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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 20-F

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2023

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

 

OR

 

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of event requiring this shell company report

 

Commission file number 001-38409

MOGO INC.

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant’s name into English)

British Columbia, Canada

(Jurisdiction of incorporation or organization)

516 - 409 Granville St, Vancouver BC, V6C 1T2, Canada

(Address of principal executive offices)

Gregory Feller, President & Chief Financial Officer
516 - 409 Granville St, Vancouver BC, V6C 1T2, Canada
Tel: 604-659-4380
Fax: 604-733-4944

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

 

 

 


Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares

MOGO

The Nasdaq Stock Market LLC

 

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 24,515,909 common shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☒ No

 

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☒ No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” "accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer☐ Non-accelerated filer

Emerging growth company

 

 

 


If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.☐

 

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☐

International Financial Reporting Standards as issued by the International Accounting Standards Board ☒

Other ☐

 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 Item 18

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

Auditor Firm Id:

#85

Auditor Name:

KPMG LLP

Auditor Location:

Vancouver, British Columbia, Canada

 

 

 


TABLE OF CONTENTS

 

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

4

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

4

ITEM 3.

KEY INFORMATION

4

ITEM 4.

INFORMATION ON THE COMPANY

26

ITEM 4A.

UNRESOLVED STAFF COMMENTS

44

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

45

ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

69

ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

79

ITEM 8.

FINANCIAL INFORMATION

82

ITEM 9.

THE OFFER AND LISTING

83

ITEM 10.

ADDITIONAL INFORMATION

84

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

97

ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

98

ITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

99

ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

99

ITEM 15.

CONTROLS AND PROCEDURES

100

ITEM 16.

[RESERVED]

102

ITEM 17.

FINANCIAL STATEMENTS

107

ITEM 18.

FINANCIAL STATEMENTS

107

ITEM 19.

EXHIBITS

108

 

 

 


INTRODUCTION

Unless otherwise noted or the context indicates otherwise “we”, “us”, “our”, the “Company” or “Mogo” refer to Mogo Inc. and its direct and indirect subsidiaries. This annual report on Form 20-F includes our audited consolidated financial statements for the years ended December 31, 2021, 2022 and 2023 and as of December 31, 2021, 2022 and 2023, which are presented in Canadian dollars. Amounts in this annual report on Form 20-F are stated in Canadian dollars unless otherwise indicated.

 

On June 21, 2019, we completed our plan of arrangement (the “Arrangement”) with Mogo Finance Technology Inc (“Mogo Finance”). In connection with the Arrangement, the Company was continued into British Columbia and changed its name from Difference Capital Financial Inc. to Mogo Inc. The Arrangement is accounted for as a reverse acquisition of the Company by Mogo Finance under IFRS 3 - Business combinations, and accordingly, beginning with the second quarter of 2019, the Company’s financial statements, management’s discussion and analysis and all other documents filed with securities commissions or similar authorities in each of the provinces and territories of Canada reflect the continuing operations of Mogo Finance. See “Item 4 –A – History and Development of the Company” for more information regarding the Arrangement.

This annual report on Form 20-F may refer to trademarks, trade names and material which is subject to copyright and which are protected under applicable intellectual property laws and are the property of Mogo. Solely for convenience, our trademarks, trade names and copyrighted material referred to in this annual report on Form 20-F may appear without the ® or © symbol, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks, trade names and copyrights. All other trademarks used in this annual report on Form 20-F are the property of their respective owners.

 

This annual report on Form 20-F is dated April 30, 2024. Except where otherwise indicated, the information contained in this annual report on Form 20-F is stated as of December 31, 2023.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F contains forward-looking statements that relate to the Company’s current expectations and views of future events. These forward-looking statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. In some cases, these forward-looking statements can be identified by words or phrases such as “may”, “might”, “will”, “expect”, “anticipate”, “estimate”, “intend”, “plan”, “indicate”, “seek”, “believe”, “predict” or “likely”, or the negative of these terms, or other similar expressions intended to identify forward-looking statements. The Company has based these forward-looking statements on its current expectations and projections about future events and financial trends that it believes might affect its financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements relating to:

the Company's expectations regarding its revenue (including loan interest), expenses and operations, key performance indicators, provision for loan losses (net of recoveries) and delinquencies ratios;
the Company's anticipated cash needs and its needs for additional financing, funding costs, and ability to extend or refinance any outstanding amounts under the Credit Facility (as defined below) and debentures;
the Company's ability to protect, maintain and enforce its intellectual property;
third-party claims of infringement or violation of, or other conflicts with, intellectual property rights;
the resolution of any legal matters or disputes;
the Company's plans for and timing of expansion of its products and services;
the Company's future growth plans;
the acceptance by consumers and the marketplace of new technologies and solutions;
the Company's ability to attract new members and develop and maintain existing members;
the Company's ability to attract and retain personnel;
the Company's expectations with respect to advancement of its product offering;
the Company's competitive position and the regulatory environment in which the Company operates;
anticipated trends and challenges in the Company's business and the markets in which it operates;
the Company's historical investment approach, objectives and strategy, including its focus on specific sectors;
the structuring of its investments and its plans to manage its investments; and
the Company's expectations regarding the performance of certain sectors in which it has invested.

 

Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. Although we believe that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and we

2


cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, any investors or users of this document should not place undue reliance on these forward-looking statements. Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors that are discussed in greater detail under “Item 3. Key Information—D. Risk Factors” or elsewhere in this annual report on Form 20-F.

 

Although the forward-looking statements contained in this annual report on Form 20-F are based upon what our management believes are reasonable assumptions, these risks, uncertainties, assumptions and other factors could cause our actual results, performance, achievements and experience to differ materially from our expectations, future results, performances or achievements expressed or implied by the forward-looking statements. The forward-looking statements made in this annual report on Form 20-F relate only to events or information as of the date of this annual report on Form 20-F and are expressly qualified in their entirety by this cautionary statement. Except as required by law, we do not assume any obligation to update or revise any of these forward-looking statements to reflect events or circumstances after the date of this annual report on Form 20-F, including the occurrence of unanticipated events.

 

3


PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

A.
[Reserved]
B.
Capitalization and Indebtedness

Not applicable.

C.
Reasons for the Offer and Use of Proceeds

Not applicable.

4


D.
Risk Factors

In addition to any other risks contained in this annual report on Form 20-F, as well as our management’s discussion and analysis and consolidated financial statements and accompanying notes, the risks described below are the principal risks that could have a material and adverse effect on our business, financial condition, results of operations, cash flows, future prospects or the trading price of our Common Shares. This annual report on Form 20-F also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below. See "Cautionary Note Regarding Forward Looking Statements”.

 

Risk Factors Summary:

The following is a summary of the principal risks that could adversely affect our business, operations and financial results.

Worsening economic conditions may cause our members' loan default rates to increase and harm our operating results.
Our allowance for loan losses is determined based upon both objective and subjective factors and may not be adequate to absorb loan losses.
We rely on our proprietary credit scoring model in the forecasting of loss rates. If we are unable to effectively forecast loss rates, it may negatively impact our operating results.
Our risk management efforts may not be effective.
We have a history of losses and may not achieve consistent profitability in the future. In addition, if we continue to grow, we may not be able to manage our growth effectively.
Carta's business is reliant on contracts with key customers operating in the payment industry.
We may require additional capital to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances. If capital is not available to us, our business, operating results and financial condition may be harmed.
If new products and platform enhancements do not achieve sufficient market acceptance, our financial results and competitive position will be harmed.
We may not realize the expected benefits from acquisitions due to challenges associated with integrating the operations, technologies, and personnel of Mogo and the acquired companies.
Our business is subject to extensive and evolving regulation and oversight in a variety of areas, all of which are subject to change and uncertain interpretation.
As a registrant and member of the Canadian Investment Regulatory Organization, MogoTrade is subject to extensive regulation in Canada.
Our business may be adversely affected by material changes to the interest rate charged to our members and paid to our lenders.
Our debt financing sources are highly concentrated, and we may not be able to access additional sources of funding on reasonable terms or at all.
Our agreements with our lenders contain a number of early payment triggers and covenants. A breach of such triggers or covenants or other terms of such agreements could result in an early

5


amortization, default, or acceleration of the maturity date which could materially impact our operations.
Our levels of indebtedness can have negative implications for our shareholders.
Our investment in WonderFi may expose us to certain risks, which could have a material adverse effect on our financial conditions and results of operations, including the effects of negative publicity resulting from fraudulent actors in the cryptocurrency space.
We and our partners obtain, store and process a large amount of sensitive data. Any real or perceived improper or unauthorized use of, disclosure of, or access to such data could harm our reputation as a trusted brand, as well as have a material and adverse effect on our business.
The collection, processing, storage, use, and disclosure of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights.
Cybersecurity incidents and other systems and technology problems may materially and adversely affect our business, operations and financial results.
It may be difficult and costly to protect our intellectual property rights, and we may not be able to ensure their protection.
We may face claims by third parties for alleged infringement of their intellectual property rights, which could harm our business.
Some aspects of our platforms include open-source software, and any failure to comply with the terms of one or more of these open-source licenses could negatively affect our business.
If our software contains serious errors or defects, we may lose revenue and market acceptance.
Our success and future growth depend in part on our successful marketing efforts and increased brand awareness. Failure to effectively use our brand to convert sales may negatively affect our growth and our financial performance.
Member complaints or negative publicity could result in a decline in our member growth and our business could suffer.
Any misconduct or errors by our employees and third-party service providers could harm our business and reputation.
Our business depends on our ability to collect payments and service the products we make available to our members.
We rely on third-party partners, service providers and systems to deliver our products and services and perform key functions. Any disruption of service by such third parties could interrupt or delay our ability to deliver our products and service to our members.
We face increasing competition and, if we do not compete effectively, our operating results could be harmed.
If the information provided by members to us is incorrect or fraudulent, we may misjudge a member's qualification to receive a loan and our operating results may be harmed.
We rely on our management team and need additional key personnel to grow our business, and the loss of key employees or inability to hire key personnel could harm our business.
Litigation may adversely affect our business and financial condition.

6


Worsening economic conditions may cause our members' loan default rates to increase and harm our operating results.

 

Approximately 30% of our assets as of December 31, 2023 consisted of loans to our members. Uncertainty and negative trends in general economic conditions in Canada and abroad, including significant tightening of credit markets, historically have created a difficult environment for companies operating in our industries. Many factors, including factors that are beyond our control, may have a detrimental impact on our operating performance. These factors include short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets, unemployment levels (which are currently low and resulting in staff shortages and upward wage pressure), consumer confidence, energy costs and other general economic conditions, as well as events such as natural disasters, acts of war, terrorism and catastrophes.

 

There can be no assurance that economic conditions will remain favorable for our business or that default rates on our loans by our members will remain at current levels. Increased default rates by our members on our loans may inhibit our access to capital and negatively impact our profitability. If delinquency or uncollectable rates on our consumer loans exceed certain levels defined in the Credit Facility it could constitute a default under the Credit Facility or other credit facilities, reducing or terminating such facilities. Furthermore, we receive a number of applications from potential members who do not satisfy the requirements for our loans. If an insufficient number of qualified individuals apply for our loans, our growth and revenue could decline.

 

Our allowance for loan losses is determined based upon both objective and subjective factors and may not be adequate to absorb loan losses.

 

We face the risk that our members will fail to repay their loans in full. We reserve for such losses by establishing an allowance for loan losses, the increase of which results in a charge to our earnings as a provision for loan losses. We have established an evaluation process designed to determine the adequacy of our allowance for loan losses. While this evaluation process uses historical and other objective information, the classification of loans and the forecasts and establishment of loan losses are also dependent on our subjective assessment based upon our experience and judgment. Actual losses are difficult to forecast, especially if such losses stem from factors beyond our historical experience, and unlike traditional banks, we are not subject to periodic review by bank regulatory agencies of our allowance for loan losses. As a result, there can be no assurance that our allowance for loan losses will be comparable to that of traditional banks subject to regulatory oversight or sufficient to absorb losses or prevent a material adverse effect on our business, financial condition and results of operations.

 

We rely on our proprietary credit scoring model in the forecasting of loss rates. If we are unable to effectively forecast loss rates, it may negatively impact our operating results.

 

In deciding whether to extend credit to prospective members, we rely heavily on our credit score generated by our proprietary credit scoring model and decisioning system, an empirically derived suite of statistical models built using third-party data, data from our members and our credit experience gained through monitoring the performance of our members over time. If our proprietary credit scoring model and decisioning system fails to adequately predict the creditworthiness of our members, or if our proprietary cash flow analytics system fails to assess prospective members' financial ability to repay their loans, or if any portion of the information pertaining to the prospective member is false, inaccurate or incomplete, and our systems did not detect such falsities, inaccuracies or incompleteness, or any or all of the other components of the credit decision process described herein fails, we may experience higher than forecasted losses. Furthermore, if we are unable to access the third-party data used in our credit scores, our access to such data is limited or such information is outdated or incorrect, our ability to accurately evaluate potential

7


members will be compromised, and we may be unable to effectively predict probable credit losses inherent in our loan portfolio, which would negatively impact our results of operations.

 

Our risk management efforts may not be effective.

 

We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify, manage, monitor and mitigate financial risks, such as credit risk, interest rate risk, liquidity risk, and other market-related risk, as well as operational risks related to our business, assets and liabilities. To the extent our models used to assess the creditworthiness of potential members do not adequately identify potential risks, the credit scores we produce would not adequately represent the risk profile of such members and could result in higher risk than anticipated. Our risk management policies, procedures, and techniques, including our use of our proprietary credit scoring technology, may not be sufficient to identify all of the risks we are exposed to, mitigate the risks that we have identified or identify concentrations of risk or additional risks to which we may become subject in the future.

 

We have a history of losses and may not achieve consistent profitability in the future. In addition, if we continue to grow, we may not be able to manage our growth effectively.

 

Although we had shareholders equity of approximately $94 million as of December 31, 2023, we also had an accumulated deficit of approximately $332 million. We will need to generate and sustain increased revenue levels in future periods to become profitable, and, even if we do so, we may not be able to maintain or increase our level of profitability. We intend to continue to expend significant funds to expand our marketing and sales operations, continue developing our products including further development of our platforms, increase our service and general product servicing capabilities, compensate our growing employee base, and expand into new markets. In addition, our provision for loan losses, net of recoveries, is based on our expectation of future loan losses related to our loans receivable. As we continue to grow our members and loans receivable, we expect the aggregate amount of this expense will also continue to grow.

 

Our historical growth has placed, and may continue to place, significant demands on our management and our operational and financial resources. Our organizational structure is becoming more complex as we add additional staff, and we will need to improve our operational, financial, management and compliance controls as well as our reporting systems and procedures. Our efforts to grow our business may be costlier than we expect, and we may not be able to increase our revenue enough to offset our higher operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described in this 20-F, and unforeseen expenses, difficulties, complications and delays, and other unknown events. If we are unable to achieve and sustain profitability, the market price of our publicly listed securities may significantly decrease.

 

Further, the circumstances that accelerated the growth of our business in recent years, including an extended period of general macroeconomic growth in Canada and the U.S., as well as growth in the financial services and technology industries in which we operate, slowed in 2022 and 2023 and may not return in the future. Our membership grew from 2.0 million members as at December 31, 2022 to 2.1 million members as at December 31, 2023, down from our growth of 0.2 million members between December 31, 2021 and December 31, 2022. We may experience declines in the growth of our business (or negative growth) as a result of a number of factors, including slowing demand for our products, insufficient growth in the number of customers that utilize our products, declines in the level of usage of our products by existing members, macroeconomic factors, increasing competition, a decrease in the growth of our overall market or our failure to continue to capitalize on growth opportunities, including as a result of our inability to scale to meet such growth and economic conditions that could reduce financial activity and the maturation of our business,

8


among others. If our growth rate declines, our business, operating results, financial condition and prospects could be adversely affected.

 

Carta's business is reliant on contracts with key customers operating in the payment industry.

 

There can be no assurance that we will be able to maintain our relationships with these clients or that these client relationships will result in increasing revenue. Given the B2B nature of Carta's operations, the number of clients that are potential users of the Carta platform is concentrated. Our largest clients may not be easily replaced and the loss of any one or more of such clients may have a material adverse impact on the results of operations and financial condition of the Company. In addition, if we are unable to add new clients, we may not realize anticipated levels of growth in the future. While we expect this concentration of revenue to decrease over time, we may continue to depend upon a relatively small number of clients for a significant portion of our revenue in the foreseeable future. The loss of a significant client or failure to attract new clients could materially adversely affect our business, financial condition and results of operations.

We may require additional capital to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances. If capital is not available to us, our business, operating results and financial condition may be harmed.

 

Since our founding, we have raised substantial equity and debt financing to support the growth of our business. Because we intend to continue to make investments to support the growth of our business, we may require additional capital to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances, including increasing our marketing expenditures to improve our brand awareness, developing new products or services or further improving existing products and services, enhancing our operating infrastructure and acquiring complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. However, additional funds may not be available when we need them, on terms that are acceptable to us, or at all. In addition, our agreements with our lenders contain restrictive covenants relating to our capital raising activities and other financial and operational matters, and any debt financing that we secure in the future could involve further restrictive covenants which may make it more difficult for us to obtain additional capital and to pursue business opportunities. Volatility in the credit markets may also have an adverse effect on our ability to obtain debt financing.

 

If we raise additional funds through further issuances of equity or convertible debt securities, our existing shareholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our Common Shares. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to pursue our business objectives and to respond to business opportunities, challenges or unforeseen circumstances could be significantly limited, and our business, operating results, financial condition and prospects could be adversely affected.

 

If new products and platform enhancements do not achieve sufficient market acceptance, our financial results and competitive position will be harmed.

 

We incur expenses and expend resources upfront to develop, acquire and market new products and platform enhancements to incorporate additional features, improve functionality or otherwise make our platform more desirable to our members. New product or platform enhancements must achieve high levels of market acceptance in order for us to recoup our investment in developing and bringing them to market.

 

Any new products, including MogoTrade, and changes to our platforms could fail to attain sufficient market acceptance for many reasons, including, without limitation, the following:

9


our failure to predict market demand accurately and supply products that meet this demand in a timely fashion;
members using our platforms may not like, find useful or agree with any changes;
defects, errors or failures in our platforms;
negative publicity about our products or our platforms' performance or effectiveness;
delays in releasing to the market new products or platform enhancements; and
the introduction or anticipated introduction of competing products by our competitors.

 

If our new products or platform enhancements do not achieve adequate acceptance in the market or if management decides not to proceed with the launch of new products or platform enhancements if it does not expect to achieve adequate acceptance in the market, our competitive position, revenue and operating results could be harmed. The adverse effect on our financial results may be particularly acute because of the significant development, marketing, sales and other expenses we will have incurred in connection with new products or enhancements.

 

We may not realize the expected benefits from acquisitions due to challenges associated with integrating the operations, technologies, and personnel of Mogo and the acquired companies.

 

Acquisitions, strategic investments, or partnerships could divert the attention of key management personnel, disrupt our business, dilute shareholder value and adversely affect our results of operations and financial condition. The anticipated benefits of any acquisition, strategic investment, or partnership may not be realized or we may be exposed to unknown risks or liabilities.

 

We may seek to acquire or invest in businesses, products, or technologies that we believe could complement our products and services or otherwise offer growth opportunities. The pursuit of potential investments or acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable opportunities, whether or not they are consummated. Any acquisition, investment, or business relationship may result in unforeseen operating difficulties and expenditures.

 

We may be required to issue equity or increase debt to acquire businesses which could dilute our shareholders or adversely affect our results of operations. In addition, if an acquired business fails to meet our expectations, our business, results of operations, and financial condition may suffer. Further, we may invest in companies that do not succeed, and our investments may lose all or some of their value, which result in us recording impairment charges reflected in of results of operations.

 

Our business is subject to extensive and evolving regulation and oversight in a variety of areas, all of which are subject to change and uncertain interpretation.

 

Our business is subject to numerous federal, provincial and other local laws, ordinances and regulations in each of the jurisdictions in which we operate, which are subject to change and which may impose significant costs or limitations on the way we conduct or expand our business. As we develop and introduce new products and services, we may become subject to additional laws and regulations.

 

Future legislation or regulations may restrict our ability to continue our current methods of operation or expand our operations and may have a negative effect on our business, results of operations, financial condition and the price of our Common Shares. In addition, future legislation or regulations, or amendments to the existing regulatory regime, could require us to modify our platforms and processes, which may cause us to incur additional costs and lead to a reduction in revenue.

10


 

For example, our lending business activities are subject to section 347 of the Criminal Code. Following consultations on predatory lending conducted by the Department of Finance in August 2022, in 2023, the Canadian federal government introduced the Budget Implementation Act, 2023, No 1 ("Budget Act"), to reduce the criminal rate of interest to 35% APR, and replace an effective annual rate of interest calculation with an annual percentage rate of interest calculation. The Budget Act received Royal Assent on June 22, 2023, but the criminal rate of interest amendments are not yet in force, and they will only come into force upon proclamation by an order of the Cabinet, on a date to be determined.

 

On December 23, 2023, pursuant to its regulation-making authority under the Budget Act, the federal government released the Criminal Interest Rate Regulations ("Interest Rate Regulations") to exempt certain agreements from the criminal rate of interest. The Interest Rate Regulations, which will come into force concurrently with the criminal interest rate amendments, include provisions relating to payday loans, as well as exemptions from the criminal rate of interest for loans that the government views as non-predatory including certain commercial loans and small dollar, non-recourse collateralized loans (pawn loans), none of which are relevant to our current lending activities. The federal government has indicated it may further reduce the criminal rate of interest below 35% APR. A consultation on the further lowering of the criminal rate closed on January 7, 2024. While the criminal interest rate amendments and companion regulations are not yet in force, the Company is in the process of preparing for this change.

 

In addition to the criminal interest rate restrictions, certain of our MogoMoney products may be subject to new legislation and regulations respecting 'high-cost credit products' which have been implemented in certain provinces in which we operate. Provincial high-cost credit ("HCC") legislation has been implemented in the provinces of Alberta and British Columbia. HCC legislation, which is part of the broader provincial consumer protection regime in these provinces, imposes additional requirements, including licensing and disclosures, on lenders making loans above certain interest rate thresholds. We are currently licensed as an HCC lender in both provinces and comply with all regulatory requirements. We also continue to participate in the regulatory process, monitor the HCC landscape that continues to develop in other provinces, including the province of Newfoundland and Labrador, which has also passed legislation that will implement an HCC regime. This legislation will take effect in June 2024. We are currently in the process of preparing for the changes in that province. The Company will continue to ensure that its business complies with any HCC regulatory changes and is well positioned to respond to any enhanced disclosure requirements.

 

While we endeavor to operate our business model in compliance with the applicable provincial and federal laws, with respect to certain of our business models, the application of certain law may be subject to evolving interpretation and requirements. As such, there is a risk that regulatory bodies or consumers could assert that certain federal or provincial laws are applicable where we have determined that they are not, or that such laws apply to aspects of our business in a manner that we have not addressed. If it is determined that we have not complied with the requirements of applicable laws, we could be subject to civil actions for nullification of contracts, rebate of some or all payments made by members, and damages, or subject to sanctions, penalties, or other enforcement for violation of the laws, any of which outcomes could have a material adverse effect on the Company.

 

Further, the laws and regulations applicable to cryptocurrency are evolving and subject to interpretation and change. Mogo has an approximate 13% stake in WonderFi, Canada's leading operator of regulated crypto trading platforms and other digital asset businesses. The value of Mogo's investment in WonderFi may be adversely impacted if WonderFi is unable to comply with regulations or prohibitions applicable to them, faces regulatory or other enforcement actions and potential fines and other consequences.

 

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As a registrant and member of the Canadian Investment Regulatory Organization, MogoTrade is subject to extensive regulation in Canada.

 

MogoTrade is registered as an investment dealer in each of the provinces and territories in Canada, and it is also a member of the Canadian Investment Regulatory Organization ("CIRO"). Compliance with many of the regulations applicable to MogoTrade involves a number of risks, particularly in areas where applicable regulations may be subject to interpretation. In the event of non-compliance with an applicable regulation, securities regulators or CIRO may institute administrative or judicial proceedings that may result in censure, fine, civil penalties, issuance of cease-and-desist orders, deregistration or suspension of the non-compliant investment dealer or investment adviser, suspension or disqualification of the investment dealer's officers or employees, or other adverse consequences. The imposition of any such penalties or orders on MogoTrade regardless of duration or any subsequent appellate results could have a material adverse effect on the Company.

Our business may be adversely affected by material changes to the interest rate charged to our members and paid to our lenders.

 

We earn a substantial portion of our revenues from interest payments on the loans we make to our members. Various financial institutions and other funding sources provide, and may in the future provide, us with the capital to fund these term loans and lines of credit and charge us interest on funds that we draw down. In the event that the spread between the rate at which we lend to our members and the rate at which we borrow from our lenders decreases, our financial results and operating performance will be harmed.

 

There are a variety of factors that could affect the interest rates we charge to our members and which we pay to our lenders, such as access to capital based on our business performance, the volume of loans we make to our members, competition with other lenders, regulatory requirements. These interest rates may also be affected by variations to the types of products we sell to our members and investors over time and a shift among our channels of member acquisition. Interest rate changes may adversely affect our business forecasts and expectations and are highly sensitive to many macroeconomic factors beyond our control, such as inflation, recession, the state of the credit markets, changes in market interest rates, global economic disruptions, unemployment and the fiscal and monetary policies of the federal government and its agencies. Any material reduction in our interest rate spread could have a material adverse effect on our business, results of operations and financial condition.

 

Our debt financing sources are highly concentrated, and we may not be able to access additional sources of funding on reasonable terms or at all.

 

We have obtained debt financing from a limited number of lenders. Our reliance on the Credit Facility for a significant amount of our funding exposes us to funding concentration risks. If the lender decides to terminate the Credit Facility, our business, operating results, financial condition and prospects could be adversely affected. In addition, the Credit Facility must be renewed on a periodic basis. If we were unable to renew the Credit Facility on acceptable terms when it became due there could be a material adverse effect on our financial condition, liquidity and results of operations.

 

Our agreements with our lenders contain a number of early payment triggers and covenants. A breach of such triggers or covenants or other terms of such agreements could result in an early amortization, default, or acceleration of the maturity date which could materially impact our operations.

Primary funding sources available to support the maintenance and growth of our business include, among others, the Credit Facility. The Credit Facility contains restrictions on the Company's ability to, among other things, pay dividends, sell or transfer assets, incur additional debt, repay other debt, make certain

12


investments or acquisitions, repurchase or redeem shares, and engage in alternate business activities. The Credit Facility also contains a number of covenants that require the Company to maintain certain specified financial ratios. Description of these covenants, requirements and events are set out in the Credit Facility agreement.

 

During the occurrence of an event of default under the Credit Facility, for example, principal collections from our consumer loans would be applied to repay principal under the Credit Facility rather than being available on a revolving basis to fund newly originated loans. During the occurrence of an event of default under any of our debt, including debt owing under the Credit Facility, debt owing to the holders of debentures issued by the Company or debt owing to future facilities we may enter into, the applicable lender could accelerate the repayment of our debt and the lender's commitments to extend further credit would terminate. If we were unable to repay the amounts due and payable under our debt when due, the applicable lender could seek remedies, including against the collateral pledged as security for such debt.

An event of default or other event requiring early repayment of the Credit Facility would negatively impact our liquidity, including our ability to originate new loans, and require us to rely on alternative funding sources, which might increase our funding costs or which might not be available when needed. If we were unable to arrange new or alternative methods of financing on favorable terms, we might have to curtail the origination of loans, which could have a material adverse effect on our business, financial condition, operating results and cash flow, which in turn could have a material adverse effect on our ability to meet our obligations under our facility.

 

Our levels of indebtedness can have negative implications for our shareholders.

 

We have, and anticipate having, a significant amount of indebtedness, which totaled $49.4 million on our Credit Facility and $36.8 million in outstanding debentures as of December 31, 2023. Our ability to make payments of principal and interest on our funding debt will depend on our future operating performance and our ability to enter into additional debt and equity financings, which to a certain extent, is subject to economic, financial, competitive and other factors beyond our control. If, in the future, we are unable to generate sufficient cash flow to service our debt, we may be required to refinance all or a portion of our existing debt or obtain additional financing. There can be no assurance that any such refinancing would be possible or that any additional financing could be obtained on terms acceptable to us. The inability to obtain additional financing could have a material adverse effect on our operating performance and any additional equity financing would result in the dilution of shareholders.

 

Our substantial indebtedness could have significant consequences to shareholders, such as the inability to satisfy our obligations under the Credit Facility and increased vulnerability to adverse general economic and industry conditions. We may find it more difficult to fund future working capital, capital expenditures, general corporate purposes or other purposes and we would have to allocate a substantial portion of our cash resources to the payment on our indebtedness, which would reduce the funds available for operations and for distribution to shareholders.

 

Our investment in WonderFi may expose us to certain risks, which could have a material adverse effect on our financial conditions and results of operations, including the effects of negative publicity resulting from fraudulent actors in the cryptocurrency space.

 

Mogo is an approximate 13% shareholder in WonderFi, Canada's leading operator of regulated crypto trading platforms and other digital asset businesses. In 2022, a number of digital asset exchanges filed for bankruptcy proceedings and/or became the subjects of investigation by various governmental agencies for, among other things, fraud, causing a loss of confidence and an increase in negative publicity for the digital asset ecosystem. As a result, many digital asset markets have experienced increased price volatility. The

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cryptocurrency ecosystem may continue to be negatively impacted and experience long term volatility if public confidence decreases.

 

The failure of several crypto platforms has impacted and may continue to impact the broader crypto economy; the full extent of these impacts may not yet be known. WonderFi is part of the cryptocurrency environment and is subject to volatility resulting from financial instability, poor business practices, and fraudulent activities of players in the cryptocurrency market. When investors in cryptocurrency and cryptocurrency-based companies experience financial difficulty as a result of price volatility, poor business practices, and/or fraud, it has, and may cause loss of confidence in the cryptocurrency space, reputational harm to cryptocurrency assets, heightened scrutiny by regulatory authorities and law makers, among other material impacts.

 

These events are continuing to develop and it is not possible to predict, at this time, every risk that they may pose to us, our service providers, or the digital asset industry as a whole. A perceived lack of stability in the digital asset exchange market and the closure or temporary shutdown of digital asset exchanges due to business failure, hackers or malware, government-mandated regulation, or fraud, may reduce confidence in digital asset networks and result in greater volatility in cryptocurrency values. These potential consequences of a digital asset exchange's failure could adversely affect our investment in WonderFi, which could have a material adverse effect on our financial condition.

 

We and our partners obtain, store and process a large amount of sensitive data. Any real or perceived improper or unauthorized use of, disclosure of, or access to such data could harm our reputation as a trusted brand, as well as have a material and adverse effect on our business.

 

We and our third-party partners and service providers, including third-party data centers that we use, obtain and process large amounts of sensitive data, including our members' personal and credit information and other sensitive data relating to our members and their transactions. We face risks, including to our reputation as a trusted brand, in the handling and protection of this data, and these risks will increase as our business continues to expand to include new products and technologies.

We have administrative, technical, and physical security measures in place, and we have policies and procedures in place to contractually require third parties to whom we transfer data to implement and maintain appropriate security measures. However, if our security measures or those of the previously mentioned third parties are inadequate or are breached as a result of third-party action, employee error, malfeasance, malware, phishing, hacking attacks, system error, trickery, or otherwise, and, as a result, someone obtains unauthorized access to funds, or sensitive information, including personally identifiable information, on our systems or our partners' systems, or if we suffer a ransomware or advanced persistent threat attack, or if any of the foregoing is reported or perceived to have occurred, our reputation and business could be damaged. Any perceived or actual breach of security, regardless of how it occurs or the extent of the breach, could have a significant impact on our reputation as a trusted brand, cause us to lose existing members, prevent us from obtaining new members, require us to expend significant funds to remedy problems caused by breaches and to implement measures to prevent further breaches, cease operations, and expose us to legal risk and potential liability including those resulting from governmental or regulatory investigations, class action litigation and costs associated with remediation, such as fraud monitoring. Any actual or perceived security breach at a company providing services to us or our customers could have similar effects.

 

 

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The collection, processing, storage, use, and disclosure of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights.

 

We receive, transmit and store a large volume of personally identifiable information and other sensitive data from members. There are federal, provincial and foreign laws regarding privacy and the storing, sharing, use, disclosure and protection of personally identifiable information and sensitive data. Specifically, personally identifiable information is increasingly subject to legislation and regulations to protect the privacy of personal information that is collected, processed and transmitted. Any violations of these laws and regulations may require us to change our business practices or operational structure, address legal claims and sustain monetary penalties or other harms to our business.

 

While we have policies and procedures in place to protect personally identifiable information and other sensitive data of our members that comply with applicable laws, the regulatory framework for privacy issues in Canada is constantly evolving and is likely to remain uncertain for the foreseeable future. The interpretation and application of such laws is often uncertain, and such laws may be interpreted and applied in a manner inconsistent with our current policies and practices or require changes to the features of our platforms. If either we or our third-party service providers are unable to address any privacy concerns, even if unfounded, or to comply with applicable laws and regulations, it could result in additional costs and liability, damage our reputation and harm our business.

 

Cybersecurity incidents and other systems and technology problems may materially and adversely affect our business, operations and financial results.

 

Cybersecurity incidents and other issues related to our information systems, technology and data may materially and adversely affect us. Cybersecurity incidents and cyberattacks have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency in the future. The digital finance industry is a particular target for cybersecurity incidents, which may occur through intentional or unintentional acts by individuals or groups having authorized or unauthorized access to our systems or our members' or counterparties' information, which may include confidential information. These individuals or groups include employees, vendors and customers, as well as hackers. The information and technology systems used by us and our third-party partners and service providers are vulnerable to damage or interruption from, among other things: hacking, ransomware, malware and other computer viruses; denial of service attacks; network failures; computer and telecommunication failures; phishing attacks; infiltration by unauthorized persons; security breaches; usage errors by their respective professionals; power outages; terrorism; and catastrophic events such as fires, tornadoes, floods, hurricanes and earthquakes.

 

We may experience cybersecurity incidents in the future. While we take efforts to protect our systems and data, including establishing internal processes and implementing technological measures designed to provide multiple layers of security, and contract with third-party partners and service providers to take similar steps, there can be no assurance that our safety and security measures (and those of our third-party partners and service providers) will prevent damage to, or interruption or breach of, our information systems, data (including personal data) and operations. We may be required to expend significant resources to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.

 

Nevertheless, it is possible we could suffer an impact or disruption that could materially and adversely affect us. Our operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of our employees, or otherwise, and, as a result, an unauthorized party may obtain access to our members' personally identifiable information and other sensitive data. Additionally, outside parties may attempt to fraudulently induce our employees to disclose sensitive information in order to gain access to

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our infrastructure. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined event, and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures.

 

Controls employed by our information technology department and our third-party partners and service providers, including cloud vendors, could prove inadequate. If an actual or perceived breach of any of our information systems occurs, the market perception of our effectiveness could be harmed. Moreover, there could be public announcements regarding any cybersecurity-related incidents and any steps we take to respond to or remediate such incidents, and if securities analysts or investors perceive these announcements to be negative, it could, among other things, have a substantial adverse effect on the price of our Common Shares.

 

As we rely on our third-party partners and service providers for our operations, the risk of cybersecurity attacks and loss, corruption, or unauthorized access to or publication of our information or the confidential information and personal data of members and employees may be more acute. Third-party risks may include insufficient security measures, data location uncertainty, and the possibility of data storage in inappropriate jurisdictions where laws, security measures or other controls may be inadequate or in which there are uncertainties regarding governmental intervention and use of such data, and our ability to monitor our third-party partners' and service providers' data security practices are limited. Although we generally have agreements relating to cybersecurity and data privacy in place with our third-party service providers, they are limited in nature and we cannot guarantee that such agreements will prevent the accidental or unauthorized access to or disclosure, loss, destruction, disablement or encryption of, use or misuse of or modification of data (including personal data) or enable us to obtain adequate or any reimbursement from our third-party partners or service providers in the event we should suffer any such incidents. Due to applicable laws and regulations or contractual obligations, we may be held responsible for any information security failure or cybersecurity attack attributed to our third-party partners and service providers as they relate to the information we share with them. A vulnerability in or related to a third-party partner or service provider's software or systems, a failure of our third-party partners' or service providers' safeguards, policies or procedures, or a breach of a third-party partner or service provider's software or systems could result in the compromise of the confidentiality, integrity or availability of our systems or the data housed in our third-party platforms.

 

The security of the information and technology systems used by us and our service providers may continue to be subjected to cybersecurity threats that could result in material failures or disruptions in our business. If these systems are compromised, become inoperable for extended periods of time or cease to function properly, we or a service provider may have to make a significant investment to fix or replace them. The failure of these systems or of disaster recovery plans for any reason could cause significant interruptions in operations and result in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to shareholders (and the beneficial owners of shareholders). Such a failure could harm our reputation, subject to legal claims and otherwise materially and adversely affect our investment and trading strategies and our value.

 

It may be difficult and costly to protect our intellectual property rights, and we may not be able to ensure their protection.

 

The success of our platforms depend, in part, upon our intellectual property. We primarily rely on copyright, trade secret and trademark laws, trade secret protection and confidentiality or license agreements with our employees, suppliers and other third parties to protect our intellectual property rights. However, the steps we take to protect our intellectual property rights may be inadequate. We currently do not have any issued patents.

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In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights.

 

Our failure to secure, protect and enforce our intellectual property rights could seriously harm our brand and adversely affect our business.

 

We may face claims by third parties for alleged infringement of their intellectual property rights, which could harm our business.

 

Our competitors, as well as a number of other entities and individuals, may claim that we infringe their intellectual property rights. Claims of infringement are becoming increasingly common as the software industry develops and third parties may assert infringement claims against us in the future. Although we have developed most of our platforms, we do include third-party software in our platforms. In these cases, this software is licensed from the entity holding the intellectual property rights. Although we believe that we have secured proper licenses for all third-party software that is integrated into our platforms, third parties may assert infringement claims against us in the future. Any such assertion may result in litigation or may require us to obtain a license for the intellectual property rights of third parties. Such licenses may not be available, or they may not be available on reasonable terms. In addition, such litigation could be disruptive to our ability to generate revenue or enter into new market opportunities and may result in significantly increased costs as a result of our defense against those claims or our attempt to license the intellectual property rights or rework our platforms to ensure they comply with judicial decisions. Even if we were to prevail, any litigation regarding our intellectual property could be costly and time-consuming and divert the attention of our management and key personnel from our business operations. Any of the foregoing could have a significant adverse effect on our business and operating results as well as our ability to generate future revenue.

 

Some aspects of our platforms include open-source software, and any failure to comply with the terms of one or more of these open-source licenses could negatively affect our business.

 

We incorporate open-source software into our proprietary platforms and into other processes supporting our business. Such open-source software may include software covered by licenses like the GNU General Public License and the Apache License. The terms of various open-source licenses have not been interpreted by courts, and there is a risk that such licenses could be construed in a manner that limits our use of the software, inhibits certain aspects of the platforms and negatively affects our business operations. Some open-source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the type of open-source software we use. If portions of our proprietary platforms are determined to be subject to an open-source license, or if the license terms for the open-source software that we incorporate change, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our platforms or change our business activities. In addition to risks related to license requirements, the use of open-source software can lead to greater risks than the use of third-party commercial software, as open-source licensors generally do not provide warranties or controls on the origin of the software. Many of the risks associated with the use of open-source software cannot be eliminated, and could adversely affect our business.

 

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If our software contains serious errors or defects, we may lose revenue and market acceptance.

 

Software developed for our proprietary platforms often contains errors, defects, security vulnerabilities or software bugs that are difficult to detect and correct, particularly when first introduced. Despite internal testing, our platforms may contain serious errors or defects, security vulnerabilities or software bugs that we may be unable to successfully correct in a timely manner or at all, which could result in lost revenue, significant expenditures of capital and damage to our reputation and brand, any of which could have an adverse effect on our business, financial condition and results of operations. Since the software we use is a critical component to our proprietary platforms, errors, defects, security vulnerabilities, service interruptions or software bugs in our platforms could result in inappropriate loan decisioning and corresponding credit scores or interest rates or outages that could affect our ability to process some customers' MogoTrade transactions.

 

Operating risk and insurance coverage.

 

The Company has insurance to protect its assets, operations and employees. While the Company believes its insurance coverage addresses all material risks to which it is exposed and is adequate and customary in its current state of operations, such insurance is subject to coverage limits and exclusions and may not be available for the risks and hazards to which the Company is exposed. In addition, no assurance can be given that such insurance will be adequate to cover the Company's liabilities or will be generally available in the future or, if available, that premiums will be commercially justifiable. If the Company were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, or if the Company were to incur such liability at a time when it is not able to obtain liability insurance, its business, results of operations and financial condition could be materially adversely affected.

 

Our success and future growth depend in part on our successful marketing efforts and increased brand awareness. Failure to effectively use our brand to convert sales may negatively affect our growth and our financial performance.

 

We believe that an important component of our growth will be continued market penetration through our digital marketing channel and leveraging our marketing collaboration agreement with Postmedia. To achieve this growth, we anticipate relying heavily on marketing and advertising to increase the visibility of the Mogo brand with potential members. The goal of this marketing and advertising is to increase the strength, recognition and trust in the Mogo and Moka brands, and drive more unique visitors to open accounts and access our products. We incurred of $3.3 million of marketing expenses in the year ended December 31, 2023.

 

Our business model relies on our ability to scale rapidly and to decrease incremental member acquisition costs as we grow. If we are unable to recover our marketing costs through increases in website traffic and in our conversion rates, or if we discontinue our broad marketing campaigns, it could have a material adverse effect on our growth, results of operations and financial condition.

 

Member complaints or negative publicity could result in a decline in our member growth and our business could suffer.

 

Our reputation is very important to attracting new members to Mogo as well as securing repeat lending and mortgage refinancing to existing members. While we believe that we have a good reputation and that we provide our members with a superior experience, there can be no assurance that we will continue to maintain a good relationship with our members or avoid negative publicity. Any damage to our reputation, whether arising from our conduct of business, negative publicity, regulatory, supervisory or enforcement actions,

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matters affecting our financial reporting or compliance with securities regulatory authorities and TSX and Nasdaq requirements, security breaches or otherwise could have a material adverse effect on our business.

 

Any misconduct or errors by our employees and third-party service providers could harm our business and reputation.

 

We are exposed to many types of operational risk, including the risk of misconduct and errors by our employees and third-party service providers. Our business depends on our employees and third-party service providers to process a large number of increasingly complex transactions, including transactions that involve significant dollar amounts and loan transactions that involve the use and disclosure of personal and business information. We could be materially adversely affected if transactions are redirected, misappropriated or otherwise improperly executed, if personal and business information is disclosed to unintended recipients or if an operational breakdown or failure in the processing of other transactions occurs, whether as a result of human error, a purposeful sabotage or by means of a fraudulent manipulation of our operations or systems. In addition, the manner in which we store and use certain personal information and interact with members is governed by various federal and provincial laws. If any of our employees or third-party service providers take, convert or misuse funds, documents or data or fail to follow our protocol when interacting with members, we could be liable for damages and subject to regulatory actions and penalties. As a result, we could also be perceived to have facilitated or participated in illegal misappropriation of funds, documents or data, or failed to have followed protocol, and therefore be subject to civil or criminal liability. It is not always possible to identify and deter misconduct or errors by employees or third-party service providers, and the precautions we take to detect and prevent such activities may not be effective in controlling unknown or unmanaged risks or losses. Any of these occurrences could result in our diminished ability to operate our business, potential liability to our members, inability to attract future members, reputational damage, regulatory intervention and financial harm, which could negatively impact our business, financial condition and results of operations.

 

Our business depends on our ability to collect payments and service the products we make available to our members.

 

We rely on banks and services providers to facilitate funds transfers within our customer accounts, including among other things, the disbursement of proceeds of newly originated loans to our members and the collection of payments from members. As we are not a bank, we do not have the ability to directly access the electronic funds transfer payment network, and must therefore rely on a service provider to process our transactions. If we cannot continue to obtain such services from our current institution, service provider or elsewhere, or if we cannot transition to another processor quickly, our ability to process transactions will suffer.

 

We rely on third-party partners, service providers and systems to deliver our products and services and perform key functions. Any disruption of service by such third parties could interrupt or delay our ability to deliver our products and service to our members.

 

We rely on third-party partners, service providers and systems, including internet service providers, payment services providers, market and third-party data providers, regulatory services providers, clearing systems, market makers, exchange systems, banking systems, payment gateways that link us to the payment card and bank clearing networks to process transactions, co-location facilities, communications facilities, cloud-based and traditional data center facilities, and other third-party facilities, to deliver our products and services, run our platform, facilitate trades by our customers, and support or carry out some regulatory obligations, including with respect to the provision of our products and services, account verification, credit decisioning and transaction processing. In addition, external content providers provide us with financial

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information, market news, charts, option and stock quotes, research reports, and other fundamental data that we provide to our customers.

 

The continuous availability of our service depends on the continued operations of these third-party partners, service providers and facilities. These providers are susceptible to processing, operational, technological and security vulnerabilities, including security breaches, which might impact our business, and our ability to monitor our third-party service providers' data security is limited. We depend on the ability of our third-party partners and service providers to protect their operations and facilities against damage or interruption from security breaches, natural disasters, power or telecommunications failures, criminal acts and similar events. Any failures by our third-party service providers that result in an interruption in service, unauthorized access, misuse, loss or destruction of data or other similar occurrences could interrupt our business, cause us to incur losses, result in decreased customer satisfaction and increase customer attrition, subject us to customer complaints, significant fines, litigation, disputes, claims, regulatory investigations or other inquiries and harm our reputation. Regulators might also hold us responsible for the failures of our providers.

 

In addition, these third-party service providers might rely on subcontractors to provide services to us that face similar risks. We face a risk that our third-party service providers might be unable or unwilling to continue to provide these services to meet our current needs in an efficient, cost-effective manner or to expand their services to meet our needs in the future.

 

We designed our system infrastructure and procure and own or lease the computer hardware used for our services. Design and mechanical errors, failure to follow operations protocols and procedures could cause our systems to fail, resulting in interruptions in our platforms. Any such interruptions or delays, whether as a result of third-party error, our own error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with members and cause our revenue to decrease or our expenses to increase. Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. These factors in turn could further reduce our revenue and subject us to liability, which could materially adversely affect our business.

 

We face increasing competition and, if we do not compete effectively, our operating results could be harmed.

 

We compete with other companies that provide financial services to individuals. These traditional financial institutions include banks, credit unions, credit card issuers and other consumer finance companies. In addition, other technology companies may begin to focus, or may in the future focus, their efforts on targeting millennials.

 

In some cases, some competitors may offer a broader range of financial products to our members, and some competitors may offer a specialized set of specific products or services. Many of these competitors have significantly more resources and greater brand recognition than we do and may be able to attract customers more effectively than we do.

 

When new competitors seek to enter one of our markets, or when existing market participants seek to increase their market share, they sometimes undercut the pricing or credit terms prevalent in that market, which could adversely affect our market share or ability to exploit new market opportunities. Our pricing and credit terms could deteriorate if we act to meet these competitive challenges. All of the foregoing could adversely affect our business, results of operations, financial condition and future growth.

 

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If the information provided by members to us is incorrect or fraudulent, we may misjudge a member's qualification to receive a loan and our operating results may be harmed.

 

Our lending decisions are based partly on information provided to us by loan applicants. To the extent that these applicants provide information to us in a manner that we are unable to verify, our credit model may not accurately reflect the associated risk. In addition, data provided by third-party sources is a significant component of our credit model, and this data may contain inaccuracies. Inaccurate analysis of credit data that could result from false loan application information could harm our reputation, business and operating results.

 

We also use identity and fraud check analyzing data provided by external databases to authenticate each member's identity. There is a risk, however, that these checks could fail, and fraud may occur. We may not be able to recoup funds underlying loans made in connection with inaccurate statements, omissions of fact or fraud, in which case our revenue, operating results and profitability will be harmed. Fraudulent activity or significant increases in fraudulent activity could also lead to regulatory intervention, negatively impact our operating results, brand and reputation and require us to take steps to reduce fraud risk, which could increase our costs.

 

We rely on our management team and need additional key personnel to grow our business, and the loss of key employees or inability to hire key personnel could harm our business.

 

We believe our success has depended, and continues to depend, on the efforts and talents of our executives and employees, including David Feller, our Chair and Chief Executive Officer ("CEO"), and Gregory Feller, our President and Chief Financial Officer ("CFO"). Our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand and we may incur significant costs to attract and retain them. In addition, the loss of any of our senior management or key employees could materially adversely affect our ability to execute our business plan and strategy, and despite maintaining a comprehensive succession plan, we may not be able to find adequate replacements on a timely basis, or at all. We do not maintain key person life insurance policies on any of our employees.

 

Competition for our employees is intense, and we may not be able to attract and retain the highly skilled employees whom we need to support our business.

 

Competition for highly skilled engineering and data analytics personnel is extremely intense, and we continue to face difficulty identifying and hiring qualified personnel in many areas of our business. We may not be able to hire and retain such personnel at compensation levels consistent with our existing compensation and salary structure. Many of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment. In particular, candidates making employment decisions, specifically in high-technology industries, often consider the value of any equity they may receive in connection with their employment. Any significant volatility in the price of our Common Shares may adversely affect our ability to attract or retain highly skilled technical, financial and marketing personnel.

 

In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements and the quality of our services and our ability to serve our members could diminish, resulting in a material adverse effect on our business.

 

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If we cannot maintain our corporate culture, we could lose valuable qualities from our workforce.

We believe that our corporate culture is a critical component of our success, which we believe fosters innovation, encourages teamwork and cultivates creativity. As we evolve, we may find it difficult to maintain these valuable aspects of our corporate culture. Failure to preserve our corporate culture could negatively impact our future success, including our ability to attract and retain employees, encourage innovation and teamwork and effectively focus on and pursue our corporate objectives.

 

Litigation may adversely affect our business and financial condition.

 

Our business is subject to the risk of litigation by employees, members, consumers, suppliers, competitors, shareholders, government agencies, or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation. The outcome of litigation, particularly class action lawsuits, regulatory actions and intellectual property claims, is difficult to assess or quantify. Plaintiffs in these types of law suits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to these lawsuits may remain unknown for substantial periods of time. In addition, certain of these lawsuits, if decided adversely to us or settled by us, may result in liability material to our financial statements as a whole or may negatively affect our operating results if changes to our business operations are required. The cost to defend future litigation may be significant. There also may be adverse publicity associated with litigation that could negatively affect consumer perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. As a result, litigation may adversely affect our business and financial condition.

 

 

Our business could be negatively affected as a result of actively managing our investment portfolio.

 

In managing our investment portfolio, we may from time to time take a position as an activist investor and advocate for changes to corporate governance practices, such as management and board composition, executive compensation practices, social issues and other corporate actions. For example, we recently entered into the Voting Agreement with KAOS, whereby we agreed to vote in favour of KAOS’ director nominees and our nominee, as alternatives to the nominees put forth by WonderFi, for election to the board of directors of WonderFi at its 2024 annual general meeting of shareholders. If a proxy contest results from our shareholder action under the Voting Agreement or otherwise, our business could be adversely affected because engaging in proxy contests and other investor activist actions can be costly and time-consuming, disrupting our operations and diverting the attention of management. In addition, perceived uncertainties as to the future of the strategic direction of any of our investments may result in a loss to the value of such investments, which could negatively impact our financial condition.

 

United States investors may not be able to obtain enforcement of civil liabilities against the Company.

 

The enforcement by investors of civil liabilities under the United States federal or state securities laws may be affected adversely by the fact that the Company is governed by the BCBCA, that the majority of the Company's officers and directors are residents of Canada, and that all, or a substantial portion of their assets and a portion of the Company's assets, are located outside the United States. It may not be possible for investors to effect service of process within the United States on certain of its directors and officers or enforce judgments obtained in the United States courts against the Company or certain of the Company's directors and officers based upon the civil liability provisions of United States federal securities laws or the securities laws of any state of the United States.

 

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If we become a passive foreign investment company ("PFIC") for United States federal income tax purposes, certain adverse tax rules may apply to U.S. Holders of our Common Shares.

 

Based on the market price of our Common Shares and the composition of our income and assets, including goodwill, we do not expect to be treated as a PFIC for U.S. federal income tax purposes for the taxable year ending December 31, 2023. However, this is a factual determination that must be made annually after the close of each taxable year, and the application of the PFIC rules is subject to uncertainty in several respects. Moreover, the value of our assets for the purposes of the PFIC determination will generally be determined by reference to the market price of our Common Shares, which could fluctuate significantly. Therefore, there can be no assurance that we are not a PFIC for the current taxable year or will not be classified as a PFIC in the future.

 

We will be classified as a PFIC for any taxable year for United States federal income tax purposes if either (i) 75% or more of our gross income in that taxable year is passive income or (ii) the average percentage of our assets by value in that taxable year which produce or are held for the production of passive income (which includes cash) is at least 50%.

 

If we are a PFIC for any taxable year during which a beneficial owner of Common Shares that, for U.S. federal income tax purposes, is or is treated as any of the following (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or another entity treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof, or the District of Columbia, (iii) an estate, the income of which is subject to U.S. federal income tax regardless of its source, or (iv) a trust that (A) is subject to the supervision of a U.S. court and the control of one or more "United States persons" (within the meaning of Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), or (B) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes (a "U.S. Holder") holds Common Shares, such U.S. Holders could be subject to adverse United States federal income tax consequences whether or not we continue to be a PFIC. For example, U.S. Holders may become subject to increased tax liabilities under United States federal income tax laws and regulations, and will become subject to burdensome reporting requirements. If we are a PFIC during which a U.S. Holder holds Common Shares, such U.S. Holder may be able to make a "mark-to-market" election or a "qualified electing fund" election that could mitigate the adverse United States federal income tax consequences that would otherwise apply to such U.S. Holder. Although upon request of a U.S. Holder, we will provide the information necessary for a U.S. Holder to make the qualified election, no assurance can be given that such information will be available for any lower-tier PFIC that we do not control.

 

Epidemics, pandemics or other outbreaks of an illness, disease or virus could materially adversely affect our business, financial position and results of operations.

 

Epidemics, pandemics or other outbreaks of an illness, disease or virus could have, a broad impact across industries and the economy, including impacts on our operations and our employees, partners and members. At the onset of an epidemic, pandemic or other outbreaks of an illness, disease or virus, governments and regulatory bodies in affected areas may impose a number of measures designed to contain the outbreak, including business closures, social distancing protocols, travel restrictions, quarantines, curfews and restrictions on gatherings and events. Future disruptions arising from the ongoing COVID-19 pandemic or a new pandemic could have a material adverse effect on our business, financial condition and results of operations.

 

 

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If we fail to maintain effective internal control over financial reporting, as well as required disclosure controls and procedures, our ability to produce timely and accurate consolidated financial statements or comply with applicable regulations could be impaired.

 

The Sarbanes-Oxley Act of 2002 and related rules of the SEC require, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight. Our current controls and any new controls that we develop could become inadequate because of changes in conditions in our business. In addition, changes in accounting principles or interpretations could also challenge our internal controls and require that we establish new business processes, systems and controls to accommodate such changes. If these new systems, controls or standards and the associated process changes do not give rise to the benefits that we expect or do not operate as intended, it could adversely affect our financial reporting systems and processes, our ability to produce timely and accurate financial reports or the effectiveness of our internal control over financial reporting. Moreover, our business might be harmed if we experience problems with any new systems and controls that result in delays in their implementation or increased costs to correct any postimplementation issues that might arise. Further, weaknesses in our disclosure controls and internal control over financial reporting could be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our business or cause us to fail to meet our reporting obligations and could result in a restatement of our consolidated financial statements for prior periods. Any failure to design, develop or maintain effective controls, or difficulties encountered in implementing, improving or remediation lapses in internal controls may affect our ability to prevent fraud, detect material misstatements, and fulfill our reporting obligations. Ineffective disclosure controls and procedures or internal control over financial reporting could harm our business, cause investors to lose confidence in the accuracy and completeness of our reported financial and other information, and result in us becoming subject to investigations by the stock exchanges on which our securities are listed, the SEC or other regulatory authorities, any of which would likely have a negative effect on the trading price of our shares and have a material and adverse effect on our business, results of operations, financial condition and prospects. In addition, if we are unable to continue to meet these requirements, we might not be able to remain listed on the Nasdaq.

 

Cost-cutting may adversely affect our business.

 

In response to challenging macroeconomic conditions, we have taken aggressive cost-cutting steps to accelerate the path to profitability and make us a more efficient company. There can be no guarantee that these cost-cutting measures will be successful. We face a risk that our cost-cutting measures negatively impact. Cost-cutting steps, if managed incorrectly, may have a material and adverse effect on our business, results of operations, financial condition and prospects or our ability to expand our business.

 

Our insurance coverage might be inadequate or expensive.

 

While we may have insurance to protect our assets, operations, and employees, such insurance is subject to coverage limits and exclusions and may not be available for the risks and hazards to which we are exposed. No assurance can be given that such insurance will be adequate to cover our liabilities or that it will be available in the future or at all, and that it will be commercially justifiable. We may be subject to liability for risks against which we cannot insure or against which we may elect not to insure due to the high cost of insurance premiums or other factors. The payment of any such liabilities would reduce the funds available for our normal business activities. Payment of liabilities for which we do not carry insurance may have a material adverse effect on our business, financial condition and operations.

 

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Our flexible remote working model subjects us to heightened operational risks.

 

We have a flexible remote work policy, under which a large segment of our employees are not required to come into the office on a daily basis. Allowing our employees to work remotely subjects us to heightened operational risks. There is no guarantee that the data security and privacy safeguards we have put in place will be completely effective or that we will not encounter risks associated with employees accessing company data and systems remotely. We also face challenges due to the need to operate with a dispersed and remote workforce, as well as increased costs related to business continuity initiatives. Our flexible remote working model may make it more difficult for us to preserve our corporate culture of innovation and our employees might have decreased opportunities to collaborate in meaningful ways. Further, we cannot guarantee that having a large portion of our workforce continuing to work remotely will not have a negative impact on employee morale or productivity. Any failure to overcome the challenges presented by our flexible remote work policy could harm our future success, including our ability to retain and recruit personnel, innovate and operate effectively, maintain product development velocity, and execute on our business strategy.

 

If we do not maintain the net capital levels required by regulators, our broker-dealer business may be restricted and we may be fined or subject to other disciplinary or corrective actions.

 

The SEC, Financial Industry Regulatory Authority ("FINRA"), and various state regulators have stringent rules with respect to the maintenance of specific levels of net capital by securities broker-dealers. Failure to maintain the required net capital levels could result in immediate suspension of securities activities, suspension or expulsion by the SEC or FINRA, restrictions on our ability to expand our existing business or to commence new businesses, and could ultimately lead to the liquidation and/or winding down of our broker-dealer business. If such net capital rules are changed or expanded, if there is an unusually large charge against net capital, or if we make changes in our business operations that increase our capital requirements, operations that require an intensive use of capital could be limited. A large operating loss or charge against net capital could have adverse effects on our ability to maintain or expand our business.

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ITEM 4: INFORMATION ON THE COMPANY

A.
History and Development of the Company

Mogo Finance was incorporated under the Company Act on August 26, 2003 as 675909 B.C. Ltd. and transitioned under the BCBCA on May 4, 2005. Mogo Finance’s name was changed several times, the last of which occurred on June 1, 2012 when its name was changed from "Hornby Management Inc." to the current name, "Mogo Finance Technology Inc." Mogo Finance completed an initial public offering of its common shares on the Toronto Stock Exchange (“TSX”) under the trading symbol “GO” in June 2015.

 

The Company was incorporated by letters patent under the laws of Canada on January 14, 1972 under the name “Eskimo International Resources Limited.” On August 17, 1972, the Company changed its name to “Natalma Mines Limited” by supplementary letters patent. The Company was continued under the CBCA by articles of continuance dated November 19, 1979. On May 4, 1983 the Company’s name was changed to “Tonka Resources Inc.” The Company underwent several name changes between 1988 and 2013. On June 13, 2013, the Company changed its name to “Difference Capital Financial Inc.” As detailed below, in April of 2019 the Company announced the Arrangement, being a business combination with Mogo Finance by way of a statutory plan of arrangement. On June 21, 2019, the Company changed its name to “Mogo Inc.” and Mogo Finance became a wholly owned subsidiary of the Company following the Arrangement. Prior to completing the Arrangement, the Company was continued in British Columbia under the BCBCA.

 

On June 21, 2019, Mogo (referred to in this section prior to the Arrangement as “Difference”, and following the Arrangement as the “Combined Entity”) and Mogo Finance combined their businesses pursuant to a statutory plan of arrangement under Section 288 of the BCBCA. The Arrangement became effective at 12:01 a.m. (PST) on June 21, 2019 (the “Effective Time”).

Under the Arrangement, Mogo Finance was amalgamated with a wholly owned subsidiary of Difference and each Mogo Finance common share (each a "Mogo Finance Share") outstanding immediately prior to the Arrangement, other than Mogo Finance Shares held by Difference, was exchanged for one common share of the Combined Entity (each, a “Common Share”). Prior to the Arrangement, Difference continued from a corporation existing under the Canada Business Corporations Act (“CBCA”) to a corporation existing under the BCBCA (the "Continuance"). On completion of the Arrangement, former Mogo Finance shareholders owned approximately 80% of the Combined Entity, on a fully diluted basis and, as discussed below, the former directors of Mogo Finance make up a majority of the directors of the Combined Entity and the former officers of Mogo Finance became officers of the Combined Entity. In connection with the Arrangement, all of Mogo Finance's outstanding convertible securities became exercisable or convertible, as the case may be, for Common Shares in accordance with the provisions thereof.

The Common Shares began trading on the TSX under the trading symbol "MOGO" in place of the Difference common shares at the open of trading on June 25, 2019. In addition, the Combined Entity was treated as a successor in interest to Mogo Finance and, as such, the Combined Entity was listed on the Nasdaq Capital Market (the “Nasdaq”) under the symbol "MOGO". Mogo Finance Shares were delisted from the TSX on the close of trading on June 24, 2019. Mogo Finance Shares and common shares of Difference traded between June 21st and June 25th were automatically settled for common shares of the Combined Entity. On August 10, 2023 the issued and outstanding Common Shares of the Combined Entity were consolidated on a three for one basis.

See “Item 4 – C. Organizational Structure" and “Item 10 – C. Material Contracts” for additional information on our corporate structure, including a list of our major subsidiaries.

 

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Our principal place of business is located at 516-409 Granville St, Vancouver, BC, V6C 1T2, telephone number (604)-659-4380, and our registered office is located at Suite 1700, 666 Burrard Street, Vancouver, British Columbia V6C 2X8. Our website can be accessed at www.mogo.ca. The information contained on, or accessible through our website is not incorporated by reference into this annual report. Our agent for service of process in the United States is C T Corporation System, located at 28 Liberty Street, New York, NY 10005. Copies of our electronic filings can be accessed on the SEC website at www.sec.gov.

 

We made capital expenditures of $0.2 million, $0.5 million, and $0.5 million in 2023, 2022, and 2021, respectively. Our capital expenditures were primarily for the purchase of computer equipment.

 

B.
Business Overview

Mogo is a digital wealth and payments company headquartered in Vancouver, Canada. The Company offers simple digital solutions to help its members dramatically improve their path to wealth-creation and financial freedom. Mogo's stock trading app, MogoTrade, offers commission-free stock trading that helps users thoughtfully invest based on a Warren Buffett approach to long-term investing – while also making a positive impact with every investment. Moka offers Canadians a real alternative to mutual funds and wealth managers that overcharge and underperform with a fully managed investing solution based on the proven outperformance of an S&P 500 strategy, and at a fraction of the cost. Mogo also offers digital loans and mortgages. Through Mogo's wholly owned digital payments subsidiary, Carta Worldwide, the Company offers a low-cost payments platform that power next-generation card programs for companies across Europe and Canada.

 

Products and Services

MogoTrade

 

Mogo offers one of the leading digital wealth platforms in Canada led by our newest product MogoTrade, a commission-free stock trading app that helps users thoughtfully invest based on a Warren Buffett approach to long-term investing – while also making a positive impact with every investment. In partnership with Flash Forest, one tree is planted each month on behalf of each user. Mogo is designed to help its members outperform the average investor by following key lessons from Warren Buffett and to provide the behavioral edge they need to build wealth. MogoTrade users can trade stocks on the Nasdaq, TSX, TSX Venture Exchange and New York Stock Exchange, among others.

Our mission is to help Canadians achieve financial freedom while also making a positive impact. MogoTrade is available for download on the App Store and Google Play.

 

Moka

 

Moka is a fully managed investment platform that includes a powerful combination of features to help Canadians simplify and automate the wealth-building process. Moka utilizes behavioral science to help users adopt the right habits to achieve financial freedom and specializes in helping members invest strategically in the S&P500. With a low, flat monthly subscription fee for unlimited investing, Moka can help Canadians save hundreds of thousands on their investments over a long-term investment horizon while putting them on track for retiring with millions. There's no minimum contribution to get started and no fee to withdraw funds at any time.

 

Moka operates through the Moka.ai app, available on the App Store and Google Play.

 

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MogoMoney

 

Mogo offers an unsecured open credit product to help consumers meet their short-term cash needs. Loans offered are in amounts up to $5,000 at annual rates up to 47.42%. We've designed MogoMoney to provide an instant no-obligation, pre-approval decision which can be refreshed every 90 days. The pre-approval decision is determined based on our proprietary credit decisioning models. We leverage technology and data to simplify the user experience, and for some users that means a 100% automated loan experience. No dealing with documents or people, simply sign up and get your pre-approval, customize your loan to fit your needs, and digitally sign loan agreements. The money can be received within 30 minutes. On eligible Mogo loans, where permitted by law, we offer a unique Level Up Program which includes giving members an opportunity to increase their available balance through good payment history.

 

MogoMortgage

 

Working with some of Canada's top mortgage lenders, Mogo brings a new level of transparency and convenience to the Canadian mortgage experience, and offers the best of both worlds: market-leading rates and the best digital mortgage experience in Canada. In 2017, Mogo won the Canadian Mortgage Award for Best Use of Mobile Technology. Our MogoMortgage solution is intended to simplify the mortgage experience with transparency around interest rates and the entire process of getting a mortgage. Members can apply anywhere with our quick and stress-free online mortgage application. Members enjoy low rates, ongoing guidance from our MogoMortgage team, and the ability to keep track of their mortgage with our digital dashboard after the mortgage funds. The Company is not a lender and therefore does not carry the mortgages on its balance sheet. Mogo earns revenue from brokerage fees.

 

MogoCard

 

The MogoCard was designed to help members learn to spend less than they earn in a convenient and engaging way through features such as instant transaction alerts with each purchase and real-time balance alerts delivered to members' phones. For every purchase made on a MogoCard, Mogo's tree planting partners planted one tree on the consumer's behalf, absorbing approximately 500lbs of CO2.This turned every purchase made on the MogoCard into climate action. The MogoCard was Chip/Pin and Paywave enabled, members could transfer funds instantly from most bank accounts in Canada to their MogoCard directly through the Mogo app, and the MogoCard supported Apple Pay, Google Pay and Samsung Pay.

 

The MogoCard product was wound down in June 2023 and is no longer offered.

 

Free Credit Score Monitoring and MogoProtect

 

Until June 2023, when Mogo's legacy app was wound down, when an individual opened an account with Mogo(a "MogoAccount"), they received their Equifax credit score on a monthly basis for free for an initial period of 90 days. Members who signed up and activated a MogoCard, continued to receive this service while their MogoCard was active.

 

MogoProtect was a product within the MogoAccount that helped individuals protect themselves against identity fraud by monitoring their Equifax credit bureau daily for hard credit inquiries, which can be one of the earliest signs of identity fraud. Members received a push notification and email within 24 hours of the inquiry being reported. If a member identified any suspicious inquiries, Mogo guided them through the next steps to help stop fraudsters in their tracks. In July 2020, MogoProtect became the first free, mobile-first identity fraud protection product in Canada. When an individual opened a MogoAccount, they received

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MogoProtect for free initially for 90 days and the service continued as long as they remained an active MogoCard or MogoTrade user.

 

The MogoProtect product was wound down in June 2023 and is no longer offered.

 

Carta

 

Carta is a digital payments software company which provides technology and services that enable financial technology companies, banks, and corporations to issue payment products to consumers via multiple channels, including physical, virtual and tokenized cards, as well as payment switching and routing services.Carta was founded in 2008 with a vision to build a modern issuer processing platform that could enable innovators around the globe to deploy a new wave of payment products. The Carta platform provides the infrastructure to help fintech and payments businesses build and manage their payment systems, and it supports prepaid, debit, and credit card issuer processing. Carta is certified as Visa and MasterCard processor with active card programs in over 30 countries, and annual transaction volume of approximately $9.9 billion.

 

Mogo Ventures

 

In March 2022, Mogo announced the formation of Mogo Ventures to manage its existing investments in strategic partners and companies that support Mogo's broader ecosystem. As of December 31, 2023, the Mogo Ventures portfolio is valued at approximately $37.8 million and includes:

An approximate 13% stake in TSX-listed WonderFi Technologies Inc. ("WonderFi"), the only fully regulated crypto exchange in Canada;
Investments in leading and emerging Crypto and Web 3.0 platforms including Gemini,NFT Trader, and Tetra Trust; and
Investments in gaming companies including Enthusiast Gaming (NASDAQ:EGLX) and Eleven Gaming.

 

Mogo Ventures also manages the Company's portfolio of legacy investments, including Hootsuite,Blue Ant Media and Alida, with a focus on monetizing these investments.

 

In connection with the formation of Mogo Ventures, Mogo created an investment committee (the "Investment Committee") currently consisting of the following directors of Mogo: Michael Wekerle (Chair), David Feller, and Greg Feller.

 

General Development of the Business

Mogo has continued its evolution with a series of strategic and financial initiatives throughout 2023 and early 2024 as described in more detail below.

 

In 2024, Mogo:

Launched Moka.ai. In March 2024, the Company announced the launch of Moka.ai, the next generation of its wealth-building app with significant updates and enhancements designed to help the next generation of Canadians get on a real path to becoming millionaires and achieving financial freedom.
Entered into Voting Agreement with KAOS Capital. On March 27, 2024, Mogo and KAOS Capital ("KAOS") entered into a voting agreement (the "Voting Agreement"), pursuant to

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which, among other things, Mogo and KAOS agreed to vote their respective common shares of WonderFi in favour of the five individuals put forth by KAOS and the one individual put forth by Mogo (pursuant to its rights under an investor rights agreement with WonderFi dated April 2, 2023 (the "Mogo IRA")) for election to the board of directors of WonderFi at the 2024 annual general meeting of shareholders of WonderFi. Mogo nominated Christopher Payne, a director of Mogo, to the board of directors of WonderFi as its director nominee pursuant to the terms of the Mogo IRA.
Added Bitcoin to its Treasury Management Strategy. In March 2024, the Company announced that its Board of Directors has approved a change to its treasury management strategy to include Bitcoin and Bitcoin ETFs and authorized an initial investment of up to $5.0 million. As of the date hereof, the Company has invested approximately US$600,000 in Bitcoin ETFs.

 

Three Year History

 

In 2023, Mogo:

Announced WonderFi Business Combination. In July 2023, Mogo announced that Coinsquare Ltd. ("Coinsquare") completed a business combination with WonderFi and CoinSmart Financial Inc. This transaction positioned the resulting entity, WonderFi (TSX:WNDR), as the only fully regulated crypto exchange in Canada. Mogo's shares in Coinsquare were exchanged for ~87.0 million shares of WonderFi in the business combination, making Mogo the largest shareholder of WonderFi. Mogo currently has an approximate 13% ownership stake in WonderFi. Certain of the WonderFi shares are subject to a lock-up period, with gradual release scheduled until January 2025.
Entered Multi-Year Agreements with Oracle. Mogo entered multi-year agreements with Oracle Cloud Infrastructure("OCI") in October 2023 to transition to OCI to support the long-term growth of the Company's digital wealth platform. Carta also announced that it selected OCI to accelerate innovation and support future growth.
Expanded Partnership with Snowflake. Mogo expanded its partnership with Snowflake, the Data Cloud company, to integrate AI applications and scale its digital wealth offerings. By leveraging Snowflake's Data Cloud, Mogo aims to enhance processing efficiency and introduce innovative AI solutions, empowering users to invest more effectively and achieve financial freedom.
Completed a Share Consolidation. In August 2023, Mogo completed a share consolidation at a ratio of three pre-consolidation Common Shares to one post-consolidation Common Share (the “Share Consolidation”), regaining compliance with the minimum bid price requirement under the Nasdaq Listing Rule 555(a)(2). The Common Shares commenced trading on the TSX and Nasdaq on a post-consolidation basis at the start of trading on August 14, 2023.
Prioritized Profitability.During the year ended December 31, 2023, Mogo continued to focus on accelerating the path to profitability by placing an emphasis on cost efficiency and building financial resiliency in light of challenging financial market conditions. The Company narrowed its strategic focus and completed the wind down of its legacy Mogo app including its prepaid card product, MogoCard, and its identity fraud monitoring product, MogoProtect.

Amended Postmedia Agreement. Mogo amended its marketing collaboration agreement with Postmedia, and extended it until December 31, 2024, aiming to leverage Postmedia's extensive media network to reach a broader audience.

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Launched MogoTrade App in Quebec. In 2023, Mogo expanded its market reach by launching the MogoTrade app in Quebec, offering it in both English and French languages. This move increased the company's total addressable market opportunity by approximately 28%. Additionally, on May 15, 2023, MogoTrade removed invitation-only restrictions, making the application available to the general public.
Filed New Base Shelf Prospectus. On November 6, 2023, Mogo filed a final short form base shelf prospectus with the securities regulators in each province and territory of Canada, except Quebec. The prospectus replaced the prospectus that was filed in 2021, and enables Mogo to make offerings of Common Shares, preferred shares, debt securities, warrants to purchase Common Shares, preferred shares or debt securities, or any combination thereof of up to an aggregate offering price of US$250 million at any time during the 25-month period that the prospectus remains effective.
Announced Carta Worldwide's Growth. Mogo's digital payment solutions business, Carta Worldwide, experienced significant growth, processing over $2.2 billion of payments volume in Q1 2023. This marked a notable increase of over 43% compared to Q1 2022, reflecting the continued expansion and adoption of Carta's services.
Launched Normal Course Issuer Bid on TSX. In August 2023, Mogo received approval from the TSX to commence repurchasing its Common Shares on the TSX pursuant to a normal course issuer bid (the "NCIB"). The NCIB is in addition to Mogo's existing Common Share buyback program launched on the Nasdaq in March 2022 (the "Nasdaq Bid" and together with the NCIB, the "Bids"). Under the Bids, Mogo may purchase up to 2,183,000 Common Shares (on a post-consolidation basis), representing approximately 10% of the public float of Mogo's outstanding Common Shares as at March 21, 2023. Purchases under the Bids will be made through the facilities of the TSX, Nasdaq or other designated exchanges or any Canadian or US alternative trading system. In accordance with the policies of the TSX, the period of the NCIB was considered to have commenced on March 22, 2023 and ran until March 21, 2024. Under the NCIB, Mogo repurchased 104,800 Common Shares through the facilitates of the TSX. The Nasdaq Bid remains on-going and Mogo is able to repurchase up to US$7.5 million in Common Shares thereunder.

 

In 2022, Mogo:

Prioritized Profitability.During the year ended December 31, 2022, Mogo continued to focus on accelerating the path to profitability by placing an emphasis on cost efficiency and building financial resiliency in light of challenging financial market conditions. The following cost reduction initiatives were implemented in 2022:
o
An approximate 33% reduction in workforce headcount as at December 31, 2022 compared to March 31, 2022
o
A reduction in vendor expenses by all departments
o
Completed the exit of Moka France during Q4 2022.
o
Completed the exit of Mogo's bitcoin product, MogoCrypto
o
As a result of these initiatives, total quarterly operating expenses decreased by $9.2 million from Q1 2022 to Q4 2022 and resulted in Mogo reporting its first positive quarterly adjusted EBITDA since FY 2020 of $0.2 million in Q4 2022.
Exited MogoCrypto and Monetized the Digital Assets on Mogo's Balance Sheet. With the exit of its MogoCrypto product and the sale of digital assets (Bitcoin and Ethereum) in Q4 2022,

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Mogo's sole remaining crypto exposure is comprised of its investment in Canada's first IIROC registered crypto dealer Coinsquare along with several smaller crypto-related investments in our investment portfolio.
Accelerated the roll-out of invitations to MogoTrade. Mogo continued on its path to providing consumers with a commission-free stock trading app, MogoTrade, while also making further product enhancements, such as automatic approval for account openings, instant funding, and the ability to receive in-app monthly statements, in advance of a broader launch.
2 Million Members. In 2022, Mogo grew its member base to 2 million members.
One Million Trees Planted. In alignment with its mission to help Canadians achieve financial freedom while also solving one of the biggest social issues we face, climate change, Mogo announced it reached its one million trees milestone in partnership with Vancouver-based reforestation platform, veritree.
Formation of Mogo Ventures. Mogo announced Mogo Ventures to Manage its investment portfolio. Mogo Ventures also manages the Company's portfolio of legacy investments, including its investments in Hootsuite, Blue Ant Media and Alida, with a focus on monetizing these investments.

 

In 2021, Mogo:

 

Converted our Convertible Debentures (TSX:MOGO.DB) into Common Shares effective January 11, 2021. This early conversion was intended to simplify Mogo's capital structure as Mogo continued to transition back into growth mode.
Acquired Carta. On January 25, 2021, Mogo completed its acquisition of 100% of the issued and outstanding securities of Carta in exchange for the issuance of 10,000,000 Common Shares (the "Carta Transaction"). The Carta Transaction was completed pursuant to a plan of arrangement under the CBCA, upon the terms and conditions of the definitive arrangement agreement between Mogo and Carta dated November 17, 2020 (the "Carta Arrangement Agreement"). Pursuant to the Carta Arrangement Agreement, the 10,000,000 Common Shares (the "Consideration Shares") were issued to an intermediary limited partnership in which the former holders of Carta securities are limited partners. The distribution of the Consideration Shares took place on July 25, 2021. Upon completion of the Carta Transaction, Carta became a wholly owned subsidiary of Mogo. See "Business Overview – Carta".
Announced Carta's Visa Ready Certification. On May 20, 2021, Carta was granted a Visa Ready certification through its Visa Ready for Fintech Enablers program. Joining the Visa Ready for Fintech Enablers program enables Carta to provide both fintechs and traditional issuers across Europe and North America with a robust solution for digital issuance, speeding up their time to market and addressing the needs for digital-first strategies.
Investment in Coinsquare. On April 16, 2021, Mogo acquired ownership of 19.99% of the outstanding common shares of Coinsquare, Canada's leading digital asset trading platform, on a post-transaction basis, for total consideration of approximately $56.4 million, consisting of a cash payment of $27.4 million and the issuance of 2,807,577 Common Shares. On June 4, 2021, Mogo announced the closing of a purchase of an additional 5,412,222 common shares of Coinsquare which increased Mogo's ownership in Coinsquare from 19.9% to approximately 37%. The purchase was completed in two separate transactions consisting of (a) the exercise of a call option of 3,223,690 Coinsquare common shares from certain selling shareholders and (b) the purchase of 2,188,532 common shares of Coinsquare from Riot Blockchain Inc.

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(NASDAQ:RIOT). The aggregate consideration paid by Mogo under the two transactions was $48.6 million, which was satisfied by the issuance of an aggregate of 5,080,876 Common Shares. On June 15, 2021, Mogo announced that it had acquired an additional 2.0% of the outstanding common shares of Coinsquare from Michael Diamond and two affiliated companies.
Closed a US$54 Million Registered Direct Offering. On February 24, 2021, Mogo closed its sale to certain institutional investors of an aggregate of 5,346,536 Common Shares at a purchase price of US$10.10 per Common Share in a registered direct offering (the "First Registered Direct Offering") priced at-the-market under the Nasdaq rules. H.C. Wainwright & Co., LLC ("HCW") acted as exclusive placement agent of the First Registered Direct Offering pursuant to the terms of an engagement agreement with the Company dated February 21, 2021. The aggregate gross proceeds to the Company were approximately US$54 million, and after deducting the placement agent's fees and the estimated expenses of the First Registered Direct Offering, the net proceeds from the First Registered Direct Offering were approximately US$50.1 million. In connection with the First Registered Direct Offering, Mogo completed the issuance to investors of unregistered warrants to purchase up to an aggregate of 2,673,268 Common Shares in a concurrent private placement. Each such warrant entitles the holder thereof to acquire one Common Share at an exercise price of US$11.00 at any time until 5:00 p.m. (New York time) on August 26, 2024. In addition, the Company issued unregistered warrants to purchase 267,327 Common Shares to HCW in consideration of its services as placement agent of the First Registered Direct Offering. Each such warrant entitles the holder thereof to acquire one Common Share at an exercise price of US$12.65 at any time until 5:00 p.m. (New York time) on February 26, 2024.
Terminated our ATM Offering.Simultaneously with the announcement of the First Registered Direct Offering, Mogo announced the termination of its at-the-market offering agreement dated December 31, 2020 between Mogo, HCW, as lead agent, Raymond James Ltd., and Eight Capital, effectively ceasing the US$50 million at-the-market offering (the "ATM Offering") established by the Company under a prospectus supplement dated December 31, 2020. Prior to terminating the ATM Offering, Mogo sold a total of 1,524,759 Common Shares for total aggregate gross proceeds of US$14,867,402.04.
Closed a US$27.5 Million Registered Direct Offering. On December 13, 2021, Mogo closed its sale to certain institutional investors of an aggregate of 6,111,112 Common Shares and warrants to purchase up to an aggregate of 3,055,556 Common Shares (each whole warrant, a "Warrant" and each Common Share and one-half of one Warrant, a "Unit") at a purchase price of US$4.50 per Unit in a registered direct offering(the "Second Registered Direct Offering"). HCW acted as exclusive placement agent of the Second Registered Direct Offering. The aggregate gross proceeds to the Company were approximately US$27.5 million, and after deducting the placement agent's fees and the estimated expenses of the Second Registered Direct Offering, the net proceeds from the Second Registered Direct Offering were approximately US$25.3 million. Each Warrant entitles the holder thereof to acquire one Common Share at an exercise price of US$4.70, exercisable six months following closing, and has a term of 36 months.
Sold our Investment in Vena for a 116% Gain. On April 28, 2021, Mogo divested its equity stake in Vena Solutions Inc. as part of their recent $300 million Series C funding, for proceeds of $4,670,000, a 116% increase from the book value as at December 31, 2020. The Company's legacy investment portfolio, which included Vena, was acquired as part of its 2019 business combination with Difference.
Invested in Ethereum. On May 3, 2021, Mogo announced that it purchased approximately 146 ether at an average price of $3,425 (US$2,780) per ether.

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Acquired Moka. On May 4, 2021, Mogo acquired all of the issued and outstanding securities of Moka, one of Canada's leading saving and investing apps, in exchange for the issuance of 4,999,991 Common Shares. The acquisition increased Mogo's member base by approximately 400,000 and expanded Mogo's wealth offering to include saving and investing products.
Expanded the Bitcoin Rewards Program. Mogo's first-of-its-kind rewards program was extended to include the MogoCard in January 2021, and MogoMortgage in March 2021.
Filed a Mixed Shelf Prospectus. On April 15, 2021, Mogo filed a final short form base shelf prospectus with the securities regulators in each province and territory of Canada, except Quebec, and a corresponding shelf registration statement on Form F-10 with the United States Securities and Exchange Commission ("SEC"). The prospectus replaced the prospectus that was filed in 2019, and enabled Mogo to make offerings of Common Shares, preferred shares, debt securities, warrants to purchase Common Shares, preferred shares or debt securities, or any combination thereof of up to an aggregate offering price of US$500 million at any time during the 25-month period that the prospectus remained effective.
Partnered with Fundstrat. On May 6, 2021, Mogo announced a new partnership to provide MogoMembers with exclusive access to crypto and other equity research from FSInsight LLC ("FSI"), a market-leading, independent research firm that is a division of Fundstrat Global Advisors. Under the agreement, Mogo became the exclusive distributor bringing FSI's research to Canada's retail investor market.
Invested in Tetra Trust. On July 8, 2021, Mogo announced a new minority investment in Tetra Trust Company ("Tetra Trust"), Canada's first qualified custodian for cryptocurrency assets, acquiring approximately 4% of the outstanding common shares of Tetra Trust.
Acquired Fortification (Renamed MogoTrade). On September 1, 2021, Mogo acquired 100% of the issued and outstanding securities of Fortification Capital Inc. ("Fortification"), in exchange for (i) a cash payment of $500,000, (ii) a cash payment equal to the working capital of Fortification plus repayment of the subordinated debt owed to the vendor at the time of closing totalling approximately $550,000, and (iii) the issuance of 75,000 Common Shares. The acquisition of Fortification brings OEO (order execution only) registration capabilities which is a necessary regulatory requirement for Mogo to offer commission-free stock trading to its members through MogoTrade. Following closing, Fortification was renamed MogoTrade Inc., and will continue to operate as a stand-alone wholly owned subsidiary of Mogo.
Partnered with CI Investments. On October 12, 2021, Mogo announced a new partnership with CI Investment Services Inc. to provide a range of back-office services to support MogoTrade, including clearing and settlement, custody of client funds and securities, and trade execution.
Launched "Green" Bitcoin. On October 26, 2021, Mogo launched the world's first climate-positive bitcoin, an initiative which makes all bitcoin purchased on the Mogo platform climate positive. For every bitcoin purchased through its platform, Mogo will plant enough trees to completely absorb the CO2 emissions produced by mining that bitcoin —and then some. This initiative, believed to be the first of its kind, also includes all bitcoin currently held by members on the platform. Mogo's"green" bitcoin further demonstrates the Company's commitment to creating a healthier planet while empowering Canadians to invest and spend wisely.
Invested in Gemini. On November 23, 2021, Mogo announced a minority investment in Gemini's US$400 million financing, led by Morgan Creek Digital.
Expanded the Credit Facility and Lowered the Interest Rate. On December 17, 2021, Mogo announced amendments to the Credit Facility that lowered the effective interest rate from a

34


maximum of 9% plus LIBOR with a LIBOR floor of 1.5%, to 8% plus LIBOR with no floor. In addition, the amendment increases the available loan capital from $50 million to $60 million and extends the maturity date by three years from July 2, 2022 to July 2, 2025.
Received Regulatory Approval and Launched MogoTrade App. On December 21, 2021, Mogo received final approval from IIROC for the launch of MogoTrade, and subsequently launched the MogoTrade App in the App Store and on Google Play. See "Business Overview – MogoTrade".
Ended 2021 with more than 1.8 million members, placing us among the largest fintech companies in Canada by total members.

 

Product Development

 

We are a product‑focused company that is passionate about developing new and innovative products. Our CEO leads our product team and ensures that all products are aligned with both our brand and our mission to improve the financial health of our members. We value convenience, transparency and simplicity, and create financial products for everyday life that we ourselves would want to use. We constantly monitor member feedback and market trends and strive to remain a market leader by continuing to optimize our user experience and value proposition. We expect to continue to invest in products that we believe meet our ROI criteria such as MogoTrade and Moka.

 

Our Platform

 

MogoTrade and Moka Platforms

 

MogoTrade and Moka are built entirely in the cloud leveraging a mesh of in-house made microservices using RESTful Application Program Interfaces ("APIs"). Application data resides in both Canada as well as the United States. We rely on a vast list of third parties to ensure that customers are making financial decisions based on correct market information and market analysis.

 

The user interface that customers interact with is designed to minimize the amount of customer inquiries required to be fielded by operations. Trading for MogoTrade is facilitated through Fortification's technology suite, which was acquired in 2021. Extensive amount of application functionality rides on previously made services used in other lines of business at Mogo such as ledger services, funds transfers, account creation, and account management. The platforms take into consideration future customer scaling requirements.

 

Mogo Platform

 

We leverage our integrated platform specifically to meet the financial needs of consumers, with a track record of providing a growing and innovative suite of products that address the full credit spectrum of consumers. All functions are designed and built as small services for ease of use and enhanced system reliability.

 

Our platform is characterized by four key technology strengths:

Ease of Use. Having a member‑centric approach requires providing members with a high degree of usability, facilitated by a positive member experience and self‑service. This objective transcends everything we do, beginning with the front‑end of Mogo's website, to the member's online interaction with our product and MogoAccount pages. We look to promote self‑service through a secure portal called the MogoAccount. The Mogo member relationship management environment, which is integrated within the MogoAccount, provides automated personalized

35


communication via online chat, emails, text messages and phone calls. This includes upselling and cross‑selling options as well as product status information in a streamlined and easy-to-use manner.
Automation. Ensuring a quick and appropriate decisioning process, 24/7, requires streamlining the process to avoid steps that are unnecessarily burdensome to the member. We view automation as an important element of this, whether it is during the application process, which includes verification of employment, bank or phone data, as well as during all monetary transactions, including loan funding and member payment processes. Our online interactions with our members are enabled via website rendering on both desktop and mobile.
Analytics‑Based. A key pillar of our platform is the integration of analytics into the transaction flow. By doing so, we believe we are able to derive unique insights into our operations and member experience. Our data gathering processes combine both batch style data warehousing technology, and real‑time actionable intelligence. This enables real‑time credit, upsell and cross-selling opportunities, as well as a personalized experience and data products. We believe that our data‑driven model facilitates and maximizes the sourcing of prospects, significantly increases product application completions, yields a higher conversion rate and enables higher member retention and collections performance.
Plug‑&‑Play Functionality. We use standardized transaction interfaces to third‑party vendor technologies instead of customized integrations or offline/batch data synchronization. By designing our platform architecture this way, we have the ability to rapidly evolve and expand our platform using the most advanced capabilities available in the market without significant investment. Selection of these vendors is driven by their functional scope and the value we are able to derive via our platform. We frequently review the capabilities and value of other or emerging technologies, and are able to quickly replace or integrate existing or new providers into the platform as a result of this flexible structure.

 

The data that we generate through our various processes is monitored and allows us to continually refine and improve our business. This data plays a key role in our credit quality and marketing functions. Since we are able to correlate the performance of our products against these and other metrics, we are able to continuously improve the quality of our credit decisioning. Through the use of analytics, the data we collect also provides valuable marketing insight.

 

Carta Platform

Carta’s business-to-business (“B2B”) offering is based on a hosted platform with data centers in North America and Europe with direct connectivity to global card payment networks – Visa and MasterCard ("Payment Networks"). The Carta platform maintains data compliance with Payment Card Industry Data Security Standards (PCI DSS Level 1), General Data Protection Regulation (GDPR), and regional and bank partner regulatory requirements.

 

Carta serves customers seeking to issue payment cards by offering platform connectivity to Payment Networks and client facing interfaces that allow management of the card programs. Carta's customers access the platform through API and client administration portals, which are based on the API services. This allows for the real-time creation and modification of user accounts and issuing of 16 Digit Personal Account Numbers ("PANs"). The core of Carta's platform is the authorization functionality. This functionality allows for real-time authorizations of transactions based on rules within the Carta platform. Additionally, clients can interact with the authorization flow by way of Carta's delegated authorization service called Issuer Link. This provides clients an opportunity to apply business rules that go beyond standard processing

36


rules. This enables clients to have a higher level of spend control on each and every authorization and build out products and offerings not possible on legacy platforms.

 

Platform Maintenance

 

We maintain our platforms with 66 full‑time technology and credit risk analysis employees (credit risk, product, design, development, business intelligence and information technology) as of December 31, 2023

 

Principal Markets

Mogo competes in the financial services industry in Canada and in Europe through its payments subsidiary, Carta Worldwide. In particular, we currently operate in all provinces and territories of Canada with some product-specific limitations in certain provinces.

The following table details the breakdown of revenue by category of activity in geographic markets for the years ended December 31:

($000s)

 

 

 

 

Years ended December 31,

2023

2022

  2021

Subscription and services revenue:

 

 

 

Canada

32,668

35,112

26,422

Europe

6,117

6,531

7,287

Other

98

699

Interest revenue:

 

 

 

Canada

26,436

27,208

23,111

Total revenue

65,221

68,949

57,519

 

Marketing

Mogo and Moka

 

Our marketing strategy aims to build the best digital financial brand in Canada, with innovative products designed to help our members improve their financial health while also making a positive impact with their money. Mogo's brand and marketing strategy leverages compelling and creative content to inspire and motivate Canadians to sign up for Mogo to help them improve their financial lives. Mogo targets consumers who are looking for ways to take their money game to the next level.

We use an integrated marketing approach to create a consistent, seamless, multi-dimensional brand experience for our members. Our multi-touchpoint marketing strategy melds all marketing tactics such as advertising, sales promotions, content creation, public relations, direct marketing, and social media.

The main pillars of our integrated marketing approach are as follows:

Website. We view our marketing websites (mogo.ca, mogotrade.ca and moka.ai) as our biggest opportunity to convert leads into Mogo members. Constant focus on upgrades and optimizations are prioritized.

37


Brand Building Mass Marketing. Through our partnership with Postmedia Networks Inc. ("Postmedia"), we leverage Postmedia's extensive distribution and reach, to feature our brand and disruptive value proposition. This increases awareness and interest in the Mogo brand and products.
Performance Marketing Channels. We effectively leverage performance marketing channels to reach people who have displayed an intent to purchase with highly optimized, data driven targeted ad campaigns.
Public Relations. Our PR strategy is focused on building awareness of Mogo and our products and increasing brand awareness with the general public, Mogo members and existing and potential investors.
Social Media. We curate content tailored to the nuances and unique audiences of major social platforms, delivering messages about financial products and services, but also extending to topics of interest. With this tactic, we achieve increased brand recognition and improved brand loyalty, higher conversion rates, higher brand authority, increased inbound traffic, reduced marketing costs, better search engine ranking, and improved member insights.
Content Marketing. We leverage content as a part of our overall marketing strategy, including featuring it in Postmedia, our blog, in app and through email.
Email Marketing. We use this channel to nurture prospects with the goal of boosting conversion and maintaining effective communication with our members. Email also helps drive loyalty and retention as we often deploy reactivation and Level Up campaigns.
Partnerships. We maintain ongoing relationships with cost‑effective prospecting partners and build marketing partnerships with brands that target similar audiences or provide products and services that apply to Mogo’s target audience.
Affiliate and Influencer Marketing. We partner with popular influencers and agencies to reach wider audiences across Canada. These partnerships leverage highly engaged followings on social media, such as Instagram and TikTok, to accelerate the growth of Mogo’s own social media followings and to create brand relevance with disparate groups.

 

Carta

Carta is a business-to-business (“B2B”) platform with sales and marketing activities targeted towards fintechs, banks, and other corporations seeking to issue payment cards. Carta's primary markets are Europe and Canada, with sales and marketing activities delivered through industry generated lead activity, including channel partnerships, web and social lead generation, in-bound inquiries, and direct sales engagement.

Intellectual Property

In accordance with industry practice, we protect our proprietary rights through a combination of copyright, trademark, design patent, trade secret laws and contractual provisions. The source code for our software is protected under Canadian and applicable international copyright laws. We currently have no issued or pending utility patents.

 

We also seek to avoid disclosure of our intellectual property and proprietary information by requiring employees and consultants to execute non‑disclosure and assignment of intellectual property agreements.

38


Such agreements require our employees and consultants to assign to us all intellectual property developed in the course of their employment or engagement. We also utilize non‑disclosure agreements to govern interaction with business partners and prospective business partners and other relationships where disclosure of proprietary information may be necessary.

 

Our software includes software components licensed from third parties, including open source software. We believe that we follow industry best practices for using open source software and that replacements for third‑party licensed software are available either as open source software or on commercially reasonable terms.

 

We are the registered owners of trademarks in Canada, the United States, the United Kingdom and the European Union and have a number of pending trademark applications in Canada. We are the authorized user of various social media handles, pages and profiles that reflect the Mogo and Moka brands and we have registered and maintain the registration of a variety of domain names that include "Mogo" or variations of "Mogo", “Moka” or variations of “Moka”, as well as cartaworldwide.com.

The enforcement of our intellectual property rights depends on any legal actions against any infringers being successful, but these actions may not be successful or may be prohibitively expensive, even when our rights have been infringed. See “Item 3. Key Information—D. Risk Factors”.

 

Specialized Skill and Knowledge

 

As of December 31, 2023, Mogo had 209 team members. With over ten years of operating experience, we have developed strong competencies across multiple disciplines. In addition to 52 software developers, designers, data scientists, product managers, and marketers, we have all of the traditional roles of a financial services provider including credit risk, finance, customer experience, operations, governance, legal and compliance. Our team contributes to transforming the traditional financial services experience by delivering a digital suite of innovative financial products. Our future success partly depends on our continuing ability to attract, develop, motivate, and retain highly qualified and skilled employees who share Mogo's passion for innovation through our products, platform and brand.

 

Competitive Conditions

 

Mogo

 

The financial services market continues to undergo dramatic changes. Our competitors include other financial technology companies, other consumer finance companies, brokerages, online lenders, mortgage brokerages, traditional financial institutions such as banks, credit unions, and new market entrants. We compete with various financial services companies in each of our main products including financial technology companies such as Wealthsimple, Koho, Questrade, Qtrade and Webull; large Schedule I banks such as TD Canada Trust, Scotiabank, Royal Bank of Canada, Tangerine, Canadian Imperial Bank of Commerce, EQ Bank and Bank of Montreal; credit unions such as Meridian Credit Union and Coast Capital Savings Federal Credit Union; and consumer credit companies such as Capital One, Fairstone Financial Inc., and goeasy.

 

We believe our innovative online and digital platforms and process automation enable us to operate more efficiently, with more competitive rates and higher customer satisfaction than these competitors. We anticipate that new and established internet, technology and financial services companies, some of whom may possess large, existing customer bases, substantial financial resources and established distribution channels, may enter the market in the future. We believe that our strong brand (enhanced via our Postmedia

39


partnership), scale, 20 years of historical data, talented and diverse team, and performance record provide us with significant competitive advantages over current and future competitors.

 

Carta

 

As an issuer processor, Carta operates in a competitive market landscape that includes established legacy processing platforms as well other modern platforms. Legacy processing platforms, including TSYS, FISERV, FIS, and others historically emerged as an outsourcing of traditional bank credit and debit card processing functions and grew to become incumbent players in the payment card market. Often these platforms are based on legacy technology and were not designed to support the complex and dynamic requirements of modern fintech card issuing ecosystem.

As Carta competes against other modern issuer processors, the business leverages product differentiation, service level, pricing models, and partnership engagement to effectively compete in the market. Modern issuer processing platform competitors include Marqeta and Galileo (a subsidiary of SoFi). In some markets, Carta may also face competition from large fintech platforms such as Stripe, Adyen and Checkout.com, whose core business is not issuer processing but may be expanding to more directly compete with Carta. Competitive dynamics vary across countries and regions where Carta operates as well as within industry verticals, and Carta's B2B sales and marketing approach follows a model that is tailored to optimize growth within target market segmentation.

 

Government Regulations

Our business is subject to numerous federal, provincial and other local laws, ordinances and regulations in each of the jurisdictions in which we operate, which are subject to change.

 

The following is an overview of key government regulations applicable to our business:

Privacy

 

Similarly to all Canadian businesses we are subject, at the federal level, to the Office of the Privacy Commissioner of Canada. The Privacy Commissioner of Canada is an Agent of Parliament whose mission is to protect and promote privacy rights. The Office of the Privacy Commissioner of Canada (OPC) oversees compliance with the Privacy Act, which covers the personal information-handling practices of federal government departments and agencies, and the Personal Information Protection and Electronic Documents Act (PIPEDA), Canada’s federal private-sector privacy law. In addition to the federal regulator, we are also subject to the purview of the equivalent provincial regulator, for provinces that do have such a body.

 

Consumer Protection

 

As we operate a business to consumer model, we are subject to the various consumer protection and business practices acts that each of the Canadian provinces legislate and supervise through their respective provincial regulatory bodies for this matter. These regulations impact a variety of matters including marketing, cost of credit disclosure, credit reporting, lending, and collections.

Securities & Investments

 

Our business is subject to the securities legislations and regulations as developed and enforced by the provincial securities and investment regulators, the Canadian Securities Agency ("CSA") and CIRO is committed to the protection of investors, providing efficient and consistent regulation, and building Canadians’ trust in financial regulation and the people managing their investments and is the primary body

40


overseeing the activities of MogoTrade Inc. which is registered as an Investment Dealer. Furthermore, Mogo Asset Management Inc. ("MAMI") holds registrations as both an Exempt Market Dealer and as a Portfolio Manager. The primary regulatory framework for these activities is governed by National Instrument 31-103, National Instrument 45-106, and their related regulations and enforced by each of the provinces respective securities regulator, with the primary regulator for MAMI being Quebec’s Autorité des Marchés Financiers where MAMI is headquartered.

Lending

 

Our lending business activities are subject to section 347 of the Criminal Code. Following consultations on predatory lending conducted by the Department of Finance in August 2022, in 2023, the Canadian federal government introduced the Budget Implementation Act, 2023, No 1 ("Budget Act"), to reduce the criminal rate of interest to 35% APR, and replace an effective annual rate of interest calculation with an annual percentage rate of interest calculation. The Budget Act received Royal Assent on June 22, 2023, but the criminal rate of interest amendments are not yet in force, and they will only come into force upon proclamation by an order of the Cabinet, on a date to be determined.

 

On December 23, 2023, pursuant to its regulation-making authority under the Budget Act, the federal government released the Criminal Interest Rate Regulations ("Interest Rate Regulations") to exempt certain agreements from the criminal rate of interest. The Interest Rate Regulations, which will come into force concurrently with the criminal interest rate amendments, include provisions relating to payday loans, as well as exemptions from the criminal rate of interest for loans that the government views as non-predatory including certain commercial loans and small dollar, non-recourse collateralized loans (pawn loans), none of which are relevant to our current lending activities. The federal government has indicated it may further reduce the criminal rate of interest below 35% APR. A consultation on the further lowering of the criminal rate closed on January 7, 2024. While the criminal interest rate amendments and companion regulations are not yet in force, the Company is in the process of preparing for this change.

 

In addition to the criminal interest rate restrictions, certain of our MogoMoney products may be subject to new legislation and regulations respecting 'high-cost credit products' which have been implemented in certain provinces in which we operate. Provincial high-cost credit ("HCC") legislation has been implemented in the provinces of Alberta and British Columbia. HCC legislation, which is part of the broader provincial consumer protection regime in these provinces, imposes additional requirements, including licensing and disclosures, on lenders making loans above certain interest rate thresholds. We are currently licensed as an HCC lender in both provinces and comply with all regulatory requirements. We also continue to participate in the regulatory process, monitor the HCC landscape that continues to develop in other provinces, including the province of Newfoundland and Labrador, which has also passed legislation that will implement an HCC regime. This legislation will take effect in June 2024. We are currently in the process of preparing for the changes in that province. The Company will continue to ensure that its business complies with any HCC regulatory changes and is well positioned to respond to any enhanced disclosure requirements.

Mortgage Brokerage

 

Our Mortgage Brokerage business line is subject to the specific Mortgage Brokers Acts and regulations governing such activities which are regulated by the provincial legislators and their regulatory bodies, where applicable.

Financial Crime

 

41


As a provider of various types of financial services, we are subject to Proceeds of Crime (Money Laundering) and Terrorist Financing Act ("PCMLTFA") and associated Regulations and must fulfill specific obligations as required by the PCMLTFA to help combat money laundering and terrorist activity financing in Canada. The Financial Transactions and Reports Analysis Centre of Canada ("FINTRAC") has the mandate to ensure the compliance of businesses subject to the PCMLTFA and to generate actionable financial intelligence for police, law enforcement and national security agencies to assist in the investigation of money laundering and terrorist activity financing offences or threats to the security of Canada.

 

French Language Laws

 

Our service offerings and operations within the province of Québec are subject to the language legislation of that province, namely the Charter of the French Language and its related legislation and regulations. These are supervised and enforced by the Office québecois de la langue francaise.

 

C.
Organizational Structure

Mogo has a number of direct and indirect subsidiaries, each of which is wholly‑owned by Mogo. The following table sets out our significant subsidiaries, including their place of incorporation and our ownership interest, as of December 31, 2023:

 

Name of Entity

Place of Incorporation

Ownership Interest

Mogo Finance Technology Inc.

British Columbia

100%

Mogo Financial Inc

Manitoba

100%

MogoTrade Inc.

Canada

100%

Mogo Asset Management Inc.

Canada

100%

Moka Financial Technologies Inc

Canada

100%

Carta Solutions Holding Corp.

Canada

100%

Carta Financial Services Ltd

United Kingdom

100%

 

Reorganization

 

Our authorized share capital consists of an unlimited number of common shares and an unlimited number of preferred shares of the Company. As at December 31, 2023, there were 24,515,909 common shares and no preferred shares issued and outstanding.

 

Each common share entitles its holder to notice of and to one vote at all meetings of the Company’s shareholders. Each common share is also entitled to receive dividends if, as and when declared by the Board. Holders of common shares are entitled to participate in any distribution of the Company’s net assets upon liquidation, dissolution or winding-up of the Company on an equal basis per share.

 

Transfer Agent and Registrar

The transfer agent and registrar for the common shares is Computershare Investor Services Inc. at its principal office in Vancouver, British Columbia.

Experts

 

The consolidated financial statements of Company which comprise the consolidated statements of financial position as at December 31, 2023 and December 31, 2022, the related consolidated statements of operations and comprehensive income (loss), changes in equity (deficit) and cash flows for each of the years in the

42


three-year period ended December 31, 2023, and the related notes, have been included herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

 

D.
Property, Plants and Equipment

The following table summarizes our principal leased properties as of December 31, 2023. The Company does not own any real property and is remote-first with respect to its North America and European operations. We have a leased property in Vancouver for administrative and IT support purposes and leased properties in Morocco, Cyprus and PEI supporting our Carta business operations which are used for data centers, product development, customer service, collections and other related support services including finance, human resources, legal and compliance, marketing and branding, and business intelligence and analytics.

 

 

 Square Footage

 Lease Expiration Date

Vancouver, BC, Canada

13,193 sq. ft.

July 2027

Winnipeg, MB, Canada

10,026 sq. ft.

July 2025

Charlottetown, PEI, Canada

117 sq. ft.

December 2024

Casablanca, Morocco

3,900 sq. ft

August 2024

Nicosia, Cyprus

848 sq. ft.

October 2024

 

In 2023, we executed an Indenture to Sublease our 13,193 sq ft. Vancouver office to a third-party and entered a lease for a smaller office. Given we have transitioned our Canadian employees to remote work, we currently are seeking to exit the lease of the Winnipeg office before its lease expiration date if a suitable sublease opportunity becomes available. We consider each of the other properties in the table above to be adequate for its purpose. We currently expect to extend the terms of expiring leases or to find replacement sites on commercially acceptable terms. We do not anticipate any environmental issues that may affect the Company’s utilization of the assets. There are no plans to expand or improve the facilities described above.

 

Our material tangible property and equipment are described in note 8 to the Consolidated Financial Statements in “Item 17. Financial Statements.”

 

43


ITEM 4A: UNRESOLVED STAFF COMMENTS

None.

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ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A.
Operating Results

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and “Item 4. Information on the Company — B. Business Overview”. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Item 3. Key Information—D. Risk Factors" or in other parts of this annual report on Form 20-F.

Please refer to our Annual Report on Form 20-F, filed with the SEC on March 23, 2023, for discussion of financial results for the years ended December 31, 2022 and 2021.

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Table of Contents

 

 

 

 

 

Financial Performance Review

The following provides insight on the Company’s financial performance by illustrating and providing commentary on its key performance indicators and operating results.

Key Performance Indicators

 

The key performance indicators that we use to manage our business and evaluate our financial results and operating performance consist of: Mogo members, revenue, subscription and services revenue, net (loss) income, net cash used in operating activities, adjusted EBITDA(1), adjusted net loss(1) and cash provided by (used in) operating activities before investment in gross loans receivable(1). We evaluate our performance by comparing our actual results to prior period results.

 

The tables below provide the summary of key performance indicators for the applicable reported periods:

 

 

 

As at

 

 

 

 

 

 

December 31,
2023

 

 

December 31,
2022

 

 

Change %

 

Key Business Metrics

 

 

 

 

 

 

 

 

 

Mogo Members (000s)

 

 

2,110

 

 

 

1,993

 

 

 

6

%

 

($000s, except percentages)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

 

 

Year ended

 

 

 

 

 

 

December 31,
2023

 

 

December 31,
2022

 

 

Change %

 

 

December 31,
2023

 

 

December 31,
2022

 

 

Change %

 

IFRS Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

17,157

 

 

$

17,146

 

 

 

0

%

 

$

65,221

 

 

$

68,949

 

 

 

(5

)%

Subscription and services revenue

 

 

10,187

 

 

 

10,343

 

 

 

(2

)%

 

 

38,785

 

 

 

41,741

 

 

 

(7

)%

Net income (loss)

 

 

8,511

 

 

 

(74,943

)

 

 

(111

)%

 

 

(17,887

)

 

 

(165,678

)

 

 

(89

)%

Net cash used in operating activities

 

 

(2,199

)

 

 

(1,356

)

 

 

62

%

 

 

(9,167

)

 

 

(27,009

)

 

 

(66

)%

Other Key Performance Indicators(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

2,743

 

 

 

248

 

 

 

1006

%

 

 

7,669

 

 

 

(12,227

)

 

 

(163

)%

Adjusted net loss

 

 

(2,600

)

 

 

(5,375

)

 

 

(52

)%

 

 

(11,939

)

 

 

(33,977

)

 

 

(65

)%

Cash provided by (used in) operations before investment in gross loans receivable

 

 

4,676

 

 

 

457

 

 

 

923

%

 

 

9,488

 

 

 

(10,617

)

 

 

(189

)%

 

1.
For more information regarding our use of these non-IFRS measures and, where applicable, a reconciliation to the most comparable IFRS measure, see “Non-IFRS Financial Measures”.

 

46


Table of Contents

 

 

 

 

 

Mogo members

 

Our total member base grew to 2,110,000 members as at December 31, 2023, from 1,993,000 members as at December 31, 2022, representing an increase of approximately 6% or 117,000 net members. Quarter over quarter, net members increased by 33,000 in Q4 2023. The growth in our member base reflects the continued adoption of our products by new members.

 

Revenue

 

Three months ended Q4 2023 vs Q4 2022

 

Total revenue increased slightly to $17.2 million for the three months ended December 31, 2023 compared to $17.1 million in the same period last year. This represents a return to growth in the Company’s primary business segments of wealth, payments, and lending, offset by the Company’s previously disclosed decision to narrow its strategic focus and exit certain sub-scale and unprofitable products.

 

Year ended 2023 vs 2022

 

Total revenue decreased by 5% to $65.2 million for the year ended December 31, 2023 compared to $68.9 million in the same period last year. The revenue decrease was primarily a result of the previously announced elimination of sub-scale revenue streams and unprofitable products including MogoCrypto, Moka France, and MogoCard.

Subscription and services revenue

 

Three months ended Q4 2023 vs Q4 2022

 

Subscription and services revenue decreased by 2% to $10.2 million for the three months ended December 31, 2023 compared to $10.3 million in the same period last year. The decrease was primarily driven by the previously announced elimination of sub-scale and unprofitable products including the wind down of MogoCrypto, Moka France and MogoCard. The decrease due to these products was offset by higher revenues related to wealth and payments.

 

Year ended 2023 vs 2022

 

Subscription and services revenue decreased by 7% to $38.8 million for the year ended December 31, 2023 compared to $41.7 million in the same period last year. The decrease in subscription and services revenue was primarily driven by the same reasons noted above.

 

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Table of Contents

 

 

 

 

 

Net income (loss)

Three months ended Q4 2023 vs Q4 2022

 

Net income was $8.5 million for the three months ended December 31, 2023, which is a decrease in net loss of $83.4 million compared to net loss of $74.9 million in the same period last year.

 

In 2022, the Company recognized impairment of investment accounted for using the equity method of $31.5 million, and impairment of goodwill and intangible assets of $37.2 million. No such impairment was recognized in the three months ended December 31, 2023. Additionally, the operating efficiency initiatives implemented in 2023 resulted in a $3.7 million reduction in operating expenses. The Company also recognized an unrealized revaluation gain on our investment portfolio of $13.6 million, compared to a loss of $1.2 million in the same period last year.

 

Year ended 2023 vs 2022

 

Net loss was $17.9 million for the year ended December 31, 2023, which is a decrease in net loss of $147.8 million compared to net loss of $165.7 million in the same period last year. In 2022, the Company recognized its share of loss in investment accounted for using the equity method of $78.8 million, compared to $8.3 million in 2023. Impairment of goodwill and intangibles of $38.3 million were also recognized in 2022.

 

Additionally, the operating efficiency initiatives noted above resulted in a $29.3 million decrease in operating expenses, and reductions in non-operating losses including a decrease in other non-operating expenses of $5.1 million. The Company also recognized a revaluation gain on our investment portfolio of $9.6 million in 2023, compared to a loss of $2.4 million in 2022.

 

Net cash used in operating activities

Three months ended Q4 2023 vs Q4 2022

 

Net cash used in operating activities was $2.2 million for the three months ended December 31, 2023, which is an increase of $0.8 million compared to $1.4 million in the same period last year. The increase was primarily due to an increase in net issuance of loans receivable of $6.9 million, which was offset by operating expense efficiencies gained in the past year.

 

Year ended 2023 vs 2022

 

Net cash used in operating activities was $9.2 million for the year ended December 31, 2023, which is a decrease of $17.8 million compared to $27.0 million in the same period last year. The improvement was primarily attributed to significant operating expense efficiencies gained in the past year, in addition to gross margin improvement.

 

 

1.
For more information regarding our use of these non-IFRS measures and, where applicable, a reconciliation to the most comparable IFRS measure, see “Non-IFRS Financial Measures”.

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Adjusted EBITDA(1)

 

Three months ended Q4 2023 vs Q4 2022

 

Adjusted EBITDA was $2.7 million for the three months ended December 31, 2023, which is a $2.5 million improvement from the adjusted EBITDA of $0.2 million in the same period last year. The improvement in adjusted EBITDA was primarily driven by a 25% reduction in operating expenditures arising from the realization of cost efficiency initiatives implemented in the last twelve months.

 

Year ended 2023 vs 2022

 

Adjusted EBITDA was $7.7 million for the year ended December 31, 2023, which is a $19.9 million improvement compared to the adjusted EBITDA loss of $12.2 million in the same period last year. The improvement in adjusted EBITDA was primarily driven by a 37% reduction in operating expenditures arising from the realization of cost efficiency initiatives implemented in the last twelve months. Additionally, overall gross profit increased despite the significant reduction in operating expenses.

 

Adjusted net loss(1)

 

Three months ended Q4 2023 vs Q4 2022

 

Adjusted net loss was $2.6 million for the three months ended December 31, 2023, which is a $2.8 million improvement compared to an adjusted net loss of $5.4 million in the same period last year. The improvement in adjusted net loss was attributed primarily to the same reasons noted above in the adjusted EBITDA variance and partially offset by a $0.2 million increase in credit facility interest expense due to higher interest rates.

 

Year ended 2023 vs 2022

 

Adjusted net loss was $11.9 million for the year ended December 31, 2023, which is a decrease in loss of $22.1 million compared to an adjusted net loss of $34.0 million in the same period last year. The improvement in adjusted net loss was attributed primarily to the same reasons noted above in the adjusted EBITDA variance and partially offset by a $1.4 million increase in credit facility interest expense due to higher interest rates and a $1.4 million increase in debentures and other financing expense primarily due to a one-time gain on revaluation of debentures recorded in Q4 2022.

 

Cash provided by (used in) operating activities before investment in gross loans receivable(1)

 

Three months ended Q4 2023 vs Q4 2022

 

Cash provided by operating activities before investment in gross loans receivable was $4.7 million for the three months ended December 31, 2023, which is a $4.2 million improvement compared to $0.5 million in the same period last year. The improvement was primarily attributed to significant operating expense efficiencies gained in the past year.

 

Year ended 2023 vs 2022

 

Cash provided by operating activities before investment in gross loans receivable was $9.5 million for the year ended December 31, 2023, which is a $20.1 million improvement compared to negative $10.6 million in the same period last year. The improvement was primarily attributed to the same reasons noted above.

 

 

1.
For more information regarding our use of these non-IFRS measures and, where applicable, a reconciliation to the most comparable IFRS measure, see “Non-IFRS Financial Measures”.

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Non-IFRS Financial Measures

 

This MD&A makes reference to certain non-IFRS financial measures. Adjusted EBITDA, adjusted net loss and cash provided by (used in) operating activities before investment in gross loans receivable are non-IFRS financial measures. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS.

 

We use non‑IFRS financial measures to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We believe that securities analysts, investors and other interested parties frequently use non‑IFRS financial measures in the evaluation of issuers.

 

Our management also uses non‑IFRS financial measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet our capital expenditure and working capital requirements. These non-IFRS financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results under IFRS. There are a number of limitations related to the use of non‑IFRS financial measures versus their nearest IFRS equivalents. Investors are encouraged to review our financial statements and disclosures in their entirety and are cautioned not to put undue reliance on any non‑IFRS financial measure and view it in conjunction with the most comparable IFRS financial measures. In evaluating these non‑IFRS financial measures, readers should be aware that in the future we will continue to incur expenses similar to those adjusted in these non-IFRS financial measures.

 

Adjusted EBITDA

 

Adjusted EBITDA is a non-IFRS financial measure that we calculate as net (loss) income before tax excluding depreciation and amortization, stock-based compensation, credit facility interest expense, debenture and other financing expense, accretion related to debentures, share of (gain) loss in investment accounted for using the equity method, revaluation (gain) loss, impairment of investment accounted for using the equity method, impairment of goodwill, and other non-operating expense. Adjusted EBITDA is a measure used by management and the Board to understand and evaluate our core operating performance and trends.

The following table presents a reconciliation of adjusted EBITDA to net (loss) income before tax, the most comparable IFRS financial measure, for each of the periods indicated:

($000s)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Year ended

 

 

 

December 31,
2023

 

 

December 31,
2022

 

 

December 31,
2023

 

 

December 31,
2022

 

Net income (loss) before tax

 

$

8,432

 

 

$

(75,030

)

 

$

(18,287

)

 

$

(166,014

)

Depreciation and amortization

 

 

2,385

 

 

 

3,166

 

 

 

9,067

 

 

 

12,636

 

Stock-based compensation

 

 

580

 

 

 

835

 

 

 

2,478

 

 

 

8,712

 

Credit facility interest expense

 

 

1,595

 

 

 

1,363

 

 

 

6,064

 

 

 

4,640

 

Debenture and other financing expense

 

 

1,141

 

 

 

779

 

 

 

3,519

 

 

 

3,225

 

Accretion related to debentures

 

 

222

 

 

 

315

 

 

 

958

 

 

 

1,249

 

Share of loss in investment accounted for using the equity method

 

 

 

 

 

31,142

 

 

 

8,267

 

 

 

78,832

 

Revaluation (gain) loss

 

 

(13,600

)

 

 

(2,020

)

 

 

(9,628

)

 

 

2,375

 

Impairment of goodwill

 

 

 

 

 

31,758

 

 

 

 

 

 

31,758

 

Other non-operating expense

 

 

1,988

 

 

 

7,940

 

 

 

5,231

 

 

 

10,360

 

Adjusted EBITDA

 

 

2,743

 

 

 

248

 

 

 

7,669

 

 

 

(12,227

)

 

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Adjusted net loss

 

Adjusted net loss is a non-IFRS financial measure that we calculate as net loss before tax excluding stock-based compensation, share of (gain) loss in investment accounted for using equity method, revaluation loss, impairment of investment accounted for using the equity method, impairment of goodwill, and other non-operating expense. This measure differs from adjusted EBITDA in that adjusted net loss includes depreciation and amortization, credit facility interest expense, and debenture and other financing expense, and thus comprises more elements of the Company’s overall net profit or loss. Adjusted net loss is a measure used by management and the Board to evaluate the Company’s core financial performance.

 

The following table presents a reconciliation of adjusted net loss to net (loss) income before tax, the most comparable IFRS financial measure, for each of the periods indicated:

 

($000s)

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Year ended

 

 

 

December 31,
2023

 

 

December 31,
2022

 

 

December 31,
2023

 

 

December 31,
2022

 

Net income (loss) before tax

 

$

8,432

 

 

$

(75,030

)

 

$

(18,287

)

 

$

(166,014

)

Stock-based compensation

 

 

580

 

 

 

835

 

 

 

2,478

 

 

 

8,712

 

Share of loss in investment accounted for using the equity method

 

 

 

 

 

31,142

 

 

 

8,267

 

 

 

78,832

 

Revaluation (gain) loss

 

 

(13,600

)

 

 

(2,020

)

 

 

(9,628

)

 

 

2,375

 

Impairment of goodwill

 

 

 

 

 

31,758

 

 

 

 

 

 

31,758

 

Other non-operating expense

 

 

1,988

 

 

 

7,940

 

 

 

5,231

 

 

 

10,360

 

Adjusted net loss

 

 

(2,600

)

 

 

(5,375

)

 

 

(11,939

)

 

 

(33,977

)

 

 

 

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Cash provided by (used in) operating activities before investment in gross loans receivable

 

Cash provided by (used in) operating activities before investment in gross loans receivable is a non-IFRS financial measure that we calculate as cash used in operating activities, less net issuance of loans receivables. The Company requires net cash outflows in order to grow its gross loans receivable, which in turn generates future growth in interest revenue. These net cash outflows are presented within the operating activities section of the consolidated statement of cash flows, whereas the economic benefits are realized over the longer term. Consequently, we consider cash provided by operating activities before investment in gross loans receivable to be a useful measure in understanding the cash flow trends inherent to our existing scale of operations, by separating out the portion of cash flows related to investment in portfolio growth.

 

The following table presents a reconciliation of cash provided by operating activities before investment in gross loans receivable, the most comparable IFRS financial measure, for each of the periods indicated:

 

($000s)

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Year ended

 

 

 

December 31,
2023

 

 

December 31,
2022

 

 

December 31,
2023

 

 

December 31,
2022

 

Net cash used in operating activities

 

$

(2,199

)

 

$

(1,356

)

 

$

(9,167

)

 

$

(27,009

)

Net issuance of loans receivable

 

 

(6,875

)

 

 

(1,813

)

 

 

(18,655

)

 

 

(16,392

)

Cash provided by (used in) operations before investment in gross loans receivable

 

 

4,676

 

 

 

457

 

 

 

9,488

 

 

 

(10,617

)

 

Mogo members

 

Mogo members is not a financial measure. Mogo members refers to the number of individuals who have signed up for one or more of our products and services including: MogoMoney, MogoMortgage, MogoTrade, Moka services, our premium account subscription offerings, unique content, or events. People cease to be Mogo members if they do not use any of our products or services for 12 months and have a deactivated account. Reported Mogo members may overstate the number of unique individuals who actively use our products and services within a 12-month period, as one individual may register for multiple accounts whether inadvertently or in a fraudulent attempt. Customers are Mogo members who have accessed one of our revenue generating products, including MogoMoney, MogoMortgage, MogoTrade, Moka services and our premium account subscription offerings. Management believes that the size of our Mogo member base is one of the key drivers of the Company’s future performance. Our goal is to continue to grow and monetize our member base as we build our digital financial platform, launch new products and strive to build the largest digital financial brand in Canada.

 

 

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Results of Operations

The following table sets forth a summary of our results of operations for the three months ended December 31, 2023 and 2022:

($000s, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Year ended

 

 

 

December 31,
2023

 

 

December 31,
2022

 

 

December 31,
2023

 

 

December 31,
2022

 

Total revenue

 

$

17,157

 

 

$

17,146

 

 

$

65,221

 

 

$

68,949

 

Cost of revenue

 

 

5,694

 

 

 

5,403

 

 

 

18,562

 

 

 

22,709

 

Gross profit

 

 

11,463

 

 

 

11,743

 

 

 

46,659

 

 

 

46,240

 

Technology and development

 

 

2,196

 

 

 

3,139

 

 

 

10,591

 

 

 

12,973

 

Marketing

 

 

1,101

 

 

 

1,035

 

 

 

3,340

 

 

 

11,208

 

Customer service and operations

 

 

2,376

 

 

 

3,040

 

 

 

10,602

 

 

 

14,089

 

General and administration

 

 

3,047

 

 

 

4,281

 

 

 

14,457

 

 

 

20,197

 

Stock-based compensation

 

 

580

 

 

 

835

 

 

 

2,478

 

 

 

8,712

 

Depreciation and amortization

 

 

2,385

 

 

 

3,166

 

 

 

9,067

 

 

 

12,636