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 March 2021
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.
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Form 20-F |
☒Form 40-F |
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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 March 31, 2021 |
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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: May 13, 2021 |
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-5 |
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Notes to the Interim Condensed Consolidated Financial Statements |
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F-6 |
Mogo Inc.
Interim Condensed Consolidated Statement of Financial Position
(Unaudited)
(Expressed in thousands of Canadian Dollars)
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Note |
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March 31, 2021 |
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December 31, 2020 |
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Assets |
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|
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Cash and cash equivalent |
|
|
|
|
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95,467 |
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12,119 |
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Digital assets |
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6 |
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1,326 |
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— |
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Loans receivable |
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4 |
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46,386 |
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47,227 |
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Prepaids, and other receivables and assets |
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5,537 |
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2,994 |
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Investment portfolio |
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17 |
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24,195 |
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18,445 |
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Property and equipment |
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7 |
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1,167 |
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892 |
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Right-of-use assets |
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3,978 |
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3,879 |
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Intangible assets |
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8 |
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40,846 |
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18,912 |
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Goodwill |
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16 |
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32,294 |
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— |
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Total assets |
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251,196 |
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104,468 |
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Liabilities |
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Accounts payable, accruals and other |
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12,525 |
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7,843 |
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Lease liabilities |
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4,467 |
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4,336 |
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Credit facilities |
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9 |
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37,476 |
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37,644 |
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Debentures |
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10 |
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40,370 |
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40,658 |
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Convertible debentures |
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11 |
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— |
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8,751 |
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Derivative stock warrants |
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12 |
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16,101 |
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— |
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Total liabilities |
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110,939 |
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99,232 |
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Shareholders’ Equity |
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Share capital |
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19a |
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243,899 |
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106,730 |
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Contributed surplus |
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13,365 |
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13,560 |
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Foreign currency translation reserve |
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288 |
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— |
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Revaluation reserve |
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6 |
|
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|
576 |
|
|
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— |
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Deficit |
|
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|
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(117,871 |
) |
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|
(115,054 |
) |
Total shareholders’ equity |
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140,257 |
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5,236 |
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Total equity and liabilities |
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251,196 |
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104,468 |
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Approved on Behalf of the Board
Signed by “Greg Feller” , Director
Signed by “Minhas Mohamed” , Director
The accompanying notes are an integral part of these financial statements.
F-2
Mogo Inc.
Interim Condensed Consolidated Statement of Operations and Comprehensive Loss
(Unaudited)
(Expressed in thousands of Canadian Dollars)
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Three months ended |
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Note |
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March 31, 2021 |
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March 31, 2020 |
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Revenue |
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Subscription and services |
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6,002 |
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5,811 |
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Interest revenue |
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5,418 |
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8,099 |
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13 |
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11,420 |
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13,910 |
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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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1,535 |
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5,338 |
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Transaction costs |
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412 |
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177 |
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1,947 |
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5,515 |
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Gross profit |
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9,473 |
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8,395 |
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Operating expenses |
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Technology and development |
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4,509 |
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3,799 |
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Marketing |
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3,040 |
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1,238 |
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Customer service and operations |
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2,176 |
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2,153 |
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General and administration |
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4,050 |
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2,855 |
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Total operating expenses |
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|
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13,775 |
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10,045 |
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Loss from operations |
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(4,302 |
) |
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(1,650 |
) |
Other expenses (income) |
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Credit facility interest expense |
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9 |
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|
996 |
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2,566 |
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Debenture and other financing expense |
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5,10,11 |
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|
952 |
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1,884 |
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Accretion related to debentures and convertible debentures |
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|
310 |
|
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|
209 |
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Revaluation (gain) losses |
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14 |
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(5,262 |
) |
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|
2,161 |
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Other non-operating expenses |
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15 |
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1,511 |
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1,595 |
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(1,493 |
) |
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8,415 |
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Net loss before tax |
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(2,809 |
) |
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(10,065 |
) |
Income tax expense |
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8 |
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— |
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Net loss |
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(2,817 |
) |
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(10,065 |
) |
Other comprehensive income: |
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Items that are or may be reclassified subsequently to profit or loss: |
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Unrealized revaluation gain on digital assets |
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6 |
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|
576 |
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|
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— |
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Foreign currency translation reserve gain |
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|
|
|
288 |
|
|
|
— |
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Other comprehensive income |
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|
864 |
|
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— |
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Total comprehensive loss |
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(1,953 |
) |
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(10,065 |
) |
Net loss per share |
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|
|
|
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|
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Basic and fully diluted |
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(0.06 |
) |
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(0.36 |
) |
Weighted average number of basic and fully diluted common shares (in 000’s) |
|
|
|
|
45,957 |
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|
27,652 |
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The accompanying notes are an integral part of these financial statements.
F-3
Mogo Inc.
Interim Condensed Consolidated Statement of Changes in Equity (Deficit)
(Expressed in thousands of Canadian Dollars)
|
|
Number of shares (000s) |
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|
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Share capital |
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|
Contributed surplus |
|
|
Foreign currency translation reserve |
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|
Revaluation reserve |
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Deficit |
|
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Total |
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|||||||
Balance, December 31, 2020 |
|
|
32,731 |
|
|
|
$ |
106,730 |
|
|
$ |
13,560 |
|
|
$ |
— |
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|
$ |
— |
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|
$ |
(115,054 |
) |
|
$ |
5,236 |
|
Loss and comprehensive loss |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,817 |
) |
|
|
(2,817 |
) |
Foreign currency translation reserve |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
288 |
|
|
|
— |
|
|
|
— |
|
|
|
288 |
|
Revaluation reserve |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
576 |
|
|
|
— |
|
|
|
576 |
|
Stock based compensation (Note 19b) |
|
|
— |
|
|
|
|
— |
|
|
|
557 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
557 |
|
Options and restricted share units (“RSUs”) exercised |
|
|
507 |
|
|
|
|
1,651 |
|
|
|
(816 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
835 |
|
Shares issued – ATM arrangement, net |
|
|
1,525 |
|
|
|
|
17,315 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
17,315 |
|
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 – convertible debentures (Note 11) |
|
|
3,179 |
|
|
|
|
8,783 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,783 |
|
Warrants issued for broker services (Note 19d) |
|
|
— |
|
|
|
|
— |
|
|
|
1,410 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,410 |
|
Warrants exercised (Note 19d) |
|
|
3,375 |
|
|
|
|
7,498 |
|
|
|
(1,615 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,883 |
|
Amortization of warrants (Note 19d) |
|
|
— |
|
|
|
|
— |
|
|
|
269 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
269 |
|
Balance, March 31, 2021 |
|
|
56,664 |
|
|
|
|
243,899 |
|
|
|
13,365 |
|
|
|
288 |
|
|
|
576 |
|
|
|
(117,871 |
) |
|
|
140,257 |
|
|
|
Number of shares (000s) |
|
|
|
Share capital |
|
|
Contributed surplus |
|
|
Deficit |
|
|
Total |
|
|||||
|
|
27,558 |
|
|
|
$ |
94,500 |
|
|
$ |
8,861 |
|
|
$ |
(101,609 |
) |
|
$ |
1,752 |
|
|
Loss and comprehensive loss |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
(10,065 |
) |
|
|
(10,065 |
) |
Stock based compensation (Note 19b) |
|
|
— |
|
|
|
|
— |
|
|
|
214 |
|
|
|
— |
|
|
|
214 |
|
Options and restricted share units (“RSUs”) exercised |
|
|
6 |
|
|
|
|
30 |
|
|
|
(15 |
) |
|
|
— |
|
|
|
15 |
|
Shares issued – Partial settlement of credit facility prepayment |
|
|
307 |
|
|
|
|
1,000 |
|
|
|
— |
|
|
|
— |
|
|
|
1,000 |
|
Amortization of warrants (Note 19d) |
|
|
— |
|
|
|
|
— |
|
|
|
(381 |
) |
|
|
— |
|
|
|
(381 |
) |
Balance, March 31, 2020 |
|
|
27,871 |
|
|
|
|
95,530 |
|
|
|
8,679 |
|
|
|
(111,674 |
) |
|
|
(7,465 |
) |
The accompanying notes are an integral part of these financial statements.
F-4
Mogo Inc.
Consolidated Statement of Cash Flows
(Expressed in thousands of Canadian Dollars)
|
|
|
|
Three months ended |
|
|||||
|
|
Note |
|
March 31, 2021 |
|
|
March 31, 2020 |
|
||
Cash provided by (used in) the following activities: |
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
(2,817 |
) |
|
|
(10,065 |
) |
Items not affecting cash: |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
2,418 |
|
|
|
2,225 |
|
Postmedia warrant and setup fee expenses |
|
19d |
|
|
269 |
|
|
|
(245 |
) |
Provision for loan losses |
|
4 |
|
|
1,861 |
|
|
|
5,672 |
|
Credit facility and debenture interest expense |
|
|
|
|
1,948 |
|
|
|
4,450 |
|
Accretion related to debentures and convertible debentures |
|
|
|
|
310 |
|
|
|
209 |
|
Stock based compensation expense |
|
19b |
|
|
557 |
|
|
|
214 |
|
Revaluation (gains) losses |
|
|
|
|
(5,262 |
) |
|
|
2,161 |
|
Other non-operating (income) expenses |
|
|
|
|
325 |
|
|
|
(628 |
) |
|
|
|
|
|
(391 |
) |
|
|
3,993 |
|
Changes in: |
|
|
|
|
|
|
|
|
|
|
Net issuance of loans receivable |
|
|
|
|
(1,021 |
) |
|
|
(2,028 |
) |
Proceeds from sale of loan book |
|
|
|
|
— |
|
|
|
31,572 |
|
Prepaid expenses, deposits and other assets |
|
|
|
|
(297 |
) |
|
|
(195 |
) |
Accounts payable and accruals |
|
|
|
|
(142 |
) |
|
|
(50 |
) |
Cash generated from (used in) operating activities |
|
|
|
|
(1,851 |
) |
|
|
33,292 |
|
Interest paid |
|
|
|
|
(1,932 |
) |
|
|
(4,103 |
) |
Net cash generated from (used in) operating activities |
|
|
|
|
(3,783 |
) |
|
|
29,189 |
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
Cash acquired upon acquisition of Carta |
|
|
|
|
2,101 |
|
|
|
— |
|
Purchases of property and equipment |
|
|
|
|
(98 |
) |
|
|
(23 |
) |
Investment in digital assets |
|
|
|
|
(750 |
) |
|
|
— |
|
Investment in intangible assets |
|
|
|
|
(1,183 |
) |
|
|
(1,848 |
) |
Net cash generated from (used in) investing activities |
|
|
|
|
70 |
|
|
|
(1,871 |
) |
|
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
Cash invested in investment portfolio |
|
|
|
|
(95 |
) |
|
|
— |
|
Lease liabilities – principal payments |
|
|
|
|
(141 |
) |
|
|
(159 |
) |
Net repayments on debentures |
|
|
|
|
(502 |
) |
|
|
(5 |
) |
Net repayments on credit facilities |
|
|
|
|
(168 |
) |
|
|
(31,061 |
) |
Proceeds from issuance of common shares, net |
|
|
|
|
81,285 |
|
|
|
— |
|
Proceeds from exercise of warrants |
|
|
|
|
5,883 |
|
|
|
— |
|
Proceeds from exercise of options |
|
|
|
|
281 |
|
|
|
15 |
|
Net cash provided by (used in) financing activities |
|
|
|
|
86,543 |
|
|
|
(31,210 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
|
|
|
82,830 |
|
|
|
(3,892 |
) |
Effect of exchange rate fluctuations |
|
|
|
|
518 |
|
|
|
— |
|
Cash and cash equivalent, beginning of period |
|
|
|
|
12,119 |
|
|
|
10,417 |
|
Cash and cash equivalent, end of period |
|
|
|
|
95,467 |
|
|
|
6,525 |
|
The accompanying notes are an integral part of these financial statements.
F-5
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
1. |
Nature of operations |
Mogo Inc. (formerly Difference Capital Financial 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. (“Mogo Finance”). 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 are listed on the Toronto Stock Exchange (“TSX”) and the Nasdaq Capital Market under the symbol “MOGO”.
Mogo — a financial technology company — offers a finance app that empowers consumers with simple solutions to help them get in control of their financial health and be more mindful of the impact they have on society and the planet. Users can sign up for Mogo and get instant access to an ecosystem of free financial products and content to help them live a more sustainable lifestyle. Mogo offers free credit score monitoring, identity fraud protection, bitcoin trading, loans and a digital spending account that comes with a prepaid Mogo Visa* Platinum Prepaid Card to help members control their spending and help fight climate change, by automatically offsetting CO2 as they spend. With a marketing partnership with Canada's largest news media company, Mogo continues to execute on its vision of becoming the go-to financial app for the next generation of Canadians.
COVID-19 Pandemic
During first quarter of 2021, the Canadian economy continued experiencing significant disruption and market volatility related to the global 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 rapid worldwide spread of COVID-19 has prompted governments to implement restrictive measures to curb the spread of the pandemic. During this period of uncertainty, the Company’s priority has been to protect the health and safety of its employees, support and enforce government actions to slow the spread of COVID-19, and to continually assess and take appropriate actions to mitigate the risks to the business operations as a result of this pandemic.
The Company has implemented a COVID-19 response plan (the “COVID-19 Response Plan”) that includes a number of measures to safeguard against the spread of the virus at its offices and has maintained regular communications with suppliers, customers and business partners to monitor any potential risks to its ongoing operations. Operationally, the Company has shifted its employees to work remotely, which was a relatively easy transition given the digital nature of the business. The Company is working closely with customers to support them through this changing environment and in certain circumstances, offering more flexible options including extended payment terms, payment deferrals and interest relief.
The Company makes estimates and assumptions in preparing the interim condensed consolidated financial statements. These estimates and assumptions have been made taking into consideration the economic impact of the COVID-19 pandemic and the significant economic volatility and uncertainty it has created. Actual results could differ materially from these estimates, in which case the impact would be recognized in the interim condensed consolidated financial statements in future periods.
F-6
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
2. |
Basis of presentation |
Statement of compliance
These interim condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). The policies applied in these interim condensed consolidated financial statements were based on IFRS issued and outstanding at December 31, 2020.
The Company presents its interim condensed consolidated statement of financial position on a non-classified basis in order of liquidity.
These interim condensed consolidated financial statements were authorized for issue by the Board of Directors (the “Board”) on May 13, 2021.
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 with the Board and has collectively formed a judgment that the Company has adequate resources to continue as a going concern for the foreseeable future, which Management and the Board have 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 current fiscal year, 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 9, 10, 11, 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.
Functional and presentation currency
These interim condensed consolidated financial statements are presented in Canadian dollars, which is the Company's functional currency.
3. 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, 2020, except for the accounting policies adopted subsequent to the business combination with Carta Solutions Holdings Corporation (“Carta”) on January 25, 2021 as discussed below (refer to note 16 for further details), and the adoption of new accounting policies applied as a result of the Company’s acquisition of digital assets. |
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, 2020.
F-7
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
3. Significant accounting policies (Continued from previous page)
Foreign currency translation
The interim condensed consolidated financial statements are presented in Canadian dollars, which is the Company’s functional and presentation currency. The functional currency of each subsidiary is determined based on the currency of the primary economic environment in which that subsidiary operates. Transactions in foreign currencies are initially recorded by the subsidiaries at their respective functional rates prevailing at the date of the transaction. Monetary items are translated into Canadian dollars at the exchange rate in effect as at the date of the interim condensed consolidated statement of financial position and non-monetary items are translated as at the rate of exchange in effect when the assets were acquired or the obligation was incurred. Revenue and expenses are translated at the exchange rate in effect at the time of the transaction. Foreign exchange gains or losses are recorded in the interim condensed consolidated statement of loss and comprehensive loss.
Foreign operations
The assets and liabilities of foreign operations are translated to the presentation currency using exchange rates at the reporting date. The income and expenses of foreign operations are translated to the presentation currency using exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income.
Revenue
The Company’s transaction processing revenue is derived from long-term processing contracts with financial and non-financial institutions. Transaction processing revenue is generated primarily from [i] fees charged to set up a customer on the Company’s processing platform; and [ii] processing charges, including maintenance fees on cards on the Company’s processing platform, determined by the number of transactions processed and/or cards boarded by the Company for its customers.
Transaction processing revenue typically includes a performance obligation to provide processing services to its customers. The Company has determined that transaction processing services represent a stand-ready series of distinct daily services that are substantially the same, with the same pattern of service performed for the customer. As a result, the Company has determined that transaction processing revenue arrangements represent an individual performance obligation.
The Company recognizes set-up fees over the contract period, on a straight-line basis, commencing when services to set up a customer have been completed. The Company recognizes transaction processing charges, including maintenance fees, on a monthly basis based on the greater of the monthly minimum contracted revenue or the total actual transaction fees due based on the number of transactions processed.
Costs to obtain or fulfill a contract
The Company capitalizes the incremental costs of obtaining a customer if the Company expects to recover those costs. The incremental costs of obtaining a contract are those that the Company incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained.
The Company capitalizes the costs incurred to fulfill a contract only if these costs meet all of the following criteria:
[i] The costs relate directly to a contract or to an anticipated contract that the Company can specifically identify.
[ii] The costs generate or enhance resources of the Company that will be used to satisfy [or in continuing to satisfy] performance obligations in the future; and
[iii] The costs are expected to be recovered.
F-8
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
3. Significant accounting policies (Continued from previous page)
Goodwill
Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognized. Goodwill is measured at cost less accumulated impairment losses.
Goodwill is tested annually for impairment. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the Company’s cash-generating units (“CGU”) that are expected to benefit from the combination. For impairment testing purposes, the Company is determined to be a single CGU.
Intangible assets
Intangible assets, with the exception of digital assets, are measured at cost less accumulated amortization and impairment losses. Intangible assets include internally generated and acquired software, acquired technology assets, and customer relationships with finite useful lives. Acquired brand and trade names are considered to have indefinite useful lives. Internally generated software costs primarily consist of salaries and payroll-related costs for employees directly involved in the development efforts and fees paid to outside consultants.
Amortization is recorded at rates intended to amortize the cost of the intangible assets over their estimated useful lives as follows:
|
|
Rate |
Software - Internally generated |
|
5 years straight line |
Software licences |
|
5 years straight line |
Technology assets - Acquired |
|
10 years straight line |
Customer relationships |
|
5 years straight line |
Brand and trade name |
|
Indefinite |
Digital assets
Digital assets represent investments in cryptocurrencies held by the Company that are classified as indefinite life intangible assets. The Company has ownership and control over its digital assets and uses third-party custodial services to secure them. The Company has concluded that digital assets are traded in an active market where there are observable prices and digital assets are measured under the revaluation model at fair value at the revaluation date less any accumulated impairment loss.
Acquisitions are recognized at cost and are remeasured to fair value at the end of the period by reference to active markets. We determine the fair value of our digital assets in accordance with IFRS 13, Fair Value Measurement, based on market approach using quoted prices on the active exchanges for digital assets (Level 1 inputs). Digital assets are remeasured to fair value on this basis at each reporting date. In addition, we perform an analysis each quarter to identify whether events or changes in circumstances in addition to market price, provide indicators of impairment. A decrease in value due to impairment identified in this manner is accounted for as a fair value decrease below.
Fair value increases are recognized as other comprehensive income and recorded to a revaluation reserve, except to the extent that the increase reverses a previous revaluation decrease on the same asset recognized in net loss, in which case a gain up to the amount of the loss previously charged to net loss is recognized in net profit. Fair value decreases are recognized as other comprehensive loss to the degree that these reduce any accumulated revaluation reserve, with any decrease in excess of the revaluation reserve recognized in net loss.
F-9
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
3. Significant accounting policies (Continued from previous page)
New and amended standards and interpretations
Certain new or amended standards and interpretations became effective on January 1, 2021, 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.
Impact of COVID-19
The overall economic impacts of COVID-19 could include an impact on our ability to obtain debt and equity financing or potential future decreases in revenue or the profitability of our ongoing operations. This is an evolving situation, and the Company will continue to evaluate and adapt on an ongoing basis. The extent of the impact that this pandemic may have on the Canadian economy and the Company’s business is currently highly uncertain and difficult to predict. Accordingly, there is a higher level of uncertainty with respect to management’s judgements and estimates at this time, particularly as it relates to the measurement of allowance for loan losses and fair valuation of our investment portfolio. The Company will continue to revisit our judgements and estimates where appropriate in future reporting periods as economic conditions surrounding the COVID-19 pandemic continue to evolve.
4. |
Loans receivable |
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 March 31, 2021 and December 31, 2020 are as follows:
|
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||
|
|
54,658 |
|
|
|
54,978 |
|
|
Non-Current (terms exceeding one year) |
|
|
910 |
|
|
|
1,135 |
|
|
|
|
55,568 |
|
|
|
56,113 |
|
F-10
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
4. |
Loans receivable (Continued from previous page) |
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 expected credit loss (“ECL”) 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 March 31, 2021 |
|
|||||||||||||
|
Days past due |
|
Stage 1 |
|
|
Stage 2 |
|
|
Stage 3 |
|
|
Total |
|
|||||
Strong |
|
Not past due |
|
|
46,691 |
|
|
|
— |
|
|
|
— |
|
|
|
46,691 |
|
Lower risk |
|
1-30 days past due |
|
|
1,765 |
|
|
|
— |
|
|
|
— |
|
|
|
1,765 |
|
Medium risk |
|
31-60 days past due |
|
|
— |
|
|
|
655 |
|
|
|
— |
|
|
|
655 |
|
Higher risk |
|
61-90 days past due |
|
|
— |
|
|
|
508 |
|
|
|
— |
|
|
|
508 |
|
Non-performing |
|
91+ days past due or bankrupt |
|
|
— |
|
|
|
— |
|
|
|
5,949 |
|
|
|
5,949 |
|
|
|
Gross loans receivable |
|
|
48,456 |
|
|
|
1,163 |
|
|
|
5,949 |
|
|
|
55,568 |
|
|
|
Allowance for loan losses |
|
|
(5,458 |
) |
|
|
(813 |
) |
|
|
(2,911 |
) |
|
|
(9,182 |
) |
|
|
Loans receivable, net |
|
|
42,998 |
|
|
|
350 |
|
|
|
3,038 |
|
|
|
46,386 |
|
|
|
|
As at December 31, 2020 |
|
||||||||||||||
Risk Category |
|
Days past due |
|
Stage 1 |
|
|
Stage 2 |
|
|
Stage 3 |
|
|
Total |
|
||||
Strong |
|
Not past due |
|
|
47,590 |
|
|
|
— |
|
|
|
— |
|
|
|
47,590 |
|
Lower risk |
|
1-30 days past due |
|
|
1,571 |
|
|
|
— |
|
|
|
— |
|
|
|
1,571 |
|
Medium risk |
|
31-60 days past due |
|
|
— |
|
|
|
720 |
|
|
|
— |
|
|
|
720 |
|
Higher risk |
|
61-90 days past due |
|
|
— |
|
|
|
415 |
|
|
|
— |
|
|
|
415 |
|
Non-performing |
|
91+ days past due or bankrupt |
|
|
— |
|
|
|
— |
|
|
|
5,817 |
|
|
|
5,817 |
|
|
|
Gross loans receivable |
|
|
49,161 |
|
|
|
1,135 |
|
|
|
5,817 |
|
|
|
56,113 |
|
|
|
Allowance for loan losses |
|
|
(5,425 |
) |
|
|
(772 |
) |
|
|
(2,689 |
) |
|
|
(8,886 |
) |
|
|
Loans receivable, net |
|
|
43,736 |
|
|
|
363 |
|
|
|
3,128 |
|
|
|
47,227 |
|
F-11
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
4. |
Loans receivable (Continued from previous page) |
The Company’s measurement of ECLs is impacted by forward looking indicators (FLIs) including the consideration of forward macroeconomic conditions. In light of the COVID-19 pandemic, management has applied a probability weighted approach to the measurement of ECL as at March 31, 2021, involving multiple scenarios and additional FLIs. The primary FLIs impacting ECL include rate of loans experiencing financial difficulty and collections. Additional factors considered include the possibility of a prolonged economic recession, the effectiveness of collection strategies implemented to assist customers experiencing financial difficulty (including varying potential levels of defaults for customers who have been offered payment deferral plans), the extent to which government subsidies will continue to be available as the COVID-19 pandemic continues, and the level of loan protection insurance held by customers within our portfolio.
|
Three months ended March 31, 2021 |
|
|
Year ended December 31, 2020 |
|
|
Three months ended March 31, 2020 |
|
||||
Balance, beginning of period |
|
|
8,886 |
|
|
|
16,020 |
|
|
|
16,020 |
|
Derecognition of allowance associated with loan sale |
|
|
— |
|
|
|
(2,131 |
) |
|
|
(2,131 |
) |
Provision for loan losses |
|
|
1,861 |
|
|
|
9,451 |
|
|
|
5,672 |
|
Charge offs |
|
|
(1,565 |
) |
|
|
(14,454 |
) |
|
|
(4,416 |
) |
Balance, end of period |
|
|
9,182 |
|
|
|
8,886 |
|
|
|
15,145 |
|
As at March 31, 2021, our allowance for loan losses includes $1,036 of management overlay added due to the present economic uncertainties caused in part by the COVID-19 pandemic (December 31, 2020 - $1,049). The Company believes this provides adequate provision to absorb the impact on our loan book of any reasonably possible potential deterioration in future macroeconomic conditions that may result from the ongoing COVID-19 pandemic.
The provision for loan losses in the interim condensed consolidated statement of operations and comprehensive loss is recorded net of recoveries for the three months ended March 31, 2021 of $326 (three months ended March 31, 2020 - $334).
On February 28, 2020, Mogo completed the sale of the majority of its non-current (“MogoLiquid”) loan portfolio (the “Liquid Sale”) for gross consideration of $31,572, de-recognized net loan receivables of $29,896 and recognized a corresponding gain on sale of loan book amounting to $1,676. This gain is presented within other non-operating expenses, in the interim condensed consolidated statement of operations and comprehensive loss.
5. |
Related party transactions |
Related party transactions during the three months ended March 31, 2021 include transactions with debenture holders that incur interest. The related party debentures balance as at March 31, 2021 totaled $338 (December 31, 2020 – $358). The debentures bear annual coupon interest of 8.0% (December 31, 2020 – 8.0%) with interest expense of $7 for the three months ended March 31, 2021 (three months ended March 31, 2020 – $11). The related parties involved in such transactions include shareholders, officers, directors, and management, close members of their families, or entities which are directly or indirectly controlled by close members of their families. The debentures are ongoing contractual obligations that are used to fund our corporate and operational activities. In relation to the amendment to the terms of debentures on September 30, 2020 (see note 11), 35,831 warrants were issued to related parties with a fair value of $28.
F-12
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
6. Digital assets
Digital assets represent investments in cryptocurrencies which the company expects to hold for the foreseeable future.
|
|
Digital assets |
|
|
Balance at December 31, 2020 |
|
|
— |
|
Acquisitions of Bitcoin at cost |
|
|
750 |
|
Revaluation gain through other comprehensive income |
|
|
576 |
|
Balance at March 31, 2021 |
|
|
1,326 |
|
During the three months ended March 31, 2021, we purchased $750 of bitcoin. During the three months ended March 31, 2021, we recorded $576 of revaluation gain on bitcoin. As of March 31, 2021, the carrying value of our bitcoin held was $1,326.
7. |
Property and equipment |
|
|
Computer equipment |
|
|
Furniture and fixtures |
|
|
Leasehold improvements |
|
|
Total |
|
||||
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019 |
|
|
4,513 |
|
|
|
1,180 |
|
|
|
2,509 |
|
|
|
8,202 |
|
Additions |
|
|
22 |
|
|
|
— |
|
|
|
— |
|
|
|
22 |
|
Disposals |
|
|
(2,452 |
) |
|
|
— |
|
|
|
(454 |
) |
|
|
(2,906 |
) |
Balance at December 31, 2020 |
|
|
2,083 |
|
|
|
1,180 |
|
|
|
2,055 |
|
|
|
5,318 |
|
Additions |
|
|
98 |
|
|
|
— |
|
|
|
— |
|
|
|
98 |
|
Additions through business combinations |
|
|
264 |
|
|
|
3 |
|
|
|
— |
|
|
|
267 |
|
Effects of movement in exchange rate |
|
|
(5 |
) |
|
|
— |
|
|
|
— |
|
|
|
(5 |
) |
Balance at March 31, 2021 |
|
|
2,440 |
|
|
|
1,183 |
|
|
|
2,055 |
|
|
|
5,678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019 |
|
|
3,761 |
|
|
|
733 |
|
|
|
1,935 |
|
|
|
6,429 |
|
Depreciation |
|
|
229 |
|
|
|
91 |
|
|
|
311 |
|
|
|
631 |
|
Disposals |
|
|
(2,443 |
) |
|
|
— |
|
|
|
(191 |
) |
|
|
(2,634 |
) |
Balance at December 31, 2020 |
|
|
1,547 |
|
|
|
824 |
|
|
|
2,055 |
|
|
|
4,426 |
|
Depreciation |
|
|
67 |
|
|
|
18 |
|
|
|
— |
|
|
|
85 |
|
Balance at March 31, 2021 |
|
|
1,614 |
|
|
|
842 |
|
|
|
2,055 |
|
|
|
4,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020 |
|
|
536 |
|
|
|
356 |
|
|
|
— |
|
|
|
892 |
|
Balance at March 31, 2021 |
|
|
826 |
|
|
|
341 |
|
|
|
— |
|
|
|
1,167 |
|
F-13
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
7. |
Property and equipment (Continued from previous page) |
Upon the completion of the acquisition of Carta on January 25, 2021, the Company recognized property and equipment with a fair value of $267, along with effects of exchange rate movement related to foreign subsidiaries on the interim condensed consolidated statement of financial position.
Depreciation of $nil for the three months ended March 31, 2021 (three months ended March 31, 2020 - $114) for leasehold improvements is included in general and administration expenses. Depreciation expense of $85 for the three months ended March 31, 2021 (three months ended March 31, 2020 - $80) for property and equipment is included in technology and development costs.
8. |
Intangible assets |
|
|
Internally generated development costs – completed |
|
|
Internally generated development costs – in progress |
|
|
Software licences |
|
|
Acquired technology assets |
|
|
Customer relationships |
|
|
Brand & trade name |
|
|
Total |
|
|||||||
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019 |
|
|
34,849 |
|
|
|
1,388 |
|
|
|
3,356 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
39,593 |
|
Additions |
|
|
— |
|
|
|
4,796 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,796 |
|
Transfers |
|
|
4,655 |
|
|
|
(4,655 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Balance at December 31, 2020 |
|
|
39,504 |
|
|
|
1,529 |
|
|
|
3,356 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
44,389 |
|
Additions |
|
|
— |
|
|
|
1,183 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,183 |
|
Additions through a business combination |
|
|
— |
|
|
|
— |
|
|
|
628 |
|
|
|
20,100 |
|
|
|
1,300 |
|
|
|
900 |
|
|
|
22,928 |
|
Transfers |
|
|
969 |
|
|
|
(969 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Effects of movement in exchange rate |
|
|
— |
|
|
|
— |
|
|
|
(23 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(23 |
) |
Balance at March 31, 2021 |
|
|
40,473 |
|
|
|
1,743 |
|
|
|
3,961 |
|
|
|
20,100 |
|
|
|
1,300 |
|
|
|
900 |
|
|
|
68,477 |
|
Accumulated depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019 |
|
|
15,138 |
|
|
|
— |
|
|
|
3,198 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
18,336 |
|
Amortization |
|
|
7,093 |
|
|
|
— |
|
|
|
48 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,141 |
|
Balance at December 31, 2020 |
|
|
22,231 |
|
|
|
— |
|
|
|
3,246 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
25,477 |
|
Amortization |
|
|
1,734 |
|
|
|
— |
|
|
|
42 |
|
|
|
335 |
|
|
|
43 |
|
|
|
— |
|
|
|
2,154 |
|
Balance at March 31, 2021 |
|
|
23,965 |
|
|
|
— |
|
|
|
3,288 |
|
|
|
335 |
|
|
|
43 |
|
|
|
— |
|
|
|
27,631 |
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020 |
|
|
17,273 |
|
|
|
1,529 |
|
|
|
110 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
18,912 |
|
Balance at March 31, 2021 |
|
|
16,508 |
|
|
|
1,743 |
|
|
|
673 |
|
|
|
19,765 |
|
|
|
1,257 |
|
|
|
900 |
|
|
|
40,846 |
|
F-14
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
8. |
Intangible assets (Continued from previous page) |
Upon the acquisition of Carta on January 25, 2021, the Company recognized intangible assets with a fair value of $22,928 on the interim condensed consolidated statement of financial position.
Intangible assets include internally generated development costs, acquired software and technology assets, and customer relationships with finite useful lives. Amortization of intangible assets of $2,154 for the three months ended March 31, 2021 (three months ended March 31, 2020 – $1,860) is included in technology and development costs.
9. |
Credit facility |
The credit facility consists of a $50,000 senior secured credit facility maturing on July 2, 2022. 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 9% (with a 1 month USD LIBOR floor of 1.5%) on the greater of the actual aggregate unpaid principal balance, or the prescribed minimum balance under the credit facility agreement. There is a 0.33% fee on the available but undrawn portion of the $50,000 facility. The balance outstanding for the Credit Facility-Other as at March 31, 2021 was $37,476 (December 31, 2020 - $37,644).
On February 28, 2020, in conjunction with the Liquid Sale, Mogo repaid and extinguished its Credit Facility – Liquid, which held a principal outstanding balance of approximately $28,683 immediately prior to derecognition. As part of extinguishing the facility in advance of its maturity, Mogo recognized a prepayment penalty of $2,500 of which $1,500 was payable in cash and of which $1,000 was settled in shares on March 5, 2020, through the issuance of 306,842 common shares, priced at $3.259 per share.
Credit facility - Other is subject to certain covenants and events of default. As at March 31, 2021 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 statement of operations and comprehensive loss.
Management routinely reviews and renegotiates terms, including interest rates and maturity dates, and will continue to refinance these credit facilities as they become due and payable.
10. |
Debentures |
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 the Company’s 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 of the Company in October 2020 subsequent to the end of the quarter. |
F-15
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
10. Debentures (Continued from previous page)
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 warrant. The Debenture Warrants are exercisable at any time until December 31, 2022. As at March 31, 2021, 3,053,054 (three months ended March 31, 2021: 2,062,627) warrants have been exercised and converted into common shares for cash proceeds of $6,198 (three months ended March 31, 2021: $4,187). As at March 31, 2021, 1,426,338 Debenture Warrants remain outstanding and exercisable.
The Company’s debentures balance includes the following:
|
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||
|
|
42,861 |
|
|
|
43,442 |
|
|
Discount |
|
|
(3,265 |
) |
|
|
(3,575 |
) |
|
|
|
39,596 |
|
|
|
39,867 |
|
Interest payable |
|
|
774 |
|
|
|
791 |
|
|
|
|
40,370 |
|
|
|
40,658 |
|
The debenture principal repayments will be made according to the following schedule and are payable in either cash or Mogo common shares at Mogo’s option:
|
Principal component of quarterly payment |
|
|
Principal due on maturity |
|
|
Total |
|
||||
2021 |
|
|
1,552 |
|
|
|
— |
|
|
|
1,552 |
|
2022 |
|
|
2,183 |
|
|
|
— |
|
|
|
2,183 |
|
2023 |
|
|
3,294 |
|
|
|
16,678 |
|
|
|
19,972 |
|
2024 |
|
|
941 |
|
|
|
18,293 |
|
|
|
19,234 |
|
|
|
|
7,970 |
|
|
|
34,971 |
|
|
|
42,941 |
|
11. |
Convertible debentures |
On June 6, 2017, the Company issued 10% convertible debentures of $15,000 aggregate principal amount at a price of one thousand dollars per debenture, with a maturity date of May 31, 2020. On May 27, 2020, the Company amended the remaining $12,621 principal value of convertible debentures (the “Amendments”) to include, among other things, an extension of the maturity date to May 31, 2022, and a reduction in the conversion price of the principal by 45% from $5.00 to $2.75 per common share (the “Conversion Price”).
On December 10, 2020, the Company gave notice to the holders of the convertible debentures that it was exercising its early conversion right such that the convertible debentures would be converted to common shares at the Conversion Price of $2.75 per share on or about January 11, 2021.
On January 11, 2021, the Company converted all of the outstanding balance related to principal and interest of convertible debentures into 3,178,930 common shares.
F-16
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
11. |
Convertible debentures (Continued from previous page) |
The following table summarizes the carrying value of the convertible debentures as at March 31, 2021:
|
Net book value, March 31, 2021 |
|
|
Net book value, December 31, 2020 |
|
|||
Convertible debentures |
|
|
8,751 |
|
|
|
11,963 |
|
Transaction costs |
|
|
— |
|
|
|
(755 |
) |
Net proceeds |
|
|
8,751 |
|
|
|
11,208 |
|
Conversion of debentures to equity |
|
|
(8,683 |
) |
|
|
(3,754 |
) |
Accretion in carrying value of debenture liability |
|
|
— |
|
|
|
1,228 |
|
Accrued interest |
|
|
32 |
|
|
|
684 |
|
Interest converted in shares and paid |
|
|
(100 |
) |
|
|
(615 |
) |
|
|
|
— |
|
|
|
8,751 |
|
12. |
Derivative stock warrants |
On February 24, 2021, in connection with a registered direct offering, Mogo 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. |
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 statement of operations and comprehensive loss. The stock warrants are classified as a derivative liability, and not equity, due to the exercise price being denominated in USD, which is different than the Company's functional currency.
In the event that these warrants are fully exercised, the Company would receive cash proceeds of US$29,406, 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 statement of operations and comprehensive loss.
|
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
|
|
— |
|
|
|
— |
|
Stock warrants issued |
|
|
15,767 |
|
|
|
— |
|
Change in fair value due to revaluation of derivative stock warrant |
|
|
288 |
|
|
|
|
|
Change in fair value due to foreign exchange |
|
|
46 |
|
|
|
— |
|
Balance, end of period |
|
|
16,101 |
|
|
|
— |
|
F-17
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
12. |
Derivative stock warrants (Continued from previous page) |
Details of the derivative stock warrants as at March 31, 2021 are as follows:
|
|
Warrants Outstanding and exercisable (000s) |
|
|
Weighted Average Exercise Price $ |
|
||
As at December 31, 2020 |
|
|
— |
|
|
|
— |
|
Warrants granted |
|
|
2,673 |
|
|
|
13.83 |
|
As at March 31, 2021 |
|
|
2,673 |
|
|
|
13.83 |
|
The 2,673,268 warrants outstanding noted above have an expiry date of August, 2024.
The fair value of the warrants outstanding was estimated using the Black-Scholes option pricing model with the following assumptions:
|
|
For the three months ended March 31, 2021 |
|
|
For the year ended December 31, 2020 |
|
||
Risk-free interest rate |
|
0.24%-0.35% |
|
|
|
— |
|
|
Expected life |
|
3.5 years |
|
|
|
— |
|
|
Expected volatility in market price of shares |
|
91%-94% |
|
|
|
— |
|
|
Expected dividend yield |
|
|
0% |
|
|
|
— |
|
Expected forfeiture rate |
|
|
0% |
|
|
|
— |
|
13. |
Geographic information |
Revenue presented below has been based on the geographic location of customers.
|
|
Three months ended |
|
|||||
|
|
March 31, 2021 |
|
|
March 31, 2020 |
|
||
Canada |
|
|
10,254 |
|
|
|
13,910 |
|
Europe |
|
|
1,144 |
|
|
|
— |
|
Other |
|
|
22 |
|
|
|
— |
|
Total |
|
|
11,420 |
|
|
|
13,910 |
|
F-18
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
14. |
Revaluation (gains) and losses |
|
|
Three months ended |
|
|||||
|
|
March 31, 2021 |
|
|
March 31, 2020 |
|
||
Unrealized exchange loss |
|
|
236 |
|
|
|
27 |
|
Change in fair value due to revaluation of derivative stock warrant |
|
|
288 |
|
|
|
— |
|
Unrealized (gain) loss on investment portfolio, net |
|
|
(5,786 |
) |
|
|
2,423 |
|
Unrealized gain on other receivable |
|
|
— |
|
|
|
(289 |
) |
|
|
|
(5,262 |
) |
|
|
2,161 |
|
15. |
Other non-operating (income) expenses |
|
|
Three months ended |
|
|||||
|
|
March 31, 2021 |
|
|
March 31, 2020 |
|
||
Gain on sale of loan book |
|
|
— |
|
|
|
(1,676 |
) |
Credit facility prepayment and related expenses |
|
|
(5 |
) |
|
|
2,599 |
|
Government grant |
|
|
(606 |
) |
|
|
— |
|
Direct offering transaction costs allocated to warrant liability |
|
|
1,466 |
|
|
|
— |
|
Restructuring and other |
|
|
656 |
|
|
|
672 |
|
|
|
|
1,511 |
|
|
|
1,595 |
|
On February 28, 2020, Mogo completed the Liquid Sale and recognized a gain on sale of loan book amounting to $1,676 (refer to Note 4). On the same date, Mogo repaid and extinguished its Credit Facility – Liquid and recognized an early prepayment expense of $2,500 as a result of paying down the facility in advance of the maturity date (refer to Note 9).
Due to the outbreak of COVID-19, the Government of Canada announced the Canadian Emergency Wage Subsidy (“CEWS”) to support companies that have experienced a certain level of revenue decline in their operations. Mogo has determined that it qualifies for the CEWS and has made an accounting policy election to record the grant on a gross basis. As a result, Mogo has recorded other non-operating income of $606 for the three months ended March 31, 2021 (three months ended March 31, 2020: $nil) in respect of the CEWS.
Direct offering transaction costs allocated to warrant liability of $1,466 relate to the issuance of warrants with a USD denominated exercise price to investors. This resulted in the recognition of a derivative financial liability and the allocation of the associated transaction costs to other non-operating expenses (refer to Note 12 for further details).
16. |
Business combination |
On January 25, 2021, Mogo completed the acquisition of all of the issued and outstanding securities of Carta in exchange for 10.0 million common shares of Mogo with a fair value of $54.8 million based on Mogo's closing share price at the acquisition date.
Issue costs directly attributable to the issuance of the common shares have been netted against the deemed proceeds. Acquisition-related costs of $379 not directly attributable to the issuance of the common shares are included in other non-operating (income) expenses in the interim condensed consolidated statement of operations and comprehensive loss and in operating cash flows in the statement of cash flows.
F-19
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
16. |
Business combination (Continued from previous page) |
The acquisition is expected to significantly expand Mogo’s total addressable market by entering the global payments market, increase revenue scale and accelerate the growth of its high-margin subscription and transaction-based revenue, and strengthen the Company’s digital wallet capabilities which includes the development of its peer-to-peer payment solution planned for 2021.
The following tables summarizes the fair value of consideration transferred, and its provisional allocation to estimated fair values assigned to each major class of assets acquired and liabilities assumed at the January 25, 2021 acquisition date. The Company may adjust the provisional purchase price allocation, as necessary, up to one year after the business combination date as new information is obtained about facts and circumstances that existed as of the closing date. The purchase price allocation process was not completed at the publication date of the consolidated financial statements. The amounts allocated to certain assets and liabilities, goodwill, and intangibles below are preliminary and may be restated upon completion of the purchase price allocation process.
|
|
January 25, 2021 |
|
|
|
|
$ 000's |
|
|
Assets acquired: |
|
|
|
|
Cash and cash equivalent |
|
|
2,101 |
|
Prepaids, and other receivables and assets |
|
|
1,692 |
|
Property and equipment |
|
|
270 |
|
Right-of-use assets |
|
|
316 |
|
Intangible assets |
|
|
22,928 |
|
Goodwill |
|
|
32,294 |
|
|
|
|
59,601 |
|
Liabilities assumed: |
|
|
|
|
Accounts payable, accruals & other |
|
|
4,485 |
|
Lease liabilities |
|
|
316 |
|
|
|
|
4,801 |
|
|
|
|
|
|
Net assets acquired at fair value |
|
|
54,800 |
|
|
|
|
|
|
Share consideration |
|
|
54,800 |
|
F-20
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
17. |
Fair value of financial instruments |
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 statement 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:
|
• |
Level 1: Unadjusted quoted prices in an active market for identical assets and liabilities. |
|
• |
Level 2: Quoted prices in markets that are not active or inputs that are derived from quoted prices of similar (but not identical) assets or liabilities in active markets. |
|
• |
Level 3: Unobservable inputs that are supported by little or no market activity and are significant to the estimated fair value of the assets or liabilities. |
|
(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-21
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
|
(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. There has not been any transfer between fair value hierarchy levels during the year. The fair value disclosure of lease liabilities is also not required.
|
|
|
|
|
|
Carrying amount |
|
|
Fair value |
|
||||||||||||||||||||||||||
March 31, 2021 |
|
Note |
|
|
Mandatorily at 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: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equities |
|
|
|
|
|
|
24,195 |
|
|
|
— |
|
|
|
— |
|
|
|
24,195 |
|
|
|
— |
|
|
|
242 |
|
|
|
23,953 |
|
|
|
24,195 |
|
|
|
|
|
|
|
|
24,195 |
|
|
|
— |
|
|
|
— |
|
|
|
24,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets not measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalent |
|
|
|
|
|
|
— |
|
|
|
95,467 |
|
|
|
— |
|
|
|
95,467 |
|
|
|
95,467 |
|
|
|
— |
|
|
|
— |
|
|
|
95,467 |
|
Loans receivable – current |
|
|
4 |
|
|
|
— |
|
|
|
54,658 |
|
|
|
— |
|
|
|
54,658 |
|
|
|
— |
|
|
|
54,658 |
|
|
|
— |
|
|
|
54,658 |
|
Loans receivable – non-current |
|
|
4 |
|
|
|
— |
|
|
|
910 |
|
|
|
— |
|
|
|
910 |
|
|
|
— |
|
|
|
— |
|
|
|
853 |
|
|
|
853 |
|
Other receivables |
|
|
|
|
|
|
— |
|
|
|
1,067 |
|
|
|
— |
|
|
|
1,067 |
|
|
|
— |
|
|
|
1,067 |
|
|
|
— |
|
|
|
1,067 |
|
|
|
|
|
|
|
|
— |
|
|
|
152,102 |
|
|
|
— |
|
|
|
152,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative stock warrants |
|
12 |
|
|
|
16,101 |
|
|
|
— |
|
|
|
— |
|
|
|
16,101 |
|
|
|
— |
|
|
|
16,101 |
|
|
|
— |
|
|
|
16,101 |
|
|
|
|
|
|
|
|
|
16,101 |
|
|
|
— |
|
|
|
— |
|
|
|
16,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities not measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accruals |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
11,828 |
|
|
|
11,828 |
|
|
|
— |
|
|
|
11,828 |
|
|
|
— |
|
|
|
11,828 |
|
Credit facilities |
|
|
9 |
|
|
|
— |
|
|
|
— |
|
|
|
37,476 |
|
|
|
37,476 |
|
|
|
— |
|
|
|
37,476 |
|
|
|
— |
|
|
|
37,476 |
|
Debentures |
|
|
10 |
|
|
|
— |
|
|
|
— |
|
|
|
40,370 |
|
|
|
40,370 |
|
|
|
— |
|
|
|
40,370 |
|
|
|
— |
|
|
|
40,370 |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
89,674 |
|
|
|
89,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-22
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
17. |
Fair value of financial instruments (Continued from previous page) |
|
|
|
|
|
|
Carrying amount |
|
|
Fair value |
|
||||||||||||||||||||||||||
December 31, 2020 |
|
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: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equities |
|
|
|
|
|
|
18,445 |
|
|
|
— |
|
|
|
— |
|
|
|
18,445 |
|
|
|
— |
|
|
|
154 |
|
|
|
18,291 |
|
|
|
18,445 |
|
|
|
|
|
|
|
|
18,445 |
|
|
|
— |
|
|
|
— |
|
|
|
18,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets not measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalent |
|
|
|
|
|
|
— |
|
|
|
12,119 |
|
|
|
— |
|
|
|
12,119 |
|
|
|
12,119 |
|
|
|
— |
|
|
|
— |
|
|
|
12,119 |
|
Loans receivable – current |
|
|
4 |
|
|
|
— |
|
|
|
54,978 |
|
|
|
— |
|
|
|
54,978 |
|
|
|
— |
|
|
|
54,978 |
|
|
|
— |
|
|
|
54,978 |
|
Loans receivable – non-current |
|
|
4 |
|
|
|
— |
|
|
|
1,135 |
|
|
|
— |
|
|
|
1,135 |
|
|
|
— |
|
|
|
— |
|
|
|
1,064 |
|
|
|
1,064 |
|
|
|
|
|
|
|
|
— |
|
|
|
68,232 |
|
|
|
— |
|
|
|
68,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities not measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable, accruals and other |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
7,843 |
|
|
|
7,843 |
|
|
|
— |
|
|
|
7,843 |
|
|
|
— |
|
|
|
7,843 |
|
Credit facilities |
|
|
9 |
|
|
|
— |
|
|
|
— |
|
|
|
37,644 |
|
|
|
37,644 |
|
|
|
— |
|
|
|
37,644 |
|
|
|
— |
|
|
|
37,644 |
|
Debentures |
|
|
10 |
|
|
|
— |
|
|
|
— |
|
|
|
40,658 |
|
|
|
40,658 |
|
|
|
— |
|
|
|
40,658 |
|
|
|
— |
|
|
|
40,658 |
|
Convertible debentures |
|
|
11 |
|
|
|
— |
|
|
|
— |
|
|
|
8,751 |
|
|
|
8,751 |
|
|
|
— |
|
|
|
8,751 |
|
|
|
— |
|
|
|
8,751 |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
94,896 |
|
|
|
94,896 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
The following tables show the valuation techniques used in measuring Level 3 fair values for financial instruments in the statement of financial position, as well as the significant unobservable inputs used.
F-23
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
17. |
Fair value of financial instruments (Continued from previous page) |
Financial instrument measured at FV
Type |
Valuation technique |
Significant unobservable inputs |
Inter-relationship between significant unobservable inputs and FV |
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 |
|
|
|
|
|
Loan 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 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 Stock Warrants |
• Option pricing model |
• None |
• None |
F-24
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
17. |
Fair value of financial instruments (Continued from previous page) |
The following table presents the changes in fair value measurements of the Company’s investment portfolio recognized at fair value at March 31, 2021 and December 31, 2020 and classified as Level 3:
|
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||
Opening balance of Level 3 investments |
|
|
18,291 |
|
|
|
20,691 |
|
Additions |
|
|
95 |
|
|
|
150 |
|
Unrealized exchange loss |
|
|
(130 |
) |
|
|
(247 |
) |
Unrealized gain (loss) on investment portfolio |
|
|
5,697 |
|
|
|
(2,303 |
) |
Balance of level 3 investments, end of period |
|
|
23,953 |
|
|
|
18,291 |
|
|
(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: |
|
|
|
|
|
|
|
|
|
|
31 March 2021 |
|
Adjusted market multiple (5% movement) |
|
|
1,224 |
|
|
|
(1,224 |
) |
|
|
|
|
|
|
|
|
|
|
|
31 December 2020 |
|
Adjusted market multiple (5% movement) |
|
|
937 |
|
|
|
(937 |
) |
During the three months ended March 31, 2021, there were no transfers of assets or liabilities within the fair value hierarchy levels.
18. |
Nature and extent of risk arising from financial instruments |
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 the 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.
F-25
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
18. |
Nature and extent of risk arising from financial instruments (Continued from previous page) |
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 are 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.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due or will not receive sufficient funds from its third-party lenders to advance to the Company’s customers. The Company manages all liquidity risk through maintaining a sufficient working capital amount through daily monitoring of controls, cash balances and operating results. The Company’s principal sources of cash are funds from operations, which the Company believes will be sufficient to cover its normal operating and capital expenditures.
F-26
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
18. |
Nature and extent of risk arising from financial instruments (Continued from previous page) |
The Company’s accounts payable and accruals are substantially due within 12 months. The maturity schedule of the Company’s credit facilities, debentures, and convertible debentures are described below. Management’s intention is to continue to refinance any outstanding amounts owing under the credit facilities and debentures and will consider the issuance of shares in lieu of amounts owing under the convertible debentures, in each case as they become due and payable. The debentures are subordinated to the credit facilities which has the effect of extending the maturity date of the debentures to the later of contractual maturity or the maturity date of credit facilities. See Note 9 for further details.
($000s) |
|
2021 |
|
|
2022 |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
Thereafter |
|
||||||
Commitments - operational |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease payments |
|
|
1,139 |
|
|
|
1,446 |
|
|
|
1,297 |
|
|
|
1,206 |
|
|
|
1,240 |
|
|
|
2,727 |
|
Trade payables |
|
|
7,360 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Accrued wages and other expenses |
|
|
4,469 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Interest – Credit Facilities (Note 9) |
|
|
2,951 |
|
|
|
1,967 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Interest – Debentures (Note 10) |
|
|
2,325 |
|
|
|
2,986 |
|
|
|
1,875 |
|
|
|
352 |
|
|
|
— |
|
|
|
— |
|
Purchase obligations |
|
|
789 |
|
|
|
1,052 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
19,033 |
|
|
|
7,451 |
|
|
|
3,172 |
|
|
|
1,558 |
|
|
|
1,240 |
|
|
|
2,727 |
|
Commitments – principal repayments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Facility – Other (Note 9) |
|
|
— |
|
|
|
37,476 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Debentures (Note 10) |
|
|
1,552 |
|
|
|
2,183 |
|
|
|
19,972 |
|
|
|
19,234 |
|
|
|
— |
|
|
|
— |
|
|
|
|
1,552 |
|
|
|
39,659 |
|
|
|
19,972 |
|
|
|
19,234 |
|
|
|
— |
|
|
|
— |
|
Total contractual obligations |
|
|
20,585 |
|
|
|
47,110 |
|
|
|
23,144 |
|
|
|
20,792 |
|
|
|
1,240 |
|
|
|
2,727 |
|
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include cash, digital assets, investment portfolio, debentures, credit facilities and derivative stock warrants.
Interest rate risk
Changes in market interest rates may have an effect on the cash flows associated with some financial assets and liabilities, known as cash flow risk, and on the fair value of other financial assets or liabilities, known as price risk. The Company is exposed to interest rate risk primarily relating to its credit facilities that bear interest fluctuating with 1 month USD LIBOR. The Credit Facility - Other has a 1 month USD LIBOR floor of 1.5%. As at March 31, 2021, 1 month USD LIBOR is 0.1% (December 31, 2020 – 0.34%). A 50-basis point change in 1 month USD LIBOR would not increase or decrease credit facility interest expense
The debentures and convertible debentures have fixed rates of interest and are not subject to interest rate risk.
F-27
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
18. |
Nature and extent of risk arising from financial instruments (Continued from previous page) |
Currency risk
Currency risk is the risk that changes in foreign exchange rates may have an effect on future cash flows associated with financial instruments. The Company is exposed to foreign currency risk on cash, investment portfolio and debentures denominated in U.S. dollars (USD). A 5% increase or decrease in USD/CAD exchange rate would increase or decrease the unrealized exchange gain (loss) by $256.
(‘$000 in US$) |
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||
Cash |
|
|
5,487 |
|
|
|
107 |
|
Investment portfolio |
|
|
8,298 |
|
|
|
6,171 |
|
Derivative stock warrants |
|
|
(12,804 |
) |
|
|
— |
|
Debentures |
|
|
(5,055 |
) |
|
|
(5,105 |
) |
The Company has certain subsidiaries that operate in a foreign functional currency different than the Canadian dollar. The assets and liabilities of these subsidiaries are translated to the Canadian dollar presentation currency using exchange rates as at the reporting date. A 5% increase or decrease in the exchange rate of these foreign functional currencies into CAD would increase or decrease the amount of foreign currency reserve gain (loss) booked to other comprehensive income (loss) by $13.
Other price risk
Other market price risk is the risk that the fair value of the financial instrument will fluctuate as a result of changes in market prices (other than those arising from interest rate risks or currency risk), whether caused by factors specific to an individual investment or its issuers or factors affecting all instruments traded in the market. Our investment portfolio comprises of non-listed closely held equity instruments which are not exposed to market prices. Fair valuation of our investment portfolio is conducted on a quarterly basis.
|
(a) |
Share capital |
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.
As at March 31, 2021, there are 56,663,941 common shares and no preferred shares issued and outstanding.
|
(b) |
Options |
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 of the Company and ii) 3,800,000. As a result of a business combination with Difference Capital Financial Inc. completed on June 21, 2019, there were an additional 536,000 options issued, which were granted pursuant to the Company’s prior stock option plan (the “Prior Plan”). As at March 31, 2021 there are 449,333 of these options outstanding that do not contribute towards the maximum number of common shares reserved for issuance under the Plan as described above.
F-28
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
19. |
Equity (Continued from previous page) |
Each option converts into one common share of the Company upon exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither right to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of expiry. Options issued under the Plan have a maximum contractual term of eight years, and options issued under the Prior Plan have a maximum contractual term of ten years.
A summary of the status of the stock options and changes in the period is as follows:
|
|
Options Outstanding (000s) |
|
|
Weighted Average Grant Date Fair Value $ |
|
|
Weighted Average Exercise Price $ |
|
|
Options Exercisable (000s) |
|
|
Weighted Average Exercise Price $ |
|
|||||
As at December 31, 2019 |
|
|
3,697 |
|
|
|
— |
|
|
|
4.05 |
|
|
|
2,833 |
|
|
|
4.12 |
|
Options granted |
|
|
1,988 |
|
|
|
1.45 |
|
|
|
2.47 |
|
|
|
— |
|
|
|
— |
|
Exercised |
|
|
(276 |
) |
|
|
— |
|
|
|
1.59 |
|
|
|
— |
|
|
|
— |
|
Forfeited |
|
|
(432 |
) |
|
|
— |
|
|
|
2.86 |
|
|
|
— |
|
|
|
— |
|
As at December 31, 2020 |
|
|
4,977 |
|
|
|
— |
|
|
|
3.07 |
|
|
|
2,965 |
|
|
|
3.47 |
|
Options granted |
|
|
2,125 |
|
|
|
6.47 |
|
|
|
10.72 |
|
|
|
— |
|
|
|
— |
|
Exercised |
|
|
(507 |
) |
|
|
— |
|
|
|
1.65 |
|
|
|
— |
|
|
|
— |
|
Forfeited |
|
|
(9 |
) |
|
|
— |
|
|
|
1.78 |
|
|
|
— |
|
|
|
— |
|
As at March 31, 2021 |
|
|
6,586 |
|
|
|
— |
|
|
|
5.61 |
|
|
|
2,626 |
|
|
|
3.76 |
|
The above noted options have expiry dates ranging from November 2021 to December 2029.
The fair value of each option granted was estimated using the Black-Scholes option pricing model with the following assumptions:
|
|
For the three months ended March 31, 2021 |
|
|
For the year ended December 31, 2020 |
|
||
Risk-free interest rate |
|
0.58% |
|
|
0.32% - 0.39% |
|
||
Expected life |
|
5 years |
|
|
5 years |
|
||
Expected volatility in market price of shares |
|
|
84 |
% |
|
72% - 77% |
|
|
Expected dividend yield |
|
|
0 |
% |
|
|
0 |
% |
Expected forfeiture rate |
|
|
15 |
% |
|
|
15 |
% |
These options generally vest either immediately or monthly over a three to four year period after an initial one year cliff. Volatility is estimated using historical data of comparable publicly traded companies operating in a similar segment.
Total share-based compensation costs related to options and RSUs for the three months ended March 31, 2021 were $557 (three months ended March 31, 2020 - $214).
|
(c) |
Restricted share units |
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 of the Company’s common shares. 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
F-29
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
19. |
Equity (Continued from previous page) |
objectives are met as determined by the Board of Directors. The maximum number of shares which may be made subject to issuance under RSUs awarded under the RSU Plan is 500,000.
Details of outstanding RSUs as at March 31, 2021 are as follows:
|
|
Number of RSUs (000s) |
|
|
As at December 31, 2019 |
|
|
141 |
|
Converted |
|
|
(59 |
) |
Expired |
|
|
(5 |
) |
As at December 31, 2020 |
|
|
77 |
|
As at March 31, 2021 |
|
|
77 |
|
|
(d) |
Warrants |
|
|
Warrants Outstanding (000s) |
|
|
Weighted Average Exercise Price $ |
|
|
Warrants Exercisable (000s) |
|
|
Weighted Average Exercise Price $ |
|
||||
As at December 31, 2019 |
|
|
1,196 |
|
|
|
2.96 |
|
|
|
598 |
|
|
|
2.96 |
|
Warrants granted |
|
|
4,829 |
|
|
|
1.98 |
|
|
|
— |
|
|
|
— |
|
Warrants exercised |
|
|
(990 |
) |
|
|
2.03 |
|
|
|
— |
|
|
|
— |
|
As at December 31, 2020 |
|
|
5,035 |
|
|
|
1.80 |
|
|
|
4,386 |
|
|
|
1.88 |
|
Warrants granted |
|
|
267 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Warrants exercised |
|
|
(3,375 |
) |
|
|
1.74 |
|
|
|
— |
|
|
|
— |
|
As at March 31, 2021 |
|
|
1,927 |
|
|
|
3.86 |
|
|
|
1,694 |
|
|
|
4.22 |
|
The 1,926,999 warrants outstanding noted above have expiry dates ranging from January 2021 to August 2023, and do not include the stock warrants accounted for as a derivative liability discussed in note 12.
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 Debenture Warrant. The Debenture Warrants are exercisable at any time until December 31, 2022. During the quarter, 2,062,627 Debenture Warrants were exercised into common shares resulting in cash proceeds of $4,187.
On January 25, 2016, in connection with the original marketing collaboration agreement (the “Postmedia Agreement”) with Postmedia Network Inc. (“Postmedia”), Mogo issued Postmedia five-year warrants to acquire 1,196,120 common shares of Mogo at an exercise price of $2.96. 50% of the warrants were to vest in equal instalments over three years while the remaining 50% (the “Performance Warrants”) were to vest based on Mogo achieving certain quarterly revenue targets. Effective January 1, 2018, the Postmedia Agreement was amended and extended, with changes in the vesting terms of 598,060 Performance Warrants so that i) they vest equally over the remaining two years of the collaboration (50% in January 2020 and 50% in January 2021).
F-30
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
19. |
Equity (Continued from previous page) |
Effective January 1, 2020, Mogo amended and extended the Postmedia Agreement for an additional two years expiring on December 31, 2022. Under the amended and extended Postmedia Agreement, Postmedia receives a quarterly revenue share payment of $263, reduced from $527 in Q4 2019. Further, the contractual life of 50% of the warrants previously issued to Postmedia was extended to seven years such that the new expiry date is January 25, 2023. Mogo also granted Postmedia additional 3.5-year warrants (the “New Warrants”) to acquire 350,000 common shares of Mogo at an exercise price of $3.537, which will vest in equal instalments over three years.
On June 3, 2020, the Company entered into a further amendment with Postmedia pursuant to which Postmedia agreed to waive certain amounts payable by Mogo through December 31, 2020 in exchange for Mogo reducing the exercise price of the 1,546,120 common share purchase warrants previously issued to Postmedia, to $1.292.
During March 2021, Postmedia exercised 1,312,787 warrants to purchase the same number of Company’s common shares at an exercise price of $1.292 per share. Mogo received cash payment of $1,696 pursuant to the exercise.
On February 24, 2021, in connection with a US$54,000 registered direct offering, Mogo issued to investors warrants 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. 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 a derivative stock warrants. Refer to note 12 for more details.
The Company also issued 267,327 warrants in connection with broker services rendered on the offering.
The fair value of the warrants outstanding was estimated using the Black-Scholes option pricing model with the following assumptions:
|
|
For the three months ended March 31, 2021 |
|
|
For the year ended December 31, 2020 |
|
||
Risk-free interest rate |
|
0.18%-0.49% |
|
|
0.32% - 0.39% |
|
||
Expected life |
|
3 -7 years |
|
|
3.5 -7 years |
|
||
Expected volatility in market price of shares |
|
77%-111% |
|
|
50% - 77% |
|
||
Expected dividend yield |
|
|
0 |
% |
|
|
0 |
% |
Expected forfeiture rate |
|
|
0 |
% |
|
|
0 |
% |
20. |
Subsequent events |
Investment in Coinsquare Ltd (“Coinsquare”)
On April 16, 2021, the Company closed its previously announced strategic investment (the “Investment”) in Coinsquare, Canada’s leading digital asset trading platform, pursuant to which Mogo has acquired a 19.99% ownership interest in Coinsquare for total aggregate consideration consisting of a cash payment of $27,396 and the issuance of 2,807,577 common shares of Mogo to Coinsquare and certain selling shareholders of Coinsquare. The Investment also included rights for Mogo to increase its ownership up to 43% at a fixed price through the exercise of a 12-month call option to acquire additional shares from certain selling shareholders (the “Call Option”) and the exercise of an 18-month warrant to acquire addition shares from Coinsquare under certain conditions (the “Coinsquare Warrant”).
F-31
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three months ended March 31, 2021 and 2020
On May 13, 2021, Mogo announced its intention to purchase an additional 5,412,222 common shares of Coinsquare which would increase Mogo’s ownership in Coinsquare from 19.9% to approximately 37% (the “New Coinsquare Transaction”). The purchase would be completed in two separate transactions consisting of a) the exercise of the Call Option on 3,223,690 Coinsquare common shares from certain selling shareholders expected on May 31, 2021 and b) the purchase of 2,188,532 common shares of Coinsquare from Riot Blockchain Inc (NASDAQ: RIOT) pursuant to a binding agreement expected to be completed on May 24, 2021. Purchase consideration for the New Coinsquare Transaction is expected to range between $46,860 and $48,610, payable at Mogo’s option, in cash or common shares. The Coinsquare Warrant, if exercised, would allow Mogo to increase its total ownership interest to approximately 48%, for additional consideration of approximately $60,025.
Acquisition of Moka Financial Technologies Inc. ("Moka")
On May 5, 2021, the Company closed its previously announced acquisition of Moka, one of Canada's leading saving and investing apps. Mogo has acquired all of the issued and outstanding shares of Moka in exchange for the issuance of 4,999,991 Mogo common shares, pursuant to the terms of a share exchange agreement among Mogo, Moka and all of the shareholders of Moka. The acquisition brings differentiated saving and investing products to broaden Mogo’s wealth offering.
The Company acquired certain assets and liabilities including cash, receivables, property and equipment, intangible assets, goodwill, and payables and accruals. Due to the timing of the closing of this transaction subsequent to the end of the quarter, the Company is unable to provide additional disclosures on the acquisition, as the purchase price accounting and valuation of assets and liabilities acquired is still in progress.
Sale of equity stake in Vena Solutions
On April 28, 2021, the Company sold its investment in Vena Solutions Inc. (“Vena”) for proceeds of $4,670. The Company’s investment portfolio, which included Vena, was acquired as part of its 2019 business combination with Difference Capital Financial Inc. This transaction has been reflected in the fair value of this investment as at March 31, 2021.
F-32
|
|
Management’s Discussion and Analysis |
Exhibit 99.2
MOGO INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE QUARTER ENDED MARCH 31, 2021
DATED: MAY 13, 2021
1 | Page
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Management’s Discussion and Analysis |
Table of Contents |
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2 | Page
|
|
Management’s Discussion and Analysis |
MANAGEMENT’S DISCUSSION AND ANALYSIS
This Management’s Discussion and Analysis (“MD&A”) is current as of May 13, 2021 and presents an analysis of the financial condition of Mogo Inc. (formerly Difference Capital Financial Inc. (“Difference”)) and its subsidiaries (collectively referred to as “Mogo” or the “Company”) as at and for the three months ended March 31, 2021 compared with the corresponding period 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 months ended March 31, 2021. The financial information presented in this MD&A is derived from our interim condensed consolidated financial statements prepared in accordance with 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 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 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 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 interim condensed 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 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 adjusted EBITDA and adjusted cash 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 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 facilities, 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 2021 and may not be appropriate for other purposes. This outlook involves numerous assumptions, particularly around member growth & 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 |
Mogo Inc. a financial technology and digital payments company, is empowering its more than one million members with simple digital solutions to help them get in control of their financial health. Through the Mogo app, consumers can access a digital spending account with Mogo Visa* Platinum Prepaid Card featuring automatic carbon offsetting, easily buy and sell bitcoin, and get free monthly credit score monitoring, ID fraud protection, and personal loans. Mogo’s wholly-owned subsidiary, Carta Worldwide, also 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
|
• |
In May 2021, we completed the previously announced acquisition of Moka Finance Technologies Inc. (“Moka”), one of Canada’s leading saving and investing apps, for 5.0 million Mogo common shares in an all-stock transaction. The acquisition increases Mogo’s member base to approximately 1.6 million and will bring differentiated saving and investing products to broaden Mogo’s wealth offering (“MogoWealth”). |
|
• |
The Moka acquisition has accelerated Mogo’s plan to launch a free stock trading solution for Canadians in 2021, further solidifying its position as the most comprehensive digital wallet in Canada. |
|
• |
In April 2021, the Company closed its previously announced strategic investment (the “Investment”) in Coinsquare, Canada’s leading digital asset trading platform, pursuant to which Mogo has acquired a 19.99% ownership interest in Coinsquare for total aggregate consideration consisting of a cash payment of $27.4 million and the issuance of 2.8 million common shares of Mogo to Coinsquare and certain selling shareholders of Coinsquare. The Investment also included rights for Mogo to increase its ownership up to 43% at a fixed price through the exercise of a 12-month call option to acquire additional shares from certain selling shareholders (the “Call Option”) and the exercise of an 18-month warrant to acquire addition shares from Coinsquare under certain conditions (the “Coinsquare Warrant”). |
|
• |
On May 13, 2021, Mogo announced its intention to purchase an additional 5.4 million common shares of Coinsquare which would increase Mogo’s ownership in Coinsquare from 19.9% to approximately 37% (the “New Coinsquare Transaction”). The purchase would be completed in two separate transactions consisting of a) the exercise of the Call Option on 3.2 million Coinsquare common shares from certain selling shareholders expected on May 31, 2021 and b) the purchase of 2.2 million common shares of Coinsquare from Riot Blockchain Inc (NASDAQ: RIOT) pursuant to a binding agreement expected to be completed on May 24, 2021. Purchase consideration for the New Coinsquare Transaction is expected to range between $46.9 million and $48.6 million, payable, at Mogo’s option, in cash or common shares. The Coinsquare Warrant, if exercised, would allow Mogo to increase its total ownership interest to approximately 48%, for additional consideration of approximately $60.0 million. |
|
• |
On April 28, 2021, the Company sold its investment in Vena Solutions Inc. (“Vena”) for proceeds of $4.7 million, representing a 116% increase from the book value as at December 31, 2020. Mogo’s investment portfolio was acquired as part of its 2019 business combination with Difference Capital Financial Inc and the Vena investment was one of about a dozen equity investments in private technology and e-gaming companies, including Hootsuite, Blue Ant Media, Alida and Tiidal Gaming. Mogo plans to continue capitalizing on monetization opportunities from its investment portfolio going forwards. |
|
• |
On January 25, 2021 we closed the acquisition of Carta Solutions Holding Corporation ("Carta"), a leader in digital payment solutions. The acquisition adds a business to business payments platform to the Company and is expected to significantly expand Mogo’s total addressable market by entering the global payments market. Carta’s issuing |
5 | Page
|
|
Management’s Discussion and Analysis |
|
platform provides processing technology to industry leaders in Europe, Asia, and Canada, and recently announced expansion into the United States and Japan. The Carta acquisition is expected to increase Mogo’s revenue scale and accelerate growth of its high-margin subscription and transaction-based revenue, while strengthening the Company’s digital wallet capabilities, including the development of its peer-to-peer payment solution. |
|
• |
In November 2020, we announced the launch of our bitcoin rewards program. Active members receive bitcoin rewards based on account activation, funding, and improving their credit score. In January 2021, we announced the extension of our bitcoin cashback reward program to the MogoCard, whereby participating members earn bitcoin cashback rewards for every purchase made on their MogoCard. In March 2021, we announced an extension of our bitcoin cashback rewards program to include MogoMortgage. Under the program, Mogo members who take out a new mortgage or refinance with Mogo can earn cashback deposited in their bitcoin and rewards account. |
|
• |
In July 2020, we announced a new automatic carbon offsetting feature with the MogoCard, designed to help Canadians improve their financial health and the health of the planet through better spending control and automatic carbon offsetting. MogoCard is the only card in Canada that helps fight climate change by automatically offsetting carbon as you spend. MogoCard also allows members to separate their spending into a separate account, avoid credit and limit themselves to a specific budget. |
|
• |
In November 2020, we announced that MogoCard now supports Apple Pay®, Google Pay™ and Samsung Pay. This provides MogoCard users with even more options for cashless, contactless payment using their smartphone or other devices, while continuing to get all the benefits and security of MogoCard. |
|
• |
In August 2020, we announced that we have established a new referral agreement with EQ Bank, the digital banking platform offered by Equitable Bank, through which Mogo will offer access to EQ Bank’s Savings Plus Account to Mogo members through the Mogo app. |
|
• |
In August 2020, we announced that we have established a new referral agreement with Lendful Financial Inc. (“Lendful”), through which Mogo will offer its members access to Lendful’s prime loan products through the Mogo app. |
|
• |
In February 2020, we signed a three-year lending partnership (the “goeasy Arrangement”) with goeasy Ltd. (“goeasy”), one of Canada’s largest and most experienced non-prime consumer lenders, enabling Mogo to monetize its lending platform and drive new recurring fee-based revenue, with no capital investment or credit risk from these loans. |
Financial Highlights
|
• |
In December 2020, we announced plans to make an initial corporate investment of up to $1.5 million in cryptocurrencies, representing approximately 1.5% of Mogo’s total assets as of the end of 2020. To date we have acquired approximately 18 bitcoins at an average purchase price of $42,079 (US$33,083) per bitcoin, and approximately 146 units of Ether at an average purchase price of $3,425 (US$2,777) per unit. This initial financial investment builds on Mogo’s significant product development related investments in bitcoin over the last several years, including MogoCrypto & the bitcoin rewards program. |
6 | Page
|
|
Management’s Discussion and Analysis |
|
• |
In December 2020, we announced the early conversion of our convertible debentures with an aggregate principal amount outstanding of $8.7 million as at December 31, 2020. The early conversion was completed on January 11, 2021 and has resulted in a strengthened balance sheet and reduced interest expense going forward. |
|
• |
In September 2020, the Company and its non-convertible debenture holders approved certain amendments to the terms of the debentures, effective July 1, 2020. The amendments include a reduction in the average coupon interest rate, from approximately 14% to approximately 7%, the extension of the maturity date for 50% of the principal balance to January 31, 2023, and the remainder to January 31, 2024, and the choice to settle principal and interest payments at the Company’s option either in cash or the Company’s shares. In connection with the amendment, the Company issued approximately 4.5 million common share purchase warrants to the debenture holders subsequent to the end of the quarter. |
|
• |
In Q2 2020, we reduced our cash operating expenses by $5.4 million relative to Q4 2019, a decrease of over 50%, in connection with our cost saving initiatives announced in March 2020 (the "COVID-19 Response Plan"). During Q1 and Q2 2020 we reduced our total workforce by approximately 40% relative to the end of Q4 2019. Based on its business needs, Mogo subsequently facilitated a return to work for some of its employees that had been placed on temporary layoff. |
|
• |
In February 2020, we sold the majority of our “MogoLiquid” loan portfolio to goeasy for gross consideration of $31.6 million (the “Liquid Sale”). In conjunction with the Liquid Sale, we repaid and extinguished the Credit Facility – Liquid, which had an outstanding balance of $29.3 million as at December 31, 2019. |
|
• |
In January 2020, we extended the term of our strategic marketing collaboration agreement with Canada’s premier news media company, Postmedia Network Inc. (“Postmedia”), for an additional two years to the end of 2022, while decreasing our quarterly payments from $0.5M to $0.3M (the “Postmedia Extension”). We also issued additional 3.5-year warrants to acquire 350,000 common shares of Mogo at an exercise price of $3.54, which along with existing outstanding warrants held by Postmedia, were amended to an exercise price of $1.29 in June 2020 in exchange for Postmedia waiving certain amounts payable by Mogo through December 31, 2020. |
Based upon the substantial growth opportunities we see across our core businesses, we expect to continue increasing our growth investments to drive accelerating member and revenue growth in 2021. Specifically, we re-iterate our previously communicated financial outlook for 2021:
|
- |
Continued increase in net Mogo member additions in 2021; |
|
- |
Accelerated growth in subscription and services revenue in 2021; and |
|
- |
Year-over-year growth of 80% to 100% in subscription and services revenue in Q4 2021 as compared to Q4 2020. |
Q1 2021 Update on COVID-19 Impact
Daily Operations and Safety
The rapid worldwide spread of COVID-19 has prompted governments to implement restrictive measures to curb the spread of the pandemic. During this period of uncertainty, our priority is to protect the health and safety of our employees, support and enforce government actions to slow the spread of COVID-19, and to continually assess and take appropriate actions to mitigate the risks to our business operations as a result of this pandemic.
In 2020, we implemented a COVID-19 response plan that included a number of measures to safeguard against the spread of the virus at our offices and maintain regular communications with suppliers, customers and business partners to monitor any potential risks to our ongoing operations. Operationally, Mogo shifted its employees to work remotely in early 2020. Given the digital nature of our business, the customer experience has been wholly unchanged. Given the ongoing, changing and uncertain situation regarding COVID-19, Mogo continues to monitor, evaluate, and adapt to developments as they unfold.
7 | Page
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Management’s Discussion and Analysis |
Cash Flow and Operating Expenses
In light of continued member growth and better than expected loan book performance across 2020 we have not extended the measures taken in 2020 related to our COVID-19 response plan to 2021. As fintech adoption accelerates in Canada we plan to continue to increase our growth investments including product development and marketing to drive continued member and revenue growth.
In 2020 we took steps to reduce operating expenses and improve cash flow in three key areas: personnel costs, interest costs, and vendor management. We reduced headcount, salaries, and hours in the first half of 2020, and were able to return to regular hours & salary levels for all staff by Q4 2020. We amended our non-convertible debentures in Q3 2020 to significantly reduce our cash interest obligations from approximately 14% to 7%, in addition to providing us the option to settle interest and principal in either Mogo common shares or cash. We worked with vendors to ensure continuity of service at reduced rates, securing significant one-time and ongoing savings of cash operating expenses.
Digital Lending and Customer Support
In Q1 2021, we experienced lower rates of customer default relative to historical levels, which is a continuation of the positive trend established in Q2 2020.
Mogo worked closely with customers to support them through this changing environment and in 2020 launched a Job Loss Action Plan for members, including payment programs for affected loan customers. As of March 31, 2021, no customers remain on any form of loan relief under this plan.
In Q1 2020, we temporarily paused new on-balance sheet loan originations and redirected a portion of loan demand to our lending partner. In Q2 2020, we introduced an enhanced employment and income verification framework to help identify higher risk loan applications and in late Q2 2020, we restarted on-balance sheet loan offers to new customers. In the second half of 2020, we saw a return to moderate loan origination volume to new customers, in addition to loan balance increases to existing customers in good standing, and loans to past customers who had previously paid in full. In the second half of 2020, the volume of early loan repayments reverted closer to historical levels compared to the higher rate of early loan repayments from our customers observed in Q2 2020.
Revenue
In Q1 2021, revenue grew by 14% to $11.4 million compared to $10.0 million in Q4 2020. We expect the positive revenue growth trend from the last two quarters to continue into 2021 as we continue to increase our growth investments and more fully integrate the acquisitions of Carta and Moka.
In 2020 we experienced a decrease in revenues attributable to the measures taken to manage credit risk and reduce operating spend in response to the COVID-19 pandemic. Specifically, as described above, we reduced loan originations compared to historical levels in order to limit credit exposure, and significantly reduced marketing expenses, which resulted in a corresponding decrease in revenue in Q1 2020 to Q3 2020. Additionally, the Liquid Sale in Q1 2020 contributed to a decline in revenues.
Risk Management and Critical Accounting Estimates
The current outbreak of COVID-19, and any future emergence and spread of similar pathogens, could have a material adverse effect on global and local economic and business conditions which may adversely impact our business and results of operations, and the operations of contractors and service providers. The overall economic impacts of COVID-19 could include an impact on our ability to obtain debt and equity financing or potential future decreases in revenue or the profitability of our ongoing operations. The extent of the impact that this pandemic may have on the Canadian economy and the Company’s business is currently highly uncertain and difficult to predict. Accordingly, there is a higher level of uncertainty with respect to management’s judgements and estimates at this time, particularly as it relates to the measurement of allowance for loan losses and fair valuation of our investment portfolio. We will continue to revisit our judgements and estimates where appropriate in future reporting periods as economic conditions surrounding the COVID-19 pandemic continue to evolve.
8 | Page
|
|
Management’s Discussion and Analysis |
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: revenue, subscription and services revenue, net loss, adjusted EBITDA(1), adjusted cash net loss(1), and Mogo members(1). We evaluate our performance by comparing our actual results to prior year results. The tables below provide the summary of key performance indicators for the applicable reported periods:
The tables below provide the summary of key performance indicators for the applicable reported periods:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
|||||
|
|
March 31, 2021 |
|
|
March 31, 2020 |
|
|
Percentage change |
|
|||
IFRS Measures |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
11,420 |
|
|
$ |
13,910 |
|
|
|
(18 |
)% |
Subscription and services revenue |
|
|
6,002 |
|
|
|
5,811 |
|
|
|
3 |
% |
Net loss |
|
|
(2,817 |
) |
|
|
(10,065 |
) |
|
|
(72 |
)% |
Key Performance Indicators(1) |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
(1,066 |
) |
|
|
544 |
|
|
n/a |
|
|
Adjusted cash net loss |
|
|
(4,165 |
) |
|
|
(5,217 |
) |
|
|
(20 |
)% |
|
|
|
|
|
|
|
|
|
|
As at |
|
|
|
|
March 31, 2021 |
|
|
March 31, 2020 |
|
|
Percentage change |
|
|||
Non-IFRS Non-Financial Measures(1) |
|
|
|
|
|
|
|
|
|
|
|
|
Mogo Members (000s) |
|
|
1,195 |
|
|
|
1,022 |
|
|
|
17 |
% |
(1) |
For more information regarding our use of these non-IFRS measures and, where applicable, a reconciliation to the most comparable IFRS measure, see “Non-IFRS Financial Measures”. |
9 | Page
|
|
Management’s Discussion and Analysis |
Revenue
Total revenue for the three months ended March 31, 2021 was $11.4 million compared to $13.9 million in the three months ended March 31, 2020, a decrease of $2.5 million or 18%. The revenue decrease resulted primarily from the strategic sale of a portion of our loan book in Q1 2020, which was aligned with our objective to drive a higher concentration of our revenues from subscription and services as opposed to interest revenue going forwards. We took further steps to reduce our remaining loan book, as we purposely levered down our balance sheet in 2020 to minimize credit risk exposure in light of the COVID-19 pandemic. The decrease in total revenue was partially offset by our transaction processing revenues related to the acquisition of Carta and an increase in transactional volume on our MogoCard and MogoCrypto products in the same periods.
Total revenue for the three months ended March 31, 2021 increased by $1.4 million compared to $10.0 million in Q4 2020, an increase of 14%. This was driven by subscription and services revenue growth of 32% in the period, aided by a substantial increase in MogoCrypto and MogoCard transaction volume. The acquisition of Carta in Q1 2021 further contributed to this increase, which collectively offset a slight decline in loan related revenues. Subscription and services revenue remains the company’s key focus to drive growth in 2021.
Subscription and services revenue
Subscription and services revenue increased to $6.0 million in the three months ended March 31, 2021, a 3% increase from $5.8 million in the same period last year. Subscription and services revenue now represents 53% of total quarterly revenue as compared to 42% in the same period last year and 46% in Q4 2020.
This increase was driven by increased transaction volumes in MogoCrypto and MogoCard products along with the addition of transactional processing revenues from the acquisition of Carta in Q1 2021. This was offset by a reduction in loan related subscription and services revenue resulting from the downsizing of our loan book in 2020.
Subscription and services revenue increased by $1.4 million to $6.0 million in the three months ended March 31, 2021, compared to $4.6 million in Q4 2020, representing a quarter over quarter increase of 32%. This increase was driven by the addition of transactional processing revenues related to Carta, and an increase in active users and transaction volumes on our MogoCrypto and MogoCard products. Transaction volumes for the three months ended March 31, 2021 for MogoCrypto and MogoCard increased by 1,522% and 1,034% respectively as compared to Q1 2020.
Net loss
Net loss was $2.8 million for the three months ended March 31, 2021, a decrease of $7.3 million compared to $10.1 million in the same period last year.
The variance in net loss is due primarily to a $7.5 million improvement in revaluations (gains) and losses primarily attributable to our investment portfolio. In Q1 2021, we recorded a gain of $5.3 million which includes an unrealized gain on the recently announced monetization of our investment in Vena Solutions Inc. (“Vena”), which was subsequently realized in April 2021. In Q1 2020, we recorded a $2.2 million loss due to revaluations primarily driven by the initial impact of COVID-19 on capital markets.
Additionally, net loss improved due to a $1.1 million increase in gross profit in the three months ended March 31, 2021 compared to the same period last year, as the reduction in revenue as described above was more than offset by our decrease in loan loss provision as we continue to experience levels of defaults below historical averages. We experienced an increase in operating expenses related to our resumed investment in growth particularly in marketing expenses, and also due to our acquisition of Carta in Q1 2021. These increases were largely offset by a reduction in credit facility interest expense and debenture interest expense, driven by the full repayment of our Credit Facility- Liquid in Q1 2020, and the full conversion of our convertible debentures into equity in Q1 2021.
10 | Page
|
|
Management’s Discussion and Analysis |
Adjusted EBITDA(1)
Adjusted EBITDA was a loss of $1.1 million for the three months ended March 31, 2021, a $1.6 million reduction compared to a gain of $0.5 million in the same period last year.
The decrease in adjusted EBITDA was driven primarily by an increase in growth related marketing expenses in the three months ended March 31, 2021. Marketing expenses increased by $1.8 million compared to the same period last year, comprising an increase in performance marketing spend and personnel costs. Additionally, the acquisition of Carta contributed to a reduction in adjusted EBITDA in Q1 2021, as we expand our sales and technology employee base to support the growth of customer contracts expected in 2021. These impacts were slightly offset by a net reduction in technology and development personnel cost compared to the prior period.
After demonstrating strong underlying profitability of our financial model in 2020, including achieving 49% adjusted EBITDA margin in both Q2 and Q3 2020, the Company has turned its focus to investments that it believes will drive long-term member and revenue growth. Specifically, Mogo believes that it has a unique opportunity to leverage its position as fintech adoption accelerates in Canada which is why it is focused on investing in its product and platform during this period. Specifically, the integration of Moka along with investments in expansion of Carta into the U.S. market and the continued investment in product development including our plans to launch free-stock trading later this year is expected to result in continued negative adjusted EBITDA during the rest of the year. As always, management will continue to assess its growth investments and adjust these investments when appropriate.
Adjusted cash net loss(1)
Adjusted cash net loss was $4.2 million for the three months ended March 31, 2021, a decrease of 20% compared to $5.2 million in the same period last year.
The $1.0 million improvement in adjusted cash net loss is driven primarily by a $1.1 million improvement in gross profit in the three months ended March 31, 2021, compared to the three months ended March 31, 2020. Additionally, there was $0.8 million less cash investment in intangible assets in the current period. This was partially offset by an overall net increase in other cash expenses, particularly around incremental growth-related cash operating expenses, which offset savings in credit facility interest expense and cash debenture interest expense.
Mogo members
Our total member base grew to 1,195,000 members as at March 31, 2021, from 1,022,000 members as at March 31, 2020, representing an increase of approximately 17% or 173,000 net members. Quarter over quarter, net members increased by 69,000 in Q1 2021, up from 1,126,000 members at December 31, 2020. This represents an acceleration in member growth compared to 52,000 net members added in Q4 2020. The continuous increase in our member base, reflects increased brand awareness through our marketing collaboration agreement with Postmedia and the continuing adoption of the Company’s new and existing products such as MogoCrypto and MogoCard.
(1) |
For more information regarding our use of these non-IFRS measures and, where applicable, a reconciliation to the most comparable IFRS measure, see “Non-IFRS Financial Measures”. |
11 | Page
|
|
Management’s Discussion and Analysis |
Results of Operations
The following table sets forth a summary of our results of operations for the three months ended March 31, 2021 and 2020:
($000s, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|||||
|
|
March 31, 2021 |
|
|
March 31, 2020 |
|
||
Total revenue |
|
$ |
11,420 |
|
|
$ |
13,910 |
|
Cost of revenue |
|
|
1,947 |
|
|
|
5,515 |
|
Gross profit |
|
|
9,473 |
|
|
|
8,395 |
|
Technology and development |
|
|
4,509 |
|
|
|
3,799 |
|
Marketing |
|
|
3,040 |
|
|
|
1,238 |
|
Customer service and operations |
|
|
2,176 |
|
|
|
2,153 |
|
General and administration |
|
|
4,050 |
|
|
|
2,855 |
|
Total operating expenses |
|
|
13,775 |
|
|
|
10,045 |
|
Loss from operations |
|
|
(4,302 |
) |
|
|
(1,650 |
) |
Credit facility interest expense |
|
|
996 |
|
|
|
2,566 |
|
Debenture and other financing expense |
|
|
952 |
|
|
|
1,884 |
|
Accretion related to debentures and convertible debentures |
|
|
310 |
|
|
|
209 |
|
Revaluation (gain) losses |
|
|
(5,262 |
) |
|
|
2,161 |
|
Other non-operating expenses |
|
|
1,511 |
|
|
|
1,595 |
|
|
|
|
(1,493 |
) |
|
|
8,415 |
|
Net loss before tax |
|
|
(2,809 |
) |
|
|
(10,065 |
) |
Income tax expense |
|
|
8 |
|
|
|
— |
|
Net loss |
|
|
(2,817 |
) |
|
|
(10,065 |
) |
Other comprehensive income: |
|
|
|
|
|
|
|
|
Items that are or may be reclassified subsequently to profit or loss: |
|
|
|
|
|
|
|
|
Unrealized revaluation gain on digital assets |
|
|
576 |
|
|
|
— |
|
Foreign currency translation reserve gain |
|
|
288 |
|
|
|
— |
|
Other comprehensive income |
|
|
864 |
|
|
|
— |
|
Total comprehensive loss |
|
|
(1,953 |
) |
|
|
(10,065 |
) |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(1) |
|
|
(1,066 |
) |
|
|
544 |
|
Adjusted cash net loss |
|
|
(4,165 |
) |
|
|
(5,217 |
) |
Net loss per share (Basic and fully dilutive) |
|
|
(0.06 |
) |
|
|
(0.36 |
) |
(1) |
For more information regarding our use of these non-IFRS measures and, where applicable, a reconciliation to the most comparable IFRS measure, see “Non-IFRS Financial Measures”. |
12 | Page
|
|
Management’s Discussion and Analysis |
Key Income Statement Components
Total revenue
The following table summarizes total revenue for the three months ended March 31, 2021 and 2020:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
|||||
|
|
March 31, 2021 |
|
|
March 31, 2020 |
|
|
Percentage change |
|
|||
Subscription and services revenue |
|
$ |
6,002 |
|
|
$ |
5,811 |
|
|
|
3 |
% |
Interest revenue |
|
|
5,418 |
|
|
|
8,099 |
|
|
|
(33 |
)% |
Total revenue |
|
|
11,420 |
|
|
|
13,910 |
|
|
|
(18 |
)% |
Subscription and services revenue – represents MogoProtect subscriptions, MogoCard revenue, MogoMortgage brokerage commissions, premium account revenue, net loan protection premiums, MogoCrypto revenue, partner lending fees, transaction processing revenue and other fees and charges.
Interest revenue - represents interest on our long-term loan products. Our long‑term loans fall into two categories: line of credit accounts and installment loans.
Total revenue was $11.4 million for the three months ended March 31, 2021, a decrease of 18% compared to $13.9 million in the same period last year.
The revenue decrease resulted primarily from the previously announced Liquid Sale in Q1 2020. Additionally, we purposely levered down the remainder of our loan portfolio and balance sheet throughout 2021 to minimize credit risk exposure in light of the COVID-19 pandemic. The decrease in total revenue was partially offset by our transaction processing revenue related to acquisition of Carta and an increase in transactional volume on our MogoCard and MogoCrypto products in the same periods.
Subscription and services revenue for the three months ended March 31, 2021 was $6.0 million compared to $5.8 million in the same period of 2020, an increase of $0.2 million or 3%. The increase in subscription and services revenue is primarily due to our transaction processing revenue related to acquisition of Carta and increase in activity on our MogoCard and MogoCrypto products, offsetting declines in loan-related subscription and services revenue resulting from the reduction in our loan portfolio discussed above.
Interest revenue for the three months ended March 31, 2021 was $5.4 million compared to $8.1 million in the same period of 2020, a decrease of $2.7 million or 33%. The decrease in interest revenue is primarily attributable to the Liquid Sale during Q1 2020 and lower average loan book size as discussed above.
Cost of revenue
The following table summarizes the cost of revenue for the three months ended March 31, 2021 and 2020:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
|||||
|
|
March 31, 2021 |
|
|
March 31, 2020 |
|
|
Percentage change |
|
|||
Provision for loan losses, net of recoveries |
|
$ |
1,535 |
|
|
$ |
5,338 |
|
|
|
(71 |
)% |
Transaction costs |
|
|
412 |
|
|
|
177 |
|
|
|
133 |
% |
Cost of revenue |
|
|
1,947 |
|
|
|
5,515 |
|
|
|
(65 |
)% |
As a percentage of total revenue |
|
|
17 |
% |
|
|
40 |
% |
|
|
|
|
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
13 | Page
|
|
Management’s Discussion and Analysis |
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.
Cost of revenue was $1.9 million for the three months ended March 31, 2021, a decrease of 65% compared to $5.5 million in the same period last year. The decrease in cost of revenue is largely driven by a specific $1.2 million additional provision expense recorded in Q1 2020 in response to the onset of the COVID-19 pandemic which did not recur in Q1 2021. Additionally, the Liquid Sale resulted in the elimination of recurring provision expense on that portion of the loan portfolio effective in Q2 2020. Further, ongoing provision for loan losses were lower in Q1 2021 as compared to Q1 2020, as Mogo continues to experience lower than historical average defaults despite the economic challenges presented by the COVID-19 pandemic.
We believe we are adequately provisioned to absorb any potential future material shocks to the loan book as a result of 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. As a result of uncertain economic conditions arising from the COVID-19 pandemic, 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, the extent to which government subsidies will continue to be available as the COVID-19 pandemic continues, 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.
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, and transaction processing costs related to the Carta business. Transaction costs were $0.4 million for the three months ended March 31, 2021, an increase of 133% compared to $0.2 million in the same period last year, primarily due to transaction processing costs related to Carta.
Technology and Development Expenses
The following table provides the technology and development expenses for the three months ended March 31, 2021 and 2020:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
|||||
|
|
March 31, 2021 |
|
|
March 31, 2020 |
|
|
Percentage change |
|
|||
Technology and development |
|
$ |
4,509 |
|
|
$ |
3,799 |
|
|
|
19 |
% |
As a percentage of total revenue |
|
|
39 |
% |
|
|
27 |
% |
|
|
|
|
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, depreciation, amortization of capitalized software costs related to our technology platform, and for the comparative period only, hosting costs relating to servers and bitcoin mining equipment.
Technology and development expenses were $4.5 million for the three months ended March 31, 2021, an increase of 19% compared to $3.8 million in the same period last year. Technology and development expenses as a percentage of total revenue increased from 27% to 39% for the three months ended March 31, 2021, an increase of 12% compared to the same period last year. This increase is primarily due to new non-cash amortization expense in Q1 2021 associated with the $22.3 million intangible assets recognized on the purchase price allocation of our acquisition of Carta this quarter. Additionally, there was an overall increase in personnel costs arising from the Carta acquisition as a result of increased employee headcount.
The capitalization of technology and development expenses for the three months ended March 31, 2021 was $1.2 million compared to $1.8 million in the same period of 2020, a decrease of $0.7 million or 36%. The variance is primarily related to the decrease in average employee headcount related to capitalized projects during the period.
14 | Page
|
|
Management’s Discussion and Analysis |
As the Company continues in 2021, we anticipate further increasing our growth investment in technology and development in order to capitalize on opportunities that we believe will strengthen Mogo’s product service offerings and drive long-term member and revenue growth. Specifically, these include investments in the development of a free stock trading solution, a peer-to-peer payments solution, enhancements to our MogoCard and MogoCrypto products, the addition of Moka’s saving and investing products and the expansion of Carta into the U.S. digital payments market, which represents the largest portion of the US$500 billion North American payments market. We believe that these strategic investments are critical 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 accelerated long-term growth and user adoption.
Marketing Expenses
The following table provides the marketing expenses for the three months ended March 31, 2021 and 2020:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
|||||
|
|
March 31, 2021 |
|
|
March 31, 2020 |
|
|
Percentage change |
|
|||
Marketing |
|
$ |
3,040 |
|
|
$ |
1,238 |
|
|
|
146 |
% |
As a percentage of total revenue |
|
|
27 |
% |
|
|
9 |
% |
|
|
|
|
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, public relations, promotional event programs and corporate communications.
Marketing expenses were $3.0 million for the three months ended March 31, 2021, an increase of 146% compared to $1.2 million in the same period last year. Marketing expenses as a percentage of total revenue increased from 9% to 27% for the three months ended March 31, 2021, an increase of 18% compared to the same period last year. The increase for the three months ended March 31, 2021 is primarily due to higher expenses on social media marketing and other promotional activities to support growth of our business. Following our conscious reduction in marketing activities in 2020, we have ramped marketing expense back up in 2021 in support of return to growth initiatives.
Customer Service and Operations Expenses
The following table provides the customer service and operations expenses (“CS&O”) for the three months ended March 31, 2021 and 2020:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
|||||
|
|
March 31, 2021 |
|
|
March 31, 2020 |
|
|
Percentage change |
|
|||
Customer service and operations |
|
$ |
2,176 |
|
|
$ |
2,153 |
|
|
|
1 |
% |
As a percentage of total revenue |
|
|
19 |
% |
|
|
15 |
% |
|
|
|
|
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 $2.2 million for the three months ended March 31, 2021, an increase of 1% compared to $2.2 million in the same period last year. CS&O expenses as a percentage of total revenue increased from 15% to 19% for the three months ended March 31, 2021, an increase of 4% compared to the same period last year. The increase in CS&O expense is primarily due to a increase in personnel costs.
15 | Page
|
|
Management’s Discussion and Analysis |
General and Administration Expenses
The following table provides the general and administration expenses (“G&A”) for the three months ended March 31, 2021 and 2020:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
|||||
|
|
March 31, 2021 |
|
|
March 31, 2020 |
|
|
Percentage change |
|
|||
General and administration |
|
$ |
4,050 |
|
|
$ |
2,855 |
|
|
|
42 |
% |
As a percentage of total revenue |
|
|
35 |
% |
|
|
21 |
% |
|
|
|
|
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 were $4.0 million for the three months ended March 31, 2021, an increase of 42% compared to $2.9 million in the same period last year. G&A expenses as a percentage of total revenue increased from 21% to 35% for the three months ended March 31, 2021, an increase of 14% compared to the same period last year. The increase in the current quarter is primarily due to increased personnel cost upon the acquisition of Carta, along with an increase in professional fees, insurance and non-cash stock compensation expenses compared to the same period last year.
Credit Facility Interest Expense
The following table provides a breakdown of credit facility interest expense for the three months ended March 31, 2021 and 2020:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
|||||
|
|
March 31, 2021 |
|
|
March 31, 2020 |
|
|
Percentage change |
|
|||
Credit facility interest expense – Other |
|
|
996 |
|
|
|
1,657 |
|
|
|
(40 |
)% |
Credit facility interest expense – Liquid |
|
$ |
— |
|
|
$ |
909 |
|
|
|
(100 |
)% |
Total credit facility interest expense |
|
|
996 |
|
|
|
2,566 |
|
|
|
(61 |
)% |
As a percentage of total revenue |
|
|
9 |
% |
|
|
18 |
% |
|
|
|
|
Credit facility interest expense relates to the costs incurred in connection with our Credit Facility – Other, and prior to the Liquid Sale in Q1 2020 our Credit Facility – Liquid which has now been repaid in full. It includes interest expense and the amortization of deferred financing costs.
Credit facility interest expense for the three months ended March 31, 2021 was $1.0 million compared to $2.6 million in the same period of 2020, a decrease of $1.6 million or 61%. Credit facility interest expense as a percentage of total revenue decreased from 18% to 9% for the three months ended March 31, 2021.
The decrease in credit facility interest expense was driven by the extinguishment of the Credit Facility – Liquid during Q1 2020, a reduction in the interest rate on the Credit Facility – Other to 10.5% from 14.5% effective July 2, 2020, and repayments of the Credit Facility - Other resulting in lower related interest payments.
16 | Page
|
|
Management’s Discussion and Analysis |
Other Income and Expense
The following table provides a breakdown of other income and expense by type for the three months ended March 31, 2021 and 2020:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
|||||
|
|
March 31, 2021 |
|
|
March 31, 2020 |
|
|
Percentage change |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
Debenture and other financing expense |
|
$ |
952 |
|
|
$ |
1,884 |
|
|
|
(49 |
)% |
Accretion related to debentures and convertible debentures |
|
|
310 |
|
|
|
209 |
|
|
|
48 |
% |
Gain on acquisition, net of transaction costs |
|
|
— |
|
|
|
— |
|
|
n/a |
|
|
Revaluation (gain) losses |
|
|
(5,262 |
) |
|
|
2,161 |
|
|
n/a |
|
|
Other non-operating expenses |
|
|
1,511 |
|
|
|
1,595 |
|
|
n/a |
|
|
Total other (income) expense |
|
|
(2,489 |
) |
|
|
5,849 |
|
|
|
(143 |
)% |
As a percentage of total revenue |
|
|
(22 |
)% |
|
|
42 |
% |
|
|
|
|
Total other income was $2.5 million for the three months ended March 31, 2021, an increase of $8.3 million compared to the same period last year. Total other income as a percentage of total revenue decrease from 42% to (22%) for the three months ended March 31, 2021 compared to the same period last year. Change in total other (income) expense was primarily attributable to the revaluation gain on investments of ($5.3) million during Q1 2021 compared to a loss of $2.2 million.
Debenture and other financing expense primarily consist 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 49% for the three months ended March 31, 2021. The decrease is primarily related to the amendments made to the terms of the debentures, effective July 1, 2020 resulting in the reduction in the average coupon interest rate, from approximately 14% to approximately 7%. Additionally, the convertible debentures were fully converted to equity in Q1 2021 and no longer contribute to debenture expense.
Accretion related to debentures and non-convertible debentures increased by $0.1 million for the three months ended March 31, 2021. The increase is due to debenture related accretion after amendment to the debentures on September 30, 2020.
Revaluation gains for the three months ended March 31, 2021 are primarily due to unrealized gains booked on our investment portfolio related to the fair market value adjustment of certain companies within the portfolio. In Q1 2021, we recorded a gain of $5.3 million which includes an unrealized gain on the recently announced monetization of our Vena investment, which was subsequently realized in April 2021. Comparatively in Q1 2020, we recorded a $2.2 million loss due to revaluations primarily driven by the initial impact of COVID-19 on capital markets.
In Q1 2021, Mogo completed a US$54.0 million registered direct offering of common shares and common share purchase warrants. 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. The Company has recorded a fair value loss of $0.3 million related to the derivative stock warrants during Q1 2021. 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 this transaction, the portion of total transaction costs incurred with respect to the offering that is proportionate to the fair value of the derivative liability as a percentage of the total USD$54.0 million proceeds, was recognized to net loss during the quarter. The $1.5 million expense was recorded to other non-operating expenses.
17 | Page
|
|
Management’s Discussion and Analysis |
Other Comprehensive Income and Loss
The following table provides a breakdown of other comprehensive income and loss by type for the three months ended March 31, 2021 and 2020:
($000s, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|||||
|
|
March 31, 2021 |
|
|
March 31, 2020 |
|
|
Percentage change |
||
Unrealized revaluation gain on digital assets |
|
|
576 |
|
|
|
— |
|
|
n/a |
Foreign currency translation reserve gain |
|
|
288 |
|
|
|
— |
|
|
n/a |
Other comprehensive income |
|
|
864 |
|
|
|
— |
|
|
n/a |
Total other comprehensive income was $0.9 million for the three months ended March 31, 2021, an increase of $0.9 million compared to the same period last year.
Following the financial investment in bitcoin in Q1 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 financial statements for our detailed accounting policy.
Unrealized revaluation gains on digital assets were $0.6 million for the three months ended March 31, 2021, an increase of $0.6 million compared to the same period last year. These gains are due to increases in the market price of bitcoin across the quarter.
From the date of the acquisition of Carta in Q1 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 exchange rates at the dates of the transactions. Foreign currency differences arising are recognized in other comprehensive income or loss.
Foreign currency translation reserve gains were $0.3 million for the three months ended March 31, 2021, an increase of $0.3 million compared to the same period last year. These gains are due to fluctuations in foreign currency exchange rates across the quarter.
Selected Quarterly Information
($000s, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||||||||||||||||||||||
|
|
First Quarter |
|
|
Fourth Quarter |
|
|
Third Quarter |
|
|
Second Quarter |
|
|
First Quarter |
|
|
Fourth Quarter |
|
|
Third Quarter |
|
|
Second Quarter |
|
||||||||
Income Statement Highlights |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
11,420 |
|
|
$ |
10,002 |
|
|
$ |
9,774 |
|
|
$ |
10,559 |
|
|
$ |
13,910 |
|
|
$ |
15,018 |
|
|
$ |
15,029 |
|
|
$ |
14,867 |
|
Net (loss) income |
|
|
(2,817 |
) |
|
|
(2,849 |
) |
|
|
1,019 |
|
|
|
(1,550 |
) |
|
|
(10,065 |
) |
|
|
(6,188 |
) |
|
|
(6,033 |
) |
|
|
6,401 |
|
Net (loss) income per common share (basic and fully diluted) |
|
|
(0.06 |
) |
|
|
(0.09 |
) |
|
|
0.04 |
|
|
|
(0.06 |
) |
|
|
0.36 |
|
|
|
(0.24 |
) |
|
|
(0.22 |
) |
|
|
0.27 |
|
Non-IFRS Financial Measures(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
(1,066 |
) |
|
|
1,052 |
|
|
|
4,825 |
|
|
|
5,197 |
|
|
|
544 |
|
|
|
2,295 |
|
|
|
1,081 |
|
|
|
1,587 |
|
18 | Page
|
|
Management’s Discussion and Analysis |
Key Quarterly Trends
We have experienced continued quarter over quarter revenue growth since Q3 2020, driven by continuous growth in our subscription and services revenue and increasing uptake in our broadening portfolio of products along with the addition of transaction processing revenues related to the acquisition of Carta. Year over year total revenues primarily reflect a decrease in loan origination volumes due primarily to the sale of our Liquid loan portfolio in Q1 2020, and discontinuation of bitcoin mining operations in Q3 2019.
In Q1 2021, net (loss) income is relatively better than 2019 and first quarter of 2020 driven by a $5.3 million unrealized gain on our investment portfolio in the current quarter. Net (loss) income performed well in Q2 2020 to Q4 2020 relative to the prior periods due to a significant reduction in our operating costs during COVID-19. In Q1 2020 and prior, fluctuations in net (loss) income were driven by changes in non-cash related items such as the gain on acquisition in Q2 2019, and the initial Q1 2020 COVID-19 related charges to loan loss provision and unrealized loss on investments.
Adjusted EBITDA generally fluctuated within the same range from Q2 2019 to the end of 2019, and the decline in Q1 2020 was primarily attributable to the initial upfront COVID-19 allowance recorded to loan loss provision expense in that quarter, based on our estimate of future losses that would result from worsening economic conditions associated with COVID-19. During Q2 2020 and Q3 2020, the improvement in Adjusted EBITDA is driven primarily by a dedicated plan implemented in late March 2020 to significantly reduce operating expenses, and strong loan book performance despite the COVID-19 pandemic, whereas for last two quarters, adjusted EBITDA decreased due to our resumed investment in growth expenses, for which there is a timing lag between expenditure and revenue growth.
(1) |
For more information regarding our use of these non-IFRS measures and, where applicable, a reconciliation to the most comparable IFRS measure, see “Non-IFRS Financial Measures”. |
19 | Page
|
|
Management’s Discussion and Analysis |
Key Balance Sheet Components
The following table provides a summary of the key balance sheet components as at March 31, 2021 and December 31, 2020:
($000s) |
|
|
|
|
|
As at |
|
|
|
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||
Cash |
|
$ |
95,467 |
|
|
$ |
12,119 |
|
Loans receivable, net |
|
|
46,386 |
|
|
|
47,227 |
|
Investment portfolio |
|
|
24,195 |
|
|
|
18,445 |
|
Total assets |
|
|
251,196 |
|
|
|
104,468 |
|
Total liabilities |
|
|
110,939 |
|
|
|
99,232 |
|
Total assets increased by $146.7 million during the three months ended March 31, 2021. The increase is primarily due to $54.2 million of goodwill and other intangible assets related to Carta and net cash proceeds of $87.4 million from issuing of common shares including shares issued in lieu of warrants and stock options.
Total liabilities increased by $11.7 million during the three months ended March 31, 2021. The increase is primarily due to the $16.1 million derivative stock warrants recognized in connection with the USD denominated exercise price of warrants issued under the US$54.0 million registered direct offering in Q1 2021, partially offset by the conversion of convertible debentures.
Loans receivable
The following table provides a breakdown of loans receivable as at March 31, 2021 and December 31, 2020:
($000s) |
|
|
|
|
|
As at |
|
|
|
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||
Gross loans receivable |
|
$ |
55,568 |
|
|
$ |
56,113 |
|
Allowance for loan losses |
|
|
(9,182 |
) |
|
|
(8,886 |
) |
Net loans receivable |
|
|
46,386 |
|
|
|
47,227 |
|
The gross loans receivable portfolio was $55.6 million as at March 31, 2021, a decrease of $0.5 million or 1% compared to the balance as at December 31, 2020, the decrease being primarily attributable to principal repayments on our line of credit loan products.
($000s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2021 |
|
|
Year ended December 31, 2020 |
|
|
Three months ended March 31, 2020 |
|
|||
Allowance for loan losses, beginning of year |
|
$ |
8,886 |
|
|
$ |
16,020 |
|
|
$ |
16,020 |
|
Derecognition of allowance associated with loan sale |
|
|
— |
|
|
|
(2,131 |
) |
|
|
(2,131 |
) |
Provision for loan losses |
|
|
1,861 |
|
|
|
9,451 |
|
|
|
5,672 |
|
Loans charged-off |
|
|
(1,565 |
) |
|
|
(14,454 |
) |
|
|
(4,416 |
) |
Allowance for loan losses, end of year |
|
|
9,182 |
|
|
|
8,886 |
|
|
|
15,145 |
|
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
20 | Page
|
|
Management’s Discussion and Analysis |
allowance for loan losses at each reporting date. Increases in the provision for loan losses, net of recoveries, are recorded as a cost of revenue in the interim condensed consolidated statement of operations and comprehensive loss.
The allowance for loan losses was $9.2 million as at March 31, 2021, an increase of $0.3 million compared to December 31, 2020, due primarily to new loan originations and a slight adjustment to provisioning rates.
The allowance for loan losses as a percentage of gross loans receivable remained relatively flat at 16.5% in Q1 2021 compared to 15.8% in Q4 2020. As at March 31, 2021, the allowance still includes an incremental allowance in respect of potential future losses arising from COVID-19 as a result of the requirement under IFRS 9 to account for forward-looking indicators when determining the allowance. We believe that the COVID-19 related allowance is adequate to absorb any material shocks to the loan book as a result of COVID-19 conditions. It should be noted that this upfront COVID-19 related allowance has already been reflected in our provision for loan losses in the consolidated statements of operations and comprehensive loss. Refer to the “Cost of revenue” section above for further discussion of the impact of COVID-19 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 the 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 months ended March 31, 2021 include transactions with debenture holders that incur interest. The related party debentures balance as at March 31, 2021 totaled $338,000 (December 31, 2020 – $358,000). The debentures bear annual coupon interest of 8.0% (December 31, 2020 – 8.0%) with interest expense of $7,000 for the three months ended March 31, 2021 (three months ended March 31, 2020 – $11,000). The related parties involved in such transactions were (i) a member of the family of Gregory Feller, a director and officer of the Company; (ii) David Feller, a director and officer of the Company; and (iii) key management personnel and members of their families. The debentures are ongoing contractual obligations that are used to fund our corporate and operational activities.
Off‑Balance Sheet Arrangements
We have 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.
21 | Page
|
|
Management’s Discussion and Analysis |
Liquidity and Capital Resources
To date the Company has funded its lending activities, expenses and losses primarily through the proceeds of its initial public offering which raised $50 million in 2015, subsequent issuance 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 (formerly Difference Capital Financial Inc.) and Mogo Finance Technology Inc. in the second quarter of 2019 also added to the Company’s capital resources and strengthened its financial position with an investment portfolio valued at $24.2 million as at March 31, 2021 which the Company is actively seeking to monetize. In the first quarter of 2020, the Company completed the Liquid Sale: being the sale of a majority of its MogoLiquid loan portfolio for total gross consideration of $31.6 million, using the proceeds to extinguish its Credit Facility - Liquid. 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 Facilities or our long-term debentures, in each case as they become due and payable. The debentures are subordinated to the Credit Facility – Other 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 – Other, being July 2, 2022.
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 (US$14.4 million), net of agent commission. The program was terminated on February 21, 2021.
On February 24, 2021, the Company issued to certain individual investors an aggregate of 5,346,536 common shares at a purchase price of US$10.10 per common share and received cash proceeds of approximately $62.8 million (US$50.1 million), net of agent commission. In a concurrent private placement, Mogo completed the issuance to the investors of unregistered warrants 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 the date which is three and a half years following the data of issuance. A portion of the net proceeds from the offering were used to fund the cash component of the investment in Coinsquare, with the remaining net proceeds to be used for general corporate and working capital purposes.
22 | 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 months ended March 31, 2021 and 2020:
($000s) |
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|||||
|
|
March 31, 2021 |
|
|
March 31, 2020 |
|
||
Cash (used in) operating activities before investment in gross loans receivable(1) |
|
$ |
(2,762 |
) |
|
$ |
(355 |
) |
Proceeds from sale of loan book |
|
|
— |
|
|
|
31,572 |
|
Cash invested in loans receivable |
|
|
(1,021 |
) |
|
|
(2,028 |
) |
Cash provided by (used in) operating activities |
|
|
(3,783 |
) |
|
|
29,189 |
|
Cash provided by (used in) investing activities |
|
|
70 |
|
|
|
(1,871 |
) |
Cash provided by (used in) financing activities |
|
|
86,543 |
|
|
|
(31,210 |
) |
Net increase (decrease) in cash for the period |
|
|
82,830 |
|
|
|
(3,892 |
) |
Net cash increase in the three months ended March 31, 2021 was $82.9 million inflow compared to ($3.9) million outflow during the same period last year. The increase is primarily due to net cash inflow of $81.3 million from issuance of common shares and $5.9 million related to proceeds from common shares issued from the exercise of warrants. The prior period includes proceeds of $31.6 million from sale of our MogoLiquid loan book, which we used primarily to pay down our Credit Facility- Liquid.
Cash provided by (used in) operating activities
Our operating activities consist of our subscription and services revenue inflows, our cash operating and interest expense outflows, as well as the funding and servicing of our loan products, including the receipt of principal and interest payments from our loan customers, and payment of associated direct costs and receipt of associated fees.
Cash provided by (invested in) operating activities before investment in gross loans receivable was ($2.8) million in the three months ended March 31, 2021, compared to ($0.4) million in the same period last year. This increase is primarily due to higher cash operating expenses primarily related to Carta acquisition.
Cash invested in loans receivable was ($1.0) million in the three months ended March 31, 2021, compared to ($2.0) million in the same period last year. This was the result of management reducing net loan originations relative to the same period last year in light of the COVID-19 pandemic and sale of Liquid loan book in February 2020.
In the three months ended March 31, 2021, cash provided by (used in) operating activities was ($3.8) million outflow, compared to $29.2 million inflow in the same period last year, due to the reasons above along with $31.6 million of proceeds from the Liquid Sale in February 2020.
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 and cash 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.
For the three months ended March 31, 2021, cash provided by investing activities was $0.1 million inflow, compared to ($1.9) million outflow in the same period last year. This is primarily due to $2.1 million cash acquired in Carta acquisition partially offset with our investment in digital assets of $0.8 million.
23 | Page
|
|
Management’s Discussion and Analysis |
Cash provided by (used in) financing activities
Historically, our financing activities have consisted primarily of the issuance of our common shares, debentures, convertible debentures, and borrowings and repayments on our credit facilities.
Cash (used in) provided by financing activities in the three months ended March 31, 2021 was $86.5 million inflow, primarily due to net cash inflow of $81.3 million from issuance of common shares, $5.9 million related to proceeds from common shares issued on the exercise of warrants and proceeds of $0.3 million on account of stock option exercises, partially offset with $0.5 million of debenture principal repayment. Comparatively for the same period last year, cash (used in) provided by financing activities was ($31.2) million, driven primarily by the payoff of our Credit Facility- Liquid.
Contractual Obligations
The following table shows contractual obligations as at March 31, 2021. Management will continue to refinance any outstanding amounts owing under the Credit Facilities or our long-term debentures as they become due and payable.
($000s) |
|
2021 |
|
|
2022 |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
Thereafter |
|
||||||
Commitments - operational |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease payments |
|
|
1,139 |
|
|
|
1,446 |
|
|
|
1,297 |
|
|
|
1,206 |
|
|
|
1,240 |
|
|
|
2,727 |
|
Trade payables |
|
|
7,360 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Accrued wages and other expenses |
|
|
4,469 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Interest – Credit Facilities |
|
|
2,951 |
|
|
|
1,967 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Interest – Debentures |
|
|
2,325 |
|
|
|
2,986 |
|
|
|
1,875 |
|
|
|
352 |
|
|
|
— |
|
|
|
— |
|
Purchase obligations |
|
|
789 |
|
|
|
1,052 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
19,033 |
|
|
|
7,451 |
|
|
|
3,172 |
|
|
|
1,558 |
|
|
|
1,240 |
|
|
|
2,727 |
|
Commitments – principal repayments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Facility – Other |
|
|
— |
|
|
|
37,476 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Debentures |
|
|
1,552 |
|
|
|
2,183 |
|
|
|
19,972 |
|
|
|
19,234 |
|
|
|
— |
|
|
|
— |
|
|
|
|
1,552 |
|
|
|
39,659 |
|
|
|
19,972 |
|
|
|
19,234 |
|
|
|
— |
|
|
|
— |
|
Total contractual obligations |
|
|
20,585 |
|
|
|
47,110 |
|
|
|
23,144 |
|
|
|
20,792 |
|
|
|
1,240 |
|
|
|
2,727 |
|
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 May 13, 2021, 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 May 12, 2021 |
Common shares |
|
64,798 |
Stock options |
|
4,701 |
Restricted share units |
|
79 |
Common share purchase warrants |
|
5,111 |
24 | Page
|
|
Management’s Discussion and Analysis |
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, 2020 and interim condensed consolidated financial statements for the three months ended March 31, 2021.
This MD&A makes reference to certain non-IFRS financial measures. Adjusted EBITDA and adjusted cash net loss are both 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.
Adjusted EBITDA is a non-IFRS financial measure that we calculate as net loss and comprehensive loss excluding depreciation and amortization, stock-based compensation, non-cash warrant expense, one-time provision for excise tax, credit facility interest expense, debenture and other financing expense and related accretion, gain on acquisition, revaluation (gains) and losses and other non-operating (income) expenses. 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 and comprehensive loss, the most comparable IFRS financial measure, for each of the periods indicated:
($000s) |
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|||||
|
|
March 31, 2021 |
|
|
March 31, 2020 |
|
||
Net loss |
|
$ |
(2,817 |
) |
|
$ |
(10,065 |
) |
Depreciation and amortization |
|
|
2,418 |
|
|
|
2,225 |
|
Stock‑based compensation |
|
|
557 |
|
|
|
214 |
|
Non-cash warrant expense |
|
|
269 |
|
|
|
(245 |
) |
Credit facility interest expense |
|
|
996 |
|
|
|
2,566 |
|
Debenture and other financing expense |
|
|
952 |
|
|
|
1,884 |
|
Accretion related to debentures and convertible debentures |
|
|
310 |
|
|
|
209 |
|
Revaluation (gain) losses |
|
|
(5,262 |
) |
|
|
2,161 |
|
Other non-operating expenses |
|
|
1,511 |
|
|
|
1,595 |
|
Adjusted EBITDA |
|
|
(1,066 |
) |
|
|
544 |
|
25 | Page
|
|
Management’s Discussion and Analysis |
Adjusted net loss and adjusted cash net loss
Adjusted net loss is a non-IFRS financial measure that we calculate as net loss and comprehensive loss excluding stock-based compensation, revaluation (gains) and losses, net, and other non-operating expenses. 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 overall financial performance.
Adjusted cash net loss is a non-IFRS financial measure that excludes from adjusted net loss depreciation and amortization, deferred financing costs and non-cash interest expense, which are expenses recognized in the period that do not impact cash flow in that period, as well as other non-operating (income) and expenses. It also deducts capitalized intangible assets which are cash outflows in the period that get capitalized to the statement of financial position, rather than expensed through the statement of operations and comprehensive loss. Adjusted cash net loss is a measure used by our management and Board to evaluate core cash flow trends within the business. We believe that the adjustment out of net loss of certain non-cash related items, and inclusion of recurring capitalized cash costs, provides a useful gauge of underlying net cash flow in the business, excluding impacts of timing differences from changes in working capital.
The following table presents a reconciliation of adjusted net loss and adjusted cash net loss to net loss and comprehensive loss, the most comparable IFRS financial measure, for each of the periods indicated:
($000s) |
|
|
|
|
||||
|
|
Three months ended |
|
|||||
|
|
March 31, 2021 |
|
|
March 31, 2020 |
|
||
Net loss |
|
|
(2,817 |
) |
|
|
(10,065 |
) |
Stock‑based compensation |
|
|
557 |
|
|
|
214 |
|
Non-cash warrant expense |
|
|
269 |
|
|
|
(245 |
) |
Revaluation (gain) losses |
|
|
(5,262 |
) |
|
|
2,161 |
|
Other non-operating expenses |
|
|
1,511 |
|
|
|
1,595 |
|
Adjusted net loss |
|
|
(5,742 |
) |
|
|
(6,340 |
) |
|
|
|
|
|
||||
Depreciation and amortization |
|
|
2,418 |
|
|
|
2,225 |
|
Deferred financing cost amortization |
|
|
— |
|
|
|
222 |
|
Accretion related to debentures and convertible debentures |
|
|
310 |
|
|
|
209 |
|
Convertible debenture non-cash interest |
|
|
32 |
|
|
|
315 |
|
Capitalization cost of intangible assets |
|
|
(1,183 |
) |
|
|
(1,848 |
) |
Adjusted cash net loss |
|
|
(4,165 |
) |
|
|
(5,217 |
) |
26 | Page
|
|
Management’s Discussion and Analysis |
Non-Financial Measures
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, MogoSpend, MogoMortgage, MogoCrypto, our premium account subscription offerings, free credit score with free monthly credit score monitoring, 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, MogoProtect, MogoSpend, MogoMortgage, MogoCrypto, 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.
The preparation of the interim 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 capitalization of intangible assets, valuation of long-lived assets, allowance for loan losses, valuation of privately held investments, share-based payments, income taxes, valuation of goodwill and acquired intangible assets, derivative stock warrants and judgments surrounding the accounting for digital assets, which are described further in the notes to the Company’s consolidated financial statements for the twelve months ended December 31, 2020 and interim condensed consolidated financial statements for the three months ended March 31, 2021.
Changes in Accounting Policies including Initial Adoption
Recent IFRS standards adopted in 2021
Certain new or amended standards and interpretations became effective on January 1, 2021 or later, 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.
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, 2020, except for the new policies discussed in note 3 to the interim condensed consolidated financial statements.
The Company’s CEO and 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.
27 | Page
|
|
Management’s Discussion and Analysis |
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 March 31, 2021, 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.
28 | Page
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 March 31, 2021. |
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 January 1, 2021 and ended on March 31, 2021 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR. |
Date: May 13, 2021
“David Feller”
______________________
David Feller
Chief Executive Officer
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 March 31, 2021. |
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 January 1, 2021 and ended on March 31, 2021 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR. |
Date: May 13, 2021
“Gregory Feller”
_______________________
Gregory Feller
Chief Financial Officer