilities, lease liabilities, credit facility, and debentures.
The Company’s financial instruments measured at FVTPL include the investment portfolio, derivative financial assets and derivative financial liabilities.
Realized gains or losses on the disposal of investments are determined based on the weighted average cost. Unrealized gains or losses on investments and derivative instruments are determined based on the change in fair value at each reporting period.
Impairment of financial assets
Expected credit loss model
The expected credit loss (“ECL”) model is a three-stage impairment approach used to measure the allowance for loan losses on loans receivable at each reporting period date. Loans are classified under one of three stages based on changes in credit quality since initial recognition. Stage 1 loans consist of performing loans that have not had a significant increase in credit risk since initial recognition. Loans that have experienced a significant increase in credit risk since initial recognition are classified as Stage 2, and loans considered to be credit-impaired are classified as Stage 3. The Company routinely refinances its existing customers, and accordingly, does not consider a refinancing to be an indicator of increased credit risk. The allowance for loan losses on both Stage 2 and Stage 3 loans is measured at lifetime ECLs. The allowance for loan losses on Stage 1 loans is measured at an amount equal to 12-month ECLs, representing the portion of lifetime ECLs expected to result from default events possible within 12 months of the reporting date. The Company’s measurement of ECLs is impacted by forward looking indicators (“FLIs”) including the consideration of forward macroeconomic conditions. Management has applied a probability weighted approach to the measurement of ECL as at December 31, 2023, involving multiple scenarios and FLIs. Refer to Note 4 for more details.
Assessment of significant increase in credit risk
Significant increases in credit risk are assessed based on changes in probability of default of loans receivable subsequent to initial recognition. The Company uses past due information to determine whether credit risk has increased significantly since initial recognition. Loans receivable are considered to have experienced a significant increase in credit risk and are reclassified to Stage 2 if a contractual payment is more than 30 days past due as at the reporting date.
The Company defines default as the earlier of when a contractual loan payment is more than 90 days past due or when a loan becomes insolvent as a result of customer bankruptcy. Loans that have experienced a default event are considered to be credit-impaired and are reclassified as Stage 3 loans.
F-16
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
Measurement of expected credit losses
ECLs are measured as the calculated expected value of cash shortfalls over the remaining life of a loan receivable, using a probability-weighted approach that reflects reasonable and supportable information about historical loss rates, post-charge off recoveries, current conditions and forward-looking indicators such as unemployment rates, inflation rates, bank prime rates and GDP growth rates. The measurement of ECLs primarily involves using this information to determine both the expected probability of a default event occurring and expected losses resulting from such default events. Loans are grouped according to product type, customer tenure and aging for the purpose of assessing ECLs. Historical loss rates and probability weights are re-assessed quarterly and subject to management review.
Intangible assets, with the exception of digital assets, are measured at cost less accumulated amortization and impairment losses. Intangible assets include internally generated and acquired software, acquired technology assets, regulatory licenses, and customer relationships with finite useful lives. Acquired brand and trade names are considered to have indefinite useful lives. Internally generated software costs primarily consist of salaries and payroll-related costs for employees directly involved in the development efforts and fees paid to outside consultants.
Amortization is recorded at rates intended to amortize the cost of the intangible assets over their estimated useful lives as follows:
|
|
Rate |
Software - Internally generated |
|
5 years straight line |
Software licenses |
|
5 years straight line |
Technology assets - Acquired |
|
10 years straight line |
Customer relationships |
|
7 to 10 years straight line |
Regulatory licenses |
|
5 years straight line |
Brand and trade name |
|
Indefinite |
Development costs, including those related to the development of software, are recognized as an intangible asset when the Company can demonstrate:
Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete, and the asset is available for use. During the period of development, the asset is tested for impairment annually.
F-17
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
e) Goodwill
Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognized. Goodwill is measured at cost less accumulated impairment losses. Goodwill is tested for impairment annually or when indicators of impairment exist.
f) Impairment of non-financial assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash‑generating units (“CGUs”) to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual CGUs, or otherwise they are allocated to the smallest group of CGUs for which a reasonable and consistent allocation basis can be identified.
For impairment testing purposes, the Company is determined to be two CGUs as follows:
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre‑tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognized immediately in the consolidated statements of operations and comprehensive income (loss).
Other than for goodwill, where an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, such that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or CGU in prior years. A reversal of an impairment loss is recognized in the consolidated statements of operations and comprehensive income (loss).
g) Foreign currency translation
The consolidated financial statements are presented in Canadian dollars. The functional currency of each subsidiary is determined based on the currency of the primary economic environment in which that subsidiary operates. Transactions in foreign currencies are initially recorded in the respective functional currencies at the rate prevailing at the date of the transaction. Monetary items are translated into the functional currency at the exchange rate in effect as at the date of the statement financial position and non-monetary items are translated as at the rate of exchange in effect when the assets were acquired or the obligation was incurred. Revenue and expenses are translated into Canadian dollars using average monthly exchange rates.
F-18
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
g) Foreign currency translation (Continued from previous page)
Foreign exchange gains or losses are recorded to revaluation loss (gain) in the consolidated statements of operations and comprehensive income (loss). The functional currency of each subsidiary that is not in Canadian dollars is as follows: Carta Financial Services Ltd. (GBP), Carta Solutions Processing Services Cyprus Ltd. (EUR), Carta Solutions Processing Services Corp. (MAD), Carta Solutions Singapore PTE. Ltd. (SGD), Carta Americas Inc. (USD), Moka Financial Technologies Europe (EUR), and Tactex Advisors Inc. (USD).
h) Foreign operations
The assets and liabilities of foreign operations are translated to the presentation currency using exchange rates at the reporting date. The revenue and expenses of foreign operations are translated to the presentation currency using exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income.
i) Income taxes
Income tax expense is comprised of current and deferred tax. Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.
j) Share-based payments
The Company measures equity settled stock options granted to directors, officers, employees and consultants based on their fair value at the grant date and recognizes compensation expense over the vesting period. Measurement inputs include the Company’s share price on the measurement date, the exercise price of the option or warrant, the expected volatility of the Company’s shares, the expected life of the options or warrants, and the risk-free rate of return. Dividends are not factored in as the Company does not expect to pay dividends in the foreseeable future. Expected forfeitures are estimated at the date of grant and subsequently adjusted if further information indicates actual forfeitures may vary from the original estimate.
For each restricted share unit granted to directors, officers and employees, compensation expense is recognized equal to the market value of one common share at the date of grant based on the number of RSUs expected to vest, recognized over the term of the vesting period, with a corresponding credit to contributed surplus.
Share-based payment arrangements with non-employees in which the Company receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payments transactions. The share-based payments are measured based on the fair value of the goods or services received if the fair value can be reliably measured. Otherwise, the share-based payments are measured based on the fair value of the share-based awards using the expected life, risk free interest rate, volatility, exercise price, and fair value of the underlying equity instrument at the time the goods or services are received.
F-19
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
k) Earnings per share
The computation of earnings per share is based on the weighted average number of shares outstanding during the period and profit attributable to the common shareholders. Diluted earnings per share are computed in a similar way to basic earnings per share except that the weighted average shares outstanding are increased to include the additional effects of all dilutive potential common shares assuming the exercise of share options or warrants.
l) Business combinations
The Company uses the acquisition method of accounting for its business combinations. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any gain on purchase is recognized in the consolidated statements of operations and comprehensive income (loss). Transaction cost are expenses as incurred, except if related to the issue of debt or equity securities. The consideration transferred does not include amounts related to the settlement of pre-existing relationship. Such amounts are generally recognized in the consolidated statements of operations and comprehensive income (loss).
If share-based payment awards are required to be exchanged for awards held by acquiree’s employees (“replacement awards”), then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based measure of the replacement awards compared with the market-based measure of the acquiree’s awards and the extent to which the replacement awards related to pre-acquisition services.
m) Investment in associate
An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
Any investments in associates are accounted for using the equity method. Under the equity method, the investment in an associate is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the Company’s share of the profit or loss and other comprehensive income of the associate since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is not tested for impairment separately.
The consolidated statements of operations and comprehensive income (loss) reflects the Company’s share of the results of operations of the associate. Unrealized gains and losses resulting from transactions between the Company and the associate are eliminated to the extent of the interest in the associate.
The aggregate of the Company’s share of an associate’s profit or loss after tax is shown on the face of the consolidated statements of operations and comprehensive income (loss) as a separate line item. The financial statements of the associate are prepared for the same reporting period as the Company. When necessary, adjustments are made to bring the accounting policies in line with those of the Company. After application of the equity method, the Company determines whether it is necessary to recognize an impairment loss on its investment in its associate. At each reporting date, the Company determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, and then recognizes the loss within its share of profit or loss of an associate in the consolidated statements of operations and comprehensive income (loss).
If significant influence over an entity is lost, the Company recognizes a gain or loss in profit or loss and will then account for the investment as a financial instrument, as outlined in note 3(c).
F-20
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
n) Cash and cash equivalent
Cash and cash equivalent in the consolidated statements of financial position and cash flows is comprised of cash held at banks, cash held on hand and short-term highly liquid deposits with an original maturity of three months or less that are readily convertible to a known amount of cash and subject to an insignificant risk of changes in value.
o) Leases
Right-of-use assets
Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct cost incurred, and lease payments made at or before the commencement date less any lease incentives received. The right-of-use assets are depreciated on a straight-line basis over the lease term. Right-of-use assets are subject to an evaluation of impairment if any indicators of impairment are noted.
Lease liabilities
The Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payment includes fixed payments (including in-substance fixed payments). Variable payments other than those that depend on an index or a rate are recorded in general and administration expenses as incurred.
In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease commencement date if 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 re-measured if there is a modification, a change in the lease term or a change in the in-substance fixed lease payments.
Subleases
For subleases classified as a finance lease, the Company de-recognizes the right-of-use asset relating to the head lease and recognizes a net investment in the sublease. Any difference between the right-of-use asset and the net investment in the finance sublease is recognized in profit or loss. The Company measures the net investment in the sublease at an amount equal to the present value of the lease payments of the underlying right-of-use asset. The net investment in the sublease lease is depreciated on a straight-line basis over the lease term.
Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases of properties (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e., below $5,000). Lease payments on short-term leases and leases of low-value assets are recognized as expenses in the period incurred.
F-21
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
p) Significant accounting judgements, estimates and assumptions
The preparation of the consolidated financial statements requires management to make estimates, assumptions and judgments that affect the reported amount of assets and liabilities, and the reported amount of revenues and expenses during the year. Actual results may differ from these estimates. Estimates, assumptions, and judgments are reviewed on an ongoing basis. Revisions to accounting estimates are recognized on a prospective basis beginning from the period in which they are revised.
Significant accounting judgements
The following are the critical judgements, apart from those involving estimations that have been made in the process of applying the Company’s accounting policies, which have the most significant effect on the amounts recognized in the consolidated financial statements.
Expected credit losses
In applying its accounting policy for the expected credit loss model, the Company applies judgment in defining significant increase in defaults, and its write-offs policy. Refer to Note 4 for further details.
Significant accounting estimates and assumptions
These estimates and assumptions are based on management’s historical experience, best knowledge of current events, conditions and actions that the Company may undertake in the future and other factors that management believes are reasonable under the circumstances.
These estimates and assumptions are reviewed periodically, and the effect of a change in accounting estimate or assumption is recognized prospectively by including it in the consolidated statements of operations and comprehensive income (loss) in the period of the change and in any future periods affected.
The areas where estimates and assumptions have the most significant effect on the amounts recognized in the consolidated financial statements include the following:
The provision for loan losses consists of amounts charged to the consolidated statements of operations and comprehensive income (loss) during the period to maintain an adequate allowance for loan losses. The Company's allowance for loan losses represents its estimate of the expected credit losses expected from its existing loan portfolio and is based on a variety of factors, including the composition and quality of the portfolio, loan-specific information gathered through collection efforts, delinquency levels, historical charge-off and loss experience, the Company's expectations of future loan performance, and general forward-looking macroeconomic conditions. The methodology and assumptions used in setting the loan loss allowance are reviewed regularly to reduce any difference between loss estimates and actual loss experience.
Estimating fair value requires that significant judgment be applied to each individual investment. For privately held investments, the fair value of each investment is measured using the most appropriate valuation methodology or combination of methodologies in the judgment of management in light of the specific nature, facts and circumstances surrounding that investment. This may take into consideration, but not be limited to, one or more of the following: valuations of recent or in-progress funding rounds, forward revenue and earnings projections, comparable peer valuation multiples, and the initial cost base of the investment. Actual results could differ significantly from these estimates.
F-22
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
p) Significant accounting judgements, estimates and assumptions (Continued from previous page)
The Company is required to assess the recoverability of values assigned to cash generating units that include goodwill on an annual basis. Estimating the recoverable amount requires significant judgment in the determination of appropriate inputs. This may take into consideration the following: forecast period, cash flow projections and discount rates. Actual results could differ significantly from these estimates.
The Company is required to assess the recoverability of its investment in associate when indicators of impairment are identified. Estimating the recoverable amount requires significant judgment in determination of fair value of the investment. The fair value of the investment in associate is measured using the most appropriate valuation methodology or combination of methodologies in the judgement of management in light of the specific nature, facts and circumstances surrounding the investment. Management exercises judgement in determining inputs to the valuation methodology including forward revenue projections and comparable peer valuation multiples. Actual results could differ significantly from these estimates.
Assessment of the going concern
Based on cash flow forecasts, the Company believes that it will have sufficient liquidity to operate and discharge its liabilities as they become due. Development of these forecasts required management to make subjective estimates and assumptions related to forecasted revenue and loan growth rates, and access to undrawn funds under existing credit facilities for financing new loans.
q) New and amended standards and interpretations
Changes in material accounting policies
Material accounting policy:
The Company adopted Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) from January 1, 2023. Although the amendments did not result in any changes to the accounting policies themselves, they impacted the accounting policy information disclosed in the financial statements.
The amendments require the disclosure of ‘material’, rather than ‘significant’, accounting policies. The amendments also provide guidance on the application of materiality to disclosure of accounting policies, assisting entities to provide useful, entity-specific accounting policy information that users need to understand other information in the financial statements.
Management reviewed the accounting policies and made updates to the information disclosed in Note 3 Material accounting policies (2022: Significant accounting policies) in certain instances in line with the amendments.
Certain other new or amended standards and interpretations became effective on January 1, 2023, but do not have an impact on the consolidated financial statements of the Company.
Certain new or amended standards and interpretations are expected to become effective on January 1, 2024 and beyond. There are no new standards, interpretations or amendments that are expected to have a material impact to the Company’s consolidated financial statements. The Company has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
F-23
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
Loans receivable represent unsecured installment loans and lines of credit advanced to customers in the normal course of business. Current loans are defined as loans to customers with terms of one year or less, while non-current loans are those with terms exceeding one year. The breakdown of the Company’s gross loans receivable as at December 31, 2023 and December 31, 2022 are as follows:
|
|
As at |
|
|||||
|
|
December 31, |
|
|
December 31, 2022 |
|
||
Current (terms of one year or less) |
|
|
74,121 |
|
|
|
69,693 |
|
Non-current (terms exceeding one year) |
|
|
151 |
|
|
|
221 |
|
|
|
|
74,272 |
|
|
|
69,914 |
|
The following table provides a breakdown of gross loans receivable and allowance for loan losses by aging bucket, which represents the Company's assessment of credit risk exposure and by their IFRS 9 – Financial Instruments expected credit loss measurement stage. The entire loan balance of a customer is aged in the same category as its oldest individual past due payment, to align with the stage groupings used in calculating the allowance for loan losses under IFRS 9. Stage 3 gross loans receivable include net balances outstanding and still anticipated to be collected for loans previously charged off and these are carried in gross receivables at the net expected collectable amount with no associated allowance.
|
|
|
|
As at December 31, 2023 |
|
|||||||||||||
Risk Category |
|
Days past due |
|
Stage 1 |
|
|
Stage 2 |
|
|
Stage 3 |
|
|
Total |
|
||||
Strong |
|
Not past due |
|
|
59,938 |
|
|
|
— |
|
|
|
— |
|
|
|
59,938 |
|
Lower risk |
|
1-30 days past due |
|
|
3,404 |
|
|
|
— |
|
|
|
— |
|
|
|
3,404 |
|
Medium risk |
|
31-60 days past due |
|
|
— |
|
|
|
1,096 |
|
|
|
— |
|
|
|
1,096 |
|
Higher risk |
|
61-90 days past due |
|
|
— |
|
|
|
808 |
|
|
|
— |
|
|
|
808 |
|
Non-performing |
|
91+ days past due or bankrupt |
|
|
— |
|
|
|
— |
|
|
|
9,026 |
|
|
|
9,026 |
|
|
|
Gross loans receivable |
|
|
63,342 |
|
|
|
1,904 |
|
|
|
9,026 |
|
|
|
74,272 |
|
|
|
Allowance for loan losses |
|
|
(6,445 |
) |
|
|
(1,266 |
) |
|
|
(4,844 |
) |
|
|
(12,555 |
) |
|
|
Loans receivable, net |
|
|
56,897 |
|
|
|
638 |
|
|
|
4,182 |
|
|
|
61,717 |
|
F-24
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
|
|
|
|
As at December 31, 2022 |
|
|||||||||||||
Risk Category |
|
Days past due |
|
Stage 1 |
|
|
Stage 2 |
|
|
Stage 3 |
|
|
Total |
|
||||
Strong |
|
Not past due |
|
|
55,087 |
|
|
|
— |
|
|
|
— |
|
|
|
55,087 |
|
Lower risk |
|
1-30 days past due |
|
|
2,903 |
|
|
|
— |
|
|
|
— |
|
|
|
2,903 |
|
Medium risk |
|
31-60 days past due |
|
|
— |
|
|
|
1,211 |
|
|
|
— |
|
|
|
1,211 |
|
Higher risk |
|
61-90 days past due |
|
|
— |
|
|
|
898 |
|
|
|
— |
|
|
|
898 |
|
Non-performing |
|
91+ days past due or bankrupt |
|
|
— |
|
|
|
— |
|
|
|
9,815 |
|
|
|
9,815 |
|
|
|
Gross loans receivable |
|
|
57,990 |
|
|
|
2,109 |
|
|
|
9,815 |
|
|
|
69,914 |
|
|
|
Allowance for loan losses |
|
|
(5,794 |
) |
|
|
(1,239 |
) |
|
|
(6,040 |
) |
|
|
(13,073 |
) |
|
|
Loans receivable, net |
|
|
52,196 |
|
|
|
870 |
|
|
|
3,775 |
|
|
|
56,841 |
|
In determination of the Company’s allowance for loan losses, internally developed models are used to factor in credit risk related metrics, including the probability of defaults, the loss given default and other relevant risk factors. Management also considered the impact of key macroeconomic factors and determined that historic loan losses are most correlated with unemployment rate, inflation rate, bank prime rate and GDP growth rate. These macroeconomic factors were used to generate various forward-looking scenarios used in the calculation of allowance for loan losses. If management were to assign 100% probability to a pessimistic scenario forecast, the allowance for credit losses would have been $1,235 higher than the reported allowance for credit losses as at December 31, 2023 (December 31, 2022 – $1,222 higher). The following table provides a reconciliation of the allowance for loan losses:
|
|
As at December 31, 2023 |
|
|||||||||||||
|
|
Stage 1 |
|
|
Stage 2 |
|
|
Stage 3 |
|
|
Total |
|
||||
Balance as at January 1, 2023 |
|
|
5,794 |
|
|
|
1,239 |
|
|
|
6,040 |
|
|
|
13,073 |
|
Gross loans originated |
|
|
3,158 |
|
|
|
— |
|
|
|
— |
|
|
|
3,158 |
|
Principal payments |
|
|
(1,281 |
) |
|
|
(40 |
) |
|
|
(437 |
) |
|
|
(1,758 |
) |
Re-measurement of allowance before transfers |
|
|
139 |
|
|
|
158 |
|
|
|
(30 |
) |
|
|
267 |
|
Re-measurement of amounts transferred between stages |
|
|
(142 |
) |
|
|
1,102 |
|
|
|
11,151 |
|
|
|
12,111 |
|
Transfer to (from) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stage 1 – 12-month ECLs |
|
|
166 |
|
|
|
(136 |
) |
|
|
(30 |
) |
|
|
— |
|
Stage 2 – Lifetime ECLs |
|
|
(200 |
) |
|
|
200 |
|
|
|
— |
|
|
|
— |
|
Stage 3 – Lifetime ECLs |
|
|
(1,189 |
) |
|
|
(1,257 |
) |
|
|
2,446 |
|
|
|
— |
|
Net amounts charged off against allowance |
|
|
— |
|
|
|
— |
|
|
|
(14,296 |
) |
|
|
(14,296 |
) |
Balance as at December 31, 2023 |
|
|
6,445 |
|
|
|
1,266 |
|
|
|
4,844 |
|
|
|
12,555 |
|
F-25
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
|
|
As at December 31, 2022 |
|
|||||||||||||
|
|
Stage 1 |
|
|
Stage 2 |
|
|
Stage 3 |
|
|
Total |
|
||||
Balance as at January 1, 2022 |
|
|
5,721 |
|
|
|
1,119 |
|
|
|
2,973 |
|
|
|
9,813 |
|
Gross loans originated |
|
|
2,607 |
|
|
|
— |
|
|
|
— |
|
|
|
2,607 |
|
Principal payments |
|
|
(1,107 |
) |
|
|
(136 |
) |
|
|
(359 |
) |
|
|
(1,602 |
) |
Re-measurement of allowance before transfers |
|
|
142 |
|
|
|
89 |
|
|
|
591 |
|
|
|
822 |
|
Re-measurement of amounts transferred between stages |
|
|
(67 |
) |
|
|
1,047 |
|
|
|
12,576 |
|
|
|
13,556 |
|
Transfer to (from) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Stage 1 – 12-month ECLs |
|
|
79 |
|
|
|
(65 |
) |
|
|
(14 |
) |
|
|
— |
|
Stage 2 – Lifetime ECLs |
|
|
(218 |
) |
|
|
220 |
|
|
|
(2 |
) |
|
|
— |
|
Stage 3 – Lifetime ECLs |
|
|
(1,363 |
) |
|
|
(1,035 |
) |
|
|
2,398 |
|
|
|
— |
|
Net amounts charged off against allowance |
|
|
— |
|
|
|
— |
|
|
|
(12,123 |
) |
|
|
(12,123 |
) |
Balance as at December 31, 2022 |
|
|
5,794 |
|
|
|
1,239 |
|
|
|
6,040 |
|
|
|
13,073 |
|
Overall changes in the allowance for loan losses are summarized below:
|
|
Year ended |
|
|||||
|
|
December 31, |
|
|
December 31, |
|
||
|
|
|
|
|
|
|
||
Balance, beginning of the period |
|
|
13,073 |
|
|
|
9,813 |
|
Provision for loan losses |
|
|
13,778 |
|
|
|
15,383 |
|
Charge offs |
|
|
(14,296 |
) |
|
|
(12,123 |
) |
Balance, end of the period |
|
|
12,555 |
|
|
|
13,073 |
|
The provision for loan losses in the consolidated statements of operations and comprehensive income (loss) is recorded net of recoveries for the year ended December 31, 2023 of $588 (December 31, 2022 – $653).
F-26
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
|
|
As at |
|
|||||
|
|
December 31, |
|
|
December 31, |
|
||
Prepaid expenses |
|
|
1,308 |
|
|
|
2,499 |
|
Accounts receivable |
|
|
2,834 |
|
|
|
2,347 |
|
Brokerage firm receivables |
|
|
7,023 |
|
|
|
4,804 |
|
Deposits and other receivables and assets |
|
|
1,901 |
|
|
|
2,741 |
|
Total |
|
|
13,067 |
|
|
|
12,391 |
|
|
|
As at |
|
|||||
|
|
December 31, |
|
|
December 31, |
|
||
Equities |
|
|
37,768 |
|
|
|
11,504 |
|
Other |
|
|
— |
|
|
|
1,016 |
|
Total |
|
|
37,768 |
|
|
|
12,520 |
|
F-27
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
|
|
Computer |
|
|
Furniture |
|
|
Leasehold |
|
|
Total |
|
||||
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance, December 31, 2020 |
|
|
2,083 |
|
|
|
1,180 |
|
|
|
2,055 |
|
|
|
5,318 |
|
Additions |
|
|
462 |
|
|
|
2 |
|
|
|
— |
|
|
|
464 |
|
Additions through business combinations |
|
|
298 |
|
|
|
31 |
|
|
|
— |
|
|
|
329 |
|
Effects of movement in exchange rate |
|
|
(20 |
) |
|
|
(1 |
) |
|
|
— |
|
|
|
(21 |
) |
Balance, December 31, 2021 |
|
|
2,823 |
|
|
|
1,212 |
|
|
|
2,055 |
|
|
|
6,090 |
|
Additions |
|
|
455 |
|
|
|
— |
|
|
|
— |
|
|
|
455 |
|
Impairment |
|
|
(125 |
) |
|
|
— |
|
|
|
— |
|
|
|
(125 |
) |
Disposals |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Effects of movement in exchange rate |
|
|
22 |
|
|
|
(2 |
) |
|
|
— |
|
|
|
20 |
|
Balance, December 31, 2022 |
|
|
3,175 |
|
|
|
1,210 |
|
|
|
2,055 |
|
|
|
6,440 |
|
Additions |
|
|
214 |
|
|
|
— |
|
|
|
— |
|
|
|
214 |
|
Impairment |
|
|
(239 |
) |
|
|
(212 |
) |
|
|
— |
|
|
|
(451 |
) |
Disposals |
|
|
(2,160 |
) |
|
|
(998 |
) |
|
|
(2,055 |
) |
|
|
(5,213 |
) |
Effects of movement in exchange rate |
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
Balance, December 31, 2023 |
|
|
992 |
|
|
|
— |
|
|
|
— |
|
|
|
992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accumulated depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance, December 31, 2020 |
|
|
1,547 |
|
|
|
824 |
|
|
|
2,055 |
|
|
|
4,426 |
|
Depreciation |
|
|
400 |
|
|
|
78 |
|
|
|
— |
|
|
|
478 |
|
Balance, December 31, 2021 |
|
|
1,947 |
|
|
|
902 |
|
|
|
2,055 |
|
|
|
4,904 |
|
Depreciation |
|
|
403 |
|
|
|
69 |
|
|
|
— |
|
|
|
472 |
|
Impairment |
|
|
(37 |
) |
|
|
— |
|
|
|
— |
|
|
|
(37 |
) |
Balance, December 31, 2022 |
|
|
2,313 |
|
|
|
971 |
|
|
|
2,055 |
|
|
|
5,339 |
|
Depreciation |
|
|
313 |
|
|
|
27 |
|
|
|
— |
|
|
|
340 |
|
Disposals |
|
|
(2,160 |
) |
|
|
(998 |
) |
|
|
(2,055 |
) |
|
|
(5,213 |
) |
Balance, December 31, 2023 |
|
|
466 |
|
|
|
— |
|
|
|
— |
|
|
|
466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net book value |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance, December 31, 2022 |
|
|
862 |
|
|
|
239 |
|
|
|
— |
|
|
|
1,101 |
|
Balance, December 31, 2023 |
|
|
526 |
|
|
|
— |
|
|
|
— |
|
|
|
526 |
|
Depreciation of property and equipment of $340 for the year ended December 31, 2023 (December 31, 2022 – $472) is included in depreciation and amortization in the consolidated statements of operations and comprehensive income (loss).
Impairment charges of $451 were recognized in other non-operating expense for the year ended (December 31, 2023 (December 31, 2022 – $125).
F-28
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
|
|
Internally |
|
|
Internally |
|
|
Software |
|
|
Acquired technology assets |
|
|
Customer relationships |
|
|
Brand |
|
|
Regulatory licenses |
|
|
Total |
|
||||||||
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance, December 31, 2020 |
|
|
39,504 |
|
|
|
1,529 |
|
|
|
3,356 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
44,389 |
|
Additions |
|
|
1,200 |
|
|
|
6,303 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,503 |
|
Additions through business combinations |
|
|
— |
|
|
|
— |
|
|
|
628 |
|
|
|
21,000 |
|
|
|
8,900 |
|
|
|
1,000 |
|
|
|
6,800 |
|
|
|
38,328 |
|
Impairment |
|
|
— |
|
|
|
(898 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(898 |
) |
Transfers |
|
|
3,936 |
|
|
|
(3,936 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Effects of movement in exchange rate |
|
|
— |
|
|
|
— |
|
|
|
(8 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8 |
) |
Balance, December 31, 2021 |
|
|
44,640 |
|
|
|
2,998 |
|
|
|
3,976 |
|
|
|
21,000 |
|
|
|
8,900 |
|
|
|
1,000 |
|
|
|
6,800 |
|
|
|
89,314 |
|
Additions |
|
|
201 |
|
|
|
7,281 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,482 |
|
Impairment |
|
|
(18,440 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(18,440 |
) |
Transfers |
|
|
3,132 |
|
|
|
(3,132 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Effects of movement in exchange rate |
|
|
— |
|
|
|
— |
|
|
|
(3 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3 |
) |
Balance, December 31, 2022 |
|
|
29,533 |
|
|
|
7,147 |
|
|
|
3,973 |
|
|
|
21,000 |
|
|
|
8,900 |
|
|
|
1,000 |
|
|
|
6,800 |
|
|
|
78,353 |
|
Additions |
|
|
— |
|
|
|
3,206 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,206 |
|
Impairment |
|
|
— |
|
|
|
— |
|
|
|
(10 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10 |
) |
Disposals |
|
|
(13,597 |
) |
|
|
— |
|
|
|
(3,444 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(17,041 |
) |
Transfers |
|
|
8,810 |
|
|
|
(8,810 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Effects of movement in exchange rate |
|
|
— |
|
|
|
— |
|
|
|
(32 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(32 |
) |
Balance, December 31, 2023 |
|
|
24,746 |
|
|
|
1,543 |
|
|
|
487 |
|
|
|
21,000 |
|
|
|
8,900 |
|
|
|
1,000 |
|
|
|
6,800 |
|
|
|
64,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Accumulated amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance, December 31, 2020 |
|
|
22,231 |
|
|
|
— |
|
|
|
3,246 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
25,477 |
|
Amortization |
|
|
7,279 |
|
|
|
— |
|
|
|
218 |
|
|
|
1,722 |
|
|
|
1,427 |
|
|
|
— |
|
|
|
887 |
|
|
|
11,533 |
|
Balance, December 31, 2021 |
|
|
29,510 |
|
|
|
— |
|
|
|
3,464 |
|
|
|
1,722 |
|
|
|
1,427 |
|
|
|
— |
|
|
|
887 |
|
|
|
37,010 |
|
Amortization |
|
|
6,759 |
|
|
|
— |
|
|
|
148 |
|
|
|
2,100 |
|
|
|
1,066 |
|
|
|
— |
|
|
|
1,360 |
|
|
|
11,433 |
|
Impairment |
|
|
(11,919 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11,919 |
) |
Balance, December 31, 2022 |
|
|
24,350 |
|
|
|
— |
|
|
|
3,612 |
|
|
|
3,822 |
|
|
|
2,493 |
|
|
|
— |
|
|
|
2,247 |
|
|
|
36,524 |
|
Amortization |
|
|
3,797 |
|
|
|
— |
|
|
|
105 |
|
|
|
2,100 |
|
|
|
1,065 |
|
|
|
— |
|
|
|
1,360 |
|
|
|
8,427 |
|
Disposals |
|
|
(13,597 |
) |
|
|
— |
|
|
|
(3,444 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(17,041 |
) |
Effects of movement in exchange rate |
|
|
(24 |
) |
|
|
— |
|
|
|
28 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4 |
|
Balance, December 31, 2023 |
|
|
14,526 |
|
|
|
— |
|
|
|
301 |
|
|
|
5,922 |
|
|
|
3,558 |
|
|
|
— |
|
|
|
3,607 |
|
|
|
27,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net book value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance, December 31, 2022 |
|
|
5,183 |
|
|
|
7,147 |
|
|
|
361 |
|
|
|
17,178 |
|
|
|
6,407 |
|
|
|
1,000 |
|
|
|
4,553 |
|
|
|
41,829 |
|
Balance, December 31, 2023 |
|
|
10,220 |
|
|
|
1,543 |
|
|
|
186 |
|
|
|
15,078 |
|
|
|
5,342 |
|
|
|
1,000 |
|
|
|
3,193 |
|
|
|
36,562 |
|
Amortization of intangible assets of $8,427 for the year ended December 31, 2023 (December 31, 2022 – $11,433) is included in depreciation and amortization in the consolidated statements of operations and comprehensive income (loss).
Impairment charges of $10 were recognized in other non-operating expense for the year ended (December 31, 2023 (December 31, 2022 – $6,521).
F-29
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
The Company has lease agreements for its office spaces. Leases generally have lease terms between 2 years to 7 years with an option to renew the lease after that date. The Company assesses at the lease commencement date whether it is reasonably certain to exercise the extension option. The Company re-assesses whether it is reasonably certain to exercise the options if there is a significant event or significant change in circumstances within its control.
During the year, the Company has not made any re-assessment related to extension options. Information about leases for which the Company is a lessee is presented below:
Amount recognized in the consolidated statements of financial position:
(i) Right-of-use assets
Set out below are the carrying amounts of the Company’s right-of-use assets and lease liabilities recognized and the movements during the year ended December 31, 2023 and 2022:
|
|
Right-of-use assets |
|
|
Lease liabilities |
|
||
Balance, as at December 31, 2021 |
|
|
3,430 |
|
|
|
3,948 |
|
Impairment |
|
|
(78 |
) |
|
|
— |
|
Depreciation |
|
|
(730 |
) |
|
|
— |
|
Interest expense |
|
|
— |
|
|
|
212 |
|
Payments |
|
|
— |
|
|
|
(880 |
) |
Balance, as at December 31, 2022 |
|
|
2,622 |
|
|
|
3,280 |
|
Impairment |
|
|
(669 |
) |
|
|
— |
|
Transfers |
|
|
(979 |
) |
|
|
— |
|
Depreciation |
|
|
(304 |
) |
|
|
— |
|
Interest expense |
|
|
— |
|
|
|
178 |
|
Payments |
|
|
— |
|
|
|
(749 |
) |
Balance, as at December 31, 2023 |
|
|
670 |
|
|
|
2,709 |
|
(ii) Investment in Sublease, net
|
|
As at |
|
|||||
|
|
December 31, |
|
|
December 31, 2022 |
|
||
Transfers |
|
|
979 |
|
|
|
— |
|
Additions |
|
|
191 |
|
|
|
— |
|
Interest accretion |
|
|
71 |
|
|
|
— |
|
Payments from sublessor |
|
|
(13 |
) |
|
|
— |
|
Balance, as at December 31, 2023 |
|
|
1,228 |
|
|
|
— |
|
F-30
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
Amount recognized in the consolidated statements of operations and comprehensive income (loss):
|
|
Year ended |
|
|||||||||
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|||
Depreciation of right-of-use assets |
|
|
304 |
|
|
|
730 |
|
|
|
725 |
|
Interest expense on lease liabilities |
|
|
178 |
|
|
|
212 |
|
|
|
243 |
|
Expenses relating to short term leases |
|
|
449 |
|
|
|
478 |
|
|
|
436 |
|
Impairment |
|
|
669 |
|
|
|
78 |
|
|
|
— |
|
Variable lease payments |
|
|
429 |
|
|
|
505 |
|
|
|
453 |
|
Total |
|
|
2,029 |
|
|
|
2,003 |
|
|
|
1,857 |
|
Depreciation of right-of-use assets is included in depreciation and amortization expense. Interest expense related to lease liabilities is included in debenture and other financing expense.
The Company in its cash flow has classified cash payment related to principal portion of $571 (December 31, 2022 – $668 ) of lease payments as financing activities and cash payments related to interest portion of $178 (December 31, 2022 – $212) as operating activities consistent with the presentation of interest payments chosen by the Company.
|
|
As at |
|
|||||
|
|
December 31, |
|
|
December 31, |
|
||
Accounts payables |
|
|
6,448 |
|
|
|
5,686 |
|
Accrued expenses |
|
|
5,797 |
|
|
|
6,441 |
|
Accrued wages and other benefits |
|
|
1,412 |
|
|
|
1,008 |
|
Client liabilities |
|
|
8,760 |
|
|
|
6,743 |
|
Other |
|
|
1,665 |
|
|
|
1,104 |
|
Total |
|
|
24,082 |
|
|
|
20,982 |
|
F-31
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
The credit facility consists of a $60,000 senior secured credit facility maturing on July 2, 2025. The credit facility is subject to variable interest rates that reference the Secured Overnight Financing Rate (“SOFR”), or under certain conditions, the Federal Funds Rate in effect. On December 16, 2021, the Company amended its credit facility to lower the effective interest rate from a maximum of LIBOR plus 9%, to LIBOR plus 8%. In June 2023, this was transitioned to SOFR plus 8% upon the cessation of USD LIBOR. There is a 0.33% fee on the available but undrawn portion of the $60,000 facility. The principal and interest balance outstanding for the credit facility as at December 31, 2023 was $49,405 (December 31, 2022 – $46,180). Refer to Note 24 for details on the reform of major interest rate benchmarks.
The credit facility is subject to certain covenants and events of default. As at December 31, 2023 and December 31, 2022, the Company was in compliance with these covenants. Interest expense on the credit facility is included in credit facility interest expense in the consolidated statements of operations and comprehensive income (loss).
Interest expense on the credit facility for the year ended December 31, 2023 of $6,064 (December 31, 2022 – $4,640) is included in credit facility interest expense in the consolidated statements of operations and comprehensive income (loss).
The Company has provided its senior lenders with a general security interest in all present and after acquired personal property of the Company, including certain pledged financial instruments, cash and cash equivalents.
|
|
As at |
|
|||||
|
|
December 31, |
|
|
December 31, 2022 |
|
||
|
|
|
|
|
|
|
||
Credit facility - funds drawn |
|
|
49,405 |
|
|
|
46,180 |
|
The Company has pledged financial instruments as collateral against its credit facilities. Under the terms of the general security agreement, assets pledged as collateral primarily include loans receivable with a carrying amount equal to $61,717 (December 31, 2022 – $56,841) and cash and cash equivalents with a balance of $316 (December 31, 2022 – $288).
F-32
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
The Company's debentures with maturity dates of July 2, 2025 pay interest at a coupon rate between 8 - 10% per annum. Payments of interest and principal are made to debenture holders on a quarterly basis on the first business day following the end of a calendar quarter, at the Company's option either in cash or Common Shares.
|
|
As at |
|
|||||
($000s) |
|
December 31, |
|
|
December 31, 2022 |
|
||
Principal balance |
|
|
37,020 |
|
|
|
39,658 |
|
Discount |
|
|
(1,000 |
) |
|
|
(2,118 |
) |
|
|
|
36,020 |
|
|
|
37,540 |
|
Interest payable |
|
|
763 |
|
|
|
726 |
|
|
|
|
36,783 |
|
|
|
38,266 |
|
The Debentures are secured by the assets of the Company, governed by the terms of a trust deed and, among other things, are subject to a subordination agreement to the credit facility which effectively extends the individual maturity dates of such debentures between January 2024 and June 2025 to July 2, 2025, being the maturity date of the credit facility.
The debenture principal repayment dates, after giving effect to the subordination agreement referenced above, are as follows:
($000s) |
|
Principal component of quarterly payment |
|
|
Principal due on maturity |
|
|
Total |
|
|||
2024 |
|
|
1,924 |
|
|
|
— |
|
|
|
1,924 |
|
2025 |
|
|
1,543 |
|
|
|
33,553 |
|
|
|
35,096 |
|
|
|
|
3,467 |
|
|
|
33,553 |
|
|
|
37,020 |
|
The debenture principal repayments are payable in either cash or Common Shares at Mogo’s option. The number of Common Shares required to settle the principal repayments is variable based on the Company's share price at the repayment date.
F-33
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
On February 24, 2021, in connection with a registered direct offering, the Company issued stock warrants to investors to purchase up to an aggregate of 891,089 Common Shares at an exercise price of US$33.00 at any time prior to three and a half years following the date of issuance.
On December 13, 2021, as part of a registered direct offering, the Company issued stock warrants to investors to purchase up to an aggregate of 1,018,519 Common Shares at an exercise price of US$14.10 at any time prior to three and a half years following the date of issuance.
The stock warrants are classified as a liability by the sole virtue of their exercise price being denominated in USD. As such, the warrants are subject to revaluation under the Black Scholes model at each reporting date, with gains and losses recognized to the consolidated statements of operations and comprehensive income (loss). The stock warrants are classified as a derivative liability, and not equity, due to the exercise price being denominated in USD, which is different than the Company's functional currency.
In the event that these warrants are fully exercised, the Company would receive cash proceeds of US$43,767, with the balance of the liability reclassified to equity at that time. If the warrants were to expire unexercised, then the liability would be extinguished through a gain in the consolidated statements of operations and comprehensive income (loss).
|
|
As at |
|
|||||
|
|
December 31, |
|
|
December 31, 2022 |
|
||
Balance, beginning of the period |
|
|
419 |
|
|
|
12,688 |
|
Change in fair value due to revaluation of derivative financial liabilities |
|
|
(379 |
) |
|
|
(12,558 |
) |
Change in fair value due to foreign exchange |
|
|
(6 |
) |
|
|
289 |
|
Balance, end of the period |
|
|
34 |
|
|
|
419 |
|
Details of the derivative financial liabilities as at December 31, 2023 are as follows:
|
|
Warrants outstanding and exercisable (000s) |
|
|
Weighted average exercise price $ |
|
||
Balance, December 31, 2021 |
|
|
1,910 |
|
|
|
29.06 |
|
Warrants issued |
|
|
— |
|
|
|
— |
|
Balance, December 31, 2022 |
|
|
1,910 |
|
|
|
29.06 |
|
Warrants issued |
|
|
— |
|
|
|
— |
|
Balance, December 31, 2023 |
|
|
1,910 |
|
|
|
29.06 |
|
The 1,909,608 warrants outstanding noted above have expiry dates of August 2024 and June 2025.
F-34
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
13. Derivative financial liabilities (Continued from previous page)
The fair value of the warrants outstanding was estimated using the Black-Scholes option pricing model with the following assumptions:
|
|
As at |
||
|
|
December 31, |
|
December 31, 2022 |
Risk-free interest rate |
|
4.79% |
|
4.41% |
Expected life |
|
0.7 - 1.5 years |
|
1.6 - 2.5 years |
Expected volatility in market price of shares |
|
73 - 77% |
|
89 - 106% |
Expected dividend yield |
|
0% |
|
0% |
Expected forfeiture rate |
|
0% |
|
0% |
14. Geographic information
Revenue presented below has been based on the geographic location of customers.
|
|
|
Year ended |
|
|||||||||
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|||
Canada |
|
|
|
59,104 |
|
|
|
62,320 |
|
|
|
49,533 |
|
Europe |
|
|
|
6,117 |
|
|
|
6,531 |
|
|
|
7,287 |
|
Other |
|
|
|
— |
|
|
|
98 |
|
|
|
699 |
|
Total |
|
|
|
65,221 |
|
|
|
68,949 |
|
|
|
57,519 |
|
Non-current assets presented below has been based on geographic location of the assets.
|
|
As at |
|
|||||
|
|
December 31, |
|
|
December 31, 2022 |
|
||
Canada |
|
|
77,032 |
|
|
|
82,587 |
|
Europe |
|
|
263 |
|
|
|
433 |
|
Other |
|
|
46 |
|
|
|
887 |
|
Total |
|
|
77,341 |
|
|
|
83,907 |
|
F-35
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
The following table summarizes the Company’s operating expenses by nature:
|
|
Year ended |
|
|||||||||
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|||
Personnel expense |
|
|
20,226 |
|
|
|
28,628 |
|
|
|
26,509 |
|
Depreciation and amortization |
|
|
9,067 |
|
|
|
12,636 |
|
|
|
12,736 |
|
Hosting and software licenses |
|
|
5,355 |
|
|
|
6,647 |
|
|
|
4,200 |
|
Marketing |
|
|
3,120 |
|
|
|
10,282 |
|
|
|
13,709 |
|
Professional services |
|
|
2,414 |
|
|
|
2,889 |
|
|
|
3,800 |
|
Stock-based compensation |
|
|
2,479 |
|
|
|
8,712 |
|
|
|
11,683 |
|
Insurance and licenses |
|
|
2,000 |
|
|
|
3,138 |
|
|
|
2,316 |
|
Credit verification costs |
|
|
1,256 |
|
|
|
1,918 |
|
|
|
1,990 |
|
Premises |
|
|
1,029 |
|
|
|
1,224 |
|
|
|
1,040 |
|
Others |
|
|
3,589 |
|
|
|
3,741 |
|
|
|
3,588 |
|
Total |
|
|
50,535 |
|
|
|
79,815 |
|
|
|
81,571 |
|
The following table summarizes the Company’s operating expenses by function including stock-based compensation and depreciation and amortization:
|
|
Year ended |
|
|||||||||
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|||
Technology and development |
|
|
15,906 |
|
|
|
26,718 |
|
|
|
25,021 |
|
Marketing |
|
|
3,379 |
|
|
|
11,448 |
|
|
|
16,619 |
|
Customer service and operations |
|
|
11,351 |
|
|
|
15,900 |
|
|
|
15,870 |
|
General and administration |
|
|
19,899 |
|
|
|
25,749 |
|
|
|
24,061 |
|
Total |
|
|
50,535 |
|
|
|
79,815 |
|
|
|
81,571 |
|
F-36
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
|
|
Year ended |
|
|||||||||
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|||
Change in fair value due to revaluation of derivative financial asset |
|
|
— |
|
|
|
7,866 |
|
|
|
(1,788 |
) |
Change in fair value due to revaluation of derivative financial liabilities |
|
|
(379 |
) |
|
|
(12,558 |
) |
|
|
(11,276 |
) |
Realized loss (gain) on investment portfolio |
|
|
340 |
|
|
|
— |
|
|
|
(4,219 |
) |
Unrealized (gain) loss on investment portfolio |
|
|
(9,659 |
) |
|
|
7,951 |
|
|
|
942 |
|
Unrealized loss on digital assets |
|
|
— |
|
|
|
625 |
|
|
|
— |
|
Unrealized loss (gain) on debentures |
|
|
32 |
|
|
|
(1,114 |
) |
|
|
— |
|
Realized exchange loss |
|
|
46 |
|
|
|
— |
|
|
|
— |
|
Unrealized exchange gain |
|
|
(8 |
) |
|
|
(395 |
) |
|
|
670 |
|
Unrealized gain on other receivable |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss related to property and equipment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
(9,628 |
) |
|
|
2,375 |
|
|
|
(15,671 |
) |
|
|
Year ended |
|
|||||||||
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|||
Government grants |
|
|
— |
|
|
|
(93 |
) |
|
|
(1,597 |
) |
Direct offering transaction costs allocated to derivative financial liabilities |
|
|
— |
|
|
|
— |
|
|
|
2,260 |
|
Restructuring charges |
|
|
4,519 |
|
|
|
2,784 |
|
|
|
421 |
|
Impairment of intangible assets |
|
|
— |
|
|
|
6,521 |
|
|
|
— |
|
Acquisition costs and other |
|
|
712 |
|
|
|
1,148 |
|
|
|
3,016 |
|
Total |
|
|
5,231 |
|
|
|
10,360 |
|
|
|
4,100 |
|
During the year ended December 31, 2023 the Company continued with the formal restructuring plans initiated in 2022 resulting in charges of $4,519 (December 31, 2022 - $2,784). The restructuring charges include incremental costs associated directly with the restructuring plans including employee termination benefits, consulting fees, onerous contracts and contract termination costs.
For the year ended December 31, 2021, direct offering transaction costs allocated to derivative financial liabilities of $2,260 relate to the issuance of warrants with a USD denominated exercise price to investors. This resulted in the recognition of a derivative financial liability and the allocation of the associated transaction costs to other non-operating expenses. The Company did not complete a direct offering in the year ended December 31, 2023 or December 31, 2022, and therefore did not incur any direct offering transaction costs.
F-37
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
As at December 31, 2022 the Company held a 34% ownership in Coinsquare (December 31, 2021 - 39%), a digital asset trading platform, which was accounted for using the equity method in the consolidated financial statements. As a result, the Company would record its share of the investee’s gain or loss, as well as any gains or losses arising from the dilution of its ownership interest in Coinsquare, into the consolidated statements of operations and comprehensive income (loss).
In October 2022, Coinsquare’s subsidiary, Coinsquare Capital Markets Ltd (“CCML”), was admitted to IIROC which resulted in the obligatory conversion of certain convertible debentures issued by Coinsquare, resulting in dilution of Mogo's interest in associate while recording a net gain of $2,927 from the release of liability. Additionally, during the year ended December 31, 2022, the Company had identified indicators of impairment related to the Company’s investment in Coinsquare, resulting in an estimated recoverable amount of $24,989 as at December 31, 2022.
The following table summarizes the Company's investment accounted for using the equity method as at December 31, 2023 and December 31, 2022:
|
|
As at |
|
|||||||||
|
|
December 31, |
|
|
December 31, 2022 |
|
|
December 31, 2021 |
|
|||
Balance, beginning of the period |
|
|
24,989 |
|
|
|
103,821 |
|
|
|
— |
|
Additions |
|
|
|
|
|
|
|
|
|
|||
Initial investments in Coinsquare |
|
|
— |
|
|
|
— |
|
|
|
45,026 |
|
Step up investments in Coinsquare |
|
|
— |
|
|
|
— |
|
|
|
59,073 |
|
Share of loss in investment accounted for using the equity method: |
|
|
|
|
|
|
|
|
|
|||
Share of investee's loss |
|
|
(2,972 |
) |
|
|
(23,496 |
) |
|
|
(278 |
) |
Gain from dilution of interest in associate |
|
|
— |
|
|
|
2,927 |
|
|
|
— |
|
Impairment |
|
|
(5,295 |
) |
|
|
(58,263 |
) |
|
|
— |
|
Revaluation gain |
|
|
97 |
|
|
|
— |
|
|
|
— |
|
Distributions received |
|
|
(731 |
) |
|
|
— |
|
|
|
— |
|
Transfer to investments measured at FVTPL |
|
|
(16,088 |
) |
|
|
— |
|
|
|
— |
|
Balance, end of the period |
|
|
— |
|
|
|
24,989 |
|
|
|
103,821 |
|
On July 10, 2023, Coinsquare, WonderFi Technologies Inc. ("WonderFi") and CoinSmart Financial Inc. ("CoinSmart") completed a business combination to merge their respective businesses. Before the execution of the WonderFi Transaction, Mogo received 1,353,770 shares of FRNT Financial Inc and 89,429 shares of Mogo from Coinsquare. As part of the transaction, Mogo exchanged its 12,518,473 shares in Coinsquare for 86,962,640 shares of WonderFi. Immediately prior to the transaction Mogo owned 34% of Coinsquare. Following the closing of the transaction, Mogo owns approximately 14% of the combined company, which is traded on the TSX under the ticker WNDR.TO
As a result of Mogo’s ownership interest in WonderFi dropping below 20%, the Company no longer has significant influence over its investment such that it has changed the classification of its investment from investment in associate accounted for using the equity method, to investment measured at fair value through profit and loss. Furthermore, MogoTrade Inc. ("MTI") is no longer responsible for guaranteeing Coinsquare Capital Markets Ltd's obligations to its clients up to the amount of MTI's regulatory capital.
For the year ended December 31, 2023, the consolidated statements of operations and comprehensive income (loss) have included all amounts relating to the investment accounted for using the equity method in one line item called share of loss in investment accounted for using the equity method. Prior year presentation has been adjusted to reflect this change in presentation.
F-38
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
The major components of provision for income taxes are as follows:
|
|
Year ended |
|
|||||||||
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|||
Current tax expense |
|
|
19 |
|
|
|
76 |
|
|
|
133 |
|
Deferred tax recovery |
|
|
(419 |
) |
|
|
(412 |
) |
|
|
(365 |
) |
Income tax recovery |
|
|
(400 |
) |
|
|
(336 |
) |
|
|
(232 |
) |
The reconciliation of the provision for income taxes to the amount of income taxes calculated using statutory income tax rates applicable to the Company in Canada is as follows:
|
|
Year ended |
|
|||||||||
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|||
Canadian federal and provincial recovery of income taxes using statutory rate of 27% (2021 – 27%, 2020 – 27%) |
|
|
(4,938 |
) |
|
|
(44,832 |
) |
|
|
(9,029 |
) |
Change in recognized taxable temporary differences |
|
|
(1,297 |
) |
|
|
— |
|
|
|
— |
|
Change in unrecognized deductible temporary differences and unused tax losses |
|
|
4,680 |
|
|
|
33,554 |
|
|
|
6,538 |
|
Impact of rate differences between jurisdictions |
|
|
293 |
|
|
|
— |
|
|
|
— |
|
Permanent differences and other |
|
|
862 |
|
|
|
10,942 |
|
|
|
2,259 |
|
Income tax recovery |
|
|
(400 |
) |
|
|
(336 |
) |
|
|
(232 |
) |
The Company’s deferred tax assets are as follows:
|
|
As at |
|
|||||
|
|
December 31, |
|
|
December 31, |
|
||
Non-capital losses |
|
|
6,142 |
|
|
|
6,728 |
|
Property and equipment |
|
|
— |
|
|
|
— |
|
Intangible assets |
|
|
— |
|
|
|
— |
|
Total |
|
|
6,142 |
|
|
|
6,728 |
|
F-39
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
The Company’s deferred tax liabilities are as follows:
|
|
As at |
|
|||||
|
|
December 31, |
|
|
December 31, |
|
||
Intangible assets |
|
|
6,656 |
|
|
|
7,492 |
|
Right-of-use assets |
|
|
512 |
|
|
|
708 |
|
Property and equipment |
|
|
— |
|
|
|
9 |
|
Digital assets and derivatives |
|
|
— |
|
|
|
— |
|
Equity investments |
|
|
— |
|
|
|
— |
|
Deferred cost |
|
|
— |
|
|
|
— |
|
|
|
|
7,168 |
|
|
|
8,209 |
|
Deferred tax assets have not been recognized because it is not probable that future taxable profit will be available against which the Company can use the benefits therefrom.
The Company has deductible temporary differences for which no deferred tax assets are recognized as follows:
|
|
As at |
|
|||||
|
|
December 31, |
|
|
December 31, |
|
||
Unused tax losses |
|
|
237,115 |
|
|
|
235,546 |
|
Property and equipment |
|
|
5,778 |
|
|
|
5,225 |
|
Lease liability |
|
|
2,709 |
|
|
|
3,280 |
|
Equity investments |
|
|
7,587 |
|
|
|
7,523 |
|
Intangible assets |
|
|
31,934 |
|
|
|
30,341 |
|
Investment accounted for using the equity method |
|
|
78,005 |
|
|
|
79,109 |
|
Debentures |
|
|
5,595 |
|
|
|
2,185 |
|
Financing costs |
|
|
1,720 |
|
|
|
2,643 |
|
Research and development expenditures |
|
|
3,006 |
|
|
|
3,406 |
|
Investment in subsidiaries |
|
|
3,742 |
|
|
|
3,395 |
|
Capital losses |
|
|
6,511 |
|
|
|
— |
|
Other |
|
|
34 |
|
|
|
419 |
|
|
|
|
383,736 |
|
|
|
373,072 |
|
F-40
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
The Company’s non-capital losses expire as follows:
|
|
As at |
|
|||||
|
|
December 31, |
|
|
December 31, |
|
||
Expires 2024 |
|
|
335 |
|
|
|
549 |
|
Expires 2025 |
|
|
426 |
|
|
|
777 |
|
Expires 2026 |
|
|
829 |
|
|
|
1,822 |
|
Expires 2027 |
|
|
719 |
|
|
|
4,419 |
|
Expires 2028 |
|
|
480 |
|
|
|
4,068 |
|
Expires 2029 |
|
|
2,732 |
|
|
|
7,615 |
|
Expires 2030 |
|
|
3,120 |
|
|
|
5,816 |
|
Expires 2031 |
|
|
3,439 |
|
|
|
3,519 |
|
Expires 2032 |
|
|
6,432 |
|
|
|
6,441 |
|
Expires 2033 |
|
|
10,297 |
|
|
|
10,311 |
|
Expires 2034 |
|
|
10,264 |
|
|
|
10,268 |
|
Expires 2035 |
|
|
15,609 |
|
|
|
15,641 |
|
Expires 2036 |
|
|
28,528 |
|
|
|
29,378 |
|
Expires 2037 |
|
|
31,963 |
|
|
|
32,384 |
|
Expires 2038 |
|
|
31,264 |
|
|
|
33,159 |
|
Expires 2039 |
|
|
25,580 |
|
|
|
26,914 |
|
Expires 2040 |
|
|
13,708 |
|
|
|
15,738 |
|
Expires 2041 |
|
|
20,816 |
|
|
|
22,575 |
|
Expires 2042 |
|
|
32,773 |
|
|
|
30,291 |
|
Expires 2043 |
|
|
21,823 |
|
|
|
— |
|
|
|
|
261,137 |
|
|
|
261,685 |
|
F-41
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
20. Loss per share
The following reflects consolidated comprehensive loss and weighted average number of shares used in the basic and diluted loss per share computations:
|
|
Year ended |
|
|||||||||
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|||
Net loss attributed to shareholders |
|
|
(17,887 |
) |
|
|
(165,678 |
) |
|
|
(33,209 |
) |
Basic weighted average number of shares (in 000s) |
|
|
24,853 |
|
|
|
25,442 |
|
|
|
21,002 |
|
Basic and diluted loss per share |
|
|
(0.72 |
) |
|
|
(2.17 |
) |
|
|
(0.53 |
) |
The outstanding stock options and warrants were excluded from the calculation of diluted loss per share because their effect is anti-dilutive.
21. Capital management
The Company’s objectives when managing capital are to maintain financial flexibility in order to preserve its ability to meet financial obligations and continue as a going concern, and to deploy capital to provide future investment return to its shareholders.
The Company sets the amount and type of capital required relative to its assessment of risk and makes adjustments when necessary to respond to changes to economic conditions, the risk characteristics of the underlying assets, and externally imposed capital requirements. In order to maintain or modify its capital structure, the Company may issue new shares, seek other forms of financing, or sell assets to reduce debt.
The Company manages the following as capital:
|
|
As at |
|
|||||
|
|
December 31, |
|
|
December 31, |
|
||
Share capital |
|
|
389,806 |
|
|
|
391,243 |
|
Contributed surplus |
|
|
35,503 |
|
|
|
33,025 |
|
Deficit |
|
|
(331,828 |
) |
|
|
(313,941 |
) |
Credit facility |
|
|
49,405 |
|
|
|
46,180 |
|
Debentures |
|
|
37,020 |
|
|
|
39,658 |
|
There have been no changes in the Company’s definition of capital, capital management objectives, policies and processes during the year. There are certain capital requirements of the Company resulting from the Company’s credit facility that include financial covenants and ratios. Management uses these capital requirements in the decisions made in managing the level and make-up of the Company’s capital structure. The Company was in compliance with all of the financial covenants as at December 31, 2023 and December 31, 2022.
F-42
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
Goodwill and indefinite-life intangible assets are attributed to CGUs or groups of CGUs to which they relate. Annual impairment testing was performed as at December 31, 2023 for goodwill and indefinite-life intangible assets by comparing the carrying value of net assets within the CGU to the recoverable amount of that CGU. Management tested the individual CGUs, being the Carta and the remaining Mogo related entities CGU.
The recoverable amount of the CGUs to which goodwill and indefinite life intangibles are allocated were determined based on a value in use assessment using Level 3 inputs in a discounted cash flow analysis.
Management applied a range of assumptions in assessing the value in use of the Carta and Mogo CGUs. The significant assumptions applied in the determination of the recoverable amount are described below:
As a result of the impairment test as at December 31, 2023, management concluded that the recoverable amount of each respective CGU was higher than the carrying value of its net assets in each of the range of assumptions noted above. Therefore, no impairment was recognized on goodwill and indefinite life intangible assets for the year ended December 31, 2023
As at December 31, 2023, the carrying value of goodwill and indefinite life intangible assets attributable to the Carta CGU is $24,315 and $1,000, respectively (December 31, 2022 – $24,315 and $1,000, respectively). The carrying value of goodwill attributable to the remaining Mogo related entities CGU is $14,040 (December 31, 2022 – $14,040). The amounts by which the value in use of the CGUs exceeded their carrying value were $1,931 and $1,943 for the Carta and Mogo CGUs, respectively, at the low end of the range. A 1% increase in the pre-tax discount rates would be required in order for the CGUs’ recoverable amount to be equal to their carrying value.
F-43
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
The fair value of a financial instrument is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants which takes place in the principal (or most advantageous) market at the measurement date. The fair value of a liability reflects its non-performing risk. Assets and liabilities recorded at fair value in the consolidated statements of financial position are measured and classified in a hierarchy consisting of three levels for disclosure purposes. The three levels are based on the priority of the inputs to the respective valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). An asset or liability's classification within the fair value hierarchy is based on the lowest level of significant input to its valuation. The input levels are defined as follows:
The Company maximizes the use of quoted prices from active markets, when available. A market is regarded as active if transactions take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Where independent quoted market prices are not available, the Company uses quoted market prices for similar instruments, other third-party evidence or valuation techniques.
The fair value of financial instruments determined using valuation techniques include the use of recent arm’s length transactions and discounted cash flow analysis for investments in unquoted securities, discounted cash flow analysis for derivatives, third-party pricing models or other valuation techniques commonly used by market participants and utilize independent observable market inputs to the maximum extent possible.
The use of valuation techniques to determine the fair value of a financial instrument requires management to make assumptions such as the amount and timing of future cash flows and discount rates and incorporate the Company’s estimate of assumptions that a market participant would make when valuing the instruments.
F-44
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
The following table shows the carrying amount and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. During the year ended December 31, 2023 and 2022, there have not been any transfers between fair value hierarchy levels except for the transfers indicated in Note 25(c)(i) related to the investment portfolio.
|
|
|
|
Carrying amount |
|
|
Fair value |
|
||||||||||||||||||||||||||
As at December 31, 2023 |
|
Note |
|
FVTPL |
|
|
Financial asset at |
|
|
Other financial |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||||||
Financial assets measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Investment portfolio |
|
|
|
|
37,768 |
|
|
|
— |
|
|
|
— |
|
|
|
37,768 |
|
|
|
26,332 |
|
|
|
— |
|
|
|
11,436 |
|
|
|
37,768 |
|
|
|
|
|
|
37,768 |
|
|
|
— |
|
|
|
— |
|
|
|
37,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial assets not measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalent |
|
|
|
|
— |
|
|
|
16,133 |
|
|
|
— |
|
|
|
16,133 |
|
|
|
16,133 |
|
|
|
— |
|
|
|
— |
|
|
|
16,133 |
|
Restricted cash |
|
|
|
|
— |
|
|
|
1,737 |
|
|
|
— |
|
|
|
1,737 |
|
|
|
1,737 |
|
|
|
— |
|
|
|
— |
|
|
|
1,737 |
|
Loans receivable – current |
|
4 |
|
|
— |
|
|
|
74,121 |
|
|
|
— |
|
|
|
74,121 |
|
|
|
— |
|
|
|
74,121 |
|
|
|
— |
|
|
|
74,121 |
|
Loans receivable – non-current |
|
4 |
|
|
— |
|
|
|
151 |
|
|
|
— |
|
|
|
151 |
|
|
|
— |
|
|
|
— |
|
|
|
151 |
|
|
|
151 |
|
Other receivables |
|
|
|
|
— |
|
|
|
11,750 |
|
|
|
— |
|
|
|
11,750 |
|
|
|
— |
|
|
|
11,750 |
|
|
|
— |
|
|
|
11,750 |
|
|
|
|
|
|
— |
|
|
|
103,892 |
|
|
|
— |
|
|
|
103,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial liabilities measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Derivative financial liabilities |
|
13 |
|
|
34 |
|
|
|
— |
|
|
|
— |
|
|
|
34 |
|
|
|
— |
|
|
|
34 |
|
|
|
— |
|
|
|
34 |
|
|
|
|
|
|
34 |
|
|
|
— |
|
|
|
— |
|
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial liabilities not measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Accounts payable, accruals and other |
|
|
|
|
— |
|
|
|
— |
|
|
|
23,904 |
|
|
|
23,904 |
|
|
|
— |
|
|
|
23,904 |
|
|
|
— |
|
|
|
23,904 |
|
Credit facility |
|
11 |
|
|
— |
|
|
|
— |
|
|
|
49,405 |
|
|
|
49,405 |
|
|
|
— |
|
|
|
49,405 |
|
|
|
— |
|
|
|
49,405 |
|
Debentures |
|
12 |
|
|
— |
|
|
|
— |
|
|
|
36,783 |
|
|
|
36,783 |
|
|
|
— |
|
|
|
34,997 |
|
|
|
— |
|
|
|
34,997 |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
110,092 |
|
|
|
110,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
F-45
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
Fair value of financial instruments (Continued from previous page)
|
|
|
|
Carrying amount |
|
|
Fair value |
|
||||||||||||||||||||||||||
As at December 31, 2022 |
|
Note |
|
FVTPL |
|
|
Financial asset at amortized cost |
|
|
Other financial liabilities |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||||||
Financial assets measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Investment portfolio |
|
|
|
|
12,520 |
|
|
|
— |
|
|
|
— |
|
|
|
12,520 |
|
|
|
605 |
|
|
|
— |
|
|
|
11,915 |
|
|
|
12,520 |
|
|
|
|
|
|
12,520 |
|
|
|
— |
|
|
|
— |
|
|
|
12,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial assets not measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalent |
|
|
|
|
— |
|
|
|
29,268 |
|
|
|
— |
|
|
|
29,268 |
|
|
|
29,268 |
|
|
|
— |
|
|
|
— |
|
|
|
29,268 |
|
Restricted cash |
|
|
|
|
— |
|
|
|
1,578 |
|
|
|
— |
|
|
|
1,578 |
|
|
|
1,578 |
|
|
|
— |
|
|
|
— |
|
|
|
1,578 |
|
Loans receivable – current |
|
4 |
|
|
— |
|
|
|
69,693 |
|
|
|
— |
|
|
|
69,693 |
|
|
|
— |
|
|
|
69,693 |
|
|
|
— |
|
|
|
69,693 |
|
Loans receivable – non-current |
|
4 |
|
|
— |
|
|
|
221 |
|
|
|
— |
|
|
|
221 |
|
|
|
— |
|
|
|
— |
|
|
|
221 |
|
|
|
221 |
|
Other receivables |
|
|
|
|
— |
|
|
|
9,719 |
|
|
|
— |
|
|
|
9,719 |
|
|
|
— |
|
|
|
9,719 |
|
|
|
— |
|
|
|
9,719 |
|
|
|
|
|
|
— |
|
|
|
110,479 |
|
|
|
— |
|
|
|
110,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial liabilities measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Derivative financial liabilities |
|
13 |
|
|
419 |
|
|
|
— |
|
|
|
— |
|
|
|
419 |
|
|
|
— |
|
|
|
419 |
|
|
|
— |
|
|
|
419 |
|
|
|
|
|
|
419 |
|
|
|
— |
|
|
|
— |
|
|
|
419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial liabilities not measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Accounts payable, accruals and other |
|
|
|
|
— |
|
|
|
— |
|
|
|
20,773 |
|
|
|
20,773 |
|
|
|
— |
|
|
|
20,773 |
|
|
|
— |
|
|
|
20,773 |
|
Credit facility |
|
11 |
|
|
— |
|
|
|
— |
|
|
|
46,180 |
|
|
|
46,180 |
|
|
|
— |
|
|
|
46,180 |
|
|
|
— |
|
|
|
46,180 |
|
Debentures |
|
12 |
|
|
— |
|
|
|
— |
|
|
|
38,266 |
|
|
|
38,266 |
|
|
|
— |
|
|
|
36,067 |
|
|
|
— |
|
|
|
36,067 |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
105,219 |
|
|
|
105,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
F-46
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
(i) Valuation techniques and significant unobservable inputs
The following tables show the valuation techniques used in measuring Level 3 fair values for financial instruments in the consolidated statements of financial position, as well as the significant unobservable inputs used.
Type |
Valuation technique |
Significant unobservable inputs |
Inter-relationship between significant unobservable inputs and fair value |
Investment portfolio: Equities Unlisted |
• Price of recent investments in the investee company
• Implied multiples from recent transactions of the underlying investee companies
• Offers received by investee companies
• Revenue multiples derived from comparable public companies and transactions
• Option pricing model |
• Third-party transactions
• Revenue multiples
• Balance sheets and last twelve-month revenues for certain of the investee companies
• Equity volatility
• Time to exit events
• Discount for lack of marketability |
• Increases in revenue multiples increases fair value • Increases in equity volatility can increase or decrease fair value depending on class of shares held in the investee company • Increases in estimated time to exit event can increase or decrease fair value depending on class of shares held in the investee company
|
|
|
|
|
Partnership interest and others |
• Adjusted net book value
|
• Net asset value per unit
• Change in market pricing of comparable companies of the underlying investments made by the partnership |
• Increases in net asset value per unit or change in market pricing of comparable companies of the underlying investment made by the partnership can increase fair value |
|
|
|
|
Loans receivable non-current |
• Discounted cash flows: Considering expected prepayments and using management’s best estimate of average market interest rates with similar remaining terms. |
• Expected timing and amount of cash flows
• Discount rate |
• Changes to the expected amount and timing of cash flow changes fair value
• Increases to the discount rate can decrease fair value |
|
|
|
|
F-47
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
(i) Valuation techniques and significant unobservable inputs (Continued from previous page)
The following table presents the changes in fair value measurements of the Company’s investment portfolio recognized at fair value at December 31, 2023 and December 31, 2022 and classified as Level 3:
|
|
As at |
|
|||||
|
|
December 31, |
|
|
December 31, 2022 |
|
||
Balance, beginning of the period |
|
|
11,915 |
|
|
|
16,303 |
|
Additions |
|
|
— |
|
|
|
1,837 |
|
Disposal |
|
|
(152 |
) |
|
|
— |
|
Transfer to Level 1 investments |
|
|
— |
|
|
|
(500 |
) |
Unrealized exchange (loss) gain |
|
|
(201 |
) |
|
|
547 |
|
Realized loss on investment portfolio |
|
|
(508 |
) |
|
|
— |
|
Unrealized gain (loss) on investment portfolio |
|
|
382 |
|
|
|
(6,272 |
) |
Balance, end of the period |
|
|
11,436 |
|
|
|
11,915 |
|
The fair value of the Company's current loans receivable, other receivables, and accounts payable, accruals and other approximates its carrying values due to the short-term nature of these instruments. The fair value of the Company's credit facility approximates its carrying amount due to its variable interest rate, which approximates a market interest rate. The fair value of the Company's debentures was determined based on a discounted cash flow analysis using observable market interest rates for instruments with similar terms.
(ii) Sensitivity analysis
For the fair value of equity securities, reasonably possible changes at the reporting date to one of the significant unobservable inputs, holding other inputs constant, would have the following effects.
|
|
|
|
Profit or loss |
|
|||||
|
|
|
|
Increase |
|
|
Decrease |
|
||
Investment portfolio: |
|
|
|
|
|
|
||||
December 31, 2023 |
|
Adjusted market multiple (5% movement) |
|
|
572 |
|
|
|
(572 |
) |
|
|
|
|
|
|
|
|
|
||
December 31, 2022 |
|
Adjusted market multiple (5% movement) |
|
|
626 |
|
|
|
(626 |
) |
F-48
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
(iii) Investment portfolio breakdown
The following table presents the breakdown of the Company’s investment portfolio recognized at fair value at December 31, 2023 and December 31, 2022:
|
|
As at |
|
|||||
|
|
December 31, |
|
|
December 31, 2022 |
|
||
WonderFi |
|
|
25,654 |
|
|
|
— |
|
Alida Inc. |
|
|
3,035 |
|
|
|
2,001 |
|
Blue Ant Media Inc. |
|
|
2,700 |
|
|
|
2,237 |
|
Hootsuite Inc. |
|
|
2,491 |
|
|
|
2,467 |
|
Gemini |
|
|
898 |
|
|
|
569 |
|
Cardiac Dimensions Pty Ltd. |
|
|
828 |
|
|
|
880 |
|
Tetra Trust Company |
|
|
715 |
|
|
|
1,300 |
|
Others |
|
|
1,447 |
|
|
|
3,066 |
|
Balance, end of the period |
|
|
37,768 |
|
|
|
12,520 |
|
Risk management policy
In the normal course of business, the Company is exposed to financial risk that arises from a number of sources. Management’s involvement in operations helps identify risks and variations from expectations. As a part of the overall operation of the Company, Management takes steps to avoid undue concentrations of risk. The Company manages these risks as follows:
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counter‑party to a financial instrument fails to meet its contractual obligations and arises primarily from the Company’s loans receivable. The maximum amount of credit risk exposure is limited to the gross carrying amount of the loans receivable disclosed in these financial statements.
The Company acts as a lender of unsecured consumer loans and lines of credit and has little concentration of credit risk with any particular individual, company or other entity, relating to these services. However, the credit risk relates to the possibility of default of payment on the Company’s loans receivable. The Company performs on‑going credit evaluations, monitors aging of the loan portfolio, monitors payment history of individual loans, and maintains an allowance for loan loss to mitigate this risk.
The credit risk decisions on the Company’s loans receivable are made in accordance with the Company’s credit policies and lending practices, which are overseen by the Company’s senior management. Credit quality of the customer is assessed based on a credit rating scorecard and individual credit limits are defined in accordance with this assessment. The consumer loans receivable is unsecured. The Company develops underwriting models based on the historical performance of groups of customer loans which guide its lending decisions. To the extent that such historical data used to develop its underwriting models is not representative or predictive of current loan book performance, the Company could suffer increased loan losses.
The Company cannot guarantee that delinquency and loss levels will correspond with the historical levels experienced and there is a risk that delinquency and loss rates could increase significantly.
F-49
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due or will not receive sufficient funds from its third-party lenders to advance to the Company’s customers. The Company manages all liquidity risk through maintaining a sufficient working capital amount through daily monitoring of controls, cash balances and operating results. The Company’s principal sources of cash are funds from operations, which the Company believes will be sufficient to cover its normal operating and capital expenditures.
The Company’s accounts payable and accruals are substantially due within 12 months. The maturity schedule of the Company’s credit facility and debentures are described below. Management’s intention is to continue to refinance any outstanding amounts owing under the credit facility and debentures, in each case as they become due and payable. The debentures are subordinated to the credit facility which has the effect of extending the maturity date of the debentures to the later of contractual maturity or the maturity date of credit facility. See Note 11 and 12 for further details.
|
|
2024 |
|
|
2025 |
|
|
2026 |
|
|
2027 |
|
|
2028 |
|
|
Thereafter |
|
||||||
Commitments - operational |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Lease payments |
|
|
1,206 |
|
|
|
1,240 |
|
|
|
1,255 |
|
|
|
872 |
|
|
|
113 |
|
|
|
526 |
|
Accounts payable |
|
|
6,448 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Accruals and other |
|
|
17,634 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other purchase obligations |
|
|
1,308 |
|
|
|
812 |
|
|
|
584 |
|
|
|
642 |
|
|
|
221 |
|
|
|
— |
|
Interest – Credit facility (Note 11) |
|
|
6,601 |
|
|
|
3,300 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Interest – Debentures (Note 12) |
|
|
3,197 |
|
|
|
2,252 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
36,394 |
|
|
|
7,604 |
|
|
|
1,839 |
|
|
|
1,514 |
|
|
|
334 |
|
|
|
526 |
|
Commitments – principal repayments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Credit facility (Note 11) |
|
|
— |
|
|
|
49,405 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Debentures (Note 12) (1) |
|
|
1,924 |
|
|
|
35,096 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
1,924 |
|
|
|
84,501 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
Total contractual obligations |
|
|
38,318 |
|
|
|
92,105 |
|
|
|
1,839 |
|
|
|
1,514 |
|
|
|
334 |
|
|
|
526 |
|
(1) The debenture principal repayments are payable in either cash or Common Shares at Mogo’s option. The number of Common Shares required to settle the principal repayments is variable based on the Company's share price at the repayment date.
F-50
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments that could be affected by market risk include cash, investment portfolio, credit facilities, debentures, derivative financial assets and derivative financial liabilities.
Given the concentration of our investments, a 10% decrease in the market value of WonderFi shares would have an impact of $2.6 million on the statement of loss
Interest rate risk
Changes in market interest rates may have an effect on the cash flows associated with some financial assets and liabilities, known as cash flow risk, and on the fair value of other financial assets or liabilities, known as price risk. The Company is exposed to interest rate risk primarily relating to its credit facility that bear interest fluctuating with the Secured Overnight Financing Rate (“SOFR”). The credit facility does not have a SOFR floor. As at December 31, 2023, SOFR is 5.38% (December 31, 2022 – LIBOR 4.32%). For the year ended December 31, 2023, a 100-basis point change in SOFR would increase or decrease credit facility interest expense by $386 (December 31, 2022 – $515). The debentures have fixed rates of interest and are not subject to variability in cash flows due to interest rate risk.
A fundamental reform of major interest rate benchmarks (the "Reform") was undertaken in 2023. The USD LIBOR ceased to be published in June 2023 for all USD LIBOR tenors. Management has performed an assessment on the impact of the Reform and has determined that the Company only has exposure to the Reform through its credit facility and the nature of the risks are operational and financial. Operational risk includes ensuring proper contractual terms are in place and engagement with the credit facility lender on the progress and impact of their own transition. Financial risk includes the impact on the economics of the financial instruments.
Currency risk
Currency risk is the risk that changes in foreign exchange rates may have an effect on future cash flows associated with financial instruments. The Company is primarily exposed to foreign currency risk on the following financial instruments denominated in U.S. dollars. As at December 31, 2023, a 5% increase or decrease in the U.S. dollar exchange rate would increase or decrease the unrealized exchange gain (loss) by $123 (December 31, 2022 – $314).
|
|
As at |
|
|||||
($000 USD) |
|
December 31, |
|
|
December 31, |
|
||
Cash |
|
|
38 |
|
|
|
3,553 |
|
Investment portfolio |
|
|
5,813 |
|
|
|
5,958 |
|
Derivative financial liabilities |
|
|
(26 |
) |
|
|
(310 |
) |
Debentures |
|
|
(3,971 |
) |
|
|
(4,562 |
) |
F-51
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
Other price risk
Other market price risk is the risk that the fair value of the financial instrument will fluctuate as a result of changes in market prices (other than those arising from interest rate risks or currency risk), whether caused by factors specific to an individual investment or its issuers or factors affecting all instruments traded in the market. The investment portfolio comprises of non-listed closely held equity instruments which have minimal exposure to market prices. The valuation of the investment portfolio is conducted on a quarterly basis.
The Company’s authorized share capital is comprised of an unlimited number of Common Shares with no par value and an unlimited number of preferred shares issuable in one or more series. The Board is authorized to determine the rights and privileges and number of shares of each series of preferred shares.
As of August 14, 2023, Mogo completed a share consolidation of the Company's issued and outstanding common shares (the "Share Consolidation") at a consolidation ratio of 3-for-1. All references to common shares, warrants, derivative warrant liabilities, stock options, and RSUs have been retrospectively adjusted to reflect the Share Consolidation.
As at December 31, 2023 there were 24,515,909 (December 31, 2022 – 24,992,513) Common Shares and no preferred shares issued and outstanding.
For the year ended December 31, 2023, the Company repurchased 474,353 Common Shares for cancellation under the share repurchase program at an average price of CAD $2.36 per share, for a total repurchase cost of $1,193.
For the year ended December 31, 2022, the Company repurchased 600,000 Common Shares for cancellation under the share repurchase program at an average price of CAD $2.70 per share, for a total repurchase cost of $1,627.
The treasury share reserve comprises the cost of the shares held by the Company. As at December 31, 2023, the Company held 190,706 Common Shares in reserve (December 31, 2022 – 101,272).
F-52
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
The Company has a stock option plan (the “Plan”) that provides for the granting of options to directors, officers, employees and consultants. The exercise price of an option is set at the time that such option is granted under the Plan. The maximum number of Common Shares reserved for issuance under the Plan is the greater of i) 15% of the number of Common Shares issued and outstanding, and ii) 1,266,667. As a result of a business combination with Mogo Finance Technology Inc. completed on June 21, 2019, there were additional options issued, which were granted pursuant to the Company’s prior stock option plan (the “Prior Plan”). As at December 31, 2023, there are 32,333 of these options outstanding that do not contribute towards the maximum number of Common Shares reserved for issuance under the Plan as described above.
Each option entitles the holder to receive one Common Share upon 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 expiry. Options issued under the Plan have a maximum contractual term of eight years and options issued under the Prior Plan have a maximum contractual term of ten years.
A summary of the status of the stock options and changes in the period is as follows:
|
|
Options outstanding (000s) |
|
|
Weighted average grant date fair value $ |
|
|
Weighted average exercise price $ |
|
|
Options exercisable (000s) |
|
|
Weighted average exercise price $ |
|
|||||
Balance, December 31, 2021 |
|
|
2,975 |
|
|
|
— |
|
|
|
13.92 |
|
|
|
1,012 |
|
|
|
11.79 |
|
Options issued |
|
|
1,152 |
|
|
|
3.18 |
|
|
|
4.22 |
|
|
|
— |
|
|
|
— |
|
Exercised |
|
|
(16 |
) |
|
|
3.65 |
|
|
|
4.76 |
|
|
|
— |
|
|
|
— |
|
Forfeited |
|
|
(904 |
) |
|
|
10.69 |
|
|
|
10.53 |
|
|
|
— |
|
|
|
— |
|
Balance, December 31, 2022 |
|
|
3,207 |
|
|
|
— |
|
|
|
9.09 |
|
|
|
1,236 |
|
|
|
11.22 |
|
Options issued |
|
|
1,362 |
|
|
|
1.80 |
|
|
|
2.41 |
|
|
|
— |
|
|
|
— |
|
Forfeited |
|
|
(1,071 |
) |
|
|
9.02 |
|
|
|
9.07 |
|
|
|
— |
|
|
|
— |
|
Balance, December 31, 2023 |
|
|
3,498 |
|
|
|
— |
|
|
|
5.56 |
|
|
|
1,499 |
|
|
|
8.18 |
|
The above noted options have expiry dates ranging from March 2024 to December 2031.
Options granted during the year ended December 31, 2023 include nil options granted to non-employees (December 31, 2022 – 100,000). These options measured at the fair value of corresponding services received, rather than using the Black-Scholes option pricing model.
F-53
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
The fair value of each option granted was estimated using the Black-Scholes option pricing model with the following assumptions:
|
|
Year ended |
||
|
|
December 31, |
|
December 31, |
Risk-free interest rate |
|
3.02 - 4.30% |
|
1.73 - 3.40% |
Expected life |
|
5 years |
|
5 years |
Expected volatility in market price of shares |
|
90 - 91% |
|
87 - 91% |
Expected dividend yield |
|
0% |
|
0% |
Expected forfeiture rate |
|
0% - 15% |
|
0% - 15% |
These options generally vest monthly over a four-year period after an initial one-year cliff.
Total stock-based compensation costs related to options and RSUs for the year ended December 31, 2023 was $2,457 (December 31, 2022 – $8,604).
RSUs are granted to executives and other key employees. The fair value of an RSU at the grant date is equal to the market value of one Common Share. Executives and other key employees are granted a specific number of RSUs for a given performance period based on their position and level of contribution. RSUs vest fully after three years of continuous employment from the date of grant and, in certain cases, if performance objectives are met as determined by the Board. The maximum number of Common Shares which may be made subject to issuance under RSUs awarded under the RSU Plan is 166,667.
As at December 31, 2023, the balance of RSUs outstanding is nil (December 31, 2022 - 667)
F-54
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
|
|
Warrants outstanding (000s) |
|
|
Weighted average exercise price $ |
|
|
Warrants exercisable (000s) |
|
|
Weighted average exercise price $ |
|
||||
Balance, December 31, 2021 |
|
|
663 |
|
|
|
13.80 |
|
|
|
586 |
|
|
|
15.12 |
|
Warrants issued |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Balance, December 31, 2022 |
|
|
663 |
|
|
|
13.80 |
|
|
|
625 |
|
|
|
14.40 |
|
Warrants issued |
|
|
89 |
|
|
|
2.79 |
|
|
|
— |
|
|
|
— |
|
Warrants exercised |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Warrants expired |
|
|
(394 |
) |
|
|
6.09 |
|
|
|
(394 |
) |
|
|
6.09 |
|
Balance, December 31, 2023 |
|
|
358 |
|
|
|
20.53 |
|
|
|
280 |
|
|
|
25.46 |
|
The 357,739 warrants outstanding noted above have expiry dates ranging from February 2024 to February 2026, and do not include the stock warrants accounted for as a derivative financial liability discussed in Note 13.
On October 7, 2020, Mogo issued 1,493,131 Debenture Warrants to its debenture holders in connection with the debenture amendments approved on September 30, 2020, at an exercise price of $6.09 per Common Share. On January 3, 2023, 394,655 Debenture Warrants expired unexercised. There were no Debenture Warrants outstanding as at December 31, 2023 (December 31, 2022 – 394,655).
On August 11, 2023, Mogo entered into an extended agreement with Postmedia Network Inc. (“Postmedia”) which is effective January 1, 2023. Under the extended agreement Mogo will receive discounted access to Postmedia’s network. As part of the extended agreement, the companies agreed to: (1) amend the exercise price of the 77,778 outstanding warrants of the Company held by Postmedia to $2.79 per share, each such warrant entitling Postmedia to acquire one Mogo share, and (2) extend the term of these warrants from January 25, 2023 to September 20, 2025. The amendments to the outstanding warrants will be effective as of the date that is ten (10) business days following the date hereof. In addition, Mogo will issue an additional 89,000 warrants, each such new warrant entitling Postmedia to acquire one Mogo share at the same price as the amended warrants for a period of 2 years and 6 months from the date of issuance.
During the year ended December 31, 2021, the Company also issued 190,961 warrants to purchase Common Shares with exercise prices ranging from USD $16.89 to USD $37.89 per warrant in connection with broker services rendered on offerings during the period. As at December 31, 2023, these warrants remain outstanding and exercisable.
Warrants issued to investors are denominated in a currency other than the functional currency of the Company therefore do not meet the definition of an equity instrument and are classified as derivative financial liabilities. Refer to Note 13 for more details.
F-55
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
Related party transactions during the year ended December 31, 2023, include transactions with debenture holders that incur interest. The related party debentures balance as at December 31, 2023, totaled $290 (December 31, 2022 – $306). The debentures bear annual coupon interest of 8.0% (December 31, 2022 – 8.0%) with interest expense for the year ended December 31, 2023, totaling $24 (December 31, 2022 – $25). The related parties involved in such transactions include Company shareholders, officers, directors, and management, close members of their families, or entities which are directly or indirectly controlled by close members of their families. The debentures are ongoing contractual obligations that are used to fund the Company's corporate and operational activities.
In the year ended December 31, 2023, the Company incurred $175 of sponsorship expenses (December 31, 2022 – $188) with a company owned by a director of Mogo.
Key management personnel
Key management personnel (“KMP”) are those persons having authority and responsibility for planning, directing, and controlling the activities of the entity, directly or indirectly. KMP consist of directors and executive officers of the Company.
During the year ended December 31, 2023, KMP were granted 832,999 stock options with a fair value of $1,481 at the grant date (December 31, 2022 – 806,494 stock options with a fair value of $2,553 at the grant date).
Aggregate compensation of KMP recorded as expenses in the consolidated statement of operations and comprehensive income (loss) during the year consisted of:
|
|
Year ended |
|
|||||
|
|
December 31, |
|
|
December 31, |
|
||
Salary and short – term benefits |
|
|
1,940 |
|
|
|
2,192 |
|
Stock-based compensation |
|
|
1,278 |
|
|
|
3,129 |
|
Termination benefits |
|
|
163 |
|
|
|
1,224 |
|
|
|
|
3,381 |
|
|
|
6,545 |
|
F-56
Mogo Inc.
Notes to the Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the years ended December 31, 2023 and 2022
Details of changes in financing activities for the year ended December 31, 2023 are as follows:
|
|
|
|
|
|
|
|
Non-cash changes |
|
|
|
|
||||||||||||
|
|
January 1, |
|
|
Cash |
|
|
Conversion/ |
|
|
Foreign |
|
|
Fair Value/ Amortization |
|
|
December 31, |
|
||||||
Share capital |
|
|
391,243 |
|
|
|
(1,193 |
) |
|
|
(244 |
) |
|
|
— |
|
|
|
— |
|
|
|
389,806 |
|
Lease liability |
|
|
3,280 |
|
|
|
(571 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,709 |
|
Credit facility |
|
|
46,180 |
|
|
|
3,225 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
49,405 |
|
Debentures |
|
|
38,266 |
|
|
|
(2,393 |
) |
|
|
(84 |
) |
|
|
18 |
|
|
|
976 |
|
|
|
36,783 |
|
Total |
|
|
478,969 |
|
|
|
(932 |
) |
|
|
(328 |
) |
|
|
18 |
|
|
|
976 |
|
|
|
478,703 |
|
Details of changes in financing activities for the year ended December 31, 2022 are as follows:
|
|
|
|
|
|
|
|
Non-cash changes |
|
|
|
|
||||||||||||
|
|
January 1, |
|
|
Cash |
|
|
Conversion/ |
|
|
Foreign |
|
|
Fair Value/ Amortization |
|
|
December 31, |
|
||||||
Share capital |
|
|
392,628 |
|
|
|
(1,558 |
) |
|
|
173 |
|
|
|
— |
|
|
|
— |
|
|
|
391,243 |
|
Lease liability |
|
|
3,948 |
|
|
|
(668 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,280 |
|
Credit facility |
|
|
44,983 |
|
|
|
1,197 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
46,180 |
|
Debentures |
|
|
39,794 |
|
|
|
(2,050 |
) |
|
|
— |
|
|
|
429 |
|
|
|
93 |
|
|
|
38,266 |
|
Total |
|
|
481,353 |
|
|
|
(3,079 |
) |
|
|
173 |
|
|
|
429 |
|
|
|
93 |
|
|
|
478,969 |
|
Details of changes in financing activities for the year ended December 31, 2021 are as follows:
|
|
|
|
|
|
|
|
Non-cash changes |
|
|
|
|
||||||||||||
|
|
January 1, |
|
|
Cash |
|
|
Conversion/ |
|
|
Foreign |
|
|
Fair Value/ Amortization |
|
|
December 31, |
|
||||||
Share capital |
|
|
106,730 |
|
|
|
121,238 |
|
|
|
164,660 |
|
|
|
— |
|
|
|
— |
|
|
|
392,628 |
|
Lease liability |
|
|
4,336 |
|
|
|
(660 |
) |
|
|
272 |
|
|
|
— |
|
|
|
— |
|
|
|
3,948 |
|
Credit facility |
|
|
37,644 |
|
|
|
7,339 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
44,983 |
|
Debentures |
|
|
40,658 |
|
|
|
(2,053 |
) |
|
|
(49 |
) |
|
|
(14 |
) |
|
|
1,252 |
|
|
|
39,794 |
|
Convertible debentures |
|
|
8,751 |
|
|
|
— |
|
|
|
(8,751 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
198,119 |
|
|
|
125,864 |
|
|
|
156,132 |
|
|
|
(14 |
) |
|
|
1,252 |
|
|
|
481,353 |
|
F-57
Exhibit 97
‑ 1 ‑
MOGO INC.
POLICY FOR RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION
Mogo Inc. (the “Company”) has adopted this Policy for Recovery of Erroneously Awarded Compensation (the “Policy”), effective as of October 2, 2023 (the “Effective Date”). Capitalized terms used in this Policy but not otherwise defined in the text of this policy are defined in Section 11.
This Policy shall apply to current and former Officers of the Company.
2. Compensation Subject to Policy
This Policy shall apply to Incentive-Based Compensation received on or after the Effective Date. For purposes of this Policy, the date on which Incentive-Based Compensation is “received” shall be determined under the Applicable Rules, which generally provide that Incentive-Based Compensation is “received” in the Company’s fiscal period during which the relevant Financial Reporting Measure is attained or satisfied, without regard to whether the grant, vesting or payment of the Incentive-Based Compensation occurs after the end of that period.
3. Recovery of Compensation
In the event that the Company is required to prepare a Restatement, the Company shall recover, reasonably promptly, the portion of any Incentive-Based Compensation that is Erroneously Awarded Compensation, unless the Committee has determined that recovery would be Impracticable. Recovery shall be required in accordance with the preceding sentence regardless of whether the applicable Officer engaged in misconduct or otherwise caused or contributed to the requirement for the Restatement and regardless of whether or when restated financial statements are filed by the Company. For clarity, the recovery of Erroneously Awarded Compensation under this Policy will not give rise to any person’s right to voluntarily terminate employment for “good reason,” or due to a “constructive termination” (or any similar term of like effect) under any plan, program or policy of or agreement with the Company or any of its affiliates.
4. Manner of Recovery; Limitation on Duplicative Recovery
The Committee shall, in its sole discretion, determine the manner of recovery of any Erroneously Awarded Compensation, which may include, without limitation, reduction or cancellation by the Company or an affiliate of the Company of Incentive-Based Compensation or Erroneously Awarded Compensation, reimbursement or repayment by any person subject to this Policy of the Erroneously Awarded Compensation, and, to the extent permitted by law, an offset of the Erroneously Awarded Compensation against other compensation payable by the Company or an affiliate of the Company to such person. Notwithstanding the foregoing, unless otherwise prohibited by the Applicable Rules, to the extent this Policy provides for recovery of Erroneously Awarded Compensation already recovered by the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 or Other Recovery Arrangements, the amount of Erroneously Awarded Compensation already recovered by the Company from the recipient of such Erroneously Awarded Compensation will be credited to the amount of Erroneously Awarded Compensation required to be recovered pursuant to this Policy from such person.
1
5. Administration
This Policy shall be administered, interpreted and construed by the Committee, which is authorized to make all determinations necessary, appropriate or advisable for such purpose. The Board of Directors of the Company (the “Board”) may re-vest in itself the authority to administer, interpret and construe this Policy in accordance with applicable law, and in such event references herein to the “Committee” shall be deemed to be references to the Board. Subject to any permitted review by the applicable national securities exchange or association pursuant to the Applicable Rules, all determinations and decisions made by the Committee pursuant to the provisions of this Policy shall be final, conclusive and binding on all persons, including the Company and its affiliates, equityholders and employees. The Committee may delegate administrative duties with respect to this Policy to one or more directors or employees of the Company, as permitted under applicable law, including any Applicable Rules.
6. Interpretation
This Policy will be interpreted and applied in a manner that is consistent with the requirements of the Applicable Rules, and to the extent this Policy is inconsistent with such Applicable Rules, it shall be deemed amended to the extent necessary to ensure it is consistent therewith.
7. No Indemnification; No Personal Liability
The Company shall not indemnify or insure any person against the loss of any Erroneously Awarded Compensation pursuant to this Policy, nor shall the Company directly or indirectly pay or reimburse any person for any premiums for third-party insurance policies that such person may elect to purchase to fund such person’s potential obligations under this Policy. No member of the Committee or the Board shall have any personal liability to any person as a result of actions taken under this Policy and each member of the Committee and the Board will be fully indemnified by the Company to the fullest extent available under applicable law and the Company’s governing documents with respect to any actions taken under this Policy. The foregoing sentence will not limit any other rights to indemnification of the members of the Board under applicable law and the Company’s governing documents.
8. Application; Enforceability
Except as otherwise determined by the Committee or the Board, the adoption of this Policy does not limit, and is intended to apply in addition to, any other clawback, recoupment, forfeiture or similar policies or provisions of the Company or its affiliates, including any such policies or provisions of such effect contained in any employment agreement, bonus plan, incentive plan, equity-based plan or award agreement thereunder or similar plan, program or agreement of the Company or an affiliate or required under applicable law (the “Other Recovery Arrangements”). The remedy specified in this Policy shall not be exclusive and shall be in addition to every other right or remedy at law or in equity that may be available to the Company or an affiliate of the Company.
2
9. Severability
The provisions in this Policy are intended to be applied to the fullest extent of the law; provided, however, to the extent that any provision of this Policy is found to be unenforceable or invalid under any applicable law, such provision will be applied to the maximum extent permitted, and shall automatically be deemed amended in a manner consistent with its objectives to the extent necessary to conform to any limitations required under applicable law.
10. Amendment and Termination
The Board or the Committee may amend, modify or terminate this Policy in whole or in part at any time and from time to time in its sole discretion. This Policy will terminate automatically when the Company does not have a class of securities listed on a national securities exchange or association and will be limited the extent that any provision of the Applicable Rules is no longer in effect or applicable to the Company.
11. Definitions
“Applicable Rules” means Section 10D of the Exchange Act, Rule 10D-1 promulgated thereunder, the listing rules of the national securities exchange or association on which the Company’s securities are listed, and any applicable rules, standards or other guidance adopted by the Securities and Exchange Commission or any national securities exchange or association on which the Company’s securities are listed, in each case, as amended from time to time.
“Committee” means the committee of the Board responsible for executive compensation decisions comprised solely of independent directors (as determined under the Applicable Rules), or in the absence of such a committee, a majority of the independent directors serving on the Board.
“Erroneously Awarded Compensation” means the amount of Incentive-Based Compensation received by a current or former Officer that exceeds the amount of Incentive-Based Compensation that would have been received by such current or former Officer based on a restated Financial Reporting Measure, as determined on a pre-tax basis in accordance with the Applicable Rules.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Financial Reporting Measure” means any measure determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and any measures derived wholly or in part from such measures, including GAAP, IFRS and non-GAAP/IFRS financial measures, as well as stock or share price and total equityholder return.
“GAAP” means United States generally accepted accounting principles.
“IFRS” means international financial reporting standards as adopted by the International Accounting Standards Board.
3
“Impracticable” means (a) the direct costs paid to third parties to assist in enforcing recovery would exceed the Erroneously Awarded Compensation; provided that the Company (i) has made reasonable attempts to recover the Erroneously Awarded Compensation, (ii) documented such attempt(s), and (iii) provided such documentation to the relevant listing exchange or association, (b) to the extent permitted by the Applicable Rules, the recovery would violate the Company’s home country laws pursuant to an opinion of home country counsel; provided that the Company has (i) obtained an opinion of home country counsel, acceptable to the relevant listing exchange or association, that recovery would result in such violation, and (ii) provided such opinion to the relevant listing exchange or association, or (c) recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and the regulations thereunder.
“Incentive-Based Compensation” means, with respect to a Restatement, any compensation that is granted, earned, or vested based wholly or in part upon the attainment of one or more Financial Reporting Measures and received by a person: (a) after beginning service as an Officer; (b) who served as an Officer at any time during the performance period for that compensation; (c) while the issuer has a class of its securities listed on a national securities exchange or association; and (d) during the applicable Three-Year Period.
“Officer” means each person who serves as an executive officer of the Company, as defined in Rule 10D‑1(d) under the Exchange Act.
“Restatement” means an accounting restatement to correct the Company’s material noncompliance with any financial reporting requirement under securities laws, including restatements that correct an error in previously issued financial statements (a) that is material to the previously issued financial statements or (b) that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.
“Three-Year Period” means, with respect to a Restatement, the three completed fiscal years immediately preceding the date that the Board, a committee of the Board, or the officer or officers of the Company authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare such Restatement, or, if earlier, the date on which a court, regulator or other legally authorized body directs the Company to prepare such Restatement. The “Three-Year Period” also includes any transition period (that results from a change in the Company’s fiscal year) within or immediately following the three completed fiscal years identified in the preceding sentence. However, a transition period between the last day of the Company’s previous fiscal year end and the first day of its new fiscal year that comprises a period of nine to 12 months shall be deemed a completed fiscal year.
4
Exhibit 97
‑ 1 ‑
ACKNOWLEDGMENT AND CONSENT TO
POLICY FOR RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION
The undersigned has received a copy of the Policy for Recovery of Erroneously Awarded Compensation (the “Policy”) adopted by Mogo Inc. (the “Company”).
For good and valuable consideration, the receipt of which is acknowledged, the undersigned hereby agrees, to the extent that the Policy is authorized and required by Applicable Rules (as defined in the Policy), that: (i) the undersigned is and shall be bound by and subject to the terms of the Policy; (ii) compensation received by the undersigned may be subject to reduction, cancellation, forfeiture and/or recoupment to the extent necessary to comply with the Policy, notwithstanding any other agreement to the contrary; (iii) the undersigned is not entitled to indemnification in connection with any enforcement of the Policy to the extent required by the Applicable Rules; and (iv) the undersigned expressly waives any rights to such indemnification under the Company’s organizational documents or otherwise.
|
___________________ Date |
________________________________________ Signature
|
|
________________________________________ Name
|
|
________________________________________ Title |
5
