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Exhibit 99.1
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|
Page |
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F-2 |
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F-3 |
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F-4 |
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F-6 |
|
Notes to the Interim Condensed Consolidated Financial Statements |
|
F-7 |
Mogo Inc.
Interim Condensed Consolidated Statements of Financial Position
(Unaudited)
(Expressed in thousands of Canadian Dollars)
|
|
Note |
|
September 30, |
|
|
December 31, |
|
||
Assets |
|
|
|
|
|
|
|
|
||
Cash and cash equivalent |
|
|
|
|
35,344 |
|
|
|
69,208 |
|
Digital assets |
|
5 |
|
|
747 |
|
|
|
1,718 |
|
Loans receivable, net |
|
4 |
|
|
58,410 |
|
|
|
55,832 |
|
Prepaid expenses, and other receivables and assets |
|
|
|
|
14,650 |
|
|
|
10,302 |
|
Investment portfolio |
|
17 |
|
|
13,792 |
|
|
|
18,088 |
|
Investment accounted for using the equity method |
|
15 |
|
|
56,131 |
|
|
|
103,821 |
|
Property and equipment |
|
6 |
|
|
1,259 |
|
|
|
1,186 |
|
Right-of-use assets |
|
|
|
|
2,898 |
|
|
|
3,430 |
|
Intangible assets |
|
7 |
|
|
48,772 |
|
|
|
52,304 |
|
Derivative financial assets |
|
16 |
|
|
— |
|
|
|
7,866 |
|
Goodwill |
|
|
|
|
70,112 |
|
|
|
70,112 |
|
Total assets |
|
|
|
|
302,115 |
|
|
|
393,867 |
|
|
|
|
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
|
|
||
Accounts payable, accruals and other |
|
|
|
|
21,382 |
|
|
|
20,783 |
|
Lease liabilities |
|
|
|
|
3,423 |
|
|
|
3,948 |
|
Credit facility |
|
8 |
|
|
47,790 |
|
|
|
44,983 |
|
Debentures |
|
9 |
|
|
39,692 |
|
|
|
39,794 |
|
Derivative financial liabilities |
|
10 |
|
|
1,798 |
|
|
|
12,688 |
|
Deferred tax liability |
|
|
|
|
1,584 |
|
|
|
1,894 |
|
Total liabilities |
|
|
|
|
115,669 |
|
|
|
124,090 |
|
|
|
|
|
|
|
|
|
|
||
Equity |
|
|
|
|
|
|
|
|
||
Share capital |
|
19a |
|
|
391,809 |
|
|
|
392,628 |
|
Contributed surplus |
|
|
|
|
32,295 |
|
|
|
24,486 |
|
Revaluation reserve |
|
5 |
|
|
— |
|
|
|
468 |
|
Foreign currency translation reserve |
|
|
|
|
1,342 |
|
|
|
458 |
|
Deficit |
|
|
|
|
(239,000 |
) |
|
|
(148,263 |
) |
Total equity |
|
|
|
|
186,446 |
|
|
|
269,777 |
|
Total equity and liabilities |
|
|
|
|
302,115 |
|
|
|
393,867 |
|
Approved on Behalf of the Board
Signed by “Greg Feller” , Director
Signed by “Christopher Payne” , Director
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
F-2
Mogo Inc.
Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(Expressed in thousands of Canadian Dollars, except per share amounts)
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
|
Note |
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Subscription and services |
|
|
|
|
10,405 |
|
|
|
9,487 |
|
|
|
31,398 |
|
|
|
23,707 |
|
Interest revenue |
|
|
|
|
6,852 |
|
|
|
5,952 |
|
|
|
20,405 |
|
|
|
16,817 |
|
|
|
11a |
|
|
17,257 |
|
|
|
15,439 |
|
|
|
51,803 |
|
|
|
40,524 |
|
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Provision for loan losses, net of recoveries |
|
4 |
|
|
4,418 |
|
|
|
2,143 |
|
|
|
11,506 |
|
|
|
4,452 |
|
Transaction costs |
|
|
|
|
2,004 |
|
|
|
1,118 |
|
|
|
5,800 |
|
|
|
2,327 |
|
|
|
|
|
|
6,422 |
|
|
|
3,261 |
|
|
|
17,306 |
|
|
|
6,779 |
|
Gross profit |
|
|
|
|
10,835 |
|
|
|
12,178 |
|
|
|
34,497 |
|
|
|
33,745 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Technology and development |
|
|
|
|
3,186 |
|
|
|
2,082 |
|
|
|
9,834 |
|
|
|
7,786 |
|
Marketing |
|
|
|
|
2,061 |
|
|
|
4,735 |
|
|
|
10,173 |
|
|
|
11,400 |
|
Customer service and operations |
|
|
|
|
3,446 |
|
|
|
4,043 |
|
|
|
11,050 |
|
|
|
9,626 |
|
General and administration |
|
|
|
|
4,941 |
|
|
|
4,756 |
|
|
|
15,916 |
|
|
|
12,392 |
|
Stock-based compensation |
|
19c |
|
|
1,691 |
|
|
|
2,877 |
|
|
|
7,877 |
|
|
|
7,765 |
|
Depreciation and amortization |
|
6,7 |
|
|
3,144 |
|
|
|
3,665 |
|
|
|
9,470 |
|
|
|
9,054 |
|
Total operating expenses |
|
12 |
|
|
18,469 |
|
|
|
22,158 |
|
|
|
64,320 |
|
|
|
58,023 |
|
Loss from operations |
|
|
|
|
(7,634 |
) |
|
|
(9,980 |
) |
|
|
(29,823 |
) |
|
|
(24,278 |
) |
Other expenses (income) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit facility interest expense |
|
8 |
|
|
1,305 |
|
|
|
1,028 |
|
|
|
3,277 |
|
|
|
3,028 |
|
Debenture and other financing expense |
|
9,20 |
|
|
789 |
|
|
|
1,005 |
|
|
|
2,446 |
|
|
|
2,827 |
|
Accretion related to debentures and convertible debentures |
|
9 |
|
|
313 |
|
|
|
314 |
|
|
|
934 |
|
|
|
935 |
|
Share of loss in investment accounted for using the equity method |
|
15 |
|
|
6,612 |
|
|
|
2,495 |
|
|
|
20,941 |
|
|
|
5,354 |
|
Revaluation loss (gain) |
|
13 |
|
|
2,146 |
|
|
|
(5,376 |
) |
|
|
4,395 |
|
|
|
(35,488 |
) |
Impairment of investment accounted for using the equity method |
|
15 |
|
|
— |
|
|
|
— |
|
|
|
26,749 |
|
|
|
— |
|
Other non-operating expense |
|
14 |
|
|
1,287 |
|
|
|
357 |
|
|
|
2,421 |
|
|
|
2,623 |
|
|
|
|
|
|
12,452 |
|
|
|
(177 |
) |
|
|
61,163 |
|
|
|
(20,721 |
) |
Net loss before tax |
|
|
|
|
(20,086 |
) |
|
|
(9,803 |
) |
|
|
(90,986 |
) |
|
|
(3,557 |
) |
Income tax (recovery) expense |
|
|
|
|
(90 |
) |
|
|
10 |
|
|
|
(249 |
) |
|
|
28 |
|
Net loss |
|
|
|
|
(19,996 |
) |
|
|
(9,813 |
) |
|
|
(90,737 |
) |
|
|
(3,585 |
) |
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Items that will not be reclassified subsequently to profit or loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unrealized revaluation gain (loss) on digital assets |
|
5 |
|
|
— |
|
|
|
371 |
|
|
|
(468 |
) |
|
|
397 |
|
Items that are or may be reclassified subsequently to profit or loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency transaction reserve gain (loss) |
|
|
|
|
106 |
|
|
|
(29 |
) |
|
|
884 |
|
|
|
331 |
|
Other comprehensive income |
|
|
|
|
106 |
|
|
|
342 |
|
|
|
416 |
|
|
|
728 |
|
Total comprehensive loss |
|
|
|
|
(19,890 |
) |
|
|
(9,471 |
) |
|
|
(90,321 |
) |
|
|
(2,857 |
) |
Net loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic loss per share |
|
|
|
|
(0.26 |
) |
|
|
(0.14 |
) |
|
|
(1.19 |
) |
|
|
(0.06 |
) |
Diluted loss per share |
|
|
|
|
(0.26 |
) |
|
|
(0.14 |
) |
|
|
(1.19 |
) |
|
|
(0.06 |
) |
Weighted average number of basic common shares (in 000s) |
|
|
|
|
75,953 |
|
|
|
69,898 |
|
|
|
76,463 |
|
|
|
59,905 |
|
Weighted average number of fully diluted common shares (in 000s) |
|
|
|
|
75,953 |
|
|
|
69,898 |
|
|
|
76,463 |
|
|
|
59,905 |
|
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
F-3
Mogo Inc.
Interim Condensed Consolidated Statements of Changes in Equity (Deficit)
(Unaudited)
(Expressed in thousands of Canadian Dollars, except share amounts)
|
|
Number of |
|
|
|
Share |
|
|
Contributed |
|
|
Revaluation reserve |
|
|
Foreign currency translation reserve |
|
|
Deficit |
|
|
Total |
|
|||||||
Balance, December 31, 2021 |
|
|
76,391 |
|
|
|
|
392,628 |
|
|
|
24,486 |
|
|
|
468 |
|
|
|
458 |
|
|
|
(148,263 |
) |
|
|
269,777 |
|
Net loss |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(90,737 |
) |
|
|
(90,737 |
) |
Purchase of common shares for cancellation (Note 19a) |
|
|
(800 |
) |
|
|
|
(955 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(955 |
) |
Forfeiture of common shares |
|
|
(3 |
) |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Foreign currency translation reserve |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
884 |
|
|
|
— |
|
|
|
884 |
|
Revaluation reserve (Note 5) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
(468 |
) |
|
|
— |
|
|
|
— |
|
|
|
(468 |
) |
Stock-based compensation (Note 19c) |
|
|
— |
|
|
|
|
— |
|
|
|
7,877 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,877 |
|
Options and restricted share units (“RSUs”) exercised or converted |
|
|
62 |
|
|
|
|
136 |
|
|
|
(68 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
68 |
|
Balance, September 30, 2022 |
|
|
75,650 |
|
|
|
|
391,809 |
|
|
|
32,295 |
|
|
|
— |
|
|
|
1,342 |
|
|
|
(239,000 |
) |
|
|
186,446 |
|
|
|
Number of |
|
|
|
Share |
|
|
Contributed |
|
|
Revaluation reserve |
|
|
Foreign currency translation reserve |
|
|
Deficit |
|
|
Total |
|
|||||||
Balance, June 30, 2022 |
|
|
75,650 |
|
|
|
|
391,809 |
|
|
|
30,604 |
|
|
|
— |
|
|
|
1,236 |
|
|
|
(219,004 |
) |
|
|
204,645 |
|
Net loss |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(19,996 |
) |
|
|
(19,996 |
) |
Foreign currency translation reserve |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
106 |
|
|
|
— |
|
|
|
106 |
|
Stock-based compensation (Note 19c) |
|
|
— |
|
|
|
|
— |
|
|
|
1,691 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,691 |
|
Balance, September 30, 2022 |
|
|
75,650 |
|
|
|
|
391,809 |
|
|
|
32,295 |
|
|
|
— |
|
|
|
1,342 |
|
|
|
(239,000 |
) |
|
|
186,446 |
|
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
F-4
Mogo Inc.
Interim Condensed Consolidated Statements of Changes in Equity (Deficit)
(Unaudited)
(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 |
|
|
32,731 |
|
|
|
|
106,730 |
|
|
|
13,560 |
|
|
|
— |
|
|
|
— |
|
|
|
(115,054 |
) |
|
|
5,236 |
|
Net loss |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,585 |
) |
|
|
(3,585 |
) |
Treasury shares reserve (Note 19b) |
|
|
(304 |
) |
|
|
|
(2,364 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,364 |
) |
Foreign currency translation reserve |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
331 |
|
|
|
— |
|
|
|
331 |
|
Revaluation reserve (Note 5) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
397 |
|
|
|
— |
|
|
|
— |
|
|
|
397 |
|
Stock-based compensation (Note 19c & Note 19e) |
|
|
— |
|
|
|
|
— |
|
|
|
7,765 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,765 |
|
Options and RSUs exercised or converted |
|
|
796 |
|
|
|
|
2,676 |
|
|
|
(1,141 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,535 |
|
Shares issued – ATM arrangement, net |
|
|
1,525 |
|
|
|
|
16,955 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
16,955 |
|
Shares issued – Bought deal financing |
|
|
5,347 |
|
|
|
|
47,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,122 |
|
||||
Shares issued on acquisition of Carta |
|
|
10,000 |
|
|
|
|
54,800 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
54,800 |
|
Shares issued on acquisition of Moka |
|
|
4,634 |
|
|
|
|
47,207 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
47,207 |
|
Shares issued – Replacement awards |
|
|
366 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Shares issued on acquisition of Fortification |
|
|
75 |
|
|
|
|
396 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
396 |
|
Shares issued on investment accounted for using the equity method |
|
|
8,267 |
|
|
|
|
77,779 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
77,779 |
|
Shares issued – Convertible debentures |
|
|
3,179 |
|
|
|
|
8,783 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,783 |
|
Equity settled share-based payment |
|
|
17 |
|
|
|
|
164 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
164 |
|
Warrants issued for broker services (Note 19e) |
|
|
— |
|
|
|
|
— |
|
|
|
1,410 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,410 |
|
Warrants exercised (Note 19e) |
|
|
3,605 |
|
|
|
|
8,145 |
|
|
|
(1,795 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,350 |
|
Balance, September 30, 2021 |
|
|
70,238 |
|
|
|
|
368,393 |
|
|
|
19,799 |
|
|
|
397 |
|
|
|
331 |
|
|
|
(118,639 |
) |
|
|
270,281 |
|
|
|
Number of |
|
|
|
Share |
|
|
Contributed |
|
|
Revaluation reserve |
|
|
Foreign currency translation reserve |
|
|
Deficit |
|
|
Total |
|
|||||||
Balance, June 30, 2021 |
|
|
68,803 |
|
|
|
|
355,994 |
|
|
|
30,928 |
|
|
|
26 |
|
|
|
360 |
|
|
|
(108,826 |
) |
|
|
278,482 |
|
Net loss |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9,813 |
) |
|
|
(9,813 |
) |
Treasury shares reserve (Note 19b) |
|
|
(304 |
) |
|
|
|
(2,364 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,364 |
) |
Foreign currency translation reserve |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(29 |
) |
|
|
— |
|
|
|
(29 |
) |
Revaluation reserve (Note 5) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
371 |
|
|
|
— |
|
|
|
— |
|
|
|
371 |
|
Stock-based compensation (Note 19c & Note 19e) |
|
|
— |
|
|
|
|
— |
|
|
|
2,877 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,877 |
|
Options and RSUs exercised or converted |
|
|
30 |
|
|
|
|
52 |
|
|
|
(20 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
32 |
|
Shares issued – ATM arrangement, net |
|
|
— |
|
|
|
|
109 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
109 |
|
Shares issued on acquisition of Fortification |
|
|
75 |
|
|
|
|
396 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
396 |
|
Shares issued on investment accounted for using the equity method |
|
|
1,526 |
|
|
|
|
13,901 |
|
|
|
(13,901 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Equity settled share-based payment |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Warrants exercised (Note 19e) |
|
|
108 |
|
|
|
|
305 |
|
|
|
(85 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
220 |
|
Balance, September 30, 2021 |
|
|
70,238 |
|
|
|
|
368,393 |
|
|
|
19,799 |
|
|
|
397 |
|
|
|
331 |
|
|
|
(118,639 |
) |
|
|
270,281 |
|
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
F-5
Mogo Inc.
Interim Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Expressed in thousands of Canadian Dollars)
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
Cash provided by (used in) the following activities: |
|
Note |
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
|
|
|
(19,996 |
) |
|
|
(9,813 |
) |
|
|
(90,737 |
) |
|
|
(3,585 |
) |
Items not affecting cash: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
6,7 |
|
|
3,144 |
|
|
|
3,665 |
|
|
|
9,470 |
|
|
|
9,054 |
|
Provision for loan losses |
|
4 |
|
|
4,570 |
|
|
|
2,357 |
|
|
|
12,001 |
|
|
|
5,179 |
|
Credit facility interest expense |
|
8 |
|
|
1,305 |
|
|
|
1,028 |
|
|
|
3,277 |
|
|
|
3,028 |
|
Debenture and other financing expense |
|
9,20 |
|
|
789 |
|
|
|
1,004 |
|
|
|
2,446 |
|
|
|
2,828 |
|
Accretion related to debentures and convertible debentures |
|
9 |
|
|
313 |
|
|
|
314 |
|
|
|
934 |
|
|
|
935 |
|
Share of loss in investment using the equity method |
|
15 |
|
|
6,612 |
|
|
|
2,495 |
|
|
|
20,941 |
|
|
|
5,354 |
|
Stock-based compensation expense |
|
19c |
|
|
1,691 |
|
|
|
2,877 |
|
|
|
7,877 |
|
|
|
7,765 |
|
Revaluation loss (gain) |
|
14 |
|
|
2,146 |
|
|
|
(5,376 |
) |
|
|
4,395 |
|
|
|
(35,488 |
) |
Impairment of investment using the equity method |
|
15 |
|
|
— |
|
|
|
— |
|
|
|
26,749 |
|
|
|
— |
|
Other non-operating expense |
|
|
|
|
1,100 |
|
|
|
— |
|
|
|
1,177 |
|
|
|
490 |
|
Income tax (recovery) expense |
|
|
|
|
(90 |
) |
|
|
— |
|
|
|
(249 |
) |
|
|
— |
|
|
|
|
|
|
1,584 |
|
|
|
(1,449 |
) |
|
|
(1,719 |
) |
|
|
(4,440 |
) |
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net issuance of loans receivable |
|
|
|
|
(4,148 |
) |
|
|
(6,564 |
) |
|
|
(14,579 |
) |
|
|
(10,619 |
) |
Prepaid expenses, and other receivables and assets |
|
|
|
|
61 |
|
|
|
(532 |
) |
|
|
(4,261 |
) |
|
|
(1,112 |
) |
Accounts payable, accruals and other |
|
|
|
|
(1,034 |
) |
|
|
1,499 |
|
|
|
298 |
|
|
|
307 |
|
Cash used in operating activities |
|
|
|
|
(3,537 |
) |
|
|
(7,046 |
) |
|
|
(20,261 |
) |
|
|
(15,864 |
) |
Interest paid |
|
|
|
|
(1,847 |
) |
|
|
(1,863 |
) |
|
|
(5,470 |
) |
|
|
(5,670 |
) |
Income taxes paid |
|
|
|
|
(13 |
) |
|
|
— |
|
|
|
(60 |
) |
|
|
— |
|
Net cash used in operating activities |
|
|
|
|
(5,397 |
) |
|
|
(8,909 |
) |
|
|
(25,791 |
) |
|
|
(21,534 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash (invested) acquired upon acquisition of subsidiary |
|
|
|
|
— |
|
|
|
(1,131 |
) |
|
|
— |
|
|
|
689 |
|
Proceeds from sale of investment |
|
|
|
|
— |
|
|
|
253 |
|
|
|
— |
|
|
|
4,878 |
|
Cash invested in investment portfolio |
|
17 |
|
|
— |
|
|
|
(1,263 |
) |
|
|
(1,837 |
) |
|
|
(3,057 |
) |
Cash invested in investment using the equity method |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(32,396 |
) |
Purchases of property and equipment |
|
6 |
|
|
(64 |
) |
|
|
(217 |
) |
|
|
(406 |
) |
|
|
(390 |
) |
Investment in digital assets |
|
5 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,250 |
) |
Investment in intangible assets |
|
7 |
|
|
(1,814 |
) |
|
|
(2,884 |
) |
|
|
(6,251 |
) |
|
|
(5,106 |
) |
Net cash used in investing activities |
|
|
|
|
(1,878 |
) |
|
|
(5,242 |
) |
|
|
(8,494 |
) |
|
|
(36,632 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lease liabilities – principal payments |
|
|
|
|
(180 |
) |
|
|
(155 |
) |
|
|
(525 |
) |
|
|
(494 |
) |
Repayments on debentures |
|
9 |
|
|
(532 |
) |
|
|
(516 |
) |
|
|
(1,503 |
) |
|
|
(1,527 |
) |
Advances on credit facility |
|
8 |
|
|
— |
|
|
|
4,359 |
|
|
|
2,548 |
|
|
|
4,190 |
|
Proceeds from issuance of common shares, net |
|
|
|
|
— |
|
|
|
109 |
|
|
|
— |
|
|
|
80,925 |
|
Repurchase of common shares |
|
19a |
|
|
— |
|
|
|
— |
|
|
|
(955 |
) |
|
|
— |
|
Proceeds from exercise of warrants |
|
|
|
|
— |
|
|
|
220 |
|
|
|
— |
|
|
|
6,350 |
|
Proceeds from exercise of options |
|
|
|
|
— |
|
|
|
32 |
|
|
|
74 |
|
|
|
1,535 |
|
Net cash (used in) provided by financing activities |
|
|
|
|
(712 |
) |
|
|
4,049 |
|
|
|
(361 |
) |
|
|
90,979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of exchange rate fluctuations on cash and cash equivalents |
|
|
|
|
(232 |
) |
|
|
274 |
|
|
|
782 |
|
|
|
646 |
|
Net (decrease) increase in cash and cash equivalent |
|
|
|
|
(8,219 |
) |
|
|
(9,828 |
) |
|
|
(33,864 |
) |
|
|
33,459 |
|
Cash and cash equivalent, beginning of period |
|
|
|
|
43,563 |
|
|
|
55,406 |
|
|
|
69,208 |
|
|
|
12,119 |
|
Cash and cash equivalent, end of period |
|
|
|
|
35,344 |
|
|
|
45,578 |
|
|
|
35,344 |
|
|
|
45,578 |
|
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
F-6
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
Mogo Inc. (“Mogo” or the "Company") was continued under the Business Corporations Act (British Columbia) on June 21, 2019 in connection with 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 financial technology companies, is empowering its 2 million members with simple digital solutions to help them get in control of their financial health while also making a positive impact with their money. Through the free Mogo app, consumers can access a digital spending account with the Mogo Visa* Platinum Prepaid Card featuring automatic carbon offsetting, get free monthly credit-score monitoring and ID fraud protection, and access personal loans and mortgages. Mogo’s new MogoTrade app offers commission-free stock trading that helps users make a positive impact with every investment and together with Moka, Mogo’s wholly-owned subsidiary, is bringing automated, fully-managed flat-fee investing to Canadians, forms the heart of Mogo’s digital wealth platform. Mogo’s wholly-owned subsidiary, Carta Worldwide, offers a digital payments platform that powers the next-generation card programs from innovative fintech companies in Europe, North America and APAC. To learn more, please visit mogo.ca or download the mobile app (iOS or Android).
Statement of compliance
These interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standards ("IAS") 34, Interim Financial Reporting. The policies applied in these interim condensed consolidated financial statements were based on IFRS issued and outstanding at September 30, 2022.
The Company presents its interim condensed consolidated statements of financial position on a non-classified basis in order of liquidity.
These interim condensed consolidated financial statements were authorized by the Board of Directors (the “Board”) to be issued on November 10, 2022.
These interim condensed 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 the next 12 months. 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 these interim condensed consolidated financial statements, and (ii) the base of investors and debt lenders historically available to the Company. The expected cash flows have been modeled based on anticipated revenue and profit streams with debt programmed into the model. Refer to Notes 8, 9, and 18 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 interim condensed consolidated financial statements.
F-7
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
Functional and presentation currency
These interim condensed 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. 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), Tactex Asset Management Inc. (EUR), and Tactex Advisors Inc. (USD).
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Company’s annual consolidated financial statements for the year ended December 31, 2021.
Significant accounting judgements, estimates and assumptions
The preparation of the interim condensed consolidated financial statements requires management to make estimates, assumptions and judgments that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amount of revenues and expenses during the period. The critical accounting estimates and judgments have been set out in the notes to the Company’s consolidated financial statements for the year ended December 31, 2021.
COVID-19 Pandemic
The overall impact of the pandemic continues to be uncertain and is dependent on actions taken by the Canadian government, businesses, and individuals to limit spread of the COVID-19 virus, as well as governmental economic response and support efforts. The Company has taken into consideration the economic impact of the COVID-19 pandemic and the significant economic volatility and uncertainty it has created when making estimates and assumptions in preparation of the interim condensed consolidated financial statements. Other than the impact on measurement of allowance for loan losses and fair valuation of our investment portfolio, there are no material accounting impacts from uncertainties surrounding the COVID-19 pandemic. For information on the Company’s allowance for loan losses and measurement of fair value, refer to Note 4 and Note 17, respectively.
New and amended standards and interpretations
Certain new or amended standards and interpretations became effective on January 1, 2022, but do not have an impact on the interim condensed consolidated financial statements of the Company. The Company has not adopted any standards or interpretations that have been issued but are not yet effective.
F-8
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
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 September 30, 2022 and December 31, 2021 are as follows:
|
|
As at |
|
|||||
|
|
September 30, |
|
|
December 31, 2021 |
|
||
Current (terms of one year or less) |
|
|
71,310 |
|
|
|
65,397 |
|
Non-current (terms exceeding one year) |
|
|
257 |
|
|
|
248 |
|
|
|
|
71,567 |
|
|
|
65,645 |
|
The following table provides a breakdown of gross loans receivable and allowance for loan losses by aging bucket, which represents our 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 September 30, 2022 |
|
|||||||||||||
Risk Category |
|
Days past due |
|
Stage 1 |
|
|
Stage 2 |
|
|
Stage 3 |
|
|
Total |
|
||||
Strong |
|
Not past due |
|
|
56,375 |
|
|
|
— |
|
|
|
— |
|
|
|
56,375 |
|
Lower risk |
|
1-30 days past due |
|
|
3,084 |
|
|
|
— |
|
|
|
— |
|
|
|
3,084 |
|
Medium risk |
|
31-60 days past due |
|
|
— |
|
|
|
1,416 |
|
|
|
— |
|
|
|
1,416 |
|
Higher risk |
|
61-90 days past due |
|
|
— |
|
|
|
1,172 |
|
|
|
— |
|
|
|
1,172 |
|
Non-performing |
|
91+ days past due or bankrupt |
|
|
— |
|
|
|
— |
|
|
|
9,520 |
|
|
|
9,520 |
|
|
|
Gross loans receivable |
|
|
59,459 |
|
|
|
2,588 |
|
|
|
9,520 |
|
|
|
71,567 |
|
|
|
Allowance for loan losses |
|
|
(5,876 |
) |
|
|
(1,457 |
) |
|
|
(5,824 |
) |
|
|
(13,157 |
) |
|
|
Loans receivable, net |
|
|
53,583 |
|
|
|
1,131 |
|
|
|
3,696 |
|
|
|
58,410 |
|
F-9
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
|
|
|
|
As at December 31, 2021 |
|
|||||||||||||
Risk Category |
|
Days past due |
|
Stage 1 |
|
|
Stage 2 |
|
|
Stage 3 |
|
|
Total |
|
||||
Strong |
|
Not past due |
|
|
54,067 |
|
|
|
— |
|
|
|
— |
|
|
|
54,067 |
|
Lower risk |
|
1-30 days past due |
|
|
2,797 |
|
|
|
— |
|
|
|
— |
|
|
|
2,797 |
|
Medium risk |
|
31-60 days past due |
|
|
— |
|
|
|
1,284 |
|
|
|
— |
|
|
|
1,284 |
|
Higher risk |
|
61-90 days past due |
|
|
— |
|
|
|
798 |
|
|
|
— |
|
|
|
798 |
|
Non-performing |
|
91+ days past due or bankrupt |
|
|
— |
|
|
|
— |
|
|
|
6,699 |
|
|
|
6,699 |
|
|
|
Gross loans receivable |
|
|
56,864 |
|
|
|
2,082 |
|
|
|
6,699 |
|
|
|
65,645 |
|
|
|
Allowance for loan losses |
|
|
(5,291 |
) |
|
|
(1,119 |
) |
|
|
(3,403 |
) |
|
|
(9,813 |
) |
|
|
Loans receivable, net |
|
|
51,573 |
|
|
|
963 |
|
|
|
3,296 |
|
|
|
55,832 |
|
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. 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 $1,406 higher than the reported allowance for credit losses as at September 30, 2022 (December 31, 2021 – $705 higher).
Allowance for loan losses |
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance, beginning of period |
|
|
12,048 |
|
|
|
8,239 |
|
|
|
9,813 |
|
|
|
8,886 |
|
Provision for loan losses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Originations |
|
|
541 |
|
|
|
715 |
|
|
|
1,832 |
|
|
|
1,617 |
|
Repayments |
|
|
(220 |
) |
|
|
(238 |
) |
|
|
(703 |
) |
|
|
(445 |
) |
Re-measurement |
|
|
4,249 |
|
|
|
1,880 |
|
|
|
10,872 |
|
|
|
4,007 |
|
Charge offs |
|
|
(3,461 |
) |
|
|
(2,002 |
) |
|
|
(8,657 |
) |
|
|
(5,471 |
) |
Balance, end of period |
|
|
13,157 |
|
|
|
8,594 |
|
|
|
13,157 |
|
|
|
8,594 |
|
The provision for loan losses in the interim condensed consolidated statements of operations and comprehensive income (loss) is recorded net of recoveries for the three and nine months ended September 30, 2022 of $152 and $495, respectively (September 30, 2021 – $214 and $727, respectively).
F-10
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
Digital assets represent investments in cryptocurrencies which the company expects to hold for the foreseeable future. The following table summarizes the Company’s digital assets as at September 30, 2022:
|
|
Quantities |
|
|
Average cost per unit |
|
|
Fair value per unit |
|
|
Total fair value ($000s) |
|
|
Historical cost ($000s) |
|
|
Cumulative revaluation gain (loss) ($000s) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Bitcoin (BTC) |
|
|
17.82 |
|
|
$ |
42,079 |
|
|
$ |
26,875 |
|
|
$ |
479 |
|
|
$ |
750 |
|
|
$ |
(271 |
) |
Ethereum (ETH) |
|
|
145.99 |
|
|
|
3,425 |
|
|
|
1,837 |
|
|
|
268 |
|
|
|
500 |
|
|
|
(232 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
747 |
|
|
|
1,250 |
|
|
|
(503 |
) |
|||
During the three and nine months ended September 30, 2022, the Company recorded a revaluation loss on digital assets in other comprehensive income of $nil and $468, respectively (September 30, 2021 – gain of $371 and $397, respectively).
During the three and nine months ended September 30, 2022, the Company recorded a revaluation gain on digital assets of $116 and loss on digital assets $503, respectively, in net loss (September 30, 2021 – $nil and loss of $92, respectively).
As at September 30, 2022, the carrying value of the Company’s digital assets held was $747 (December 31, 2021 – $1,718).
|
|
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 |
|
440 |
|
— |
|
— |
|
440 |
Effects of movement in exchange rate |
|
(18) |
|
— |
|
— |
|
(18) |
Balance, September 30, 2022 |
|
3,245 |
|
1,212 |
|
2,055 |
|
6,512 |
|
|
|
|
|
|
|
|
|
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 |
|
297 |
|
52 |
|
— |
|
349 |
Balance, September 30, 2022 |
|
2,244 |
|
954 |
|
2,055 |
|
5,253 |
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
Balance, December 31, 2021 |
|
876 |
|
310 |
|
— |
|
1,186 |
Balance, September 30, 2022 |
|
1,001 |
|
258 |
|
— |
|
1,259 |
Depreciation of $122 and $349 for the three and nine months ended September 30, 2022, respectively (September 30, 2021 – $136 and $350, respectively) for property and equipment is included in depreciation and amortization.
F-11
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
|
|
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 a business combination |
|
— |
|
— |
|
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 |
|
195 |
|
6,066 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
6,261 |
Impairment |
|
(3,064) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(3,064) |
Transfers |
|
3,360 |
|
(3,360) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
Effects of movement in exchange rate |
|
— |
|
— |
|
(27) |
|
— |
|
— |
|
— |
|
— |
|
(27) |
Balance, September 30, 2022 |
|
45,131 |
|
5,704 |
|
3,949 |
|
21,000 |
|
8,900 |
|
1,000 |
|
6,800 |
|
92,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
5,155 |
|
— |
|
118 |
|
1,575 |
|
799 |
|
— |
|
1,020 |
|
8,667 |
Impairment |
|
(1,965) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(1,965) |
Balance, September 30, 2022 |
|
32,700 |
|
— |
|
3,582 |
|
3,297 |
|
2,226 |
|
— |
|
1,907 |
|
43,712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2021 |
|
15,130 |
|
2,998 |
|
512 |
|
19,278 |
|
7,473 |
|
1,000 |
|
5,913 |
|
52,304 |
Balance, September 30, 2022 |
|
12,431 |
|
5,704 |
|
367 |
|
17,703 |
|
6,674 |
|
1,000 |
|
4,893 |
|
48,772 |
Amortization of intangible assets of $2,899 and $8,667 for the three and nine months ended September 30, 2022, respectively (September 30, 2021 – $3,319 and $8,152, respectively) is included in depreciation and amortization.
An impairment charge of $1,099 was recognized in other non-operating expense for the three and nine months ended September 30, 2022 related to MogoCrypto intangible assets.
F-12
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
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 to 1 month USD LIBOR, or under certain conditions, the Federal Funds Rate in effect. Interest on advance is payable at 1 month USD LIBOR plus 8% with no LIBOR floor. 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 September 30, 2022 was $47,790 (December 31, 2021 – $44,983).
The credit facility is subject to certain covenants and events of default. As at September 30, 2022, the Company was in compliance with these covenants. Interest expense on the credit facility is included in credit facility interest expense in the interim condensed 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.
On September 30, 2020, the Company and its debenture holders approved certain amendments to the terms of the debentures, with an effective date of July 1, 2020. Among other things, the amendments include:
i) |
|
a reduction in the weighted average coupon interest rate, from approximately 14% to approximately 7% and the extension of the maturity date for 50% of the principal balance to January 31, 2023, and the remainder to January 31, 2024; |
|
|
|
ii) |
|
replacement of the former monthly interest payable by a new quarterly payment (the “Quarterly Payment”), the amount of which is fixed at 12% per annum (3% per quarter) of the principal balance of the debentures as at September 29, 2020. Debenture holders received an election to either receive the Quarterly Payment as a) an interest payment of 8% per annum (2% per quarter) with the remainder of the payment going towards reducing the principal balance of the debenture, or b) a reduction of the principal balance of the debenture equal to the amount of the Quarterly Payment; |
|
|
|
iii) |
|
settlement of the new Quarterly Payment on the first business day following the end of a calendar quarter at the Company’s option either in cash or Common Shares; and |
|
|
|
iv) |
|
an option for all debenture holders to receive a lump-sum payout of their previously unpaid interest for the period from March 1, 2020 to June 30, 2020, at a reduced interest rate of 10%. Those who elected this option were paid in Common Shares in October 2020 subsequent to the end of the quarter. |
On October 7, 2020, Mogo issued 4,479,392 warrants (the “Debenture Warrants”) to its debenture holders in connection with the debenture amendments approved on September 30, 2020, at an exercise price of $2.03 per Common Share. The Debenture Warrants are exercisable at any time until December 31, 2022. As at September 30, 2022, 3,295,377 Debenture Warrants have been exercised and converted into Common Shares for cash proceeds of $6,686. As at September 30, 2022, 1,184,015 Debenture Warrants remain outstanding and exercisable.
F-13
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
9. Debentures (Continued from previous page)
The Company’s debentures balance includes the following:
|
|
As at |
||
|
|
September 30, |
|
December 31, 2021 |
Principal balance |
|
40,277 |
|
41,375 |
Discount |
|
(1,319) |
|
(2,323) |
|
|
38,958 |
|
39,052 |
Interest payable |
|
734 |
|
742 |
|
|
39,692 |
|
39,794 |
The debenture principal repayments will be made according to the following schedule and are payable in either cash or Common Shares at Mogo’s option:
|
|
Principal component of quarterly payment |
|
Principal due on maturity |
|
Total |
2022 |
|
565 |
|
— |
|
565 |
2023 |
|
3,333 |
|
16,911 |
|
20,244 |
2024 |
|
952 |
|
18,516 |
|
19,468 |
|
|
4,850 |
|
35,427 |
|
40,277 |
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 2,673,268 Common Shares at an exercise price of US$11.00 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 3,055,556 Common Shares at an exercise price of US$4.70 at any time prior to three and a half years following the date of issuance.
The stock warrants are classified as a liability under IFRS 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 interim condensed 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.
F-14
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
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 interim condensed consolidated statements of operations and comprehensive income (loss).
|
|
As at |
||
|
|
September 30, |
|
December 31, 2021 |
Balance, beginning of period |
|
12,688 |
|
— |
Stock warrants issued |
|
— |
|
23,986 |
Change in fair value due to revaluation of derivative financial liabilities |
|
(11,196) |
|
(11,276) |
Change in fair value due to foreign exchange |
|
306 |
|
(22) |
Balance, end of period |
|
1,798 |
|
12,688 |
The change in fair value due to revaluation of derivative financial liabilities for the three and nine months ended September 30, 2022 was a gain of $90 and $11,196, respectively (September 30, 2021 – gain of $7,133 and $8,953, respectively). Change in fair value due to foreign exchange for the three and nine months ended September 30, 2022 was a loss of $145 and $306, respectively (September 30, 2021 – loss of $271 and $14, respectively).
Details of the derivative financial liabilities as at September 30, 2022 are as follows:
|
|
Warrants outstanding and exercisable (000s) |
|
Weighted average exercise price $ |
Balance, December 31, 2021 |
|
5,729 |
|
9.69 |
Warrants issued |
|
— |
|
— |
Balance, September 30, 2022 |
|
5,729 |
|
9.69 |
The 5,728,824 warrants outstanding noted above have expiry dates of August 2024 and June 2025.
The fair value of the warrants outstanding was estimated using the Black-Scholes option pricing model with the following assumptions:
|
|
As at |
||
|
|
September 30, |
|
December 31, 2021 |
Risk-free interest rate |
|
4.22 - 4.25% |
|
0.97% |
Expected life |
|
1.9 - 2.7 years |
|
2.7 - 3.5 years |
Expected volatility in market price of shares |
|
109 - 116% |
|
102 - 109% |
Expected dividend yield |
|
0% |
|
0% |
Expected forfeiture rate |
|
0% |
|
0% |
F-15
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
Revenue presented below has been based on the geographic location of customers.
|
|
Three months ended |
|
Nine months ended |
||||
|
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
Canada |
|
15,550 |
|
13,067 |
|
46,318 |
|
34,974 |
Europe |
|
1,521 |
|
2,080 |
|
4,942 |
|
5,094 |
Other |
|
186 |
|
292 |
|
543 |
|
456 |
Total |
|
17,257 |
|
15,439 |
|
51,803 |
|
40,524 |
Non-current assets presented below has been based on geographic location of the assets.
|
|
As at |
||
|
|
September 30, |
|
December 31, 2021 |
Canada |
|
191,580 |
|
255,315 |
Europe |
|
449 |
|
609 |
Other |
|
935 |
|
883 |
Total |
|
192,964 |
|
256,807 |
The following table summarizes the Company’s operating expenses by nature:
|
|
Three months ended |
|
Nine months ended |
||||
|
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
Personnel expense |
|
6,688 |
|
6,792 |
|
22,868 |
|
18,993 |
Marketing |
|
1,886 |
|
2,703 |
|
9,478 |
|
7,065 |
Depreciation and amortization |
|
3,144 |
|
4,381 |
|
9,470 |
|
10,471 |
Stock-based compensation |
|
1,691 |
|
3,665 |
|
7,877 |
|
9,054 |
Hosting and software licenses |
|
1,737 |
|
1,190 |
|
4,895 |
|
2,820 |
Professional services |
|
752 |
|
579 |
|
2,605 |
|
1,635 |
Insurance and licenses |
|
858 |
|
1,009 |
|
2,319 |
|
2,936 |
Credit verification costs |
|
541 |
|
329 |
|
1,363 |
|
756 |
Premises |
|
323 |
|
642 |
|
898 |
|
1,710 |
Others |
|
849 |
|
868 |
|
2,547 |
|
2,583 |
Total |
|
18,469 |
|
22,158 |
|
64,320 |
|
58,023 |
F-16
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
The following table summarizes the Company’s operating expenses by function including stock-based compensation and depreciation and amortization:
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
Technology and development |
|
|
6,819 |
|
|
|
5,986 |
|
|
|
21,251 |
|
|
|
17,463 |
|
Marketing |
|
|
2,101 |
|
|
|
4,936 |
|
|
|
10,377 |
|
|
|
12,168 |
|
Customer service and operations |
|
|
3,858 |
|
|
|
4,798 |
|
|
|
12,775 |
|
|
|
11,351 |
|
General and administration |
|
|
5,691 |
|
|
|
6,438 |
|
|
|
19,917 |
|
|
|
17,041 |
|
Total |
|
|
18,469 |
|
|
|
22,158 |
|
|
|
64,320 |
|
|
|
58,023 |
|
|
|
Three months ended |
|
Nine months ended |
||||
|
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
Change in fair value due to revaluation of derivative financial asset |
|
894 |
|
982 |
|
7,866 |
|
(23,826) |
Change in fair value due to revaluation of derivative financial liabilities |
|
(90) |
|
(7,133) |
|
(11,196) |
|
(8,953) |
Realized gain on investment portfolio |
|
— |
|
(170) |
|
— |
|
(2,630) |
Unrealized loss (gain) on investment portfolio |
|
1,853 |
|
1,085 |
|
6,780 |
|
(339) |
Unrealized (gain) loss on digital assets |
|
(116) |
|
— |
|
503 |
|
92 |
Unrealized exchange (gain) loss |
|
(395) |
|
(140) |
|
442 |
|
168 |
|
|
2,146 |
|
(5,376) |
|
4,395 |
|
(35,488) |
|
|
Three months ended |
|
Nine months ended |
||||
|
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
Credit facility prepayment and related expenses |
|
— |
|
— |
|
— |
|
(5) |
Government grants |
|
(1) |
|
(129) |
|
(92) |
|
(1,337) |
Direct offering transaction costs allocated to derivative financial liabilities |
|
— |
|
— |
|
— |
|
1,466 |
Acquisition costs, restructuring and other |
|
1,288 |
|
486 |
|
2,513 |
|
2,499 |
|
|
1,287 |
|
357 |
|
2,421 |
|
2,623 |
F-17
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
During the year ended December 31, 2021, the Company completed its strategic investment in Coinsquare Ltd. (“Coinsquare”), one of Canada’s leading digital asset trading platforms, pursuant to which Mogo acquired 12,518,473 Coinsquare common shares, representing an approximately 38% ownership interest in Coinsquare.
Share of loss in investment accounted for using the equity method was $6,612 and $20,941 for the three and nine months ended September 30, 2022 (September 30, 2021 – $2,495 and 5,354, respectively).
As at June 30, 2022, the Company identified indicators of impairment related to the Company’s investment in Coinsquare, which has been accounted for using the equity method. Coinsquare experienced lower trading volumes amidst the recent broader cryptocurrency and equity market declines in the period. The Company assessed the carrying value of the investment against the estimated recoverable amount that was determined using a market approach. The estimated recoverable amount of the investment in Coinsquare was $62,743 as at June 30, 2022. As a result of this assessment, as at June 30, 2022, the Company recognized an impairment on its equity method investment in the amount of $26,749 (September 30, 2021 – $nil). No additional impairment related to the Company's investment in Coinsquare was recognized as at September 30, 2022.
Subsequent to quarter-end, Coinsquare Capital Markets Ltd. (“CCML”), a wholly-owned subsidiary of Coinsquare, became an IIROC Dealer Member. MogoTrade Inc. (“MTI”), a wholly-owned subsidiary of Mogo, is also an IIROC Dealer Member. Pursuant to IIROC Rule 2206, MTI and CCML are related companies because Mogo has an ownership interest of at least 20% in each of them and each is responsible for and must guarantee the other’s obligations to its clients in an amount equal to Mogo’s ownership percentage multiplied by its regulatory capital. This guarantee would only be triggered in the event of an insolvency of the related IIROC Dealer Member. As such, in the event of CCML’s insolvency, MTI would be responsible for guaranteeing CCML’s obligations to its clients up to the amount of MTI’s regulatory capital. As at September 30, 2022, MTI had regulatory capital of $4,173.
As part of the Company’s investment in Coinsquare, the Company obtained warrants to acquire 7,240,665 additional Coinsquare common shares (the “Coinsquare Warrant”) through treasury at an exercise price of $8.29 per share, subject to certain conditions and payable by Mogo at least 50% in cash and the remainder in Common Shares.
The Coinsquare Warrant was classified as a derivative financial asset on the statements of financial position, fair valued using the Black-Scholes valuation model at initial recognition, and subsequently remeasured to fair value as at each reporting date. Any change in the fair value of these derivative financial assets is recognized to revaluation gains (losses) in the interim condensed consolidated statements of operations and comprehensive income (loss).
The Coinsquare Warrant expired unexercised on October 16, 2022.
|
|
As at |
||
|
|
September 30, |
|
December 31, 2021 |
Balance, beginning of period |
|
7,866 |
|
— |
Additions |
|
— |
|
11,591 |
Change in fair value due to revaluation of derivative financial assets |
|
(7,866) |
|
1,788 |
Exercised |
|
— |
|
(5,513) |
Balance, end of period |
|
— |
|
7,866 |
F-18
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
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 interim condensed 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:
(a) Valuation process
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-19
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
(b) Accounting classifications and fair values
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 three months ended September 30, 2022, there have not been any transfers between fair value hierarchy levels.
|
|
|
|
Carrying amount |
|
|
Fair value |
|
||||||||||||||||||||||||||
As at September 30, 2022 |
|
Note |
|
FVTPL |
|
|
Financial asset at |
|
|
Other financial |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||||||
Financial assets measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Investment portfolio |
|
|
|
|
13,792 |
|
|
|
— |
|
|
|
— |
|
|
|
13,792 |
|
|
|
751 |
|
|
|
— |
|
|
|
13,041 |
|
|
|
13,792 |
|
|
|
|
|
|
13,792 |
|
|
|
— |
|
|
|
— |
|
|
|
13,792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial assets not measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalent |
|
|
|
|
— |
|
|
|
35,344 |
|
|
|
— |
|
|
|
35,344 |
|
|
|
35,344 |
|
|
|
— |
|
|
|
— |
|
|
|
35,344 |
|
Loans receivable – current |
|
4 |
|
|
— |
|
|
|
71,310 |
|
|
|
— |
|
|
|
71,310 |
|
|
|
— |
|
|
|
71,310 |
|
|
|
— |
|
|
|
71,310 |
|
Loans receivable – non-current |
|
4 |
|
|
— |
|
|
|
257 |
|
|
|
— |
|
|
|
257 |
|
|
|
— |
|
|
|
— |
|
|
|
257 |
|
|
|
257 |
|
Other receivables |
|
|
|
|
— |
|
|
|
11,727 |
|
|
|
— |
|
|
|
11,727 |
|
|
|
— |
|
|
|
11,727 |
|
|
|
— |
|
|
|
11,727 |
|
|
|
|
|
|
— |
|
|
|
118,638 |
|
|
|
— |
|
|
|
118,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial liabilities measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Derivative financial liabilities |
|
10 |
|
|
1,798 |
|
|
|
— |
|
|
|
— |
|
|
|
1,798 |
|
|
|
— |
|
|
|
1,798 |
|
|
|
— |
|
|
|
1,798 |
|
|
|
|
|
|
1,798 |
|
|
|
— |
|
|
|
— |
|
|
|
1,798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial liabilities not measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Accounts payable, accruals and other |
|
|
|
|
— |
|
|
|
— |
|
|
|
21,382 |
|
|
|
21,382 |
|
|
|
— |
|
|
|
21,382 |
|
|
|
— |
|
|
|
21,382 |
|
Credit facility |
|
8 |
|
|
— |
|
|
|
— |
|
|
|
47,790 |
|
|
|
47,790 |
|
|
|
— |
|
|
|
47,790 |
|
|
|
— |
|
|
|
47,790 |
|
Debentures |
|
9 |
|
|
— |
|
|
|
— |
|
|
|
39,692 |
|
|
|
39,692 |
|
|
|
— |
|
|
|
37,441 |
|
|
|
— |
|
|
|
37,441 |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
108,864 |
|
|
|
108,864 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
F-20
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
|
|
|
|
Carrying amount |
|
|
Fair value |
|
||||||||||||||||||||||||||
As at December 31, 2021 |
|
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 |
|
|
|
|
18,088 |
|
|
|
— |
|
|
|
— |
|
|
|
18,088 |
|
|
|
1,785 |
|
|
|
— |
|
|
|
16,303 |
|
|
|
18,088 |
|
Derivative financial assets |
|
16 |
|
|
7,866 |
|
|
|
— |
|
|
|
— |
|
|
|
7,866 |
|
|
|
— |
|
|
|
— |
|
|
|
7,866 |
|
|
|
7,866 |
|
|
|
|
|
|
25,954 |
|
|
|
— |
|
|
|
— |
|
|
|
25,954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial assets not measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalent |
|
|
|
|
— |
|
|
|
69,208 |
|
|
|
— |
|
|
|
69,208 |
|
|
|
69,208 |
|
|
|
— |
|
|
|
— |
|
|
|
69,208 |
|
Loans receivable – current |
|
4 |
|
|
— |
|
|
|
65,397 |
|
|
|
— |
|
|
|
65,397 |
|
|
|
— |
|
|
|
65,397 |
|
|
|
— |
|
|
|
65,397 |
|
Loans receivable – non-current |
|
4 |
|
|
— |
|
|
|
248 |
|
|
|
— |
|
|
|
248 |
|
|
|
— |
|
|
|
— |
|
|
|
248 |
|
|
|
248 |
|
Other receivables |
|
|
|
|
— |
|
|
|
8,259 |
|
|
|
— |
|
|
|
8,259 |
|
|
|
— |
|
|
|
8,259 |
|
|
|
— |
|
|
|
8,259 |
|
|
|
|
|
|
— |
|
|
|
143,112 |
|
|
|
— |
|
|
|
143,112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial liabilities measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Derivative financial liabilities |
|
10 |
|
|
12,688 |
|
|
|
— |
|
|
|
— |
|
|
|
12,688 |
|
|
|
— |
|
|
|
12,688 |
|
|
|
— |
|
|
|
12,688 |
|
|
|
|
|
|
12,688 |
|
|
|
— |
|
|
|
— |
|
|
|
12,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial liabilities not measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Accounts payable, accruals and other |
|
|
|
|
— |
|
|
|
— |
|
|
|
20,783 |
|
|
|
20,783 |
|
|
|
— |
|
|
|
20,783 |
|
|
|
— |
|
|
|
20,783 |
|
Credit facility |
|
8 |
|
|
— |
|
|
|
— |
|
|
|
44,983 |
|
|
|
44,983 |
|
|
|
— |
|
|
|
44,983 |
|
|
|
— |
|
|
|
44,983 |
|
Debentures |
|
9 |
|
|
— |
|
|
|
— |
|
|
|
39,794 |
|
|
|
39,794 |
|
|
|
— |
|
|
|
39,794 |
|
|
|
— |
|
|
|
39,794 |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
105,560 |
|
|
|
105,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(c) Measurement of fair values:
(i) Valuation techniques and significant unobservable inputs
The Company has been closely monitoring developments related to COVID-19, including the existing and potential impact on its investment portfolio. As a result of the ongoing and developing COVID-19 pandemic and its resulting impact on the global economy, the Company believes that there is increased uncertainty to input factors on fair value of our Level 3 investments, including revenue multiples, time to exit events and increased equity volatility.
F-21
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
The following tables show the valuation techniques used in measuring Level 3 fair values for financial instruments in the interim condensed 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
|
• 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 12% |
• Changes to the expected amount and timing of cash flow changes fair value
• Increases to the discount rate can decrease fair value |
|
|
|
|
Derivative financial assets |
• Option pricing model |
• Equity stock price and volatility |
• Increase in equity stock price and volatility will increase fair value |
F-22
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
The following table presents the changes in fair value measurements of the Company’s investment portfolio recognized at fair value at September 30, 2022 and December 31, 2021 and classified as Level 3:
|
|
As at |
|
|||||
|
|
September 30, |
|
|
December 31, 2021 |
|
||
Balance of Level 3 investments, opening |
|
|
16,303 |
|
|
|
18,291 |
|
Additions |
|
|
1,814 |
|
|
|
3,555 |
|
Disposal |
|
|
— |
|
|
|
(9,272 |
) |
Transfer to Level 1 investments |
|
|
(500 |
) |
|
|
— |
|
Unrealized exchange gain (loss) |
|
|
672 |
|
|
|
(90 |
) |
Realized gain on investment portfolio |
|
|
— |
|
|
|
4,120 |
|
Unrealized loss on investment portfolio |
|
|
(5,248 |
) |
|
|
(301 |
) |
Balance of Level 3 investments, end of period |
|
|
13,041 |
|
|
|
16,303 |
|
Unrealized exchange gain (loss) for the three and nine months ended September 30, 2022 was a gain of $560 and $672, respectively (September 30, 2021 – gain of $295 and loss of $82, respectively).
Unrealized gain (loss) on investment portfolio for the three and nine months ended September 30, 2022 was a loss of $912 and $5,248, respectively (September 30, 2021 – loss of $1,085 and gain of $628, respectively).
(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: |
|
|
|
|
|
|
||||
September 30, 2022 |
|
Adjusted market multiple (5% movement) |
|
|
690 |
|
|
|
(690 |
) |
|
|
|
|
|
|
|
|
|
||
December 31, 2021 |
|
Adjusted market multiple (5% movement) |
|
|
920 |
|
|
|
(920 |
) |
F-23
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
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-24
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
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 8 and 9 for further details.
|
|
2022 |
|
2023 |
|
2024 |
|
2025 |
|
2026 |
|
Thereafter |
Commitments - operational |
|
|
|
|
|
|
|
|
|
|
|
|
Lease payments |
|
333 |
|
1,297 |
|
1,206 |
|
1,240 |
|
1,255 |
|
1,472 |
Accounts payable |
|
4,346 |
|
— |
|
— |
|
— |
|
— |
|
— |
Accruals and other |
|
17,036 |
|
— |
|
— |
|
— |
|
— |
|
— |
Interest – Credit facility (Note 8) |
|
1,363 |
|
5,453 |
|
5,453 |
|
2,726 |
|
— |
|
— |
Interest – Debentures (Note 9) |
|
727 |
|
1,502 |
|
— |
|
— |
|
— |
|
— |
Purchase obligations |
|
263 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
24,068 |
|
8,252 |
|
6,659 |
|
3,966 |
|
1,255 |
|
1,472 |
Commitments – principal repayments |
|
|
|
|
|
|
|
|
|
|
|
|
Credit facility (Note 8) |
|
— |
|
— |
|
— |
|
47,790 |
|
— |
|
— |
Debentures (Note 9) (1) |
|
565 |
|
20,244 |
|
19,468 |
|
— |
|
— |
|
— |
|
|
565 |
|
20,244 |
|
19,468 |
|
47,790 |
|
— |
|
— |
Total contractual obligations |
|
24,633 |
|
28,496 |
|
26,127 |
|
51,756 |
|
1,255 |
|
1,472 |
(1) The debenture principal repayments are payable in either cash or Common Shares at Mogo’s option.
F-25
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
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.
For the nine months ended September 30, 2022, the Company repurchased 800,000 Common Shares for cancellation under its share repurchase program at an average price of CAD$1.19 per share, for a total repurchase cost of $955.
As at September 30, 2022, there are 75,953,490 (December 31, 2021 – 76,693,859) Common Shares and no preferred shares issued and outstanding.
The treasury share reserve comprises the cost of the shares held by the Company. As at September 30, 2022, the Company held 303,816 of Common Shares (December 31, 2021 – 303,816).
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) 3,800,000. 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 September 30, 2022, there are 97,000 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 converts into 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.
F-26
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
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, 2020 |
|
4,977 |
|
— |
|
3.07 |
|
2,965 |
|
3.47 |
Options issued |
|
5,410 |
|
4.76 |
|
7.47 |
|
— |
|
— |
Exercised |
|
(810) |
|
1.70 |
|
1.77 |
|
— |
|
— |
Forfeited |
|
(653) |
|
6.19 |
|
6.24 |
|
— |
|
— |
Balance, December 31, 2021 |
|
8,924 |
|
— |
|
4.64 |
|
3,036 |
|
3.93 |
Options issued |
|
1,780 |
|
1.51 |
|
2.18 |
|
— |
|
— |
Exercised |
|
(48) |
|
1.22 |
|
1.26 |
|
— |
|
— |
Forfeited |
|
(683) |
|
2.78 |
|
2.87 |
|
— |
|
— |
Balance, September 30, 2022 |
|
9,973 |
|
— |
|
3.55 |
|
4,064 |
|
4.02 |
The above noted options have expiry dates ranging from October 2022 to September 2030.
With the exception of performance-based stock options, the fair value of each option granted was estimated using the Black-Scholes option pricing model with the following assumptions:
|
|
Nine months ended |
||
|
|
September 30, |
|
September 30, |
Risk-free interest rate |
|
1.73 - 3.40% |
|
0.58 - 1.11% |
Expected life |
|
5 years |
|
5 years |
Expected volatility in market price of shares |
|
87 - 91% |
|
84 - 87% |
Expected dividend yield |
|
0% |
|
0% |
Expected forfeiture rate |
|
0% - 15% |
|
0% - 15% |
These options generally vest either immediately or monthly over a three-to-four-year period.
On September 30, 2021, the Company granted performance-based stock options that vest monthly over a two-year period starting on January 1, 2022. Vesting of these options is dependent on certain performance criteria being met.
Total stock-based compensation costs related to options and RSUs for the three and nine months ended September 30, 2022 was $1,677 and $7,771 respectively (September 30, 2021 – $2,703 and $7,065, respectively).
F-27
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
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 500,000.
As at September 30, 2022, the balance of RSUs outstanding is 28,000 (December 31, 2021 – 42,000)
|
|
Warrants outstanding (000s) |
|
Weighted average exercise price $ |
|
Warrants exercisable (000s) |
|
Weighted average exercise price $ |
Balance, December 31, 2020 |
|
5,035 |
|
1.80 |
|
4,386 |
|
1.88 |
Warrants issued |
|
573 |
|
11.25 |
|
— |
|
— |
Warrants exercised |
|
(3,618) |
|
1.76 |
|
— |
|
— |
Balance, December 31, 2021 |
|
1,990 |
|
4.60 |
|
1,757 |
|
5.04 |
Warrants issued |
|
— |
|
— |
|
— |
|
— |
Warrants exercised |
|
— |
|
— |
|
— |
|
— |
Balance, September 30, 2022 |
|
1,990 |
|
4.60 |
|
1,874 |
|
4.80 |
The 1,990,231 warrants outstanding noted above have expiry dates ranging from December 2022 to June 2025, and do not include the stock warrants accounted for as a derivative financial liability discussed in Note 10.
On October 7, 2020, Mogo issued 4,479,392 Debenture Warrants to its debenture holders in connection with the debenture amendments approved on September 30, 2020, at an exercise price of $2.03 per Common Share. The Debenture Warrants are exercisable at any time until December 31, 2022. There were 1,184,015 Debenture Warrants outstanding as at September 30, 2022 (December 31, 2021 – 1,184,015). During the three and nine months ended September 30, 2022, no Debenture Warrants were exercised into Common Shares (September 30, 2021 – 108,467 and 2,292,650, respectively) resulting in no cash proceeds (September 30, 2021 – $220 and $4,654, respectively).
In connection with a marketing collaboration agreement with Postmedia Network Inc. (“Postmedia”) dated January 25, 2016 and amended on January 1, 2018 and January 1, 2020 effective until December 31, 2022, Mogo issued Postmedia a total of 1,546,120 warrants, of which 1,312,787 have been exercised by September 30, 2022 for cash proceeds of $1,696. 233,333 warrants remain outstanding as at September 30, 2022 with 116,667 having vested and the remaining 116,667 vesting on February 24, 2023. The warrants remain exercisable until August 24, 2023 subject to an earlier liquidation event. Subsequent to an amendment entered into on June 3, 2020, the exercise price of the warrants was reduced to $1.292. Under the marketing collaboration agreement, Postmedia also receives a quarterly payment of $263.
F-28
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine months ended September 30, 2022 and 2021
During the year ended December 31, 2021, the Company also issued 572,883 warrants to purchase Common Shares with exercise prices ranging from USD $5.63 to USD $12.63 per warrant in connection with broker services rendered on offerings during the period. As at September 30, 2022, 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 10 for more details.
Related party transactions during the three and nine months ended September 30, 2022, include transactions with debenture holders that incur interest. The related party debentures balance as at September 30, 2022, totaled $310 (December 31, 2021 – $322). The debentures bear annual coupon interest of 8.0% (December 31, 2021 – 8.0%) with interest expense for the three and nine months ended September 30, 2022, totaling $6 and $19, respectively (September 30, 2021 – $5 and $17, 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.
F-29
