6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of March 2021

Commission File Number:  001-38409

Mogo Inc.

(formerly Mogo Finance Technology Inc.)

2100-401 West Georgia St.

Vancouver, British Columbia

V6B 5A1, Canada

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

☒ Form 20-F ☐ Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

Form 6-K Exhibit Index

Exhibit Number	Document Description
99.1	Audited consolidated financial statements for the years ended December 31, 2020 and 2019
99.2	Management’s discussion and analysis for the year ended December 31, 2020

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Mogo Inc.
Date: March 23, 2021	By:	/s/ Gregory Feller
		Name:  Gregory Feller
		Title:    President & Chief Financial Officer

EX-99.1

Exhibit 99.1 

	Page
Management’s Report on Internal Control over Financial Reporting	N/A
Reports of Independent Registered Public Accounting Firm	F-1
Consolidated Statement of Financial Position as at December 31, 2020 and 2019	F-3
Consolidated Statement of Comprehensive Loss for the years ended December 31, 2020 and 2019	F-4
Consolidated Statement of Changes in Equity for the years ended December 31, 2020 and 2019	F-5
Consolidated Statement of Cash Flows for the years ended December 31, 2020 and 2019	F-6
Notes to the Consolidated Financial Statements	F-7

KPMG LLP

Chartered Professional Accountants

PO Box 10426 777 Dunsmuir Street

Vancouver BC V7Y 1K3

Telephone (604) 691-3000

Fax (604) 691-3031

www.kpmg.ca

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors
Mogo Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of financial position of Mogo Inc. (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, changes in equity (deficit), and cash flows for each of the years in the two‑year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and its financial performance and its cash flows for each of the years in the two‑year period ended December 31, 2020, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

© 2021 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

F-1

Mago Inc. Page 2

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Chartered Professional Accountants

We have served as the Company’s auditor since 2019.

Vancouver, Canada

March 23, 2021

F-2

Mogo Inc.

Consolidated Statement of Financial Position

(Expressed in thousands of Canadian Dollars)

	Note		December 31, 2020			December 31, 2019
Assets
Cash and cash equivalent				12,119			10,417
Loans receivable		4		47,227			88,655
Prepaid expenses, deposits and other assets		5		2,994			3,248
Investment portfolio		6		18,445			20,790
Deferred costs				—			137
Property and equipment		7		892			1,773
Right-of-use assets		11		3,879			4,821
Intangible assets		9		18,912			21,257
Total assets				104,468			151,098
Liabilities
Accounts payable and accruals		10		7,843			11,254
Lease liabilities		11		4,336			5,208
Credit facilities		12		37,644			76,472
Debentures		13		40,658			44,039
Convertible debentures		14		8,751			12,373
Total liabilities				99,232			149,346
Shareholders’ Equity
Share capital	25(a)			106,730			94,500
Contributed surplus				13,560			8,861
Deficit				(115,054	)		(101,609	)
Total shareholders’ equity				5,236			1,752
Total equity and liabilities				104,468			151,098

Approved on Behalf of the Board

Signed by “Greg Feller”                 , Director

Signed by “Minhas Mohamed”     , Director

The accompanying notes are an integral part of these financial statements.

F-3

Mogo Inc.

Consolidated Statement of Operations and Comprehensive Loss

(Expressed in thousands of Canadian Dollars)

		For the years ended December 31,
	Note	2020			2019
Revenue
Subscription and services	17		19,114			25,311
Interest revenue			25,131			34,494
			44,245			59,805
Cost of revenue
Provision for loan losses, net of recoveries	4		8,334			18,162
Transaction costs			414			625
			8,748			18,787
Gross profit			35,497			41,018
Operating expenses
Technology and development			12,989			14,989
Marketing			4,831			9,412
Customer service and operations			6,185			8,787
General and administration			10,353			11,484
Total operating expenses	17		34,358			44,672
Income (loss) from operations			1,139			(3,654	)
Other expenses (income)
Credit facility interest expense	12		6,194			11,316
Debenture and other financing expense	6,11,14		6,170			7,710
Accretion related to debentures and convertible debentures	13,14		963			761
Gain on acquisition, net of transaction costs	22		—			(13,141	)
Revaluation (gains) and losses	18		2,426			(18	)
Other non-operating (income) expenses	19		(1,169	)		543
			14,584			7,171
Net loss and comprehensive loss			(13,445	)		(10,825	)
Net loss per share
Basic and fully diluted	20		(0.47	)		(0.42	)
Weighted average number of basic and fully diluted common shares (in 000’s)			28,873			25,545

The accompanying notes are an integral part of these financial statements.

F-4

Mogo Inc.

Consolidated Statement of Changes in Equity (Deficit)

(Expressed in thousands of Canadian Dollars)

	Number of shares (000s)		Share capital		Contributed surplus			Deficit			Total
Balance, December 31, 2019		27,558	$	94,500	$	8,861		$	(101,609	)	$	1,752
Loss and comprehensive loss		—		—		—			(13,445	)		(13,445	)
Stock based compensation (Note 25b)		—		—		1,371			—			1,371
Options and restricted share units (“RSUs”) exercised		335		1,112		(556	)		—			556
Shares issued – Partial settlement of credit facility prepayment		307		1,000		—			—			1,000
Shares issued – debentures		776		1,410					—			1,410
Equity portion – convertible debentures		—		—		617			—			617
Shares issued – convertible debentures (Note 14)		2,155		4,983		—			—			4,983
Shares issued to settle debt		610		939		—			—			939
Warrants issued (Note 25d)		—				3,508			—			3,508
Conversion of warrants (Note 25d)		990		2,786		(775	)		—			2,011
Amortization of warrants (Note 25d)		—		—		534			—			534
Balance, December 31, 2020		32,731		106,730		13,560			(115,054	)		5,236

	Number of shares (000s)		Share capital		Contributed surplus			Deficit			Total
Balance, December 31, 2018		23,227	$	75,045	$	7,045		$	(90,784	)	$	(8,694	)
Loss and comprehensive loss		—		—		—			(10,825	)		(10,825	)
Incremental share issuance – acquisition of Difference Capital Financial Inc. (Note 22)		3,176		14,867		—			—			14,867
Issuance of replacement stock-based awards – acquisition of Difference Capital Financial Inc. (Note 22)		—		—		682			—			682
Conversion of warrants (Note 25d)		337		1,534		—			—			1,534
Shares issued – convertible debentures (Note 14)		367		1,568		(19	)		—			1,549
Stock based compensation (Note 25b)		—		—		1,732			—			1,732
Options and restricted share units (“RSUs”) exercised		451		1,486		(716	)		—			770
Amortization of warrants (Note 25d)		—		—		137			—			137
Balance, December 31, 2019		27,558		94,500		8,861			(101,609	)		1,752

The accompanying notes are an integral part of these financial statements.

F-5

Mogo Inc.

Consolidated Statement of Cash Flows

(Expressed in thousands of Canadian Dollars)

		Years ended December 31,
	Note	December 31, 2020			December 31, 2019
Cash provided by (used in) the following activities:
Operating activities
Net loss and comprehensive loss			(13,445	)		(10,825	)
Items not affecting cash:
Depreciation and amortization			8,414			8,049
Non-cash warrant expense	25(d)		670			274
Gain on acquisition	22		—			(14,786	)
Provision for loan losses	4		9,451			19,899
Credit facility and debenture interest expense			12,364			19,026
Accretion related to debentures			963			761
Stock based compensation expense	25(b)		1,371			1,732
Revaluation losses	18		2,426			276
Other non-operating (income) expenses	19		(606	)		184
			21,608			24,590
Changes in:
Net collection (issuance) of loans receivable			2,080			(22,207	)
Proceeds from sale of loan book			31,572			—
Prepaid expenses, deposits and other assets	5		513			239
Accounts payable and accruals	10		(3,328	)		(323	)
Cash generated from operating activities			52,445			2,299
Interest paid			(8,640	)		(17,509	)
Cash provided by (used in) operating activities			43,805			(15,210	)
Investing activities
Purchases of property and equipment			(23	)		(647	)
Investment in intangible assets			(4,796	)		(8,438	)
Cash used in investing activities			(4,819	)		(9,085	)
Financing activities
Investment portfolio			(150	)		—
Cash acquired upon acquisition of Difference Capital Financial Inc.	22		—			10,246
Proceeds from sale of investment			—			2,114
Lease liabilities – principal payments	11		(444	)		(833	)
Net advances (repayments) from (on) debentures			(399	)		2,201
Net advances from credit facilities			(38,859	)		(225	)
Proceeds against warrants conversion			2,011			—
Cash payments on options exercised			557			770
Cash provided by (used in) financing activities			(37,284	)		14,273
Net increase (decrease) in cash			1,702			(10,022	)
Cash and cash equivalent, beginning of year			10,417			20,439
Cash and cash equivalent, end of year			12,119			10,417

The accompanying notes are an integral part of these financial statements.

F-6

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

1. Nature of operations

Mogo Inc. (formerly Difference Capital Financial Inc.) (“Mogo” or the "Company") was continued under the Business Corporations Act (British Columbia) on June 21, 2019 in connection with the combination with Mogo Finance Technology Inc. (“Mogo Finance”) as further described in Note 22. The transaction was accounted for as a Business Combination, with Mogo Finance as the accounting acquirer. Accordingly, these financial statements reflect the continuing financial statements of Mogo Finance. The address of the Company's registered office is Suite 1700, Park Place, 666 Burrard Street, Vancouver, British Columbia, Canada, V6C 2X8. The Company’s common shares are listed on the Toronto Stock Exchange (“TSX”) and the Nasdaq Capital Market under the symbol “MOGO”.

Mogo — a financial technology company — offers a finance app that empowers consumers with simple solutions to help them get in control of their financial health and be more mindful of the impact they have on society and the planet. Users can sign up for Mogo and get instant access to an ecosystem of free financial products and content to help them live a more sustainable lifestyle. Mogo offers free credit score monitoring, identity fraud protection, bitcoin trading, loans and a digital spending account that comes with a prepaid Mogo Visa* Platinum Prepaid Card to help members control their spending and help fight climate change, by automatically offsetting CO2 as they spend. With a marketing partnership with Canada's largest news media company, Mogo continues to execute on its vision of becoming the go-to financial app for the next generation of Canadians.

COVID-19 Pandemic

During 2020, the Canadian economy experienced significant disruption and market volatility related to the global COVID-19 pandemic. The overall impact of the pandemic continues to be uncertain and dependent on actions taken by the Canadian government, businesses, and individuals to limit spread of the COVID-19 virus, as well as governmental economic response and support efforts.

The rapid worldwide spread of COVID-19 has prompted governments to implement restrictive measures to curb the spread of the pandemic. During this period of uncertainty, the Company’s priority has been to protect the health and safety of its employees, support and enforce government actions to slow the spread of COVID-19, and to continually assess and take appropriate actions to mitigate the risks to the business operations as a result of this pandemic.

The Company has implemented a COVID-19 response plan (the “COVID-19 Response Plan”) that includes a number of measures to safeguard against the spread of the virus at its offices and has maintained regular communications with suppliers, customers and business partners to monitor any potential risks to its ongoing operations.  Operationally, the Company has shifted its employees to work remotely, which was a relatively easy transition given the digital nature of the business. The Company is working closely with customers to support them through this changing environment and in certain circumstances, offering more flexible options including extended payment terms, payment deferrals and interest relief.  

The Company make estimates and assumptions in preparing the consolidated financial statements. These estimates and assumptions have been made taking into consideration the economic impact of the COVID-19 pandemic and the significant economic volatility and uncertainty it has created. Actual results could differ materially from these estimates, in which case the impact would be recognized in the consolidated financial statements in future periods.

F-7

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

2. Basis of presentation

Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). The policies applied in these consolidated financial statements were based on IFRS issued and outstanding at December 31, 2020.

The Company presents its consolidated statement of financial position on a non-classified basis in order of liquidity.

These consolidated financial statements were authorized for issue by the Board of Directors (the “Board”) on March 23, 2021.

These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the payment of liabilities in the ordinary course of business. Should the Company be unable to continue as a going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due in the normal course.

Management routinely plans future activities which includes forecasting future cash flows. Management has reviewed their plan with the Board and has collectively formed a judgment that the Company has adequate resources to continue as a going concern for the foreseeable future, which Management and the Board have defined as being at least the next 12 months. In arriving at this judgment, Management has considered the following: (i) cash flow projections of the Company, which incorporates a rolling forecast and detailed cash flow modeling through the current fiscal year, and (ii) the base of investors and debt lenders historically available to the Company. The expected cash flows have been modeled based on anticipated revenue and profit streams with debt programmed into the model. Refer to notes 10, 12, 13, 14 and 24 for details on amounts that may come due in the next 12 months.

For these reasons, the Company continues to adopt a going concern basis in preparing the consolidated financial statements.

Functional and presentation currency

These consolidated financial statements are presented in Canadian dollars, which is the Company's and its subsidiaries functional currency.

Basis of consolidation

The Company has consolidated the assets, liabilities, revenues and expenses of all its subsidiaries and its structured entity. The consolidated financial statements include the accounts of the Company, and its direct and indirect wholly-owned subsidiaries, Mogo Finance, Mogo Financial (Alberta) Inc., Mogo Financial (B.C.) Inc., Mogo Financial Inc., Mogo Financial (Ontario) Inc., Mogo Mortgage Technology Inc., Hornby Loan Brokers (Ottawa) Inc., Hornby Leasing Inc., Mogo Technology Inc. (a US subsidiary), Mogo Blockchain Technology Inc., Mogo Wealth Technology Inc., Thurlow Management Inc., Thurlow Capital (Alberta) Inc., Thurlow Capital (B.C.) Inc., Thurlow Capital (Manitoba) Inc., Thurlow Capital (Ontario) Inc., and Thurlow Capital (Ottawa) Inc. and its special purpose entity, Mogo Finance Trust (the “Trust”). The financial statements of the subsidiaries and the Trust are prepared for the same reporting period as the Company, using consistent accounting policies.

Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

F-8

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

2. Basis of presentation(Continued from previous page)

An entity is consolidated if the Company concludes that it controls the entity. The following circumstances may indicate a relationship in which, in substance, Mogo controls and therefore consolidates the entity:

• The Company has power over the entity whereby the Company has the ability to direct the relevant activities (i.e., the activities that affect the entity’s returns);

• The Company is exposed, or has rights, to variable returns from its involvement with the entity; and

• The Company has the ability to use its power over the entity to affect the amount of the entity’s returns.

Special purpose entities (“SPEs”) are entities that are created to accomplish a narrow and well-defined objective such as the execution of a specific borrowing or lending transaction. An SPE is consolidated, if based on an evaluation of the substance of its relationship with the Company, and the SPE’s risks and rewards, the Company concludes that it controls the SPE. Mogo’s activities with respect to the Trust has resulted in the Company consolidating the Trust within these consolidated financial statements.

All inter‑company balances, income and expenses and unrealized gains and losses resulting from inter‑company transactions are eliminated in full.

3. Significant accounting policies

(a) Revenue recognition

Revenue is comprised of subscription and services and interest revenue.

The Company recognizes interest revenue, nonsufficient funds fees, and any other fees or charges permitted by applicable laws and pursuant to the agreement with the borrower. The Company records revenue on a net basis for those sales in which the Company has in substance acted as an agent or broker in the transaction.

Subscription and services is comprised of MogoSpend revenue, MogoMortgage brokerage commissions, premium account revenues, loan protection premiums, MogoCrypto revenue, MogoProtect subscriptions, Bitcoin mining revenue, and other fees and charges. Subscription and services revenue is measured based on the consideration specified in a contract with customers. The Company recognizes revenue when control of the services is transferred to the customer.

Interest revenue represents interest on our long-term loan products. Our long‑term loans fall into two categories: line of credit accounts and installment loans. For line of credit accounts, interest is recognized on an effective interest basis during the period, and fees are recognized when assessed to the customer. For installment loans, revenue is recognized on an effective interest basis over the term of the loan and fees are recognized when assessed to the customer. On February 28, 2020, Mogo completed the sale of the majority of its instalment loan portfolio, refer note 4 for more details.

In 2018, the Company, through a third-party hosting agreement, joined a Bitcoin mining pool that provided transaction verification services on the Bitcoin network. As there is no definitive guidance in IFRS for the accounting of digital currency mining activities, management has exercised judgement in determining this accounting treatment for the recognition of revenue from Bitcoin mining. The Company received Bitcoin as compensation for these services, which are recognized as revenue and measured at fair value (“FV”) according to the spot price at the time they were mined. Bitcoin is considered earned upon the addition of a block to the Bitcoin blockchain at which time the economic benefit is received and can be reliably measured. The Company ceased its Bitcoin operation in June 2019.

F-9

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

3. Significant accounting policies (Continued from previous page)

(b) Cost of revenue

Cost of revenue consists of provision for loan losses and transaction costs. Transaction costs are expenses that relate directly to the acquisition and processing of new customers (excluding marketing) and include expenses such as credit scoring fees, loan system transaction fees, and certain fees related to the MogoSpend and MogoProtect programs.

(c) Financial instruments

Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred, and the Company has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognized when the obligation specified in the contract is discharged, cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the consolidated statement of operations and comprehensive loss.

Classification and measurement of financial assets and financial liabilities

At initial recognition, the Company measures a financial asset at its fair value plus, and in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. Financial liabilities are recognized initially at fair value and are classified as amortized cost or as fair value through profit or loss (“FVTPL”). A financial liability is classified as at FVTPL if it is classified as held-for trading, it is a derivative or it is designated as such on initial recognition.

The Company classifies its financial assets between those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and those to be measured at amortized cost. Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as FVTPL:

• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

F-10

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

3. Significant accounting policies (Continued from previous page)

(c) Financial instruments (Continued from previous page)

A debt investment is measured at fair value through other comprehensive income (“FVOCI”) if it meets both of the following conditions and is not designated as at FVTPL:

• it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL.

Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense is recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

The Company’s financial instruments measured at amortized cost include cash and cash equivalent, loans receivable, accounts payable and accruals, credit facilities, debentures, and convertible debentures.

The Company’s financial instruments measured at FVTPL include the investment portfolio and derivative instruments.

Realized gains or losses on the disposal of investments are determined based on the weighted average cost. Unrealized gains or losses on investments and derivative instruments are determined based on the change in fair value at each reporting period.

Impairment of financial assets

Expected credit loss model

The expected credit loss (“ECL”) model is a three-stage impairment approach used to measure the allowance for loan losses on loans receivable at each reporting period date. Loans are classified under one of three stages based on changes in credit quality since initial recognition. Stage 1 loans consist of performing loans that have not had a significant increase in credit risk since initial recognition. Loans that have experienced a significant increase in credit risk since initial recognition are classified as Stage 2, and loans considered to be credit-impaired are classified as Stage 3. The Company routinely refinances its existing customers, and accordingly, does not consider a modification to be an indicator of increased credit risk. The allowance for loan losses on both Stage 2 and Stage 3 loans is measured at lifetime ECLs. The allowance for loan losses on Stage 1 loans is measured at an amount equal to 12-month ECLs, representing the portion of lifetime ECLs expected to result from default events possible within 12 months of the reporting date. The Company’s measurement of ECLs is impacted by forward looking indicators (FLIs) including the consideration of forward macroeconomic conditions. Management has applied a probability weighted approach to the measurement of ECL as at December 31, 2020, involving multiple scenarios and additional FLIs, refer to note 4 for more details.

In response to the COVID-19 pandemic, the Company considered payment deferral requests from eligible customers. The agreement to a payment deferral on its own does not represent a significant increase in credit risk for an individual borrower that required migration from Stage 1 to Stage 2 under IFRS 9, nor are facilities with payment deferrals considered past due. In assessing credit risk, we monitor the credit quality of impacted borrowers using sound credit risk management practices. The loan modifications due to payment deferrals did not result in any modification gains or losses. As payment deferral periods conclude, we have been successful in working with clients to resume normal payments. As at December 31, 2020, the total outstanding balance of loans on a deferral plan is $34.

F-11

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

3. Significant accounting policies (Continued from previous page)

(c) Financial instruments (Continued from previous page)

Assessment of significant increase in credit risk

Significant increases in credit risk are assessed based on changes in probability of default of loans receivable subsequent to initial recognition. The Company uses past due information to determine whether credit risk has increased significantly since initial recognition. Loans receivable are considered to have experienced a significant increase in credit risk and are reclassified to Stage 2 if a contractual payment is more than 30 days past due as at the reporting date.

The Company defines default as the earlier of when a contractual loan payment is more than 90 days past due or when a loan becomes insolvent as a result of customer bankruptcy. Loans that have experienced a default event are considered to be credit-impaired and are reclassified as Stage 3 loans.

Measurement of expected credit losses

ECLs are measured as the calculated expected value of cash shortfalls over the remaining life of a loan receivable, using a probability-weighted approach that reflects reasonable and supportable information about historical loss rates, post-charge off recoveries, current conditions and forward-looking indicators such as bank rates and unemployment rates. During the year, the Company made certain adjustments with reference to COVID-19 in our ECL model, refer note 4 for more details. The measurement of ECLs primarily involves using this information to determine both the expected probability of a default event occurring and expected losses resulting from such default events. Loans are grouped according to product type, customer tenure and aging for the purpose of assessing ECLs. Historical loss rates and probability weights are re-assessed quarterly and subject to management review.

(d) Property and equipment

All property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. When parts of an item of property and equipment have different useful lives, they are accounted for as separate items of property and equipment.

All assets having limited useful lives are depreciated using the declining balance method at rates intended to depreciate the cost of assets over their estimated useful lives except leasehold improvements, which are depreciated straight line over the term of lease.

The depreciation rate for each class of asset during the current and comparative period are as follows:

	Rate
Computer equipment		30	%
Computer equipment – Bitcoin rigs		75	%
Furniture and fixtures		20	%
Leasehold improvements	Term of lease

The useful lives of items of property and equipment are reviewed periodically, and the useful life is altered if estimates have changed significantly.

F-12

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

3. Significant accounting policies (Continued from previous page)

(e) Intangible assets

Intangible assets are stated at cost less accumulated amortization and impairment losses. Intangible assets include both internally generated and acquired software with finite useful lives. Internally generated software costs primarily consist of salaries and payroll-related costs for employees directly involved in the development efforts and fees paid to outside consultants. Amortization is recorded at rates intended to amortize the cost of the intangible assets over their estimated useful lives as follows:

	Rate
Software - Internally generated	5 years straight line
Software - Acquired	30% declining balance

Development costs, including those related to the development of software, are recognized as an intangible asset when the Company can demonstrate:

• the technical feasibility of completing the intangible asset so that it will be available for use or sale;

• its intention to complete and its ability to use or sell the asset;

• how the asset will generate future economic benefits;

• the availability of resources to complete the asset; and

• the ability to measure reliably the expenditure during development.

Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete, and the asset is available for use. During the period of development, the asset is tested for impairment annually.

Impairment of non‑financial assets

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash‑generating units (“CGU”) to which the asset belongs. For impairment testing the Company is determined as one CGU. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual CGUs, or otherwise they are allocated to the smallest group of CGUs for which a reasonable and consistent allocation basis can be identified. The Company has identified its intangible asset, the digital platform, as one CGU for the purpose of assessing impairment as synergies are realized between its digital products such that the products cannot be considered in insolation. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre‑tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

F-13

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

3. Significant accounting policies (Continued from previous page)

(e) Intangible assets (Continued from previous page)

If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognized immediately in the consolidated statement of operations and comprehensive loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, such that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or CGU in prior years. A reversal of an impairment loss is recognized in the consolidated statement of operations and comprehensive loss.

(f) Foreign currencies

Transactions in foreign currencies are initially recorded at the foreign currency rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency of the Company at the rates prevailing on the reporting date. The Company has no subsidiaries or foreign operations with a functional currency other than Canadian dollars.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates in effect at the date of the reporting period.

(g) Income taxes

Income tax expense is comprised of current and deferred tax. Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

(h) Investment tax credits

The benefits of investment tax credits for scientific research and development expenditures are recognized in the year the qualifying expenditure is made, providing there is reasonable assurance of recovery.

(i) Sales tax

Revenue, expenses and assets are recognized net of the amount of sales tax except where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognized as part of the cost of acquisition of the asset or as part of the expense item as applicable. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of amounts receivable or accounts payable and accrued liabilities in the consolidated statement of financial position.

F-14

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

3. Significant accounting policies (Continued from previous page)

(j) Provisions

Provisions are recognized when the Company has a present legal or constructive obligation that is the result of a past event, when it is probable that the Company will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. If the effect of the time value of money is material, provisions are discounted using a current pre‑tax rate that reflects the risk specific to the obligation.

(k) Earnings per share

The computation of earnings per share is based on the weighted average number of shares outstanding during the period. Diluted earnings per share are computed in a similar way to basic earnings per share except that the weighted average shares outstanding are increased to include additional shares assuming the exercise of share options or warrants, or conversion of convertible debentures, if dilutive.

(l) Share-based payments

The Company measures equity settled stock options granted to directors, officers, employees and consultants based on their fair value at the grant date and recognizes compensation expense over the vesting period. Measurement inputs include the Company’s share price on the measurement date, the exercise price of the option or warrant, the expected volatility of the Company’s shares, the expected life of the options or warrants, and the risk-free rate of return. Dividends are not factored in as the Company does not expect to pay dividends in the foreseeable future. Expected forfeitures are estimated at the date of grant and subsequently adjusted if further information indicates actual forfeitures may vary from the original estimate.

For each restricted share unit (“RSU”) granted to directors, officers and employees, compensation expense is recognized equal to the market value of one common share at the date of grant based on the number of RSUs expected to vest, recognized over the term of the vesting period, with a corresponding credit to contributed surplus.

Share-based payment arrangements with non-employees in which the Company receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payments transactions. The share-based payments are measured based on the fair value of the goods or services received if the fair value can be reliably measured. Otherwise, the share-based payments are measured based on the fair value of the share-based awards using the expected life, risk free interest rate, volatility, and fair value of the underlying equity instrument at the time the goods or services are received.

For each restricted share unit (“RSU”) granted, compensation expense is recognized equal to the market value of one common share at the date of grant based on the number of RSUs expected to vest, recognized over the term of the vesting period, with a corresponding credit to contributed surplus.

(m) Business combination

The Company uses acquisition method of accounting for its Business Combination. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any gain on purchase is recognized in profit or loss immediately. Transaction cost are expenses as incurred, except if related to the issue of debt or equity securities. The consideration transferred does not include amounts related to the settlement of pre-existing relationship. Such amounts are generally recognized in statement of operations and comprehensive loss.

If Share-based payment awards (replacement awards) are required to be exchanged for awards held by acquiree’s employees, then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based measure of the replacement awards compared with the market-based measure of the acquiree’s awards and the extent to which the replacement awards related to pre-acquisition services.

F-15

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

3. Significant accounting policies (Continued from previous page)

(n) Cash and cash equivalent

Cash and cash equivalent in the statement of financial position comprise cash at banks and on hand and short-term highly liquid deposits with an original maturity of three months or less, that are readily convertible to a known amount of cash and subject to an insignificant risk of changes in value. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above.

(o) Leases

Right-of-use assets

Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct cost incurred, and lease payments made at or before the commencement date less any lease incentives received. The right-of-use assets are depreciated on a straight-line basis over the lease term. Right-of-use assets are subject to evaluation of potential impairment.

Lease liabilities

The Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payment includes fixed payments (including in-substance fixed payments). Variable payments are recorded in general and administration expenses as incurred.

In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is re-measured if there is a modification, a change in the lease term or a change in the in-substance fixed lease payments.

Short-term leases and leases of low-value assets

The Company applies the short-term lease recognition exemption to its short-term leases of properties (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e., below $5,000). Lease payments on short-term leases and leases of low-value assets are recognized as expenses in the period incurred.

(p) Significant accounting judgements, estimates and assumptions

The preparation of the consolidated financial statements requires management to make estimates, assumptions and judgments that affect the reported amount of assets and liabilities, and the reported amount of revenues and expenses during the year. Actual results may differ from these estimates. Estimates, assumptions, and judgments are reviewed on an ongoing basis. Revisions to accounting estimates are recognized on a prospective basis beginning from the period in which they are revised.

F-16

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

3. Significant accounting policies (Continued from previous page)

(p) Significant accounting judgements, estimates and assumptions (Continued from previous page)

Impact of COVID-19

The current outbreak of COVID-19, and any future emergence and spread of similar pathogens, could have a material adverse effect on global and local economic and business conditions which may adversely impact our business and results of operations, and the operations of contractors and service providers. In March 2020, the Company announced and implemented a number of cost saving initiatives to reduce operating expenses in response to the pandemic as part of its COVID-19 Response Plan.

The overall economic impacts of COVID-19 could include an impact on our ability to obtain debt and equity financing or potential future decreases in revenue or the profitability of our ongoing operations. This is an evolving situation, and the Company will continue to evaluate and adapt on an ongoing basis.  The extent of the impact that this pandemic may have on the Canadian economy and the Company’s business is currently highly uncertain and difficult to predict. Accordingly, there is a higher level of uncertainty with respect to management’s judgements and estimates at this time, particularly as it relates to the measurement of allowance for loan losses and fair valuation of our investment portfolio. The Company will continue to revisit our judgements and estimates where appropriate in future reporting periods as economic conditions surrounding the COVID-19 pandemic continue to evolve.

Significant accounting judgements

The following are the critical judgements, apart from those involving estimations that have been made in the process of applying the Company’s accounting policies, which have the most significant effect on the amounts recognized in the consolidated financial statements.

Capitalization of intangible assets

In applying its accounting policy for costs incurred during the development phase for new software, the Company must determine whether the criteria for capitalization have been met. The most difficult and subjective estimate is whether a project will generate probable future economic benefits. Management considers all appropriate facts and circumstances in making this assessment including historical experience, costs and anticipated future economic conditions.

Expected credits losses

In applying its accounting policy for the expected credit loss model the Company applies judgment in defining significant increase in credit losses, defaults, and its write-offs policy. Refer to note 4 for further details.

F-17

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

3. Significant accounting policies (Continued from previous page)

(p) Significant accounting judgements, estimates and assumptions (Continued from previous page)

Significant accounting estimates and assumptions

These estimates and assumptions are based on management’s historical experience, best knowledge of current events, conditions and actions that the Company may undertake in the future and other factors that management believes are reasonable under the circumstances.

These estimates and assumptions are reviewed periodically, and the effect of a change in accounting estimate or assumption is recognized prospectively by including it in the consolidated statement of operations and comprehensive loss in the period of the change and in any future periods affected.

The areas where estimates and assumptions have the most significant effect on the amounts recognized in the consolidated financial statements include the following:

(i) Useful life of property and equipment and intangible assets and asset impairment

Estimated useful lives of property and equipment and intangible assets are based on management’s judgment and experience.

When management identifies that the actual useful lives for these assets differ materially from the estimates used to calculate depreciation and amortization, that change is adjusted prospectively. Due to the significant investment in intangible assets by the Company, variations between actual and estimated useful lives could impact operating results both positively and negatively. Asset lives, depreciation and amortization methods, and residual values are reviewed at the end of each reporting period.

The Company at the end of each reporting period assesses the recoverability of values assigned to property and equipment and intangible assets after considering potential impairment indicated by such factors as significant changes in technological, market, economic or legal environment, business and market trends, future prospects, current market value and other economic factors. If there is any indication in performing its review of recoverability, management estimates either the value in use or fair value less costs to sell.

(ii) Allowance for loan losses

Our provision for loan losses consists of amounts charged to the consolidated statement of operations and comprehensive loss during the period to maintain an adequate allowance for loan losses. Our allowance for loan losses represents our estimate of the expected credit losses inherent in our existing loan portfolio and is based on a variety of factors, including the composition and quality of the portfolio, loan-specific information gathered through our collection efforts, delinquency levels, our historical charge-off and loss experience, our expectations of future loan performance, and general forward-looking macroeconomic conditions. The methodology and assumptions used in setting the loan loss allowance are reviewed regularly to reduce any difference between loss estimates and actual loss experience.

(iii) Fair value of share-based payments

The Company uses the Black-Scholes valuation model to determine the fair value of equity-settled stock options. Management exercises judgment in determining certain inputs to this model including the expected life of the options, expected volatility and forfeiture rates, and expected dividend yield. Variation in actual results for any of these inputs will result in a different fair value of the stock option as compared to the original estimate.

F-18

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

3. Significant accounting policies (Continued from previous page)

(p) Significant accounting judgements, estimates and assumptions (Continued from previous page)

(iv) Fair value of privately held investments:

Estimating fair value requires that significant judgment be applied to each individual investment. For privately held investments, the fair value of each investment is measured using the most appropriate valuation methodology or combination of methodologies in the judgment of management in light of the specific nature, facts and circumstances surrounding that investment. This may take into consideration, but not be limited to, one or more of the following: valuations of recent or in-progress funding rounds, forward revenue and earnings projections, comparable peer valuation multiples, and the initial cost base of the investment. Actual results could differ significantly from these estimates.

(v) Determining the lease term of contracts with renewal options

The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

The Company has the option, under some of its agreements to lease the assets for additional terms of one to ten years. The Company applies judgment in evaluating whether it is reasonably certain to exercise the option to renew, including the consideration of all relevant factors that create an economic incentive to exercise the renewal option. After the commencement date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise the option to renew. The Company included the renewal period as part of the lease term for substantially all its property leases due to the significance of these assets to its operations.

(q) New accounting policies

Government grants

Government grants are recognized if there is reasonable assurance that they will be received, and the Company will comply with any conditions associated with the grant. Grants that compensate the Company for expenses incurred are recognized in profit or loss on a gross basis in the period in which the expenses are recognized.

(r) New and amended standards and interpretations

During 2020, the Company has applied Amendments to IFRS 16 - COVID-19 Related rent concessions.

The Amendment to IFRS 16 provide the practical expedient allowing the Company not to assess whether eligible rent concessions that are a direct consequence of the COVID-19 pandemic are lease modifications.

Certain other IFRS amendments and interpretations became effective on January 1, 2020, but do not have an impact on the consolidated financial statements of the Company. The Company has not adopted any standards or interpretations that have been issued but are not yet effective.

F-19

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

4. Loans receivable

Loans receivable represent unsecured installment loans and lines of credit advanced to customers in the normal course of business. Current loans are defined as loans to customers with terms of one year or less, while non-current loans are those with terms exceeding one year. The breakdown of the Company’s gross loans receivable as at December 31, 2020 and December 31, 2019 are as follows:

	December 31, 2020		December 31, 2019
Current (terms of one year or less)		54,978		69,949
Non-Current (terms exceeding one year)		1,135		34,726
		56,113		104,675

The following table provides a breakdown of gross loans receivable and allowance for loan losses by aging bucket, which represents our assessment of credit risk exposure and by their IFRS 9 ECL measurement stage. The entire loan balance of a customer is aged in the same category as its oldest individual past due payment, to align with the stage groupings used in calculating the allowance for loan losses under IFRS 9. Stage 3 gross loans receivable include net balances outstanding and still anticipated to be collected for loans previously charged off and these are carried in gross receivables at the net expected collectable amount with no associated allowance:

		As at December 31, 2020
Risk Category	Days past due	Stage 1			Stage 2			Stage 3			Total
Strong	Not past due		47,590			—			—			47,590
Lower risk	1-30 days past due		1,571			—			—			1,571
Medium risk	31-60 days past due		—			720			—			720
Higher risk	61-90 days past due		—			415			—			415
Non-performing	91+ days past due or bankrupt		—			—			5,817			5,817
	Gross loans receivable		49,161			1,135			5,817			56,113
	Allowance for loan losses		(5,425	)		(772	)		(2,689	)		(8,886	)
	Loans receivable, net		43,736			363			3,128			47,227

F-20

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

4. Loans receivable (Continued from previous page)

		As at December 31, 2019
Risk Category	Days past due	Stage 1			Stage 2			Stage 3			Total
Strong	Not past due		87,910			—			—			87,910
Lower risk	1-30 days past due		3,240			—			—			3,240
Medium risk	31-60 days past due		—			1,650			—			1,650
Higher risk	61-90 days past due		—			1,289			—			1,289
Non-performing	91+ days past due or bankrupt		—			—			10,586			10,586
	Gross loans receivable		91,150			2,939			10,586			104,675
	Allowance for loan losses		(7,477	)		(1,784	)		(6,759	)		(16,020	)
	Loans receivable, net		83,673			1,155			3,827			88,655

The following tables show reconciliations from the opening to the closing balance of the loss allowance:

	As at December 31, 2020
	Stage 1			Stage 2			Stage 3			Total
Balance as at January 1, 2020		7,479			1,783			6,758			16,020
Gross loans originated		1,346			—			—			1,346
Principal payments		(2,448	)		(476	)		(838	)		(3,762	)
Derecognition of allowance associated with Liquid Sale		(1,575	)		(247	)		(309	)		(2,131	)
Re-measurement of allowance before transfers		1,702			128			532			2,362
Re-measurement of amounts transferred between stages		(145	)		636			9,014			9,505
Transfer to (from)
Stage 1 – 12 month ECLs		173			(122	)		(51	)		—
Stage 2 - Lifetime ECLs		(124	)		125			(1	)		—
Stage 3 - Lifetime ECLs		(983	)		(1,055	)		2,038			—
Net amounts written off against allowance								(14,454	)		(14,454	)
Balance as at December 31, 2020		5,425			772			2,689			8,886

F-21

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

4. Loans receivable (Continued from previous page)

	As at December 31, 2019
	Stage 1			Stage 2			Stage 3			Total
Balance as at January 1, 2019		6,951			2,118			6,340			15,409
Gross loans originated		4,296			—			—			4,296
Principal payments		(2,536	)		(449	)		(912	)		(3,897	)
Re-measurement of allowance before transfers		523			(197	)		(20	)		306
Re-measurement of amounts transferred between stages		(84	)		1,528			17,750			19,194
Transfer to (from)
Stage 1 – 12 month ECLs		96			(76	)		(20	)		—
Stage 2 - Lifetime ECLs		(238	)		240			(2	)		—
Stage 3 - Lifetime ECLs		(1,529	)		(1,381	)		2,910			—
Net amounts written off against allowance		—			—			(19,288	)		(19,288	)
Balance as at December 31, 2019		7,479			1,783			6,758			16,020

The Company’s measurement of ECLs is impacted by forward looking indicators (FLIs) including the consideration of forward macroeconomic conditions. In light of the COVID-19 pandemic, management has applied a probability weighted approach to the measurement of ECL as at December 31, 2020, involving multiple scenarios and additional FLIs. Additional factors considered include the possibility of a prolonged economic recession, the effectiveness of collection strategies implemented to assist customers experiencing financial difficulty (including varying potential levels of defaults for customers who have been offered payment deferral plans), the extent to which government subsidies will continue to be available as the COVID-19 pandemic continues, and the level of loan protection insurance held by customers within our portfolio..

The primary FLIs impacting ECL include rate of loans experiencing financial difficulty and collections. As part of the process, three forward looking scenarios are generated 1) Optimistic, 2) Neutral, and 3) Pessimistic. The following table shows the primary FLIs used in the determination of the probability weighted allowance in each of the scenarios relative to the base case.

	Optimistic forecast			Neutral forecast			Pessimistic forecast
Increase in delinquent loans going into collections		5	%		7	%		13	%
Decrease in collection efficiency		5	%		10	%		15	%

The assignment of the probability weighting for the multiple scenarios using these FLIs involves management judgment through a robust internal review and analysis to arrive at a collective view on the likelihood of each scenario. If management were to assign 100% probability to the optimistic and pessimistic scenario forecasts, the allowance for credit losses would have been $361 lower and $472 higher than the reported allowance for credit losses as at December 31, 2020, respectively.

F-22

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

4. Loans receivable (Continued from previous page)

In response to the COVID-19 pandemic, the Company considered payment deferral requests from eligible customers. The agreement to a payment deferral on its own does not represent a significant increase in credit risk for an individual borrower that required migration from Stage 1 to Stage 2 under IFRS 9, nor are facilities with payment deferrals considered past due. In assessing credit risk, we monitor the credit quality of impacted borrowers using sound credit risk management practices. The loan modifications due to payment deferrals did not result in any modification gains or losses. As payment deferral periods conclude, we have been successful in working with clients to resume normal payments. As at December 31, 2020 there are 16 loans that remain on a deferral plan with a total outstanding balance of $34.

As at December 31, 2020, our allowance for loan losses includes $1,049 of management overlay added due to the present economic uncertainties caused in part by the COVID-19 pandemic. The Company believes this provides adequate provision to absorb the impact on our loan book of any potential deterioration in future macroeconomic conditions that may result from the ongoing COVID-19 pandemic.

The overall changes in the allowance for loan losses are summarized below:

Allowance for loan losses	Year ended December 31, 2020			Year ended December 31, 2019
Balance, beginning of period		16,020			15,409
Derecognition of allowance associated with loan sale		(2,131	)		—
Provision for loan losses		9,451			19,899
Charge offs		(14,454	)		(19,288	)
Balance, end of period		8,886			16,020

The provision for loan losses in the consolidated statement of operations and comprehensive loss is recorded net of recoveries of $1,117 (2019- $1,737).

On February 28, 2020, Mogo completed the sale of the majority of its non-current (“MogoLiquid”) loan portfolio (the “Liquid Sale”) for gross consideration of $31,572, de-recognized net loan receivables of $29,896 and recognized a corresponding gain on sale of loan book amounting to $1,676. This gain is presented within other non-operating expenses, in the consolidated statement of operations and comprehensive loss.

Mogo is also eligible for an additional performance-based payment of up to $1,500 payable upon achieving certain agreed-upon annual origination amounts under the 3-year lending partnership with the purchaser of the Liquid Sale. These performance-based payments are not recognizable into income until the related performance milestones are fully achieved. For the year ended December 31, 2020, none of this additional performance-based payment has been recognized.

F-23

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

5. Prepaid expenses, deposits and other assets

	2020		2019
Prepaid expenses		1,546		1,150
Deposits and other receivables		1,448		2,098
		2,994		3,248

6. Related party transactions

Related party transactions during the year ended December 31, 2020 include transactions with debenture holders that incur interest. The related party debentures balance as at December 31, 2020 totaled $358 (December 31, 2019 – $348). The debentures bear annual coupon interest of 8.0% (December 31, 2019 – 10.0% to 18.0%) with interest expense of $35 for the year ended December 31, 2020 (December 31, 2019 – $258). The related parties involved in such transactions include shareholders, officers, directors, and management, close members of their families, or entities which are directly or indirectly controlled by close members of their families. The debentures are ongoing contractual obligations that are used to fund our corporate and operational activities. In relation to the amendment to the terms of debentures on September 30, 2020 (see Note 25d), 35,831 warrants were issued to related parties with a fair value of $28.   

On June 28, 2019, the Company sold its minority interest in Wekerloo Developments Inc., which is majority-owned by one of the Company’s directors, to an arm’s length buyer for proceeds of $2,100, equivalent to its initial cost recognized on the consolidated statement of financial position, resulting in no gain or loss on disposition.

Key management personnel

Key management personnel (“KMP”) are those persons having authority and responsibility for planning, directing, and controlling the activities of the entity, directly or indirectly. Key management personnel consist of directors and executive officers.

Share based payments below are measured at the grant date fair value of options & awards issued in the year.

During the year ended December 31, 2020, KMP were granted 1,425,000 stock options with a fair value of $2,403 at the grant date (2019: 117,714 stock options with a fair value of $237 at the grant date).

Aggregate compensation of KMP during the year consisted of:

	2020		2019
Salary and short-term benefits		761		1,554
Share – based payments		591		368
		1,352		1,922

7. Investment portfolio

Investments consist of the following by investment type:

	December 31, 2020		December 31, 2019
Equities		18,445		20,590
Partnership interests and others		-		200
		18,445		20,790

F-24

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

8. Property and equipment

	Computer equipment			Furniture and fixtures			Leasehold improvements			Total
Cost
Balance at December 31, 2018		5,046			1,502			2,509			9,057
Additions		186			3			—			189
Disposals		(719	)		(325	)		—			(1,044	)
Balance at December 31, 2019		4,513			1,180			2,509			8,202
Additions		22			—			—			22
Disposals		(2,452	)		—			(454	)		(2,906	)
Balance at December 31, 2020		2,083			1,180			2,055			5,318
Accumulated depreciation
Balance at December 31, 2018		3,672			899			1,470			6,041
Depreciation		749			116			465			1,330
Disposals		(660	)		(282	)		—			(942	)
Balance at December 31, 2019		3,761			733			1,935			6,429
Depreciation		229			91			311			631
Disposals		(2,443	)		—			(191	)		(2,634	)
Balance at December 31, 2020		1,547			824			2,055			4,426
Net book value
Balance at December 31, 2019		752			447			574			1,773
Balance at December 31, 2020		536			356			—			892

During the current year, the Company vacated one of its leased properties and accordingly wrote off $263 of net book value related to leasehold improvements for the right of use asset and also recognized a loss of $9 (2019- $102) on the disposal of computer equipment, including fully depreciated bitcoin equipment with a cost and accumulated depreciation of $2,427 and furniture and fixtures. Non-cash expense related to disposals is recorded in the consolidated statement of operations and comprehensive loss.

F-25

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

8. Property and equipment (Continued from previous page)

Depreciation of $311 for the year ended December 31, 2020 (December 31, 2019 - $465) is included in general and administration expenses. Depreciation expense of $320 for the year ended December 31, 2020 (December 31, 2019 - $865) for all other property and equipment is included in technology and development costs.

9. Intangible assets

	Internally generated – Completed		Internally generated – In Process			Acquired software licences		Total
Cost
Balance at December 31, 2018		26,901		898			3,356		31,155
Additions		—		8,438			—		8,438
Transfers		7,948		(7,948	)		—		—
Balance at December 31, 2019		34,849		1,388			3,356		39,593
Additions		—		4,796			—		4,796
Transfers		4,655		(4,655	)		—		—
Balance at December 31, 2020		39,504		1,529			3,356		44,389
Accumulated depreciation
Balance at December 31, 2018		9,374		—			3,123		12,497
Amortization		5,764		—			75		5,839
Balance at December 31, 2019		15,138		—			3,198		18,336
Amortization		7,093		—			48		7,141
Balance at December 31, 2020		22,231		—			3,246		25,477
Net book value
Balance at December 31, 2019		19,711		1,388			158		21,257
Balance at December 31, 2020		17,273		1,529			110		18,912

Intangible assets include both internally generated and acquired software with finite useful lives. Amortization of intangible assets of $7,141 for the year ended December 31, 2020 (December 31, 2019 – $5,839) is included in technology and development costs.

10. Accounts payable and accruals

	2020		2019
Trade payables		3,291		7,128
Accrued expenses		2,423		2,801
Accrued wages and other benefits		1,379		575
Others		750		750
		7,843		11,254

F-26

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

11. Leases

The Company has lease agreements for its office spaces. Leases generally have lease terms between 2 years to 7 years with an option to renew the lease after that date. The Company assesses at the lease commencement date whether it is reasonably certain to exercise the extension option. The Company re-assesses whether it is reasonably certain to exercise the options if there is a significant event or significant change in circumstances within its control.

During the year, the Company has not made any re-assessment related to extension option. Information about leases for which the Company is a lessee is presented below:

Amount recognized in the consolidated statement of financial position:

Set out below are the carrying amounts of the Company’s right-of-use assets and Lease liabilities recognized and the movements during the year ended December 31, 2020 and 2019.

	Right -of-use- assets			Lease Liabilities
As at January 1, 2019		4,352			4,694
Modifications and renewals		1,228			1,226
Additions		121			121
Depreciation expense		(880	)		—
Interest expense		—			345
Payments		—			(1,178	)
As at December 31, 2019		4,821			5,208
Modifications and renewals		33			(100	)
Disposals		(333	)		(328	)
Depreciation expense		(642	)		—
Interest expense		—			272
Payments		—			(716	)
As at December 31, 2020		3,879			4,336

Amount recognized in the consolidated statement of operations and comprehensive loss:

	2020		2019
Depreciation expense of right-of-use assets		642		880
Interest expense on lease liabilities		272		345
Expenses relating to short term leases		39		151
Variable lease payments		516		155
Total amount recognized in consolidated statement of operations and comprehensive loss		1,469		1,531

Depreciation of right-of-use assets is included in general and administration expenses. Interest expense related to lease liabilities is included in debenture and other financing expense.

The Company in its cash flow has classified cash payment of $444 related to principal portion of lease payments as financing activities and cash payments of $272 related to interest portion as operating activities consistent with the presentation of interest payments chosen by the Company.

F-27

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

11. Leases(Continued from previous page)

The Company negotiated rent concessions with its landlords for some of its leased properties in relation to actions taken as part of its COVID-19 Response Plan during the current year. The Company has applied the IFRS 16 practical expedient for COVID-19 related to rent concessions to all eligible rent concessions. The Company recognized a gain of $107 during the year ended December 31, 2020 (2019 - $nil) which is included in other non-operating (income) expenses in the consolidated statement of comprehensive loss to reflect changes in lease payments arising from rent concessions

12. Credit facilities

As of December 31, 2019, the Company had two credit facilities: the “Credit Facility – Liquid” and the “Credit Facility – Other”, both credit facilities are subject to variable interest rates that reference LIBOR, or under certain conditions, the Federal Funds Rate in effect.

On December 31, 2019, the Company amended its Credit Facility – Other. The amendments lowered the effective interest rate from a maximum of LIBOR plus 12.5% (with a LIBOR floor of 2%) to LIBOR plus 9% (with a LIBOR floor of 1.5%) effective July 2, 2020, payable on the greater of the actual aggregate unpaid principal balance, or the prescribed minimum balance under the term loan agreement. In addition, the amendment increased the available loan capital from $50 million to $60 million and extended the maturity date of the facility by two years from July 2, 2020 to July 2, 2022.

On June 29, 2020, the Company further amended its Credit Facility – Other. The amendments decreased the available loan capital back from $60 million to $50 million and reduced the prescribed minimum balances applicable in the calculation of interest as described above. There is a 0.33% fee on the available but undrawn portion of the $50 million facility.

On February 28, 2020, in conjunction with the Liquid Sale, Mogo repaid and extinguished its Credit Facility – Liquid, which held a principal outstanding balance of approximately $28,683 immediately prior to derecognition. As part of extinguishing the facility in advance of its maturity, Mogo recognized a prepayment penalty of $2,500 of which $1,500 was payable in cash and of which $1,000 was settled in shares on March 5, 2020, through the issuance of 306,842 common shares, priced at $3.259 per share.

	December 31, 2020		December 31, 2019
Credit Facility - Other
Funds drawn		37,644		47,248
Credit Facility - Liquid
Funds drawn		—		29,255
Interest payable		—		191
Unamortized deferred financing cost		—		(222	)
		—		29,224
		37,644		76,472

Credit facility- Other is subject to certain covenants and events of default. As of December 31, 2020, and December 31, 2019, the Company was in compliance with these covenants. Interest expense on both credit facilities is included in credit facility interest expense in the consolidated statement of operations and comprehensive loss.

F-28

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

12. Credit facilities (Continued from previous page)

Management routinely reviews and renegotiates terms, including interest rates and maturity dates, and will continue to refinance these credit facilities as they become due and payable.

The Company has pledged financial instruments as collateral against its credit facilities. Under the terms of the general security agreement, assets pledged as collateral primarily include cash and cash equivalents with a balance of $892 (2019 - $5,050) and loans receivable with a carrying amount equal to $47,227 (2019 - $88,655).

13. Debentures

On September 30, 2020, the Company and its debenture holders approved certain amendments to the terms of the debentures, with an effective date of July 1, 2020. Among other things, the amendments include:

i) a reduction in the weighted average coupon interest rate, from approximately 14% to approximately 7% and the extension of the maturity date for 50% of the principal balance to January 31, 2023, and the remainder to January 31, 2024;

ii) replacement of the former monthly interest payable by a new quarterly payment (the “Quarterly Payment”), the amount of which is fixed at 12% per annum (3% per quarter) of the principal balance of the debentures as at September 29, 2020. Debenture holders received an election to either receive the Quarterly Payment as a) an interest payment of 8% per annum (2% per quarter) with the remainder of the payment going towards reducing the principal balance of the debenture, or b) a reduction of the principal balance of the debenture equal to the amount of the Quarterly Payment;

iii) settlement of the new Quarterly Payment on the first business day following the end of a calendar quarter at the Company’s option either in cash or the Company’s common shares; and

iv) an option for all debenture holders to receive a lump-sum payout of their previously unpaid interest for the period from March 1, 2020 to June 30, 2020, at a reduced interest rate of 10%. Those who elected this option were paid in common shares of the Company in October 2020 subsequent to the end of the quarter.

On October 7, 2020, Mogo issued 4,479,392 warrants (the “Debenture Warrants”) to its debenture holders in connection with the debenture amendments approved on September 30, 2020, at an exercise price of $2.03 per warrant. The Debenture Warrants are exercisable at any time until December 31, 2022. During the year, 990,427 warrants were exercised into common shares for cash proceeds of $2,011.

At the date of the amendments, the warrants were recognized as a financial liability of $3,500 at fair value using the Black Scholes valuation model. Upon issuance of the Debenture Warrants on October 7, 2020, the financial liability was converted into an equity instrument and remeasured to a fair value of $3,508 recognized in equity as of that date with the difference recorded as a gain to the consolidated statement of operations and comprehensive loss.

The amendments to the debentures were accounted for as a settlement of the previous debt and replacement by a new financial liability. On September 30, 2020, the carrying amount of the previous debt of $47,264 was replaced by a new financial liability with a fair value of $42,231, calculated using the present value of future cash flows discounted at the prevailing market interest rate. The difference between the face value of the new financial liability and its fair value is recorded against the principal balance and accreted using the effective interest rate method over the term of the debentures. Additionally, the Debenture Warrants issuable at October 7, 2020, were initially recognized as a separate liability with a fair value of $3,500. The $1,533 difference in carrying value of the previous debt and fair value of the new financial liabilities was recorded as a $767 reduction to debenture interest expense and other financing expense to revise interest owing, using the amended interest rate, and a $765 gain on debenture amendment recorded to other non-operating (income) expenses in the consolidated statement of operations and comprehensive loss.

F-29

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

13. Debentures(Continued from previous page)

Transaction costs of $169 related to amendments were recorded in other non-operating (income) expenses in the consolidated statement of operations and comprehensive loss. Interest expense on the debentures related to the coupon payment is included in debenture interest and other financing expense, and the portion of expense related to accretion of the discount is recorded separately to accretion related to debentures, in the consolidated statement of operations and comprehensive loss.

	December 31, 2020			December 31, 2019
Principal balance		43,442			43,496
Discount		(3,575	)		—
		39,867			43,496
Interest payable		791			543
		40,658			44,039

Previously the debentures required monthly interest only payments and had annual interest rates ranging between 10.0% and 18.0% for the six months ended June 30, 2020 (year ended December 31, 2019 – 10.0% and 18.0%). For debenture interest owing from March to June 2020, the Company exercised its right to add the debenture interest to the principal balance of the debentures rather than paying it monthly in cash.

The debenture principal repayments will be made according to the following schedule and are payable in either cash or Mogo common shares at Mogo’s option:

	Principal component of quarterly payment		Principal due on maturity		Total
2021		2,054		—		2,054
2022		2,183		—		2,183
2023		3,294		16,677		19,971
2024		941		18,293		19,234
		8,472		34,970		43,442

14. Convertible debentures

On June 6, 2017, the Company issued 10% convertible debentures of $15,000 aggregate principal amount at a price of one thousand dollars per debenture, with a maturity date of May 31, 2020. On May 27, 2020, the Company amended the remaining $12,621 principal value of convertible debentures (the “Amendments”) to include, among other things, an extension of the maturity date to May 31, 2022, and a reduction in the conversion price of the principal by 45% from $5.00 to $2.75 per common share (the “Conversion Price”).

Subsequent to the Amendments, the interest is payable on a quarterly basis in arrears in February, May, August and November of each year, at the Company’s option either i) in common shares of the Company, issued at a price equal to the volume weighted average trading price (“VWAP”) of the common shares for the 20 trading days ending on the fifth day prior to the interest payment date, or ii) in cash. Prior to the Amendments, interest was payable on a semi-annual basis in arrears in May and November of each year.

F-30

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

14. Convertible debentures (Continued from previous page)

At any time that the 20-day VWAP of the common shares on the TSX exceeds $3.4375 per share, representing 125% of the Conversion Price, the Company may convert the convertible debentures in whole or in part, including any accrued interest, to common shares at the Conversion Price of $2.75 per common share. This trigger price was changed from 115% of the former conversion price to 125% of the new Conversion Price as a result of the Amendments. Additionally, the convertible debentures are convertible, at the option of the holder, in whole or in part, into common shares of the Company at any time before the maturity date at the Conversion Price of $2.75 per share.

Upon maturity the convertible debentures are payable, at the Company’s option, either i) in common shares of the Company issued at a price equal to the 20-day VWAP of the common shares on the TSX ending on the fifth day prior to the maturity date, or ii) in cash.

The amendments to the convertible debentures were accounted for as a settlement of the previous debt and replacement by a new compound financial instrument. On May 27, 2020, the principal balance of $12,621 was bifurcated and first allocated to the debt component of the convertible debenture by discounting the future principal and interest payments at the prevailing market interest rate at the date of issuance for a similar non-convertible debt instrument. The residual difference between the $12,621 and the fair value allocated to the debt component, was then allocated to contributed surplus within shareholders’ equity. Transaction costs of $796 related to amendments were netted against their respective debt and equity components.

On December 10, 2020, the Company gave notice to the holders of the convertible debentures that it was exercising its early conversion right such that the convertible debentures would be converted to common shares at the Conversion Price of $2.75 per share on or about January 11, 2021 refer to note 27– Subsequent event for details. On the date of this announcement the carrying amount of the liability component was adjusted to par and recognized unamortized discount and transaction costs of $927 to the consolidated statement of operations and comprehensive loss.  

The following table summarizes the carrying value of the convertible debentures as at December 31, 2020:

	Liability component of convertible debentures			Equity component of convertible debentures			Net book value, December 31, 2020			Net book value, December 31, 2019
Convertible debentures		11,963			658			12,621			12,621
Transaction costs		(755	)		(41	)		(796	)		(1,318	)
Net proceeds		11,208			617			11,825			11,303
Conversion of debentures to equity (net of $184 unamortized transaction cost)		(3,754	)		—			(3,754	)		—
Accretion in carrying value of debenture liability		1,228			—			1,228			1,786
Accrued interest		684			—			684			1,381
Interest converted in shares and paid		(615	)		—			(615	)		(1,276	)
		8,751			617			9,368			13,194

Interest expense related to previous debt and replaced convertible debenture, in the amount of $1,219 for the year ended December 31, 2020 (December 31, 2019 – $1,274) is included in debenture and other financing expense in the consolidated statement of operations and comprehensive loss. In 2020, the Company issued 723,025 shares in lieu of $1,230 interest payable (December 31, 2019 – 308,502) and 1,431,982 (December 31, 2019 – 58,200) shares for the conversion of $3,938 of principal (December 31, 2019 – $291).

F-31

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

15. Income taxes

(a) Provision for income taxes

The major components of provision for income taxes are as follows:

	2020		2019
Current tax expense		—		—
Deferred tax expense		—		—
Provision for income taxes		—		—

The reconciliation of the provision for income taxes to the amount of income taxes calculated using statutory income tax rates applicable to the Company in Canada is as follows:

	2020			2019
Canadian federal and provincial recovery of income taxes using statutory    rate of 27% (2019 – 27%,)		(3,630	)		(2,653	)
Change in unrecognized deductible temporary differences and unused    tax losses		3,093			4,534
Permanent differences and other		537			(1,881	)
Provision for income taxes		—			—

(b) Deferred tax assets

As at December 31, the Company’s deferred tax assets are as follows:

	2020		2019
Unused tax losses		222		37

(c) Deferred tax liabilities

As at December 31, the Company’s deferred tax liabilities are as follows:

	2020		2019
Convertible debentures		—		—
Deferred cost		222		37
		222		37

(d) Deductible temporary differences and unused tax losses

Deferred tax assets have not been recognized because it is not probable that future taxable profit will be available against which the Company can use the benefits therefrom.

F-32

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

15. Income taxes (Continued from previous page)

As at December 31, the Company has deductible temporary differences for which no deferred tax assets are recognized as follows:

	2020		2019
Property and equipment		2,946		2,103
Right-of-use assets, net lease liability		438		388
Intangible assets		10,346		3,205
Debentures		433		595
Convertible debentures		1,679		530
Financing costs		1,496		1,509
Research and development expenditures		1,437		1,437
Other		2,245		—
		21,020		9,767

In addition to the deductible temporary differences listed above, as at December 31, the Company has unused tax losses for which no deferred tax assets are recognized as follows:

	2020		2019
Expires 2024		610		610
Expires 2025		936		1,101
Expires 2026		2,112		2,136
Expires 2027		4,863		5,203
Expires 2028		2,064		2,064
Expires 2029		4,237		4,679
Expires 2030		3,698		3,698
Expires 2031		1,470		1,614
Expires 2032		3,772		4,854
Expires 2033		6,065		11,006
Expires 2034		7,416		8,420
Expires 2035		9,680		11,168
Expires 2036		18,713		18,886
Expires 2037		20,450		20,449
Expires 2038		20,214		20,214
Expires 2039		24,977		14,557
Expires 2040		169		—
		131,446		130,659

F-33

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

16. Revenue

Subscription and services

	2020		2019
Revenue from contracts with customers		19,114		23,449
Other		—		1,862
Total		19,114		25,311

17. Expenses by nature

	2020		2019
Personnel expense		12,677		14,402
Marketing		4,027		9,119
Depreciation and amortization		8,414		8,049
Hosting and software licenses		2,321		4,838
Credit verification costs		1,651		2,099
Professional services		1,407		1,201
Premises		1,010		2,402
Insurance and licenses		572		326
Other		2,279		2,236
		34,358		44,672

18. Revaluation (gains) and losses

	2020			2019
Unrealized exchange (gain) loss		155			(296	)
Change in fair value due to revaluation of derivative liability		8			570
Realized gain on investment portfolio		—			(294	)
Unrealized loss (gain) on investment portfolio, net		2,249			(100	)
Realized gain on other-receivable		(258	)		—
Losses related to property and equipment		272			102
		2,426			(18	)

F-34

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

19. Other non-operating (income) expenses

	2020			2019
Gain on sale of loan book		(1,676	)		—
Credit facility prepayment and related expenses		2,608			—
Convertible debenture early conversion		927			—
Gain on amendment of debentures		(765	)		—
Government grant		(3,201	)		—
Restructuring and other		938			543
		(1,169	)		543

On February 28, 2020, Mogo completed the Liquid Sale and recognized a gain on sale of loan book amounting to $1,676 (refer to Note 4). On the same date, Mogo repaid and extinguished its Credit Facility – Liquid and recognized an early prepayment expense of $2,500 as a result of paying down the facility in advance of the maturity date (refer to Note 12). Mogo also recognized $108 of other related legal and termination expenses in connection with the transactions.

Due to the outbreak of COVID-19, the Government of Canada announced the Canadian Emergency Wage Subsidy (“CEWS”) to support companies that have experienced a certain level of revenue decline in their operations. Mogo has determined that it qualifies for the CEWS and has made an accounting policy election to record the grant on a gross basis. As a result, Mogo has recorded other non-operating income of $3,201 for the year ended December 31, 2020.

20. Loss per share

Loss per share is based on consolidated comprehensive loss for the year divided by the weighted average number of shares outstanding during the year. Diluted loss per share is computed in accordance with the treasury stock method and is based on the weighted average number of shares and dilutive share equivalents.

The following reflects consolidated comprehensive loss and weighted average number of shares used in the basic and diluted loss per share computations:

	2020			2019
Loss attributed to shareholders		(13,445	)		(10,825	)
Basic weighted average number of shares (in 000s)		28,873			25,545
Basic and diluted loss per share		(0.47	)		(0.42	)

The outstanding stock options and warrants were excluded from the calculation of diluted loss per share because their effect is anti-dilutive.

F-35

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

21. Capital management

The Company’s objectives when managing capital are to maintain financial flexibility in order to preserve its ability to meet financial obligations and continue as a going concern, and to deploy capital to provide future investment return to its shareholders.

The Company sets the amount and type of capital required relative to its assessment of risk and makes adjustments when necessary to respond to changes to economic conditions, the risk characteristics of the underlying assets, and externally imposed capital requirements. In order to maintain or modify its capital structure, the Company may issue new shares, seek other forms of financing, or sell assets to reduce debt.

The Company manages the following as capital:

	2020			2019
Share capital		106,730			94,500
Deficit		(115,054	)		(101,609	)
Credit facilities		37,644			76,472
Debentures		43,442			44,039
Convertible debentures		8,751			12,373

There have been no changes in the Company’s capital management objectives, policies and processes during the year. There are certain capital requirements of the Company resulting from the Company’s credit facility that include financial covenants and ratios. Management uses these capital requirements in the decisions made in managing the level and make-up of the Company’s capital structure. The Company was in compliance with all of the financial covenants as at December 31, 2020 and December 31, 2019.

Changes in the share capital of the Company over the year ended December 31, 2020 are mainly attributed to the, conversion of convertible debentures and related interest conversion and the conversion of stock options and RSUs, as disclosed in Note 14 and Note 25, respectively.

Change in the credit facilities of the Company over the year ended December 31, 2020 is primarily related to the repayment and extinguishment of its Credit Facility – Liquid, which held a principal outstanding balance of approximately $28,683 immediately prior to derecognition.

F-36

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

22. Business combination

Acquisition in 2019:

On June 21, 2019, Mogo Finance and the Company, formerly named Difference Capital Financial Inc. (“Difference”), completed a plan of arrangement (the “Business Combination”). Under the Business Combination, Mogo Finance amalgamated with a wholly-owned subsidiary of Difference. In connection with the Business Combination, Difference was continued into British Columbia and changed its name to Mogo Inc. and continues to execute on Mogo Finance’s vision of building the leading fintech platform in Canada.

Under the Business Combination, each outstanding common share of Mogo Finance, excluding the 2,549,163 Mogo Finance common shares held by Difference immediately prior to consummation of the Business Combination, was exchanged for one common share of the Company. All of Mogo Finance’s outstanding convertible securities became exercisable or convertible, as the case may be, for common shares in the Company. The Business Combination provided Mogo Finance access to $10,246 in cash and a portfolio of investments, increasing the financial position and liquidity of the Company.

The Business Combination was accounted for as a reverse takeover under IFRS 3, where Mogo Finance was the accounting acquirer. Accordingly, these consolidated financial statements represent the continuing statements of Mogo Finance. The following table presents a reconciliation of the common shares outstanding immediately after the Business Combination:

	Number of common shares
Mogo Finance common shares outstanding at June 20, 2019		24,101,405
Less: Mogo Finance common shares already held by Difference (not exchanged for common shares in Difference)		(2,549,163	)
Difference common shares outstanding at June 20, 2019		5,725,821
Common shares of Mogo outstanding upon completion of the Business Combination		27,278,063
Common shares of Mogo Finance immediately before the Business Combination		24,101,405
Incremental issuance of common shares		3,176,658

In the period June 21, 2019 to December 31, 2019, the operations of Difference contributed revenue of $nil and net income of $283. If the acquisition had occurred on January 1, 2019, management estimates that proforma consolidated revenue would have been $68,143 and proforma consolidated net losses would have been ($8,514) for the year ended December 31, 2019. In determining these amounts, management has assumed the fair value adjustments, determined, that arose on the date of the Business Combination would have been the same if the acquisition had occurred on January 1, 2019.

The fair value of incremental common shares issued as consideration under the Arrangement was based on the June 20, 2019 closing price of a Mogo Finance common share on the TSX of $4.68 per share. Difference’s outstanding stock-based awards at the acquisition date became exercisable for common shares of the Company according to the provisions thereof. Since Mogo Finance is the accounting acquirer, these awards are accounted for as replacement awards. The estimated fair value of the replacement awards attributed to the pre-acquisition and post-acquisition service periods were $682 and $225, respectively, measured as at June 21, 2019. The pre-acquisition amount had been included as part of the total consideration.

F-37

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

22. Business combination (Continued from previous page)

The previously disclosed provisional allocation of consideration to estimated fair values had been updated based on fair valuations completed on the investment portfolio as of the acquisition date. This resulted in a decrease of $1,100 to investment portfolio previously disclosed at $23,904 and a corresponding decrease to the gain on acquisition previously disclosed at $15,886. The following tables summarize the fair value of consideration transferred, and its final allocation to estimated fair values assigned to each major class of assets acquired and liabilities assumed at the June 21, 2019 acquisition date.

(a) Purchase consideration:

Fair value of 3,176,658 incremental common shares issued	14,867
Fair value of replacement stock-based awards attributable to pre-acquisition service	682
Purchase consideration	15,549

(b) Purchase price allocation:

Cash and cash equivalents	10,246
Prepaid expenses, deposits and other assets	60
Investment portfolio	22,804
Accounts payable and accruals	(2,775	)
Fair value of net identifiable assets acquired	30,335
Purchase consideration	15,549
Gain on acquisition	14,786

The $14,786 gain on acquisition is expressed net of $1,645 transaction costs incurred in the consolidated statement of operations and comprehensive loss.

23. Fair value of financial instruments

The fair value of a financial instrument is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants which takes place in the principal (or most advantageous) market at the measurement date. The fair value of a liability reflects its non-performing risk. Assets and liabilities recorded at fair value in the consolidated statement of financial position are measured and classified in a hierarchy consisting of three levels for disclosure purposes. The three levels are based on the priority of the inputs to the respective valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). An asset or liability's classification within the fair value hierarchy is based on the lowest level of significant input to its valuation. The input levels are defined as follows:

• Level 1: Unadjusted quoted prices in an active market for identical assets and liabilities.

• Level 2: Quoted prices in markets that are not active or inputs that are derived from quoted prices of similar (but not identical) assets or liabilities in active markets.

• Level 3: Unobservable inputs that are supported by little or no market activity and are significant to the estimated fair value of the assets or liabilities.

F-38

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

23. Fair value of financial instruments (Continued from previous page)

(a) Valuation process

The Company maximizes the use of quoted prices from active markets, when available. A market is regarded as active if transactions take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Where independent quoted market prices are not available, the Company uses quoted market prices for similar instruments, other third-party evidence or valuation techniques.

The fair value of financial instruments determined using valuation techniques include the use of recent arm’s length transactions and discounted cash flow analysis for investments in unquoted securities, discounted cash flow analysis for derivatives, third-party pricing models or other valuation techniques commonly used by market participants and utilize independent observable market inputs to the maximum extent possible.

The use of valuation techniques to determine the fair value of a financial instrument requires management to make assumptions such as the amount and timing of future cash flows and discount rates and incorporate the Company’s estimate of assumptions that a market participant would make when valuing the instruments.

(b) Accounting classifications and fair values

The following table shows the carrying amount and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. There has not been any transfer between fair value hierarchy levels during the year. The fair value disclosure of lease liabilities is also not required.

			Carrying amount								Fair value
December 31, 2020	Note		Mandatorily at FVTPL		Financial asset at amortized cost		Other financial liabilities		Total		Level 1		Level 2		Level 3		Total
Financial assets measured at fair value
Investment portfolio:
Equities		8		18,445		—		—		18,445		—		154		18,291		18,445
				18,445		—		—		18,445
Financial assets not measured at fair value
Cash and cash equivalent				—		12,119		—		12,119		12,119		—		—		12,119
Loans receivable – current		5		—		54,978		—		54,978		—		54,978		—		54,978
Loans receivable – non-current		5		—		1,135		—		1,135		—		—		1,064		1,064
				—		68,232		—		68,232
Financial liabilities not measured at fair value
Accounts payable and accruals				—		—		7,843		7,843		—		7,843		—		7,843
Credit facilities		13		—		—		37,644		37,644		—		37,644		—		37,644
Debentures		14		—		—		40,658		40,658		—		40,658		—		40,658
Convertible debentures		15		—		—		8,751		8,751		—		8,751		—		8,751
				—		—		94,896		94,896

F-39

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

23. Fair value of financial instruments (Continued from previous page)

			Carrying amount								Fair value
December 31, 2019	Note		FVTPL		Financial asset at amortized cost		Other financial liabilities		Total		Level 1		Level 2		Level 3		Total
Financial assets measured at fair value
Investment portfolio:
Equities		8		20,590		—		—		20,590		—		99		20,491		20,590
Partnership interest and other		8		200		—		—		200		—		—		200		200
				20,790		—		—		20,790
Financial assets not measured at fair value
Cash and cash equivalent				—		10,417		—		10,417		10,417		—		—		10,417
Loans receivable – current		5		—		69,949		—		69,949		—		69,647		—		69,647
Loans receivable – non-current		5		—		34,726		—		34,726		—		—		34,396		34,396
				—		115,092		—		115,092
Financial liabilities not measured at fair value
Accounts payable and accruals				—		—		11,254		11,254		—		11,254		—		11,254
Credit facilities		13		—		—		76,472		76,472		—		76,472		—		76,472
Debentures		14		—		—		44,039		44,039		—		44,867		—		44,867
Convertible debentures		15		—		—		12,373		12,373		—		12,373		—		12,373
				—		—		144,138		144,138

(c) Measurement of fair values:

(i) Valuation techniques and significant unobservable inputs

The Company has been closely monitoring developments related to COVID-19, including the existing and potential impact on its investment portfolio. As a result of the ongoing and developing COVID-19 pandemic and its resulting impact on the global economy, the Company believes that there is increased uncertainty to input factors on fair value of our Level 3 investments, including revenue multiples, time to exit events and increased equity volatility. See Note 18 for gain (loss) on investments related to the impact of COVID-19.

The following tables show the valuation techniques used in measuring Level 3 fair values for financial instruments in the statement of financial position, as well as the significant unobservable inputs used.

F-40

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

23. Fair value of financial instruments (Continued from previous page)

Financial instrument measured at FV

Type	Valuation technique	Significant unobservable inputs	Inter-relationship between significant unobservable inputs and FV
Investment portfolio:
Equities
Unlisted	• Price of recent investments in the investee company • Implied multiples from recent transactions of the underlying investee companies • Offers received by investee companies • Revenue multiples derived from comparable public companies and transactions • Option pricing model	• Third-party transactions • Revenue multiples • Balance sheets and last twelve-month revenues for certain of the investee companies • Equity volatility • Time to exit events	• Increases in revenue multiples increases fair value • Increases in equity volatility can increase or decrease fair value depending on class of shares held in the investee company • Increases in estimated time to exit event can increase or decrease fair value depending on class of shares held in the investee company
Partnership interest and others	• Adjusted net book value	• Net asset value per unit • Change in market pricing of comparable companies of the underlying investments made by the partnership
Loan receivable – non-current	• Discounted cash flows: Considering expected prepayments and using management’s best estimate of average market interest rates with similar remaining terms.	• Expected timing of cash flows • Discount rate 12%	• Changes to the expected timing of cash flow changes fair value • Increases to the discount rate can decrease fair value

F-41

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

23. Fair value of financial instruments (Continued from previous page)

The following table presents the changes in fair value measurements of the Company’s investment portfolio recognized at fair value at December 31, 2020 and 2019 and classified as Level 3:

	December 31, 2020			December 31, 2019
Opening balance of Level 3 investments		20,691			—
Acquired in business combination with Difference		—			22,648
Addition		150			—
Disposal		—			(2,100	)
Repayment of debenture		—			(14	)
Unrealized exchange loss		(247	)		(118	)
Unrealized (loss) gain on investment portfolio		(2,303	)	275
Balance of level 3 investments, end of year		18,291			20,691

(ii) Sensitivity analysis

For the fair value of equity securities, reasonably possible changes at the reporting date to one of the significant unobservable inputs, holding other inputs constant, would have the following effects.

		Profit or loss
		Increase		Decrease
Investment portfolio:
31 December 2020		937			(937	)
	Adjusted market multiple (5% movement)
31 December 2019			1,000		(1,000	)

During the year ended December 31, 2020, there were no transfers of assets or liabilities within the fair value hierarchy levels.

24. Nature and extent of risk arising from financial instruments

Risk management policy

In the normal course of business, the Company is exposed to financial risk that arises from a number of sources. Management’s involvement in operations helps identify risks and variations from expectations. As a part of the overall operation of the Company, Management takes steps to avoid undue concentrations of risk. The Company manages the risks as follows:

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counter‑party to a financial instrument fails to meet its contractual obligations and arises primarily from the Company’s loans receivable. The maximum amount of credit risk exposure is limited to the gross carrying amount of the loans receivable disclosed in these financial statements.

F-42

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

24. Nature and extent of risk arising from financial instruments (Continued from previous page)

The Company acts as a lender of unsecured consumer loans and lines of credit and has little concentration of credit risk with any particular individual, company or other entity, relating to these services. However, the credit risk relates to the possibility of default of payment on the Company’s loans receivable. The Company performs on‑going credit evaluations, monitors aging of the loan portfolio, monitors payment history of individual loans, and maintains an allowance for loan loss to mitigate this risk.

The credit risk decisions on the Company’s loans receivable are made in accordance with the Company’s credit policies and lending practices, which are overseen by the Company’s senior management. Credit quality of the customer is assessed based on a credit rating scorecard and individual credit limits are defined in accordance with this assessment. The consumer loans receivable are unsecured. The Company develops underwriting models based on the historical performance of groups of customer loans which guide its lending decisions. To the extent that such historical data used to develop its underwriting models is not representative or predictive of current loan book performance, the Company could suffer increased loan losses.

The Company cannot guarantee that delinquency and loss levels will correspond with the historical levels experienced and there is a risk that delinquency and loss rates could increase significantly.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due or will not receive sufficient funds from its third-party lenders to advance to the Company’s customers. The Company manages all liquidity risk through maintaining a sufficient working capital amount through daily monitoring of controls, cash balances and operating results. The Company’s principal sources of cash are funds from operations, which the Company believes will be sufficient to cover its normal operating and capital expenditures.

F-43

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

24. Nature and extent of risk arising from financial instruments (Continued from previous page)

The Company’s accounts payable and accruals are substantially due within 12 months. The maturity schedule of the Company’s credit facilities, debentures, and convertible debentures are described below. Management’s intention is to continue to refinance any outstanding amounts owing under the credit facilities and debentures and will consider the issuance of shares in lieu of amounts owing under the convertible debentures, in each case as they become due and payable. The debentures are subordinated to the credit facilities which has the effect of extending the maturity date of the debentures to the later of contractual maturity or the maturity date of credit facilities. See Note 12 for further details.

($000s)	2021		2022		2023		2024		2025		Thereafter
Commitments - operational
Lease payments		1,396		1,308		1,297		1,206		1,240		2,727
Trade payables		4,041		—		—		—		—		—
Accrued wages and other expenses		3,802		—		—		—		—		—
Interest – Credit Facilities (note 13)		3,953		1,976		—		—		—		—
Interest – Debentures (note 14)		3,084		2,952		1,502		—		—		—
Purchase obligations		1,052		1,052		—		—		—		—
		17,328		7,288		2,799		1,206		1,240		2,727
Commitments – principal repayments
Credit Facility – Other (note 13)		—		37,644		—		—		—		—
Debentures (note 14)		2,054		2,183		19,971		19,234		—		—
		2,054		39,827		19,971		19,234		—		—
Commitments – extinguished subsequent to year end
Convertible debentures (1) (note 15)		8,751								—		—
		8,751		—		—		—		—		—
Total contractual obligations		28,133		47,115		22,770		20,440		1,240		2,727

⁽¹⁾ Subsequent to year end the Company converted all the outstanding convertible debenture into common shares of the Company, and there are no further interest payments related to convertible debentures.

F-44

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

24. Nature and extent of risk arising from financial instruments (Continued from previous page)

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include cash, investment portfolio, debentures, credit facilities and derivative financial liability.

Interest rate risk

Changes in market interest rates may have an effect on the cash flows associated with some financial assets and liabilities, known as cash flow risk, and on the fair value of other financial assets or liabilities, known as price risk. The Company is exposed to interest rate risk primarily relating to its credit facilities that bear interest fluctuating with LIBOR. The Credit Facility - Other has a LIBOR floor of 1.5%. As at December 31, 2020, LIBOR is 0.34% (December 31, 2019 – 1.74%). A 50-basis point change in LIBOR would not increase or decrease credit facility interest expense

The debentures and convertible debentures have fixed rates of interest and are not subject to interest rate risk.

Currency risk

Currency risk is the risk that changes in foreign exchange rates may have an effect on future cash flows associated with financial instruments. The Company is exposed to foreign currency risk on the following financial instruments denominated in U.S. dollars. A 5% increase or decrease in the U.S. dollar exchange rate would increase or decrease the unrealized exchange gain (loss) by $75.

(‘$000 in USD$)	December 31, 2020			December 31, 2019
Cash		107			322
Investment portfolio		6,171			7,060
Debentures		(5,105	)		(5,020	)

Other price risk

Other market price risk is the risk that the fair value of the financial instrument will fluctuate as a result of changes in market prices (other than those arising from interest rate risks or currency risk), whether caused by factors specific to an individual investment or its issuers or factors affecting all instruments traded in the market. Our investment portfolio comprises of non-listed closely held equity instruments which are not exposed to market prices. Fair valuation of our investment portfolio is conducted on a quarterly basis.

25. Equity

(a) Share capital

The Company’s authorized share capital is comprised of an unlimited number of common shares with no par value and an unlimited number of preferred shares issuable in one or more series. The Board is authorized to determine the rights and privileges and number of shares of each series.

As at December 31, 2020, there are 32,731,242 common shares and no preferred shares issued and outstanding.

F-45

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

25. Equity (Continued from previous page)

(b) Options

The Company has a stock option plan (the “Plan”) that provides for the granting of options to directors, officers, employees and consultants. The exercise price of an option is set at the time that such option is granted under the Plan. The maximum number of common shares reserved for issuance under the Plan is the greater of i) 15% of the number of common shares issued and outstanding of the Company and ii) 3,800,000. As a result of the Business Combination described in Note 22, there are an additional 536,000 options issued , which were granted pursuant to the Company’s prior stock option plan (the “Prior Plan”). These 536,000 options outstanding do not contribute towards the maximum number of common shares reserved for issuance under the Plan as described above.

Each option converts into one common share of the Company upon exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither right to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of expiry. Options issued under the Plan have a maximum contractual term of eight years, and options issued under the Prior Plan have a maximum contractual term of ten years.

A summary of the status of the stock options and changes in the period is as follows:

	Options Outstanding (000s)			Weighted Average Grant Date Fair Value $		Weighted Average Exercise Price $		Options Exercisable (000s)		Weighted Average Exercise Price $
As at December 31, 2018		3,108					3.88		1,965		3.80
Options granted		817			1.86		4.06
Replacement awards (Note 23)		536			1.69		2.64
Exercised		(356	)				2.16
Forfeited		(408	)				5.11
As at December 31, 2019		3,697					4.05		2,833		4.12
Options granted		1,988			1.45		2.47
Exercised		(276	)				1.59
Forfeited		(432	)				2.86
As at December 31, 2020		4,977					3.07		2,965		3.47

The above noted options have expiry dates ranging from November 2021 to December 2029.

On June 10, 2020, Mogo modified the exercise price of 1,394,425 outstanding options previously granted to its employees to $1.56. The incremental modification expense arising from the repricing of these options was $397. Subsequently, Mogo modified a further 141,914 options previously granted to its employees resulting in an incremental modification expense of $88.

Options granted during the year ended December 31, 2020 include 150,000 options granted to non-employees and measured at the fair value of corresponding services received, rather than using the Black-Scholes option pricing model.

F-46

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

25. Equity (Continued from previous page)

The fair value of each option granted was estimated using the Black-Scholes option pricing model with the following assumptions:

	For the year ended December 31, 2020		For the year ended December 31, 2019
Risk-free interest rate	0.32% - 0.39%		1.17% - 1.83%
Expected life	5 years		5 years
Expected volatility in market price of shares	72% - 77%			50%
Expected dividend yield		0%		0%
Expected forfeiture rate		15%		15%

These options generally vest either immediately or monthly over a three to four year period after an initial one year cliff. Volatility is estimated using historical data of comparable publicly traded companies operating in a similar segment.

Total share-based compensation costs related to options and RSUs for the year ended December 31, 2020 were $1,371 (2019 - $1,732).

(c) Restricted share units

RSUs are granted to executives and other key employees. The fair value of an RSU at the grant date is equal to the market value of one of the Company’s common shares. Executives and other key employees are granted a specific number of RSUs for a given performance period based on their position and level of contribution. RSUs vest fully after three years of continuous employment from the date of grant and, in certain cases, if performance objectives are met as determined by the Board of Directors. The maximum number of shares which may be made subject to issuance under RSUs awarded under the RSU Plan is 500,000.

Details of outstanding RSUs as at December 31, 2020 are as follows:

	Number of RSUs (000s)
Outstanding, December 31, 2018		246
Granted		—
Converted		(94	)
Expired		(11	)
Outstanding, December 31, 2019		141
Granted		—
Converted		(59	)
Expired		(5	)
Outstanding, December 31, 2020		77

F-47

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

25. Equity (Continued from previous page)

(d) Warrants

	Warrants Outstanding (000s)			Weighted Average Exercise Price $		Warrants Exercisable (000s)		Weighted Average Exercise Price $
As at December 31, 2018		1,779			2.66		982		2.42
Warrants exercised		(583	)		2.05		—		—
As at December 31, 2019		1,196			2.96		598		2.96
Warrants granted		4,829			1.98		—		—
Warrants exercised		(990	)		2.03		—		—
As at December 31, 2020		5,035			1.80		4,386		1.88

The 5,035,025 warrants outstanding noted above have expiry dates ranging from January 2021 to January 2023.

On October 7, 2020, Mogo issued 4,479,392 Debenture Warrants to its debenture holders in connection with the debenture amendments approved on September 30, 2020, at an exercise price of $2.03 per Debenture Warrant. The Debenture Warrants are exercisable at any time until December 31, 2022. During the year, 990,427 Debenture Warrants with a cash proceed of $2,011, were exercised into common shares. Refer to Note 13 for additional details.

On June 17, 2019, our lender exercised all of its warrants to purchase 583,333 of the Company’s common shares at an exercise price of $2.05 per share. The warrants were exercised via a net equity settlement option included in the warrant certificate. As a result, the warrants were net settled on a cashless basis, with reference to the $4.85 volume weighted average trading price (“VWAP”) of Mogo Finance’s common shares on the TSX for the 5 trading days prior to the exercise date. The cashless exercise resulted in the net issuance of 336,871 common shares, and also resulted in the extinguishment of the derivative financial liability, fair valued at $1,534 as at the exercise date, on the consolidated statement of operations and comprehensive loss.

On January 25, 2016, in connection with the original marketing collaboration agreement (the “Postmedia Agreement”) with Postmedia Network Inc. (“Postmedia”), Mogo issued Postmedia five-year warrants to acquire 1,196,120 common shares of Mogo at an exercise price of $2.96. 50% of the warrants were to vest in equal instalments over three years while the remaining 50% (the “Performance Warrants”) were to vest based on Mogo achieving certain quarterly revenue targets. Effective January 1, 2018, the Postmedia Agreement was amended and extended, with changes in the vesting terms of 598,060 Performance Warrants so that i) they vest equally over the remaining two years of the collaboration (50% in January 2020 and 50% in January 2021).

Effective January 1, 2020, Mogo amended and extended the Postmedia Agreement for an additional two years expiring on December 31, 2022. Under the amended and extended Postmedia Agreement, Postmedia receives a quarterly revenue share payment of $263, reduced from $527 in Q4 2019. Further, the contractual life of 50% of the warrants previously issued to Postmedia was extended to seven years such that the new expiry date is January 25, 2023. Mogo also granted Postmedia additional 3.5-year warrants (the “New Warrants”) to acquire 350,000 common shares of Mogo at an exercise price of $3.537, which will vest in equal instalments over three years.

On June 3, 2020, the Company entered into a further amendment with Postmedia pursuant to which Postmedia agreed to waive certain amounts payable by Mogo through December 31, 2020 in exchange for Mogo reducing the exercise price of the 1,546,120 common share purchase warrants previously issued to Postmedia, to $1.292.

F-48

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

25. Equity (Continued from previous page)

On March 2, 2021, Postmedia exercised 1,196,120 warrants to purchase same number of Company’s common shares at an exercise price of $1.292 per share. Mogo received cash payment of $1.5 million pursuant to the exercise. The fair value of the warrants outstanding was estimated using the Black-Scholes option pricing model with the following assumptions:

	For the year ended December 31, 2020			For the year ended December 31, 2019
Risk-free interest rate	0.32% - 0.39%			0.64%-2.05%
Expected life	3.5 -7 years			5-7 years
Expected volatility in market price of shares	50% - 77%			50%-55%
Expected dividend yield		0	%		0	%
Expected forfeiture rate		0	%		0	%

26. Cash flow changes from financing activities

Details of changes in financing activities for the year ended December 31, 2020 are as follows:

						Non-cash changes
	January 1, 2020		Cash flows			Conversion/ Other			Foreign exchange			Fair Value/ Amortization			December 31, 2020
Investment portfolio		20,790		150			—			(247	)		(2,248	)		18,445
Share capital		94,500		2,568			9,662			—			—			106,730
Lease liability		5,208		(444	)		(428	)		—			—			4,336
Credit facility		76,472		(39,050	)		—			—			222			37,644
Debentures		44,039		(399	)		(3,175	)		(116	)		309			40,658
Convertible debentures		12,373		—			(4,265	)		—			643			8,751
Total		232,592		(37,175	)		1,794			(363	)		(1,074	)		216,564

Details of changes in financing activities for the year ended December 31, 2019 are as follows:

						Non-cash changes
	January 1, 2019		Cash flows			Conversion/ Other			Foreign exchange			Fair Value/ Amortization		December 31, 2019
Share capital		75,045		770			18,685			—			—		94,500
Credit facility		76,465		(565	)		—			—			572		76,472
Debentures		42,156		2,213			—			(330	)		—		44,039
Convertible debentures		11,889		—			(276	)		—			760		12,373
Lease liability		4,694		(833	)		1,347			—			—		5,208
Derivative financial liability		964		—			(1,534	)		—			570		—
Total		211,213		1,585			18,222			(330	)		1,902		232,592

F-49

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

27. Subsequent Events

Convertible debentures

On January 11, 2021, the Company converted all the outstanding convertible debentures as of that date into common shares as per its announcement on December 10, 2020 and accordingly issued 3,157,453 common shares. Refer Note 14 for additional details.

Business Combination

On January 25, 2021, Mogo completed its previously announced acquisition of all of the issued and outstanding securities of Carta Solutions Holding Corporation ("Carta") in exchange for 10.0 million common shares of Mogo with a fair value of $54.8 million based on Mogo's closing share price at the acquisition date.

Issue costs directly attributable to the issuance of the common shares have been netted against the deemed proceeds. Acquisition-related costs of $379 not directly attributable to the issuance of the common shares are included in other non-operating (income) expenses in the consolidated statement of operations and comprehensive loss and in operating cash flows in the statement of cash flows.

Carta is a leading provider of next generation digital payments solutions. Carta’s modern issuing platform is the engine behind innovative fintech companies and products around the globe, powering over 100 card programs and providing vital processing technology to industry leaders. Carta is currently operating in Europe, Asia and Canada and recently Carta announced its expansion into the United States and Japan.

The acquisition is expected to significantly expand Mogo’s total addressable market by entering the global payments market; increase revenue scale and accelerate the growth of its high-margin subscription and transaction-based revenue; and strengthen the Company’s digital wallet capabilities which includes the development of its peer-to-peer payment solution planned for 2021.

F-50

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

27. Subsequent Events (Continued from previous page)

The following tables summarize the fair value of consideration transferred, and its allocation to estimated fair values assigned to each major class of assets acquired and liabilities assumed at the January 25, 2021 acquisition date.

	January 25, 2021
	$ 000's
Assets acquired:
Cash and cash equivalents		2,101
Trade and other receivables	878
Prepaid expenses and deposits	353
Property and equipment	270
Right-of-use assets	166
Intangible assets	628
Unallocated goodwill and intangible value		54,735
		59,131
Liabilities assumed:
Accounts payable		1,739
Accrued and other liabilities		1,328
Deferred revenue	705
Debt	150
Lease liabilities	316
		4,238
Net assets acquired at fair value		54,893
Share consideration		54,800

The purchase price allocation process was not completed at the publication date of the consolidated financial statements. The amounts allocated to goodwill and intangibles are preliminary and will be restated at a later date as the assessment of the identifiable intangible assets has not been completed.

F-51

Mogo Inc.

Notes to the Consolidated Financial Statements

(Expressed in thousands of Canadian dollars, except per share amounts)

For the years ended December 31, 2020 and 2019

27. Subsequent Events (Continued from previous page)

Investment in Coinsquare Ltd (“Coinsquare”)

On February 11, 2021, the Company announced a strategic investment in Coinsquare, Canada’s premier cryptocurrency trading platform. On closing, Mogo will acquire 19.99% ownership of Coinsquare’s outstanding common shares on a post-transaction basis for total consideration of approximately $27.4 million in cash and 2.8 million Mogo common shares. As part of the transaction, Mogo also has a call option to acquire from existing shareholders, and certain existing shareholders of Coinsquare have a right to require Mogo to purchase, 3.2 million additional Coinsquare common shares, representing an additional 10% of the outstanding common shares of Coinsquare. Mogo’s call option may be exercised at the earliest on May 31, 2021 and expires 12 months subsequent to the closing date of the initial investment, subject to certain conditions. Coinsquare shareholders’ put right may be exercised at the earliest of 6 months subsequent to the closing date of the initial investment and expires 13 months subsequent to the closing date of the initial investment, subject to certain conditions.

Further, Mogo holds 7.2 million warrants exercisable at its option only, which would increase its total ownership interest up to over 40% in the event that these warrants, along with all aforementioned rights, are fully exercised.   

Issuance of Common shares

On December 31, 2020, the Company announced the establishment of an at-the-market equity program (the “ATM Program”) pursuant to which the Company may, at its discretion and from time-to-time during the 12-month remaining term of its base shelf prospectus, sell such number of common shares as would result in aggregate proceeds to the Company of up to US$50million.

From January 7, 2020 until February 19, 2021, the Company sold a total of 1,524,759 common shares and raised an aggregate of US$14.98 million (net proceeds of US$14.4 million) under the ATM Program. On February 21, 2021, the Company terminated the ATM Program.

On February 24, 2021, the Company issued to certain institutional investors (the “Investors”) 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 aggregate gross proceeds to the Company were approximately US$54 million (net proceeds of US$50.1 million). In a concurrent private placement, Mogo completed the issuance to the Investors of unregistered warrants to purchase up to an aggregate of 2,673,268 common shares at an exercise price of US$11 at any time prior to the date which is three and a half years following the data of issuance. The Company also issued 267,327 broker warrants in connection with the offering.

Proposed Acquisition of Moka

On March 23, 2021, the Company announced a binding letter of intent to acquire 100% of Moka Finance Technologies Inc. (“Moka”), one of Canada’s leading saving and investing apps, for 5,000,000 Mogo common shares in an all-stock transaction. The proposed acquisition brings differentiated saving and investing products to broaden Mogo’s wealth offering. The two companies expect to complete a definitiveagreement and finalize the transaction in Q2 2021.

F-52

EX-99.2

Management’s Discussion and Analysis

Exhibit 99.2

MOGO INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED DECEMBER 31, 2020

DATED: MARCH 23, 2021

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Management’s Discussion and Analysis

Table of Contents
Caution Regarding Forward-looking Statements		4
Company Overview		5
Mission		7
Financial Outlook	7
COVID-19		7
Financial Performance Review		11
Liquidity and Capital Resources		25
Risk Management		29
Non-IFRS Financial Measures		29
Critical Accounting Estimates		34
Changes in Accounting Policies		34
Controls and Procedures		34

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Management’s Discussion and Analysis

MANAGEMENT’S DISCUSSION AND ANALYSIS

This Management’s Discussion and Analysis (“MD&A”) is current as of March 23, 2021 and presents an analysis of the financial condition of Mogo Inc. (formerly Difference Capital Financial Inc. (“Difference”)) and its subsidiaries (collectively referred to as “Mogo” or the “Company”) as at and for the twelve and three months ended December 31, 2020 compared with the corresponding periods in the prior year. This MD&A should be read in conjunction with the Company’s audited annual consolidated financial statements and the related notes thereto for the twelve months ended December 31, 2020. The financial information presented in this MD&A is derived from our audited annual consolidated financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The Company was continued under the Business Corporations Act (British Columbia) on June 21, 2019 in connection with the combination with Mogo Finance Technology Inc. (“Mogo Finance”) as further described in Note 23 to our audited annual consolidated financial statements. The transaction was accounted for as a business combination, with Mogo Finance as the accounting acquirer (the “Business Combination”). Accordingly, the financial statements and this MD&A reflect the continuing financial statements of Mogo Finance.

This MD&A is the responsibility of management. The Board of Directors has approved this MD&A after receiving the recommendation of the Company’s Audit Committee, which is comprised exclusively of independent directors, and the Company’s Disclosure Committee.  

Unless otherwise noted or the context indicates otherwise “we”, “us”, “our”, the “Company” or “Mogo” refer to Mogo Inc. and its direct and indirect subsidiaries.  The Company presents its consolidated financial statements in Canadian dollars. Amounts in this MD&A are stated in Canadian dollars unless otherwise indicated.

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

The Company’s continuous disclosure materials, including interim filings, audited consolidated financial statements, annual information form and annual report on Form 40-F can be found on SEDAR at www.sedar.com, with the Company’s filings with the United States Securities and Exchange Commission at www.sec.gov, and on the Company’s website at www.mogo.ca.

This MD&A makes reference to certain non‑IFRS financial measures. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. These measures are provided as additional information to complement the IFRS financial measures contained herein by providing further metrics to understand the Company’s results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We use non‑IFRS financial measures, including core revenue, adjusted EBITDA, adjusted cash net loss and cash operating expenses to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We also use non‑IFRS financial measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet our capital expenditure and working capital requirements. See “Key Performance Indicators” and “Non‑IFRS Financial Measures”.

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Management’s Discussion and Analysis

Caution Regarding Forward-Looking Statements

This MD&A contains forward‑looking statements that relate to the Company’s current expectations and views of future events. In some cases, these forward‑looking statements can be identified by words or phrases such as “outlook”, “may”, “might”, “will”, “expect”, “anticipate”, “estimate”, “intend”, “plan”, “indicate”, “seek”, “believe”, “predict” or “likely”, or the negative of these terms, or other similar expressions intended to identify forward‑looking statements. The Company has based these forward‑looking statements on its current expectations and projections about future events and financial trends that it believes might affect its financial condition, results of operations, business strategy and financial needs. These forward‑looking statements include, among other things, statements relating to the Company’s expectations regarding its revenue, expenses and operations, key performance indicators, provision for loan losses (net of recoveries), anticipated cash needs and its need for additional financing, completion of announced transactions, funding costs, ability to extend or refinance any outstanding amounts under the Company’s credit facilities, ability to protect, maintain and enforce its intellectual property, plans for and timing of expansion of its product and services, future growth plans, ability to attract new members and develop and maintain existing customers, ability to attract and retain personnel, expectations with respect to advancement of its product offering, competitive position and the regulatory environment in which the Company operates, anticipated trends and challenges in the Company’s business and the markets in which it operates, third‑party claims of infringement or violation of, or other conflicts with, intellectual property rights, the resolution of any legal matters, and the acceptance by the Company’s consumers and the marketplace of new technologies and solutions.

Forward-looking statements, including our financial outlook, are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate and are subject to risks and uncertainties. Although we believe that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and we cannot assure that actual results will be consistent with these forward-looking statements. Our financial outlook is intended to provide further insight into our expectations for results in 2021 and may not be appropriate for other purposes. This outlook involves numerous assumptions, particularly around member growth & take up of products and services, and we believe it is prepared on a reasonable basis reflecting management’s best estimates and judgements. However, given the inherent risks, uncertainties and assumptions, any investors or other users of this document should not place undue reliance on these forward-looking statements.

Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors that are discussed in greater detail in the “Risk Factors” section of the Company’s current annual information form available at www.sedar.com and at www.sec.gov, which risk factors are incorporated herein by reference.

The forward-looking statements made in this MD&A relate only to events or information as of the date of this MD&A and are expressly qualified in their entirety by this cautionary statement. Except as required by law, we do not assume any obligation to update or revise any of these forward-looking statements to reflect events or circumstances after the date of this MD&A, including the occurrence of unanticipated events. An investor should read this MD&A with the understanding that our actual future results may be materially different from what we expect.

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Management’s Discussion and Analysis

Company Overview

Mogo Inc. a financial technology and digital payments company, is empowering its more than one million members with simple digital solutions to help them get in control of their financial health. Through the Mogo app, consumers can access a digital spending account with Mogo Visa* Platinum Prepaid Card featuring automatic carbon offsetting, easily buy and sell bitcoin, and get free monthly credit score monitoring, ID fraud protection, and personal loans. Mogo’s wholly-owned subsidiary, Carta Worldwide, also offers a digital payments platform that powers the next-generation card programs from innovative fintech companies in Europe, North America and APAC. To learn more, please visit mogo.ca or download the mobile app (iOS or Android).

In addition to the products described above, the following key corporate changes, transactions and material contracts are referred to, and assist in understanding this MD&A:

Business Developments

• In March 2021, we announced a binding letter of intent to acquire 100% of Moka Finance Technologies Inc. (“Moka”), one of Canada’s leading saving and investing apps, for 5.0 million Mogo common shares in an all-stock transaction. The proposed acquisition will increase Mogo’s member base to more than 1.7 million with the addition of Moka’s over 500,000 members and will bring differentiated saving and investing products to broaden Mogo’s wealth offering (“MogoWealth”). Following the completion of the Moka acquisition, we expect to further expand the MogoWealth product offering in 2021, including options for free stock trading. The two companies expect to complete a definitive agreement and close the transaction in Q2 2021 (the “Transaction”). Moka’s senior management, board members and key external shareholders representing in the aggregate more than two-thirds of Moka’s outstanding securities have entered into voting and support agreements agreeing to vote in favor of the Transaction.

• In February 2021, we announced a strategic investment in Coinsquare Ltd. (“Coinsquare”), Canada’s premier cryptocurrency trading platform. On closing, Mogo will acquire 19.99% ownership of Coinsquare’s outstanding common shares on a post-transaction basis for total consideration of approximately $27.4 million in cash and 2.8 million Mogo common shares. As part of the transaction, Mogo also has a 12-month call option to acquire from existing shareholders an additional 10% of the outstanding common shares of Coinsquare, along with an 18-month warrant which would increase its total ownership interest to over 40% in the event that both the option and warrant are fully exercised.  Separately, certain Coinsquare shareholders’ have a put right for 10% of the outstanding shares that may be exercised under certain conditions within 6 to 13 months of the closing date of the initial investment. The put right will be void if Mogo exercises the call option and vice versa.

• On January 25, 2021 we closed the acquisition of Carta Solutions Holding Corporation ("Carta"), a leader in digital payment solutions. The acquisition adds a business to business payments platform to the Company and is expected to significantly expand Mogo’s total addressable market by entering the global payments market. Carta’s issuing platform provides processing technology to industry leaders in Europe, Asia, and Canada, and recently announced with recent expansion into the United States and Japan. The Carta acquisition is expected to increase Mogo’s revenue scale and accelerate growth of its high-margin subscription and transaction-based revenue, while strengthening the Company’s digital wallet capabilities, including the development of its peer-to-peer payment solution.

• In November 2020, we announced the launch of our bitcoin rewards program. Active members receive bitcoin rewards based on account activation, funding, and improving their credit score. In January 2021, we announced the extension of our bitcoin cashback reward program to the MogoCard. The program is available exclusively to members who refer a friend to Mogo, and participating members earn bitcoin cashback rewards for every purchase made on their MogoCard.

• In July 2020, we announced a new automatic carbon offsetting feature with the MogoCard, designed to help Canadians improve their financial health and the health of the planet through better spending control, and automatic carbon offsetting. By separating spending into a separate account, and avoiding credit, consumers are able to limit

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Management’s Discussion and Analysis

themselves to a specific budget. MogoCard is the only card in Canada that helps fight climate change by automatically offsetting carbon as you spend.

• In November 2020, we announced that MogoCard now supports Apple Pay®, Google Pay™ and Samsung Pay. This provides MogoCard users with even more options for cashless, contactless payment using their smartphone or other devices, while continuing to get all the benefits and security of MogoCard.

• In August 2020, we announced that we have established a new referral agreement with EQ Bank, the digital banking platform offered by Equitable Bank, through which Mogo will offer access to EQ Bank’s Savings Plus Account to Mogo members through the Mogo app.

• In August 2020, we announced that we have established a new referral agreement with Lendful Financial Inc. (“Lendful”), through which Mogo will offer its members access to Lendful’s prime loan products through the Mogo app.

• In February 2020, we signed a three-year lending partnership (the “goeasy Arrangement”) with goeasy Ltd. (“goeasy”), one of Canada’s largest and most experienced non-prime consumer lenders, enabling Mogo to monetize its lending platform and drive new recurring fee-based revenue, with no capital investment or credit risk from these loans.

Financial Highlights

• Between December 2020 and February 2021, we raised a total of approximately $81.6 million, net of agent commissions through the issuance of common shares and warrants. On February 24, 2021, we issued to certain individual investors 5.3 million common shares at a purchase price of US$10.10 per share, along with warrants to purchase up to 2.7 million common shares. The aggregate proceeds to the Company were approximately $63.3 million (US$49.7 million), net of agent commissions. Between December 31, 2020 and February 21, 2021, we sold 1.5 million common shares on the NASDAQ for cash proceeds of approximately $18.3 million (US$14.4 million), net of agent commissions, under an at-the-market equity program. The program was terminated on February 21, 2021.

• In December 2020, we announced plans to make an initial corporate investment of up to $1.5 million in bitcoin, representing approximately 1.5% of Mogo’s total assets as of the end of 2020. To date we have acquired approximately 18 bitcoins at an average purchase price of $42,079 (US$33,083) per bitcoin. This initial financial investment builds on Mogo’s significant product development related investments in bitcoin over the last several years, including MogoCrypto & the bitcoin rewards program.

• In December 2020, we announced the early conversion of our convertible debentures with an aggregate principal amount outstanding of $8.7 million as at December 31, 2020. The early conversion was completed on January 11, 2021 and has resulted in a strengthened balance sheet and reduced interest expense going forward.

• In September 2020, the Company and its non-convertible debenture holders approved certain amendments to the terms of the debentures, effective July 1, 2020. The amendments include a reduction in the average coupon interest rate, from approximately 14% to approximately 7%, the extension of the maturity date for 50% of the principal balance to January 31, 2023, and the remainder to January 31, 2024, and the choice to settle principal and interest payments at the Company’s option either in cash or the Company’s shares. In connection with the amendment, the Company issued approximately 4.5 million common share purchase warrants to the debenture holders subsequent to the end of the quarter.

• In Q2 2020, we reduced our cash operating expenses⁽¹⁾ by $5.4 million relative to Q4 2019, a decrease of over 50%, in connection with our cost saving initiatives announced in March 2020 (the "COVID-19 Response Plan"). During Q1 and Q2 2020 we reduced our total workforce by approximately 40% relative to the end of Q4 2019. Based on its business needs, Mogo subsequently facilitated a return to work for some of its employees that had been placed on temporary layoff.

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Management’s Discussion and Analysis

• In February 2020, we sold the majority of our “MogoLiquid” loan portfolio to goeasy for gross consideration of $31.6 million (the “Liquid Sale”). In conjunction with the Liquid Sale, we repaid and extinguished the Credit Facility – Liquid, which had an outstanding balance of $29.3 million as at December 31, 2019.

• In December 2019, we renegotiated our Credit Facility – Other, decreasing the interest rate by up to 400 basis points effective July 2, 2020, and extending the maturity to July 2, 2022 (the “Credit Facility Renewal”).

• In January 2020, we extended the term of our strategic marketing collaboration agreement with Canada’s premier news media company, Postmedia Network Inc. (“Postmedia”), for an additional two years to the end of 2022, while decreasing our quarterly payments from $0.5M to $0.3M (the “Postmedia Extension”). We also issued additional 3.5-year warrants to acquire 350,000 common shares of Mogo at an exercise price of $3.54, which along with existing outstanding warrants held by Postmedia, were amended to an exercise price of $1.29 in June 2020 in exchange for Postmedia waiving certain amounts payable by Mogo through December 31, 2020.

• In June 2019, Mogo Finance and the Company, formerly named Difference Capital Financial Inc. (“Difference”), completed a plan of arrangement (the “Business Combination”) which included the acquisition of cash and an investment portfolio which, before transaction related expenses, had a total fair value of $30.3 million as of the date of business combination. Details of this business combination are disclosed in Note 21 of the Company’s annual financial statements for the year ended December 31, 2020.

Mission

Mogo’s mission is to make it easy and engaging for consumers to get financially fit and live a more sustainable lifestyle.

Financial Outlook

Based on the strong underlying profitability of our model along with the substantial growth opportunities we see across our core businesses, we expect to continue increasing our growth investments to drive accelerating member and revenue growth in 2021. Specifically we expect:

- Continued increase in net Mogo member additions in 2021;

- Accelerated growth in subscription and services revenue in 2021; and

- Year-over-year growth of 80% to 100% in subscription and services revenue in Q4 2021 as compared to Q4 2020.

Q4 2020 Update on COVID-19 Impact

Daily Operations and Safety

The rapid worldwide spread of COVID-19 has prompted governments to implement restrictive measures to curb the spread of the pandemic. During this period of uncertainty, our priority is to protect the health and safety of our employees, support and enforce government actions to slow the spread of COVID-19, and to continually assess and take appropriate actions to mitigate the risks to our business operations as a result of this pandemic.

In the first half of 2020, we implemented a COVID-19 Response Plan that included a number of measures to safeguard against the spread of the virus at our offices and maintain regular communications with suppliers, customers and business partners to monitor any potential risks to our ongoing operations.  Operationally, Mogo has shifted its employees to work remotely. Given the digital nature of our business, the customer experience has been wholly unchanged.

Cash Flow and Operating Expenses

In March 2020, in light of the uncertain economic environment, Mogo undertook a thorough review of all its expenses and implemented a plan to significantly reduce those expenses. Operating expense reduction initiatives resulted in a $5.4 million reduction in Q2 2020 cash operating expenses⁽¹⁾ relative to Q4 2019, and this reduced cost base continued in Q3 2020 with a focus on deferring growth investments in technology and development, and marketing. In Q4 2020 we returned to growth investments in platform and product development, and marketing which resulted in an increase of our operating expenses compared to Q3 2020.

(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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Management’s Discussion and Analysis

As we continue to focus on growing our member base and revenues, we expect a continued increase in operating expenses in the first of quarter of 2021. Given the ongoing, changing and uncertain situation regarding COVID-19, Mogo continues to monitor, evaluate, and adapt to developments as they unfold.

Summary of Reductions to Operating Expenses and Improvements to Cash Flow

The following table provides a reconciliation of cash operating expenses, a non-IFRS measure, to operating expenses, the nearest IFRS measure:

($000s,)
	Three months ended December 31, 2020			Three months ended September 30, 2020			Three months ended June 30, 2020			Three months ended March 31, 2020			Three months ended December 31, 2019
Operating expenses	$	9,540		$	7,135		$	7,638		$	10,045		$	10,689
Add: Capitalized cost of intangible assets		933			839			882			1,847			2,213
Less:
Depreciation and amortization		(1,614	)		(2,288	)		(2,287	)		(2,225	)		(2,042	)
Stock based compensation		(313	)		(384	)		(460	)		(214	)		(177	)
Non-Cash warrant expense		(108	)		(291	)		(516	)		245			(68	)
Cash operating expenses		8,438			5,011			5,257			9,698			10,615

• In Q1 and Q2 2020, we saw reductions to headcount in some areas of the business, including natural attrition and both temporary and permanent layoffs. We also implemented temporary salary reductions including a 40% reduction for our CEO and President & CFO, 5-20% for most of our other salaried employees and reduced hours for the majority of other hourly based employees. At the beginning of Q3 2020, we were able to return a small number of employees on temporary layoff to their positions and return hourly employees to their full schedules. In Q4 2020, we continued to return employees to various positions and were able to return to regular salary levels for all impacted employees in Q4 2020.

• The amendment of our non-convertible debentures in Q3 2020 significantly reduces our interest obligations, reducing our average coupon interest rate from approximately 14% to 7%, and further providing us with flexibility to settle interest and principal in either Mogo common shares or cash, at our option. Mogo paid $0.6 million cash interest in Q4 2020 in respect of these debentures (Q3 2020 - $nil; Q2 2020 - $nil; Q1 2020 - $1.5 million).

• We worked with vendors to ensure continuity of service at reduced rates, securing significant one-time and ongoing savings of cash operating expenses.

• Cash flow from operations remained positive in Q4 2020 despite a steady resumption of loan offers to new customers. Net loan originations were $5.3 million in Q4 2020, compared to $3.0 million in Q3 2020.

• Cash provided by operating activities was $1.2 million in the three months ended December 31, 2020 compared to $0.0 million in the comparative prior year period, primarily due to lower cash operating expenses. Cash used in investing activities decreased to ($1.2) million from ($2.3) million in the comparative prior year period, due to a net reduction of investment in our digital platform.

($000s,)
	Three months ended December 31, 2020			Three months ended December 31, 2019
Cash provided by operating activities	$	1,182		$	15
Cash used in investing activities		(1,227	)		(2,265	)
Cash used in operating and investing activities		(45	)		(2,250	)

(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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Management’s Discussion and Analysis

Digital Lending and Customer Support

Mogo has been working closely with customers to support them through this changing environment and has launched a Job Loss Action Plan for members, including payment programs for affected loan customers. In addition, measures have been taken to limit additional credit exposure during this uncertain time. Specific actions and results include:

• As of December 31, 2020, less than 0.5% of our customers are still on some form of loan relief, including reduced interest and deferred payments. The number of customers on relief options has reduced significantly in the second half of the year as compared to March and April 2020.

• In Q4 2020, we experienced lower rates of customer default relative to historical levels, which is a continuation of this positive trend established in Q2 2020.

• In March 2020, we temporarily paused new on-balance sheet loan originations, instead focusing on servicing our existing members and loan customers and directed a certain portion of the reduced loan demand to our lending partner. In late Q2 2020 we restarted on-balance sheet loan offers to new customers.

• We continue to take a deliberate and measured approach to restarting new loan originations. Since Q2 2020, we introduced an enhanced employment and income verification framework to help identify higher risk loan applications. In the second half of 2020, we saw a return to moderate loan origination volume to new customers for the first time since March 2020, in addition to loan balance increases to existing customers in good standing, and loans to past customers who had previously paid in full.

• In the second half of 2020, the volume of early loan repayments reverted closer to historical levels compared to the higher rate of early loan repayments from our customers observed in Q2 2020.

Revenue

In Q4 2020, we returned to revenue growth compared to Q3 2020, driven by a $0.3 million increase in subscription and services revenue resulting from increased transaction activity on MogoCard and MogoCrypto, partner lending, and increased uptake on premium account services, offsetting a $0.1 million decline in interest revenue. In previous quarters we experienced a decrease in revenues attributable to measures taken to managing our credit risk and reducing operating spend in response to the COVID-19 pandemic. Specifically, as described above, we had reduced loan originations compared to historical levels in order to limit credit exposure and significantly reduced marketing expenses, which resulted in a corresponding decrease in revenue in Q1 2020 to Q3 2020. Excluding the impact of the Liquid Sale in Q1 2020, our revenues declined by 13.4% in Q2 2020, and 7.4% in Q3 2020. We expect the positive revenue growth trend from Q4 2020 to continue into Q1 2021 as we continue to resume our growth investments.

($000s,)
	2020
	Fourth Quarter			Third Quarter			Second Quarter			First Quarter
Total revenue, previously stated	$	10,002		$	9,774		$	10,559		$	13,910
Less: Mogoliquid loan revenue		—			—			—			(1,724	)
Core revenue		10,002			9,774			10,559			12,186
Quarter over quarter % change		2.3	%		(7.4	)%		(13.4	)%		(1.3	)%

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Management’s Discussion and Analysis

Risk Management and Critical Accounting Estimates

The current outbreak of COVID-19, and any future emergence and spread of similar pathogens, could have a material adverse effect on global and local economic and business conditions which may adversely impact our business and results of operations, and the operations of contractors and service providers. The overall economic impacts of COVID-19 could include an impact on our ability to obtain debt and equity financing or potential future decreases in revenue or the profitability of our ongoing operations.  The extent of the impact that this pandemic may have on the Canadian economy and the Company’s business is currently highly uncertain and difficult to predict. Accordingly, there is a higher level of uncertainty with respect to management’s judgements and estimates at this time, particularly as it relates to the measurement of allowance for loan losses and fair valuation of our investment portfolio. We will continue to revisit our judgements and estimates where appropriate in future reporting periods as economic conditions surrounding the COVID-19 pandemic continue to evolve.

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Management’s Discussion and Analysis

Financial Performance Review

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

Key Performance Indicators

The key performance indicators that we use to manage our business and evaluate our financial results and operating performance consist of: core revenue^{(1) (2)}, adjusted EBITDA⁽¹⁾, adjusted cash net loss⁽¹⁾, and Mogo members. We evaluate our performance by comparing our actual results to prior year results. The tables below provide the summary of key performance indicators and their most comparable IFRS measures, for the applicable reported periods:

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

($000s, except percentages and average revenue per member)
	Years ended December 31						Percentage			Three months ended December 31						Percentage
		2020			2019		Change				2020			2019		Change
IFRS Measures
Revenue	$	44,245		$	59,805			(26	)%	$	10,002		$	15,018			(33	)%
Net loss and comprehensive loss		(13,445	)		(10,825	)		24	%		(2,849	)		(6,188	)		(54	)%
Key Performance Indicators(1)
Core revenue(2)		42,521			47,178			(10	)%		10,002			12,355			(19	)%
Adjusted EBITDA		11,618			7,201			61	%		1,052			2,295			(54	)%
Adjusted cash net loss		(784	)		(18,382	)		(96	)%		(1,583	)		(4,576	)		(65	)%

					As at
	December 31, 2020		December 31, 2019		Percentage Change
Non-IFRS Non-Financial Measures(1)
Mogo Members (000s)		1,126		976		15	%

(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”.

(2) In light of our exit from our bitcoin mining operations and the Liquid Sale, the Company has revised its definition of core revenue to exclude revenue from bitcoin mining and revenue related to Liquid loans. The prior period comparative figures for core revenue have been revised to conform with this new definition. See “Non-IFRS Financial Measures” for a reconciliation of core revenue to amounts reported as such in prior periods.

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Management’s Discussion and Analysis

Revenue

Revenue for the twelve months ended December 31, 2020 was $44.2 million compared to $59.8 million in the same period of 2019, a decrease of $15.6 million or 26%. For the three months ended December 31, 2020, total revenue was $10.0 million compared to $15.0 million in the same period of 2019, a decrease of $5.0 million or 33%.

The revenue decrease results primarily from the Liquid Sale in Q1 2020 and discontinuation of bitcoin mining operations in Q3 2019. In the twelve and three months ended December 31, 2020, our exit from these revenue streams contributed to $12.6 million and $2.7 million of the decline in total revenue respectively, as compared to the same periods last year. In the twelve and three months ended December 31, 2020, a lower average loan book size also contributed to a decrease in interest revenue and other loan related revenue streams, as Mogo purposely levered down its balance sheet in Q2 and Q3 of 2020 to minimize credit risk exposure in light of the COVID-19 pandemic. These decreases were offset by growth in certain subscription and services revenue streams, including partner lending, MogoCrypto, and MogoCard, which we expect to continue into 2021.

Net loss and comprehensive loss

Net loss and comprehensive loss was $13.1 million in the twelve months ended December 31, 2020, compared to $10.8 million in the twelve months ended December 31, 2019. Net loss and comprehensive loss in the comparative period was driven by a one-time $13.1 million gain on the acquisition of Difference. Excluding this one-time gain on acquisition, net loss and comprehensive loss in the comparable prior period was $23.9 million. The variance was driven by cost savings related to our COVID-19 response plan, reduced interest expense, and other one-time gains and losses.

Our COVID-19 response plan achieved a $10.3 million reduction in operating expenses as a result of our cost reduction initiatives, offset by decreased gross profit of $5.5 million due to levering down our balance sheet and the Liquid Sale. Net revaluation losses of $1.9 million in the investment portfolio relate to changes in economic conditions that are largely impacted by COVID-19. Interest expenses decreased by $6.7 million, due to the full repayment of the Credit Facility – Liquid in Q1 2020, and a negotiated reduction in interest rate on our Credit Facility – Other from 14.5% to 10.5% effective July 2, 2020. Additionally, we recorded $3.2 million other income related to the Canada Emergency Wage Subsidy (“CEWS”) in 2020, a $0.9 million one-time cost on the Liquid Sale in Q1 2020, and a $1.0 million one-time cost on the early conversion of convertible debentures.

Net loss and comprehensive loss was $2.8 million in the three months ended December 31, 2020, compared to $6.2 million in the three months ended December 31, 2019. The improvement of $3.4 million in the current quarter is primarily driven by a $1.1 million reduction in operating expenses as a result of our previously announced cost reduction initiatives, a $3.0 million decrease in interest expense, 0.5 million related to CEWS partially offset by $1.0 million one-time cost on the early conversion of convertible debentures for the reasons described above, and $1.5 million lower gross profit due to a loan portfolio base in the current period relative to 2019.

Core revenue^{(1) (2)}

In the twelve months ended December 31, 2020, core revenue was $42.5 million compared to $47.2 million in the comparative period last year, a decreased of $4.7 million or 10%. This decrease was driven by a lower average loan book size and thus lower loan related revenues, as Mogo intentionally levered down its balance sheet during Q2 and Q3 2020 to mitigate against credit risk during the COVID-19 pandemic. Management is encouraged with the results to date of our measured approach to managing the loan portfolio, as we experienced lower rates of customer default in 2020 relative to historical levels despite the challenges of COVID-19, and saw an improvement in the aging of the loan portfolio during the year. These decreases in loan related revenue were offset by growth in subscription and services revenue related to partner lending, MogoCrypto and MogoCard which increased compared to the same period last year.

Core revenue was $10.0 million for the three months ended December 31, 2020, representing a 19% decrease compared to $12.4 million in the same period last year. This decrease was driven for the same reasons discussed 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”.

(2) In light of our exit from our bitcoin mining operations and the sale of our MogoLiquid loan portfolio, the Company has revised its definition of core revenue to exclude revenue from bitcoin mining and revenue related to Liquid loans. The prior period comparative figures for core revenue and core.

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Management’s Discussion and Analysis

Adjusted EBITDA⁽¹⁾

In the twelve months ended December 31, 2021, adjusted EBITDA was $11.6 million, a 61% increase compared to $7.2 million in the same period last year. The improvement is driven primarily by a $10.0 million reduction in cash operating expenses, offset by a $5.5 million decrease in gross profit. The reduction in cash operating expenses is primarily attributable to the significant cost reduction initiatives implemented since March 2020. The decrease in gross profit results from lower revenue in the current period, largely offset by lower loan loss provision expense due to continued strong credit performance in the loan book despite the challenges of the COVID-19 pandemic. Although some of our cost reductions are temporary in nature, we expect that certain initiatives will result in permanent savings and efficiencies, which will provide us with an overall lower fixed cost base and improved operating leverage going forward.

Adjusted EBITDA was $1.1 million for the three months ended December 31, 2020, a 54% decrease compared to $2.3 million in the same period last year. The decrease is primarily related to a decrease in loan related revenues from the sale of Liquid and reduction in our loan book size in 2020, for which associated credit facility interest expense savings are not reflected in adjusted EBITDA.

Adjusted cash net loss⁽¹⁾

In the twelve months ended December 31, 2020, adjusted cash net loss was $0.8 million compared to $18.4 million in the same period last year. The $17.6 million improvement in adjusted cash net loss is driven primarily by the $10.0 million reduction in operating expenses. In addition, cash technology and development expenses capitalized to the balance sheet were reduced by $3.9 million compared to the same period last year due to reductions in headcount. Further, there was a $4.5 million reduction in cash debenture interest paid in 2020, as Mogo and its debenture holders approved certain amendments to the terms of the debentures in the quarter. There was also a $4.7 million reduction of cash credit facility interest expense in 2020 compared to the same period last year, resulting from the paydown of the Credit Facility – Liquid in Q1 2020 and a reduction in interest rate on the Credit Facility – Other effective Q3 2020. The improvement in adjusted cash net loss was offset partially by a $5.5 million decrease in gross profit in 2020 compared to the previous year.

Adjusted cash net loss was $1.6 million for the three months ended December 31, 2020, compared to $4.6 million in the three months ended December 31, 2019, with the improvement primarily due to the variances described above.

Mogo members

Our total member base grew to 1,126,000 members as at December 31, 2020, from 976,000 members as at December 31, 2019, representing an increase of approximately 15% or 150,000 net members. Net members increased by 52,000 in Q4 2020 relative to Q3 2020 representing a 51% increase compared to the previous quarter. The continuous increase in our member base, despite temporarily reducing marketing spend for the majority of the year, reflects increased brand awareness through our marketing collaboration agreement with Postmedia and the continuing adoption of the Company’s new and existing products, including MogoCrypto and MogoCard.

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

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Management’s Discussion and Analysis

Results of Operations

The following table sets forth a summary of our results of operations for the twelve and three months ended December 31, 2020 and 2019:

($000s, except per share amounts)
	Years ended December 31						Three months ended December 31
		2020			2019			2020			2019
Total revenue	$	44,245		$	59,805		$	10,002		$	15,018
Cost of revenue		8,748			18,787			1,589			5,121
Gross profit		35,497			41,018			8,413			9,897
Technology and development		12,989			14,989			2,713			2,658
Marketing		4,831			9,412			2,189			2,984
Customer service and operations		6,185			8,787			1,856			2,432
General and administration		10,353			11,484			2,782			2,615
Total operating expenses		34,358			44,672			9,540			10,689
Income (loss) from operations		1,139			(3,654	)		(1,127	)		(792	)
Credit facility interest expense		6,194			11,316			1,009			3,022
Debenture and other financing expense		6,170			7,710			1,183			2,157
Accretion related to debentures and convertible debentures		963			761			402			200
Gain on acquisition, net of transaction costs		0			(13,141	)		—			—
Revaluation (gains) and losses		2,426			(18	)		(1,642	)		(219	)
Other non-operating (income) expenses		(1,169	)		543			770			236
Net loss and comprehensive loss		(13,445	)		(10,825	)		(2,849	)		(6,188	)
Adjusted EBITDA(1)		11,618			7,201			1,052			2,295
Adjusted cash net loss		(784	)		(18,382	)		(1,583	)		(4,576	)
Net loss per share (Basic and fully diluted)		(0.47	)		(0.42	)		(0.09	)		(0.24	)

(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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Management’s Discussion and Analysis

Key Income Statement Components

Total revenue

The following table summarizes total revenue for the twelve and three months ended December 31, 2020 and 2019:

($000s, except percentages)
	Years ended December 31				Percentage			Three months ended December 31				Percentage
		2020		2019	Change				2020		2019	Change
Subscription and services revenue	$	19,114	$	25,311		(24	)%	$	4,561	$	6,105		(25	)%
Interest revenue		25,131		34,494		(27	)%		5,441		8,913		(39	)%
Total revenue		44,245		59,805		(26	)%		10,002		15,018		(33	)%

Subscription and services revenue – represents MogoProtect subscriptions, MogoCard revenue, MogoMortgage brokerage commissions, premium account revenue, net loan protection premiums, MogoCrypto revenue, partner lending fees, revenue from our bitcoin mining operations (in comparative period only) and other fees and charges.

Interest revenue - represents interest on our long-term loan products. Our long‑term loans fall into two categories: line of credit accounts and installment loans.

Total revenue for the twelve months ended December 31, 2020 was $44.2 million compared to $59.8 million in the same period of 2019, a decrease of $15.6 million or 26%. For the three months ended December 31, 2020 total revenue was $10.0 million compared to $15.0 million in the same period of 2019, a decrease of $5.0 million or 33%.

The revenue decreases result primarily from the previously announced Liquid Sale in Q1 2020 and discontinuation of bitcoin mining operations in Q3 2019. In the twelve and three months ended December 31, 2020, our exit from these revenue streams contributed to $12.6 million and $2.7 million of the decline in total revenue respectively, as compared to the same periods last year. A lower average loan book size during the reporting periods also contributed to revenue decrease, as Mogo purposely levered down its balance sheet to minimize credit risk exposure in light of the COVID-19 pandemic. The decrease in total revenue was partially offset by higher partner lending and MogoCrypto revenues in the same periods. We are gradually resuming new loan originations in a cautious manner in order to manage our credit risk.

Subscription and services revenue for the twelve months ended December 31, 2020 was $19.1 million compared to $25.3 million in the same period of 2020, a decrease of $6.2 million or 24%. For the three months ended December 31, 2020 subscription and services revenue was $4.6 million compared to $6.6 million in the same period of 2019, a decrease of $2.0 million or 25%. The decrease in subscription and services revenue is primarily due to our strategic exit from bitcoin mining during Q3 2019 and to a loss of subscription and services related revenue associated with the Liquid Sale in February 2020, partially offset by higher partner lending and MogoCrypto revenues in the same periods.

Interest revenue for the twelve months ended December 31, 2020 was $25.1 million compared to $34.5 million in the same period of 2019, a decrease of $9.4 million or 27%. For the three months ended December 31, 2020 interest revenue was $5.4 million compared to $8.9 million in the same period of 2019, a decrease of $3.5 million or 39%. The decrease in interest revenue is primarily attributable to the Liquid Sale during Q1 2020.

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Management’s Discussion and Analysis

Cost of revenue

The following table summarizes the cost of revenue for the twelve and three months ended December 31, 2020 and 2019:

($000s, except percentages)
	Years ended December 31						Percentage			Three months ended December 31						Percentage
		2020			2019		Change				2020			2019		Change
Provision for loan losses, net of recoveries	$	8,334		$	18,162			(54	)%	$	1,441		$	4,951			(71	)%
Transaction costs(1)		414			625			(34	)%		148			170			(13	)%
Cost of revenue		8,748			18,787			(53	)%		1,589			5,121			(69	)%
As a percentage of total revenue		20	%		31	%					16	%		34	%

Cost of revenue consists of provision for loan losses, net of recoveries, and transaction costs. Provision for loan losses, net of recoveries, represents the amounts charged against income during the period to maintain an adequate allowance for loan losses. Our allowance for loan losses represents our estimate of the expected credit losses (“ECL”) inherent in our portfolio and is based on various factors including the composition of the portfolio, delinquency levels, historical and current loan performance, expectations of future performance, and general economic conditions.

Cost of revenue for the twelve months ended December 31, 2020 was $8.7 million compared to $18.8 million in the same period of 2019, a decrease of $10.1 million or 53%. For the three months ended December 31, 2020, cost of revenue was $1.6 million compared to $5.1 million in the same period of 2019, a decrease of $3.5 million or 69%. The decrease in cost of revenue is primarily related to a lower provision for loan losses as Mogo experienced lower than historical average defaults and above average principal repayments despite the economic challenges presented by the COVID-19 pandemic.

We believe we are adequately provisioned to absorb any potential future material shocks to the loan book as a result of any further deterioration in COVID-19 conditions. Please note that IFRS 9 requires the use of forward-looking indicators when measuring ECL, which can result in upfront recognition of expenses prior to any actual occurrence of a default event. As a result of uncertain economic conditions arising from the COVID-19 pandemic, we have applied a probability weighted approach in applying these forward-looking indicators to measure incremental ECL. This approach involved multiple stress scenarios and a range of potential outcomes. Factors considered in determining the range of ECL outcomes include varying degrees of possible length and severity of a recession, the effectiveness of collection strategies implemented to assist customers experiencing financial difficulty, the extent to which government subsidies will continue to be available as the COVID-19 pandemic continues, and the level of loan protection insurance held by customers within our portfolio. We will continue to revisit assumptions under this methodology in upcoming quarters as economic conditions evolve.

Transaction costs are expenses that relate directly to the onboarding and processing of new customers (excluding marketing) and include expenses such as credit scoring fees, loan system transaction fees and certain fees related to the MogoCard and MogoProtect programs. Transaction cost for the twelve months ended December 31, 2020 was $0.4 million compared to $0.6 million in the same period of 2019, a decrease of $0.2 million or 34%. For the three months ended December 31, 2020 transaction cost was $0.1 million compared to $0.2 million in the same period of 2019, a decrease of $0.02 million or 13%. The decrease in transaction costs is primarily due to reductions in loan origination activity during the current periods, as part of our measured approach to managing our loan book to mitigate against credit risk during the COVID-19 pandemic, and discounts received from our suppliers.

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Management’s Discussion and Analysis

Technology and Development Expenses

The following table provides the technology and development expenses for the twelve and three months ended December 31, 2020 and 2019:

($000s, except percentages)
	Years ended December 31						Percentage			Three months ended December 31						Percentage
		2020			2019		Change				2020			2019		Change
Technology and development expenses	$	12,989		$	14,989			(13	)%	$	2,713		$	2,658			2	%
As a percentage of total revenue		29	%		25	%					27	%		18	%

Technology and development expenses consist primarily of personnel and related costs of our product development, business intelligence, and information technology infrastructure employees. Associated expenses include third‑party data acquisition expenses, professional services, expenses related to the development of new products and technologies and maintenance of existing technology assets, depreciation, amortization of capitalized software costs related to our technology platform, and for the comparative period only, hosting costs relating to servers and bitcoin mining equipment.

Technology and development expenses for the twelve months ended December 31, 2020 was $13.0 million compared to $15.0 million in the same period of 2019, a decrease of $2.0 million or 13%. For the three months ended December 31, 2020 and 2019, technology and development expenses were $2.7 million a marginal increase of 2%. Technology and development expenses as a percentage of total revenue increased from 25% to 29% for the twelve months ended December 31, 2020 and increased from 18% to 27% for the three months ended December 31, 2020, compared to the same periods last year.

The decrease for the twelve months ended December 31, 2020 is primarily due to exiting Bitcoin mining in the third quarter of 2019 and reductions in employee headcount as per our COVID-19 Response Plan announced in late March 2020 to reduce cash expenses. The increase for the three months ended December 31, 2020, is primarily due to an increase in amortization related to capitalized projects and increase in personnel cost, as we invest in our platform and product development beginning from the latter part of Q4 2020.

The capitalization of technology and development expenses for the twelve months ended December 31, 2020 was $4.5 million compared to $8.4 million in the same period of 2019, a decrease of $3.9 million or 46%. For the three months ended December 31, 2020, capitalization of technology and development expense was $0.9 million compared to $2.2 million in the same period of 2019, a decrease of $1.3 million or 59%. The variance is primarily related to the decrease in average employee headcount during the year as discussed above.

Marketing Expenses

The following table provides the marketing expenses for the twelve and three months ended December 31, 2020 and 2019:

($000s, except percentages)
	Years ended December 31						Percentage			Three months ended December 31						Percentage
		2020			2019		Change				2020			2019		Change
Marketing expenses	$	4,831		$	9,412			(49	)%	$	2,189		$	2,984			(27	)%
As a percentage of total revenue		11	%		16	%					22	%		20	%

Marketing expenses consist of salaries and personnel‑related costs, direct marketing and advertising costs related to online and offline customer acquisition (paid search advertising, search engine optimization costs, and direct mail), quarterly payments to Postmedia, public relations, promotional event programs and corporate communications.

Marketing expenses for the twelve months ended December 31, 2020 was $4.8 million compared to $9.4 million in the same period of 2019, a decrease of $4.6 million or 49%. For the three months ended December 31, 2020, marketing expenses was $2.2 million compared to $3.0 million in the same period of 2019, an increase of $0.8 million or 27%. Marketing expenses as

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Management’s Discussion and Analysis

a percentage of total revenue decreased from 16% to 11% for the twelve months ended December 31, 2020 and increased from 20% to 22%for the three months ended December 31, 2020, compared to the same periods last year.

The decrease for the twelve months ended December 31, 2020 is primarily due to reduced paid search advertising costs because of a more moderate level of new loan originations. Further, there was a reduction in Postmedia related costs after we entered into an agreement to reduce fixed quarterly cash payments in connection with the extension of the agreement to January 2023, and additionally by our temporary suspension of new loan originations in early Q2 2020, offset by an increase in non-cash warrant expenses. The decrease for the three-month period ended December 31, 2020 was driven by the above factors, offset by increased marketing spend as we invest in growth during the quarter.

Customer Service and Operations Expenses

The following table provides the customer service and operations expenses (“CS&O”) for the twelve and three months ended December 31, 2020 and 2019:

($000s, except percentages)
	Years ended December 31						Percentage			Three months ended December 31						Percentage
		2020			2019		Change				2020			2019		Change
Customer Service and Operations expenses	$	6,185		$	8,787			(30	)%	$	1,856		$	2,432			(24	)%
As a percentage of total revenue		14	%		15	%					19	%		16	%

CS&O expenses consist primarily of salaries and personnel‑related costs for customer support, payment processing and collections employees. Associated expenses include third-party expenses related to credit data sources and collections.

CS&O expenses for the twelve months ended December 31, 2020 was $6.2 million compared to $8.8 million in the same period of 2019, a decrease of $2.6 million or 30%. For the three months ended December 31, 2020, CS&O expenses was $1.9 million compared to $2.4 million in the same period of 2019, a decrease of $0.5 million or 24%. CS&O expenses as a percentage of total revenue decreased from 15% to 14% for the twelve months ended December 31, 2020 and increased from 16% to 19% for the three months ended December 31, 2020, compared to the same periods last year.

The decrease in CS&O expense is primarily due to a decrease in personnel costs and lower credit scoring expenses as a result of our lower level of new loan origination activity in the twelve and three months ended December 31, 2020.

General and Administration Expenses

The following table provides the general and administration expenses (“G&A”) for the twelve and three months ended December 31, 2020 and 2019:

($000s, except percentages)
	Years ended December 31						Percentage			Three months ended December 31						Percentage
		2020			2019		Change				2020			2019		Change
General and administration expenses	$	10,353		$	11,484			(10	)%	$	2,782		$	2,615			6	%
As a percentage of total revenue		23	%		19	%					28	%		17	%

G&A expenses consist primarily of salary and personnel related costs for our executive, finance and accounting, credit analysis, underwriting, legal and compliance, fraud detection and human resources employees. Additional expenses include consulting and professional fees, insurance, legal fees, occupancy costs, travel and other corporate expenses.

G&A expenses for the twelve months ended December 31, 2020 was $10.4 million compared to $11.5 million in the same period of 2019, a decrease of $1.1 million or 10%. For the three months ended December 31, 2020, G&A expenses was $2.8 million compared to $2.6 million in the same period of 2019, an increase of $0.2 million or 6%. G&A expenses as a percentage

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Management’s Discussion and Analysis

of total revenue increased from 19% to 23% for the twelve months ended December 31, 2020 and increased from 17% to 28%for the three months ended December 31, 2020, compared to the same periods last year.

The decrease for the twelve months period ended December 31, 2020 is primarily due to reductions in headcount and temporary reductions in salaries of our employees, along with reductions in discretionary expenditures. The marginal increase for the three-month period ended December 31, 2020 was primarily due to higher personnel cost.

Credit Facility Interest Expense

The following table provides a breakdown of credit facility interest expense for the twelve and three months ended December 31, 2020 and 2019:

($000s, except percentages)
	Years ended December 31						Percentage			Three months ended December 31						Percentage
	2020			2019			Change			2020			2019			Change
Credit facility interest expense – Other		5,285			6,984			(24	)%		1,009			1,831			(45	)%
Credit facility interest expense – Liquid	$	909		$	4,332			(79	)%	$	—		$	1,190			(100	)%
Total credit facility interest expense		6,194			11,316			(45	)%		1,009			3,021			(67	)%
As a percentage of total revenue		14	%		19	%					10	%		20	%

Credit facility interest expense relates to the costs incurred in connection with our Credit Facility – Other, and prior to the Liquid Sale in Q1 2020 our Credit Facility – Liquid which has now been repaid in full. It includes interest expense and the amortization of deferred financing costs.

Credit facility interest expenses for the twelve months ended December 31, 2020 was $6.2 million compared to $11.3 million in the same period of 2019, a decrease of $5.1 million or 45%. For the three months ended December 31, 2020, credit facility interest expense was $1.0 million compared to $3.0 million in the same period of 2019, a decrease of $2.0 million or 67%. Credit facility interest expenses as a percentage of total revenue decreased from 19% to 14% for the twelve months ended December 31, 2020 and decreased from 20% to 10% for the three months ended December 31, 2020, compared to the same periods last year.

Decreases in credit facility interest expense were driven by the extinguishment of the Credit Facility – Liquid during Q1 2020, a reduction in the interest rate on the Credit Facility – Other to 10.5% from 14.5% effective July 2, 2020, and repayments of the Credit Facility - Other resulting in lower related interest payments.

Other Income and Expense

The following table provides a breakdown of other income and expense by type for the twelve and three months ended December 31, 2020 and 2019:

($000s, except percentages)
	Years ended December 31						Percentage			Three months ended December 31						Percentage
	2020			2019			Change			2020			2019			Change
Debenture and other financing expense	$	6,170		$	7,710			(20	)%	$	1,183		$	2,157			(45	)%
Accretion related to debentures and convertible debentures		963			761			27	%		402			200			101	%
Gain on acquisition, net of transaction costs		—			(13,141	)	n/a				—			108			(100	)%
Revaluation (gains) and losses		2,426			(18	)	n/a				(1,642	)		(219	)	n/a
Other non-operating (income) expenses		(1,169	)		543		n/a				770			128		n/a
Total other expense (income)		8,390			(4,145	)	n/a				713			2,374			(70	)%
As a percentage of total revenue		19	%		(7	)%					7	%		16	%

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Management’s Discussion and Analysis

Total other expense (income) for the twelve months ended December 31, 2020 was $8.4 million expense compared to ($4.1) million income in the same period of 2019, an increase of $12.5 million. For the three months ended December 31, 2020, total other expense (income) was $0.7 million expense compared to $2.4 million expense in the same period of 2019, a decrease of $1.7 million or 70%. Total other expense (income) as a percentage of total revenue increased from (7%) to 19% for the twelve months ended December 31, 2020 and decreased from 16% to 7% for the three months ended December 31, 2020, compared to the same periods last year.

Change in total other expense (income) was primarily attributable to the gain on acquisition resulting from the Business Combination with Difference during Q2 2019, offset by unrealized losses on our investment portfolio recognized within revaluation gains and losses, net, in 2020. Additionally, the impact of the gain on Liquid Sale net of credit facility prepayment expenses during Q1 2020 and government grant received related to the CEWS during the year, contributed to the variance.

Debenture and other financing expense consist of interest expense related to our non-convertible and convertible debentures and interest expense related to our lease liabilities resulting from the adoption of IFRS 16. Debenture and other financing expense decreased by 20% and 53% for the twelve and three months ended December 31, 2020, respectively. The decrease is primarily related to the amendments made to the terms of the debentures, effective July 1, 2020 resulting in the reduction in the average coupon interest rate, from approximately 14% to approximately 7%.

Accretion related to debentures and non-convertible debentures increased by 27% and 492% for the twelve and three months ended December 31, 2020, respectively. The increase is due to debenture related accretion after amendment in debenture indenture on September 30, 2020.

Revaluation (gains) and losses, net, for the twelve months ended December 31, 2020 and 2019 are primarily due to $1.9 million of net unrealized losses and $0.1 million gain booked on our investment portfolio, respectively, related to the fair market value adjustment of certain companies within the portfolio. In the twelve months ended December 31, 2020, this was partially offset by a $0.3 million gain on other receivables. The COVID-19 pandemic and related public health restrictions and shutdowns of non-essential businesses have caused severe disruption in the Canadian and global economies and have adversely impacted the valuation of many public companies that are comparable to companies within our investment portfolio. As a result, we have written down the fair value of these companies to reflect the general economic conditions and the impact of COVID-19.

For the twelve months and three months ended December 31, 2020, we accrued ($3.2) million and ($0.5) respectively related to the CEWS in other non-operating (income) expenses, and recognized a ($0.8) million gain on the amendment of our non-convertible debentures. Other non-operating (income) expenses also includes one-time non-cash expense of $0.9 million related to convertible debenture early conversion, net expense of $0.9 million resulting from prepayment expense on the Credit Facility – Liquid offset by the gain on sale of Liquid, and $0.9 million of restructuring and other expenses.

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Management’s Discussion and Analysis

Summary of Annual Results

The following table sets forth a summary of selected financial data derived from our financial statements for each of the three most recently completed financial years:

($000s, except percentages and per share amounts)
	Years Ended December 31,
	2020			2019			2018			% change 2020 vs 2019			% change 2019 vs 2018
Financial Statement Highlights
Total revenue	$	44,245		$	59,805		$	56,550			(26	)%		6	%
Net loss and comprehensive loss		(13,445	)		(10,825	)		(22,022	)		24	%		(51	)%
Net loss per common share		(0.47	)		(0.42	)		(0.97	)		10	%		(56	)%
(Basic and fully diluted)
Total assets		104,468			151,098			132,234			(31	)%		14	%
Total liabilities		99,232			149,346			140,928			(34	)%		6	%
Non-IFRS Financial Measures(1)
Core revenue(1)(2)		42,521			47,178			35,500			(10	)%		33	%
Adjusted EBITDA		11,618			7,201			4,154			61	%		73	%

The increase in the Company’s total revenue from 2018 to 2019 is attributable to a broadening portfolio of products and solutions other than loan products, and a growing loan book coupled with a strategic shift in the Company’s product focus from short term to long term loan products. The decrease in revenue from 2019 to 2020 is primarily related to previously announced Liquid Sale in Q1 2020 and discontinuation of bitcoin mining operations in Q3 2019. A lower average loan book size during 2020 also contributed to the revenue decrease, as Mogo purposely levered down its balance sheet to minimize credit risk exposure in light of the COVID-19 pandemic.

Excluding the impact of one-time gain of $13.1 million on the Business Combination in Q2 2019, the increases in net loss and comprehensive loss are attributable to increases in non-cash provision for loan losses and depreciation and amortization expenses from 2018 to 2019. Improvement in net loss and comprehensive loss during 2020 was driven primarily by cash flow savings on operating expense and interest expense as a result of our cost reduction initiatives, partially offset by lower revenues. Changes in the Company’s total assets and total liabilities during the previous three years are primarily driven by the Liquid Sale, the reduction in fair value of investment portfolio as a result of COVID-19, and the extinguishment of the Credit Facility – Liquid and paydowns on the Credit Facility – Other.

The Company has observed an increase in the Company’s core revenue⁽¹⁾⁽²⁾ from 2018 to 2019, driven primarily by growth in subscription and services revenue. The decrease in core revenue from 2019 to 2020 is primarily due to the Company pausing loan originations during Q2 and Q3 of 2020.

This is the Company’s fifth consecutive year of positive and growing adjusted EBITDA⁽¹⁾, driven by increases in revenue, partially offset by increased discretionary expenditure in technology, development, and marketing, as we made a conscious decision to ramp up investment in new product initiatives, platform development, and brand awareness over the three-year period, apart from last three quarters of 2020, where the Company focused on cost reduction initiatives due to COVID-19.

(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”.

(2) In light of our exit from our bitcoin mining operations and the Liquid Sale, the Company has revised its definition of core revenue to exclude revenue from bitcoin mining and revenue related to MogoLiquid loans. The prior period comparative figures for core revenue have also been revised to conform with the new definition.

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Management’s Discussion and Analysis

Selected Quarterly Information

($000s, except per share amounts)
	2020											2019
	Fourth Quarter			Third Quarter		Second Quarter			First Quarter			Fourth Quarter			Third Quarter			Second Quarter		First Quarter
Income Statement Highlights
Total revenue(3)	$	10,002		$	9,774	$	10,559		$	13,910		$	15,018		$	15,029		$	14,867	$	14,891
Net income (loss) and comprehensive income (loss)		(2,849	)		1,019		(1,550	)		(10,065	)		(6,188	)		(6,033	)		6,401		(5,005	)
Net income (loss) per common share (basic and fully diluted)		(0.09	)		0.04		(0.06	)		0.36			(0.24	)		(0.22	)		0.27		(0.21	)
Non-IFRS Financial Measures(1)
Core revenue(2)(3)		10,002			9,774		10,559			12,186			12,355			12,190			11,287		11,345
Adjusted EBITDA		1,052			4,825		5,197			544			2,295			1,081			1,587		2,238

Key Quarterly Trends

Total revenue increased in Q4 2020 compared to Q3 2020 as we resumed marketing and loan originations. Total revenue growth was driven by continuous growth in our subscription and services revenue and increasing uptake in our broadening portfolio of products and premium account subscription offerings. Year over year total revenues primarily reflect an expected decrease in loan origination volumes and bitcoin mining revenues due to the sale of our liquid loan portfolio in Q1 2020 and discontinuation of bitcoin mining operations in Q3 2019.

In Q4 2020, net income (loss) and comprehensive income (loss) is relatively better than 2019 and first quarter of 2020 as we made significant reduction in our operating cost post COVID-19, whereas increase in net loss during Q4 2020 compared to previous two quarter is primarily due to a conscious decision to ramp up our investment in new product initiatives, platform development, and brand awareness. In Q1 2020 and prior, fluctuations in net income (loss) and comprehensive income (loss) were driven by changes in non-cash related items such as the gain on acquisition in Q2 2019, and the initial Q1 2020 COVID-19 related charges to loan loss provision and unrealized loss on investments.

Core revenue increased consistently quarter over quarter from Q1 2019 to the end of 2019, driven by continuous growth in our subscription and services revenue and increasing uptake in our broadening portfolio of products and premium account subscription offerings, and started to decline from Q1 2020 up until Q3 2020 for the same reasons discussed above.

Adjusted EBITDA generally fluctuated within the same range from Q1 2019 to the end of 2019, and the decline in Q1 2020 was primarily attributable to the initial upfront COVID-19 allowance recorded to loan loss provision expense in that quarter, based on our estimate of future losses that would result from worsening economic conditions associated with COVID-19. During the last two quarters, the improvement in Adjusted EBITDA is driven primarily by a dedicated plan implemented in late March 2020 to significantly reduce operating expenses, and strong loan book performance despite the COVID-19 pandemic, whereas for Q4 2020, adjusted EBITDA returned to pre-pandemic levels for the reasons described 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”.

(2) In light of our exit from our bitcoin mining operations and the sale of our MogoLiquid loan portfolio, the Company has revised its definition of core revenue to exclude revenue from bitcoin mining and revenue related to Liquid loans.

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Management’s Discussion and Analysis

Key Balance Sheet Components

The following table provides a summary of the key balance sheet components as at December 31, 2020 and 2019:

($000s)			As at
	December 31, 2020		December 31, 2019
Cash	$	12,119	$	10,417
Loans receivable, net		47,227		88,655
Investment portfolio		18,445		20,790
Total assets		104,468		151,098
Total liabilities		99,232		149,346

Total assets decreased by $46.3 million during the twelve months ended December 31, 2020, driven primarily by the Liquid Sale and the reduction in fair value of investment portfolio as a result of COVID-19.

Total liabilities decreased by $50.1 million during the twelve months ended December 31, 2020, driven primarily by the extinguishment of the Credit Facility – Liquid and paydowns on the Credit Facility – Other.

Loans receivable

The following table provides a breakdown of loans receivable as at December 31, 2020 and 2019:

($000s)				As at
	December 31, 2020			December 31, 2019
Gross loans receivable	$	56,113		$	104,675
Allowance for loan losses		(8,886	)		(16,020	)
Net loans receivable		47,227			88,655

The gross loans receivable portfolio was $56.1 million as at December 31, 2020, a decrease of $48.6 million or 46% compared to the balance as at December 31, 2019, the decrease being primarily attributable to the Liquid Sale in February 2020 and principal repayments on our line of credit loan products. The Liquid Sale in Q1 2020 resulted in the derecognition of $32.0 million gross loans receivable and $2.1 million of corresponding allowance.

($000s)
	Year ended December 31, 2020			Year ended December 31, 2019
Allowance for loan losses, beginning of year	$	16,020		$	15,409
Derecognition of allowance associated with loan sale		(2,131	)		—
Provision for loan losses		9,451			19,899
Loans charged-off		(14,454	)		(19,288	)
Allowance for loan losses, end of year		8,886			16,020

The allowance for loan losses is reported on the Company’s balance sheet and is netted against gross loans receivable to arrive at the net loans receivable. The allowance for loan losses represents our estimate of the ECL inherent in our loan portfolio. Refer to Note 5 of the consolidated financial statements for a breakdown of gross loans receivable and allowance for loan losses by aging category based on their IFRS 9 ECL measurement stage. The Company assesses its allowance for loan losses at each reporting date. Increases in the provision for loan losses, net of recoveries, are recorded as a cost of revenue in the condensed consolidated statement of operations and comprehensive loss.

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Management’s Discussion and Analysis

The allowance for loan losses was $8.9 million as at December 31, 2020, a decrease of $7.1 million compared to December 31, 2019. During Q1 2020, the Liquid Sale resulted in a $2.1 million derecognition of corresponding allowance, offset by a $1.2 million incremental allowance booked in respect of potential future losses arising from COVID-19 as a result of the requirement under IFRS 9 to account for forward-looking indicators when determining the allowance.

Additionally, the allowance for loan losses decreased during the twelve and three months ended December 31, 2020, due to lower than historical default rates resulting in the release of previously booked allowance. The allowance for loan losses as a percentage of gross loans receivable decreased continuously over the last four quarters from 21.6% in Q1 2020 to 15.8% in Q4 2020, indicating an improved outlook for expected future credit losses relative to the prior quarter. We believe that as at December 31, 2020, the COVID-19 related allowance, is adequate to absorb any material shocks to the loan book as a result of COVID-19 conditions. It should be noted that this upfront COVID-19 related allowance has already been reflected in our provision for loan losses through the end of Q4 2020 in the consolidated statements of operations and comprehensive loss. Refer to the “Cost of revenue” section above for further discussion of the impact of COVID-19 on the provision for loan losses.

The Company reserves and charges off consumer loan amounts to the extent that there is no reasonable expectation of recovery, once the loan or a portion of the loan has been classified as past due for more than 180 consecutive days. Recoveries on loan amounts previously charged off are credited against the provision for loan losses when collected.

In the opinion of management, the Company has provided adequate allowances to absorb expected credit losses inherent in its loan portfolio based on available and relevant information affecting the loan portfolio at each balance sheet date. The Company cannot guarantee that delinquency and loss levels will correspond with the historical levels experienced and there is a risk that delinquency and loss rates could change significantly.  

Transactions with Related Parties

Related party transactions during the twelve and three months ended December 31, 2020 include transactions with debenture holders that incur interest. The related party debentures balance as at December 31, 2020 totaled $0.4 million (December 31, 2019 – $0.3 million). The debentures bear annual coupon interest of 8.0% (December 31, 2019 – 10.0% to 18.0%) with interest expense for twelve and three months ended December 31, 2020 totaling $0.04 million and $0.01 million, respectively (twelve and three months ended December 31, 2019 - $0.3 million and $0.1 million respectively). The related parties involved in such transactions were (i) a member of the family of Gregory Feller, a director and officer of the Company; (ii) David Feller, a director and officer of the Company; and (iii) key management personnel and members of their families. The debentures are ongoing contractual obligations that are used to fund our corporate and operational activities. In relation to the amendment to the terms of debentures on September 30, 2020, 35,831 warrants were issued to related parties with a fair value of $0.03 million.

On June 28, 2019, the Company sold its minority interest in Wekerloo Development Inc., which is majority-owned by one of the Company’s directors, to an arms’ length buyer for proceeds of $2.1 million, equivalent to its initial cost recognized on the balance sheet, resulting in no gain or loss on disposition.

Off‑Balance Sheet Arrangements

We have no off‑balance sheet arrangements that have, or are likely to have, a current or future material effect on our consolidated financial position, financial performance, liquidity, capital expenditures or capital resources.

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Management’s Discussion and Analysis

Liquidity and Capital Resources

To date the Company has funded its lending activities, expenses and losses primarily through the proceeds of its initial public offering which raised $50 million in 2015, subsequent issuance of common shares, convertible debentures, warrants, prior private placements of preferred shares, placements of debentures, credit facilities, and cash from operating activities. The Business Combination with Difference in the second quarter of 2019 also added to the Company’s capital resources and strengthened its financial position with an investment portfolio valued at $18.7 million as at December 31, 2020 which the Company is actively seeking to monetize. In the first quarter of 2020, the Company completed the Liquid Sale: being the sale of a majority of its MogoLiquid loan portfolio for total gross consideration of $31.6 million, using the proceeds to extinguish its Credit Facility - Liquid. In order to support its growth strategy, the Company gives consideration to additional financing options including accessing the capital markets for additional equity or debt, monetization of our investment portfolio, increasing the amount of long-term debentures outstanding or increasing availability under existing or new credit facilities.

We manage our liquidity by continuously monitoring revenues, expenses and cash flow compared to budget.  To maintain adequate liquidity, the long-term business goal of the Company is to diversify its funding sources. The purpose of diversification by source, geographic location and maturity is to mitigate liquidity and funding risk by ensuring that the Company has in place alternative sources of funds that strengthen its capacity to withstand a variety of market conditions and support its long-term growth. Management expects that they will be able to refinance any outstanding amounts owing under the Credit Facilities or our long-term debentures and may consider the issuance of shares in satisfaction of amounts owing under the convertible debentures, in each case as they become due and payable. The debentures are subordinated to the Credit Facility – Other which has the effect of extending the maturity date of the debentures to the later of contractual maturity or the maturity date of Credit Facility – Other, being July 2, 2022.

On December 31, 2019, we amended our Credit Facility – Other. The amendments lowered the effective interest rate as of July 2, 2020 and extended the maturity date of the facility by two years from July 2, 2020 to July 2, 2022. The amendments also increased the available loan capital from $50 million to $60 million, though this was reduced back down to $50 million on a subsequent amendment effective June 29, 2020.

On September 29, 2020, Mogo and its non-convertible debenture holders approved certain amendments to the terms of the debentures, effective July 1, 2020. Among other things, these amendments reduce the interest rate of the debentures, and allow for the settlement of interest and principal in either cash or Mogo common shares, at our option.

On December 31, 2020, the Company established an at-the-market equity program to raise funds for operational expenditures, to maintain the Company’s working capital balances, and for general corporate purposes. The Company sold 1,524,759 common shares on the NASDAQ and received cash proceeds of approximately $18.3 million (US$14.4 million), net of agent commission. The program was terminated on February 21, 2021.

On February 24, 2021, the Company issued to certain individual investors an aggregate of 5,346,536 common shares at a purchase price of US$10.10 per common share and received cash proceeds of approximately $63.3 million (US$49.7 million), net of agent commission. In a concurrent private placement, Mogo completed the issuance to the investors of unregistered warrants to purchase up to an aggregate of 2,673,268 common shares at an exercise price of US$11.00 at any time prior to the date which is three and a half years following the data of issuance. A portion of the net proceeds from the Offering will be used to fund the cash component of the previously announced investment in Coinsquare Ltd., with the remaining net proceeds to be used for general corporate and working capital purposes.

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Management’s Discussion and Analysis

Cash Flow Summary

The following table provides a summary of cash inflows and outflows by activity for the twelve and three months ended December 31, 2020 and 2019:

($000s)
	Years ended December 31						Three months ended December 31
	2020			2019			2020			2019
Cash provided by operating activities before investment in gross loans receivable(1)	$	10,153		$	6,997		$	3,578		$	2,185
Proceeds from sale of loan book	$	31,572			—			—			—
Cash provided by (invested in) loans receivable		2,080			(22,207	)		(2,396	)		(2,170	)
Cash provided by (used in) operating activities		43,805			(15,210	)		1,182			15
Cash used in investing activities		(4,819	)		(9,085	)		(1,227	)		(2,265	)
Cash provided by (used in) financing activities		(37,284	)		14,273			2,309			(978	)
Net increase (decrease) in cash for the period		1,702			(10,022	)		2,264			(3,228	)

Net cash increase (decrease) in the twelve months ended December 31, 2020 was $1.7 million inflow compared to $(10.0) million outflow in 2019. Excluding the one-time $12.3 million financing cash inflows in 2019 related to the acquisition of Difference, there was a $24.0 million reduction in cash use in 2020, primarily due to the Company slowing down loan originations during Q2 2020 and Q3 2020, resulting in less cash invested in loan receivable. The proceeds from the Liquid Sale were used primarily to pay down the Credit Facility - Liquid in February 2020.

Net cash increase (decrease) for the three months ended December 31, 2020 was $2.3 million of inflow, driven by $1.2 million generated from operating activities and $2.3 million cash received from issuance of common shares, off set with an investment of ($1.2) million in investing activities. In contrast, the ($3.2) million outflow in Q3 2019 was driven by ($2.3) million outflow used in investing activities and ($1.0) million cash outflows related to net borrowings on our credit facilities.in the three months ended December 31, 2019.

Cash provided by (used in) operating activities

Our operating activities consist of our subscription and services revenue inflows, our cash operating and interest expense outflows, as well as the funding and servicing of our loan products, including the receipt of principal and interest payments from our loan customers, and payment of associated direct costs and receipt of associated fees.

Cash provided by operating activities before investment in gross loans receivable was $10.2 million in the twelve months ended December 31, 2020, which was an increase from $7.0 million in the same period last year. This improvement was driven primarily by cash flow savings on operating expense and interest expense as a result of our cost reduction initiatives, partially offset by lower revenues.

Cash provided by (invested in) loans receivable was $2.1 million in the twelve months ended December 31, 2020, compared to ($22.2) million in the same period last year. This was the result of management reducing net loan originations relative to the same period last year in light of the COVID-19 pandemic and sale of Liquid loan book in February 2020.

In the twelve months ended December 31, 2020, cash provided by (used in) operating activities was $43.8 million inflow, an increase of $59.0 million compared to ($15.2) million outflow in 2019, due to the reasons above along with $31.6 million of proceeds from the liquid Sale in February 2020.

In the three months ended December 31, 2020, cash provided by (used in) operating activities was $1.2 million inflow, an increase of $1.2 million compared to $0.02 million inflow in 2019, driven primarily by cash flow savings on operating expense and interest expense as a result of our cost reduction initiatives, partially offset by lower revenues.

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Management’s Discussion and Analysis

Cash used in investing activities

Our investing activities consist primarily of capitalization of software development costs, and the purchases of property, equipment and software. Capitalization of software development costs and purchases of property, equipment and software may vary from period to period due to the timing of the expansion of our operations, changes in employee headcount and the development cycles of our internal‑use technology.

For the twelve months ended December 31, 2020, cash used in the purchase of equipment and investment in software was $4.8 million, a decrease of $4.3 million compared to $9.1 million in the same period in 2019. This is primarily due to a reduction in employee headcount in 2020 which has reduced overall cash personnel expenses, including capitalizable personnel costs.

For the three months ended December 31, 2020, cash used in the purchase of equipment and investment in software was $1.2 million, a decrease of $1.0 million compared to $2.3 million in the same period in 2019, for the same reasons as described above.

Cash provided by (used in) financing activities

Historically, our financing activities have consisted primarily of the issuance of our common shares, debentures, convertible debentures, and borrowings and repayments on our credit facilities.

Cash (used in) provided by financing activities in the twelve months ended December 31, 2020 was ($37.3) million, driven by repayments on our long-term credit facilities, including the early paydown of the Credit Facility – Liquid in connection with the Liquid Sale in Q1 2020. Comparatively for the same period last year, cash (used in) provided by financing activities was $14.3 million, driven by cash inflows related to the acquisition of Difference Capital and net advances from debentures.

Cash (used in) provided by financing activities in the three months ended December 31, 2020 was $2.3 million, driven primarily by issue of common shares in lieu of warrants and stock options. In contrast, cash (used in) provided by financing activities in the comparative prior year period was $(1.0) million, driven primarily by ($1.0) million of cash outflows related to net borrowings on our credit facilities.

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Management’s Discussion and Analysis

Contractual Obligations

The following table shows contractual obligations as at December 31, 2020. Management will continue to refinance any outstanding amounts owing under the Credit Facilities or our long-term debentures as they become due and payable.

($000s)	2021		2022		2023		2024		2025		Thereafter
Commitments - operational
Lease payments		1,396		1,308		1,297		1,206		1,240		2,727
Trade payables		3,722		—		—		—		—		—
Accrued wages and other expenses		4,475		—		—		—		—		—
Interest – Credit Facilities		3,953		1,976		—		—		—		—
Interest – Debentures		2,920		2,790		1,753		328		—		—
Purchase obligations		1,052		1,052		—		—		—		—
		17,518		7,126		3,050		1,534		1,240		2,727
Commitments – principal repayments
Credit Facility – Other		—		37,644		—		—		—		—
Debentures		2,054		2,183		19,971		19,234		—		—
		2,054		39,827		19,971		19,234		—		—
Commitments – extinguished subsequent to year end
Convertible debentures (1)		8,751								—		—
		8,751		—		—		—		—		—
Total contractual obligations		28,323		46,953		23,021		20,768		1,240		2,727

(1) Subsequent to year end the Company converted all the outstanding convertible debenture into common shares of the Company, and there are no further interest payments related to convertible debentures.

Disclosure of Outstanding Shares

The authorized capital of Mogo consists of an unlimited number of common shares without par value and an unlimited number of preferred shares, issuable in one or more series. As of March 23, 2021, no preferred shares have been issued and the following common shares, and rights to acquire common shares, were outstanding:

Class of Security	Number outstanding (in 000s) as at March 23, 2021
Common shares	55,587
Stock options	4,932
Restricted share units	79
Common share purchase warrants	5,216

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Management’s Discussion and Analysis

Risk Management

In the normal course of business, the Company is exposed to financial risk that arises from a number of sources. Management’s involvement in operations helps identify risks and variations from expectations. As a part of the overall operation of the Company, Management takes steps to avoid undue concentrations of risk, the Company’s significant risk and related policies are described further in the notes to the Company’s consolidated financial statements for the twelve months ended December 31, 2020.

Other risks

Other risks facing our business, and that could cause actual results to differ materially from current expectations may include, but are not limitedto, risks and uncertainties that are discussed in greater detail in the "Risk Factors" section of our current annual information formfor the twelve months ended December 31, 2020 and elsewhere in this MD&A.

Capital management

Our objective in managing our capital is financial stability and sufficient liquidity to increase shareholder value through organic growth and investment in technology, marketing and product development. Our senior management team is responsible for managing the capital through regular review of financial information to ensure sufficient resources are available to meet operating requirements and investments to support our growth strategy. The Board is responsible for overseeing this process. In order to maintain or adjust our capital structure, we may issue new shares, repurchase shares, approve special dividends and/or issue debt.

Non-IFRS Financial Measures

This MD&A makes reference to certain non-IFRS financial measures. Core revenue⁽¹⁾, adjusted EBITDA, adjusted cash net loss and cash operating expenses are all non-IFRS financial measures. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS.

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

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

(1) In light of our exit from our bitcoin mining operations and the Liquid Sale, the Company has revised its definition of core revenue to exclude revenue from bitcoin mining and revenue related to MogoLiquid loans. The prior period comparative figures for core revenue have also been revised to conform with the new definition.

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Management’s Discussion and Analysis

Core revenue⁽¹⁾⁽²⁾

Core revenue is a non-IFRS financial measure that we calculate as total revenue less revenue from our bitcoin mining operations and revenue related to MogoLiquid loans. Core revenue is a measure used by our management and the Board to understand and evaluate trends within our core business given that we exited our bitcoin mining operations in the third quarter of 2019 and sold our MogoLiquid loan portfolio in the first quarter of 2020. Thus, we consider it important to highlight trends in revenue relating to our primary revenue segments. The following table presents a reconciliation of core revenue to total revenue, the most comparable IFRS financial measure, for each of the periods indicated:

The following table presents a reconciliation of core revenue to total revenue, the most comparable IFRS financial measure, for each of the periods indicated:

($000s)
	Years ended December 31						Three months ended December 31
		2020			2019			2020		2019
Total revenue	$	44,245		$	59,805		$	10,002	$	15,018
Less: Mining revenue		—			(1,662	)		—		—
Less: MogoLiquid loan revenue		(1,724	)		(10,965	)		—		(2,663	)
Core revenue		42,521			47,178			10,002		12,355

The Company has adjusted its prior period comparatives to conform with the new definition of core revenue.

($000s,)
	2020									2019
	Fourth Quarter		Third Quarter		Second Quarter		First Quarter			Fourth Quarter			Third Quarter			Second Quarter			First Quarter
Core revenue, previously stated	$	10,002	$	9,774	$	10,559	$	13,910		$	15,018		$	16,585		$	16,378		$	16,351
Presentation recast(1)		—		—		—		—			—			(1,557	)		(1,511	)		(1,460	)
Less: Mining revenue		—		—		—		—			—			—			(814	)		(848	)
Less: MogoLiquid loan revenue		—		—		—		(1,724	)		(2,663	)		(2,838	)		(2,766	)		(2,698	)
Core revenue		10,002		9,774		10,559		12,186			12,355			12,190			11,287			11,345

(1) In light of our exit from our bitcoin mining operations and the Liquid Sale, the Company has revised its definition of core revenue to exclude revenue from bitcoin mining and revenue related to MogoLiquid loans. The prior period comparative figures for core revenue have also been revised to conform with the new definition.

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Management’s Discussion and Analysis

Adjusted EBITDA

Adjusted EBITDA is a non-IFRS financial measure that we calculate as net loss and comprehensive loss excluding depreciation and amortization, stock based compensation, non-cash warrant expense, one-time provision for excise tax, credit facility interest expense, debenture and other financing expense and related accretion, gain on acquisition, revaluation (gains) and losses and other non-operating (income) expenses. Adjusted EBITDA is a measure used by management and the Board to understand and evaluate our core operating performance and trends. The following table presents a reconciliation of adjusted EBITDA to net loss and comprehensive loss, the most comparable IFRS financial measure, for each of the periods indicated:

($000s)
	Years ended December 31						Three months ended December 31
		2020			2019			2020			2019
Net loss and comprehensive loss	$	(13,445	)	$	(10,825	)	$	(2,849	)	$	(6,188	)
Depreciation and amortization		8,414			8,049			1,614			2,042
Stock‑based compensation		1,371			1,732			313			176
Non-cash warrant expense		670			274			108			69
One-time provision for excise tax		24			800			144			800
Credit facility interest expense		6,194			11,316			1,009			3,021
Debenture and other financing expense		6,170			7,710			1,183			2,157
Accretion related to debentures and convertible debentures		963			761			402			200
Gain on acquisition, net of transaction costs		—			(13,141	)		—			108
Revaluation (gains) and losses		2,426			(18	)		(1,642	)		(219	)
Other non-operating (income) expenses		(1,169	)		543			770			129
Adjusted EBITDA		11,618			7,201			1,052			2,295

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Management’s Discussion and Analysis

Adjusted net loss and adjusted cash net loss

Adjusted net loss is a non-IFRS financial measure that we calculate as net loss and comprehensive loss excluding stock-based compensation, revaluation (gains) and losses, net, and other non-operating expenses. This measure differs from adjusted EBITDA in that adjusted net loss includes depreciation and amortization, credit facility interest expense and debenture and other financing expense, and thus comprises more elements of the Company’s overall net profit or loss. Adjusted net loss is a measure used by management and the Board to evaluate the Company’s overall financial performance.

Adjusted cash net loss is a non-IFRS financial measure that excludes from adjusted net loss depreciation and amortization, deferred financing costs and non-cash interest expense, which are expenses recognized in the period that do not impact cash flow in that period, as well as other non-operating (income) and expenses. It also deducts capitalized intangible assets which are cash outflows in the period that get capitalized to the statement of financial position, rather than expensed through the statement of operations and comprehensive loss.  Adjusted cash net loss is a measure used by our management and Board to evaluate core cash flow trends within the business. We believe that the adjustment out of net loss of certain non-cash related items, and inclusion of recurring capitalized cash costs, provides a useful gauge of underlying net cash flow in the business, excluding impacts of timing differences from changes in working capital.

The following table presents a reconciliation of adjusted net loss and adjusted cash net loss to net loss and comprehensive loss, the most comparable IFRS financial measure, for each of the periods indicated:

($000s)
	Years ended December 31						Three months ended December 31
		2020			2019			2020			2019
Net loss and comprehensive loss	$	(13,445	)	$	(10,825	)	$	(2,849	)	$	(6,188	)
Stock‑based compensation		1,371			1,732			313			176
Non-cash warrant expense		670			274			108			69
One-time provision for excise tax		24			800			144			800
Gain on acquisition, net of transaction costs		—			(13,141	)		—			108
Revaluation (gains) and losses		2,426			(18	)		(1,642	)		(219	)
Other non-operating (income) expenses		(1,169	)		543			770			129
Adjusted net loss		(10,123	)		(20,635	)		(3,156	)		(5,125	)
Depreciation and amortization	$	8,414		$	8,049		$	1,614		$	2,042
Deferred financing cost amortization		222			573			—			204
Accretion related to debentures and convertible debentures		963			761			402			200
Convertible debenture non-cash interest		1,219			1,274			292			317
Debenture interest expense added to principal		2,824			—			—			—
Debenture non-cash interest		198			—			198			—
Capitalization cost of intangible assets		(4,501	)		(8,404	)		(933	)		(2,214	)
Adjusted cash net loss		(784	)		(18,382	)		(1,583	)		(4,576	)

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Management’s Discussion and Analysis

Cash operating expenses

Cash operating expenses is a non-IFRS financial measure that we calculate as operating expenses, including the cost of intangible assets capitalized to the balance sheet, and excluding depreciation and amortization, stock-based compensation, and non-cash warrant expenses. Cash operating expenses is a measure used by management and the Board to evaluate the impact of our operating expenses as it relates to cash flow.

The following table presents a reconciliation of cash operating expenses to operating expenses, the most comparable IFRS financial measure, for each of the periods indicated:

($000s,)
	Three months ended December 31, 2020			Three months ended September 30, 2020			Three months ended June 30, 2019			Three months ended March 31, 2020			Three months ended December 31, 2019
Operating expenses	$	9,540		$	7,135		$	7,638		$	10,045		$	10,689
Add: Capitalized cost of intangible assets		933			839			882			1,847			2,213
Less:
Depreciation and amortization		(1,614	)		(2,288	)		(2,287	)		(2,225	)		(2,042	)
Stock based compensation		(313	)		(384	)		(460	)		(214	)		(177	)
Non-Cash warrant expense		(108	)		(291	)		(516	)		245			(68	)
Cash operating expenses		8,438			5,011			5,257			9,698			10,615

Non-Financial Measures

Mogo members

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

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Management’s Discussion and Analysis

Critical Accounting Estimates

The preparation of the consolidated financial statements requires management to make estimates, assumptions and judgments that affect the reported amount of assets and liabilities, and the reported amount of revenues and expenses during the period. Actual results may differ from these estimates. Estimates, assumptions, and judgments are reviewed on an ongoing basis. Revisions to accounting estimates are recognized on a prospective basis beginning from the period in which they are revised.

Significant estimates and judgments include the capitalization of intangible assets, valuation of long-lived assets, allowance for loan losses, fair value of privately held investments, share-based payments, income taxes, and derivative financial liability, which are described further in the notes to the Company’s consolidated financial statements for the twelve months ended December 31, 2020.

Changes in Accounting Policies including Initial Adoption

Recent IFRS standards adopted in 2020

During 2020, the Company has applied Amendments to IFRS 16 - COVID-19 Related Rent Concessions.

The Amendment to IFRS 16 provide the practical expedient allowing the Company not to assess whether eligible rent concessions that are a direct consequence of the COVID-19 pandemic are lease modifications.

Certain other IFRS amendments and interpretations became effective on January 1, 2020, but do not have an impact on the consolidated financial statements of the Company. The Company has not adopted any standards or interpretations that have been issued but are not yet effective.

As at December 31, 2020, management assessed the design and operating effectiveness of the Company’s ICFR, and concluded that such ICFR is appropriately designed and operating effectively, and that there are no material weaknesses in the Company’s ICFR that have been identified by management. There have been no changes in the Company's ICFR during the period that have materially affected, or are likely to materially affect, the Company's ICFR.

Controls and Procedures

The Company’s CEO and CFO are responsible for establishing and maintaining disclosure controls and procedures for the Company. The Company maintains a set of disclosure controls and procedures designed to provide reasonable assurance that information required to be publicly disclosed is recorded, processed, summarized and reported on a timely basis. The CEO and CFO have evaluated the design of the Company’s disclosure controls and procedures at the end of the quarter and based on the evaluation, the CEO and CFO have concluded that the disclosure controls and procedures are effectively designed.

Internal Controls over Financial Reporting

The Company’s internal controls over financial reporting (“ICFR”) are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. The Company’s management is responsible for establishing and maintaining adequate ICFR for the Company. Management, including the CEO and CFO, does not expect that the Company’s ICFR will prevent or detect all errors and all fraud or will be effective under all future conditions. A control system is subject to inherent limitations and even those systems determined to be effective can provide only reasonable, but not absolute, assurance that the control objectives will be met with respect to financial statement preparation and presentation. The Company’s management under the supervision of the CEO and CFO has evaluated the design of the Company’s ICFR based on the Internal Control – Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. As at December 31, 2020, management assessed the design and operating effectiveness of the Company’s ICFR and concluded that such ICFR is appropriately designed and operating effectively, and that there are no material weaknesses in the Company’s ICFR that have been identified by management. There have been no changes in the Company's ICFR during the period that have materially affected, or are likely to materially affect, the Company's ICFR.

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