Exhibit 99.1
|
| Page |
| F-2 | |
| F-3 | |
| F-4 | |
| F-6 | |
Notes to the Interim Condensed Consolidated Financial Statements |
| F-7 |
Mogo Inc.
Interim Condensed Consolidated Statement of Financial Position
(Unaudited)
(Expressed in thousands of Canadian Dollars)
|
| Note |
|
| June 30, 2021 |
|
| December 31, 2020 |
| |||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalent |
|
|
|
|
|
| 55,406 |
|
|
| 12,119 |
|
Digital assets |
|
| 6 |
|
|
| 1,184 |
|
|
| — |
|
Loans receivable |
|
| 4 |
|
|
| 48,460 |
|
|
| 47,227 |
|
Prepaids, and other receivables and assets |
|
|
|
|
|
| 7,474 |
|
|
| 2,994 |
|
Investment portfolio |
|
| 19 |
|
|
| 19,173 |
|
|
| 18,445 |
|
Investment accounted for using the equity method |
|
| 18 |
|
|
| 101,803 |
|
|
| — |
|
Property and equipment |
|
| 7 |
|
|
| 1,154 |
|
|
| 892 |
|
Right-of-use assets |
|
|
|
|
|
| 3,813 |
|
|
| 3,879 |
|
Intangible assets |
|
| 8 |
|
|
| 62,404 |
|
|
| 18,912 |
|
Derivative financial assets |
|
| 18 |
|
|
| 30,321 |
|
|
| — |
|
Goodwill |
|
| 17 |
|
|
| 58,944 |
|
|
| — |
|
Total assets |
|
|
|
|
|
| 390,136 |
|
|
| 104,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable, accruals and other |
|
|
|
|
|
| 16,772 |
|
|
| 7,843 |
|
Lease liabilities |
|
|
|
|
|
| 4,270 |
|
|
| 4,336 |
|
Credit facilities |
|
| 9 |
|
|
| 37,476 |
|
|
| 37,644 |
|
Debentures |
|
| 10 |
|
|
| 40,053 |
|
|
| 40,658 |
|
Convertible debentures |
|
| 11 |
|
|
| — |
|
|
| 8,751 |
|
Derivative stock warrants |
|
| 12 |
|
|
| 13,690 |
|
|
| — |
|
Total liabilities |
|
|
|
|
|
| 112,261 |
|
|
| 99,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
| 21a |
|
|
| 355,387 |
|
|
| 106,730 |
| |
Contributed surplus |
|
|
|
|
|
| 30,928 |
|
|
| 13,560 |
|
Foreign currency translation reserve |
|
|
|
|
|
| 360 |
|
|
| — |
|
Revaluation reserve |
| 6 |
|
|
| 26 |
|
|
| — |
| |
Deficit |
|
|
|
|
|
| (108,826 | ) |
|
| (115,054 | ) |
Total shareholders’ equity |
|
|
|
|
|
| 277,875 |
|
|
| 5,236 |
|
Total equity and liabilities |
|
|
|
|
|
| 390,136 |
|
|
| 104,468 |
|
Approved on Behalf of the Board
Signed by “Greg Feller” , Director
Signed by “Christopher Payne” , Director
The accompanying notes are an integral part of these financial statements.
F-2
Mogo Inc.
Interim Condensed Consolidated Statement of Operations and Comprehensive Income (Loss)
(Unaudited)
(Expressed in thousands of Canadian Dollars)
|
|
|
| Three months ended |
|
| Six months ended |
| ||||||||||
|
| Note |
| June 30, 2021 |
|
| June 30, 2020 |
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription and services |
|
|
|
| 8,218 |
|
|
| 4,536 |
|
|
| 14,220 |
|
|
| 10,347 |
|
Interest revenue |
|
|
|
| 5,447 |
|
|
| 6,023 |
|
|
| 10,865 |
|
|
| 14,122 |
|
|
| 13 |
|
| 13,665 |
|
|
| 10,559 |
|
|
| 25,085 |
|
|
| 24,469 |
|
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses, net of recoveries |
| 4 |
|
| 774 |
|
|
| 973 |
|
|
| 2,309 |
|
|
| 6,311 |
|
Transaction costs |
|
|
|
| 797 |
|
|
| 14 |
|
|
| 1,209 |
|
|
| 191 |
|
|
|
|
|
| 1,571 |
|
|
| 987 |
|
|
| 3,518 |
|
|
| 6,502 |
|
Gross profit |
|
|
|
| 12,094 |
|
|
| 9,572 |
|
|
| 21,567 |
|
|
| 17,967 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology and development |
|
|
|
| 3,486 |
|
|
| 1,148 |
|
|
| 5,704 |
|
|
| 2,942 |
|
Marketing |
|
|
|
| 4,154 |
|
|
| 610 |
|
|
| 7,190 |
|
|
| 1,843 |
|
Customer service and operations |
|
|
|
| 3,420 |
|
|
| 1,214 |
|
|
| 5,583 |
|
|
| 3,359 |
|
General and administration |
|
|
|
| 4,253 |
|
|
| 1,919 |
|
|
| 7,636 |
|
|
| 4,353 |
|
Stock based compensation |
|
|
|
| 3,805 |
|
|
| 460 |
|
|
| 4,362 |
|
|
| 674 |
|
Depreciation and amortization |
|
|
|
| 2,971 |
|
|
| 2,287 |
|
|
| 5,389 |
|
|
| 4,512 |
|
Total operating expenses |
| 14 |
|
| 22,089 |
|
|
| 7,638 |
|
|
| 35,864 |
|
|
| 17,683 |
|
(Loss) income from operations |
|
|
|
| (9,995 | ) |
|
| 1,934 |
|
|
| (14,297 | ) |
|
| 284 |
|
Other expenses (income) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit facility interest expense |
| 9 |
|
| 1,005 |
|
|
| 1,580 |
|
|
| 2,001 |
|
|
| 4,146 |
|
Debenture and other financing expense |
| 5,10,11 |
|
| 871 |
|
|
| 1,946 |
|
|
| 1,823 |
|
|
| 3,830 |
|
Accretion related to debentures and convertible debentures |
|
|
|
| 312 |
|
|
| 168 |
|
|
| 621 |
|
|
| 377 |
|
Share of loss in investment accounted for using the equity method |
| 18 |
|
| 2,860 |
|
|
| — |
|
|
| 2,860 |
|
|
| — |
|
Revaluation (gains) losses |
| 15 |
|
| (24,850 | ) |
|
| 1,186 |
|
|
| (30,112 | ) |
|
| 3,347 |
|
Other non-operating expenses (income) |
| 16 |
|
| 752 |
|
|
| (1,396 | ) |
|
| 2,264 |
|
|
| 199 |
|
|
|
|
|
| (19,050 | ) |
|
| 3,484 |
|
|
| (20,543 | ) |
|
| 11,899 |
|
Net income (loss) before tax |
|
|
|
| 9,055 |
|
|
| (1,550 | ) |
|
| 6,246 |
|
|
| (11,615 | ) |
Income tax expense |
|
|
|
| 10 |
|
|
| — |
|
|
| 18 |
|
|
| — |
|
Net income (loss) |
|
|
|
| 9,045 |
|
|
| (1,550 | ) |
|
| 6,228 |
|
|
| (11,615 | ) |
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that are or may be reclassified subsequently to profit or loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized revaluation (loss) gain on digital assets |
| 6 |
|
| (550 | ) |
|
| — |
|
|
| 26 |
|
|
| — |
|
Foreign currency translation reserve gain |
|
|
|
| 72 |
|
|
| — |
|
|
| 360 |
|
|
| — |
|
Other comprehensive income (loss): |
|
|
|
| (478 | ) |
|
| — |
|
|
| 386 |
|
|
| — |
|
Total comprehensive income (loss) |
|
|
|
| 8,567 |
|
|
| (1,550 | ) |
|
| 6,614 |
|
|
| (11,615 | ) |
Net income (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
|
|
|
| 0.142 |
|
|
| (0.055 | ) |
|
| 0.112 |
|
|
| (0.417 | ) |
Diluted earnings (loss) per share |
|
|
|
| 0.134 |
|
|
| (0.055 | ) |
|
| 0.103 |
|
|
| (0.417 | ) |
Weighted average number of basic common shares (in 000s) |
|
|
|
| 63,597 |
|
|
| 28,111 |
|
|
| 55,368 |
|
|
| 27,882 |
|
Weighted average number of fully diluted common shares (in 000s) |
|
|
|
| 67,352 |
|
|
| 28,111 |
|
|
| 60,195 |
|
|
| 27,882 |
|
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) |
|
|
| Share capital |
|
| Contributed surplus |
|
| Foreign currency translation reserve |
|
| Revaluation reserve |
|
| Deficit |
|
| Total |
| |||||||
Balance, December 31, 2020 |
|
| 32,731 |
|
|
| $ | 106,730 |
|
| $ | 13,560 |
|
| $ | — |
|
| $ | — |
|
| $ | (115,054 | ) |
| $ | 5,236 |
|
Loss and comprehensive loss |
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,817 | ) |
|
| (2,817 | ) |
Foreign currency translation reserve |
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| 288 |
|
|
| — |
|
|
| — |
|
|
| 288 |
|
Revaluation reserve (Note 6) |
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 576 |
|
|
| — |
|
|
| 576 |
|
Stock based compensation (Note 21b) |
|
| — |
|
|
|
| — |
|
|
| 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 (Note 17) |
|
| 10,000 |
|
|
|
| 54,800 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 54,800 |
|
Shares issued – convertible debentures (Note 11) |
|
| 3,179 |
|
|
|
| 8,783 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8,783 |
|
Warrants issued for broker services (Note 21d) |
|
| — |
|
|
|
| — |
|
|
| 1,410 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,410 |
|
Warrants exercised (Note 20d) |
|
| 3,375 |
|
|
|
| 7,498 |
|
|
| (1,615 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,883 |
|
Amortization of warrants (Note 20d) |
|
| — |
|
|
|
| — |
|
|
| 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 |
|
| Foreign currency translation reserve |
|
| Revaluation reserve |
|
| Deficit |
|
| Total |
| |||||||
Balance, March 31, 2021 |
|
| 56,664 |
|
|
| $ | 243,899 |
|
| $ | 13,365 |
|
| $ | 288 |
|
| $ | 576 |
|
| $ | (117,871 | ) |
| $ | 140,257 |
|
Loss and comprehensive loss |
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,045 |
|
|
| 9,045 |
|
Foreign currency translation reserve |
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| 72 |
|
|
| — |
|
|
| — |
|
|
| 72 |
|
Revaluation reserve (Note 6) |
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (550 | ) |
|
| — |
|
|
| (550 | ) |
Stock based compensation (Note 21b) |
|
| — |
|
|
|
| — |
|
|
| 3,805 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,805 |
|
Options and restricted share units (“RSUs”) exercised |
|
| 259 |
|
|
|
| 973 |
|
|
| (305 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 668 |
|
Shares issued – ATM arrangement, net |
|
| — |
|
|
|
| (469 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (469 | ) |
Shares issued on acquisition of Moka (Note 17) |
|
| 5,000 |
|
|
|
| 46,600 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 46,600 |
|
Shares issued on investment accounted for using the equity method (Note 18) |
|
| 6,741 |
|
|
|
| 63,878 |
|
|
| 13,901 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 77,779 |
|
Equity settled share based payment (Note 21b) |
|
| 17 |
|
|
|
| 164 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 164 |
|
Warrants exercised (Note 21d) |
|
| 122 |
|
|
|
| 342 |
|
|
| (95 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 247 |
|
Amortization of warrants (Note 21d) |
|
| — |
|
|
|
| — |
|
|
| 257 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 257 |
|
Balance, June 30, 2021 |
|
| 68,803 |
|
|
|
| 355,387 |
|
|
| 30,928 |
|
|
| 360 |
|
|
| 26 |
|
|
| (108,826 | ) |
|
| 277,875 |
|
The accompanying notes are an integral part of these financial statements.
F-4
Mogo Inc.
Interim Condensed Consolidated Statement of Changes in Equity (Deficit)
(Expressed in thousands of Canadian Dollars)
|
| Number of shares (000s) |
|
|
| Share capital |
|
| Contributed surplus |
|
| Deficit |
|
| Total |
| |||||
Balance, December 31, 2019 |
|
| 27,558 |
|
|
| $ | 94,500 |
|
| $ | 8,861 |
|
| $ | (101,609 | ) |
| $ | 1,752 |
|
Loss and comprehensive loss |
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| (10,065 | ) |
|
| (10,065 | ) |
Stock based compensation (Note 21b) |
|
| — |
|
|
|
| — |
|
|
| 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 21d) |
|
| — |
|
|
|
| — |
|
|
| (381 | ) |
|
| — |
|
|
| (381 | ) |
Balance, March 31, 2020 |
|
| 27,871 |
|
|
|
| 95,530 |
|
|
| 8,679 |
|
|
| (111,674 | ) |
|
| (7,465 | ) |
|
| Number of shares (000s) |
|
|
| Share capital |
|
| Contributed surplus |
|
| Deficit |
|
| Total |
| |||||
Balance, March 31, 2020 |
|
| 27,871 |
|
|
| $ | 95,530 |
|
| $ | 8,679 |
|
| $ | (111,674 | ) |
| $ | (7,465 | ) |
Loss and comprehensive loss |
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| (1,550 | ) |
|
| (1,550 | ) |
Stock based compensation (Note 21b) |
|
| — |
|
|
|
|
|
|
|
| 460 |
|
|
| — |
|
|
| 460 |
|
Options and restricted share units (“RSUs”) exercised |
|
| 37 |
|
|
|
| 114 |
|
|
| (114 | ) |
|
| — |
|
|
| — |
|
Equity portion - convertible debenture (Note 11) |
|
| — |
|
|
|
| — |
|
|
| 617 |
|
|
| — |
|
|
| 617 |
|
Shares issued – convertible debentures (Note 11) |
|
| 499 |
|
|
|
| 629 |
|
|
| — |
|
|
| — |
|
|
| 629 |
|
Shares issued to settle debt |
|
| 427 |
|
|
|
| 537 |
|
|
| — |
|
|
| — |
|
|
| 537 |
|
Amortization of warrants (Note 21d) |
|
| — |
|
|
|
| — |
|
|
| 515 |
|
|
| — |
|
|
| 515 |
|
Balance, June 30, 2020 |
|
| 28,834 |
|
|
|
| 96,810 |
|
|
| 10,157 |
|
|
| (113,224 | ) |
|
| (6,257 | ) |
The accompanying notes are an integral part of these financial statements.
F-5
Mogo Inc.
Consolidated Statement of Cash Flows
(Expressed in thousands of Canadian Dollars)
|
|
|
| Three months ended |
|
| Six months ended |
| ||||||||||
|
| Note |
| June 30, 2021 |
|
| June 30, 2020 |
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||||
Cash provided by (used in) the following activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
| 9,045 |
|
|
| (1,550 | ) |
|
| 6,228 |
|
|
| (11,615 | ) |
Items not affecting cash: |
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
Depreciation and amortization |
|
|
|
| 2,971 |
|
|
| 2,287 |
|
|
| 5,389 |
|
|
| 4,512 |
|
Postmedia warrant expenses |
| 21d |
|
| 257 |
|
|
| 516 |
|
|
| 526 |
|
|
| 271 |
|
Provision for loan losses |
| 4 |
|
| 961 |
|
|
| 1,311 |
|
|
| 2,822 |
|
|
| 6,983 |
|
Credit facility and debenture interest expense |
|
|
|
| 1,876 |
|
|
| 3,526 |
|
|
| 3,823 |
|
|
| 7,976 |
|
Accretion related to debentures and convertible debentures |
|
|
|
| 312 |
|
|
| 168 |
|
|
| 621 |
|
|
| 377 |
|
Share of loss from investment in associate |
|
|
|
| 2,860 |
|
|
| — |
|
|
| 2,860 |
|
|
| — |
|
Stock based compensation expense |
| 21b |
|
| 3,805 |
|
|
| 460 |
|
|
| 4,362 |
|
|
| 674 |
|
Revaluation (gains) losses |
|
|
|
| (24,850 | ) |
|
| 1,186 |
|
|
| (30,112 | ) |
|
| 3,347 |
|
Other non-operating (income) expenses |
|
|
|
| 164 |
|
|
| (34 | ) |
|
| 490 |
|
|
| (662 | ) |
|
|
|
|
| (2,599 | ) |
|
| 7,870 |
|
|
| (2,991 | ) |
|
| 11,863 |
|
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net issuance of loans receivable |
|
|
|
| (3,035 | ) |
|
| 5,456 |
|
|
| (4,055 | ) |
|
| 3,428 |
|
Proceeds from sale of loan book |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 31,572 |
|
Prepaid expenses, deposits and other assets |
|
|
|
| (284 | ) |
|
| (180 | ) |
|
| (580 | ) |
|
| (375 | ) |
Accounts payable and accruals |
|
|
|
| (1,054 | ) |
|
| (3,181 | ) |
|
| (1,197 | ) |
|
| (3,232 | ) |
Cash generated from (used in) operating activities |
|
|
|
| (6,972 | ) |
|
| 9,965 |
|
|
| (8,823 | ) |
|
| 43,256 |
|
Interest paid |
|
|
|
| (1,875 | ) |
|
| (1,736 | ) |
|
| (3,807 | ) |
|
| (5,839 | ) |
Net cash (used in) generated from operating activities |
|
|
|
| (8,847 | ) |
|
| 8,229 |
|
|
| (12,630 | ) |
|
| 37,417 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of a subsidiary, net of cash acquired |
|
|
|
| (281 | ) |
|
| — |
|
|
| 1,820 |
|
|
| — |
|
Cash invested in investment accounted for using the equity method |
|
|
|
| (32,396 | ) |
|
| — |
|
|
| (32,396 | ) |
|
| — |
|
Purchases of property and equipment |
|
|
|
| (73 | ) |
|
| — |
|
|
| (171 | ) |
|
| (23 | ) |
Investment in digital assets |
|
|
|
| (500 | ) |
|
| — |
|
|
| (1,250 | ) |
|
| — |
|
Investment in intangible assets |
|
|
|
| (1,038 | ) |
|
| (882 | ) |
|
| (2,221 | ) |
|
| (2,730 | ) |
Net cash used in investing activities |
|
|
|
| (34,288 | ) |
|
| (882 | ) |
|
| (34,218 | ) |
|
| (2,753 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of investment |
|
|
|
| 4,625 |
|
|
| — |
|
|
| 4,625 |
|
|
| — |
|
Cash invested in investment portfolio |
|
|
|
| (1,700 | ) |
|
| — |
|
|
| (1,794 | ) |
|
| — |
|
Lease liabilities – principal payments |
|
|
|
| (197 | ) |
|
| (114 | ) |
|
| (339 | ) |
|
| (273 | ) |
Net repayments on debentures |
|
|
|
| (509 | ) |
|
| — |
|
|
| (1,011 | ) |
|
| (5 | ) |
Net repayments on credit facilities |
|
|
|
| — |
|
|
| (6,272 | ) |
|
| (168 | ) |
|
| (37,333 | ) |
Proceeds from issuance of common shares, net of transaction costs |
|
|
|
| (469 | ) |
|
| — |
|
|
| 80,816 |
|
|
| — |
|
Proceeds from exercise of warrants |
|
|
|
| 247 |
|
|
| — |
|
|
| 6,130 |
|
|
| — |
|
Proceeds from exercise of options |
|
|
|
| 1,223 |
|
|
| — |
|
|
| 1,504 |
|
|
| 15 |
|
Net cash provided by (used in) financing activities |
|
|
|
| 3,220 |
|
|
| (6,386 | ) |
|
| 89,763 |
|
|
| (37,596 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash |
|
|
|
| (39,915 | ) |
|
| 961 |
|
|
| 42,915 |
|
|
| (2,932 | ) |
Effect of exchange rate fluctuations |
|
|
|
| (146 | ) |
|
| — |
|
|
| 372 |
|
|
| — |
|
Cash and cash equivalent, beginning of period |
|
|
|
| 95,467 |
|
|
| 6,524 |
|
|
| 12,119 |
|
|
| 10,417 |
|
Cash and cash equivalent, end of period |
|
|
|
| 55,406 |
|
|
| 7,485 |
|
|
| 55,406 |
|
|
| 7,485 |
|
The accompanying notes are an integral part of these financial statements.
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 and six months ended June 30, 2021 and 2020
1. | Nature of operations |
Mogo Inc. (“Mogo” or the "Company") was continued under the Business Corporations Act (British Columbia) on June 21, 2019 in connection with the combination with Mogo Finance Technology Inc. (“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 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.
COVID-19 Pandemic
During the second 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 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.
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. 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. 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-7
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and six months ended June 30, 2021 and 2020
2. | Basis of presentation |
Statement of compliance
These interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standards ("IAS") 34, Interim Financial Reporting. The policies applied in these interim condensed consolidated financial statements were based on IFRS issued and outstanding at June 30, 2021.
The Company presents its interim condensed consolidated statement of financial position on a non-classified basis in order of liquidity.
The Company elected to change the presentation of its interim condensed consolidated statement of operations and comprehensive income (loss) to include stock based compensation and depreciation and amortization as separate items. The Group believes that this presentation is relevant to an understanding of its financial performance. Refer to note 14 for a reconciliation of total operating expenses to a presentation by function.
These interim condensed consolidated financial statements were authorized by the Board of Directors (the “Board”) to be issued on August 11, 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 20 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.
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 and six months ended June 30, 2021 and 2020
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, and the business combination with Moka Financial Technologies Inc. (“Moka”) on May 4, 2021, as discussed below (refer to note 17 for further details), and the adoption of new accounting policies applied as a result of the Company’s investment in digital assets.
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
Revenue is comprised of subscription and services and interest revenue. The Company introduced new subscription and services revenue streams through business combinations during the three and six months ended June 30, 2021 and adopted the following new revenue policies.
Transaction processing revenue
The Company’s transaction processing revenue is derived from long-term processing contracts with financial and non-financial institutions. Transaction processing revenue is generated primarily from [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.
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 and six months ended June 30, 2021 and 2020
3. | Significant accounting policies (Continued from previous page) |
Service revenue
The Company earns service revenue through its offering of certain subscription-based saving and investing products. The Company’s service revenue is derived from monthly contracts with individual users.
The Company recognizes service revenue from the two performance obligations on a straight-line basis, over the length of the contract, on a monthly basis.
Management fee revenue
Revenue from management services consists of management fees earned through investment advisory services and from investment fund management.
Revenue is recognized when the services are provided based on the management fees set out in the corresponding contract and collectability is reasonably assured.
Exempt Market Dealer commission revenue
The Company’s Exempt Market Dealer commission revenue is earned by organizing, assisting and coordinating investments in privately held entities without a prospectus to third parties. The Company earns a commission based on the rate set out within the agreement and is payable upon completion of the services outlined in the agreement.
Restricted cash
The cash and cash equivalents disclosed above and in the statement of cash flows include $2,010 which are held by the Company. These deposits are subject to regulatory restrictions and are therefore not available for general use.
Investment in associate
An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The considerations made in determining significant influence are similar to those necessary to determine control over subsidiaries.
The Company’s investment in its associate is accounted for using the equity method. Under the equity method, the investment in an associate is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the Company’s share of net assets of the associate since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is not tested for impairment separately.
The statement of operations and comprehensive income (loss) reflects the Company’s share of the results of operations of the associate. Unrealized gains and losses resulting from transactions between the Company and the associate are eliminated to the extent of the interest in the associate.
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 and six months ended June 30, 2021 and 2020
3. | Significant accounting policies (Continued from previous page) |
The aggregate of the Company’s share of an associate’s profit or loss after tax is shown on the face of the statement of operations and comprehensive income (loss) as a separate line item. The financial statements of the associate are prepared for the same reporting period as the Company. When necessary, adjustments are made to bring the accounting policies in line with those of the Company. After application of the equity method, the Company determines whether it is necessary to recognize an impairment loss on its investment in its associate. At each reporting date, the Company determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence, the Company calculates the amount of impairment as the
difference between the recoverable amount of the associate and its carrying value, and then recognizes the loss within its share of profit or loss of an associate in the statement of operations and comprehensive income (loss).
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, regulatory licenses, and customer relationships with finite useful lives. Acquired brand and trade names are considered to have indefinite useful lives. Internally generated software costs primarily consist of salaries and payroll-related costs for employees directly involved in the development efforts and fees paid to outside consultants.
Amortization is recorded at rates intended to amortize the cost of the intangible assets over their estimated useful lives as follows:
|
| Rate |
Software - Internally generated |
| 5 years straight line |
Software licenses |
| 5 years straight line |
Technology assets - Acquired |
| 10 years straight line |
Customer relationships |
| 5 years straight line |
Regulatory licenses |
| 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.
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 and six months ended June 30, 2021 and 2020
3. | Significant accounting policies (Continued from previous page) |
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.
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.
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.
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 June 30, 2021 and December 31, 2020 are as follows:
|
| June 30, 2021 |
|
| December 31, 2020 |
| ||
Current (terms of one year or less) |
|
| 56,203 |
|
|
| 54,978 |
|
Non-current (terms exceeding one year) |
|
| 496 |
|
|
| 1,135 |
|
|
|
| 56,699 |
|
|
| 56,113 |
|
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 and six months ended June 30, 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 June 30, 2021 |
| |||||||||||||
Risk Category |
| Days past due |
| Stage 1 |
|
| Stage 2 |
|
| Stage 3 |
|
| Total |
| ||||
Strong |
| Not past due |
|
| 47,827 |
|
|
| — |
|
|
| — |
|
|
| 47,827 |
|
Lower risk |
| 1-30 days past due |
|
| 1,815 |
|
|
| — |
|
|
| — |
|
|
| 1,815 |
|
Medium risk |
| 31-60 days past due |
|
| — |
|
|
| 592 |
|
|
| — |
|
|
| 592 |
|
Higher risk |
| 61-90 days past due |
|
| — |
|
|
| 504 |
|
|
| — |
|
|
| 504 |
|
Non-performing |
| 91+ days past due or bankrupt |
|
| — |
|
|
| — |
|
|
| 5,961 |
|
|
| 5,961 |
|
|
| Gross loans receivable |
|
| 49,642 |
|
|
| 1,096 |
|
|
| 5,961 |
|
|
| 56,699 |
|
|
| Allowance for loan losses |
|
| (4,600 | ) |
|
| (656 | ) |
|
| (2,983 | ) |
|
| (8,239 | ) |
|
| Loans receivable, net |
|
| 45,042 |
|
|
| 440 |
|
|
| 2,978 |
|
|
| 48,460 |
|
|
|
| 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-13
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and six months ended June 30, 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 June 30, 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.
Allowance for loan losses |
| Three months ended |
|
| Six months ended |
| ||||||||||
|
| June 30, 2021 |
|
| June 30, 2020 |
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
|
| 9,182 |
|
|
| 15,145 |
|
|
| 8,886 |
|
|
| 16,020 |
|
Derecognition of allowance associated with loan sale |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,131 | ) |
Provision for loan losses |
|
| 961 |
|
|
| 1,311 |
|
|
| 2,822 |
|
|
| 6,983 |
|
Charge offs |
|
| (1,904 | ) |
|
| (4,142 | ) |
|
| (3,469 | ) |
|
| (8,558 | ) |
Balance, end of period |
|
| 8,239 |
|
|
| 12,314 |
|
|
| 8,239 |
|
|
| 12,314 |
|
As at June 30, 2021, our allowance for loan losses includes $922 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 and six months ended June 30, 2021 of $187 and $513 respectively (three and six months ended June 30, 2020 - $338 and $672 respectively).
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 and six months ended June 30, 2021 include transactions with debenture holders that incur interest. The related party debentures balance as at June 30, 2021 totaled $259 (December 31, 2020 – $358). The debentures bear annual coupon interest of 8.0% (December 31, 2020 – 8.0%) with interest expense for the three and six months ended June 30, 2021 totalling $5 and $12 respectively (three and six months ended June 30, 2020 – $14 and $25 respectively). The related parties involved in such transactions include shareholders, officers, directors, and management, close members of their families, or entities which are directly or indirectly controlled by close members of their families. The debentures are ongoing contractual obligations that are used to fund our corporate and operational activities. In 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.
On June 30, 2021, the Company acquired 1,300,000 common shares of Tetra Trust Company from its associate Coinsquare Ltd. for $1,300.
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 and six months ended June 30, 2021 and 2020
6. | Digital assets |
Digital assets represent investments in cryptocurrencies which the company expects to hold for the foreseeable future.
|
| Average cost per unit |
|
| Quantities |
|
| Total Average cost |
|
| Fair value per unit June 30, 2021 |
|
| Total fair value June 30, 2021 |
|
| Cumulative revaluation gain (loss) |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bitcoin (BTC) |
| $ | 42,079 |
|
|
| 17.82 |
|
| $ | 750 |
|
| $ | 44 |
|
| $ | 776 |
|
| $ | 26 |
|
Ethereum (ETH) |
|
| 3,425 |
|
|
| 145.99 |
|
|
| 500 |
|
|
| 3 |
|
|
| 408 |
|
|
| (92 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,184 |
|
|
| (66 | ) |
In January 2021, the Company purchased $750 of Bitcoin and in April 2021, the Company purchased $500 of Ethereum. During the three and six months ended June 30, 2021, the Company recorded $550 of revaluation loss and $26 of revaluation gain respectively on digital assets through other comprehensive income (loss). During the three and six months ended June 30, 2021, the Company recorded $92 of revaluation loss through net income (loss). As at June 30, 2021, the carrying value of our digital assets held was $1,184.
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 |
|
| 170 |
|
|
| — |
|
|
| — |
|
|
| 170 |
|
Additions through business combinations |
|
| 298 |
|
|
| 15 |
|
|
| — |
|
|
| 313 |
|
Effects of movement in exchange rate |
|
| (8 | ) |
|
| (1 | ) |
|
| — |
|
|
| (9 | ) |
Balance at June 30, 2021 |
|
| 2,543 |
|
|
| 1,194 |
|
|
| 2,055 |
|
|
| 5,792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
| 175 |
|
|
| 37 |
|
|
| — |
|
|
| 212 |
|
Balance at June 30, 2021 |
|
| 1,722 |
|
|
| 861 |
|
|
| 2,055 |
|
|
| 4,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020 |
|
| 536 |
|
|
| 356 |
|
|
| — |
|
|
| 892 |
|
Balance at June 30, 2021 |
|
| 821 |
|
|
| 333 |
|
|
| — |
|
|
| 1,154 |
|
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 and six months ended June 30, 2021 and 2020
7. | Property and equipment (Continued from previous page) |
Upon the completion of the acquisition of Carta on January 25, 2021 and Moka on May 4, 2021, the Company recognized property and equipment with a fair value of $298 and $15 respectively, 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 and six months ended June 30, 2021 respectively (three and six months ended June 30, 2020 - $113 and $227 respectively) for leasehold improvements are included in general and administration expenses. Depreciation expense of $127 and $212 for the three and six months ended June 30, 2021 respectively (three and six months ended June 30, 2020 - $83 and $163 respectively) for computer equipment, furniture and fixtures is included in technology and development costs.
8. | Intangible assets |
|
| Internally generated – completed |
|
| Internally generated – in progress |
|
|
Software licenses |
|
| Acquired technology assets |
|
| Customer relationships |
|
| Brand |
|
| Regulatory licenses |
|
| 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 |
|
| — |
|
|
| 2,197 |
|
|
| 25 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,222 |
|
Additions through a business combination |
|
| — |
|
|
| — |
|
|
| 628 |
|
|
| 32,900 |
|
|
| 4,000 |
|
|
| 900 |
|
|
| 7,700 |
|
|
| 46,128 |
|
Transfers |
|
| 1,936 |
|
|
| (1,936 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Effects of movement in exchange rate |
|
| — |
|
|
| — |
|
|
| (24 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (24 | ) |
Balance at June 30, 2021 |
|
| 41,440 |
|
|
| 1,790 |
|
|
| 3,985 |
|
|
| 32,900 |
|
|
| 4,000 |
|
|
| 900 |
|
|
| 7,700 |
|
|
| 92,715 |
|
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 |
|
| 3,516 |
|
|
| — |
|
|
| 105 |
|
|
| 946 |
|
|
| 136 |
|
|
| — |
|
|
| 131 |
|
|
| 4,834 | �� |
Balance at June 30, 2021 |
|
| 25,747 |
|
|
| — |
|
|
| 3,351 |
|
|
| 946 |
|
|
| 136 |
|
|
| — |
|
|
| 131 |
|
|
| 30,311 |
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020 |
|
| 17,273 |
|
|
| 1,529 |
|
|
| 110 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 18,912 |
|
Balance at June 30, 2021 |
|
| 15,693 |
|
|
| 1,790 |
|
|
| 634 |
|
|
| 31,954 |
|
|
| 3,864 |
|
|
| 900 |
|
|
| 7,569 |
|
|
| 62,404 |
|
Upon the acquisition of Carta on January 25, 2021 and Moka on May 4, 2021, the Company recognized intangible assets with a fair value of $22,928 and $24,200 respectively, on the interim condensed consolidated statement of financial position.
Intangible assets include internally generated development costs, acquired software and technology assets, regulatory license, and customer relationships with finite useful lives. Amortization of intangible assets of $2,379 and $4,533 for the three and six months ended June 30, 2021 respectively (three and six months ended June 30, 2020 – $1,935 and $3,795 respectively) are included in technology and development costs.
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 and six months ended June 30, 2021 and 2020
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 June 30, 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 June 30, 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.
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. |
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 June 30, 2021, 3,174,610 warrants have been exercised and converted into common shares for cash proceeds of $6,444. As at June 30, 2021, 1,304,782 Debenture Warrants remain outstanding and exercisable.
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 and six months ended June 30, 2021 and 2020
10. | Debentures (Continued from previous page) |
The Company’s debentures balance includes the following:
|
| June 30, 2021 |
|
| December 31, 2020 |
| ||
Principal balance |
|
| 42,231 |
|
|
| 43,442 |
|
Discount |
|
| (2,953 | ) |
|
| (3,575 | ) |
|
|
| 39,278 |
|
|
| 39,867 |
|
Interest payable |
|
| 775 |
|
|
| 791 |
|
|
|
| 40,053 |
|
|
| 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 |
| |||
|
| 1,545 |
|
|
| — |
|
|
| 1,545 |
| |
2022 |
|
| 2,174 |
|
|
| — |
|
|
| 2,174 |
|
2023 |
|
| 3,279 |
|
|
| 16,355 |
|
|
| 19,634 |
|
2024 |
|
| 937 |
|
|
| 17,941 |
|
|
| 18,878 |
|
|
|
| 7,935 |
|
|
| 34,296 |
|
|
| 42,231 |
|
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.
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 and six months ended June 30, 2021 and 2020
11. | Convertible debentures (Continued from previous page) |
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.
The following table summarizes the carrying value of the convertible debentures as at June 30, 2021:
|
| Net book value, June 30, 2021 |
|
| Net book value, December 31, 2020 |
| ||
|
| 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.
|
| June 30, 2021 |
|
| December 31, 2020 |
| ||
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020 |
|
| — |
|
|
| — |
|
Stock warrants issued at February 24, 2021 |
|
| 15,767 |
|
|
| — |
|
Change in fair value due to revaluation of derivative stock warrants |
|
| (1,820 | ) |
|
| — |
|
Change in fair value due to foreign exchange |
|
| (257 | ) |
|
| — |
|
Balance, June 30, 2021 |
|
| 13,690 |
|
|
| — |
|
Change in fair value due to revaluation of stock warrants for the three and six months ended June 30, 2021 was a loss of $2,108 and $1,820 respectively. Change in fair value due to foreign exchange for the three and six months ended June 30, 2021 was a loss of $303 and $257 respectively.
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 and six months ended June 30, 2021 and 2020
12. | Derivative stock warrants (Continued from previous page) |
Details of the derivative stock warrants as at June 30, 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 June 30, 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 six months ended June 30, 2021 |
|
| For the year ended December 31, 2020 |
| ||
Risk-free interest rate |
| 0.24%-0.46% |
|
|
| — |
| |
Expected life |
| 3.2 years |
|
|
| — |
| |
Expected volatility in market price of shares |
| 91%-95% |
|
|
| — |
| |
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 |
|
| Six months ended |
| ||||||||||
|
| June 30, 2021 |
|
| June 30, 2020 |
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||||
Canada |
|
| 11,653 |
|
|
| 10,559 |
|
|
| 21,906 |
|
|
| 24,469 |
|
Europe |
|
| 1,869 |
|
|
| — |
|
|
| 3,014 |
|
|
| — |
|
Other |
|
| 143 |
|
|
| — |
|
|
| 165 |
|
|
| — |
|
Total |
|
| 13,665 |
|
|
| 10,559 |
|
|
| 25,085 |
|
|
| 24,469 |
|
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 and six months ended June 30, 2021 and 2020
14. | Expense by function |
The following table summarizes the Company’s operating expenses by function including stock based compensation and depreciation and amortization:
|
| Three months ended |
|
| Six months ended |
| ||||||||||
|
| June 30, 2021 |
|
| June 30, 2020 |
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||||
Technology and development |
|
| 6,969 |
|
|
| 3,329 |
|
|
| 11,477 |
|
|
| 7,128 |
|
Marketing |
|
| 4,192 |
|
|
| 621 |
|
|
| 7,232 |
|
|
| 1,859 |
|
Customer service and operations |
|
| 4,377 |
|
|
| 1,210 |
|
|
| 6,553 |
|
|
| 3,363 |
|
General and administration |
|
| 6,551 |
|
|
| 2,478 |
|
|
| 10,602 |
|
|
| 5,333 |
|
Total operating expenses |
|
| 22,089 |
|
|
| 7,638 |
|
|
| 35,864 |
|
|
| 17,683 |
|
15. | Revaluation (gains) and losses |
|
| Three months ended |
|
| Six months ended |
| ||||||||||
|
| June 30, 2021 |
|
| June 30, 2020 |
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||||
Unrealized exchange loss |
|
| 164 |
|
|
| 67 |
|
|
| 400 |
|
|
| 94 |
|
Change in fair value due to revaluation of derivative financial asset |
|
| (24,808 | ) |
|
| — |
|
|
| (24,808 | ) |
|
| — |
|
Change in fair value due to revaluation of derivative stock warrant |
|
| (2,107 | ) |
|
| — |
|
|
| (1,820 | ) |
|
| — |
|
Realized (gain) on investment portfolio |
|
| — |
|
|
| — |
|
|
| (2,460 | ) |
|
| — |
|
Unrealized loss (gain) on investment portfolio |
|
| 1,901 |
|
|
| 856 |
|
|
| (1,424 | ) |
|
| 3,279 |
|
Unrealized (gain) on other receivable |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (289 | ) |
Losses related to property and equipment |
|
| — |
|
|
| 263 |
|
|
| — |
|
|
| 263 |
|
|
|
| (24,850 | ) |
|
| 1,186 |
|
|
| (30,112 | ) |
|
| 3,347 |
|
On April 28, 2021, the Company sold its investment in Vena Solutions Inc. for cash proceeds of $4,625. The resultant gain on sale was recorded within unrealized (gain) loss on investment portfolio during the three months ended March 31, 2021 and is realized during the three months ended June 30, 2021.
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 and six months ended June 30, 2021 and 2020
16. | Other non-operating (income) expenses |
|
| Three months ended |
|
| Six months ended |
| ||||||||||
|
| June 30, 2021 |
|
| June 30, 2020 |
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||||
Gain on sale of loan book |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,676 | ) |
Credit facility prepayment and related expenses |
|
| — |
|
|
| 19 |
|
|
| (5 | ) |
|
| 2,618 |
|
Government grants |
|
| (602 | ) |
|
| (1,332 | ) |
|
| (1,208 | ) |
|
| (1,332 | ) |
Direct offering transaction costs allocated to warrant liability |
|
| — |
|
|
| — |
|
|
| 1,466 |
|
|
| — |
|
Acquisition costs, restructuring and other |
|
| 1,354 |
|
|
| (83 | ) |
|
| 2,011 |
|
|
| 589 |
|
|
|
| 752 |
|
|
| (1,396 | ) |
|
| 2,264 |
|
|
| 199 |
|
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”) and Canadian Emergency Rent Subsidy (“CERS”) 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 CERS and has made an accounting policy election to record the grants on a gross basis. As a result, Mogo has recorded other non-operating income of $602 and $1,208 for the three and six months ended June 30, 2021 respectively (three and six months ended June 30, 2020: $1,332 in respect of CEWS) in respect of the CEWS and CERS.
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).
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 and six months ended June 30, 2021 and 2020
17. | Business combinations |
Acquisition of Carta:
On January 25, 2021, Mogo completed the acquisition of all of the issued and outstanding securities of Carta in exchange for 10,000,000 common shares of Mogo with a fair value of $54,800 based on Mogo's closing share price at the acquisition date.
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.
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.
In the period January 25, 2021 to June 30, 2021, the operations of Carta contributed revenue of $3,477 and net loss of $970. If the acquisition had occurred on January 1, 2021, management estimates that proforma consolidated revenue would have been $25,550 and proforma consolidated net profit would have been $5,810 for the year ended December 31, 2021. In determining these amounts, management has assumed the fair value adjustments, determined, that arose on the date of business combination would have been the same if the acquisition had occurred on January 1, 2021.
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 and six months ended June 30, 2021 and 2020
17. | Business combination (Continued from previous page) |
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 interim condensed 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 |
|
Acquisition of Moka:
On May 4, 2021, Mogo completed the acquisition of all of the issued and outstanding securities 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 with a fair value of $46,600 based on Mogo's closing share price at the acquisition date, and cash consideration of $4,508 pursuant to the terms of a share exchange agreement among Mogo, Moka and all of the shareholders of Moka. In connection with the acquisition of Moka, the Company exchanged equity-settled share-based payments awards held by the employees of Moka for 366,343 equity-settled share-based payments awards of the Company with a contractual life of eight years.
Acquisition-related costs of $536 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.
The acquisition is expected to bring differentiated saving and investing products to broaden Mogo’s wealth offering and accelerate the growth of its high-margin subscription and transaction-based revenue.
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 and six months ended June 30, 2021 and 2020
17. | Business combination (Continued from previous page) |
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 May 4, 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 interim condensed 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.
|
| May 4, 2021 |
| |
|
| $ 000's |
| |
Assets acquired: |
|
|
|
|
Cash and cash equivalent |
|
| 4,227 |
|
Prepaids, and other receivables and assets |
|
| 2,208 |
|
Property and equipment |
|
| 40 |
|
Intangible assets |
|
| 23,200 |
|
Goodwill |
|
| 26,650 |
|
|
|
| 56,325 |
|
Liabilities assumed: |
|
|
|
|
Accounts payable, accruals & other |
|
| 5,217 |
|
|
|
| 5,217 |
|
|
|
|
|
|
Net assets acquired at fair value |
|
| 51,108 |
|
|
|
|
|
|
Share consideration |
|
| 46,600 |
|
Cash consideration |
|
| 4,508 |
|
Total consideration transferred |
|
| 51,108 |
|
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 and six months ended June 30, 2021 and 2020
18. | Investment accounted for using the equity method |
On April 16, 2021, the Company completed its initial strategic investment (the “Initial Investment”) in Coinsquare Ltd. (“Coinsquare”), Canada’s leading digital asset trading platform, pursuant to which Mogo has acquired 6,450,607 Coinsquare common shares, representing 19.99% ownership interest in Coinsquare, for total aggregate consideration of $55,359, comprising of a cash payment of $27,396 and the issuance of 2,807,577 Mogo common shares valued at $27,963 to Coinsquare and certain selling shareholders of Coinsquare. The transaction also included:
| • | a right for Mogo to purchase 3,223,690 common shares from certain selling shareholders at $8.29 per Coinsquare common share (the “Call Option”), whereby Mogo has an option to pay the purchase consideration fully in Mogo common shares. |
| • | a right for these certain selling shareholders to require Mogo to purchase 3,223,690 Coinsquare common shares (the “Put Option”), whereby the Call Option and Put Option are subject to certain exercise conditions, and whereby the exercise of either one of the Call Option or the Put Option results in the immediate expiry of the another, and; |
| • | a warrant to acquire 7,240,665 additional Coinsquare common shares through treasury at an exercise price of $8.29 per warrant, subject to certain conditions and payable by Mogo at least 50% in cash and the remainder in Mogo common shares (the “Coinsquare Warrant”). |
On June 4, 2021, Mogo acquired an additional 5,412,222 common shares of Coinsquare which increased Mogo’s ownership in Coinsquare from 19.99% to approximately 36.74%, through two separate transactions executed on that day, specifically:
| • | the exercise of the Call Option, to acquire 3,223,690 Coinsquare common shares from certain selling shareholders, with total consideration paid through the issuance of 2,791,904 Mogo common shares, and; |
| • | the purchase of 2,188,532 Coinsquare common shares from a selling shareholder pursuant to a share purchase agreement for a total consideration of 2,288,972 Mogo shares to be issued in three equal tranches on June 4, July 4 and August 4, 2021 respectively. As at June 30, 2021, 1,525,982 Mogo common shares in the amount of $13,901 remain issuable under this arrangement. |
On June 15, 2021, Mogo purchased an additional 655,644 common shares of Coinsquare from a selling shareholder which increased Mogo’s ownership from 36.74% to approximately 38.77%, for total aggregate consideration of $8,523, consisting of a cash payment of $5,000 and the issuance of 378,774 common shares of Mogo valued at $3,523. This transaction includes a right for Mogo (the “New Call Option”) to purchase addition 1,100,000 Coinsquare shares under certain conditions, at an exercise price of $13.00 per Coinsquare common share.
The Company’s initial 19.99% position in Coinsquare and subsequent investments are accounted for using the equity method in the interim condensed consolidated financial statements, effective as at the date of the Initial Investment on April 16, 2021, as Mogo participates in all significant financial and operating decisions of Coinsquare, even though it holds just under 20% of the voting rights. Therefore, the Company has determined that it exerted significant influence over Coinsquare as at that date.
The Company determined that the Call Option, Put Option, Coinsquare Warrant and New Call Option are classified as derivative financial instruments on the statement of financial position, fair valued using the Black-Scholes valuation model at initial recognition, and subsequently remeasured to fair value as at each reporting date. Any change in the fair value of these derivative financial instruments is recognized to revaluation gains (losses) in the interim condensed consolidated statement of operations and comprehensive income (loss).
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 and six months ended June 30, 2021 and 2020
18. | Investment accounted for using the equity method (Continued from previous page) |
The following table shows an allocation breakdown of the total $55,359 Initial Investment between the 19.99% investment, the Call Option, the Put Option and the Coinsquare Warrant, and further reconciles the total revaluation gains (losses) recognized on the derivative instruments in the three months ended June 30, 2021:
|
| Initial recognition date |
| Initial fair value on recognition |
|
| Call/Put Option fair value at exercise |
|
| Value at June 30, 2021 |
|
| Revaluation (gains) losses |
| ||||
Initial 19.99% investment |
| 16-Apr-21 |
|
| 45,506 |
|
| n/a |
|
|
| 45,506 |
|
|
| — |
| |
Call Option |
| 16-Apr-21 |
|
| 2,978 |
|
|
| 5,513 |
|
|
| — |
|
|
| (2,535 | ) |
Put Option |
| 16-Apr-21 |
|
| (3,533 | ) |
|
| — |
|
|
| — |
|
|
| (3,533 | ) |
Coinsquare Warrants |
| 16-Apr-21 |
|
| 10,408 |
|
| n/a |
|
|
| 29,282 |
|
|
| (18,874 | ) | |
Total - Initial Transaction |
|
|
|
| 55,359 |
|
|
|
|
|
|
|
|
|
|
| (24,942 | ) |
New Call Option |
| 15-Jun-21 |
|
| 1,173 |
|
| n/a |
|
|
| 1,039 |
|
|
| 134 |
| |
Total revaluation (gains) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (24,808 | ) |
Immediately prior to the exercise of Call Option on June 4, 2021, the Company fair valued its Call Option and Put Option to $5,513 and $nil respectively, and recorded revaluation gains of $2,535 and $3,533 respectively on these instruments in the interim condensed consolidated statement of operations and comprehensive income (loss) for the three and six months ended June 30, 2021. The exercise of Call Option resulted in the immediate expiry of the Put Option, accounted for through a derecognition of the Call Option and Put Option derivative assets from the statement of financial position and a corresponding increase to the investment in Coinsquare.
The fair value of the Coinsquare Warrant, Call Option, Put Option and New Call Option were estimated using the Black-Scholes option pricing model with the following assumptions:
|
| For the six months ended June 30, 2021 |
| |
Risk-free interest rate |
| 0.30% |
| |
Expected life |
| 0.26 - 0.83 years |
| |
Expected volatility in market price of shares |
| 69%-76% |
| |
Expected dividend yield |
|
| 0% |
|
Expected forfeiture rate |
|
| 0% |
|
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 and six months ended June 30, 2021 and 2020
18. | Investment accounted for using the equity method (Continued from previous page) |
The following table summarizes the fair value of net assets and the Company’s share of net assets acquired:
|
| As at June 30, 2021 |
| |
|
| $ 000's |
| |
|
|
|
|
|
Current assets |
|
| 103,210 |
|
Non-current assets |
|
| 45,333 |
|
Current liabilities |
|
| (79,814 | ) |
Non-current liabilities |
|
| (2,646 | ) |
Net assets |
|
| 66,083 |
|
Company's share of net assets - 38.77% |
|
| 25,620 |
|
|
|
|
|
|
Goodwill |
|
| 76,183 |
|
Carrying amount of interest in associate |
|
| 101,803 |
|
|
|
|
|
|
|
| April 16, 2021 to June 30, 2021 |
| |
Revenue |
|
| 19,574 |
|
|
|
|
|
|
Net income from continuing operations (100%) |
|
| 465 |
|
Post-tax loss from discontinued operations (100%) |
|
| (33 | ) |
Total comprehensive income |
|
| 432 |
|
|
|
|
|
|
Company's share of total comprehensive loss |
|
| (2,860 | ) |
|
|
|
|
|
|
|
|
|
|
Initial investment in Coinsquare |
|
| 45,507 |
|
Step up investments in Coinsquare |
|
| 59,156 |
|
Total investments in Coinsquare |
|
| 104,663 |
|
Share of loss in associate |
|
| (2,860 | ) |
Carrying amount of equity accounted investment |
|
| 101,803 |
|
|
|
|
|
|
Mogo's share of: |
|
|
|
|
Loss from continuing operations |
|
| (2,852 | ) |
Loss from discontinued operation - after tax |
|
| (8 | ) |
Other comprehensive income |
|
| - |
|
Total other comprehensive loss |
|
| (2,860 | ) |
|
|
|
|
|
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 and six months ended June 30, 2021 and 2020
19. | 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-29
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and six months ended June 30, 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 |
| ||||||||||||||||||||||||||
June 30, 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 |
|
|
|
|
|
| 19,173 |
|
|
| — |
|
|
| — |
|
|
| 19,173 |
|
|
| — |
|
|
| 253 |
|
|
| 18,920 |
|
|
| 19,173 |
|
Derivative assets |
|
| 18 |
|
|
| 30,321 |
|
|
| — |
|
|
| — |
|
|
| 30,321 |
|
|
| — |
|
|
| — |
|
|
| 30,321 |
|
|
| 30,321 |
|
|
|
|
|
|
|
| 49,494 |
|
|
| — |
|
|
| — |
|
|
| 49,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets not measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalent |
|
|
|
|
|
| — |
|
|
| 55,406 |
|
|
| — |
|
|
| 55,406 |
|
|
| 55,406 |
|
|
| — |
|
|
| — |
|
|
| 55,406 |
|
Loans receivable – current |
|
| 4 |
|
|
| — |
|
|
| 56,203 |
|
|
| — |
|
|
| 56,203 |
|
|
| — |
|
|
| 56,203 |
|
|
| — |
|
|
| 56,203 |
|
Loans receivable – non-current |
|
| 4 |
|
|
| — |
|
|
| 496 |
|
|
| — |
|
|
| 496 |
|
|
| — |
|
|
| — |
|
|
| 651 |
|
|
| 651 |
|
Other receivables |
|
|
|
|
|
| — |
|
|
| 1,637 |
|
|
| — |
|
|
| 1,637 |
|
|
| — |
|
|
| 1,637 |
|
|
| — |
|
|
| 1,637 |
|
|
|
|
|
|
|
| — |
|
|
| 113,742 |
|
|
| — |
|
|
| 113,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative stock warrants |
| 12 |
|
|
| 13,690 |
|
|
| — |
|
|
| — |
|
|
| 13,690 |
|
|
| — |
|
|
| 13,690 |
|
|
| — |
|
|
| 13,690 |
| |
|
|
|
|
|
|
| 13,690 |
|
|
| — |
|
|
| — |
|
|
| 13,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities not measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accruals |
|
|
|
|
|
| — |
|
|
| — |
|
|
| 16,075 |
|
|
| 16,075 |
|
|
| — |
|
|
| 16,075 |
|
|
| — |
|
|
| 16,075 |
|
Credit facilities |
|
| 9 |
|
|
| — |
|
|
| — |
|
|
| 37,476 |
|
|
| 37,476 |
|
|
| — |
|
|
| 37,476 |
|
|
| — |
|
|
| 37,476 |
|
Debentures |
|
| 10 |
|
|
| — |
|
|
| — |
|
|
| 40,053 |
|
|
| 40,053 |
|
|
| — |
|
|
| 40,053 |
|
|
| — |
|
|
| 40,053 |
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| 93,604 |
|
|
| 93,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 and six months ended June 30, 2021 and 2020
19. | 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-31
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and six months ended June 30, 2021 and 2020
19. | 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 liability | • Option pricing model | • None | • None |
Derivative financial assets | • Option pricing model | • Equity volatility | • None |
F-32
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and six months ended June 30, 2021 and 2020
19. | 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 June 30, 2021 and December 31, 2020 and classified as Level 3:
|
| June 30, 2021 |
|
| December 31, 2020 |
| ||
Opening balance of Level 3 investments |
|
| 18,291 |
|
|
| 20,691 |
|
Additions |
|
| 1,792 |
|
|
| 150 |
|
Disposal |
|
| (4,670 | ) |
|
| — |
|
Unrealized exchange loss |
|
| (377 | ) |
|
| (247 | ) |
Realized gain on investment portfolio |
|
| 2,460 |
|
|
| — |
|
Unrealized gain (loss) on investment portfolio |
|
| 1,424 |
|
|
| (2,303 | ) |
Balance of level 3 investments, end of period |
|
| 18,920 |
|
|
| 18,291 |
|
Unrealized exchange loss for the three and six months ended June 30, 2021 were $130 and $377 respectively (three and six months ended June 30, 2020 – loss of $335 and gain of $254 respectively).
Realized gain on investment portfolio for the three and six months ended June 30, 2021 were $nil and $2,460 respectively (three and six months ended June 30, 2020 - $nil).
Unrealized gain (loss) on investment portfolio for the three and six months ended June 30, 2021 were a loss of $4,273 and gain of $1,424 respectively (three and six months ended June 30, 2020 – loss of $856 and $3,279 respectively).
| (ii) | Sensitivity analysis |
For the fair value of equity securities, reasonably possible changes at the reporting date to one of the significant unobservable inputs, holding other inputs constant, would have the following effects.
|
|
|
| Profit or loss |
| |||||
|
|
|
| Increase |
|
| Decrease |
| ||
Investment portfolio: |
|
|
|
|
|
|
|
|
|
|
June 30, 2021 |
| Adjusted market multiple (5% movement) |
|
| 898 |
|
|
| (898 | ) |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020 |
| Adjusted market multiple (5% movement) |
|
| 937 |
|
|
| (937 | ) |
During the three and six months ended June 30, 2021 there were no transfers of assets or liabilities within the fair value hierarchy levels.
F-33
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and six months ended June 30, 2021 and 2020
20. | 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.
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.
F-34
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and six months ended June 30, 2021 and 2020
20. | 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 |
|
| 762 |
|
|
| 1,446 |
|
|
| 1,297 |
|
|
| 1,206 |
|
|
| 1,240 |
|
|
| 2,727 |
|
Trade payables |
|
| 7,240 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Accrued wages and other expenses |
|
| 9,532 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Interest – Credit Facilities (Note 9) |
|
| 1,967 |
|
|
| 1,967 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Interest – Debentures (Note 10) |
|
| 1,542 |
|
|
| 2,986 |
|
|
| 1,875 |
|
|
| 352 |
|
|
| — |
|
|
| — |
|
Purchase obligations |
|
| 526 |
|
|
| 1,052 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
| 21,569 |
|
|
| 7,451 |
|
|
| 3,172 |
|
|
| 1,558 |
|
|
| 1,240 |
|
|
| 2,727 |
|
Commitments – principal repayments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Facility – Other (Note 9) |
|
| — |
|
|
| 37,476 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Debentures (Note 10) |
|
| 1,545 |
|
|
| 2,174 |
|
|
| 19,634 |
|
|
| 18,878 |
|
|
| — |
|
|
| — |
|
|
|
| 1,545 |
|
|
| 39,650 |
|
|
| 19,634 |
|
|
| 18,878 |
|
|
| — |
|
|
| — |
|
Total contractual obligations |
|
| 23,114 |
|
|
| 47,101 |
|
|
| 22,806 |
|
|
| 20,436 |
|
|
| 1,240 |
|
|
| 2,727 |
|
F-35
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and six months ended June 30, 2021 and 2020
| (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 June 30, 2021, there are 68,803,294 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 June 30, 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.
In connection with the acquisition of Moka, the Company exchanged equity-settled share-based payments awards held by the employees of Moka for 366,343 equity-settled share-based payments awards of the Company with a contractual life of eight years.
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 |
|
| (745 | ) |
|
| — |
|
|
| 1.77 |
|
|
| — |
|
|
| — |
|
Forfeited |
|
| (24 | ) |
|
| — |
|
|
| 3.33 |
|
|
| — |
|
|
| — |
|
As at June 30, 2021 |
|
| 6,333 |
|
|
| — |
|
|
| 5.82 |
|
|
| 2,783 |
|
|
| 4.01 |
|
The above noted options have expiry dates ranging from November 2021 to December 2029.
F-36
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and six months ended June 30, 2021 and 2020
21. | Equity (Continued from previous page) |
The fair value of each option granted was estimated using the Black-Scholes option pricing model with the following assumptions:
|
| For the six months ended June 30, 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.
Total share-based compensation costs related to options and RSUs for the three and six months ended June 30, 2021, were $3,805 and $4,362 respectively (three and six months ended June 30, 2020 - $460 and $674 respectively). The Company issued 17,500 shares to suppliers in lieu of services received for a cost of $164.
| (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
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 June 30, 2021 are as follows:
|
| Number of RSUs (000s) |
| |
As at December 31, 2019 |
|
| 141 |
|
Converted |
|
| (59 | ) |
Expired |
|
| (5 | ) |
As at December 31, 2020 |
|
| 77 |
|
Converted |
|
| (21 | ) |
Expired |
|
| (4 | ) |
As at June 30, 2021 |
|
| 52 |
|
F-37
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and six months ended June 30, 2021 and 2020
21. | Equity (Continued from previous page) |
| (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 |
|
| (3,497 | ) |
|
| 1.75 |
|
|
| — |
|
|
| — |
|
As at June 30, 2021 |
|
| 1,805 |
|
|
| 3.98 |
|
|
| 1,572 |
|
|
| 4.38 |
|
The 1,805,443 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 three and six months ended June 30, 2021, 121,556 and 2,184,183 Debenture Warrants were exercised into common shares resulting in cash proceeds of $247 and $4,434 respectively.
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).
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
F-38
Mogo Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and six months ended June 30, 2021 and 2020
21. | Equity (Continued from previous page) |
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 six months ended June 30, 2021 |
|
| For the year ended December 31, 2020 |
| ||
Risk-free interest rate |
| 0.48%-0.65% |
|
| 0.32% - 0.39% |
| ||
Expected life |
| 2 -3 years |
|
| 3.5 -7 years |
| ||
Expected volatility in market price of shares |
| 115%-122% |
|
| 50% - 77% |
| ||
Expected dividend yield |
|
| 0% |
|
|
| 0% |
|
Expected forfeiture rate |
|
| 0% |
|
|
| 0% |
|
22. | Subsequent events |
Acquisition of Fortification: |
On May 17, 2021, Mogo entered into a binding letter of intent to acquire 100% of Fortification Capital Inc. (“Fortification”), a Canadian registered investment dealer, for a combination of approximately $1,050 in cash and 75,000 common shares of Mogo. The acquisition of Fortification would bring order execution only registration capabilities which is a necessary regulatory requirement for Mogo to offer stock trading to its members.
Fortification is a registered investment dealer and a member of the Investment Industry Regulatory Organization of Canada. Among several benefits of the proposed acquisition, Mogo would acquire the necessary licenses, registration and technology – including an order management system and market data processing – to accelerate the development of the Company’s planned commission free stock trading solution.
The assets and liabilities to be acquired from Fortification cannot be disclosed at this time because the Company is still in the process of completing the purchase price allocation process including the valuation of assets and liabilities and amounts allocated to acquired intangibles and goodwill.
Return of capital from investment
On July 26, 2021, a limited partnership set up by the former shareholders of Carta distributed all of its assets, comprising of Mogo common shares, to its unit holders.
The Company held units in the limited partnership as part of its investment portfolio, with a book value of $2,385 at June 30, 2021. These holdings entitled Mogo to the return of 303,816 common shares of its own stock that it intends to retire. The derecognition of the investment and reacquisition of the Company’s own equity will be accounted for as a deduction from equity equal to the book value of the investment in the third quarter of 2021.
F-39