UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November 2022
Commission File Number: 001-38409
Mogo Inc.
(formerly Mogo Finance Technology Inc.)
2100-401 West Georgia St.
Vancouver, British Columbia
V6B 5A1, Canada
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or
Form 40-F.
|
Form 20-F |
☒Form 40-F |
|
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Form 6-K Exhibit Index
Exhibit Number |
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Document Description |
99.1 |
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99.2 |
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Management’s discussion and analysis for the quarter ended September 30, 2022 |
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99.3 |
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99.4 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Mogo Inc. |
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Date: November 10, 2022 |
By: |
/s/ Gregory Feller |
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Name: Gregory Feller |
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Title: President & Chief Financial Officer |
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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 |
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Notes to the Interim Condensed Consolidated Financial Statements |
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F-7 |
Mogo Inc.
Interim Condensed Consolidated Statements of Financial Position
(Unaudited)
(Expressed in thousands of Canadian Dollars)
|
|
Note |
|
September 30, |
|
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December 31, |
|
||
Assets |
|
|
|
|
|
|
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||
Cash and cash equivalent |
|
|
|
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35,344 |
|
|
|
69,208 |
|
Digital assets |
|
5 |
|
|
747 |
|
|
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1,718 |
|
Loans receivable, net |
|
4 |
|
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58,410 |
|
|
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55,832 |
|
Prepaid expenses, and other receivables and assets |
|
|
|
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14,650 |
|
|
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10,302 |
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Investment portfolio |
|
17 |
|
|
13,792 |
|
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18,088 |
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Investment accounted for using the equity method |
|
15 |
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56,131 |
|
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103,821 |
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Property and equipment |
|
6 |
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1,259 |
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1,186 |
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Right-of-use assets |
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2,898 |
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3,430 |
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Intangible assets |
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7 |
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48,772 |
|
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52,304 |
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Derivative financial assets |
|
16 |
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— |
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7,866 |
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Goodwill |
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70,112 |
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70,112 |
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Total assets |
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302,115 |
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393,867 |
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Liabilities |
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Accounts payable, accruals and other |
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21,382 |
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20,783 |
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Lease liabilities |
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3,423 |
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3,948 |
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Credit facility |
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8 |
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|
47,790 |
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44,983 |
|
Debentures |
|
9 |
|
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39,692 |
|
|
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39,794 |
|
Derivative financial liabilities |
|
10 |
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|
1,798 |
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12,688 |
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Deferred tax liability |
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1,584 |
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|
1,894 |
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Total liabilities |
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|
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115,669 |
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124,090 |
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Equity |
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Share capital |
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19a |
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391,809 |
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392,628 |
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Contributed surplus |
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32,295 |
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24,486 |
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Revaluation reserve |
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5 |
|
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— |
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|
468 |
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Foreign currency translation reserve |
|
|
|
|
1,342 |
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|
458 |
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Deficit |
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(239,000 |
) |
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(148,263 |
) |
Total equity |
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186,446 |
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269,777 |
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Total equity and liabilities |
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|
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302,115 |
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393,867 |
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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)
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Three months ended |
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Nine months ended |
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Note |
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September 30, |
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September 30, |
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September 30, |
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September 30, |
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||||
Revenue |
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Subscription and services |
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10,405 |
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9,487 |
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31,398 |
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23,707 |
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Interest revenue |
|
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6,852 |
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5,952 |
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20,405 |
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16,817 |
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11a |
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17,257 |
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15,439 |
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51,803 |
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40,524 |
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Cost of revenue |
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Provision for loan losses, net of recoveries |
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4 |
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4,418 |
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2,143 |
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11,506 |
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|
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4,452 |
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Transaction costs |
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2,004 |
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1,118 |
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5,800 |
|
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2,327 |
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|
|
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6,422 |
|
|
|
3,261 |
|
|
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17,306 |
|
|
|
6,779 |
|
Gross profit |
|
|
|
|
10,835 |
|
|
|
12,178 |
|
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|
34,497 |
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33,745 |
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Operating expenses |
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Technology and development |
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3,186 |
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2,082 |
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9,834 |
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7,786 |
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Marketing |
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2,061 |
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4,735 |
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10,173 |
|
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11,400 |
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Customer service and operations |
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3,446 |
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4,043 |
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11,050 |
|
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9,626 |
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General and administration |
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4,941 |
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4,756 |
|
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15,916 |
|
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12,392 |
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Stock-based compensation |
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19c |
|
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1,691 |
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2,877 |
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7,877 |
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7,765 |
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Depreciation and amortization |
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6,7 |
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3,144 |
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3,665 |
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9,470 |
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9,054 |
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Total operating expenses |
|
12 |
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18,469 |
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22,158 |
|
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|
64,320 |
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|
58,023 |
|
Loss from operations |
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(7,634 |
) |
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(9,980 |
) |
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|
(29,823 |
) |
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(24,278 |
) |
Other expenses (income) |
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|
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Credit facility interest expense |
|
8 |
|
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1,305 |
|
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|
1,028 |
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|
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 |
|
|
|
|
|
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12,452 |
|
|
|
(177 |
) |
|
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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: |
|
|
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|
|
|
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|
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|
||||
Items that will not be reclassified subsequently to profit or loss: |
|
|
|
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|
|
|
|
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|
|
|
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|
||||
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
|
|
Management’s Discussion and Analysis |
Exhibit 99.2
MOGO INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE QUARTER ENDED SEPTEMBER 30, 2022
DATED: NOVEMBER 10, 2022
1 | Page
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Management’s Discussion and Analysis |
Table of Contents |
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32 |
2 | Page
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|
Management’s Discussion and Analysis |
MANAGEMENT’S DISCUSSION AND ANALYSIS
This Management’s Discussion and Analysis (“MD&A”) is current as of November 10, 2022, and presents an analysis of the financial condition of Mogo Inc. (formerly Difference Capital Financial Inc.) and its subsidiaries (collectively referred to as “Mogo” or the “Company”) as at and for the three and nine months ended September 30, 2022 compared with the corresponding periods in the prior year. This MD&A should be read in conjunction with the Company’s interim condensed consolidated financial statements and the related notes thereto for the three and nine months ended September 30, 2022, as well as with the Company’s annual consolidated financial statements and the related notes thereto for the year ended December 31, 2021. The financial information presented in this MD&A is derived from our interim condensed consolidated financial statements prepared in accordance with International Accounting Standards 34 - Interim Financial Reporting of International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The Company was continued under the Business Corporations Act (British Columbia) on June 21, 2019, in connection with the business combination with Mogo Finance Technology Inc. (“Mogo Finance”). The transaction was accounted for as a business combination, with Mogo Finance as the accounting acquirer. Accordingly, the consolidated financial statements and this MD&A reflect the continuing financial statements of Mogo Finance.
This MD&A is the responsibility of management. The board of directors of Mogo (the “Board”) has approved this MD&A after receiving the recommendation of the Company’s Audit Committee, which is comprised exclusively of independent directors, and the Company’s Disclosure Committee.
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. The Company presents its consolidated financial statements in Canadian dollars. Amounts in this MD&A are stated in Canadian dollars unless otherwise indicated.
This MD&A may refer to trademarks, trade names and material which are subject to copyright, 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 MD&A 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 trade‑marks used in this MD&A are the property of their respective owners.
The Company’s continuous disclosure materials, including interim filings, audited annual consolidated financial statements, annual information form and annual report on Form 40-F can be found on SEDAR at www.sedar.com, with the Company’s filings with the United States Securities and Exchange Commission at www.sec.gov, and on the Company’s website at www.mogo.ca.
This MD&A makes reference to certain 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. These measures are provided as additional information to complement the IFRS financial measures contained herein by providing further metrics to understand 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, including contribution, adjusted EBITDA and adjusted net loss 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 also use 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. See “Key Performance Indicators” and “Non‑IFRS Financial Measures”.
3 | Page
|
|
Management’s Discussion and Analysis |
Caution Regarding Forward-Looking Statements
This MD&A contains forward‑looking statements that relate to the Company’s current expectations and views of future events. In some cases, these forward‑looking statements can be identified by words or phrases such as “outlook”, “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 the Company’s expectations (including our financial outlook) regarding its revenue, expenses and operations, key performance indicators, provision for loan losses (net of recoveries), anticipated cash needs and its need for additional financing, completion of announced transactions, funding costs, ability to extend or refinance any outstanding amounts under the Company’s credit facility, ability to protect, maintain and enforce its intellectual property, plans for and timing of expansion of its product and services, future growth plans, ability to attract new members and develop and maintain existing customers, ability to attract and retain personnel, expectations with respect to advancement of its product offering, competitive position and the regulatory environment in which the Company operates, anticipated trends and challenges in the Company’s business and the markets in which it operates, third‑party claims of infringement or violation of, or other conflicts with, intellectual property rights, the resolution of any legal matters, and the acceptance by the Company’s consumers and the marketplace of new technologies and solutions.
Forward-looking statements, including our financial outlook, 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. Our financial outlook is intended to provide further insight into our expectations for results in 2022 and 2023 and may not be appropriate for other purposes. This outlook involves numerous assumptions, particularly around member growth and take up of products and services, and we believe it is prepared on a reasonable basis reflecting management’s best estimates and judgements. However, given the inherent risks, uncertainties and assumptions, any investors or other 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 in the “Risk Factors” section of the Company’s current annual information form available at www.sedar.com and at www.sec.gov, which risk factors are incorporated herein by reference.
The forward-looking statements made in this MD&A relate only to events or information as of the date of this MD&A 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 MD&A, including the occurrence of unanticipated events. An investor should read this MD&A with the understanding that our actual future results may be materially different from what we expect.
[The rest of this page left intentionally blank]
4 | Page
|
|
Management’s Discussion and Analysis |
Company Overview
Mogo Inc., 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 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).
Mission
Mogo’s mission is to make it easy and engaging for consumers to get financially fit and live a more sustainable lifestyle.
The following key corporate changes, transactions and material contracts are referred to, and assist in understanding this MD&A:
Business Developments
As a result of these initiatives, total operating expenses decreased by 25% in Q3 2022 compared to Q1 2022 resulting in a 50% reduction in adjusted EBITDA loss.
5 | Page
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Management’s Discussion and Analysis |
6 | Page
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Management’s Discussion and Analysis |
Financial Highlights
Financial Outlook
7 | Page
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Management’s Discussion and Analysis |
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, contribution(1), adjusted EBITDA(1), and adjusted net loss(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 |
|
|
|
|
||||||
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
|||
Key Business Metrics |
|
|
|
|
|
|
|
|
|
|||
Mogo Members (000s) |
|
|
2,061 |
|
|
|
1,766 |
|
|
|
17 |
% |
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Nine months ended |
|
|
|
|
||||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
||||||
IFRS Measures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenue |
|
$ |
17,257 |
|
|
$ |
15,439 |
|
|
|
12 |
% |
|
$ |
51,803 |
|
|
$ |
40,524 |
|
|
|
28 |
% |
Subscription and services revenue |
|
|
10,405 |
|
|
|
9,487 |
|
|
|
10 |
% |
|
|
31,398 |
|
|
|
23,707 |
|
|
|
32 |
% |
Net (loss) income |
|
|
(19,996 |
) |
|
|
(9,813 |
) |
|
|
104 |
% |
|
|
(90,737 |
) |
|
|
(3,585 |
) |
|
|
2431 |
% |
Other Key Performance Indicators(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Contribution |
|
|
6,084 |
|
|
|
7,107 |
|
|
|
(14 |
)% |
|
|
20,170 |
|
|
|
21,091 |
|
|
|
(4 |
)% |
Adjusted EBITDA |
|
|
(2,799 |
) |
|
|
(3,438 |
) |
|
|
(19 |
)% |
|
|
(12,476 |
) |
|
|
(7,459 |
) |
|
|
67 |
% |
Adjusted net loss |
|
|
(8,350 |
) |
|
|
(9,450 |
) |
|
|
(12 |
)% |
|
|
(28,603 |
) |
|
|
(23,303 |
) |
|
|
23 |
% |
8 | Page
|
|
Management’s Discussion and Analysis |
Mogo members
Our total member base grew to 2,061,000 members as at September 30, 2022, from 1,766,000 members as at September 30, 2021, representing an increase of approximately 17% or 295,000 net members. Quarter over quarter, net members increased by 54,000 in Q3 2022 as compared to a net member increase of 66,000 in Q2 2022. The growth in our member base reflects the continued adoption of our products by new members. In Q3 2022, Mogo focused on performance marketing expenses that drove more efficient payback periods. As a result of these changes, Mogo ultimately expects better profitability despite a decrease in member growth compared to Q1 and Q2 2022.
Revenue
Three months ended Q3 2022 vs Q3 2021
Total revenue increased by 12% to $17.3 million for the three months ended September 30, 2022 compared to $15.4 million in the same period last year. This increase in revenue was driven by a $0.9 million increase in subscription and services revenue, resulting from a combination of additional revenue streams from our acquisition of Fortification in 2021 and growth in other Mogo products. In addition, there was a $0.9 million increase in interest revenue as the overall size of our loan portfolio has increased relative to the same period last year.
Nine months ended Q3 2022 vs Q3 2021
Total revenue increased by 28% to $51.8 million for the nine months ended September 30, 2022 compared to $40.5 million in the same period last year. This increase in revenue was driven by a $7.7 million increase in subscription and services revenue, resulting from a combination of additional revenue streams from our acquisitions of Carta, Moka and Fortification in 2021 and growth in other Mogo products. In addition, there was a $3.6 million increase in interest revenue as the overall size of our loan portfolio has increased relative to the same period last year.
Subscription and services revenue
Three months ended Q3 2022 vs Q3 2021
Subscription and services revenue increased by 10% to $10.4 million for the three months ended September 30, 2022 compared to $9.5 million in the same period last year. Subscription and services revenue represents 60% of total quarterly revenue in the current period as compared to 61% in the same period last year.
The increase was driven by a number of factors including additional revenue streams from our acquisition of Fortification in 2021 and growth in other Mogo products. Fortification contributed brokerage revenue from its direct-market-access program.
Nine months ended Q3 2022 vs Q3 2021
Subscription and services revenue increased by 32% to $31.4 million for the nine months ended September 30, 2022 compared to $23.7 million in the same period last year. Subscription and services revenue represents 61% of total revenue in the current period as compared to 59% in the same period last year. The increase was driven by a number of factors including additional revenue streams from our Carta, Moka and Fortification acquisitions in 2021 and growth in other Mogo products.
9 | Page
|
|
Management’s Discussion and Analysis |
Net (loss) income
Three months ended Q3 2022 vs Q3 2021
Net loss was $20.0 million for the three months ended September 30, 2022, which is an increase in net loss of $10.2 million compared to net loss of $9.8 million in the same period last year.
The variance is primarily driven by changes in non-cash gains and losses arising from a $7.0 million decrease in the unrealized gain on warrants issued by Mogo, $4.1 million increase in our share of Coinsquare's net comprehensive loss of $15.9 million during the quarter, and $0.8 million increase in unrealized loss on our investment portfolio. These losses have primarily resulted from recent broader equity and cryptocurrency declines during the period.
Partially offsetting the above is an improvement in loss from operations of $2.3 million arising from lower operating expenditures from the realization of cost initiatives implemented in Q2 2022 more than offsetting the slight decline in gross profit noted. The slight decline in gross profit is due to an increase in the provision for loan losses as loan losses in the comparative period were abnormally low as a result of increased customer liquidity aided by government subsidy programs available in response to the COVID-19 pandemic. Furthermore, incremental provision was recorded in Q3 2022 to reflect forward-looking macroeconomic indicators including the increase in inflation and rising interest rates.
Nine months ended Q3 2022 vs Q3 2021
Net loss was $90.7 million for the nine months ended September 30, 2022, which is an increase in net loss of $87.2 million compared to net loss of $3.6 million in the same period last year.
The increase in net loss for the nine months ended September 30, 2022 was attributed primarily to the same non-cash items noted for the three months ended September 30, 2022. Additionally, we recognized a non-cash impairment charge on our investment in Coinsquare of $26.7 million in Q2 2022 and unrealized loss on our Coinsquare warrants of $7.9 million compared to unrealized gain of $23.8 million in the comparative period. We also increased investment-related spend in the latter part of 2021 and into early 2022 as we focused on continuing to drive future growth including the rollout of MogoTrade.
Contribution(1)
Three months ended Q3 2022 vs Q3 2021
Contribution was $6.1 million for the three months ended September 30, 2022, which is a decrease of $1.0 million compared to $7.1 million in the same period last year. The decrease in contribution was driven by an increase to provision for loan losses, net of recoveries, of $2.3 million for reasons discussed in the net loss variance partially offset by a combination of the acquisition of Fortification and organic growth during the period.
Nine months ended Q3 2022 vs Q3 2021
Contribution was $20.2 million for the nine months ended September 30, 2022, which is a decrease of $0.9 million compared to $21.1 million in the same period last year. The decrease in contribution compared to the same periods in the prior year was due to an increase in customer service and operations expense of $1.4 million due to the acquisitions of Carta and Moka and increase in credit facility interest expense of $0.3 million due to rising interest rates. This increase in customer service and operations expense was partially offset by an increase in gross profit of $0.8 million arising from combination of acquisitions and organic growth during the period partially offset by an increase in provision for loan losses, net of recoveries, for reasons discussed in the net loss variance.
10 | Page
|
|
Management’s Discussion and Analysis |
Adjusted EBITDA(1)
Three months ended Q3 2022 vs Q2 2022
Adjusted EBITDA loss was $2.8 million for the three months ended September 30, 2022, which is a $1.3 million improvement from the adjusted EBITDA loss of $4.1 million for the three months ended June 30, 2022. This is a result of certain cost reduction initiatives implemented in Q2 2022 described above in the "Business Developments" section, resulting in a 13% reduction in operating expenses in Q3 2022 compared to Q2 2022, which more than offset the decline in gross profit driven by higher loan losses in the quarter. Increases in loan losses were a result of additional provisioning for macroeconomic headwinds while actual default rates for Q3 2022 improved relative to Q2 2022.
Mogo has a unique opportunity to leverage our position as one of Canada’s leading and most established fintechs as fintech adoption continues to accelerate in Canada and consumers increasingly turn to digital wealth-building solutions. As such, we have been focused on investing in our product and platform during this period. Our digital wealth solution consists of Moka and MogoTrade and offers our members a selection of both passive and active investing options. The Moka product is a passive investing strategy whereby customer savings are automatically invested in a professionally managed portfolio consisting primarily of index funds. MogoTrade is our active investing platform, offering customers a commission-free stock trading solution whereby they can buy and sell stocks in a self-directed portfolio. Mogo believes that long-term, low-cost passive investing should be a core component of an investment strategy and sees a significant opportunity to leverage MogoTrade to organically grow its existing Moka subscriber base. The strong underlying base profitability of our financial model was evidenced in 2020, when we achieved a strong positive adjusted EBITDA margin in both Q2 and Q3 2020.
Three months ended Q3 2022 vs Q3 2021
Adjusted EBITDA loss was $2.8 million for the three months ended September 30, 2022, which is a $0.6 million improvement from the adjusted EBITDA loss of $3.4 million in the same period last year. The decrease in adjusted EBITDA loss was primarily driven by a $2.0 million reduction in cash operating expenditures arising from the realization of cost initiatives implemented in Q2 2022 and $0.9 million increase in interest revenue from a larger loan portfolio. This was partially offset by an increase in provision for loan losses, net of recoveries, of $2.3 million for reasons discussed in the net loss variance.
Nine months ended Q3 2022 vs Q3 2021
Adjusted EBITDA loss was $12.5 million for the nine months ended September 30, 2022, which is a $5.0 million increase in loss compared to the adjusted EBITDA loss of $7.5 million in the same period last year. The increase in loss was driven by the same reasons noted above in the adjusted EBITDA variance, and additionally due to higher growth-related operating expenses in the first quarter of 2022 relative to the first quarter of 2021.
Adjusted net loss(1)
Three months ended Q3 2022 vs Q3 2021
Adjusted net loss was $8.4 million for the three months ended September 30, 2022, which is a $1.1 million improvement compared to an adjusted net loss of $9.5 million in the same period last year. The increase in adjusted net loss was attributed primarily to the same reasons noted above in the adjusted EBITDA variance.
Nine months ended Q3 2022 vs Q3 2021
Adjusted net loss was $28.6 million for the nine months ended September 30, 2022, which is an increase in loss of $5.3 million compared to an adjusted net loss of $23.3 million in the same period last year. The increase in adjusted net loss was attributed primarily to the same reasons noted above in the adjusted EBITDA variance.
11 | Page
|
|
Management’s Discussion and Analysis |
Non-IFRS Financial Measures
This MD&A makes reference to certain non-IFRS financial measures. Contribution, adjusted EBITDA and adjusted net loss 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, you should be aware that in the future we will continue to incur expenses similar to those adjusted in these non-IFRS financial measures.
Contribution
Contribution is a non-IFRS financial measure that we calculate as gross profit less the customer service and operations expense and credit facility interest expense. Contribution is a measure used by our management and the Board to understand and evaluate our core operating performance and trends and to evaluate the variable profit contribution of our revenue before the impact of investment related spend and overhead including technology, marketing and general and administration expenses. Factors that affect our contribution include revenue mix, transaction costs, and provision for loan losses, net of recoveries, origination and servicing expenses.
The following table presents a reconciliation of contribution to gross profit, the most comparable IFRS financial measure, for each of the periods indicated:
($000s) |
|
|
|
|
|
|
|
|
||||||||
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
Gross profit |
|
$ |
10,835 |
|
|
$ |
12,178 |
|
|
$ |
34,497 |
|
|
$ |
33,745 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Customer service and operations |
|
|
3,446 |
|
|
|
4,043 |
|
|
|
11,050 |
|
|
|
9,626 |
|
Credit facility interest expense |
|
|
1,305 |
|
|
|
1,028 |
|
|
|
3,277 |
|
|
|
3,028 |
|
Contribution |
|
|
6,084 |
|
|
|
7,107 |
|
|
|
20,170 |
|
|
|
21,091 |
|
12 | Page
|
|
Management’s Discussion and Analysis |
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 and convertible debentures, share of loss in investment accounted for using the equity method, revaluation loss (gain), impairment of investment accounted for using the equity method 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 |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
Net loss before tax |
|
$ |
(20,086 |
) |
|
$ |
(9,803 |
) |
|
$ |
(90,986 |
) |
|
$ |
(3,557 |
) |
Depreciation and amortization |
|
|
3,144 |
|
|
|
3,665 |
|
|
|
9,470 |
|
|
|
9,054 |
|
Stock-based compensation |
|
|
1,691 |
|
|
|
2,877 |
|
|
|
7,877 |
|
|
|
7,765 |
|
Credit facility interest expense |
|
|
1,305 |
|
|
|
1,028 |
|
|
|
3,277 |
|
|
|
3,028 |
|
Debenture and other financing expense |
|
|
789 |
|
|
|
1,005 |
|
|
|
2,446 |
|
|
|
2,827 |
|
Accretion related to debentures and convertible debentures |
|
|
313 |
|
|
|
314 |
|
|
|
934 |
|
|
|
935 |
|
Share of loss in investment accounted for using the equity method |
|
|
6,612 |
|
|
|
2,495 |
|
|
|
20,941 |
|
|
|
5,354 |
|
Revaluation loss (gain) |
|
|
2,146 |
|
|
|
(5,376 |
) |
|
|
4,395 |
|
|
|
(35,488 |
) |
Impairment of investment accounted for using the equity method |
|
|
— |
|
|
|
— |
|
|
|
26,749 |
|
|
|
— |
|
Other non-operating expense |
|
|
1,287 |
|
|
|
357 |
|
|
|
2,421 |
|
|
|
2,623 |
|
Adjusted EBITDA |
|
|
(2,799 |
) |
|
|
(3,438 |
) |
|
|
(12,476 |
) |
|
|
(7,459 |
) |
13 | Page
|
|
Management’s Discussion and Analysis |
Adjusted net loss
Adjusted net loss is a non-IFRS financial measure that we calculate as net (loss) income before tax excluding stock-based compensation, share of loss in investment accounted for using equity method, revaluation loss (gain), impairment of investment accounted for using the equity method 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 |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
Net loss before tax |
|
$ |
(20,086 |
) |
|
$ |
(9,803 |
) |
|
$ |
(90,986 |
) |
|
$ |
(3,557 |
) |
Stock-based compensation |
|
|
1,691 |
|
|
|
2,877 |
|
|
|
7,877 |
|
|
|
7,765 |
|
Share of loss in investment accounted for using the equity method |
|
|
6,612 |
|
|
|
2,495 |
|
|
|
20,941 |
|
|
|
5,354 |
|
Revaluation loss (gain) |
|
|
2,146 |
|
|
|
(5,376 |
) |
|
|
4,395 |
|
|
|
(35,488 |
) |
Impairment of investment accounted for using the equity method |
|
|
— |
|
|
|
— |
|
|
|
26,749 |
|
|
|
— |
|
Other non-operating expense |
|
|
1,287 |
|
|
|
357 |
|
|
|
2,421 |
|
|
|
2,623 |
|
Adjusted net loss |
|
|
(8,350 |
) |
|
|
(9,450 |
) |
|
|
(28,603 |
) |
|
|
(23,303 |
) |
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, MogoProtect, MogoCard, MogoMortgage, MogoTrade, Moka services, our premium account subscription offerings, free monthly credit score, 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, MogoCard, 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.
14 | Page
|
|
Management’s Discussion and Analysis |
Results of Operations
The following table sets forth a summary of our results of operations for the three and nine months ended September 30, 2022 and 2021:
($000s, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
Total revenue |
|
$ |
17,257 |
|
|
$ |
15,439 |
|
|
$ |
51,803 |
|
|
$ |
40,524 |
|
Cost of revenue |
|
|
6,422 |
|
|
|
3,261 |
|
|
|
17,306 |
|
|
|
6,779 |
|
Gross profit |
|
|
10,835 |
|
|
|
12,178 |
|
|
|
34,497 |
|
|
|
33,745 |
|
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 |
|
|
1,691 |
|
|
|
2,877 |
|
|
|
7,877 |
|
|
|
7,765 |
|
Depreciation and amortization |
|
|
3,144 |
|
|
|
3,665 |
|
|
|
9,470 |
|
|
|
9,054 |
|
Total operating expenses |
|
|
18,469 |
|
|
|
22,158 |
|
|
|
64,320 |
|
|
|
58,023 |
|
Loss from operations |
|
|
(7,634 |
) |
|
|
(9,980 |
) |
|
|
(29,823 |
) |
|
|
(24,278 |
) |
Credit facility interest expense |
|
|
1,305 |
|
|
|
1,028 |
|
|
|
3,277 |
|
|
|
3,028 |
|
Debenture and other financing expense |
|
|
789 |
|
|
|
1,005 |
|
|
|
2,446 |
|
|
|
2,827 |
|
Accretion related to debentures and convertible debentures |
|
|
313 |
|
|
|
314 |
|
|
|
934 |
|
|
|
935 |
|
Share of loss in investment accounted for using the equity method |
|
|
6,612 |
|
|
|
2,495 |
|
|
|
20,941 |
|
|
|
5,354 |
|
Revaluation loss (gain) |
|
|
2,146 |
|
|
|
(5,376 |
) |
|
|
4,395 |
|
|
|
(35,488 |
) |
Impairment of investment accounted for using the equity method |
|
|
— |
|
|
|
— |
|
|
|
26,749 |
|
|
|
— |
|
Other non-operating expense |
|
|
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: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unrealized revaluation gain (loss) on digital assets |
|
|
— |
|
|
|
371 |
|
|
|
(468 |
) |
|
|
397 |
|
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 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contribution(1) |
|
|
6,084 |
|
|
|
7,107 |
|
|
|
20,170 |
|
|
|
21,091 |
|
Adjusted EBITDA(1) |
|
|
(2,799 |
) |
|
|
(3,438 |
) |
|
|
(12,476 |
) |
|
|
(7,459 |
) |
Adjusted net loss(1) |
|
|
(8,350 |
) |
|
|
(9,450 |
) |
|
|
(28,603 |
) |
|
|
(23,303 |
) |
Net loss per share (basic) |
|
|
(0.26 |
) |
|
|
(0.14 |
) |
|
|
(1.19 |
) |
|
|
(0.06 |
) |
Net loss per share (diluted) |
|
|
(0.26 |
) |
|
|
(0.14 |
) |
|
|
(1.19 |
) |
|
|
(0.06 |
) |
15 | Page
|
|
Management’s Discussion and Analysis |
Key Income Statement Components
Total revenue
The following table summarizes total revenue for the three and nine months ended September 30, 2022 and 2021:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Nine months ended |
|
|
|
|
||||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
||||||
Subscription and services revenue |
|
$ |
10,405 |
|
|
$ |
9,487 |
|
|
|
10 |
% |
|
$ |
31,398 |
|
|
$ |
23,707 |
|
|
|
32 |
% |
Interest revenue |
|
|
6,852 |
|
|
|
5,952 |
|
|
|
15 |
% |
|
|
20,405 |
|
|
|
16,817 |
|
|
|
21 |
% |
Total revenue |
|
|
17,257 |
|
|
|
15,439 |
|
|
|
12 |
% |
|
|
51,803 |
|
|
|
40,524 |
|
|
|
28 |
% |
Subscription and services revenue – represents Carta transaction processing revenue, Moka subscriptions, MogoCard revenue, MogoMortgage brokerage commissions, premium account revenue, net loan protection premiums, partner lending fees, portfolio management fees, exempt market dealer commission revenue, referral fee revenue and other fees and charges.
Interest revenue - represents interest on our line of credit loan products.
Please refer to the "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 and nine months ended September 30, 2022 and 2021:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Nine months ended |
|
|
|
|
||||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
||||||
Provision for loan losses, net of recoveries |
|
$ |
4,418 |
|
|
$ |
2,143 |
|
|
|
106 |
% |
|
$ |
11,506 |
|
|
$ |
4,452 |
|
|
|
158 |
% |
Transaction costs |
|
|
2,004 |
|
|
|
1,118 |
|
|
|
79 |
% |
|
|
5,800 |
|
|
|
2,327 |
|
|
|
149 |
% |
Cost of revenue |
|
|
6,422 |
|
|
|
3,261 |
|
|
|
97 |
% |
|
|
17,306 |
|
|
|
6,779 |
|
|
|
155 |
% |
As a percentage of total revenue |
|
|
37 |
% |
|
|
21 |
% |
|
|
|
|
|
33 |
% |
|
|
17 |
% |
|
|
|
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 credit scoring fees, loan system transaction fees and certain fees related to the MogoCard and MogoProtect programs, transaction processing costs related to the Carta business and other transaction costs related to Moka and Fortification.
Cost of revenue was $6.4 million for the three months ended September 30, 2022, an increase of $3.2 million compared to the same period in the prior year. Cost of revenue was $17.3 million for the nine months ended September 30, 2022, an increase of $10.5 million compared to the same period last year.
Provision for loan losses, net of recoveries, has increased for the three and nine months ended September 30, 2022 compared to the same periods in the prior year. This increase is due to overall growth in the size of the loans portfolio, lower default rates in the comparative period, and an incremental provision recorded in Q3 2022 to reflect forward looking macroeconomic indicators including the rise in interest rates and inflation.
16 | Page
|
|
Management’s Discussion and Analysis |
Transaction costs have increased for the three and nine months ended September 30, 2022 compared to the same periods in the prior year. This increase is due to transaction costs being incurred by Carta, Moka and Fortification after their acquisitions in 2021.
We believe we are adequately provisioned to absorb reasonably possible future material shocks to the loan book as a result of inflation, rising interest rates, and any further deterioration in COVID-19 conditions. 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 and nine months ended September 30, 2022 and 2021:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Nine months ended |
|
|
|
|
||||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
||||||
Technology and development |
|
$ |
3,186 |
|
|
$ |
2,082 |
|
|
|
53 |
% |
|
$ |
9,834 |
|
|
$ |
7,786 |
|
|
|
26 |
% |
As a percentage of total revenue |
|
|
18 |
% |
|
|
13 |
% |
|
|
|
|
|
19 |
% |
|
|
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 third‑party data acquisition expenses, professional services, expenses related to the development of new products and technologies and maintenance of existing technology assets.
Technology and development expenses were $3.2 million for the three months ended September 30, 2022, which is an increase of $1.1 million compared to $2.1 million in the same period last year. Technology and development expenses were $9.8 million for the nine months ended September 30, 2022, which is an increase of $2.0 million compared to $7.8 million in the same period last year. The increase is due to higher spend in the current year relative to prior year in order to accelerate key growth initiatives including the development of MogoTrade.
MogoTrade and Moka form the core of our digital wealth platform. We believe our investments in their development will strengthen Mogo’s product service offerings and drive long-term member and revenue growth. Further, we believe that these strategic investments are key to unlocking and integrating the full potential of Mogo’s value proposition to consumers and will create a holistic and comprehensive user experience that positions us to drive long-term growth and user adoption.
17 | Page
|
|
Management’s Discussion and Analysis |
Marketing expenses
The following table provides the marketing expenses for the three and nine months ended September 30, 2022 and 2021:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Nine months ended |
|
|
|
|
||||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
||||||
Marketing |
|
$ |
2,061 |
|
|
$ |
4,735 |
|
|
|
(56 |
)% |
|
$ |
10,173 |
|
|
$ |
11,400 |
|
|
|
(11 |
)% |
As a percentage of total revenue |
|
|
12 |
% |
|
|
31 |
% |
|
|
|
|
|
20 |
% |
|
|
28 |
% |
|
|
|
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), quarterly payments to Postmedia Network Inc. under our strategic collaboration agreement, public relations, promotional event programs and corporate communications.
Marketing expenses were $2.1 million for the three months ended September 30, 2022, which is a decrease of $2.6 million compared to $4.7 million in the same period last year. Marketing expenses were $10.2 million for the nine months ended September 30, 2022, which is a decrease of $1.2 million compared to $11.4 million in the same period last year. During the second and third quarters of 2022, there was a reduction in marketing expenses to focus on more efficient marketing channels that drive shorter payback periods.
Customer service and operations expenses
The following table provides the customer service and operations (“CS&O”) expenses for the three and nine months ended September 30, 2022 and 2021:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Nine months ended |
|
|
|
|
||||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
||||||
Customer service and operations |
|
$ |
3,446 |
|
|
$ |
4,043 |
|
|
|
(15 |
)% |
|
$ |
11,050 |
|
|
$ |
9,626 |
|
|
|
15 |
% |
As a percentage of total revenue |
|
|
20 |
% |
|
|
26 |
% |
|
|
|
|
|
21 |
% |
|
|
24 |
% |
|
|
|
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 were $3.4 million for the three months ended September 30, 2022, which is a decrease of $0.6 million compared to $4.0 million in the same period last year. The decrease is due to certain cost reduction initiatives implemented in Q2 2022 described above in the "Business Developments" section.
CS&O expenses were $11.1 million for the nine months ended September 30, 2022, which is an increase of $1.5 million compared to $9.6 million in the same period last year. This increase is due to transaction costs being incurred by Carta, Moka and Fortification after their respective acquisitions in 2021.
18 | Page
|
|
Management’s Discussion and Analysis |
General and administration expenses
The following table provides the general and administration (“G&A”) expenses for the three and nine months ended September 30, 2022 and 2021:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Nine months ended |
|
|
|
|
||||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
||||||
General and administration |
|
$ |
4,941 |
|
|
$ |
4,756 |
|
|
|
4 |
% |
|
$ |
15,916 |
|
|
$ |
12,392 |
|
|
|
28 |
% |
As a percentage of total revenue |
|
|
29 |
% |
|
|
31 |
% |
|
|
|
|
|
31 |
% |
|
|
31 |
% |
|
|
|
G&A expenses consist primarily of salary and personnel related costs for our executive, 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 increased for the three and nine months ended September 30, 2022, compared to the same periods last year. The increases are primarily due to increased costs resulting from the acquisitions of Carta, Moka and Fortification in 2021.
Stock-based compensation and depreciation and amortization
The following table summarizes the stock-based compensation and depreciation and amortization. Expenses for the three and nine months ended September 30, 2022 and 2021 were as follows:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Nine months ended |
|
|
|
|
||||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
||||||
Stock-based compensation |
|
$ |
1,691 |
|
|
$ |
2,877 |
|
|
|
(41 |
)% |
|
$ |
7,877 |
|
|
$ |
7,765 |
|
|
|
1 |
% |
Depreciation and amortization |
|
|
3,144 |
|
|
|
3,665 |
|
|
|
(14 |
)% |
|
|
9,470 |
|
|
|
9,054 |
|
|
|
5 |
% |
|
|
|
4,835 |
|
|
|
6,542 |
|
|
|
(26 |
)% |
|
|
17,347 |
|
|
|
16,819 |
|
|
|
3 |
% |
As a percentage of total revenue |
|
|
28 |
% |
|
|
42 |
% |
|
|
|
|
|
33 |
% |
|
|
42 |
% |
|
|
|
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 $1.7 million in the three months ended September 30, 2022 compared to $2.9 million in the same period last year. The decrease in stock-based compensation is due to a greater number of options being granted at higher fair values in the prior year than the current year.
Stock-based compensation was consistent at $7.9 million in the nine months ended September 30, 2022 compared to $7.8 million in the same period last year.
Depreciation and amortization decreased to $3.1 million in the three months ended September 30, 2022 compared to $3.7 million in the same period last year. The decrease is driven by changes to the amortization of intangible assets recognized in the acquisition of Carta, Moka and Fortification.
Depreciation and amortization increased to $9.5 million in the nine months ended September 30, 2022 compared to $9.1 million in the same period last year. The increase is driven by the timing in which the acquisitions of Carta, Moka and Fortification were completed in the prior year and commencement of amortization for the associated intangible assets.
19 | Page
|
|
Management’s Discussion and Analysis |
Credit facility interest expense
The following table provides a breakdown of credit facility interest expense for the three and nine months ended September 30, 2022 and 2021:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Nine months ended |
|
|
|
|
||||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
||||||
Credit facility interest expense |
|
$ |
1,305 |
|
|
$ |
1,028 |
|
|
|
27 |
% |
|
$ |
3,277 |
|
|
$ |
3,028 |
|
|
|
8 |
% |
As a percentage of total revenue |
|
|
8 |
% |
|
|
7 |
% |
|
|
|
|
|
6 |
% |
|
|
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 and nine months ended September 30, 2022 compared to the same periods last year. The increase is due to additional advances on the Credit Facility and higher interest rates in 2022.
Other expenses (income)
The following table provides a breakdown of other expenses (income), excluding credit facility interest expense, by type for the three and nine months ended September 30, 2022 and 2021:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Nine months ended |
|
|
|
|
||||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
||||||
Debenture and other financing expense |
|
$ |
789 |
|
|
$ |
1,005 |
|
|
|
(21 |
)% |
|
$ |
2,446 |
|
|
$ |
2,827 |
|
|
|
(13 |
)% |
Accretion related to debentures and convertible debentures |
|
|
313 |
|
|
|
314 |
|
|
|
(0 |
)% |
|
|
934 |
|
|
|
935 |
|
|
|
(0 |
)% |
Share of loss in investment accounted for using the equity method |
|
|
6,612 |
|
|
|
2,495 |
|
|
|
165 |
% |
|
|
20,941 |
|
|
|
5,354 |
|
|
|
291 |
% |
Revaluation loss (gain) |
|
|
2,146 |
|
|
|
(5,376 |
) |
|
|
(140 |
)% |
|
|
4,395 |
|
|
|
(35,488 |
) |
|
|
(112 |
)% |
Impairment of investment accounted for using the equity method |
|
|
— |
|
|
|
— |
|
|
n/a |
|
|
|
26,749 |
|
|
|
— |
|
|
n/a |
|
||
Other non-operating expense |
|
|
1,287 |
|
|
|
357 |
|
|
|
261 |
% |
|
|
2,421 |
|
|
|
2,623 |
|
|
|
(8 |
)% |
Total other expenses (income) |
|
|
11,147 |
|
|
|
(1,205 |
) |
|
|
(1025 |
)% |
|
|
57,886 |
|
|
|
(23,749 |
) |
|
|
(344 |
)% |
As a percentage of total revenue |
|
|
65 |
% |
|
|
(8 |
)% |
|
|
|
|
|
112 |
% |
|
|
(59 |
)% |
|
|
|
Total other expenses (income) were $11.1 million for the three months ended September 30, 2022, which is an increase in expense of $12.4 million compared to the same period last year. The increase in total other expenses was primarily driven by an increase in non-cash net revaluation losses on our Coinsquare warrants, investment portfolio and derivative stock warrants compared to net revaluation gains in the prior period and an increase to our share of Coinsquare's net comprehensive loss.
Total other expenses (income) were $57.9 million for the nine months ended September 30, 2022, which is an increase in expense of $81.6 million compared to the same period last year. The increase in total other expense was driven by the same reasons noted above, and additionally due to a non-cash impairment charge on our investment in Coinsquare recognized in Q2 2022.
As at June 30, 2022, Mogo recognized an impairment charge of $26.7 million on its investment in Coinsquare after performing a comparison of the investment’s estimated value to its carrying value. The impairment was triggered as Coinsquare experienced lower trading volumes in the second quarter of 2022 amidst the recent broader cryptocurrency and equity market declines.
20 | Page
|
|
Management’s Discussion and Analysis |
Share of loss in investment accounted for using the equity method increased for the three and nine months ended September 30, 2022, compared to the same periods last year. The increase in this equity pickup loss was due to Mogo’s share of Coinsquare’s non-operating losses on their investment portfolio and digital assets, along with Mogo's share of operating losses. Mogo’s share of Coinsquare’s operating losses increased with the general decline in cryptocurrency trading volumes in 2022 compared to 2021.
Revaluation losses were $2.1 million and $4.4 million for the three and nine months ended September 30, 2022, respectively, compared to revaluation gains of $5.4 million and $35.5 million in the same periods last year. Revaluation losses were driven by a decrease in fair value of our Coinsquare warrants and an unrealized loss on our investment portfolio. These non-cash losses have primarily resulted from the equity and cryptocurrency market declines during 2022. Revaluation losses were offset by a revaluation gain on Mogo’s derivative stock warrants.
During the year ended December 31, 2021, Mogo completed two registered direct offerings of Common Shares and Common Share purchase warrants resulting in US$81.5 million of gross proceeds. By virtue of the warrants having an exercise price denominated in USD, different than Mogo’s functional currency, the warrants are classified as a derivative liability as opposed to equity on the balance sheet. During the three and nine months ended September 30, 2022, the Company has recorded a fair value gain related to the derivative stock warrants of $0.1 million and $11.2 million, respectively. If the exercise price of these warrants had been denominated in CAD, the warrants would have been classified as equity with no subsequent revaluations through profit and loss. As a result of these transactions, the portion of total transaction costs incurred with respect to the offerings that is proportionate to the fair value of the derivative liability as a percentage of the total USD $81.5 million proceeds was recognized to non-operating expense during the respective periods. The portion of transaction costs from the offerings charged to non-operating expense amounted to $1.5 million for the three months ended March 31, 2021 with no similar financing and related expense in the current period.
Other non-operating expense for the three months ended September 30, 2022 primarily consists of a $1.1 million write-down of intangible assets related to MogoCrypto. Other non-operating expense for the nine months ended September 30, 2022 also includes restructuring costs incurred from the changes in personnel structure made in Q2 2022. Other non-operating expense in the three and nine months ended September 30, 2021 relates to costs incurred from the acquisitions of Carta, Moka and Fortification.
Debenture and other financing expense primarily consists of interest expense related to our non-convertible and convertible debentures and interest expense related to our lease liabilities resulting from the adoption of IFRS 16. Debenture and other financing expense decreased by $0.2 million and $0.4 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods last year. The decreases are primarily related to the conversion of our convertible debentures into equity in Q1 2021, along with additional legal fees incurred in 2021 to support financing.
21 | Page
|
|
Management’s Discussion and Analysis |
Other comprehensive income
The following table provides a breakdown of other comprehensive income by type for the three and nine months ended September 30, 2022 and 2021:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three months ended |
|
|
|
|
|
Nine months ended |
|
|
|
|
||||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
|
September 30, |
|
|
September 30, |
|
|
Change % |
|
||||||
Unrealized revaluation gain (loss) on digital assets |
|
$ |
— |
|
|
$ |
371 |
|
|
|
(100 |
)% |
|
$ |
(468 |
) |
|
$ |
397 |
|
|
|
(218 |
)% |
Foreign currency transaction reserve gain (loss) |
|
|
106 |
|
|
|
(29 |
) |
|
|
(466 |
)% |
|
|
884 |
|
|
|
331 |
|
|
|
167 |
% |
Other comprehensive income |
|
|
106 |
|
|
|
342 |
|
|
|
(69 |
)% |
|
|
416 |
|
|
|
728 |
|
|
|
(43 |
)% |
Total other comprehensive income was $0.1 million for the three months ended September 30, 2022 compared to $0.3 million in the same period last year. Total other comprehensive income was $0.4 million for the nine months ended September 30, 2022 compared to $0.7 million in the same period last year.
Following the financial investment in bitcoin and ether in 2021, the Company has 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, 2021 for our detailed accounting policy.
Unrealized revaluation gain (loss) on digital assets impacting other comprehensive income for the three months ended September 30, 2022 is $nil compared to a $0.4 million gain in the same period last year. Unrealized revaluation gain (loss) on digital assets impacting other comprehensive income for the nine months ended September 30, 2022 is a $0.5 million loss compared to a $0.4 million gain 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.
With the decrease in digital asset market prices during 2022, there is currently a cumulative unrealized loss on digital assets as at September 30, 2022. As a result, the revaluation reserve in equity was reduced to $nil, and an unrealized gain of $0.1 million and an unrealized loss of $0.5 million on digital assets was recognized in revaluation loss (gain) in the three and nine months ended September 30, 2022, respectively. For the three and nine months ended September 30, 2021, an unrealized loss on digital assets of $nil and $0.1 million was recognized in revaluation loss (gain), respectively.
From the date of the acquisition of Carta in Q1 2021 and Moka in Q2 2021, the Company consolidates foreign operations with functional currencies denominated in a foreign currency. 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 gain was $0.1 million for the three months ended September 30, 2022 compared to a loss of $0.1 million in the same period last year. Foreign currency translation reserve gain was $0.9 million for the nine months ended September 30, 2022 compared to a gain of $0.3 million in the same period last year. These gains are due to fluctuations in foreign currency exchange rates across the periods.
22 | Page
|
|
Management’s Discussion and Analysis |
Selected Quarterly Information
($000s, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||||||||||||||||||||||
|
Third |
|
|
Second |
|
|
First |
|
|
Fourth |
|
|
Third |
|
|
Second |
|
|
First |
|
|
Fourth |
|
||||||||
Income Statement Highlights |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total revenue |
$ |
17,257 |
|
|
$ |
17,290 |
|
|
$ |
17,256 |
|
|
$ |
16,996 |
|
|
$ |
15,439 |
|
|
$ |
13,665 |
|
|
$ |
11,420 |
|
|
$ |
10,002 |
|
Loss from operations |
|
(7,634 |
) |
|
|
(9,854 |
) |
|
|
(12,335 |
) |
|
|
(11,257 |
) |
|
|
(9,980 |
) |
|
|
(9,995 |
) |
|
|
(4,302 |
) |
|
|
(1,125 |
) |
Other (expenses) income, including taxes |
|
(12,362 |
) |
|
|
(42,017 |
) |
|
|
(6,535 |
) |
|
|
(18,366 |
) |
|
|
167 |
|
|
|
19,040 |
|
|
|
1,485 |
|
|
|
(1,723 |
) |
Net (loss) income |
|
(19,996 |
) |
|
|
(51,871 |
) |
|
|
(18,870 |
) |
|
|
(29,623 |
) |
|
|
(9,813 |
) |
|
|
9,045 |
|
|
|
(2,817 |
) |
|
|
(2,848 |
) |
Net (loss) income per share (basic) |
|
(0.26 |
) |
|
|
(0.68 |
) |
|
|
(0.25 |
) |
|
|
(0.53 |
) |
|
|
(0.14 |
) |
|
|
0.14 |
|
|
|
(0.06 |
) |
|
|
(0.09 |
) |
Net (loss) income per share (diluted) |
|
(0.26 |
) |
|
|
(0.68 |
) |
|
|
(0.25 |
) |
|
|
(0.53 |
) |
|
|
(0.14 |
) |
|
|
0.13 |
|
|
|
(0.06 |
) |
|
|
(0.09 |
) |
Non-IFRS Financial Measures(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Contribution |
|
6,084 |
|
|
|
6,719 |
|
|
|
7,364 |
|
|
|
7,624 |
|
|
|
7,107 |
|
|
|
7,669 |
|
|
|
6,315 |
|
|
|
7,107 |
|
Adjusted EBITDA |
|
(2,799 |
) |
|
|
(4,134 |
) |
|
|
(5,545 |
) |
|
|
(3,656 |
) |
|
|
(3,438 |
) |
|
|
(2,962 |
) |
|
|
(1,066 |
) |
|
|
1,052 |
|
Adjusted net loss |
|
(8,350 |
) |
|
|
(9,476 |
) |
|
|
(10,777 |
) |
|
|
(9,749 |
) |
|
|
(9,450 |
) |
|
|
(10,981 |
) |
|
|
(5,742 |
) |
|
|
(9,450 |
) |
Key Quarterly Trends
We have experienced steady revenue in 2022 after continued quarter over quarter revenue growth since Q4 2020, driven by growth in our subscription and services revenue, increasing uptake in our broadening portfolio of products and the addition of transaction processing revenues related to the acquisition of Carta and other subscription and service-based revenue related to the acquisition of Moka. We have achieved steady revenue in 2022 while reducing operating expenses in each quarter.
Loss from operations increased from Q4 2020 to Q1 2022. During 2020, we significantly reduced discretionary growth-related expenditures with the onset of COVID-19 and also experienced historically low default rates, resulting in reduced loss from operations. In 2021, we increased growth spend and acquired Carta, Moka and Fortification. Additional expenditures were incurred to grow the loan book, develop MogoTrade, and support the acquisitions. During Q2 2022, we implemented certain cost reduction initiatives including changes in personnel and a reduction in performance marketing spend. Loss from operations has decreased quarter over quarter from Q1 2022 to Q3 2022, with steady revenue and decreasing operating expenditures.
Other (expenses) income, including taxes, resulted in income for Q1 2021 to Q3 2021, followed by losses from Q4 2021 to Q3 2022. Gains in Q1 2021 to Q3 2021 were driven by a fair value gain on the Coinsquare warrants, fair value gain on derivative stock warrants and gain on the investment portfolio. Between Q4 2021 and Q3 2022, broader equity and cryptocurrency market declines have resulted in non-cash losses, including a $26.7 million impairment charge in Q2 2022 on our investment in Coinsquare.
There was an increase in growth spend in 2021 through Q1 2022 resulting in an increase to the adjusted EBITDA loss. We have reduced growth spend in 2022 and implemented changes to personnel structure to achieve quarter over quarter improvements in adjusted EBITDA from Q1 2022 to Q3 2022.
23 | Page
|
|
Management’s Discussion and Analysis |
Key Balance Sheet Components
The following table provides a summary of the key balance sheet components as at September 30, 2022 and December 31, 2021:
($000s) |
|
As at |
|
|||||
|
|
September 30, |
|
|
December 31, |
|
||
Cash and cash equivalent |
|
$ |
35,344 |
|
|
$ |
69,208 |
|
Total assets |
|
|
302,115 |
|
|
|
393,867 |
|
Total liabilities |
|
|
115,669 |
|
|
|
124,090 |
|
Total assets decreased by $91.8 million during the nine months ended September 30, 2022. The decrease is primarily attributable to $23.3 million non-cash share of loss and $26.7 million non-cash impairment related to our investment in Coinsquare, $33.9 million lower cash balance, non-cash loss of $7.9 million on our Coinsquare warrants, and a revaluation loss on our investment portfolio that has reduced its carrying value by $4.3 million. These decreases were offset by higher loans and other receivables.
Total liabilities decreased by $8.4 million during the nine months ended September 30, 2022. The decrease is primarily due to a $10.9 million decrease in derivative financial liability partially offset by advances on the Credit Facility and increases in accounts payable.
Loans receivable
The following table provides a breakdown of loans receivable as at September 30, 2022 and December 31, 2021:
($000s) |
|
As at |
|
|||||
|
|
September 30, |
|
|
December 31, |
|
||
Gross loans receivable |
|
$ |
71,567 |
|
|
$ |
65,645 |
|
Allowance for loan losses |
|
|
(13,157 |
) |
|
|
(9,813 |
) |
Net loans receivable |
|
|
58,410 |
|
|
|
55,832 |
|
The gross loans receivable portfolio was $71.6 million as at September 30, 2022, which is an increase of $5.9 million compared to the balance as at December 31, 2021. The increase is primarily due to an increase in originations.
The following table provides a reconciliation of changes in our loan loss allowance for the nine months ended September 30, 2022 and the year ended December 31, 2021:
($000s) |
|
As at |
|
|||||
|
|
September 30, |
|
|
December 31, |
|
||
Allowance for loan losses, beginning of period |
|
$ |
9,813 |
|
|
$ |
8,886 |
|
Provision for loan losses |
|
|
12,001 |
|
|
|
8,476 |
|
Loans charged-off |
|
|
(8,657 |
) |
|
|
(7,549 |
) |
Allowance for loan losses, end of period |
|
|
13,157 |
|
|
|
9,813 |
|
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 interim condensed 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).
24 | Page
|
|
Management’s Discussion and Analysis |
The allowance for loan losses as a percentage of gross loans receivable increased to 18.4% as at September 30, 2022 from 14.9% as at December 31, 2021. This is primarily due to abnormally low default rates in the comparative period, and an incremental provision recorded in 2022 to reflect forward looking macroeconomic indicators such as the spike in inflation and rising interest rates.
As at September 30, 2022, 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 any material shocks to 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.
Transactions with Related Parties
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 $0.3 million (December 31, 2021 – $0.3 million). 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 $6,000 and $19,000, respectively (September 30, 2021 – $5,000 and $17,000, 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.
Off‑Balance Sheet Arrangements
The Company has no off‑balance sheet arrangements that have, or are likely to have, a current or future material effect on our consolidated financial position, financial performance, liquidity, capital expenditures or capital resources.
25 | Page
|
|
Management’s Discussion and Analysis |
Liquidity and Capital Resources
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 27 in the Company’s annual consolidated financial statements for the year ended December 31, 2021.
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, 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 and digital assets, including our investment in Coinsquare, was $70.7 million as at September 30, 2022. 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 debentures outstanding or increasing availability under existing or new credit facilities.
We manage our liquidity by continuously monitoring revenues, expenses and cash flow compared to budget. To maintain adequate liquidity, the long-term business goal of the Company is to diversify its funding sources. The purpose of diversification by source, geographic location and maturity is to mitigate liquidity and funding risk by ensuring that the Company has in place alternative sources of funds that strengthen its capacity to withstand a variety of market conditions and support its long-term growth. Management expects that they will be able to refinance any outstanding amounts owing under the Credit Facility or our long-term debentures and may consider the issuance of shares in satisfaction of amounts owing under the convertible debentures, in each case as they become due and payable. The debentures are subordinated to the Credit Facility.
In December 2021, we amended our Credit Facility. The amendments lowered 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.
On September 29, 2020, Mogo and its non-convertible debenture holders approved certain amendments to the terms of the debentures, effective July 1, 2020. Among other things, these amendments reduce the interest rate of the debentures, and allow for the settlement of interest and principal in either cash or Common Shares, at our option.
On December 31, 2020, the Company established an at-the-market equity program to raise funds for operational expenditures, to maintain the Company’s working capital balances, and for general corporate purposes. The Company sold 1,524,759 Common Shares on the NASDAQ and received cash proceeds of approximately $18.3 million, net of agent commission. The program was terminated on February 21, 2021.
In registered direct offerings completed in February 2021 and December 2021, the Company received cash proceeds of approximately $113.3 million, net of agent commission, and issued to certain individual investors an aggregate of 11,457,648 Common Shares and unregistered warrants to purchase up to an aggregate of 5,728,824 Common Shares at any time prior to the date which is three and a half years following the date of issuance. A portion of the net proceeds was used to fund the cash component of the previously announced investment in Coinsquare with the remaining net proceeds used for general corporate and working capital purposes.
26 | Page
|
|
Management’s Discussion and Analysis |
Cash Flow Summary
The following table provides a summary of cash inflows and outflows by activity for the three and nine months ended September 30, 2022 and 2021:
($000s) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
Cash used in operating activities before changes in working capital (1) |
|
$ |
(276 |
) |
|
$ |
(3,312 |
) |
|
$ |
(7,249 |
) |
|
$ |
(10,110 |
) |
Cash invested in loans receivable |
|
|
(4,148 |
) |
|
|
(6,564 |
) |
|
|
(14,579 |
) |
|
|
(10,619 |
) |
Other changes in working capital (1) |
|
|
(973 |
) |
|
|
967 |
|
|
|
(3,963 |
) |
|
|
(805 |
) |
Cash used in operating activities |
|
|
(5,397 |
) |
|
|
(8,909 |
) |
|
|
(25,791 |
) |
|
|
(21,534 |
) |
Cash used in investing activities |
|
|
(1,878 |
) |
|
|
(5,242 |
) |
|
|
(8,494 |
) |
|
|
(36,632 |
) |
Cash (used in) provided by financing activities |
|
|
(712 |
) |
|
|
4,049 |
|
|
|
(361 |
) |
|
|
90,979 |
|
Effect of exchange rate fluctuations |
|
|
(232 |
) |
|
|
274 |
|
|
|
782 |
|
|
|
646 |
|
Net (decrease) increase in cash for the period |
|
|
(8,219 |
) |
|
|
(9,828 |
) |
|
|
(33,864 |
) |
|
|
33,459 |
|
Net decrease in cash for the three and nine months ended September 30, 2022 was primarily related to growth investment expenditures including costs related to MogoTrade and continued loan originations. We are experiencing a temporary increase in net cash use from changes in working capital in 2022 as we reduce our operating expenses.
The net decrease in cash for the three months ended September 30, 2022 was lower than that of the comparative period primarily due to higher revenue, lower operating expenses as a percentage of revenue in the current period, and fewer acquisitions and investments made in the investment portfolio. There were no advances on the Credit Facility in the three months ended September 30, 2022.
The net decrease in cash during the nine months ended September 30, 2022 contrasts the net increase in cash in the comparative period due to the issuance of Common Shares and proceeds from the exercise of warrants in 2021, offset by the investment in Coinsquare.
Cash 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 used in operating activities decreased by $3.5 million in the three months ended September 30, 2022 compared to the same period last year. Cash used in operating activities increased by $4.3 million in the nine months ended September 30, 2022 compared to the same period last year.
Cash used in operating activities before changes in working capital was a $0.3 million outflow in the three months ended September 30, 2022 compared to a $3.3 million outflow in the same period last year. Cash used in operating activities before changes in working capital was a $7.2 million outflow in the nine months ended September 30, 2022 compared to a $10.1 million outflow in the same period last year. The overall decrease in cash outflows was due to higher revenue and lower operating expenses as a percentage of revenue in the current period relative to the prior period.
Cash invested in loans receivable was a $4.1 million outflow in the three months ended September 30, 2022 compared to a $6.6 million outflow in the same period last year. There was a reduction in loan originations in Q3 2022 to manage credit risk due to the current inflationary environment.
27 | Page
|
|
Management’s Discussion and Analysis |
Cash invested in loans receivable was a $14.6 million outflow in the nine months ended September 30, 2022 compared to a $10.6 million outflow in the same period last year. The increase in cash outflows was due higher loan originations in the first half of 2022 relative to the comparative period. 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.
Other changes in working capital resulted in a $1.0 million outflow in the three months ended September 30, 2022 compared to a $1.0 million inflow in the same period last year. Other changes in working capital resulted in a $4.0 million outflow in the nine months ended September 30, 2022 compared to a $0.8 million outflow in the same period last year. The overall reduction in operating expenses beginning Q2 2022 and timing of vendor payments has resulted in higher cash outflows from changes in working capital during 2022.
Cash used in investing activities
Our investing activities consist primarily of capitalization of software development costs, purchases of property, equipment and software, investment in 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 September 30, 2022 was $1.9 million compared to $5.2 million in the same period last year. The decrease in cash used in investing activities is primarily due to lower capitalized development costs and cash invested in the investment portfolio in the current year, and the acquisition of Fortification in the prior period.
Cash used in investing activities in the nine months ended September 30, 2022 was $8.5 million compared to $36.6 million in the same period last year. The decrease in cash used in financing activities is primarily due to our investment in Coinsquare made in the comparative period, partially offset by proceeds from the sales of investments in the prior period.
Cash (used in) provided by 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 used in financing activities in the three months ended September 30, 2022 was $0.7 million compared to cash provided by financing activities of $4.0 million for the same period last year. The net decrease in cash (used in) provided by financing activities is primarily attributable to advances on the Credit Facility in the prior period with no advances in the current period.
Cash used in financing activities in the nine months ended September 30, 2022 was $0.4 million compared to cash provided by financing activities of $91.0 million for the same period last year. The net decrease in cash (used in) provided by financing activities for the nine months ended September 30, 2022 relative to the same period in the prior year is primarily attributable to the issuance of Common Shares for proceeds of approximately $80.9 million and proceeds from Common Shares issued from the exercise of warrants of $6.4 million in the first quarter of 2021 with no similar financing occurring in 2022.
28 | Page
|
|
Management’s Discussion and Analysis |
Contractual Obligations
The following table shows contractual obligations as at September 30, 2022. 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) |
|
2022 |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
2026 |
|
|
Thereafter |
|
||||||
Commitments - operational |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Lease payments |
|
|
333 |
|
|
|
1,297 |
|
|
|
1,206 |
|
|
|
1,240 |
|
|
|
1,255 |
|
|
|
1,472 |
|
Trade payables |
|
|
4,346 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Accrued wages and other expenses |
|
|
17,036 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Interest – Credit Facility |
|
|
1,363 |
|
|
|
5,453 |
|
|
|
5,453 |
|
|
|
2,726 |
|
|
|
— |
|
|
|
— |
|
Interest – Debentures |
|
|
727 |
|
|
|
1,502 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Purchase obligations |
|
|
263 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
24,068 |
|
|
|
8,252 |
|
|
|
6,659 |
|
|
|
3,966 |
|
|
|
1,255 |
|
|
|
1,472 |
|
Commitments – principal repayments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Credit Facility |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
47,790 |
|
|
|
— |
|
|
|
— |
|
Debentures (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 |
|
Disclosure of Outstanding Shares
The authorized capital of Mogo consists of an unlimited number of Common Shares without par value and an unlimited number of preferred shares, issuable in one or more series. As of November 10, 2022, no preferred shares have been issued and the following Common Shares, and rights to acquire Common Shares were outstanding:
Class of Security |
|
Number outstanding (in 000s) as at November 10, 2022 |
|
|
Common shares |
|
|
75,953 |
|
Stock options |
|
|
9,647 |
|
Restricted share units |
|
|
28 |
|
Common share purchase warrants (2) |
|
|
7,719 |
|
29 | Page
|
|
Management’s Discussion and Analysis |
Risk Management
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’s significant risk and related policies are described further in the notes to the Company’s annual consolidated financial statements for the year ended December 31, 2021 and interim condensed consolidated financial statements for the three and nine months ended September 30, 2022.
Other risks
As changes in our business environment or investment strategy occur, we may adjust our strategies to meet these changes, which may include restructuring a particular business or asset or refocusing on different sectors of our investment portfolio. In addition, external events, including changing technology, changing consumer patterns, changing market sentiment, and changes in macroeconomic condition, including the volatility and uncertainty in financial markets (including cryptocurrency markets), may impair the value of some or all of our assets or require us to take a charge against such assets, including our investment in Coinsquare. When these changes or events occur, we may need to write down the value of certain assets or the overall value of our investment portfolio. We may also make investments in existing or new businesses in order to build on or diversify our investment portfolio. Some of these investments may have short-term returns that are negative or low and the ultimate prospects of those investments in our portfolio may be uncertain, volatile or may not develop at a rate that supports our level of investment. In any of these events, we may have significant charges associated with the write-down of assets or certain asset classes such as cryptocurrency or technology company investments.
Other risks facing our business, and that could cause actual results to differ materially from current expectations may include, but are not limited to, risks and uncertainties that are discussed in greater detail in the "Risk Factors" section of our current annual information form for the year ended December 31, 2021 and elsewhere in this MD&A.
Capital management
Our objective in managing our capital is financial stability and sufficient liquidity to increase shareholder value through organic growth and investment in technology, marketing and product development. Our senior management team is responsible for managing the capital through regular review of financial information to ensure sufficient resources are available to meet operating requirements and investments to support our growth strategy. The Board is responsible for overseeing this process. In order to maintain or adjust our capital structure, we may issue new shares, repurchase shares, approve special dividends, or issue debt.
30 | Page
|
|
Management’s Discussion and Analysis |
Critical Accounting Estimates
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, and the reported amount of revenues and expenses during the period. 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 estimates and judgments include the determination of allowance for loan losses, fair value of privately held investments, fair value of identifiable intangible assets acquired from business combinations, valuation of goodwill acquired in business combinations, which are described further in the notes to the Company’s consolidated financial statements for the year ended December 31, 2021 and interim condensed consolidated financial statements for the three and nine months ended September 30, 2022 and 2021.
COVID-19 Pandemic
The overall impact of the pandemic continues to be uncertain and 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. We will continue to revisit our estimates and assumptions where appropriate in future reporting periods as economic conditions surrounding the COVID-19 pandemic continue to evolve.
Changes in Accounting Policies including Initial Adoption
Significant accounting policies
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.
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.
31 | Page
|
|
Management’s Discussion and Analysis |
Controls and Procedures
The Company’s Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") are responsible for establishing and maintaining disclosure controls and procedures for the Company. The Company maintains a set of disclosure controls and procedures designed to provide reasonable assurance that information required to be publicly disclosed is recorded, processed, summarized and reported on a timely basis. The CEO and CFO have evaluated the design of the Company’s disclosure controls and procedures at the end of the quarter and based on the evaluation, the CEO and CFO have concluded that the disclosure controls and procedures are effectively designed.
Internal Controls over Financial Reporting
The Company’s internal controls over financial reporting (“ICFR”) are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. The Company’s management is responsible for establishing and maintaining adequate ICFR for the Company. Management, including the CEO and CFO, does not expect that the Company’s ICFR will prevent or detect all errors and all fraud or will be effective under all future conditions. A control system is subject to inherent limitations and even those systems determined to be effective can provide only reasonable, but not absolute, assurance that the control objectives will be met with respect to financial statement preparation and presentation. The Company’s management under the supervision of the CEO and CFO has evaluated the design of the Company’s ICFR based on the Internal Control – Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission.
As at September 30, 2022, management assessed the design of the Company’s ICFR and concluded that such ICFR is appropriately designed, and that there are no material weaknesses in the Company’s ICFR that have been identified by management. There have been no changes in the Company's ICFR during the period that have materially affected, or are likely to materially affect, the Company's ICFR.
32 | Page
Exhibit 99.3
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, David Feller, Chief Executive Officer of Mogo Inc., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the "Interim filings") of Mogo Inc. (the "issuer") for the interim period ended September 30, 2022.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the Interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer and I have, as at the end of the period covered by the interim filings
(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared: and
(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it 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 the issuer's GAAP.
5.1 Control framework: The control framework the issuer's other certifying officer and I used to design the issuer's ICFR is the Internal Control – Integrated Framework (COSO Framework 2013) published by The Committee of Sponsoring Organizations of the Treadway Commission (COSO).
5.2 ICFR - material weakness relating to design: N/A
5.3 Limitation on scope of design: N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on July 1, 2022 and ended on September 30, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
Date: November 10, 2022
“David Feller”
______________________
David Feller
Chief Executive Officer
Exhibit 99.4
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Gregory Feller, Chief Financial Officer of Mogo Inc., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the "Interim filings") of Mogo Inc. (the "issuer") for the interim period ended September 30, 2022.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the Interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer and I have, as at the end of the period covered by the interim filings
(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared: and
(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it 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 the issuer's GAAP.
5.1 Control framework: The control framework the issuer's other certifying officer and I used to design the issuer's ICFR is the Internal Control – Integrated Framework (COSO Framework 2013) published by The Committee of Sponsoring Organizations of the Treadway Commission (COSO).
5.2 ICFR - material weakness relating to design: N/A
5.3 Limitation on scope of design: N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on July 1, 2022 and ended on September 30, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
Date: November 10, 2022
“Gregory Feller”
_______________________
Gregory Feller
Chief Financial Officer