UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A10-K
Amendment No. 1
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31 2021, 2023
OR
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number File Number: 001-39346
MoneyLion Inc.
(Exact name of registrant as specified in its charter)
Delaware | 85-0849243 | |
(State or other jurisdiction | (I.R.S. Employer | |
30 West 21st Street, 9th Floor New York, New York | 10010 | |
(Address of principal executive offices) | (Zip Code) |
(212)300-9865
(Registrant’s telephone number)number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Class A common stock, par value $0.0001 per share | ML | The New York Stock Exchange | ||
Redeemable warrants, each whole warrant exercisable for 1/30th of one share of Class A common stock | ML WS | The New York Stock Exchange |
s
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐No☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐No☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d)15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer |
Non-accelerated filer | Smaller reporting company ☒ |
Emerging growth company ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of common sharesequity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter, June 30, 2021,2023, was approximately $348,250,000.$100,228,000. Shares of the registrant’s Class A common stock held by each executive officer and director and by each person who may be deemed to be an affiliate of the registrant have been excluded from this computation. This calculation does not reflect a determination that certain persons are affiliates of the registrant for any other purpose.
There were 230,763,13910,517,998 shares of Class A common stock, par value $0.0001 per share, issued and outstanding as of March 4, 2022.1, 2024.
EXPLANATORY NOTE
MoneyLion Inc. (together with its consolidated subsidiaries, as context requires, the “Company,” “we,” “our” or “us”) is filing this Amendment No. 1 to the Annual Report on Form 10-K/A (the “Amendment”) to amend and restate its Annual Report on Form 10-K for the fiscal year ended December 31, 2021, originally filed with the Securities and Exchange Commission (“SEC”) on March 17, 2022 (the “Original Filing”), to restate certain of the Company’s financial statements (collectively, the “Original Financial Statements”) as a result of an error related to the classification and related accounting treatment of certain consideration paid and payable to the sellers (the “Selling Members”) of Malka Media Group LLC (“MALKA”) as equity instead of a liability in connection with the Company’s acquisition of MALKA (the “MALKA Acquisition”), as described in more detail below.
Restatement Background — In connection with the preparation of the Company’s unaudited consolidated financial statements as of and for the three and six months ended June 30, 2022, the Company’s management, in consultation with its advisors, identified an error arising from the manner in which the Company classified and accounted for certain consideration paid and payable to the Selling Members.
Upon the closing of the MALKA Acquisition, the Company (i) issued $30.0 million in restricted shares (the “Closing Consideration Shares”) of MoneyLion’s Class A common stock, par value $0.0001 per share (the “MoneyLion Class A Common Stock”), at a price per share of $9.00 and (ii) paid to the Selling Members approximately $10.0 million in cash in exchange for all of the issued and outstanding membership interests of MALKA. The Membership Interest Purchase Agreement governing the MALKA Acquisition includes a make-whole provision with respect to the Closing Consideration Shares issued pursuant to which the Company was and may be required to issue additional restricted shares of MoneyLion Class A Common Stock or pay additional cash, as determined by the Company in its sole discretion, on each of December 31, 2021, March 31, 2022, June 30, 2022 and September 30, 2022 (the “Make-Whole Provision”). The Company originally classified the Closing Consideration Shares and the Make-Whole Provision as equity and recorded the fair value as stockholders’ equity on the consolidated balance sheet as of November 15, 2021, the closing date of the MALKA Acquisition (the “MALKA Acquisition Closing Date”). The Company’s management, in consultation with its advisors, has now determined that the Make-Whole Provision should not have been classified as equity and should have been classified as a liability within the scope of Accounting Standards Codification 480, Distinguishing Liabilities from Equity, as of the MALKA Acquisition Closing Date, with subsequent changes in the fair value of such liability recorded in the consolidated statement of operations under change in fair value of contingent consideration from mergers and acquisitions.
As a result, the Company’s management has noted errors related to net loss and basic and diluted loss per share in the consolidated statements of operations for the year ended December 31, 2021 and three months ended March 31, 2022 and accounts payable and accrued liabilities as of December 31, 2021, other liabilities as of March 31, 2022 and additional paid-in capital and accumulated deficit as of December 31, 2021 and March 31, 2022 in the consolidated balance sheets, along with related impacts to the consolidated statements of cash flows for the year ended December 31, 2021 and three months ended March 31, 2022 and the consolidated statements of redeemable convertible preferred stock, redeemable noncontrolling interests and stockholders’ equity (deficit) for the year ended December 31, 2021 and three months ended March 31, 2022.
The manner in which the Company accounted for the Make-Whole Provision had no effect on the Company’s previously reported cash position.
In light of the foregoing, on August 8, 2022, the Audit Committee of the Company’s board of directors, based on the recommendation of and after consultation with management and the Company’s advisors, concluded that (a) the Company’s Original Financial Statements and related financial information contained in the Original Filing and (b) the Company’s unaudited consolidated financial statements as of and for the three months ended March 31, 2022 and related financial information contained in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, originally filed with the SEC on May 16, 2022 (the “Q1 2022 10-Q”), should no longer be relied upon and should be restated in order to correct the error described above. We intend to file an amendment to the Q1 2022 10-Q in order to correct the Make-Whole Provision classification error described above and restate the financial statements and related financial information contained in the Q1 2022 10-Q.
The financial information that has been previously filed or otherwise reported is superseded by the information in this Amendment, and the Original Financial Statements and related financial information contained in the Original Filing should no longer be relied upon.
The restatement is more fully described in Note 2 to the consolidated financial statements included herein.
In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new certifications by the Company’s principal executive officer and principal financial officer are filed as exhibits to this Amendment under Item 15 of Part IV hereof.
Internal Control and Disclosure Controls Considerations — In the Original Filing, the Company’s management concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2021 as a result of the restatement of the financial statements and related financial information contained in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021, originally filed with the SEC on November 15, 2021, and the material weakness identified in connection therewith and in prior periods. The Company’s management has concluded again that as a result of the prior restatement, the classification error described above and the material weakness, as described further herein, the Company’s disclosure controls and procedures were not effective as of December 31, 2021. The Company’s management intended to complete the remediation of the material weakness by December 31, 2022, as described in the Original Filing. However, in light of the restatements of the financial statements described above, management has now determined that an estimated remediation completion date of March 31, 2023 is more appropriate. For additional discussion, see Part II, Item 9A, “Controls and Procedures” of this Amendment.
Items Amended In This Amendment — For the convenience of the reader, this Amendment sets forth the Original Filing in its entirety, as amended to reflect the restatement. No attempt has been made in this Amendment to update other disclosures presented in the Original Filing, except as required to reflect the effects of the restatement. The following items have been amended as a result of the restatement:
Except as described above, this Amendment does not substantively amend, update or change any other items or disclosures contained in the Original Filing, and accordingly, this Amendment does not reflect or purport to reflect any information or events occurring after March 17, 2022, the original filing date, or modify or update those disclosures affected by subsequent events, except to the extent they are otherwise required to be included and discussed herein. Accordingly, this Amendment should be read in conjunction with the Original Filing and the Company’s other filings with the SEC. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Original Filing.
Documents Incorporated by Reference
The information required by Part III of this Annual Report, to the extent not set forth herein, is incorporated herein by reference from the registrant's definitive proxy statement relating to the Annual Meeting of Shareholders to be held on June 15, 2022,in 2024, which definitive proxy statement wasshall be filed with the Securities and Exchange Commission on April 29, 2022 (withinwithin 120 days after the end of the fiscal year to which this Annual Report relates).relates.
MoneyLion Inc.
TABLE OF CONTENTS
ANNUAL REPORT ON FORM 10-K/A10-K
For the Fiscal Year Ended December 31, 20212023
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INTRODUCTORY NOTE
On September 22, 2021 (the “Business Combination Closing Date”), MoneyLion Inc., formerly known as Fusion Acquisition Corp. (“Fusion”), consummated a business combination (the “Business Combination”) with MoneyLion Technologies Inc., formerly known as MoneyLion Inc. (“Legacy MoneyLion”). Pursuant to the Agreement and Plan of Merger, dated as of February 11, 2021 and amended on June 28, 2021 and September 4, 2021 (the “Merger Agreement”), by and among Fusion, ML Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Fusion (“Merger Sub”), and Legacy MoneyLion, immediately upon the completion of the Business Combination and the other transactions contemplated by the Merger Agreement (the “Business Combination Closing”), each of the following transactions occurred in the following order: (i) Merger Sub merged with and into Legacy MoneyLion, with Legacy MoneyLion surviving the merger as a wholly-owned subsidiary of Fusion (the “Merger”); (ii) Legacy MoneyLion changed its name to “MoneyLion Technologies Inc.”; and (iii) Fusion changed its name to “MoneyLion Inc.” Following the Business Combination, MoneyLion Inc. became a publicly traded company, with Legacy MoneyLion, a subsidiary of MoneyLion Inc., continuing the existing business operations. The MoneyLion Class A Common Stock is listed on the NYSE under the ticker symbol “ML.”
As used in this Annual Report on Form 10-K/A,10-K, unless the context requires otherwise, references to “MoneyLion,” the “Company,” “we,” “us,” “our” and similar references refer to MoneyLion Inc. and, as context requires, its consolidated subsidiaries for the period following the Business Combination andsubsidiaries. “MALKA” refers to Malka Media Group LLC, a wholly-owned subsidiary of MoneyLion Technologies Inc., and as context requires, its consolidated subsidiaries for the period prior to the Business Combination. “Fusion”“Engine” refers to Fusion Acquisition Corp. prior toML Enterprise Inc., doing business as the Business Combination.brand “Engine by MoneyLion,” a wholly-owned subsidiary of MoneyLion Technologies Inc. which was previously named “Even Financial Inc.” and subsequently renamed in February 2023.
For convenience, the trademarks and service marks referred to in this Annual Report on Form 10-K/A10-K are listed without the ®, TM and SM symbols, but we intend to assert, and notify others of, our rights in and to these trademarks and service marks to the fullest extent under applicable law.
Reverse Stock Split
On April 24, 2023, the Company amended the Company's Fourth Amended and Restated Certificate of Incorporation (as amended from time to time, the “Certificate of Incorporation”) to effect, effective as of 5:01 p.m. Eastern Time on April 24, 2023, a 1-for-30 reverse stock split (the “Reverse Stock Split”) of its Class A Common Stock, par value $0.0001 per share (the “Class A Common Stock”). At the effective time of the Reverse Stock Split, every 30 shares of Class A Common Stock either issued and outstanding or held as treasury stock were automatically reclassified into one new share of Class A Common Stock, and the total number of shares of Class A Common Stock authorized for issuance was reduced by a corresponding proportion from 2,000,000,000 shares to 66,666,666 shares. The Reverse Stock Split was approved by the Company's stockholders at a Special Meeting of Stockholders on April 19, 2023 and approved by the Board of Directors on April 21, 2023. The primary goal of the Reverse Stock Split was to increase the per share price of the Class A Common Stock in order to meet the minimum per share price requirement for continued listing on the New York Stock Exchange (the “NYSE”). The Class A Common Stock began trading on the NYSE on an as-adjusted basis on April 25, 2023 under the existing trading symbol “ML.”
In addition, as a result of the Reverse Stock Split, proportionate adjustments were made to the number of shares of Class A Common Stock underlying the Company’s outstanding equity awards, the number of shares issuable upon the exercise of the Company’s outstanding warrants and the number of shares issuable under the Company’s equity incentive plans and certain existing agreements, as well as the exercise, grant and acquisition prices of such equity awards and warrants, as applicable. Furthermore, proportionate adjustments were made to the conversion factor at which the Company’s previously outstanding Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), converted to Class A Common Stock. The total number of shares of preferred stock of the Company authorized for issuance remained at 200,000,000. Stockholders who would have been entitled to receive fractional shares as a result of the Reverse Stock Split were instead entitled to a cash payment in lieu thereof at a price equal to the fraction of one share to which the stockholder was otherwise entitled multiplied by the closing price per share of the Class A Common Stock on the NYSE on the effective date of the Reverse Stock Split.
The effects of the Reverse Stock Split have been reflected in this Annual Report on Form 10-K for all periods presented.
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Cautionary Statement Regarding Forward-Looking Statements
This Annual Report on Form 10-K/A,10-K, including the information incorporated herein by reference, contains forward-looking statements regarding, among other things, the plans, strategies and prospects, both business and financial, of MoneyLion Inc. and its wholly-owned subsidiaries (“MoneyLion”).MoneyLion. These statements are based on the beliefs and assumptions of the management of MoneyLion. Although MoneyLion believes that its respective plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, MoneyLion cannot assure you that it will achieve or realize these plans, intentions or expectations. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates,” or “intends” or similar expressions. The forward-looking statements are based on projections prepared by, and are the responsibility of, MoneyLion’s management.
Forward-looking statements are inherently subject to known and unknown risks and uncertainties, many of which may be beyond MoneyLion’s control. Forward-looking statements are not guarantees of future performance or outcomes, and MoneyLion’s actual performance and outcomes, including, without limitation, actual results of operations, financial condition and liquidity, and the development of the market in which MoneyLion operates, may differ materially from those made in or suggested by the forward-looking statements contained in this Annual Report on Form 10-K/A.10-K. Factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation:
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These forward-looking statements are based on information available as of the date of this Annual Report on Form 10-K/A10-K and our management’s current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We undertake no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
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RISK FACTOR SUMMARY
Our business is subject to numerous risks and uncertainties, including those we face in connection with the successful implementation of our strategy and the growth of our business. The following considerations, among others, may offset our competitive strengths or have a negative effect on our business strategy, which could cause a decline in the price of shares of our securities and result in a loss of all or a portion of your investment:
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The risks described above should be read together with the “Cautionary Statement Regarding Forward-Looking Statements” herein, the other risk factors set forth under Part I, Item 1A “Risk Factors” in this Annual Report on Form 10-K/A,10-K, our consolidated financial statements and the related notes presented in Part II, Item 8 “Financial“Financial Statements and Supplementary Data” Data”in this Annual Report on Form 10-K/A,10-K, as well as in other documents that we file with the U.S. Securities and Exchange Commission (the “SEC”). Our business, prospects, financial condition or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial.
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Part I
Item 1. Business
MissionOur Company
RewireMoneyLion is a leader in financial technology, powering the next generation of personalized products and financial content for American banking system to positively change the financial path for every hard-working American.
Company Overview
consumers. MoneyLion was founded onin 2013 with a simple observation:vision to rewire the current financial system failssystem. Our mission is to meetgive everyone the needs of 100 million middle-class Americans.power to make their best financial decisions. We believe these Americans deserve a better alternativethat the financial wellness gap in financial services, and MoneyLionAmerica can be a partneraddressed by bridging the financial literacy and the financial access gaps, shortening the distance between education and action.
We design and offer modern personal finance products, tools and features and curate money-related content that delivers actionable insights and guidance to our users. We also operate and distribute embedded finance marketplace solutions that match consumers with personalized third-party offers from our partners, providing convenient access to an expansive breadth of financial solutions that enable consumers to borrow, spend, save and achieve better financial outcomes. Our leading marketplace solutions provide valuable distribution, acquisition, growth and monetization channels for our partners. In addition, we provide creative media and brand content services to clients across industries through our media division and leverage our adaptive, in-house content studio to produce and deliver engaging and dynamic content in improvingsupport of our product and service offerings.
We have purposefully built our platform to help consumers navigate all of their financial well-being.inflection points, combining our deep first-party product expertise, engaging content, marketplaces, innovative technology, data and AI capabilities to create the ultimate marketplace solution. As of December 31, 2023, we had 14.0 million Total Customers who used 23.1 million Total Products and over 1,100 Enterprise Partners in our network. We strategically employ comprehensive, data-driven analytics and cutting-edge technology to enhance our platform, creating personalized experiences for our users based on our rich datasets. Utilizing innovative approaches to financial guidance that engage and educate our users within a peer community, we seek to empower consumers to take control of their financial lives.
Our Platform
Consumer
Through our Consumer platform, accessible through the free-to-download MoneyLion mobile application and online at www.moneylion.com, we offer a personalized, all-in-one, digitalour integrated core suite of financial platform that provides convenient, low-cost accessproducts and services to make premium banking, borrowing and investing solutions tailored foraccessible to everyone. We believe the simplicity and seamless integration of our customers, rooted in data, and delivered through our proprietary technology platform.
We use innovative, data-driven approaches to address our customers’ individual life inflection points and financial circumstances. When our customers enjoy periodsproducts with a full spectrum of financial excess, we provide tools for them to easily manage their spending and saving goals through our digital banking and automated investing solutions. When our customers experience moments of financial need, we provide them immediate access to innovative lending or earned income advance products and credit improvement programs that can bridge these times of financial stress and improve their financial health. We provide access to personalized proprietary products as well as financial and non-financial products offered by third-party providers. Our subsidiary, Malka Media Group LLC (“MALKA”), provides digital media and content production services tooffers from our partners sets us and to its own clientsapart in entertainment, sports, gaming, live streaming and other sectors.
Our technology platform has been purpose-built to support our strategy of creating a relationship with the customer. How Americans consume financial information and advice is evolving, with many Americans engaging with financial content online and on select social media channels. We endeavor for the MoneyLion platform to become a daily destination for product discovery, education, advice and financial transactions, allowing our customers to better understand their individual financial circumstances and take action to live a better financial life. Our comprehensive, modern approach to providing money-related content,industry. These products and services include personal financial management tools and features that provide critical insights into a customer’s financial health and support informed money-related decisions. We provide a differentiated solution to our customers is designed to allow MoneyLion to own the end-to-end financial product buying cycle.
In addition, the technical architecture of our platform, which centers around a data-driven, multifaceted understanding of our customers built upon our longstanding experience in risk management, underwriting and origination, differentiates us from the transactional solutions provided by incumbents in our industry. Consumer financial services remain oriented around siloed service providers with incomplete customer data and fee-first product delivery models. We believe consumers benefit when their financial partner understands their entire financial life and can provide both access and advice at the right time, the right place and, importantly, with the appropriate solution. Traditional providers generally attempt to sell consumers specific financial products, only seeking to qualify them as a suitable buyer and generate a fee. With a deep, data-driven understanding of our customers and a broad set of integrated, tailor-made products, we can guide our customers to use our products when and if appropriate for their needs, creating a mutually beneficial partnership.
We address large, pervasive problems in the $3.5 trillion financial services industry by focusing on the largest segment ofmatching consumers the hardworking American middle class. American consumers face enormous costs to obtain the basic elements of financial life — spend, save, investengaging and borrow — that in aggregate generate over $250 billion in fees for the financial services industry on an annual basis. With 100 million middle-class Americans as our core focus — defined as individuals with household incomes up to $150,000 and FICO scores up to 750 — the breadth of our potential customers, and the costs they face in obtaining financial services, are substantial.
We have only just begun to address these problems, but our progress to date demonstrates the demand for MoneyLion to rewire the banking system. As of December 31, 2021, over 3.3 million customers have opened an account on our platform to use at least one of our current products. We added approximately 3.0 million of these customers since the beginning of 2019, andeducational, curated money content, which we believe that we have a substantial opportunityattracts and retains consumers. We continue to growdevelop, expand and refine our customer base going forward. We focus on delivering the benefits ofproduct and service offerings, features and content libraries to best serve our personalized, all-in-one, digital financial platform to our customers. We believe the value proposition of our platform approach will increase the network effects for sustained user growth.
Our data-driven perspective of our customersFinancial Products and our capability to create content to engage with our customers increases their time spent on our platform, allowing us to introduce products and guidance that address their changing life circumstances.Services
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Our Strategy
We address our customers’ needs by pursuing a differentiated strategy. Our personalized, all-in-one, digital financial platform is designed to foster a relationship with consumers and provide them with the tools to discover and learn about their finances and our solutions, as well as to transact in a variety of different financial and non-financial products based on their individual circumstances, all through one app. Our strategy is supported by:
Organize a Team to Address the Problem: The complexity of the problems faced by our customers required a different type of team to address them. The American middle class is under tremendous, ongoing financial stress with many individuals living paycheck to paycheck without enough savings to navigate through a small financial setback, even before COVID-19. We believed building yet another provider of standard financial products, whether delivered digitally or at a branch, was unlikely to impact their financial well-being for the better.
What was required were individuals who understood the current ecosystem of solutions in detail, including its legacy technology, exorbitant pricing models and myopic single transaction-focused view of customers. But understanding the problem set was only the beginning. Experience in solving seemingly intractable problems through the application of modern data and technology tools was necessary. Our team grew to include individuals who had built advanced technologies to algorithmically identify and eliminate inefficiencies in some of the most demanding and competitive markets. To this team, we added experts in product development and financial planning to translate these solutions into a data-driven platform that maximized the benefit of these innovations for our customers.
Organizing a team that understands the complex problems of both our customers and the financial system and has the experience to address such problems was our foundation. However, to generate meaningful benefits for our customers, we had to go farther. Customers required a partner who could deliver products that were transparent and made addressing their problems both easy to understand and enjoyable. We added team members experienced in delivering best-in-class consumer digital experiences, bringing to market a beautiful, easy-to-use interface for our customers to access our platform, consume our products and receive advice.
Lastly, as we established an institution built for every hardworking American to use, we acquired capabilities in content creation, talent relationships and production. We have a differentiated ability to introduce MoneyLion to our prospective consumers through culturally relevant, personalized content and stories told through thought leaders and influencers in a cost-effective manner. We believe our innovations in customer acquisition, engagement and retention have provided us with network effects that we expect to continue as we scale.
Understand the Problem Through Data: We build innovative consumer financial products that address our customers’ individual and complex problems by leveraging advancements in data science from both Silicon Valley and Wall Street and applying those advancements for the benefit of America’s middle class. We believe this approach separates us both from incumbent providers and new market entrants.
MoneyLion begins and ends every conversation with data. We have a near-decade long track record of underwriting, pricing risk and originating credit at scale across the American credit spectrum. We now benefit from the compounding improvements made to our data models since 2013. This compounding data advantage garnered through conducting scaled consumer diligence, underwriting and servicing allows us to offer differentiated, personalized experiences across our platform. This advantage drives our approach to understanding the problems of our customers, how we can address these problems with products and guidance and how we approach prospective customers in a timely, cost-effective manner.
We consume an enormous flow of data about the American middle class to understand their problems. Since inception, we have engaged with millions of Americans through our web and mobile applications, linked to over 17 million bank accounts, and integrated over 100 external data sources, coming to understand the cycle of financial excess and deficit that permeates our prospective customer base. Each day we ingest billions of transactional data points such that our understanding grows, and with it, our ability to address both legacy and emerging problems in our customers’ lives. We are constantly analyzing this data reservoir through our 55 machine learning models to generate three billion inferences, categorizations and predictions per day that we distill into over 14,000 insights for each of our customers.
These insights allow us to understand our customers and drive the development of innovative products. On a standalone basis, our products reflect deep insights in our customers’ needs:
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Our data-driven customer insights drive the power of our platform, where our current products can work in conjunction to drive better outcomes for our customers. Selected examples include:
Lastly, we use our data advantage to drive our efficient customer acquisition strategy through peer-to-peer referrals, dynamic performance marketing strategies, affiliates, brand marketing and search engine optimizations. Drawing upon the best practices of advertising technology, we use our deep understanding of our prospective customers to cost effectively introduce the MoneyLion platform at the right time and place.
Build Technology to Scale and Innovate: When we started MoneyLion, we recognized that both incumbent providers of financial services and new market entrants generally chose to build technology to deliver a single product to market. While certainly an easier path than building a platform, a monoline product model can never deliver a fully integrated platform experience or support rapid product innovation. We chose to build differently.
We built a single core platform from an array of microservices that allows us to deliver both our current products as well as all those we have in development. We believe this technology development model is more in line with the best practices of leading global technology companies, rather than the legacy models still largely employed in the financial services industry.
The primary beneficiary of our technology strategy is our customers. Products we have introduced are integrated across our platform. Customers can move money from their bank account to their investment or crypto account and invest that money into an ETF or a cryptocurrency. Customers can request a salary advance and deposit that money into their bank account. These seamless product experiences can occur within a single app, without friction, in real-time and reflects the benefit of our original design decision.
We have experienced additional benefits from our decision to build a truly integrated technology platform, that we believe will only compound as we add additional products and features to the platform:
We built this platform to deliver a uniform customer experience alongside near complete flexibility in terms of the regulated and unregulated partners we utilize to support our products. For example, MoneyLion is not a bank. However, our customers can open and utilize a Federal Deposit Insurance Corporation (“FDIC”)-insured digital demand deposit account, provided by a partner bank, that is fully integrated into our platform. This model allows MoneyLion to adopt best-of-breed partners to support an ever-increasing range of financial activities, shortening the time to deliver new products to our customers, while maintaining a seamless customer experience.
We utilize Amazon Web Services (“AWS”) to host and deliver our platform to customers. Delivery through AWS allows for reliable, secure, cost-effective and high-performance scaling.
We have also invested in specific technologies to attract prospective customers to MoneyLion and convert those individuals into customers. Our technological approach to customer acquisition and retention is a core competitive advantage of MoneyLion and an area in which we will continue to invest resources to maintain what we believe is a material advantage in our cost of marketing.
Solve with a Platform, not a Product: Many new companies have entered the market since our inception that seek to provide an individual or single-point financial product to American consumers, while fewer, if any, have attempted to deliver a complete platform of products as we do. We continue to believe that a single product strategy is neither advantageous for consumers nor a tenable long-term strategy for the providers of these products.
Our customers require a variety of products and services to successfully manage their financial lives. By providing a complete platform for these customers, they can address these financial needs both conveniently and seamlessly, and we are able to architect a unique user experience, personalized to the individual customer. Most importantly, by addressing the complete financial life of our customers, we can provide much needed guidance to our customers as to their saving, spending, borrowing and investing decisions, with substantially better insight into their life circumstances. We believe a valuable financial partner needs to both see and provide guidance based on the whole problem, rather than only a portion, and our platform approach is fundamental to achieving our mission to improve financial outcomes for the American middle class.
In addition to being a better alternative for our customers, we believe that our platform approach is a substantially better long-term model as a business. The cost to acquire customers in a competitive market such as consumer financial services is a material portion of the variable cost structure for both incumbent providers as well as new market entrants. A platform approach allows us to generate multiple income streams from a single customer and deliver our products at pricing levels that we believe will be comparatively lower over the long-term while maintaining attractive operating margins. Lastly, as we continue to mature our customer relationships, we believe that we will continue to grow wallet share with our customers in a manner only available to a full-service platform.
Similarly, our platform approach has also proved advantageous in acquiring new customers. We believe our ability to selectively market multiple products at once allows us to more cost effectively reach prospective customers initially seeking at least one of the products on our platform.
Guidance Brings it All Together: Providing our customers with access to financial products is fundamental to our mission. However, products alone, without discovery, education and personalized insights, will not adequately address the financial needs of our customers. We believe that contextual and relevant financial education and guidance is an essential component of the required service model of a personalized, all-in-one, digital financial platform.
When we refer to guiding our customers, we are not referring to an asset allocation strategy or a specific investment opportunity. We use the term guidance to reflect a holistic, customer-centric set of automated suggestions, recommendations, behavioral nudges, goal ingestion and adjustment, planning tips and reporting across the entire spectrum of financial product discovery, saving, spending, borrowing and investing activities driven by our knowledge of the customer, their peers and our customers’ own goals.
Our model is most similar to goals-based planning, a methodology used by certain incumbent providers of financial planning services to address multiple customer objectives across different time horizons. Historically, goals-based planning has been used by financial planning providers to assist high-net-worth customers navigate their allocation of resources across current and future objectives. Through our acquisition of Wealth Technologies Inc. (“WTI”), we acquired WTI’s market-leading wealth management decisioning and administration technology, including fGPS (Financial Goals Positioning System), a version of goals-based planning that we adopted, customized and refined for our middle-class American customers and which we believe to be more advanced than those employed by even the most sophisticated financial planning organizations. Amongst our many advancements, we expect to deliver real-time goals-based planning services, customized to the individual customer and their goals, on a fully automated basis, covering millions of concurrent customers and goals.
To date, we have focused our guidance on addressing the immediate and near-term problems of our customers to assist them in making decisions to place them on a path to a better financial future. Examples include:
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As our customers make progress on the basic elements of managing their financial lives, we will assist them in setting and maintaining progress towards longer-dated goals and aspirations. Examples of longer-dated goals we will seek to assist our customers achieve include:
Our platform utilizes affiliates, third-party providers of products and services to whom we may introduce our customers from our network to assist customers in making purchases in-line with their goals. We expect to grow our affiliate network over time to address the range of customer-defined goals. We earn revenue from fees from our affiliate partners in exchange for meeting certain success metrics related to their campaigns such as customers’ clicks, impressions or completed transactions. This revenue is reflected in affiliates income.
Content to Drive Engagement and Financial Literacy: Our customers not only want to successfully manage their financial lives, but they want to do so in a way that is both informative and enjoyable. Consistent with our vision of establishing MoneyLion as a lifestyle brand, we introduced MoneyLife, an online financial education content destination. MoneyLife is a video content-driven educational platform available on the MoneyLion app and our website where customers can share and discover ideas, advice and insights regarding their financial lives. With high usability and sleek design, MoneyLife includes highly personalized content driven by financial advice and education influencers, tools to achieve financial goals and additional ways of earning rewards to shop and save. Through MoneyLife, we provide an additional daily destination site for current customers, drive additional prospective customers and increase customer engagement and cross-sell opportunities for us and our affiliate partners. Our acquisition of MALKA, a creator network and content platform, accelerates our ability to engage with consumers across all digital and emerging channels, allowing us to directly connect with communities natively inside and outside of our platform. We will expand our vision of a daily destination, which started with our own MoneyLife content, with personalized content that educates, informs and supports consumers’ financial decision making and other general interests. MALKA operates as an independent wholly-owned subsidiary of MoneyLion and produces digital media and content for us as well as its own clients across entertainment, sports, gaming, live streaming and other sectors. We earn revenue from fees that MALKA charges its clients in connection with its digital media and content production, client services and licensing. This revenue is reflected in other income.
Our Product Platform
Once consumers download the free MoneyLion app, they are ready to improve their financial health, with a full range of financial services across banking, borrowing and investing, delivered through a personalized, all-in-one, easy-to-use digital financial platform.
Our intuitive and user-friendly app provides a fast, seamless experience across all our products. We continually listen to our customers’ feedback and implement improvements on an accelerated release cycle, always remaining committed to delivering a delightful customer experience. As of December 31, 2021, we had received over 130,000 five-star ratings across all app stores, with a 4.7 average on Apple, a 4.3 average on Google and a 4.7 average on TrustPilot, and had an overall Net Promoter Score of 51 for December 2021.
MoneyLion’s current product platform includes:
Premium Mobile Banking: RoarMoney
RoarMoney is our FDIC-insured digital demand deposit account with zero minimums, premium features and rewards. Our RoarMoney demand deposit accounts are currently issued by MetaBank®,Pathward, N.A. (“MetaBank”Pathward”), a South Dakota-based, nationally chartered bank owned by MetaPathward Financial, Group, Inc. (NASDAQ: CASH).
Customers can open a We charge each RoarMoney account in minutes througha $1 monthly administrative fee, which is deducted from the MoneyLion mobile application, add funds to theircustomer’s RoarMoney account, and begin spending usingunless a customer’s RoarMoney account has less than $1 on deposit or the customer is a Credit Builder Plus or WOW member (as described further below).
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RoarMoney accounts include a virtual debit card. RoarMoney accounts also includecard as well as a physical MoneyLion Debit Mastercard that can be used at any of the approximatelyover 55,000 Allpoint ATM network locations to make no-fee withdrawals.
Our RoarMoney account includes some of the best features and rewards in banking, including:
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RoarMoney offers robust security controls such as multi-factor authentication, contactless payment, instant card lock and robust protection against unauthorized purchases if cards are lost or stolen.
Each RoarMoney account is charged a $1 per month administrative fee, which is deducted from the customer’s RoarMoney account. The account administrative fee is retained by MoneyLion and is not shared with any of its third-party partners/vendors. If a customer’s account has less than $1 on deposit, the account will not be charged the administrative fee. We began charging this fee in 2020 and assessed the administrative fee on approximately 49% and 20%, respectively, of total RoarMoney accounts during the years ended December 31, 2021 and 2020.
Our RoarMoney demand deposit accounts are currently issued by MetaBank. MetaBank is also the issuer of all RoarMoney debit cards and sponsors access to debit networks for payment transactions, funding transactions and associated settlement of funds under a sponsorship agreement with MoneyLion. MetaBank also provides sponsorship and support for ACH and associated funds settlement. Under the agreement between MoneyLion and MetaBank, MetaBank receives all of the program revenue and transaction fees, and passes them on to MoneyLion, minus any obligations owed to MetaBank. MoneyLion pays all payment network fees and other program-specific expenses associated with RoarMoney. These payment network fees are set directly by the various payment networks and based on the transactions processed on their respective network. See “Our Business Model” herein for additional information.
RoarMoney accounts can be funded with a paycheck direct deposit, an external debit card, an external bank account or a mobile check capture. For an additional retail service fee of up to $4.95 paid to the retailer, customersaccount holders may also make cash deposits to their RoarMoney debit cards through a network of over 90,000100,000 retailers across the country, a service provided by Green Dot Corporation (“Green Dot”). Under our network membership agreement with Green Dot, all transactions made
RoarMoney accounts include additional premium features and rewards, many of which are accessible by customers through the Green Dot network are settledaccount holders for no additional mandatory fees, including early paycheck delivery by MetaBank. MoneyLion does not pay Green Dot any fees for this service, nor does MoneyLion receive any of the retail service fee revenue collected by retailer. Green Dot may have revenue sharing arrangements with the retailer.
Shake ‘N’ Bank and other cashback rewards are paid for by MoneyLion and included in our marketing expense on our consolidated statement of operations. We pay a nominal fee to MetaBank for our customers to access their direct deposits up to two days, earlier than the scheduled payment date. As part ofcashback rewards opportunities with qualifying purchases, and “Price Protection,” a fee arrangement between MoneyLion and Allpoint, MoneyLion pays Allpoint a fee to provide RoarMoney customers with access to approximately 55,000 Allpoint ATM network locations at no additional cost to RoarMoney customers. Price Protection is anMastercard-sponsored insurance benefit sponsored by Mastercard and providedworth up to $1,000 in individual coverage limits per year per MoneyLion Debit Mastercard cardholders by the Member Companies of AIG Insurance Company and paid for by MoneyLion.
Personalized Investing: MoneyLion Investing
MoneyLion Investing is an online investment account that offers access to separately managedcardholder. RoarMoney accounts invested based on model portfolios comprised of ETFs and managed on a discretionary basis. Advisory services related to the MoneyLion investment account are provided by ML Wealth LLC (“ML Wealth”), an SEC-registered investment adviser and an indirect wholly-owned subsidiary of MoneyLion Inc. Brokerage and custodial services are provided by DriveWealth LLC (“DriveWealth”), a third-party provider. See “Our Business Model” herein for additional information regarding our agreement with DriveWealth.
This fully-managed account model allows customers to set their investment strategy and let ML Wealth manage investment decisions to implement that strategy on a discretionary basis. An investment account holder simply identifies their investing comfort zone to receive a personalized portfolio, a mix of stock and bond ETFs. The customer is then free to make the portfolio more or less aggressive, if their preferences or goals change. Additionally, accounts are monitored on an ongoing basis and are managed to and rebalanced toward target allocations whenever there is money movement within an account, when model allocations are updated, as well as on a periodic basis. Auto-investing allows customers to automatically contribute into their investment account with recurring deposits directly into the account.
Investment strategies range from Steady-Income (most conservative; consistent investment income with an all-bond ETF portfolio and minimal exposure to market fluctuation) to Equity Only (most aggressive; taking on higher potential risk by investing in equity ETFs, in pursuit of the highest long-term potential gains). Thematic investing allows customers to invest in their interests and passions, with thematic ETFs aligned to specific topicsalso include robust security controls such as technology innovationmulti-factor authentication, contactless payment, instant card lock and social responsibility, by adding additional models to their investment account to be incorporated as part of their target allocations alongside their core allocation model.
Each active investment account is charged a $1 per month administrative fee, which is deducted from the customer’s investment account. The account administrative fee is retained by MoneyLion and is not shared with any of its third-party partners/vendors. If a customer’s account has no balance, the account will not be charged the administrative fee. We began charging this fee in the fourth quarter of 2019 and for the years ended December 31, 2021 and 2020, approximately 60% and 87%, respectively, of our investment accounts have been charged the administrative fee. Thereprotection against unauthorized purchases if cards are no asset-based management fees chargedlost or minimum balance required to maintain an investment account.stolen.
Portfolios are powered by two of the leading global investment solution providers in the industry, Wilshire and Global X. Wilshire provides ML Wealth with consulting services with respect to the development and maintenance of risk-based asset allocation and ETF selection for the core allocation models that ML Wealth offers to customers. Global X and Wilshire each provide research and consulting regarding the construction of the thematic portfolios that ML Wealth offers to customers. ML Wealth compensates Wilshire directly through a flat fee investment consulting arrangement for these services, including asset allocation research and advice, as well as security due diligence and selection. ML Wealth does not compensate Global X for these services.Instacash
As of December 31, 2021, ML Wealth had assets under management of approximately $14.7 million. Certain cashback rewards offered by MoneyLion (or its affiliates) may be added directly to the MoneyLion investment account. In those cases, the customer is required to maintain an investment account to be eligible for the reward. These rewards are offered and funded by MoneyLion and not by ML Wealth. See “Premium Mobile Banking: RoarMoney” herein.
Crypto
MoneyLion Crypto is an online cryptocurrency account that enables customers to buy, sell and hold cryptocurrency. The account is provided by Zero Hash LLC and its affiliate, Zero Hash Liquidity Services LLC (collectively, “Zero Hash”), both of which are registered as money services businesses and have the required state-level licenses for engaging in digital assets activities where the Zero Hash services are offered.
RoarMoney accountholders can open a MoneyLion Crypto account through the MoneyLion mobile application and fund it via their RoarMoney account. Customers are subject to a minimum purchase per transaction of $1 and a daily maximum total purchase limit of $2,500. In addition, customers can also round up purchases made either on their RoarMoney account or an external bank account to the nearest dollar. The accrued round ups can then be transferred into the customer’s MoneyLion Crypto account and invested in Bitcoin.
As of December 31, 2021, the only cryptocurrencies available through the MoneyLion Crypto account were Bitcoin and Ether. In January 2022, MoneyLion Crypto expanded to include Bitcoin Cash and Litecoin. Transactions in additional digital assets may only be made available through the MoneyLion Crypto account if mutually agreed between us and Zero Hash. MoneyLion’s evaluation of whether to provide any additional digital currency-related products or services on our platform will depend on customer demand, estimated costs, potential risks and applicable regulatory requirements, among other factors.
There are no mandatory fees or minimum account balances associated with the MoneyLion Crypto account.
Access to Earned Money: Instacash
Instacash is our 0% APR advanceearned wage access product that gives customers early access to their recurring income deposits. Customers who link their RoarMoney account or an external checking account can access Instacash advances at any time during a regular deposit period up to their advance limit, providing customers with the flexibility to cover temporary cash needs and avoid costly overdraft fees. When customers link their RoarMoney account or an external checking account, they can qualify for Instacash. No credit check is required.
needs. Eligibility for Instacash is based on the verification of the customer’s RoarMoney account or external checking account and the customer’s identity, and thewithout any required credit check. The advance limit is primarily based on a percentage of income or other recurring deposit amounts detected through the linked checking account. This process isbank account, subject to special boosts that temporarily raise the advance limit. These processes are fully automated unless there are any issues flagged via our customer identification processes. MoneyLion has theprocesses, and we retain sole authoritydiscretion to make Instacash advances.
There are no fees associated with regular delivery of funds to either a RoarMoney account (typically delivered within 12-48 hours)one to two business days) or an external checking account (typically delivered within two to five business days). However, customers have the option to pay an additional fee in order to receive their funds on an expedited basis (typically within minutes or less)minutes), the amount of which is based on the amount of the disbursement and whether the funds are delivered to a RoarMoney account or an external checking account. Customers may also choose to leave MoneyLion an optional tip for use of the Instacash service. Instacash advances are included in receivables, net in our consolidated balance sheets.
Membership Programs
Building Credit History and Giving Access to Credit: Credit Builder Plus
Our Credit Builder Plus membership program offers a proven path for our customers to access credit and manage funds, establish or rebuild credit history build savings, establish financial literacy and trackmonitor their financial health.
Forhealth through a suite of products and services, including access to the secured personal Credit Builder Loan, for a monthly cost of $19.99, customers receive a suite of services including banking and investment accounts, credit tracking and financial literacy content, rewards programs and access to loans of up$19.99. Credit Builder Loans, which range from $500 to $1,000, at competitive ratesare offered by MoneyLionour lending subsidiaries allowing our customersand allow members to establish up to twelve months of payment history with all three credit bureaus.Equifax, Experian and TransUnion. The interest rate on a Credit Builder Plus members do not pay additional recurring fees for the services included in the membership program — the $1 per month administrative fees for the RoarMoney accountLoan ranges from 5.99% to 29.99%, and MoneyLion investment account are waived. Credit Builder Plus members may incur certain fees or other charges for using specific features of the membership services, such as interest charges on a loan they choose to borrow or non-recurring convenience fees associated with their RoarMoney account.
We offer our Credit Builder Plus members access to the Lion’s Share Loyalty Program, where members can earn rewards of up to $19.99 per month. The size of the Lion’s Share reward depends on a customer’s number of logins into the MoneyLion app and purchases using their RoarMoney account in that month. Expenses related to our Lion’s Share Loyalty Program are included in our marketing expense.all have 12-month terms. For the year ended December 31, 2021, on2023, the average approximately 25%amount of our Credit Builder Plus customers who met the minimum eligibility criteria received this benefit.
As part of the Credit Builder Plus membership program, members may apply for a Credit Builder Plus secured personal loan. While most other credit builder products in the market do not give the consumer any of the loan funds upfront, MoneyLion provides a portion of the loan proceeds right away alongside access to Instacash advances to help cover everyday expenses. The rest of the loan funds are saved for the customer in a credit reserve account, an account in the customer’s name maintained by ML Wealth and held at DriveWealth (“Credit Reserve Account”). Based on the customer’s credit profile, the MoneyLion lending subsidiary will disburse a portion of the loan principal to the customer’s selected bank account, with the remainder deposited in a Credit Reserve Account. Funds in the Credit Reserve Account serve as collateral that partially secures the loan, which may not be withdrawn while the loan is outstanding and may be liquidated if the customer defaults on their loan obligations. Funds in the Credit Reserve Account are held in low-volatility money market funds or cash sweep vehicles and become fully accessible to the customer once the full loan amount has been repaid. Monitoring of the collateral is done through monthly reviews of the collateral value relative to the value of the outstanding loan-based finance receivables. With the membership, customers receive their credit score as well as key credit factors, such as credit utilization, to track their progress.
For the year ended December 31, 2021, the average Credit Builder Plus loanLoan was $705,$720, with a weighted average APR of 21.29%21.4%. Credit Builder Plus loans range in size from $500
The amount of loan proceeds, if any, disbursed to $1,000 with an interest rate range from 5.99% to 29.99%. All Credit Builder Plus loans have 12-month terms.the customer’s selected disbursement method is based on the customer’s credit profile, and we do not impose any minimum FICO score requirements. Our underwriting is driven by proprietary models that combine applicants’ prior credit history, based on credit bureau data, with bank account and income data and their repayment history with MoneyLion. We doProceeds not havedisbursed to the customer are held in reserve in a minimum FICOcredit reserve account with a third-party provider, DriveWealth LLC (“DriveWealth”), which account is in the customer’s name and maintained by ML Wealth LLC (“ML Wealth”), an indirect wholly-owned subsidiary of MoneyLion. Funds in the credit reserve account are held in money market and/or cash sweep vehicles and serve as collateral that partially or fully secures the loan. The funds may not be withdrawn while the loan is outstanding and may be liquidated by us if the customer defaults on their loan obligations. With each on-time payment, customers build credit history, which is reported to all three credit bureaus, and receive their credit score and other valuable credit insights to track their progress. The funds held in the credit reserve account become fully accessible to the customer once the full loan amount has been repaid.
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Although Credit Builder Plus members may incur certain fees or charges for approval ofusing specific products and services bundled in the membership (such as interest charged on the Credit Builder Plus loans. MoneyLion develops and executes all credit policies and risk management strategies directly. While MoneyLion does not provide a guarantee for the performance of loans and other receivables that we originate, we sold these loans and other receivables at a discount of approximately 10% to IIA (as defined below). Beginning in the fourth quarter of 2021, we transitioned our primary source of funding for originated receivables from IIA to special purpose vehicle financings from third-party institutional lenders. The receivables are included in receivables, net on our consolidated balance sheet.
Prior to our launch ofLoan), Credit Builder Plus members in 2019,good standing do not pay additional recurring fees for the RoarMoney account and MoneyLion Investing account included in the membership program—the administrative fees for both accounts are waived. Through qualifying actions and purchases, members can also earn rewards of up to $19.99 per month, allowing them to partially or fully offset the price of the membership.
As part of the continued evolution of our membership model, we offeredlaunched our new WOW membership in January 2024. For a MLmembership price of $9.99 per month, WOW members receive exclusive access to premium products, offers and features such as cashback marketplace rewards and single stock investing functionality, as well as additional content and engagement opportunities with other members. Similar to Credit Builder Plus members, WOW members in good standing do not pay additional recurring fees for the RoarMoney account and MoneyLion Investing account included in the WOW membership—the administrative fees for both accounts are waived. The WOW membership through which we originated unsecured personal loans, ML Plus loans. The ML Plus membership transitioned intoalso comes with many of the benefits associated with the Credit Builder Plus membership, inincluding eligibility for the second quartersame Credit Builder Loan.
MoneyLion Investing
MoneyLion Investing is an online investment account that offers access to separately managed accounts invested based on model exchange-traded fund (“ETF”) portfolios, enabling customers to invest any amount of 2020.their choosing, with no account minimums. Through MoneyLion Investing, customers are able to develop sound investing habits through features such as auto-investing, allowing them to automatically contribute into their account with recurring direct deposits, and “Round Ups” (as described further below under “— Round Ups”). MoneyLion Investing accounts are managed on a discretionary basis by ML Plus loans were fixed at $500,Wealth, an SEC-registered investment adviser. As of December 31, 2023, ML Wealth had discretionary assets under management of approximately $11.4 million. Brokerage and custodial services are provided by DriveWealth. See “— Our Business Model — Third-Party Providers — DriveWealth” for additional information regarding our agreement with DriveWealth.
With a MoneyLion Investing account, customers establish their investment strategy based on their preferred balance of risk and return and receive a personalized portfolio comprising a mix of stock and bond ETFs. MoneyLion Investing accounts are managed and rebalanced toward target asset allocations periodically, as well as whenever there is money movement within an interest rate of 5.99%. Allaccount or when model allocations are updated. Wilshire Associates, Inc. (“Wilshire”) provides ML Plus loans had 12-month terms. Our underwriting was driven by proprietaryWealth with consulting services to develop and maintain the risk-based asset allocation and ETF selection for the core allocation models that combine applicants’ prior credit history,ML Wealth offers to customers. ML Wealth compensates Wilshire directly through a flat fee investment consulting arrangement for its services, including asset allocation research and advice, as well as security due diligence and selection.
Additionally, customers can invest in their interests by adding thematic investing aligned to specific topics such as technology innovation and social responsibility. These additional thematic ETF models are incorporated as part of a customer’s target asset allocations alongside their core risk-based asset allocation model. Thematic investment portfolios are powered by Wilshire and Global X Management Company LLC (“Global X”), which each provide research and consulting services regarding the construction of the thematic portfolios. ML Wealth does not compensate Global X for these services.
We charge each MoneyLion Investing account a tiered monthly administrative fee based on the account value: $1 for accounts valued up to $5,000, $3 for accounts valued over $5,000 but under $25,000, and $5 for accounts valued over $25,000. This fee is deducted from the customer’s MoneyLion Investing account, unless the account has no balance or the customer is a Credit Builder Plus or WOW member (as described above). We do not separately charge ongoing management or trading fees.
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MoneyLion Crypto
MoneyLion Crypto is an online cryptocurrency account available only to RoarMoney account holders that enables customers to buy, sell and hold certain cryptocurrencies. The account is provided by Zero Hash LLC and its affiliate, Zero Hash Liquidity Services LLC (collectively, “Zero Hash”) and is available in all U.S. states and the District of Columbia except for Hawaii. The Zero Hash entities are registered as money services businesses with FinCEN and hold active money transmitter licenses (or the state equivalent of such licenses) in all U.S. states and the District of Columbia except for (i) California and Wisconsin, where Zero Hash relies upon licensing exemptions; (ii) Montana, which does not currently have a money transmitter licensing requirement; and (iii) Hawaii. See “— Our Business Model — Third-Party Providers — Zero Hash” for additional information regarding our agreement with Zero Hash.
Customers are subject to a minimum purchase per transaction of $1 and a daily maximum total purchase limit of $10,000, funded using the balance in their RoarMoney account. We do not charge an additional transaction fee to buy or sell crypto assets. MoneyLion Crypto also includes features such as auto-investing, allowing customers to automatically purchase available cryptocurrencies on an automated, recurring basis based on a frequency of their choice (daily, weekly, biweekly or monthly), and “Round Ups” to purchase Bitcoin (as described further below under “— Round Ups”).
As of December 31, 2023, the only cryptocurrencies available through MoneyLion Crypto were Bitcoin, Bitcoin Cash, Ether and Litecoin. We have evaluated and will continue to evaluate expanding the cryptocurrency offerings available to our customers in light of, among other factors, customer demand, estimated costs, potential risks and applicable laws and regulatory guidance relating to different types of cryptocurrency and digital assets. Transactions in additional digital assets may only be made available through MoneyLion Crypto if mutually agreed between us and Zero Hash, and both we and Zero Hash must consent in writing before adding any additional digital assets to the program.
Round Ups
As part of our core suite of products and services, we provide features designed to encourage customers to establish good saving and investing habits. Using our “Round Ups” feature, customers automatically round up qualifying purchases made on their RoarMoney account or an external debit or credit bureau data,card to the nearest dollar, with the option to double their Round Ups. Once Round Ups reach $5, the amount is either transferred to the customer’s MoneyLion Investing account and invested in accordance with the customer’s chosen investment strategy or transferred to the customer’s MoneyLion Crypto account and invested in Bitcoin, at the customer’s choice.
All MoneyLion users are eligible to sign up for Round Ups. In order to enable Round Ups, a customer is required to designate (i) at least one linked debit or credit card as a transaction source from which qualifying purchases will be rounded up and (ii) a linked bank account and income data and their performance history with MoneyLion. MoneyLion develops and executes all credit policies and risk management strategies directly. While MoneyLion does not provide a guarantee for the performance of loans and other receivables that we originate, we sold these loans and other receivables at a discount of approximately 10% to IIA. See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations of MoneyLion — Revenues — ML Plus loans” below for more information on ML Plus loans.
Advice and financial wellness: Financial Tracking
In addition to offering a complementary suite of financial products, MoneyLion has pioneered a new approach to personal financial management with Financial Heartbeat, an intelligent, automated tool that guides customers on their financial journey. Financial Heartbeat evaluates customers’ financial situation across four key dimensions: SAVE (savings and financial preparedness), SPEND (spending and personal budget), SHIELD (insurance needs and coverage) and SCORE (credit tracking and health). Through our easy-to-use interface, customers can review the key issues impacting their financial situation, decide what actions to take, evaluate which productsfund Round Ups. There are no additional fees required to use the Round Up feature, though separate fees may be required associated with the RoarMoney and receive guidance on howMoneyLion Investing accounts, as described above.
The Round Up feature allows customers to build their MoneyLion Investing or MoneyLion Crypto portfolio with discipline and consistency, helping customers stay motivated on their journey towards financial wellness. In addition, GamePlaninvested even in challenging times, with frequent and regular investments that avoid overreactions to market movements and headlines. We believe this feature provides our customers with the option to take easy action to live a personalized action plan, including a checklist with tasks, meantbetter financial life, helping them to help them reachachieve their financial goals across different categoriesor bridge times of financial need.
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Guidance
As part of our mission to give everyone the power to make their best financial decisions, we seek to deliver an engaging, data-driven personal financial management experience to our users, offering actionable insights and guidance via a personalized content feed in the MoneyLion mobile application called Discover. Through the Discover feed, we provide curated video content to consumers from our network of creators, including MoneyLion original series produced in-house, on relevant and trending topics such as spending, savinginvesting, budgeting, taxes, money tips and more.
Engagingfinancial news, based on what our algorithms and proprietary data sets determine is most relevant for them. Our vast content library is complemented by innovative tools and improving financial literacy: MoneyLife
Consistent with our vision of establishing MoneyLion as a lifestyle brand, in 2021 we introduced MoneyLife, an online financial education content destination. MoneyLife is a video content-driven educational platform available onfeatures that deepen engagement within the MoneyLion appecosystem, including financial calculators and AI-powered search through which users can better understand their financial lives.
Powered by our website where customers can share and discovermedia division, our content capabilities allow us to not only drive higher engagement but also encourage our customers’ exploration of ideas, advice and insights regarding their financial lives. With high usabilitylives, with personalized offers at their fingertips to take action. Our efforts to reach customers through easily digested and sleek design, MoneyLife includesenjoyable content drivenis not only designed to enhance their financial literacy but also to pique curiosity, entertain and deliver a delightful in-app experience. Ultimately, our content strategy seeks to place MoneyLion as the go-to destination when customers seek both guidance and solutions for all of their money decisions.
Enterprise
Consumer Marketplace
Our Enterprise business infrastructure and technology powers our Consumer marketplace, delivered through the MoneyLion mobile application and website, through which customers can access a broad range of personalized and actionable offers for both financial and non-financial products and services. These offers, provided by our Product Partners, are accessible by consumers on a standalone basis and cover a wide variety of verticals, including personal loans, saving accounts, credit cards, insurance, financial advicewellness and education influencers,mortgages, among others.
The Consumer marketplace expands the breadth and depth of available products and services on our platform. We leverage our machine-learning recommendation algorithms and vast amounts of contextualized data about our customers to deliver highly relevant solutions for them in one easy-to-access, easy-to-use experience. We believe we create more value for our customers by providing additional opportunities for them to earn more, save more and spend and borrow smarter. We continue to evaluate and expand the number and types of offers and third-party partners on the Consumer marketplace.
Enterprise Marketplace
Leveraging the same Enterprise business infrastructure and innovative technology, we deliver leading embedded finance marketplace solutions, powered by what we believe is the definitive search, comparison and recommendation engine for real-time, personalized financial product and service offers. Our partners integrate our one-to-many platform onto their properties and can incorporate additional consumer-facing financial management tools to achieve financial goals and additional ways of earning rewards to shop and save. Our acquisition of MALKA acceleratesfeatures we have developed, highlighting our ability to engage with consumers across all digitaldistribute a premiere marketplace experience to our partners. Our platform integrations are fully configurable and emerging channels, allowing usrange from co-branded, customizable webpages that we host, to more sophisticated embedded widgets and custom-built, native API integrations. In addition, through our rich datasets, we provide complementary, value-added enterprise services, including data analytics, expanded decisioning capabilities and filters, reporting and marketing infrastructure and related services to our Enterprise clients, enabling them to better understand the performance of their marketplace programs and optimize their business over time.
For our Product Partners, which provide the products and services in the marketplace, our marketplace platform enables them to expand their reach and more easily engage high-intent consumers when and where they seek financial offerings. For our visionChannel Partners, the organizations through which we reach a wide base of consumers, including news sites, content publishers, product comparison sites and financial institutions, our platform provides them with a daily destination, which started with our own MoneyLife content, with personalized content that educates, informs and supports consumers’ financial decision making and other general interests. We estimate that in the fourth quarter of 2021, MALKA’s content creators provided over 69 million MoneyLion brand impressions. MoneyLife will drive additional prospective customers to MoneyLion and increase customer engagement and cross-sell opportunities for both MoneyLion and its affiliate partners.
Our Business Model
We offer a rangebreadth of financial products and services to add to their business with ease, providing value to their users and, in turn, monetizing their impressions. As of December 31, 2023, we had 547 Product Partners and 624 Channel Partners on our platform.
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Our platform offers a more simple and efficient system of customer acquisition for our partners, and we have a strong track record of delivering value for them. By providing both sides of the network via a programmatic online marketplace, we create a powerful engine for real-time, personalized financial product and service search, comparison and recommendations. The MoneyLion ecosystem benefits from the synergies between our Consumer and Enterprise businesses as we drive more consumers to our platform, which expands our marketplace and further enhances our value proposition to our partners.
Media
In our media division, we offer creative media and brand content services to our Enterprise clients across a variety of industries, including consumer goods, professional services and entertainment. We produce bespoke brand narratives, live events and entertainment, content feeds, advertising campaigns and other creative assets, including graphic design, animated content, podcast series and feature length documentaries, across myriad digital media. Our creative capabilities combine the creativity of an adaptive content agency with the resourcefulness of a production studio, and we embrace technological innovation to rapidly bring ideas to life.
Our Strategies
We have a unique set of assets that allow us to reach and acquire customers at scale. We have leading technology and data processing capabilities that allow us to capitalize on the structural advantages inherent in being a digitally native, data-driven, customer-centric and built-to-scale platform with a vast and expanding network of partners. Our media assets and creative capabilities, which combine with our connected lifestyle and intelligent marketing efforts, deepen engagement in support of both our Consumer and Enterprise strategies. Our strategies are designed to continue building upon the momentum we have generated to date to create hyper-personalized experiences and even greater lifetime value for our customers.
Scale Top-of-Funnel Conversion Efficiently
Our unique combination of diversified product and service offerings, content capabilities, deep data insights and marketplace assets drives a large top-of-funnel, which we continue to scale to efficiently acquire customers. During the year ended December 31, 2023, we had over 200 million Total Customer Inquiries, representing the aggregate number of MoneyLion mobile application installations, users who have registered via the MoneyLion website and number of submitted consumer applications for financial products across our marketplace business. This large top-of-funnel feeds into our highly efficient, capital-light customer acquisition approach that we believe presents us with a significant opportunity to effectively drive new customer growth at industry-leading low costs. As we expand our Enterprise Partner relationships (as described further below), we grow the connected network of high-intent consumers and product and service providers, resulting in lower costs to acquire customers compared to traditional performance marketing channels.
In addition, our content creation capabilities give us differentiated customer acquisition and retention advantages. By creating a personalized experience for our users and providing both guidance and accessible products, services and features at scale in one destination, we believe we can reduce the friction of converting customers while simultaneously significantly augmenting the user experience, driving monetization and lifetime value. Furthermore, we believe our innovations in customer engagement and retention have provided us with network effects that we expect to continue as we scale.
During the year ended December 31, 2023, we added approximately 7.5 million Total Customers and had 14.0 million Total Customers as of December 31, 2023, representing approximately 115% growth year-over-year. During that same period, we reduced our marketing expenditures considerably. As we continue to scale and increase our market presence and brand awareness, we will have opportunities to further efficiently grow our top-of-funnel and enhance conversion by leveraging a sizable customer base and associated data that will expand our customer insights. In turn, this will allow us to innovate and offer even broader solutions to attract more customers to our platform at a lower cost.
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Compound Our Data Advantage and Deliver Solutions with Innovative Technology
The foundation of MoneyLion is data. Our customers provide us with contextualized data to analyze so that we can grow our understanding of their financial circumstances, and we continually expand our rich datasets as consumers enter our funnel. Since inception, approximately 24.5 million bank accounts were linked on our platform and we had over 45 million unique consumer profiles across our platform. We ingest billions of transactional data points each day, and we are constantly analyzing this data through our 26 machine learning models to generate billions of inferences, categorizations and predictions per day that we distill into approximately 11,000 insights for each of our customers. With an ever-growing number of consumer touchpoints providing consumer information, qualification attributes, intent data and conversion statistics, we continue to strategically seek and build our proprietary knowledge and enhance the predictive value of our data, which in turn enables us to continue building robust products, services, tools and features.
Combining this data with our strong track record of underwriting, pricing risk and originating credit at scale, we have amassed a data advantage that underpins our platform and continues to compound over time. We also continue to benefit from continuing improvements made to our data and risk models since inception. This data advantage drives our approach to understanding and adapting to the problems of our customers, how we can address these problems with personalized experiences across our platform, how to accelerate the development and the adoption of our and our third-party partners’ products and services and how we approach prospective customers in a timely, cost-effective manner.
Using these data insights and embracing technological innovation to power personalization, we have built an integrated technology platform designed to deliver optimal solutions for customers in both our Consumer and Enterprise businesses while reducing our costs and automating business processes to increase our efficiency and drive operating leverage. Crucially, these methods are not only used to enhance the experience in our Consumer platform but are also provided to our Enterprise clients. We continually evaluate opportunities to apply and commercialize our distributable technology and our data advantage to help our partners optimize their marketplace integrations and competitiveness through, for instance, data products and analytics that help enhance conversions or flag fraud signals.
Expand Enterprise Partner Relationships and Broaden Our Product and Service Portfolio
Through our leading embedded marketplace solutions, we enable any company to add financial product and service offerings to their business, connecting consumers with the right offers when and where they choose to engage. As of December 31, 2023, we had over 1,100 Enterprise Partners, forming a powerful and efficient network of supply and demand that presents a positive value proposition for consumers and businesses alike.
We believe we have a significant opportunity to grow our Enterprise business and provide a best-in-class user experience by deepening our core verticals while expanding the breadth of our category offerings. In our core verticals, we are expanding our expertise and onboarding additional premiere partners, offering robust distribution capabilities and data-driven value-added services, which in turn provides additional opportunities for monetization. These deep verticals are complemented by a broad set of adjacent, high-value verticals that cover a wide range of diversified financial and non-financial solutions designed to address the needs of any and every consumer, which unlocks further expansion of our total addressable market. We remain focused on diversifying our product and revenue mix, which helps to mitigate the impact of macroeconomic downturns. Revenue from our personal loan vertical represented approximately 60% of our Enterprise marketplace revenue for the year ended December 31, 2023 compared to approximately 85% for the year ended December 31, 2022.
Ultimately, expanding our Enterprise Partner relationships fuels a synergistic flywheel effect across our Consumer and Enterprise businesses that drives our growth and capabilities. As we increase our Channel Partners, thereby scaling our top-of-funnel, and add additional customers, we receive more data, which in turn allows us to generate better product and service recommendations. As we increase our Product Partners and expand our portfolio of products and services, we improve customer outcomes, leading to more conversions and better monetization.
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While we have achieved significant growth and scale to date, including as the result of strategic acquisitions that we undertook to extend our addressable market, we believe we have a long runway for future growth across our business. We will continue to evaluate opportunistic transactions and partnerships that would allow us to capture additional opportunities in our addressable market, expand our product and service offerings to our existing customers or allow us to enter new verticals.
Engage, Educate and Empower Customers to Enhance the Customer Experience
Our platform is designed to foster a relationship with our customers and provide them with the tools to search, discover, learn and share ideas and insights regarding their finances in an informative and enjoyable manner. Our content strategy is based on our differentiated ability to introduce MoneyLion to prospective customers and engage with existing customers through timely and relevant money-related content. We believe this modern approach to engagement and financial education is the next frontier of financial product marketing. Our customers better understand their financial circumstances and, with the innovative tools and features we have launched such as AI-powered search and the access we provide to a broad range of solutions, take action to live a better financial life.
Our content strategy is to deliver in-context guidance and outcomes to our customers, not impersonal ads. Our holistic, customer-centric set of automated suggestions, insights and recommended actions across the entire spectrum of financial product discovery, saving, spending, borrowing and investing activities are driven by our deep knowledge of the customer, their peers and our customers’ own goals. Our goal is to organically grow our daily active user base and in support of this strategy, we have unlocked new social features in the Discover feed to drive engagement and instill a sense of community, fostering conversations about money amongst our users through prompts and polls.
We are dedicated to addressing the needs of our customers not only by empowering them to manage their financial lives, but also by delivering an optimal customer digital experience and easy-to-use interface via the MoneyLion mobile application. To support customer satisfaction, we offer a searchable, self-service Frequently Asked Questions database within our Help Center, which is supplemented by chat, telephone and email support available 24 hours a day, 7 days a week via chatbot or live agent. As of December 31, 2023, we had received over 200,000 five-star ratings across all app stores, with a 4.7-star average on Apple, a 4.5-star average on Google and a 4.5-star average on TrustPilot, and had an overall Net Promoter Score of 60 for December 2023.
Optimize Business Equation to Drive Profitable Conversions and Marketing Initiatives Across Our Platform
Our platform approach is designed to not only deliver improved outcomes throughout our customers’ entire financial lives but also to produce strong revenue growth and profitability. A platform model allows us to generate multiple income streams from a single platform delivered via a mobile application. customer and deliver products and services at pricing levels that we believe will be comparatively lower over the long-term while maintaining sound operating margins. This leads to attractive unit economics that, coupled with our strong customer payback periods and recurring revenue profile, lays the foundation for profitable growth at scale.
Our subsidiary, MALKA, provides digital mediafocus on forming deep customer relationships expands lifetime value as our lifecycle engine leverages our existing customer base, content strategy and breadth of first- and third-party products and services to drive overall product usage. As customers consume content and receive advice and guidance, we increase engagement for ourselves and our partners. In turn, we gain insights on how to optimize marketing opportunities and initiatives for us as well as our partners. By increasing incremental product adoption per customer, we drive revenue and revenue diversification and further enhance our profitability by lowering our cost to acquire and service customers. As of December 31, 2023, we had 14.0 million Total Customers who used 23.1 million Total Products, which translates to approximately 1.6 products per customer.
We also continue to expand our marketing efforts not only directly to consumers but to our Enterprise clients, leveraging relationships across our businesses to bolster our pipeline for our enterprise services, including content production services to uscapabilities, and to its own clients in entertainment, sports, gaming, live streamingpursue strategic partnerships for the entire MoneyLion ecosystem as it expands and other sectors.matures.
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Our Business Model
Revenue Overview
We categorize our revenue is primarily broken out intobased on our Consumer and Enterprise businesses. For the following categories:
Our Adjusted Revenue is primarily broken out into the following categories:
Adjusted Revenue is a non-GAAP measure. See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations of MoneyLion — Non-GAAP Measures” for a reconciliation of Adjusted Revenue to total revenues, net, and $138.3 million of revenue from our Enterprise business, representing 32.7% of total revenues, net.
Consumer
In our Consumer business, we primarily earn revenue as follows:
•RoarMoney Banking: We originate loans directly underearn revenue from interchange fees from payment networks based on customer expenditures on the debit card, as well as transaction volume-based incentive payments from the payment network. We also earn revenue from cardholder fees charged to our lending licenses or pursuant to applicable exemptions across various statescustomers, such as the monthly administrative fee, an out-of-network ATM fee, a foreign transaction fee and instant transfer fees. Interchange fees, payment network payments and cardholder fees are reflected in service and subscription fees.
Enterprise
In our Enterprise business, we originate. Our subsidiary, ML Plus LLC, makes Instacash advances that we service.primarily earn revenue, reflected in enterprise service revenues, as follows:
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Originated Receivables
Receivables originated on our platform, including Credit Builder Plus loansLoans and Instacash advances, were primarily financedare funded through Invest in America Credit Fund I LLC (“IIA”) until the end of the fourth quarter of 2021. IIA was formed in 2016 and is an indirect wholly owned subsidiary of MoneyLion Inc. IIA had been our primary source of funding for originated receivables since 2018. IIA is organized as a Delaware limited liability company and is treated as a partnership for United States income tax purposes. IIA’s membership interests were issued in separately designated series, with each series consisting of Class A Units and Class B Units. IIA investors owned all non-voting Class B Units of the applicable series they invested in, which entitled them to a targeted, non-guaranteed, preferred return of typically 12% per year. ML Capital III LLC (“ML Capital III”), an indirect wholly owned MoneyLion subsidiary, is the managing member of IIA and owned the Class A Units of each series, which entitled ML Capital III to returns that exceeded the targeted preferred return on the Class B Units (if any). IIA used proceeds from the sale of Class B Units to investors to purchase borrower payment dependent promissory notes from Invest in America Notes SPV I LLC and Invest in America Notes SPV IV LLC, each an indirect wholly-owned MoneyLion subsidiary. The collateral consisted of a portfolio of underlying MoneyLion loans and advance receivables. Investors in Class B Units funded their investment into IIA at the time of subscription, which proceeds were used to finance receivables originated on MoneyLion’s platform. At the end of the fourth quarter of 2021, IIA was wound down and all assets were returned to investors. As of December 31, 2021, IIA had no assets.
Beginning in the fourth quarter of 2021, MoneyLion transitioned its primary source of funding for originated receivables from IIA to special purpose vehicle financings from third-party institutional lenders. In September 2021, ROAR 1 SPV Finance LLC, an indirect wholly owned subsidiary of MoneyLion (the “ROAR 1 SPV Borrower”), entered into a $100 million credit agreement, which was subsequently increased to $135 million (the “ROAR 1 SPV Credit Facility”), with a lender for the funding of receivables, which secure the ROAR 1 SPV Credit Facility. As of December 31, 2021, there2023, $64.5 million aggregate principal amount was an outstanding principal balance of $78 million under the ROAR 1 SPV Credit Facility. In December 2021, ROAR 2 SPV Finance LLC, an indirect wholly owned subsidiary of MoneyLion (the “ROAR 2 SPV Borrower”), entered into a $125 million credit agreement, which was subsequently reduced to $75 million (the “ROAR 2 SPV Credit Facility”), with a lender for the funding of receivables, which secure the ROAR 2 SPV Credit Facility. As of December 31, 2021, there2023, $62.5 million aggregate principal amount was an outstanding principal balance of $68 million under the ROAR 2 SPV Credit Facility. For additional information regarding ROAR 1 SPV Borrower and ROAR 2 SPV Borrower and the financing structure, see Part II, Item 8 “Financial Statements and Supplementary Data — Variable Interest Entities.”
Third-Party Providers
We dependrely on certain keyagreements with Pathward, DriveWealth, Zero Hash and other third-party partnersproviders to provide certain of our productsdeposit accounts, debit card services, investment advisory services and cryptocurrency-related services.
Banking Partners
Our RoarMoney demand deposit accounts and associated debit cards are currently issued by MetaBank.Pathward. Our partnership with Pathward allows us to provide deposit accounts and debit cards while complying with various federal, state and other laws. Pathward also sponsors access to debit networks and ACH for payment transactions, funding transactions and associated settlement of funds. Our subsidiary, ML Plus LLC, is party to an Account Servicing Agreement with Pathward (as amended from time to time, the “Account Servicing Agreement”) with MetaBank, which had an initial three-year. The term ending January 2023 and was amendedof the Account Servicing Agreement ends in December 2021 to extend the term until January 2026, with automatic renewal for successive two-year periods unless either party provides written notice of non-renewal, which may be provided without cause, to the other party at least 180 days prior to the end of any such term. In addition, upon the occurrence of certain early termination events, either we or MetaBankPathward may terminate the Account Servicing Agreement immediately upon written notice to the other party.
Under the terms of the Account Servicing Agreement, Pathward receives all of the program revenue and transaction fees and passes them on to us, minus any obligations owed to Pathward. We generally pay all expenses related to the arrangement, including payment network fees, marketing expenses, vendor management expenses and taxes. In addition, pursuant to the Account Servicing Agreement, Pathward has the right to supervise, oversee, monitor and review our performance, and we are required to comply with applicable laws and regulations, including data privacy, U.S. Bank Secrecy Act (“BSA”) / U.S. anti-money laundering (“AML”) and Customer Identification Program requirements. The Account Servicing Agreement does not prohibit MetaBankPathward from working with our competitors or from offering competing services, nor does it prevent us from working with other banks to provide similar services. Our partnership with MetaBank allows us to provide deposit accounts and debit cards while complying with various federal, state and other laws. MetaBank also sponsors access to debit networks and ACH for payment transactions, funding transactions and associated settlement of funds. Under the terms of the Account Servicing Agreement, MetaBank has the right to supervise, oversee, monitor and review our performance, and we have to comply with applicable laws and regulations, including data privacy, BSA/AML and Customer Identification Program requirements. MetaBank receives all of the program revenue and transaction fees, and passes it on to MoneyLion, minus any obligations owed to MetaBank. In addition, we are generally responsible for any expenses related to this arrangement, including payment network fees, marketing expenses, vendor management expenses and taxes.
In connection with our arrangements with MetaBank,Pathward, we have also entered into a multi-year service agreement with Galileo in(as amended from time to time, the “Service Agreement”), pursuant to which Galileo has agreed to processprocesses all of our transactions for ourthe RoarMoney accounts and debit cards and to handlehandles corresponding payments and adjustments. Galileo also maintains cardholder information, implements certain fraud control processes and procedures and provides related services in connection with the RoarMoney accounts and debit cards. We pay the greater of actual fees or the minimum monthly fee for these services. Following the initial term, the service agreementThe Service Agreement renews for successive two-year periods unless either party provides written notice of non-renewal, which may be provided without cause, to the other party at least 180 days prior to the end of any such term. The occurrence ofEach party also has certain events would provide each party with an early termination rightrights under the agreement.Service Agreement.
Under our network membership agreement with Green Dot, all transactions made by customers through the Green Dot network are settled by Pathward. We do not pay Green Dot any fees for this service, and we receive a portion of the retail service fee revenue collected by retailers. Green Dot may have revenue sharing arrangements with retailers.
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DriveWealth
Our MoneyLion Investing offering is currently reliant upon DriveWealth, a third-party broker-dealer partner, whichpartner. Under the terms of ML Wealth’s Amended and Restated Carrying Agreement with DriveWealth (as amended from time to time, the “Carrying Agreement”), DriveWealth provides brokerage and relatedcustodial services for the investment accounts facilitated through our platform. Under the terms of ML Wealth’s amendedMoneyLion Investing and restated Carrying Agreement with DriveWealth, which was entered into in October 2020, DriveWealth provides brokerage and custodial services to ML Wealth’s advisory customers, including by executingexecutes orders successfully submitted by ML Wealth via its master trading account. The term of the Carrying Agreement has an initial three-year term endingends in October 2023, which automatically renews2024, with automatic renewal for successive one-year periods unless either party provides written notice of non-renewal, which may be provided without cause, to the other party at least 60 days prior to the end of any such term. In addition, upon the occurrence of certain early termination events, either we or DriveWealth may terminate the agreementCarrying Agreement immediately upon written notice to the other party. The Carrying Agreement does not prohibit DriveWealth from working with our competitors or from offering competing services, and DriveWealth currently provides similar services to a variety
Under the terms of other financial institutions. Under our arrangement with DriveWealth, our MoneyLion Investing customers must sign a Customer Account Agreement with DriveWealth, andDriveWealth. DriveWealth maintains ultimate authority on whether to reject the opening of an account or to take any actions related to an account, including closing any account, liquidating the assets under an account or limiting the activities of any account, if DriveWealth deems it necessary to comply with applicable laws or if there is a reasonable risk-based justification for doing so. The Carrying Agreement does not prohibit DriveWealth from working with our competitors or from offering competing services, and DriveWealth currently provides similar services to a variety of other financial institutions.
Zero Hash
Our MoneyLion Crypto account offering is currently reliant upon Zero Hash, a third-party regulated digital asset settlement and custody service provider. Under the terms of the licensingLicensing and cooperating agreement signedCooperating Agreement with Zero Hash, LLC and its affiliate, Zero Hash Liquidity Services LLC, entered into on March 26, 2021 (as amended from time to time, the “Licensing and Cooperating Agreement”), Zero Hash pays us a share of the fees that they earn from our customers in exchange for MoneyLionus enabling Zero Hash to effect digital currency-related transactions for our customers with RoarMoney accounts that reside in states where Zero Hash is authorized to conduct digital assets activities. activities, which currently includes all U.S. states and the District of Columbia except for Hawaii. As of December 31, 2023, the only cryptocurrencies available through MoneyLion Crypto were Bitcoin, Bitcoin Cash, Ether and Litecoin. We have evaluated and will continue to evaluate expanding the cryptocurrency offerings available to our customers in light of, among other factors, customer demand, estimated costs, potential risks and applicable laws and regulatory guidance relating to different types of cryptocurrency and digital assets. Transactions in additional digital assets may only be made available through the MoneyLion Crypto account if mutually agreed between us and Zero Hash, and both we and Zero Hash must consent in writing before adding any additional digital assets to the program.
Under the terms of the agreement, MoneyLionLicensing and Cooperating Agreement, Zero Hash is primarily liable for its digital asset activities. We are not directly involved in any cryptocurrency transactions or the exchange of fiat funds for cryptocurrency taking place at or through Zero Hash. Both parties agreed, at launch,Hash, which provides all custody, trading and pricing of the crypto assets. We enable Zero Hash to limit the cryptocurrency offeringsoffer its services to Bitcoin and Ether, which was subsequently expanded to include Bitcoin Cash and Litecoin in January 2022. Both parties must consent in writing before adding any additional digital assets to the program. UnderMoneyLion Crypto customers through our arrangement,platform; each customer opening a MoneyLion Crypto account is required to enter into a separate user agreement with Zero Hash (the “Zero Hash User Agreement”) to engage in the buying and selling of the available cryptocurrency offerings. Our role is limited to passing instructions from MoneyLion Crypto customers to Pathward, as depository bank (that provides the RoarMoney demand deposit account) to instruct Pathward to transfer funds to Zero Hash for the crypto asset transaction(s). The depository bank then sends, pursuant to the customer’s instructions, funds directly to Zero Hash.
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Our Growth Strategy
We believeOpening Zero Hash accounts, approving Zero Hash customers, the Zero Hash User Agreement, supervising Zero Hash accounts used for the custody of crypto assets and the crypto asset transactions themselves are all within the exclusive control of Zero Hash. Zero Hash maintains all liability for the money transmission, custody and transfer services provided pursuant to the Zero Hash User Agreement, and further assumes all liability with respect to their provision of cryptocurrency services, the purchase and sale of cryptocurrency, customer claims regarding Zero Hash’s settlement of cryptocurrency and Zero Hash’s failure to comply with applicable law related to the trading, settlement and custodian services it provides to customers. As we are not directly involved in the early inningscustody, trading or pricing of realizingany crypto assets and instead enable Zero Hash to offer its crypto asset services to MoneyLion Crypto customers, we do not maintain insurance policies covering the full valuecrypto assets in which MoneyLion Crypto customers transact. Our direct arrangement with Zero Hash obligates Zero Hash to maintain all applicable licenses and to comply with applicable law and also specifically requires Zero Hash to indemnify us for, among other things, all liabilities, losses, expenses and costs arising out of, our existing platform. We seekin connection with or relating to capitalize(a) Zero Hash’s failure to perform or comply with the provisions of the agreement, (b) Zero Hash’s cryptocurrency business and their provision of cryptocurrency transaction services, (c) any claims or disputes between Zero Hash and a customer with respect to the purchase and sale of cryptocurrency and (d) any failure by Zero Hash to comply with, or perform any action required by, applicable laws, rules and regulations. However, Zero Hash is not required to indemnify us or MoneyLion Crypto customers for any risk of loss related to customers’ underlying crypto assets, nor is Zero Hash required to maintain an insurance policy with respect to the crypto assets of MoneyLion Crypto customers custodied with Zero Hash. Zero Hash’s wallet technology provider, Fireblocks, is SOC 2 Type II certified by Ernst & Young and undergoes a SOC 2 Type II review on an annual basis, as well as regular penetration testing by third-party firms to evaluate the Fireblocks security architecture. Fireblocks also maintains an insurance policy which has coverage for technology, cyberattacks and professional liability and is rated “A” by A.M. Best based on the structural advantages inherent in beingstrength of the policy. However, Zero Hash does not maintain separate insurance coverage for any risk of loss with respect to the digital assets that they custody on behalf of customers. As a digitally native, customer-centric and built-to-scale platform as we continue capturing market share and economic gains. Our multi-pronged growth strategy, designedresult, customers who purchase cryptocurrencies through MoneyLion Crypto may suffer losses with respect to continue building upon the momentum we have generated to date to create even greater value for consumers, is to:
Continue penetrating our large addressable market: Our target market is the 100 million middle-class Americans whose needstheir digital assets that are not well-addressedcovered by the current financial system. We define this market as individuals with household incomes up to $150,000 and FICO scores up to 750. While we have achieved significant growth and scale to date through developing a personalized, all-in-one, digital financial platform to meet the needs of our customers, the addressable market is vast. We believe we have a long runway for future growth, and we have the ability to substantially increase our marketing spend versus our historical expenditure levels. We believe we have developed a highly efficient customer acquisition approach that will allow us to effectively deploy the expanded marketing spend and drive new customer growth.
Increase top-of-funnel conversion: We have a significant opportunity to increase the rate at which we convert consumers we reach through various marketing channels into customers. While we have invested in a technology-based approach to customer acquisition that is highly efficient, we believe scale will allow us to further enhance top-of-funnel conversion. Expanding our market presence and consumer awareness of our brand is expected to result in higher rates of customer conversion. In addition, a growing customer base and associated financial and transactional data points will enhance our consumer insights and allow us to better address the needs of our target market, the middle class. Those insights will allow us to innovate and offer an even broader suite of financial products, attracting more customers onto the MoneyLion platform.
Accelerate cross-sell and attachment rates with our platform approach: We take a platform approach to address our customers’ entire financial lives. The combination of a deep, data-driven understanding of our customers’ pain points and a broad suite of products allows us to help improve our customers’ financial well-being while producing strong revenue growth and profitability. We believe the number of customers using two or more products will further expand as more customers see value in our holistic platform approach, and as we continue to innovate and launch new products. Not only does multiple product engagement increase revenue per customer and drive revenue growth, it also further enhances our profitability by driving a lower cost to acquire and service customers.
Deliver new products, features and content: Our product and engineering teams are constantly innovating, leveraging both our data-driven understanding of our customers and our existing technology infrastructure to build new, impactful products and features. Our products and services follow established product development steps, including research and development, design, validation and testing. For each product launch, we generally anticipate expenses related to technology, product design and implementation, including compensation and benefits, to amount to approximately $1.5 to $2.0 million on average. We are developing several new products and services to continue our mission to better serve our customers which will provide further financial flexibility for MoneyLion customers.
Another way we aim to better serve our customers is through the creation of digital media and content that educates our customers about how to improve their financial health by using MoneyLion’s and our affiliates’ products and services. MoneyLife, our online financial education content destination, includes content driven by financial advice and education influencers, tools to achieve financial goals and additional ways of earning rewards to shop and save. Through MoneyLife, we will drive additional prospective customers to MoneyLion and increase customer engagement and cross-sell opportunities for both MoneyLion and our affiliate partners. Our acquisition of MALKA will accelerate our ability to engage with consumers across all digital and emerging channels.
Grow our affiliate network and expand our corporate partnerships: We have established an affiliate network to offer products and services to our customers as guided by our platform. We will continue to dramatically expand our pool of affiliate partners to provide our customers an ever-growing selection of products that can lower their cost of living and improve their quality of life.
MoneyLion partners with companies to provide company-sponsored financial wellness programs that are designed to decrease financial stress and bolster productivity by offering employees the financial products, education and tailored advice they require. We expect to continue to add corporate partners to deliver our products in a cost-effective manner to our targeted customer segment.
Evaluate additional strategic acquisitions: We acquired MALKA in November 2021. MALKA is a creator network and content platform that produces digital media and content across entertainment, sports, games, live streaming and other sectors. MALKA’s content capabilities can drive industry-leading customer acquisition and retention at scale to help accelerate MoneyLion’s customer growth. By combining MALKA’s capabilities with MoneyLion’s financial products and extensive first-party data, we hope to turn the MoneyLion mobile application into a daily destination for our customers with personalized content that educates, informs and supports customers’ financial decisions.
In addition, on December 15, 2021, we entered into an agreement to acquire Even Financial Inc. (“Even Financial”), an embedded finance marketplace that digitally connects and matches consumers with real-time personalized financial product recommendations from a growing network of financial institution, insurance and fintech partners,for which closed on February 17, 2022. This acquisition strengthens MoneyLion’s platformno person is liable for damages and may have limited rights of legal recourse in the event of such loss. For additional information, see Part I, Item 1A “Risk Factors — Risks Relating to Regulation — States may require that we obtain licenses that apply to blockchain technologies and digital assets.”
Competitive Landscape
We operate in dynamic, fragmented and highly competitive industries across our business lines, characterized by improving customers’ abilities to find and access the right financial products to help them manage their financial lives. The acquisition also extends our addressable market, extends the reach of our own products, diversifies our revenue mix and furthers our ambition to be the premier financial super app for hardworking Americans.
We will continue to evaluate opportunistic acquisitions that would allow us to either expand ourrapidly evolving technologies, frequent product and service offeringsintroductions and competition based on pricing, innovative features, quality and functionality, brand recognition and other differentiators. With respect to our existing customers or allow us to enter new verticals.
Marketing
Our customer acquisition channels combine a mix of onlinefinancial product and offline, as well as paid and unpaid, channels. They include marketing affiliates, sponsorships, radio, direct mail, organic web traffic, email marketing and online advertising, among others.
MoneyLion applies a full-funnel marketing approach both in media and in content creation. By creating complete marketing programs, we believe we generate a sustainable cost advantage across our various customer acquisition channels. We create multiple secondary content pieces from an original long-form content asset, and then cycle these content assets and marketing narratives across earned media channels and our own platforms, including our MoneyLion mobile application.
Customer Service
We are dedicated to addressing the needs of our customers. We believe that our multi-pronged approach to providing cost-effective customer service helps to support customer satisfaction. We offer a searchable, robust self-service Frequently Asked Questions database within our help center, where most questions can be easily answered 24 hours a day, seven days a week. In addition, we offer both a chatbot and a live chat service with an agent, either through the home screen of the MoneyLion app or on the MoneyLion web dashboard. Finally, should a customer wish to speak with a live agent over the phone or email their inquiries to our customer support team, we offer those support services as well.
Competitive Landscape
Consumer financial services is a large, fragmented and competitive market, andofferings, we compete in varying degrees with a rangevariety of existingdirect and marketplace providers of consumer-focused banking, lending, investing and other financial products. Our competitors include traditional banks and credit unions; new entrants obtaining banking licenses; non-bank digital providers offering banking-related services; specialty finance and other non-bank digital providers offering consumer lending-related or earned wage access products; digital wealth management platforms such as robo-advisors offering consumer investment services and other brokerage-related services; and digital financial platform and marketplace competitors, which aggregate and connect consumers to financial product and service offerings. In addition to competing for customers for our product and service offerings, we also compete to attract viewership of the content to which we connect customers, as there are other sources of financial-related content and news, many of which are more established and have a larger subscriber base. Furthermore, we compete with other advertising agencies and other service providers to attract marketing budget spending from our Enterprise clients. With respect to our media division, we compete with others in the digital media and content creation industry, which range from large and established media companies, including social media companies, advertising agencies and production studios, to emerging start-ups.
We expect our competition to continue to increase, as there are generally large, well-capitalized financial services companies.no substantial barriers to entry to the markets we serve. Some of our current and potential competitors have longer operating histories, particularly with respect to financial services products similar to what we offer,ours, significantly greater financial, technical, marketing and other resources and a larger customer base. Our competitors include:
Banking Competitors: Traditional banks and credit unions (e.g., Chase and Wells Fargo), new entrants obtaining banking licenses (e.g., Varo Money) and other non-bank digital providersbase than we do. Notwithstanding these competitive challenges, we believe that white label regulated products,the combination of our personalized, mass market offering banking-related services (e.g., Chime);
Lending and Earned Income Advance Competitors: Traditional banks and credit unions, specialty finance and other non-bank providers, offering consumer lending-related or advance products (e.g., Upstart and Dave);
Marketplace Competitors: Online financial product and service marketplaces and aggregators that offer consumerof financial products and services, (e.g., Credit Karma and WalletHub); and
Investing Competitors: Online wealth management platforms, such as robo-advisors, offering consumer investment services (e.g., Betterment and Stash).
We believe other market participants do not adequately meet the needs of the 100 million middle-class Americans who make up our target market. We feel ourtechnology-driven marketplace solutions, data-driven approach single-core technology stack, holistic product offering and financial guidance focus representcontent capabilities presents a compelling competitive differentiatorsdifferentiator that continues to compound and will allow us to continuecompete effectively.
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Seasonality
We may experience seasonal fluctuations in our revenue. During the fourth quarter, revenue in our Consumer business may benefit from increased consumer spending during the holiday season, which may increase demand for our advance product as consumers seek additional liquidity. During the first quarter, we may see stronger collections on Instacash receivables resulting in a relatively lower provision for credit losses on consumer receivables as a result of the impact of tax refunds, as well as stronger demand for our banking and investment products and services. Seasonal trends may be superseded by market or macroeconomic events, which can have a significant impact on our business, as described herein.
Human Capital Resources
Two of the operating principles underpinning our mission include Win Together and Grow Together: we embrace our global footprint and diversity of opinions from technology, design, finance and business. To that end, one of our goals is to capture market shareattract and drive growth.
Management Team
We areretain the best employees by providing a founder-led businesstransformative career experience, driving a high performance culture with a diverse management team that brings togethershared vision to give everyone the power to make their best financial decisions. As of December 31, 2023, we had a total of 600 full-time employees across all locations. Of our employees, approximately 16%, 50%, 13%, 1% and 1% are located in our New York City, Kuala Lumpur, Jersey City, Santa Monica and Sioux Falls offices, respectively, and the remaining approximately 19% work remotely. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be very strong and have not historically experienced viewpoints from both technology and financial services.any work stoppages.
Employees and Culture
We believeAs the focal point of our human capital strategy, we have builtfocus on becoming a unique company culture.destination for top talent. We attract smart and talented individuals who possess a passion for innovation and flourish when provided the opportunity to learn and grow. We provide our employees with support programs designed to allow employees to thrive and our teams to outperform. Incentives are further aligned throughpride ourselves on a broad-based equity compensation program acrosscollaborative culture that values the employee base.
team over the individual. In operating multiple offices across the globe, bringing together some of the best talent from both the U.S. and around the world, we place significant emphasis on having a seamless,achieving an integrated, one-firm culture and employee experience. This model has paid dividends for our global team members as reflected in our employee engagement
Our total compensation and retention.
As the focal point of our human capital strategy, webenefits programs are designed to attract and retain a diverse, talented and motivated employee base. Career growth at MoneyLion may include manager skillsThe comprehensive benefits that we offer, including health and leadership training,other insurance coverage, paid time off, a 401(K) retirement plan with employer matching and on-demand mental health support, reflect our care for the well-being of our employees. We have a broad-based equity compensation program that aligns the interests of our employees to the long-term interests of our shareholders, as well as peer-based recognition and rewards, transparent incentive and promotion processes and time and budget allocatedresources dedicated to learning and development initiatives.initiatives which reflect our investment in manager capability building.
We place special emphasis on diversity, from our recruitment process to our career development programs. Our management team members come from diverse backgrounds and seek to build agrow the company with diversity clearly established as an organization priority. We have established employee resource groups, which are employee-led groups that provide support and assistance in both personal and professional capacities and also allow members to connect with management and colleagues across the organization and pursue actionable solutions to any challenges they face. For example, Here Women Roar is an employee resource group that aims to champion the growth and advancement of women at MoneyLion by investing in their social, personal and professional development. In 2021, we launched additionaldevelopment, and Roar With Pride is an employee resource groupsgroup dedicated to further support oursupporting, promoting and recruiting LGBTQ+ employees and allies. These programs are designed to allow employees of diverse backgrounds.all different backgrounds to thrive and our teams to outperform.
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Regulatory Environment
Overview
We operate in a rapidly evolving regulatory environment and are subject to extensive and complex regulation under U.S. federal law and the laws of the states in which we operate covering most aspects of our business. We are impacted by these laws and regulations both directly and indirectly, including by way of our partnership with Pathward, which provides deposit accounts and debit cards to our customers. We could become subject to additional legal or regulatory requirements if laws or regulations change in the jurisdictions in which we operate or if we were to release new products or services. In addition, the regulatory framework for our products and services is evolving and uncertain as federal and state governments and regulators consider the application of existing laws and potential adoption of new laws. New laws and regulations, as well as continued uncertainty regarding the application of existing laws and regulations to our products and services, may negatively affect our business. Failure to comply with regulatory requirements applicable to us may result in, among other things, revocation of required licenses or registrations, loss of approved status, private litigation, administrative enforcement actions, sanctions, civil and criminal liability and constraints on our ability to continue to operate. For additional information relating to regulation and regulatory actions, see Part I, Item 1A “Risk Factors — Risks Relating to Regulation.”
Regulation of Our Business and Offerings
Pathward: Regulation of Our Bank Partnership Model
Through our partnership with Pathward, we offer our RoarMoney deposit accounts and debit cards, both of which are provided by Pathward. Pathward is chartered as a national bank and subject to regulation and supervision, including by the Office of the Comptroller of the Currency (the “OCC”), Pathward’s primary banking regulator, and the FDIC. Many laws and regulations that apply directly to Pathward are indirectly applicable to us as a service provider to Pathward. As a result, our partnership with Pathward is also subject to the supervision and enforcement authority of the OCC. Additionally, in order for each participating RoarMoney customer’s deposits to be covered by FDIC insurance up to the applicable maximum deposit insurance amount, we and Pathward must meet certain eligibility requirements established by the FDIC, such as adequately evidencing participating customers’ ownership of each account.
ML Wealth: Regulation of Our Investment Adviser
We offer investment management services for MoneyLion Investing customers through our wholly-owned subsidiary, ML Wealth. As a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), ML Wealth is subject to, among other things, anti-fraud provisions and fiduciary duties derived from the Advisers Act and various restrictions and obligations related to its dealings with clients and investments it manages. These requirements include maintaining effective and comprehensive compliance programs and written policies and procedures, record-keeping, reporting and disclosure, advertising and solicitation rules, safeguards for protecting client funds and securities, restrictions on advisory contract assignments and principal and agency cross trading, privacy protection regulations and anti-corruption rules.
In addition, ML Wealth is subject to examination and regulation by the SEC, which has broad administrative powers under the Advisers Act to limit or restrict an investor adviser from certain activities if it fails to comply with federal securities laws. The SEC can also impose sanctions or bring civil actions to seek damages or other relief for any failure by ML Wealth to comply with applicable requirements. ML Wealth has in the past and will in the future be subject to periodic SEC examinations. The SEC examination staff may also conduct more frequent examinations focusing on a limited number of specific issues or conduct an examination “for cause.”
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MoneyLion Securities: Regulation of Our Broker-Dealer
MoneyLion Securities LLC (“MoneyLion Securities”), our wholly-owned subsidiary, is a broker-dealer registered with the SEC and a member of the Financial Industry Regulatory Authority (“FINRA”). Although we do not currently engage in any business activity through MoneyLion Securities, as a broker-dealer, it is subject to SEC and FINRA rules and regulations. The regulations cover all aspects of the broker-dealer business and operations, including, among other things, sales and trading practices, client onboarding, disclosure requirements, publication or distribution of research, margin lending, uses and safekeeping of clients’ funds and securities, capital adequacy, recordkeeping, reporting, fee arrangements, suitability, best interest and best execution requirements, customer privacy, data protection, information security and cybersecurity, the safeguarding and sharing of customer information, public offerings, customer qualifications for margin and options transactions, registration of personnel, business continuity planning, transactions with affiliates, conflicts and the conduct of directors, officers and employees. The SEC, FINRA and applicable state securities authorities also have the authority to conduct periodic examinations of MoneyLion Securities and may also conduct administrative proceedings that could result in sanctions being imposed if MoneyLion Securities fails to comply with applicable requirements.
MoneyLion Securities is also subject to Rule 15c3-1 (the “Uniform Net Capital Rule”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and related self-regulatory organization requirements, which specifies minimum capital and debt-to-equity ratio requirements that measure the general financial soundness and liquidity of broker-dealers. If MoneyLion Securities fails to maintain specified levels of net capital, we could be subject to sanctions, which may include immediate suspension or revocation of registration, and suspension or expulsion. As of December 31, 2021,2023, MoneyLion Securities was in compliance with the Uniform Net Capital Rule and had net capital in excess of the minimum requirements.
MoneyLion Crypto: Regulation of Zero Hash
General
We offer MoneyLion Crypto to our customers, which enables them to buy, sell and hold certain cryptocurrencies, through a partnership with Zero Hash. The Zero Hash entities are registered as money services businesses with the Financial Crimes Enforcement Network (“FinCEN”) and hold active money transmitter licenses (or the state equivalent of such licenses) in all U.S. states and the District of Columbia except for (i) California, Indiana and Wisconsin, where Zero Hash relies upon licensing exemptions; (ii) Montana, which does not currently have a money transmitter licensing requirement; and (iii) Hawaii. Zero Hash currently engages in crypto asset activities in all U.S. states and the District of Columbia except for Hawaii.
Under the terms of our agreement with Zero Hash, we hadare not directly involved in any cryptocurrency transactions or the exchange of fiat funds for cryptocurrency at or through Zero Hash, and therefore, we do not currently expect to be subject to money services business, money transmitter licensing or other licensing or regulatory requirements specific to transactions relating to virtual currencies. However, federal and state laws and regulations applicable to digital assets remain uncertain and will continue to evolve, and changes to the applicable laws, regulations or guidance in this area may require us to meet additional licensing, registration or other requirements.
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Analysis of Digital Assets as “Securities” under the U.S. Federal Securities Laws
A key question with respect to the trading of cryptocurrencies is whether the digital assets our customers transact in via MoneyLion Crypto are “securities” under the federal securities laws. Whether a totaldigital asset is a security under the federal securities laws depends on whether it is included in the lists of 556 employees across all locations,instruments making up the definition of “security” in the Securities Act of 1933, as amended (the “Securities Act”), the Exchange Act and the Investment Company Act of 1940, as amended. Digital assets as such do not appear in any of these lists, although each list includes the terms “investment contract” and “note,” and the SEC has typically analyzed whether a particular digital asset is a security by reference to whether it meets the tests developed by the federal courts interpreting these terms, known as the Howey and Reves tests, respectively. For many digital assets, whether or not the Howey or Reves tests are met is difficult to resolve definitively, and substantial legal arguments can often be made both in favor of and against a particular digital asset qualifying as a security under one or both of the Howey and Reves tests. Adding to the complexity, the SEC staff has indicated that the security status of a particular digital asset can change over time as the relevant facts evolve.
Generally, if a particular digital asset is a security, any transaction in that digital asset that falls under U.S. jurisdiction would be subject to the SEC’s anti-fraud and anti-manipulation authority. Offers and sales of that digital asset would also require registration under the Securities Act or, alternatively, establishing an exemption from registration. Our involvement in these transactions could subject us to regulation as a broker-dealer or investment adviser. In addition, while transactions in digital asset securities in the United States or with U.S. clients and counterparties would generally be subject to regulation under the federal securities laws, similar transactions that take place outside the United States with non-U.S. clients and counterparties generally would not implicate the federal securities laws. As a result, the manner in which included 155 MALKA employees who joinedwe are able to engage in transactions in a particular digital asset depends on the digital asset itself and the characteristics of the specific transaction and requires us to maintain procedures for conducting careful facts-and-circumstances analyses.
We have adapted our process for determining the federal securities law status of digital assets over time. As part of our federal securities law analytical process, we take into account a number of factors, including the various definitions of “security” under the federal securities laws and federal court decisions interpreting elements of these definitions, such as the U.S. Supreme Court’s decisions in the Howey and Reves cases, as well as reports, orders, press releases, public statements and speeches by the SEC and its staff providing guidance on when a digital asset may be a security for purposes of the federal securities laws. We continue to monitor the U.S. (and global) regulatory environment, and we expect our process to continuously evolve to take into account case law, facts and developments in technology, as regulatory guidance evolves.
The application of securities laws to the specific facts and circumstances of digital asset transactions is complex and subject to change, and therefore legal and regulatory risk will be an inherent feature of the MoneyLion teamCrypto business model until greater legal and regulatory certainty becomes possible. Our determination that each digital asset available on the MoneyLion Crypto platform is not a “security” for purposes of the U.S. federal securities laws is a “risk-based” assessment, not a legally binding determination on any regulatory body or court, and does not preclude legal or regulatory action. As a result, a particular digital asset that our customers transact in may in the future be found by the SEC, a federal court or a state securities regulator to be a security notwithstanding our prior determination. In addition, the SEC, a federal court or a state securities regulator may determine that a digital asset is a security based on factors that are difficult to predict and/or are outside of our control, potentially including the actions of a third-party promoter. In that case, our prior determination, even if reasonable under the circumstances, would not preclude legal or regulatory enforcement action, or lawsuits brought by our clients and counterparties, based on the presence of a security.
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The potential consequences of having engaged in a digital asset transaction in the U.S. or with U.S. clients and counterparties in which we did not, but in retrospect should have, treated the digital asset in question as a security would depend on the facts of the specific transaction. For example, if we brokered a trade or engaged in a principal transaction in an unregistered digital asset security, depending on the facts, it is possible that we could have acted as an unregistered broker or dealer or as an “underwriter” with respect to that digital asset security, incurring fines and other penalties for the failure to register as a broker-dealer with the SEC and for having engaged in an illegal unregistered securities transaction. A client or counterparty who purchased a digital asset in an illegal unregistered securities transaction in which we were involved could also, depending on the facts, have the right to rescind that transaction and to sue us for damages. Similarly, if we advised a client or counterparty in connection with the MALKA acquisition. Ofpurchase or sale of a digital asset security, depending on the facts, we could incur fines and other penalties for the failure to register as an investment adviser, and our employees, approximately 15%client or counterparty could also have a damages claim against us. The amount of fines, penalties and damages that we could incur as a result of having improperly transacted in digital asset securities could be significant enough to have a material adverse effect on our business, financial condition and results of operations.
Consumer Protection Requirements
We must comply with various federal and state consumer protection regimes applicable to consumer lending and other consumer financial services, both pursuant to the financial products and services we provide directly and as a service provider to our bank partner. These federal regulations include, but are not limited to, the Federal Trade Commission Act, the Trust in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act, the Military Lending Act, the Electronic Fund Transfer Act, the Gramm-Leach-Bliley Act and the rules and regulations promulgated thereunder.
We are subject to regulation by the Consumer Financial Protection Bureau (“CFPB”), 20%which oversees compliance with and enforces federal consumer financial protection laws and has substantial power to regulate consumer financial products and services. If the CFPB has determined or suspects us of violating any consumer financial laws or regulations, the CFPB, through its enforcement authority, could increase our compliance costs, impose requirements to alter products and services that would make them less attractive to consumers and impair our ability to offer products and services profitably. For more information regarding our legal proceeding with the CFPB, see Part I, Item 3 “Legal Proceedings.” The CFPB also has enforcement authority with respect to the conduct of third parties that provide services to financial institutions. As a result, we perform due diligence reviews of potential vendors, review their policies and procedures and internal training materials to confirm compliance-related focus, include enforceable consequences in contracts with vendors regarding failure to comply with consumer protection requirements and take prompt action, including terminating the relationship, in the event that vendors fail to meet our expectations. Where a company has violated Title X of the Dodd-Frank Act or CFPB regulations under Title X, the Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions to enforce such laws and regulations. If the CFPB or one or more state officials find that we have violated the foregoing laws, they could exercise their enforcement powers in ways that would have a material adverse effect on our business.
In addition, our marketing activities may subject us to certain federal and state laws and regulations regarding marketing activities conducted over the internet, or by mail, email or telephone, including, without limitation, the federal Telephone Consumer Protection Act (“TCPA”), 46%the federal Controlling the Assault of Non-Solicited Pornography and Marketing Act (“CAN-SPAM Act”), 6%FTC regulations and 1%guidelines that implement the FTC’s Do-Not-Call Registry and impose other requirements in connection with telemarketing activities and state telemarketing laws. Our policies are locateddesigned to address the requirements of the TCPA and other laws and regulations limiting telephone outreach. Our email communications with all consumers are formulated to comply with the CAN-SPAM Act and other applicable requirements.
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State Licensing
We are subject to state licensing and other laws, rules, regulations and requirements of each individual U.S. state in which we operate, including with respect to certain consumer lending, life insurance and mortgage products and services that we offer directly or to which we connect consumers through third parties. We have either obtained the necessary licenses or conduct our operations pursuant to relevant exemptions in the jurisdictions in which we operate. Licensing statutes and regulations vary from state to state and prescribe different requirements, including restrictions on loan origination and servicing practices (including limits on the type, amount and manner of our fees and other charges), interest rate limits, restrictions on mortgage and insurance brokering practices, disclosure requirements, periodic examination requirements, surety bond and minimum specified net worth requirements, periodic financial reporting requirements, notification requirements for changes in principal officers, stock ownership or corporate control, restrictions on advertising and requirements that loan forms be submitted for review.
We are also subject to supervision and examination by state regulatory authorities in the jurisdictions where we operate, which have resulted and may continue to result in findings or recommendations that require us to modify our internal controls and/or business practices. While we believe we are in compliance with applicable licensing requirements, state regulators may request or require that we obtain additional licenses or otherwise comply with additional requirements in the future, which may result in changes to our business practices. If we are found to have engaged in activities that require a state license without having the requisite license or in activities that are otherwise deemed to be in violation of state lending, licensing or other laws, the state regulatory authority may impose fines, restrict our operations in the relevant state or seek other remedies for our activities conducted in the state.
Other Regulatory Requirements
Anti-Bribery and Corruption; Anti-Money Laundering; Sanctions
We are subject to compliance obligations related to BSA/AML laws, regulations and supervisory guidance. We have developed and currently operate AML and sanctions compliance programs, which is overseen by a designated BSA/AML compliance officer and includes policies, procedures, reporting protocols and internal controls. Our programs are designed to prevent our products and services from being used to facilitate money laundering, terrorist financing and other financial crimes. Our programs are also designed to prevent transactions to or from countries or territories that are subject to comprehensive sanctions, or with certain individuals or entities, including those designated as prohibited persons by the U.S. Department of the Treasury’s Office of Foreign Assets Controls (“OFAC”) and other U.S. and non-U.S. sanctions authorities.
Data Privacy and Protection
We collect, process, use, store, share and transmit a wide variety of information, including PII, for various purposes in our New York City, Jersey City, Kuala Lumpur, Santa Monica and Sioux Falls offices, respectively, andbusiness, including to help ensure the remaining approximately 13% work remotely. Noneintegrity of our employeesbusiness and to provide useful and personalized features and functionality to our customers. This aspect of our business is subject to numerous industry standards, contractual obligations and privacy, data protection, cybersecurity and other laws and regulations in the United States, including the Gramm-Leach-Bliley Act (as amended from time to time, the “GLBA”), as well as state laws such as the California Consumer Privacy Act of 2019, together with any subsequent amendments or acts, including the California Privacy Rights Act (the “CPRA” and together, the “CCPA”) and others. Accordingly, we publish our privacy policies, state privacy notices and GLBA notices, which describe our practices concerning the collection, storage, use, disclosure, transmission, processing and protection of PII. The laws and regulations that apply to privacy and security issues are represented by a labor union or covered by a collective bargaining agreement.evolving and are subject to interpretation and change, and therefore, additional laws and regulations may become relevant to us. For additional discussion, see “— Privacy and Security” below.
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Privacy and Security
Our business involves the collection, storage, processing, use, storage, sharing and transmission of personally identifiable information (“PII”)PII and other sensitive data, including customer and employee information, financial information and information about how customers interact with our platform. We collect, store, process, use, store, share and transmit data while maintaining physical, electronicadministrative and proceduraltechnical safeguards. We maintain physical security measures designed to guard against unauthorized access to systems and use additional safeguards such as firewalls and data encryption. We also enforce physical access controls to our facilities, and we authorizerestrict access to PII on a least privilege access model only for those employees or agents who require it to fulfill the responsibilities of their jobs.
To prevent against fraud, we have built fraud detection capabilities to protect our customers and merchants.third-party providers. We first seek to establish the consumer’s identity using basic information following our KYC protocols. Theprotocols and further evaluate the consumer is then evaluated byusing our automated fraud model, and we will then either move forward in the approval processes or request additional data from the consumer. Our sophisticatedWe continually monitor and refine our fraud models use approximately 40-80 other data pointsmodel to make a near-instantaneous decision on whetherrespond to block a transaction.different fraud patterns. There are also secondary rules that, when triggered, are designed to ensure a transaction is sent to fraud investigators.
The technology infrastructure supporting our platform optimizes the storage and processing of large amounts of data and facilitates the deployment and operations of large-scale products and services in our cloud computing environments. Our technology infrastructure is designed around industry practices intended to reduce downtime in the event of outages or disaster recovery occurrences. We incorporate multiple layers of protection for business continuity and system redundancy purposes to address cybersecurity risks and loss of data. We havedata, with a robust cybersecurity program designed to protect our technology, includingtechnology. We regularly testingtest our systems to identify and address potential vulnerabilities. Wevulnerabilities and strive to continually improve our technology infrastructure to enhance the customer experience and to increase efficiency, scalability and security.
As a result of our collection, storage, processing, use, storage, sharing and transmission of PII and other sensitive data, we are subject to certain privacy and information security laws including, for example, the Gramm-Leach-Bliley Act (“GLBA”), the California Consumer Privacy Act (“CCPA”), the California Privacy Rights Act (“CPRA”) and other state privacy regulations, andas well as other laws, rules and regulations designed to regulate consumer information and data privacy, security and protection and mitigate identity theft. These laws impose obligations with respect to the collection, processing, storage, disposal, use, transfer, retention and disclosure of PII, and some may require that financial services providers, contractors, and other affiliated third parties have in place policies regarding information privacy and security. In addition, under certain of these laws, we must provide notice to consumers and employees of our policies and practices for sharing PII with third parties, provide notice of changes to our policies and, with limited exceptions, give consumers and employees rights regarding their data including the right to preventaccess their data, to correct data that may be inaccurate, to have their data deleted (subject to retention requirements), to opt out of certain uses of their data, to limit use of their PIIsensitive data and disclosureto non-discrimination based on the choice to exercise data privacy rights. We have procedures in place to appropriately respond to consumer data requests as well as notify relevant third parties of it to third parties. such requests.
Further, all 50 states and the District of Columbia have adopted data breach notification laws that impose, in varying degrees, an obligation to notify affected individuals in the event of a data or security breach or compromise of our systems, including when their PII has or may have been accessed by an unauthorized person. These laws may also require us to notify relevant law enforcement authorities, regulators or consumer reporting agencies in the event of a data breach. Some laws may also impose physical and electronic security requirements regarding the safeguarding of PII.
Privacy and information security laws evolve regularly, and complying with these various laws, rules, regulations and standards, and with any new laws or regulations or changes to existing laws, could cause us to incur substantial costs that are likely to increase over time, requiring us to adjust our compliance program on an ongoing basis, change our business practices in a manner adverse to our business, divert resources from other initiatives and projects and restrict the way products and services involving data are offered. SeeFor additional discussion, see Part I, Item 1A “Risk Factors — Risks Relating to CybersecurityRegulation — TheOur collection, processing, use, storage, sharing and transmission of PII and other sensitive data areis subject to stringent and changing state federal and internationalfederal laws, regulations, and standards and policies and could give rise to liabilities as a result of our failure or perceived failure to protect such data, comply with privacy and data protection laws and regulations or adhere to the privacy and data protection practices that we articulate to our customers.”
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Regulatory Environment
We operate in a rapidly evolving regulatory environment and are subject to extensive and complex regulation under U.S. federal law and the laws of the states in which we operate. These cover most aspects of our business and include laws, regulations, rules and guidance relating to consumer finance and protection, privacy and data protection, banking, payments and investment advisory services, among other areas. For example, with respect to our lending business, certain state laws may, if applicable, regulate interest rates and other charges and require certain disclosures to our customers, and may also require licensing for certain activities. In addition, other federal and state laws, public policy and general principles of equity, such as with respect to the protection of consumers, unfair and deceptive acts or practices and debt collection practices, may apply to our activities involving the origination, servicing and collection of consumer loans, as well as to our activities in banking, cash advances, payments, investment advisory services and other areas. We are impacted by these laws and regulations both directly and indirectly, including by way of our partnership with MetaBank, which provides deposit accounts and debit cards to our customers. Ensuring compliance with these laws and regulations imposes significant burdens on our business operations.
We could become subject to additional legal or regulatory requirements if laws or regulations change in the jurisdictions in which we operate, or if we were to release new products or services, under applicable laws or regulations to which we are not currently subject today. In addition, the regulatory framework for our products and services is evolving and uncertain as federal and state governments and regulators consider the application of existing laws and potential adoption of new laws. Although some of the products and services that we offer are relatively novel, we are typically required to comply with the existing regulatory regimes for consumer financial products and services. New laws and regulations, as well as continued uncertainty regarding the application of existing laws and regulations to our products and services, may negatively affect our business. This could include the need to obtain new or different types of licenses or comply with additional laws and regulations in order to conduct our business.
State licensing requirements and regulation
Our lending operations must satisfy the laws and standards of each individual U.S. state in which we operate. This means that when individual states differ in how they regulate consumer lending activity, we must operate in accordance with those jurisdictional-specific requirements.
We are subject to state licensing and other requirements with respect to loans that we originate, and we have obtained necessary licenses or conduct operations pursuant to relevant exemptions in order to originate loans in the jurisdictions in which we do so. Licensing statutes and regulations vary from state to state and prescribe different requirements, including restrictions on loan origination and servicing practices (including limits on the type, amount and manner of our fees), interest rate limits, disclosure requirements, periodic examination requirements, surety bond and minimum specified net worth requirements, periodic financial reporting requirements, notification requirements for changes in principal officers, stock ownership or corporate control, restrictions on advertising and requirements that loan forms be submitted for review. We are also subject to supervision and examination by state regulatory authorities in the jurisdictions where we operate, which have resulted and may continue to result in findings or recommendations that require us to modify our internal controls and/or business practices. The application of state licensing requirements to our business model is not always clear, and while we believe we are in compliance with applicable licensing requirements, state regulators may request or require that we obtain additional licenses or otherwise comply with additional requirements in the future, which may result in changes to our business practices. If we are found to have engaged in activities that require a state license without having the requisite license or in activities that are otherwise deemed to be in violation of state lending laws, the licensing authority may impose fines, restrict our operations in the relevant state or seek other remedies for activities conducted in the state.
U.S. federal consumer protection requirements
We must comply with various federal consumer protection regimes, both pursuant to the financial products and services we provide directly and as a service provider to our bank partner, including those set forth in Part I, Item 1A “Risk Factors — Risks Relating to Financial Regulation — Our business is subject to extensive regulation, examination and oversight in a variety of areas, including registration and licensing requirements under federal, state and local laws and regulations.”
We are subject to regulation by the Consumer Financial Protection Bureau (“CFPB”), which oversees compliance with and enforces federal consumer financial protection laws. The CFPB directly and significantly influences the regulation of consumer financial services, including the origination, brokering, servicing, transfer and collection of consumer loans, including personal loans and other consumer financial services we may provide. The CFPB has substantial power to regulate financial products and services received by consumers from both bank and non-bank providers of consumer financial products or services and their respective service providers, including rulemaking authority in enumerated areas of federal law applicable to consumer financial products or services such as truth in lending, fair credit reporting and fair debt collection. Under Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the CFPB has the authority to pursue enforcement actions against companies that offer or provide consumer financial products or services that engage in unfair, deceptive or abusive acts or practices, which can be referred to as “UDAAP.” The CFPB may also seek a range of other remedies, including rescission of contracts, refund of money, return of real property, restitution, disgorgement of profits or other compensation for unjust enrichment, damages, public notification of the violation, and “conduct” restrictions (i.e., future limits on the target’s activities or functions). Where a company has violated Title X of the Dodd-Frank Act or CFPB regulations under Title X, the Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions to enforce such laws and regulations.
The CFPB also has enforcement authority with respect to the conduct of third parties that provide services to financial institutions. The CFPB has made it clear that it expects non-bank entities to maintain an effective process for managing risks associated with vendor relationships, including compliance-related risks. In connection with this vendor risk management process, we are expected to perform due diligence reviews of potential vendors, review their policies and procedures and internal training materials to confirm compliance-related focus, include enforceable consequences in contracts with vendors regarding failure to comply with consumer protection requirements and take prompt action, including terminating the relationship, in the event that vendors fail to meet our expectations.
Our business activities are also subject to applicable requirements under other federal statutes and regulations, including, but not limited to:
The federal regulatory framework applicable to consumer financial services providers, such as us, is evolving and uncertain. Additional or different requirements may apply to our business in the future. While we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance is given that our compliance policies and procedures will be effective or will be adequate as laws change or are applied in a new manner.
Investment adviser and broker-dealer regulation
We offer investment management services through our wholly-owned subsidiary ML Wealth, an internet-based investment adviser that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) and is subject to regulation by the SEC. ML Wealth is subject to, among other things, the anti-fraud provisions of the Advisers Act and fiduciary duties derived from these provisions, which apply to our relationships with our advisory clients. These provisions and duties impose restrictions and obligations on us with respect to our dealings with our clients and the investments we manage, including, for example, disclosure of any conflicts of interest. ML Wealth has in the past and will in the future be subject to periodic SEC examinations. A regular or routine SEC examination will typically involve, at a minimum, a careful review of the adviser’s books and records and may include interviewing employees. The SEC examination staff may also conduct more frequent examinations focusing on a limited number of specific issues or conduct an examination “for cause.” ML Wealth is also subject to other requirements under the Advisers Act and related regulations primarily intended to protect advisory clients. These additional requirements include maintaining effective and comprehensive compliance programs and written policies and procedures, record-keeping, reporting and disclosure, advertising and solicitation rules, safeguards for protecting client funds and securities, limitations on agency cross and principal transactions between an adviser and its advisory clients, restrictions on advisory contract assignments, privacy protection regulations and anti-corruption rules relating to investors associated with U.S. state or local governments.
The Advisers Act generally grants the SEC broad administrative powers, including the power to limit or restrict an investment adviser from conducting advisory activities in the event it fails to comply with federal securities laws. Additional sanctions that may be imposed for failure to comply with applicable requirements include the prohibition of individuals from associating with an investment adviser, the revocation of registrations, significant monetary penalties, disgorgement of gains, cease-and-desist orders and other censures. The SEC may bring civil actions against investment advisers, and seek damages or other relief, in a U.S. district court or before an administrative law judge. Even if an investigation or proceeding did not result in a sanction or the sanction imposed against us or our personnel by the SEC were small in monetary amount, the adverse publicity relating to the investigation, proceeding or imposition of these sanctions could harm our reputation and cause us to lose existing clients or fail to gain new clients.
One of our subsidiaries, MoneyLion Securities LLC, is a broker-dealer and is therefore registered with the SEC and a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”). Although we do not currently engage in any business activity through MoneyLion Securities LLC, as a broker-dealer, it is subject to SEC and FINRA rules and regulations. The principal purpose of regulating broker-dealers is the protection of clients and securities markets. The regulations cover all aspects of the broker-dealer business and operations, including, among other things, sales and trading practices, client onboarding, communications with the public, publication or distribution of research, margin lending, uses and safekeeping of clients’ funds and securities, capital adequacy, recordkeeping, reporting, fee arrangements, disclosures to clients, suitability, acting in retail customers’ best interests when making recommendations to them, customer privacy, data protection, information security and cybersecurity, the safeguarding of customer information, the sharing of customer information, best execution of customer orders, public offerings, customer qualifications for margin and options transactions, registration of personnel, business continuity planning, transactions with affiliates, conflicts and the conduct of directors, officers and employees.
MoneyLion Securities LLC is subject to Rule 15c3-1 (the “Uniform Net Capital Rule”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and related self-regulatory organization requirements. The Uniform Net Capital Rule specifies minimum capital requirements that measure the general financial soundness and liquidity of broker-dealers. SEC and FINRA rules require notification to these regulators when net capital falls below certain defined criteria, or when withdrawals of capital exceed certain thresholds. These rules also dictate the ratio of debt to equity in the regulatory capital composition of a broker-dealer. If MoneyLion Securities LLC fails to maintain specified levels of net capital, we could be subject to sanctions, which may include immediate suspension or revocation of registration, and suspension or expulsion. MoneyLion Securities LLC has been and currently is in compliance with the Uniform Net Capital Rule and has net capital in excess of the minimum requirements.
The SEC, FINRA and applicable state securities authorities also have the authority to conduct periodic examinations of MoneyLion Securities LLC and may also conduct administrative proceedings that could result in sanctions being imposed. To the extent any applicable SEC, state or FINRA rules or regulations change, MoneyLion Securities LLC will need to adapt to those changes.
Regulation of our bank partnership model
Pursuant to our partnership with MetaBank, we offer to our customers FDIC-insured, non-interest-bearing deposit accounts and debit cards with which customers can access their account balances, both of which are provided by MetaBank. We act as the service provider to, among other things, provide customer support and technology features for customers utilizing their MetaBank account through our platform.
MetaBank is chartered as a national bank and subject to regulation and supervision as such by the Office of the Comptroller of the Currency (the “OCC”) and the FDIC. Many laws and regulations that apply directly to MetaBank are indirectly applicable to us as a service provider to MetaBank. Our partnership with MetaBank is also subject to the supervision and enforcement authority of the OCC, MetaBank’s primary banking regulator. Additionally, in order for each participating customer’s deposits to be covered by FDIC insurance up to the applicable maximum deposit insurance amount, we and MetaBank must meet certain eligibility requirements established by the FDIC, such as adequately evidencing participating customers’ ownership of each account.
Regulation of money services business / money transmission involving virtual currencies
We offer certain digital currency-related products and services to our customers through a partnership with Zero Hash. Both of the Zero Hash entities involved in this partnership are registered as money services businesses with the Financial Crimes Enforcement Network and have the required state-level licenses for engaging in digital assets activities where the Zero Hash services are offered. Under the terms of our agreement with Zero Hash, we do not engage directly in any transactions involving the exchange of fiat currency for digital currencies taking place at or through Zero Hash or the provision of money transmission services on behalf of our customers or of MoneyLion. Therefore, we do not currently expect to be required to be registered as a money services business or be subject to money transmitter licensing requirements or other regulatory requirements specific to transactions relating to virtual currencies. Other laws and regulations may apply to us as a service provider to Zero Hash LLC and Zero Hash Liquidity Services LLC, including Bank Secrecy Act (“BSA”)/ U.S. anti-money laundering (“AML”) requirements, but these would be similar to the legal and regulatory regimes to which we are already subject. However, federal and state laws and regulations applicable to digital assets remain uncertain and will continue to evolve, and changes to the applicable laws, regulations or guidance in this area may require us to meet additional licensing, registration or other requirements.
Other requirements
In addition to the requirements described above, we are subject to and seek to comply with other state and federal laws and regulations applicable to consumer lending and other consumer financial services, including additional requirements relating to loan disclosure, credit discrimination, credit reporting, debt collection and UDAAP prevention. These laws and regulations may be enforced by state banking or consumer protection regulatory agencies, state attorneys general, the CFPB and private litigants, among others. Given our novel business model and the subjective nature of some of these laws and regulations, particularly UDAAP-prevention laws, we may become subject to regulatory scrutiny or legal challenge with respect to our compliance with these requirements.
Given the nature of our business and our arrangements with third parties, we are subject to compliance obligations related to AML laws and regulations. We have developed and currently operate an AML program designed to prevent our products from being used to facilitate money laundering, terrorist financing and other financial crimes. Our program is also designed to prevent our products from being used to facilitate business in certain countries or territories, or with certain individuals or entities, including those on designated lists promulgated by the U.S. Department of the Treasury’s Office of Foreign Assets Controls and other U.S. and non-U.S. sanctions authorities. Our AML and sanctions compliance programs include policies, procedures, reporting protocols and internal controls, including the designation of a BSA/AML compliance officer to oversee the programs. Our programs are designed to address these legal and regulatory requirements and to assist in managing risk associated with money laundering and terrorist financing.
We collect, store, use, disclose, transfer and otherwise process a wide variety of information, including PII, for various purposes in our business, including to help ensure the integrity of our services and to provide features and functionality to our customers. This aspect of our business, including the collection, storage, use, disclosure, transfer, processing and protection of the information, including PII, we acquire in connection with our consumers use of our services, is subject to numerous privacy, data protection, cybersecurity and other laws and regulations in the United States, including the GLBA as well as state laws such as the CCPA. Accordingly, we publish our privacy policies and terms of service, which describe our practices concerning the collection, storage, use, disclosure, transmission, processing and protection of information. The laws and regulations that apply to privacy and security issues are evolving and are subject to interpretation and change, and therefore, additional laws and regulations may become relevant to us. For additional discussion, please see the risk factors related to regulation of our business and regulation in the areas of privacy and data use under Part I, Item 1A “Risk Factors — Risks Relating to Cybersecurity — The collection, processing, use, storage, sharing and transmission of PII and other sensitive data are subject to stringent and changing state, federal and international laws, regulations and standards and policies and could give rise to liabilities as a result of our failure or perceived failure to protect such data, comply with privacy and data protection laws and regulations or adhere to the privacy and data protection practices that we articulate to our customers.”
In addition, there are federal and state laws and regulations on marketing activities conducted over the internet, or by mail, email or telephone, including without limitation the federal Telephone Consumer Protection Act (“TCPA”), the federal Controlling the Assault of Non-Solicited Pornography and Marketing Act (“CAN-SPAM Act”), FTC regulations and guidelines that implement the FTC’s Do-Not-Call Registry and impose other requirements in connection with telemarketing activities and state telemarketing laws. Our marketing activities may subject us to some of these laws and regulations. MoneyLion’s policies address the requirements of the TCPA and other laws and regulations limiting telephone outreach, and we do not engage in certain activities covered by the TCPA. Our email communications with all consumers are formulated to comply with the CAN-SPAM Act and other applicable requirements.
The offerings of membership interests in designated series of IIA described under “Our Business Model” herein were not offered publicly to retail investors and were not registered under the Securities Act of 1933, as amended (the “Securities Act”). IIA membership interests were offered in private placements only to “accredited investors” within the meaning of the Securities Act, pursuant to the exemption provided in Regulation D thereunder, or to non-US persons in offshore transactions, pursuant to the exemption provided in Regulation S thereunder.
Various federal and state regulatory agencies in the United States continue to examine a wide variety of issues that are applicable to us and may impact our business. These issues include account management guidelines, antidiscrimination, consumer protection, identity theft, privacy, disclosure rules, electronic transfers, cybersecurity and marketing. As our business continues to develop and expand, we continue to monitor the additional rules and regulations that may become relevant.
Intellectual Property
We rely on a combination of trademark, trade secrets and copyright laws, as well asintellectual property rights, confidentiality procedures and contractual restrictions to establish, maintain and protect our proprietary rights.rights both in the United States and in foreign jurisdictions. We own the domain name rights for, among other sites, moneylion.com, engine.tech, fiona.com and malkamedia.com, and as of December 31, 2021,2023, we owned 22 registered trademarks oneand 1 registered copyright and fourhad 10 trademark applications in the United States.and 1 copyright applications. Despite substantial investment in research and development activities, we have not focused on patents and patent applications historically. In addition to the intellectual property that we own, we license certain third-party technologies and intellectual property, which are incorporated into some of our products and services.
Although we take steps to protect our intellectual property and proprietary rights, we cannot be certain that the efforts we have taken to protect our intellectual property may not be sufficient or effective. It may be possible for other parties to copy or otherwise obtain and use the content of our solutions or other technology without authorization. Moreover, others may independently develop technologies or services that are competitive with ours or that infringe, misappropriate or otherwise violate our intellectual property and proprietary rights. In addition, third parties may initiate litigation against us alleging infringement, misappropriation or other violation of their proprietary rights or declaring their non-infringement of our intellectual property. Failure to protect our intellectual property or other proprietary rights adequately could significantly harm our competitive position, business, financial condition and results of operations. See Part I, Item 1A “Risk Factors” for a more comprehensive description of risks related to our intellectual property and proprietary rights.
Our History
MoneyLion was founded in 2013 and is headquartered in New York, New York. On September 22, 2021, MoneyLion Inc., formerly known as Fusion Acquisition Corp., consummated a business combination (the “Business Combination”) with MoneyLion Technologies Inc., formerly known as MoneyLion Inc. Following the Business Combination, MoneyLion became a publicly traded company, with MoneyLion Technologies Inc., a subsidiary of MoneyLion Inc., continuing the existing business operations.
Available Information
Our website is www.moneylion.com. Our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, and any amendments to those forms, are available free of charge through our website (investors.moneylion.com) as soon as reasonably practicable after they are filed with or furnished to the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov.
We use our website as a routine channel for distribution of information that may be deemed material for investors, including news releases, presentations, financial information and corporate governance information. We may use our website as a means of disclosing material information and for complying with our disclosure obligations under Regulation Fair Disclosure promulgated by the SEC. These disclosures are included on our website in the “Investor Relations” section. Accordingly, investors should monitor these portions of our website, in addition to following MoneyLion’s news releases, SEC filings, public conference calls and webcasts.
None of the information contained on, or that may be accessed through, our websites or any other website identified herein is part of, or incorporated into, this filing. All website addresses in this Annual Report on Form 10-K/A10-K are intended to be inactive textual references only, unless expressly noted.
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Item 1A. Risk Factors
Risks Relating to Our Business
If we are unable to acquire, engage and Operationsretain customers and clients or sell additional functionality, products and services to them on our platform, our business will be adversely affected.
In order to grow our business and increase our revenue, we must continue to acquire new customers and clients, engage and retain existing customers and clients and expand our customers’ and clients’ use of our platform by cross-selling additional functionality, products and services to them, particularly as a significant portion of the revenue we generate in our business is derived from transaction-based fees. In addition, our ability to sell additional functionality, products and services to our existing customers and clients may require more sophisticated and costly development, sales or engagement efforts and could be impaired for a variety of reasons, including adverse reaction to changes in the pricing of our products or services, increases in costs we incur to offer our products or services, general economic conditions and/or the other risks described herein in this “Risk Factors” section. If our efforts to sell additional functionality, products and services to our customers and clients are not successful, our business and growth prospects would suffer. In addition, if our customers or clients reduce their usage of our platform or if we lose customers or clients, our revenue and other operating results will decline, and our business would be adversely affected.
As the market for our platform matures, or as new or existing competitors introduce new products, services or functionality that compete with ours, we may experience pricing pressure and may be unable to retain current customers and clients or attract new customers and clients at consistent prices within our operating budget. Our pricing strategy may prove to be unappealing to our customers and clients, and our competitors could choose to bundle certain products and services that are competitive with ours. If this were to occur, it is possible that we would have to change our pricing strategies or reduce our prices, which could harm our business, financial condition, and results of operations may be adversely impactedand cash flows.
Any failure to effectively match consumer leads from our Channel Partners with product offerings from our Product Partners or any reduced marketing spend by the COVID-19 pandemic.
Occurrences of epidemics or pandemics, dependingsuch Product Partners on their scale, may cause different degrees of disruption to the regional, state and local economies in which we offer our products and services. The current COVID-19 pandemicEnterprise platform could have a material adverse effect on the value, operating results and financial condition of our business.
The COVID-19 pandemic has caused substantial changes in consumer behavior, restrictions on business, and individual activities and high unemployment rates, which led to reduced economic activity and may continue to cause economic volatility. Extraordinary actions taken by international, federal, state and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions throughout the world, including travel bans, quarantines, “stay-at-home” orders, suspension of interest accrual and similar mandates for many individuals and businesses to substantially restrict daily activities have led to a decrease in consumer activity generally. Additionally, the COVID-19 pandemic has had a negative impact on consumer finances and on employment levels, which could lead to lower demand for loans, higher loan delinquencies, less likelihood of signing up for our membership programs, less likelihood of making investments through our platform and less spending on the MoneyLion platform, all of which would have a negative impact on our financial condition, results of operations and cash flows.
ThereWe connect and match consumers with real-time personalized financial product recommendations from our Product Partners through our Enterprise platform. The success of our Enterprise business is dependent in part on our relationships with our Channel Partners, through which we reach a wide base of consumers, and our Product Partners, the financial institutions which provide consumers with product offerings. Our Enterprise business has historically derived, and expects to continue to be significant uncertainties associatedderive, the majority of revenue through the delivery of qualified consumer lead inquiries and conversions to completed transactions for various financial products to Product Partners. However, the failure of our Enterprise platform to effectively connect and match consumers from our Channel Partners with the COVID-19 pandemic, including with respectproduct offerings from our Product Partners in a manner that results in converted customers and increased revenue for such Product Partners could cause Product Partners to the course, duration and severity of the virus and additional variants, future actions that may be taken by governmental authorities and private businesses to contain the COVID-19 pandemic or to mitigate its impact and the effectiveness of such actions, the timing and speed of economic recovery and the ultimate effectiveness of vaccinations for COVID-19. We continue to monitor the situation and assess further possible implications tocease spending marketing funds on our business. A continued significant economic slowdownEnterprise platform, which could have a substantialmaterial adverse effectimpact on our financial condition, liquidity and results of operations. COVID-19 could have the following adverse effects on our business and results of operations, among others:
See Part II, Item 7 “Management’s Discussion and Analysis of our Financial Condition and Results of Operations — Key Performance Metrics” and “— Results of Operations for the Twelve Months Ended December 31, 2021 and 2020” for further discussion of the impact of the COVID-19 pandemic in recent periods on our business and operating results. We cannot at this time reasonably estimate the impact to our future results of operations, cash flows and financial condition; however, if these conditions worsen, we may be materially and adversely impacted. The COVID-19 pandemic, and its impact, may also have the effect of heightening many of the other risks described herein.
Our business may be adversely affected by economic conditions and other factors that we cannot control.
Uncertainty and negative trends in general economic conditions, including significant tightening of credit markets, historically have created a difficult operating environment for our industry. Many factors, including factors that are beyond our control, may impact our results of operations or financial condition and our overall success by affecting a customer’s willingness and capacity to use our products and services, including a customer’s willingness to incur loan obligations or willingness or capacity to make payments on their loans or other services we offer. These factors include interest rates, unemployment levels, conditions in the housing market, immigration policies, gas prices, energy costs, government shutdowns, trade wars and delays in tax refunds, as well as events such as natural disasters, acts of war, terrorism, catastrophes and pandemics.
Many new customers on our platform have limited or no credit history and limited financial resources. Accordingly, such customers have historically been, and may in the future become, disproportionately affected by adverse macroeconomic conditions, such as the disruption and uncertainty caused by the COVID-19 pandemic. In addition, major medical expenses, divorce, death or other issues that affect customers could affect a customer’s willingness or ability to make payments on their loans or advances or engage in investing activities. If borrowers default on loans facilitated on our platform, the cost to service these loans may also increase without a corresponding increase in revenue earned from lending operations and the value of the loans could decline. Higher default rates by these borrowers may lead to lower demand by our funding sources and institutional investors to fund loans and other receivables facilitated by our platform, which would adversely affect our business, financial condition and results of operations.
During periods of economic slowdown or recession, our current and potential investors in our special purpose financing structure may reduce the number of loans or other receivables they are willing to finance or demand terms that are less favorable to us, to compensate for any increased risks. A reduction in the volume of the loans and other receivables we are able to finance through this structure would negatively impact our ability to maintain or increase our Enterprise revenue.
In addition, even if our Enterprise platform effectively connects and matches consumers from our Channel Partners with offers from our Product Partners, our Product Partners may still reduce their marketing spend through our Enterprise platform. For example, adverse macroeconomic conditions have impacted and may continue to impact our Product Partners’ spend in the levelshort-term and potentially in the long-term. During 2023, the high interest rate environment and increased cost of capital resulted in a decrease in marketing spend and tightened underwriting standards by our Product Partners in our personal loans vertical that negatively impacted our Enterprise revenue. If any of our lending and provision of other servicesProduct Partners do not continue to customers. Any sustainedplace marketing spend on our Enterprise platform, we could experience a rapid decline in demand for loansour Enterprise revenue over a relatively short period of time. Any factors that limit the amount that our Product Partners are willing to, and do, spend on marketing or other services we offer, or any increase in delinquencies or defaults that result from economic downturns, may harm our ability to maintain robust volumes for our lending operations and other services, which would adversely affectadvertising with us could have a material adverse effect on our business, financial condition, and results of operations. For the year ended December 31, 2021,operations and cash flows.
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If our underwriting criteria for secured personal loans provided through our Credit Builder Plus membership program, the average 30+ day delinquency rate was 3.9% and the average monthly default rate was 1.4%. For the year ended December 31, 2021, the non-repayment rate for advances provided through our Instacash product was 5.4%. See Part I, Item 1 “Business — Our Product Platform.”
For example, the COVID-19 pandemic and other related adverse economic events led to a significant increase in unemployment, comparable, and at times surpassing, the unemployment rates during the peak of the financial crisis in 2008. There can be no assurance that levels of unemployment or underemployment will improve in the near term. The increase in the unemployment rate could increase the non-repayment rate on ourmaking loans and advance products, increasecash advances in our Consumer business is not sufficient to mitigate against the rate of customers declaring bankruptcy or decrease our customers’ usecredit risk of our investment and other products and services, any of which could adversely affect the attractiveness of our loans and other receivables to our financing sources. If we are unable to adjust our platform to account for events like the COVID-19 pandemic and the resulting rise in unemployment, or if our platform is unable to more successfully predict the creditworthiness of potential borrowers compared to other lenders, thencustomers, our business, financial condition, and results of operations and cash flows could be materially and adversely affected.
Furthermore, the COVID-19 pandemic has caused some borrowers onIn our platformConsumer business, our secured personal loan and non-recourse earned wage access products expose us to request a temporary extension or modification ofcredit risk and potential financial loss if our customers do not repay the payment schedules of their loans under our temporary relief or loan modification programs, or hardship programs. If a large number of borrowers seek to participate in such hardship programs, the investment returns of our financing sources could decline. Further, if the rate of borrowers that participate in such hardship programs is greater than those experienced by our competitors, then our financing sources may become less interested providing financing for our loans and other consumer receivables, which could negatively impact our funding strategy or significantly increase the cost of obtaining funding. Any of the foregoing could adversely affect our business, financial condition and results of operations.
If there is an economic downturn that affects our current and prospective customers or our financing sources, or ifcash advances we are unableprovide to address and mitigate the risks associated with any of the foregoing, our business, financial condition and results of operations could be adversely affected.
We operate in a cyclical industry. In an economic downturn, wethem. Our underwriting standards may not be able to grow our business or maintain expected levelsoffer adequate protection against the risk of liquidity or revenue growth.
The timing, severity and durationnon-payment, especially in periods of an economic downturn can have a significant negative impact on our ability to generate adequate revenue and to absorb expected and unexpected losses. For example, in making a decision whether to extend credit to a new or existing customer or determine appropriate pricing for a loan or whether to provide a customer an advance, our decision strategies rely on robust data collection, including from third-party sources, proprietary scoring models and market expertise. An economic downturn could place financial stress on our customers, potentially impacting our ability to make accurate assessments or decisions about our customers’ ability to pay for loans and other services we provide, as well as our customers’ willingness to use our products and services.uncertainty when accurately forecasting repayments is more difficult. Our ability to adaptaccurately forecast performance and determine an appropriate provision and allowance for losses on consumer receivables is critical to our Consumer business and financial results. The provision for credit losses on consumer receivables is established based on management’s assessment of various factors such as changes in the nature, volume and risk characteristics of the consumer receivables portfolio, including trends in delinquency and charge-offs and current economic conditions that may affect a manner that balances future revenue production and loss management may be tested in a downturn. The longevity and severity of a downturn may also place pressure on our funding sources.customer’s ability to repay. There can be no assurance that our financing arrangementsperformance forecasts will remain available to us through any particular business cyclebe accurate. Our allowance for losses on consumer receivables is an estimate, and if actual repayment defaults and charge-offs are materially greater than our allowance, or be renewed on the same terms. The timing and extent of a downturn may also require us to change, postpone or cancelmore generally, if our strategic initiatives or growth plans to pursue shorter-term sustainability. The longer and more severe an economic downturn, the greater the potential adverse impact on us, which could be material.
We are a rapidly growing company with a relatively limited operating history, which may result in increased risks, uncertainties, expenses and difficulties, and makes it difficult to evaluate our future prospects.
We were founded in 2013 and have experienced rapid growth in recent years. Our limited operating history may make it difficult to make accurate predictions about our future performance. Assessing our business and future prospects may also be difficult because of the risks and difficulties we face. These risks and difficulties include our ability to:
If weforecasts are not able to timely and effectively address these risks and difficulties as well as those described elsewhere in this “Risk Factors” section, our business and results of operations may be harmed.
Our results of operations and future prospects depend on our ability to attract new and retain existing customers. We face intense and increasing competition and, if we do not compete effectively, our competitive positioning and our operating results may be harmed.
We operate in a rapidly changing and highly competitive industry, and our results of operations and future prospects depend on, among others:
We believe that our ability to compete depends upon many factors both within and beyond our control, including, among others, the following:
We expect our competition to continue to increase, as there are generally no substantial barriers to entry to the markets we serve. In addition to established enterprises, we may also face competition from early-stage companies attempting to capitalize on the same, or similar, opportunities as we are. Some of our current and potential competitors have longer operating histories, particularly with respect to financial services products similar to ours, significantly greater financial, technical, marketing and other resources and a larger customer base than we do. This allows them, among other things, to potentially offer more competitive pricing or other terms or features, a broader range of financial products or a more specialized set of specific products or services, as well as respond more quickly than we can to new or emerging technologies and changes in customer preferences. Our existing or future competitors may develop products or services that are similar to our products and services or that achieve greater market acceptance than our products and services. This could attract customers away from our services and reduce our market share in the future. Additionally, when new competitors seek to enter our markets, or when existing market participants seek to increase their market share, these competitors sometimes undercut, or otherwise exert pressure on, the pricing terms prevalent in that market, which could adversely affect our market share and/or ability to capitalize on new market opportunities.
We currently compete at multiple levels with a variety of competitors, including:
We compete with traditional banks for many of the services we offer. Because we do not currently control a bank or a bank holding company, we are subject to regulation by a variety of state and federal regulators across our products and services and we rely on MetaBank to provide banking accounts and debit cards to our customers. This regulation by federal, state and local authorities increases our compliance costs, particularly for our lending business, as we navigate multiple regimes with different examination schedules and processes, varying disclosure requirements and at times conflicting consumer protection laws. In addition, our ability to compete may be hampered in certain states where the amount of interest we are permitted to charge customers is capped and we are consequently unable to make loans to all the customers that we believe may be qualified but to whom we cannot offer the appropriate risk-adjusted margin.
Our current and future business prospects demand that we act to meet these competitive challenges but, in doing so, our net revenue and results of operations could be adversely affected if we, for example, increase marketing expenditures or make other expenditures. Competitive pressures could also result in us reducing the amounts we charge for our various products and services, such as reducing the annual percentage rate on the loans we originate, or incurring higher customer acquisition costs, and could make it more difficult for us to grow our financial services product offerings in both number and volume for new as well as existing customers. All of the foregoing factors and events could adversely affectaccurate, our business, financial condition, results of operations and cash flows could be materially and future prospects.adversely affected.
In addition, our subsidiary, MALKA, faces competition from othersWe depend on various third-party partners, service providers and vendors, and any adverse changes in the digital content creation industry and media companies. MALKA’s current and potential competitors range from large and established companies to emerging start-ups. Established companies have longer operating histories and more establishedour relationships with customersthese third parties could materially and users, and they can use their experience and resources in ways that could affect MALKA’s competitive position, including by making acquisitions, investing aggressively in research and development, aggressively initiating intellectual property claims (whether or not meritorious) and competing aggressively for advertisers and websites. Emerging start-ups may be able to innovate and provide products and services faster than we can. MALKA’s operating results may suffer if its digital content is not appropriately timed with market opportunities, or if its digital content is not effectively brought to market. As technology continues to develop, MALKA may be forced to compete in different ways and expend significant resources in order to remain competitive. If MALKA’s competitors are more successful than MALKA is in developing compelling content or in attracting and retaining clients, MALKA’s revenues and operating results could be adversely affected.
Demand for our products or services may decline if we do not continue to innovate or respond to evolving technological or other changes.
We operate in a dynamic industry characterized by rapidly evolving technology, frequent product introductions and competition based on pricing and other differentiators. We rely on our proprietary technology to make the MoneyLion platform available to customers, to service customers and to introduce new products. In addition, we may increasingly rely on technological innovation as we introduce new types of products, expand our current products into new markets, and continue to streamline the MoneyLion platform. The process of developing new technologies and products is complex, and if we are unable to successfully innovate and continue to deliver a superior customer experience, customers’ demand for our products may decrease and our growth and operations may be harmed. Participants in our industry also compete on price, and our ability to meet the demand of our customers in this respect could affect our ability to maintain demand for our products and services.
In addition, our subsidiary, MALKA, provides digital media and content production services to clients in entertainment, sports, gaming, live streaming and other sectors. To the extent that MALKA is unable to successfully innovate and provide superior services to its clients, these actions could reduce demand for certain services provided by MALKA, which could have an adverse effect on our results of operations and financial position.
Any acquisitions, strategic investments, entries into new businesses, joint ventures, divestitures and other transactions could fail to achieve strategic objectives, disrupt our ongoing operations or result in operating difficulties, liabilities and expenses, harm our business and negatively impact our results of operations.
We have and will continue to evaluate and consider strategic transactions, combinations, acquisitions, dispositions or alliances, or other entries into new businesses. These transactions, including the recently completed acquisitions of MALKA and Even Financial, could be material to our financial condition and results of operations if consummated. If we are able to identify an appropriate business opportunity, we may not be successful in negotiating favorable terms and/or consummating the transaction and, even if we do consummate such a transaction, we may be unable to obtain the benefits or avoid the difficulties and risks of such transaction.
Any strategic transaction, combination, acquisition, disposition or alliance we have entered into, including the recently completed acquisitions of MALKA and Even Financial, or may enter into in the future will involve risks encountered in business relationships, including:
We may not make any transactions, combinations, acquisitions, dispositions or alliances, or any such transactions, combinations, acquisitions, dispositions or alliances may not be successful, may not benefit our business strategy, may not generate sufficient revenue to offset the associated costs or may not otherwise result in the intended benefits. It may take us longer than expected to fully realize the anticipated benefits and synergies of these transactions, and those benefits and synergies may ultimately be smaller than anticipated or may not be realized at all, which could adversely affect our business and operating results.business.
Our recent acquisitions of MALKA and Even Financial include both cash consideration and issuance of equity. Any future transactions, combinations, acquisitions, dispositions or alliances may also require us to issue additional equity securities, spend our cash, or incur debt (and increased interest expense), liabilities and amortization expenses related to intangible assets or write-offs of goodwill, which could adversely affect our results of operations and dilute the economic and voting rights of our stockholders and the interests of holders of our indebtedness.
We may not be successful in identifying businesses or opportunities that meet our acquisition or expansion criteria. Even if a potential acquisition target or other strategic investment is identified, we may not be successful in completing such acquisition or integrating such new business or other investment. For example, we may not be successful in completing the integration of the MALKA business or the Even Financial business with our business. We expect that completing the integration process for each acquisition will require significant additional time and resources, and we may not be able to manage the process successfully. It is possible that we will experience disruption of our, MALKA’s or Even Financial’s ongoing businesses.
In addition, we cannot assure you that any future acquisition of new businesses or technology will lead to the successful development of new or enhanced products and services or that any new or enhanced products and services, if developed, will achieve market acceptance or prove to be profitable. Further, we may also choose to divest certain businesses or product lines that no longer fit with our strategic objectives. If we decide to sell assets or a business, we may have difficulty obtaining terms acceptable to us in a timely manner, or at all. Additionally, the terms of such potential transactions may expose us to ongoing obligations and liabilities.
Because we rely on third parties to provide services, we could be adversely impacted if they fail to fulfill their obligations or if our arrangements with them are terminated and suitable replacements cannot be found on commercially reasonable terms or at all.
We depend on certain keyvarious third-party partners, service providers and vendors for certain products and services. The success ofIn our Consumer business, our business depends in part on our ability to work with aour bank partner, currently MetaBank,Pathward, to provide our customers with deposit accounts and debit cards facilitated through our platform. We are also dependentdepend on our relationship with DriveWealth a third-party broker-dealer partner, which providesto provide brokerage and related services for the investment accounts facilitated through our Consumer platform as well asand with Zero Hash a third-party digital asset settlement provider, which providesto provide certain digital currency-related products and services to our customers. In addition, we also depend on our relationships with our Product Partners to provide the various product and service offerings available in our Consumer marketplace.
In our Enterprise business, our success also depends in part on our relationships with our Enterprise Partners and their financial strength. For example, during challenging macroeconomic conditions, our Product Partners may tighten underwriting standards for certain of their products, which would result in fewer opportunities for us to generate revenue from matching consumers from our Channel Partners with them. In times of financial difficulty, Enterprise Partners may also fail to pay fees when due. Our Product Partners could also change their online marketing strategies or implement cost-reduction initiatives that decrease spending through our Enterprise platform. The occurrence of one or more of these events, alone or in combination, with a significant number of our Enterprise Partners could harm our business, financial condition and results of operations.
Any changes in these relationships or loss of these partners, or any failure of them to perform their obligations in a timely manner or at all, could degrade the functionality of our platform, materially and adversely affect usage of our products and services, impose additional costs or requirements or give preferential treatment to competitors’ services, including their own services, and materially and adversely affect usage of our products and services. In the event our agreements with these third parties are terminated, or if upon their expiration we are unable to renew the contracts on terms favorable todisadvantage us or at all, it may be difficult for us to replace these services, which may adversely affect our operations and profitability. Some of these organizations and third-party service providers provide similar services and technologycompared to our competitors, and we do not have long-term or exclusive contracts with them.
In addition, wecompetitors. We also rely on relationships with third-party partners to obtain and maintain customers. Ourcustomers, and our ability to acquire new customers could be materially harmed if we are unable to enter into or maintain these relationships on terms that are commercially reasonable to us, or at all.
Our systems and operations or those of our third-party service providers could be exposed to damage or interruption from, among other things, financial insolvency, bankruptcy, contractual default, or adverse regulatory changes. In addition, we may be unable to renew our existing contracts with our most significant third-party relationships, MetaBankincluding Pathward and DriveWealth, on terms favorable to us, or at all, or they may stop providing or otherwise supporting the products and services we obtain from them, and wethem. We may not be able to obtain these or similar products or services on the same or similar terms as our existing arrangements, if at all. The failure of these
We also rely on third-party service providers and vendors to perform their obligationsvarious functions that are important to our business, including underwriting, fraud detection, marketing, operational functions, cloud infrastructure services, information technology and telecommunications, and, because we are not a bank and cannot belong to or directly access the ACH payment network, ACH processing and debit and credit card payment processing. If one or more key third-party service providers or vendors were to cease to provide the products and services we obtain from them in a timely mannersuch functions for any reason, there could be delays in our ability to process payments and perform other operational functions for which we are currently relying on such third-party service provider or vendor, and we may not be able to promptly replace such third-party service provider or vendor on the same economic terms. The loss of those service providers or vendors could materially and adversely affect our business, results of operations and profitability.financial condition.
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While we require our third-party partners, service providers and vendors to provide services to us in accordance with our agreements and regulatory requirements, we do not have control over their operations. In the event that such a third party for any reason fails to comply with legal or regulatory requirements or otherwise to perform its functions properly, our ability to conduct our business and perform other operational functions for which we currently rely on such third party will suffer, and our business, financial condition, results of operations and cash flows may be negatively impacted.
If we fail to comply with the applicable requirements of our third-party partners,providers, they could seek to suspend or terminate our accounts, which could adversely affect our business.
We rely on agreements with MetaBank,Pathward, DriveWealth, Zero Hash and other third-party providers to provide deposit accounts, debit card services, investment advisory services and cryptocurrency-related services. These agreements and corresponding regulations governing banks and financial institutions may give them substantial discretion in approving certain aspects of our business practices, including our application and qualification procedures for customers, and require us to comply with certain legal requirements. Our financial institution partners’third-party providers’ discretionary actions under these agreements could impose material limitations to, or have a material adverse effect on, our business, financial condition and results of operations. Without these relationships, we would not be able to offer or service our deposit accounts, debit cards, investment accounts and cryptocurrency accounts, which would have a material adverse effect on our business, financial condition and results of operations. Furthermore, our financial results could be adversely affected if our costs associated with such relationships materially change or if any penalty or claim for damages is imposed as a result of our breach of the agreement with them or their other requirements.
We rely on third-party service providers for payment processing and other functions that are important to our operations. The loss of those service providers could materially and adversely affect our business, results of operations and financial condition. Additionally, if a third-party service provider fails to comply with legal or regulatory requirements or otherwise to perform these functions properly, our business may be adversely affected.
We rely on third-party service providers to perform various functions relating to our business, including underwriting, fraud detection, marketing, operational functions, cloud infrastructure services, information technology and telecommunications, and, because we are not a bank and cannot belong to or directly access the ACH payment network, ACH processing and debit card payment processing. While we oversee these service providers to ensure they provide services in accordance with our agreements and regulatory requirements, we do not have control over the operations of any of the third-party service providers that we utilize. In the event that a third-party service provider for any reason fails to perform such functions, including through negligence, willful misconduct or fraud, our ability to process payments and perform other operational functions for which we currently rely on such third-party service providers will suffer and our business, cash flows and future prospects may be negatively impacted.
Additionally, if one or more key third-party service providers were to cease to exist, to become a debtor in a bankruptcy or an insolvency proceeding or to seek relief under any debtor relief laws or to terminate its relationship with us, there could be delays in our ability to process payments and perform other operational functions for which we are currently relying on such third-party service provider, and we may not be able to promptly replace such third-party service provider with a different third-party service provider that has the ability to promptly provide the same services in the same manner and on the same economic terms. As a result of any such delay or inability to replace such key third-party service provider, our ability to process payments and perform other business functions could suffer and our business, cash flows and future prospects may be negatively impacted.
A significant change in consumer confidence in our products and services or adverseAdverse publicity concerning us, our business or our personnel or our failure to maintain our brand in a cost-effective manner could negatively impactmaterially and adversely affect our business.
We have developed a strong and trusted brand that has contributed significantly to the success of our business. We believe that maintainingMaintaining and promoting our brand in a cost-effective manner is critical to achieving widespread acceptance of our products and services, retaining existing customers on our platformand clients and expanding our base of customers.
customers and clients. Maintaining and promoting our brand will dependdepends largely on our ability to continue to provide useful, reliable, secure and innovative products and services, the effectiveness of our marketing efforts, the experience of existing customers and clients, including our ability to provide high-quality support and solutions to quickly resolve issues or otherwise meet their needs, and our ability to maintain trust and remain a leading financial services platform.trust. We may introduce, or make changes to, features, products, services, privacy practices or terms of service that customers and clients do not like, which may materially and adversely affect our brand. Our efforts to build our brand have involved significant expense, and we expect to increase our marketing spend may increase in the near term.term or in the future. Our brand promotion activities, including efforts and initiatives to create personalized content using MALKA’s digitalthrough our media division and content productionany actions we take as part of any rebranding of our businesses, products or services, may not generate customeror maintain brand awareness or increase revenue, and even if they do, any increase in revenue may not offset the expenses we incur in building our brand. Additionally, the successful protection and maintenance of our brand will depend on our ability to obtain, maintain, protect and enforce trademark and other intellectual property protection formaintaining our brand. If we fail to successfully promote, protect and maintain our brand or if we incur excessive expenses in this effort, we may lose our existing merchantscustomers and customersclients to our competitors or be unable to attract new merchantscustomers and customers. Any such loss of existing merchants or customers, or inability to attract new merchants or customers, wouldclients, which could have an adverse effect on our business and results of operations.
Harm to our brand can arise from many sources, including failure by us or our partners and service providers to satisfy expectations of service and quality, inadequate protection or misuse of PII, compliance failures and claims, litigation and other claims, misconduct by our partners or other counterparties or any other negative publicity concerning our company or key personnel, including management and MALKA’s content creators. We have been from time to time, and may in the future be, the target of incomplete, inaccurate and misleading or false statements about our company and our business that could damage our brand and deter customersthe adoption of our platform. Harm to our brand can arise from adopting our services.
Any negative publicity relating to the individuals or entities that we employ or contract with or that otherwise represent our company,many sources, including from reported or actual incidents or allegations of illegal or improper conduct, such as harassment, discrimination or other misconduct, as well as any negative publicity about our industry or our company, the quality and reliability of our products and services or changes thereto; the experience of our compliancecustomers and risk management processes, changes toclients with our products or services and services, our ability to effectively manage and resolve customer complaints,issues and complaints; our privacy, data protection and information security practices and our compliance and risk management processes; incidents or allegations of illegal or improper conduct by us, our partners or other counterparties; litigation or regulatory licensingaction; and infrastructure,any other negative publicity about our company, our key personnel, including management, and the experience of our customers with our products or services, could result in significant media attention, even if not directly relating to or involving MoneyLion. This could also have a negative impact on our reputation, potentially resulting in termination of contracts, our inability to attract new customer or client relationships or the loss or termination of such employees’ services.content creators. If we do not successfully maintain a strong and trusted brand, our business could be materially and adversely affected.
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Demand for our products or services may decline if we do not continue to innovate or respond to evolving technological or other changes.
Companies periodically review
We operate in a dynamic industry characterized by rapidly evolving technology, frequent product and change their advertisingservice offering introductions and marketing businesscompetition based on pricing, innovative features and other differentiators. We rely on our proprietary technology to make our Consumer platform available to customers and to integrate our Enterprise platform with our Enterprise Partners’ businesses. In addition, we may increasingly rely on technological innovation as we introduce new types of products and services, expand into new markets and continue to streamline our platform. The process of developing and integrating new technologies, including artificial intelligence (“AI”) and machine learning models, is complex and relationships.may cause errors or inadequacies that are not easily detectable, and as we integrate more generative AI technology into our platform to improve the experience of our users, it may result in unintentional or unexpected outputs that are incorrect. If MALKA, our wholly-owned subsidiary, iswe are unable to remain competitivesuccessfully innovate and continue to deliver a high-quality, superior experience, demand for our products or retain key clients, its businessservices may decrease and results ofour growth and operations and financial position may be adversely affected.harmed.
From time to time, MALKA’s clients put their advertising and marketing business up for competitive review. Key competitive considerations for retaining existing business and winning new business include the quality and effectiveness of the advertising and marketing services that MALKA offers and the content that it produces, actions taken by MALKA’s competitors to enhance their offerings, whether MALKA meets the expectations of its customers, its ability to efficiently serve clients, particularly large international clients, on a broad geographic basis and a number of other factors. To the extent that MALKA is not able to remain competitive or retain key clients, its revenue may be materially adversely affected, which could have an adverse effect on our results of operations and financial position. In addition, many factors can affect corporate spending, including economic conditions, changes in tax rates and tax laws and inflation, and any reduction in client spending or a delay in client payments could significantly impact MALKA’s operating results. While corporate spending may decline at any time for reasons beyond our or MALKA’s control, the risks associated with MALKA’s business become more acute in periods of a slowing economy or recession, which may be accompanied by reductions in corporate sponsorship and advertising.
If the information provided to us by customers or other third parties is incorrect or fraudulent, we may misjudge a customer’s qualifications to receive our products and services and our results of operations may be harmed and could subject us to regulatory scrutiny or penalties.
Our decisions to provide many of our products and services to our customers are based partly on information customersthat they provide to us or authorize us to receive. To the extent that these customers or third parties provide information to us in a manner that we are unable to verify, our decisioning process may not accurately reflect the associated risk. In addition, data provided by third-party sources, including consumer reporting agencies, is a component of our credit decisions and this data may contain inaccuracies. Inaccurate analysis ofThis may result in the inability to either approve otherwise qualified applicants or rejected otherwise unqualified applicants through our platform or accurately analyze credit data, that could result from false loan application information could harmwhich may adversely impact our reputation, business and results of operations.negatively impact our reputation.
In addition, wethere is risk of fraudulent activity associated with our business, including as a result of the service providers and other third parties who handle customer information on our behalf. We use identity and fraud prevention tools to analyze data provided by external databases to authenticate the identity of each applicant’s identity. From time to time,applicant that signs up for our first-party products and services. However, these checks have failed from time to time and there is a risk that these checks couldmay again fail in the future, and fraud, which may be significant, has and may in the future occur. The level of fraud-related charge-offs on the first-party products and services facilitated through our platform could be adversely affected if fraudulent activity were to significantly increase. We may not be able to recoup funds underlying loans or associated with our otherfirst-party products and services made in connection with inaccurate statements, omissions of fact or fraud, in which case our revenue, results of operations and profitability will be harmed. FraudulentHigh profile fraudulent activity or significant increases in fraudulent activity could also lead to regulatory intervention, negative publicity and the erosion of trust from our customers, which could negatively impact our results of operations, brand and reputation, and require us to take steps to reduce fraud risk, which could increase our costs.
ManyAny acquisitions, strategic investments, entries into new businesses, joint ventures, divestitures and other transactions could fail to achieve strategic objectives, disrupt our ongoing operations or result in operating difficulties, liabilities and expenses, harm our business and negatively impact our results of our investment advisory customers are first-time investorsoperations.
We have evaluated and our revenuesconsidered, and will continue to evaluate and consider, acquisitions, strategic investments, entries into new businesses, joint ventures, divestitures and other transactions. These transactions could be reducedmaterial to our financial condition and results of operations if these customers stop investing altogetherconsummated and will involve known and unknown risks, including:
● | difficulties in integrating the operations, personnel, systems, data, technologies, products and services of the acquired business and in maintaining uniform standards, controls, procedures and policies within the combined organization; |
● | inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits, or failure to successfully incorporate or further develop acquired technologies; |
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● | diversion of management’s time and resources from our normal daily operations and potential disruptions to our ongoing businesses; |
● | difficulties in retaining relationships with customers, employees, suppliers and other third-party partners of the acquired business; |
● | risks of entering markets in which we have no or limited direct prior experience; |
● | regulatory risks, including remaining in good standing with existing regulatory bodies or receiving any necessary approvals, as well as being subject to new regulators with oversight over an acquired business; |
● | assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights or increase our risk for liability; |
● | liability or other ongoing obligations for activities of the acquired or disposed of business before the acquisition or disposition, including patent and trademark infringement claims, violations of laws, regulatory actions, commercial disputes, tax liabilities and other known and unknown liabilities; and |
● | unexpected costs and unknown risks and liabilities associated with strategic transactions. |
We may not be able to identify appropriate business opportunities that benefit our business strategy or stop usingotherwise satisfy our platform for their investing activities.
Our business model focuses on makingcriteria to undertake such opportunities. Even if we do identify potential strategic transactions, we may not be successful in negotiating favorable terms in a timely manner or at all or in consummating the financial markets accessibletransaction, and even if we do consummate such a transaction, it may not generate sufficient revenue to a broad demographicoffset the associated costs, may not otherwise result in the intended benefits or may result in unexpected difficulties and risks. In particular, any future acquisition of retail investors. In eachnew businesses or technology may not lead to the successful development of the years ended December 31, 2020new or enhanced products and 2019, over half of our customers for the applicable period were first-time investors. Our success,services, and our abilityany new or enhanced products and services, if developed, may not achieve market acceptance or prove to increase revenues and operate profitably, depends in part on such customers continuing to utilize our platform, even as global social and economic conditions shift. However, our customers do not have long-term contractual arrangements with us and can utilize our platform on a transaction-by-transaction basis andbe profitable. It may also ceasetake us longer than expected to use our platform at any time or use a competitor’s platform. We may face particular challenges in retaining these investors as customers, for example as a result of a return to pre-COVID-19 behaviors, increased volatility infully realize the financial markets or increasing availability of competing products that seek to target the same demographic. In particular, a broad decline or volatility in the equity or other financial markets could result in someanticipated benefits and synergies of these investors exiting the marketstransactions, and leaving our platform. Any significant loss of these customersthose benefits and synergies may ultimately be smaller than anticipated or a significant reduction in their use of our platformmay not be realized at all, which could have a material impact on our investment volumes and revenues, and materially adversely affect our business, financial condition and results of operations.
If loansIn addition, any future strategic transactions may also require us to issue additional equity securities, spend our cash or incur debt (and increase interest expense), liabilities and other receivables originated throughamortization expenses related to intangible assets or write-offs of goodwill, which could adversely affect our platform do not perform, or significantly underperform, we may incur financial losses onresults of operations and dilute the receivables we originate or lose the confidenceeconomic and voting rights of our financing sources.stockholders.
Any significant underperformanceCompanies periodically review and change their advertising and marketing business models and relationships. If we are unable to remain competitive or retain key clients in our media division, our business, financial condition, results of operations and cash flows may be adversely affected.
From time to time, clients of our digital media and content production services put their advertising and marketing business up for competitive review. Key competitive considerations for retaining existing business and winning new business include the quality and effectiveness of the loansadvertising and other receivables facilitated through our platform, especially if they underperform compared to those generatedmarketing services that we offer and the content that we produce, actions taken by our competitors to enhance their digital media offerings, whether we meet the expectations of our clients and a number of other factors. To the extent that we are unable to remain competitive or retain key clients in our media division, our revenue may be adversely affected, which could have a material and adverse effect on our business, financial condition, results of operations and cash flows. In addition, many factors can affect corporate spending, including economic conditions, changes in tax rates and tax laws and inflation, and any reduction in client spending or a delay in client payments in our media division could negatively impact our operating results.
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Increases in the costs of content may adversely affect our business.
The success of our business and our ability to engage and retain customers in our platform are dependent in part on our ability to produce or acquire popular content, which in turn depends on our ability to retain content creators and rights to content for our platform. We may in the future incur increasing revenue-sharing costs to compensate content creators for producing original content. We also rely on key personnel in our media division to generate creative ideas for original content and to supervise the original content origination and production process, which can require considerable resources. If we are not able to compete effectively for talent or attract and retain top talent at reasonable costs, our content production capabilities would be negatively impacted.
We may also, from time to time, license content for our platform instead, and our ability to do so may be impacted by increasing licensing costs to compensate content creators. If we are unable to procure such licenses at reasonable costs, this may impact the categories and volume of engaging content that we can display on our relationship withConsumer platform.
We depend on our funding sourcessenior management team and other key personnel, and if we fail to attract, retain and motivate our personnel, our business, financial condition and results of operations could be adversely affected.
Our success significantly depends on the continued service of our senior management team and other key personnel. Our success also depends on our ability to identify, hire, develop, motivate and retain highly qualified personnel for all areas of our organization. As a result, any shortage of qualified labor could significantly adversely affect our business. Labor shortages will also likely lead to higher wages for employees and result in their loss of confidencedirect and indirect increases in costs to us, which could lead to the termination ofwould reduce our existing funding arrangements. Any requirement that we increase the amount of receivables we hold on our balance sheet due to a decrease or termination by our funding sources in their investments in our credit productsprofitability and other consumer receivables could have a material adverse effect on our business, results of operations, financial condition and future prospects.
Borrowers may prepay a loan at any time without penalty, which could reduce our revenue and limit our ability to obtain financing for our lending operations.
A borrower may decide to prepay all or a portion of the remaining principal amount on a loan at any time without penalty. If the entire or a significant portion of the remaining unpaid principal amount of a loan is prepaid, we would receive significantly lower interest associated with such prepaid loan. Prepayments may occur for a variety of reasons, including if interest rates decrease after a loan is made. If a significant volume of prepayments occurs, the amount of our servicing fees would decline, which could harm our business and results of operations. Our data-driven models
Competition for highly skilled personnel is extremely intense, particularly in New York, where our headquarters is located, and in Kuala Lumpur, where many of our engineering and data analytics personnel are designedlocated. We have experienced, and expect to predict prepayment rates. However, if acontinue to face, difficulty identifying, hiring and retaining qualified personnel and may also encounter difficulties in retaining key employees of acquired companies. In addition, we invest significant volumetime and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements. Many of prepayments occur thatthe companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment. In particular, candidates making employment decisions, specifically in high-technology industries, often consider the value of any equity they may receive in connection with their employment. Any significant volatility in the price of our models do not accurately predict, returns targeted by our financing sources in our loan funding programs would bestock may adversely affected andaffect our ability to attract new investorsor retain highly skilled personnel. Further, many companies have adopted work-from-home policies that may be more flexible than ours, which further increases the challenges associated with hiring and retaining qualified personnel.
Our engineering and technical development teams are based primarily in Malaysia, which could be adversely affected by changes in political or economic stability or by government policies.
Our engineering and technical development teams are based primarily in Malaysia, which is subject to relatively higher degrees of political and social instability than the United States and may lack the infrastructure to withstand political unrest, market turmoil or natural disasters. The political or regulatory climate in the United States, or elsewhere, also could change so that it would not be negatively affected.
We servicelawful or practical for us to use international operations in the manner in which we currently use them. If we had to curtail or cease operations in Malaysia and transfer some or all of the loansthese operations to another geographic area, we would incur significant transition costs as well as higher future overhead costs that could materially and advances we originate. A failure by us to service loans or advances properly could result in lost revenue and negatively impactadversely affect our business and operations or subject us to regulatory scrutiny or penalties.results of operations.
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We service all of the loans and advances we originate. Any failure on our part to perform functions related to our servicing activities to properly service our loans or advances could result in a significant decrease in the amount of loans or advances we service and therefore adversely impact the amount of revenue generated from interest income.
We rely on a variety of funding sources to support our business model. If our existing funding arrangements are not renewed or replaced or our existing funding sources are unwilling or unable to provide funding to us on terms acceptable to us, or at all, it could have a material adverse effect on our business, financial condition, results of operations financial condition,and cash flows and future prospects.flows.
To support the origination of loans, cash advances and other receivables on our platform and the growth of our business, we must maintain a variety of funding arrangements. If we are unable to maintain access to, or expand, our funding arrangements, our business, results of operations, financial condition and future prospects could be materially and adversely affected.
We cannot guarantee that these funding arrangementswe will continue to be available on favorable terms or at all, and our funding strategy may change over time and depends on the availability of such funding arrangements. For example, disruptions in the credit markets or other factors, such as the impact of the COVID-19 pandemic, could adversely affect the availability, diversity, cost and terms of our funding arrangements. The broad impact of COVID-19 on the financial markets has created uncertainty and volatility in many funding markets and with many funding sources. In addition, our funding sources may reassess their exposure to our industry and either curtail access to uncommitted financing capacity, fail to renew or extend facilities, or impose higher costs to access our funding.
In addition, there can be no assurances that we would be able to extend or replace our existing funding arrangements at maturity on reasonable terms or at all. For example, disruptions in the credit markets or other factors, such as the high inflation and interest rate environment in 2023, could adversely affect the availability, diversity, cost and terms of our funding arrangements. In addition, our funding sources may reassess their exposure to our industry or our business, including as a result of any significant underperformance of the consumer receivables facilitated through our platform or regulatory developments, in particular regarding earned wage access products, that impose significant requirements on, or increase potential risks and liabilities related to, the consumer receivables facilitated through our platform, and fail to renew or extend facilities or impose higher costs to access our funding. If our existing funding arrangements are not renewed or replaced or our existing funding sources are unwilling or unable to provide funding on terms acceptable to us, or at all, we would need to secure additional sources of funding or reduce our operations significantly. significantly, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Further, as the volume of loans and otherconsumer receivables facilitated through our platform increases and in order to support future business growth, we may require the expansion of our funding capacity under our existing funding arrangements or the addition of new sources of capital. We may also change our funding strategy over time depending on the attractiveness and availability of alternative funding structures. The availability and diversity of ournew funding arrangements depends on various factors and are subject to numerous risks, many of which are outside of our control. In the event of a sudden or unexpected shortage of funds in the financial system, we may not be able to maintain necessary levels of funding without incurring high funding costs or a reduction in the term or size of funding instruments. In such a case, if we are unable to arrange new or alternative methods of financing on favorable terms, we would have to reduce our transaction volume or otherwise inhibit our business growth, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
The agreements governing our funding arrangements require us to comply with certain covenants. A breach of such covenants or other events of default under our funding agreements could result in the reduction or termination of our access to such funding, could increase our cost of such funding or, in some cases, could give our lenders the right to require repayment of the loans prior to their scheduled maturity. Certain of these covenants and restrictions limit our and our subsidiaries’ ability to, among other things: incur additional debt;indebtedness; create liens on certain assets; pay dividends on or make distributions in respect of their capital stock or make other restricted payments; consolidate, merge, sell, or otherwise dispose of all or substantially all of their assets; andpurchase or otherwise acquire assets or equity interests; modify organizational documents; enter into certain transactions with their affiliates. Our senior credit facilityaffiliates; enter into restrictive agreements; engage in other business activities; and make investments. The Monroe Credit Agreement (as defined in Part II, Item 8 “Financial Statements and Supplementary Data — Debt” in this Annual Report on Form 10-K) also contains certain financial maintenance covenants that require uswith respect to minimum adjusted revenue, EBITDA, liquidity and our subsidiaries to maintain a certain income level each quarter, and to maintain a minimum level of unrestricted cash while any borrowings under the senior credit facility are outstanding.(each as defined therein).
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In the event of a sudden or unexpected shortage of funds in the financial system, we may not be able to maintain necessary levels of funding without incurring high funding costs, a reduction in the term or size of funding instruments, and/or the liquidation of certain assets. In such a case, if we are unable to arrange new or alternative methods of financing on favorable terms, we would have to reduce our transaction volume, which could have a material adverse effect on our business, results of operations, financial condition, cash flows and future prospects.
We may be unsuccessful in managing the effects of changes in the cost of capital on our business.
InWe have in the future, we may seekpast and will continue to evaluate and consider opportunities to access the capital markets to obtain capital to develop new technologies, expand our business, respond to competitive pressures and make acquisitions.or pursue strategic transactions, as well as for general corporate purposes. We may try to raise additional funds through public or private financings, strategic relationships or other arrangements. However, our future access to the capital markets and ability to obtain debt or equity funding on terms that are satisfactory to us, if at all, could be restricted due to a variety of factors, including a deterioration of our earnings, cash flows, balance sheet quality, our credit rating, investor interest or overall business or industry prospects, our share price, interest rates, adverse regulatory changes, a disruption to or volatility or deterioration in the state of the capital markets or a negative bias toward our industry by market participants. Due toIn particular, the negative bias toward our industry, certain financial institutions have restricted access to available financing by participants in our industry, and we may have more limited access to institutional capital than other businesses. Future prevailing capital market conditions and potential disruptions inprice of the capital markets may adversely affect our efforts to arrange additional financing on terms that are satisfactory to us, if at all. In addition, our share priceClass A Common Stock has been and may continue to be volatile, and any limitation on market liquidity or reduction in the share price of MoneyLion Class A Common Stock, including as a result of a delisting of our securities from a national exchange, could have a material adverse effect on our ability to raise capital on terms acceptable to us, or at all. If adequate funds are not available, or are not available on acceptable terms, we may not have sufficient liquidity to fund our operations, make future investments, take advantage of acquisitions or other opportunities or respond to competitive challenges and this, in turn, could adversely affect our ability to advance our strategic plans. In addition, if the capital and credit markets experience volatility, and the availability of funds is limited, third parties with whom we do business may incur increased costs or business disruption and this could adversely affect our business relationships with such third parties, which in turn could have a material adverse effect on our business, results of operations, financial condition, cash flows and future prospects.challenges.
If we succeed in raising additional funds through the issuance of equity or equity-linked securities, then existing stockholders could experience substantial dilution. If we raise additional funds through the issuance of debt securities or preferred stock, these new securities would have rights, preferences and privileges senior to those of the holders of our common stock.the Class A Common Stock. In addition, any such issuance could subject us to restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Further, to the extent we incur additional indebtedness or such other obligations, the risks associated with our existing debt, including our possible inability to service our existing debt, would increase.
Real or perceived inaccuracies in our key operating metrics may harm our reputation and negatively affect our business.
We dependtrack certain key operating metrics such as those set forth in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Performance Metrics” with internal systems and tools that are not independently verified by any third party. While the metrics presented in this Annual Report on Form 10-K are based on what we believe to be reasonable assumptions and estimates, our internal systems and tools have limitations, and our methodologies for tracking these metrics may change over time. In addition, limitations or errors with respect to the data that we measure may affect our understanding of certain details of our business, which could affect our long-term strategies. If the internal systems and tools we use to track these metrics misstate performance or contain algorithmic or other technical errors, the key operating metrics we report may not be accurate. If investors do not perceive our operating metrics to be accurate, or if we discover material inaccuracies with respect to these figures, our reputation may be significantly harmed, and our results of operations and financial condition could be adversely affected.
We are a rapidly growing company with a relatively limited operating history, which may result in increased risks, uncertainties, expenses and difficulties and makes it difficult to evaluate our future prospects.
We have experienced rapid growth in recent years, which has placed significant demands on our key personneloperational, risk management, technology, compliance and other highly skilled personnel,finance and ifaccounting infrastructure, and has resulted in increased expenses. Our historical revenue growth should not be considered indicative of our future performance, which may make it difficult to make accurate predictions about our future performance. We have also encountered, and will continue to encounter, risks, uncertainties and difficulties frequently experienced by growing companies in rapidly changing and heavily regulated industries, including challenges associated with achieving market acceptance of our products and services, attracting and retaining customers, the evolving fraud and information security landscape and complying with extensive laws and regulations (particularly those that are subject to evolving interpretations and application), as well as increased competition and the complexities of managing expenses as we failexpand our business. If we are not able to attract, retaintimely and motivate our personnel,effectively address these risks and difficulties, as well as those described elsewhere in this “Risk Factors” section, our business, financial condition, and results of operations couldand cash flows may be adversely affected.
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Our success significantly depends on the continued service of our senior management team, including Diwakar (Dee) Choubey, our Co-Founder and Chief Executive Officer, and Rick Correia, our Chief Financial Officer, and other highly skilled personnel. Our success also depends on our ability to identify, hire, develop, motivate and retain highly qualified personnel for all areas of our organization.
Competition for highly skilled personnel, including engineering and data analytics personnel, is extremely intense, particularly in New York where our headquarters is located. We have experienced,a history of losses and expect tomay not achieve or maintain profitability in the future.
Our net losses were $45.2 million and $189.1 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had a total accumulated deficit of $702.7 million. We may continue to face, difficulty identifying and hiring qualified personnel in many areas and may also encounter difficulties in retaining key employees of acquired companies, especially as we pursue our growth strategy. Further, as a result of the COVID-19 pandemic, a large and increasing number of companies have adopted permanent work-from-home policies, which further increases the challenges associated with hiring and retaining qualified personnel. We may not be able to hire or retain such personnel at compensation or flexibility levels consistent with our existing compensation and salary structure and policies. Many of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment. In particular, candidates making employment decisions, specifically in high-technology industries, often consider the value of any equity they may receive in connection with their employment. Any significant volatilityincur net losses in the price of our stockfuture, and such losses may adversely affect our abilityfluctuate significantly from quarter to attract or retain highly skilled technical, financial and marketing personnel.
In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements. While we are in the process of training their replacements, the quality of our services and our ability to serve our customers could decline, resulting in an adverse effect on our business.
Increases in the costs of content may have an adverse effect on MALKA’s business, financial condition and results of operations.
The success of the business of our subsidiary, MALKA, is dependent in part on its ability to produce popular content. The production of such content depends on MALKA’s ability to retain its content creators. As MALKA’s business develops, MALKA may incur increasing revenue-sharing costs to compensate its content creators for producing original content. MALKA relies on its teamquarter. We will need to generate creative ideasand sustain significant revenues for original content and to supervise the original content origination and production process, and MALKA intends to continue to invest resources in content production. If MALKA is not able to compete effectively for talent or attract and retain top influencers at reasonable costs, MALKA’s original content production capabilities would be negatively impacted.
Our engineering and technical development teams are based primarily in Malaysia, which could be adversely affected by changes in political or economic stability or by government policies.
Our engineering and technical development teams operate a foreign office in Malaysia, which is subject to relatively higher degrees of political and social instability than the United States and may lack the infrastructure to withstand political unrest or natural disasters. The political or regulatory climate in the United States, or elsewhere, also could change so that it would not be lawful or practical for us to use international operations in the manner in which we currently use them. If we had to curtail or cease operations in Malaysia and transfer some or all of these operations to another geographic area, we would incur significant transition costs as well as higher future overhead costs that could materially and adversely affect our results of operations. In many foreign countries, particularly in those with developing economies, it may be common to engage in business practices that are prohibited by laws and regulations applicable to us, such as the Foreign Corrupt Practices Act of 1977, as amended (“FCPA”). Any violations of the FCPA or local anti-corruption laws by us, our subsidiaries or our local agents could have an adverse effect on our business and reputation and resultgenerate greater operating cash flows in substantial financial penalties or other sanctions.
Our abilityfuture periods in order to collect payments on our financial products and services and maintain accurate accountsachieve profitability, which, even if achieved, we may be adversely affected by computer malware, social engineering, phishing, physical or electronic break-ins, undetected technical errors, bugsunable to maintain due to a number of reasons, including the risks described herein, unforeseen expenses, difficulties, complications and similar disruptions.
The automated nature ofdelays and other unknown events. Our efforts to grow our platformbusiness may make it an attractive target for hackingbe more costly than we expect, and potentially vulnerable to computer viruses, physical or electronic break-ins and similar disruptions. It is possible that we may not be able to anticipate orincrease our revenue sufficiently to implement effective preventive measures against all security breaches ofoffset our higher operating expenses. We intend to continue to invest in sales and marketing, technology and new products and services in order to enhance our brand recognition and our value proposition to our customers, and these types, in which case there would be an increased risk of fraud or identity theft,additional costs will create further challenges to generating near-term profitability. In addition, general and weadministrative expenses may experience losses on, or delays in the collectionfuture increase to meet the increased compliance and other requirements associated with evolving regulatory requirements or other factors.
Borrowers in our Consumer business may prepay a loan at any time without penalty, which could reduce our revenue and harm our business, financial condition, results of amounts owed on, a fraudulently induced loan or payments relating to our other products and services. Security breaches could occur from outside our company, and also from the actions of persons inside our company who may have authorized or unauthorized access to our technology systems. Furthermore, any failure of our computer systems could cause an interruption in operations and result in disruptions in,cash flows.
In our Consumer business, a borrower may decide to prepay all or reductions ina portion of the remaining outstanding principal amount on our first-party loan product at any time without penalty. Prepayments may occur for a variety of reasons, including if interest rates decrease after a loan is made. However, if a significant volume of prepayments occur that our models do not accurately predict, we would receive significantly lower interest associated with such prepaid loan and the amount of collections onour servicing fees would decline, which could harm our business, financial condition, results of operations and cash flows.
Our risk management processes and procedures may not be effective.
We have established processes and procedures intended to identify, measure, monitor and control the types of risk to which we are subject, including credit risk, deposit risk, market risk, liquidity risk, strategic risk, operational risk, fraud risk, information security risk, cybersecurity risk and reputational risk, as described further herein in this “Risk Factors” section. Our management is responsible for defining the priorities, initiatives and resources necessary to execute our strategic plan, the success of which is regularly evaluated by the Board of Directors. Our risk management processes and procedures seek to appropriately balance risk and return and mitigate risks. In order to be effective, among other amounts fromthings, our customers.
Additionally, if hackers were ableenterprise risk management capabilities must adapt and align to accesssupport any new product feature, service offering, capability, strategic development or external change.
Risk is inherent in our secure files, they mightbusiness, and therefore, despite our efforts to manage risk, there can be able to gain accessno assurance that we will not sustain unexpected losses. We could incur substantial losses and our business operations could be disrupted to the personal information ofextent our customers. If we are unable to prevent such activity, webusiness model, operational processes, control functions, technological capabilities, risk analyses and business/product knowledge do not adequately identify and manage potential risks associated with our strategic initiatives. There also may be subject to significant liability, negative publicityrisks that exist, or that develop in the future, that we have not appropriately anticipated, identified or mitigated, including when processes are changed or new products and services are introduced. If our risk management framework does not effectively identify and control our risks, we could suffer unexpected losses or be adversely affected, which could have a material loss of customers, all of which may negatively affectadverse effect on our business.
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Our platform and internal systems, and those of third parties upon whom we rely, rely on software that is highly technical, and if it contains undetected technical errors, our business could be adversely affected.
Our platform and internal systems rely on software that is highly technical and complex. In addition, our platformcomplex and internal systems depend on the ability of such software to store, retrieve, process and manage high volumes of data. The software upon which we rely may from time to time contain undetected technical errors or bugs. Some technical errors or bugs may only be discovered after the code has been released for external or internal use. Technical errors or other design defects within the software upon which we rely may result in a negative experience for customers, clients or third-party partners and issues in our provision of our products and services or their functionality, including the operation of the embedded finance marketplace platform solutions that we provide to our Enterprise Partners, failure to accurately predict a loan applicant’s creditworthiness or the suitability of other applicantscustomers for our other products and services, failure to comply with applicable laws and regulations, approval of sub-optimally priced loans, incorrectly displayed interest rates or other fees to borrowers and other customers, or incorrectly charged interest or fees to borrowers and other customers, third-party partners or institutional investors, failure to detect fraudulent activity on our platform, our inability to accurately evaluate potential customers, a negative experience for customers or third-party partners, delayed introductions of new features or enhancements or failure to protect customerconsumer data, our intellectual property or other sensitive data or proprietary information. Any technical errors, bugs or defects discovered in the software upon which we rely could result in harm to our reputation, loss of customers, clients or bankthird-party partners, increased regulatory scrutiny, fines or penalties, loss of revenue or liability for damages, any of which could adversely affect our business, financial condition and results of operations.
Some aspects ofRisks Relating to Our Industry
We operate in highly competitive industries, and our business processes include open-source software, which poses risks that could have a material and adverse effect on our business, financial condition and results of operations. In addition, any failureinability to comply with the terms of one or more of these open-source licenses could negatively affect our business.
We incorporate open-source software into processes supporting our business and anticipate using open-source software in the future. Such open-source software may include software covered by licenses like the GNU General Public License and the Apache License. The terms of various open-source licenses to which we are subject have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to operate our systems, limits our use of the software, inhibits certain aspects of our systems and negatively affects our business operations.
Some open-source licenses contain requirements that we make source code modifications or derivative works we create publicly available or make available on unfavorable terms or at no cost, based upon the type of open-source software we use.
While we monitor our use of open-source software and try to ensure that none is used in a manner thatcompete successfully would require us to disclose our proprietary source code or that would otherwise breach the terms of an open-source license, such use could inadvertently occur, or could be claimed to have occurred, in part because open-source license terms are often ambiguous. We may face claims from third parties claiming ownership of, or demanding the release or license of, modifications or derivative works that we have developed using such open-source software (which could include our proprietary source code or artificial intelligence (“AI”) models), or otherwise seeking to enforce the terms of the applicable open-source license. These claims could result in litigation and if portions of our proprietary AI models or software are determined to be subject to an open-source license, or if the license terms for the open-source software that we incorporate change, we could be required to publicly release all or affected portions of our source code, purchase a costly license, cease offering the implicated products or services unless and until we can re-engineer such source code in a manner that avoids infringement, discontinue or delay the provision of our offerings if re-engineering could not be accomplished on a timely basis or change our business activities, any of which could negatively affect our business operations and potentially our intellectual property rights. In addition, the re-engineering process could require us to expend significant additional research and development resources, and we may not be able to complete the re-engineering process successfully. If we were required to publicly disclose any portion of our proprietary models, it is possible we could lose the benefit of trade secret protection for our models.
In addition to risks related to license requirements, the use of certain open-source software can lead to greater risks than the use of third-party commercial software, as open-source licensors generally do not provide support, warranties, indemnification, controls or other contractual protections regarding infringement claims or the quality of the origin of the software. There is little legal precedent in this area, and any actual or claimed requirement to disclose our proprietary source code or pay damages for breach of contract could harm our business and could help third parties, including our competitors, develop products and services that are similar to or better than ours. Use of open-source software may also present additional security risks because the public availability of such software may make it easier for hackers and other third parties to determine how to breach our website and systems that rely on open-source software. Any of these risks associated with the use of open-source software could be difficult to eliminate or manage, and if not addressed, could materially and adversely affect our business, financial condition, results of operations and cash flows.
We operate in rapidly changing and highly competitive industries. We compete across our business lines with a variety of competitors, including traditional banks and credit unions; new entrants obtaining banking licenses; non-bank digital providers offering banking-related services; specialty finance and other non-bank digital providers offering consumer lending-related or earned wage access products; digital wealth management platforms such as robo-advisors offering consumer investment services and other brokerage-related services; and digital financial platform, embedded finance and marketplace competitors, which aggregate and connect consumers to financial product and service offerings. We also compete with advertising agencies and other service providers to attract marketing budget spending from our Enterprise clients. We expect our competition to continue to increase, as there are generally no substantial barriers to entry to the markets we serve. Some of our current and potential competitors have longer operating histories, particularly with respect to financial services products similar to ours, significantly greater resources and a larger customer base than we do. This allows them, among other things, to potentially offer more competitive pricing or other terms or features, a broader range of financial or other products or a more specialized set of specific products or services, as well as respond more quickly than we can to new or emerging technologies and changes in consumer preferences. Our existing or future competitors may develop products or services that are similar to our products and services or that achieve greater market acceptance than our products and services. This could attract customers away from our services and reduce our market share in the future.
In addition, we face competition in our media division from others in the digital media and content creation industry, which range from large and established media companies, including social media companies and production studios, to emerging start-ups. Established companies have longer operating histories and more established relationships with customers and users, and they can use their experience and resources in ways that could affect our competitive position, including by making acquisitions, investing aggressively in research and development, aggressively initiating intellectual property claims (whether or not meritorious) and competing aggressively for advertisers and websites. Emerging start-ups may be able to innovate and provide products and services faster than we can. Our operating results may suffer if our digital content is not appropriately timed with market opportunities, if our competitors are more successful than we are in developing compelling content, if we are unable to successfully innovate and provide superior services to clients or if our digital content is not effectively brought to market.
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Our results of operations and future prospects depend on our ability to compete effectively and attract new and retain existing customers and clients, which depends upon many factors both within and beyond our control, including those described in this “Risk Factors” section. In acting to meet these competitive challenges, we may be forced to increase marketing expenditures or utilize significant other resources. Competitive pressures could also result in us reducing the amounts we charge for our various products and services or incurring higher customer acquisition costs, and could make it more difficult for us to grow our product and service offerings in both number and volume for new as well as existing customers and clients. All of the foregoing factors and events could adversely affect our business, financial condition, results of operations and cash flows.
Changing expectations for inflation and deflation and corresponding fluctuations in interest rates could decrease demand for our lending products and negatively affect loan performance as well as increase certain operating costs such as employee compensation.
There is uncertainty about the prospects for growth in the U.S. economy impacted by a number of factors, including, but not limited to, rising government debt levels, potential government policy shifts, changing U.S. consumer spending patterns and changing expectations for inflation and deflation which may impact interest rates. During 2022 and 2023, the U.S. Federal Reserve raised benchmark interest rates eleven times, partially in response to increasing inflation and a strong labor market. Any change in the fiscal policies or stated target interest rates of the U.S. Federal Reserve or other central banking institutions, or market expectations of such change, are difficult to predict and may result in sustained levels of high interest rates. Increased interest rates, which often lead to higher payment obligations, may adversely impact the spending level of consumers and their willingness and ability to borrow money, resulting in decreased borrower demand for our lending products or those provided by our Product Partners. A change in demand for our lending products or those provided by our Product Partners and any steps we may take to mitigate such change could impact credit quality and overall growth of our business. In addition, our Product Partners may tighten underwriting standards in high interest rate and inflationary environments, resulting in decreased lending supply, and therefore decreased revenue to us, in our personal loans vertical. During the year ended December 31, 2023, revenue from our personal loans vertical represented the majority of our Enterprise marketplace revenue. This concentration of revenue in the personal loans sector could heighten the impact of adverse macroeconomic conditions on our Enterprise business, which could materially and adversely affect financial condition, results of operations and cash flows. Furthermore, inflationary and other economic pressure resulting in the inability of a borrower to repay a loan could translate into increased loan delinquencies, defaults, bankruptcies or foreclosures and charge-offs and decreased recoveries, all of which could negatively affect our business, financial condition, results of operations and cash flows.
Additionally, an inflationary environment, combined with the tight labor market, could make it more costly for us to attract or retain employees. In order to meet the compensation expectations of our prospective and current employees due to inflationary factors, we may be required to increase our operating costs or risk losing skilled workers to competitors.
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Adverse developments affecting financial institutions or the financial services industry generally, such as actual events or concerns involving liquidity, defaults or non-performance, could adversely affect our operations and liquidity.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions for the financial services industry generally, or concerns or rumors about any events of these kinds, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. Despite subsequent actions taken by the U.S. Department of the Treasury, the U.S. Federal Reserve and the FDIC to ensure that all depositors of SVB had access to all of their cash deposits following the closure of SVB, uncertainty and liquidity concerns in the broader financial services industry remain. Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates. The U.S. Federal Reserve Board announced a program to provide up to $25 billion of loans to financial institutions secured by such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments. However, widespread demands for customer withdrawals or other needs of financial institutions for immediate liquidity may exceed the capacity of such program. There is no guarantee that the U.S. Department of Treasury, the U.S. Federal Reserve and the FDIC will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions in a timely fashion or at all. The failure of banks and financial institutions and the measures taken by governments, businesses and other organizations in response to these events could adversely impact our business, financial condition and results of operations.
We regularly maintain cash balances at third-party financial institutions in excess of the FDIC insurance limit. Our access to our cash and cash equivalents in amounts adequate to finance our operations could be significantly impaired by the financial institutions with which we maintain cash balances to the extent such financial institutions face liquidity constraints or failures, particularly if we hold a large concentration of cash and cash equivalents in any single financial institution.
In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any material decline in available funding or our ability to access our cash and cash equivalents could adversely impact our ability to meet our operating expenses, result in breaches of our contractual obligations or result in significant disruptions to our business, any of which could have material adverse impacts on our operations and liquidity.
Our business may be adversely affected by economic conditions and other factors that we cannot control.
The timing, severity and duration of an economic downturn can have a material adverse effect on our ability to generate revenue and to absorb expected and unexpected losses. Many factors, including factors that are beyond our control, may impact our business, financial condition, results of operations and cash flows by affecting our customers’ and clients’ willingness and capacity to use our products and services. These factors include interest rates, unemployment levels, the impact of seasonality, conditions in the housing market, immigration policies, gas prices, energy costs, government shutdowns, political developments and unrest (including relating to the upcoming 2024 U.S. presidential election), trade wars, as well as events such as natural disasters, acts of war and other geopolitical developments (such as the ongoing conflicts between Ukraine and Russia and in the Middle East), terrorism, catastrophes and pandemics such as the COVID-19 pandemic or other similar epidemics or adverse public health developments. In addition, adverse macroeconomic conditions may cause our Product Partners to reduce their marketing spend or advertising on our platform, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. Adverse macroeconomic conditions may also have the effect of heightening many of the other risks described herein. In particular, the ongoing conflicts between Ukraine and Russia and in the Middle East could amplify disruptions to the financial and credit markets, increase risks of an information security or operational technology incident, cause cost fluctuations to us or third parties upon which we rely and increase costs to ensure compliance with global and local laws and regulations. The occurrence of any of these risks could adversely impact our business and financial results.
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Uncertainty and negative trends in general economic conditions, including significant tightening of credit markets, historically have created a difficult operating environment for the consumer finance industry. For example, in making a decision whether to extend credit to a new or existing customer or determine appropriate pricing for a loan or whether to provide a customer an advance, our decision strategies rely on robust data collection, including from third-party sources, proprietary scoring models and market expertise. Our ability to adapt in a manner that balances future revenue production and loss management may be tested in a downturn. The timing and extent of an economic downturn may also require us to change, postpone or cancel our strategic initiatives or growth plans to pursue shorter-term sustainability. The longer and more severe an economic downturn, the greater the potential adverse impact on us, which could be material.
Many new customers on our platform have limited or no credit history and limited financial resources. Accordingly, such customers have historically been, and may in the future become, disproportionately affected by adverse macroeconomic conditions, potentially impacting our ability to make accurate assessments or decisions about our customers’ ability to pay for loans, repay cash advances or pay for other products and services we provide. In addition, major medical expenses, divorce, death or other issues that affect customers could affect a customer’s willingness or ability to make payments on their loans, repayments on their advances or engage in investing activities. If borrowers default on loans facilitated on our Consumer platform, the cost to service these loans may also increase without a corresponding increase in revenue earned from lending operations and the value of the loans could decline. Any sustained decline in demand for loans, cash advances or other products and services we offer, or any increase in delinquencies or defaults that result from economic downturns, may harm our ability to maintain robust volumes for our business, which would adversely affect our financial condition and results of operations. For the year ended December 31, 2023, for the partially or fully secured personal loans provided through our Credit Builder Plus membership program, the average 30+ day delinquency rate was 4.0% (representing uncovered past due balances divided by total principal) and the average monthly net charge-off rate was 0.8%. For the year ended December 31, 2023, the non-repayment rate for advances provided through our Instacash product was 4.2%. See Part I, Item 1 “Business — Our Platform — Consumer — First-Party Financial Products and Services.”
In addition, sustained high levels of unemployment may increase the non-repayment rate on our loans and cash advance products, increase the rate of customers declaring bankruptcy or decrease our customers’ use of our investment and other products and services. If we are unable to adjust our business operations to account for rises in unemployment, or if our platform is unable to more successfully predict the creditworthiness of potential borrowers compared to other lenders, then our business, financial condition, results of operations and cash flows could be adversely affected.
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Systems defects,Risks Relating to Information Security
Cyberattacks, data security breaches or other similar incidents or disruptions suffered by us or third parties upon which we rely could have a material adverse effect on our business, harm our reputation and expose us to public scrutiny or liability.
In the normal course of business, we collect, process, use and retain sensitive and confidential information regarding our customers and prospective customers, including data provided by and related to consumers and their transactions, as well as other data of the counterparties to their payments. We also have arrangements in place with certain third-party service providers that require us to share customer information. Although we devote significant resources and management focus to ensuring the integrity of our systems through information security and business continuity programs, our facilities and systems, and those of third-party service providers, are vulnerable to actual or threatened external or internal security breaches; acts of vandalism, theft, fraud or misconduct on the part of employees, other internal sources or third parties; computer viruses or malware; phishing attacks; internet interruptions; disruptions or losses; misplaced or lost data; ransomware; unauthorized encryption; denial-of-service attacks; social engineering; unauthorized access; spam or other attacks; natural disasters; fires; terrorism; war; telecommunications or electrical interruptions or failures; programming or human errors or malfeasance; and other similar malicious or inadvertent disruptions or events. We and our third-party service providers from time to time have experienced and may in the future continue to experience such instances, and we may experience heightened risks of cyberattacks and other security breaches or disruptions as a result of the ongoing unification efforts to integrate certain legacy IT infrastructure and systems of MALKA and Even Financial Inc. (now Engine by MoneyLion). The access by unauthorized persons to, or the improper disclosure by us of, confidential information regarding our customers or our proprietary information, software, methodologies and business secrets could interrupt our business or operations, result in legal claims or proceedings, significant legal and financial exposure, supervisory liability under U.S. federal or state or non-U.S. laws regarding the privacy and protection of information, including PII, damage to our reputation or a loss of confidence in the security of our systems, products and services, all of which could have a material adverse impact on our business. Although the impact to date from these events has not had a material adverse effect on us, no assurance is given that this will be the case in the future.
In addition to cyberattacks, data security breaches and other similar incidents involving the theft of sensitive and confidential information, ransomware, hackers, terrorists, sophisticated nation-state and nation-state supported actors and other malicious third parties recently have engaged in attacks that are designed to disrupt key business services, such as consumer-facing websites, which attacks we have faced in the past and anticipate will continue to grow in scope and complexity over time. We and our third-party partners, service providers or vendors may not be able to anticipate or implement effective preventive measures against all security breaches of these types, especially because the techniques used to sabotage or to obtain unauthorized access to our or our third-party partners’, service providers’ or vendors’ technology, systems, networks and/or physical facilities in which data is stored or through which data is transmitted change frequently and because attacks can originate from a wide variety of sources. We employ detection and response mechanisms designed to contain and mitigate security incidents. Nonetheless, early detection efforts may be thwarted by sophisticated attacks and malware designed to avoid detection, and we may fail to detect the existence of a security breach related to the information of our customers and to prevent or detect service interruptions, system failure or data loss. Further, as many of our employees continue to work remotely, these cybersecurity risks may be heightened by an increased attack surface across our business and those of our customers and third-party partners, service providers and vendors. We cannot guarantee that our efforts, or the efforts of those upon whom we rely and with whom we partner, will be successful in preventing any such information security incidents.
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Information security risks in the financial services industry in particular are significant, in part because of new technologies, the use of the internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and the increased sophistication and activities of organized criminals, perpetrators of fraud, hackers, terrorists and other malicious third parties. In addition, there have been a number of well-publicized attacks or breaches affecting companies in the financial services industry that have heightened concern by customers, which could also intensify regulatory focus, cause customers to lose trust in the security of the industry in general and result in reduced use of our services and increased costs, all of which could also have a material adverse effect on our business. The digital nature of our platform may also make it an attractive target for hacking and potentially vulnerable to security breaches and similar disruptions.
Most jurisdictions (including all 50 states) have enacted laws requiring companies to notify individuals, regulatory authorities and/or others of security breaches involving certain types of data. In addition, our agreements with certain partners and service providers may require us to notify them in the event of a security breach. Such mandatory disclosures are costly, could lead to negative publicity, may cause our customers, partners and service providers to lose confidence in the effectiveness of our security measures and require us to expend significant capital and other resources to respond to and/or alleviate problems caused by the actual or perceived security breach. A security breach of any of our vendors that processes PII may pose similar risks.
A cyberattack, data security breach or other similar incident may also cause us to breach customer contracts. Our agreements with certain partners and service providers may require us to use industry-standard or reasonable measures to safeguard PII. We also may be subject to laws that require us to use industry-standard or reasonable security measures to safeguard PII. A cyberattack, data security breach or other similar incident could lead to claims by our customers or other relevant stakeholders that we have failed to comply with such legal or contractual obligations. As a result, we could be subject to legal action, and our customers could end their relationships with us. There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages, and in some cases, our customer agreements may not limit our remediation costs or liability with respect to data breaches.
Litigation resulting from cyberattacks, data security breaches or other similar incidents may adversely affect our business. Unauthorized access to our technology, systems, networks or physical facilities, or those of our third-party partners, service providers or vendors, could result in litigation with our customers or other relevant stakeholders. These proceedings could force us to spend money in defense or settlement, divert management’s time and attention, increase our costs of doing business or adversely affect our reputation. We could be required to fundamentally change our business activities and practices or modify our products and/or technology capabilities in response to such litigation, which could have an adverse effect on our business. If a cyberattack, data security breach or other similar incident were to occur, and the confidentiality, integrity or availability of PII was disrupted, we could incur significant liability, or our technology, systems or networks may be perceived as less desirable, which could negatively affect our business and damage our reputation.
While we maintain cybersecurity insurance, we may not have adequate insurance coverage with respect to liabilities that result from any cyberattacks, data security breaches or other similar incidents or disruptions suffered by us or third parties upon which we rely. The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), could have an adverse effect on our business. In addition, we cannot be sure that our existing insurance coverage and coverage for errors and omissions will continue to be available on acceptable terms or at all, or that our insurers will not deny coverage as to any future claim.
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Defects, failures or disruptions including events beyondin our control,systems or those of third parties upon which we rely and resulting interruptions in the availability of our websites, applications, products, or servicesplatform could harm our business and financial condition, harm our reputation, result in significant costs to us decrease our potential profitability and expose us to substantial liability.
We use third-party service providers and vendors, such as our cloud computing web services provider, account transaction and card processing companies, and third-party software providers, in the operation of our platform. The satisfactory performance, reliability and availability of our technology and our underlying network and infrastructure are critical to our operations and reputation and the ability of our platform to attract new and retain existing customers. We rely on these third-party service providers and vendors to protect their systems and facilities against damage or service interruptions from natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer viruses or attempts to harm these systems, criminal acts, unauthorized access, sabotage, acts of vandalism, military actions, negligence, human errors, fraud, spikes in platform use and denial of service issues, hardware failures, improper operation, cyberattacks, data loss, wars and similar events. The escalation of tensions due to global conflicts could also result in increased cyberattacks that could either directly or indirectly affect our operations.
If ouran arrangement with a third-party service provider or vendor is terminated or if there is a lapse of service or damage to its systems or facilities, we could experience interruptions in our ability to operate our platform. We also may experience increased costs and difficulties in replacing that third-party service provider or vendor, and replacement services may not be available on commercially reasonable terms, on a timely basis, or at all.
In addition,the event of damage or interruption, our platform is accessed by many customers, often at the same time. Asinsurance policies may not adequately compensate us for any losses that we continue to expand the number of our customers,may incur. Our disaster recovery plan has not been tested under actual disaster conditions, and products and services available through our platform, we may not be ablehave sufficient capacity to scale our technology to accommodaterecover all data and services in the increased capacity requirements. The failureevent of data centers, internet service providers or other third-party service providers to meet our capacity requirements could result in interruptions or delays in access to our platform or impede our ability to grow our business and scale our operations. Any interruptions or delays in our platform availability, whether as a result of a failure to perform on the part of a vendor, any damage to one of our vendor’s systems or facilities, the termination of any of our third-party vendor agreements, software failures, our or our vendor’s error, natural disasters, terrorism, other man-made problems, security breaches, whether accidental or willful, or other factors, could harm our relationships with our customers, prevent our customers from accessing their accounts, damage our reputation with current and potential customers, expose us to liability, cause us to lose customers, cause the loss of critical data, prevent us from supporting our platform, products or services or cause us to incur additional expense in arranging for new facilities and support or otherwise harm our business and also harm our reputation.an outage.
In addition, we source certain information from third parties. For example, our risk-scoring model is based on algorithms that evaluate a number of factors and currently dependdepends on sourcing certain information from third parties, including consumer reporting agencies. In the event that any third party from which we source information experiences a service disruption whether as a result of maintenance, natural disasters, terrorism, or security breaches, whether accidental or willful, or other factors,for any reason, the ability to operate our platform, including to score and decision loan applications and applications for our othervarious products and services, through our platform may be adversely impacted. Additionally, there may be errors contained in the information provided by third parties. This may result in the inability to approve otherwise qualified applicants through our platform, which may adversely impact our business by negatively impacting our reputation and reducing our transaction volume.
To the extent we use or are dependent on any particular third-party data, technology or software, we may also be harmed if such data, technology, or software becomes non-compliant with existing regulations or industry standards, becomes subject to third-party claims of intellectual property infringement, misappropriation or other violation, or malfunctions or functions in a way we did not anticipate. Any loss of the right to use any of this data, technology or software could result in delays in the provisioning of our products and services until equivalent or replacement data, technology or software is either developed by us, or, if available, is identified, obtained and integrated, and there is no guarantee that we would be successful in developing, identifying, obtaining or integrating equivalent or similar data, technology or software, which could result in the loss or limiting of our products or services or features available in our products or services.
In addition, inour platform is accessed by many customers, often at the eventsame time. As we continue to expand the number of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. Our disaster recovery plan has not been tested under actual disaster conditions,customers and the products and services available through our platform, we may not have sufficientbe able to scale our technology to accommodate the increased capacity requirements. The failure of data centers, internet service providers or other third-party service providers or vendors to recover all datameet our capacity requirements could result in interruptions or delays in access to our platform or impede our ability to grow our business and servicesscale our operations. Any interruptions or delays in the eventour platform availability of an outage. Furthermore, prolonged interruption in the availability, or reduction in the speed or other functionality of our platform could harm our relationships with our customers, prevent our customers from accessing their accounts, damage our reputation with current and potential customers, expose us to liability, cause us to lose customers, cause the loss of critical data, prevent us from supporting our platform, products or services could materiallyor processing transactions with our customers or cause us to incur additional expense in arranging for new facilities and support or otherwise harm our reputation and business. Any of the foregoing could prevent us from processing transactions or posting payments on our platform, damage our brand and reputation, divert the attention of our employees, reduce our revenue, subject us to liability and cause customers to abandon our platform,business, any of which could have a material and adverse effect on our business, results of operations, financial condition, and future prospects.
Real or perceived inaccuracies in our key operating metrics may harm our reputation and negatively affect our business.
We track certain key operating metrics such as total payment volume, Total Originations and Total Customers (each as defined herein) with internal systems and tools that are not independently verified by any third party. While the metrics presented in this Annual Report on Form 10-K/A are based on what we believe to be reasonable assumptions and estimates, our internal systems and tools have a number of limitations, and our methodologies for tracking these metrics may change over time. In addition, limitations or errors with respect to how we measure data or with respect to the data that we measure may affect our understanding of certain details of our business, which could affect our long-term strategies. If the internal systems and tools we use to track these metrics understate or overstate performance or contain algorithmic or other technical errors, the key operating metrics we report may not be accurate. If investors do not perceive our operating metrics to be accurate, or if we discover material inaccuracies with respect to these figures, our reputation may be significantly harmed, and our results of operations and financial conditioncash flows.
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Risks Relating to Intellectual Property
We may be unable to sufficiently obtain, maintain, protect or enforce our intellectual property and other proprietary rights, which could be adversely affected.reduce the value of our platform, products, services and brand, impair our competitive position and cause reputational harm.
Intellectual property and other proprietary rights are important to the success of our business, and our trademarks, trade names and service marks have significant value to our brand. Our ability to compete effectively is dependent in part upon our ability to obtain, maintain, protect and enforce our intellectual property and other proprietary rights, including with respect to our proprietary technology. We have a history of lossesrely on both registrations and may not achieve profitability in the future. (As Restated)
Our net losses were $169.5 million and $41.6 millioncommon law protections for the years ended December 31, 2021 and 2020, respectively.our trademarks. As of December 31, 2021,2023, we owned 22 registered trademarks and 1 registered copyright and had a total accumulated deficit10 trademark applications and 1 copyright application. We also own the domain name rights for, among other sites, moneylion.com, engine.tech, fiona.com and malkamedia.com. Nonetheless, the steps we take to obtain, maintain, protect and enforce our intellectual property and other proprietary rights may be inadequate, and we cannot guarantee that any future patent, trademark or service mark registrations will be issued for our pending or future applications or that any of $465.3 million.our current or future patents, copyrights, trademarks or service marks (whether registered or unregistered) will be valid, enforceable, sufficiently broad in scope, provide adequate protection of our intellectual property or other proprietary rights or provide us with any competitive advantage. The legal standards relating to the validity, enforceability and scope of protection of intellectual property and other proprietary rights are uncertain and still evolving. Changes to U.S. or foreign intellectual property laws and regulations may also jeopardize the enforceability and validity of our intellectual property portfolio and harm our ability to obtain patent protection, including for some of our business methods.
Despite our efforts to protect these rights, unauthorized third parties, including our competitors, may reverse engineer, access, obtain or use the proprietary aspects of our technology, processes, products or services without our permission, thereby impeding our ability to promote our platform and possibly leading to customer confusion. Our competitors and other third parties may also design around or independently develop similar technology or otherwise duplicate or mimic our products or services such that we would not be able to successfully assert our intellectual property or other proprietary rights against them. The value of our intellectual property and other proprietary rights could diminish if others assert rights in or ownership of our intellectual property or other proprietary rights. We may continuealso be unable to incur net lossesprevent competitors or other third parties from acquiring or using trademarks, service marks, or other intellectual property or other proprietary rights that are similar to, infringe upon, misappropriate, dilute, or otherwise violate or diminish the value of our trademarks and service marks and our other intellectual property and proprietary rights. Additionally, if third parties succeed in registering or developing common law rights in our trademarks or similar trademarks, and if we are not successful in challenging such third-party rights, we may not be able to use these trademarks to develop brand recognition of our platform, products or services. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively, which could adversely impact our business, financial condition and results of operations.
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In addition to registered intellectual property rights such as trademark registrations, we rely on non-registered proprietary information and technology, such as trade secrets, confidential information, know-how and technical information. We utilize confidentiality and intellectual property assignment agreements with our employees and contractors involved in the development of material intellectual property for us, which require such individuals to assign such intellectual property to us and place restrictions on the employees’ and contractors’ use and disclosure of our confidential information. However, these agreements may not be self-executing, and we cannot guarantee that we have entered into such agreements containing obligations of confidentiality with each party that has or may have had access to proprietary information, knowhow or trade secrets owned or held by us. Additionally, our contractual arrangements may be insufficient, breached or may otherwise not effectively prevent disclosure of, or control access to, our confidential or otherwise proprietary information or provide an adequate remedy in the event of an unauthorized disclosure, which could cause us to lose any competitive advantage resulting from this intellectual property. Individuals that were involved in the development of intellectual property for us or who had access to our intellectual property may make adverse ownership claims to our current and future intellectual property. Likewise, to the extent that our employees, independent contractors or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting works of authorship, know-how and inventions. The measures we have put in place may not prevent misappropriation, infringement or other violation of our intellectual property, proprietary rights or information, and any resulting loss of competitive advantage, and we may be required to litigate to protect our intellectual property or other proprietary rights or information from misappropriation, infringement or other violation by others, which is time-consuming and expensive, could cause a diversion of resources and may not be successful. Additionally, our efforts to enforce our intellectual property and other proprietary rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property and other proprietary rights, and if such defenses, counterclaims or countersuits are successful, it could diminish, or we could otherwise lose, valuable intellectual property and other proprietary rights. Additionally, the laws of some foreign countries may not be as protective of intellectual property and other proprietary rights as those in the U.S., and the mechanisms for enforcement of intellectual property and other proprietary rights may be inadequate. Any of the foregoing could adversely impact our business, financial condition and results of operations.
Our inability to obtain or maintain intellectual property, proprietary rights and technology licensed from third parties could have a material and adverse effect on our business, financial condition, results of operations and cash flows.
Our business and our platform rely on technologies licensed from third parties. Third-party software components may become obsolete, defective or incompatible with future versions of our services, or our relationships with the third-party licensors or technology providers may deteriorate, expire or be terminated. Additionally, some of these licenses or other grants of rights may not be available to us in the future on terms that are acceptable, or at all, or that allow our platform, products and such lossesservices to remain competitive. Companies that perceive us to be a competitor may fluctuate significantly from quarteralso be unwilling to quarter. We will needassign, license or otherwise grant rights to generateus. Our inability to obtain licenses or rights on favorable terms could have a material and sustain significant revenues foradverse effect on our business generally, and achieve greater scaleresults of operations. Even if such licenses or other grants of rights are available, we may be required to pay the licensor (or other applicable counterparty) substantial royalties, which may affect the margins on our products and generate greater operating cash flowsservices. Furthermore, incorporating intellectual property or proprietary rights in future periodsour products or services licensed from or otherwise made available to us by third parties on a non-exclusive basis could limit our ability to protect the intellectual property and proprietary rights in orderour products and services and our ability to achieve, maintainrestrict third parties from developing, selling or increaseotherwise providing similar or competitive technology using the same third-party intellectual property or proprietary rights.
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If we fail to comply with our level of profitability. We intendobligations under license or technology agreements with third parties, or if we cannot license rights to continueuse technologies on reasonable terms, we could be required to invest in sales and marketing, technology andpay damages, lose license rights that are critical to our business or be unable to commercialize new products and services in order to enhance our brand recognition and our value propositionthe future.
We license certain third-party intellectual property that is important to our customers,business, including technologies, content and thesesoftware from third parties, and in the future we may license additional costs will create further challengesvaluable third-party intellectual property or technology. If we fail to generating near-term profitability. We also expect generalcomply with any of the obligations under our license agreements, we may be required to pay damages and administrative expensesthe licensor may have the right to increaseterminate the license, which would cause us to meetlose valuable rights, and could prevent us from selling our products and services, or inhibit our ability to commercialize current or future products and services. Our business may suffer if any current or future licenses or other grants of rights to us terminate, if the licensors (or other applicable counterparties) fail to abide by the terms of the license or other applicable agreement, if the licensors fail to enforce the licensed intellectual property rights against infringing third parties, or if the licensed intellectual property rights are found to be invalid or unenforceable. Third parties from whom we currently license intellectual property and technology could refuse to renew our agreements upon their expiration or could impose additional terms and fees that we otherwise would not deem acceptable, requiring us to obtain the intellectual property or technology from another third party, if any is available, or to pay increased compliance and other requirements associated with operating as a public company and evolving regulatory requirements.
Our effortslicensing fees or be subject to growadditional restrictions on our use of such third-party intellectual property or technology.
Some aspects of our business processes include open-source software, which poses risks that could have a material and adverse effect on our business, financial condition and results of operations.
We incorporate open-source software into processes supporting our business and anticipate using open-source software in the future. Such open-source software may include software covered by licenses like the GNU General Public License and the Apache License. While we monitor our use of open-source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open-source license, such use could inadvertently occur, or could be moreclaimed to have occurred, in part because open-source license terms are often ambiguous. The terms of various open-source licenses to which we are subject have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to operate our systems, limits our use of the software, inhibits certain aspects of our systems and negatively affects our business operations.
We may also face claims from third parties claiming ownership of, or demanding the release or license of, modifications or derivative works that we have developed using such open-source software (which could include our proprietary source code or AI models), or otherwise seeking to enforce the terms of the applicable open-source license. These claims could result in litigation and if portions of our proprietary AI models or software are determined to be subject to an open-source license, or if the license terms for the open-source software that we incorporate change, we could be required to publicly release all or affected portions of our source code, purchase a costly license, cease offering the implicated products or services unless and until we can re-engineer such source code in a manner that avoids infringement, discontinue or delay the provision of our offerings if re-engineering could not be accomplished on a timely basis or change our business activities, any of which could negatively affect our business operations and potentially our intellectual property rights and help third parties, including our competitors, develop products and services that are similar to or better than we expect,ours. In addition, the re-engineering process could require us to expend significant additional research and development resources, and we may not be able to increasecomplete the re-engineering process successfully. If we were required to publicly disclose any portion of our revenue sufficientlyproprietary models, it is possible we could lose the benefit of trade secret protection for our models.
In addition to offsetrisks related to license requirements, the use of certain open-source software can lead to greater risks than the use of third-party commercial software, as open-source licensors generally do not provide support, warranties, indemnification, controls or other contractual protections regarding infringement claims or the quality of the origin of the software. Use of open-source software may also present additional security risks because the public availability of such software may make it easier for hackers and other third parties to determine how to breach our higher operating expenses. website and systems that rely on open-source software. Any of these risks associated with the use of open-source software could be difficult to eliminate or manage and, if not addressed, could materially and adversely affect our business, financial condition and results of operations.
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We may be sued by third parties for alleged infringement, misappropriation or other violation of their intellectual property or other proprietary rights, which may be costly and may subject us to significant liability and increased costs of doing business.
We may become involved in disputes from time to time concerning intellectual property or other proprietary rights of third parties, which may relate to our own proprietary technology or to technology that we acquire or license from third parties or the content which we produce or license, and we may not prevail in these disputes. Relatedly, competitors or other third parties may raise claims alleging that we or third parties retained or indemnified by us infringe on, misappropriate or otherwise violate such competitors’ or other third parties’ intellectual property or other proprietary rights. These claims of infringement, misappropriation or other violation may be extremely broad, and it may not be possible for us to conduct our operations in such a way as to avoid all such alleged violations of such intellectual property or other proprietary rights. If we are found to have willingly infringed a patent or other intellectual property right, we could be liable for significant monetary damages, including treble damages and attorneys’ fees. We also may be unaware of third-party intellectual property or other proprietary rights that, if found to be valid and enforceable, could be alleged to be infringed by our current or future technologies or products. Additionally, we do not currently have a patent portfolio, which could prevent us from deterring patent infringement claims from competitors or other third parties, and our competitors and others may now and in the future have significantly larger and more mature patent portfolios than we may have.
Given the complex, rapidly changing and competitive technological and business environment in which we operate, and the potential risks and uncertainties of intellectual property-related litigation, a claim of infringement, misappropriation or other violation against us may require us to spend significant amounts of time and other resources to defend against the claim (even if we ultimately prevail or settle the claim); pay significant money damages; lose significant revenues; be prohibited from using the relevant systems, processes, technologies or other intellectual property (temporarily or permanently); obtain a license, which may not be available on commercially reasonable terms or at all, to use the relevant technology; redesign our allegedly infringing products or services, or functionality therein, or recreate, edit or otherwise cease using content we produce to avoid infringement, misappropriation or other violations, which could be costly, time-consuming or impossible; and/or rebrand our products and services or otherwise limit our branding. In addition, if a third party is able to obtain an injunction preventing us from accessing such third-party intellectual property rights, or if we cannot license or develop alternative technology or content for any infringing aspect of our business, we may be forced to limit or stop offering our relevant products, services and/or technology capabilities, limit the use or distribution of particular content or cease business activities related to such intellectual property. We cannot predict the outcome of lawsuits and cannot ensure that the results of any such actions will not have an adverse effect on our business, financial condition or results of operations.
While in some cases a third party may have agreed to indemnify us for costs associated with intellectual property-related litigation, such indemnifying third party may refuse or be unable to uphold its contractual obligations. In other cases, our insurance may not cover potential claims of this type adequately or at all, and we may be required to pay monetary damages, which may be significant.
Even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the attention and resources of our management and harm our business and operating results. Moreover, public announcements related to such claims that are perceived to be negative could have a substantial adverse effect on the price of the Class A Common Stock. The occurrence of infringement and misappropriation claims may grow as the market for our platform grows. Accordingly, our exposure to damages resulting from infringement claims could increase and this could further exhaust our financial and management resources. Any of the foregoing could adversely impact our business, financial condition and results of operations.
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Risks Relating to Legal and Accounting Matters
We have in the past, and continue to be, subject to inquiries, subpoenas, exams, pending investigations, enforcement matters and litigation by state and federal regulators, the outcomes of which are uncertain and could cause reputational and financial harm to our business, financial condition, results of operations and cash flows.
The financial services industry is subject to extensive regulation under federal, state and applicable international laws. From time to time, we have been, and continue to be, subject to inquiries, subpoenas, pending investigations and enforcement matters by state and federal regulators and have been threatened with or named as a defendant in lawsuits, arbitrations and administrative claims involving securities, consumer financial services and other matters. We are also subject to periodic regulatory examinations and inspections. Additionally, we have in the past received and responded to, and continue to receive and respond to, civil investigative demands, subpoenas and other similar information and investigatory requests from federal and state regulators and attorneys general relating to our provision of consumer financial services, including our lending activity, our membership program, our earned wage access product and other products and services. Any of these matters could result in adverse judgments, settlements, fines, penalties, restitution, disgorgement, injunctions or other relief. For example, in November 2023, we settled an ongoing investigation with the Colorado Department of Law relating to our historical lending activities in Colorado and the fees charged under our membership model. While such settlement had no material impact on us, similar future matters with other state regulators could have a material adverse effect on our business, financial condition, results of operations and cash flows.
In addition, compliance issues and complaints that are reported to and investigated by regulators, such as the SEC, FINRA, the CFPB or state regulators may, if pursued, result in formal claims being filed against us by customers or disciplinary action being taken against us or our employees by regulators or enforcement agencies. To resolve issues raised in examinations or other governmental actions, we may be required to take various corrective actions, including changing certain business practices, making refunds or taking other actions that could be financially or competitively detrimental to us. We expect to continue to incur lossescosts to comply with governmental regulations. Any such claims or disciplinary actions that are decided against us could have a material impact on our financial results and may prompt litigation or additional investigations or proceedings as other litigants or other government agencies begin independent reviews of the same activities.
Unfavorable outcomes in legal proceedings may harm our business, financial condition, results of operations and cash flows.
We are, and may in the future become, subject to litigation, claims, examinations, investigations, legal and administrative cases and proceedings, whether civil or criminal, or lawsuits by governmental agencies or private parties, which may affect our business, financial condition, results of operations and cash flows. These claims, lawsuits and proceedings could involve labor and employment, discrimination and harassment, commercial disputes, intellectual property rights (including patent, trademark, copyright, trade secret and other proprietary rights), class actions, general contract, tort, defamation, data privacy rights, antitrust, common law fraud, government regulation, compliance, alleged federal and state securities and “blue sky” law violations or other investor claims and other matters. For a discussion of specific legal proceedings to which we are currently subject, see Part I, Item 3 “Legal Proceedings.” Due to the consumer-oriented nature of a significant portion of our business and the application of certain laws and regulations, participants in our industry are regularly named as defendants in litigation alleging violations of federal and state laws and regulations and consumer law torts, including fraud. Many of these legal proceedings involve alleged violations of consumer protection laws. In addition, we have in the past and may in the future be subject to litigation, claims, examinations, investigations, legal and administrative cases and proceedings related to our loan products and other financial services we provide. For instance, our membership model and some of the products and services we offer, including our earned wage access product, Instacash, are relatively novel and have been and may in the future continue to be subject to regulatory scrutiny or interest and/or litigation. While we continue to respond to and cooperate with state regulators and will continue to do so in the future, as appropriate, any regulatory action in the future could have a material adverse effect on our business, financial condition, results of operations and cash flows. For additional information, see “— Risks Relating to Regulation — The legal and regulatory regimes governing certain of our products and services are uncertain and evolving. Changing or new laws, regulations, interpretations or regulatory enforcement priorities may have a material and adverse effect on our business, financial condition and results of operations.”
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Any unfavorable results of pending or future legal proceedings may result in contractual damages, usury-related claims, fines, penalties, injunctions, the unenforceability, rescission or other impairment of loans or cash advances originated on our platform or other censure that could have a material adverse effect on our business, financial condition, results of operations and cash flows. Even if we adequately address the issues raised by an investigation or proceeding or successfully defend a third-party lawsuit or counterclaim, we may have to devote significant financial and management resources to address these issues, which could harm our business, financial condition, results of operations and cash flows.
Although we currently maintain insurance, there can be no assurance that we will be able to maintain such insurance on acceptable terms in the future, if at all, or that any such insurance will provide adequate protection against potential liabilities. Additionally, we do not achievecarry insurance for all categories of risk that our business may encounter. Any significant liability that is uninsured or not fully insured may require us to pay substantial amounts. There can be no assurance that any current or future profitabilityclaims will not materially and adversely affect our business, financial condition, results of operations and cash flows.
Failure to comply with government laws and requirements regarding anti-money laundering, counter-terror financing, economic sanctions, anti-bribery and anti-corruption could subject us to penalties and other adverse consequences.
We maintain an enterprise-wide program designed to enable us to comply with all applicable anti-money laundering, anti-terrorism financing and economic sanctions laws and regulations, including the BSA and the USA PATRIOT Act of 2001. This program includes policies, procedures, processes and other internal controls designed to identify, monitor, manage and mitigate the risk of money laundering and terrorist financing and prevent our platform from being used to facilitate business in countries or if achieved,with persons or entities designated on lists promulgated by OFAC and equivalent international authorities or that are otherwise the target of sanctions. These controls include procedures and processes to detect and report potentially suspicious transactions, perform customer due diligence, respond to requests from law enforcement and meet all recordkeeping and reporting requirements related to particular transactions involving currency or monetary instruments. Certain of our subsidiaries may be “financial institutions” under the BSA that are required to establish and maintain such program. Additionally, we are required to maintain this program under our agreements with our third-party partners, and certain state regulatory agencies have intimated they expect the program to be in place and followed.
We cannot provide any assurance that our programs and controls will be effective to ensure compliance with all applicable anti-money laundering, anti-terrorism financing and economic sanctions laws and regulations we are required to comply with, and our failure to comply with these laws and regulations could result in a breach and termination of our agreements with our third-party partners, criticism, fines or other penalties by governmental agencies or any other adverse consequences, which would have a material adverse effect on our business, financial condition and results of operations.
We are also subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, U.S. domestic bribery laws and other U.S. and foreign anti-corruption laws. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies, their employees and their third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public sector. These laws also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions. The failure to comply with any such laws could subject us to criminal or civil liability, cause us significant reputational harm and have an adverse effect on our business, financial condition and results of operations.
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If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (as amended, the “Sarbanes-Oxley Act”), and the rules and regulations of the applicable listing standards of the NYSE. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly and place significant strain on our personnel, systems and resources. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. Effective internal controls are necessary to provide reliable financial reports and prevent fraud. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs, and require significant management oversight. Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.
Our financial statements involve a number of complex accounting policies, many of which involve significant elements of judgment, including determinations regarding the consolidation of variable interest entities, determinations regarding fair value measurements and the appropriate classification of various items within our financial statements. The inherent complexity of these accounting matters and the nature and variety of transactions in which we are involved require that we have sufficient qualified accounting personnel with an appropriate level of experience and controls in our financial reporting process commensurate with the complexity of our business. We expect that the continued growth and development of our business will place significant additional demands on our internal and external accounting resources. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in material weaknesses and/or one or more restatements of our financial statements.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of an entity’s annual or interim financial statements will not be prevented or detected and corrected on a timely basis. We have in the past identified, and may in the future identify one or more, material weaknesses in our internal control over financial reporting. For additional information with respect to certain previously identified material weaknesses that we remediated as of December 31, 2023, see Part II, Item 9A “Controls and Procedures.” The measures that we have taken to date, and any measures we may take in the future, may not be sufficient to avoid potential future material weaknesses. If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of its accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain such profitability, duecompliance with securities law requirements regarding timely filing of periodic reports in addition to applicable NYSE listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a numberresult. In addition, ineffective disclosure controls and procedures and internal controls over financial reporting could subject us to additional risks and uncertainties, including, among others, increased professional fees and expenses and time commitment that may be required to address matters related to the remediation of reasons, including the risks described in “Risk Factors” herein, unforeseen expenses, difficulties, complicationsmaterial weaknesses and delaysthe restatements and increased scrutiny of the SEC and other unknown events.regulatory bodies, which could cause investors to lose confidence in our reported financial information and could subject us to penalties. In addition, we could face increased potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from, among other things, the restatements, the material weaknesses in our internal control over financial reporting and the preparation of our financial statements. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, financial condition and results of operations and could cause our stock price to decline.
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Our management is responsible for establishing and maintaining adequate internal controls over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls. Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until we are no longer an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating.
Our ability to use our deferred tax assets to offset future taxable income may be limited.
We may be limited in the portion of net operating loss carryforwards (“NOLs”) that we can use in the future to offset taxable income for U.S. federal and state income tax purposes. Any changes to the federal or state tax laws that reduce the corporate tax rate could operate to effectively reduce or eliminate the value of any deferred tax asset. In addition, a lack of future taxable income would adversely affect our ability to utilize our NOLs. Our tax attributes as of December 31, 2023 may expire unutilized or underutilized, which could prevent us from offsetting future taxable income. Furthermore, under Section 382 of the Internal Revenue Code (the “Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its NOLs to offset future taxable income. Future changes in our stock ownership, as well as other changes that may be outside of our control, could result in additional ownership changes under Section 382 of the Code. Our NOLs may also be impaired under similar provisions of state law.
Risks Relating to Financial Regulation
As used herein, the terms “cryptocurrency,” “crypto asset,” “digital asset” and “virtual currency” are intended to be consistent with one another unless specifically noted otherwise.
Our business is subject to extensive regulation, examination and oversight in a variety of areas, including registration and licensing requirements under federal, state and local laws and regulations.
We are subject to extensive regulation, supervision and examination under United StatesU.S. federal and state laws and regulations. Regulators have broad discretion with respect to the interpretation, implementation and enforcement of these laws and regulations, including through enforcement actions that could subject us to civil money penalties, customer remediations, increased compliance costs and limits or prohibitions on our ability to offer certain products or services or to engage in certain activities.regulations. Any failure or perceived failure to comply with any of these laws or regulations could subject us to lawsuits or governmental actions and/or damage our reputation, which could materially and adversely affect our business. In addition, to the extent that we undertake actions requiring regulatory approval or non-objection, regulators may make their approval or non-objection subject to conditions or restrictions that could have a material adverse effect on our business. Moreover, any competitors subject to different, or in some cases less restrictive, legislative or regulatory regimes may have or obtain a competitive advantage over us.
We must comply with various federal consumer protection regimes, both as a result of the financial products and services we provide directly or facilitate and as a service provider to our bank partner, Pathward. For example, we are subject to the regulatory and enforcement authority of the CFPB, which oversees compliance with federal consumer financial protection laws. In addition, ifIf the CFPB were to expand its supervisory authority by promulgating new regulations or reinterpreting existing regulations, it is possible that the CFPB could be permitted to conduct periodic examination of our business, which may increase our risk of regulatory or enforcement actions.
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Further, we are regulated by many state regulatory agencies through licensing and other supervisory or enforcement authority, which includes regular examination by state governmental authorities. State attorneys general have indicated that they will take a more active role in enforcing consumer protection laws, including through use of Dodd-Frank Act provisions that authorize state attorneys general to enforce certain provisions of federal consumer financial laws and obtain civil money penalties and other relief available to the CFPB. Our failure to comply with state licensing or other regulatory requirements as may be in effect from time to time could have a material adverse effect on us and our ability to conduct our business. For example, any failure to obtain and maintain required state licenses for the brokerage of financial, insurance and other related products, including product-specific licenses relating to lending, life insurance and mortgage products, could have a material adverse effect on our Enterprise business. Furthermore, if we expand the scope of our products or services or we operate in new markets, we may be required to obtain additional licenses and otherwise maintain compliance with additional laws, regulations or licensing requirements.
In addition, our wholly-owned subsidiary, ML Wealth, is registered as an investment adviser under the Advisers Act and is subject to regulation by the SEC. The Advisers Act, together with related regulations and interpretations of the SEC, impose numerous obligations and restrictions on investment advisers, including requirements relating to the safekeeping of client funds and securities, limitations on advertising, disclosure and reporting obligations, prohibitions on fraudulent activities, restrictions on agency cross and principal transactions between an adviser and its advisory clients and other detailed operating requirements, as well as general fiduciary obligations. We also have aMoreover, although we do not currently engage in any business activity through our wholly-owned subsidiary, MoneyLion Securities LLC, which isas a broker-dealer, andit is therefore registered with the SEC and a member of FINRA. Although we doit has not currently engage in anycommenced business, activity throughas a registered broker-dealer, MoneyLion Securities LLC as a broker-dealer, it is subject to SECperiodic examinations and FINRA rules and regulations.
Weinvestigations by FINRA. Further, broker-dealers are also subject to potential enforcementregulations that cover all applicable aspects of their business, which include sales practices, anti-money laundering, handling of material non-public information, safeguarding data, recordkeeping, reporting and the conduct and qualifications of directors, officers, employees, representatives and other actions thatassociated persons.
We expect to continue to launch, broker and/or otherwise facilitate new products and services in the coming years, which may subject us to additional legal and regulatory requirements under federal, state and local laws and regulations, but which we expect to be brought bysimilar to the legal and regulatory regimes to which we are already subject.
U.S. federal regulators, state attorneys general or other state enforcement authorities and other governmental agencies. Any suchagencies may take formal or informal actions couldagainst us (or our employees, representatives, agents and third-party service providers). Such formal or informal actions might result in cease and desist orders, fines, civil money penalties, and fines, customer remediations, increasedcriminal penalties or other disciplinary action or force us to adopt new compliance costs, damageprograms or policies, remove personnel including senior executives, provide remediation or refunds to customers, or undertake other changes to our reputation and brand andbusiness operations, such as limits or prohibitions of our ability to offer certain products and services, or engagesuspension or revocation of one or more of our licenses. Any weaknesses in certainour compliance management system may also subject us to penalties or enforcement action by the CFPB.
If we fail to manage our legal and regulatory risk in the jurisdictions in which we operate, our business practices.could suffer, our reputation could be harmed and we would be subject to additional legal and regulatory risks. This could, in turn, increase the size and number of claims and damages asserted against us and/or subject us to regulatory investigations, enforcement actions or other proceedings, or lead to increased regulatory concerns. We may also be required to spend additional time and resources on remedial measures and conducting inquiries, beyond those already initiated and ongoing, which could have an adverse effect on our business.
While we have implemented policies and procedures designed to help our compliance with applicable laws and regulations, there are a number of risks that cannot be completely controlled. Further, in some cases, regardless of fault, it may be less time-consuming or costly to settle these matters, which may require us to implement certain changes to our business practices, provide remediation to certain individuals or make a settlement payment to a given party or regulatory body. For a discussion of specific legal and regulatory proceedings, inquiries and investigations to which we are currently subject, see Part I, Item 3 “Legal Proceedings.”
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The legal and regulatory regimes governing certain of our products and services are uncertain and evolving. Changing or new laws, regulations, interpretations or regulatory enforcement priorities may negatively impact the management ofhave a material and adverse effect on our business, financial condition and results of operations, ability to offer certain products or the terms and conditions upon which they are offered and ability to compete.operations.
We are required to comply with constantly changing federal, state and local laws, regulations and regulationsrules that regulate among other things, the termsvarious aspects of the loansproducts and other consumer receivablesservices that we originate and the associated fees that may be charged.offer. Federal and state regulators of consumer financial products and services are also enforcing existing laws, regulations and rules more aggressively and enhancing their supervisory expectations regarding the management of legal and regulatory compliance risks. Changes in theSuch laws, regulations and enforcement priorities applicable to our business could have a material impact on our business model, operations and financial position.
Such laws and regulationsrules are complex and require us to incur significant expenses and devote significant management attention to ensure compliance. In addition, our failureFor example, the CFPB may adopt new model disclosures and regulations governing consumer financial services, including regulations defining unfair, deceptive or abusive acts or practices, and they could also issue advisory opinions or other similar soft tools to comply (or to ensure that our agents and third-party service providers comply) with these laws or regulations may result in litigation or enforcement actions, the penalties forcomplement its rulemaking authority which could include: revocation of licensessubject us to new or differing legal and registrations; finesregulatory requirements, which could materially and adversely affect our business. The CFPB’s authority to change or interpret regulations adopted in the past by other monetary penalties; civilregulators, or to rescind or alter past regulatory guidance, could increase our compliance costs and criminal liability; substantially reduced payments by our customers; modification oflitigation exposure. If the original terms of loans and other products, permanent forgiveness of debt, or inability to, directly or indirectly, collect all or a part of the principal of or interest on loansCFPB or other amounts owed by our customers; and indemnification claims. Such consequences could, among other things, require changessimilar regulatory bodies adopt, or customer advocacy groups are able to generate widespread support for, positions that are detrimental to our business, practicesthen our business, financial condition and scoperesults of operations or harmcould be harmed.
Changes in the laws, regulations and enforcement priorities applicable to our reputation, which in turn,business, including reexamination of current enforcement practices, could have a material and adverse effectimpact on our business, financial condition, results of operations financial condition or business.
State attorneys general have indicated that they will take a more active role in enforcing consumer protection laws, including through use of Dodd-Frank Act provisions that authorize state attorneys general to enforce certain provisions of federal consumer financial laws and obtain civil money penalties and other relief available to the CFPB.
Further, wecash flows. We may not be able to respond quickly or effectively to regulatory, legislative and other developments,developments. In particular, the regulatory landscape regarding earned wage access products (including our Instacash advance service) is uncertain and these changesevolving given rapid growth in the use of earned wage access products in recent years. State and federal regulators, including the California Department of Financial Protection and Innovation and the CFPB, may in turn impair our ability to offer our existingthe future launch inquiries, reviews or planned features, products and services and/or increase our cost of doing business. In addition, if our practices are not consistent or viewed as not consistent with legal and regulatory requirements, we may become subject to audits, inquiries, whistleblower complaints, adverse media coverage,similar investigations or criminalissue new, or civil sanctions, all ofchange or interpret, regulations or rules relating to earned wage access products, which may have an adverse effect on our reputation, business, results of operations and financial condition.
These regulatory changes and uncertainties make our business planning more difficult and could result in changesadditional compliance requirements and other risks relating to our current and past business model and potentially adversely impact the results ofactivities as described herein. Such regulators could also launch inquiries, reviews or similar investigations into our operations. New laws or regulations also require us to incur significant expenses to ensure compliance. As compared to our competitors, we could be subject to more stringent state or local regulations or could incur marginally greater compliance costs as a result of regulatory changes.
Instacash product. Proposals to change the statutes affecting financial services companies are frequently introduced in Congress and state legislatures that, if enacted, maycould affect our operating environment in substantial and unpredictable ways. In addition, numerous federal and state regulators have the authority to promulgate or change regulations that could have a similar effect on our operating environment. We cannot determine with any degree of certainty whether any such legislative or regulatory proposals will be enacted and, if enacted, the ultimate impact that any such potential legislation or implemented regulations, or any such potential regulatory actions by federal or state regulators, would have upon our business.
business or our operating environment. As a result, we could be forced, as we have in the past, to temporarily pause, limit or permanently cease to offer our earned wage access product in certain states depending on state regulatory regimes. In addition, we expectnumerous federal and state regulators have the authority to continuepromulgate or change regulations that could have a similar effect on our third-party partners and service providers and restrict their business practices, such as the recent rulemaking under the TCPA by the Federal Communications Commission to launch newrequire one-to-one consumer consents for telemarketing. These changes and uncertainties make our business planning more difficult and could result in changes to our business model, impair our ability to offer our existing or planned features, products and services or increase our cost of doing business.
Our failure to comply (or to ensure that our third-party partners, service providers or other agents comply) with these changing laws, regulations or rules may result in litigation, enforcement actions and penalties, including revocation of licenses and registrations; fines and other monetary penalties; civil and criminal liability; substantially reduced payments by our customers; modification of the coming years,original terms of loans and other products, permanent forgiveness of debt or inability to collect on amounts owed by our borrowers; and indemnification claims. Such consequences could, among other things, require changes to our business practices and scope of operations or harm our reputation, which may subject us to additionalin turn, could have a material adverse effect on our business, financial condition and results of operations. If our practices are not consistent or viewed as not consistent with legal and regulatory requirements, under federal, statewe may become subject to audits, inquiries, whistleblower complaints, adverse media coverage, investigations, litigation or criminal or civil sanctions, all of which may have an adverse effect on our reputation, business, results of operations and local laws and regulations, but which we expect to be similar to the legal and regulatory regimes to which we are already subject.financial condition.
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New laws, regulations, rules, guidance and policies or changes in enforcement of existing laws or regulations applicablecould require us to our business, or reexamination of current practices, couldincur significant expenses to ensure compliance, adversely impact our profitability, limit our ability to continue existing or pursue new business activities, require us to change certain of our business practices or alter itsour relationships with customers, affect retention of key personnel or expose us to additional costs (including increased compliance costs and/or customer remediation). These changes also may require us to invest significant resources or devote significant management attention in order to make any necessary changeschanges. For example, the regulatory frameworks for an open banking paradigm and could adverselyAI and machine learning technology are evolving and remain uncertain. It is possible that new laws and regulations will be adopted in the U.S., or existing laws and regulations may be interpreted in new ways, that would affect the operation of our business.
The regulatory regime governing blockchain technologiesplatform and digital assets is uncertain,the way in which we use consumer data, AI and new regulations or policies may alter our business practicesmachine learning technology, including with respect to digital assets.fair lending laws.
We currently offer certain cryptocurrency-related products and services availableIf we fail to our customers through Zero Hash. The Zero Hash entities are registered as money services businesses and have the necessary state-level licenses for engagingoperate in digital assets activities where the Zero Hash services are offered. Although many regulators have provided some guidance, regulation of digital assets based oncompliance with state or incorporating blockchain, such as digital assets and digital asset exchanges, remains uncertain and will continue to evolve. Further, regulation varies significantly among international, federal, state and local jurisdictions. As blockchain networks and blockchain assets have grown in popularity and in market size, federal and state agencies are increasingly taking interest in, and in certain cases regulating, their use and operation. Treatment of virtual currencies continues to evolve under federal and state law. Many U.S. regulators, including the SEC, the Financial Crimes Enforcement Network, the Commodity Futures Trading Commission, (the “CFTC”), the Internal Revenue Service (the “IRS”) and state regulators including the New York State Department of Financial Services (the “NYSDFS”), have made official pronouncements or issued guidance or rules regarding the treatment of Bitcoin and other digital currencies. The IRS released guidance treating virtual currency as property that is not currency for U.S. federal income tax purposes, although there is no indication yet whether other courts or federal or state regulators will follow this classification. Both federal and state agencies have instituted enforcement actions against those violating their interpretation of existing laws. Other U.S. and many state agencies have offered little official guidance and issued no definitive rules regarding the treatment of digital assets. The CFTC has publicly taken the position that certain virtual currencies, which term includes digital assets, are commodities. To the extent that virtual currencies are deemed to fall within the definition of a “commodity interest” under the Commodity Exchange Act (the “CEA”), we may be subject to additional regulation under the CEA and CFTC regulations.
As blockchain technologies and digital assets business activities grow in popularity and market size, and as new digital assets businesses and technologies emerge and proliferate, foreign, federal, state and local regulators revisit and update their laws and policies, and can be expected to continue to do so in the future. Changes in this regulatory environment, including changing interpretations and the implementation of new or varying regulatorylicensing requirements, by the government, may significantly affect or change the manner in which we currently conduct some aspects of our business.
States may require that we obtain licenses that apply to blockchain technologies and digital assets.
Under the terms of our agreement with Zero Hash, we are not directly involved in any cryptocurrency transactions or the exchange of fiat funds for cryptocurrency at or through Zero Hash, and therefore, we do not currently expect to be subject to money services business, money transmitter licensing, or other licensing or regulatory requirements specific to transactions relating to virtual currencies. However, state and federal regulatory frameworks around virtual currencies continue to evolve and are subject to interpretation and change, which may subject us to additional licensing and other requirements.
In the case of virtual currencies, state regulators such as the NYSDFS have created regulatory frameworks. For example, in July 2014, the NYSDFS proposed the first U.S. regulatory framework for licensing participants in virtual currency business activity. The regulations, known as the “BitLicense”, are intended to focus on consumer protection. The NYSDFS issued its final BitLicense regulatory framework in June 2015. The BitLicense regulates the conduct of businesses that are involved in virtual currencies in New York or with New York customers and prohibits any person or entity involved in such activity from conducting such activities without a license. The Zero Hash entities do not currently hold BitLicenses but they are in the process of obtaining it; therefore we do not currently offer cryptocurrency-related products to our New York customers but we expect to do so in the future.
Other states may adopt similar statutes and regulations which will require us or our partners to obtain a license to conduct digital asset activities. Effective August 1, 2020, Louisiana adopted the Virtual Currency Business Act, which requires an operator of a virtual currency business to obtain a virtual currency license to conduct business in Louisiana, and the Louisiana Office of Financial Institutions issued related guidance in December 2021. Other states, such as Texas, have published guidance on how their existing regulatory regimes governing money transmitters apply to virtual currencies. Some states, such as Alabama, North Carolina and Washington, have amended their state’s statutes to include virtual currencies in existing licensing regimes, while others have interpreted their existing statutes as requiring a money transmitter license to conduct certain virtual currency business activities. The Zero Hash entities are money transmitters or the equivalent in a majority of states and the District of Columbia.
It is likely that, as blockchain technologies and the use of virtual currencies continues to grow, additional states will take steps to monitor the developing industry and may require us or our regulated partners to obtain additional licenses in connection with our virtual currency activity.
If loans made by our lending subsidiaries are found to violate applicable state interest rate limits or other provisions of applicable state lending and other laws, it could adversely affect our business, financial condition, results of operations financial condition and future prospects.cash flows.
We have 37 subsidiaries through which we conduct our consumer lending business. These entities originate loans pursuant to state licenses or applicable exemptions under state law. The loans we originate are subject to state licensing or exemption requirements and interest rate restrictions, as well as numerous state requirements regarding consumer protection, interest rate, disclosure, prohibitions on certain activities and loan term lengths. If the loans we originate were deemed subject to and in violation of certain state consumer finance or other laws, we could be subject to fines, damages, injunctive relief (including required modification or discontinuation of our business in certain areas) and other penalties or consequences, and the loans could be rendered void or unenforceable in whole or in part, any of which could have an adverse effect on our business, results of operations, financial condition and future prospects.
If we operate without having obtained necessary state or local licenses, it could adversely affect our business, results of operations, financial condition and future prospects.
Certain states and localities have adopted laws regulating and requiring licensing, registration, notice filing or other approval by parties that engage in certain activity regarding consumer finance transactions, including facilitating and assisting such transactions in certain circumstances. Furthermore, certain states and localities have also adopted laws requiring licensing, registration, notice filing or other approval for consumerlending (including debt collection or servicing and/or purchasing or selling consumer loans.loans), life insurance and mortgage transactions, as well as brokering, facilitating and assisting such transactions in certain circumstances, and we currently hold certain state or local licenses. We have also received inquiries from state regulatory agencies regarding requirements to obtain licenses from or register with those states, including in states where we have determined that we are not required to obtain such a license or be registered with the state, and we expect to continue to receive such inquiries. The application of some consumer financialfinance licensing laws to our platform and the related activities it performs is unclear. In addition, state licensing requirements may evolve over time, including, in particular, recent trends towardas the regulatory landscape regarding earned wage access products develops, as well as increased licensing requirements and regulation of parties engaged in loan solicitation activities. If we were found to be in violation of applicable state licensing requirements by a court or a state, federal or local enforcement agency, or agree to resolve such concerns by voluntary agreement, we could be subject to or agree to pay fines, damages, injunctive relief (including required modification or discontinuation of our business in certain areas), criminal penalties and other penalties or consequences,consequences. In addition, certain products and theoffers we offer, including loans facilitated through our platform, could be rendered void or unenforceable in whole or in part, which could adversely affect our business, financial condition, results of operations and cash flows.
We may not be able to maintain all currently required licenses and permits. If we change or expand our business activities, we may be required to obtain additional licenses before we can engage in those activities. If we apply for a new license, a regulator may determine that we were required to do so at an earlier point in time, and as a result, may impose penalties or refuse to issue the license, which could require us to modify or limit our activities in the relevant state. In addition, the states that currently do not provide extensive regulation of our business may later choose to do so, and if such states so act, we may not be able to obtain or maintain all requisite licenses and permits, which could require us to modify or limit our activities in the relevant state or states. The failure to satisfy those and other regulatory requirements could materially and adversely impact our business.
If loans made by our lending subsidiaries in our Consumer business are found to violate applicable federal or state interest rate limits or other provisions of applicable consumer lending, consumer protection or other laws, it could adversely affect our business, financial condition, results of operations and cash flows.
In our Consumer business, we have 37 subsidiaries through which we conduct our consumer lending business. These entities originate loans pursuant to state licenses or applicable exemptions under state law. The loans we originate are subject to state licensing or exemption requirements and federal and state interest rate restrictions, as well as numerous federal and state requirements regarding consumer protection, interest rate, disclosure, prohibitions on certain activities and loan term lengths. If the loans we originate were deemed subject to and in violation of certain federal or state consumer finance or other laws, including the Military Lending Act, we could be subject to fines, damages, injunctive relief (including required modification or discontinuation of our business in certain areas) and other penalties or consequences, and the loans could be rendered void or unenforceable in whole or in part, any of which could have an adverse effect on the enforceability or collectability of the loans facilitated through our platform.
The highly regulated environment in which our third-party financial institution partners operate may subject us to regulation and could have an adverse effect on our business, financial condition, results of operations financial condition and future prospects.
Our third-party partners are subject to federal and state supervision and regulation. Federal regulationcash flows. For a discussion of the banking and investment industries, along with tax and accounting laws, regulations, rules and standards, may limit their operations significantly and controlongoing civil action initiated by the methods by which they conduct business. In addition, compliance with laws and regulations can be difficult and costly, and changes to laws and regulations can impose additional compliance requirements. Regulatory requirements affect our third-party partners’ banking, investment and virtual currency practices, among other aspectsCFPB alleging certain violations of their business, and restrict transactions between us and our third-party partners. These requirements may constrain the operations of our third-party partners,Military Lending Act and the adoption of new laws and changes to, or repeal of, existing laws may have a further impact on our business and the businesses of our third-party partners.Consumer Financial Protection Act, see Part I, Item 3 “Legal Proceedings.”
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In choosing whether and how to conduct business with us, current and prospective third-party partners can be expected to take into account the legal, regulatory and supervisory regime that applies to them, including potential changes in the application or interpretation of regulatory standards, licensing requirements or supervisory expectations. Regulators may elect to alter standards or the interpretation of the standards used to measure regulatory compliance or to determine the adequacy of liquidity, certain risk management or other operational practices for financial services companies in a manner that impacts our current and prospective third-party partners.
Furthermore, the regulatory agencies have extremely broad discretion in their interpretation of the regulations and laws and their interpretation of the quality of our third-party partners’ assets. If any regulatory agency’s assessment of the quality of our third-party partners’ assets, operations, lending practices, investment practices or other aspects of their business changes, it may reduce our third-party partners’ earnings, capital ratios and share price in such a way that affects our business.
Bank holding companies and financial institutions are extensively regulated and currently face an uncertain regulatory environment. Applicable state and federal laws, regulations and interpretations, including enforcement policies and accounting principles, have been subject to significant changes in recent years, and may be subject to significant future changes. We cannot predict with any degree of certainty the substance or effect of pending or future legislation or regulation or the application of laws and regulations to our current and prospective third-party partners. Future changes may have an adverse effect on our current and prospective third-party partners and, therefore, on us.
Risks Relating to Cybersecurity
TheOur collection, processing, use, storage, sharing and transmission of PII and other sensitive data areis subject to stringent and changing state federal and internationalfederal laws, regulations, and standards and policies and could give rise to liabilities as a result of our failure or perceived failure to protect such data, comply with privacy and data protection laws and regulations or adhere to the privacy and data protection practices that we articulate to our customers.
In the course of our operations and the processing of transactions, we collect, process, use, store, disclose, use, share and/or transmit a large volume of PII and other sensitive data from current, past and prospective customers, as well as our employees, in and across multiple jurisdictions. The regulatory framework for privacy issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. ThereWe are subject to federal state and foreignstate laws and regulations regarding privacy, data security and the collection, processing, use, storage, protection, sharing and/or transmission of PII and sensitive data. For example, the GLBA (along with its implementing regulations) restricts certain collection, processing, storage, use and disclosure of personal information, requires notice to individuals of privacy practices and provides individuals with certain rights to prevent the use and disclosure of certain nonpublic or otherwise legally protected information.
Additionally, many states continue to enact legislation on matters of privacy, information security, cybersecurity, data breach and data breach notification requirements. For example,Because the Company is subject to the GLBA, we are currently granted an entity-level exception from compliance with the vast majority of comprehensive state privacy laws. However, certain states, such as ofCalifornia and Oregon, grant this exception at the data-level only, meaning that our business must comply with these laws with respect to all PII that does not strictly qualify as GLBA-covered consumer financial information. In California, the CCPA, which went into effect on January 1, 2020, the CCPA grants additional consumer rights with respect to data privacy in California. The CCPA, among other things, entitles California residents to know how their PII is being collected and shared, to access or request the deletion of their PII and to opt out of certain sharingsales of their PII. The CCPA is subject to further amendments pending certain proposed regulations that are being reviewed and revised by the California Attorney General.PII, among other things. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of PII. This private right of action may increase the likelihood of, and risks associated with, data breach litigation. We cannot predict the impact of the CCPA on our business, operations or financial condition, but it could result in liabilities and/or require us to modify certain processes or procedures, which could result in additional costs.
Additionally, the California CPRA, was passed in November 2020. Effective in most material respects startingwhich became fully operative on January 1, 2023, the CPRA imposes additional obligations on companies covered by the legislation and will significantly modifymodified the CCPA including by expanding customers’consumers’ rights with respect to certain sensitive PII. The CPRA also createsPII, adding a consumer right to opt-out of certain sharing of their PII in addition to sales of their PII, and created a new state agency thatto enforce civil and administrative obligations added by the CPRA. The Oregon Consumer Privacy Act (“OCPA”), which will be vested with authoritygo into effect on July 1, 2024, grants Oregon residents data access and control rights similar in substance to implement and enforcethose afforded to California residents under the CCPA and CPRA. Unlike the CPRA. The effectsCCPA/CPRA, the OCPA does not provide for a private right of action; the Oregon Office of the CCPAAttorney General has exclusive authority to enforce and the CPRA are potentially significant andseek civil penalties for violations. Other states may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and/or litigation.
We expect more statescontinue to enact legislationcomprehensive privacy and data security laws similar to the CCPA, CPRA and the CPRA,OCPA, with which our business must comply, and which provide customersconsumers with new privacy rights and increase theour privacy and security obligations of entities handling certain PII of such customers. The CCPA has prompted a number of proposals for new federal and state-levelobligations. Such consumer privacy legislation such as in Virginia, which signed such legislation, the Virginia Consumer Data Protection Act (“VCDPA”), into law on March 2, 2021 with an effective date of January 1, 2023. In addition, on July 7, 2021, Colorado enacted the Colorado Privacy Act (the “CoPA”), becoming the third comprehensive consumer privacy law to be passed in the United States (after the CCPA and VCDPA). The CoPA is set to take effect on July 1, 2023. The VCDPA, CoPA and such other proposed legislation, if enacted, may addadds additional complexity variation in requirements,and restrictions and potential legal risk, require additional investment of resources in compliance programs,to our operations, which may impact business strategies and the availability of previously useful datadata. Compliance with these laws requires additional investment of resources into compliance programs and could result in increased compliance costs and/or changes in business practices and policies.
Additionally, our investment adviser, ML Wealth, and broker-dealer, MoneyLion Securities LLC, are subject to SEC Regulation S-P, which requires that businesses maintain policies and procedures addressing the protection of customerconsumer information and records. This includes protecting against any anticipated threats or hazards to the security or integrity of customerconsumer records and information and against unauthorized access to or use of customerconsumer records or information. Regulation S-P also requires businesses to provide initial and annual privacy notices to customersconsumers describing information sharing policies and informing customersconsumers of their rights.
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Because the interpretation and application of many privacy and data protection laws areis uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our products and services and platform capabilities. If so, in addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change our business activities and practices or modify our platform, which could have an adverse effect on our business. Any violations or perceived violations of these laws, rules and regulations by us, or any third parties with which we do business, may require us to change our business practices or operational structure, including limiting our activities in certain states and/or jurisdictions, addressing legal claims by governmental entities or private actors, sustaining monetary penalties, sustaining reputational damage, expending substantial costs, time and other resources and/or sustaining other harms to our business. Furthermore, our online, external-facing privacy policy and website make certain statements regarding our privacy, information security and data security practices with regard to information collected from our customersconsumers or visitors to our website. Failure or perceived failure to adhere to such practices may result in regulatory scrutiny and investigation, complaints by affected customersconsumers or visitors to our website, reputational damage and/or other harm to our business. If either we, or the third-party partners, service providers or vendors with which we share customerconsumer data, are unable to address privacy concerns, even if unfounded, or to comply with applicable privacy or data protection laws, regulations and policies, it could result in additional costs and liability to us, damage our reputation, inhibit sales and harm our business, financial condition, and results of operations.
Cyberattacks and other security breaches or disruptions suffered by us or third parties upon which we rely could have a materially adverse effect on our business, harm our reputation and expose us to public scrutiny or liability.
In the normal course of business, we collect, process, use and retain sensitive and confidential information regarding our customers and prospective customers, including data provided by and related to customers and their transactions, as well as other data of the counterparties to their payments. We also have arrangements in place with certain third-party service providers that require us to share consumer information. Although we devote resources and management focus to ensuring the integrity of our systems through information security and business continuity programs, our facilities and systems, and those of third-party service providers, are vulnerable to actual or threatened external or internal security breaches, acts of vandalism, theft, fraud or misconduct on the part of employees, other internal sources or third parties, computer viruses, phishing attacks, internet interruptions, disruptions or losses, misplaced or lost data, ransomware, unauthorized encryption, denial-of-service attacks, social engineering, unauthorized access, spam or other attacks, natural disasters, fires, terrorism, war, telecommunications or electrical interruptions or failures, programming or human errors or malfeasance and other similar malicious or inadvertent disruptions or events. We and our third-party service providers from time to time have experienced and may in the future continue to experience such instances. For example, during the third quarter of 2021, we experienced a customer account takeover incident where an unknown third party(ies) utilized password and other customer credentials found outside of MoneyLion to successfully gain access to MoneyLion customer accounts. In some cases, the bad actors facilitated unauthorized financial transactions. Our investigation to date shows no signs that our systems were actually breached by the bad actors, and we have compensated and made whole the customers whose accounts were accessed and financially impacted. We also worked with our banking partners and advisors to provide notices to affected customers and relevant regulators, and expect to incur total costs and expenses associated with the incident that are immaterial to our financial statements and operations. We also face security threats from malicious third parties that could obtain unauthorized access to our systems and networks, which threats we anticipate will continue to grow in scope and complexity over time. These events could interrupt our business or operations, result in legal claims or proceedings, result in significant legal and financial exposure, supervisory liability under U.S. federal or state, or non-U.S. laws regarding the privacy and protection of information, including PII, damage to our reputation and a loss of confidence in the security of our systems, products and services. Although the impact to date from these events has not had a material adverse effect on us, no assurance is given that this will be the case in the future.
Information security risks in the financial services industry have increased recently, in part because of new technologies, the use of the internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and the increased sophistication and activities of organized criminals, perpetrators of fraud, hackers, terrorists and other malicious third parties. In addition to cyberattacks and other security breaches involving the theft of sensitive and confidential information, hackers, terrorists, sophisticated nation-state and nation-state supported actors and other malicious third parties recently have engaged in attacks that are designed to disrupt key business services, such as consumer-facing websites. We and our third-party service providers may not be able to anticipate or implement effective preventive measures against all security breaches of these types, especially because the techniques used to sabotage or to obtain unauthorized access to our or our third-party service providers’ technology, systems, networks and/or physical facilities in which data is stored or through which data is transmitted change frequently and because attacks can originate from a wide variety of sources. We employ detection and response mechanisms designed to contain and mitigate security incidents. Nonetheless, early detection efforts may be thwarted by sophisticated attacks and malware designed to avoid detection. We also may fail to detect the existence of a security breach related to the information of our customers and to prevent or detect service interruption, system failure or data loss. Further, as the current COVID-19 pandemic continues to result in a significant number of people working from home, these cybersecurity risks may be heightened by an increased attack surface across our business and those of our customers and third-party service providers. We cannot guarantee that our efforts, or the efforts of those upon whom we rely and partner with, will be successful in preventing any such information security incidents.
The access by unauthorized persons to, or the improper disclosure by us of, confidential information regarding our customers or our proprietary information, software, methodologies and business secrets could interrupt our business or operations, result in significant legal and financial exposure, supervisory liability, damage to our reputation or a loss of confidence in the security of our systems, products and services, all of which could have a material adverse impact on our business. In addition, there recently have been a number of well-publicized attacks or breaches affecting companies in the financial services industry that have heightened concern by customers, which could also intensify regulatory focus, cause customers to lose trust in the security of the industry in general and result in reduced use of our services and increased costs, all of which could also have a material adverse effect on our business.
Most jurisdictions (including all 50 states) have enacted laws requiring companies to notify individuals, regulatory authorities and/or others of security breaches involving certain types of data. In addition, our agreements with certain partners and service providers may require us to notify them in the event of a security breach. Such mandatory disclosures are costly, could lead to negative publicity, may cause our customers, partners and service providers to lose confidence in the effectiveness of our security measures and require us to expend significant capital and other resources to respond to and/or alleviate problems caused by the actual or perceived security breach. A security breach of any of our vendors that processes PII of our customers may pose similar risks.
A security breach may also cause us to breach customer contracts. Our agreements with certain partners and service providers may require us to use industry-standard or reasonable measures to safeguard PII. We also may be subject to laws that require us to use industry-standard or reasonable security measures to safeguard PII. A security breach could lead to claims by our customers or other relevant stakeholders that we have failed to comply with such legal or contractual obligations. As a result, we could be subject to legal action or our customers could end their relationships with us. There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages, and in some cases our customer agreements may not limit our remediation costs or liability with respect to data breaches.
Litigation resulting from security breaches may adversely affect our business. Unauthorized access to our technology, systems, networks or physical facilities, or those of our third-party service providers, could result in litigation with our customers or other relevant stakeholders. These proceedings could force us to spend money in defense or settlement, divert management’s time and attention, increase our costs of doing business or adversely affect our reputation. We could be required to fundamentally change our business activities and practices or modify our products and/or technology capabilities in response to such litigation, which could have an adverse effect on our business. If a security breach were to occur, and the confidentiality, integrity or availability of PII was disrupted, we could incur significant liability, or our technology, systems or networks may be perceived as less desirable, which could negatively affect our business and damage our reputation.
While we maintain cybersecurity insurance, we may not have adequate insurance coverage with respect to liabilities that result from any cyberattacks or other security breaches or disruptions suffered by us or third parties upon which we rely. The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), could have an adverse effect on our business. In addition, we cannot be sure that our existing insurance coverage and coverage for errors and omissions will continue to be available on acceptable terms or that our insurers will not deny coverage as to any future claim.
While we take precautions to prevent consumer identity fraud, it is possible that identity fraud may still occur or has occurred, which may adversely affect the performance of our products and services or subject us to scrutiny or penalties.
There is risk of fraudulent activity associated with our platform, customers, service providers and third parties handling consumer information. Our resources, technologies and fraud prevention tools may be insufficient to accurately detect and prevent fraud. The level of fraud-related charge-offs on the loans and other products and services facilitated through our platform could be adversely affected if fraudulent activity were to significantly increase. Significant amounts of fraudulent cancellations or chargebacks could adversely affect our business or financial condition. High profile fraudulent activity or significant increases in fraudulent activity could also lead to regulatory intervention, negative publicity and the erosion of trust from our customers, and could materially and adversely affect our business, results of operations financial condition, future prospects and cash flows.
Risks Relating to Intellectual Property
We may be unable to sufficiently obtain, maintain, protect or enforceThe highly regulated environment in which our intellectual property and other proprietary rights, which could reduce the value of our platform, products, services and brand, impair our competitive position and cause reputational harm.
Intellectual property and other proprietary rights are important to the success of our business. Our ability to compete effectively is dependent in part upon our ability to obtain, maintain, protect and enforce our intellectual property and other proprietary rights, including with respect to our proprietary technology, and to obtain licenses to use the intellectual property and proprietary rights of others. We rely on a combination of trademarks, service marks, copyrights, trade secrets, domain names and contractual rights to protect our intellectual property and other proprietary rights. We own the domain name rights for moneylion.com, and, as of December 31, 2021, we owned 22 registered trademarks and four trademark applications in the United States. Nonetheless, the steps we take to obtain, maintain, protect and enforce our intellectual property and other proprietary rights may be inadequate and, despite our efforts to protect these rights, unauthorized third parties, including our competitors, may duplicate, mimic, reverse engineer, access, obtain, or use the proprietary aspects of our technology, processes, products, or services without our permission, thereby impeding our ability to promote our platform and possibly leading to customer confusion. Our competitors and other third parties may also design around or independently develop similar technology or otherwise duplicate or mimic our services or products such that we would not be able to successfully assert our intellectual property or other proprietary rights against them. We have filed, and may continue in the future to file, applications to protect certain of our innovations and intellectual property. We cannot assure that any future patent, trademark, or service mark registrations will be issued for our pending or future applications or that any of our current or future patents, copyrights, trademarks, or service marks (whether registered or unregistered) will be valid, enforceable, sufficiently broad in scope, provide adequate protection of our intellectual property or other proprietary rights, or provide us with any competitive advantage.
Our trademarks, trade names and service marks have significant value, and our brand is an important factor in the marketing of our services. We rely on, and intend to rely on, both registrations and common law protections for our trademarks. However, we may be unable to prevent competitors or other third parties from acquiring or using trademarks, service marks, or other intellectual property or other proprietary rights that are similar to, infringe upon, misappropriate, dilute, or otherwise violate or diminish the value of our trademarks and service marks and our other intellectual property and proprietary rights. The value of our intellectual property and other proprietary rights could diminish if others assert rights in or ownership of our intellectual property or other proprietary rights, or in trademarks or service marks that are similar to our trademarks or service marks. Additionally, if third parties succeed in registering or developing common law rights in such trademarks or similar trademarks, and if we are not successful in challenging such third-party rights, we may not be able to use these trademarks to develop brand recognition of our platform, products or services. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively, which could adversely impact our business, financial condition and results of operations.
In addition to registered intellectual property rights such as trademark registrations, we rely on non-registered proprietary information and technology, such as trade secrets, confidential information, know-how and technical information. In order to protect our proprietary information and technology, we rely in part on confidentiality and intellectual property assignment agreements with our employees and contractors involved in the development of material intellectual property for us, which require such individuals to assign such intellectual property to us and place restrictions on the employees’ and contractors’ use and disclosure of our confidential information. However, these agreements may not be self-executing, and we cannot guarantee that we have entered into such agreements containing obligations of confidentiality with each party that has or may have had access to proprietary information, know-how, or trade secrets owned or held by us. Individuals that were involved in the development of intellectual property for us or who had access to our intellectual property may make adverse ownership claims to our current and future intellectual property. Likewise, to the extent that our employees, independent contractors or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting works of authorship, know-how and inventions. Moreover, our contractual arrangements may be insufficient, breached or may otherwise not effectively prevent disclosure of, or control access to, our confidential or otherwise proprietary information or provide an adequate remedy in the event of an unauthorized disclosure, which could cause us to lose any competitive advantage resulting from this intellectual property. The measures we have put in place may not prevent misappropriation, infringement, or other violation of our intellectual property, proprietary rights or information and any resulting loss of competitive advantage, and we may be required to litigate to protect our intellectual property or other proprietary rights or information from misappropriation, infringement or other violation by others, which is time-consuming and expensive, could cause a diversion of resources and may not be successful, even when our rights have been infringed, misappropriated or otherwise violated. Our efforts to enforce our intellectual property and other proprietary rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property and other proprietary rights, and if such defenses, counterclaims or countersuits are successful, it could diminish or we could otherwise lose valuable intellectual property and other proprietary rights. Furthermore, changes to U.S. or foreign intellectual property laws and regulations may jeopardize the enforceability and validity of our intellectual property portfolio and harm our ability to obtain patent protection, including for some of our unique business methods. Additionally, the laws of some foreign countries may not be as protective of intellectual property and other proprietary rights as those in the U.S., and the mechanisms for enforcement of intellectual property and other proprietary rights may be inadequate.
Furthermore, third parties may challenge, invalidate, or circumvent our intellectual property and proprietary rights, including through administrative processes or litigation. The legal standards relating to the validity, enforceability and scope of protection of intellectual property and other proprietary rights are uncertain and still evolving. Our intellectual property and other proprietary rights may not be sufficient to provide us with a competitive advantage and the value of our intellectual property and other proprietary rights could also diminish if others assert rights therein or ownership thereof, and we may be unable to successfully resolve any such conflicts in our favor or to our satisfaction.
We may be sued by third parties for alleged infringement, misappropriation or other violation of their intellectual property or other proprietary rights which may be costly andinstitution partners operate may subject us to significant liabilityregulation and increased costs of doing business.
Our success depends, in part, on our ability to develop and commercialize our products and services without infringing, misappropriating or otherwise violating the intellectual property or other proprietary rights of third parties.
We may become involved in disputes from time to time concerning intellectual property or other proprietary rights of third parties, which may relate to our own proprietary technology, or to technology that we acquire or license from third parties, and we may not prevail in these disputes. Relatedly, competitors or other third parties may raise claims alleging that we, service providers or other third parties retained or indemnified by us, infringe on, misappropriate or otherwise violate such competitors’ or other third parties’ intellectual property or other proprietary rights. These claims of infringement, misappropriation or other violation may be extremely broad, and it may not be possible for us to conduct our operations in such a way as to avoid all such alleged violations of such intellectual property or other proprietary rights. We also may be unaware of third-party intellectual property or other proprietary rights that cover or otherwise relate to some or all of our products and services. For example, there may be issued patents of which we are not aware, held by third parties that, if found to be valid and enforceable, could be alleged to be infringed by our current or future technologies or products. There also may be pending patent applications of which we are not aware that may result in issued patents, which could be alleged to be infringed by our current or future technologies or products. Because patent applications can take years to issue and are often afforded confidentiality for some period of time, there may currently be pending applications, unknown to us, that later result in issued patents that could cover our current or future technologies or products.
Given the complex, rapidly changing and competitive technological and business environment in which we operate, and the potential risks and uncertainties of intellectual property-related litigation, a claim of infringement, misappropriation or other violation against us may require us to spend significant amounts of time and other resources to defend against the claim (even if we ultimately prevail), pay significant money damages, make significant payments for legal fees, settlement payments or other costs, lose significant revenues, be prohibited from using the relevant systems, processes, technologies or other intellectual property (temporarily or permanently), cease offering certain products or services, obtain a license, which may not be available on commercially reasonable terms or at all, to sell or use the relevant technology or redesign our allegedly infringing products or services, or functionality therein, to avoid infringement, misappropriation or other violations, which could be costly, time-consuming or impossible, rebrand our products and services and/or be prevented from selling some of our products or services if third parties successfully oppose or challenge our trademarks or successfully claim that we infringe, misappropriate or otherwise violate their trademarks or other intellectual property rights and/or limit the manner in which we use our brands. In addition, if a third party is able to obtain an injunction preventing us from accessing such third-party intellectual property rights, or if we cannot license or develop alternative technology for any infringing aspect of our business, we may be forced to limit or stop sales of our relevant products and technology capabilities or cease business activities related to such intellectual property. We cannot predict the outcome of lawsuits and cannot ensure that the results of any such actions will not have an adverse effect on our business, financial condition, or results of operations.
Some of the aforementioned risks of infringement, misappropriation or other violation, in particular with respect to patents, are potentially increased due to the nature of our business, industry and intellectual property portfolio. For instance, it has become common in recent years for certain third parties to purchase patents or other intellectual property assets for the sole purpose of making claims of infringement, misappropriation or other violation in an attempt to extract settlements from companies such as ours. In addition, many companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them than we can. In a patent infringement claim against us, we may assert, as a defense, that we do not infringe the relevant patent claims, that the patent is invalid or both. The strength of our defenses may depend on the patents asserted, the interpretation of these patents or our ability to invalidate the asserted patents. However, we could be unsuccessful in advancing non-infringement and/or invalidity arguments in our defense. In the U.S., issued patents enjoy a presumption of validity, and the party challenging the validity of a patent claim must present clear and convincing evidence of invalidity, which is a high burden of proof. Conversely, the patent owner need only prove infringement by a preponderance of the evidence, which is a lower burden of proof. We do not currently have a patent portfolio, which could prevent us from deterring patent infringement claims from competitors or other third parties and our competitors and others may now and in the future have significantly larger and more mature patent portfolios than we may have. Any litigation may also involve patent holding companies or other adverse patent owners that have no relevant product revenue, and therefore, any future patents we may have may provide little or no deterrence as we would not be able to assert them against such entities or individuals.
In addition to the previously mentioned impacts of intellectual property-related litigation, while in some cases a third party may have agreed to indemnify us for costs associated with intellectual property-related litigation, such indemnifying third party may refuse or be unable to uphold its contractual obligations. In other cases, our insurance may not cover potential claims of this type adequately or at all, and we may be required to pay monetary damages, which may be significant.
Even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business and operating results. Moreover, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of the MoneyLion Class A Common Stock. The occurrence of infringement and misappropriation claims may grow as the market for our platform and products grows. Accordingly, our exposure to damages resulting from infringement claims could increase and this could further exhaust our financial and management resources. Any of the foregoing could adversely impact our business, financial condition and results of operations.
Our business and platform depend in part on intellectual property and proprietary rights and technology licensed from or otherwise made available to us by third parties. If we fail to comply with our obligations under license or technology agreements with third parties, we may be required to pay damages and we could lose license rights that are critical to our business.
Our business and our platform rely on technologies developed or licensed by third parties. These third-party software components may become obsolete, defective or incompatible with future versions of our services, relationships with the third-party licensors or technology providers may deteriorate or our agreements with the third-party licensors or technology providers may expire or be terminated. Additionally, some of these licenses or other grants of rights may not be available to us in the future on terms that are acceptable, or at all, or that allow our platform, products and services to remain competitive. Our inability to obtain licenses or rights on favorable terms could have a material and adverse effect on our business and results of operations. Furthermore, incorporating intellectual property or proprietary rights licensed from or otherwise made available to us by third parties on a non-exclusive basis in our products or services could limit our ability to protect the intellectual property and proprietary rights in our services and our ability to restrict third parties from developing, selling or otherwise providing similar or competitive technology using the same third-party intellectual property or proprietary rights.
We believe we have all the necessary licenses and other grants of rights from third parties to use technology and software that we do not own. A third party could, however, allege that we are infringing its rights, which may deter our ability to obtain licenses or other grants of rights on commercially reasonable terms from the third party, if at all, or cause the third party to commence litigation against us. Our failure to obtain necessary licenses or other rights, or litigation or claims arising out of intellectual property matters, may harm or restrict our business. In addition, we could be found liable for significant monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. Any such litigation or the failure to obtain any necessary licenses or other rights could adversely impact our business, financial position and results of operations.
Risks Relating to Legal and Regulatory Matters
Failure to comply with anti-money laundering, economic and trade sanctions regulations and similar laws could subject us to penalties and other adverse consequences.
We maintain an enterprise-wide program designed to enable us to comply with all applicable anti-money laundering and anti-terrorism financing laws and regulations, including the BSA and the USA PATRIOT Act of 2001. This program includes policies, procedures, processes and other internal controls designed to identify, monitor, manage and mitigate the risk of money laundering and terrorist financing. These controls include procedures and processes to detect and report potentially suspicious transactions, perform consumer due diligence, respond to requests from law enforcement and meet all recordkeeping and reporting requirements related to particular transactions involving currency or monetary instruments. We are required to maintain this program under our agreements with our third-party partners, and certain state regulatory agencies have intimated they expect the program to be in place and followed. We cannot provide any assurance that our programs and controls will be effective to ensure compliance with all applicable anti-money laundering and anti-terrorism financing laws and regulations we are required to comply with, and our failure to comply with these laws and regulations could result in a breach and termination of our agreements with our third-party partners or criticism by state governmental agencies, which would have a material adverse effect on our business, results of operations, financial condition and future prospects.
We have in the past, and continue to be, subject to inquiries, subpoenas, exams, pending investigations and enforcement matters by state and federal regulators, the outcomes of which are uncertain and could cause reputational and financial harm to our business and results of operations.
The financial services industry is subject to extensive regulation under federal, state and applicable international laws. From time to time, we have been, and continue to be, subject to inquiries, subpoenas, pending investigations and enforcement matters by state and federal regulators and have been threatened with or named as a defendant in lawsuits, arbitrations and administrative claims involving securities, consumer financial services and other matters. We are also subject to periodic regulatory examinations and inspections. Compliance and trading problems that are reported to regulators, such as the SEC, FINRA, the CFPB or state regulators, by dissatisfied customers or others are investigated by such regulators, and may, if pursued, result in formal claims being filed against us by customers or disciplinary action being taken against us or our employees by regulators or enforcement agencies. To resolve issues raised in examinations or other governmental actions, we may be required to take various corrective actions, including changing certain business practices, making refunds or taking other actions that could be financially or competitively detrimental to us. We expect to continue to incur costs to comply with governmental regulations. Any such claims or disciplinary actions that are decided against us could have a material impact on our financial results. For a discussion of specific legal and regulatory proceedings, inquiries and investigations, to which we are currently subject, please refer to Part I, Item 3 “Legal Proceedings.”
Unfavorable outcomes in legal proceedings may harm our business and results of operations.
We are, and may in the future become, subject to litigation, claims, examinations, investigations, legal and administrative cases and proceedings, whether civil or criminal, or lawsuits by governmental agencies or private parties, which may affect our results of operations. These claims, lawsuits and proceedings could involve labor and employment, discrimination and harassment, commercial disputes, intellectual property rights (including patent, trademark, copyright, trade secret and other proprietary rights), class actions, general contract, tort, defamation, data privacy rights, antitrust, common law fraud, government regulation, compliance, alleged federal and state securities and “blue sky” law violations or other investor claims and other matters. Due to the consumer-oriented nature of our business and the application of certain laws and regulations, participants in our industry are regularly named as defendants in litigation alleging violations of federal and state laws and regulations and consumer law torts, including fraud. Many of these legal proceedings involve alleged violations of consumer protection laws. In addition, we have in the past and may in the future be subject to litigation, claims, examinations, investigations, legal and administrative cases and proceedings related to our loan products and other financial services we provide. For instance, our membership model and some of the products and services we offer are relatively novel and have been subject to limited regulatory scrutiny, but there has been, and may continue to be, increasing regulatory interest in and/or litigation challenging our membership model, our products or our services.
Any unfavorable results of pending or future legal proceedings may result in contractual damages, usury-related claims, fines, penalties, injunctions, the unenforceability, rescission or other impairment of loans originated on our platform or other censure that could have a material adverse effect on our business, results of operations and financial condition. Even if we adequately address the issues raised by an investigation or proceeding or successfully defend a third-party lawsuit or counterclaim, we may have to devote significant financial and management resources to address these issues, which could harm our business, financial condition and results of operations.
Although we currently maintain insurance, there can be no assurance that we will be able to maintain such insurance on acceptable terms in the future, if at all, or that any such insurance will provide adequate protection against potential liabilities. Additionally, we do not carry insurance for all categories of risk that our business may encounter. Any significant liability that is uninsured or not fully insured may require us to pay substantial amounts. There can be no assurance that any current or future claims will not materially and adversely affect our business, financial position, results of operations and cash flows.
Certain of our third-party partners are subject to federal and state supervision and regulation, which may limit their operations significantly and impact the methods by which they conduct business. In particular, bank holding companies and financial institutions are extensively regulated and currently face an uncertain regulatory environment. Compliance with laws and regulations can be difficult and costly, and the adoption of new laws and changes to, or repeal of, existing laws can impose additional compliance requirements. Regulatory requirements affect our third-party partners’ banking, investment and virtual currency practices, among other aspects of their business, and restrict transactions between us and our third-party partners. Regulatory agencies have extremely broad discretion in their interpretation of the regulations and laws and may elect to alter standards or the interpretation of the standards used to measure regulatory compliance or to determine the adequacy of liquidity, certain risk management or other operational practices for financial services companies in a manner that impacts our current and prospective third-party partners.
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In choosing whether and how to conduct business with us, current and prospective third-party partners can be expected to take into account the legal, regulatory and supervisory regime that applies to them and to us, including potential changes in the application or interpretation of regulatory standards, licensing requirements or supervisory expectations. Applicable state and federal laws, regulations and interpretations, including enforcement policies and accounting principles, have been subject to significant changes in recent years and may be subject to significant future changes. We cannot predict with any degree of certainty the substance or effect of pending or future legislation or regulation or the application of laws and regulations to our current and prospective third-party partners. Future changes may have an adverse effect on our current and prospective third-party partners and, therefore, on us.
The regulatory regime governing blockchain technologies and digital assets is uncertain, and new laws, regulations or policies may alter our business practices with respect to digital assets.
We currently offer certain cryptocurrency-related products and services available to our customers through Zero Hash. The Zero Hash entities are registered as money services businesses and have the necessary state-level licenses for engaging in digital assets activities where the Zero Hash services are offered. Although many regulators have provided some guidance, regulation of digital assets based on or incorporating blockchain, such as digital assets and digital asset exchanges, remains uncertain and will continue to evolve. Further, regulation varies significantly among international, federal, state and local jurisdictions. As blockchain networks and blockchain assets have grown in popularity and in market size, federal and state agencies are increasingly taking interest in, and in certain cases regulating, their use and operation. Treatment of virtual currencies continues to evolve under federal and state law. Many U.S. regulators, including the SEC, the FinCEN, the Commodity Futures Trading Commission (the “CFTC”), the Internal Revenue Service (the “IRS”) and state regulators including the New York State Department of Financial Services (the “NYSDFS”), have made official pronouncements, pursued cases against businesses in the digital assets space or issued guidance or rules regarding the treatment of Bitcoin and other digital currencies. The IRS released guidance treating virtual currency as property that is not currency for U.S. federal income tax purposes, although there is no indication yet whether other courts or federal or state regulators will follow this classification. Both federal and state agencies have instituted enforcement actions against those violating their interpretation of existing laws. Other U.S. and many state agencies have offered little official guidance and issued no definitive rules regarding the treatment of digital assets. The CFTC has publicly taken the position that certain virtual currencies, which term includes digital assets, are commodities. To the extent that certain virtual currencies are deemed to fall within the definition of a “commodity interest” under the Commodity Exchange Act (the “CEA”), or if proposed legislation passes which grants the CFC jurisdiction over spot virtual currency trading beyond its current limited power to bring actions for fraud and manipulation, we may be subject to additional regulation under the CEA and CFTC regulations.
Foreign, federal, state and local regulators revisit and update their laws and policies on blockchain technologies and digital assets and can be expected to continue to do so in the future. Changes in this regulatory environment, including changing interpretations and the implementation of new or varying regulatory requirements by federal or state government agencies, or any new legislation, may impose significant costs or restrictions on our ability to conduct business, significantly affect or change the manner in which we currently conduct some aspects of our business or impact our business in unforeseeable ways. Regulatory guidance and judicial precedent around issues like whether a digital asset may be considered a “security” under the federal securities laws has been unclear, and regulatory or enforcement action in this area have been common, but may not resolve these ambiguities. The test for determining whether a particular digital asset is a “security” is complex and difficult to apply, and the outcome is difficult to predict. Public, though non-binding, statements by senior officials at the SEC have indicated that the SEC did not consider Bitcoin or Ethereum to be securities in 2018, and does not currently consider Bitcoin to be a security. The SEC staff has also provided informal assurances to a handful of promoters that their digital assets are not securities. In addition, in early 2024, the SEC approved certain spot Bitcoin ETFs for listing and trading while noting that their approval was not signaling anything about the SEC’s views as to the status of crypto assets under federal securities laws. On the other hand, the SEC has brought enforcement actions against the issuers and promoters of several other digital assets on the basis that the digital assets in question are securities. As we facilitate our customers’ purchase and sale of digital assets, if the SEC alleges that any digital assets we offer are securities, we could be viewed as operating as an unregistered broker-dealer and could face potential liability, including an enforcement action or private class action lawsuits, and face the costs of defending ourselves in the action, including potential fines, penalties, reputation harm and potential loss of revenue. Our personnel could also become disqualified from associating with a broker-dealer, which could adversely affect our business. See Part I, Item 1 “Business— Our Platform — Consumer — First-Party Financial Products and Services — MoneyLion Crypto.”
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States may require that we obtain licenses that apply to blockchain technologies and digital assets.
Under the terms of our agreement with Zero Hash, we are not directly involved in any cryptocurrency transactions or the exchange of fiat funds for cryptocurrency at or through Zero Hash, and therefore, we do not currently expect to be subject to money services business, money transmitter licensing or other licensing or regulatory requirements specific to transactions relating to virtual currencies. However, state and federal regulatory frameworks around virtual currencies continue to evolve and are subject to interpretation and change, which may subject us to additional licensing and other requirements. The Zero Hash entities are registered as money services businesses with FinCEN and hold active money transmitter licenses (or the state equivalent of such licenses) in all U.S. states and the District of Columbia except for (i) California, Indiana and Wisconsin, where Zero Hash relies upon licensing exemptions; (ii) Montana, which does not currently have a money transmitter licensing requirement; and (iii) Hawaii. The Zero Hash entities currently engage in crypto asset activities in all U.S. states and the District of Columbia except for Hawaii.
As we are not directly involved in the custody, trading or pricing of any crypto assets and instead enable Zero Hash to offer its crypto asset services to MoneyLion Crypto customers, we do not maintain insurance policies covering the crypto assets in which MoneyLion Crypto customers transact. In addition, while our agreement with Zero Hash requires Zero Hash to indemnify us for, among other things, all liabilities, losses, expenses and costs arising out of, in connection with or relating to (a) Zero Hash’s failure to perform or comply with the provisions of the agreement, (b) Zero Hash’s cryptocurrency business and their provision of cryptocurrency transaction services, (c) any claims or disputes between Zero Hash and a customer with respect to the purchase and sale of cryptocurrency and (d) any failure by Zero Hash to comply with, or perform any action required by, applicable laws, rules and regulations, it does not require Zero Hash to indemnify us or MoneyLion Crypto customers for any risk of loss related to customers’ underlying crypto assets, nor does it require Zero Hash to maintain an insurance policy with respect to the crypto assets of MoneyLion Crypto customers custodied with Zero Hash. Zero Hash’s wallet technology provider, Fireblocks Inc. (“Fireblocks”), is SOC 2 Type II certified by Ernst & Young and undergoes a SOC 2 Type II review on an annual basis, as well as regular penetration testing by third-party firms to evaluate the Fireblocks security architecture. Fireblocks also maintains an insurance policy which has coverage for technology, cyberattacks and professional liability and is rated “A” by A.M. Best based on the strength of the policy. However, Zero Hash does not maintain separate insurance coverage for any risk of loss with respect to the digital assets that they custody on behalf of customers. As a result, customers who purchase cryptocurrencies through MoneyLion Crypto may suffer losses with respect to their digital assets that are not covered by insurance and for which no person is liable for damages and may have limited rights of legal recourse in the event of such loss. For additional information regarding our arrangement with Zero Hash, see Part I, Item 1 “Business — Our Business Model — Third-Party Providers — Zero Hash.”
In the case of virtual currencies, state regulators such as the NYSDFS have created regulatory frameworks. For example, in July 2014, the NYSDFS proposed the first U.S. regulatory framework for licensing participants in virtual currency business activity. The regulations, known as the “BitLicense” (23 NYCRR Part 200), are intended to focus on consumer protection. The NYSDFS issued its final BitLicense regulatory framework in June 2015. The BitLicense regulates the conduct of businesses that are involved in virtual currencies in New York or with New York consumers and prohibits any person or entity involved in such activity from conducting such activities without a license. Zero Hash LLC has received a BitLicense and is approved to conduct virtual currency business activity in New York by the NYSDFS.
Other states may adopt similar statutes and regulations which will require us or our partners to obtain a license to conduct digital asset activities. Effective August 1, 2020, Louisiana adopted the Virtual Currency Business Act, which requires an operator of a virtual currency business to obtain a virtual currency license to conduct business in Louisiana, and the Louisiana Office of Financial Institutions issued related guidance in December 2021. Other states, such as Texas, have published guidance on how their existing regulatory regimes governing money transmitters apply to virtual currencies. Some states, such as Alabama, North Carolina and Washington, have amended their state’s statutes to include virtual currencies in existing licensing regimes, while others have interpreted their existing statutes as requiring a money transmitter license to conduct certain virtual currency business activities.
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It is likely that, as blockchain technologies and the use of virtual currencies continues to grow, additional states will take steps to monitor the developing industry and may require us or our regulated partners to obtain additional licenses in connection with our virtual currency activity.
Changes in tax law and differences in interpretation of tax laws and regulations may adversely impact our financial statements.
We operate in multiple jurisdictions and are subject to tax laws and regulations of the U.S. federal, state and local and non-U.S. governments. U.S. federal, state and local and non-U.S. tax laws and regulations are complex and subject to varying interpretations. U.S. federal, state and local and non-U.S. tax authorities may interpret tax laws and regulations differently than we do and challenge tax positions that we have taken. This may result in differences in the treatment of revenues, deductions, credits and/or differences in the timing of these items. The differences in treatment may result in payment of additional taxes, interest or penalties that could have an adverse effect on our financial condition and results of operations. Further, future changes to U.S. federal, state and local and non-U.S. tax laws and regulations could increase our tax obligations in jurisdictions where we do business or require us to change the manner in which we conduct some aspects of our business.
As the regulatory framework for artificial intelligence and machine learning technology evolves, our business, financial condition and results of operations may be adversely affected.
The regulatory framework for artificial intelligence and machine learning technology is evolving and remains uncertain. It is possible that new laws and regulations will be adopted in the U.S., or existing laws and regulations may be interpreted in new ways, that would affect the operation of our platform and the way in which we use artificial intelligence and machine learning technology, including with respect to fair lending laws. Further, the cost to comply with such laws or regulations could be significant and would increase our operating expenses, which could adversely affect our business, financial condition and results of operations.
If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
As a public company, we are now subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), and the rules and regulations of the applicable listing standards of the NYSE. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly and place significant strain on our personnel, systems and resources.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our internal control over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs, and significant management oversight. Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.
The nature of our business is such that our financial statements involve a number of complex accounting policies, many of which involve significant elements of judgment, including determinations regarding the consolidation of variable interest entities, determinations regarding the fair value of derivative warrant liabilities and the appropriate classification of various items within our financial statements. The inherent complexity of these accounting matters and the nature and variety of transactions in which we are involved require that we have sufficient qualified accounting personnel with an appropriate level of experience and controls in our financial reporting process commensurate with the complexity of our business. While we believe we have sufficient internal accounting personnel and external resources and appropriate controls to address the demands of our business, we expect that the growth and development of our business will place significant additional demands on our accounting resources. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements. Any failure to implement and maintain effective internal control over financial reporting could also adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NYSE. As a public company, we are now subject to the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and will be required to provide an annual management report on the effectiveness of our internal control over financial reporting. There can be no assurance that we will maintain internal control over financial reporting sufficient to enable us to identify or avoid material weaknesses in the future.
Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until we are no longer an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could materially and adversely affect our business, results of operations and financial condition and could cause a decline in the trading price of our common stock.
MoneyLion has identified a material weakness in its internal control over financial reporting which remains un-remediated as of December 31, 2021 and March 31, 2022. If MoneyLion is unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results. (As Restated)
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of an entity’s annual or interim financial statements will not be prevented or detected and corrected on a timely basis. Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls.
Subsequent to the issuance of MoneyLion’s consolidated financial statements for the years ended December 31, 2020 and December 31, 2019, MoneyLion had to restate such financial statements with respect to the treatment of the noncontrolling interests attributable to the Class B investors of IIA. For additional information with respect to the restatement, see Note 2 to MoneyLion’s audited financial statements for the years ended December 31, 2020 and December 31, 2019 included in our prospectus (File No. 333-255936), filed with the SEC on September 3, 2021 pursuant to Rule 424(b) under the Securities Act. As a result of the foregoing, MoneyLion identified a material weakness in its internal control over financial reporting as of December 31, 2020 and December 31, 2019. MoneyLion did not maintain an effective control environment as there were certain areas in which the accounting function did not operate as expected, resulting in the foregoing restatement of previously issued financial statements. Despite efforts to improve the deficiencies in our internal control over financial reporting, as described below under Part II, Item 9A “Controls and Procedures,” the Company’s management has concluded that the material weakness in our internal control over financial reporting as of December 31, 2020 and December 31, 2019 remained un-remediated as of December 31, 2021.
In addition, subsequent to the issuance of MoneyLion’s condensed consolidated financial statements as of and for the three and nine months ended September 30, 2021, MoneyLion had to restate such previously issued financial statements with respect to the accounting for the conversion of subordinated convertible notes and exercise of stock warrants into equity and the calculation of diluted earnings per share for the three months ended September 30, 2021. For additional information with respect to the restatement, see Part II, Item 9A “Controls and Procedures.” MoneyLion determined that such restatement resulted from the previously identified material weakness in its internal control over financial reporting as of September 30, 2021, which remained un-remediated as of December 31, 2021. MoneyLion did not maintain an effective control environment, resulting in the foregoing restatement of previously issued financial statements, as there were certain areas in which the accounting function did not operate as expected, due to a lack of sufficient internal accounting resources and inadequate level of precision embedded in control activities, as well as lack of sufficient formalization over processes and control evidence, resulting in multiple audit adjustments and restatements in our previously issued financial statements.
Furthermore, subsequent to the issuance of MoneyLion’s audited consolidated financial statements as of and for the year ended December 31, 2021 and the issuance of MoneyLion’s unaudited consolidated financial statements as of and for the three months ended March 31, 2022, MoneyLion determined to restate such previously issued financial statements to correct an error arising from the manner in which the Company classified and accounted for the Make-Whole Provision related to the Closing Consideration Shares issued in connection with the closing of the MALKA Acquisition. For additional information with respect to the error, see the Explanatory Note to this Amendment and Note 2 to the audited consolidated financial statements included in Part II, Item 8 of this Amendment. MoneyLion determined that such restatements resulted from the previously identified material weakness in its internal control over financial reporting as of December 31, 2021 and March 31, 2022. MoneyLion did not maintain an effective control environment, resulting in the previously undetected error and the need to restate such previously issued financial statements, as there were certain areas in which the accounting function did not operate as expected due to a lack of sufficient internal accounting resources, in particular technical accounting expertise with respect to complex financial instruments resulting in undue reliance on third-party accounting and valuation experts, and inadequate level of precision embedded in control activities, as well as lack of sufficient formalization over processes and control evidence, resulting in audit adjustments and restatements in our previously issued financial statements.
Effective internal controls are necessary to provide reliable financial reports and prevent fraud. MoneyLion continues to evaluate steps to remediate the identified material weakness and is in the process of remediating the control deficiencies that relate to the material weakness, as described further in Part II, Item 9A “Controls and Procedures.” We intend to complete the remediation by March 31, 2023, but these remediation measures may be time consuming and costly, and there is no assurance that we will be able to complete the remediation and put in place the appropriate controls within this timeframe or that these initiatives will ultimately have the intended effects.
If MoneyLion identifies any new material weaknesses in the future, any such newly identified material weakness could limit its ability to prevent or detect a misstatement of its accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a result. We cannot assure you that the measures MoneyLion has taken to date, or any measures it may take in the future, will be sufficient to avoid potential future material weaknesses.
The material weakness in our internal control over financial reporting and the restatements of certain of our previously issued financial statements subjected us to additional risks and uncertainties, including increased professional costs and the increased possibility of legal proceedings. (As Restated)
As a result of the material weakness in our internal control over financial reporting and the restatements of certain of our previously issued financial statements as described further in the foregoing risk factor, we have become subject to additional risks and uncertainties, including, among others, increased professional fees and expenses and time commitment that may be required to address matters related to the remediation of the material weakness and the restatements and increased scrutiny of the SEC and other regulatory bodies, which could cause investors to lose confidence in our reported financial information and could subject us to penalties. In addition, we face increased potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from, among other things, the restatements, the material weakness in our internal control over financial reporting and the preparation of our financial statements. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, financial condition and results of operations and could cause our stock price to decline.
Our risk management processes and procedures may not be effective.
Our risk management processes and procedures seek to appropriately balance risk and return and mitigate risks. We have established processes and procedures intended to identify, measure, monitor and control the types of risk to which we are subject, including credit risk, deposit risk, market risk, liquidity risk, strategic risk, operational risk, cybersecurity risk and reputational risk. Credit risk is the risk of loss that arises when a loan obligor fails to meet the terms of a loan repayment obligation, the loan enters default, and if uncured results in financial loss of remaining principal and interest to the investor. Our exposure to credit risk mainly arises from our lending activities. Deposit risk refers to accelerated availability of depositor funds, prior to settlement, risk of ACH returns or merchant settlements and transactional limits that may be applied to deposit accounts. Market risk is the risk of loss due to changes in external market factors, such as interest rates, asset prices and foreign exchange rates. Liquidity risk is the risk that financial condition or overall safety and soundness are adversely affected by an inability, or perceived inability, to meet obligations (e.g., current and future cash flow needs) and support business growth. We actively monitor our liquidity position. Strategic risk is the risk from changes in the business environment, ineffective business strategies, improper implementation of decisions or inadequate responsiveness to changes in the business and competitive environment.
Our management is responsible for defining the priorities, initiatives and resources necessary to execute our strategic plan, the success of which is regularly evaluated by the board of directors. Operational risk is the risk of loss arising from inadequate or failed internal processes, controls, people (e.g., human error or misconduct) or systems (e.g. technology problems), business continuity or external events (e.g., natural disasters), compliance, reputational, regulatory or legal matters and includes those risks as they relate directly to us, fraud losses attributed to applications, transaction processing or employees, as well as to third parties with whom we contract or otherwise do business. Operational risk is one of the most prevalent forms of risk in our risk profile. We strive to manage operational risk by establishing policies and procedures to accomplish timely and efficient processing, obtaining periodic internal control attestations from management, conducting internal process risk control self-assessments and audit reviews to evaluate the effectiveness of internal controls.
In order to be effective, among other things, our enterprise risk management capabilities must adapt and align to support any new product or loan features, capability, strategic development, or external change. Cybersecurity risk is the risk of a malicious technological attack intended to impact the confidentiality, availability or integrity of our systems and data, including, but not limited to, sensitive client data. Our technology and information security teams rely on a layered system of preventive and detective technologies, practices and policies to detect, mitigate and neutralize cybersecurity threats. In addition, our information security team and third-party consultants regularly assess our cybersecurity risks and mitigation efforts. Cyberattacks can also result in financial and reputational risk.
Reputational risk is the risk arising from possible negative perceptions of us, whether true or not, among our current and prospective customers, counterparties, employees and regulators. The potential for either enhancing or damaging our reputation is inherent in almost all aspects of business activity. We manage this risk through our commitment to a set of core values that emphasize and reward high standards of ethical behavior, maintaining a culture of compliance and by being responsive to customer and regulatory requirements.
Risk is inherent in our business, and therefore, despite our efforts to manage risk, there can be no assurance that we will not sustain unexpected losses. We could incur substantial losses and our business operations could be disrupted to the extent our business model, operational processes, control functions, technological capabilities, risk analyses and business/product knowledge do not adequately identify and manage potential risks associated with our strategic initiatives. There also may be risks that exist, or that develop in the future, that we have not appropriately anticipated, identified or mitigated, including when processes are changed or new products and services are introduced. If our risk management framework does not effectively identify and control our risks, we could suffer unexpected losses or be adversely affected, which could have a material adverse effect on our business.
Our ability to use our deferred tax assets to offset future taxable income may be subject to certain limitations that could subject our business to higher tax liabilities.
We may be limited in the portion of net operating loss carryforwards (“NOLs”) that we can use in the future to offset taxable income for U.S. federal and state income tax purposes. The Tax Cuts and Jobs Act (the “Tax Act”) enacted on December 22, 2017, makes broad and complex changes to the U.S. tax code. While future interpretative guidance of the Tax Act and how many U.S. states will incorporate these federal law changes may have an impact on our business, the Tax Act’s reduction of the federal corporate income tax rate from 35% to 21%, effective January 1, 2018, has reduced our deferred tax asset associated with NOLs. A lack of future taxable income would adversely affect our ability to utilize our NOLs.
In addition, under Section 382 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its NOLs to offset future taxable income. Future changes in our stock ownership as well as other changes that may be outside of our control, could result in additional ownership changes under Section 382 of the Code. Our NOLs may also be impaired under similar provisions of state law.
We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. On the basis of this evaluation, a full valuation allowance has historically been recorded to recognize only deferred tax assets that are more likely than not to be realized.
Finally, further changes to the federal or state tax laws or technical guidance relating to the Tax Act that would further reduce the corporate tax rate could operate to effectively reduce or eliminate the value of any deferred tax asset. Our tax attributes as of December 31, 2021 may expire unutilized or underutilized, which could prevent us from offsetting future taxable income.
Risks Relating to Ownership of MoneyLion Class A Common Stock
Our warrants are exercisable for MoneyLion Class A Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.Securities
As of December 31, 2021, there were 17,499,900 outstanding Public Warrants to purchase 17,499,900 shares of MoneyLion Class A Common Stock at an exercise price of $11.50 per share, which warrants became exercisable commencing 30 days following the Business Combination. In addition, as of December 31, 2021, there were 8,100,000 private placement warrants outstanding exercisable for 8,100,000 shares of MoneyLion Class A Common Stock at an exercise price of $11.50 per share. To the extent such warrants are exercised, additional shares of MoneyLion Class A Common Stock will be issued, which will result in dilution to the holders of MoneyLion Class A Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of MoneyLion Class A Common Stock, the impact of which is increased as the value of our stock price increases.
We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
We have the ability to redeem outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the closing price of MoneyLion Class A Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date we give notice of redemption. If and when the warrants become redeemable by MoneyLion, we may exercise the redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force holders to (i) exercise the warrants and pay the exercise price therefor at a time when it may be disadvantageous to do so, (ii) sell the warrants at the then-current market price when the holder might otherwise wish to hold onto such warrants or (iii) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of the warrants. None of the private placement warrants will be redeemable by us so long as they are held by their initial purchasers or their permitted transferees.
In addition, we may redeem your warrants after they become exercisable for a number of shares of MoneyLion Class A Common Stock determined based on the redemption date and the fair market value of MoneyLion Class A Common Stock. Any such redemption may have similar consequences to a cash redemption described above. In addition, such redemption may occur at a time when the warrants are “out-of-the-money,” in which case you would lose any potential embedded value from a subsequent increase in the value of the MoneyLion Class A Common Stock had your warrants remained outstanding.
Delaware law and provisions in MoneyLion’s Certificate of Incorporation and Bylaws could make a takeover proposal more difficult.
Our organizational documents are governed by Delaware law. Certain provisions of Delaware law and of MoneyLion’s Fourth Amended and Restated Certificate of Incorporation (as amended and restated from time to time, the “Certificate of Incorporation”) and Amended and Restated Bylaws (as amended and restated from time to time, the “Bylaws”) could discourage, delay, defer or prevent a merger, tender offer, proxy contest or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares of MoneyLion Class A Common Stock held by MoneyLion’s stockholders. These provisions include the ability of the board of directors to designate the terms of and issue new series of preference shares, which may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
These anti-takeover provisions as well as certain provisions of Delaware law could make it more difficult for a third party to acquire MoneyLion, even if the third party’s offer may be considered beneficial by many of MoneyLion’s stockholders. As a result, MoneyLion’s stockholders may be limited in their ability to obtain a premium for their shares. If prospective takeovers are not consummated for any reason, MoneyLion may experience negative reactions from the financial markets, including negative impacts on the price of MoneyLion Class A Common Stock. These provisions could also discourage proxy contests and make it more difficult for MoneyLion’s stockholders to elect directors of their choosing and to cause MoneyLion to take other corporate actions that MoneyLion’s stockholders desire.
The market price of our securities may be volatile.
Fluctuations in the price of MoneyLion’sour securities could contribute to the loss of all or part of your investment. The trading price of MoneyLionour securities may be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our securities and MoneyLionour securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.
Factors affecting the trading price of MoneyLion’sour securities may include:
● | actual or anticipated fluctuations in our |
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operating results failing to meet the expectations of securities analysts or investors in a particular |
● | changes in financial estimates and recommendations by securities analysts concerning |
● | operating and stock price performance of other companies that investors deem comparable to |
● | our ability to market new and enhanced products and services on a timely basis; |
● | changes in laws and regulations affecting our business; |
● | commencement of, or involvement in, litigation involving |
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● | changes in the volume of shares of |
● | any major change in |
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● | sales of substantial amounts of |
● | general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism. |
Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general, and the NYSE specifically, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your securities at or above the price at which it was acquired. A loss of investor confidence in the market for the stocks of other companies which investors perceive to be similar to MoneyLionus could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.
MoneyLion’sOur failure to meet the continued listing requirements of the NYSE could result in a delisting of itsour securities.
On April 24, 2023, we effected a 1-for-30 reverse stock split of the Class A Common Stock, along with a corresponding proportionate reduction in the number of authorized shares of Class A Common Stock, in order to increase the per share market price of the Class A Common Stock to meet the minimum per share price requirement for continued listing on the NYSE. There can be no assurance that we will be able to continue to comply with the NYSE’s minimum per share price requirement or other continued listing standards in the future. If MoneyLion failswe fail to satisfy the continued listing requirements of the NYSE, such as the corporate governance requirements or the minimum closing bid price requirement, the NYSE may take steps to delist itsour securities. SuchIn the event the Class A Common Stock is delisted from the NYSE, such a delisting would likely have a negative effect on the price of our securities, including the securitiesClass A Common Stock, and would impair your ability to sell or purchase theour securities when you wish to do so. In addition, in the event of a delisting, MoneyLionwe can provide no assurance that any action taken by itus to restore compliance with listing requirements would allow itsany of our securities to become listed again, stabilize the market price or improve the liquidity of itsour securities prevent its securities from dropping below the NYSE minimum bid price requirement or prevent future non-compliance with the NYSE’s listing requirements.
Additionally, if MoneyLion’sour securities are not listed on, or become delisted from, the NYSE for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of MoneyLion’sour securities may be more limited than if it were quoted or listed on the NYSE or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.
MoneyLion qualifiesWe qualify as an emerging growth company within the meaning of Section 2(a) of the Securities Act, as modified by the JOBS Act. Because MoneyLion intends to take advantage ofwe utilize certain exemptions from disclosure requirements available to emerging growth companies, this couldcan make MoneyLion’sour securities less attractive to investors and may make it more difficult to compare MoneyLion’sour performance with other public companies.
In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised financial accounting standards until such time as those standards apply to private companies. MoneyLion intends toWe currently take advantage of this extended transition period under the JOBS Act for adopting new or revised financial accounting standards.
For as long as MoneyLion continueswe continue to be an emerging growth company, itwe may also take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. As a result, itsour stockholders may not have access to certain information that they may deem important. MoneyLion could be an emerging growth company for up to five years, although circumstances could cause it to lose that status earlier, including if its total annual gross revenue exceeds $1.07 billion, if it issues more than $1.0 billion in non-convertible debt securities during any three-year period, or if before that time it is a “large accelerated filer” under U.S. securities laws.
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MoneyLion cannot predict if investors will find MoneyLion Class A Common Stock less attractive because it may rely on these exemptions. If some investors find MoneyLionthe Class A Common Stock less attractive as a result of us taking advantage of these exemptions, there may be a less active trading market for MoneyLionthe Class A Common Stock and MoneyLion’sour share price may be more volatile. If an active, liquid public trading market for MoneyLionthe Class A Common Stock does not develop or is not maintained, we may be limited in our ability to raise capital by selling shares of MoneyLion Class A Common Stock and our ability to acquire other companies or assets by using shares of MoneyLion Class A Common Stock or other MoneyLion securities as consideration. Further, thereWe can qualify as an emerging growth company for up to a total of five years, although circumstances could cause us to lose that status earlier, including if our total annual gross revenue exceeds $1.235 billion (as adjusted for inflation from time to time pursuant to SEC rules), if we issue more than $1.0 billion in non-convertible debt securities during any three-year period, or if before that time we are a “large accelerated filer” under U.S. securities laws. There is no guarantee that the exemptions available to MoneyLionus under the JOBS Act will result in significant savings. To the extent that MoneyLion chooseswe choose not to use exemptions from various reporting requirements under the JOBS Act itor the exemptions are no longer available to us, we will incur additional compliance costs, which may impact MoneyLion’sour financial condition.
The issuance by us of additional equity securities may dilute your ownership and adversely affect the market price of the Class A Common Stock.
Subject to our Fourth Amended and Restated Certificate of Incorporation (as amended and restated from time to time, the “Certificate of Incorporation”), from time to time, we may issue additional shares of Class A Common Stock and securities convertible into shares of Class A Common Stock on the terms and conditions established by the Board of Directors in its sole discretion. Any Class A Common Stock or securities convertible into shares of Class A Common Stock that we issue, including in connection with a financing, acquisition, investment, other strategic transaction or under any equity incentive plans that we have in place or may adopt in the future, may dilute the economic and voting rights of our existing stockholders and would likely reduce the market price of the Class A Common Stock both upon issuance or, in the case of securities convertible into shares of Class A Common Stock, conversion. Debt securities convertible into equity securities could also be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion. In addition, preferred stock, if issued, would have rights, preferences and privileges senior to those of the holders of the Class A Common Stock, including preferences with respect to a liquidating distribution or with respect to dividend payments. Our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, which may adversely affect the amount, timing and nature of our future issuances.
Delaware law and provisions in our Certificate of Incorporation and Bylaws could make a takeover proposal more difficult.
Our organizational documents are governed by Delaware law. Certain provisions of Delaware law and our Certificate of Incorporation and Amended and Restated Bylaws (as amended and restated from time to time, the “Bylaws”) could discourage, delay, defer or prevent a merger, tender offer, proxy contest or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares of Class A Common Stock held by our stockholders. These provisions include the ability of the Board of Directors to designate the terms of and issue new series of preference shares, which may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
These anti-takeover provisions as well as certain provisions of Delaware law could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares. If prospective takeovers are not consummated for any reason, we may experience negative reactions from the financial markets, including negative impacts on the price of the Class A Common Stock. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions that such stockholders desire.
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Our Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by MoneyLion’sour stockholders, which could limit MoneyLion’sour stockholders’ ability to obtain what such stockholders believe to be a favorable judicial forum for disputes with MoneyLionus or MoneyLion’sour directors, officers or other employees.
Our Certificate of Incorporation provides that, unless MoneyLion consentswe consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (the “Court of Chancery”) shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on our behalf, of MoneyLion, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officerof our directors, officers or other employee of MoneyLionemployees to MoneyLionus or MoneyLion’sour stockholders, (iii) any action asserting a claim against MoneyLion, itsus or our directors, officers or employees arising pursuant to any provision of the Delaware General Corporation Law or MoneyLion’sour Certificate of Incorporation or Bylaws, or (iv) any action asserting a claim against MoneyLion, itsus or our directors, officers or employees governed by the internal affairs doctrine and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel, except for, as to each of (i) through (iv) above, any claim (A) as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, (C) for which the Court of Chancery does not have subject matter jurisdiction, or (D) arising under the Securities Act as to which the Court of Chancery and the federal district court for the District of Delaware shall have concurrent jurisdiction. Notwithstanding the foregoing, these provisions will not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
Any person or entity purchasing or otherwise acquiring any interest in any security of MoneyLionour securities shall be deemed to have notice of and consented to these provisions.
These choice-of-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that he, she or it believes to be favorable for disputes with MoneyLionus or MoneyLion’sour directors, officers or other employees, which may discourage such lawsuits. We note that there is uncertainty as to whether a court would enforce these provisions and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
Alternatively, if a court were to find these provisions of our Certificate of Incorporation inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, MoneyLionwe may incur additional costs associated with resolving such matters in other jurisdictions, which could materially adversely affect MoneyLion’sour business, financial condition and results of operations and result in a diversion of the time and resources of MoneyLion’sour management and boardthe Board of directors.Directors.
We incur significant costs and have becomeare subject to additional regulations and requirements as a result of becomingbeing a public company, and our management is required to devote substantial time to newvarious compliance matters, which could lower profits and make it more difficult to run our business.
We completed the Business Combination with Legacy MoneyLion on September 22, 2021. As a publicly traded company, MoneyLion incurswe incur significant legal, accounting and other expenses, that Legacy MoneyLion was not required to incur in the past as a privately held company, including costs associated with public company reporting requirements and costs of recruiting and retaining non-employee directors. We also have incurred, and will continue to incur, costs associated with compliance with the rules and regulations of the SEC, the listing requirements of NYSE and various other costs of a public company. These expenses will increase once MoneyLion iswe are no longer an “emerging growth company” as defined under the JOBS Act. These laws and regulations also could make it more difficult and costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult to attract and retain qualified persons to serve on our boardthe Board of directorsDirectors and boardits committees and to serve as executive officers.
In addition, new and changing laws, regulations and standards relating to corporate governance and public disclosure for public companies, including the Dodd-Frank Act, the Sarbanes-Oxley Act, regulations related thereto and the rules and regulations of the SEC and NYSE, have increased the costs and the time that must be devoted to compliance matters. We expect these rules and regulations will increase our legal and financial costs and lead to a diversion of management time and attention from revenue-generating activities.
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We do not intend to pay any cash dividends on the Class A Common Stock in the foreseeable future.
We have never declared or paid a cash dividend on the Class A Common Stock. We have no current intention to declare or pay cash dividends on the Class A Common Stock in the foreseeable future. In addition, the Monroe Credit Agreement contains certain restrictions on our ability to pay dividends. See Part II, Item 8 “Financial Statements and Supplementary Data — Debt” in this Annual Report on Form 10-K. The declaration, payment and amount of future cash dividends, if any, will be at the discretion of the Board of Directors. As a result, capital appreciation, if any, of the Class A Common Stock will be the sole source of gain for the foreseeable future for holders of the Class A Common Stock.
Our warrants are exercisable for Class A Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.
As of December 31, 2023, there were 17,499,889 Public Warrants and 8,100,000 Private Warrants outstanding, each exercisable for 1/30th of a share of Class A Common Stock at an exercise price of $345.00 per whole share. To the extent such warrants are exercised, additional shares of Class A Common Stock will be issued, which will result in dilution to the holders of Class A Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of the Class A Common Stock, the impact of which is increased as the value of our stock price increases.
We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
We have the ability to redeem outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the closing price of the Class A Common Stock equals or exceeds $540.00 per share for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date we give notice of redemption. If and when the warrants become redeemable, we may exercise the redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force holders to (i) exercise the warrants and pay the exercise price therefor at a time when it may be disadvantageous to do so, (ii) sell the warrants at the then-current market price when the holder might otherwise wish to hold onto such warrants or (iii) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of the warrants. None of the private placement warrants will be redeemable by us so long as they are held by their initial purchasers or their permitted transferees.
In addition, we may redeem your warrants after they become exercisable for a number of shares of Class A Common Stock determined based on the redemption date and the fair market value of the Class A Common Stock. Any such redemption may have similar consequences to a cash redemption described above. In addition, such redemption may occur at a time when the warrants are “out-of-the-money,” in which case you would lose any potential embedded value from a subsequent increase in the value of the Class A Common Stock had your warrants remained outstanding.
Item 1B. Unresolved Staff Comments
None.
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Item 1C. Cybersecurity
At MoneyLion, cybersecurity risk management is an integral part of our overall risk assessment management program. Our cybersecurity risk management program is designed to align with industry best practices, including the National Institute of Standards and Technology Framework and the International Organization Standardization 27001 Information Security Management System Requirements, and provide a framework for handling cybersecurity threats and incidents, including threats and incidents associated with the use of applications developed and services provided by third-party service providers, and identify and mitigate potential threats and vulnerabilities utilizing our enhanced governance, risk and compliance solution, which incorporates system integration for continuous assessment. This framework includes steps for regularly assessing our threat landscape, taking a holistic view of cybersecurity risks to our enterprise, assessing the severity of any cybersecurity threat, identifying the source of a cybersecurity threat including whether the cybersecurity threat is associated with a third-party service provider, implementing cybersecurity countermeasures and mitigation strategies and informing management and our Risk & Compliance Committee of material cybersecurity threats and incidents.
Our Board of Directors has overall oversight responsibility for our risk management, and delegates cybersecurity risk management oversight to Risk & Compliance Committee of the Board of Directors. The Risk & Compliance Committee, in conjunction with management, routinely reviews the company’s major financial risks and enterprise-level exposures, including cybersecurity risk, and our related policies and procedures to ensure that we have processes in place to identify and manage cybersecurity risks. The Risk & Compliance Committee, in conjunction with our Chief Legal Officer and Chief Information Security Officer, or CISO, also reviews our data security programs, our plans to mitigate cybersecurity risk and respond to data security breaches and monitoring of compliance with data security compliance programs and test preparedness. The Risk & Compliance Committee periodically reports to our full Board of Directors on, among other things, our key enterprise risk exposures and our data security program, including cybersecurity, and also reports to the Audit Committee, as it deems appropriate or as instructed by the Board of Directors, regarding cybersecurity matters that may have a material effect on our financial statements. Management is responsible for identifying, considering and assessing material cybersecurity risks on an ongoing basis, establishing processes to ensure that such potential cybersecurity risk exposures are monitored, putting in place appropriate mitigation measures and maintaining cybersecurity programs.
Our Information Security and Cybersecurity teams are responsible for managing and assessing our cybersecurity risk management program under the direction of our CISO, who receives reports from our Information Security and Cybersecurity teams and monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents. We have cybersecurity operations in both the United States and in our office in Kuala Lumpur, Malaysia to ensure 24/7 monitoring of our global cybersecurity environment and to coordinate the investigation and remediation of alerts. Our CISO and dedicated personnel are certified and experienced information systems security professionals and information security managers with many years of experience. In addition, we provide cybersecurity training to all employees annually. Our Information Security and Cybersecurity teams manage and continually enhance a robust enterprise security infrastructure with the goal of preventing cybersecurity incidents to the extent feasible while simultaneously increasing our system resilience in an effort to minimize the business impact should an incident occur. We have also established a Major Incident Response team, which is responsible for responding to, mitigating and resolving any unexpected security incident. Management, including the CISO and our cybersecurity team, regularly update the Risk & Compliance Committee on the company’s cybersecurity programs, material cybersecurity risks and mitigation strategies and provide cybersecurity reports quarterly that cover, among other topics, third-party assessments of the company’s cybersecurity programs, developments in cybersecurity and updates to the company’s cybersecurity programs and mitigation strategies.
Third-party cybersecurity experts also play a key role in our cybersecurity risk management. We engage third-party service providers to conduct evaluations of our security controls, including through penetration testing, independent audits and consulting on best practices to address new challenges. These evaluations include testing both the design and operational effectiveness of our security controls, leveraging third-party technology and expertise.
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None.In 2023, we did not identify any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. However, despite our efforts, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced an undetected cybersecurity incident. In addition, our third-party service providers and other partners face similar cybersecurity threats, and although we assess these third parties’ cybersecurity controls through a cybersecurity assessment, which may include a cybersecurity questionnaire depending on our risk evaluation, and include security and privacy addendums to our contracts where applicable, a cybersecurity incident any of these entities could materially adversely affect our operations, performance and results of operations. For more information about these risks, please see “Risk Factors – Risks Relating to Information Security – Cyberattacks, data security breaches or other similar incidents or disruptions suffered by us or third parties upon which we rely could have a material adverse effect on our business, harm our reputation and expose us to public scrutiny or liability” in this Annual Report on Form 10-K.
Item 2. Properties
Facilities
Our principal corporate headquarters are located in New York City, and as of December 31, 2021, we maintained additional offices in Jersey City, New Jersey, Kuala Lumpur, Malaysia, Santa Monica, California and Sioux Falls, South Dakota.City. We lease all our facilities and do not own any real property. We believe our facilities are adequate and suitable for our current needs and that, should it become necessary, suitable additional or alternative space will be available to accommodate our operations. The square footage leased as of December 31, 2023 in each of the Company's office locations is as follows:
Location | Approximate | |||
New York, New York | 23,455 | |||
Jersey City, New Jersey | 34,418 | |||
Kuala Lumpur, Malaysia | 27,698 | |||
Santa Monica, California | 3,750 | |||
Sioux Falls, South Dakota | 2,160 | |||
Item 3. Legal Proceedings
From time to time, we are subject to various claims and legal proceedings in the ordinary course of business, including lawsuits, arbitrations, class actions and other litigation. We are also the subject of various actions, inquiries, investigations and proceedings by regulatory and other governmental agencies. The outcome of any such legal and regulatory matters, including those discussed in this section, is inherently uncertain, and some of these matters may result in adverse judgments or awards, including penalties, injunctions or other relief, andwhich could materially and adversely impact our business, financial condition, operating results and cash flows. See Part I, Item 1A “Risk Factors — Risks Relating to Legal and RegulatoryAccounting Matters — Unfavorable outcomes in legal proceedings may harm our business, andfinancial condition, results of operations.operations and cash flows.”
We have determined, based on our current knowledge, that the aggregate amount or range of losses that are estimable with respect to our legal proceedings, including the matters described below, would not have a material adverse effect on our business, financial position, results of operations or cash flows. As of December 31, 2023, amounts accrued were not material. Notwithstanding the foregoing, the ultimate outcome of legal proceedings involves judgments, estimates and inherent uncertainties, and cannot be predicted with certainty. It is possible that an adverse outcome of any matter could be material to our business, financial position, results of operations or cash flows as a whole for any particular reporting period of occurrence. In addition, it is possible that a matter may prompt litigation or additional investigations or proceedings by other government agencies or private litigants.
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State Regulatory Examinations and Investigations
We hold a number of state licenses in connection with our business activities, and must also comply with various licensing,other applicable compliance and otherregulatory requirements in the states in whichwhere we operate. In most states in whichwhere we operate, one or more regulatory agencies have authority with respect to regulation and enforcement of our business activities under applicable state laws, and we may also be subject to the supervisory and examination authority of such state regulators.regulatory agencies. Examinations by state regulators have and may continue to result in findings or recommendations that require us, among other potential consequences, to provide refunds to customers or to modify our internal controls and/or business practices.
With respectIn the ordinary course of our business, we are and have been from time to time subject to, and may in the future be subject to, governmental and regulatory examinations, information requests, investigations and proceedings (both formal and informal) in connection with various aspects of our activities by state agencies, certain of which could result in California, we received a report of examination in 2020 fromadverse judgments, settlements, fines, penalties, restitution, disgorgement, injunctions or other relief. We have responded to and cooperated with the California Department of Financial Protectionrelevant state agencies and Innovation (the “CA DFPI”) regarding MoneyLion of California, LLC, our subsidiary, and a follow-up request for information in May 2021. This matter is ongoing, and we intend towill continue to fully cooperate withdo so in the CA DFPIfuture, as appropriate.
CFPB Litigation
On September 29, 2022, the CFPB initiated a civil action in this matter. In addition, the CA DFPI is currently conducting an industry-wide investigationUnited States District Court for the Southern District of companies that provide earned wage access products and services, including Instacash. We intend to continue cooperating fully in this investigation and to that end entered into a memorandum of understandingNew York (“MOU”SDNY”) with the CA DFPI on February 23, 2021. The MOU requires us to regularly provide certain information to the CA DFPI and adhere to certain best practices regarding Instacash while the CA DFPI continues to investigate. Any potential impacts on our financial condition or operations relating to these CA DFPI matters are unknown at this time.
With respect to our activities in Minnesota, we received information requests in 2019, 2020 and 2021 from the Minnesota Department of Commerce (“Minnesota DOC”) regarding an investigation relating to our lending activity in Minnesotaagainst MoneyLion Technologies Inc., ML Plus LLC and our membership program. The Minnesota DOC previously informed us that it was no longer pursuing the investigation regarding our membership program but continued the investigation into38 state lending activity. In December 2021, we signed a settlement order with the Minnesota DOC, which had no material impact on our financial condition or operations.
We are also in the processsubsidiaries, alleging violations of responding to Civil Investigative Demands (“CIDs”) or other investigatory requests relating to our provision of consumer financial services from the office of the Attorney General of the Commonwealth of Virginia, the New York Attorney General’s Office, as well as the Colorado Department of Law. We are cooperating with each of these state regulators and intend to take any corrective actions required to maintain compliance with applicable state laws. We cannot predict the outcome or any potential impact on our financial condition or operations at this time.
CFPB Civil Investigative Demands
In 2019, 2020 and 2021, we received CIDs from the CFPB relating to our compliance with the Military Lending Act and the Consumer Financial Protection Act. The CFPB is seeking injunctive relief, redress for allegedly affected consumers and civil monetary penalties. On January 10, 2023, we moved to dismiss the lawsuit, asserting various constitutional and merits-based arguments. On June 13, 2023, the CFPB filed its first amended complaint, alleging substantially similar claims as those asserted in its initial complaint. On July 11, 2023, we moved to dismiss the lawsuit, again asserting various constitutional and merit-based arguments. On October 9, 2023, we moved for a stay of the action pending a decision from the United States Supreme Court in CFPB v. Community Financial Services Association of America, Ltd., No. 22-448 (U.S. argued Oct. 3, 2023) (“CFSA”). On December 1, 2023, the Court issued an order granting our membership model.motion and staying the action pending the United State Supreme Court’s decision in CFSA. We will continue to providemaintain that the CFPB’s claims are meritless and are vigorously defending against the lawsuit. Nevertheless, at this time, we cannot predict or determine the timing or final outcome of this matter or the effect that any adverse determinations in the lawsuit may have on our business, financial condition, results of operations or cash flows.
MALKA Seller Members Litigation
On July 21, 2023, Jeffrey Frommer, Lyusen Krubich, Daniel Fried and Pat Capra, the former equity owners of MALKA (collectively, the “Seller Members”), brought a civil action in the SDNY against MoneyLion Technologies Inc. alleging, among other things, breaches of the Membership Interest Purchase Agreement (the “MIPA”) governing our acquisition of Malka Media Group LLC (the “MALKA Acquisition”). Among other claims, the Seller Members allege that they are entitled to payment of $25.0 million of Class A Common Stock pursuant to the CFPB allearnout provisions set forth in the MIPA, based on the Seller Members’ assertion that MALKA achieved certain financial targets for the year ended December 31, 2022 (such payment, the “2022 Earnout Payment”). We believe that the Seller Members are not entitled to any portion of the information2022 Earnout Payment under the terms of the MIPA and documents requiredthat the Seller Members’ claims in their lawsuit are meritless. We continue to vigorously defend against the lawsuit and have filed counterclaims against the Seller Members, alleging, among other things, negligent misrepresentation, conversion, breach of fiduciary duties and breach of contract and seeking compensatory damages and other remedies as a result of wrongdoing by the CIDsSeller Members. On October 17, 2023, the SDNY denied, in full, the Seller Members’ motion for a preliminary injunction to remove the restrictive legends on certain shares of Class A Common Stock previously issued to the Seller Members. At this time, we cannot predict or determine the timing or final outcome of this matter or the effect that any adverse determinations in the lawsuit may have on our business, financial condition, results of operations or cash flows.
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Former Series A Preferred Stockholders Litigation
On July 27, 2023, MassMutual Ventures US II LLC, Canaan X L.P., Canaan XI L.P., F-Prime Capital Partners Tech Fund LP and GreatPoint Ventures Innovation Fund II, L.P., each of which are former equityholders of Even Financial Inc. and former holders of the Company’s Series A Preferred Stock (collectively, the “Former Preferred Stockholders”), brought a civil action in the SDNY against MoneyLion Inc., our Board of Directors and certain officers seeking declaratory relief and related damages.
The Former Preferred Stockholders allege that the 1-for-30 Reverse Stock Split of the Class A Common Stock effected on April 24, 2023 was undertaken in a manner designed to trigger the automatic conversion event pursuant to which all outstanding shares of Series A Preferred Stock automatically converted into certain shares of Class A Common Stock following the close of trading on the NYSE on May 26, 2023. The Former Preferred Stockholders further allege that the Definitive Proxy Statement we filed with the SEC on March 31, 2023 relating to the Special Meeting of Stockholders to approve the Reverse Stock Split proposal contained false and/or misleading statements and material omissions, and that we improperly failed to obtain the separate vote of the holders of the Series A Preferred Stock to approve the Reverse Stock Split. In connection therewith, the Former Preferred Stockholders assert claims against all defendants under Section 14(a) of the Securities Exchange Act of 1934 and for breach of the Certificate of Designations governing the Series A Preferred Stock, and a claim against the individual defendants for breach of fiduciary duty.
We believe that the Former Preferred Stockholders’ claims are meritless, and on November 6, 2023, we filed a motion to dismiss the lawsuit in its entirety. We intend to continue to fully cooperate withvigorously defend against the CFPBlawsuit. Nevertheless, at this time, we cannot predict or determine the timing or final outcome of this matter or the effect that any adverse determinations in this investigation. The investigation is ongoing and any potential impactthe lawsuit may have on our business, financial condition, results of operations or operations are unknown at this time.cash flows.
SEC Investigation
In February and March 2021, we received investigative subpoenas from the SEC concerning IIA, which primarily held assets from institutional investors, and was our primary source of funding for originated receivables through the end of the fourth quarter of 2021. We are cooperating with the investigation and cannot predict its outcome or any potential impact on our financial condition or operations.
Item 4. Mine Safety Disclosures
Not applicable.
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Part II
Item 5. Market for Registrant’s Common Equity, Related ShareholderStockholder Matters and Issuer Purchases of Equity Securities
Market Information for Common Stock
MoneyLionThe Class A Common Stock and Public Warrants are currently listed on the NYSE under the symbols “ML” and “ML WS,” respectively.
Holders
As of March 4, 2022,1, 2024, there were 118164 holders of record of MoneyLion Class A Common Stock. The number of holders of record does not include a substantially greater number of “street name” holders or beneficial holders whose MoneyLion Class A Common Stock and Public Warrants are held of record by banks, brokers and other financial institutions.
Dividend Information
We do not currently pay any cash dividends on the MoneyLion Class A Common Stock. The declaration and amount of all dividends will be at the discretion of our boardBoard of directorsDirectors and will depend upon many factors, including our financial condition, results of operations, cash flows, prospects, industry conditions, capital requirements of our business, covenants associated with certain debt obligations, legal requirements, regulatory constraints, industry practice and other factors the boardBoard of directorsDirectors deems relevant. We can give no assurances that we will pay a dividend in the future.
Securities Authorized for Issuance Under Equity Compensation Plans
See Part III, Item 12 “Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters” for information related to securities authorized for issuance under the Company's equity compensation plans.
Stock Performance Graph
The following stock price performance graph should not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K/A10-K into any filing under the Exchange Act or the Securities Act, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.
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The graph below compares the cumulative total return of MoneyLion Class A Common Stock from September 22,23, 2021, the date on which the MoneyLion Class A Common Stock commenced trading on the NYSE, through December 31, 2021,2023, with the comparable cumulative return of two indices, the S&P SmallCap 600 and the F-Prime Fintech Index. The performance graph and table assume an initial investment of $100 on September 22,23, 2021. We have not paid any cash dividends on the Class A Common Stock and, therefore, the cumulative total return calculation for us is based solely upon the change in share price. The share price performance shown on the graph is not necessarily indicative of future price performance.
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| MoneyLion |
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| S&P |
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| F-Prime |
| |||
September 23, 2021 |
| $ | 100.00 |
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| $ | 100.00 |
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| $ | 100.00 |
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December 31, 2021 |
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| 40.30 |
|
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| 106.29 |
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| 86.61 |
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December 31, 2022 |
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| 6.20 |
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| 89.18 |
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| 28.46 |
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December 31, 2023 |
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| 20.90 |
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| 103.50 |
|
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| 61.09 |
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| MoneyLion | S&P SmallCap 600 | F-Prime Fintech Index | ||||||||||
| September 22, 2021 | $ | 100.00 | $ | 100.00 | $ | 100.00 | ||||||
| September 30, 2021 | 67.70 | 100.62 | 91.77 | |||||||||
| October 31, 2021 | 58.90 | 104.07 | 92.97 | |||||||||
| November 30, 2021 | 42.20 | 101.69 | 99.67 | |||||||||
| December 31, 2021 | 40.30 | 106.29 | 86.61 | |||||||||
Unregistered Sales of Equity Securities and Use of Proceeds
On November 15, 2021 and December 31, 2021, in connection with MoneyLion’s acquisitionNone.
Issuer Purchases of MALKA, MoneyLion issued to Jeffrey Frommer, Lyusen Krubich, Daniel Fried and Pat Capra, the former shareholders of MALKA, 3,206,167 and 975,274 restricted shares of MoneyLion Class A Common Stock, respectively, as part of the consideration in exchange for all of the issued and outstanding membership interests of MALKA.Equity Securities
On December 22, 2021, MoneyLion issued 123,199 restricted shares of MoneyLion Class A Common Stock to NFP Venture, LLC (“NFP”) in connection with NFP’s achievement of certain performance milestones in connection with NFP’s and MoneyLion’s partnership.None.
Such offers, sales and issuances of the MoneyLion Class A Common Stock were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof. No underwriters were involved in any of the foregoing transactions.
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and capital resources of MoneyLion and is intended to help the reader understand MoneyLion, our operations and our present business environment. This discussion should be read in conjunction with MoneyLion’s audited consolidated financial statements and notes to those financial statements included in Part II, Item 8 “Financial Statements and Supplementary Data” within this Annual Report on Form 10-K/A.10-K. References to “we,” “us,” “our,” “Company” or “MoneyLion” refer to MoneyLion Technologies Inc. and, as context requires, its wholly-owned subsidiariessubsidiaries.
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Overview
MoneyLion is a leader in financial technology, powering the next generation of personalized products and financial content for American consumers. MoneyLion was founded in 2013 with a vision to rewire the periods priorfinancial system. Our mission is to give everyone the Business Combination Closing Datepower to make their best financial decisions. We believe that the financial wellness gap in America can be addressed by bridging the financial literacy and the financial access gaps, shortening the distance between education and action.
We design and offer modern personal finance products, tools and features and curate money-related content that delivers actionable insights and guidance to MoneyLion Inc.our users. We also operate and as context requires, its wholly-owned subsidiariesdistribute embedded finance marketplace solutions that match consumers with personalized third-party offers from our partners, providing convenient access to an expansive breadth of financial solutions that enable consumers to borrow, spend, save and achieve better financial outcomes. Our leading marketplace solutions provide valuable distribution, acquisition, growth and monetization channels for the period thereafter. “Fusion” refersour partners. In addition, we provide creative media and brand content services to Fusion Acquisition Corp. for the periods priorclients across industries through our media division and leverage our adaptive, in-house content studio to the Business Combination Closing Date.
This Management’s Discussionproduce and Analysis of Financial Conditiondeliver engaging and Results of Operations gives effect to the restatementdynamic content in support of our audited consolidatedproduct and service offerings.
We have purposefully built our platform to help consumers navigate all of their financial statements forinflection points, combining our deep first-party product expertise, engaging content, marketplaces, innovative technology, data and AI capabilities to create the year endedultimate marketplace solution. As of December 31, 2021. See the Explanatory Note2023, we had 14.0 million Total Customers who used 23.1 million Total Products and over 1,100 Enterprise Partners in our network. We strategically employ comprehensive, data-driven analytics and cutting-edge technology to this Annual Report on Form 10-K/A and Note 2, “Restatement of Previously Issued Financial Statements,” to the audited consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K/A for a detailed explanation and impacts of the restatement. Except as described above, this Management’s Discussion and Analysis of Financial Condition and Results of Operations does not substantively amend, update or change any other items or disclosures contained in the Original Filing, and accordingly, this Management’s Discussion and Analysis of Financial Condition and Results of Operations does not reflect or purport to reflect any information or events occurring after March 17, 2022, the original filing date, or modify or update those disclosures affected by subsequent events, except to the extent they are otherwise required to be included and discussed herein.
Overview
MoneyLion offers aenhance our platform, creating personalized all-in-one, digital financial platform that provides convenient, low-cost access to banking, borrowing and investing solutions tailoredexperiences for our customers, rooted in data and delivered throughusers based on our proprietary technology platform. We userich datasets. Utilizing innovative data-driven approaches to addressfinancial guidance that engage and educate our customers’ individual life inflection points and financial circumstances. When our customers enjoy periodsusers within a peer community, we seek to empower consumers to take control of financial excess, we provide tools for them to easily manage their spending and saving goals through our digital banking and automated investing solutions. When our customers experience moments of financial need, we provide them immediate access to innovative lending or earned income advance products and credit improvement programs that can bridge these times of financial stress and improve their financial health. We provide access to personalized proprietary productslives.
In our Consumer business, we primarily earn revenue as well as financial and non-financial products offered by third-party providers. Our subsidiary, MALKA, provides digital media and content production services to us and to its own clients in entertainment, sports, gaming, live streaming and other sectors.follows:
The Company’s key product offerings include:
RoarMoney Premium Mobile Banking — RoarMoney is our FDIC-insured digital demand deposit account with zero minimums, premium features and rewards. Our RoarMoney demand deposit accounts are currently issued by MetaBank. Customers can open a RoarMoney account in minutes through the MoneyLion mobile application, add funds to their account and begin spending using a RoarMoney virtual debit card. RoarMoney accounts also include a physical MoneyLion Debit Mastercard that can be used at any of the approximately 55,000 Allpoint ATM network locations to make no-fee withdrawals.: We earn revenue from interchange fees from payment networks based on customer expenditures on the debit card.card, as well as transaction volume-based incentive payments from the payment network. We also earn revenue from cardholder fees such as a small monthly administrative fee charged to our customers, and asuch as the monthly administrative fee, charged to customers when an out-of-network ATM is utilized to withdraw cash. Both interchangefee, a foreign transaction fee and instant transfer fees. Interchange fees, payment network payments and cardholder fees are reflected in fee income. We incur direct costs in connection with the RoarMoney account offering, which include fees paid to the payment networksservice and our partner bank.
•
Personalized Investing — MoneyLion Investing is an online investment account that offers access to separately managed accounts invested based on model portfolios comprised of ETFs and managed on a discretionary basis. Advisory services related to the MoneyLion investment account are provided by ML Wealth, an SEC-registered investment adviser and an indirect wholly-owned subsidiary of MoneyLion. Brokerage and custodial services are provided by DriveWealth, a third-party provider. This fully-managed account model allows customers to set their investment strategy and let ML Wealth manage investment decisions to implement that strategy on a discretionary basis. An investment account holder simply identifies their investing comfort zone to receive a personalized portfolio, a mix of stock and bond ETFs. Our managed investment account is available on a standalone basis.Instacash: We earn revenue from a smalloptional tips and instant transfer fees, both reflected in service and subscription fees.
•
Crypto — MoneyLion Crypto is an online cryptocurrency account that enables customers to buy, sell and hold cryptocurrency. The account is provided by Zero Hash. RoarMoney accountholders can open a MoneyLion Crypto account through the MoneyLion mobile application and fund it via their RoarMoney account. In addition, customers can also round up purchases made either on their RoarMoney account or an external bank account to the nearest dollar. The accrued round ups can then be transferred into the customer’s MoneyLion Crypto account and invested in Bitcoin. As of December 31, 2021, the only cryptocurrencies available through the MoneyLion Crypto account were Bitcoin and Ether. In January 2022, MoneyLion Crypto expanded to include Bitcoin Cash and Litecoin.: We earn revenue from Zero Hash, as they paywhich is reflected in service and subscription fees. Zero Hash pays us a share of the fees that they earn from our customers in exchange for MoneyLionus enabling Zero Hash to effect digital currency-related transactions for our customers. This
In our Enterprise business, we primarily earn revenue, is reflected in fee income.enterprise service revenues, as follows:
Instacash — Instacash is our 0% APR advance product that gives customers early access to their recurring income deposits. Customers can access Instacash advances at any time during a regular deposit period up to their advance limit, providing customers with the flexibility to cover temporary cash needs and avoid costly overdraft fees. There are no fees associated with regular delivery of funds to either a RoarMoney account (typically delivered within 12-48 hours) or an external checking account (typically delivered within two to five business days). However, customers have the option to pay an additional fee in order to receive their funds on an expedited basis (typically within minutes or less), the amount of which is based on the amount of the disbursement and whether the funds are delivered to a RoarMoney account or an external checking account. Customers may also choose to leave MoneyLion an optional tip for use of the Instacash service. We earn revenue from tips and instant transfer fees, both reflected in fee income.
Credit Builder Plus — Our Credit Builder Plus membership program offers a proven path for our customers to access credit and establish or rebuild history, build savings, establish financial literacy and track their financial health. For a monthly cost of $19.99, customers receive a suite of services including banking and investment accounts, credit tracking and financial literacy content, rewards programs and access to loans of up to $1,000 at competitive rates offered by MoneyLion lending subsidiaries, allowing our customers to establish up to twelve months of payment history with all three credit bureaus. We offer our Credit Builder Plus members access to the Lion’s Share Loyalty Program, where members can earn rewards of up to $19.99 per month. We earn revenue from monthly membership fees paid by our customers. These fees are reflected in membership subscription revenue. As part of the Credit Builder Plus membership program, members may apply for a Credit Builder Plus secured personal loan. In addition to a free standard disbursement option, we also offered our customers an option to disburse their funds to their MoneyLion-serviced RoarMoney bank account or external bank account on an expedited basis for an instant transfer fee. This instant disbursement option for Credit Builder Plus loans was removed in the second quarter of 2021. Prior to our launch of Credit Builder Plus in 2019, we offered a ML Plus membership through which we originated unsecured personal loans, ML Plus loans. The ML Plus membership transitioned into the Credit Builder Plus membership in the second quarter of 2020. We earn revenue from interest income, reflected in net interest income on finance receivables, and, prior to the removal of the instant disbursement option, instant transfer fees, reflected in fee income.
Financial Tracking — We offer our customers access to financial tracking tools such as Financial Heartbeat, GamePlan and credit score tracking. Financial Heartbeat is an intelligent, automated tool that guides customers on their financial journey. Financial Heartbeat evaluates customers’ financial situation across four key dimensions: SAVE (savings and financial preparedness), SPEND (spending and personal budget), SHIELD (insurance needs and coverage) and SCORE (credit tracking and health). Through our easy-to-use interface, customers can review the key issues impacting their financial situation, decide what actions to take, evaluate which products to use and receive guidance on how to stay motivated on their journey towards financial wellness. GamePlan provides our customers with a personalized action plan, including a checklist with tasks, meant to help them reach their financial goals across different categories such as spending, saving and more. Financial tracking tools are offered to our customers at no cost and we do not earn revenue from these services.
MoneyLife — Consistent with our vision of establishing MoneyLion as a lifestyle brand, in 2021 we introduced MoneyLife, an online financial education content destination. MoneyLife is an influencer-focused, video content-driven educational platform where customers can share and discover ideas, advice and insights regarding their financial lives. With high usability and sleek design, MoneyLife includes highly personalized content driven by financial advice and education influencers, tools to achieve financial goals and additional ways of earning rewards to shop and save. Through MoneyLife, we provide an additional daily destination site for current customers, drive additional prospective customers to MoneyLion and increase customer engagement and cross-sell opportunities for both MoneyLion and its affiliate partners.
Affiliate marketing program — We work with various affiliate partners that offer products or services that we may recommend to our customers via display ads, offers or campaigns through our digital platform. Our customers can access these offers on a standalone basis.Consumer Marketplace: We earn revenue from fees from our affiliate partners in exchange for meeting certain success metrics relatedProduct Partners based on a range of criteria depending on each Product Partner relationship, including, but not limited to, their campaigns such as customers’ clicks, impressions, completed transactions or completed transactions. Thisa share of revenue is reflected in affiliates income.
Unsecured personal loans —Enterprise Marketplace: We used to offer unsecured personal loans to our customers. We earned revenue from interest income, which was reflected in net interest income on finance receivables, and fees, which were reflected in fee income. We phased out this offering in the first quarter of 2020 and it is not expected to contribute to revenue going forward.
Credit-related decision servicing — MoneyLion provided credit-related decision servicing to third parties. We earnedearn revenue from fees generated from this service. These fees were reflected in fee income. We phased out this offering in the first quarter of 2020 and it is not expected to contribute to revenue going forward.
Receivables originated on our platform, including Credit Builder Plus loans and Instacash advances, were primarily financed through IIA until the end of the fourth quarter of 2021. As of December 31, 2020, IIA had assets of approximately $86 million, primarily from institutional investors, and had been our primary source of funding for originated receivables since 2018. As of December 31, 2021, IIA had no assets. Beginning in the fourth quarter of 2021, MoneyLion transitioned its primary source of funding for originated receivables from IIA to special purpose vehicle financings from third-party institutional lenders. As of December 31, 2021, there was an outstanding principal balance of $78 million under the ROAR 1 SPV Credit Facility and an outstanding principal balance of $68 million under the ROAR 2 SPV Credit Facility. See Part II, Item 8 “Financial Statements and Supplementary Data — Description of Business and Basis of Presentation” and “— Debt” for more information.
Recent Developments
Recent events impacting our business are as follows:
COVID-19 — The COVID-19 pandemic has caused substantial changes in consumer behavior, restrictions on business and individual activities and high unemployment rates, which led to reduced economic activity and may continue to cause economic volatility. There continue to be significant uncertainties associated with the COVID-19 pandemic, including with respect to the course, duration and severity of the virus and additional variants, future actions that may be taken by governmental authorities and private businesses to contain the COVID-19 pandemic or to mitigate its impact and the effectiveness of such actions, the timing and speed of economic recovery and the ultimate effectiveness of vaccinations for COVID-19.
In response to the economic uncertainty caused by the pandemic, during 2021, we made certain operational changes and implemented certain consumer support programs which were immaterial to our performance. For example, we reduced our marketing activities such as advertising through digital platforms, which have since returned to pre-pandemic levels and also reduced our sponsorship arrangements with third parties. In addition, we implemented underwriting policy changes on a targeted basis to more closely manage credit risk while we further evaluated market conditions. Our underwriting models are dynamic relative to real time changes in our customer’s income and credit profiles and our credit performance remained steady as our underwriting models quickly adapted to these changes. To further support our customers, we expanded our payment deferral options and reduced certain fees, while providing them with relevant content and resources on topics like unemployment insurance and stimulus checks. For instance, for our secured personal loan customers with no prior missed payments, we offered payment deferralsEnterprise Partners based on a customer’s payment frequency, ranging from one payment deferral for monthly payments and up to three payment deferrals for weekly payments. For our Instacash customers with an outstanding advance, we allowed them to change the scheduled repayment date by up to 14 days. Once the advance was repaid, the customer could request another change to the scheduled repaymentrange of criteria depending on another advance. While there is no limit to the number of changes a customer may be granted, they areeach Enterprise Partner relationship, including, but not limited to, one atcustomers’ clicks, completed transactions or a timeshare of revenue generated for the Product Partner. We also earn various SaaS and per advance. Despite the economic uncertainty as a result of COVID-19, we have increased the number of customersplatform fees from our Enterprise Partners.
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In April 2020, the Company borrowed $3.2 million from a bank under the U.S. Small Business Administration’s (“SBA”) Paycheck Protection Program that was introduced as part of the U.S. Government’s COVID-19 relief efforts (the “PPP Loan”). In June 2021, the SBA approved the Company’s application for forgiveness with respect to the entire outstanding balance of the PPP Loan.
Management will continue to monitor the nature and extent of potential impact to the business as the pandemic continues.
Business Combinations (As Restated) — Since January 1, 2020,2022, we have completed the following business combinations:
At the closing of the Engine Acquisition, we (i) issued to the equityholders of Even Financial Inc. an aggregate of 28,164,811 shares of Series A Preferred Stock, along with an additional 529,120 shares of Series A Preferred Stock to advisors of Even Financial Inc. for transaction expenses, valued at $193.7 million, (ii) paid to certain Even Financial Inc. management equityholders approximately $14.5 million in cash and (iii) exchanged 8,883,228 options to acquire Even Financial Inc. common stock for 196,728 options to acquire Class A Common Stock, of which the vested portion at the acquisition date was valued at $9.0 million. In addition, certain recipients of options to acquire shares of Class A Common Stock were entitled to receive dividend equivalents in lieu of receiving Series A Preferred Stock, subject to certain conditions (the “Preferred Stock Equivalents”). The total purchase price was approximately $271.1 million, subject to customary purchase price adjustments for working capital and inclusive of amounts used to repay approximately $5.7 million of existing indebtedness of Even Financial Inc. and pay $2.9 million of seller transaction costs.
Pursuant to the Amended and Restated Agreement and Plan of Merger, dated as of February 17, 2022, governing the Engine Acquisition (the “Engine Merger Agreement”), the equityholders and advisors of Even Financial Inc. were entitled to receive an additional payment from the Company of up to an aggregate of 8,000,000 shares of Series A Preferred Stock, based on the attributed revenue of Engine’s business during the 13-month period commencing January 1, 2022 (the “Earnout”). On May 22, 2023, in connection with Engine's partial achievement of the Earnout, the Company issued 4,354,092 shares of Series A Preferred Stock and, in lieu of fractional shares and with respect to recipients otherwise ineligible to receive shares, approximately $0.5 million in cash to the former equityholders and advisors of Even Financial Inc.
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Factors Affecting Our Performance
The Company isWe are subject to a number of risks including, but not limited to, the need for successful development of products, services and functionality; the need for additional capital (or financing) to fund operating losses,losses; competition fromwith substitute products and services from larger companies,companies; protection of proprietary technology and information; dependence on key individualsindividuals; and risks associated with changes in information technology. For additional information, see Part I, Item 1A “Risk Factors.”
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New customer growthCustomer and increasing usage across existing customersClient Growth and Increasing Usage Across Existing Customers and Clients
Our ability to effectively acquire new customers and clients through our acquisition and marketing efforts and drive usage of our products and services across our existing customers and clients is key to our growth.growth, particularly as a significant portion of the revenue we generate in our business is derived from transaction-based fees. We invested in the platform approach and believe our customers’ experience is enhanced by using our full product suite of first-party financial products and services, complemented by the full spectrum of offers available in our marketplace, as we can better tailor the insights and recommendations.recommendations we provide to them. In turn, this generates higher revenueorder to grow our business, we must engage and lifetime valueretain customers and continue to expand their use of our platform by cross-selling additional functionality, products and services to them. In our Enterprise business, we are dependent in part on our relationships with our Enterprise Partners, and any failure to effectively match consumers leads from our customer base.
Channel Partners with product and service offerings from our Product expansionPartners, or any reduced marketing spend by such Product Partners on our Enterprise platform, could adversely affect our business and innovationresults of operations.
We believe in the platform approachExpansion and providing relevant products to our customers to help them better manage their financial lives, both in timesInnovation of needProducts, Services and excess. Functionality
We will continue to invest in expanding and enhancing the products, services and functionality available through our platform for our customers and clients. Our ability to expand, enhance and sell additional functionality, products and services to our existing suite of productscustomers and developing new products.clients may require more sophisticated and costly development, sales or engagement efforts. Any factors that impair our ability to do so may negatively impact our efforts towards retaining and attracting customers.customers and clients.
General economicEconomic and market conditionsMarket Conditions
Our performance is impacted by the relative strength of the overall economy, market volatility, consumer spending behavior and consumer demand for financial products and services. TheFor example, with respect to our Consumer business, the willingness of our customers to spend, invest or borrow may fluctuate with their level of disposable income. Other factors such as interest rate fluctuations or monetary policies may also impact our customers’ behavior and our own ability to fund Instacash advances and loan volume. In addition, in our Enterprise business, adverse macroeconomic conditions, such as significant tightening of credit markets, may cause our Product Partners to reduce their marketing spend or advertising on our platform or may cause a reduction in client spending in our media division, which could adversely affect our business and results of operations.
CompetitionSeasonality
We compete with several larger financial institutionsmay experience seasonal fluctuations in our revenue. During the fourth quarter, revenue in our Consumer business may benefit from increased consumer spending during the holiday season, which may increase demand for our advance product as consumers seek additional liquidity. During the first quarter, we may see stronger collections on Instacash receivables resulting in a relatively lower provision for credit losses on consumer receivables as a result of the impact of tax refunds, as well as stronger demand for our banking and technology platforms that offer similarinvestment products and services. Seasonal trends may be superseded by market or macroeconomic events, which can have a significant impact on our business, as described above.
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Competition
We compete across our business lines with those that offer both single point solutions similara variety of competitors, including traditional banks and credit unions; new entrants obtaining banking licenses; non-bank digital providers offering banking-related services; specialty finance and other non-bank digital providers offering consumer lending-related or earned wage access products; digital wealth management platforms such as robo-advisors offering consumer investment services and other brokerage-related services; and digital financial platform, embedded finance and marketplace competitors, which aggregate and connect consumers to any onefinancial product and service offerings. In addition to competing for customers for our product and service offerings, we also compete to attract viewership of the content to which we connect customers, as there are other sources of financial-related content and news, many of which are more established and have a larger subscriber base. Furthermore, we compete with other advertising agencies and other service providers to attract marketing budget spending from our Enterprise clients. With respect to our media division, we compete with others in the digital media and content creation industry, which range from large and established media companies, including social media companies, advertising agencies and production studios, to emerging start-ups. We expect our competition to continue to increase. The success of our products as well as more integrated, complete solutions. Some ofbusiness depends on our competitors may have accessability to more resources than we docompete effectively and thus may be able to offer better pricing or benefits toattract new and retain existing customers and clients, which depends upon many factors both within and beyond our customers.control.
Pricing of our productsOur Products and Services
We derive a substantial portion of our revenue from fees earned from our products.products and services. The fees we earn are subject to a variety of external factors such as competition, interchange rates and other macroeconomic factors, such as interest rates and inflation, among others. We may provide discounts or other incentives and rewards that we pay to customers who utilize multiple products and services to expand usage of our platform. We may also lower pricing on our products and services to acquire new customers. For example,As the market for our platform matures, or as new or existing competitors introduce new products, services or functionality that compete with ours, we offermay experience pricing pressure and be unable to retain current customers and clients and attract new customers and clients at prices that are consistent with our pricing model and operating budget. Our pricing strategy may prove to be unappealing to our customers discounts such as Shake ‘N’ Bank cashback and other cashback rewards opportunities as part ofclients, and our RoarMoney bank account product offeringcompetitors could choose to bundle certain products and such discounts are providedservices competitive with ours. If this were to customers based on eligible MoneyLion debit card transactions. On average, approximately 40% ofoccur, it is possible that we would have to change our eligible RoarMoney bank account customers receive this benefit. pricing strategies or reduce our prices, which could adversely affect our business.
Product and Service Mix
We also offer our Credit Builder Plus members access to our Lion’s Share Loyalty Program where members can earn up to $19.99 per month. The size of the Lion’s Share reward depends on a customer’s number of logins into the MoneyLion app and purchases using their RoarMoney account in that month. On average, approximately 25% of our Credit Builder Plus members who met the minimum eligibility criteria received a Lion’s Share reward.
Product mix
We provide various products and services on our platform, including our core suite of first-party financial products and services, a membership program, loans, earned income advancesbroad range of financial and cryptocurrency, investmentnon-financial offers in our Consumer marketplace and bank accounts.embedded finance marketplace solutions and media services in our Enterprise business. Each product and service has a different profitability profile. The relative usage of products and services with high or low profitability and their lifetime value could have an impact on our performance.
Access and costCost of financingFinancing
Our credit products, earned wage access product and other receivables wereare primarily financed through IIA until the end of the fourth quarter of 2021. Beginning in the fourth quarter of 2021, we transitioned our primary source of funding for originated receivables from IIA toby special purpose vehicle financings from third-party institutional lenders. LossThe loss of one or more of the financing sources we have for our credit products, earned wage access product and other receivables could have an adverse impact on our performance, and it could be costly to obtain new financing.
Key Performance Metrics
We regularly review several metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
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Total Customers
We define Total Customers as the cumulative number of customers that have opened at least one account, including banking, membership subscription, secured personal loan, Instacash advance, managed investment account, cryptocurrency account and customers that are monetized through our marketplace and affiliate products. Total Customers also include customers that have submitted for, received or clicked on at least one marketplace loan offer. We consider Total Customers to be a key performance metric as it can be used to understand lifecycle efforts of our customers, as we look to cross-sell products to our customer base and grow our platform. Total Customers were 14.0 million and 6.5 million as of December 31, 2023 and 2022, respectively.
Total Products
We define Total Products as the total number of products that our Total Customers have opened, including banking, membership subscription, secured personal loan, Instacash advance, managed investment account, cryptocurrency account and monetized marketplace and affiliate products, as well as customers who signed up for our financial tracking services (with either credit tracking enabled or external linked accounts), whether or not the customer is still registered for the product. Total Products also include marketplace loan offers that our Total Customers have submitted for, received or clicked on through our marketplace. If a customer has funded multiple secured personal loans or Instacash advances or opened multiple products through our marketplace, it is only counted once for each product type. We consider Total Products to be a key performance metric as it can be used to understand the usage of our products across our customer base. Total Products were 23.1 million and 12.9 million as of December 31, 2023 and 2022, respectively.
Enterprise Partners
Enterprise Partners is comprised of Product Partners and Channel Partners. We define Product Partners as providers of the financial and non-financial products and services that we offer in our marketplaces, including financial institutions, financial services providers and other affiliate partners. We define Channel Partners as organizations that allow us to reach a wide base of consumers, including but not limited to news sites, content publishers, product comparison sites and financial institutions. Enterprise Partners were 1,171, comprising 547 Product Partners and 624 Channel Partners, and 1,067, comprising 480 Product Partners and 587 Channel Partners, as of December 31, 2023 and 2022, respectively.
Total Originations
We define Total Originations as the dollar volume of the secured personal loans originated and Instacash advances funded within the stated period. We consider Total Originations to be a key performance metric as it can be used to measure the usage and engagement of the customers across our secured personal lending product and Instacash productsearned wage access product and is a significant driver of net interest income on finance receivables and fee income.service and subscription fees. Total Originations were $1.1$2.3 billion and $410 million$1.8 billion for the twelve months ended December 31, 20212023 and 2020, respectively, and2022, respectively. All originations were originated directly by MoneyLion.
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Gross Profit
The calculation of gross profit, which is prepared in accordance with U.S. GAAP, for the twelve months ended December 31, 2023 and 2022 is as follows:
|
| Twelve Months Ended December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Total revenue, net |
| $ | 423,431 |
|
| $ | 340,745 |
|
Less: |
|
|
|
|
|
| ||
Cost of Sales |
|
|
|
|
|
| ||
Direct costs |
|
| (126,361 | ) |
|
| (106,419 | ) |
Provision for credit losses on receivables - subscription receivables1 |
|
| (4,101 | ) |
|
| (5,231 | ) |
Provision for credit losses on receivables - fees receivables2 |
|
| (12,988 | ) |
|
| (8,253 | ) |
Technology related costs |
|
| (12,532 | ) |
|
| (10,447 | ) |
Professional services |
|
| (5,501 | ) |
|
| (5,898 | ) |
Compensation and benefits |
|
| (9,221 | ) |
|
| (8,951 | ) |
Other operating expenses |
|
| (377 | ) |
|
| (438 | ) |
Gross Profit |
| $ | 252,350 |
|
| $ | 195,109 |
|
Total Customers
We define Total Customers as those customersDuring the quarter, we determined that have opened at least one account, including banking, membership subscription, secured personal loan, Instacash advance, managed investment account, cryptocurrency account or affiliate product. We consider Total Customers to beGross Profit was no longer a key performance metric as it can be usedthat we use to understand lifecycle efforts ofmeasure our customers, as we look to cross-sell products to our customer base and grow our platform. Total Customers were 3.3 million and 1.4 million as of December 31, 2021 and 2020, respectively. For the years ended December 31, 2021 and 2020, approximately 27% and 33%, respectively, of our Total Customers that have opened a banking or managed investment account have funded accounts. For the years ended December 31, 2021 and 2020, approximately 64% and 53%, respectively, of our Total Customers have engaged in any activitybusiness performance based on our platform.evolving financing structure. As a result, we will no longer be presenting Gross Profit for subsequent quarters or years.
Total ProductsAdjusted EBITDA (Non-GAAP Measure)
We define Total Products asManagement believes Adjusted EBITDA, a non-U.S. GAAP measure, provides relevant and useful information to investors regarding the total numberperformance of products that our Total Customers have opened including banking, membership subscription, secured personal loan, Instacash advance, managed investment account, cryptocurrency account, affiliate product, or signed up for our financial tracking services (with either credit tracking enabled or external linked accounts), whether or not the customer is still registered for the product. If a customer has funded multiple secured personal loans or Instacash advances, it is only counted once for each product type. We consider Total Products to be a key performance metric as it can be used to understand the usage of our products across our customer base. Total Products were 8.0 million and 4.5 million as of December 31, 2021 and 2020, respectively.
Adjusted Revenue
Adjusted Revenue is defined as total revenues, net, plus amortization of loan origination costs less provision for loss on membership receivables and provision for loss on fees receivables, revenue derived from phased out products and non-operating income. We believe that Adjusted Revenue provides a meaningful understanding of revenue from ongoing products and recurring revenue for comparability purposes. Adjusted Revenue is a non-GAAP measure and should not be viewed as a substitute for total revenues, net.company. Refer to the ““— Non-GAAP Measures”Measures” section below for further discussion.
Our Adjusted Revenue is further broken into the following categories:
| Twelve Months Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| (In thousands) | ||||||||
| Fees | $ | 125,081 | $ | 60,955 | ||||
| Payments | 13,602 | 6,556 | ||||||
| Advice | 16,622 | 3,388 | ||||||
| Interest | 9,628 | 5,154 | ||||||
| Adjusted Revenue | $ | 164,934 | $ | 76,053 | ||||
This breakdowndiscussion of Adjusted Revenue across the categories of fees, payments, advice and interest helps provide our management with a better understanding of Adjusted Revenue by type and may help to inform strategic pricing and resource allocations across our products.EBITDA.
68
Adjusted Gross Profit, Adjusted EBITDA and Adjusted Net Income (Loss)
We believe Adjusted Gross Profit, Adjusted EBITDA and Adjusted Net Income (Loss) provide a meaningful understanding of an aspect of profitability based on our current product portfolio. These are non-GAAP measures and should not be viewed as a substitute for gross profit nor net income (loss). Refer to the “Non-GAAP Measures” section below for further discussion.
Results of Operations for the Twelve Months Ended December 31, 20212023 and 20202022
Revenues
The following table is reference for the discussion that follows.
| Twelve Months Ended December 31, | Change (As Restated) | |||||||||||||||
2021 (As Restated) | 2020 | $ | % | |||||||||||||
| (In thousands, except for percentages) | ||||||||||||||||
| Revenue | ||||||||||||||||
| Net interest income on finance receivables | $ | 7,002 | $ | 4,347 | $ | 2,655 | 61.1 | % | ||||||||
| Membership subscription revenue | 32,357 | 25,994 | 6,363 | 24.5 | % | |||||||||||
| Affiliates income | 10,900 | 2,234 | 8,666 | 387.9 | % | |||||||||||
| Fee income | 116,131 | 46,639 | 69,492 | 149.0 | % | |||||||||||
| Other income | 4,721 | 197 | 4,524 | 2,296.4 | % | |||||||||||
| Total Revenues, net | 171,111 | 79,411 | 91,700 | 115.5 | % | |||||||||||
| Operating expenses | ||||||||||||||||
| Marketing | 43,170 | 11,060 | 32,110 | 290.3 | % | |||||||||||
| Provision for loss on receivables | 60,749 | 21,294 | 39,455 | 185.3 | % | |||||||||||
| Other direct costs | 8,864 | 4,336 | 4,528 | 104.4 | % | |||||||||||
| Interest expense | 7,251 | 2,950 | 4,301 | 145.8 | % | |||||||||||
| Personnel expenses | 45,878 | 24,200 | 21,678 | 89.6 | % | |||||||||||
| Underwriting expenses | 8,253 | 6,242 | 2,011 | 32.2 | % | |||||||||||
| Information technology expenses | 7,488 | 7,041 | 447 | 6.3 | % | |||||||||||
| Bank and payment processor fees | 24,565 | 13,737 | 10,828 | 78.8 | % | |||||||||||
| Change in fair value of warrant liability | 39,629 | 14,419 | 25,210 | 174.8 | % | |||||||||||
| Change in fair value of subordinated convertible notes | 41,877 | 4,000 | 37,877 | 946.9 | % | |||||||||||
| Change in fair value of contingent consideration from mergers and acquisitions | 10,838 | - | 10,838 | nm | ||||||||||||
| Professional fees | 19,847 | 8,396 | 11,451 | 136.4 | % | |||||||||||
| Depreciation and amortization expense | 2,392 | 1,108 | 1,284 | 115.9 | % | |||||||||||
| Occupancy expense | 997 | 1,233 | (236 | ) | (19.1 | )% | ||||||||||
| Gain on foreign currency translation | (431 | ) | (179 | ) | (252 | ) | 140.8 | % | ||||||||
| Other operating expenses | 19,172 | 1,155 | 18,017 | 1,559.9 | % | |||||||||||
| Total operating expenses | 340,539 | 120,992 | 219,547 | 181.5 | % | |||||||||||
| Net loss before income taxes | (169,428 | ) | (41,581 | ) | (127,847 | ) | 307.5 | % | ||||||||
| Income tax expense | 56 | 6 | 50 | 833.3 | % | |||||||||||
| Net loss | $ | (169,484 | ) | $ | (41,587 | ) | $ | (127,897 | ) | 307.5 | % | |||||
|
| Twelve Months Ended December 31, |
|
| Change |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| $ |
|
| % |
| ||||
|
| (In thousands, except for percentages) |
| |||||||||||||
Consumer revenues |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Service and subscription fees |
| $ | 272,897 |
|
| $ | 208,829 |
|
| $ | 64,068 |
|
|
| 30.7 | % |
Net interest income on finance receivables |
|
| 12,193 |
|
|
| 10,147 |
|
|
| 2,046 |
|
|
| 20.2 | % |
Total consumer revenues |
|
| 285,090 |
|
|
| 218,976 |
|
|
| 66,114 |
|
|
| 30.2 | % |
Enterprise service revenues |
|
| 138,341 |
|
|
| 121,769 |
|
|
| 16,572 |
|
|
| 13.6 | % |
Total revenue, net |
| $ | 423,431 |
|
| $ | 340,745 |
|
| $ | 82,686 |
|
|
| 24.3 | % |
Revenues
We generate revenuesrevenue primarily from originating loans,various product-related fees, providing membership subscriptions, various product relatedperforming enterprise services and originating loans.
Service and subscription fees
Service and promoting affiliate services.
Total revenuessubscription fees increased by $91.7$64.1 million, or 115.5%30.7%, to $171.1$272.9 million for the twelve months ended December 31, 2021,2023, as compared to $79.4$208.8 million for the same period in 2020.2022. The increase in service and subscription fees was driven by increases in fee income related to instant transfer fees and tips from Instacash of $62.7 million as a result of the growth of Instacash advances across both existing and new customers, an increase in banking-related revenue such as interchange and fee income of $2.2 million and an increase in subscription fees of $0.3 million due to an increased number of customers enrolled in the Credit Builder Plus membership. These increases were partially offset by a net decrease of $0.9 million in revenue from a volume-based incentive payment program from a third-party payment network and $0.2 million of lower account fees on our investing product.
Net interest income on finance receivables
Net interest income on finance receivables is generated by interest earned on unsecured personal loans, ML Plus loans, and Credit Builder Plus loans,Loans, which is partially offset by the amortization of loan origination costs.
Net interest income on finance receivables increased by $2.7$2.0 million, or 61.1%20.2%, to $7.0$12.2 million for the twelve months ended December 31, 2021,2023, as compared to $4.3$10.1 million for the same period in 2020. Net2022. The increase in net interest income on finance receivables comprises the following:
was driven by origination growth on our Credit Builder Plus loans
Net interest income relatedLoans across both existing and new customers. The amortization of loan origination costs decreased by $0.8 million to Credit Builder Plus loans increased by $5.4 million, or 128.1%, to $9.6$0.2 million for the twelve months ended December 31, 20212023, as compared to $4.2$1.0 million for the same period in 2020. We launched Credit Builder Plus in 2019 and it became our only secured personal loan product in the second quarter of 2020 as we transitioned from ML Plus loans, which contributed2022.
Enterprise service revenues
Enterprise service revenues increased by $16.6 million, or 13.6%, to the increase in net interest income as Credit Builder Plus loans increased across both existing and new customers.
ML Plus loans
Net interest income related to ML Plus loans decreased by $0.9 million to $0.0$138.3 million for the twelve months ended December 31, 2021,2023, as compared to $0.9$121.8 million for the same period in 2020. We transitioned from originating ML Plus loans in the second quarter of 2020 as we offered our new and existing customers our Credit Builder Plus loans. Therefore, these loans are immaterial to our ongoing performance as they represent less than 1% of receivables on our consolidated balance sheets.
Unsecured personal loans
Net interest income related to unsecured personal loans decreased by $1.3 million to $(0.1) million for the twelve months ended December 31, 2021, as compared to $1.2 million for the same period in 2020. During the first quarter of 2020, we phased out originating unsecured personal loans. Therefore, these loans are immaterial to our ongoing performance as they represent less than 1% of receivables on our consolidated balance sheets.
Amortization of loan origination costs
The amortization of loan origination costs increased by $0.6 million, to $2.5 million for the twelve months ended December 31, 2021, as compared to $1.9 million for the same period in 2020.
Membership subscription revenue
Membership subscription revenue increased by $6.4 million, or 24.5%, to $32.4 million for the twelve months ended December 31, 2021, as compared to $26.0 million for the same period in 2020 due to an increasing number of customers using the Credit Builder Plus membership program. This was slightly offset by a lower monthly Credit Builder Plus membership fee charged to customers compared to the higher priced ML Plus membership offered in the first half of 2020. There was a non-recurring adjustment of $3.6 million in 2020 that reduced membership revenue during that period. Membership subscription revenue would have increased $2.8 million during this period excluding this adjustment.
Affiliates income
Affiliates income increased by $8.7 million, or 387.9%, to $10.9 million for the twelve months ended December 31, 2021, as compared to $2.2 million for the same period in 2020.2022. This increase was primarily attributable to an increasestronger performance in income generated from running campaigns promoting various affiliate partners through our digital platform, driven by the expansion of our partner networkEnterprise Marketplace and growth in Total Customers.
Fee income
Fee income increased by $69.5 million, or 149.0%, to $116.1 million for the twelve months ended December 31, 2021, as compared to $46.6 million for the same period in 2020.
Fee income is primarily compriseda full year impact of the following:
Instant transfer fees
Fee income related to instant transfer fees on Instacash, Credit Builder Plus loans and ML Plus loans increasedEngine Acquisition, which was slightly offset by $51.6 million to $78.0 million for the twelve months ended December 31, 2021, as compared to $26.4 million for the same period in 2020. The increase is largely attributable to the growth of Instacash advances, across both existing and new customers. We launched the instant transfer disbursement option for Instacash customers in 2019 and have since seen a consistent percentage of our Instacash customers elect this disbursement option. In November 2021, our pricing structure was changed from a fixed to a variable structure based on the size of the advance. Additionally, there was a decrease in instant transfer fees on Credit Builder Plus loans as beginning in the second quarter of 2021, the instant transfer disbursement option was removed for Credit Builder Plus loans.Media Services revenue.
69
Operating Expenses
Tips
Fee income related to tips from Instacash increased by $11.7 million to $23.5 millionThe following table is reference for the twelve months ended December 31, 2021, as compared to $11.8 million for the same period in 2020. This increase was driven by the growth of Instacash advances, across both existing and new customers.
Interchange fees
Fee income related to interchange fees from our bank account increased by $5.8 million to $11.1 million for the twelve months ended December 31, 2021, as compared to $5.3 million for the same period in 2020. This increase was driven by an increase in bank account customers and transaction volume on the platform.
Cardholder fees
Fee income related to cardholder fees from our bank account increased by $1.2 million to $2.5 million for the twelve months ended December 31, 2021, as compared to $1.3 million for the same period in 2020. This increase was primarily driven by a small monthly administration feediscussion that we began charging our bank account customers in the third quarter of 2020 as well as an increase in bank account customers and usage of ATM-related services.follows:
|
| Twelve Months Ended December 31, |
|
| Change |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| $ |
|
| % |
| ||||
|
| (In thousands, except for percentages) |
| |||||||||||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Provision for credit losses on consumer receivables |
| $ | 93,418 |
|
| $ | 99,753 |
|
| $ | (6,335 | ) |
|
| -6.4 | % |
Compensation and benefits |
|
| 93,895 |
|
|
| 99,603 |
|
|
| (5,708 | ) |
|
| -5.7 | % |
Marketing |
|
| 28,125 |
|
|
| 37,245 |
|
|
| (9,120 | ) |
|
| -24.5 | % |
Direct costs |
|
| 126,361 |
|
|
| 106,419 |
|
|
| 19,942 |
|
|
| 18.7 | % |
Professional services |
|
| 19,105 |
|
|
| 32,650 |
|
|
| (13,545 | ) |
|
| -41.5 | % |
Technology-related costs |
|
| 24,056 |
|
|
| 21,536 |
|
|
| 2,520 |
|
|
| 11.7 | % |
Other operating expenses |
|
| 43,816 |
|
|
| 42,216 |
|
|
| 1,600 |
|
|
| 3.8 | % |
Total operating expenses |
| $ | 428,776 |
|
| $ | 439,422 |
|
| $ | (10,646 | ) |
|
| -2.4 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other (expense) income |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense |
| $ | (28,663 | ) |
| $ | (29,799 | ) |
| $ | 1,136 |
|
|
| -3.8 | % |
Change in fair value of warrant liability |
|
| (473 | ) |
|
| 7,923 |
|
|
| (8,396 | ) |
| nm |
| |
Change in fair value of contingent consideration from mergers and acquisitions |
|
| 6,613 |
|
|
| 41,254 |
|
|
| (34,641 | ) |
|
| -84.0 | % |
Goodwill impairment loss |
|
| (26,721 | ) |
|
| (136,760 | ) |
|
| 110,039 |
|
|
| -80.5 | % |
Other income |
|
| 8,268 |
|
|
| 1,359 |
|
|
| 6,909 |
|
|
| 508.4 | % |
Total other expense |
| $ | (40,976 | ) |
| $ | (116,023 | ) |
| $ | 75,047 |
|
|
| -64.7 | % |
|
|
|
|
|
|
|
|
|
|
|
| |||||
Income tax benefit |
| $ | (1,076 | ) |
| $ | (25,634 | ) |
| $ | 24,558 |
|
|
| -95.8 | % |
Administration fees
Fee income related to administration fees from our managed investment account decreased by $0.1 million to $1.0 million for the twelve months ended December 31, 2021, as compared to $1.1 million for the same period in 2020. We charge our investment account customers a small administration fee. We transitioned from a quarterly to monthly frequency, while holding the fee amount the same, in the fourth quarter of 2020, while also instituting a waiver of the fee for Credit Builder Plus members.
Credit-related decision services fees
Fee income related to credit-related decision services decreased to zero for the twelve months ended December 31, 2021, as compared to $0.7 million for same period in 2020. These decreases in revenue were due to the phasing out of this offering in the first quarter of 2020. We do not expect this to contribute to revenue going forward.
Other income
Other income increased by $4.5 million to $4.7 million, for the twelve months ended December 31, 2021, as compared to $0.2 million for the same period in 2020. This increase was primarily driven by revenue generated by digital media and content production services.
Operating Expenses
Our operating expenses consist of the following:
Marketing
Marketing increased by $32.1 million, or 290.3%, to $43.2 million for the twelve months ended December 31, 2021, as compared to $11.1 million for the same period in 2020. This increase resulted primarily from an increase in costs related to advertising through digital platforms of $26.8 million and other marketing-related activities of $5.6 million, partially offset by a decrease in costs related to sponsor agreements with third parties of $0.3 million. Marketing expenses also included $1.1 million in the twelve months ended December 31, 2021 related to the Business Combination.
Provision for losscredit losses on consumer receivables
Provision for losscredit losses on consumer receivables consists of amounts charged during the period to maintain an allowance for credit and advance losses. The allowance represents management’s estimate of the credit losses in our loan and advanceconsumer receivable portfolio and is based on management’s assessment of many factors, including changes in the nature, volume and risk characteristics of the financeconsumer receivables portfolio, including trends in delinquency and charge-offs and current economic conditions that may affect the customer’s ability to pay.
Provision for losscredit losses on consumer receivables increaseddecreased by $39.5$6.3 million, or 185.3%6.4%, to $60.7$93.4 million for the twelve months ended December 31, 2021,2023, as compared to $21.3$99.8 million for the same period in 2020.2022. This increasedecrease resulted primarily from an increasea decrease to the provision related to Instacash advance receivables of $30.4$6.9 million, Credit Builder Loan receivables of $3.0 million and subscription fees receivables of $1.1 million. These decreases were partially offset by an increase in provision related to Instacash instant transfer fees and tips of $4.2$4.7 million.
Compensation and benefits
Compensation and benefits decreased by $5.7 million, and Credit Builder Plus loan receivables of $1.0 million, evidenced by the increase in Total Originations from approximately $410or 5.7%, to $93.9 million for the twelve months ended December 31, 20202023, as compared to approximately $1.1 billion for the same period in 2021. Provision related to membership fees increased by $1.3 million. Related to the ML Plus loans, a legacy product we transitioned from in the second quarter of 2020, the provision increased by $2.3 million, from $(3.3) million in the twelve months ended December 31, 2020 compared to $(1.0)$99.6 million for the same period in 2021.2022. This decrease was driven primarily by $9.7 million of lower employee costs and $1.6 million of lower severance costs as a result of expense reduction initiatives taken at the end of 2022. This decrease was partially offset by an increase in stock-based compensation expenses of $3.3 million, lower software capitalization benefit of $1.4 million and an increase in annual bonuses and commissions of $0.9 million due to company performance.
70
Marketing
Other direct costs
Other direct costs increasedMarketing decreased by $4.5$9.1 million, or 104.4%24.5%, to $8.9$28.1 million for the twelve months ended December 31, 2021,2023, as compared to $4.3$37.2 million for the same period in 2020.2022. This increasedecrease resulted primarily from an increase inlower spend on advertising through digital platforms.
Direct costs related to our bank account offering, paid to our partner bank, card associations and third-party service providers, which was largely driven by the increase in bank account customers and transaction volume on the platform.
Interest expense
Interest expenseDirect costs increased by $4.3$19.9 million, or 145.8%18.7%, to $7.3$126.4 million for the twelve months ended December 31, 2021,2023, as compared to $3.0$106.4 million for the same period in 2020.2022. The increase was primarily driven by $15.0 million of direct costs related to the growth of Enterprise Marketplace revenues, an increase in payment processing fees of $5.7 million and an increase in origination expenses of $1.9 million, driven by growth in Total Originations and Total Customers, which was partially offset by a $1.1 million decrease in Media direct costs as a result of lower revenues, a $0.9 million decrease in costs related to our banking and investment account products and $0.6 million of lower underwriting costs.
Professional services
Professional services decreased by $13.5 million, or 41.5%, to $19.1 million for the twelve months ended December 31, 2023, as compared to $32.7 million for the same period in 2022. This decrease resulted primarily from lower outside consulting and accounting fees of $11.4 million, lower recruiting expenses of $1.2 million and lower outside legal fees of $0.9 million.
Technology-related costs
Technology-related costs increased by $2.5 million, or 11.7%, to $24.1 million for the twelve months ended December 31, 2023, as compared to $21.5 million for the same period in 2022. This increase resulted primarily from an increase in debt fromdepreciation and amortization related to equipment and software of $1.3 million and an increase in costs related to internet hosting, software licenses and subscriptions of $1.2 million.
Other operating expenses
Other operating expenses increased by $1.6 million, or 3.8%, to $43.8 million for the twelve months ended December 31, 20202023, as compared to $42.2 million for the same period in 2022. The increase was primarily due to an increase related to legal matters of $2.1 million, an increase in intangible amortization of $1.7 million attributable to the Engine Acquisition and an increase in rent expense of $1.2 million primarily attributable to a landlord reimbursement of capital expenditures during 2022, the Engine Acquisition and lease impairment charges from subleasing Engine's former office space. These increases were partially offset by lower costs related to corporate insurance of $1.0 million and lower expenses related to processing transactions in our Consumer business of $2.2 million.
Our other (expense) income consists of the following:
Interest expense
Interest expense decreased by $1.1 million, or 3.8%, to $28.7 million for the twelve months ended December 31, 2021.2023, as compared to $29.8 million for the same period in 2022. This decrease resulted from a decrease in average debt outstanding during the twelve months ended December 31, 2023 compared to the same period in 2022. See Part II, Item 8 “Financial Statements and Supplementary Data — Debt” within this Annual Report on Form 10-K for more information.
71
Personnel expenses
Personnel expenses increased by $21.7 million, or 89.6%, to $45.9 million for the twelve months ended December 31, 2021, as compared to $24.2 million for the same period in 2020. This increase resulted from an increase in personnel-related costs, such as compensation and benefits, including $6.3 million in non-recurring, discretionary incentive bonus expense related to the Business Combination. Stock-based compensation also increased by $3.4 million. Total employees across all locations increased from 234 as of December 31, 2020 to 556 as of December 31, 2021.
Underwriting expenses
Underwriting expenses increased by $2.0 million, or 32.2%, to $8.3 million for the twelve months ended December 31, 2021, as compared to $6.2 million for the same period in 2020. This increase resulted primarily from an increase in data costs for Total Originations and Total Customers.
Information technology expenses
Information technology expenses increased by $0.4 million, or 6.3%, to $7.5 million for the twelve months ended December 31, 2021, as compared to $7.0 million for the same period in 2020. This increase resulted primarily from an increase in internet hosting expenses of $0.9 million, offset by a decrease in software licenses and subscriptions of $0.4 million.
Bank and payment processor fees
Bank and payment processor fees increased by $10.8 million, or 78.8%, to $24.6 million for the twelve months ended December 31, 2021, as compared to $13.7 million for the same period in 2020. This increase resulted primarily from an increase in payment processing fees driven by the growth in Total Originations and Total Customers.
Change in fair value of warrant liability
Change in fair value of warrant liability was an expense of $39.6$0.5 million for the twelve months ended December 31, 2021,2023, as compared to an expensea benefit of $14.4$7.9 million for the same period in 2020.2022. The change in fair value of warrant liability iswas due to changes in inputs that drive the warrant liability fair value calculations.
Change in fair value of subordinated convertible notes
Change in fair value of subordinated convertible notes was an expense of $41.9 million for the twelve months ended December 31, 2021, as compared to $4.0 million for the same period in 2020. The increase in expense resulted from the issuance of the convertible subordinated notes in December 2020 and January 2021, which were converted into common stock immediately prior to the Business Combination Closing; the noteholders subsequently received shares of MoneyLion Class A Common Stock upon the Business Combination Closing.
Change in fair value of contingent consideration from mergers and acquisitions (As Restated)
Change in fair value of contingent consideration from mergers and acquisitions was an expensea benefit of $10.8$6.6 million for the twelve months ended December 31, 2021,2023, as compared to zeroa benefit of $41.3 million for the same period in 2020.2022. The change in fair value and related increase in expense resulted from MALKA’s operating performance exceeding initial estimates available at the time of the MALKA Acquisition and the declinewas due to changes in the market value of the MoneyLion Class A Common Stock subsequent to the closing of the MALKA Acquisition, which increasedinputs driving the fair value calculations.
Goodwill impairment loss
A goodwill impairment loss was identified based on goodwill impairment calculations effective June 30, 2023 and December 31, 2022. See Part II, Item 8 “Financial Statements and Supplementary Data — Summary of various make-whole provisions relating to the MALKA Acquisition valued within contingent consideration.Significant Accounting Policies — Goodwill” for additional information.
Professional feesOther income
Professional feesOther income increased by $11.5$6.9 million or 136.4%, to $19.8other income of $8.3 million for the twelve months ended December 31, 2021,2023, as compared to $8.4other income of $1.4 million for the same period in 2020. This increase resulted primarily from an2022. The majority of the increase in fees related to accounting and consulting services of $5.5 million and legal services of $5.9 million, resulting in part from supplemental accounting and legal support related to the Business Combination and other transaction-related activity such as the MALKA Acquisition and Even Acquisition.
Other operating expenses
Other operating expenses increased by $18.0 million to $19.2 million forincome during the twelve months ended December 31, 2021, as compared2023 was related to $1.2 million for the same period in 2020. The increase was driven by an increase in interest income of $10.3$5.3 million from interest bearing deposit accounts and a decrease in losses on debt extinguishment of $0.3 million. The twelve months ended December 31, 2023 also included a gain on the sale of regulatory credits totaling $0.6 million, non-recurring trademark use settlement income of $0.2 million and income from a sublease initiated during the twelve months ended December 31, 2023 of $0.3 million.
Income tax benefit
See Part II, Item 8 “Financial Statements and Supplementary Data — Income Taxes” for unrecovered customer purchase transactions related to our banking product, $3.5 million insurance-related expenses, digital media and content production services costs of $2.6 million, $1.9 million related to a reserve for costs related to ongoing legal matters and other general operating expenses. This was offset by the gain related to the forgiveness of loans of $3.2 million as the SBA approved the Company’s application for forgiveness with respect to the entire outstanding balancean explanation of the PPP loan insignificant income tax benefit recorded during the second quarter of 2021.twelve months ended December 31, 2023.
Non-GAAP Measures
In addition to total revenues, net, net income (loss) and gross profit,, which are measuresis a measure presented in accordance with U.S. GAAP, management believes that Adjusted Revenue, Adjusted Gross Profit, Adjusted Net Income (Loss) and Adjusted EBITDA provideprovides relevant and useful information which is widely used by analysts, investors and competitors in our industry in assessing performance. Adjusted Revenue, Adjusted Gross Profit, Adjusted Net Income (Loss) and Adjusted EBITDA areis a supplemental measuresmeasure of MoneyLion’sour performance that areis neither required by nor presented in accordance with U.S. GAAP. Adjusted Revenue, Adjusted Gross Profit, Adjusted Net Income (Loss) and Adjusted EBITDA should not be considered as substitutesa substitute for U.S. GAAP metrics such as total revenues, net, net income (loss), gross profit or any other performance measures derived in accordance with U.S. GAAP and may not be comparable to similar measures used by other companies.
We define Adjusted Revenue as total revenues, net plus amortization of loan origination costs less provision for loss on membership receivables and provision for loss on fees receivables, revenue derived from phased out products and non-operating income. We believe that Adjusted Revenue provides a meaningful understanding of revenue from ongoing products and recurring revenue for comparability purposes.
We define Adjusted Gross Profit as gross profit less revenue derived from phased out products and non-operating income. We define Adjusted Net Income (Loss)EBITDA as net income (loss) plus interest expense related to corporate debt, income tax expense (benefit), depreciation and amortization expense, change in fair value of warrants, change in fair value of subordinated convertible notes,warrant liability, change in fair value of contingent consideration from mergers and acquisitions, goodwill impairment loss, stock-based compensation one-time transaction related expenses and other one-time expenses less origination financing cost of capital. We define Adjusted EBITDA as Adjusted Net Income (Loss) plus depreciation and amortization expense and interest expense related to corporate debt.certain other expenses that management does not consider in measuring performance. We believe that these measures provideAdjusted EBITDA provides a meaningful understanding of an aspect of profitability based on our current product portfolio.
Adjusted Revenue, Adjusted Gross Profit, Adjusted Net Income (Loss) and In addition, Adjusted EBITDA areis useful to an investor in evaluating our performance because these measures:it:
The reconciliation of total revenues, netis a measure widely used by investors, analysts and competitors to Adjusted Revenue for the twelve months ended December 31, 2021 and 2020 is as follows:
Twelve Months Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| (In thousands) | ||||||||
| Total revenues, net | $ | 171,111 | $ | 79,411 | ||||
| Add back: | ||||||||
| Amortization of loan origination costs(1) | 2,500 | 1,894 | ||||||
| Less: | ||||||||
| Provision for loss on receivables – membership receivables (2) | (3,170 | ) | (1,856 | ) | ||||
| Provision for loss on receivables – fees receivables (3) | (5,604 | ) | (1,356 | ) | ||||
| Revenue, net derived from products that have been phased out(4) | 114 | (1,926 | ) | |||||
| Non-operating income(5) | (17 | ) | (113 | ) | ||||
| Adjusted Revenue | $ | 164,934 | $ | 76,053 | ||||
The reconciliation of gross profit, which is prepared in accordance with U.S. GAAP, to Adjusted Gross Profit for the twelve months ended December 31, 2021 and 2020 is as follows:
| Twelve Months Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| (In thousands) | ||||||||
| Total revenues, net | $ | 171,111 | $ | 79,411 | ||||
| Less: | ||||||||
| Cost of sales | ||||||||
| Bank and payment processor fees | (24,565 | ) | (13,737 | ) | ||||
| Underwriting expenses | (8,253 | ) | (6,242 | ) | ||||
| Provision for loss on receivables – membership receivables (1) | (3,170 | ) | (1,856 | ) | ||||
| Provision for loss on receivables – fees receivables (2) | (5,604 | ) | (1,356 | ) | ||||
| Information technology expenses | (6,352 | ) | (5,280 | ) | ||||
| Professional fees | (3,574 | ) | (2,753 | ) | ||||
| Personnel expenses | (3,836 | ) | (3,513 | ) | ||||
| Other direct costs | (8,864 | ) | (4,336 | ) | ||||
| Other operating (income) expenses | (2,708 | ) | 282 | |||||
| Gross profit | 104,185 | 40,620 | ||||||
| Less: | ||||||||
| Revenue, net derived from products that have been phased out(3) | 114 | (1,926 | ) | |||||
| Non-operating income(4) | (17 | ) | (113 | ) | ||||
| Adjusted Gross Profit | $ | 104,283 | $ | 38,580 | ||||
72
The reconciliation of net loss which is prepared in accordance with U.S. GAAP, to Adjusted Net Loss and to Adjusted EBITDA for the twelve months ended December 31, 20212023 and 20202022 is as follows:
|
| Twelve Months Ended December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Net loss |
| $ | (45,245 | ) |
| $ | (189,066 | ) |
Add back: |
|
|
|
|
|
| ||
Interest related to corporate debt1 |
|
| 13,037 |
|
|
| 10,117 |
|
Income tax benefit |
|
| (1,076 | ) |
|
| (25,634 | ) |
Depreciation and amortization expense |
|
| 24,826 |
|
|
| 21,673 |
|
Changes in fair value of warrant liability |
|
| 473 |
|
|
| (7,923 | ) |
Change in fair value of contingent consideration from mergers and acquisitions |
|
| (6,613 | ) |
|
| (41,254 | ) |
Goodwill impairment loss |
|
| 26,721 |
|
|
| 136,760 |
|
Stock-based compensation expense |
|
| 22,896 |
|
|
| 19,603 |
|
Other expenses2 |
|
| 11,394 |
|
|
| 12,432 |
|
Adjusted EBITDA |
| $ | 46,413 |
|
| $ | (63,296 | ) |
(1)
| Twelve Months Ended December 31, | ||||||||
2021 (As Restated) | 2020 | |||||||
| (In thousands) | ||||||||
| Net loss | $ | (169,484 | ) | $ | (41,587 | ) | ||
| Add back: | ||||||||
| Change in fair value of warrant liability | 39,629 | 14,419 | ||||||
| Change in fair value of subordinated convertible notes | 41,877 | 4,000 | ||||||
| Change in fair value of contingent consideration from mergers and acquisitions | 10,838 | - | ||||||
| Stock compensation expense | 5,039 | 1,650 | ||||||
| One-time transaction related expenses (1) | 10,409 | 50 | ||||||
| Other one-time (gains) expenses (2) | (1,358 | ) | 775 | |||||
| Less: | ||||||||
| Origination financing cost of capital (3) | (12,718 | ) | (8,409 | ) | ||||
| Adjusted net loss | (75,768 | ) | (29,102 | ) | ||||
| Add back: | ||||||||
| Depreciation and amortization expense | 2,392 | 1,108 | ||||||
| Interest expense related to corporate debt (4) | 6,179 | 2,950 | ||||||
| Adjusted EBITDA | $ | (67,197 | ) | $ | (25,044 | ) | ||
| |
| We add back the interest expense related to all outstanding corporate debt, excluding outstanding principal balances |
Changes in Financial Condition to December 31, 2021 from December 31, 2020
| December 31, 2021 | December 31, | Change | ||||||||||||||
(As Restated) | 2020 | $ | % | |||||||||||||
| (In thousands, except for percentages) | ||||||||||||||||
| Assets | ||||||||||||||||
| Cash and restricted cash | $ | 246,224 | $ | 20,927 | $ | 225,297 | 1,076.6 | % | ||||||||
| Receivables | 153,741 | 68,794 | 84,947 | 123.5 | % | |||||||||||
| Allowance for losses on receivables | (22,323 | ) | (9,127 | ) | (13,196 | ) | 144.6 | % | ||||||||
| Receivables, net | 131,418 | 59,667 | 71,751 | 120.3 | % | |||||||||||
| Property and equipment, net | 1,801 | 502 | 1,299 | 258.8 | % | |||||||||||
| Goodwill and intangible assets, net | 77,665 | 30,840 | 46,825 | 151.8 | % | |||||||||||
| Other assets | 34,430 | 11,707 | 22,723 | 194.1 | % | |||||||||||
| Total assets | $ | 491,538 | $ | 123,643 | $ | 367,895 | 297.5 | % | ||||||||
| Liabilities, Redeemable Convertible Preferred Stock, Redeemable Noncontrolling Interests and Stockholders’ Equity (Deficit) | ||||||||||||||||
| Liabilities: | ||||||||||||||||
| Debt agreements | 186,591 | 46,602 | 139,989 | 300.4 | % | |||||||||||
| Accounts payable and accrued liabilities | 75,003 | 20,968 | 54,035 | 257.7 | % | |||||||||||
| Warrant liability | 8,260 | 24,667 | (16,407 | ) | (66.5 | )% | ||||||||||
| Total liabilities | 269,854 | 92,237 | 177,617 | 192.6 | % | |||||||||||
| Redeemable convertible preferred stock (Series A-1, A-2, A-3, B, B-2, C, C-1) | - | 288,183 | (288,183 | ) | (100.0 | )% | ||||||||||
| Redeemable noncontrolling interests | - | 71,852 | (71,852 | ) | (100.0 | )% | ||||||||||
| Stockholders’ equity (deficit): | ||||||||||||||||
| Common Stock | 23 | - | 23 | 0.0 | % | |||||||||||
| Additional paid-in capital | 701,234 | - | 701,234 | 0.0 | % | |||||||||||
| Accumulated deficit | (469,873 | ) | (327,629 | ) | (142,244 | ) | 43.4 | % | ||||||||
| Treasury stock | (9,700 | ) | (1,000 | ) | (8,700 | ) | 870.0 | % | ||||||||
| Total stockholders’ equity (deficit) | 221,684 | (328,629 | ) | 550,313 | (167.5 | )% | ||||||||||
| Total liabilities, redeemable convertible preferred stock, redeemable noncontrolling interests and stockholders’ equity (deficit) | $ | 491,538 | $ | 123,643 | $ | 367,895 | 297.5 | % | ||||||||
Assets
Cash and restricted cash
Cash and restricted cash increased by $225.3 million, or 1,076.6%, to $246.2 million as of December 31, 2021, as compared to $20.9 million as of December 31, 2020. Refer to the “Cash Flows” section below for further discussion on the net cash provided by (used in) operating activities, investing activities and financing activities during the period.
Receivables, net
Receivables, net increased by $71.8 million, or 120.3%, to $131.4 million as of December 31, 2021, as compared to $59.7 million as of December 31, 2020. This increase was primarily driven by the increase in Total Originations, including Credit Builder Plus loans and Instacash advances, membership fees and Instacash tips and instant transfer fees as Instacash continued to see strong growth. This was partially offset by the decrease in ML Plus loans as we completed our transition to Credit Builder Plus loans in 2020 as well as unsecured personal loans as we phased out this offering in 2020. Refer to the “Results of Operations for the twelve months ended December 31, 2021 and 2020” section above for further discussion on the changes in revenues and provisions for loss on receivables.
Goodwill and intangible assets, net
Goodwill and intangible assets, net increased by $46.8 million, or 151.8%, to $77.7 million as of December 31, 2021, as compared to $30.8 million as of December 31, 2020. This increase was attributable to the MALKA Acquisition, which closed in the fourth quarter of 2021.
Other assets
Other assets increased by $22.7 million, or 194.1%, to $34.4 million as of December 31, 2021, as compared to $11.7 million as of December 31, 2020. This was primarily attributable to an increase in prepaid expenses of $7.2 million, including $5.4 million in insurance premiums, receivable from payment processor – debit card collections and others of $12.3 million and other assets of $3.2 million.
Liabilities
Debt agreements
Debt agreements increased by $140.0 million, or 300.4%, to $186.6 million as of December 31, 2021, as compared to $46.6 million as of December 31, 2020. This increase was primarily attributable to $146.0 million of aggregate new debt related to the ROAR 1 SPV Credit Facility and the ROAR 2 SPV Credit FacilityFacility. For U.S. GAAP reporting purposes, interest expense related to corporate debt is included within interest expense in the statement of operations.
73
Changes in Financial Condition to December 31, 2023 from December 31, 2022
|
| December 31, |
|
| December 31, |
|
| Change |
| |||||||
|
| 2023 |
|
| 2022 |
|
| $ |
|
| % |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and restricted cash |
| $ | 94,479 |
|
| $ | 153,709 |
|
| $ | (59,230 | ) |
|
| -38.5 | % |
Consumer receivables |
|
| 208,167 |
|
|
| 169,976 |
|
|
| 38,191 |
|
|
| 22.5 | % |
Allowance for credit losses on consumer receivables |
|
| (35,329 | ) |
|
| (24,841 | ) |
|
| (10,488 | ) |
|
| 42.2 | % |
Consumer receivables, net |
|
| 172,838 |
|
|
| 145,135 |
|
|
| 27,703 |
|
|
| 19.1 | % |
Enterprise receivables, net |
|
| 15,978 |
|
|
| 19,017 |
|
|
| (3,039 | ) |
|
| -16.0 | % |
Property and equipment, net |
|
| 1,864 |
|
|
| 2,976 |
|
|
| (1,112 | ) |
|
| -37.4 | % |
Goodwill and intangible assets, net |
|
| 176,541 |
|
|
| 220,847 |
|
|
| (44,306 | ) |
|
| -20.1 | % |
Other assets |
|
| 53,559 |
|
|
| 54,658 |
|
|
| (1,099 | ) |
|
| -2.0 | % |
Total assets |
| $ | 515,259 |
|
| $ | 596,342 |
|
| $ | (81,083 | ) |
|
| -13.6 | % |
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Debt agreements |
| $ | 189,753 |
|
| $ | 232,011 |
|
| $ | (42,258 | ) |
|
| -18.2 | % |
Accounts payable and accrued liabilities |
|
| 52,396 |
|
|
| 58,129 |
|
|
| (5,733 | ) |
|
| -9.9 | % |
Warrant liability |
|
| 810 |
|
|
| 337 |
|
|
| 473 |
|
|
| 140.4 | % |
Other liabilities |
|
| 15,077 |
|
|
| 33,496 |
|
|
| (18,419 | ) |
|
| -55.0 | % |
Total liabilities |
|
| 258,036 |
|
|
| 323,973 |
|
|
| (65,937 | ) |
|
| -20.4 | % |
Series A Preferred Stock |
|
| - |
|
|
| 173,208 |
|
|
| (173,208 | ) |
|
| -100.0 | % |
Stockholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Common Stock |
|
| 1 |
|
|
| 1 |
|
|
| - |
|
|
| 0.0 | % |
Additional paid-in capital |
|
| 969,641 |
|
|
| 766,839 |
|
|
| 202,802 |
|
|
| 26.4 | % |
Accumulated deficit |
|
| (702,719 | ) |
|
| (657,979 | ) |
|
| (44,740 | ) |
|
| 6.8 | % |
Treasury stock |
|
| (9,700 | ) |
|
| (9,700 | ) |
|
| - |
|
|
| 0.0 | % |
Total stockholders' equity |
|
| 257,223 |
|
|
| 99,161 |
|
|
| 158,062 |
|
|
| 159.4 | % |
Total liabilities, redeemable convertible preferred stock and stockholders' equity |
| $ | 515,259 |
|
| $ | 596,342 |
|
| $ | (81,083 | ) |
|
| -13.6 | % |
Assets
Cash and restricted cash
Cash and restricted cash decreased by $59.2 million, borrowingsor 38.5%, to $94.5 million as of December 31, 2023, as compared to $153.7 million as of December 31, 2022. Refer to the “— Cash Flows” section below for further discussion on the Second Lien Loan (as defined herein)net change in cash and restricted cash from operating activities, investing activities and financing activities during the period.
Consumer receivables, net
Consumer receivables, net increased by $27.7 million, or 19.1%, to $172.8 million as of December 31, 2023, as compared to $145.1 million as of December 31, 2022. The increase was primarily driven by an increase in Instacash receivables, net of allowance for credit losses, from December 31, 2022 to December 31, 2023, which was partially offset by a decrease in loan receivables.
74
Enterprise receivables, net
Enterprise receivables, net decreased by $3.0 million, or 16.0%, to $16.0 million as of December 31, 2023, as compared to $19.0 million as of December 31, 2022. This decrease was primarily attributable to a decrease in Consumer Marketplace receivables of $3.1 million and a decrease in Media receivables of $2.6 million. These decreases were partially offset by growth in Enterprise Marketplace receivables of $1.7 million and a reduction in the conversionallowance for credit losses for enterprise receivables of $0.7 million.
Goodwill and intangible assets, net
Goodwill and intangible assets, net decreased by $44.3 million, or 20.1%, to $176.5 million as of December 31, 2023, as compared to $220.8 million as of December 31, 2022. This decrease was primarily attributable to the fair value Subordinated Convertible Notes (as defined herein)goodwill impairment recorded during the twelve months ended December 30, 2023 and amortization of $14.0intangible assets.
Other assets
Other assets decreased by $1.1 million, repaymentor 2.0%, to $53.6 million as of $5.0December 31, 2023, as compared to $54.7 million as of the Second Lien LoanDecember 31, 2022. This was primarily attributable to a decline in operating lease right-of-use assets of $3.0 million due to amortization and forgivenessimpairments and a decline in prepaid expenses of the PPP Loan$2.8 million. These declines were partially offset by an increase in receivables from payment processors of $3.2$4.5 million.
Liabilities
Debt agreements
Debt agreements decreased by $42.3 million, or 18.2%, to $189.8 million as of December 31, 2023, as compared to $232.0 million as of December 31, 2022. Refer to the Part II, Item 8 “Financial Statements and Supplementary Data — Debt” within this Annual Report on Form 10-K for further discussion onof financing transactions during the period.transactions.
Accounts payable and accrued expenses (As Restated)liabilities
Accounts payable and accrued expenses increasedliabilities decreased by $54.0$5.7 million, or 257.7%9.9%, to $75.0$52.4 million as of December 31, 2021,2023, as compared to $21.0$58.1 million as of December 31, 2020, which2022. The decrease was primarily attributable to a reduction of dividends payable of $6.8 million due to the settlement of the related Series A Preferred Stock, a reduction in payroll-related liabilities of $1.2 million, a reduction of $0.6 million in payable owed to payment processors and a reduction in the customer rewards accrual of $0.5 million. These decreases were partially offset by an increase in operating expenses during the period, $5.4litigation reserves of $3.5 million.
Warrant liability
Warrant liability increased by $0.5 million, of accrued liability relatedor 140.4%, to insurance premiums, $3.7$0.8 million of transaction costs related to the Business Combination that remain unpaid as of December 31, 2021 and $29.62023, as compared to $0.3 million as of contingent consideration related to the MALKA Acquisition.December 31, 2022. Refer to the “Results“Results of Operations for the Twelve Months Ended December 31, 20212023 and 2020” section above for further discussion on operating expense activity during the period.
Warrant liability
Warrant liability decreased by $16.4 million, or 66.5%, to $8.3 million as of December 31, 2021, as compared to $24.7 million as of December 31, 2020. Part of the change is due to the conversion of older warrants and acquisition of new warrants as part of the Business Combination described in Note 4, “Business Combination.” Also refer to the “Results of Operations for the Twelve Months Ended December 31, 2021 and 2020”2022” section above for further discussion on the change in fair value of warrant liability.
Other liabilities
Other liabilities decreased by $18.4 million, or 55.0%, to $15.1 million as of December 31, 2023, as compared to $33.5 million as of December 31, 2022. The decrease was primarily attributable to a decrease in liabilities related to the settlement of contingent consideration from mergers and acquisitions of $11.4 million, a decrease in operating lease liabilities of $2.6 million due to paydowns and a reduction in insurance premium liabilities of $2.5 million due to reduced insurance premiums.
75
Liquidity and Capital Resources
As a result of the Business Combination, we raised net proceeds of $293.2 million, including the contribution of cash held in Fusion’s trust account from its initial public offering of $91.1 million, post redemption of Fusion’s common stock held by Fusion’s public stockholders prior to the Business Combination, and $250.0 million of private investment in public equity (“PIPE”) at $10.00 per share of MoneyLion Class A Common Stock, net of transaction expenses. Prior to the Business Combination, the funds received from previous common stock and redeemable convertible preferred stock equity financings, as well as the Company’s ability to obtain lending commitments, provided the liquidity necessary for the Company to fund its operations. We believe our existing cash and cash equivalents and cash flows from operating activities will be sufficient to meet our operating working capital needs for at least the next twelve months. Our future financing requirements will depend on several factors, including our growth, the timing and level of spending to support continued development of our platform, the expansion of marketing activities and merger and acquisition activity. In addition, growth of our finance receivables increases our liquidity needs, and any failure to meet those liquidity needs could adversely affect our business. Additional funds may not be available on terms favorable to us or at all. If the Company is unable to generate positive operating cash flows, additional debt and equity financings or refinancing of existing debt financings may be necessary to sustain future operations.
Receivables originated on our platform, including Credit Builder Loans and Instacash advances, were primarily financed through special purpose vehicle financings from third-party institutional lenders. As part of December 31, 2023, there was an outstanding principal balance of $64.5 million under the Even Acquisition, which closedROAR 1 SPV Credit Facility and an outstanding principal balance of $62.5 million under the ROAR 2 SPV Credit Facility. For more information, see Part II, Item 8 “Financial Statements and Supplementary Data — Debt” within this Annual Report on February 17, 2022, we agreed to pay approximately $14.5 million in cash to certain Even Financial management equityholders.Form 10-K for more information on the ROAR 1 SPV Credit Facility and the ROAR 2 SPV Credit Facility.
The following table presents the Company’s cash, restricted cash and receivable from payment processor, as of December 31, 20212023 and 2020:2022:
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| (In thousands) | ||||||||
| Cash | $ | 201,763 | $ | 19,406 | ||||
| Restricted cash | 44,461 | 1,521 | ||||||
| Receivable from payment processor - Debit card collections | 16,681 | 5,600 | ||||||
| Receivable from payment processor - Other | 3,156 | 1,936 | ||||||
|
| December 31, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Cash |
| $ | 92,195 |
|
| $ | 115,864 |
|
Restricted cash |
|
| 2,284 |
|
|
| 37,845 |
|
Receivable from payment processor |
| $ | 37,362 |
|
| $ | 32,881 |
|
Cash Flows
The following table presents cash provided by (used in) operating, investing and financing activities during the twelve months ended December 31, 20212023 and 2020:2022:
Twelve Months Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| (In thousands) | ||||||||
| Net cash (used in) provided by operating activities | $ | (8,569 | ) | $ | 3,028 | |||
| Net cash used in investing activities | (144,361 | ) | (42,747 | ) | ||||
| Net cash provided by financing activities | 378,227 | 14,833 | ||||||
| Net change in cash and restricted cash | $ | 225,297 | $ | (24,886 | ) | |||
|
| Twelve Months Ended December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Net cash provided by operating activities |
| $ | 116,346 |
|
| $ | 3,361 |
|
Net cash used in investing activities |
|
| (127,565 | ) |
|
| (141,546 | ) |
Net cash (used in) provided by financing activities |
|
| (48,011 | ) |
|
| 45,670 |
|
Net change in cash and restricted cash |
| $ | (59,230 | ) |
| $ | (92,515 | ) |
Operating Activities
Net cash used inprovided by operating activities was $8.6$116.3 million for the twelve months ended December 31, 20212023 compared to net cash provided by operating activities of $3.0$3.4 million for the twelve months ended December 31, 2020.2022. The primary driverincrease in net cash provided by operating activities was a decreaseprimarily driven by an increase in profitability, after adjusting for non-cash activity included in our net loss, of approximately $12.6$100.2 million and changes in working capital during the twelve months ended December 31, 20212023 compared to the twelve months ended December 31, 2020, primarily as the result of increases in marketing expenses, other direct costs, personnel expenses, bank and payment processor fees, professional fees and other expenses, which were partially offset by increases in net revenues.2022.
76
Investing Activities
Net cash used in investing activities was $144.4 million and $42.7$127.6 million for the twelve months ended December 31, 2021 and 2020, respectively.2023 compared to net cash used in investing activities of $141.5 million for the twelve months ended December 31, 2022. The increasedecrease in net cash used in investing activities was primarily related to an increasea reduction in net originationsspending on mergers and collections of finance receivables of $90.2 millionacquisitions and $12.1 million spent on the MALKA Acquisitionsoftware development during the twelve months ended December 31, 2021.2023, which was partially offset by an increase in net originations of finance receivables and cash payments to settle contingent consideration related to mergers and acquisitions.
Financing Activities
Net cash provided byused in financing activities was $378.2 million and $14.8$48.0 million for the twelve months ended December 31, 2021 and 2020, respectively.2023 compared to net cash provided by financing activities of $45.7 million for the twelve months ended December 31, 2022. The increase in cash provided byused for financing activities was primarily attributable to neta decrease in proceeds from the Business Combinationdebt issuances, net of $293.2 million,fees and financing costs, an increase in debt principal payments, a decrease in proceeds of $146.0 million from aggregate new debt related to the ROAR 1 SPV Credit Facility and the ROAR 2 SPV Credit Facility and an increase in proceeds from the issuanceexercise of convertible notes of $26.8 million, partially offset by an increase in outflows to noncontrolling interests of $73.9 million and payments for redeemed common stock and stock options during the twelve months ended December 31, 2023 compared to the twelve months ended December 31, 2022 and cash disbursements related to the automatic conversion of $22.4 million.the Series A Preferred Stock to Class A Common Stock pursuant to the terms of the Certificate of Designations governing the Series A Preferred Stock and dividends on the Series A Preferred Stock that were paid during the twelve months ended December 31, 2023.
Financing Arrangements
Refer to the Part II, Item 8 “Financial Statements and Supplementary Data — Debt” within this Annual Report on Form 10-K for further discussion on financing transactions during the period.
Contractual Obligations
The table below summarizes debt, lease and other minimum cash obligations outstanding as of December 31, 2021:2023:
| Twelve Months Ended December 31, | ||||||||||||||||||||
| Total | 2022 | 2023 – 2024 | 2025 – 2026 | Thereafter | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| First Lien Loan | $ | 24,028 | $ | 21,667 | $ | 2,361 | $ | - | $ | - | ||||||||||
| Second Lien Loan | 20,000 | 13,333 | 6,667 | - | - | |||||||||||||||
| ROAR 1 SPV Credit Facility | 78,000 | - | - | 78,000 | - | |||||||||||||||
| ROAR 2 SPV Credit Facility | 68,000 | - | - | 68,000 | - | |||||||||||||||
| Operating lease obligations | 4,554 | 1,242 | 2,312 | 1,000 | - | |||||||||||||||
| Total | $ | 194,582 | $ | 36,242 | $ | 11,340 | $ | 147,000 | $ | - | ||||||||||
|
| Total |
|
| 2024 |
|
| 2025 – 2026 |
|
| 2027 – 2028 |
|
| Thereafter |
| |||||
Monroe Term Loans |
| $ | 65,000 |
|
| $ | — |
|
| $ | 65,000 |
|
| $ | — |
|
| $ | — |
|
ROAR 1 SPV Credit Facility |
|
| 64,500 |
|
|
| — |
|
|
| 64,500 |
|
|
| — |
|
|
| — |
|
ROAR 2 SPV Credit Facility |
|
| 62,500 |
|
|
| — |
|
|
| 62,500 |
|
|
| — |
|
|
| — |
|
Operating lease obligations |
|
| 8,318 |
|
|
| 3,101 |
|
|
| 3,545 |
|
|
| 1,672 |
|
|
| — |
|
Vendor unconditional purchase obligations |
|
| 27,817 |
|
|
| 2,317 |
|
|
| 17,000 |
|
|
| 8,500 |
|
|
| — |
|
Total |
| $ | 228,135 |
|
| $ | 5,418 |
|
| $ | 212,545 |
|
| $ | 10,172 |
|
| $ | — |
|
Secured Loans and Other Debt
For more information regarding our secured loans and other debt, see Part II, Item 8 “Financial“Financial Statements and Supplementary Data — Debt” Debt” within this Annual Report on Form 10-Kin this Annual Report on Form 10-K/A.10-K.
Equity
MoneyLion ClassSeries A Common Stock
After the Business Combination Closing, MoneyLion’s Certificate of Incorporation authorized the issuance of an aggregate of 2,200 million shares of capital stock, consisting of 2,000,000,000 shares of MoneyLion Class A Common Stock, $0.0001 par value per share and 200,000,000 shares of preferred stock, $0.0001 par value per share. Immediately following the Business Combination, 970,000 shares of MoneyLion Class A Common Stock were redeemed for $9.7 million.
Redeemable Convertible Preferred Stock
For more information regarding our redeemable convertible preferred stock,the Series A Preferred Stock, see Part II, Item 8 “Financial“Financial Statements and Supplementary Data — Redeemable ConvertibleCommon and Preferred Stock” Stock”in this Annual Report on Form 10-K/A.10-K.
Off-Balance Sheet Arrangements
At December 31, 2021,2023, the Company did not have any material off-balance sheet arrangements.
77
Critical Accounting Policies and Estimates
See Part II, Item 8 “Financial Statements and Supplementary Data — Summary of Significant Accounting Policies” included elsewhere in this Annual Report on Form 10-K/A10-K for a description of critical accounting policies and estimates.
Recently Issued and Adopted Accounting Pronouncements
See Part II, Item 8 “Financial Statements and Supplementary Data — Summary of Significant Accounting Policies” included elsewhere in this Annual Report on Form 10-K/A10-K for a description of recently issued accounting pronouncements that may potentially impact our results of operations, financial condition or cash flows.
78
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates.
Interest RatesRate Risk
Interest rates may adversely impact our customers’ level of engagement on our platform and ability and willingness to pay outstanding amounts owed to us. While we do not charge interest on a lotmany of our products, higher interest rates could deter customers from utilizing our credit products and other loans. Moreover, higher interest rates may lead to increased delinquencies, charge-offs and allowances for loans and interest receivable, which could have an adverse effect on our operating results.
Certain of our funding arrangements,The Monroe Term Loans (as defined in Part II, Item 8 “Financial Statements and Supplementary Data — Debt”in this Annual Report on Form 10-K), and future funding arrangements may, bear a variable interest rate. The ROAR 1 SPV Credit Facility and ROAR 2 SPV Credit Facility have fixed interest rates. Given the fixed interest rates charged on many of our loans, a rising variable interest rate would reduce our interest margin earned in these funding arrangements. Dramatic increases in interest rates may make these forms of funding nonviable. A one percent change in the interest rate on our variable interest rate debt, based on principal balances as of December 31, 2021,2023, would result in an approximately $0.4$0.7 million impact to annual interest expense.
79
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of MoneyLion Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of MoneyLion Inc. and its subsidiaries (the Company) as of December 31, 20212023 and 2020,2022, the related consolidated statements of operations, redeemable convertible preferred stock redeemable noncontrolling interests and stockholders’ equity (deficit) and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20212023 and 2020,2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 2 and Note 3 to the financial statements, the 2021 financial statements have been restatedCompany has changed its method of accounting for the allowance for credit losses in the year ended December 31, 2023, due to correct a misstatement.the adoption of Accounting Standards Update 2016-13, Financial Instruments – Credit Losses (Topic 326).
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ RSM US LLP
We have served as the Company's auditor since 2016.
Austin, Texas
March 7, 2024
F-2
March 17, 2022, except for Notes 2, 3, 11, 16 and 18,
as to which the date is August 11, 2022
MONEYLION INC.
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands, except per share amounts)
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (As Restated) | ||||||||
| Assets | ||||||||
| Cash, including amounts held by variable interest entities (VIEs) of $0 and $390 | $ | 201,763 | $ | 19,406 | ||||
| Restricted cash, including amounts held by VIEs of $39,396 and $0 | 44,461 | 1,521 | ||||||
| Receivables | 153,741 | 68,794 | ||||||
| Allowance for losses on receivables | (22,323 | ) | (9,127 | ) | ||||
| Receivables, net, including amounts held by VIEs of $92,796 and $52,264 | 131,418 | 59,667 | ||||||
| Property and equipment, net | 1,801 | 502 | ||||||
| Intangible assets, net | 25,124 | 9,275 | ||||||
| Goodwill | 52,541 | 21,565 | ||||||
| Other assets | 34,430 | 11,707 | ||||||
| Total assets | $ | 491,538 | $ | 123,643 | ||||
| Liabilities, Redeemable Convertible Preferred Stock, Redeemable Noncontrolling Interests and Stockholders’ Deficit | ||||||||
| Liabilities: | ||||||||
| Secured loans | 43,591 | 24,395 | ||||||
| Accounts payable and accrued liabilities | 75,003 | 20,968 | ||||||
| Subordinated convertible notes, at fair value | - | 14,000 | ||||||
| Related party loan | - | 5,000 | ||||||
| Warrant liability | 8,260 | 24,667 | ||||||
| Other debt, including amounts held by VIEs of $143,000 and $0 | 143,000 | 3,207 | ||||||
| Total liabilities | 269,854 | 92,237 | ||||||
| Commitments and contingencies (Note 18) | ||||||||
| Redeemable convertible preferred stock (Series A-1, A-2, A-3, B, B-2, C, C-1), $0.0001 par value; 0 and 7,471,198 shares authorized, 0 and 7,085,923 issued and outstanding at December 31, 2021 and December 31, 2020; aggregate liquidation preference of $0 and $288,183 at December 31, 2021 and December 31, 2020(1) | - | 288,183 | ||||||
| Redeemable noncontrolling interests | - | 71,852 | ||||||
| Stockholders’ equity (deficit): | ||||||||
| Class A Common Stock, $0.0001 par value; 2,000,000,000 and 0 shares authorized as of December 31, 2021 and December 31, 2020, respectively, 231,452,448 and 230,482,448 issued and outstanding, respectively, as of December 31, 2021 and 0 issued and outstanding as of December 31, 2020 | 23 | - | ||||||
| Additional paid-in capital | 701,234 | - | ||||||
| Accumulated deficit | (469,873 | ) | (327,629 | ) | ||||
| Treasury stock at cost, 970,000 and 44,924 shares at December 31, 2021 and December 31, 2020, respectively | (9,700 | ) | (1,000 | ) | ||||
| Total stockholders’ equity (deficit) | 221,684 | (328,629 | ) | |||||
| Total liabilities, redeemable convertible preferred stock, redeemable noncontrolling interests and stockholders’ equity (deficit) | $ | 491,538 | $ | 123,643 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
MONEYLION INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollar amounts in thousands, except per share amounts)
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| (As Restated) | ||||||||
| Revenue | ||||||||
| Net interest income on finance receivables | $ | 7,002 | $ | 4,347 | ||||
| Membership subscription revenue | 32,357 | 25,994 | ||||||
| Affiliates income | 10,900 | 2,234 | ||||||
| Fee income | 116,131 | 46,639 | ||||||
| Other income | 4,721 | 197 | ||||||
| Total Revenues, net | 171,111 | 79,411 | ||||||
| Operating expenses | ||||||||
| Marketing | 43,170 | 11,060 | ||||||
| Provision for loss on receivables | 60,749 | 21,294 | ||||||
| Other direct costs | 8,864 | 4,336 | ||||||
| Interest expense | 7,251 | 2,950 | ||||||
| Personnel expenses | 45,878 | 24,200 | ||||||
| Underwriting expenses | 8,253 | 6,242 | ||||||
| Information technology expenses | 7,488 | 7,041 | ||||||
| Bank and payment processor fees | 24,565 | 13,737 | ||||||
| Change in fair value of warrant liability | 39,629 | 14,419 | ||||||
| Change in fair value of subordinated convertible notes | 41,877 | 4,000 | ||||||
| Change in fair value of contingent consideration from mergers and acquisitions | 10,838 | - | ||||||
| Professional fees | 19,847 | 8,396 | ||||||
| Depreciation and amortization expense | 2,392 | 1,108 | ||||||
| Occupancy expense | 997 | 1,233 | ||||||
| Gain on foreign currency translation | (431 | ) | (179 | ) | ||||
| Other operating expenses | 19,172 | 1,155 | ||||||
| Total operating expenses | 340,539 | 120,992 | ||||||
| Net loss before income taxes | (169,428 | ) | (41,581 | ) | ||||
| Income tax expense | 56 | 6 | ||||||
| Net loss | $ | (169,484 | ) | $ | (41,587 | ) | ||
| Net income attributable to redeemable noncontrolling interests | (12,776 | ) | (8,409 | ) | ||||
| Reversal of previously accrued (accrual of) dividends on redeemable convertible preferred stock | 42,728 | (17,209 | ) | |||||
| Net loss attributable to common shareholders | $ | (139,532 | ) | $ | (67,205 | ) | ||
| Net loss per share, basic and diluted(1) | $ | (1.44 | ) | $ | (1.49 | ) | ||
| Weighted average shares used in computing net loss per share, basic and diluted(1) | 97,158,738 | 45,177,217 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
MONEYLION INC.
|
| December 31, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Assets |
|
|
|
|
|
| ||
Cash |
| $ | 92,195 |
|
| $ | 115,864 |
|
Restricted cash, including amounts held by variable interest entities (VIEs) of $128 and $36,235 |
|
| 2,284 |
|
|
| 37,845 |
|
Consumer receivables |
|
| 208,167 |
|
|
| 169,976 |
|
Allowance for credit losses on consumer receivables |
|
| (35,329 | ) |
|
| (24,841 | ) |
Consumer receivables, net, including amounts held by VIEs of $131,283 and $113,963 |
|
| 172,838 |
|
|
| 145,135 |
|
Enterprise receivables, net |
|
| 15,978 |
|
|
| 19,017 |
|
Property and equipment, net |
|
| 1,864 |
|
|
| 2,976 |
|
Intangible assets, net |
|
| 176,541 |
|
|
| 194,247 |
|
Goodwill |
|
| — |
|
|
| 26,600 |
|
Other assets |
|
| 53,559 |
|
|
| 54,658 |
|
Total assets |
| $ | 515,259 |
|
| $ | 596,342 |
|
Liabilities, Redeemable Convertible Preferred Stock and Stockholders' Equity |
|
|
|
|
|
| ||
Liabilities: |
|
|
|
|
|
| ||
Secured loans, net |
| $ | 64,334 |
|
| $ | 88,617 |
|
Accounts payable and accrued liabilities |
|
| 52,396 |
|
|
| 58,129 |
|
Warrant liability |
|
| 810 |
|
|
| 337 |
|
Other debt, net, including amounts held by VIEs of $125,419 and $143,394 |
|
| 125,419 |
|
|
| 143,394 |
|
Other liabilities |
|
| 15,077 |
|
|
| 33,496 |
|
Total liabilities |
|
| 258,036 |
|
|
| 323,973 |
|
Commitments and contingencies (Note 14) |
|
|
|
|
|
| ||
Redeemable convertible preferred stock (Series A), $0.0001 par value; 45,000,000 shares authorized as of December 31, 2023 and December 31, 2022, 0 and 25,655,579 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively |
|
| — |
|
|
| 173,208 |
|
Stockholders' equity: |
|
|
|
|
|
| ||
Class A Common Stock, $0.0001 par value; 66,666,666 shares authorized as of December 31, 2023 and December 31, 2022, 10,444,627 and 10,412,294 issued and outstanding, respectively, as of December 31, 2023 and 8,619,678 and 8,587,345 issued and outstanding, respectively, as of December 31, 2022(1) |
|
| 1 |
|
|
| 1 |
|
Additional paid-in capital |
|
| 969,641 |
|
|
| 766,839 |
|
Accumulated deficit |
|
| (702,719 | ) |
|
| (657,979 | ) |
Treasury stock at cost, 32,333 shares at December 31, 2023 and December 31, 2022(1) |
|
| (9,700 | ) |
|
| (9,700 | ) |
Total stockholders' equity |
|
| 257,223 |
|
|
| 99,161 |
|
Total liabilities, redeemable convertible preferred stock and stockholders' equity |
| $ | 515,259 |
|
| $ | 596,342 |
|
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY (DEFICIT)
(amounts in thousands, except share amounts)
| Redeemable Convertible Preferred Stock (All Series) | Redeemable Noncontrolling | Common Stock | Additional Paid-in | Accumulated | Treasury | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||
| Shares (1) | Amount | Interests | Shares (1) | Amount | Capital | Deficit | Stock | (Deficit) | ||||||||||||||||||||||||||||
| Balances at January 1, 2021 | 116,264,374 | $ | 288,183 | $ | 71,852 | 47,870,720 | $ | - | $ | - | $ | (327,629 | ) | $ | (1,000 | ) | $ | (328,629 | ) | |||||||||||||||||
| Stock-based compensation | - | - | - | - | - | 5,039 | - | - | 5,039 | |||||||||||||||||||||||||||
| Exercise of stock options and warrants | - | - | - | 788,774 | - | 252 | - | - | 252 | |||||||||||||||||||||||||||
| Accrued dividends on redeemable convertible preferred stock | - | 14,292 | - | - | - | (2,606 | ) | (11,686 | ) | - | (14,292 | ) | ||||||||||||||||||||||||
| Preferred stock conversion | (116,264,374 | ) | (302,475 | ) | - | 116,264,374 | 12 | 250,761 | 51,702 | - | 302,475 | |||||||||||||||||||||||||
| Reverse capitalization on September 22, 2021 | - | - | - | 62,223,940 | 11 | 437,948 | - | 1,000 | 438,959 | |||||||||||||||||||||||||||
| Redemption of common stock | - | - | - | (970,000 | ) | - | - | - | (9,700 | ) | (9,700 | ) | ||||||||||||||||||||||||
| Redemption of stock options | - | - | - | - | - | (12,741 | ) | - | - | (12,741 | ) | |||||||||||||||||||||||||
| Issuance of common stock in connection with the acquisition of Malka Media Group LLC | - | - | - | 4,181,441 | - | 21,766 | - | - | 21,766 | |||||||||||||||||||||||||||
| Issuance of common stock in connection with business contracts | - | - | - | 123,199 | - | 815 | - | - | 815 | |||||||||||||||||||||||||||
| Contributions from redeemable noncontrolling interests | - | - | 53,000 | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Redemptions by redeemable noncontrolling interests | - | - | (127,391 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Distributions to redeemable noncontrolling interests | - | - | (10,237 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Net income (loss) | - | - | 12,776 | - | - | - | (182,260 | ) | - | (182,260 | ) | |||||||||||||||||||||||||
| Balances at December 31, 2021 (As Restated) | - | $ | - | $ | - | 230,482,448 | $ | 23 | $ | 701,234 | $ | (469,873 | ) | $ | (9,700 | ) | $ | 221,684 | ||||||||||||||||||
| Redeemable Convertible Preferred Stock (All Series) | Redeemable Noncontrolling | Class A Common Stock | Additional Paid-in | Accumulated | Treasury | Total Stockholders’ | ||||||||||||||||||||||||||||||
| Shares (1) | Amount | Interests | Shares (1) | Amount | Capital | Deficit | Stock | Deficit | ||||||||||||||||||||||||||||
| Balances at January 1, 2020 | 103,598,936 | $ | 231,020 | $ | 73,977 | 44,198,935 | $ | - | $ | - | $ | (262,208 | ) | $ | (1,000 | ) | $ | (263,208 | ) | |||||||||||||||||
| Stock-based compensation | - | - | - | - | - | 1,650 | - | - | 1,650 | |||||||||||||||||||||||||||
| Exercise of stock options and warrants | - | - | - | 3,671,785 | - | 134 | - | - | 134 | |||||||||||||||||||||||||||
| Issuance of Series C-1 in connection with the acquisition of WTI | 8,853,530 | 27,929 | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Issuance of Series C-1 redeemable convertible preferred stock | 3,811,908 | 12,025 | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Accrued dividends on redeemable convertible preferred stock | - | 17,209 | - | - | - | (1,784 | ) | (15,425 | ) | - | (17,209 | ) | ||||||||||||||||||||||||
| Redemption of common stock | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Redemption of stock options | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Contributions from redeemable noncontrolling interests | - | - | 10,750 | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Redemptions by redeemable noncontrolling interests | - | - | (17,489 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Distributions to redeemable noncontrolling interests | - | - | (3,795 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Net income (loss) | - | - | 8,409 | - | - | - | (49,996 | ) | - | (49,996 | ) | |||||||||||||||||||||||||
| Balances at December 31, 2020 | 116,264,374 | $ | 288,183 | $ | 71,852 | 47,870,720 | $ | - | $ | - | $ | (327,629 | ) | $ | (1,000 | ) | $ | (328,629 | ) | |||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
MONEYLION INC.
CONSOLIDATED STATEMENTS OF CASH FLOWSOPERATIONS
(dollar amounts in thousands)thousands, except per share amounts)
| Twelve Months Ended December 31, |
| |||||
| 2023 |
|
| 2022 |
| ||
Revenue |
|
|
|
|
| ||
Service and subscription revenue | $ | 411,238 |
|
| $ | 330,598 |
|
Net interest income on loan receivables |
| 12,193 |
|
|
| 10,147 |
|
Total revenue, net |
| 423,431 |
|
|
| 340,745 |
|
Operating expenses |
|
|
|
|
| ||
Provision for credit losses on consumer receivables |
| 93,418 |
|
|
| 99,753 |
|
Compensation and benefits |
| 93,895 |
|
|
| 99,603 |
|
Marketing |
| 28,125 |
|
|
| 37,245 |
|
Direct costs |
| 126,361 |
|
|
| 106,419 |
|
Professional services |
| 19,105 |
|
|
| 32,650 |
|
Technology-related costs |
| 24,056 |
|
|
| 21,536 |
|
Other operating expenses |
| 43,816 |
|
|
| 42,216 |
|
Total operating expenses |
| 428,776 |
|
|
| 439,422 |
|
Net income (loss) before other (expense) income and income taxes |
| (5,345 | ) |
|
| (98,677 | ) |
Interest expense |
| (28,663 | ) |
|
| (29,799 | ) |
Change in fair value of warrant liability |
| (473 | ) |
|
| 7,923 |
|
Change in fair value of contingent consideration from mergers and acquisitions |
| 6,613 |
|
|
| 41,254 |
|
Goodwill impairment loss |
| (26,721 | ) |
|
| (136,760 | ) |
Other income |
| 8,268 |
|
|
| 1,359 |
|
Net loss before income taxes |
| (46,321 | ) |
|
| (214,700 | ) |
Income tax benefit |
| (1,076 | ) |
|
| (25,634 | ) |
Net loss |
| (45,245 | ) |
|
| (189,066 | ) |
Reversal of previously accrued / (accrued) dividends on preferred stock |
| 690 |
|
|
| (6,880 | ) |
Net loss attributable to common shareholders | $ | (44,555 | ) |
| $ | (195,946 | ) |
|
|
|
|
| |||
Net loss per share, basic and diluted(1) | $ | (4.63 | ) |
| $ | (24.32 | ) |
Weighted average shares used in computing net loss per share, basic and diluted(1) |
| 9,614,309 |
|
|
| 8,056,529 |
|
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | (As Restated) | |||||||
| Net loss | $ | (169,484 | ) | $ | (41,587 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Provision for losses on receivables | 60,749 | 21,294 | ||||||
| Depreciation and amortization expense | 2,392 | 1,108 | ||||||
| Change in deferred fees and costs, net | 1,827 | 1,103 | ||||||
| Change in fair value of warrants | 39,629 | 14,419 | ||||||
| Change in fair value of subordinated convertible notes | 41,877 | 4,000 | ||||||
| Change in fair value of contingent consideration from mergers and acquisitions | 10,838 | - | ||||||
| Gain on PPP Loan forgiveness | (3,207 | ) | - | |||||
| Gains on foreign currency translation | (431 | ) | (179 | ) | ||||
| Stock compensation expense | 5,039 | 1,650 | ||||||
| Changes in assets and liabilities, net of effects of business combination: | ||||||||
| Accrued interest receivable | (449 | ) | 231 | |||||
| Other assets | (17,050 | ) | (4,199 | ) | ||||
| Accounts payable and accrued liabilities | 19,701 | 5,188 | ||||||
| Net cash (used in) provided by operating activities | (8,569 | ) | 3,028 | |||||
| Cash flows from investing activities: | ||||||||
| Net originations and collections of finance receivables | (131,737 | ) | (41,562 | ) | ||||
| Purchase of property, equipment and software | (479 | ) | (1,185 | ) | ||||
| Acquisition of Malka Media Group LLC, net of cash acquired | (12,145 | ) | - | |||||
| Net cash used in investing activities | (144,361 | ) | (42,747 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Repayments to secured/senior lenders | (798 | ) | (18,333 | ) | ||||
| Repayment of related party loan | (5,000 | ) | - | |||||
| Proceeds from issuance of related party loan | - | 5,000 | ||||||
| Proceeds from issuance of special purpose vehicle credit facilities | 146,000 | - | ||||||
| Proceeds from issuance of subordinated convertible notes | 36,750 | 10,000 | ||||||
| Borrowings from secured lenders | 20,000 | 16,697 | ||||||
| Payment of deferred financing costs | (5,147 | ) | - | |||||
| Redemption of founders common stock | (9,700 | ) | - | |||||
| Payment of redeemed stock options | (12,741 | ) | - | |||||
| Proceeds from issuance of common stock related to exercise of stock options and warrants | 252 | 134 | ||||||
| Proceeds from reverse capitalization, net of transaction costs | 293,239 | - | ||||||
| Issuance of Series C-1 preferred stock | - | 12,025 | ||||||
| Contributions from redeemable noncontrolling interests | 53,000 | 10,750 | ||||||
| Redemptions by redeemable noncontrolling interests | (127,391 | ) | (17,645 | ) | ||||
| Distributions to noncontrolling interests | (10,237 | ) | (3,795 | ) | ||||
| Net cash provided by financing activities | 378,227 | 14,833 | ||||||
| Net change in cash and restricted cash | 225,297 | (24,886 | ) | |||||
| Cash and restricted cash, beginning of year | 20,927 | 45,813 | ||||||
| Cash and restricted cash, end of year | $ | 246,224 | $ | 20,927 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 4,378 | $ | 3,090 | ||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Accrued dividends on redeemable convertible preferred stock | $ | (14,292 | ) | $ | (17,209 | ) | ||
| Series C-1 redeemable convertible preferred stock issued to acquire WTI | $ | - | $ | 27,929 | ||||
| Conversion of preferred stock to common stock | $ | 302,475 | $ | - | ||||
| Issuance of common stock related to convertible debt | $ | 92,627 | $ | - | ||||
| Issuance of common stock related to warrants exercised | $ | 85,502 | $ | - | ||||
| Acquisition of private warrants | $ | 29,466 | $ | - | ||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
MONEYLION INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
(amounts in thousands, except share amounts)
| Redeemable Convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| |||||||||||||||
| Preferred Stock (Series A) |
|
|
| Class A Common Stock |
|
| Additional |
|
| Accumulated |
|
| Treasury |
|
| Stockholders' |
| |||||||||||||||
| Shares |
|
|
| Amount |
|
|
| Shares(1) |
|
| Amount(1) |
|
| Paid-in Capital(1) |
|
| Deficit |
|
| Stock |
|
| Equity |
| ||||||||
Balances at January 1, 2023 |
| 25,655,579 |
|
|
| $ | 173,208 |
|
|
|
| 8,587,345 |
|
| $ | 1 |
|
| $ | 766,839 |
|
| $ | (657,979 | ) |
| $ | (9,700 | ) |
| $ | 99,161 |
|
Stock-based compensation |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| 22,896 |
|
|
| — |
|
|
| — |
|
|
| 22,896 |
|
Exercise of stock options and warrants and vesting of RSUs and PSUs, net of tax withholdings |
| — |
|
|
|
| — |
|
|
|
| 449,544 |
|
|
| — |
|
|
| (860 | ) |
|
| — |
|
|
| — |
|
|
| (860 | ) |
Issuance of common stock in connection with earnout and make-whole provisions related to the acquisition of Malka Media Group LLC |
| — |
|
|
|
| — |
|
|
|
| 110,925 |
|
|
| — |
|
|
| 1,914 |
|
|
| — |
|
|
| — |
|
|
| 1,914 |
|
Issuance of equity in connection with Engine Acquisition and the related contingent consideration, net of working capital adjustments |
| 4,400,172 |
|
|
|
| 1,560 |
|
|
|
| 23,453 |
|
|
| — |
|
|
| 304 |
|
|
| — |
|
|
| — |
|
|
| 304 |
|
Voluntary conversion of preferred stock to common stock |
| (6,698 | ) |
|
|
| (45 | ) |
|
|
| 230 |
|
|
| — |
|
|
| 45 |
|
|
| — |
|
|
| — |
|
|
| 45 |
|
Reversal of previously accrued dividends on preferred stock |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| 690 |
|
|
| — |
|
|
| — |
|
|
| 690 |
|
Settlement of accrued dividends on preferred stock |
| — |
|
|
|
| — |
|
|
|
| 229,605 |
|
|
| — |
|
|
| 2,976 |
|
|
| — |
|
|
| — |
|
|
| 2,976 |
|
Automatic conversion of redeemable convertible preferred stock (Series A) |
| (30,049,053 | ) |
|
|
| (174,723 | ) |
|
|
| 1,012,093 |
|
|
| — |
|
|
| 174,849 |
|
|
| — |
|
|
| — |
|
|
| 174,849 |
|
Other |
| — |
|
|
|
| — |
|
|
|
| (901 | ) |
|
| — |
|
|
| (12 | ) |
|
| 505 |
|
|
| — |
|
|
| 493 |
|
Net loss |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (45,245 | ) |
|
| — |
|
|
| (45,245 | ) |
Balances at December 31, 2023 |
| — |
|
|
| $ | — |
|
|
|
| 10,412,294 |
|
| $ | 1 |
|
| $ | 969,641 |
|
| $ | (702,719 | ) |
| $ | (9,700 | ) |
| $ | 257,223 |
|
The accompanying notes are an integral part of these consolidated financial statements.
F-5
MONEYLION INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
(amounts in thousands, except share amounts)
| Redeemable Convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| ||||||||||||
| Preferred Stock (Series A) |
|
|
| Class A Common Stock |
|
| Additional |
|
| Accumulated |
|
| Treasury |
|
| Stockholders' |
| |||||||||||||||
| Shares |
|
|
| Amount |
|
|
| Shares(1) |
|
| Amount(1) |
|
| Paid-in Capital(1) |
|
| Deficit |
|
| Stock |
|
| Equity |
| ||||||||
Balances at January 1, 2022 |
| — |
|
|
| $ | — |
|
|
|
| 7,682,748 |
|
| $ | 1 |
|
| $ | 701,256 |
|
| $ | (469,873 | ) |
| $ | (9,700 | ) |
| $ | 221,684 |
|
Stock-based compensation |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| 19,603 |
|
|
| — |
|
|
| — |
|
|
| 19,603 |
|
Exercise of stock options and warrants and vesting of RSUs and PSUs, net of tax withholdings |
| — |
|
|
|
| — |
|
|
|
| 294,988 |
|
|
| — |
|
|
| 2,399 |
|
|
| — |
|
|
| — |
|
|
| 2,399 |
|
Issuance of common stock in connection with earnout and make-whole provisions related to the acquisition of Malka Media Group LLC |
| — |
|
|
|
| — |
|
|
|
| 508,069 |
|
|
| — |
|
|
| 22,250 |
|
|
| — |
|
|
| — |
|
|
| 22,250 |
|
Issuance of options and preferred stock in connection with Engine Acquisition, net of working capital adjustments |
| 28,656,121 |
|
|
|
| 193,465 |
|
|
|
| — |
|
|
| — |
|
|
| 8,960 |
|
|
| — |
|
|
| — |
|
|
| 8,960 |
|
Conversion of preferred stock to common stock |
| (3,000,542 | ) |
|
|
| (20,257 | ) |
|
|
| 100,018 |
|
|
| — |
|
|
| 20,257 |
|
|
| — |
|
|
| — |
|
|
| 20,257 |
|
Accrued dividends on preferred stock |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| (6,880 | ) |
|
| — |
|
|
| — |
|
|
| (6,880 | ) |
Accrued dividends settled in common stock |
| — |
|
|
|
| — |
|
|
|
| 1,522 |
|
|
| — |
|
|
| 81 |
|
|
| — |
|
|
| — |
|
|
| 81 |
|
Other |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| (1,087 | ) |
|
| 960 |
|
|
| — |
|
|
| (127 | ) |
Net loss |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (189,066 | ) |
|
| — |
|
|
| (189,066 | ) |
Balances at December 31, 2022 |
| 25,655,579 |
|
|
| $ | 173,208 |
|
|
|
| 8,587,345 |
|
| $ | 1 |
|
| $ | 766,839 |
|
| $ | (657,979 | ) |
| $ | (9,700 | ) |
| $ | 99,161 |
|
The accompanying notes are an integral part of these consolidated financial statements.
F-6
MONEYLION INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
| Twelve Months Ended December 31, |
| |||||
| 2023 |
|
| 2022 |
| ||
Cash flows from operating activities: |
|
|
|
|
| ||
Net loss | $ | (45,245 | ) |
| $ | (189,066 | ) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
| ||
Provision for losses on receivables |
| 93,418 |
|
|
| 99,753 |
|
Depreciation and amortization expense |
| 24,826 |
|
|
| 21,673 |
|
Change in deferred fees and costs, net |
| 2,119 |
|
|
| 2,017 |
|
Change in fair value of warrants |
| 473 |
|
|
| (7,923 | ) |
Change in fair value of contingent consideration from mergers and acquisitions |
| (6,613 | ) |
|
| (41,254 | ) |
Gain (loss) on foreign currency translation |
| (60 | ) |
|
| 18 |
|
Expenses related to debt modification and prepayments |
| — |
|
|
| 730 |
|
Goodwill impairment loss |
| 26,721 |
|
|
| 136,760 |
|
Stock compensation expense |
| 22,896 |
|
|
| 19,603 |
|
Deferred income taxes |
| (2,091 | ) |
|
| (26,020 | ) |
Changes in assets and liabilities, net of effects of business combination: |
|
|
|
|
| ||
Accrued interest receivable |
| (234 | ) |
|
| 4 |
|
Enterprise receivables, net |
| 2,853 |
|
|
| (3,152 | ) |
Other assets |
| 1,098 |
|
|
| (14,908 | ) |
Accounts payable and accrued liabilities |
| 819 |
|
|
| 5,059 |
|
Other liabilities |
| (4,634 | ) |
|
| 67 |
|
Net cash provided by operating activities |
| 116,346 |
|
|
| 3,361 |
|
Cash flows from investing activities: |
|
|
|
|
| ||
Net originations and collections of finance receivables |
| (120,441 | ) |
|
| (114,072 | ) |
Purchase of property and equipment and software development |
| (6,008 | ) |
|
| (8,890 | ) |
Acquisition of Engine, net of cash acquired |
| — |
|
|
| (18,584 | ) |
Settlement of contingent consideration related to mergers and acquisitions |
| (1,116 | ) |
|
| — |
|
Net cash used in investing activities |
| (127,565 | ) |
|
| (141,546 | ) |
Cash flows from financing activities: |
|
|
|
|
| ||
Repayments to secured/senior lenders |
| (25,000 | ) |
|
| (24,029 | ) |
Fees related to debt prepayment |
| — |
|
|
| (375 | ) |
Net repayments to special purpose vehicle credit facilities |
| (19,000 | ) |
|
| — |
|
Borrowings from secured lenders |
| — |
|
|
| 69,300 |
|
Payment of deferred financing costs |
| (132 | ) |
|
| (1,625 | ) |
Payments related to the automatic conversion of redeemable convertible preferred stock (Series A) in lieu of fractional shares of common stock and dividends on preferred stock |
| (3,007 | ) |
|
| — |
|
Proceeds (payments) related to issuance of common stock related to exercise of stock options and warrants, net of tax withholdings related to vesting of stock-based compensation |
| (860 | ) |
|
| 2,399 |
|
Other |
| (12 | ) |
|
| — |
|
Net cash (used in) provided by financing activities |
| (48,011 | ) |
|
| 45,670 |
|
Net change in cash and restricted cash |
| (59,230 | ) |
|
| (92,515 | ) |
Cash and restricted cash, beginning of period |
| 153,709 |
|
|
| 246,224 |
|
Cash and restricted cash, end of period | $ | 94,479 |
|
| $ | 153,709 |
|
|
|
|
|
| |||
Supplemental disclosure of cash flow information: |
|
|
|
|
| ||
Cash paid for interest | $ | 27,578 |
|
| $ | 27,521 |
|
|
|
|
|
| |||
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
| ||
Voluntary conversion of preferred stock to common stock | $ | 45 |
|
| $ | 20,257 |
|
Automatic conversion of redeemable convertible preferred stock (Series A) to common stock | $ | 174,849 |
|
| $ | — |
|
Reversal of previously accrued / (accrued) dividends on preferred stock | $ | 690 |
|
| $ | (6,880 | ) |
Issuance of common stock to settle accrued dividends on preferred stock and Preferred Stock Equivalents | $ | 3,280 |
|
| $ | 81 |
|
Equity issued as consideration for mergers and acquisitions | $ | 1,864 |
|
| $ | 202,425 |
|
Equity issued as settlement of contingent consideration related to Malka Acquisition | $ | 1,914 |
|
| $ | 22,250 |
|
Equity issued as settlement of contingent consideration related to Engine Acquisition | $ | 1,440 |
|
| $ | — |
|
Contingent consideration issued related to mergers and acquisitions | $ | — |
|
| $ | 45,336 |
|
Lease liabilities incurred in exchange for operating right-of-use assets | $ | — |
|
| $ | 7,568 |
|
The accompanying notes are an integral part of these consolidated financial statements.
F-7
MONEYLION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share amounts or as otherwise indicated)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
MoneyLion Inc. (“MoneyLion” or the “Company”) was founded in 2013 and is headquartered in New York, New York. On September 22, 2021, (the “Business Combination Closing Date”), MoneyLion Inc., formerly known as Fusion Acquisition Corp. (prior to the Business Combination Closing Date, “Fusion” and after the Business Combination Closing Date, “MoneyLion” or the “Company”), consummated the previously announceda business combination (the “Business Combination”) pursuant to the terms of the Agreement and Plan of Merger, dated as of February 11, 2021 and amended on June 28, 2021 and September 4, 2021 (the “Merger Agreement”), by and among Fusion, ML Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Fusion (“Merger Sub”), andwith MoneyLion Technologies Inc., formerly known as MoneyLion Inc. (prior to the Business Combination Closing Date, “MoneyLion” or the “Company”, and after the Business Combination Closing Date, “Legacy MoneyLion”), a Delaware corporation.
Pursuant to the terms of the Merger Agreement, immediately upon the completion of the Business Combination and the other transactions contemplated by the Merger Agreement (the “Business Combination Closing”), each of the following transactions occurred in the following order: (i) Merger Sub merged with and into Legacy MoneyLion, with Legacy MoneyLion surviving the merger as a wholly owned subsidiary of Fusion (the “Merger”); (ii) Legacy MoneyLion changed its name to “MoneyLion Technologies Inc.”; and (iii) Fusion changed its name to “MoneyLion Inc.” Following the Business Combination, MoneyLion Inc. became a publicly traded company, with Legacy MoneyLion Technologies Inc. continuing the existing business operations as a subsidiary of MoneyLion continuing the existing business operations. MoneyLion’sInc. MoneyLion Inc.’s Class A common stock, par value $0.0001$0.0001 per share (the “MoneyLion Class“Class A Common Stock”), is listed on the New York Stock Exchange (the “NYSE”) under the ticker symbol “ML.”
As previously announced, on February 11, 2021, concurrentlyMoneyLion is a leader in financial technology, powering the next generation of personalized products and financial content for American consumers. MoneyLion designs and offers modern personal finance products, tools and features and curate money-related content that delivers actionable insights and guidance to its users. MoneyLion also operates and distributes embedded finance marketplace solutions that match consumers with the executionpersonalized third-party offers from its partners, providing convenient access to an expansive breadth of the Merger Agreement, Fusion entered into subscription agreements (the “Subscription Agreements”) with certain investors (collectively, the “PIPE Investors”) pursuantfinancial solutions that enable consumers to which, among other things, Fusion agreedborrow, spend, save and achieve better financial outcomes. In addition, MoneyLion provides creative media and brand content services to issueclients across industries through its media division and sellleverages its adaptive, in-house content studio to produce and deliver engaging and dynamic content in private placements an aggregatesupport of 25,000,000 shares (“PIPE Shares”) of MoneyLion Class A Common Stock to the PIPE Investors for $10.00 per share, for an aggregate commitment amount of $250,000 (the “PIPE Financing”). Pursuant to the Subscription Agreements, Fusion gave certain re-sale registration rights to the PIPE Investors with respect to the PIPE Shares. The PIPE Financing was consummated substantially concurrently with the Business Combination Closing.MoneyLion's product and service offerings.
MoneyLion was founded in 2013, and the Company’s headquarters is located in New York, New York. The Company operates a personal finance platform (the “Platform”) that provides a mobile app that is designed to help users simplify their personal financial management and improve their financial health, giving users access to credit, investment, banking and other financial services and provide them with a single place to track spending, savings and credit. The Platform is based upon analytical models that power recommendations which are designed to help users achieve their financial goals ranging from building savings, improving credit health and managing unexpected expenses. Investment management services are provided by ML Wealth LLC, a wholly owned subsidiary of the Company, which is a Securities and Exchange Commission (“SEC”) registered investment advisor.
On November 15, 2021, MoneyLion acquired MALKAcompleted its acquisition of Malka Media Group LLC (“MALKA” and such transaction, the “MALKA Acquisition”). MALKA is a creator networkforms the basis of MoneyLion's media division and provides MoneyLion with the creative capabilities to produce and deliver engaging and dynamic content platform that producesin support of MoneyLion's product and service offerings. MALKA also offers creative media and brand content services to clients in MoneyLion's Enterprise business. The MALKA Acquisition accelerated MoneyLion's ability to engage consumers across digital media, allowing it to directly connect with communities natively inside and content across entertainment, sports, games, live streamingoutside of the MoneyLion platform.
On February 17, 2022, MoneyLion completed its acquisition of Even Financial Inc., which was subsequently renamed to ML Enterprise Inc., doing business as the brand Engine by MoneyLion (“Engine” and other sectors. MALKA’s contentsuch acquisition, the “Engine Acquisition”). Engine powers the leading embedded finance marketplace solutions MoneyLion offers to its Enterprise Partners (as defined herein) through which Engine connects and matches consumers with real-time, personalized product and service recommendations. For the over 1,100 Enterprise Partners in MoneyLion's network who integrate MoneyLion's software platform onto their properties, MoneyLion enables robust distribution capabilities can drive industry-leadingand a more simple and efficient system of customer acquisition and retention at scalealso provides value-added data analytics and reporting services to help accelerate MoneyLion’s customer growth. By combining MALKA’s capabilities with MoneyLion’s financialenable them to better understand the performance of their marketplace programs and optimize their business over time. The Engine Acquisition expanded MoneyLion's addressable market, extended the reach of its own products and extensive first-party data, MoneyLion hopes to turn the MoneyLion mobile application into a daily destination forservices and diversified its customers with personalized content that educates, informs and supports customers’ financial decisions.revenue mix.
Basis of Presentation—The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the SEC.Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of MoneyLion Inc. and its wholly owned subsidiaries and consolidated variable interest entities (“VIEs”) for which the Company is the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation. The Company does not have any items of other comprehensive income (loss);loss; therefore, there is no difference between net loss and comprehensive loss for the twelve months ended December 31, 20212023 and 2020. Certain reclassifications have been made to the prior period financial statements to conform to the classification adopted in the current period.2022.
F-8
Receivables originatedReverse Stock Split—On April 24, 2023, the Company amended the Company's Fourth Amended and Restated Certificate of Incorporation (as amended from time to time, the "Certificate of Incorporation") to effect, effective as of 5:01 p.m. Eastern Time on the Company’s platform, including Credit Builder Plus loans and Instacash advances, were primarily financed through Invest in America Credit Fund April 24, 2023, a 1 LLC (“IIA”-for-30 reverse stock split (the “Reverse Stock Split”) until the end of the fourth quarter of 2021. IIA is organized as a Delaware limited liability company and is treated as a partnership for United States income tax purposes. IIA’s membership interests were issued in separately designated series, with each series consisting of Class A Units and Class B Units. IIA investors owned all non-voting Class B Units of the applicable series they invested in, which entitled them to a targeted, non-guaranteed, preferred return of typically 12% per year. ML Capital III LLC (“ML Capital III”), an indirect wholly owned MoneyLion subsidiary, is the managing member of IIA and owned the Class A Units of each series, which entitled ML Capital III to returns that exceededCommon Stock. At the targeted preferred return on the Class B Units (if any). IIA used proceeds from the sale of Class B Units to investors to purchase borrower payment dependent promissory notes from Invest in America Notes I SPV LLC (“IIA Notes SPV I”) and Invest in America Notes SPV IV LLC (“IIA Notes SPV IV”) (collectively “IIA Notes SPVs”). The collateral consisted of a portfolio of underlying MoneyLion loans and advance receivables. Investors in Class B Units funded their investment into IIA at theeffective time of subscription, which proceeds were used to finance receivables originated on MoneyLion’s platform. Generally, an IIA investor was able to request redemptionthe Reverse Stock Split, every 30 shares of all or a portion of their capital account, after a 120-day notice period, and in increments of $100,000, five days after the expiration of the applicable lock-up period, unless otherwise agreed between investors in a particular series and the Company. Unless a redemption request was made, both the IIA investor’s capital contribution and their related Class B returns were automatically reinvested in new notes. ML Capital III, as the managing member of IIA, had the contractual right to suspend redemptions in certain circumstances and without prior notice to the IIA investors. However, the IIA investors’ right to redemption may not have been entirely within the control of the Company and therefore the IIA investors’ share of the IIA is presented on the Company’s consolidated balance sheet as temporary equity at the redemption value. Redemptions were $127,391 and $17,489 for the twelve months ended December 31, 2021 and 2020, respectively, of which $1,500 was unpaid as of December 31, 2020. Distributions, if any, to IIA investors were made at the discretion of the Company or, if agreed between the Company and a particular IIA investor or series, in accordance with the applicable subscription agreements. The Company had identified IIA, IIA Notes SPV I and IIA Notes SPV IV as variable interest entities (“VIEs”) due to the fact that the Class A Units are entitled to residual income/loss in IIA. The Company had identified itself as the primary beneficiary of these VIEs because it directed the activities of the VIEs that most significantly impacted the VIEs’ economic performance. As the primary beneficiary of the VIEs, the Company had consolidated the balances of the VIEs into the financial statements. The IIA Class B Units are reflected in the Company’s consolidated financial statements as redeemable noncontrolling interests totaling $71,852 as of December 31, 2020. Net income in consolidated VIEs were attributed to redeemable noncontrolling interests based on the investors’ respective interests in the net assets of the consolidated VIE. Net income attributable to the noncontrolling interests in IIA, IIA Notes SPV I and IIA Notes SPV IV represented interest income.
Beginning in the fourth quarter of 2021, MoneyLion transitioned its primary source of funding for originated receivables from IIA to special purpose vehicle financings from third-party institutional lenders. By December 2021, investor balances were returned to all IIA Class B Unit holders and as of December 31, 2021, IIA had no assets. As a result, only Class A units remain which are wholly owned by ML Capital III making IIA and the IIA Notes SPVs indirect wholly owned MoneyLion subsidiaries, and therefore as of December 31, 2021 there was no longer a noncontrolling interest related to IIA and the IIA Notes SPVs. For more information on the alternative financing sources, see Note 10 “Debt” for discussion of the ROAR 1 SPV Credit Facility and the ROAR 2 SPV Credit Facility.
2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
Upon the closing of the MALKA Acquisition (as defined herein), the Company (i) issued $30.0 million in restricted shares (the “Closing Consideration Shares”) of MoneyLion Class A Common Stock either issued and outstanding or held as treasury stock were automatically reclassified into one new share of Class A Common Stock, and the total number of shares of Class A Common Stock authorized for issuance was reduced by a corresponding proportion from 2,000,000,000 shares to 66,666,666 shares. The Reverse Stock Split was approved by the Company's stockholders at a Special Meeting of Stockholders on April 19, 2023 and approved by the Board of Directors on April 21, 2023. The primary goal of the Reverse Stock Split was to increase the per share price of the Class A Common Stock in order to meet the minimum per share price requirement for continued listing on the NYSE. The Class A Common Stock began trading on the NYSE on an as-adjusted basis on April 25, 2023 under the existing trading symbol “ML.”
In addition, as a result of the Reverse Stock Split, proportionate adjustments were made to the number of shares of Class A Common Stock underlying the Company’s outstanding equity awards, the number of shares issuable upon the exercise of the Company’s outstanding warrants and the number of shares issuable under the Company’s equity incentive plans and certain existing agreements, as well as the exercise, grant and acquisition prices of such equity awards and warrants, as applicable. Furthermore, proportionate adjustments were made to the conversion factor at which the Company’s previously outstanding Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), were converted to Class A Common Stock. The total number of shares of preferred stock of the Company authorized for issuance remained at 200,000,000. Stockholders who would have been entitled to receive fractional shares as a result of the Reverse Stock Split were instead entitled to a cash payment in lieu thereof at a price equal to the fraction of one share to which the stockholder was otherwise entitled multiplied by the closing price per share of $9.00 and (ii) paid to the sellers of MALKA approximately $10.0 million in cash in exchange for all of the issued and outstanding membership interests of MALKA. The Membership Interest Purchase Agreement governing the MALKA Acquisition includes a make-whole provision with respect to the Closing Consideration Shares issued pursuant to which the Company was and may be required to issue additional restricted shares of MoneyLion Class A Common Stock or pay additional cash, as determined by the Company in its sole discretion, on each of December 31, 2021, March 31, 2022, June 30, 2022 and September 30, 2022 (the “Make-Whole Provision”). The Company originally classified the Closing Consideration Shares and the Make-Whole Provision as equity and recorded the fair value as stockholders’ equity on the consolidated balance sheet as of November 15, 2021,NYSE on the closingeffective date of the MALKA Acquisition (the “MALKA Acquisition Closing Date”). Reverse Stock Split.
The Company’s management, in consultation with its advisors, has now determined thateffects of the Make-Whole Provision should notReverse Stock Split have been classified as equityreflected in these consolidated financial statements and shouldthe accompanying footnotes for all periods presented, which includes adjusting the description of any activity that may have been classified astransacted on a liability within the scope of Accounting Standards Codification 480, Distinguishing Liabilities from Equity, as of the MALKA Acquisition Closing Date, with subsequent changes in the fair value of such liability recorded in the consolidated statement of operations under change in fair value of contingent consideration from mergers and acquisitions.pre-Reverse Stock Split basis.
The impact of the restatement on the Company’s financial statements is reflected in the following tables:
| Consolidated Balance Sheet as of December 31, 2021 | As Previously Reported | Adjustment | As Restated | |||||||||
| Accounts payable and accrued liabilities | $ | 63,453 | $ | 11,550 | $ | 75,003 | ||||||
| Total liabilities | $ | 258,304 | $ | 11,550 | $ | 269,854 | ||||||
| Additional paid-in capital | $ | 708,175 | $ | (6,941 | ) | $ | 701,234 | |||||
| Accumulated deficit | $ | (465,264 | ) | $ | (4,609 | ) | $ | (469,873 | ) | |||
| Total stockholders’ equity | $ | 233,234 | $ | (11,550 | ) | $ | 221,684 | |||||
| Consolidated Statement of Operations for the Year Ended December 31, 2021 | As Previously Reported | Adjustment | As Restated | |||||||||
| (amounts in thousands except per share amounts) | ||||||||||||
| Change in fair value of contingent consideration from mergers and acquisitions | $ | 6,229 | $ | 4,609 | $ | 10,838 | ||||||
| Total operating expenses | $ | 335,930 | $ | 4,609 | $ | 340,539 | ||||||
| Net loss before income taxes | $ | (164,819 | ) | $ | (4,609 | ) | $ | (169,428 | ) | |||
| Net loss | $ | (164,875 | ) | $ | (4,609 | ) | $ | (169,484 | ) | |||
| Net loss attributable to common shareholders | $ | (134,923 | ) | $ | (4,609 | ) | $ | (139,532 | ) | |||
| Net loss per share, basic and diluted | $ | (1.39 | ) | $ | (0.05 | ) | $ | (1.44 | ) | |||
| Consolidated Statement of Cash Flows for the Year Ended December 31, 2021 | As Previously Reported | Adjustment | As Restated | |||||||||
| Net loss | $ | (164,875 | ) | $ | (4,609 | ) | $ | (169,484 | ) | |||
| Change in fair value of contingent consideration from mergers and acquisitions | $ | 6,229 | $ | 4,609 | $ | 10,838 | ||||||
3.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (As Restated)
In the opinion of the Company, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring adjustments and adjustments to eliminate intercompany transactions and balances, necessary for a fair presentation of its financial position and its results of operations, changes in redeemable convertible preferred stock redeemable noncontrolling interests and stockholders’ equity (deficit) and cash flows.
Use of Estimates—The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated financial statements included, but are not limited to, revenue recognition, provision for transaction losses, accounting for business combinations, determination of useful lives of property and equipment, valuation and useful lives of intangible assets, impairment assessment of goodwill, internal-use software, valuation of common stock, valuation of stock warrants, valuation of convertible notes, stock option valuations, income taxes, and the recognition and disclosure of contingent liabilities. The Company evaluates its estimates and assumptions on an ongoing basis. Actual results could differ from those estimates and such differences may be material to the consolidated financial statements.
Revenue Recognition and Related Receivables—The ML Plus membership was developed to allow customers to access affordable credit through asset collateralization, build savings, improve financial literacy and track their financial health. In 2019 the Company began offering the Credit Builder Plus membership, which is intended to emphasize the program’s ability to help customers build credit while also saving. These programs are offered directly to MoneyLion customers. Members also receive access to the Company’s banking account, managed investment services, credit tracking services and Instacash advances. Revenue is recognized as the Company transfers control of promised goods or services to members, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company evaluates whether it is appropriate to recognize revenue on a gross or net basis based upon its evaluation of whether the Company obtains control of the specified goods or services by considering if it is primarily responsible for fulfilment of the promise, and has the latitude in establishing pricing, among other factors. Based on the Company’s evaluation of these factors, revenue is recorded either gross or net of costs associated with the transaction.
Membership subscription revenue is recognized on a daily basis throughout the term of the individual subscription agreements, as the control of the membership services is delivered to the customer evenly throughout that term. Membership receivables are recorded at the amount billed to the customer. The Company policy is to suspend recognition of subscription revenue when the last scheduled subscription payment is 30 days past due, or when, in the Company’s estimation, the collectability of the account is uncertain. Membership subscription revenue is recognized gross over time.
Members of the Credit Builder Plus membership program typically receive the cash related to loans and interest-free Instacash advances in 1-3 business days. Members may elect to receive cash immediately through the Company’s instant transfer option. The Company charges a fee when the instant transfer option is elected by a member. Instant transfer fees are recognized gross over the term of the loan or Instacash advance, as the services related to these fees are not distinct from the services of the loan or Instacash advance. The receivable related to the instant transfer option fee is recorded at the amount billed to the customer.
With respect to the Company’s Instacash advance service, the Company provides customers with the option to provide a tip for the offering. Fees earned on tips are recognized gross over the term of the Instacash advance, as the services related to these fees are not distinct from the services of the Instacash advance. Advances typically include a term of 30 days or less, depending on the individual’s pay cycle. The Company’s policy is to suspend the account when an advance is 60 days or more past the scheduled payment date on a contractual basis or when, in the Company’s estimation, the collectability of the account is uncertain. The receivable related to the tip is recorded at the amount billed to the customer.
Affiliate revenue is generated by displaying ads on the Company’s mobile application and by sending emails or other messages to customers promoting affiliate services. For affiliate services, the Company enters into agreements with the affiliates in the form of a signed contract, which specify the terms of the services and fees, prior to running advertising and promotional campaigns. The Company recognizes revenue from the display of impression-based ads and distribution of impression-based emails in the period in which the impressions are delivered in accordance with the contractual terms of the customer arrangements. Impressions are considered delivered when a member clicks on the advertisement or promotion.
Interest income and the related accrued interest receivables on loan-related finance receivables is accrued based upon the daily principal amount outstanding except for when these loans are on nonaccrual status. The Company recognizes interest income using the interest method. The Company’s policy is to suspend recognition of interest income on finance receivables and place the loan on nonaccrual status when the account is 60 days or more past due on a contractual basis or when, in the Company’s estimation, the collectability of the account is uncertain, and the account is less than 90 days contractually past due.
Digital media and content production services provided to third parties are generally earned and recognized over time as the performance obligations within the contracts are satisfied. The revenue is recorded in other income in the statement of operations. Contracts for digital media and content production services are typically short-term.
Allowance for Losses on Receivables—An allowance for losses on finance receivables and related accrued interest and fee receivables is established to provide for probable losses incurred in the Company’s finance receivables at the balance sheet date and is established through a provision for losses on receivables. Charge-offs, net of recoveries, are charged directly to the allowance. The allowance is based on management’s assessment of many factors, including changes in the nature, volume, and risk characteristics of the finance receivables portfolio, including trends in delinquency and charge-offs and current economic conditions that may affect the borrower’s ability to pay. The allowance is developed on a general basis and each period management assesses each product type by origination cohort in order to determine the forecasted performance of those cohorts and arrive at an appropriate allowance rate for that period. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in any of the factors.
The Company’s charge-off policy is to charge-off finance receivables for loans and related accrued interest receivables, net of expected recoveries, in the month in which the account becomes 90 days contractually past due and charge-off finance receivables for advances and related fee receivables in the month in which the account becomes 60 days past due. If an account is deemed to be uncollectable prior to this date, the Company will charge-off the receivable in the month it is deemed uncollectable.
The Company determines the past due status using the contractual terms of the finance receivables. This is the credit quality indicator used to evaluate the required allowance for losses on finance receivables for each portfolio of products.
An allowance for losses on membership and fees receivables is established to provide probable losses incurred in the Company’s membership and fee receivables at the balance sheet date and is established through a provision for losses on receivables. Charge-offs, net of recoveries, are charged directly to the allowance. The allowance is based on management’s assessment of historical charge-offs and recoveries on these receivables, as well as certain qualitative factors including current economic conditions that may affect the customers’ ability to pay. Prior to the period ended June 30, 2021, the allowance related to these receivables had not been material to the consolidated financial statements.
Segment Information—Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the chief executive officer. The Company has one business activity and there are no segment managers who are held accountable for material operations, operating results and plans for levels or components below the consolidated unit level. Accordingly, the Company has one operating segment, and therefore, one reportable segment.
Governmental Regulation—The Company is subject to various state and federal laws and regulations in each of the states in which it operates, which are subject to change and may impose significant costs or limitations on the way the Company conducts or expands its business. The Company’s loans are originated under individual state laws, which may carry different rates and rate limits, and have varying terms and conditions depending upon the state in which they are offered. The Company is licensed or exempt from licensing to make loans in substantially all states in the United States of America. Other governmental regulations include, but are not limited to, imposed limits on certain charges, insurance products and required licensing and qualification.
Fair Value Measurements—Assets and liabilities recorded at fair value on a recurring basis in the balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:F-9
The Company evaluates the significance of transfers between levels based upon the nature of the financial instruments and size of the transfer relative to total net assets available for benefits. For the years ended December 31, 2021 and 2020, there were no transfers in or out of levels 1, 2 or 3.
Net Loss Per Share—The Company calculated basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required for companies with participating securities. The Company considered the redeemable convertible preferred stock to be a participating security as the holders are entitled to receive aggregated accrued and not paid dividends if/when declared by the board of directors at a dividend rate payable in preference and priority to the holders of common stock.
Under the two-class method, basic net loss per share attributable to common stockholders was calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. The net loss attributable to common stockholders was not allocated to the redeemable convertible preferred stock as the holders of redeemable convertible preferred stock do not have a contractual obligation to share in losses, which is consistent with the if converted method of calculation. Diluted net loss per share attributable to common stockholders was computed by giving effect to all potentially dilutive common stock equivalents outstanding for the period. For purposes of this calculation, redeemable convertible preferred stock, stock options, restricted stock units, right to receive Earnout Shares, as defined in Note 4, “Business Combination,” and warrants to purchase redeemable convertible preferred stock and common stock were considered common shares equivalents but had been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect was anti-dilutive. In periods in which the Company reports a net loss attributable to all classes of common stockholders, diluted net loss per share attributable to all classes of common stockholders is the same as basic net loss per share attributable to all classes of common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported net losses attributable to common stockholders for the fiscal years ended December 31, 2021 and 2020.
Cash—Cash includes cash and cash equivalents held at financial institutions. For purposes of the consolidated financial statements, the Company considers all highly liquid investments purchased with a maturity date of three months or less to be cash equivalents. At times, the Company may maintain deposits with financial institutions in excess of the Federal Deposit Insurance Corporation insurance limits, but management believes any such amounts do not represent a significant credit risk.
Restricted Cash—Restricted cash consists of cash required to be held on reserve by the Company’s vendors for purposes of loan or advance processing or funding and cash on hand in the VIEs. All cash accounts are held in federally insured institutions, which may at times exceed federally insured limits. The Company has not experienced losses in such accounts. Management believes the Company’s exposure to credit risk is minimal for these accounts.
Goodwill—The Company performs goodwill impairment testing annually, on the last day of the fiscal year or more frequently if indicators of potential impairment exist. The goodwill impairment test is performed at the reporting unit level. The Company first evaluates whether it is more likely than not that the fair value of the reporting unit has fallen below its carrying amount. No indicators of fair value falling below the reporting unit carrying amount were noted on a quantitative or qualitative basis during the fiscal year 2021 assessment.
Intangible Assets— The Company’s intangible assets are made up of internal use software and acquired proprietary technology, customer relationships and trade names. The Company capitalizes qualifying internal use software development costs that are incurred during the application development stage, provided that management with the relevant authority authorizes the project, it is probable the project will be completed, and the software will be used to perform the function intended. Costs incurred during the application development stage internally or externally are capitalized and amortized on a straight-line basis over the expected useful life of three years. Costs related to preliminary project activities and post-implementation operation activities, including training and maintenance, are expensed as incurred.
Impairment of Long-Lived Assets— Long-lived assets, such as property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted future cash flows expected to result from the use and eventual disposition of the asset. The amount of impairment loss, if any, is measured as the difference between the carrying value of the asset and its estimated fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. No impairment charges were recognized during the years ended December 31, 2021 and 2020.
Income Taxes— Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effects of future tax rate changes are recognized in the period when the enactment of new rates occurs.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the positions taken or the amount of the positions that would be ultimately sustained. The benefit of a tax position is recognized in the consolidated financial statements in the period during which, based on all available evidence, it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more likely than not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.Variable Interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the consolidated statements of operations.Entities—
Stock-Based Compensation— The Company accounts for its stock options granted to employees or directors as stock-based compensation expense based on their grant date fair value. The Company uses an option valuation model to measure the fair value of options at the date of grant.
The Company accounts for the restricted stock units granted to employees or directors as stock-based compensation expense based on their grant date fair value. The grant date fair value is based on the price of MoneyLion Class A Common Stock on the day of the grant.
The fair value of the awards is recognized as an expense over the requisite service period in the Company’s consolidated statement of operations. Forfeitures are accounted for as they are incurred.
Warrant Liability— The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to Accounting Standards Codification (“ASC”) 480 and ASC 815. The Company accounts for its outstanding Public Warrants and Private Placement Warrants (as defined in Note 15. “Stock Warrants”) in accordance with the guidance contained in Accounting Standards Codification 815-40, “Derivatives and Hedging — Contracts on an Entity’s Own Equity” (“ASC 815-40”).
The Company determined that the Private Placement Warrants do not meet the criteria for equity treatment thereunder. For issued or modified warrants that do not meet all the criteria for equity treatment, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. As such, each Private Placement Warrant is recorded as a liability and any change in fair value is recognized in the Company’s statements of operations. The fair value of the Private Placement Warrants was estimated using a Black-Scholes Option Pricing Model.
The Public Warrants meet the conditions for equity classification in accordance with ASC 815-40. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance.
Subordinated Convertible Notes— As permitted under ASC 825, Financial Instruments (“ASC 825”), the Company has elected the fair value option to account for its Subordinated Convertible Notes (as defined below). In accordance with ASC 825, the Company records these Subordinated Convertible Notes at fair value with changes in fair value recorded as a component of other income (expense), net in the consolidated statement of operations. As a result of applying the fair value option, direct costs and fees related to the Subordinated Convertible Notes were expensed as incurred and were not deferred. The Company concluded that it was appropriate to apply the fair value option to the Subordinated Convertible Notes because there are no non-contingent beneficial conversion options related to the Subordinated Convertible Notes.
The Subordinated Convertible Notes were valued using a scenario-based discounted cash flow analysis. The Company estimated the probability and timing of the scenarios based on management’s assumptions and knowledge of specified events at issuance and as of each reporting date. The Subordinated Convertible Notes are classified as Level 3 because of the Company’s reliance on unobservable assumptions.
Contingent consideration from mergers and acquisitions— The Company determined that the contingent consideration related to the MALKA earnout provisions and the Make-Whole Provision do not meet the criteria for equity treatment. For provisions that do not meet all the criteria for equity treatment, the contingent consideration is required to be recorded at fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the contingent consideration are recognized as a non-cash gain or loss on the statements of operations. As such, the contingent consideration is recorded as a liability and any change in fair value is recognized in the Company’s statements of operations. The fair value of the contingent consideration was estimated using a Monte Carlo Simulation Model.
Property and Equipment— Property and equipment is carried at cost. Depreciation is determined principally under the straight-line method over the estimated useful lives of the assets. Expenditures for maintenance and repairs are charged to expense as incurred.
The estimated useful lives of property and equipment are described below:
Debt Issuance Costs— Costs incurred to obtain debt financing are capitalized and amortized into interest expense over the life of the related debt using a method that approximates the effective interest method. Debt issuance costs are recorded as a contra debt balance in the accompanying consolidated financial statements.
Marketing Costs— Costs related to marketing activities are expensed as incurred.
Recently Adopted Accounting Pronouncements—
In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. The new guidance provides for the deferral of implementation costs for cloud computing arrangements and expensing those costs over the term of the cloud services arrangement. The new guidance is effective for fiscal years beginning after December 15, 2020 and interim periods in 2021. The adoption of the ASU did not have an impact on the Company’s consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide: (1) financing to the issuer, or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The adoption of the ASU did not have a material impact on the Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted—
The Company currently qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Accordingly, the Company has the option to adopt new or revised accounting guidance either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods applicable to private companies. The Company has elected to adopt new or revised accounting guidance within the same time period as private companies, unless, as indicated below, management determines it is preferable to take advantage of early adoption provisions offered within the applicable guidance.
In February 2016, the FASB Issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating with classification affecting the pattern of expense recognition in the income statement. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The new standard is effective for the Company on January 1, 2022. The Company is in the process of evaluating the impact that the pending adoption of this new guidance will have on its consolidated financial statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which creates a new credit impairment standard for financial assets measured at amortized cost and available-for-sale debt securities. The ASU requires financial assets measured at amortized cost (including loans, trade receivables and held-to-maturity debt securities) to be presented at the net amount expected to be collected, through an allowance for credit losses that are expected to occur over the remaining life of the asset, rather than incurred losses. The ASU requires that credit losses on available-for-sale debt securities be presented as an allowance rather than as a direct write-down. The measurement of credit losses for newly recognized financial assets (other than certain purchased assets) and subsequent changes in the allowance for credit losses are recorded in the statement of income as the amounts expected to be collected change. The ASU is effective for nonpublic entities for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company is in process of evaluating the impact that adoption of this new guidance will have on its consolidated financial statements and related disclosures.
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The amendments in the updated guidance simplify the accounting for income taxes by removing certain exceptions and improving consistent application of other areas of the topic by clarifying the guidance. The new guidance is effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently in the process of evaluating the impact that the adoption of ASU 2019-12 will have on its consolidated financial statements and related disclosures.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitating of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions in which the reference LIBOR or another reference rate is expected to be discontinued as a result of the Reference Rate Reform. This ASU is intended to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The new guidance is effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company has no significant contracts based on LIBOR as of December 31, 2021. As such, the Company currently does not intend to elect the optional expedients and exceptions.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The updated standard will be effective for the Company on January 1, 2024; however, early adoption of the ASU is permitted on January 1, 2021. The Company is in process of evaluating the impact that the updated standard will have on its consolidated financial statements and related disclosures.
4. BUSINESS COMBINATION
On September 21, 2021, Fusion held a Special Meeting (the “Special Meeting”) at which the Fusion stockholders considered and adopted, among other matters, the Merger Agreement and the transactions contemplated therein (the “Business Combination Transactions”). On September 22, 2021, the parties to the Merger Agreement consummated the Business Combination Transactions.
Immediately prior to the time of filing of a certificate of merger with the Secretary of State of the State of Delaware upon consummation of the Merger, all issued and outstanding shares of Legacy MoneyLion preferred stock converted into shares of Legacy MoneyLion common stock (the “Legacy MoneyLion Common Stock”), par value $0.0001 per share (the “Conversion”), in accordance with Legacy MoneyLion’s amended and restated certificate of incorporation. At the Business Combination Closing Date:
|
In connection with the Business Combination Closing, holders of 25,887,987 shares of Fusion’s Class A common stock sold in its initial public offering (the “public shares”) exercised their right to have such shares redeemed for a pro rata portion of the proceeds from Fusion’s initial public offering held in Fusion’s trust account plus interest, calculated as of two business days prior to the consummation of the Business Combination, or approximately $10.00 per share and approximately $258,896 in the aggregate (the “Redemptions”). The consummation of the Business Combination Transactions resulted in approximately $293,239 in cash proceeds to MoneyLion, net of transaction expenses. Following the Redemptions and the issuance of PIPE Shares in connection with the PIPE Financing, 42,862,013 public shares remained outstanding (consisting of 25,000,000 shares held by PIPE Investors, 8,750,000 shares held by Fusion Sponsor LLC and 9,112,013 shares held by Fusion public stockholders).
Upon consummation of the Business Combination Transactions:
As of the Business Combination Closing Date and following the completion of the sale of 25,000,000 shares of MoneyLion Class A Common Stock in the PIPE Financing, MoneyLion had the following outstanding securities:
Conversion of Legacy MoneyLion shares was calculated utilizing the exchange ratio of approximately 16.4078 per share of MoneyLion Class A Common Stock (the “Exchange Ratio”).
The Business Combination was accounted for as a reverse recapitalization in accordance with GAAP. Under the guidance in ASC 805, Legacy MoneyLion is treated as the “acquirer” for financial reporting purposes. As such, Legacy MoneyLion is deemed the accounting predecessor of the combined business, and MoneyLion, as the parent company of the combined business, is the successor SEC registrant, meaning that Legacy MoneyLion’s financial statements for previous periods are disclosed in the registrant’s periodic reports filed with the SEC following the Business Combination. The Business Combination had a significant impact on the MoneyLion’s reported financial position and results as a consequence of the reverse recapitalization. The most significant change in MoneyLion’s reported financial position and results was an estimated net increase in cash (as compared to the MoneyLion’s consolidated balance sheet at December 31, 2020) of approximately $293,239. This included approximately $250,000 in proceeds from the PIPE Financing that was consummated substantially simultaneously with the Business Combination, offset by additional transaction costs incurred in connection with the Business Combination. The transaction costs for the Business Combination were approximately $56,638, of which $13,150 represents deferred underwriter fees related to Fusion’s initial public offering. As of December 31, 2021, $3,673 in transaction costs remained unpaid.
The transaction closed on September 22, 2021, and on the following day the MoneyLion Class A Common Stock and Public Warrants began trading on the New York Stock Exchange under the symbols “ML” and “ML WS”, respectively, for trading in the public market.
5. RECEIVABLES
The Company’s finance receivables consist of secured personal loans, unsecured personal loans and principal amounts of Instacash advances. Accrued interest receivables represent the interest accrued on the loan receivables based upon the daily principal amount outstanding. Fees receivables represent the amounts due to the Company for tips and instant transfer fees related to the Instacash advance product. Membership receivables represent the amounts billed to customers for membership subscription services. The credit quality and future repayment of finance receivables are dependent upon the customer’s ability to perform under the terms of the agreement. Factors such as unemployment rates and housing values, among others, may impact the customer’s ability to perform under the loan or advance terms. When assessing provision for losses on finance receivables, the Company takes into account the composition of the outstanding finance receivables, charge-off rates to date and the forecasted principal loss rates. Please see the tables below for the finance receivable activity, charge-off rates and aging by product for the twelve months ended December 31, 2021 and 2020. The Company has experienced significant growth in Instacash, a shorter-term advance product with lower charge-off rates than loans. As Instacash has become a larger component of finance receivable activity, the overall charge-off rate has decreased significantly.
Receivables consisted of the following:
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Unsecured personal loan receivables | $ | 1 | $ | 66 | ||||
| Secured personal loan receivables | 77,491 | 43,804 | ||||||
| Loan receivables | 77,492 | 43,870 | ||||||
| Instacash receivables | 62,783 | 18,888 | ||||||
| Finance receivables | 140,275 | 62,758 | ||||||
| Fees receivable | 8,366 | 2,913 | ||||||
| Membership receivables | 3,099 | 1,885 | ||||||
| Deferred loan origination costs | 929 | 615 | ||||||
| Accrued interest receivable | 1,072 | 623 | ||||||
| Receivables, before allowance for loan losses | $ | 153,741 | $ | 68,794 | ||||
Changes in the allowance for losses on receivables were as follows:
| Twelve Months Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Beginning balance | $ | 9,127 | $ | 6,613 | ||||
| Provision for loss on receivables | 60,749 | 21,294 | ||||||
| Receivables charged off | (75,557 | ) | (39,004 | ) | ||||
| Recoveries | 28,004 | 20,224 | ||||||
| Ending balance | $ | 22,323 | $ | 9,127 | ||||
Changes in allowance for losses on finance receivables were as follows:
| Twelve Months Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Beginning balance | $ | 9,127 | $ | 6,613 | ||||
| Provision for loss on receivables | 51,975 | 18,082 | ||||||
| Finance receivables charged off | (65,711 | ) | (33,719 | ) | ||||
| Recoveries | 26,234 | 18,151 | ||||||
| Ending balance | $ | 21,625 | $ | 9,127 | ||||
Changes in allowance for losses on membership receivables were as follows:
| Twelve Months Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Beginning balance | $ | - | $ | - | ||||
| Provision for loss on receivables | 3,170 | 1,856 | ||||||
| Membership receivables charged off | (3,446 | ) | (3,620 | ) | ||||
| Recoveries | 554 | 1,764 | ||||||
| Ending balance | $ | 278 | $ | - | ||||
Changes in allowance for losses on fees receivable were as follows:
| Twelve Months Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Beginning balance | $ | - | $ | - | ||||
| Provision for loss on receivables | 5,604 | 1,356 | ||||||
| Fees receivable charged off | (6,400 | ) | (1,665 | ) | ||||
| Recoveries | 1,216 | 309 | ||||||
| Ending balance | $ | 420 | $ | - | ||||
The following is an assessment of the credit quality of finance receivables as of December 31, 2021 and 2020 and presents the contractual delinquency of the finance receivable portfolio:
| December 31, 2021 | December 31, 2020 | |||||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||||
| Current | $ | 122,477 | 87.3 | % | $ | 54,247 | 86.4 | % | ||||||||
| Delinquency: | ||||||||||||||||
| 31 to 60 days | 13,397 | 9.6 | % | 6,148 | 9.8 | % | ||||||||||
| 61 to 90 days | 4,401 | 3.1 | % | 2,363 | 3.8 | % | ||||||||||
| Total delinquency | 17,798 | 12.7 | % | 8,511 | 13.6 | % | ||||||||||
| Finance receivables before allowance for loan losses | $ | 140,275 | 100.0 | % | $ | 62,758 | 100.0 | % | ||||||||
The following is an assessment of the credit quality of loans as of December 31, 2021 and 2020 and presents the contractual delinquency of the finance receivable loans portfolio:
| December 31, 2021 | December 31, 2020 | |||||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||||
| Current | $ | 66,514 | 85.8 | % | $ | 38,133 | 86.9 | % | ||||||||
| Delinquency: | ||||||||||||||||
| 31 to 60 days | 6,577 | 8.5 | % | 3,374 | 7.7 | % | ||||||||||
| 61 to 90 days | 4,401 | 5.7 | % | 2,363 | 5.4 | % | ||||||||||
| Total delinquency | 10,978 | 14.2 | % | 5,737 | 13.1 | % | ||||||||||
| Loan receivables before allowance for loan losses | $ | 77,492 | 100.0 | % | $ | 43,870 | 100.0 | % | ||||||||
The following is an assessment of the credit quality of Instacash as of December 31, 2021 and 2020 and presents the contractual delinquency of the finance receivable Instacash portfolio:
| December 31, 2021 | December 31, 2020 | |||||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||||
| Current | $ | 55,963 | 89.1 | % | $ | 16,114 | 85.3 | % | ||||||||
| Delinquency: | ||||||||||||||||
| 31 to 60 days | 6,820 | 10.9 | % | 2,774 | 14.7 | % | ||||||||||
| 61 to 90 days | - | 0.0 | % | - | 0.0 | % | ||||||||||
| Total delinquency | 6,820 | 10.9 | % | 2,774 | 14.7 | % | ||||||||||
| Instacash receivables before allowance for loan losses | $ | 62,783 | 100.0 | % | $ | 18,888 | 100.0 | % | ||||||||
The following is an assessment of the credit quality of membership receivables as of December 31, 2021 and 2020 and presents the contractual delinquency of the membership receivable portfolio:
| December 31, 2021 | December 31, 2020 | |||||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||||
| Current | $ | 2,227 | 71.8 | % | $ | 1,586 | 84.1 | % | ||||||||
| Delinquency: | ||||||||||||||||
| 31 to 60 days | 514 | 16.6 | % | 168 | 9.0 | % | ||||||||||
| 61 to 90 days | 358 | 11.6 | % | 131 | 6.9 | % | ||||||||||
| Total delinquency | 872 | 28.2 | % | 299 | 15.9 | % | ||||||||||
| Membership receivables before allowance for loan losses | $ | 3,099 | 100.0 | % | $ | 1,885 | 100.0 | % | ||||||||
The following is an assessment of the credit quality of fees receivable as of December 31, 2021 and 2020 and presents the contractual delinquency of the fees receivable portfolio:
| December 31, 2021 | December 31, 2020 | |||||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||||
| Current | $ | 6,682 | 79.9 | % | $ | 2,435 | 83.6 | % | ||||||||
| Delinquency: | ||||||||||||||||
| 31 to 60 days | 1,684 | 20.1 | % | 478 | 16.4 | % | ||||||||||
| 61 to 90 days | - | 0.0 | % | - | 0.0 | % | ||||||||||
| Total delinquency | 1,684 | 20.1 | % | 478 | 16.4 | % | ||||||||||
| Fees receivable before allowance for loan losses | $ | 8,366 | 100.0 | % | $ | 2,913 | 100.0 | % | ||||||||
6. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Leasehold improvements | $ | 545 | $ | 464 | ||||
| Furniture and fixtures | 573 | 448 | ||||||
| Computers and equipment | 2,209 | 796 | ||||||
| 3,327 | 1,708 | |||||||
| Less: accumulated depreciation | (1,526 | ) | (1,206 | ) | ||||
| Furniture and equipment, net | $ | 1,801 | $ | 502 | ||||
Total depreciation expense related to property and equipment was $343 and $317 for the twelve months ended December 31, 2021 and 2020, respectively.
7. INTANGIBLE ASSETS
Goodwill as of December 31, 2021 and 2020 was $52,541 and $21,565, respectively. The increase relates to goodwill acquired from the acquisition of MALKA. See Note 18, “Mergers and Acquisitions,” for more information regarding goodwill and other intangible assets acquired from MALKA.
Intangible assets consisted of the following:
| December 31, | December 31, | |||||||||
| Useful Life | 2021 | 2020 | ||||||||
| Capitalized internal-use software | 3 years | $ | 5,493 | $ | 5,374 | |||||
| Work in process | 1,481 | 1,481 | ||||||||
| Proprietary technology | 7 years | 6,130 | 6,130 | |||||||
| Customer relationships | 15 years | 5,960 | - | |||||||
| Trade names | 15 years | 11,820 | - | |||||||
| Less: accumulated amortization | (5,760 | ) | (3,710 | ) | ||||||
| Intangible assets, net | $ | 25,124 | $ | 9,275 | ||||||
For the twelve months ended December 31, 2021 and 2020, total amortization expense was $2,049 and $791, respectively.
The following table summarizes estimated future amortization expense of intangible assets placed in service at December 31, 2021 for the years ending:
| 2022 | $ | 2,648 | ||
| 2023 | 2,221 | |||
| 2024 | 2,072 | |||
| 2025 | 2,061 | |||
| 2026 | 2,061 | |||
| Thereafter | 12,580 | |||
| $ | 23,643 |
8. OTHER ASSETS
Other assets consisted of the following:
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Receivable from payment processor - Debit card collections | $ | 16,681 | $ | 5,600 | ||||
| Receivable from payment processor - Other | 3,156 | 1,936 | ||||||
| Prepaid expenses | 8,836 | 1,591 | ||||||
| Other | 5,757 | 2,580 | ||||||
| Total other assets | $ | 34,430 | $ | 11,707 | ||||
9. VARIABLE INTEREST ENTITIES
The following table summarizes the VIEs’ assets and liabilities included in the Company’s consolidated financial statements, after intercompany eliminations, as of December 31, 2021 and 2020:
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Assets: | ||||||||
| Cash | $ | - | $ | 390 | ||||
| Restricted cash | 39,396 | - | ||||||
| Finance receivables | 109,877 | 60,845 | ||||||
| Allowance for losses on finance receivables | (17,081 | ) | (8,581 | ) | ||||
| Finance receivables, net | 92,796 | 52,264 | ||||||
| Total assets | $ | 132,192 | $ | 52,654 | ||||
| Liabilities: | ||||||||
| Other debt | $ | 143,000 | - | |||||
| Total liabilities | $ | 143,000 | $ | - | ||||
By December 2021, IIA and the IIA Notes SPVs became indirect wholly owned MoneyLion subsidiaries, removing the variable interest in those entities. See Note 1. “Description of Business and Basis of Presentation” for more information.
Beginning in the fourth quarter of 2021, MoneyLion transitioned its primary source of funding for originated receivables from IIA tois special purpose vehicle financings from third-party lenders (the “SPV Credit Facilities”). The Company may sell certain loan and Instacash receivables to wholly owned, bankruptcy-remote special purpose subsidiaries (the “SPV Borrowers”), which pledge such receivables and related cash flows as collateral to support the financing of additional receivables. The underlying loan and Instacash receivables are originated and serviced by other wholly owned subsidiaries of the Company. The SPV Borrowers are required to maintain pledged collateral consisting of cash balances and loan and Instacash receivables, with a net asset balance that equalsthe value of which must equal or exceeds 90% ofexceed the aggregate principal amounts of the loans financed through the SPV Credit Facilities. 90% of the loan and Instacash receivables net asset balance is counted as collateral. Proceeds received from the SPV Credit Facilities can only be used to purchase loansloan and Instacash receivables. The payments and interest, as applicable, received from the loansloan and Instacash receivables held by the SPV Borrowers are used to repay obligations under the SPV Credit Facilities. While the SPV Credit Facilities and related agreements provide assurances to the third-party lenders regarding the quality of loan and Instacash receivables and certain origination and servicing functions to be performed by other wholly owned subsidiaries of the Company, the third-party lender may absorb losses in the event that the payments and interest, as applicable, received in connection with the loan and Instacash receivables are not sufficient to repay the loans made through the SPV Credit Facilities.
The Company is required to evaluate the SPV Borrowers for consolidation, which the Company has concluded are VIEs. The Company has the ability to direct the activities of the SPV Borrowers that most significantly impact the economic performance of the wholly owned subsidiaries that act as the originators and servicer of the loan and Instacash receivables held by the SPV Borrowers. Additionally, the Company has the obligation to absorb losses related to the pledged collateral in excess of the aggregate principal amount of the receivables and the right to proceeds related to the excess loan and Instacash receivables securing the SPV Credit Facilities once all loans and interest under such SPV Credit Facilities are repaid, which exposes the Company to losses and returns that could potentially be significant to the SPV Borrowers. Accordingly, the Company determined it is the primary beneficiary of the SPV Borrowers and is required to consolidate them as indirect wholly owned VIEs. For more information, see Note 10.7, “Debt” for discussion of the ROAR 1 SPV Credit Facility and the ROAR 2 SPV Credit Facility.
10. DEBTRevenue Recognition and Related Receivables—The following table summarizes revenue by type for the twelve months ended December 31, 2023 and 2022:
|
| Twelve Months Ended December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Consumer revenues |
|
|
|
|
|
| ||
Service and subscription fees |
| $ | 272,897 |
|
| $ | 208,829 |
|
Net interest income on finance receivables |
|
| 12,193 |
|
|
| 10,147 |
|
Total consumer revenues |
|
| 285,090 |
|
|
| 218,976 |
|
Enterprise service revenues |
|
| 138,341 |
|
|
| 121,769 |
|
Total revenue, net |
| $ | 423,431 |
|
| $ | 340,745 |
|
SPV Debt Agreements — In March 2018,
Service and then in April 2018, IIA Notes SPV II LLCsubscription fees—The Credit Builder Plus membership was developed to allow consumer customers to access affordable credit through asset collateralization, build savings, improve financial literacy and IIA Notes SPV III LLC, indirect wholly owned subsidiariestrack their financial health. The Credit Builder Plus membership is intended to emphasize the program’s ability to help consumer customers build credit while also saving. Members receive access to the Company’s secured personal Credit Builder Loan, banking account and related services, managed investment services, an online cryptocurrency account, credit tracking services and Instacash advances.
The membership subscription fee is recognized on a daily basis throughout the term of the individual subscription agreements, as the control of the membership services is delivered to the customer evenly throughout that term. Subscription receivables are recorded at the amount billed to the customer. The Company entered into Loanpolicy is to suspend recognition of subscription revenue when the last scheduled subscription payment is 30 days past due, or when, in the Company’s estimation, the collectability of the account is uncertain. Membership subscription revenue is recognized gross over time.
F-10
As the Company performs promised services to members, including those services that the members receive access to as part of the Credit Builder Plus membership, revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The Company evaluates whether it is appropriate to recognize revenue on a gross basis or net of costs associated with the transaction based upon its evaluation of whether the Company obtains control of the specified services by considering if it is primarily responsible for fulfilment of the promise, and Security Agreements (the “SPV Debt Agreements”has the latitude in establishing pricing, among other factors.
Most service fees are related to the Company’s Instacash advance product. Users may obtain cash from interest-free Instacash advances in 1-3 business days or may elect to receive cash immediately through the Company’s instant transfer option. The Company charges a fee when the instant transfer option is elected by a customer. Instant transfer fees are recognized gross over the term of the Instacash advance, as the services related to these fees are not distinct from the services of the Instacash advance. The receivable related to the instant transfer option fee is recorded at the amount billed to the customer.
With respect to the Company’s Instacash advance service, the Company provides customers with the option to provide a tip for the offering. Fees earned on tips are recognized gross over the term of the Instacash advance, as the services related to these fees are not distinct from the services of the Instacash advance. Advances typically include a term of 30 days or less, depending on the individual’s pay cycle. The Company’s policy is to suspend the account when an advance is past the scheduled repayment date on a contractual basis or when, in the Company’s estimation, the collectability of the account is uncertain. The receivable related to the tip is recorded at the amount billed to the customer.
Net interest income on loan receivables—Interest income and the related accrued interest receivables on loan-related receivables are accrued based upon the daily principal amount outstanding except for loans that are on nonaccrual status. The Company recognizes interest income using the interest method. The Company’s policy is to suspend recognition of interest income on finance receivables and place the loan on nonaccrual status when the account is 60 days or more past due on a contractual basis or when, in the Company’s estimation, the collectability of the account is uncertain, and the account is less than 90 days contractually past due.
Enterprise service revenues—The Company provides services to enterprise clients to allow them to better connect with existing end-users and reach new potential end-users. These services include lead generation services, advertising services and digital media and content production services custom designed to promote enterprise clients’ products and services.
The Company has a single performance obligation to facilitate lead generating services to the providers of financial and non-financial products and services (“Product Partners”) whereby qualified consumers are matched with separate lenders establishing a total credit facilityfinancial solutions offered by the Product Partners based on qualification and preference.
Lead generation fees are earned through the operation of a minimumrobust technology platform via an API that connects consumers to Product Partners. The Company’s API platform functions as a powerful definitive search, comparison and ad recommendation engine that provides consumers with personalized offers and matches the demand and supply of $20.0 million,financial and non-financial products and services. The lead generating services conducted through the API comprise a series of distinct services that are substantially the same and have the same pattern of transfer. The Company is entitled to receive transaction fees that are based on performance structure, including but not limited to cost per funded loan, cost per approved credit card, cost per click or cost per savings accounts, or revenue share based on successful lead conversion. The transaction fees and revenue share are considered revenue from contracts with Product Partners, including financial institutions and other financial service providers. These fees and revenue share to which couldthe Company expects to be entitled are deemed variable consideration because the lead generation volume over the contractual term is not known. Because the lead generating service performance obligation is a series of distinct services, the Company applies the variable consideration exception and allocates the variable consideration to the period in which the fees are earned, and recognizes revenue over time.
The Company earns various SaaS and platform fees from certain enterprise partners. This revenue is recognized evenly over the required performance period.
F-11
The Company generates advertising fees by displaying ads on the Company’s mobile application and by sending emails or other messages to potential end-users to promote the enterprise clients’ services. For advertising services, the Company enters into agreements with the enterprise clients in the form of a signed contract, which specifies the terms of the services and fees, prior to running advertising and promotional campaigns. The Company recognizes revenue from the display of impression-based ads and distribution of impression-based emails in the period in which the impressions are delivered in accordance with the contractual terms of the enterprise clients’ arrangements. Impressions are considered delivered when a member clicks on the advertisement or promotion.
Digital media and content production services provided to enterprise clients are generally earned and recognized over time as the performance obligations within the contracts are satisfied. Payment terms vary from contract to contract such that collections may occur in advance of services being rendered, as services are rendered or after services are rendered. Contracts for digital media and content production services are typically short-term in duration.
Allowance for Losses on Receivables—An allowance for losses on consumer receivables and related accrued interest and fee receivables is established to provide for current expected credit losses in the Company’s consumer receivables at the balance sheet date and is established through a provision for losses on receivables. Charge-offs, net of recoveries, are charged directly to the allowance. The allowance is based on management’s assessment of many factors, including changes in the nature, volume, and risk characteristics of the consumer receivables portfolio, including trends in delinquency and charge-offs and current economic conditions that may affect the consumer’s ability to pay. The allowance is developed on a general basis and each period management assesses each product type by origination cohort in order to determine the forecasted performance of those cohorts and arrive at an appropriate allowance rate for that period. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in any of the factors.
The Company’s charge-off policy is to charge-off finance receivables for loans and related accrued interest receivables, net of expected recoveries, in the month in which the account becomes 90 days contractually past due and charge-off finance receivables for Instacash advances and related fee receivables in the month in which the account becomes 90 days past due effective January 1, 2023 and 60 days past due prior to January 1, 2023. If an account is deemed to be uncollectable prior to this date, the Company will charge-off the receivable in the month it is deemed uncollectable.
The Company determines the past due status using the contractual terms of the finance receivables. This is the credit quality indicator used to evaluate the required allowance for losses on finance receivables for each portfolio of products.
An allowance for losses on service and subscription fees receivables is established to provide for current expected credit losses in the Company’s service and subscription fee receivables at the balance sheet date and is established through a provision for losses on receivables. Charge-offs, net of recoveries, are charged directly to the allowance. The allowance is based on management’s assessment of historical charge-offs and recoveries on these receivables, as well as certain qualitative factors including current economic conditions that may affect the customers’ ability to pay.
Receivables from enterprise services have a low rate of default, and as such the related allowance is not material. The Company monitors enterprise receivable default rates for any indication of a deterioration in average credit quality that may result in more material levels of allowance for losses.
Segment Information—Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the chief executive officer. Since the CODM reviews financial information on a consolidated basis for purposes of allocating resources and in assessing performance, the Company has one operating segment, and therefore, one reportable segment.
F-12
Governmental Regulation—The Company is subject to various state and federal laws and regulations in each of the states in which it operates, which are subject to change and may impose significant costs or limitations on the way the Company conducts or expands its business. The Company’s loans are originated under individual state laws, which may carry different rates and rate limits, and have varying terms and conditions depending upon the state in which they are offered. The Company is also subject to state licensing requirements of each individual U.S. state in which we operate, including with respect to certain consumer lending, life insurance and mortgage products and services that the Company offers directly or to which the Company connects consumers through third parties. Other governmental regulations include, but are not limited to, imposed limits on certain charges, insurance products and required licensing and qualification.
Fair Value of Financial Instruments—Accounting Standards Codification (“ASC”) 820, Fair Value Measurement (“ASC 820”), provides a single definition of fair value and a common framework for measuring fair value as well as disclosure requirements for fair value measurements used in financial statements. Under ASC 820, fair value is determined based upon the exit price that would be received by a company to sell an asset or paid by a company to transfer a liability in an orderly transaction between market participants, exclusive of any transaction costs. Fair value measurements are determined by either the principal market or the most advantageous market. The principal market is the market with the greatest level of activity and volume for the asset or liability. Absent a principal market to measure fair value, the Company uses the most advantageous market, which is the market from which the Company would receive the highest selling price for the asset or pay the lowest price to settle the liability, after considering transaction costs. However, when using the most advantageous market, transaction costs are only considered to determine which market is the most advantageous and these costs are then excluded when applying a fair value measurement. ASC 820 creates a three-level hierarchy to prioritize the inputs used in the valuation techniques to derive fair values. The basis for fair value measurements for each level within the hierarchy is described below, with Level 1 having the highest priority and Level 3 having the lowest.
Level 1: | Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. |
Level 2: | Observable inputs other than Level 1 quoted prices, such as quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active for identical or similar assets and liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | |
Level 3: | Valuations are based on inputs that are unobservable and significant to the overall fair value measurement of the assets or liabilities. Inputs reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. |
The Company had no assets measured at fair value on a recurring or non-recurring basis as of December 31, 2023 and December 31, 2022 except for goodwill, which was valued using Level 3 inputs, as described in Note 2, “Summary of Significant Accounting Policies.” Liabilities measured at fair value on a recurring basis as of December 31, 2023 and December 31, 2022 are the Private Placement Warrants (as defined herein) and contingent consideration related to mergers and acquisitions, which are further described in Note 12, “Stock Warrants,” and Note 15, “Mergers and Acquisitions,” respectively. The Company had no liabilities measured at fair value on a non-recurring basis as of December 31, 2023 and December 31, 2022. There have been increased to $27.0 million upon mutual agreementno transfers between levels during the lenderstwelve months ended December 31, 2023 and the Company. The SPV Debt Agreements matured at various dates through 2020 and carried a total interest rate of 14%. December 31, 2022.
F-13
The Company borrowed a totalalso has financial instruments which are not measured at fair value. The Company has evaluated cash, restricted cash, consumer receivables, net, enterprise receivables, net, receivables from payment processors, prepaid expenses, accounts payable and accrued liabilities and other financial instrument assets and liabilities, and believes the carrying value approximates the fair value due to the short-term nature of $22.0 million under these credit facilities. In January 2019,balances and that the Company repaid $11.0 millionfair value of these financial instruments would be based on Level 1 fair value measurements. The carrying value of the secured loans approximates their fair value based on the relatively short duration these instruments have been outstanding and the secured loans' variable interest rate based on market rates. The carrying value of other debt approximates its fair value based on the relatively short duration these instruments have been outstanding and availability of alternative financing sources at similar interest rates with the same terms. The fair value of secured loans and other debt would be based on Level 2 fair value measurements.
Net Loss Per Share—The Company calculated basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required for companies with participating securities. The Company considered the redeemable convertible preferred stock to be a participating security as the holders were entitled to receive dividends at a dividend rate payable in preference and priority to the holders of common stock.
Under the two-class method, basic net loss per share attributable to common stockholders was calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. The net loss attributable to common stockholders was not allocated to the redeemable convertible preferred stock as the holders of redeemable convertible preferred stock did not have a contractual obligation to share in losses, which is consistent with the if converted method of calculation. Diluted net loss per share attributable to common stockholders was computed by giving effect to all potentially dilutive common stock equivalents outstanding for the period. For purposes of this calculation, redeemable convertible preferred stock, stock options, restricted stock units, performance stock units, Earnout Shares, as defined in Note 13, “Net Loss Per Share,” and warrants to purchase common stock were considered common shares equivalents but were excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect was anti-dilutive. In periods in which the Company reports a net loss attributable to all classes of common stockholders, diluted net loss per share attributable to all classes of common stockholders is the same as basic net loss per share attributable to all classes of common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported net losses attributable to common stockholders for the fiscal years ended December 31, 2023 and 2022.
Cash—Cash includes cash and cash equivalents held at financial institutions. For purposes of the consolidated financial statements, the Company considers all highly liquid investments purchased with a maturity date of three months or less to be cash equivalents. At times, the Company may maintain deposits with financial institutions in excess of the Federal Deposit Insurance Corporation insurance limits, but management believes any such amounts do not represent a significant credit risk.
Restricted Cash—Restricted cash consists of cash required to be held on reserve by the Company’s vendors for purposes of loan or advance processing or funding and cash on hand in the VIEs. All cash accounts are held in federally insured institutions, which may at times exceed federally insured limits. The Company has not experienced losses in such accounts. Management believes the Company’s exposure to credit risk is minimal for these accounts.
Goodwill—The Company performed goodwill impairment testing annually on the last day of the fiscal year or more frequently if indicators of potential impairment existed until goodwill was fully impaired as described below. A potential impairment indicator was identified on each of June 30, 2022, September 30, 2022, December 31, 2022 and June 30, 2023 due to a decline in the price of the Class A Common Stock and the Company's related market capitalization and, as such, the Company performed a goodwill impairment test as of June 30, 2022, September 30, 2022, December 31, 2022 and June 30, 2023. The goodwill impairment test is performed at the consolidated company level since the Company represents one reporting unit.
The Company first evaluates whether it is more likely than not that the fair value of the reporting unit has fallen below its carrying amount. No indicators of fair value falling below the reporting unit carrying amount were noted on a quantitative or qualitative basis during the June 30, 2022 assessment nor the September 30, 2022 assessment.
F-14
The June 30, 2022 and September 30, 2022 assessments indicated that the fair value of the reporting unit exceeded the reporting unit's carrying value. The fair value of the reporting unit was calculated by valuing the Class A Common Stock and the Company's Series A Preferred Stock, primarily based on the Class A Common Stock price per share. The calculation of fair value also included an estimated control premium based on consultation between the Company's management and third-party valuation specialists.
The December 31, 2022 assessment indicated that the carrying value of the reporting unit exceeded the reporting unit's fair value, resulting in a goodwill impairment loss of $136,760, which also represented the accumulated impairment losses related to goodwill as of December 31, 2022. Determining the fair value of the reporting unit required the use of estimates and the exercise of significant judgment, which are inherently subjective in nature. For quantitative goodwill impairment testing, the fair value of the reporting unit was calculated using a blend of a discounted cash flow method and a guideline public company method.
The discounted cash flow method calculation estimates the future cash flows from the reporting unit using a multi-year forecast, and a terminal value calculated using a long-term growth rate that was informed based on our industry, analyst reports of a public company peer set, current and expected future economic conditions and management expectations. The discount rate used to discount these future cash flows was determined using a capital asset pricing model based on the market value of equity of a public company peer set, adjusted for risk characteristics and expectations specific to the reporting unit, combined with an assessment of the cost of debt. The discount rates used for the reporting unit in the Company's December 31, 2022 impairment analysis was 30.5%, and the Company applied a terminal year long-term growth rate of 3.0%.
The guideline public company method utilized the Company's historical and forecasted revenue to enterprise value ratio to determine revenue multiples to calculate the enterprise value of the reporting unit. The guideline public company method also included an estimated control premium based on consultation between the Company's management and third-party valuation specialists.
The June 30, 2023 assessment indicated that the carrying value of the reporting unit exceeded the reporting unit's fair value, resulting in a goodwill impairment loss of $26,721, which in turn resulted in a full impairment of goodwill. Determining the fair value of the reporting unit required the use of estimates and the exercise of significant judgment, which are inherently subjective in nature. For quantitative goodwill impairment testing, the fair value of the reporting unit was calculated by valuing the Class A Common Stock based on the Class A Common Stock price per share. The calculation of fair value also included an estimated control premium based on consultation between the Company's management and third-party valuation specialists.
Intangible Assets—The Company’s intangible assets are made up of internal use software and acquired proprietary technology, customer relationships and trade names. The Company capitalizes qualifying internal use software development costs that are incurred during the application development stage, provided that management with the relevant authority authorizes the project, it is probable the project will be completed, and the software will be used to perform the function intended. Costs incurred during the application development stage internally or externally are capitalized and amortized on a straight-line basis over the expected useful life of five years. Costs related to preliminary project activities and post-implementation operation activities, including training and maintenance, are expensed as incurred.
Impairment of Long-Lived Assets—Long-lived assets, such as property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted future cash flows expected to result from the use and eventual disposition of the asset. The amount of impairment loss, if any, is measured as the difference between the carrying value of the asset and its estimated fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. No impairment charges were recognized during the years ended December 31, 2023 and 2022.
F-15
Income Taxes—Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effects of future tax rate changes are recognized in the period when the enactment of new rates occurs.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the positions taken or the amount of the positions that would be ultimately sustained. The benefit of a tax position is recognized in the consolidated financial statements in the period during which, based on all available evidence, it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more likely than not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the consolidated statements of operations.
Stock-Based Compensation—The Company accounts for the options, restricted stock units (“RSUs”) and performance share units (“PSUs”) granted to employees or directors as stock-based compensation expense based on their grant date fair value.
The fair value of all awards is recognized as an expense over the requisite service periods (generally the vesting period of the equity award) and is included in compensation and benefits in the Company's consolidated statement of operations. Forfeitures are accounted for as they occur.
Warrant Liability—The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815. The Company accounts for its outstanding Public Warrants and Private Placement Warrants in accordance with the guidance contained in ASC 815-40, “Derivatives and Hedging — Contracts on an Entity’s Own Equity” (“ASC 815-40”).
The Company determined that the Private Placement Warrants do not meet the criteria for equity treatment thereunder. For issued or modified warrants that do not meet all the criteria for equity treatment, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. As such, each Private Placement Warrant is recorded as a liability and any change in fair value is recognized in the Company’s statements of operations. The fair value of the Private Placement Warrants was estimated using a Black-Scholes Option Pricing Model.
The Public Warrants met the conditions for equity classification in accordance with ASC 815-40. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance.
Valuation of consideration transferred related to mergers and acquisitions—The Company determined that the contingent consideration related to the earnout provisions, the Closing Make-Whole Provision (as defined herein) and the Preferred Stock Equivalents (as defined herein) in connection with the MALKA Acquisition and Engine Acquisition did not meet the criteria for equity treatment. For provisions that do not meet all the criteria for equity treatment, the contingent consideration is required to be recorded at fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the contingent consideration are recognized as a non-cash gain or loss on the statements of operations. As such, the MALKA and Engine earnout provision were recorded as a liability and any change in fair value was recognized in the Company's statements of operations. The fair value of the MALKA and Engine earnout was estimated using a Monte Carlo Simulation Model.
F-16
The Company determined that the consideration related to the shares of Series A Preferred Stock transferred as part of the consideration for the Engine Acquisition meets the criteria for equity treatment. The fair value of this consideration was estimated using a Monte Carlo Simulation Model and recorded to equity on the date of issuance.
Property and Equipment—Property and equipment is carried at cost. Depreciation is determined principally under the SPV Debt Agreements. In August 2020, IIA Notes SPV III LLC repaid in fullstraight-line method over the approximately $11.5 million that remained outstanding underestimated useful lives of the SPV Debt Agreementsassets. Expenditures for maintenance and terminated the facility.repairs are charged to expense as incurred.
The estimated useful lives of property and equipment are described below:
Property and Equipment | Useful Life | |
Leasehold improvements | 5 years | |
Furniture and fixtures | 5 years | |
Computers and equipment | 2 years |
6.75% Bank Loan— In September 2018,Leases—Effective January 1, 2022, arrangements containing leases are evaluated as an operating or finance lease at lease inception. No finance leases were identified. For operating leases, the Company entered intorecognizes an operating right-of-use asset and operating lease liability at lease commencement based on the present value of lease payments over the lease term.
Since an implicit rate of return is not readily determinable for the Company's leases, an incremental borrowing rate is used in determining the present value of lease payments. The incremental borrowing rate is determined using the rate of interest the Company pays to borrow funds on a Loan and Security Agreement (the “6.75% Bank Loan”) with a bankcollateralized basis, adjusted for a 6.75% $20 million loan. Interest only was payable monthly through September 27, 2019. Accordingdifferences in the lease term compared to the Company's debt using the differences in daily U.S. treasury par yield curve that correspond to the terms of the 6.75% Bank Loan,Company's lease and debt. These rates are updated on a quarterly basis for measurement of new lease obligations. Some leases include renewal options; however, generally it is not reasonably certain that these options will be exercised at lease commencement. Lease expense is recognized on a straight-line basis over the lease term, including leases with an initial term of 12 months or less which are not recognized on the Company's balance sheet. The Company separates lease and non-lease components for its real estate leases.
Debt Issuance Costs—Costs incurred to obtain debt financing are capitalized and amortized into interest expense over the life of the related debt using a method that approximates the effective interest method. Debt issuance costs are recorded as a contra debt balance in the accompanying consolidated financial statements.
Marketing Costs—Costs related to marketing activities are expensed as incurred.
Recently Adopted Accounting Pronouncements—
The Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), effective January 1, 2022, and applied the changes prospectively, recognizing a cumulative-effect adjustment to the beginning balance of retained earnings as of the adoption date. As permitted by the new guidance, the Company elected the package of practical expedients, which among other things, allowed historical lease classification to be carried forward. Upon adoption of the ASU No. 2016-02, the Company recognized an aggregate lease liability and right-of-use asset of $3,551, calculated based on the present value of the remaining minimum lease payments for qualifying leases as of January 1, 2022. The cumulative-effect adjustment recognized to the beginning balance of retained earnings was not material. The adoption of the new guidance did not impact the Company’s consolidated statements of operations nor cash flows.
The Company adopted ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The amendments in the updated guidance simplify the accounting for income taxes by removing certain exceptions and improving consistent application of other areas of the topic by clarifying the guidance. The adoption of ASU No. 2019-12 did not have a material impact on the Company's financial statements or the related notes.
F-17
The Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which, along with subsequent related ASUs, creates a new credit impairment standard for financial assets measured at amortized cost and available-for-sale debt securities. The ASU requires financial assets measured at amortized cost (including loans, trade receivables and held-to-maturity debt securities) to be presented at the net amount expected to be collected, through an allowance for credit losses that are expected to occur over the remaining life of the asset, rather than incurred losses. The ASU requires that credit losses on available-for-sale debt securities be presented as an allowance rather than as a direct write-down. The measurement of credit losses for newly recognized financial assets (other than certain purchased assets) and subsequent changes in the allowance for credit losses are recorded in the statement of operations as the amounts expected to be collected change. The Company adopted ASU 2016-13 and the related subsequent ASUs effective January 1, 2023, and applied the changes prospectively, recognizing a cumulative-effect adjustment to the beginning balance of retained earnings as of the adoption date. Upon adoption, the Company increased consumer receivables, net by $692, decreased enterprise receivables, net by $187 and reduced accumulated deficit by $505. The adoption of the new guidance did not impact the Company’s consolidated statements of operations or cash flows.
Recently Issued Accounting Pronouncements Not Yet Adopted—
The Company currently qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012. Accordingly, the Company has the option to adopt new or revised accounting guidance either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods applicable to private companies. The Company has elected to adopt new or revised accounting guidance within the same time period as private companies, unless, as indicated below, management determines it is preferable to take advantage of early adoption provisions offered within the applicable guidance.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitating of the Effects of Reference Rate Reform on Financial Reporting and subsequently issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions in which the reference London Interbank Offered Rate (“LIBOR”) or another reference rate is expected to be discontinued as a result of the Reference Rate Reform. These ASUs are intended to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The new guidance is effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022 and the expedients are available through December 31, 2024. Early adoption is permitted. The Company has no significant contracts based on LIBOR as of December 31, 2023. As such, the Company currently does not intend to elect the optional expedients and exceptions.
3. CONSUMER RECEIVABLES
The Company’s finance receivables consist of secured personal loans and principal amounts of Instacash advances. Secured loan principal balances are either partially or fully deposited into an escrow account upon origination with any remaining balance being given to the borrower. The funds in the escrow account may be used to pay the secured personal loan in full or can be released to the borrower once the secured personal loan is paid in full. Until such time, the funds in the escrow account may be collected by the Company in the event the borrower becomes contractually past due. Accrued interest receivables represent the interest accrued on the loan receivables based upon the daily principal amount outstanding except for loans that are on nonaccrual status.
The Company’s policy is to suspend recognition of interest income on secured personal loans and place the secured personal loan on nonaccrual status when the account is more than 60 days past due on a contractual basis or when, in the Company’s estimation, the collectability of the account is uncertain, and the account is less than 90 days contractually past due. The Company has elected to not measure an allowance for losses on accrued interest receivable. Any accrued interest receivable that becomes 90 days past due on a contractual basis is charged-off by reversing net interest income on loan receivables. Net charge-offs of accrued interest income were $1,470 and $2,058 for the twelve months ended December 31, 2023 and 2022.
F-18
Fees receivable represent the amounts due to the Company for tips and instant transfer fees related to the Instacash earned wage access product. Subscription receivables represent the amounts billed to customers for subscription services.
The credit quality and future repayment of consumer receivables are dependent upon the customer’s ability to perform under the terms of the agreement. Factors such as unemployment rates and housing values, among others, may impact the customer’s ability to perform under the loan or Instacash advance terms though no direct correlation between charge-off rates and these factors has been identified in the Company's analysis. When assessing provision for losses on consumer receivables, the Company takes into account the composition and delinquency status of the outstanding consumer receivables and the related forecasted principal loss rates based on recent historical experience. Recent historical loss rates are updated on a quarterly basis. Charge-offs of consumer receivable balances occur after becoming 90 days past contractually due unless specific circumstances are identified on an individual or group of receivables that date was convertedindicate charge-off is not appropriate. The level of exceptions to a term loan payable with principalcharge-offs occurring once 90 days past due is not material. Consumer receivable charge-offs typically occur within one year of origination. The tables below show consumer receivables balances as of December 31, 2023 and interest payable in 36 monthly installments, maturing on September 27,December 31, 2022 and the consumer receivables activity, charge-off rates and aging by product for the twelve months ended December 31, 2023 and 2022. The 6.75% Bank Loan was paid off in 2020.
Consumer receivables consisted of the following:
| December 31, |
|
| December 31, |
| ||
| 2023 |
|
| 2022 |
| ||
Loan receivables | $ | 66,815 |
|
| $ | 73,451 |
|
Instacash receivables |
| 120,336 |
|
|
| 77,688 |
|
Finance receivables |
| 187,151 |
|
|
| 151,139 |
|
Fees receivable |
| 16,137 |
|
|
| 14,019 |
|
Subscription receivables |
| 3,491 |
|
|
| 3,419 |
|
Deferred loan origination costs |
| 86 |
|
|
| 331 |
|
Accrued interest receivable |
| 1,302 |
|
|
| 1,068 |
|
Consumer receivables, before allowance for credit losses | $ | 208,167 |
|
| $ | 169,976 |
|
Changes in the allowance for losses on loan receivables were as follows:
| Twelve Months Ended December 31, |
| |||||
| 2023 |
|
| 2022 |
| ||
Beginning balance | $ | 5,784 |
|
| $ | 6,494 |
|
Provision for credit losses on receivables |
| 9,451 |
|
|
| 12,504 |
|
Loan receivables charged off |
| (13,765 | ) |
|
| (19,647 | ) |
Recoveries |
| 4,291 |
|
|
| 6,429 |
|
Ending balance | $ | 5,761 |
|
| $ | 5,780 |
|
Changes in allowance for losses on Instacash receivables were as follows:
| Twelve Months Ended December 31, |
| |||||
| 2023 |
|
| 2022 |
| ||
Beginning balance | $ | 23,240 |
|
| $ | 15,131 |
|
Provision for credit losses on receivables |
| 66,878 |
|
|
| 73,765 |
|
Instacash receivables charged off |
| (84,016 | ) |
|
| (97,264 | ) |
Recoveries |
| 19,890 |
|
|
| 26,316 |
|
Ending balance | $ | 25,992 |
|
| $ | 17,948 |
|
F-19
Changes in allowance for losses on fees receivable were as follows:
| Twelve Months Ended December 31, |
| |||||
| 2023 |
|
| 2022 |
| ||
Beginning balance | $ | 908 |
|
| $ | 420 |
|
Provision for credit losses on receivables |
| 12,988 |
|
|
| 8,253 |
|
Fees receivable charged off |
| (13,898 | ) |
|
| (11,221 | ) |
Recoveries |
| 2,554 |
|
|
| 3,251 |
|
Ending balance | $ | 2,552 |
|
| $ | 703 |
|
Changes in allowance for losses on subscription receivables were as follows:
| Twelve Months Ended December 31, |
| |||||
| 2023 |
|
| 2022 |
| ||
Beginning balance | $ | 1,292 |
|
| $ | 278 |
|
Provision for credit losses on receivables |
| 4,101 |
|
|
| 5,231 |
|
Subscription receivables charged off |
| (5,538 | ) |
|
| (5,766 | ) |
Recoveries |
| 1,169 |
|
|
| 667 |
|
Ending balance | $ | 1,024 |
|
| $ | 410 |
|
The following is an assessment of the repayment performance of loan receivables as of December 31, 2023 and December 31, 2022 and presents the contractual delinquency of the loan receivables portfolio:
| December 31, 2023 |
|
| December 31, 2022 |
| ||||||||||
| Amount |
|
| Percent |
|
| Amount |
|
| Percent |
| ||||
Current | $ | 58,980 |
|
|
| 88.2 | % |
| $ | 63,578 |
|
|
| 86.6 | % |
|
|
|
|
|
|
|
|
|
|
| |||||
Delinquency: |
|
|
|
|
|
|
|
|
|
|
| ||||
31 to 60 days |
| 4,451 |
|
|
| 6.7 | % |
|
| 5,579 |
|
|
| 7.6 | % |
61 to 90 days |
| 3,384 |
|
|
| 5.1 | % |
|
| 4,294 |
|
|
| 5.8 | % |
Total delinquency |
| 7,835 |
|
|
| 11.8 | % |
|
| 9,873 |
|
|
| 13.4 | % |
Loan receivables before allowance for credit losses | $ | 66,815 |
|
|
| 100.0 | % |
| $ | 73,451 |
|
|
| 100.0 | % |
Loan receivables that are 61 to 90 days contractually past due are placed on non-accrual status.
The following is an assessment of the repayment performance of Instacash receivables as of December 31, 2023 and December 31, 2022 and presents the contractual delinquency of the Instacash receivables portfolio:
| December 31, 2023 |
|
| December 31, 2022 |
| ||||||||||
| Amount |
|
| Percent |
|
| Amount |
|
| Percent |
| ||||
Current | $ | 104,541 |
|
|
| 86.9 | % |
| $ | 70,003 |
|
|
| 90.1 | % |
|
|
|
|
|
|
|
|
|
|
| |||||
Delinquency: |
|
|
|
|
|
|
|
|
|
|
| ||||
31 to 60 days |
| 8,829 |
|
|
| 7.3 | % |
|
| 7,685 |
|
|
| 9.9 | % |
61 to 90 days |
| 6,966 |
|
|
| 5.8 | % |
|
| — |
|
|
| 0.0 | % |
Total delinquency |
| 15,795 |
|
|
| 13.1 | % |
|
| 7,685 |
|
|
| 9.9 | % |
Instacash receivables before allowance for credit losses | $ | 120,336 |
|
|
| 100.0 | % |
| $ | 77,688 |
|
|
| 100.0 | % |
F-20
The following is an assessment of the repayment performance of fees receivable as of December 31, 2023 and December 31, 2022 and presents the contractual delinquency of the fees receivable portfolio:
| December 31, 2023 |
|
| December 31, 2022 |
| ||||||||||
| Amount |
|
| Percent |
|
| Amount |
|
| Percent |
| ||||
Current | $ | 13,971 |
|
|
| 86.6 | % |
| $ | 10,645 |
|
|
| 75.9 | % |
|
|
|
|
|
|
|
|
|
|
| |||||
Delinquency: |
|
|
|
|
|
|
|
|
|
|
| ||||
31 to 60 days |
| 1,197 |
|
|
| 7.4 | % |
|
| 3,374 |
|
|
| 24.1 | % |
61 to 90 days |
| 969 |
|
|
| 6.0 | % |
|
| — |
|
|
| 0.0 | % |
Total delinquency |
| 2,166 |
|
|
| 13.4 | % |
|
| 3,374 |
|
|
| 24.1 | % |
Fees receivable before allowance for credit losses | $ | 16,137 |
|
|
| 100.0 | % |
| $ | 14,019 |
|
|
| 100.0 | % |
The following is an assessment of the repayment performance of subscription receivables as of December 31, 2023 and December 31, 2022 and presents the contractual delinquency of the subscription receivables portfolio:
| December 31, 2023 |
|
| December 31, 2022 |
| ||||||||||
| Amount |
|
| Percent |
|
| Amount |
|
| Percent |
| ||||
Current | $ | 2,786 |
|
|
| 79.8 | % |
| $ | 2,487 |
|
|
| 72.8 | % |
|
|
|
|
|
|
|
|
|
|
| |||||
Delinquency: |
|
|
|
|
|
|
|
|
|
|
| ||||
31 to 60 days |
| 407 |
|
|
| 11.7 | % |
|
| 534 |
|
|
| 15.6 | % |
61 to 90 days |
| 298 |
|
|
| 8.5 | % |
|
| 398 |
|
|
| 11.6 | % |
Total delinquency |
| 705 |
|
|
| 20.2 | % |
|
| 932 |
|
|
| 27.2 | % |
Subscription receivables before allowance for credit losses | $ | 3,491 |
|
|
| 100.0 | % |
| $ | 3,419 |
|
|
| 100.0 | % |
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
|
| December 31, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Leasehold improvements |
| $ | 1,932 |
|
| $ | 1,970 |
|
Furniture and fixtures |
|
| 361 |
|
|
| 853 |
|
Computers and equipment |
|
| 2,551 |
|
|
| 2,298 |
|
|
| 4,844 |
|
|
| 5,121 |
| |
Less: accumulated depreciation |
|
| (2,980 | ) |
|
| (2,145 | ) |
Property and equipment, net |
| $ | 1,864 |
|
| $ | 2,976 |
|
Total depreciation expense related to property and equipment was $1,293 and $1,235 for the twelve months ended December 31, 2023 and 2022, respectively.
5. INTANGIBLE ASSETS
Changes in goodwill were as follows:
| Goodwill Before Impairment |
|
| Cumulative Goodwill Impairments |
|
| Goodwill |
| |||
Balance at December 31, 2022 | $ | 163,360 |
|
| $ | (136,760 | ) |
| $ | 26,600 |
|
Goodwill impairment loss |
| — |
|
|
| (26,721 | ) |
| $ | (26,721 | ) |
Other |
| 121 |
|
|
| — |
|
|
| 121 |
|
Balance at December 31, 2023 | $ | 163,481 |
|
| $ | (163,481 | ) |
| $ | — |
|
F-21
See Note 2, “Summary of Significant Accounting Policies,” for additional information regarding goodwill impairment.
Intangible assets consisted of the following:
|
|
|
| December 31, |
|
| December 31, |
| ||
|
| Useful Life |
| 2023 |
|
| 2022 |
| ||
Proprietary technology and capitalized internal-use software |
| 3 - 7 years |
| $ | 43,105 |
|
| $ | 41,495 |
|
Work in process |
|
|
|
| 1,695 |
|
|
| 1,812 |
|
Customer relationships |
| 10 - 15 years |
|
| 160,500 |
|
|
| 160,500 |
|
Trade names |
| 9 - 15 years |
|
| 15,960 |
|
|
| 16,620 |
|
Less: accumulated amortization |
|
|
|
| (44,719 | ) |
|
| (26,180 | ) |
Intangible assets, net |
|
|
| $ | 176,541 |
|
| $ | 194,247 |
|
The Company capitalizes certain internal-use software development costs, consisting primarily of contractor costs and employee salaries and benefits allocated to the software. Capitalization of costs incurred in connection with internally developed software commences when both the preliminary project stage is completed and management has authorized further funding for the project, based on a determination that it is probable the project will be completed and used to perform the function intended. Costs incurred for enhancements that are expected to result in additional functionalities are capitalized in a similar manner. Capitalization of costs ceases no later than the point at which the project is substantially complete and ready for its intended use, at which point amortization of capitalized costs begins. All other costs are expensed as incurred. Costs capitalized in connection with internally developed software were $5,626 and $6,984 for the twelve months ended December 31, 2023 and 2022, respectively.
For the twelve months ended December 31, 2023 and 2022, total amortization expense was $23,533 and $20,438, respectively.
The following table summarizes estimated future amortization expense of intangible assets placed in service at December 31, 2023 for the years ending:
2024 |
|
|
|
|
| $ | 23,856 |
|
2025 |
|
|
|
|
|
| 23,856 |
|
2026 |
|
|
|
|
|
| 23,856 |
|
2027 |
|
|
|
|
|
| 23,284 |
|
2028 |
|
|
|
|
|
| 20,975 |
|
Thereafter |
|
|
|
|
|
| 59,019 |
|
|
|
|
|
| $ | 174,846 |
|
6. OTHER ASSETS
Other assets consisted of the following:
|
| December 31, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Receivable from payment processors |
| $ | 37,362 |
|
| $ | 32,881 |
|
Prepaid expenses |
|
| 5,987 |
|
|
| 8,804 |
|
Operating lease right-of-use assets |
|
| 6,159 |
|
|
| 9,123 |
|
Other |
|
| 4,051 |
|
|
| 3,850 |
|
Total other assets |
| $ | 53,559 |
|
| $ | 54,658 |
|
F-22
7. DEBT
The Company’s debt as of December 31, 2023 and 2022 is presented below:
|
| December 31, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Monroe Term Loans |
| $ | 65,000 |
|
| $ | 90,000 |
|
Unamortized discounts and debt issuance costs |
|
| (666 | ) |
|
| (1,383 | ) |
Total secured loans, net |
| $ | 64,334 |
|
| $ | 88,617 |
|
|
|
|
|
|
| |||
ROAR 1 SPV Credit Facility |
| $ | 64,500 |
|
| $ | 83,000 |
|
ROAR 2 SPV Credit Facility |
|
| 62,500 |
|
|
| 63,000 |
|
Unamortized discounts and debt issuance costs |
|
| (1,581 | ) |
|
| (2,606 | ) |
Total other debt, net |
| $ | 125,419 |
|
| $ | 143,394 |
|
Second Lien Loan — In April 2020, the Company entered into a Loan and Security Agreement (“Second Lien Loan”) with a lender for a second-lien loan facility with an initial principal balance of $5,000.$5,000. The Second Lien Loan bearsbore interest at the greater of (a) 12%12%, and (b) a fluctuating rate of interest per annum equal to the Wall Street Journal Prime Rate plus 5.75%5.75%, not to exceed 15%. As of December 31, 2021, the interest rate was 12%15%. Interest only iswas payable until April 30, 2022, and thereafter, the outstanding principal will be repaidwas payable in twelve equal installments through the facility maturity date of May 1, 2023.2023. The Second Lien Loan iswas secured by substantially all assets of the Company, including capital stock of all subsidiaries, except for capital stock and assets in certain excluded subsidiaries, as defined, including IIAInvest in America Credit Fund 1 LLC (“IIA”) and all of the related SPVs, ROAR 1 SPV Finance LLC and ROAR 2 SPV Finance LLC. Under the terms of the Second Lien Loan the Company iswas subject to certain covenants, as defined. The Company used the Second Lien Loan proceeds for general corporate purposes. On August 27, 2021, the Company entered into a Second Amendment to the Loan and Security Agreement that refinanced the Second Lien Loan and increased principal borrowings up to an aggregate principal amount of $25,000,$25,000, and with Monroe Capital Management Advisors, LLC replacing MLi Subdebt Facility 1 LLC as collateral agent and administrative agent for the lenders. The other material terms of the loan remained the same. Upon the consummation of the Business Combination, the Company repaid the original $5,000$5,000 principal balance owed to MLi Subdebt Facility 1 LLC, together with accrued interest and fees. As of December 31, 2021,In March 2022, this principal was rolled into the $20,000 principal balance owed to affiliates of Monroe Capital Management Advisors, LLC remained outstanding.Term Loans (as defined herein).
First Lien Loan— In July 2020, the Company entered into a Loan and Security Agreement (“First Lien Loan”) with a bank for a $25.0$25.0 million first-lien loan facility consisting of a $20.0$20.0 million revolving credit line and $5.0$5.0 million term loan. The revolving line bearsbore interest at the greater of (i) Wall Street Journal Prime Rate plus 2.25%2.25% and (ii) 6.50%. As6.50%, and had a maturity date of December 31, 2021, the revolving line interest rate was 6.5%. The revolving line matures on May 1, 2022.2022. The term loan bearsbore interest at the greater of (i) Wall Street Journal Prime Rate plus 3.25%3.25% and (ii) 7.50%. As of December 31, 2021, the term loan interest rate was 7.5%7.50%. Interest only on the term loan was payable until September 1, 2021, and thereafter outstanding principal iswas payable in thirty-nine equal instalmentsinstallments through the facility maturity date of May 1, 2024.2024. The First Lien Loan iswas secured on a first-priority basis by all assets of the Company, including capital stock of all subsidiaries, except for capital stock and assets in certain excluded subsidiaries, as defined, including IIA and all of the related SPVs, ROAR 1 SPV Finance LLC and ROAR 2 SPV Finance LLC. Under the terms of the First Lien Loan, the Company iswas subject to certain covenants, as defined. Additionally, the Company granted the bank lender warrants to receive 12,792 shares of Legacy MoneyLion Common Stock, at an exercise price as defined in the First Lien Loan, which were exercised as part of the Business Combination. The Company used the First Lien Loan proceeds to repay in full the 6.75% Bank Loancertain outstanding indebtedness and for general corporate purposes. As of December 31, 2021, $24,028 of principal remained outstanding.
Subordinated Convertible NotesMonroe Term Loans—In December 2020,March 2022, the Company soldentered into a credit agreement (the “Original Monroe Credit Agreement” and as amended by Amendment No. 1 to a third-party lender $10,000Credit Agreement, dated as of 3% subordinated convertible notes maturing on July 31, 2021,March 30, 2023, and Amendment No. 2 to the proceedsCredit Agreement, dated as of April 28, 2023 (“Amendment No. 2”), the “Monroe Credit Agreement”) with certain financial institutions from time to time party thereto, as lenders (the “Lenders”), and Monroe Capital Management Advisors, LLC, as administrative agent and lead arranger (“Monroe Capital”). The Original Monroe Credit Agreement provided for the following:
F-23
In January 2021,connection with the foregoing, at the closing of the Original Monroe Credit Agreement, the Company sold to third-party lenders $36,750borrowed Term A-1 Loans in an aggregate principal amount of 3% subordinated convertible notes as part$70.0 million. Proceeds of the same series of notes issued in December 2020 maturing on July 31, 2021 (collectively, the “Subordinated Convertible Notes”), the proceeds of whichTerm A-1 Loans were used (a) to conductrepay in full the approximately $24.0 million aggregate principal amount outstanding under the First Lien Loan, including accrued and unpaid interest and related fees, (b) to pay transaction-related fees and expenses and (c) for general corporate purposes and working capital needs of the Company and its business. Upon maturity or certain events,subsidiaries. With respect to the Subordinated Convertible Notes couldTerm A-2 Loans, pursuant to the Monroe Credit Agreement, the lenders thereunder were deemed to have been converted into preferred shares at conversion prices as definedrolled over their $20.0 million aggregate principal amount of term loans outstanding under the Second Lien Loan in the Subordinated Convertible Notes. In July 2021,same aggregate principal amount as their respective commitments with respect to the Subordinated Convertible Note agreementsTerm A-2 Loans, following which all obligations in respect of the Second Lien Loan were amendeddeemed to be satisfied and paid in full.
On April 28, 2023, the Company entered into Amendment No. 2 with the Lenders and Monroe Capital in order to extend the maturity date of the Term A-2 Loans and proactively manage the Company's interest expense through the remainder of 2023. Pursuant to September 30, 2021.Amendment No. 2, the Company, the Lenders and Monroe Capital agreed that the Company would: (i) pay $5.0 million of the outstanding principal balance of the Term A-2 Loans on May 1, 2023, $10.0 million of the outstanding principal balance of the Term A-2 loans on July 15, 2023 and the remaining outstanding principal balance of the Term A-2 Loans in full on October 15, 2023, and (ii) prepay $5.0 million of the outstanding principal balance of the Term A-1 Loans on October 15, 2023, with the remaining outstanding principal balance of the Term A-1 Loans continuing to be due on the original maturity date of March 24, 2026. In addition, the Term B Loans were no longer available to be drawn as of the effective date of Amendment No. 2. The Company electedwas, prior to the fair value optionentry into Amendment No. 2, in compliance with all of its covenants under the Credit Agreement. Amendment No. 2 was accounted for as a debt modification. Costs associated with Amendment No. 2 were not material.
The Term A-1 Loans and Term B Loans bear annual interest, payable monthly, at a floating rate measured by reference to, account for the Subordinated Convertible Notes. The Company recorded the Subordinated Convertible Notes at fair value and subsequently remeasured it to fair value at the reporting date. ChangesCompany’s option, either (a) a base rate then in fair value were recognized aseffect (equal to the greater of (i) the federal funds rate plus 0.50%, (ii) the prime rate, (iii) 2.00% and (iv) an adjusted one-month Secured Overnight Financing Rate (“SOFR”) (subject to a componentfloor of operating expenses1.00%) plus 1.00%) plus an applicable margin ranging from 6.00% to 8.25% per annum, depending on whether the “EBITDA Trigger Date” has occurred, the Company’s “Enterprise Value” and, once the EBITDA Trigger Date has occurred, its “Total Debt to EBITDA Ratio” (as such terms are defined in the consolidated statementsMonroe Credit Agreement) or (b) an adjusted one-month or three-month SOFR (subject to a floor of operations under Change1.00%) plus an applicable margin ranging from 7.00% to 9.25% per annum, depending on whether the EBITDA Trigger Date has occurred, the Company’s Enterprise Value and, once the EBITDA Trigger Date has occurred, its Total Debt to EBITDA Ratio. The interest rate as of December 31, 2023 on the Term A-1 Loans was 14.64%. The Term A-2 Loans bore annual interest, payable monthly, at the greater of (i) 12% and (ii) a floating rate measured by reference to the prime rate plus 5.75% per annum, subject to a cap of 15%. Pursuant to Amendment No. 2, the Term A-2 Loans, which originally matured on May 1, 2023, was repaid in fair value of subordinated convertible notes. On September 22, 2021,full during the Business Combination was completedyear ended December 31, 2023.
F-24
The Term A-1 Loans and the Subordinated Convertible Notes were converted into a total of 10,068,133 shares of MoneyLion Class A Common Stock. PriorTerm B Loans mature on March 24, 2026. The Monroe Term Loans may be prepaid at the Company’s option at any time, in minimum principal amounts, and are subject to the conversion, the carrying valuemandatory prepayment in an amount equal to 100% of the Subordinated Convertible Notes was $92,627.
Other Debt—
In August 2016,net cash proceeds upon the occurrence of certain asset dispositions and equity and debt offerings, 100% of certain extraordinary cash receipts and 0-50% of certain excess cash flow, in each case as specified in the Monroe Credit Agreement and subject to certain reinvestment rights as set forth in the Monroe Credit Agreement. Upon the occurrence of certain triggering events, including any prepayment of any Monroe Term Loans for any reason (subject to limited exceptions), the Company entered intois required to pay a $50,000 creditpremium ranging from 0.00% to 3.00% of the principal amount of such prepayment depending on the Monroe Term Loans repaid and security agreement (the “2016 Credit Agreement”) with a lender for the fundingdate of finance receivables. the prepayment, plus, in the case of any Monroe Term Loans other than Term A-2 Loans and in the event the prepayment occurs within 12 months after the closing date, all interest that would have otherwise been payable on the amount of the principal prepayment from the date of prepayment to and including the date that is 12 months after the closing date.
The 2016Monroe Credit Agreement allowed for increases in the maximum borrowings under the agreement upcontains customary representations and warranties and customary affirmative and negative covenants, including financial covenants with respect to $500,000, bore interest at a rateminimum adjusted revenue, EBITDA, liquidity and unrestricted cash (all as defined in the 2016Monroe Credit Agreement). The negative covenants, among other things, limit or restrict the ability of the “Loan Parties” (as defined in the Monroe Credit Agreement) and their subsidiaries to: incur additional indebtedness; incur additional liens; make dividends, distributions and other restricted payments; merge, consolidate, sell, transfer, dispose of, convey or lease assets or equity interests; purchase or otherwise acquire assets or equity interests; modify organizational documents; enter into certain transactions with affiliates; enter into restrictive agreements; engage in other business activities; and make investments.
The obligations under the Monroe Credit Agreement are guaranteed by MoneyLion Inc., as parent, and matured in February 2023.each of its direct and indirect existing and future wholly-owned subsidiary, other than SPVs, certain foreign subsidiaries, certain regulated subsidiaries and certain other excluded subsidiaries (the “Guarantors”). The 2016Monroe Credit Agreement also required the Company to adhereis entered into by MoneyLion Technologies Inc. The Monroe Credit Agreement is secured with a perfected, first-priority security interest in substantially all tangible and intangible assets of MoneyLion Technologies Inc. and each Guarantor, subject to certain financial covenants along with certain other financial reporting requirements. customary exceptions.
The Company did not meet certain of these covenant requirements as of December 31, 2019, for which it received a waiver from the lender. The 2016 Credit Agreement was terminated upon the Business Combination Closing by mutual agreementsettlement of the CompanyFirst Lien Loan was accounted for as a debt extinguishment and the lender; thereSecond Lien Loan was no outstanding balance under the 2016 Credit Agreement at the time of termination.
In connection with the 2016 Credit Agreement, the Company granted warrants allowing the lender to purchase up to 2.5% of Legacy MoneyLion’s outstanding common stock, or 255,402 warrants. All tranches were exercised and converted into MoneyLion Class A Common Stock in connection with the Business Combination.
In April 2020, the Company borrowed $3,207 from a bank under the U.S. Small Business Administration’s (“SBA”) Paycheck Protection Program introduced as part of the U.S. Government’s COVID-19 relief efforts (the “PPP Loan”). In June 2021, the SBA approved the Company’s applicationaccounted for forgiveness with respect to the entire outstanding balance of the PPP Loan of $3,207 which resulted in a gain which is included as a componentdebt modification resulting in total expense recognized of other operating (income) expenses in$730 comprised of settlement fees and the consolidated statementswrite off of operations during the twelve months ended December 31, 2021.unamortized deferred financing costs.
Other Debt— In September 2021, ROAR 1 SPV Finance LLC, an indirect wholly owned subsidiary of the Company (the “ROAR 1 SPV Borrower”), entered into a $100,000$100,000 credit agreement, which was subsequently increased to $135,000 (the “ROAR 1 SPV Credit Facility”), with a lender for the funding of finance receivables, which secure the ROAR 1 SPV Credit Facility. The ROAR 1 SPV Credit Facility allows for increases in maximum borrowings under the agreement of up to $200,000,$200,000, bears interest at a rate of 12.5%12.5% and matures in March 2025, unless it is extended to March 2026. Under the terms of the ROAR 1 SPV Credit Facility, the ROAR 1 SPV Borrower is subject to certain covenants. As of December 31, 2021, there was a $78,000 outstanding principal balance under thecovenants including minimum asset requirements to be held by ROAR 1 SPV Credit Facility. The principal balance is secured by $61,732 of finance receivables.Borrower.
In December 2021, ROAR 2 SPV Finance LLC, an indirect wholly owned subsidiary of the Company (the “ROAR 2 SPV Borrower”), entered into a $125,000$125,000 credit agreement, which was subsequently reduced to $75,000 (the “ROAR 2 SPV Credit Facility”), with a lender for the funding of finance receivables, which secure the ROAR 2 SPV Credit Facility. The ROAR 2 SPV Credit Facility allows for increases in maximum borrowings under the agreement of up to $300,000,$300,000, bears interest at a rate of 12.5%12.5% and matures in December 2025, unless it is extended to December 2026. Under the terms of the ROAR 2 SPV Credit Facility, the ROAR 2 SPV Borrower is subject to certain covenants. As of December 31, 2021, there was a $68,000 outstanding principal balance under thecovenants including minimum asset requirements to be held by ROAR 2 SPV Credit Facility. The principal balance is secured by $48,145 of finance receivables.Borrower.
Debt Maturities—Of the principal related to the Company’s debt agreements, $35,000, $8,333, $695$127,000 and $146,000 will be repaid$65,000 is due for repayment during the years ended December 31, 2022, 2023, 20242025 and 2025,2026, respectively.
F-25
8. LEASES
The Company is party to operating leases for all of our offices. Many leases contain options to renew and extend lease terms and options to terminate leases early. Reflected in the right-of-use asset and lease liability on the consolidated balance sheets are the periods provided by renewal and extension options that we are reasonably certain to exercise, as well as the periods provided by termination options that we are reasonably certain not to exercise. All long-term leases identified by the Company are classified as operating leases. Lease expenses related to long-term leases were $3,542 and $2,936 for the twelve months ended December 31, 2023 and 2022, respectively. Short-term lease expense, variable lease expense and sublease income were not material for the twelve months ended December 31, 2023 and 2022.
On July 28, 2023, the Company entered into a sublease for 12,765 square feet of the Company's rental space in New York, New York, which does not include the Company's headquarters. As a result, $377 of impairment charges were recognized during the third quarter of fiscal year 2023 relating to the impairment of the right of use asset and property and equipment related to the site. Net rental income of $277 was recorded in other income for the twelve months ended December 31, 2023 and was not material for the twelve months ended December 31, 2022.
Maturities of the Company’s long-term operating lease liabilities, which are included in other liabilities on the consolidated balance sheet, were as follows:
|
| December 31, 2023 |
| |
2024 |
| $ | 3,101 |
|
2025 |
|
| 2,418 |
|
2026 |
|
| 1,127 |
|
2027 |
|
| 904 |
|
2028 |
|
| 768 |
|
Thereafter |
|
| - |
|
Total lease payments |
|
| 8,318 |
|
Less: imputed interest |
|
| 1,329 |
|
Lease liabilities |
| $ | 6,989 |
|
Weighted-average remaining lease term (years) |
|
| 3.3 |
|
Weighted-average discount rate |
|
| 11.4 | % |
11.9. INCOME TAXES (As Restated)
For the years ended December 31, 20212023 and 2020,2022, income tax expensebenefit computed at the federal statutory income tax rate of 21%21% differed from the recorded amount of income tax expensebenefit due primarily to state income taxes and permanent differences.
F-26
A reconciliation of the federal statutory income tax rate to the effective tax rate is as follows:
|
| Years Ended December 31, |
| |||||||||||||
|
| 2023 |
|
| 2022 |
| ||||||||||
Federal statutory rate |
| $ | (9,800 | ) |
|
| 21.00 | % |
| $ | (46,515 | ) |
|
| 21.00 | % |
Effect of: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
State taxes, net of federal tax benefit |
|
| (1,799 | ) |
|
| 3.85 | % |
|
| (3,962 | ) |
|
| 1.79 | % |
Deferred rate change |
|
| 552 |
|
|
| (1.18 | )% |
|
| (847 | ) |
|
| 0.38 | % |
Change in fair value of warrant liability |
|
| 99 |
|
|
| (0.21 | )% |
|
| (1,664 | ) |
|
| 0.75 | % |
Return to provision |
|
| (2,313 | ) |
|
| 4.95 | % |
|
| 396 |
|
|
| (0.18 | )% |
Goodwill impairment |
|
| 25 |
|
|
| (0.05 | )% |
|
| 28,720 |
|
|
| (12.97 | )% |
Other permanent differences |
|
| 708 |
|
|
| (1.52 | )% |
|
| (4,972 | ) |
|
| 2.24 | % |
Other |
|
| 41 |
|
|
| (0.08 | )% |
|
| 1,411 |
|
|
| (0.63 | )% |
Release of valuation allowance |
|
| — |
|
|
| — | % |
|
| (26,020 | ) |
|
| 11.75 | % |
Change in valuation allowance |
|
| 11,411 |
|
|
| (24.45 | )% |
|
| 27,819 |
|
|
| (12.56 | )% |
Total |
| $ | (1,076 | ) |
|
| 2.31 | % |
| $ | (25,634 | ) |
|
| 11.57 | % |
| Years Ended December 31, | ||||||||||||||||
| 2021 | 2020 | |||||||||||||||
| Federal statutory rate | $ | (38,258 | ) | 21.00 | % | $ | (14,112 | ) | 21.00 | % | ||||||
| Effect of: | ||||||||||||||||
| State taxes, net of federal tax benefit | (6,649 | ) | 3.65 | % | (1,377 | ) | 2.05 | % | ||||||||
| Deferred rate change | (367 | ) | 0.20 | % | (89 | ) | 0.13 | % | ||||||||
| Change in fair value of subordinated convertible notes | 8,794 | (4.83 | )% | — | — | % | ||||||||||
| Change in fair value of warrant liability | 8,322 | (4.57 | )% | — | — | % | ||||||||||
| Accrued dividends on redeemable convertible preferred stock | — | — | % | 3,614 | (5.38 | )% | ||||||||||
| Return to provision | 3,453 | (1.90 | )% | |||||||||||||
| Other permanent differences | (473 | ) | 0.26 | % | 3,320 | (4.94 | )% | |||||||||
| Other | 1,180 | (0.65 | )% | 1,084 | (1.61 | )% | ||||||||||
| Change in valuation allowance | 24,054 | (13.20 | )% | 7,566 | (11.26 | )% | ||||||||||
| Total | $ | 56 | (0.03 | )% | $ | 6 | (0.01 | )% | ||||||||
The income tax (benefit) expensebenefit is as follows:
|
| Years Ended |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Current: |
|
|
|
|
|
| ||
Federal |
| $ | — |
|
| $ | — |
|
State and local |
|
| 672 |
|
|
| 185 |
|
Non-U.S. |
|
| 343 |
|
|
| 201 |
|
|
| 1,015 |
|
|
| 386 |
| |
|
|
|
|
|
| |||
Deferred taxes: |
|
|
|
|
|
| ||
Federal |
|
| (2,091 | ) |
|
| (20,930 | ) |
State and local |
|
| — |
|
|
| (5,090 | ) |
Non-U.S. |
|
| — |
|
|
| — |
|
|
| (2,091 | ) |
|
| (26,020 | ) | |
Income tax benefit |
| $ | (1,076 | ) |
| $ | (25,634 | ) |
F-27
| Years Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Current: | ||||||||
| Federal | $ | — | $ | — | ||||
| State | 56 | 6 | ||||||
| 56 | 6 | |||||||
| Deferred taxes | — | — | ||||||
| Income tax benefit | $ | 56 | $ | 6 | ||||
The tax effects of the primary temporary differences included in net deferred tax assets and liabilities are shown in the following table:
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Net operating loss carryforwards | $ | 72,867 | $ | 57,092 | ||||
| Allowance for losses on finance receivables | 6,318 | 2,283 | ||||||
| Research and development credit | 1,173 | 1,173 | ||||||
| Stock compensation | 326 | 206 | ||||||
| Legal reserve | 465 | — | ||||||
| Other | 3,610 | 387 | ||||||
| Total deferred tax assets, gross | 84,759 | 61,141 | ||||||
| Less: valuation allowance | (83,153 | ) | (59,099 | ) | ||||
| Total deferred tax assets, net | 1,606 | 2,042 | ||||||
| Deferred finance receivable fees and costs, net | (261 | ) | (154 | ) | ||||
| Depreciation of furniture and equipment | (1,312 | ) | (1,888 | ) | ||||
| Other | (33 | ) | — | |||||
| Total deferred tax liabilities | (1,606 | ) | (2,042 | ) | ||||
| Total deferred tax assets (liabilities), net | $ | — | $ | — | ||||
|
| December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Net operating loss carryforwards |
| $ | 104,072 |
|
| $ | 112,952 |
|
Allowance for losses on finance receivables |
|
| 9,085 |
|
|
| 6,576 |
|
Research and development credit |
|
| 1,246 |
|
|
| 1,246 |
|
Stock compensation |
|
| 2,489 |
|
|
| 1,235 |
|
Interest expense deduction limitation |
|
| 2,917 |
|
|
| — |
|
Operating lease liability |
|
| 1,795 |
|
|
| — |
|
Legal reserve |
|
| 70 |
|
|
| 454 |
|
Contingent liability |
|
| 1,276 |
|
|
| — |
|
Other |
|
| 375 |
|
|
| 718 |
|
Total deferred tax assets, gross |
|
| 123,325 |
|
|
| 123,181 |
|
Less: valuation allowance |
|
| (96,363 | ) |
|
| (84,952 | ) |
Total deferred tax assets, net |
|
| 26,962 |
|
|
| 38,229 |
|
|
|
|
|
|
| |||
Depreciation and amortization |
|
| (26,145 | ) |
|
| (41,169 | ) |
Operating lease right-of-use assets |
|
| (1,580 | ) |
|
| — |
|
Other |
|
| (199 | ) |
|
| (114 | ) |
Total deferred tax liabilities |
|
| (27,924 | ) |
|
| (41,283 | ) |
Total deferred tax liabilities, net |
| $ | (962 | ) |
| $ | (3,054 | ) |
As of December 31, 20212023 and 2020,2022, the Company maintained a valuation allowance of $83,153$96,363 and $59,099,$84,952, respectively. The valuation allowance was recorded due to the fact that the Company has a cumulative loss incurred operating lossesover the three-year period ended December 31, 2023. The company continues to date andprovide a valuation allowance against its tax attributes because is unable to forecast when such deferred tax assets will be utilized. There was no other activity in the valuation allowance accounting during 2021 and 2020.
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $24,054$11,411 and $7,566decreased by $1,799 during the twelve months ended December 31, 20212023 and 2020,2022, respectively.
Total U.S. federal and state operating loss carryforwards as of December 31, 20212023 and 20202022 were approximately $517,700$714,300 and $377,300,$786,600, respectively. U.S. federal net operating loss carryforwards begin to expire in 2033,2037, and state operating loss carryforwards begin to expire in 2027.2025. U.S. Federal net operating losses of approximately $248,600$390,109 carry forward indefinitely.
Due to the net operating loss carryovers, the statute of limitations remains open for federal and state returns.
As of December 31, 2021,2023, the Company’s federal research and development credit carryforwards for income tax purposes were approximately $1,200. $1,200. If not used, the current carryforwards will expire beginning in 2034.
The Company primarily files income tax returns in the United States federal jurisdiction and various states. The Company’s U.S. federal returns and state returns are no longer subject to income tax examinations for taxable years before 2018.
The Company has performedcompleted a review to determine whether the future utilization of net operating loss and credit carryforwards will be restricted due to ownership changes that have occurred. Due to the Engine Acquisition, the Company experienced an ownership change on February 17, 2022. Thus, the Company's net operating loss carryforwards are subject to an annual limitation of approximately $8,200 per year. The studyCompany had a net unrealized built-in gain corporation on the ownership change date and had a net unrealized built-in gain of approximately $330,700 at the change date. As a result, under the section 338 Approach of Notice 2003-65, the Company's annual limitation is expected to be increased in the first five years post-change by approximately $121,400. Based on the February 17, 2022 limitation, all of the total net operating loss carryforwards are expected to become utilizable by the tax year ending December 31, 2043.
F-28
The Company also acquired federal net operating losses in the Engine Acquisition. It was determined that there willthe Engine net operating losses acquired are also subject to a Section 382 annual limitation of approximately $3,800 due to Engine's ownership changes in both 2018 and 2022. Engine is a net unrealized built-in gains (“NUBIG”) corporation and had a NUBIG of approximately $265,200 at the change date. As a result, the Engine annual limitation is expected to be no utilization limit afterincreased in the first five years post-change by an aggregate of approximately $87,800. As of the 2022 ownership change, approximately $3,100 of the net operating losses that were restricted by the 2018 ownership change had freed up and become available for use, and approximately $6,000 remained restricted. A further approximately $55,000 in net operating losses had been generated between the date immediately following the 2018 ownership change and the 2022 ownership change. Of the approximately $58,100 in net operating losses that were now solely limited by the section 382 limitation resulting from the 2022 ownership change, all of the total net operating loss carryforwards are expected to become utilizable by the tax year ending December 31, 2025. The review did not consider whether the future utilization of net operating loss and credit carryforwards will be restricted under IRC sections 382 and 383 due to ownership changes that occurredremaining approximately $6,000 in the MALKA acquisition. However, based on the value of the Company at the date of change, the Company believes that there would not be a limitation triggered by the ownership change and therefore would not result in any adjustment to the deferred tax assets. Due to the net operating loss carryforwards still subject to the statutesection 382 limitation resulting from the 2018 ownership change are expected to free up and become available for use by the tax year ended December 31, 2049. None of limitations remains open for federalthe pre-change net operating losses subject to the July 31, 2018 and state returns.February 17, 2022 limitation are expected to expire unutilized as a result of both ownership changes.
12.10. COMMON AND PREFERRED STOCK
FollowingClass A Common Stock—Each holder of the Business Combination Closing on September 22, 2021, 970,000 shares of MoneyLion Class A Common Stock were redeemedis entitled to one vote for $9,700.
13. REDEEMABLE CONVERTIBLE PREFERRED STOCK
Eacheach share of Legacy MoneyLion’s redeemable convertibleClass A Common Stock held of record by such holder on all matters on which stockholders generally are entitled to vote, as provide by the Company’s Certificate of Incorporation (as amended from time to time). The holders of the shares of Class A Common Stock do not have cumulative voting rights in the election of directors. Generally, all matters to be voted on by the holders of Class A Common Stock must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast present in person or represented by proxy, unless otherwise specified by law, the Company’s Certificate of Incorporation or the Company's Amended and Restated Bylaws (as amended from time to time).
Subject to preferences that may be applicable to any outstanding preferred stock, was convertible at the optionholders of the holder, atshares of Class A Common Stock are entitled to receive ratably such dividends, if any, time andas may be declared from time to time and withoutby MoneyLion’s Board of Directors out of funds legally available therefor.
In the paymentevent of additional consideration byany voluntary or involuntary liquidation, dissolution or winding up of MoneyLion’s affairs, the holder thereof, into a numberholders of fully paid and non-assessablethe shares of Legacy MoneyLion Common Stock as could be determined by dividing the applicable original issue price by the applicable conversion price in effect at the time of conversion.
Pursuant to the Merger Agreement, all outstanding shares of Legacy MoneyLion’s redeemable convertible preferred stock automatically converted into 116,264,374 shares of MoneyLion Class A Common Stock are entitled to share ratably in all assets remaining after giving effectpayment of MoneyLion’s debts and other liabilities, subject to prior distribution rights of preferred stock or any class or series of stock having a preference over the shares of Class A Common Stock, then outstanding, if any.
The holders of shares of Class A Common Stock have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Exchange Ratio uponshares of Class A Common Stock. The rights, preferences and privileges of holders of shares of Class A Common Stock will be subject to those of the Business Combination Closing. See Note 4, “Business Combination” for additional information onholders of any shares of the Business Combination.
14. STOCK-BASED COMPENSATIONpreferred stock MoneyLion may issue in the future.
2014 Stock Option Plan
Series A Preferred Stock—Prior to the Business Combination, MoneyLion’s Amended and Restated 2014 Stock Option Plan (the “2014 Plan”) allowedAutomatic Conversion Event (as described below), the Company to provide benefits in the form of stock options. The Company had designated a total of 2,492,060 shares of common stockSeries A Preferred Stock outstanding. Holders of the shares of Series A Preferred Stock (other than certain regulated holders subject to the 2014 Plan. UponBank Holding Company Act of 1956, as amended) were entitled to vote as a single class with the Business Combination Closing, the remaining unallocated share reserve under the 2014 Plan was cancelled and no new awards will be granted under such plan.
2021 Stock Incentive Plan
At the Special Meeting, Fusion stockholders approved the Omnibus Incentive Plan (the “2021 Plan”). Asholders of the Business Combination Closing, each LegacyClass A Common Stock and the holders of any other class or series of capital stock of MoneyLion Option that was outstanding and unexercised asthen entitled to vote.
Holders of the Series A Preferred Stock were entitled to a 30 cent cumulative annual dividend per share, payable at the Company’s election in either cash or Class A Common Stock (or a combination thereof), with any dividends on the Class A Common Stock valued based on the per share volume-weighted average price of the shares of Class A Common Stock on the NYSE for the 20 trading days ending on the trading day immediately prior to the Business Combination Closing Date automaticallydividend payment date.
Holders of the Series A Preferred Stock were entitled to a liquidation preference in the event of the Company's liquidation equal to the greater of $10.00 per share or the amount per share that such holder would have received had the Series A Preferred Stock been converted into the right to receive an option to acquire a number of shares of MoneyLion Class A Common Stock equal to the number of shares of Legacy MoneyLion Common Stock subject to such MoneyLion Option as of immediately prior to the Business Combination Closing Date, multiplied byliquidation.
F-29
Shares of Series A Preferred Stock were convertible into shares of Class A Common Stock on a one-for-thirty basis, subject to customary anti-dilution adjustments. The Series A Preferred Stock was convertible (i) at any time upon the Exchange Ratio (rounded down toholder’s election and (ii) automatically in the nearest whole share), at an exercise priceevent that the per share equalvolume-weighted average price of the shares of Class A Common Stock on the NYSE equaled or exceeded $10.00 on any 20 trading days (consecutive or nonconsecutive) within any consecutive 30 trading day period ending no later than the last day of the lockup period applicable to such shares of Series A Preferred Stock.
As of the exercise priceclose of trading on the NYSE on May 26, 2023, the per share volume-weighted average price of the shares of Class A Common Stock on the NYSE equaled or exceeded $10.00 for the twentieth trading day within a consecutive thirty trading day period ending no earlier than the last day of the lockup period applicable to such Legacy MoneyLion Optionshares of Series A Preferred Stock (the “Automatic Conversion Event”). Accordingly, as a result of the Automatic Conversion Event, following the close of trading on the NYSE on May 26, 2023, all 30,049,053 shares of Series A Preferred Stock issued and outstanding automatically converted into 1,012,293 shares of newly issued Class A Common Stock based on the conversion rate provided in effect immediately priorthe Certificate of Designations of the Series A Preferred Stock (the “Certificate of Designations”). In lieu of any fractional shares otherwise issuable to any holder of the Business Combination Closing Date, divided bySeries A Preferred Stock, the Exchange Ratio (rounded upCompany issued cash in accordance with the terms of the Certificate of Designations.
On June 30, 2023, the Company paid the accrued annual dividend on the previously outstanding shares of Series A Preferred Stock for the dividend payment period ending December 31, 2022 to all holders of record as of the nearest whole cent)applicable dividend record date (the “2022 Annual Dividend”). The intent behind2022 Annual Dividend was paid in a mixture of Class A Common Stock and cash through the termsissuance of 229,605 shares of Class A Common Stock and payment of approximately $3.0 million of cash.
11. STOCK-BASED COMPENSATION
Incentive Plan
At the Company's 2022 Annual Meeting of Stockholders (the “2022 Annual Meeting”), Company stockholders approved the Company's Amended and Restated Omnibus Incentive Plan (as may be amended or restated from time to time, the “Incentive Plan”), as further described in the Merger Agreement related toCompany's Definitive Proxy Statement for the exchange of2022 Annual Meeting, filed with the Legacy MoneyLion Options was to provide the holders with awards of equal value to the original awards. Accordingly, the impact of the conversion was such that the number of shares issuable under the modified awards and the related exercise prices were adjusted using the Exchange Ratio with all other terms remaining unchanged. SEC on April 29, 2022.
The conversion ratio adjustment was without substance (akin to a stock split), and therefore, the effect of the change in the number of shares and the exercise price and share value were equal and offsetting to one another. As a result, the fair value of the modified awards was equal to the fair value of the awards immediately before the modification and, therefore, there was no incremental compensation expense that should be recognized. There were no changes to the vesting period within the plan.
The 2021Incentive Plan permits the Company to deliver up to 56,697,9343,115,327 shares of MoneyLion Class A Common Stock pursuant to awards issued under the 2021 Plan, including 17,712,158 shares of MoneyLion Class A Common Stock and up to 38,985,776 shares of MoneyLion Class A Common Stock subject to outstanding prior awards.Incentive Plan. The number of shares of MoneyLion Class A Common Stock reserved for issuance under the 2021Incentive Plan will automatically increase on each of January 1 2022of each fiscal year until and including January 1, 20232031 by an amount equal to the lesser of (i) 2%5% of the total number of outstanding shares of MoneyLion Class A Common Stockall classes of the Company's voting stock outstanding on December 31st of the immediately preceding calendarfiscal year and (ii) such smaller number of shares of MoneyLion Class A Common Stock as determined by the MoneyLion Board.Compensation Committee of the Board of Directors.
Stock-based compensation of $5,039$22,896 and $1,650$19,603 was recognized during the twelve months ended December 31, 20212023 and 2020,2022, respectively.
F-30
During 2021,Summary of Stock Option Activity
No stock options were granted during the Company issued 627,228 restricted stock units (“RSUs”) at a weighted average grant date fair value per share of $5.97. All of RSUs remain unvested and outstanding as oftwelve months ended December 31, 2021 and have unamortized expense of $3,344 which will be recognized over a weighted average of 2.15 years.
2023. The weighted average grant date fair value of options granted during the twelve months ended December 31, 2021 and 20202022 was $1.50 and $0.38, respectively. These prices$2.10. The grant date fair values for the year ended December 31, 2022 were determinedcalculated using the Black-Scholes Merton option pricinga Monte Carlo simulation model which analyzesutilized estimates of future stock price volatility, lack of marketability,expected term, expected forfeitures and comparable companies, among other factors in determining the fair value of each share granted. Options granted generally vest over four years and expire ten years from the grant date. risk-free interest rate. Assumptions used for the options granted during the twelve months ended December 31, 2021 and 20202022 are as follows:
Twelve Months Ended December 31, 2022 | ||||
Expected Volatility | 81 | % | ||
Expected Dividend | — | |||
Expected Term in Years | 5.00 | |||
Expected Forfeitures | 0 | % | ||
Risk Free Interest Rate | 0.99 | % | ||
| Twelve Months Ended December 31, | |||||||||
| 2021 | 2020 | ||||||||
| Expected Volatility | 65 | % | 65 | % | |||||
| Expected Dividend | - | - | |||||||
| Expected Term in Years | 6.08 | 6.08 | |||||||
| Expected Forfeitures | - | % | - | % | |||||
| Risk Free Interest Rate | 0.59%-0.67 | % | 0.34%-1.47 | % | |||||
The following table represents option activity within the 2021 Plan since December 31, 2020:2021:
|
|
|
|
| Weighted |
|
| Weighted |
|
|
| |||
|
|
|
|
| Average |
|
| Average |
|
|
| |||
|
|
|
|
| Exercise |
|
| Remaining |
| Aggregate |
| |||
|
| Number |
|
| Price Per |
|
| Contractual |
| Intrinsic |
| |||
|
| of Options(1) |
|
| Option(1) |
|
| Term |
| Value |
| |||
Options outstanding at December 31, 2021 |
|
| 1,248,618 |
|
| $ | 24.00 |
|
| 7.6 Years |
| $ | 121,108 |
|
Options granted |
|
| 196,728 |
|
|
| 28.30 |
|
|
|
|
|
| |
Options exercised |
|
| (232,042 | ) |
|
| 13.80 |
|
|
|
| $ | 5,782 |
|
Options forfeited |
|
| (100,962 | ) |
|
| 33.00 |
|
|
|
|
|
| |
Options expired |
|
| (15,844 | ) |
|
| 47.70 |
|
|
|
|
|
| |
Options outstanding at December 31, 2022 |
|
| 1,096,498 |
|
| $ | 25.66 |
|
| 6.6 Years |
| $ | 5,234 |
|
Options exercised |
|
| (151,278 | ) |
|
| 35.93 |
|
|
|
| $ | 1,878 |
|
Options forfeited |
|
| (84,054 | ) |
|
| 39.35 |
|
|
|
|
|
| |
Options expired |
|
| (16,132 | ) |
|
| 25.94 |
|
|
|
|
|
| |
Options outstanding at December 31, 2023 |
|
| 845,034 |
|
| $ | 26.83 |
|
| 5.6 Years |
| $ | 32,628 |
|
Exercisable at December 31, 2023 |
|
| 751,981 |
|
|
| 23.52 |
|
| 5.6 Years |
| $ | 31,108 |
|
Unvested at December 31, 2023 |
|
| 93,053 |
|
| $ | 53.58 |
|
|
|
|
|
| |
| Number of Shares | Weighted Average Exercise Price Per Share | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||
| Options outstanding at December 31, 2020 | 35,453,516 | $ | 0.38 | 8.1 Years | $ | 266,548 | ||||||||
| Options granted | 6,524,723 | 2.57 | ||||||||||||
| Options exercised | (2,062,803 | ) | 0.34 | $ | (13,268 | ) | ||||||||
| Options forfeited | (539,915 | ) | 0.93 | |||||||||||
| Options expired | (1,916,974 | ) | 0.20 | |||||||||||
| Options outstanding at December 31, 2021 | 37,458,547 | $ | 0.80 | 7.6 Years | $ | 121,108 | ||||||||
| Exercisable at December 31, 2021 | 17,764,012 | 0.36 | 6.8 Years | $ | 65,265 | |||||||||
| Unvested at December 31, 2021 | 19,694,535 | $ | 1.19 | |||||||||||
6,977,038
132,122 options vested during the twelve months ended December 31, 20212023 with an aggregate intrinsic value of $24,982.$324. Total compensation cost related to unvested options not yet recognized as of December 31, 20212023 was $11,911$2,119 and will be recognized over a weighted average of 2.81.1 years.
Summary RSU and PSU Activity
RSUs entitle the holder to receive one share of Class A Common Stock for each unit when the units vest, and typically RSUs vest over periods ranging from one to four years. PSUs entitle the holder to receive a specific number of Class A Common Stock, some of which are dependent on the market performance of Class A Common Stock (“Market PSUs”) while others are based on Key Performance Indicators (“KPIs”). KPIs include, but are not limited to, adjusted revenue, Adjusted EBITDA and Total Customers as further described in Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations”.
The KPI PSU performance conditions are assessed each reporting period and expense related to these PSUs is adjusted by a factor consistent with the expected performance as of the reporting date.
F-31
The grant date fair values for the Market PSUs issued during the twelve months ended December 31, 2023 and 2022 were calculated using a Monte Carlo simulation model which utilized estimates of future stock price volatility, expected term and risk-free interest rate. Assumptions used for the Market PSUs granted during the twelve months ended December 31, 2023 are as follows:
| Twelve Months Ended December 31, |
| |||||
| 2023 |
|
| 2022 |
| ||
Expected Volatility |
| 83 | % |
| 53% - 80% |
| |
Expected Dividend |
| — |
|
|
| — |
|
Expected Term in Years |
| 3.00 |
|
| 3.30 - 4.00 |
| |
Risk Free Interest Rate |
| 4.72 | % |
| 2.10% - 4.50% |
| |
The following table represents RSU and PSU activity since December 31, 2021:
| Market PSUs |
|
| KPI PSUs |
|
| RSUs |
| ||||||||||||||||
|
|
|
|
| Weighted |
|
|
|
|
| Weighted |
|
|
|
|
| Weighted |
| ||||||
|
|
|
|
| Average Grant |
|
|
|
|
| Average Grant |
|
|
|
|
| Average Grant |
| ||||||
|
|
|
|
| Date Fair |
|
|
|
|
| Date Fair |
|
|
|
|
| Date Fair |
| ||||||
|
|
|
|
| Value |
|
|
|
|
| Value |
|
|
|
|
| Value |
| ||||||
|
| Units(1) |
|
| Per Unit(1) |
|
| Units(1) |
|
| Per Unit(1) |
|
| Units(1) |
|
| Per Unit(1) |
| ||||||
Units outstanding at December 31, 2021 |
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | — |
|
|
| 20,908 |
|
| $ | 179.00 |
|
Units granted |
|
| 334,001 |
|
|
| 26.10 |
|
|
| 89,064 |
|
|
| 59.00 |
|
|
| 714,704 |
|
|
| 53.00 |
|
Units forfeited |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (70,788 | ) |
|
| 57.00 |
|
Units vested |
|
| — |
|
|
| — |
|
|
| (1,493 | ) |
|
| 33.00 |
|
|
| (80,905 | ) |
|
| 83.00 |
|
Units outstanding at December 31, 2022 |
|
| 334,001 |
|
| $ | 26.10 |
|
|
| 87,571 |
|
| $ | 59.00 |
|
|
| 583,919 |
|
| $ | 52.51 |
|
Units granted |
|
| 300,000 |
|
|
| 9.73 |
|
|
| 173,599 |
|
|
| 17.03 |
|
|
| 713,113 |
|
|
| 20.90 |
|
Units forfeited |
|
| (308,614 | ) |
|
| 22.62 |
|
|
| (25,336 | ) |
|
| 70.56 |
|
|
| (130,939 | ) |
|
| 39.77 |
|
Units vested |
|
| (26,493 | ) |
|
| 15.99 |
|
|
| (41,942 | ) |
|
| 48.79 |
|
|
| (343,359 | ) |
|
| 42.57 |
|
Units outstanding at December 31, 2023 |
|
| 298,894 |
|
| $ | 14.16 |
|
|
| 193,892 |
|
| $ | 22.12 |
|
|
| 822,734 |
|
| $ | 31.58 |
|
15.
Total compensation cost related to unvested RSUs and PSUs not yet recognized as of December 31, 2023 was $25,689 and will be recognized over a weighted average of 1.7 years.
F-32
12. STOCK WARRANTS
Public Warrants and Private Placement Warrants
As a result of the Business Combination, MoneyLion acquired from Fusion Acquisition Corp., as of September 22, 2021, public warrants outstanding to purchase an aggregate of 17,500,000583,333 shares of the MoneyLion Class A Common Stock (the “Public Warrants”) and private placement warrants outstanding to purchase an aggregate of 8,100,000270,000 shares of the MoneyLion Class A Common Stock (the “Private Placement Warrants” and together with) (in each case, as adjusted for the Public Warrants, the “warrants”)Reverse Stock Split) that expire on September 22, 2026. Each whole warrant entitles the registered holder to purchase one whole share of MoneyLion Class A Common Stock at a price of $11.50$345 per share, at any time commencing on 12 months from closing of Fusion’sFusion Acquisition Corp.’s initial public offering.
Redemption of Warrants for Cash
The Company may call the warrants for redemption:
If and when the warrants become redeemable, the Company may exercise the redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
The Private Placement Warrants are identical to the Public Warrants except that the Private Placement Warrants are exercisable on a cashless basis and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. Except as described above, if holders of the Private Placement Warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering the warrants for that number of shares of MoneyLion Class A Common Stock equal to the quotient obtained by dividing the product of the number of shares of Money Lion Class A Common Stock underlying the warrants multiplied by the excess of the “historical fair market value” (defined below) less the exercise price of the warrants, by the historical fair market value. For these purposes, the “historical fair market value” shall mean the average last reported sale price of the MoneyLion Class A Common Stock. Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent.
The Public Warrants meet the conditions for equity classification in accordance with ASC 815-40. At the time of the Merger, the Public Warrants assumed by the Company were recorded at fair value within additional paid-in capital in the amount of $23,275.
As of December 31, 2021, the aggregate value of the Private Placement Warrants was $8,260, representing Private Placement Warrants outstanding to purchase 8,100,000 shares of MoneyLion Class A Common Stock. The Private Placement Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrants payablewarrant liability on the consolidated balance sheet.sheets. As of December 31, 2023 and 2022, the aggregate value of the Private Placement Warrants was $810 and $337, respectively. The warrant liabilities arePrivate Placement Warrant liability was measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrants payablewarrant liability in the consolidated statement of operations.
F-33
The Private Placement Warrants are measured at fair value on a recurring basis. TheAs of December 31, 2022, the Private Placement Warrants were valued using a Black-Scholes Option Pricing Model, which is calculated using Level 3 inputs.inputs as of December 31, 2022. The primary unobservable inputsinput utilized in determining the fair value of the Private Placement Warrants iswas the expected volatility of the MoneyLion Class A Common Stock. As of December 31, 2023, the Private Placement Warrants were valued based on the per warrant price of the Public Warrants, subject to adjustments to account for differences in contractual terms between the Private Placement Warrants and the Public Warrants. The per warrant price of the Public Warrants as of December 31, 2023 was $0.10.
The following table presents the quantitative information regarding Level 3 fair value measurement of warrants:
December 31, | |||
2022 | |||
Strike price(1) | $345.00 | ||
Expected Volatility | 79 | % | |
Expected Dividend - Class A Common Stock | — | ||
Expected Term in Years | 3.73 | ||
Risk Free Interest Rate | 4.14 | % | |
Warrant Value Per Share(1) | $18.60 | ||
| December 31, | ||||
| 2021 | ||||
| Strike price | $ | 11.50 | ||
| Expected Volatility | 61 | % | ||
| Expected Dividend | - | |||
| Expected Term in Years | 4.73 | |||
| Risk Free Interest Rate | 1.22 | % | ||
| Warrant Value Per Share | 1.02 | |||
The following table presents the changes in the fair value of the warrants:Private Placement Warrants:
|
| Private Placement |
| |
|
| Warrants |
| |
Warrants payable balance, December 31, 2022 |
| $ | 337 |
|
Mark-to-market adjustment |
|
| 473 |
|
Warrants payable balance, December 31, 2023 |
| $ | 810 |
|
| December 31, 2021 | ||||
| Private Placement | ||||
| Warrants | ||||
| Initial Measurement, September 22, 2021 | $ | 29,466 | ||
| Mark-to-market adjustment | $ | (21,206 | ) | |
| Warrants payable balance, December 31, 2021 | $ | 8,260 | ||
Legacy MoneyLion Warrants
See Note 4, “Business Combination” for details on the Legacy MoneyLion Warrants.
16.13. NET LOSS PER SHARE (As Restated)
The following table sets forth the computation of net loss per common share for the twelve months ended December 31, 20212023 and 2020: 2022:
| Twelve Months Ended December 31, |
| |||||
| 2023 |
|
| 2022 |
| ||
Numerator: |
|
|
|
|
| ||
Net loss | $ | (45,245 | ) |
| $ | (189,066 | ) |
Reversal of previously accrued / (accrued) dividends on preferred stock |
| 690 |
|
|
| (6,880 | ) |
Net loss attributable to common shareholders | $ | (44,555 | ) |
| $ | (195,946 | ) |
|
|
|
|
| |||
Denominator: |
|
|
|
|
| ||
Weighted-average common shares outstanding - basic and diluted(1) |
| 9,614,309 |
|
|
| 8,056,529 |
|
Net loss per share attributable to common stockholders - basic and diluted(1) | $ | (4.63 | ) |
| $ | (24.32 | ) |
| Twelve Months Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| (As Restated) | ||||||||
| Numerator: | ||||||||
| Net loss | $ | (169,484 | ) | $ | (41,587 | ) | ||
| Net income attributable to redeemable noncontrolling interests | (12,776 | ) | (8,409 | ) | ||||
| Accretion of issuance costs on redeemable convertible preferred stock | - | - | ||||||
| Reversal of previously accrued (accrual of) dividends on redeemable convertible preferred stock | 42,728 | (17,209 | ) | |||||
| Net loss attributable to common shareholders | $ | (139,532 | ) | $ | (67,205 | ) | ||
| Denominator: | ||||||||
| Weighted-average common shares outstanding - basic and diluted (1) | 97,158,738 | 45,177,217 | ||||||
| Net loss per share attributable to common stockholders - basic and diluted | $ | (1.44 | ) | $ | (1.49 | ) | ||
F-34
The Company’s potentially dilutive securities, which include stock options, RSUs, preferred stock and warrants to purchase shares of common stock and preferred stock, have been excluded from the computation of diluted net loss per share as the effect would be antidilutive. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same.
The Company excluded the following potential commonpotentially issuable shares of Class A Common Stock from the computation of diluted net loss per share because including them would have an anti-dilutive effect for the twelve months ended December 31, 20212023 and 2020:2022:
| December 31, |
| |||||
| 2023 |
|
| 2022 |
| ||
Conversion of convertible preferred stock(1) |
| — |
|
|
| 855,186 |
|
Warrants to purchase common stock(1) |
| 853,330 |
|
|
| 853,330 |
|
PSUs, RSUs and options to purchase common stock(1) |
| 2,160,554 |
|
|
| 2,115,517 |
|
Right to receive Earnout Shares(1) |
| 583,333 |
|
|
| 583,333 |
|
Total common stock equivalents |
| 3,597,217 |
|
|
| 4,407,366 |
|
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Conversion of redeemable convertible preferred stock (1) | - | 116,264,358 | ||||||
| Warrants to purchase common stock and redeemable convertible preferred stock (1) | 25,599,889 | 14,738,710 | ||||||
| RSUs and options to purchase common stock (1) | 38,085,775 | 35,453,516 | ||||||
| Right to receive Earnout Shares | 17,500,000 | - | ||||||
| Total common stock equivalents | 81,185,664 | 166,456,584 | ||||||
In connection with the Business Combination, rights to receive Class A Common Stock (the “Earnout Shares”) were issued, with the right to receive Class A Common Stock contingent upon the Class A Common Stock reaching certain price milestones. 250,000 and 333,333 shares of Class A Common Stock will be issued if the Class A Common Stock share price equals or is greater than $375 and $495, respectively, for twenty out of any thirty consecutive trading days. The right to receive the Earnout Shares will expire on September 22, 2026.
17.14. COMMITMENTS AND CONTINGENCIES
LeasePurchase Commitments—
The Company leases various office space, includingCompany’s unconditional purchase obligations include purchase commitments with suppliers and other obligations entered in to during the corporate office location, from third parties under non-cancellable agreements which require various minimum annual rentals. Certainnormal course of business regarding the leases also require the paymentpurchase of normal maintenance, utilitiesgoods and related real estate taxes on the properties.
The total minimum lease payments asservices. As of December 31, 20212023, the Company’s estimated minimum obligations associated with unconditional purchase obligations, which are as follows:
| 2022 | $ | 776 | ||
| 2023 | 788 | |||
| 2024 | 811 | |||
| 2025 | 590 | |||
| 2026 | 140 | |||
| Thereafter | - | |||
| $ | 3,105 |
not recognized in the Company’s consolidated balance sheet, were $Rent expense totaled $9972,317 in 2024, $8,500 in 2025, $8,500 in 2026 and $1,233 for$8,500 in 2027. For the yearsyear ended December 31, 20212023 and 2020,2022, purchases related to these obligations were $8,944 and $5,306, respectively.
Legal Matters— TheFrom time to time, the Company is subject to regulatory examination byvarious claims and legal proceedings in the California Departmentordinary course of Financial Protectionbusiness, including lawsuits, arbitrations, class actions and Innovation (the “CA DFPI”). With respect to its activities in California, the Company received a report of examination in 2020 from the CA DFPI regarding MoneyLion of California, LLC, MoneyLion’s subsidiary, and a follow-up request for information in May 2021. This matter is ongoing, and the Company intends to continue to fully cooperate with the CA DFPI in this matter. In addition, the CA DFPI is currently conducting an industry-wide investigation of companies that provide earned wage access products and services, including Instacash. The Company intends to continue cooperating fully in this investigation and to that end entered into a memorandum of understanding (“MOU”) with the CA DFPI on February 23, 2021. The MOU requires the Company to regularly provide certain information to the CA DFPI and adhere to certain best practices regarding Instacash while the CA DFPI continues to investigate. Any potential impacts on the Company’s financial condition or operations relating to these CA DFPI matters are unknown at this time.
With respect to the Company’s activities in Minnesota, the Company received information requests in 2019, 2020 and 2021 from the Minnesota Department of Commerce (“Minnesota DOC”) regarding an investigation relating to the Company’s lending activity in Minnesota and its membership program. The Minnesota DOC previously informed the Company that it was no longer pursuing the investigation regarding the Company’s membership program but continued the investigation into lending activity. In December 2021, the Company signed a settlement order with the Minnesota DOC, which had no material impact on the Company’s financial condition or operations.
other litigation. The Company is also the subject of various actions, inquiries, investigations and proceedings by regulatory and other governmental agencies. The outcome of any such legal and regulatory matters, including those discussed in this Note 14, is inherently uncertain, and some of these matters may result in adverse judgments or awards, including penalties, injunctions or other relief, which could materially and adversely impact the Company's business, financial condition, operating results and cash flows. See Part I, Item 1A “Risk Factors — Risks Relating to Legal and Accounting Matters — Unfavorable outcomes in legal proceedings may harm our business, financial condition, results of operations and cash flows.”
The Company has determined, based on its current knowledge, that the aggregate amount or range of losses that are estimable with respect to its legal proceedings, including the matters described below, would not have a material adverse effect on its business, financial position, results of operations or cash flows. As of December 31, 2023, amounts accrued were not material. Notwithstanding the foregoing, the ultimate outcome of legal proceedings involves judgments, estimates and inherent uncertainties, and cannot be predicted with certainty. It is possible that an adverse outcome of any matter could be material to the Company's business, financial position, results of operations or cash flows as a whole for any particular reporting period of occurrence. In addition, it is possible that a matter may prompt litigation or additional investigations or proceedings by other government agencies or private litigants.
F-35
The Company holds a number of state licenses in connection with its business activities, and must also comply with other applicable compliance and regulatory requirements in the processstates where it operates. In most states where the Company operates, one or more regulatory agencies have authority with respect to regulation and enforcement of respondingthe Company's business activities under applicable state laws, and the Company may also be subject to Civil Investigative Demands (“CIDs”)the supervisory and examination authority of such state regulatory agencies. Examinations by state regulators have and may continue to result in findings or recommendations that require the Company, among other potential consequences, to provide refunds to customers or to modify its internal controls and/or business practices.
In the ordinary course of its business, the Company is and has been from time to time subject to, and may in the future be subject to, governmental and regulatory examinations, information requests, investigations and proceedings (both formal and informal) in connection with various aspects of its activities by state agencies, certain of which could result in adverse judgments, settlements, fines, penalties, restitution, disgorgement, injunctions or other investigatory requests relating to its provision of consumer financial services from the office of the Attorney General of the Commonwealth of Virginia, the New York Attorney General’s Office, as well as the Colorado Department of Law.relief. The Company is cooperatinghas responded to and cooperated with each of thesethe relevant state regulatorsagencies and intendswill continue to take any corrective actions required to maintain compliance with applicable state laws. The Company cannot predictdo so in the outcome or any potential impact on its financial condition or operations at this time.future, as appropriate.
In 2019, 2020 and 2021, the Company received CIDs fromOn September 29, 2022, the Consumer Financial Protection Bureau (the “CFPB”) relating toinitiated a civil action in the Company’s compliance withUnited States District Court for the Southern District of New York (“SDNY”) against MoneyLion Technologies Inc., ML Plus LLC and the Company's 38 state lending subsidiaries, alleging violations of the Military Lending Act and the Consumer Financial Protection Act. The CFPB is seeking injunctive relief, redress for allegedly affected consumers and civil monetary penalties. On January 10, 2023, the Company moved to dismiss the lawsuit, asserting various constitutional and merits-based arguments. On June 13, 2023, the CFPB filed its membership model.first amended complaint, alleging substantially similar claims as those asserted in its initial complaint. On July 11, 2023, the Company moved to dismiss the lawsuit, again asserting various constitutional and merit-based arguments. On October 9, 2023, the Company moved for a stay of the action pending a decision from the United States Supreme Court in CFPB v. Community Financial Services Association of America, Ltd., No. 22-448 (U.S. argued Oct. 3, 2023) (“CFSA”). On December 1, 2023, the Court issued an order granting the Company’s motion and staying the action pending the United State Supreme Court’s decision in CFSA. The Company will continuecontinues to providemaintain that the CFPB’s claims are meritless and is vigorously defending against the lawsuit. Nevertheless, at this time, the Company cannot predict or determine the timing or final outcome of this matter or the effect that any adverse determinations in the lawsuit may have on its business, financial condition, results of operations or cash flows.
On July 21, 2023, Jeffrey Frommer, Lyusen Krubich, Daniel Fried and Pat Capra, the former equity owners of MALKA (collectively, the “Seller Members”), brought a civil action in the SDNY against MoneyLion Technologies Inc. alleging, among other things, breaches of the Membership Interest Purchase Agreement governing the MALKA Acquisition (the “MIPA”). Among other claims, the Seller Members allege that they are entitled to payment of $25.0 million of Class A Common Stock pursuant to the CFPB allearnout provisions set forth in the MIPA, based on the Seller Members’ assertion that MALKA achieved certain financial targets for the year ended December 31, 2022 (such payment, the “2022 Earnout Payment”). The Company believes that the Seller Members are not entitled to any portion of the information2022 Earnout Payment under the terms of the MIPA and documents requiredthat the Seller Members’ claims in their lawsuit are meritless. The Company continues to vigorously defend against the lawsuit and has filed counterclaims against the Seller Members, alleging, among other things, negligent misrepresentation, conversion, breach of fiduciary duties and breach of contract and seeking compensatory damages and other remedies as a result of wrongdoing by the CIDsSeller Members. On October 17, 2023, the SDNY denied, in full, the Seller Members’ motion for a preliminary injunction to remove the restrictive legends on certain shares of Class A Common Stock previously issued to the Seller Members. At this time, the Company cannot predict or determine the timing or final outcome of this matter or the effect that any adverse determinations in the lawsuit may have on its business, financial condition, results of operations or cash flows.
F-36
On July 27, 2023, MassMutual Ventures US II LLC, Canaan X L.P., Canaan XI L.P., F-Prime Capital Partners Tech Fund LP and GreatPoint Ventures Innovation Fund II, L.P., each of which are former equityholders of Even Financial Inc. and former holders of the Company’s Series A Preferred Stock (collectively, the “Former Preferred Stockholders”), brought a civil action in the SDNY against MoneyLion Inc., its Board of Directors and certain officers seeking declaratory relief and related damages. The Former Preferred Stockholders allege that the 1-for-30 Reverse Stock Split of the Class A Common Stock effected on April 24, 2023 was undertaken in a manner designed to trigger the Automatic Conversion Event pursuant to which all outstanding shares of Series A Preferred Stock automatically converted into certain shares of Class A Common Stock following the close of trading on the NYSE on May 26, 2023. The Former Preferred Stockholders further allege that the Definitive Proxy Statement the Company filed with the SEC on March 31, 2023 relating to the Special Meeting of Stockholders to approve the Reverse Stock Split proposal contained false and/or misleading statements and material omissions, and that the Company improperly failed to obtain the separate vote of the holders of the Series A Preferred Stock to approve the Reverse Stock Split. In connection therewith, the Former Preferred Stockholders assert claims against all defendants under Section 14(a) of the Securities Exchange Act of 1934 and for breach of the Certificate of Designations governing the Series A Preferred Stock, and a claim against the individual defendants for breach of fiduciary duty. The Company believes that the Former Preferred Stockholders’ claims are meritless, and on November 6, 2023, the Company filed a motion to dismiss the lawsuit in its entirety. The Company intends to continue to fully cooperate withvigorously defend against the CFPBlawsuit. Nevertheless, at this time, the Company cannot predict or determine the timing or final outcome of this matter or the effect that any adverse determinations in this investigation. The investigation is ongoing and any potential impactthe lawsuit may have on the Company’sits business, financial condition, results of operations or operations are unknown at this time.cash flows.
In February and March 2021, the Company received investigative subpoenas from the Securities and Exchange Commission concerning IIA, which primarily held assets from institutional investors and was the Company’s primary source of funding for originated receivables through the end of the fourth quarter of 2021. The Company is cooperating with the investigation and cannot predict its outcome or any potential impact on the Company’s financial condition or operations.
18.15. MERGERS AND ACQUISITIONS (As Restated)
Engine—On February 17, 2022, the Company completed the acquisition of all voting interest in Even Financial Inc., which was subsequently renamed to Engine, pursuant to the Amended and Restated Agreement and Plan of Merger, by and among the Company, Epsilon Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of the Company, Even Financial Inc. and Fortis Advisors LLC, a Delaware limited liability company, solely in its capacity as representative of the equityholders of Even Financial Inc. Engine powers the leading embedded finance marketplace solutions MoneyLion offers to its Enterprise Partners through which consumers are connected and matched with real-time, personalized financial product and service recommendations. For the over 1,100 Enterprise Partners in MoneyLion's network who integrate MoneyLion's software platform onto their properties, MoneyLion enables robust distribution capabilities and a more simple and efficient system of customer acquisition and also provides value-added data analytics and reporting services to enable them to better understand the performance of their marketplace programs and optimize their business over time. The Engine Acquisition expanded MoneyLion's addressable market, extended the reach of its own products and services and diversified its revenue mix.
At the closing of the Engine Acquisition, the Company (i) issued to the equityholders of Even Financial Inc. an aggregate of 28,164,811 shares of Series A Preferred Stock, along with an additional 529,120 shares of Series A Preferred Stock to advisors of Even Financial Inc. for transaction expenses, valued at $193,721, (ii) paid to certain Even Financial Inc. management equityholders approximately $14,514 in cash and (iii) exchanged 8,883,228 options to acquire Even Financial Inc. common stock for 196,728 options to acquire Class A Common Stock, of which the vested portion at the acquisition date was valued at $8,960. In addition, certain recipients of options to acquire shares of the Company’s Class A common stock were entitled to receive dividend equivalents in lieu of receiving Series A Preferred Stock, subject to certain conditions (the “Preferred Stock Equivalents”). The total purchase price was approximately $271,096, subject to customary purchase price adjustments for working capital and inclusive of amounts used to repay approximately $5,703 of existing indebtedness of Even Financial Inc. and pay $2,868 of seller transaction costs.
Pursuant to the Amended and Restated Agreement and Plan of Merger, dated as of February 17, 2022, governing the Engine Acquisition, the equityholders and advisors of Even Financial Inc. were entitled to receive an additional payment from the Company of up to an aggregate of 8,000,000 shares of Series A Preferred Stock, based on the attributed revenue of Engine’s business during the 13-month period commencing January 1, 2022 (the “Earnout”). On May 22, 2023, in connection with Engine's partial achievement of the Earnout, the Company issued 4,354,092 shares of Series A Preferred Stock and, in lieu of fractional shares and with respect to recipients otherwise ineligible to receive shares, approximately $459 in cash to the former equityholders and advisors of Even Financial Inc., as described further below.
F-37
The fair value of Even Financial Inc.’s acquired assets and liabilities assumed were as follows:
|
| February 17, |
| |
|
| 2022 |
| |
Assets |
|
|
| |
Cash and cash equivalents |
| $ | 4,501 |
|
Enterprise receivables |
|
| 9,863 |
|
Property and equipment |
|
| 441 |
|
Intangible assets |
|
| 182,640 |
|
Goodwill |
|
| 111,474 |
|
Other assets |
|
| 3,354 |
|
Total assets |
|
| 312,273 |
|
Liabilities |
|
|
| |
Accounts payable and accrued liabilities |
|
| 9,258 |
|
Deferred tax liability |
|
| 29,073 |
|
Other liabilities |
|
| 2,846 |
|
Total liabilities |
|
| 41,177 |
|
Net assets and liabilities acquired |
| $ | 271,096 |
|
The goodwill related to the Engine Acquisition was not tax deductible and was comprised of expected synergies from combining operations and the value of intangible assets that do not qualify for separate recognition.
The following table presents the changes in the liability related to the Earnout and Preferred Stock Equivalents:
|
|
|
|
| Preferred Stock |
| ||
|
| Earnout |
|
| Equivalents |
| ||
Balance as of December 31, 2022 |
| $ | 6,946 |
|
| $ | 1,997 |
|
Change in fair value of contingent consideration |
|
| (5,047 | ) |
|
| (1,386 | ) |
Settlement of contingent consideration |
|
| (1,899 | ) |
|
| (611 | ) |
Balance as of December 31, 2023 |
| $ | — |
|
| $ | — |
|
The Earnout and Preferred Stock Equivalents were valued using a Monte Carlo simulation model, which is calculated using Level 3 inputs. The primary unobservable inputs utilized in determining the fair value of the Earnout and Preferred Stock Equivalents are the expected volatility of the Class A Common Stock and the revenue levels of Engine.
The following table presents the quantitative information and certain assumptions regarding Level 3 fair value measurement of the Earnout and Preferred Stock Equivalents:
December 31, | |||
2022 | |||
Expected Volatility | 105 | % | |
Expected Dividend - Class A Common Stock | — | ||
Expected Term in Years | 5.00 | ||
Risk Free Interest Rate | 3.93 | % | |
F-38
In May 2023, the Earnout was settled through the issuance of 4,354,092 shares of Series A Preferred Stock, with cash paid in lieu of any fractional shares of Series A Preferred Stock. Cash payments relating to the settlement of the Earnout were $459.
In June 2023, the Preferred Stock Equivalents were settled through the issuance of 23,453 shares of Class A Common Stock, with cash paid in lieu of any fractional shares of Class A Common Stock. Cash payments relating to the settlement of the Preferred Stock Equivalents were $307. Upon the Automatic Conversion Event, the MoneyLion Inc. Preferred Share Dividend Replacement Program governing the Preferred Stock Equivalents immediately and automatically terminated in accordance with its terms, following which all Preferred Stock Equivalents were forfeited.
The Company’s pro forma revenue and net loss for the twelve months ended December 31, 2022 below have been prepared as if Even Financial Inc. had been purchased on January 1, 2022. The Company made certain pro forma adjustments related to amortization of intangible assets, intercompany activity and interest expense.
| Twelve Months Ended December 31, 2022 |
| |
| (unaudited) |
| |
Revenue | $ | 349,844 |
|
Net loss | $ | (193,495 | ) |
The unaudited pro forma financial information above is not necessarily indicative of what the Company’s consolidated results actually would have been if the Engine Acquisition had been completed at January 1, 2022. In addition, the unaudited pro forma information above does not attempt to project the Company’s future results.
MALKA—On November 15, 2021, MoneyLion completed its acquisition (the “MALKA Acquisition”)the MALKA Acquisition. MALKA forms the basis of MALKA.MoneyLion's media division and provides MoneyLion with the creative capabilities to produce and deliver engaging and dynamic content in support of MoneyLion's product and service offerings. MALKA is a creator network and content platform that provides digitalalso offers creative media and brand content production services to us and to its own clients in entertainment, sports, gaming, live streaming and other sectors. MoneyLion's Enterprise business.
The MALKA Acquisition accelerates MoneyLion’s abilityunsettled restricted shares payable relating to engage with consumers across all digital and emerging channels, allowing MoneyLion to directly connect with communities natively inside and outside of its existing platform. MoneyLion intends for MALKA to operate as an indirect, wholly-owned subsidiary of MoneyLion Inc. with MALKA’s pre-acquisition management team leading day-to-day operations.
The total purchase price of the MALKA Acquisition was approximately $52,685. Upon the closing of the MALKA Acquisition, MoneyLion issued 3,206,167 restricted shares of MoneyLion Class A Common Stock and paid $10,000 in cash to the sellers in exchange for all of the issued and outstanding membership interests of MALKA. The Make-Whole Provision related to the restricted shares of MoneyLion Class A Common Stock issued was valued at $10,870 as of the MALKA Acquisition Closing Date. MoneyLion also paid down $2,196 of MALKA debt facilities. The sellers may also earn up to an additional $35 million payable in restricted shares of MoneyLion Class A Common Stock if MALKA’s revenue and EBITDA exceeds certain targets in 2021 and 2022. The $35 million payable in earnout restricted shares based on 2021 and 2022 operating performance was valued at $11,782 as of the acquisition.
As of December 31, 2021, the payable in restricted shares based on 2021 and 2022 operating performance and the Make-Whole Provisionrelated make-whole were valued at $29,561 and were included in accounts payable and accrued liabilities on the consolidated balance sheet$2,444 as of December 31, 2021.2022 and were settled during the first quarter of 2023. The $10,838 change$180 and $4,867 decline in fair value sincefor the MALKA Acquisition wastwelve months ended December 31, 2023 and 2022, respectively, were included on the consolidated statementstatements of operations as a component of the change in fair value of contingent consideration from mergers and acquisitions.
The fair value of MALKA’s acquired assetsrestricted shares payable based on 2021 and liabilities2022 operating performance were as follows:
| November 15, | ||||
| 2021 | ||||
| Assets | ||||
| Cash and cash equivalents | $ | 51 | ||
| Property and equipment | 1,281 | |||
| Intangible assets | 17,780 | |||
| Goodwill | 30,976 | |||
| Other assets | 4,858 | |||
| Total assets | 54,946 | |||
| Liabilities and Equity | ||||
| Liabilities: | ||||
| Accounts payable and accrued liabilities | 2,261 | |||
| Total liabilities | 2,261 | |||
| Net assets and liabilities acquired | $ | 52,685 | ||
Wealth Technologies Inc. — In December 2020,valued based on the Company acquired 100% of the outstanding common stock and SeriesClass A redeemable convertible preferred shares of Wealth Technologies, Inc. in exchange for 539,592 shares of the MoneyLion Series C-1 Redeemable Convertible PreferredCommon Stock representing total consideration of approximately $27,929, which provided the Company with WTI’s market-leading wealth management decisioning and administration technology. The co-founder and equity holder of WTI was a significant stockholder of Series A redeemable convertible preferred stock of Legacy MoneyLion and was the Chairman of the Legacy MoneyLion board of directorsprice per share as of the date of the transaction. $6,130 of the total consideration was allocated to proprietary technology and $21,565 was allocated to goodwill.December 31, 2022.
19.16. RELATED PARTIES
In the ordinary course of business, we may enter into transactions with directors, principal officers, their immediate families, and affiliated companies in which they are principal stockholders (commonly referred to as “related parties”).
During the year ended December 31, 2020, the Company earned affiliate revenue through an arrangement with an affiliated company in which the Company’s Chief Financial Officer holds a minority financial interest. The revenues related to this agreement included within the consolidated statement of operations were immaterial during the year ended December 31, 2020. The amounts due from the related party were not material as of December 31, 2020. There was no such activity during the year ended December 31, 2021.
In April 2020, the Company entered into a $5,000 secured loan facility with a lender that is controlled by a significant holder of Legacy MoneyLion’s redeemable convertible preferred stock. On August 27, 2021, the Company entered into an amendment that refinanced the secured loan facility with a non-related party lender. Interest expense included within the consolidated statement of operations was $421 during the year ended December 31, 2020.
In December 2020, the Company acquired 100% of the outstanding common stock and Series A redeemable convertible preferred shares of WTI. The co-founder and equity holder of WTI was also a significant stockholder of Legacy MoneyLion’s redeemable convertible preferred stock and was the Legacy MoneyLion Chairman as of the date of the transaction. For more information about the transaction, see Note 18, “Mergers and Acquisitions.”
Additionally, some of our directors hold financial interests in separate entities, which the Company utilized in the ordinary course of business during the years ended December 31, 2021 and 2020. The activity during the year ended December 31, 2020 was not material. The Company is party to an Amended and Restated Marketing Consulting Agreement, dated as of May 11, 2021 and as amended from time to time (the “Marketing Consulting Agreement”), with LeadGen Data Services LLC (“LeadGen”), pursuant to which LeadGen provides the Company with certain marketing, consumer acquisition, lead generation and other consulting services. A significant stockholder has an indirect financial interest in LeadGen. For the year ended December 31, 2021,2023 and 2022, MoneyLion paid $6,624incurred expenses of $547 and $12,377, respectively, to LeadGen and earned $7,083$6,749 and $15,709 of revenue under the Marketing Consulting Agreement. As of December 31, 2023 and 2022, the net receivable owed to the Company from LeadGen was $1,088 and $867, respectively.
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20.17. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through March 17, 2022,7, 2024, the date on which these consolidated financial statements were available to be issued, and concluded that the following subsequent events were required to be disclosed:
Even Financial, Inc. Acquisition—On February 17, 2022,20, 2024, the Company completed its previously announced acquisition (the “Even Acquisition”) of Even Financial Inc., a Delaware corporation (“Even Financial”) pursuant to the Amended and Restated Agreement and Plan of Merger (the “Amended and Restated Merger Agreement”), by and among the Company, Epsilon Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Epsilon”), Even Financial and Fortis Advisors LLC, a Delaware limited liability company, solely in its capacity as representative of the equityholders of Even Financial (the “Equityholders’ Representative”).
Founded in 2014, Even Financial digitally connects and matches consumers with real-time personalized financial product recommendations from banks, insurance and fintech companies on mobile apps, websites and other consumer touchpoints through its marketplace technology. Even Financial’s infrastructure leverages machine learning and advanced data science to solve a significant pain point in financial services customer acquisition, seamlessly bridging financial institutions and channel partners via its industry-leading API and embedded finance marketplaces.
The Even Acquisition strengthens MoneyLion’s platform by improving consumers’ abilities to find and access the right financial products to help them manage their financial lives. Even Financial’s growing network includes over 400 financial institution partners and 500 channel partners, covering a breadth of financial services including loans, credit cards, mortgages, savings and insurance products. The Even Acquisition also expands MoneyLion’s addressable market, extends the reach of MoneyLion’s own products, diversifies its revenue mix and furthers MoneyLion’s ambition to be the premier financial super app for hardworking Americans.
At the closing of the Even Acquisition, the Company (i) issued to the equityholders of Even Financialentered into an aggregate of 28,164,811 shares of the Series A Convertible Preferred Stock, par value $0.0001 per share, of the Company (the “Preferred Stock”), with a face value of $10.00 per share (the “Conversion Price”), (ii) paid to certain Even Financial management equityholders approximately $14.5 million in cash and (iii) exchanged 8,883,228 options to acquire Even Financial common stock for 5,901,846 options to acquire MoneyLion Class A Common Stock. The equityholders of Even Financial are also entitled to receivesix year sublease which secured an additional payment from the Company35,384 square feet of up to an aggregate of 8,000,000 shares of Preferred Stock, with a face value per share equal to the Conversion Price, based on the attributed revenue of Even Financial’s business during the 13-month period commencing January 1, 2022 (the “Earnout”). Based on the Conversion Price of the shares of Preferred Stock issued at the closing of the Even Acquisition and to be issued pursuant to the Earnout, the value of the options to acquire MoneyLion Class A Common Stock and the cash paid to the management equityholders, the total purchase price was approximately $440 million, subject to customary purchase price adjustments for working capital and inclusive of amounts used to repay approximately $5.7 million of existing indebtedness of Even Financial.rental space in New York, New York.
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Due to the closing of the Even Acquisition occurring on February 17, 2022, there has not been sufficient time to apply business combination accounting to the opening balance sheet or create the financial disclosures required by U.S. GAAP.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Restatement of Q3 2021 Financial Statements
On March 10, 2022, the Company filed Amendment No. 1 to the Quarterly Report on Form 10-Q/A for the quarterly period ended September 30, 2021 (the “Q3 10-Q/A”) in order to restate (the “Q3 2021 Restatement”) the financial statements and related financial information contained in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021, originally filed with the SEC on November 15, 2021, arising from:
Further information about the Q3 2021 Restatement is described in the Q3 10-Q/A, filed with the SEC on March 10, 2022.
Restatement of FY 2021 and Q1 2022 Financial Statements
On August 11, 2022, the Company filed (a) Amendment No. 1 to the Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021 (the “FY 2021 10-K/A”) in order to restate (the “FY 2021 Restatement”) the financial statements and related financial information contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, originally filed with the SEC on March 17, 2022, and (b) Amendment No. 1 to the Quarterly Report on Form 10-Q/A for the quarterly period ended September 30, 2021, filed with the SEC on March 10, 2022.
Restatement of FY 2021 and Q131, 2022 Financial Statements
For information about the restatement of the Original Financial Statements and related financial information pursuant(the “Q1 2022 10-Q/A”) in order to this Amendment (the “FY 2021 Restatement”) and the intended restatement of the financial statements and related financial information included in the Company’s Q1 2022 10-Qrestate (the “Q1 2022 Restatement” and together with the Q3 2021 Restatement and the FY 2021 Restatement, the “Restatements”), see the Explanatory Notefinancial statements and related financial information contained in the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, originally filed with the SEC on May 16, 2022, in each case arising from the manner in which the Company classified and accounted for the make-whole provision (the “Closing Make-Whole Provision”) relating to this Amendmentcertain Class A Common Stock consideration paid and Note 2, “Restatementpayable to the sellers of MALKA in connection with the closing of the MALKA Acquisition, as the Closing Make-Whole Provision should have been classified as a liability within the scope of Accounting Standards Codification 480, Distinguishing Liabilities from Equity, as of the closing date of the MALKA Acquisition, with subsequent changes in the fair value of such liability recorded in the consolidated statement of operations under change in fair value of contingent consideration from mergers and acquisitions. Further information about the FY 2021 Restatement and the Q1 2022 Restatement is described in the FY 2021 10-K/A and Q1 2022 10-Q/A, respectively, each filed with the SEC on August 11, 2022.
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Remediation of Previously Issued Financial Statements,” toReported Material Weaknesses
As previously disclosed, we determined that the auditedRestatements described above, as well as the prior restatement of our consolidated financial statements includedfor the years ended December 31, 2020 and December 31, 2019 with respect to the treatment of the noncontrolling interests attributable to the Class B investors of IIA, resulted from a material weakness in Part II, Item 8, “Financial Statementsour internal control over financial reporting, as we did not maintain an effective control environment as controls over technical and Supplementary Data,”complex accounting did not operate as expected. Subsequently, during the audit of this Amendment.our financial statements for the year ended December 31, 2022, our auditors identified control deficiencies in our internal control over financial reporting as a result of a lack of properly designed controls related to the calculation of the fair value of our reporting unit undertaken as a part of goodwill impairment testing as of December 31, 2022.
In addition to the foregoing material weakness, in connection with our assessment of our controls for the year ended December 31, 2022, as previously disclosed, we identified a separate material weakness in our internal control over financial reporting as of December 31, 2022 relating to a lack of properly designed controls, as well as insufficient written policies and procedures, in connection with our Enterprise revenue recognition accounting in accordance with standards under Accounting Standards Codification Topic 606, Revenue from Contracts with Customers.
As a result of the actions taken by the Company to enhance the Company's internal control over financial reporting, as described further below, management has concluded that each of the material weaknesses described above was remediated as of December 31, 2023.
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Annual Report on Form 10-K/A/A,10-K, is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer (principal executive officer)Chief Executive Officer (Principal Executive Officer) and chief financial officer (principal financial officer)Chief Financial Officer (Principal Financial Officer), as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current chief executive officer (principal executive officer)Chief Executive Officer and chief financial officer (principal financial officer),Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of December 31, 2021,2023, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our chief executive officer (principal executive officer)Chief Executive Officer and chief financial officer (principal financial officer)Chief Financial Officer concluded that, in light of the Restatements, as well as the material weakness identified in connection therewith (as described under Part I, Item 1A “Risk Factors — Risks Relating to Our Business and Operations — MoneyLion has identified a material weakness in its internal control over financial reporting that remains un-remediated as of December 31, 2021 and March 31, 2022. If MoneyLion is unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results”), as of December 31, 2021,2023, our disclosure controls and procedures were not effective. As a result, we performed additional analysis as deemed necessary to ensure that our consolidated financial statements includedeffective in this Annual Report on Form 10-K/A were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believesproviding reasonable assurance that the financial statements includedinformation required for disclosure in this Annual Report on Form 10-K/A present fairly,reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in all material respects,SEC rules and forms, and that such information is accumulated and communicated to Company management, including our financial position, result of operationsChief Executive Officer and cash flows for the periods presented.Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended December 31, 20212023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting, other than as described below with respect to our ongoing remediation efforts.
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In connection with our remediation efforts of the material weakness in our internal control over financial reporting as of December 31, 2021 and March 31, 2022,weaknesses as described further under Part I, Item 1A “Risk Factors — Risks Relating to Our Business and Operations — MoneyLion has identified a material weakness in its internal control over financial reporting that remains un-remediated as of December 31, 2021 and March 31, 2022. If MoneyLion is unable to develop and maintain an effective system of internal control over financial reporting,above, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results,” and as part of our overall efforts to develop and refine our disclosure controls and procedures and improve our internal control over financial reporting as part of our obligations as a public company, we have added additional resources intended to enhance our accounting and financial reporting functions, including hiring additional qualified personnel with technical expertise. We have also begun to designdesigned formal processes in consultation with our third-party professional advisors, including formalizing our control evidence and processes, that are intended to ensure a sufficient level of precision is embedded in all financial reporting control activities. In addition, we have enhanced the supervisory review of accounting procedures in financial reporting and expanded and improved our review process for complex securities and transactions and related accounting standards.
In light of the errors described herein and the resulting Restatements, we intend to re-evaluate the design of, and validate, our internal controls to ensure that they appropriately address changes in our business that could impact our system of internal controls, review our current processes and procedures to identify potential control design enhancements to ensure that our financial reporting is complete and accurate and develop a monitoring protocol to enable management to validate the operating effectiveness of key controls over financial reporting. We believe that these actions will ultimately be effective in remediating the material weakness we have identified and will continue to evaluate our remediation efforts and report regularly to the Audit Committee of MoneyLion’s board of directors on the progress and results of our remediation plan. We intend to completecompleted the remediation by Marchas of December 31, 2023, but these remediation measures may be time consuming and costly, and there is no assurance that we will be able to complete the remediation and put in place the appropriate controls within this timeframe or that these initiatives will ultimately have the intended effects.2023.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting.reporting (as defined in Rule 13a-15(f) under the Exchange Act). As discussed elsewhere inof the end of the period covered by this Annual Report, on Form 10-K/A, we completedmanagement performed, with the Business Combination on September 22, 2021. Prior toparticipation of the Business Combination, MoneyLion Inc. was a privately held companyChief Executive Officer (“CEO”) and therefore itsthe Chief Financial Officer (“CFO”), an evaluation of the effectiveness of the company’s disclosure controls were not required to be designed or maintainedand procedures, as defined in accordance withRules 13a-15(e) and 15d-15(e) of the Exchange Act, Rule 13a-15. The designwas conducted based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of public company internal controls over financial reporting for the Company following the Business Combination has required and will continue to require significant time and resources from our management and other personnel. Furthermore, Fusion, the legal acquirer in the Business Combination, was a non-operating public shell company prior to the Business Combination, and as such the internal controls of Fusion no longer exist asSponsoring Organizations of the Treadway Commission (2013 framework). Based on this assessment, date. As a result, management was unable, without incurring unreasonable effort or expense, to conduct an assessment of ourdetermined that we maintained effective internal control over financial reporting as of December 31, 2021. Therefore, we are excluding management’s report on internal control over financial reporting pursuant to Section 215.02 of the SEC’s Compliance and Disclosure Interpretations.2023.
Attestation Report of the Registered Public Accounting Firm
Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting for as long as we are an “emerging growth company” pursuant to the provisions of the JOBS Act.
Item 9B. Other Information
None.During the quarter ended December 31, 2023, no director or officer (as defined in Rule 16a-1 under the Exchange Act) of the Company adopted or terminated a Rule 10b5-1 trading plan or adopted or terminated a non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408(a) of Regulation S-K).
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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Part III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by Item 10 hereby is incorporated by reference to such information as set forth in the Company's Definitive Proxy Statement for the 20222024 Annual Meeting of Stockholders.
Item 11. Executive Compensation
The information required by Item 11 hereby is incorporated by reference to such information as set forth in the Company's Definitive Proxy Statement for the 20222024 Annual Meeting of Stockholders under the headings “Executive and Director Compensation,” “Executive Compensation Arrangements” and “Director Compensation.”
The information required by Item 12 hereby is incorporated by reference to such information as set forth in the Company's Definitive Proxy Statement for the 20222024 Annual Meeting of Stockholders under the heading “Beneficial Ownership of Securities.”
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by Item 13 hereby is incorporated by reference to such information as set forth in the Company's Definitive Proxy Statement for the 20222024 Annual Meeting of Stockholders under the headings “Certain Relationships and Related Party Transactions” and “Director Independence.”
Item 14. Principal Accountant Fees and Services
The information required by Item 14 hereby is incorporated by reference to such information as set forth in the Company's Definitive Proxy Statement for the 20222024 Annual General Meeting of Shareholders under the heading “Audit Fee Disclosure.”
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Part IV
Item 15. Exhibits and Financial Statement Schedules
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, the representations, warranties, covenants and agreements contained in such exhibits were made only for the purposes of such agreement and as of specified dates, were solely for the benefit of the parties to such agreement and may be subject to limitations agreed upon by the contracting parties. The representations and warranties may have been made for the purposes of allocating contractual risk between the parties to such agreements instead of establishing these matters as facts and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Unless otherwise explicitly stated therein, investors and security holders are not third-party beneficiaries under any of the agreements attached as exhibits hereto and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its affiliates or businesses. Moreover, the assertions embodied in the representations and warranties contained in each such agreement are qualified by information in confidential disclosure letters or schedules that the parties have exchanged. Moreover, information concerning the subject matter of the representations and warranties may change after the respective dates of such agreements, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
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14.1 | ||
21.1* | ||
23.1* | Consent of RSM US LLP independent registered public accounting firm to MoneyLion Inc. | |
24.1* | Power of Attorney (included on the signature page of this Annual Report on Form 10-K). | |
31.1* | ||
31.2* | ||
32.1** | ||
32.2** | ||
97* | MoneyLion Inc. Financial Restatement Compensation Recoupment Policy. | |
101.INS | Inline XBRL Instance Document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema With Embedded Linkbases Document. | |
104 | Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101). |
* Filed herewith.
** The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
+ Management contract or compensatory plan or arrangement.
† Certain schedules and exhibits to this exhibit have been omitted pursuant to Regulation S-K Item 601(a)(5), or certain portions of this exhibit have been redacted pursuant to Regulation S-K Item 601(b)(iv).
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Item 16. Form 10-K Summary
The Company has elected not to include a Form 10-K summary under this Item 16.
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SIGNATURES
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MONEYLION INC. |
Date: | By: | /s/ Richard Correia |
Richard Correia |
POWER OF ATTORNEY
KNOW BY ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints jointly and severally, Diwakar Choubey and Richard Correia, and each of them, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or their substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on August 11, 2022.March 7, 2024.
Name | Position | |
| Chief Executive Officer | |
Diwakar Choubey | (Principal Executive Officer) | |
/s/ Richard Correia | President, Chief Financial Officer and Treasurer | |
Richard Correia | (Principal Financial Officer) | |
/s/ Mark Torossian | Chief Accounting Officer | |
Mark Torossian | (Principal Accounting Officer) | |
|
| |
John Chrystal | ||
| Director | |
Dwight L. Bush | ||
/s/ |
| |
| ||
/s/ Jeff Gary | Director | |
Jeff Gary | ||
/s/ Lisa Gersh | Director | |
Lisa Gersh | ||
/s/ Annette Nazareth | Director | |
Annette Nazareth | ||
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/s/ Michael Paull | Director | |
Michael Paull | ||
/s/ Chris Sugden | Director | |
Chris Sugden |
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