2023 Annual Report
3
Mongolia Growth Group Ltd |
The year 2023 was rather bittersweet for everyone
at MGG. On one hand, we finalized the sale of our
Mongolian property assets, a goal that was necessitated
by our subscale size. While foreshadowed for quite some
time, I was still saddened to crystalize this transaction.
Mongolia has been part of my life for over a decade, and
I always believed that we could somehow turn things
around if we simply waited long enough for Mongolia’s
economic fortunes to recover. Unfortunately, this
recovery has never arrived, and it became apparent that
the time had come to extract our remaining capital and
engage it in more lucrative purposes, especially as our
Mongolian operations have mostly operated at a loss for
the past few years.
At the same time, MGG had built a wonderful team that
could accomplish anything, even under almost impossible
circumstances—our most valuable assets, that never
showed up on our balance sheet. Unfortunately, no one
should toil away at a company that is slowly shrinking,
and moving on is also for their own good, though I
will miss them dearly. I will forever remember the
loyalty and resourcefulness of our core team, many of
whom have been with us since 2011. We accomplished
incredible things during our time together, and while
that has not translated into financial rewards for you
as shareholders, I don’t think you realize how much we
really accomplished. I also don’t think you realize how
difficult things frequently were in Mongolia, only to
have one of our employees find a creative way to save
the day. Putting it differently, things could have turned
out much worse for us as shareholders and we’re happy
that we were able to ultimately extract value from our
Mongolian assets.
We segregate our business lines into three categories:
Investment Properties (discontinued), Subscription
Business Products, and Corporate Division (which
includes our investment portfolio).
Given the complicated nature of the accounting for
discontinued operations, I’m going to break with normal
practices and simply summarize that we sold our seven
remaining property assets, including our Mongolian
headquarters for cash consideration of approximately
$10,800,000. Four of these properties were sold via the
sale of subsidiaries outlined in Note 5 of the financial
statements. During the 4th quarter, we completed
the wind-down of our operations, and expect that all
Mongolia-related expenses are reflected in these year-
end financial statements.
Subsequent to the complete disposal of our Mongolian
operations, we have four core assets remaining at MGG;
• Our Subscription Products Business.
• Our office property in Rincon, Puerto Rico.
• Our cash, net marketable securities, and digital assets.
• Canadian Tax assets related to the disposal of our
Mongolian subsidiaries.
I have on many occasions noted that there are tax and
regulatory reasons why we cannot be a publicly traded
business where the primary assets are marketable
securities. Therefore, we MUST purchase over 25%
of an operating business in the very near future.
Unfortunately, we have not been able to identify
any attractive opportunities and have started to lose
confidence that we will be able to identify a sufficiently
attractive opportunity. If we cannot find a suitable
acquisition in the near future, we will likely choose to
liquidate this Company, so as not to burden shareholders
with the costs of a public company.
In the meantime, we hope that future gains from our
existing marketable securities portfolio can utilize our tax
assets, maximizing the after-tax return to shareholders.
Subscription Business Products:
KEDM, our subscription business, which tracks various
Event-Driven strategies, continued to produce income
for our company. During the year, we recognized
$3,213,395 (2022-$3,174,031) of revenue while taking
in $2,792,680 (2022-$3,685,715) of gross subscription
receipts, representing a 24% decline in subscription
receipts when compared to the previous year. As
noted previously, we believe that KEDM has reached a
Harris Kupperman
CEO and Chairman of the Board
Letter to Shareholders
Dear Shareholders,
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| Mongolia Growth Group Ltd
more mature state and that churn will likely remain above
our ability to add new subscribers. We’ve tried a variety of
methods to grow the subscriber base, but a weaker equity
market, with reduced returns for investors, has led many
subscribers to cancel their subscriptions. Meanwhile, we’ve
struggled to replace these subscribers. That said, we believe
that there is a core base of subscribers that will likely continue
to renew their subscriptions as they value the data that we
provide. As KEDM shrinks into this core base, we believe that
overall churn will stabilize at a lower level that is offset by new
subscriber additions and we expect that KEDM will remain a
profitable business for us.
As a reminder, as of January 1st of 2023, my Registered In-
vestment Advisor, Praetorian PR LLC, is now contracting with
MGG to produce KEDM. To learn more about KEDM, go to
www.KEDM.COM.
Corporate Division:
Our public securities portfolio produced a $4,050,104 unre-
alized gain and a $518,828 realized gain during the year. I
would like to caution you strongly that returns, as we have
recently experienced, are highly unlikely to be repeated in fu-
ture quarters. At year-end, our portfolio was concentrated in
investments in oil futures and futures options, energy services
companies, uranium equities, and a Florida landowner. Addi-
tionally, we own a small position in a cryptocurrency named
Monero, that we added moderately to during the first quarter
of 2023. We view these investments as highly liquid, inflation-
protected, alternatives to holding cash, and we intend to
liquidate various investments should we find additional busi-
nesses to launch or acquire stakes in.
Conclusion
In summary, the fiscal year 2023 was bittersweet. While we
remain optimistic about Mongolia’s long-term future, it re-
mains mired in an economic crisis. As a result, we decided to
finally wind down operations and dispose of our remaining
property assets. We waited for over a decade for a recovery
in Mongolia’s economy. One day that recovery will come, but
unfortunately, as shareholders, we will not take part. Gen and
I made many life-long friends in Mongolia and will cherish our
memories of operating in such a remarkable country. We want
to wish all our friends and former employees the best in all of
their endeavors.
Our public equity investments continue to succeed beyond
our wildest ambitions, and we are in the best financial posi-
tion we have been in since we started this adventure. Gen
and I very much want to continue this adventure. We have big
plans and even bigger ambitions for this company, as noted
by our continued and aggressive insider purchases over the
years. Unfortunately, various regulatory and tax authorities
have put a roadblock in our way and despite speaking with
multiple consultants and spending a veritable treasure chest
of money on this problem, we cannot find a way forward. We
haven’t given up hope yet, but are also realists, hence we are
making you aware of the likely return of a substantial portion
of this company’s capital.
During the year, the company repurchased 600,200 shares un-
der its Normal Course Issuer Bid. At year-end, our share count
was 26,980,699, or 24% fewer than during our peak share
count in 2016. To date, the company has repurchased a total
of 9,438,200 shares.
Sincerely,
Harris Kupperman
CEO and Chairman of the Board
5
Mongolia Growth Group Ltd |
MONGOLIA GROWTH GROUP LTD.
Management Discussion & Analysis
December 31, 2023
The management of Mongolia Growth Group Ltd. (“MGG” or “the Corporation”) presents the Corporation’s management
discussion and analysis for the year ended December 31, 2023 (the “MD&A”), compared with the year ended December 31,
2022. As of January 1, 2011, the Corporation adopted International Financial Reporting Standards (“IFRS”). This MD&A provides
an overall discussion, followed by analyses of the performance of the Corporation’s major reportable segments. The reporting
and presentation currency in the consolidated financial statements and in this discussion and analysis is the Canadian dollar,
unless otherwise noted.
This MD&A is dated April 25, 2024, and incorporates all relevant information and considerations to that date.
The following discussion and analysis should be read in conjunction with the audited consolidated financial statements of the
Corporation for the year ended December 31, 2023, and December 31, 2022, together with all of the notes, risk factors, and
information contained therein, available on SEDAR at www.sedar.com.
Forward Looking Statements
This MD&A contains forward-looking statements relating to future events. In some cases, forward-looking statements can be
identified by words such as “anticipate”, “continue”, “estimate”, “expect”, “forecast”, “may”, “will”, “project”, “should”, “believe”,
or similar expressions. These statements represent management’s best projections but undue reliance should not be placed
upon them as they are derived from numerous assumptions. These assumptions are subject to known and unknown risks
and uncertainties, including the “Risks and Uncertainties” as discussed herein. Actual performance and financial results will
differ from any projections of future performance or results expressed or implied by such forward looking statements and the
difference may be material.
Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted.
From time to time, the Corporation’s management may make estimates and have opinions that form the basis for the forward-
looking statements. The Corporation assumes no obligation to update such statements if circumstances, management’s estimates,
or opinions change.
Forward looking statements are included within the Outlook, and Executive Strategy sections of this MD&A.
.
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| Mongolia Growth Group Ltd
Section 1 – Overview
Financial and Operational Overview
The fourth quarter saw a small decline in subscription revenue. Additionally, the Corporation recognized realized and unrealized
gains from its investment portfolio.
The Corporation has three core focuses of operation: Investment Properties (discontinued), Subscription Products, and Corporate.
For several years now, Management has been of the opinion that its Mongolian property operations were not at a sufficient scale
to be cash flow positive. As such, the Corporation has made the difficult decision to dispose of its Mongolian operations, now
classified as discontinued operations. The Company has been looking at various investment opportunities outside of Mongolia,
in order to diversify its business and has adopted a Merchant Bank model. Since 2017, the Corporation has spent substantial
time evaluating a number of businesses for acquisition but has not decided to move forward on any acquisition. However, the
Corporation has incubated and launched a Subscription Products business, which began to produce revenue during the third
quarter of 2021.
During the year ended December 31, 2023, the Company directly sold three properties for net proceeds of $471,131, resulting
in a net loss of $452,035 and sold four properties with a value of $9,095,765 via the sale of subsidiaries (note 5). During the year
ended December 31, 2022, the Company sold five properties for net proceeds of $919,621 resulting in a net loss of $146,544.
Losses related to the sale of investment properties have been included in loss from discontinued operations (note 5 of the 2023
year-end financial statements) for the years presented.
During the year, the Corporation recognized revenue of $3,213,395 (2022- $3,174,031) from its subscription data products business
named KEDM. The Corporation continues to see significant subscriber churn and an overall slowdown in new subscriptions to
KEDM as a result of equity market weakness and reduced research budgets amongst investors. The corporation believes that this
rate of churn may continue if equity markets remain difficult for investors.
While the Corporation seeks out a business to build or acquire, the Corporation has invested its excess capital in publicly traded
securities. During the year, the Corporation’s investment portfolio experienced $518,828 of realized gains and $4,050,104 of
unrealized gains. As of the end of December, the Corporation has in excess of $50.6 million of cash and net marketable securities
with negligible debt (when excluding margin borrowings). The Corporation sees its public securities holdings as a source of
capital to fund a future acquisition along with the working capital needs of the business. The Corporation may also be forced to
take on additional borrowings or issue equity to finance a future acquisition.
Mongolian Property Business
During the boom years at the beginning of the last decade, Management and employees had worked hard to build up the
infrastructure needed to manage MGG’s institutional property platform. This platform was unique in Mongolia and was one
of the only platforms capable of managing assets through the full cycle of ownership from acquisition through disposition and
included dedicated departments that managed maintenance, leasing, marketing, and tenant management.
During 2023, the Corporation continued to have occupancy levels that were in excess of market conditions, and it credits its
leasing and property management teams with this success. Unfortunately, as the Mongolian property business was never able
to reach scale, the Corporation made the difficult decision to dispose of the business.
Subscription Products
The Corporation has built a financial data product known as KEDM, which helps investors monitor various Event-Driven
opportunities. The Corporation initiated a paywall on July 1, 2021, in order to monetize this service. During the year, the
Corporation recognized $3,213,395 of subscription revenue. At the end of the year, the Corporation has $1,126,439 of unearned
revenue (2022 - $1,547,154) related to subscription fees that have been collected and not earned. As of December 31, 2023, the
Corporation had received $8,458,277 of total billings before fees since the initiation of the paywall.
The Corporation intends to invest to improve the scope and quality of the data. Should KEDM continue to perform acceptably,
the Corporation may look to launch or acquire additional subscription products. Furthermore, the Corporation is reviewing
additional services that it can add to the core KEDM platform in order to increase revenues. For more information on KEDM, go
to http://www.KEDM.COM.
Investments
The Corporation has invested a portion of its excess capital in marketable securities. As of December 31, 2023, the Corporation
held positions in multiple different publicly traded companies with the values of marketable securities owned of $46,439,938,
securities sold short of $5,724, and $5,536,537 due to broker.
During the year, the Corporation recognized realized gains of $518,828 (2022- gain of $8,792,881) from sales of public securities
and experienced unrealized gains of $4,050,104 (2022 –gain of $1,031,997).
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Mongolia Growth Group Ltd |
At the end of the year, the portfolio’s holdings with a weighting in excess of 5% of the brokerage account’s equity were:
The Corporation’s public securities as of December 31, 2023, are broken out in the following sectors:
The Corporation believes that public securities are a liquid alternative to holding cash while seeking out additional businesses to
launch or acquire. The Corporation intends to sell its holdings to fund such future businesses. Management of the Corporation
would like to strongly caution investors that there are tax and regulatory reasons that this portfolio should not be thought of as
the future of the Corporation. Between July 2021 and March 31, 2023, the Corporation traded several securities in addition to
holding several core positions. As a result, during this time, securities gains were treated as income and not capital gains under
Canadian tax statutes. As of April 1, 2023, the Corporation has no longer been purchasing and selling securities outside of its core
portfolio and intends to treat future gains as capital gains for tax purposes. The Corporation cautions investors that the public
securities portfolio is likely to be more volatile than the overall market or a money market account. Additionally, investing in
public securities entails substantial risks, far beyond the risks of investing excess cash into a bank account. The Corporation does
not expect the recent returns to be repeatable, sustainable, or indicative of future returns from the public securities portfolio.
During the first quarter of 2022, the Corporation purchased various Russian securities. As at March 31, 2022, the Company
marked all of these securities to zero as sanctions prohibit the sale of Russian securities and the Company may never recover any
value from these securities. The Corporation continues to hold these securities but has valued them at zero.
As of December 31, 2023, the public securities portfolio had a net equity value of approximately $47,000,000 when compared to
a net equity value of approximately $36,700,000 at December 31, 2022. During the year, the Corporation transferred $11,178,622
from the sale of its Mongolian portfolio to its public securities portfolio and withdrew $900,000 from the portfolio to fund
working capital needs and the Corporation’s NCIB. As of March 31, 2024, the public securities portfolio had a net equity value of
approximately $48,600,000 after withdrawing $500,000 to fund its NCIB.
Due from and due to brokers
The Company has margin facilities with its prime brokers. As at December 31, 2023, and 2022, the Company’s amounts due
to brokers have no specific repayment terms, and they are governed by the margin terms set forth in the prime brokerage
agreements. As at December 31, 2023, the Company had net margin borrowings of $5,536,573 (2022 – $7,329,685). The fair
value of the collateral-listed equity securities is calculated daily and compared to the Company’s margin limits. The prime brokers
can at any time demand full or partial repayment of the margin balances and any interest thereon or demand the delivery of
additional assets as collateral.
Top Holdings (Long and Short)
Holdings
Shares
%
Sprott Uranium Trust (U-U – Canada)
416,940
25.1%
Valaris PLC (VAL – USA)
76,230
14.7%
Yellowcake PLC
545,650
12.1%
St Joe Company (JOE – USA)
70,906
12.0%
A-Mark Precious Metals, Inc.
100,000
8.5%
Crude Oil Futures Calls
-
7.7%
Tidewater Inc
30,000
6.1%
Other
-
12.6%
Long Portfolio
Industry Sector
%
Uranium
44.3%
Energy Services
21.6%
Land
12.0%
Capital Markets
8.5%
Crude Oil Futures Calls
7.7%
Media and Communications
3.7%
Other long equities
1.1%
Short Portfolio
Industry Sector
%
Short Crude Oil Futures Calls
-0.01%
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| Mongolia Growth Group Ltd
2023
Gross
amounts due
from brokers
$
Gross
amounts due
to brokers
$
Net
amounts
$
Due from brokers
22,172
(22,021)
151
Due to brokers
-
(5,536,537)
(5,536,537)
2022
Gross
amounts due
from brokers
$
Gross
amounts due
to brokers
$
Net
amounts
$
Due from brokers
14,203
(14,203)
-
Due to brokers
-
(7,393,046)
(7,393,046)
Digital Assets
In 2023, the Corporation opened a digital currency account at Kraken Custody and purchased Monero (XMR) cryptocurrency. The
Corporation purchased 595 Monero coins during the year for $134,332 (2022-505 coins purchased for $94,910). At the end of
the year, the Corporation held 2,020 Monero coins worth $438,872. During the year, the Company’s digital assets experienced
an unrealized gain of $29,313 and a currency loss of $9,026.
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Mongolia Growth Group Ltd |
Section 2 – Results of Operations
Selected Annual Financial Information (CAD)
*Excludes operations of Investment Properties previously included in Continuing Operations.
Year ended
Year ended
Year ended
31-December-2023
31-December-2022
31-December-2021
($)
($)
($)
Revenue and other income
3,317,294
3,174,031
944,411
Income
Net income (loss) from continued operations attributable
to equity holders of the Corporation
4,811,183
7,440,371
15,549,306
Net income (loss) from discontinued operations
attributable to equity holders of the Corporation
(17,991,032)
498,051
(653,967)
Total Comprehensive income/ (loss) attributable to
equity holders of the Corporation
3,810,636
6,403,237
15,491,985
Basic earnings per share ("EPS") (in CAD)
Net income/ (loss)
(0.48)
0.29
0.53
Net income (loss) from discontinued operations
(0.66)
0.02
(0.02)
Net income (loss) from continuing operations
0.18
0.27
0.55
Diluted EPS (in CAD)
Net Income/ (loss)
(0.48)
0.29
0.53
Balance Sheet
Total assets
58,195,061
64,557,624
55,026,865
Total liabilities
9,034,941
18,434,092
14,849,578
Total equity
49,160,120
46,123,532
40,177,287
Shares outstanding at year end
26,980,699
27,710,499
27,778,499
Book value per share
1.82
1.66
1.45
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| Mongolia Growth Group Ltd
Continuing Operations
Continuing Operations Rental Revenue
During the year, the Company’s continuing operations earned rental revenues of $103,899 (2022 - $nil) as the Company leased
out a portion of its headquarters in Puerto Rico.
Continuing Operations Revenue from Subscriptions
Revenue from subscriptions consists of fees earned through our data analytics subscriptions. For the year ending December 31,
2023, revenues from subscriptions were $3,213,395 compared to $3,174,031 in 2022.
Continuing Operations Unearned Revenue
Subscription revenue collected that has not been earned has been classified as unearned revenue and will be classified according
to the Company’s revenue policies described in note 3 of the 2023 consolidated financial statements.
As of December 31, 2023, the Company has unearned revenue of $1,126,439 (December 31, 2022 - $1,547,154).
Prior to January 1, 2023, MGG had engaged an arm’s length company to compile and produce the KEDM report on an ongoing
basis, while MGG acted as the distributor and marketer of the product. As a part of this engagement, MGG had agreed to pay
certain direct and approved expenses related to producing KEDM in addition to 20% of quarterly earned revenues above a
threshold.
Beginning on January 1, 2023, MGG has engaged Praetorian PR LLC (PPR), a Puerto Rican company owned by MGG’s Chairman
and CEO to produce KEDM. Under the terms of the agreement, MGG pays PPR a monthly fee of USD $50,000 along with 20%
of any quarterly revenue in excess of USD $125,000. This transaction was necessitated by the need to consolidate all financial-
related business activities conducted by the Corporation’s Chairman and CEO under the review of his Chief Compliance Officer,
following PPR’s registration as a Registered Investment Advisor with the US Securities and Exchange Commission (SEC). MGG
believes that the compensation paid to PPR will result in a negligible profit to PPR based upon a review of anticipated expenses
going forward. Both parties reserve the right to adjust the terms of the agreement following a short notice period. For more
information about KEDM, go to www.KEDM.com.
Expenses related to the unearned revenue have generally not yet been incurred and are not reflected in the Company’s financial
statements. MGG owns all intellectual property related to KEDM and PPR disclaims any ownership or rights to the intellectual
property.
Unrealized public securities investment gain/loss
During the year, the Corporation had an unrealized public securities investment gain of $4,050,104 compared to an unrealized
public securities investment gain of $1,031,997 in 2022.
Realized public securities investment gain/loss
During the year, the Corporation had realized investment gains of $518,828 compared to a realized investment gain of $8,792,881
in 2022.
Realized foreign currency gain/loss
During the year, the continuing operations of the Corporation had a realized foreign currency loss of $17,683 compared to a
realized foreign currency gain of $203,495 in 2022.
Share Repurchase
During 2023, the Corporation repurchased 600,200 common shares under its Normal Course Issuer Bid (NCIB) at an average
price of $1.29 (2022-302,600, $1.51 average). As at December 31, 2023, the Corporation held 105,000 shares in Treasury to be
cancelled during the first quarter of 2024 (2022- 234,600).
Corporate and Subscription Salary Expenses
Corporate and subscription salary expenses include senior management and employee salaries.
For the year ending December 31, 2023, general and administrative expenses have decreased from $896,662 in 2022 to $697,635
in 2023. This decrease was primarily driven by a reallocation of salaries to Subscription product business expenses.
Corporate and Subscription Other Expenses
Corporate and subscription other expenses include listing fees, professional fees, technology, travel, investment research
expenses, KEDM.COM development costs, and administrative costs.
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Mongolia Growth Group Ltd |
For the year ending December 31, 2023, general and administrative expenses have increased from $959,328 in 2022 to $1,483,107
in 2023 for the Corporation’s Corporate division primarily due costs associated with the disposal of the Mongolian operations
and an increase in salaries. The general and administrative expenses for the Subscription business increased from $1,063,037 to
$1,545,522. This increase was primarily driven by an increase in production expenses and revenue sharing at KEDM.
Unrealized Digital Assets Investment Gain/Loss
During the year, the Corporation had an unrealized digital assets investment gain of $29,313 and a currency loss of $9,026 (2022–
$98,700 investment loss and a $21,153 currency gain).
Currency
The Mongolian Tögrög has fluctuated significantly since the Corporation’s initial investment in the country. The currency
depreciated from 1,250 MNT/CAD in February 2011 to 2,585MNT/CAD in December 2023. The fluctuation in the currency is
reflected in the Corporation’s financial statements, most notably in the investment property portfolio. Note 12 in the financial
statements discloses the foreign exchange adjustment, which flows through the investment property classification during each
period and ultimately through Other Comprehensive Income on the Income Statement. As at December 31, 2023, the Corporation
realized a foreign currency loss of $16,964,749 on the reclassification of accumulated other comprehensive income due to the
disposition of the Mongolian operations.
Net Income from Continuing Operations
For the year ended December 31, 2023, the Corporation had a net gain from continuing operations of $ 4,811,183 (Q4 2022 -
$7,440,371). Management cautions investors that the Corporation is primarily focused on increasing shareholder value on a per-
share basis. This means that, operationally, Management is more concerned with long-term asset appreciation at the expense of
short-term cash flow. Management expects this to be the case in the foreseeable future.
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| Mongolia Growth Group Ltd
Discontinued Operations
Rental Revenue from Discontinued Operations
Rental revenues from Mongolian subsidiaries decreased from $798,826 in 2022 to $519,415 in 2023. Management has decided
to focus on the core operations of the Corporation, leading to the disposition of the Mongolian property business.
Revenue from other Sources from Discontinued Operations
Revenue from other sources consists of late fees, fees earned for third-party leasing, and property management. For the year
ending December 31, 2023, revenues from other sources decreased to $23,500 compared to $100,572 for 2022.
Gain/Loss on Disposal of Investment Properties from Discontinued Operations
During the year ended December 31, 2023, the Company directly sold three properties for net proceeds of $471,131, resulting
in a net loss of $452,035 and sold four properties with a value of $9,095,765 via the sale of subsidiaries (note 5). During the year
ended December 31, 2022, the Company sold five properties for net proceeds of $919,621 resulting in a net loss of $146,544.
Losses related to the sale of investment properties have been included in loss from discontinued operations (note 5) for the years
presented.
Fair Value Adjustment on Investment Properties from Discontinued Operations
The estimate of fair value of investment properties is a critical accounting estimate to the Corporation. An external appraiser
estimates the fair value of the majority of the Investment Properties annually, the remainder are appraised internally by
Management. The fair value of investment properties is based on the nature, location and condition of the specific asset. The fair
value of investment properties represents an estimate of the price that would be made in an arm’s length transaction between
knowledgeable, willing parties. The Corporation operated in the emerging real estate market of Mongolia, which given its current
economic and industry conditions, has an increased inherent risk given the lack of reliable and comparable market information.
For the year ended December 31, 2023, the Corporation recorded a valuation loss of $nil (2022 – $622,186 gain).
Expenses from Discontinued Operations
Expenses from discontinued operations consist of salaries, repairs and maintenance, bad debts, utilities, salaries, as well as
land and property taxes. For the year ending December 31, 2023, expenses from discontinued operations were increased
to $1,509,247 compared to $1,088,147 during 2022. Expenses from the Corporation’s former property subsidiary increased
significantly during the year due to severance payments to its Mongolian employees and other costs related to the sale of the
investment property portfolio.
Foreign Currency Loss from the Sale of Discontinued Operations
During December 2023, Mongolia (Barbados) Corp, disposed of its interests in both Big Sky Capital LLC and MGG Properties LLC.
As a result of the sale, the Company realized a foreign currency loss of $16,964,749 on the reclassification of accumulated other
comprehensive income due to the disposition of the Mongolian operations.
Net Income from Discontinued Operations
For the year ended December 31, 2023, the net loss from discontinued operations was $17,991,032 (2022 - net income of
$498,051). This loss came from a foreign currency loss of $16,964,749 on the reclassification of accumulated other comprehensive
income due to the disposition of the Mongolian operations.
Net Income
For the year ended December 31, 2023, the Corporation had a net loss of $13,179,849 (2022 - $7,938,422 net income). The
bulk of this loss came from realized capital loss on the disposal of Mongolian subsidiaries. Management cautions investors
that the Corporation is primarily focused on increasing shareholder value on a per-share basis. This means that, operationally,
Management is more concerned with long-term asset appreciation at the expense of short-term cash flow. Management expects
this to be the case for the foreseeable future.
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Mongolia Growth Group Ltd |
Section 3 - Financial Condition
Cash Flow
Mongolia Growth Group’s primary sources of capital are cash generated from equity issuance, investing, financing, and asset
sales. Management expects to meet all of the Corporation’s obligations through current cash and cash equivalents along with
cash flows from asset sales.
The following table provides an overview of the Corporation’s cash flows from operating, financing, and investing activities for
the year ended December 31, 2023 and 2022.
Cash Flow Continuing Operations
31-December-2023
31-December-2022
$
$
Net change in cash related to:
Operating
(2,893,966)
(1,436,299)
Investing
2,078,761
401,740
Financing
(814,048)
(456,992)
Net change in cash during the period excluding FX
(1,629,253)
(1,491,551)
Overall, the Corporation had cash outflows of $1,629,253 from continuing operations excluding FX during the year of 2023
primarily due to significant cash outflows from operating activities, offset by inflows from investing activities. The changes in
components of cash flows for the period ended December 31, 2023, compared to the period ended December 31, 2022, were
the result of the following factors:
• Operating– Operating cash outflows increased during Q4 2023 compared to cash outflows during Q4 2022 due to an
increase in non-cash working capital balances compared to the prior year.
• Investing– Investing cash inflows occurred primarily from a net sale of marketable securities.
• Financing– Financing cash outflows occurred as the Company repurchased 600,200 shares during the year while the
Company repurchased 302,600 shares during 2022.
To date, the Corporation has been able to meet all of its capital and other cash requirements from its internal sources of cash. As
at December 31, 2023, the Corporation had $9,735,224 (2022 - $2,051,245) in cash and cash equivalents. Management considers
its marketable securities holdings to be fairly liquid and can be sold should the Corporation need to increase its cash position.
Total Assets
As of December 31, 2023, the Corporation had $56,682,081 (2022 - $51,617,254) in Current Assets of which $9,735,224 were held
in cash and cash equivalents (2022 - $2,051,245) and $46,439,938 were held in marketable securities (Q4 2022 -$49,237,506),
$438,872 were held in digital assets (Q4 2022-$284,253), and $67,896 were held in other assets (Q4 2022-$44,250). The increase
in marketable securities is due to an increase in leverage year over year. Investment Properties are classified as Non-Current
Assets and are carried at Fair Market Value. During the year, Investment Properties decreased to $nil (Q4 2022 -$10,086,956)
due to the disposal of the Mongolian business.
Property and Equipment, which primarily consists of properties that are measured at their cost base, decreased from $2,804,232
as at December 31, 2022, to $1,512,980 as at December 31, 2023 as the Company sold its Mongolian headquarters.
Total Liabilities
As of December 31, 2023, the Corporation had current liabilities of $8,534,419 (2022- $15,461,570) consisting primarily of
marketable securities sold short of $5,724 (2022-$5,159,131), amounts due to broker of $5,536,537 (2022-$7,393,046), payables
of $415,386 (2022-$659,402), unearned revenue of $1,126,439 (Q4 2022-$1,547,154) and income tax liability of $1,430,333 (Q4
2022-$642,837).
As of December 31, 2023, the Corporation had non-current liabilities of $500,522 on the balance (Q4 2022-$2,972,522). The
decrease in deferred income taxes was due to the sale of the Mongolian properties.
Management considers all other current cash commitments to be immaterial and operational in nature.
Cash Flow from Discontinuing Operations
31-December-2023
31-December-2022
$
$
Net change in cash related to:
Operating
(1,388,755)
309,467
Investing
10,599,135
919,621
Net change in cash during the period excluding FX
9,210,380
1,229,088
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| Mongolia Growth Group Ltd
Total Equity
During the year, the Company’s equity value increased to $49,160,120 as at December 31, 2023, from $46,123,532 at December
31, 2022.
The equity of the Corporation consists of one class of common shares.
Outstanding
31-December- 2023
31-December-2022
Common shares
26,980,699*
27,710,499*
Options to buy common shares
-
-
* As at December 31, 2023, the Corporation held 105,000 common shares in Treasury to be cancelled during the first quarter of 2024 (2022- 234,600).
* As at April 25, 2024, the Corporation had 26,094,399 shares outstanding, no shares held in treasury, and no options outstanding.
Acquisitions and Dispositions
During the year ended December 31, 2023, the Company directly sold three properties for net proceeds of $471,131, resulting
in a net loss of $452,035 and sold four properties with a value of $9,095,765 via the sale of subsidiaries (note 5). During the year
ended December 31, 2022, the Company sold five properties for net proceeds of $919,621 resulting in a net loss of $146,544.
Losses related to the sale of investment properties have been included in loss from discontinued operations (note 5) for the years
presented.
Related Party Transactions
Parties are generally considered to be related if the parties are under common control or if one party has the ability to control
the other party or can exercise significant influence or joint control over the other party in making financial and operational
decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not
merely the legal form.
Key management personnel of the Corporation include all directors, executive management, and persons related to directors
and executive management. The summary of compensation for key management personnel is as follows:
As at December 31, 2023, amounts due to related parties totaled approximately $240,061 (Q4 2022 - $16,446), comprised of
fees owed to management and directors, were included in trade payables and accrued liabilities. Salaries to other related parties
include the salary of an employee that is related to a director.
*Beginning on January 1, 2023, MGG engaged Praetorian PR LLC (PPR), a Puerto Rican company owned by MGG’s Chairman and
CEO to produce KEDM. Under the terms of the agreement, MGG pays PPR a monthly fee of USD $50,000 along with 20% of any
quarterly revenue in excess of USD $125,000. This transaction was necessitated by the need to consolidate all financial-related
business activities conducted by the Corporation’s Chairman and CEO under the review of his Chief Compliance Officer, following
PPR’s registration as a Registered Investment Advisor with the US Securities and Exchange Commission (SEC). MGG believes that
the compensation paid to PPR will result in a negligible profit to PPR based upon a review of anticipated expenses going forward.
Both parties reserve the right to adjust the terms of the agreement following a short notice period. Additionally, PPR agrees to
provide MGG with expense reports periodically to show the KEDM-related expenses that were incurred. For more information
about KEDM, go to www.KEDM.com.
Off-Balance Sheet Items
As of December 31, 2023, the Corporation had no off-balance sheet items.
Events Subsequent to Year End
• Since January 1, 2024, the Company has repurchased 781,300 of its shares at an average price of $1.51/share and cancelled
886,300 shares.
• As disclosed in the Corporation’s March 26, 2024, press release, the Corporation announced that the TSX Venture Exchange
(the “Exchange”) had accepted a Notice of Intention to renew its normal course issuer bid to purchase outstanding
common shares of the Corporation on the open market in accordance with the policies of the TSX.
Securities Sought
Up to 1,760,000 common shares, representing up to approximately 9.97% of the 17,648,649 common shares constituting
the Issuer’s current Public Float (as defined in the Policies of the Exchange).
Related Party Transactions
2023
$
2022
$
Salaries and other short-term benefits to officers
604,487
590,924
Salaries to other related parties
80,912
78,040
Director fees
60,000
60,000
KEDM production expense and revenue share paid to an entity controlled by the chairman*
1,298,072
-
Total
2,043,471
728,964
15
Mongolia Growth Group Ltd |
Duration
The Issuer intends to commence purchasing its common shares under the Normal Course Issuer Bid three clear trading
days following acceptance of the same by the TSX Venture Exchange (the “Exchange”). The Bid will commence on or
about April 2, 2024, and the Bid will end no later than April 1, 2025.
Method of Acquisition
Purchases will be affected through the facilities of the Exchange. Purchase and payment for the common shares of the
Issuer will be made by the Issuer in accordance with Exchange requirements.
Member and Broker
The Normal Course Issuer Bid will be conducted by Research Capital Corporation of 199 Bay Street, Suite 4500, Toronto
ON M5L 1G2; Phone: (416) 860-7655.
Consideration Offered
Purchases of common shares under the Normal Course Issuer Bid will be conducted at applicable Market Prices in
accordance with Exchange requirements. Completion of purchases under the bid will be subject to the Issuer having
sufficient funds to acquire the common shares and continue to meet its working capital requirements throughout the
course of the bid. The Issuer may in the normal course of its business operations, subject to market conditions, sell one or
more of its investment properties to fund acquisitions throughout the course of the bid.
Reasons for the Normal Course Issuer Bid
The Issuer is undertaking the bid because, in the opinion of its board of directors, the market price of its common shares,
from time to time, may not fully reflect the underlying value of its operations and future growth prospects. The Issuer
believes that in such circumstances, the purchase of the common shares of the Issuer may represent an appropriate and
desirable use of the Issuer’s funds and further enhance market stability.
Persons Acting Jointly or in Concert with the Issuer
N/A
Previous Purchases
The Issuer has purchased 1,213,400 of its common shares at an average price of $1.40 within the past 12 months.
Acceptance by Insiders, Affiliates and Associates
To the knowledge of the Issuer, no director, senior officer or other Insider of the Issuer or any associate or affiliate of the
Issuer or any insider of the Issuer currently intends to sell common shares under the Normal Course Issuer Bid. However,
such sales by persons through the facilities of the Exchange may occur if the personal circumstances of such persons
change or any such person makes a decision to sell shares as market circumstances may warrant. The benefits to any such
person whose shares are purchased under the bid would be the same as the benefits available to all other holders of the
Issuer’s common shares whose shares are purchased under the bid.
Benefits from the Normal Course Issuer Bid
N/A
Material Changes in the Affairs of the Issuer Company
The Issuer currently has no plans or proposals for any Material Change in the affairs of the Issuer or to make any Material
Changes in its business, corporate structure (debt or equity), management or personnel, or any other change which might
reasonably be expected to have a significant effect on the price or value of the securities.
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| Mongolia Growth Group Ltd
Section 4 - Quarterly Information
Quarterly Results
The following table is a summary of select quarterly information over the previous eight quarters:
Q4 2023
Q3 2023
Q2 2023
Q1 2023
Q4 2022
Q3 2022
Q2 2022
Q1 2022
Revenue
16,487
1,655,885
1,055,595
1,132,242
1,127,733
912,789
1,046,757
839,606
Net income (loss)
(19,790,455)
7,879,688
(8,158)
(1,260,924)
4,219,923
(344,086)
(2,218,219)
6,280,804
Income (loss) per common share
(0.72)
0.29
0.00
(0.05)
0.15
(0.01)
(0.08)
0.23
Total Assets
58,195,061
65,780,580
50,341,034
55,499,653
64,557,624
58,523,283
62,823,647
67,714,593
Weighted Average Shares (No.)
27,243,468
27,320,541
27,387,703
27,469,402
27,761,956
27,771,511
27,777,752
27,778,499
Ending Shares (No.)
26,980,699
27,065,199
27,307,799
27,307,799
27,710,499
27,759,299
27,759,299
27,778,499
* The chart above reflects both the continuing and discontinued operations of the Corporation
17
Mongolia Growth Group Ltd |
Section 5 – Critical Estimates
Critical Accounting Estimates
The preparation of financial statements following IFRS required Management to make assumptions about the future that affect
the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experiences
and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the
future, actual experience may differ from these estimates and assumptions.
The critical estimates made in the preparation of the consolidated financial statements include the following:
Fair Value Adjustment on Investment Properties
The estimate of fair value of investment properties is the most critical accounting estimate to the Company. An external
appraiser estimates the fair value of the majority of Investment Properties annually, the remainder is appraised internally by
Management. The fair value of investment properties is based on the nature, location and condition of the specific asset. The fair
value of investment properties represents an estimate of the price that would be made in an arm’s length transaction between
knowledgeable, willing parties. The Corporation operates in the emerging real estate market of Mongolia, which given its current
economic and industry conditions, has an increased inherent risk given the lack of reliable and comparable market information.
For the year ending December 31, 2023, the Corporation recorded a fair value adjustment of $nil (Q4 2022 – $622,186 gain).
Deferred Tax Assets
Deferred tax assets are recognized to the extent that it is probable that deductible temporary differences will reverse in the
foreseeable future and there will be sufficient future taxable profits against which the deductible temporary differences can
be utilized. The Corporation reviews the carrying amount of deferred tax assets at the end of each reporting period which is
reduced to the extent that it is no longer probable that deferred tax assets recognized will be recovered or increased to the
extent that sufficient future taxable profit will be available to allow all or part of a previously unrecognized deferred tax asset
to be recovered. Estimates of future taxable income are based on forecasted cash flows from operations, available tax planning
opportunities, and expected timing of reversals of taxable temporary differences.
Valuation of Marketable Securities
The Company recognizes marketable securities at fair value. Fair value is determined on the basis of market prices from
independent sources, if available. If there is no market price, then the fair value is determined by using valuation models with
inputs derived from observable market data where possible but where observable data is not available, judgement is required
to establish fair values.
Significant judgments made in the preparation of these consolidated financial statements include the
following areas:
Judgement is required in determining whether an asset meets the criteria for classification as assets held for sale and or as
discontinued operations in the consolidated financial statements. Criteria considered by management include the existence of
and commitment to a plan to dispose of the assets, the expected selling price of the assets, the probability of the sale being
completed within an expected timeframe of one year, and the period of time any amounts have been classified within assets
held for sale. Management reviews the criteria for assets held for sale each quarter and reclassifies such assets to or from this
financial position category as appropriate. On completion of the sale, Management exercises judgement as to whether the sale
qualifies as a discontinued operation.
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| Mongolia Growth Group Ltd
Section 6 – Risk Management
Credit Risk
The Corporation’s exposure to credit risk is managed through risk management policies and procedures with emphasis on the
quality of the investment portfolio. For the year, most of the Corporation’s credit risk consisted of institutional deposits. The
majority of the funds invested are held in reputable Canadian and American.
Liquidity Risk
Under certain market conditions, such as during volatile markets or when trading in a security or market is otherwise impaired,
the liquidity of the Corporation’s portfolio positions may be reduced. In addition, the Corporation may from time to time hold
large positions with respect to a specific type of financial instrument, which may reduce the Corporation’s liquidity. During such
times, the Corporation may be unable to dispose of certain financial instruments, including longer-term financial instruments,
which would adversely affect its ability to rebalance its portfolio. In addition, such circumstances may force the Corporation
to dispose of financial instruments at reduced prices, thereby adversely affecting its performance. If there are other market
participants seeking to dispose of similar financial instruments at the same time, the Corporation may be unable to sell such
financial instruments or prevent losses relating to such financial instruments. Furthermore, if the Corporation incurs substantial
trading losses, the need for liquidity could rise sharply while its access to liquidity could be impaired. In addition, in conjunction
with a market downturn, the Corporation’s counterparties could incur losses of their own, thereby weakening their financial
condition and increasing the Corporation’s exposure to their credit risk.
The Corporation does not believe its current maturity profile lends itself to any material liquidity risk, taking into account the
level of cash and cash equivalents, investments and marketable securities as at December 31, 2023.
As at December 31, 2023, the Corporation had working capital of $48,147,662 (2022- $36,155,684) comprised of cash and cash
equivalents, marketable securities owned, due from broker, digital assets, other assets, net of trade and accrued liabilities,
unearned revenue, due to broker, marketable securities sold short, CEBA loan and income taxes payable. Management considers
the funds on hand to be sufficient to meet its ongoing obligations.
Market Risk
Market risk is the risk that the fair value of, or future cash flows from, the Corporation’s financial instruments will significantly
fluctuate due to changes in market prices. The value of the financial instruments can be affected by changes in interest rates,
foreign exchange rates, and equity and commodity prices. The Corporation is exposed to market risk in trading its investments
and unfavorable market conditions could result in dispositions of investments at less than favorable prices.
Catastrophe risk
The Company obtained insurance on its Puerto Rican property with a value of $1,385,665 at December 31, 2023. As the property
is located on the ocean, it is at risk of significant hurricane damage or other natural disasters which could result in a significant
impairment to its value.
Cryptocurrencies Risk
Cryptocurrencies are measured at fair value less cost to sell. Cryptocurrency prices are affected by various forces including
global supply and demand, interest rates, exchange rates, inflation or deflation and political and economic conditions. Further,
cryptocurrencies have no underlying backing or contracts to enforce recovery of invested amounts. The profitability of the
Corporation is related to the current and future market price of cryptocurrencies; in addition, the Corporation may not be able to
liquidate its inventory of cryptocurrencies at its desired price if necessary. Investing in cryptocurrencies is speculative, prices are
volatile, and market movements are difficult to predict. Supply and demand for such currencies change rapidly and are affected
by a variety of factors, including regulation and general economic trends.
Cryptocurrencies have a limited history; their fair values have historically been volatile, and the value of cryptocurrencies held by
the Corporation could decline rapidly. A decline in the market prices of cryptocurrencies could negatively impact the Corporation’s
future operations. Historical performance of cryptocurrencies is not indicative of their future performance.
Many cryptocurrency networks are online end-user-to-end-user networks that host a public transaction ledger (blockchain) and
the source code that comprises the basis for the cryptographic and algorithmic protocols governing such networks. In many
cryptocurrency transactions, the recipient or the buyer must provide its public key, which serves as an address for a digital wallet,
to the seller. In the data packets distributed from cryptocurrency software programs to confirm transaction activity, each party
to the transaction user must sign transactions with a data code derived from entering the private key into a hashing algorithm,
which signature serves as validation that the transaction has been authorized by the owner of the cryptocurrency. This process
is vulnerable to hacking and malware and could lead to theft of the Corporation’s digital wallets and the loss of the Corporation’s
cryptocurrency.
19
Mongolia Growth Group Ltd |
Cryptocurrencies are loosely regulated and there is no central marketplace for exchange. Supply is determined by a computer
code, not a central bank. Additionally, exchanges may suffer from operational issues, such as delayed execution, that could have
an adverse effect on the Corporation.
The cryptocurrency exchanges on which the Corporation may trade on are relatively new and, in many cases, largely unregulated,
and therefore may be more exposed to fraud and failure than regulated exchanges for other assets. Any financial, security,
or operational difficulties experienced by such exchanges may result in an inability of the Corporation to recover money or
cryptocurrencies being held on the exchange. Further, the Corporation may be unable to recover cryptocurrencies awaiting
transmission into or out of the exchange, all of which could adversely affect an investment of the Corporation. Additionally, to
the extent that the digital asset exchanges representing a substantial portion of the volume in digital asset trading are involved
in fraud or experience security failures or other operational issues, such digital asset exchanges’ failures may result in loss or less
favorable prices of cryptocurrencies, or may adversely affect the Corporation, its operations, and its investments.
Furthermore, crypto exchanges comingle their client’s assets in exchange wallets. When crypto-assets are commingled,
transactions are not recorded on the applicable blockchain ledger but are only recorded by the exchange. Therefore, there is a
risk around the occurrence of transactions or the existence of period-end balances represented by exchanges.
Loss of access risk
The loss of access to the private keys associated with the Corporation’s cryptocurrency holdings may be irreversible and could
adversely affect an investment. Cryptocurrencies are controllable only by an individual that possess both the unique public key
and private key or keys relating to the “digital wallet” in which the cryptocurrency is held. To the extent a private key is lost,
destroyed, or otherwise compromised and no backup is accessible the Corporation may be unable to access the cryptocurrency.
Irrevocability of transactions
Cryptocurrency transactions are irrevocable and stolen or incorrectly transferred cryptocurrencies may be irretrievable. Once a
transaction has been verified and recorded in a block that is added to the blockchain, an incorrect transfer or theft generally will
not be reversible, and the Corporation may not be capable of seeking compensation.
Hard fork and air drop risks
Hard forks may occur for a variety of reasons including, but not limited to, disputes over proposed changes to the protocol,
significant security breach, or an unanticipated software flaw in the multiple versions of otherwise compatible software. In the
event of a hard fork in a cryptocurrency held by the Corporation, it is expected that the Corporation would hold an equivalent
amount of the old and new cryptocurrency following the hard fork. Airdrops occur when the promoters of a new cryptocurrency
send amounts of the new cryptocurrency to holders of another cryptocurrency that they will be able to claim a certain amount
of the new cryptocurrency for free. The Corporation may not be able to realize the economic benefit of a hard fork or airdrop,
either immediately or ever, for various reasons. For instance, the Corporation may not have any systems in place to monitor or
participate in hard forks or airdrops.
Economic Volatility and Uncertainty
Over the past few years, economic volatility and uncertainty around the world has contributed to dramatically restricted access
to capital and reduced capital markets activity for more speculative businesses. Management believes that the Corporation has
sufficient resources to carry on its business and remain a going concern.
Risks and Uncertainties
The Corporation, as part of its operations, carries financial instruments consisting of cash and cash equivalents, investments
and marketable securities, accounts receivable, and trade payables, and accrued liabilities. It is Management’s opinion that the
Corporation is not exposed to significant credit, interest, or currency risks arising from these financial instruments except as
otherwise disclosed in the notes to the Consolidated Financial Statements.
Further information related to Mongolia Growth Group Ltd. and the risks and uncertainties of MGG is filed on the System for
Electronic Document Analysis and Retrieval (“SEDAR”) and can be reviewed at www.sedar.com.
Financial Instruments
The Corporation’s financial instruments consist of cash and cash equivalents, investments and marketable securities, accounts
receivable, and trade and accrued payables. The Corporation is subject to interest risk as it earns interest income from its cash
deposits. It is Management’s opinion that the Corporation is not exposed to significant credit risks arising from these financial
instruments and that the fair value of these financial instruments approximates their carrying values.
Changes in Investment Strategies
The Corporation may alter its investment strategies and restrictions without prior approval by shareholders to adapt to changing
circumstances.
20
| Mongolia Growth Group Ltd
Possible Negative Impact of Regulation
TThe regulatory environment is evolving and changes to it may adversely affect the Corporation. To the extent that regulators
adopt practices of regulatory oversight that create additional compliance, transaction, disclosure or other costs for the
Corporation, returns of the Corporation may be negatively affected. In addition, the regulatory or tax environment for securities,
derivatives and related instruments is evolving and may be subject to modification by government or judicial action that may
adversely affect the value of the investments held by the Corporation. The effect of any future regulatory or tax change on the
Corporation is impossible to predict.
PFIC Risk
The Corporation has not undertaken an analysis to determine if it is a Passive Foreign Income Company (PFIC) under United
States tax statutes, nor does it intend to. US shareholders are advised to consult with tax professionals to determine the risks and
potential penalties that could be applicable if the Corporation is determined to be a PFIC at a later date.
Use of Derivatives
The Corporation may use derivative instruments. The use of derivatives in general presents additional risks to those applicable
to trading only in the underlying assets. To the extent of the Corporation’s investment in derivatives, it may take a credit risk
concerning parties with whom it trades and may also bear the risk of settlement default. When used for hedging purposes, an
imperfect or variable degree of correlation between price movements of the derivative instrument and the underlying investment
sought to be hedged may prevent the Corporation from achieving the intended hedge effect or expose the Corporation to the
risk of loss. In addition, derivative instruments may not be liquid at all times, so that in volatile markets the Corporation may not
be able to close out a position without incurring a loss. No assurance can be given that short sales, hedging, leverage, and other
techniques and strategies utilized by the Corporation to hedge its exposure will not result in material losses.
Custody Risk and Broker or Dealer Insolvency
The Corporation does not control the custodianship of all of its assets. The Corporation’s assets will be held in one or more
accounts maintained for the Corporation by its broker or brokers. Such brokers are subject to various laws and regulations in
various jurisdictions that are designed to protect their customers in the event of their insolvency. However, the practical effect
of these laws and their application to the Corporation’s assets are subject to substantial limitations and uncertainties. Because
of the large number of entities and jurisdictions involved and the range of possible factual scenarios involving the insolvency
of a broker or any sub-custodians, agents, or affiliates, it is impossible to generalize about the effect of their insolvency on the
Corporation and its assets. Investors should assume that the insolvency of any of the brokers or such other service providers
would result in the loss of all or a substantial portion of the Corporation’s assets held by or through such brokers and/or the
delay in the payment of withdrawal proceeds. The Corporation’s cryptocurrency is currently being held at Kraken Custody.
There is a risk that the custodian loses the Corporation’s cryptocurrency. Refer to the cryptocurrency risk section for further
cryptocurrency risks.
Investment and Trading Risks in General
All trades made by the Corporation risk the loss of capital. The Corporation may utilize trading techniques or instruments,
which can, in certain circumstances, maximize the adverse impact to which a client’s account may be subject. No guarantee
or representation is made that the Corporation’s investment program will be successful, and investment results may vary
substantially over time. Many unforeseeable events, including actions by various government agencies, and domestic and
international economic and political developments may cause sharp market fluctuations which could adversely affect the
Corporation’s portfolio and performance.
General Economic and Market Conditions
The success of the Corporation’s activities may be affected by general economic and market conditions, such as interest rates,
availability of credit, inflation rates, economic uncertainty, changes in laws, and national and international political circumstances.
These factors may affect the level and volatility of securities prices and the liquidity of the Corporation’s investments. Unexpected
volatility or illiquidity could impair the Corporation’s profitability or result in losses.
Issuer–Specific Changes
The value of an individual security or particular type of security can be more volatile than and can perform differently from the
market as a whole.
Portfolio Turnover
The Corporation has not placed any limits on the rate of portfolio turnover and portfolio securities may be sold without regard
to the time they have been held when, in the opinion of the Corporation, investment considerations warrant such action. A high
rate of portfolio turnover involves correspondingly greater expenses than a lower rate.
21
Mongolia Growth Group Ltd |
Liquidity of Underlying Investments
Some of the securities in which the Corporation may invest may be thinly traded. There are no restrictions on the investment of
the Corporation in illiquid securities. It is possible that the Corporation may not be able to sell or repurchase significant portions
of such positions without facing substantially adverse prices. If the Corporation is required to transact in such securities before
its intended investment horizon, the performance of the Corporation could suffer.
Highly Volatile Markets
The prices of financial instruments in which the Corporation’s assets may be invested can be highly volatile and may be influenced
by, among other things, specific corporate developments, interest rates, changing supply and demand relationships, trade, fiscal,
monetary and exchange control programs and policies of governments, and national and international political and economic
events and policies. The Corporation is subject to the risk of the failure of any of the exchanges on which the Corporation’s
positions trade or of their clearinghouses.
Emerging Markets
The Corporation may invest in the securities of companies that operate in some emerging markets. Operating in emerging
markets involves additional risks because companies in emerging markets may be less regulated and not subject to the same
standards, reporting practices, and disclosure requirements that apply in more developed markets. In addition, some emerging
markets and legal systems may not adequately protect investor rights.
Small- to Medium- Capitalization Companies
The Corporation may invest a portion of its assets in the securities of companies with small- to medium-sized market
capitalizations. While the Corporation believes these investments often provide significant potential for appreciation, those
securities may involve higher risks in some respects than do investments in securities of larger companies. For example, while
smaller companies generally have the potential for rapid growth, they often involve higher risks because they may lack the
management experience, financial resources, product diversification, and competitive strength of larger companies. In addition,
in many instances, the frequency and volume of their trading may be substantially less than is typical of larger companies. As a
result, the securities of smaller companies may be subject to wider price fluctuations. When making large sales, the Corporation
may have to sell portfolio holdings at discounts from quoted prices or may have to make a series of small sales over an extended
period of time due to the trading volume of smaller Corporation securities.
Fixed Income Securities
The Corporation may occasionally invest in bonds or other fixed-income securities of issuers, including, without limitation,
bonds, notes, and debentures issued by corporations. Fixed-income securities pay fixed, variable, or floating rates of interest.
The value of fixed-income securities in which the Corporation invests will change in response to fluctuations in interest rates.
In addition, the value of certain fixed-income securities can fluctuate in response to perceptions of creditworthiness, political
stability, or soundness of economic policies. Fixed income securities are subject to the risk of the issuer’s inability to meet
principal and interest payments on its obligations (i.e., credit risk) and are subject to price volatility due to such factors as interest
rate sensitivity, market perception of the creditworthiness of the issuer and general market liquidity (i.e., market risk). If fixed-
income investments are not held to maturity, the Corporation may suffer a loss at the time of the sale of such securities.
Equity Securities
To the extent that the Corporation holds equity portfolio investments or short positions in equities, it will be influenced by stock
market conditions in those jurisdictions where the securities held by the Corporation, are listed for trading and by changes in the
circumstances of the issuers whose securities are held by the Corporation.
Options
Selling call and put options is a highly specialized activity and entails greater than ordinary investment risk. The risk of loss when
purchasing an option is limited to the amount of the purchase price of the option; however, investment in an option may be
subject to greater fluctuation than an investment in the underlying security. In the case of the sale of an uncovered option, there
can be potential for an unlimited loss. To some extent, this risk may be hedged by the purchase or sale of the underlying security.
Shorting
Selling a security short (“shorting”) involves borrowing a security from an existing holder and selling the security in the market
with a promise to return it at a later date. Should the security increase in value during the shorting period, losses will incur to the
Corporation. There is in theory no upper limit to how high the price of a security may go. Another risk involved in shorting is the
loss of a borrow, a situation where the lender of the security requests its return. In cases like this, the Corporation, must either
find securities to replace those borrowed or step into the market and repurchase the securities. Depending on the liquidity of
the security shorted, if there are insufficient securities available at current market prices, the Corporation, may have to bid up
the price of the security in order to cover the short position, resulting in losses to the Corporation.
22
| Mongolia Growth Group Ltd
Trading Costs
The Corporation may engage in a high rate of trading activity resulting in correspondingly high costs being borne by the
Corporation.
Currency and Exchange Rate Risks
The Corporation’s assets will be denominated in multiple currencies. The Corporation will report its results in Canadian dollars.
The Corporation expects to report allocations of profit and loss for income tax purposes in Canadian dollars. Changes in currency
exchange rates may affect the value of the Corporation’s portfolio and the unrealized appreciation or depreciation of investments.
Leverage
The Corporation may use financial leverage by borrowing funds against the assets of the Corporation. Leverage increases
both the possibilities for profit and the risk of loss for the Corporation. From time to time, the credit markets are subject to
periods in which there is a severe contraction of both liquidity and available leverage. The combination of these two factors can
result in leveraged strategies being required to sell positions typically at highly disadvantageous prices in order to meet margin
requirements, contributing to a general decline in a wide range of different securities. Illiquidity can be particularly damaging to
leveraged strategies because of the essentially discretionary ability of dealers to raise margin requirements, requiring leveraged
strategy to attempt to sell positions to comply with such requirements at a time when there are effectively no buyers in the
market at all or at any but highly distressed prices. These market conditions have in the past resulted in major losses. Such
conditions, although unpredictable, can be expected to recur.
Future Acquisitions and Business Diversification
Management is currently evaluating future acquisitions of businesses and operating assets that are not related to investments
within Mongolia. There can be no certainty that the Corporation will acquire any business. Additionally, if the Corporation
acquires part or all of a business outside of Mongolia, it may dilute management’s focus on current operations within Mongolia.
Additionally, shareholders who desire a Mongolia-focused investment vehicle may sell shares of the Corporation if they do not
desire investments outside of Mongolia. There can be no certainty that the Corporation can raise adequate funding to finance
an acquisition of a business outside of Mongolia or that diversification of the Corporation’s business is in the best interest of the
Corporation. Capital spent on researching businesses outside of Mongolia will increase operating expenses and operating losses
as long as such due diligence is ongoing.
Internal Controls over Financial Reporting
Changes in securities laws no longer require the Chief Executive Officer and Chief Financial Officer of junior reporting issuers
to certify that they have designed internal control over financial reporting or caused it to be designed under their supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with IFRS.
Instead, an optional form of certification has been made available to junior reporting issuers and has been used by the
Corporation’s certifying officers since December 31, 2013, annual filings. The new certification reflects what the Corporation
considers to be a more appropriate level of CEO and CFO certification given the size and nature of the Corporation’s operations.
This certification requires the certifying officers to state that: they have reviewed the interim MD&A and consolidated financial
statements; they have determined that there is no untrue statement of a material fact, or any omission of material fact required
to be stated which would make a statement or its omission misleading in light of the circumstances under which it was made
within the interim MD&A and consolidated financial statements; based on their knowledge, the interim filings, together with the
other financial information included in the interim filings, fairly present in all material respects the financial condition, results of
operations and cash flows of the Corporation as of the date and for the periods presented in the filings.
Additional Information
Additional information relating to Mongolia Growth Group Ltd., including its interim financial statements, is available on SEDAR
at www.sedar.com.
23
Mongolia Growth Group Ltd |
December 31, 2023
Mongolia Growth Group Ltd.
Consolidated Financial Statements
(Expressed in Canadian dollars)
24
| Mongolia Growth Group Ltd
Mongolia Growth Group
Ltd.
Consolidated Financial Statements
December 31, 2022
(Expressed in Canadian dollars)
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of
Mongolia Growth Group Ltd.
Opinion
We have audited the accompanying consolidated financial statements of Mongolia Growth Group Ltd. (the “Company”), which
comprise the consolidated statements of financial position as at December 31, 2023 and 2022, and the consolidated statements
of operations and comprehensive income, changes in equity, and cash flows for the years then ended, and notes to the
consolidated financial statements, including material accounting policy information.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the
Company as at December 31, 2023 and 2022, and its financial performance and its cash flows for the years then ended in
accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section
of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of
the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a
basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated
financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Disposal of Mongolian Subsidiaries
As described in Note 5 to the consolidated financial statements, the Company disposed of its Mongolian wholly-owned
subsidiaries; MGG Properties LLC, Big Sky Capital LLC, Carrollton LLC, Biggie Industries LLC, Zulu LLC, Crescent City
LLC and Oceanus LLC for cash consideration of $10,320,149 and the assumption of the subsidiaries’ liabilities. As a result of
these sales, there are requirements concerning the allocation of income and expenses to discontinued operations, and the
presentation within the consolidated financial statements.
The principal considerations for our determination that the disposal of the Mongolian Subsidiaries is a key audit matter are that
there was judgment made by management when assessing whether these operations comprise a discontinued operation as
defined by IFRS 5, and that the accounting requirements for loss of control of subsidiaries are non-routine and require
significant management judgement. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing
procedures to evaluate the presentation and accuracy of the results of the discontinued operation.
25
Mongolia Growth Group Ltd |
To address this key audit matter, we performed the following procedures:
•
Reviewed accounting policies for discontinued operations to ensure compliance with IFRS.
•
Obtained a detailed understanding of the processes to allocate income and expenses to be presented as discontinued
operations.
•
Evaluated the carrying value of the disposal group at the transaction date and agreed to supporting records.
•
Reviewed share purchase agreements to gain an understanding of the key terms and conditions of the sale.
•
Verified that the consideration received was consistent with supporting documentation.
•
Recalculated loss on disposal and loss from discontinued operations.
•
Assessed the presentation of the results as discontinued operations and disclosure in accordance with IFRS 5.
Other Information
Management is responsible for the other information. The other information obtained at the date of this auditor's report includes
Management’s Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We
have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with
IFRS Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally
accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and
maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud
is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
26
| Mongolia Growth Group Ltd
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
•
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we
are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements
or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue
as a going concern.
•
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
•
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Company to express an opinion on the consolidated financial statements. We are responsible for the
direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance
in the audit of the consolidated financial statements of the current year ended and are therefore the key audit matters. We
describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Daniel Nathan.
Vancouver, Canada
Chartered Professional Accountants
April 25, 2024
27
Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Consolidated Statements of Financial Position
As at December 31
(Expressed in Canadian dollars)
2023
2022
$
$
Assets
Current assets
Cash and cash equivalents (note 6)
9,735,224
2,051,245
Marketable securities owned (note 8)
46,439,938
49,237,506
Due from broker (note 7)
151
-
Digital assets (note 10)
438,872
284,253
Other assets (note 11)
67,896
44,250
56,682,081
51,617,254
Non-current assets
Investment properties (note 12)
-
10,086,956
Other assets-long term receivable (note 11)
-
49,182
Property and equipment (note 13)
1,512,980
2,804,232
1,512,980
12,940,370
Total assets
58,195,061
64,557,624
Liabilities
Current liabilities
Trade payables and accrued liabilities (note 14)
415,386
659,402
Unearned revenue (note 9)
1,126,439
1,547,154
Due to broker (note 7)
5,536,537
7,393,046
Marketable securities sold short (note 8)
5,724
5,159,131
CEBA Loan (note 7)
20,000
60,000
Income taxes payable
1,430,333
642,837
8,534,419
15,461,570
Non-current liabilities
Deferred income tax liability (note 15)
500,522
2,972,522
Total liabilities
9,034,941
18,434,092
Equity
Share capital (note 16)
49,773,082
50,547,130
Contributed surplus
6,849,976
6,849,976
Accumulated other comprehensive loss
(46,663)
(17,037,148)
Retained earnings (deficit)
(7,416,275)
5,763,574
Total equity
49,160,120
46,123,532
Total equity and liabilities
58,195,061
64,557,624
Commitment and contingencies (note 20)
Subsequent events (note 24)
Approved by the Board of Directors
“Harris Kupperman” Director “Nick Cousyn“ Director
28
| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Consolidated Statements of Operations
For the years ended December 31
(Expressed in Canadian dollars)
2023
$
2022
$
Revenue
Rental income
103,899
-
Subscription revenue (note 9)
3,213,395
3,174,031
Total revenue
3,317,294
3,174,031
Expenses
Salaries and wages
697,635
896,662
Other expenses (note 23)
3,028,629
2,022,365
Depreciation (note 13 and note 5)
79,024
30,039
Total operating expenses
(3,805,288)
(2,949,066)
Interest income
30,948
6,813
Unrealized gain on short term investments
4,050,104
1,031,997
Realized gain on short term investments
518,828
8,792,881
Unrealized gain (loss) on digital assets (note 10)
29,313
(98,700)
Foreign currency gain (loss)
(17,683)
203,495
Total other income
4,611,510
9,936,486
Net income before income taxes
4,123,516
10,161,451
Income tax recovery (expense) (note 15)
687,667
(2,721,080)
Income from continuing operations
4,811,183
7,440,371
Income (loss) from discontinued operations (note 5)
(17,991,032)
498,051
Net income (loss) for the year
(13,179,849)
7,938,422
Net income (loss) per share (note 16)
Basic
From continuing operations
0.18
0.27
From discontinued operations
(0.66)
0.02
From net income (loss) for the year
(0.48)
0.29
Diluted
From continuing operations
0.18
0,27
From discontinued operations
(0.66)
0.02
From net income (loss) for the year
(0.48)
0.29
The accompanying notes are an integral part of these consolidated financial statements
29
Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Consolidated Statements of Comprehensive Income
For the years ended December 31
(Expressed in Canadian dollars)
2023
$
2022
$
Net income (loss) for the year
(13,179,849)
7,938,422
Other comprehensive gain (loss)
Items that may be subsequently reclassified to income or loss
Unrealized gain (loss) on translation from functional
currency to Canadian dollar reporting currency
25,736
(1,535,185)
Recycle of translation difference on disposal of subsidiaries
16,964,749
-
Total comprehensive income
3,810,636
6,403,237
The accompanying notes are an integral part of these consolidated financial statements.
30
| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Consolidated Statements of Changes in Equity
For the years ended December 31
(Expressed in Canadian dollars)
Share capital
$
Contributed
surplus
$
Accumulated
other
comprehensive
loss
$
Retained
earnings
(deficit)
$
Total
$
Balance at January 1,
2022
51,004,122
6,849,976
(15,501,963)
(2,174,848)
40,177,287
Net income for the year
-
-
-
7,938,422
7,938,422
Other comprehensive loss
-
-
(1,535,185)
-
(1,535,185)
51,004,122
6,849,976
(17,037,148)
5,763,574
46,580,524
Share repurchase
(456,992)
-
-
-
(456,992)
Balance at December
31, 2022
50,547,130
6,849,976
(17,037,148)
5,763,574
46,123,532
Share capital
$
Contributed
surplus
$
Accumulated
other
comprehensive
loss
$
Retained
earnings
(deficit)
$
Total
$
Balance at January 1,
2023
50,547,130
6,849,976
(17,037,148)
5,763,574
46,123,532
Net income for the year
-
-
-
(13,179,849)
(13,179,849)
Reclassification (note 5)
-
-
16,964,749
-
16,964,749
Other comprehensive gain
-
-
25,736
-
25,736
50,547,130
6,849,976
(46,663)
(7,416,275)
49,934,168
Share repurchase
(774,048)
-
-
-
(774,048)
Balance at December
31, 2023
49,773,082
6,849,976
(46,663)
(7,416,275) 49,160,120
31
Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Consolidated Statements of Cash Flow
As at December 31, 2023
(Expressed in Canadian dollars)
2023
$
2022
$
Cash and cash equivalents provided by (used in)
Operating activities
Net income (loss) for the year for continued operations
4,811,183
7,440,371
Items not affecting cash
Depreciation (note 13)
79,024
30,039
Deferred taxes
(2,118,000)
2,024,278
Unrealized gain on marketable securities
(4,050,104)
(1,031,997)
Realized gain on marketable securities
(518,828)
(8,792,881)
Unrealized (gain) loss on digital assets (note 10)
(29,313)
98,700
(1,826,038)
(231,490)
Net change in non-cash working capital balances (note 21)*
(1,067,928)
(1,204,809)
(2,893,966)
(1,436,299)
Cash provided by (used in) discontinued operating
activities (note 5)
(1,388,755)
309,467
Financing activities
Share repurchase (note 16)
(774,048)
(456,992)
CEBA loan (note 7)
(40,000)
-
(814,048)
(456,992)
Investing activities
Net sale of marketable securities
2,213,093
1,208,463
Acquisition of property and equipment (note 13)
-
(711,813)
Acquisition of digital assets (note 10)
(134,332)
(94,910)
2,078,761
401,740
Cash provided by discontinued investing activities (note 5)
10,599,135
919,621
Decrease in cash from continued operations
(1,629,253)
(1,491,551)
Increase in cash from discontinued operations
9,210,380
1,229,088
Effect of exchange rates on cash and cash equivalents
102,852
(82,603)
Increase (decrease) in cash and cash equivalents
7,683,979
(345,066)
Cash and cash equivalents– Beginning of year
2,051,245
2,396,311
Cash and cash equivalents – End of year
9,735,224
2,051,245
*Supplementary cash flow information (note 21)
32
| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
4
Corporate information
Mongolia Growth Group Ltd. (“MGG” or the “Company”) was incorporated in Alberta on
December 17, 2007, and is a Merchant bank with real estate investments in Ulaanbaatar, Mongolia,
a subscription product business and a public securities portfolio.
The Company trades on the TSX Venture Exchange, having the symbol YAK.
MGG has three wholly-owned subsidiaries at December 31, 2023; Mongolia (Barbados) Corp.,
MGG US Inc., and Lemontree PR LLC. During the year, Mongolia (Barbados) Corp. disposed of its
Mongolian wholly-owned subsidiaries; MGG Properties LLC and Big Sky Capital LLC. Big Sky
Capital LLC owned the wholly-owned subsidiaries, Carrollton LLC, Biggie Industries LLC, Zulu
LLC, Crescent City LLC and Oceanus LLC (together “the investment property operations”). The
Mongolian investment property operations were conducted in Big Sky Capital LLC and its
subsidiaries. MGG’s marketable securities are currently held in brokerage accounts owned by
Mongolia (Barbados) Corp and MGG US Inc.
At December 31, 2023 and 2022, the principal subsidiaries of the Company, their geographic
locations, and the ownership interest held by the Company, were as follows:
Ownership
Name
Principal Activity
December
31, 2023
December
31, 2022
Location
Mongolia (Barbados) Corp.
Holding Company and Brokerage
Account
100%
100%
Barbados
Lemontree PR LLC
Real estate operations
100%
100%
Puerto Rico
MGG US Inc.
Investments
100%
100%
United States
MGG Properties LLC
Holding Company and Real estate
operations
-
100%
Mongolia
Big Sky Capital LLC
Holding Company and Real estate
operations
-
100%
Mongolia
Carrollton LLC
Real estate operations
-
100%
Mongolia
Biggie Industries LLC
Real estate operations
-
100%
Mongolia
Zulu LLC
Real estate operations
-
100%
Mongolia
Crescent City LLC
Real estate operations
-
100%
Mongolia
Oceanus LLC
Real estate operations
-
100%
Mongolia
The Company is registered in Alberta, Canada, at its registered and records address at Centennial
Place, East Tower, 1900, 520 – 3rd Avenue S.W. Calgary, Alberta, Canada T2P 0R3. The Company’s
Canadian headquarters are located at 100 King Street West, Suite 5600, Toronto, Ontario,
M5X 1C9, Canada.
At December 31, 2023, the Company is organized into three segments based on the business
operations:
•
The MGG Corporate segment manages the Company’s corporate affairs, capital
management and public securities portfolio.
•
The Subscription Products segment manages the Company’s subscription product
business.
•
The Investment Property Operations segment manages the commercial and residential
property in Mongolia (discontinued).
33
Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
5
Basis of presentation
The consolidated financial statements of the Company have been prepared in accordance with
IFRS Accounting Standards as issued by the International Accounting Standards Board. The
material accounting policies used in the preparation of these consolidated financial statements are
summarized in note 3.
These consolidated financial statements have been prepared on a going concern basis, meaning
that the Company will continue in operation for the foreseeable future and will be able to realize
assets and discharge liabilities in the ordinary course of operations. The Company estimates it has
sufficient working capital to continue operations for the upcoming 12 months.
The consolidated financial statements, including the notes to the consolidated financial
statements, are presented in Canadian dollars ($) which is the presentation currency and the
functional currency of the parent Company. The functional currency of the Mongolian subsidiaries
(discontinued) is the Mongolian National Tögrög (MNT). The functional currency of the
Company’s operating subsidiary in Barbados in the Canadian Dollar. The functional currency of
the Company’s operating subsidiaries in the United States and Puerto Rico is the US Dollar.
These consolidated financial statements were approved by the Board of Directors of the Company
for issue on April 25, 2024.
6
Material accounting policies
a.
Basis of measurement
The consolidated financial statements have been prepared on a historical cost basis except for
certain financial instruments, and digital assets, which are measured at fair value. In
addition, these financial statements have been prepared using the accrual basis of accounting,
except for cash flow information.
b.
Basis of consolidation
These consolidated financial statements include the accounts of MGG and its wholly-owned
subsidiaries. Subsidiaries are entities controlled by MGG. Control exists when MGG is
exposed to, or has rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity. The financial statements of
the subsidiaries are prepared for the same reporting year as MGG, using consistent
accounting policies. Intercompany balances and transactions, and any unrealized income and
expenses arising from intercompany transactions, are eliminated in preparing the
consolidated financial statements. Upon the disposal of a subsidiary, amounts previously
recognized in other comprehensive income in respect of that entity, are reclassified to profit
or loss.
34
| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
c.
Discontinued Operations
A discontinued operation is a component of the Company’s business that represents a
separate major line of business or geographical area of operations that has been disposed of
or is held for sale or distribution, or is a subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs upon disposal or when the operation meets
the criteria to be classified as held for sale, if earlier. When an operation is classified as a
discontinued operation, the comparative statement of profit or loss is re-presented as if the
operation had been discontinued from the start of the comparative period. The results of
operations associated with disposal groups sold, or classified as held for sale, are reported
separately as income or loss from discontinued operations.
d.
Financial instruments
Classification and measurement
The classification of financial assets is based on the Company’s business models and the
financial asset’s contractual cash flow characteristics. Business models are reassessed
periodically, and contractual cash flow characteristics are assessed to determine whether they
are “Solely payments of principal and interest” (SPPI).
Financial assets, including hybrid contracts, are classified as either amortized cost, fair value
through other comprehensive income (FVOCI), or the residual classification of fair value
through profit and loss (FVTPL).
Financial assets with cash flows that are SPPI and are held within a business model where the
objective is to hold the financial assets in order to collect contractual cash flows (“Hold to
collect” business model) are measured at amortized cost.
Financial assets with cash flows that are SPPI and are held within a business model where the
dual objective is to hold the financial assets in order to collect contractual cash flows and
selling financial assets (“Hold to collect and sell” business model) are measured at FVOCI.
Financial assets with cash flows that are SPPI but are not held within the “Hold to collect” or
“Hold to collect and sell” business models are measured at FVTPL.
Financial assets with cash flows that do not meet the SPPI conditions are measured at FVTPL.
Marketable securities held for trading are classified as FVTPL. For all other marketable
securities that are not held for trading, the Company, on initial recognition, may irrevocably
elect to present subsequent changes in the investment’s fair value in other comprehensive
income. This election is made on an investment-by-investment basis.
Financial liabilities are measured at amortized cost unless they must be measured at fair value
through profit or loss (such as instruments held for trading or derivatives) or if the Company
elects to measure them at fair value through profit or loss.
35
Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
Financial assets and financial 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 assets
and financial liabilities are recognized on the trade date, the date on which the Company
commits to purchase or sell the investment.
Financial assets and financial liabilities are offset and the net amount reported in the
consolidated statement of financial position when there is a legally enforceable and
unconditional right to offset the recognized amounts and when there is an intention to settle
on a net basis or realize the asset and settle the liability simultaneously.
i)
Financial assets and financial liabilities held for trading
A financial asset or financial liability is classified as held for trading if it is acquired or
incurred principally for the purpose of selling or repurchasing in the near term or if on
initial recognition it is part of a portfolio of identifiable financial investments that are
managed together and for which there is evidence of a recent actual pattern of short-
term profit taking. Derivatives are also categorized as held for trading. The Company
does not classify any derivatives as hedges in a hedging relationship.
The Company makes short sales in which a borrowed security is sold in anticipation of
a decline in the market value of that security, or it may use short sales for various
arbitrage transactions.
From time to time, the Company enters into derivative financial instruments for
speculative purposes. These instruments are marked to market, and the corresponding
gains and losses for the year are recognized in the consolidated statement of operations.
The carrying value of these instruments is fair value, which approximates the amount
that would be received or paid if the derivative were to be transferred to a market
participant at the consolidated statement of financial position date. The fair value is
included in marketable securities if in an asset position or marketable securities sold
short if in a liability position.
As at December 31, 2023, the Company had a net fair market value of approximately
$5,724 (2022 - $5,159,131) of derivative financial liabilities that will expire with no
value if out of the money at expiration (Note 8).
ii)
Financial assets managed as fair value through profit or loss
Financial assets managed as fair value through profit or loss are financial instruments
that are not classified as held for trading but form part of a portfolio that is managed
and whose performance is evaluated on a fair value basis in accordance with the
Company’s documented investment strategy.
The Company’s marketable securities owned, and marketable securities sold short are all
classified as held for trading and carried at FVTPL.
Recognition, derecognition and measurement
Financial assets and financial liabilities at fair value through profit or loss are initially
recognized at fair value. Transaction costs are expensed as incurred in the consolidated
statement of operations. Subsequent to initial recognition, all financial assets and financial
liabilities at fair value through profit or loss are measured at fair value. Gains and losses
arising from changes in the fair value of financial assets or financial liabilities at fair value
through profit or loss are presented in the consolidated statement of operations in realized
and unrealized gain on short-term investments.
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Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
Financial assets at amortized cost
Classification
Financial assets at amortized cost are non-derivative financial assets with cash flows that are
“solely from the payment of principal and interest” (SPPI) and that are managed under a “held
to collect” business model.
The Company’s financial assets at amortized cost consist of cash, due from brokers, as well as
accounts receivable and long term receivable, which are included in other assets.
Recognition and measurement
At initial recognition, the Company measures its financial assets at its fair value plus
transactions costs incurred. The amortized cost is the amount at which the financial asset is
measured at initial recognition minus the principal repayments, plus or minus the cumulative
amortisation using the effective interest method of any difference between that initial amount
and the maturity amount and adjusted for any loss allowance.
Interest income is calculated by applying the effective interest rate to the gross carrying
amount of financial assets.
Financial liabilities at amortized cost
Classification
The Company’s financial liabilities at amortized cost are non-derivative liabilities that
comprise trade payables and accrued liabilities, due to broker, and CEBA loan.
Recognition and measurement
Trade payables and accrued liabilities are initially recognized at fair value. Subsequently, they
are measured at amortized cost using the effective interest method. Due to brokers and CEBA
loans are recognized initially at fair value, net of any transaction costs incurred, and
subsequently at amortized cost using the effective interest method.
Impairment
Substantially all of the Company’s financial assets at amortized cost are short-term assets and
from sources with low credit risk. The Company monitors its financial assets measured at
amortized cost and counterparty risk.
Fair Value of Financial Instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. Financial
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:
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Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
Level 1: Unadjusted quoted prices in active markets for identical assets or
liabilities
•
The Company defines active markets based on the frequency of valuation and any
restrictions or illiquidity on disposition of investments. The size of the bid/ask spread is
used as an indicator of market activity for fixed maturity securities. Fair value is based on
market price data for identical assets obtained from the investment custodian, investment
managers or dealer markets. The Company does not adjust the quoted price for such
instruments.
Level 2: Quoted prices in markets that are not active or inputs that are
observable either directly (i.e. as prices) or indirectly (i.e. derived from prices)
•
Level 2 inputs include observable market information, including quoted prices for assets
in markets that are considered less active. Fair value is based on or derived from market
price data for same or similar instruments obtained from the investment custodian,
investment managers or dealer 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
•
Level 3 assets and liabilities would include financial instruments whose values are
determined using internal pricing models, discounted cash flow methodologies, or similar
techniques that are not based on observable market data, as well as assets or liabilities for
which the determination of estimated fair value requires significant management
judgement or estimation.
The Company has determined the estimated fair values of its financial instruments based
upon appropriate valuation methodologies.
The levels of the fair value inputs used in determining estimated fair value of the
Company’s financial assets at fair value through profit or loss as at December 31, 2023
and 2022, is shown below.
Estimated fair values
December 31, 2023
Level 1
Level 2
Level 3
Marketable
securities
$46,439,938
$46,439,938
-
-
Marketable
securities sold short
($5,724)
($5,724)
-
-
$46,434,214
$46,434,214
-
-
Estimated fair values
December 31, 2022
Level 1
Level 2
Level 3
Marketable
securities
$49,237,506
$49,237,506
-
-
Marketable
Securities sold short
($5,159,131)
($5,159,131)
-
-
$44,078,375
$44,078,375
-
-
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| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
At December 31, 2023 and 2022 there were no financial assets or liabilities measured and
recognized in the statement of financial position at fair value that would be categorized as level
2 and 3 in the fair value hierarchy above.
e. Investment properties
Investment properties include properties held to earn rental revenue, for capital appreciation,
and/or for redevelopment. Investment properties are initially measured at fair value which is
most often the purchase price plus any directly attributable expenditures. Investment
properties are subsequently measured at fair value, which reflects market conditions at the
date of the consolidated statement of financial position. Gains or losses arising from changes in
the fair value of investment properties are recognized in the consolidated statement of
operations in the year they arise. A key characteristic of an investment property is that it
generates cash flows largely independently of the other assets held by an entity.
Subsequent expenditure is included in the asset’s carrying amount only when it is probable that
future economic benefits associated with the item will flow to the Company and the cost of the
item can be measured reliably. All other repairs and maintenance costs are charged to the
consolidated statement of operations during the financial period in which they occur.
Substantially all of the Company’s income generating properties and properties under
development are investment properties.
Properties under development are measured at cost.
Certain land leases held under an operating lease are classified as investment properties when
the definition of an investment property is met. At inception these leases are recognized at the
lower of the fair value of the property and the present value of the minimum lease payments.
Some properties may be partially occupied by the Company, with the remainder being held for
rental income or capital appreciation. If that part of the property occupied by the Company can
be sold separately, the Company accounts for the portions separately. The portion that is
owner-occupied is accounted for under IAS 16, and the portion that is held for rental income,
capital appreciation or both is treated as investment property under IAS 40. When the portions
cannot be sold separately, the whole property is treated as investment property only if an
insignificant portion is owner-occupied. The Company considers the owner-occupied portion
as insignificant when the property is more than 90% held to earn rental income or capital
appreciation. In order to determine the percentage of the portions, the Company uses the size
of the property measured in square metres.
The fair value of investment properties was based on the nature, location and condition of the
specific asset. The fair value is calculated at December 31 on the majority of investment
properties by an independent, professional, qualified appraisal firm, whose appraisers hold
recognized relevant, professional qualifications and who have recent experience in the locations
and categories of the investment properties valued. The remaining investment properties’ fair
value was calculated by management and was performed by qualified individuals with recent
experience in the locations and categories of the investment properties valued.
As at December 31, 2023, the Company had disposed of all investment properties (note 5).
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Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
f.
Assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, are categorized as
held for sale at the point in time when the asset or disposal group is available for immediate
sale. Management has committed to a plan to sell and is actively locating a buyer at a sales
price that is reasonable in relation to the current fair value of the asset, and the sale is probable
and expected to be completed within a one year period. Investment properties measured
under the fair value model and held for sale continue to be measured by the guidelines of IAS
40 – Investment Property. All other assets held for sale are stated at the lower of carrying
amounts and fair value less selling costs. An asset that is subsequently reclassified as held and
in use, with the exception of investment property measured under the fair value model, is
measured at the lower of its recoverable amount and the carrying value that would have been
recognized had the asset never been classified as held for sale.
g. Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to
the Company and the revenue can be reliably measured. Revenue is measured at the fair value
of the consideration received or receivable. The Company’s specific revenue recognition
criteria are as follows:
i)
Rental revenue
The Company has not transferred substantially all of the benefits and risk of ownership
of its investment properties, and therefore, the Company accounts for leases with its
tenants as operating leases. Rental revenue includes all amounts earned from tenants
related to lease agreements including property tax and operating cost recoveries.
The Company reports rental revenue on a straight-line basis, whereby the total amount
of cash to be received under a lease is recognized into earnings in equal periodic
amounts over the term of the lease.
Contingent rents are recognized as revenue in the period in which they are earned.
Amounts payable by tenants to terminate their lease prior to their contractual expiry
date (lease cancellation fees) are included in rental revenue at the time of cancellation.
ii)
Interest income
Interest income is recorded as it accrues using the effective interest method.
iii) Subscription Revenue
Subscription revenue consists of subscriptions to an investment data analytics service.
The subscription service provides customers the right to access its weekly data
publications. The Company’s subscription service represents a series of distinct
publications produced each week and are made available to the customer continuously
throughout the contractual period. However, the extent to which the customer uses the
services may vary at the customer’s discretion.
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| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
A performance obligation is a commitment in a contract with a customer to transfer
products or services that are distinct. Determining whether products and services are
distinct performance obligations that should be accounted for separately or combined
as one unit of accounting may require significant judgment. The Company’s data
analytics service is considered to have a single performance obligation where the
customer simultaneously receives and consumes the benefit, and as such revenue is
recognized ratably over the term of the contractual agreement.
For the Company’s data subscription product, the Company generally receives payment
for the full subscription contract up front.
iv) Unearned revenue
Payments received in advance of services being rendered are recorded as unearned
revenue and recognized ratably over the requisite service period.
h. Cash
Cash includes cash held at banks or on hand and demand deposits.
i.
Property and equipment
On initial recognition, property and equipment are valued at cost, being the purchase price
and directly attributable cost of acquisition or construction required to bring the asset to the
location and condition necessary to be capable of operating in a manner intended by the
Company, including appropriate borrowing costs and the estimated present value of any
future unavoidable costs of dismantling and removing items. Property and equipment is
subsequently measured at cost less accumulated depreciation, less any accumulated
impairment losses. All repairs and maintenance costs are charged to the consolidated
statement of operations during the period in which they occur.
Depreciation is recognized in the consolidated statement of operations and is provided on a
straight-line basis over the estimated useful life of the assets as follows:
Buildings
Straight-line over 40 years
Furniture and fixtures
Straight-line over 5 to 10 years
Equipment
Straight-line over 1 to 5 years
Impairment reviews are performed when there are indicators that the net recoverable amount
of an asset may be less than the carrying value. The net recoverable amount is determined as
the higher of an asset’s fair value less cost to dispose and value in use. Impairment is
recognized in the consolidated statement of operations, when there is objective evidence that
a loss event has occurred which has impaired future cash flows of an asset. In the event that
the value of previously impaired assets recovers, the previously recognized impairment loss is
recovered in the consolidated statement of operations at that time.
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Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
An item of property and equipment is derecognized upon disposal or when no further
economic benefits are expected from its use. Any gain or loss arising on de-recognition of the
asset (calculated as the difference between the net disposal proceeds and the carrying amount
of the asset) is included in the consolidated statement of operations in the period the asset is
derecognized.
Depreciation methods, useful lives and residual values are reviewed at each financial year end
and adjusted if appropriate.
j.
Income taxes
Income taxes are comprised of both current and deferred taxes. Current tax and deferred tax
are recognized in the statement of operations except to the extent that it relates to items
recognized in Other Comprehensive Income (“OCI”) or directly in equity. In this case, the tax
is recognized in OCI or directly in equity respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the consolidated statement of financial position date in the countries
where the Company and its subsidiaries operate and generate taxable income and are
measured at the amount expected to be recovered from or paid to the taxation authorities for
the current and prior periods.
Deferred income tax assets and liabilities are recorded for the expected future income tax
consequences of events that have been included in the consolidated financial statements or
income tax returns. Deferred income taxes are recognized for all significant temporary
differences between the tax and financial statement bases for assets and liabilities and for
certain carry-forward items, such as losses and tax credits not utilized from prior years.
However, if the deferred income tax arises from initial recognition of an asset or a liability in
a transaction other than a business combination that at the time of the transaction affects
neither accounting nor taxable income, it is not accounted for.
Recognition of deferred tax assets for unused tax losses, tax credits and deductible temporary
differences is restricted to those instances where, in the opinion of management, it is probable
that future taxable profit will be available against which the deferred tax asset can be realized.
Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates, on the date the changes in tax laws and rates have been enacted or substantively
enacted.
k. Foreign exchange translations
Foreign currency transactions are translated at the rate of exchange in effect on the dates they
occur. Gains and losses arising as a result of foreign currency transactions are recognized in
the consolidated statement of operations. At reporting dates, monetary items are translated
at the closing rate of exchange in effect at the consolidated statement of financial position
date.
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Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
For the purpose of the consolidated financial statements, the results and financial position of
the Company’s operations are expressed in Canadian dollars, which is the functional currency
of the parent, and the presentation currency of the consolidated financial statements.
The Company translates the assets, liabilities, income and expenses of its subsidiaries which
have a functional currency other than the Canadian dollar, to Canadian dollars on the
following basis:
•
Assets and liabilities are translated at the closing rate of exchange in effect at the
consolidated statement of financial position date.
•
Income and expense items are translated using the average rate for the month in which
they occur, which is considered to be a reasonable approximation of actual rates.
•
Equity items are translated at their historical rates.
•
The translation adjustment from the use of different rates is included as a separate
component of equity, in accumulated other comprehensive income (loss).
k. Comprehensive income
Comprehensive income consists of net income (loss) and OCI. OCI includes changes in
unrealized gains (losses) on the translation of subsidiaries with a functional currency other
than the Canadian dollar.
l.
Share capital and deferred share issuance costs
Ordinary shares issued by the Company are classified as equity. Costs directly identifiable
with the raising of capital will be charged against the related share issue, net of any tax effect.
Costs related to shares not yet issued are recorded as deferred financing costs. These costs will
be deferred until the issuance of the shares to which the costs relate, at which time the costs
will be charged against the related share issuance or charged to operations if the shares are
not issued.
m. Earnings (loss) per share
For both continuing and discontinued operations, the Company presents basic and diluted
earnings (loss) per share (EPS) data for its common shares. Basic EPS is calculated by dividing
the results of operations attributable to ordinary shareholders of the Company by the
weighted average number of common shares outstanding during the period. Diluted EPS is
determined by adjusting the results of operations attributable to common shareholders and
the weighted average number of common shares outstanding for the effects of all dilutive
potential common shares, which comprise share options.
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Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
n. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided
to the chief operating decision maker. The chief operating decision maker, who is responsible
for allocating resources and assessing performance of operations, has been identified as the
Chief Executive Officer. The Company is now managed as three operating segments based on
how information is produced internally for the purpose of making operating decisions. The
segments are defined as investment property operations, subscription products and
corporate.
o. Leases
IFRS 16, Leases (“IFRS 16”) sets out the principles for the recognition, measurement,
presentation and disclosure of leases for both the lessee and the lessor.
From a lessee point of view, the Company has entered into Mongolian government land leases
on some of its investment properties. The Company, as a lessee, has determined, based on an
evaluation of the terms and conditions of the arrangements, that these land leases meet the
definition of an investment property and has classified them as such; therefore, the fair value
model is applied to those assets, and gains and losses on changes in fair value are recorded in
the consolidated statements of operations. The payments on these leases are nominal, and
are therefore exempt from recognition as low-value leases.
The Company has also entered into commercial and residential property leases on its
investment properties. The Company as a lessor, has determined, based on an evaluation of
the terms and conditions of the arrangements, that it retains the significant risks and rewards
of ownership of these properties and therefore accounts for these agreements as operating
leases.
For other leases of low-value assets or short-term leases that end within 12 months of the
commencement date and which have no renewal or purchase option, the Company has
elected to apply the recognition exemptions specified in IFRS 16, allowing the Company to
continue to expense the lease payments in the period in which they are incurred. The total of
such expenses was $ 9,869 for the 2023 fiscal year (2022 - $4,620).
p. Provisions and contingent liabilities
Provisions are recognized when the Company has a present legal or constructive obligation as
a result of a past event, it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation. When the Company expects some or all of the provision to be
reimbursed, the reimbursement is recognized as a separate asset but only when the
reimbursement is virtually certain. The expense of any provision is recognized in the
consolidated statement of operations net of any reimbursement. If the effect of the time value
of money is material, provisions are discounted using a current pre-tax rate that reflects,
where appropriate, the risks specific to the liability. Where discounting is used, the increase
in the provision due to the passage of time is recognized as a borrowing cost.
Contingent liabilities are disclosed if there is a possible future obligation as a result of a past
event, or if there is a present obligation as a result of a past event but either a payment is not
probable or the amount cannot be reasonably estimated.
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| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
q. Due from and to brokers
Amounts due from and to brokers represent negative cash balances or margin accounts, and
pending trades on the purchase or sale of securities. Where terms in the prime brokerage
agreements permit the prime broker to settle margin balances with cash accounts or
collateral, the due from brokers cash balances are offset against the due to brokers margin
balances at each prime broker.
r. Marketable Securities
The Company presents results from trading marketable securities on both a realized and
unrealized basis separately in the consolidated statements of operations. A realized gain or
loss is recorded upon transfer of ownership of a marketable security, calculated as proceeds
(net of broker fees) less its cost which is measured on a first-in-first-out (“FIFO”) basis.
Unrealized gains and losses are the fair value adjustments to positions still held at reporting
dates.
s. Futures Contracts
The Company may invest in financial futures contracts (“futures contracts”) for the purpose
of hedging its existing portfolio securities or for speculative reasons.
Upon entering into a futures contract, the Company is required to pledge to the broker an
amount of cash and/or other assets equal to a certain percentage of the contract amount. This
payment is known as “initial margin.” Subsequent payments, known as “variation margin,”
are calculated each day, depending on the daily fluctuations in the fair value/market value of
the underlying assets. An unrealized gain or loss equal to the variation margin is recognised
on a daily basis and carried on the consolidated statements of financial position. When the
contract expires or is closed the gain (loss) is realised and is presented in the Statement of
Operations as a realised gain (loss) on short term investments. Futures contracts are valued
daily at their last quoted sale price on the exchange they are traded. A “sale” of a futures
contract means a contractual obligation to deliver the securities or foreign currency called for
by the contract at a fixed price at a specified time in the future. A “purchase” of a futures
contract means a contractual obligation to acquire the securities, commodities or foreign
currency at a fixed price at a specified time in the future.
t. Current Accounting Policy Changes
International Accounting Standard (“IAS”) 1 and IFRS Practice Statement (“PS”) 2: In
February 2021, the IASB issued amendments to IAS 1 and the IFRS PS 2, Making Materiality
Judgements, to provide guidance on the application of materiality judgments to accounting
policy disclosures. The amendments to IAS 1 replace the requirement to disclose “significant”
accounting policies with a requirement to disclose “material” accounting policies. The
standard was adopted by the Company on January 1, 2023.
International Accounting Standard (“IAS”) 1 and IFRS Practice Statement (“PS”) 2: In
February 2021, the IASB issued amendments to IAS 1 and the IFRS PS 2, Making Materiality
Judgements, to provide guidance on the application of materiality judgments to accounting
policy disclosures. The amendments to IAS 1 replace the requirement to disclose “significant”
accounting policies with a requirement to disclose “material” accounting policies. The
standard was adopted by the Company on January 1, 2023.
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Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
u. Future Accounting Policy Changes
IAS 1, Presentation of Financial Statements (“IAS 1”) The IASB issued ‘Classification of
Liabilities as Current or Non-Current (Amendments to IAS 1)’ in January 2020, affecting the
presentation of liabilities in the statement of financial position. In October 2022, the IASB
issued ‘Non-current Liabilities with Covenants (Amendments to IAS 1)’ affecting the required
disclosures for non-current liabilities with covenants. The narrow-scope amendments to IAS 1
clarify that liabilities are classified as either current or non-current, depending on the rights
that exist at the end of the reporting period. Classification is unaffected by the expectations of
the entity or events after the reporting date. The amendments also clarify what IAS 1 means
when it refers to the ‘settlement’ of a liability. The amendments must be applied
retrospectively in accordance with the normal requirements of IAS 8, Accounting Policies,
Changes in Accounting Estimates and Errors (“IAS 8”). The amendments are effective for
annual periods beginning on or after January 1, 2024, with earlier application permitted. The
amendments have not been early adopted by the Company. The Company is currently
assessing any potential impact of these amendments.
7
Significant accounting estimates and judgements
The preparation of financial statements in accordance with IFRS requires management to make
estimates and assumptions about the future that affect the reported amounts of assets and
liabilities. Estimates and judgements are continually evaluated based on historical experiences and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from these estimates and assumptions.
The effect of a change in an accounting estimate is recognized prospectively by including it in the
consolidated statements of operations in the period of the change, if the change affects that period
only, or in the period of the change and future periods, if the change affects both. Significant
estimates made in the preparation of these consolidated financial statements include the following
areas:
•
Fair value of investment properties – An external appraiser estimates the fair value of the
majority of investment properties by dollar value annually.
The remaining balance of investment properties was valued internally. The fair value of
investment properties is based on the nature, location and condition of the specific asset.
The fair value of investment properties represents an estimate of the price that would be
made in an arm’s length transaction between knowledgeable, willing parties. This fair
value assumes that the Company is in possession of the property’s land and property titles
where applicable. Management judges that the Company has the appropriate titles for
each of the properties classified as Investment Properties. Properties whereby
management judges that the Company’s titles are at risk, have been impaired to reflect the
level of risk estimated by management.
As at December 31, 2023, the Company had disposed of all investment properties (note 5).
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| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
•
The Company operates in the emerging real estate market of Mongolia, which given its
current economic, political and industry conditions, gives rise to an increased inherent risk
given the lack of reliable and comparable market information. The significant estimates
underlying the fair value determination are disclosed in note 11. Changes in assumptions
about these factors could materially affect the carrying value of investment properties. In
addition, the significant global uncertainty resulting from the novel coronavirus (“COVID-
19”) pandemic has reduced the availability of reliable market metrics to inform opinions,
and therefore a higher degree of judgment must be applied. Consequently, fair values are
subject to significant change.
As at December 31, 2023, the Company had disposed of all investment properties in
Mongolia (note 5).
•
Valuation of marketable securities – The Company recognizes marketable securities at fair
value. Fair value is determined on the basis of market prices from independent sources, if
available. If there is no market price, then the fair value is determined by using valuation
models with inputs derived from observable market data where possible but where
observable data is not available, judgement is required to establish fair values.
•
Operating environment of the Company – Mongolia displays many characteristics of an
emerging market including relatively high inflation and interest rates. The tax and customs
legislation in Mongolia is subject to varying interpretations and frequent changes. The
future economic performance of Mongolia is tied to the continuing demand from China
and global prices for commodities as well as being dependent upon the effectiveness of
economic, financial and monetary measures undertaken by the Government of Mongolia
together with tax, legal, regulatory and political developments. Management is unable to
predict all developments that could have an impact on the Mongolian economy and
consequently what effect, if any, they could have on the future financial position of the
Company.
As at December 31, 2023, the Company had disposed of all investment properties in
Mongolia (note 5).
Significant judgements made in the preparation of these consolidated financial statements include
the following:
•
Judgement is required in determining whether an asset meets the criteria for classification
as assets held for sale and or as discontinued operations in the consolidated financial
statements. Criteria considered by management include the existence of and commitment
to a plan to dispose of the assets, the expected selling price of the assets, the probability of
the sale being completed within an expected time frame of one year and the period of time
any amounts have been classified within assets held for sale.
The Company reviews the criteria for assets held for sale each quarter and reclassifies such
assets to or from this financial position category as appropriate. On completion of the sale,
management exercises judgement as to whether the sale qualifies as a discontinued
operation.
As at December 31, 2023 and 2022, management has made the judgment that none of the
Company’s assets meet the criteria to be classified as held for sale. While this is due to a
number of factors, a primary reason is that due to the conditions of the Mongolian
economy and the lack of liquidity in the market, management was unable to conclude that
the sale of any significant size asset could be considered highly probable until these sales
closed during the year ended December 31, 2023 (notes 5 and 12).
47
Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
•
Judgement is required in determining whether the Company’s investment property and
land use rights titles are at risk. As at December 31, 2020, management made the
judgment that investment properties whereby the land title has recently expired but is
expected to be renewed in the near future should continue to be classified as investment
properties. Properties whereby management judges that the Company’s titles are at risk,
have been impaired to reflect the level of risk estimated by management. As of December
31, 2022, all land titles of the Company’s investment properties were current. As of
December 31, 2023, the Company had disposed of all its investment properties (note 5).
5
Discontinued operations
During the year ended December 31, 2023, the Company disposed of its interests in all its
Mongolian subsidiaries including; Biggie Industries LLC, Zulu LLC, Crescent City LLC, MGG
Properties LLC, Big Sky LLC, Carrolton LLC and Oceanus LLC. The sale was for cash consideration
of $10,320,149 and the buyer assuming all of the subsidiaries’ liabilities. As a result of these sales,
the Company disposed of five investment properties and its Mongolian headquarters included in
property, plant and equipment.
The Company recorded a loss of $16,791,242 on disposal of the subsidiaries noted above primarily
related to the recycling of foreign exchange transaction as shown below:
For the year ended
December 31
2023
$
Consideration
Cash, net of taxes
10,320,149
Liabilities assumed:
Trade and other payables
99,692
Prepaid rent and other security deposits
51,630
Property liability
260,044
Total consideration
10,731,515
Net assets at date of disposition
Cash
192,145
Prepaids
14,155
Receivables
50,275
PP&E
1,205,668
Investment Property
9,095,765
Total Assets
10,558,008
Gain on sale of subsidiaries before other items
173,507
Recycling of foreign exchange on disposal of subsidiary
(16,964,749)
Loss on sale of subsidiaries
(16,791,242)
48
| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
The reclassification of accumulated other comprehensive income relates to the accumulated
revaluation of the Company’s assets and liabilities denominated in currencies outside of the Canadian
dollar in accordance with the Company’s accounting policy for the translation of its former
subsidiaries.
The Company discontinued its investment properties business in Mongolia during the year ended
December 31st, 2023 and the following summarizes the net income from discontinued operations for
the respective periods.
Comprehensive Statement of Operations of Discontinued Operations
For the year ended
December 31
2023
$
2022
$
Revenue
Rental income
519,415
798,826
Other revenue
23,500
100,572
Loss on disposal of investment properties
(452,035)
(146,544)
Total Revenue
90,880
752,854
Expenses
Salaries and wages
478,263
354,999
Other expenses
1,024,489
659,526
Depreciation
6,495
73,623
Total expenses
(1,509,247)
(1,088,148)
Interest income
14,162
-
Unrealized gain on fair value of investment properties
-
622,186
Impairment on property and equipment
-
127,538
Gain on disposal of Mongolian subsidiaries
173,507
-
Foreign currency gain (loss)
(35,595)
51,820
Total other income
152,074
801,544
Net income (loss) before tax
(1,266,293)
466,250
Income tax recovery
240,010
31,801
Gain (loss) from discontinued operations
before other items
(1,026,283)
498,051
Reclassification of accumulated other comprehensive
income
(16,964,749)
-
Loss from discontinued operations
(17,991,032)
498,051
49
Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
Assets held for sale and discontinued operations (continued)
Cash flows from (used in) discontinued operations:
Year
ending
December 31,
2023
Year
ending
December 31,
2022
$
$
Net income for the year from discontinued
operations
(17,991,032)
498,051
Depreciation
6,495
73,623
Deferred Taxes
(354,000)
(62,000)
Loss on disposal of investment properties
452,035
146,544
Gain on disposal of subsidiaries
(173,507)
-
Reclassification of other comprehensive income
16,964,749
-
Reversal of impairment of property and equipment
(note 13)
-
(127,538)
Unrealized gain on fair value adjustment on
investment properties (note 12)
-
(622,186)
Changes in non-cash working capital items:
Other asset
(7,594)
240,838
A/P accruals
(255,702)
131,936
Income tax payable
(30,199)
30,199
Net cash from (used in) operating activities
(1,388,755)
309,467
Net cash proceeds from investing activities
Net proceeds on sale of investment properties
471,131
-
Net proceeds on sale of subsidiaries, net of cash
disposed of
10,128,004
919,621
Net cash from investing activities
10,599,135
919,621
Increase in cash from discontinued
operations
9,210,380
1,229,088
50
| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
6 Cash and cash equivalents
Cash at banks earns interest at floating rates based on daily bank deposit rates. The component of
cash accounts currently consists only of cash amounts held in banks or on hand.
The following table discloses the geographical location of cash:
2023
$
2022
$
Barbados
5,710,431
64,643
Canada
3,345,795
1,579,747
United States
678,998
213,209
Mongolia
-
193,646
Total cash
9,735,224
2,051,245
Cash is not collateralized. The carrying amount of cash approximates fair value.
The following table discloses the breakdown of cash and cash equivalents:
2023
$
2022
$
Cash
7,053,679
707,419
Cash equivalents*
2,681,545
1,343,826
Total cash and cash equivalents
9,735,224
2,051,245
*Cash equivalents are held in a GIC at a Canadian bank.
The credit quality of cash balances may be summarized based on Standard and Poor’s ratings or
equivalents of Moody’s and/or Fitch ratings. The credit quality at December 31 was as follows:
2023
$
2022
$
Cash on hand
567
1,750
A or A+ rated
3,274,006
1,620,438
B- or B+ rated
90,689
269,152
BBB+ rated
5,709,270*
63,361*
Unrated
660,692
96,544
Total cash
9,735,224
2,051,245
The unrated balance relates to one private bank in Barbados (2022 – one), one brokerage company
in Canada (2022 – one). The BBB+ rating relates to a brokerage company in the United States.
51
Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
7
Credit facilities and due from and due to brokers
a) Credit facilities
During the year ended December 31, 2020, the Company qualified for a government-guaranteed
line of credit (Canada Emergency Business Account “CEBA”) of $40,000 which was interest-free
until December 31, 2020. On January 1, 2021, the line of credit converted to a 2-year, 0% interest
term loan to be repaid by December 31, 2022 at which time a 25% balance forgiveness ($10,000)
will apply if the loan is repaid by such date. On January 1, 2021 the Company qualified for an
additional $20,000 2-year, 0% interest term loan to be repaid by December 31, 2022. The
Company has the option to exercise a 3-year term extension on the loans by December 31, 2022, if
the loans are not repaid by then, at which time, the remaining unpaid balance of the loans will bear
interest at 5% interest per annum during the extension period and must be paid in full by December
31, 2025. In October 2022, the Government announced that the deadline for the partial loan
forgiveness and interest-free period has been extended to December 31, 2023. The Company
repaid $40,000 in December 2023, and the $20,000 has been forgiven on January 2, 2024.
Short and long term debt
2023
$
2022
$
Current
20,000
60,000
20,000
60,000
b) Due from and due to brokers
The Company has margin facilities with its prime brokers. As at December 31, 2023 and 2022, the
Company’s amounts due to brokers have no specific repayment terms, and they are governed by
the margin terms set forth in the prime brokerage agreements. The fair value of the collateral-
listed equity securities is calculated daily and compared to the Company’s margin limits. The prime
brokers can at any time demand full or partial repayment of the margin balances and any interest
thereon or demand the delivery of additional assets as collateral.
Due from and due to brokers balances are presented on a net basis by broker in the consolidated
statement of financial position. Under the prime broker agreements, the broker may upon events
of default offset, net and/or regroup any amounts owed by the Company to the broker by amounts
owed to the Company by the broker.
52
| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
The following tables set out the offsetting of the Company’s various accounts with prime brokers.
Due from and due to brokers
2023
Gross
amounts due
from brokers
$
Gross
amounts due
to brokers
$
Net
amounts
$
Due from brokers
22,172
(22,021)
151
Due to brokers
-
(5,536,537)
(5,536,537)
2022
Gross
amounts due
from brokers
$
Gross
amounts due
to brokers
$
Net
amounts
$
Due from brokers
14,203
(14,203)
-
Due to brokers
-
(7,393,046)
(7,393,046)
53
Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
8
Equity investments and other holdings, securities sold short, derivatives
and futures
Equity Investments and other holdings
December 31,
December 31,
2023
$
2022
$
Assets
Equity securities
42,823,146
34,826,329
Options on futures
3,616,792
14,411,177
Calls
-
-
Puts
-
-
46,439,938
49,237,506
Securities sold short and derivative liabilities
December 31,
2023
$
December 31,
2022
$
Liabilities
Options on futures
5,724
5,127,327
Calls
-
-
Puts
-
31,804
5,724
5,159,131
A “purchase” of a futures contract means a contractual obligation to acquire the securities,
commodities or foreign currency at a fixed price at a specified time in the future and is not included
on the consolidated statements of financial position. An unrealized gain or loss equal to the change
in value of the contract is recognised on a daily basis and carried on the consolidated statements
of financial position as futures contracts.
54
| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
9
Subscription Revenue
The Company’s revenue from contracts with customers is comprised of investment data analytics
subscriptions.
The Company has built a data analytics service, named KEDM, that tracks various event-driven
strategies. Revenue earned during the period is classified as subscription revenue on the
consolidated statements of operations. Revenue collected that has not yet been earned, have been
classified as unearned revenue and will be classified according to the Company’s revenue policies
described in note 3.
Contract Liabilities:
As of December 31, 2023, the Company has unearned revenue of $1,126,439 to be fully recognized
in the year ended December 31, 2024 in accordance with contract terms (December 31, 2022 -
$1,547,154).
December 31,
December 31,
2023
$
2022
$
Opening balance
1,547,154
1,035,471
Additions
2,792,680
3,685,714
Revenue earned
(3,213,395)
(3,174,031)
Closing balance
1,126,439
1,547,154
When the Company first launched its subscription business, the Company engaged an arm’s length
company to compile and produce the KEDM report on an ongoing basis, while MGG acted as the
distributor and marketer of the product. As a part of this engagement, MGG paid the direct and
approved expenses related to producing KEDM in addition to 20% of quarterly earned revenues
above a threshold of $125,000 USD. Beginning on January 1, 2023, MGG has engaged Praetorian
PR LLC (PPR), a Puerto Rican company owned by the MGG’s Chairman and CEO, to produce
KEDM. Under the terms of the agreement, MGG pays PPR a monthly fee of USD $50,000 along
with 20% of any quarterly revenue in excess of USD $125,000. The Company paid $488,981 in
revenue share during 2023 (December 31, 2022 - $476,236), classified as subscription product
expenses in note 22. Most of the expenses related to the unearned revenue have not yet been
incurred and are not reflected in the Company’s financial statements. MGG owns all intellectual
property related to KEDM and PPR disclaims any ownership or rights to the intellectual property.
The agreement can be discontinued by either party following a reasonable transition period and
MGG can engage a substitute party to continue the production of KEDM.
10 Digital assets
December 31,
December 31,
2023
$
2022
$
Balance - beginning of year
284,253
266,890
Net purchases
134,332
94,910
Unrealized gain (loss)
29,313
(98,700)
Foreign currency gain (loss)
(9,026)
21,153
Balance - end of year
438,872
284,253
The Company has a digital currency account at Kraken Custody which holds Monero (XMR)
cryptocurrency.
55
Mongolia Growth Group Ltd |
12 Investment properties
2023
$
2022
$
Balance - beginning of year
10,086,956
11,885,907
Disposals
(10,018,931)
(1,066,165)
Fair value adjustment
-
622,186
Foreign exchange adjustments
(68,025)
(1,354,972)
Reclassification to asset held for sale
-
-
Balance – end of year
-
10,086,956
During the year ended December 31, 2023, the Company directly sold three properties for net
proceeds of $471,131, resulting in a net loss of $452,035 and sold four properties with a value of
$9,095,765 via the sale of subsidiaries (note 5). During the year ended December 31, 2022, the
Company sold five properties for net proceeds of $919,621 resulting in a net loss of $146,544.
Losses related to the sale of investment properties have been included in loss from discontinued
operations (note 5) for the years presented.
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
11 Other assets
Short term other assets
December 31,
2023
$
December 31,
2022
$
Accounts receivable
39,652
15,172
Prepaid expenses
28,244
29,078
67,896
44,250
Long term other assets
December 31,
2023
$
December 31,
2022
$
Long term receivable
-
98,364
Allowance for doubtful debt
-
(49,182)
-
49,182
According with the disposal of the sale of its Mongolian operations, the Company wrote off its
receivable of $84,836 from a property sold in 2019 which is included in the “Other expense”
caption in loss from discontinued operations (note 5). In 2022, the Company had filed court
proceedings against the debtor and has made an allowance for 50% of the amount. The company
received $13,528 during the third quarter of 2023.
56
| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
Investment properties by major category are as follows:
2023
$
2022
$
Office
-
931,736
Retail
-
5,508,385
Land and redevelopment sites
-
3,646,835
-
10,086,956
Property valuation
All investment properties were disposed of during the year ended December 31, 2023 with the
resulting gains and losses included in loss from discontinued operations (note 5) for the years
presented.
During the year ended December 31, 2022, investment properties with an aggregate fair value of
$10,020,823, and one property classified as PPE with a value of $1,203,975, were valued by
external independent valuation professionals who are deemed to be qualified appraisers who hold
a recognized, relevant, professional qualification and who have recent experience in the locations
and categories of the investment properties valued. The remaining balance of investment
properties were valued internally.
The Company determined the fair value of investment properties using the income approach and
the sales comparison approach, which are generally accepted appraisal methodologies.
Under the income approach, the methodology used was the direct capitalization approach which
is based on rental income and yields. Rental incomes were based on current rent and reasonable
and supportable assumptions that represent what knowledgeable, willing parties would assume
about rental income from future rent in light of current conditions adjusted for non-recoverable
property costs. Yields were determined using data from real estate agencies, market reports and
property location among other things in determining the appropriate assumptions. Under this
method, year one income is stabilized and capped at a rate deemed appropriate for each investment
property.
The sales comparison approach analyzes all available information of sales of comparable
properties that have recently taken place or have recently been marketed and adjusts the price to
reflect differences in the property valued and sold.
The entire portfolio of investment properties has been valued using the income approach, the sales
comparison approach or a combination thereof.
57
Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
As at December 31, 2o22, the Company had a standing agreement with the owner of a 42 sq. meter
apartment which has been included in one of the Company’s properties classified as land and
redevelopment. The agreement entitles the owner of the apartment to 84 sq. meters of space on
the first floor of a new building to be built on this land. In this agreement, the Company had an
obligation to complete the construction of a new building by the end of fiscal 2017 and the
agreement was not extended. During the year ended December 31, 2023, the liability of $260,044
was included in the subsidiary disposal group in trades payables and accrued liabilities (note 5).
As at December 31, 2022, a liability of $261,648 was included in the Company’s trade payables and
accrued liabilities (note 14) to reflect this liability. In addition, the Company has recognized an
unrealized fair value impairment of $nil (2022 - $887,732) included in investment properties in
excess of the fair value adjustment calculated using the valuation approaches described. This
adjustment is management’s estimate of the markets perception of the risk related to this
agreement and is included within the unrealized gain (loss) on fair value adjustment on Investment
properties within profit and loss.
Under the fair value hierarchy, the fair value of the Company's investment properties is considered
a level three, as defined in note 3.
The key valuation assumptions for commercial investment properties are as follows:
2023
Maximum
Minimum
Weighted- average
Capitalization rate
-
-
-
2022
Maximum
Minimum
Weighted- average
Capitalization rate
13.1%
12.6%
13.0%
The following sensitivity table outlines the impact of a 0.25% change in the weighted average
capitalization rate on investment properties at 2022:
Change to fair value if
capitalization rate
increased 0.25%
Change to fair value if
capitalization rate
decreases 0.25%
Investment property
(16,984)
17,651
Additional valuation assumptions include the rental revenue per square meter, grade quality of the
property, and comparable market data.
At December 31, 2023, investment properties of $nil (2022 -$66,188) had no rental revenue
associated with them.
Investment properties included land use rights held under operating leases with an aggregate fair
value of $nil (2022 - $3,646,835) at December 31, 2023.
58
| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
Certain investment properties held by the Company are leased out (the Company is the lessor)
under operating leases. The future minimum lease payments under non-cancellable leases are as
follows:
2023
$
2022
$
Less than 1 year
-
468,191
Between 1 and 5 years
-
226,289
Beyond 5 years
-
-
-
694,480
Direct operating expenses arising from investment properties that generated rental income during
the year was 2023 was $1,121,622 (2022 - $769,501) and have been included in loss from
discontinued operations (note 5) for the years presented. Direct operating expenses arising from
investment properties that did not generate rental income during the year was $nil (2022 -$1,352)
and have been included in loss from discontinued operations (note 5) for the years presented.
The Company’s operating leases, in which the Company is the lessor, are structured such that the
weighted average length of the leases as at December 31, 2023 was nil (12.6 months as at December
31, 2022), calculated as a percentage of monthly revenues.
59
Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
13 Property and equipment
2023
Furniture and
fixtures
$
Equipment
$
Buildings
$
Total
$
Cost
At January 1
208,070
161,107
3,175,061
3,544,238
Additions
-
-
-
-
Disposals
(30,870)
(43,243)
(1,680,298)
(1,754,411)
Foreign exchange
adjustment
(26,871)
(71,281)
(41,261)
(139,413)
At December 31
150,329
46,583
1,453,502
1,650,414
2023
Furniture and
fixtures
$
Equipment
$
Buildings
$
Total
$
Accumulated
depreciation
At January 1
65,220
116,142
558,644
740,006
Depreciation
32,377
11,931
41,211
85,519
Disposals
(30,870)
(43,243)
(474,630)
(548,743)
Foreign exchange
adjustment
(22,337)
(59,633)
(57,378)
(139,348)
At December 31
44,390
25,197
67,847
137,434
Net book value
at December 31
105,939
21,386
1,385,655
1,512,980
During the year ended December 31, 2023, the Company sold property, plant and equipment
(including its Mongolian headquarters with a carrying value of $1,192,531) with a value of
$1,205,668 via the sale of subsidiaries (note 5).
60
| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
2022
Furniture and
fixtures
$
Equipment
$
Buildings
$
Total
$
Cost
At January 1
59,993
129,798
2,726,198
2,915,989
Additions
150,331
49,827
511,655
711,813
Disposals
(674)
(17,465)
-
(18,139)
Reversal of impairment
-
-
127,538
127,538
Foreign exchange
adjustment
(1,580)
(1,053)
(190,330)
(192,963)
At December 31
208,070
161,107
3,175,061
3,544,238
2022
Furniture and
fixtures
$
Equipment
$
Buildings
$
Total
$
Accumulated
depreciation
At January 1
48,719
122,182
524,881
695,782
Depreciation
17,574
12,325
73,763
103,662
Disposals
(674)
(17,465)
-
(18,139)
Foreign exchange
adjustment
(399)
(900)
(40,000)
(41,299)
At December 31
65,220
116,142
558,644
740,006
Net book value
at December 31
142,850
44,965
2,616,417
2,804,232
61
Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
14 Trade payables and accrued liabilities
2023
$
2022
$
Trade and accrued payables
408,773
339,191
Property commitment
-
261,648
Security deposits
6,613
58,563
415,386
659,402
The carrying amounts above reasonably approximate the fair value at the consolidated statement
of financial position date. All trade and other payables are current.
15 Income taxes
a) Effective tax rate
The income tax expense reflects an effective tax rate that differs from the combined tax rate
for Canadian federal and provincial corporate taxes for the following:
2023
$
2022
$
Income before tax from continuing operations
4,123,516
10,161,451
Income (loss) before tax from discontinued operations
(1,266,293)
466,250
Net income (loss) before income taxes
(2,857,223)
10,627,701
Combined statutory tax rate
26.5%
26.5%
Expected income tax (recovery)
757,000
2,816,000
Effect of:
Permanent differences
1,119,323
1,152,000
Change in statutory, foreign tax, foreign exchange
rates and other
(4,923,000)
(1,043,721)
Adjustment to prior years provision versus
statutory tax returns and expiry of non-capital
losses
-
(288,000)
Change in unrecognised deductible tax differences
2,119,000
53,000
Total income tax expense (recovery)
(927,677)
2,689,279
Income tax reported in the statement of profit or loss
(687,667)
2,721,080
Income tax attributable to discontinued operations
(240,010)
(31,801)
(927,677)
2,689,279
Provision for income taxes
Current
1,430,333
642,837
Deferred (recovery)
(2,118,000)
2,078,243
(687,667)
2,721,080
62
| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
b) Deferred income taxes
Differences between IFRS and statutory taxation regulations in Mongolia give rise to temporary
differences between the carrying amount of assets and liabilities for financial reporting purposes
and their tax bases. The Company did not recognize a deferred tax asset in these consolidated
financial statements as there is uncertainty with regard to the recoverability of the asset for both
the Canadian and Mongolian entities.
The significant components of the Company’s deferred tax assets and liabilities are as follows:
2023
$
2022
$
Deferred Tax Assets (liabilities)
Property and equipment
93,000
67,000
Investment properties
-
(354,000)
Marketable securities
(1,515,522)
(2,695,522)
Digital assets
28,000
33,000
Foreign accrual capital loss
2,923,000
Non-capital losses available for future period
162,000
49,000
1,690,478
(2,900,522)
Unrecognized deferred tax assets
(2,191,000)
(72,000)
Net deferred tax liability
(500,522)
(2,972,522)
The significant components of the Company’s temporary differences, unused tax credits and
unused tax losses that have not been included on the consolidated statement of financial position
are as follows:
Temporary Differences
2023
Expiry Date
Range
2022
Expiry Date
Range
Property and equipment
292,000
No expiry date
62,000
No expiry date
Foreign accrual capital loss
7,542,000
2043
-
No expiry date
Allowable capital losses
105,000
No expiry date
-
No expiry date
Non-capital losses available
for future period
192,000
2031 to 2033
131,000
2031 to 2032
Tax attributes are subject to review, and potential adjustment by tax authorities.
63
Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
16 Share capital and contributed surplus
Common shares
The Company is authorized to issue an unlimited number of common and preferred shares.
The issued and outstanding common shares are as follows:
Number of
shares
Amount
$
Balance, December 31, 2021
27,778,499
51,004,122
Shares re-purchased
-
(456,992)
Treasury stock cancelled
(68,000)
-
Balance, December 31, 2022
27,710,499
50,547,130
Shares re-purchased
-
(774,048)
Treasury stock cancelled
(729,800)
-
Balance, December 31, 2023
26,980,699
49,773,082
As at December 31, 2023, the Company held 105,000 (2022-234,600) shares in treasury.
Options
There were no options outstanding as of December 31, 2023 and 2022 and the Company’s option
plan lapsed in 2021.
Restricted Stock Awards (RSA)
There are no RSAs outstanding as of December 31, 2023.
During 2022, the Company renewed its Restricted Stock Award plan (“the RSA Plan”) whereby it
can grant RSAs to directors, officers, employees, and technical consultants of the Company. The
maximum number of RSAs that may be reserved for issuance under the RSA Plan is limited to
300,000 common shares. The Restricted Period in respect to the Restricted Shares shall end once
the Restricted Shares shall become vested. To date, no RSAs have been granted.
Earnings per share
The following table summarizes the shares used in calculating earnings (loss) per share:
2023
2022
Weighted average number of shares - basic
27,243,468
27,761,956
Effect of dilutive stock options
-
-
Weighted average number of shares - diluted
27,243,468
27,761,956
Basic earnings (loss) per share are derived by dividing net income (loss) for the year by the
weighted average number of common shares outstanding for the period.
64
| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
17 Management of capital structure
The Company’s objective when managing capital is to ensure the Company is capitalized in a
manner which provides a strong financial position for its shareholders.
The Company’s capital structure includes the components of equity. In managing its capital
structure, the Company considers future investment and acquisition opportunities, potential credit
available and potential issuances of new equity. The Company’s objective is to maintain a flexible
capital structure that will allow it to execute its stated business. There was no change in the
Company’s strategy or objective in managing capital since the prior year. There are no externally
imposed capital requirements at year end. Upon acquiring investment properties and operating
businesses, the Company will strive to balance its proportion of debt and equity within its capital
structure in accordance with the needs of the continuing business. The Company may, from time
to time, issue shares and adjust its spending to manage current and projected proportions as
deemed appropriate.
The method used by the Company to monitor its capital is based on an assessment of the
Company’s working capital position relative to its projected obligations.
18 Financial risk management
The Board of Directors ensures that management has put appropriate risk management processes
in place. Through the Audit Committee, the Board oversees such risk management procedures and
controls. Management provides updates to the Audit Committee on a quarterly basis with respect
to risk management.
Catastrophe risk
The Company has obtained insurance on its Puerto Rico property with a value of $1,385,665 (note
13) at December 31, 2023.
Credit risk
Credit risk is the risk of an unexpected financial loss to the Company if a third party fails to fulfill
its performance obligations under the terms of a financial instrument. The Company’s credit risk
arises principally from the Company’s cash and receivables as well as its marketable securities
portfolio.
The Company’s maximum exposure to credit risk comprises the carrying values of cash, accounts
receivable and marketable securities was $56,214,965 at December 31, 2023.
The Company’s exposure to credit risk is managed through risk management policies and
procedures with emphasis on the quality of the investment portfolio. The majority of the funds
invested are held in reputable Barbadian, American or Canadian banks (note 6).
2023
$
2022
$
Current assets
56,682,081
51,617,254
Current liabilities
(8,534,419)
(15,461,570)
Working capital
48,147,662
36,155,684
65
Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
The Company is exposed to credit risk as an owner of real estate in that tenants may become unable
to pay the contracted rents. The Company mitigates this risk by carrying out appropriate credit
checks and related due diligence on the significant tenants. The Company’s properties are
diversified across commercial classes.
Liquidity risk
Liquidity risk is the risk of having insufficient cash resources to meet financial obligations without
raising funds at unfavourable rates or selling assets on a forced basis. Liquidity risk arises from the
general business activities and in the course of managing the assets and liabilities. The purpose of
liquidity management is to ensure that there is sufficient cash to meet all financial commitments
and obligations as they fall due. The liquidity requirements of the Company’s business are met
primarily by funds generated from operations, liquid investments and income and other returns
received on investments. Cash provided from these sources is used primarily for investment
property operating expenses.
As at December 31, 2023, the Company does not believe the current maturity profile of the
Company lends itself to any material liquidity risk, taking into account the level of cash and
marketable securities as at December 31, 2023. All financial assets and liabilities have contractual
or expected maturities within 12 months. Due to the short term nature of the Company’s financial
instruments, there is no material impact due to discounting or the time value of money to disclose.
Equity price risk
Equity price risk is the risk that the fair value of equity investments and other holdings and equities
sold short and derivatives will vary as a result of changes in the market prices of the holdings. All
of the Company’s equity investments and other holdings and all of the equities sold short and
derivatives are based on quoted market prices as at the consolidated statement of financial position
date. Changes in the market price of quoted securities and derivatives may be related to a change
in the financial outlook of the investee entities or due to the market in general. Where non-
monetary financial instruments − for example, equity securities − are traded in currencies other
than the Canadian dollar, the price, initially expressed in a foreign currency and then converted
into Canadian dollars, will also fluctuate because of changes in foreign exchange rates.
Securities sold short represent obligations of the Company to make future delivery of specific
securities and create an obligation to purchase the security at market prices prevailing at the later
delivery date. This creates the risk that the Company’s ultimate obligation to satisfy the delivery
requirements will exceed the amount of the proceeds initially received or the liability recorded in
the consolidated financial statements. In addition, the Company has entered into derivative
financial instruments which have a notional value greater than their fair value which is recorded
in the consolidated financial statements. This information is disclosed in note 7 to these
consolidated financial statements.
This creates a risk that the Company could settle these instruments at a value greater or less than
the amount that they have been recorded in the consolidated financial statements. The Company’s
equity investments and other holdings have a downside risk limited to their carrying value, while
the risk of equities sold short and derivatives is open-ended. The Company is subject to commercial
margin requirements which act as a barrier to the open-ended risks of the equities sold short and
derivatives. The Company closely monitors both its equity investments and other holdings and its
equities sold short and derivatives.
66
| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
Currency risk
Currency risk is the risk that the value of monetary financial assets and financial liabilities
denominated in foreign currencies will vary as a result of changes in underlying foreign exchange
rates. The Company is exposed to currency risk due to potential variations in currencies other than
the Canadian dollar.
As at December 31, 2023, the Company had material exposure to foreign currencies. The
approximate impact of a 10% fluctuation of the foreign currency against the Canadian dollar are as
follows:
Impact of 10% fluctuation in foreign currency
2023
$
2022
$
Mongolian Tögrög
-
1,080,510
US Dollar
651,140
447,292
Other price risk
Other price risk market fluctuation risk is where fluctuations in the value of equity securities affect
the level and timing of recognition of gains and losses on securities held, and cause changes in
realized and unrealized gains and losses. The Company’s marketable securities are exposed to
other price risk. The approximate impact of a fluctuation of 10% in the price of the marketable
securities would impact the value of the marketable securities by $4,643,994 (2022 - $4,923,751).
Management performs regular re-assessments of tax risk and its position may change in the future
as a result of the change in conditions that cannot be anticipated with sufficient certainty at
present.
19 Related party transactions
Parties are generally considered to be related if the parties are under common control or if one
party has the ability to control the other party or can exercise significant influence or joint control
over the other party in making financial and operational decisions. In considering each possible
related party relationship, attention is directed to the substance of the relationship, not merely the
legal form.
Key management personnel of the Company include all directors and executive management, and
persons directly related to directors and executive management. The summary of compensation
for key management personnel is as follows:
2023
$
2022
$
Salaries and other short-term employee benefits
604,487
590,924
Salaries to other related parties
80,912
78,040
KEDM production expense and revenue share paid to
an entity controlled by the chairman*
1,298,072
-
Director fees
60,000
60,000
2,043,471
728,964
*Beginning on January 1, 2023, MGG engaged Praetorian PR LLC (PPR), a Puerto Rican company
owned by MGG’s Chairman and CEO to produce KEDM. Further details on the fee arrangement
can be found in note 9 and the MD&A.
67
Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
As at December 31, 2023, amounts due to related parties totalled approximately $240,061 (2022 -
$16,446) comprised of fees owed to management and directors, were included in trade payables
and accrued liabilities. Salaries to other related parties include the salary of an employee that is
related to a director.
20 Commitments and contingencies
From time to time and in the normal course of business, claims against the Company may be
received. On the basis of management’s assessments and professional legal advice, management
is of the opinion that no material losses will be incurred and no provision or disclosure has been
made in these consolidated financial statements.
The Company indemnifies its directors and officers against any and all claims or losses reasonably
incurred in the performance of their service to the Company to the extent permitted by law.
21 Supplementary cash flow information
2023
$
2022
$
Changes in non-working capital arising from
Unearned Revenue
(369,085)
511,683
Other assets
(31,300)
(205,257)
Net due to / (from) broker
(1,856,660)
(1,778,503)
Trade payables and accrued liabilities
371,422
(341,096)
Income tax payable
817,695
608,364
Changes in non-cash working capital from
operating activities
(1,067,928)
(1,204,809)
Income tax paid during the year was $416,860 (2022 - $4,975). Interest paid during the year was
$11,694 (2022 - $22).
22 Segment information
The Company’s operations are conducted in three reportable segments: Investment Property
Operations (discontinued), Corporate, and Subscription Products. The Company reports
information about its operating segments based on the way management organizes and reports the
segments within the organization for making operating decisions and evaluating performance.
Investment Property Operations consist of commercial and residential investment property in
Mongolia held for the purposes of rental revenue, capital appreciation or redevelopment. These
properties are managed by Big Sky Capital LLC and its subsidiaries. This segment has been
classified as discontinued operations as of December 31, 2023, however, was included in the charts
below for information purposes.
68
| Mongolia Growth Group Ltd
Loss on disposal of investment property
(146,544)
-
-
(146,544)
Interest income
-
6,813
-
6,813
Other revenue
100,572
-
-
100,572
Realized gain on marketable securities
-
8,792,881
-
8,792,881
Foreign currency gain (loss)
51,820
203,495
-
255,315
Net income before income taxes
466,250
8,050,457
2,110,994
10,627,701
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
22 Segment information (continued)
2023
Investment
Property
Corporate
Subscription
Products
Total
$
$
$
$
Rental income
519,415
103,899
-
623,314
Subscription revenue
-
-
3,213,395
3,213,395
Salaries and wages
(478,263)
(697,635)
(1,175,898)
Other expenses
(1,024,489)
(1,483,107)
(1,545,522)
(4,053,118)
Unrealized mark to market gain
-
4,050,104
-
4,050,104
Unrealized gain on digital assets
-
29,313
-
29,313
Depreciation
(6,495)
(79,024)
-
(85,519)
Loss on disposal of investment property
(452,035)
-
-
(452,035)
Gain on disposal of subsidiaries
173,507
-
-
173,507
Interest income
14,162
30,948
-
45,110
Other revenue
23,500
-
-
23,500
Realized gain on marketable securities
-
518,828
-
518,828
Foreign currency gain (loss)
(35,595)
(17,683)
-
(53,278)
Net income (loss) before income
taxes
(1,266,293)
2,455,643
1,667,873
2,857,223
2022
Investment
Property
Corporate
Subscription
Products
Total
$
$
$
$
Rental income
798,826
-
- 798,826
Subscription revenue
-
-
3,174,031
3,174,031
Salaries and wages
(354,999)
(896,662)
-
(1,251,661)
Other expenses
(659,526)
(959,328)
(1,063,037)
(2,681,891)
Unrealized mark to market gain
-
1,031,997
-
1,031,997
Unrealized loss on digital assets
-
(98,700)
-
(98,700)
Depreciation
(73,623)
(30,039)
-
(103,662)
Unrealized loss on investment properties
622,186
-
-
622,186
Reversal of impairment of PPE
127,538
-
-
127,538
69
Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
22 Segment information (continued)
Entity Wide Disclosures
The Company has three geographic segments: Canada, the United States of America (“USA”) and
Mongolia.
Balance as of
December 31, 2023
Investment
Property
$
Subscription
products
$
Corporate
$
Total
$
Total assets
-
-
58,195,061
58,195,061
Property and equipment
-
-
1,512,980
1,512,980
Total liabilities
-
1,126,439
7,407,980
8,534,419
Balance as of
December 31, 2022
Investment
Property
$
Subscription
products
$
Corporate
$
Total
$
Total assets
11,687,152
-
52,870,472
64,557,624
Property and equipment
1,350,730
-
1,453,502
2,804,232
Investment properties
10,086,956
-
-
10,086,956
Expenditures on long-lived assets
Property and equipment
-
-
711,813
711,813
Total liabilities
355,394
1,547,154
16,531,544
18,434,092
Revenue
Property and
equipment
Investment
property
2023
$
2022
$
2023
$
2022
$
2023
$
2022
$
Canada
3,213,395
3,160,487
-
-
-
-
USA
103,899
13,544
1,512,980
1,453,502
-
-
Mongolia
542,915
752,854
-
1,350,730
-
10,086,956
3,860,209
3,926,885
1,512,980
2,804,232
-
10,086,956
70
| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
23 Other expenses
2023
$
2022
$
Investor relations
29,114
30,981
Investment research expense
212,237
86,745
Repairs and maintenance
14,213
-
Office
132,058
124,944
Professional fees
944,610
549,795
Travel
46,036
120,689
Advertising
58,812
3,172
Land and property tax
400
882
Insurance
50,339
30,261
Utilities
15,443
11,859
Subscription processing fees
99,529
135,707
Subscription product expenses
1,298,057
927,330
Other
127,781
-
3,028,629
2,022,365
24 Subsequent events
Since January 1, 2024, the Company has repurchased 781,300 of its shares at an average price of
$1.51/share and cancelled 886,300 shares.
71
Mongolia Growth Group Ltd |
Davidson & Company LLP
Vancouver, BC
Borden Ladner Gervais LLP
Calgary, AB
Computershare Investor Services
100 University Ave., 8th Floor
Toronto, ON M5J 2Y1
Tel: 1 800 564 6253
www.investorcentre.com/service
Board of Directors
Harris Kupperman
CEO and Chairman of Mongolia Growth Group Ltd
Mr. Kupperman is a co‐founder of Mongolia Growth
Group and has been the Executive Chairman of the
Corporation since March 2014. Mr. Kupperman was the
President and CEO of the Corporation from February
2011 to March 2014 and returned as CEO in December
2014. Mr. Kupperman also publishes Kuppy’s Korner,
a blog dedicated to uncovering unique opportunities
around the world. He is currently the President and Chief
Investment Officer of Praetorian PR LLC, the Rincon, PR-
based Registered Investment Advisor to the hedge fund,
Praetorian Capital Fund LLC. He graduated from Tulane
University College with a history degree. Mr. Kupperman
served as a Director at Aeroquest International Limited
(TSX:AQL) from 2010‐ 2011.
Brad Farquhar
Independent Director
Mr. Farquhar is a corporate director. Previously, he was
Executive Vice-President and Chief Financial Officer
of SSC Security Services Corp. (TSXV: SECU). He
previously co-founded Input Capital Corp., the world’s first
agriculture streaming company, and Assiniboia Capital
Corp., which built Canada’s largest farmland fund before
selling it to the Canada Pension Plan Investment Board in
2014. Mr. Farquhar is a trained financial planner who spent
over 10 years as a senior advisor to senior political leaders
in Saskatchewan and Canada prior to going into business.
He received a MPA in Electoral Governance from Griffith
University in Australia, studied political science at Carleton
University, and completed a BA at Providence College.
He has also been Executive in Residence in Agribusiness
at the University of Regina. Mr. Farquhar is a Director
of SSC Security Services Corp., Plannera Pensions &
Benefits, Cypress Hills Partners Inc., SIM International,
Prairie College, and on the advisory board of AgFunder.
Previously, he was a Director of Luxxfolio Holdings Inc.
(CSE: LUXX), Radicle Group Inc. (sold to Bank of Montreal),
and the Legacy Group of Companies.
Nick Cousyn
Independent Director
Mr. Cousyn is a Capital Markets’ professional with over 20
years of alternatives and traditional industry experience. Mr.
Cousyn was a licensed securities professional in the U.S.
with a background in equities, fixed income, derivatives
and distressed debt. While based in the US, some of the
firms he worked for included Deutsche Bank, Banque
Populaire, Wells Fargo and First Horizon National Bank.
During his 9 year tenure in Mongolia, Mr. Cousyn served as
Chief Communications Officer for Petro Matad and Chief
Operating Officer for BDSec (MO:BDS), Mongolia’s largest
broker and investment bank. He is currently employed by
Praetorian PR LLC, the Investment Advisor to the hedge
fund Praetorian Capital Fund LLC, where he is head of Client
Relations. Mr. Cousyn holds a BA in Economics from the
University of California at Riverside.
Jim Dwyer
Independent Director
Mr. Dwyer is a Partner and Board Member of Mongolian
Business Database in Ulaanbaatar. Jim was a New
York-based investment banker specializing in mergers
and acquisitions for 30 years and completed over 100
M&A transactions. In addition, he founded and managed
M&A departments for two major investment banking
firms: Shearson Loeb Rhoades and UBS-North America.
Mr. Dwyer first visited Mongolia in 2001 to represent the
Government of Mongolia as lead investment banker for
the privatization of its largest bank, Trade & Development
Bank. Thereafter, he served as lead investment banker for
the privatization of the largest Government-owned retail
bank, Khan Bank. He co-founded the Business Council
of Mongolia (BCM) and served as Executive Director from
its formation in 2007 to 2016. He is also an independent
director of Mongolian-based entities including Golomt
Bank and Mandal Insurance, and advisor to Mongolian
Fintech Group. Mr. Dwyer received a BBA from the
University of Notre Dame and an MBA from Columbia
Graduate School of Business (Columbia University).
Robert Scott
Independent Director
Mr. Scott, CPA, CA, CFA brings more than 25 years of
professional experience in accounting, corporate finance,
and merchant and commercial banking. Mr. Scott earned
his CFA in 2001, his CA designation in 1998 and has a
B.Sc. from the University of British Columbia. He is a
Founder and President of Corex Management Inc., a
private company providing accounting, administration,
and corporate compliance services to privately held
and publicly traded companies, and has served on the
management teams and boards of numerous Canadian
publicly traded companies with a strong track record of
cost effectively running operations. Mr. Scott has also
listed several companies on the TSX Venture Exchange
gaining extensive IPO, RTO, regulatory and reporting
experience, and currently holds senior management and
board positions with a number of issuers on the TSX
Venture Exchange.
Auditors
Legal
Transfer Agent
Harris Kupperman
CEO and Chairman of the Board
Genevieve Walkden, MBA, CFP, CAIA
CFO and Corporate Secretary
Officers
72
| Mongolia Growth Group Ltd
info@mongoliagrowthgroup.com | www.mongoliagrowthgroup.com
First Canadian Place,100 King Street West,
56th Floor, Toronto, Ontario M5X 1C9, Canada
Tel: (877) 644-1186
Fax: (866) 468-9119
MONGOLIA GROWTH GROUP Ltd.
Canada: YAK
USA:
MNGGF
TSX - Venture