Mogo Finance Technology Inc.
Headnote
National Policy 11-206 Process for Cease to be a Reporting Issuer Applications -- Following a reverse takeover transaction, all of the issuer's common shares were acquired by another company; the issuer has debt securities outstanding that are held by more than 50 holders resident in Canada; there is no market for the debt securities; the issuer is not required under the terms of the debt instrument to remain a reporting issuer, but the holders of the debt securities are entitled to view financial statements of the issuer through the trustee; the issuer does not intend to do a public offering of its securities to Canadian residents; the acquiror is a reporting issuer and not in default of any securities legislation in any jurisdiction -- Relief granted.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., s. 1(10)(a)(ii).
December 30, 2019
IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR CEASE TO BE A REPORTING ISSUER APPLICATIONS AND IN THE MATTER OF MOGO FINANCE TECHNOLOGY INC. (the Filer)
ORDER
Background
¶ 1 The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for an order under the securities legislation of the Jurisdictions (the Legislation) that:
(a) the order granted to the Filer on August 12, 2019 (Previous Order) is revoked (Revocation Order), and
(b) the Filer has ceased to be a reporting issuer in all jurisdictions of Canada in which it is a reporting issuer (Cease to be Reporting Issuer Relief, and together with the Revocation Order, the Order Sought).
Under the Process for Cease to be a Reporting Issuer Applications (for a dual application):
(a) the British Columbia Securities Commission is the principal regulator for this application,
(b) the Filer has provided notice that subsection 4C.5(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland & Labrador, Northwest Territory, Yukon Territory and Nunavut, and
(c) this order is the order of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Interpretation
¶ 2 Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this order, unless otherwise defined.
Representations
¶ 3 This order is based on the following facts represented by the Filer:
1. the Filer is a corporation existing under the Business Corporations Act (British Columbia) (the BCBCA) with its head office in Vancouver, British Columbia; it is the successor entity of Mogo Finance Technology Inc. (Pre-Transaction Mogo) by amalgamation;
2. Pre-Transaction Mogo was a reporting issuer in each jurisdiction of Canada and its common shares were listed on the Toronto Stock Exchange (TSX);
3. immediately prior to the Arrangement (as defined below), Pre-Transaction Mogo had the following outstanding securities:
(a) 24,101,405 common shares (Mogo Shares);
(b) 3,091,868 options to purchase Mogo Shares (Options);
(c) 179,035 restricted share units that, upon vesting, entitled their holders to acquire Mogo Shares (RSUs);
(d) 1,196,120 warrants to purchase Mogo Shares (Warrants); and
(e) convertible debentures (Convertible Debentures) in the principal amount of $12,686,000;
4. immediately prior to the Arrangement (as defined below), Pre-Transaction Mogo also had non-convertible secured debentures (Non-Convertible Debentures) which are not convertible or exchangeable into any other voting or equity securities in the principal amount of $23,971,887, as follows:
(a) Series A in the principal amount of $8,250,736 with an annual interest rate from 12.0% to 15.0% and maturity dates between July 2, 2020 and August 30, 2022;
(b) Series B in the principal amount of $1,340,000 with an annual interest rate from 12.0% to 14.5% and maturity dates between July 2, 2020 and March 1, 2022;
(c) Series C in the principal amount of $910,000 with an annual interest rate of 13.0% and maturity dates between July 2, 2020 and October 12, 2020;
(d) Series D in the principal amount of $6,278,368 with an annual interest rate of 12.0% and maturity dates between July 2, 2020 and March 31, 2022;
(e) Series E in the principal amount of $150,000 with an annual interest rate of 11.0% and a maturity date of August 1, 2020;
(f) Series F in the principal amount of $76,406 with an annual interest rate of 10.0% and a maturity date of July 2, 2020;
(g) Series BB in the principal amount of $1,470,000 with an annual interest rate from 12.0% to 17.0% and maturity dates between July 2, 2020 and March 1, 2022;
(h) Series CC in the principal amount of $3,076,032 with an annual interest rate from 12.0% to 18.0% and maturity dates between July 2, 2020 and March 1, 2022;
(i) Series EE in the principal amount of $100,000 with an annual interest rate of 15.0% and a maturity date of July 2, 2020;
(j) Series FF in the principal amount of $170,000 with an annual interest rate of 15.0% and a maturity date of July 2, 2020; and
(k) Series 1C in the principal amount of $2,150,345 with an annual interest rate of 14.0% and a maturity date of July 2, 2020;
5. as at December 1, 2019, the Filer has outstanding Non-Convertible Debentures in the principal amount of $24,465,220;
6. Mogo Inc., previously named Difference Capital Financial Inc. (Difference), was a reporting issuer in each of the provinces of Canada prior to the Arrangement (as defined below);
7. on June 21, 2019 (the Effective Date), Pre-Transaction Mogo completed a plan of arrangement (the Arrangement) involving a three-cornered amalgamation among Pre-Transaction Mogo, Difference and a subsidiary of Difference (Difference SubCo) under section 288 of the BCBCA; the Arrangement was a "reverse takeover" within the meaning of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102);
8. the Arrangement was approved by: (a) 99.90% of all votes cast by all of Pre-Transaction Mogo's shareholders and 99.83% of votes cast excluding certain interested shareholders at the annual and special meeting of Pre-Transaction Mogo's shareholders held on June 18, 2019; and (b) a final court order issued by the British Columbia Supreme Court on June 19, 2019;
9. under the Arrangement, Pre-Transaction Mogo and Difference SubCo amalgamated to form one corporate entity which is the Filer;
10. immediately prior to the completion of the Arrangement, Difference changed its name to "Mogo Inc."; as a result of the Arrangement, Difference became a reporting issuer in each of the jurisdictions of Canada and the common shares of Difference (each, a Difference Share) remained listed on the TSX with the news and trading history of Difference substituted for the news and trading history of Pre-Transaction Mogo;
11. under the Arrangement, the holders of Mogo Shares, other than Difference, received one Difference Share in exchange for each Mogo Share held, and Difference received shares of the Filer in exchange for its Mogo Shares; immediately after the Arrangement, Difference held, and continues to hold, all of the common shares of the Filer, and shareholders of Pre-Transaction Mogo held approximately 80% of the Difference Shares;
12. on completion of the Arrangement, Pre-Transaction Mogo's convertible securities became securities exercisable or convertible for Difference Shares as follows:
(a) the Options were exchanged in accordance with the terms of Pre-Transaction Mogo's option plan for options issued by Difference entitling their holders to receive Difference Shares;
(b) the RSUs were exchanged in accordance with the terms of Pre-Transaction Mogo's RSU plan for restricted share units issued by Difference entitling their holders to receive Difference Shares upon vesting;
(c) the Warrants were exchanged in accordance with the terms of the Arrangement for warrants of Difference exercisable for Difference Shares; and
(d) the Convertible Debentures were exchanged for debentures of Difference in accordance with the convertible debenture indenture dated June 6, 2017 between Pre-Transaction Mogo and Computershare Trust Company of Canada and the first supplemental convertible debenture indenture executed by the Filer, Difference and Computershare Trust Company of Canada on June 21, 2019;
13. the Mogo Shares and Convertible Debentures were delisted from the TSX on June 24, 2019;
14. in accordance with section 282(1)(h) of the BCBCA and the amended and restated deed of trust dated October 19, 2012 (the Deed of Trust), the Non-Convertible Debentures became debentures of the Filer as the successor entity of Pre-Transaction Mogo by amalgamation;
15. the Non-Convertible Debentures were sold between 2012 to present into provinces of British Columbia, Alberta and Ontario in reliance on the accredited investor exemption, family and friends exemption, minimum investment exemption and where applicable, private issuer exemption;
16. the Non-Convertible Debentures were never listed on any exchange or traded on any marketplace; no market exists for the Non-Convertible Debentures; the Deed of Trust prohibits the transfer of any Non-Convertible Debenture without approval of the Filer's directors;
17. the Filer is not required to remain a reporting issuer under the Deed of Trust, which was entered into three years prior to Pre-Transaction Mogo becoming a reporting issuer, or to otherwise complete any public reporting, no consents or approvals were required by the Non-Convertible Debenture holders to complete the Arrangement and the treatment of the Non-Convertible Debentures is consistent with the terms of their respective debenture agreements;
18. as a result of the Arrangement, Difference continued the business of the Filer; management of Difference is composed of Pre-Transaction Mogo's management prior to the Arrangement; while Difference still holds components of its own "predecessor" portfolio of investments, that portion of Difference's former business is now passive and immaterial to the new business of Difference, being the business of Pre-Transaction Mogo;
19. in accordance with IFRS 3 Business Combinations, the Arrangement was accounted for as a business combination with the Filer as the accounting acquiror; the financial statements of Difference have and will reflect the continuing financial statements of the Filer; holders of the Non-Convertible Debentures will receive all financial and other continuous disclosure information with respect to the Filer through the financial statement and other continuous disclosure filings of Difference;
20. the Filer is required to provide the trustee under the Deed of Trust with externally prepared annual financial statements within seven days of receipt by the Filer of such annual financial statements and consolidated internal statements of income and cash flows and balance sheet of the Filer and its subsidiaries for the quarter ended within 45 days after the end of each fiscal quarters (the Financial Statements);
21. under the Deed of Trust, the Non-Convertible Debenture holders are entitled to view, through the trustee, the Financial Statements and certain other records that have been provided to the trustee by the Filer under the Deed of Trust, provided that such information is held in confidence;
22. in its management information circular dated May 13, 2019 and news release issued on the Effective Date, Pre-Transaction Mogo (or the Filer, as applicable) disclosed that it intends to make an application to cease to be a reporting issuer following the Arrangement;
23. Difference is not in default of any securities legislation in any jurisdiction;
24. following the Arrangement, based on its records, the Filer had: (a) one holder of its common shares, being Difference; and (b) 92 holders of Non-Convertible Debentures, 79 of whom reside in Canada as follows: 61 in British Columbia; 11 in Alberta, and 7 in Ontario; and 15 of whom reside in jurisdictions outside of Canada; holders of Non-Convertible Debentures resident in Canada hold $18,130,351 of Non-Convertible Debentures;
25. the Filer is not an OTC reporting issuer under Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets;
26. no securities of the Filer, including debt securities, are traded in Canada or another country on a marketplace as defined in National Instrument 21-101 Marketplace Operation or any other facility for bringing together buyers and sellers of securities where trading data is publicly reported;
27. the Filer has no intention to seek public financing by way of offering securities;
28. the Filer is not in default of any securities legislation in any jurisdiction, other than the obligation to file on or before August 14, 2019 and November 14, 2019, its interim financial statements and related management's discussion and analysis for the interim periods ended June 30, 2019 and September 30, 2019 respectively, as required by NI 51-102 and the related certificates as required under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (collectively, the Interim Filings);
29. the Filer is not eligible to use the simplified procedure under National Policy 11-206 Process for Cease to be a Reporting Issuer Applications because its securities, including debt securities, are not beneficially owned, directly or indirectly, by fewer than 15 securityholders in each of the jurisdictions of Canada and fewer than 51 securityholders in total worldwide and the Filer is in default for failure to file the Interim Filings;
30. on July 12, 2019, the Filer submitted an application for an order that the Filer had ceased to be a reporting issuer (the Initial Application); in the Initial Application, the Filer inadvertently represented that the outstanding securities of the Filer, including debt securities, were beneficially owned, directly or indirectly, by fewer than 15 securityholders in each of the jurisdictions of Canada and fewer than 51 securityholders in total worldwide;
31. on August 13, 2019, following receipt of the Previous Order, the Filer advised the principal regulator that it had failed to consider certain holders of the Non-Convertible Debentures at the time of making the Initial Application;
32. the Filer is applying for an order to revoke the Previous Order and an order that it has ceased to be a reporting issuer in all of the jurisdictions of Canada in which it is a reporting issuer; and
33. the Filer, upon the grant of the Order Sought, will no longer be a reporting issuer in any jurisdiction of Canada.
Order
¶ 4 Each of the Decision Makers is satisfied that the order meets the test set out in the Legislation for the Decision Maker to make the order.
The decision of the Decision Makers under the Legislation is that the Order Sought is granted.