UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q10-Q/A
Amendment No. 1
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021March 31, 2022
orOR
☐ 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 of | (I.R.S. Employer Identification No.) | |
30 West 21st Street, 9th Floor New York, New York | 10010 | |
| (Address of principal executive offices) | (Zip Code) |
(212) 380-1735300-9865
(Registrant’s telephone 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 one share of Class A common stock, $0.0001 par value | ML WS | The New York Stock Exchange |
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 and posted 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”,filer,” “accelerated filer” andfiler,” “smaller reporting company”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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number ofThere were 235,665,550 shares of the registrant’s Class A common stock, par value $0.0001 per share, outstanding as of November 15, 2021 was 226,177,708 shares.May 6, 2022.
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 Quarterly Report on Form 10-Q/A (the “Amendment”) to amend and restate its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, originally filed with the Securities and Exchange Commission (“SEC”) on May 16, 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 audited consolidated financial statements as of and for the year ended December 31, 2021 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 (the “FY 2021 10-K”), and (b) Company’s Original Financial Statements and related financial information contained in the Original Filing should no longer be relied upon and should be restated in order to correct the error described above. On August 11, 2022, the Company filed Amendment No. 1 to the Annual Report on Form 10-K/A to amend and restate the FY 2021 10-K in order to correct the Make-Whole Provision classification error described above and restate the financial statements and related financial information contained in the FY 2021 10-K.
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 March 31, 2022 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 March 31, 2022. 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 I, Item 4, “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:
| ● | Part I – Item 1. Financial Statements |
| ● | Part I – Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| ● | Part I – Item 4. Controls and Procedures |
| ● | Part II – Item 1A. Risk Factors |
| ● | Part II – Item 6. Exhibits |
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 May 16, 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.
MoneyLion Inc.
TABLE OF CONTENTS
QUARTERLY REPORT ON FORM 10-Q/A
For the Quarterly Period Ended March 31, 2022
i
INTRODUCTORY NOTE
On September 22, 2021 (the “Closing“Business Combination Closing Date”), MoneyLion Inc., a Delaware corporation, formerly known as Fusion Acquisition Corp. (prior to the Closing Date, “Fusion” and after the Closing Date, “MoneyLion”(“Fusion”), consummated the previously announceda 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. Pursuant to the corporation and a wholly owned subsidiary of Fusion (“Merger Agreement (as defined below)Sub”), and Legacy MoneyLion, immediately upon the completion of the Business Combination and the other transactions contemplated by the Merger Agreement (the “Closing”“Business Combination Closing”), each of the following transactions occurred in the following order: (i) ML Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Fusion (“Merger Sub”) merged with and into Legacy MoneyLion, with Legacy MoneyLion surviving the merger as a wholly ownedwholly-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.
References to MoneyLion’s Class A common stock, par value $0.0001 per share (the “MoneyLion Class A Common Stock”) is listed on the Merger Agreement shall mean that certain Agreement and Plan of Merger, dated as of February 11, 2021 and amended on June 28, 2021 and September 4, 2021New York Stock Exchange (the “Merger Agreement”“NYSE”), by and among Fusion, Merger Sub and Legacy MoneyLion.
The Business Combination was accounted for as a reverse recapitalization for which Legacy MoneyLion has been determined to be under the accounting acquirer (the “Reverse Recapitalization”). As the Business Combination was accounted for as a Reverse Recapitalization, no goodwill or other intangible assets were recorded, in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Under this method of accounting, Fusion was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of Legacy MoneyLion issuing stock for the net assets of Fusion, accompanied by a recapitalization. The net assets of Fusion were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Reverse Recapitalization will be those of Legacy MoneyLion. Notwithstanding the foregoing, see “Item 2 — MoneyLion’s Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” set forth below.
The Business Combination closed on September 22, 2021.
MONEYLION INC.
TABLE OF CONTENTS
i
MoneyLion Inc.ticker symbol “ML.”
As used in this Quarterly Report on Form 10-Q,10-Q/A, unless the context requires otherwise, references to “MoneyLion”,“MoneyLion,” the “Company”, “we”, “us”, and“Company,” “we,” “us,” “our”, and similar references refer to MoneyLion Inc. and, as context requires, its wholly-ownedconsolidated subsidiaries for the period following the Business Combination (as defined herein) and to MoneyLion Technologies Inc. and, as context requires, its consolidated subsidiaries for the period prior to the Business Combination. “Fusion” refers to Fusion Acquisition Corp. prior to the Business Combination.
For more information regardingconvenience, the Business Combination, see Item I, Note 2trademarks and service marks referred to the Notes to Unaudited Condensed Consolidated Financial Statements and Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Quarterly Report on Form 10-Q.10-Q/A 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.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSCautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q,10-Q/A, 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.MoneyLion Inc. and its wholly-owned subsidiaries. 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. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. 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.
ii
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 Quarterly Report on Form 10-Q may10-Q/A. Factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, for example, statements about:without limitation:
| ● |
| factors relating to the business, operations and financial performance of MoneyLion, |
| ● | intense and increasing competition in the industries in which MoneyLion and its subsidiaries, including Malka Media Group LLC (“MALKA”) and Even Financial Inc. (“Even Financial”), operate, and demand for and consumer confidence in MoneyLion’s products and services, including as a result of any adverse publicity concerning MoneyLion; |
| ● | MoneyLion’s ability to realize strategic objectives and avoid difficulties and risks of any acquisitions, strategic investments, entries into new businesses, joint ventures, divestitures and other transactions; |
| ● | MoneyLion’s reliance on third parties to provide services; |
iii
| ● | MoneyLion’s ability to service loans or advances properly and the performance of the loans and other receivables originated through MoneyLion’s platform; |
| ● | MoneyLion’s ability to raise financing in the future, to comply with restrictive covenants related to its long-term indebtedness and to manage the effects of changes in the cost of capital; |
| ● | MoneyLion’s success in retaining or recruiting, or changing as required, its officers, key employees and directors, including MALKA’s ability to retain its content creators; |
| ● | MoneyLion’s ability to comply with the extensive and evolving laws and regulations applicable to its business; |
| ● | risks related to the proper functioning of MoneyLion’s IT systems and data storage, including as a result of cyberattacks and other security breaches or disruptions suffered by MoneyLion or third parties upon which it relies; |
| ● | MoneyLion’s ability to protect its intellectual property rights; |
| ● | MoneyLion’s ability to comply with laws and regulations applicable to its |
| ● |
| MoneyLion’s ability to establish and maintain an effective system of internal controls over financial reporting; |
| ● | MoneyLion’s ability to maintain the |
| ● |
| other factors detailed under Part II, Item 1A |
These and other factors are more fully discussed in our filings with the U.S. Securities and Exchange Commission (the “SEC”), including the “Risk Factors” section in Amendment No. 1 to the Annual Report on Form 10-K/A for the year ended December 31, 2021, filed with the SEC on August 11, 2022, and Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q/A.
These forward-looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q10-Q/A 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, and we do notdate. We undertake anyno 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.
As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.
iiiv
Risk Factor Summary
Our business is subject to numerous risks and uncertainties, which illuminate challenges thatincluding 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:
| ● | MoneyLion’s financial condition, results of operations and business may be adversely impacted by the COVID-19 pandemic, economic conditions and other factors that it cannot control. In an economic downturn, MoneyLion may not be able to grow its business or maintain expected levels of liquidity or revenue growth. |
| ● | MoneyLion’s results of operations and future prospects depend on its ability to attract new and retain existing |
| ● | Demand for MoneyLion’s products or services may decline if it does not continue to innovate or respond to evolving technological or other changes. A significant change in consumer confidence in MoneyLion’s products or services or adverse publicity concerning MoneyLion, its business or its personnel could negatively impact MoneyLion’s business. |
| ● | Any acquisitions, strategic investments, entries into new businesses, joint ventures, divestitures and other transactions could fail to achieve strategic objectives, disrupt MoneyLion’s ongoing operations or result in operating difficulties, liabilities and expenses, harm its business and negatively impact its results of operations. |
| ● | Because MoneyLion relies on third parties to provide services, MoneyLion could be adversely impacted if such third parties fail to fulfill their obligations or if MoneyLion’s arrangements with them are terminated and suitable replacements cannot be found on commercially reasonable terms or at all. |
| ● | If MoneyLion fails to comply with the applicable requirements of |
| ● | If MALKA or Even Financial, MoneyLion’s wholly-owned subsidiaries, is unable to remain competitive or retain key clients, their respective business and results of operations and financial position may be adversely affected. Increases in the costs of content may have an adverse effect on MALKA’s business, financial condition and results of operations. |
| ● | If the information provided to MoneyLion by customers is incorrect or fraudulent, MoneyLion may misjudge a customer’s qualifications to receive its products and services and its results of operations may be harmed and could subject MoneyLion to regulatory scrutiny or penalties. |
| ● | If loans and other receivables originated through MoneyLion’s platform do not perform, or significantly underperform, MoneyLion |
| ● | If MoneyLion’s existing funding arrangements are not renewed or replaced or its existing funding sources are unwilling or unable to provide funding to it on terms acceptable to it, or at all, it could have a material adverse effect on MoneyLion’s business, results of operations, financial condition, cash flows and future prospects. MoneyLion may be unsuccessful in managing the effects of changes in the cost of capital on its business. |
| ● | MoneyLion’s 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. |
v
| ● | Systems defects, failures or disruptions, including events beyond MoneyLion’s control, and resulting interruptions in the availability of MoneyLion’s websites, applications, products, or services could harm MoneyLion’s business, harm its reputation, result in significant costs to MoneyLion, decrease MoneyLion’s potential profitability and expose it to substantial liability. |
| ● | MoneyLion has a history of losses and may not achieve profitability in the future. |
| ● | MoneyLion’s business is subject to extensive regulation, examination and oversight in a variety of areas. The legal and regulatory regimes governing certain of MoneyLion’s products and services are uncertain and evolving. Changing laws, regulations, interpretations or regulatory enforcement priorities may negatively impact the management of its business, results of operations, ability to offer certain products or the terms and conditions upon which they are offered and ability to compete. |
| ● | Cyberattacks and other security breaches or disruptions suffered by MoneyLion or third parties upon which it relies could have a materially adverse effect on MoneyLion’s business, harm its reputation and expose it to public scrutiny or liability. |
| ● | While MoneyLion takes 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 MoneyLion’s products and services or subject MoneyLion to scrutiny or penalties. |
| ● | MoneyLion may be unable to sufficiently obtain, maintain, protect or enforce its intellectual property and other proprietary rights. In addition, MoneyLion’s business and platform depend in part on intellectual property and proprietary rights and technology licensed from or otherwise made available to MoneyLion by third parties. If MoneyLion fails to comply with its obligations under license or technology agreements with third parties, MoneyLion may be required to pay damages and MoneyLion could lose license rights that are critical to |
| ● | MoneyLion has in the past been, and continues to be, subject to inquiries, subpoenas, exams, pending investigations and enforcement matters by state and federal regulators, the |
| ● |
The risks described above should be read together with the “Cautionary Statement Regarding Forward-Looking Statements” herein, the other risk factors included in our Registration Statement on Form S-1, filed on October 20, 2021, and the other information set forth under Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q, including10-Q/A, the “Risk Factors” section in Amendment No. 1 to the Annual Report on Form 10-K/A for the year ended December 31, 2021, filed with the SEC on August 11, 2022, our condensed consolidated financial statements and the related notes as well aspresented in Part I, Item 1 “Financial Statements”in this Quarterly Report on Form 10-Q/A and the other documents that we file with the Securities and Exchange Commission.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. See “Cautionary Note Regarding Forward-Looking Statements” herein.
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PART I -– FINANCIAL INFORMATION
Item 1. Financial Statements
MONEYLION INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands, except share and per share amounts)
(Unaudited)
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Cash, including amounts held by variable interest entities (VIEs) of $2,539 and $390 | $ | 295,645 | $ | 19,406 | ||||
| Restricted cash | 3,357 | 1,521 | ||||||
| Receivables | 129,281 | 68,794 | ||||||
| Allowance for losses on receivables | (16,791 | ) | (9,127 | ) | ||||
| Receivables, net, including amounts held by VIEs of $99,306 and $52,264 | 112,490 | 59,667 | ||||||
| Property and equipment, net | 588 | 502 | ||||||
| Intangible assets, net | 8,041 | 9,275 | ||||||
| Goodwill | 21,565 | 21,565 | ||||||
| Due from related party | - | 5 | ||||||
| Other assets | 26,913 | 11,702 | ||||||
| Total assets | $ | 468,599 | $ | 123,643 | ||||
| Liabilities, Redeemable Convertible Preferred Stock, Redeemable Noncontrolling Interests and Stockholders’ Deficit | ||||||||
| Liabilities: | ||||||||
| Secured loans | 43,626 | 24,395 | ||||||
| Accounts payable and accrued liabilities | 46,134 | 20,968 | ||||||
| Subordinated convertible notes, at fair value | - | 14,000 | ||||||
| Related party loan | - | 5,000 | ||||||
| Warrant liability | 22,916 | 24,667 | ||||||
| Other debt | - | 3,207 | ||||||
| Total liabilities | 112,676 | 92,237 | ||||||
| Commitments and contingencies (Note 17) | ||||||||
| 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 September 30, 2021 and December 31, 2020; aggregate liquidation preference of $0 and $288,183 at September 30, 2021 and December 31, 2020(1) | - | 288,183 | ||||||
| Redeemable noncontrolling interests | 123,549 | 71,852 | ||||||
| Stockholders’ deficit: | ||||||||
| Class A Common Stock, $0.0001 par value; 2,000,000,000 and 0 shares authorized as of September 30, 2021 and December 31, 2020, respectively, 226,177,708 and 0 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | 23 | - | ||||||
| Additional paid-in capital | 671,906 | - | ||||||
| Accumulated deficit | (429,855 | ) | (327,629 | ) | ||||
| Treasury stock, 970,000 and 44,924 shares at September 30, 2021 and December 31, 2020 at cost | (9,700 | ) | (1,000 | ) | ||||
| Total stockholders’ deficit | 232,374 | (328,629 | ) | |||||
| Total liabilities, redeemable convertible preferred stock, redeemable noncontrolling interests and stockholders’ deficit | $ | 468,599 | $ | 123,643 | ||||
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (As Restated) | ||||||||
| Assets | ||||||||
| Cash | $ | 185,009 | $ | 201,763 | ||||
| Restricted cash, including amounts held by variable interest entities (VIEs) of $61,888 and $39,396 | 63,978 | 44,461 | ||||||
| Consumer receivables | 153,634 | 153,741 | ||||||
| Allowance for credit losses on consumer receivables | (22,291 | ) | (22,323 | ) | ||||
| Consumer receivables, net, including amounts held by VIEs of $128,895 and $92,796 | 131,343 | 131,418 | ||||||
| Enterprise receivables | 14,207 | 6,002 | ||||||
| Property and equipment, net | 2,140 | 1,801 | ||||||
| Intangible assets, net | 212,948 | 25,124 | ||||||
| Goodwill | 161,678 | 52,541 | ||||||
| Other assets | 37,932 | 28,428 | ||||||
| Total assets | $ | 809,235 | $ | 491,538 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Liabilities: | ||||||||
| Secured loans | $ | 88,290 | $ | 43,591 | ||||
| Accounts payable and accrued liabilities | 44,961 | 36,868 | ||||||
| Warrant liability | 4,350 | 8,260 | ||||||
| Other debt, including amounts held by VIEs of $152,625 and $143,000 | 152,625 | 143,000 | ||||||
| Other liabilities | 91,881 | 38,135 | ||||||
| Total liabilities | 382,107 | 269,854 | ||||||
| Commitments and contingencies (Note 17) | ||||||||
| Redeemable convertible preferred stock (Series A), $0.0001 par value; 45,000,000 and 0 shares authorized as of March 31, 2022 and December 31, 2021, respectively, 28,693,931 shares issued and outstanding as of March 31, 2022 and 0 shares issued and outstanding as of December 31, 2021 | 193,647 | - | ||||||
| Stockholders’ equity: | ||||||||
| Class A Common Stock, $0.0001 par value; 2,000,000,000 shares authorized as of March 31, 2022 and December 31, 2021, 236,520,057 and 235,550,057 issued and outstanding, respectively, as of March 31, 2022 and 231,452,448 and 230,482,448 issued and outstanding, respectively, as of December 31, 2021 | 24 | 23 | ||||||
| Additional paid-in capital | 722,048 | 701,234 | ||||||
| Accumulated deficit | (478,891 | ) | (469,873 | ) | ||||
| Treasury stock at cost, 970,000 shares at March 31, 2022 and December 31, 2021 | (9,700 | ) | (9,700 | ) | ||||
| Total stockholders’ equity | 233,481 | 221,684 | ||||||
| Total liabilities, redeemable convertible preferred stock and stockholders’ equity | $ | 809,235 | $ | 491,538 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
MONEYLION INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollar amounts in thousands, except share and per share amounts)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue | ||||||||||||||||
| Net interest income on finance receivables | $ | 2,293 | $ | 1,654 | $ | 5,716 | $ | 3,617 | ||||||||
| Membership subscription revenue | 8,347 | 8,435 | 23,709 | 22,778 | ||||||||||||
| Affiliates income | 3,175 | 518 | 6,444 | 1,368 | ||||||||||||
| Fee income | 30,402 | 12,471 | 79,659 | 28,924 | ||||||||||||
| Other income | 3 | 39 | 21 | 174 | ||||||||||||
| Total Revenues, net | 44,220 | 23,117 | 115,549 | 56,861 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Marketing | 13,531 | 2,921 | 27,060 | 7,404 | ||||||||||||
| Provision for loss on receivables | 15,238 | 10,456 | 36,644 | 14,587 | ||||||||||||
| Other direct costs | 1,828 | 1,183 | 6,983 | 3,137 | ||||||||||||
| Interest expense | 1,627 | 865 | 4,947 | 2,316 | ||||||||||||
| Personnel expenses | 15,483 | 4,672 | 30,736 | 15,704 | ||||||||||||
| Underwriting expenses | 2,158 | 1,137 | 5,702 | 4,553 | ||||||||||||
| Information technology expenses | 1,195 | 1,725 | 5,009 | 5,089 | ||||||||||||
| Bank and payment processor fees | 6,770 | 3,697 | 18,526 | 8,987 | ||||||||||||
| Change in fair value of warrant liability | (6,551 | ) | (228 | ) | 42,239 | (228 | ) | |||||||||
| Change in fair value of subordinated convertible notes | - | - | 49,561 | - | ||||||||||||
| Professional fees | 4,678 | 1,879 | 12,715 | 4,516 | ||||||||||||
| Depreciation and amortization expense | 486 | 286 | 1,502 | 811 | ||||||||||||
| Occupancy expense | (46 | ) | 314 | 719 | 913 | |||||||||||
| Gain on foreign currency translation | (135 | ) | (43 | ) | (178 | ) | (155 | ) | ||||||||
| Other operating (income) expenses | 8,242 | (257 | ) | 6,221 | 393 | |||||||||||
| Total operating expenses | 64,504 | 28,607 | 248,386 | 68,027 | ||||||||||||
| Net loss before income taxes | (20,284 | ) | (5,490 | ) | (132,837 | ) | (11,166 | ) | ||||||||
| Income tax (benefit) expense | (1 | ) | - | 41 | (13 | ) | ||||||||||
| Net loss | $ | (20,283 | ) | $ | (5,490 | ) | $ | (132,878 | ) | $ | (11,153 | ) | ||||
| Net income attributable to redeemable noncontrolling interests | (3,520 | ) | (1,967 | ) | (9,364 | ) | (6,480 | ) | ||||||||
| Reversal of previously accrued / (accrued) dividends on redeemable convertible preferred stock | 52,466 | (4,387 | ) | 42,728 | (12,817 | ) | ||||||||||
| Net income (loss) attributable to common shareholders | $ | 28,663 | $ | (11,844 | ) | $ | (99,514 | ) | $ | (30,450 | ) | |||||
| Net income ( loss) per share, basic and diluted (1) | $ | 0.46 | $ | (0.26 | ) | $ | (1.87 | ) | $ | (0.67 | ) | |||||
| Weighted average shares used in computing net loss per share, basic and diluted (1) | 62,314,396 | 44,857,889 | 53,119,751 | 45,253,509 | ||||||||||||
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| (As Restated) | ||||||||
| Revenue | ||||||||
| Service and subscription revenue | $ | 67,146 | $ | 31,468 | ||||
| Net interest income on loan receivables | 2,568 | 1,662 | ||||||
| Total revenue, net | 69,714 | 33,130 | ||||||
| Operating expenses | ||||||||
| Provision for credit losses on consumer receivables | 23,044 | 5,708 | ||||||
| Compensation and benefits | 22,043 | 7,057 | ||||||
| Marketing | 11,416 | 4,363 | ||||||
| Direct costs | 21,204 | 9,903 | ||||||
| Professional services | 7,288 | 3,586 | ||||||
| Technology-related costs | 4,505 | 2,199 | ||||||
| Other operating expenses | 10,769 | 1,082 | ||||||
| Total operating expenses | 100,269 | 33,898 | ||||||
| Net loss before other (expense) income and income taxes | (30,555 | ) | (768 | ) | ||||
| Interest expense | (6,174 | ) | (1,471 | ) | ||||
| Change in fair value of warrant liability | 3,910 | (31,230 | ) | |||||
| Change in fair value of subordinated convertible notes | - | (39,939 | ) | |||||
| Change in fair value of contingent consideration from mergers and acquisitions | (4,660 | ) | - | |||||
| Other (expense) income | (916 | ) | 27 | |||||
| Net loss before income taxes | (38,395 | ) | (73,381 | ) | ||||
| Income tax (benefit) expense | (28,417 | ) | 25 | |||||
| Net loss | (9,978 | ) | (73,406 | ) | ||||
| Net income attributable to redeemable noncontrolling interests | - | (2,767 | ) | |||||
| Accrual of dividends on preferred stock | (1,028 | ) | (4,842 | ) | ||||
| Net loss attributable to common shareholders | $ | (11,006 | ) | $ | (81,015 | ) | ||
| Net loss per share, basic and diluted(1) | $ | (0.05 | ) | $ | (1.68 | ) | ||
| Weighted average shares used in computing net loss per share, basic and diluted(1) | 230,737,284 | 48,348,187 | ||||||
| (1) | Prior period results have been adjusted to reflect the exchange of Legacy MoneyLion’s common stock (the “Legacy MoneyLion Common Stock”) for MoneyLion Class A Common Stock at an exchange ratio of approximately 16.4078 (the “Exchange Ratio”) in September 2021 as a result of the Business Combination. See Note 4, “Business Combination,” for details. |
The accompanying notes are an integral part of these consolidated financial statements.
MONEYLION INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK,
REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY (DEFICIT)
(amounts in thousands, except share amounts)
(Unaudited)
| Redeemable | ||||||||||||||||||||||||||||||||
| Convertible Preferred Stock (Series A) | Class A Common Stock | Additional Paid-in | Accumulated | Treasury | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Stock | Equity | |||||||||||||||||||||||||
| Balances at January 1, 2022 (As Restated) | - | $ | - | 230,482,448 | $ | 23 | $ | 701,234 | $ | (469,873 | ) | $ | (9,700 | ) | $ | 221,684 | ||||||||||||||||
| Stock-based compensation | - | - | - | - | 3,268 | - | - | 3,268 | ||||||||||||||||||||||||
| Exercise of stock options and warrants and vesting of RSUs | - | - | 899,901 | - | 421 | - | - | 421 | ||||||||||||||||||||||||
| Issuance of common stock in connection with earnout and make-whole provisions related to the acquisition of Malka Media Group LLC | - | - | 4,167,708 | 1 | 10,277 | - | - | 10,278 | ||||||||||||||||||||||||
| Issuance of options and preferred stock in connection with Even Acquisition | 28,693,931 | 193,647 | - | - | 8,963 | - | - | 8,963 | ||||||||||||||||||||||||
| Accrued dividends on preferred stock | - | - | - | - | (1,028 | ) | - | - | (1,028 | ) | ||||||||||||||||||||||
| Other | - | - | - | - | (1,087 | ) | 960 | - | (127 | ) | ||||||||||||||||||||||
| Net loss | - | - | - | - | - | (9,978 | ) | - | (9,978 | ) | ||||||||||||||||||||||
| Balances at March 31, 2022 (As Restated) | 28,693,931 | $ | 193,647 | 235,550,057 | $ | 24 | $ | 722,048 | $ | (478,891 | ) | $ | (9,700 | ) | $ | 233,481 | ||||||||||||||||
| 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, 2021 | 116,264,374 | $ | 288,183 | $ | 71,852 | 47,870,720 | $ | - | $ | - | $ | (327,629 | ) | $ | (1,000 | ) | $ | (328,629 | ) | |||||||||||||||||
| Stock-based compensation | - | - | - | - | - | 518 | - | - | 518 | |||||||||||||||||||||||||||
| Exercise of stock options and warrants | - | - | - | 732,444 | - | 245 | - | - | 245 | |||||||||||||||||||||||||||
| Accrued dividends on redeemable convertible preferred stock | - | 4,842 | - | - | - | (763 | ) | (4,079 | ) | - | (4,842 | ) | ||||||||||||||||||||||||
| Contributions from redeemable noncontrolling interests | - | - | 21,000 | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Redemptions by redeemable noncontrolling interests | - | - | (2,656 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Distributions to redeemable noncontrolling interests | - | - | (1,969 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Net income (loss) | - | - | 2,767 | - | - | - | (76,173 | ) | - | (76,173 | ) | |||||||||||||||||||||||||
| Balances at March 31, 2021 | 116,264,374 | $ | 293,025 | $ | 90,994 | 48,603,164 | $ | - | $ | - | $ | (407,881 | ) | $ | (1,000 | ) | $ | (408,881 | ) | |||||||||||||||||
| (1) | Prior period results have been adjusted to reflect the exchange of Legacy MoneyLion Common Stock for MoneyLion Class A Common Stock at the Exchange Ratio of approximately 16.4078 in September 2021 as a result of the Business Combination. See Note |
The accompanying notes are an integral part of these condensed consolidated financial statements.
MONEYLION INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ DEFICIT
(amounts in thousands, except share amounts)
(Unaudited)
| Redeemable Convertible Preferred Stock (All Series) | Redeemable Noncontrolling | Common Stock | Additional Paid-in | Accumulated | Treasury | Total Stockholders’ | ||||||||||||||||||||||||||||||
| Shares(1) | Amount | Interests | Shares | Amount | Capital | Deficit | Stock | Deficit | ||||||||||||||||||||||||||||
| Balances at July 1, 2020 | 107,410,844 | $ | 251,475 | $ | 68,288 | 44,888,391 | $ | - | $ | - | $ | (280,116 | ) | $ | (1,000 | ) | $ | (281,116 | ) | |||||||||||||||||
| Stock-based compensation | - | - | - | - | - | 410 | - | - | 410 | |||||||||||||||||||||||||||
| Exercise of stock options and warrants | - | - | - | 880,344 | - | 58 | - | - | 58 | |||||||||||||||||||||||||||
| Accrued dividends on redeemable convertible preferred stock | - | 4,387 | - | - | - | (468 | ) | (3,919 | ) | - | (4,387 | ) | ||||||||||||||||||||||||
| Contributions by redeemable noncontrolling interests | - | - | 50 | - | - | - | - | - | ||||||||||||||||||||||||||||
| Redemptions by redeemable noncontrolling interests | - | - | (4,473 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Distributions to redeemable noncontrolling interests | - | - | (907 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Net income (loss) | - | - | 1,966 | - | - | - | (7,457 | ) | - | (7,457 | ) | |||||||||||||||||||||||||
| Balances at September 30, 2020 | 107,410,844 | $ | 255,862 | $ | 64,924 | 45,768,735 | $ | - | $ | - | $ | (291,492 | ) | $ | (1,000 | ) | $ | (292,492 | ) | |||||||||||||||||
| Redeemable Convertible Preferred Stock (All Series) | Redeemable Noncontrolling | Common Stock | Additional Paid-in | Accumulated | Treasury | Total Stockholders’ | ||||||||||||||||||||||||||||||
| Shares(1) | Amount | Interests | Shares | 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 | - | - | - | - | - | 1,082 | - | - | 1,082 | |||||||||||||||||||||||||||
| Exercise of stock options and warrants | - | - | - | 1,569,800 | - | 84 | - | - | 84 | |||||||||||||||||||||||||||
| Issuance of Series C-1 redeemable convertible preferred stock | 3,811,908 | 12,025 | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Accrued dividends on redeemable convertible preferred stock | - | 12,817 | - | - | - | (1,166 | ) | (11,651 | ) | - | (12,817 | ) | ||||||||||||||||||||||||
| Contributions from redeemable noncontrolling interests | - | - | 300 | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Redemptions by redeemable noncontrolling interests | - | - | (12,844 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Distributions to redeemable noncontrolling interests | - | - | (2,989 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Net income (loss) | - | - | 6,480 | - | - | - | (17,633 | ) | - | (17,633 | ) | |||||||||||||||||||||||||
| Balances at September 30, 2020 | 107,410,844 | $ | 255,862 | $ | 64,924 | 45,768,735 | $ | - | $ | - | $ | (291,492 | ) | $ | (1,000 | ) | $ | (292,492 | ) | |||||||||||||||||
MONEYLION INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ DEFICIT
(amounts in thousands, except share amounts)
(Unaudited)
| Redeemable Convertible Preferred Stock (All Series) | Redeemable Noncontrolling | Class A Common Stock | Additional Paid-in | Accumulated | Treasury | Total Stockholders’ | ||||||||||||||||||||||||||||||
| Shares(1) | Amount | Interests | Shares | Amount | Capital | Deficit | Stock | Deficit | ||||||||||||||||||||||||||||
| Balances at July 1, 2021 | 116,264,374 | $ | 298,010 | $ | 101,157 | 48,658,573 | $ | 5 | $ | - | $ | (453,805 | ) | $ | (1,000 | ) | $ | (454,800 | ) | |||||||||||||||||
| Stock-based compensation | - | - | - | - | - | 586 | - | - | 586 | |||||||||||||||||||||||||||
| Exercise of stock options and warrants | - | - | - | 820 | - | - | - | - | - | |||||||||||||||||||||||||||
| Accrued dividends on redeemable convertible preferred stock | - | 4,465 | - | - | - | (516 | ) | (3,949 | ) | - | (4,465 | ) | ||||||||||||||||||||||||
| 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 | 6 | 433,816 | - | 1,000 | 434,822 | |||||||||||||||||||||||||||
| Redemption of common stock | - | - | - | (970,000 | ) | - | - | - | (9,700 | ) | (9,700 | ) | ||||||||||||||||||||||||
| Redemption of stock options | - | - | - | - | - | (12,741 | ) | - | - | (12,741 | ) | |||||||||||||||||||||||||
| Contributions from redeemable noncontrolling interests | - | - | 22,000 | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Redemptions by redeemable noncontrolling interests | - | - | (500 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Distributions to redeemable noncontrolling interests | - | - | (2,628 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Net income (loss) | - | - | 3,520 | - | - | - | (23,803 | ) | - | (23,803 | ) | |||||||||||||||||||||||||
| Balances at September 30, 2021 | - | $ | - | $ | 123,549 | 226,177,708 | $ | 23 | $ | 671,906 | $ | (429,855 | ) | $ | (9,700 | ) | $ | 232,374 | ||||||||||||||||||
| Redeemable Convertible Preferred Stock (All Series) | Redeemable Noncontrolling | Class A Common Stock | Additional Paid-in | Accumulated | Treasury | Total Stockholders’ | ||||||||||||||||||||||||||||||
| Shares(1) | Amount | Interests | Shares | Amount | Capital | Deficit | Stock | Deficit | ||||||||||||||||||||||||||||
| Balances at January 1, 2021 | 116,264,374 | $ | 288,183 | $ | 71,852 | 47,870,720 | $ | 5 | $ | - | $ | (327,629 | ) | $ | (1,000 | ) | $ | (328,624 | ) | |||||||||||||||||
| Stock-based compensation | - | - | - | - | - | 2,425 | - | - | 2,425 | |||||||||||||||||||||||||||
| Exercise of stock options and warrants | - | - | - | 788,673 | - | 251 | - | - | 251 | |||||||||||||||||||||||||||
| 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 | 6 | 433,816 | - | 1,000 | 434,822 | |||||||||||||||||||||||||||
| Redemption of common stock | - | - | - | (970,000 | ) | - | - | - | (9,700 | ) | (9,700 | ) | ||||||||||||||||||||||||
| Redemption of stock options | - | - | - | - | - | (12,741 | ) | - | - | (12,741 | ) | |||||||||||||||||||||||||
| Contributions from redeemable noncontrolling interests | - | - | 53,000 | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Redemptions by redeemable noncontrolling interests | - | - | (3,556 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Distributions to redeemable noncontrolling interests | - | - | (7,111 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Net income (loss) | - | - | 9,364 | - | - | - | (142,242 | ) | - | (142,242 | ) | |||||||||||||||||||||||||
| Balances at September 30, 2021 | - | $ | - | $ | 123,549 | 226,177,708 | $ | 23 | $ | 671,906 | $ | (429,855 | ) | $ | (9,700 | ) | $ | 232,374 | ||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
MONEYLION INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(Unaudited)
| Three Months Ended March 31, | ||||||||||||||||
| Nine Months Ended September 30, | 2022 | 2021 | ||||||||||||||
| 2021 | 2020 | (As Restated) | ||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net loss | $ | (132,878 | ) | $ | (11,153 | ) | $ | (9,978 | ) | $ | (73,406 | ) | ||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||||||
| Provision for losses on receivables | 36,644 | 14,587 | ||||||||||||||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||||||||||
| Provision for credit losses on consumer receivables | 23,044 | 5,708 | ||||||||||||||
| Depreciation and amortization expense | 1,502 | 811 | 3,421 | 514 | ||||||||||||
| Change in deferred fees and costs, net | 2,847 | 553 | 259 | 1,694 | ||||||||||||
| Change in fair value of warrants | 42,239 | (228 | ) | (3,910 | ) | 31,230 | ||||||||||
| Change in fair value of subordinated convertible notes | 49,561 | - | - | 39,939 | ||||||||||||
| Gain on loan forgiveness | (3,207 | ) | - | |||||||||||||
| Gains on foreign currency translation | (178 | ) | (155 | ) | ||||||||||||
| Change in fair value of contingent consideration from mergers and acquisitions | 4,660 | - | ||||||||||||||
| Losses (gains) on foreign currency translation | 29 | (4 | ) | |||||||||||||
| Expenses related to debt modification and prepayments | 730 | - | ||||||||||||||
| Stock compensation expense | 2,425 | 1,082 | 3,268 | 518 | ||||||||||||
| Deferred income taxes | (28,442 | ) | - | |||||||||||||
| Changes in assets and liabilities, net of effects of business combination: | ||||||||||||||||
| Accrued interest receivable | 481 | 12 | (34 | ) | (83 | ) | ||||||||||
| Enterprise receivables | 1,658 | 71 | ||||||||||||||
| Other assets | (15,206 | ) | (4,217 | ) | 666 | 11 | ||||||||||
| Accounts payable and accrued liabilities | 13,708 | 110 | (2,350 | ) | (2,901 | ) | ||||||||||
| Net cash provided by (used in) operating activities | (2,062 | ) | 1,402 | |||||||||||||
| Other liabilities | (1,672 | ) | - | |||||||||||||
| Net cash (used in) provided by operating activities | (8,651 | ) | 3,291 | |||||||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Net originations and collections on finance receivables | (90,861 | ) | (22,476 | ) | ||||||||||||
| Purchase of property and equipment | (354 | ) | (1,029 | ) | ||||||||||||
| Net originations and collections of finance receivables | (22,872 | ) | (15,110 | ) | ||||||||||||
| Purchase of property, equipment and software | (823 | ) | (35 | ) | ||||||||||||
| Acquisition of Even Financial, net of cash acquired | (18,584 | ) | - | |||||||||||||
| Net cash used in investing activities | (91,215 | ) | (23,505 | ) | (42,279 | ) | (15,145 | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Repayments to secured/senior lenders | (556 | ) | (18,333 | ) | (24,028 | ) | (1,127 | ) | ||||||||
| Repayment of related party loan | (5,000 | ) | - | |||||||||||||
| Proceeds from issuance of related party loan | - | 5,000 | ||||||||||||||
| Fees related to debt prepayment | (375 | ) | - | |||||||||||||
| Proceeds from special purpose vehicle credit facilities | 10,000 | - | ||||||||||||||
| Proceeds from issuance of subordinated convertible notes | 36,750 | - | - | 36,750 | ||||||||||||
| Borrowings from secured lenders | 20,000 | 16,697 | 69,300 | - | ||||||||||||
| Payment of deferred financing costs | (2,147 | ) | (675 | ) | (1,625 | ) | - | |||||||||
| Redemption of founder’s common stock | (9,700 | ) | - | |||||||||||||
| Payment of redeemed stock options | (10,651 | ) | - | |||||||||||||
| Proceeds from issuance of common stock related to exercise of stock options | 265 | 84 | ||||||||||||||
| Proceeds from reverse capitalization, net of transaction costs | 301,062 | - | ||||||||||||||
| Issuance of Series C-1 preferred stock | - | 12,025 | ||||||||||||||
| Proceeds from issuance of common stock related to exercise of stock options and warrants | 421 | 245 | ||||||||||||||
| Contributions from redeemable noncontrolling interests | 53,000 | 300 | - | 16,844 | ||||||||||||
| Redemptions by redeemable noncontrolling interests | (4,556 | ) | (13,050 | ) | ||||||||||||
| Distributions to noncontrolling interests | (7,115 | ) | (2,989 | ) | - | (1,969 | ) | |||||||||
| Net cash provided by financing activities | 371,352 | (941 | ) | 53,693 | 50,743 | |||||||||||
| Net change in cash and restricted cash | 278,075 | (23,044 | ) | 2,763 | 38,889 | |||||||||||
| Cash and restricted cash, beginning of year | 20,927 | 45,813 | ||||||||||||||
| Cash and restricted cash, end of year | $ | 299,002 | $ | 22,769 | ||||||||||||
| Cash and restricted cash, beginning of period | 246,224 | 20,927 | ||||||||||||||
| Cash and restricted cash, end of period | $ | 248,987 | $ | 59,816 | ||||||||||||
| Supplemental disclosure of cash flow information: | ||||||||||||||||
| Cash paid for interest | $ | 2,878 | $ | 2,460 | $ | 4,990 | $ | 569 | ||||||||
| Accrued redemptions by redeemable noncontrolling interests | $ | 500 | $ | 1,450 | ||||||||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||||||||||
| Conversion of preferred stock to common stock | $ | 302,475 | $ | - | ||||||||||||
| Issuance of common stock related to convertible debt | $ | 100,311 | $ | - | ||||||||||||
| Issuance of common stock related to warrants exercised | $ | 73,456 | $ | - | ||||||||||||
| Acquisition of public and private warrants | $ | 29,466 | $ | - | ||||||||||||
| Accrued dividends on preferred stock | $ | 1,028 | $ | 4,842 | ||||||||||||
| Lease liabilities incurred in exchange for operating right-of-use assets | $ | 6,578 | $ | - | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.statements.
MONEYLION INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share amounts or as otherwise indicated)
(Unaudited)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
On September 22, 2021 (the “Business Combination Closing Date”), MoneyLion Inc., formerly known as Fusion Acquisition Corp. (prior to the Effective Time,Business Combination Closing Date, “Fusion” and after the Effective Time,Business Combination Closing Date, “MoneyLion” or the “Company”), consummated the previously announced 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”), and MoneyLion Technologies Inc., formerly known as MoneyLion Inc. (prior to the Effective Time,Business Combination Closing Date, “MoneyLion” or the “Company”, and after the Effective Time,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 “Closing”“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, continuing the existing business operations. MoneyLion’s Class A common stock, par value $0.0001 per share (the “MoneyLion 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, concurrently with the execution of the Merger Agreement, Fusion entered into subscription agreements (the “Subscription Agreements”) with certain investors (collectively, the “PIPE Investors”) pursuant to which, among other things, Fusion agreed to issue and sell in private placements an aggregate of 25,000,000 shares (“PIPE Shares”) of Fusion Class A common stock, par value $0.0001 per share (“MoneyLion Common Stock”, also referred to herein as “MoneyLion Class A Common Stock”),Stock to the PIPE Investors for $10.00 per share, for an aggregate commitment amount of $250,000,000$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 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 MALKA Media Group LLC (“MALKA”). 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, MoneyLion hopes to turn the MoneyLion mobile application into a daily destination for its customers with personalized content that educates, informs and supports customers’ financial decisions.
On February 17, 2022, MoneyLion acquired Even Financial Inc. (“Even Financial”). 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, bridging Product Partners and Channel Partners (as defined herein) via its application programming interface (“API”) and embedded finance marketplaces. The 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 network includes over 400 Product Partners and 500 Channel Partners, covering a breadth of financial services including loans, credit cards, mortgages, savings, and insurance products. The acquisition also expands MoneyLion’s addressable market, extends the reach of its own products and diversifies its revenue mix.
Basis of Presentation—The condensed 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. The consolidated financial statements include the accounts of MoneyLion Inc. and its wholly owned subsidiaries and consolidated VIEsvariable interest entities (“VIEs”) for which the Company is the primary beneficiary.
Receivables originated on the Company’s platform are currently financed through Invest in America Credit Fund 1 LLC (“IIA”). 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 are issued in separately designated series, with each series consisting of Class A Units and Class B Units. IIA investors own all non-voting Class B Units of the applicable series they invest in, which entitles 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 owns the Class A Units of each series, which entitles ML Capital III to returns that exceed the targeted preferred return on the Class B Units (if any). IIA uses 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 consists of a portfolio of underlying MoneyLion loans and advance receivables. Investors in Class B Units fund their investment into IIA at the time of subscription, which proceeds are used to finance receivables originated on MoneyLion’s platform. Generally, an IIA investor may request redemption 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 is made, both the IIA investor’s capital contribution and their related Class B returns will be automatically reinvested in new notes. ML Capital III, as the managing member of IIA, has 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 be 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 $3,556 and $12,844 for the nine months ended September 30, 2021 and 2020, respectively, of which $500 and $1,450 were unpaid as of September 30, 2021 and 2020, respectively. Distributions, if any, to IIA investors will be 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 has 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 has identified itself as the primary beneficiary of these VIEs because it directs the activities of the VIEs that most significantly impact the VIEs’ economic performance. As the primary beneficiary of the VIEs, the Company has consolidated the balances of the VIEs into these financial statements. The IIA Class B Units are reflected in the Company’s consolidated financial statements as redeemable noncontrolling interests totaling $123,549 and $71,852 as of September 30, 2021 and December 31, 2020, respectively.
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 ninethree months ended September 30, 2021March 31, 2022 and 2020.2021.
Unaudited InterimReclassification—The acquisitions of MALKA and Even Financial Informationand related ongoing integration activities have caused significant changes to the revenue and cost structure of the Company such that the organization of financial statement line items in both the consolidated balance sheets and the consolidated statements of operations used in prior reporting periods are no longer sufficient to properly present the Company’s financial condition and results of operations as of March 31, 2022. Reclassifications have been performed relative to the previous presentation of the consolidated balance sheet as of December 31, 2021 and the consolidated statement of operations for the quarter ended March 31, 2021 to present in a new format that better represents the new revenue and cost structure of the Company. The reclassifications had no impact on previously reported total assets, total liabilities or net income (loss) and an immaterial impact on total revenue, net. There was no impact on the consolidated statements of cash flows or consolidated statements of redeemable convertible preferred stock, redeemable noncontrolling interests and stockholders’ equity (deficit). There are also related reclassifications and expanded disclosure, where necessary, contained within the notes to the consolidated financial statements.
Receivable funding——Receivables originated on the Company’s platform, including Credit Builder Plus loans and Instacash advances, were primarily funded through Invest in America Credit Fund 1 LLC (“IIA”) until the end of the fourth quarter of 2021. IIA and related special purpose vehicles (“SPVs”) were classified as variable interest entities (“VIEs”) of which the Company had identified itself as the primary beneficiary because it directed the activities of the IIA and the related SPVs that most significantly impacted their economic performance. As the primary beneficiary of the VIEs, the Company consolidated the balances of the VIEs into the financial statements. See Part II, Item 8 “Description of Business and Basis of Presentation” in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021 for further discussion of these matters.
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. 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 and Note 9. “Variable Interest Entities” regarding VIE considerations related to 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 at a 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, 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.
In addition, it was identified that the accrued dividend on the Series A Redeemable Convertible Preferred Stock, as defined in Note 3, “Summary of Significant Accounting Policies,” should have been classified as a liability as opposed to temporary equity. This reclassification was not considered material and is reflected in the adjustments below.
The impact of the restatement on the Company’s financial statements is reflected in the following tables:
| Consolidated Balance Sheet as of March 31, 2022 | As Previously Reported | Adjustment | As Restated | |||||||||
| Accounts payable and accrued liabilities | $ | 43,933 | $ | 1,028 | $ | 44,961 | ||||||
| Other liabilities | $ | 81,948 | $ | 9,933 | $ | 91,881 | ||||||
| Total liabilities | $ | 371,146 | $ | 10,961 | $ | 382,107 | ||||||
| Redeemable convertible preferred stock (Series A) | $ | 194,675 | $ | (1,028 | ) | $ | 193,647 | |||||
| Additional paid-in capital | $ | 723,394 | $ | (1,346 | ) | $ | 722,048 | |||||
| Accumulated deficit | $ | (470,304 | ) | $ | (8,587 | ) | $ | (478,891 | ) | |||
| Total stockholders’ equity | $ | 243,414 | $ | (9,933 | ) | $ | 233,481 | |||||
| Consolidated Balance Sheet as of December 31, 2021 | As Previously Reported | Adjustment | As Restated | |||||||||
| Other liabilities | $ | 26,585 | $ | 11,550 | $ | 38,135 | ||||||
| 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 Three Months Ended March 31, 2022 | As Previously Reported | Adjustment | As Restated | |||||||||
| (amounts in thousands except share and per share amounts) | ||||||||||||
| Change in fair value of contingent consideration from mergers and acquisitions | $ | (682 | ) | $ | (3,978 | ) | $ | (4,660 | ) | |||
| Net loss before income taxes | $ | (34,417 | ) | $ | (3,978 | ) | $ | (38,395 | ) | |||
| Net loss | $ | (6,000 | ) | $ | (3,978 | ) | $ | (9,978 | ) | |||
| Net loss attributable to common shareholders | $ | (7,028 | ) | $ | (3,978 | ) | $ | (11,006 | ) | |||
| Net loss per share, basic and diluted | $ | (0.03 | ) | $ | (0.02 | ) | $ | (0.05 | ) | |||
| Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2022 | As Previously Reported | Adjustment | As Restated | |||||||||
| Net loss | $ | (6,000 | ) | $ | (3,978 | ) | $ | (9,978 | ) | |||
| Change in fair value of contingent consideration from mergers and acquisitions | $ | 682 | $ | 3,978 | $ | 4,660 | ||||||
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (As Restated)
In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only 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’ deficitequity (deficit) and cash flows.
The condensed consolidated balance sheet asCompany’s accounting policies are set forth in Part II, Item 8 “Summary of September 30, 2021 is unaudited. The condensed consolidated balance sheet as of December 31, 2020, was derived from audited annual financial statements but does not contain allSignificant Accounting Policies” of the footnote disclosures fromCompany’s Notes to Consolidated Financial Statements included in the annual financial statements. The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes theretoCompany’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2020.
During the nine months ended September 30, 2021, there were no significant changes2021. Included herein are certain updates to the Company’s significant accounting policies as described in the Company’s audited consolidated financial statement as of and for the year ended December 31, 2020.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESthose policies.
Use of Estimates—Revenue Recognition and Related Receivables—The preparationfollowing table summarizes revenue by type for the quarters ended March 31, 2022 and 2021:
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Consumer revenues | ||||||||
| Service and subscription fees | $ | 46,394 | $ | 30,472 | ||||
| Net interest income on finance receivables | 2,568 | 1,662 | ||||||
| Total consumer revenues | 48,962 | 32,134 | ||||||
| Enterprise service revenues | 20,752 | 996 | ||||||
| Total revenue, net | $ | 69,714 | $ | 33,130 | ||||
Service and subscription 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 track 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 also receive access to the Company’s banking account, managed investment services, credit tracking services and Instacash advances.
The membership subscription fee is recognized on a daily basis throughout the term of the condensed consolidated financial statements in conformity with GAAP requires managementindividual subscription agreements, as the control of the membership services is delivered to make estimates and assumptionsthe customer evenly throughout that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilitiesterm. Subscription receivables are recorded at the dateamount 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 financial statementsaccount is uncertain. Membership subscription revenue is recognized gross over time.
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 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 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.
Net interest income on loan receivables—Interest income and the reported amountsrelated 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 revenueinterest income on finance receivables and expenses duringplace the reporting period. Significant estimatesloan 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 assumptions reflected in these condensed consolidatedthe 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 provide lead generating services to financial statements included,institutions and financial service providers (“Product Partners”) whereby qualified consumers are matched with financial solutions offered by the Product Partners based on qualification and preference.
Lead generation fees are earned through the operation of a robust technology platform via an API that connects consumers to financial institutions and financial service providers. The Company’s API platform functions as a powerful definitive search, comparison and ad recommendation engine that provides consumers with personalized financial solution options and matches the demand and supply of financial 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 are not limited to cost per funded loan, cost per approved credit card, cost per click or cost per savings accounts, or revenue recognition, provision forshare based on successful lead conversion. The transaction losses, accounting for business combinations, determinationfees 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 the Company expects to be entitled are deemed variable consideration because the loan volume over the contractual term is not known. Because the lead generating service performance obligation is a series of useful lives of propertydistinct services, the Company applies the variable consideration exception and equipment, valuationallocates the variable consideration to the period in which the fees are earned, 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. recognizes revenue over time.
The Company evaluates its estimatesgenerates advertising fees by displaying ads on the Company’s mobile application and assumptionsby 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 an ongoing basis. Actual results could differthe 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 those estimatescontract 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 such differences may be material to the condensed consolidated financial.content production services are typically short-term in duration.
Allowance for Losses on Receivables—An allowance for losses on financeconsumer receivables is established to provide for probable losses incurred in the Company’s financeconsumer receivables at the balance sheet date and is established through a provision for loan losses.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 financeconsumer receivables portfolio, including trends in delinquency and charge-offs and current economic conditions that may affect the borrower’sconsumer’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 to loans,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 to advancesfee 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 membershipservice and feessubscription fee receivables is established to provide probable losses incurred in the Company’s membershipservice 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. Prior to the period ended June 30, 2021, the allowance related to these receivables had not been material to the consolidated financial statements.
Warrant Liability—Receivables from enterprise services have a low rate of default, and as such the related allowance is not material. The Company does notmonitors 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.
Intangible Assets—The Company’s intangible assets are made up of internal use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.software and acquired proprietary technology, customer relationships and trade names. The Company evaluates all financial instruments,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 to seven years depending on the nature of the software development. Costs related to preliminary project activities and post-implementation operation activities, including issuedtraining and maintenance, are expensed as incurred.
Stock-Based Compensation—The Company accounts for the restricted stock purchase warrants,units (“RSUs”) and performance share units (“PSUs”) granted to determine if such instrumentsemployees 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. Some PSUs have been granted with a performance condition based on the Company’s operating performance. These performance conditions are derivatives or contain features that qualifyassessed each reporting period and expense related to these PSUs is adjusted by a factor consistent with the expected performance as embedded derivatives, pursuant to ASC 480 and ASC 815. of the reporting date.
The Company accounts for its outstanding Public Warrantsstock options granted to employees or directors as stock-based compensation expense based on their grant date fair value. The Company uses a Black-Scholes option valuation model to measure the fair value of options at the date of grant.
Some PSU awards are issued with a market condition which are valued on the grant date utilizing a Monte Carlo simulation model.
The Black-Scholes option pricing model and Private Placement Warrants (collectively, the “Warrants”)Monte Carlo simulation model require estimates of future stock price volatility, expected term, risk-free interest rate and forfeitures.
The fair value of all awards is recognized as an expense over the requisite service period in accordance with the guidance contained in Accounting Standards Codification 815-40, “DerivativesCompany’s consolidated statement of operations. Forfeitures are accounted for as they are incurred.
Valuation of consideration transferred related to mergers and Hedging acquisitions— Contracts on an Entity’s Own Equity” (“ASC 815-40”) andThe Company determined that the Warrantscontingent consideration related to the earnout provision, the Make-Whole Provision and preferred share equivalents in connection with the MALKA Acquisition and Even Acquisition (each as defined herein) do not meet the criteria for equity treatment thereunder. As such, each Warrant must be recorded as a liability and is subject to re-measurement at each balance sheet date and any change in fair value is recognized in the Company’s statements of operations.
treatment. 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. For issued or modified warrantsprovisions that do not meet all the criteria for equity classification,treatment, the warrants arecontingent consideration is 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 warrantscontingent consideration are recognized as a non-cash gain or loss on the statements of operations. As such, the MALKA and Even Financial 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 Private Placement WarrantsMALKA and Even Financial contingent consideration was estimated using a Black-Scholes Option PricingMonte Carlo Simulation Model.
The Public Warrants meet the conditions for equity classification in accordance with ASC 815-40.
Recently Adopted Accounting Pronouncements—The Company determined that the consideration related to the shares of MoneyLion’s Series A Redeemable Convertible Preferred Stock, par value $0.0001 per share (the “Series A Redeemable Convertible Preferred Stock”), transferred as part of the consideration for the Even 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.
In August 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 FASB issuedCompany recognizes 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 collateralized basis, adjusted for differences 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 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. Leases with an initial term of 12 months or less are not recognized on the Company’s balance sheet. The Company separates lease and non-lease components for its real estate leases.
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. 2018-15, Intangibles – Goodwill2016-02, the Company recognized an aggregate lease liability 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 forright-of-use asset of $3,551, calculated based on the deferral of implementation costs for cloud computing arrangements and expensing those costs over the termpresent value of the cloud services arrangement.remaining minimum lease payments for qualifying leases as of January 1, 2022. The new guidance is effective for fiscal yearscumulative-effect adjustment recognized to the beginning after December 15, 2020 and interim periods in 2021.balance of retained earnings was not material. The adoption of the ASUnew guidance did not have an impact on the Company’s condensedunaudited consolidated financial statements.interim statements of operations or cash flows.
In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based PaymentRecently Issued 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 condensed consolidated financial statements.
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”).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.
Recently Issued Accounting Pronouncements Not Yet Adopted—
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 condensed 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, 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 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 condensed 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 inbelieves the process of evaluating theadoption impact that the adoption of ASU 2019-12 will have on its condensednot be material to the 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 LIBORLondon Interbank Offered Rate (“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 is in processhas no significant contracts based on LIBOR as of evaluatingMarch 31, 2022. As such, the impact thatCompany currently does not intend to elect the adoption of ASU 2020-04 will have on its condensed consolidated financial statementsoptional expedients and related disclosures.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 condensed consolidated financial statements and related disclosures.
3.4. 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 “Transactions”“Business Combination Transactions”). On September 22, 2021, the parties to the Merger Agreement consummated the 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 (the “Effective Time”), all issued and outstanding shares of Legacy MoneyLion preferred stock (the “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 Effective Time:
In connection with the 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 the Trust Account (as defined in the Proxy Statement/Prospectus) 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 theBusiness Combination Transactions resulted in approximately $301,062 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 the Sponsor and 9,112,013 shares held by Fusion public stockholders).
Upon consummation of the Transactions:
As of the Closing Date and following the completion of the sale of 25,000,000 shares of MoneyLion 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 will be disclosed in the registrant’s periodic reports filed with the SEC from here forward. The Business Combination will have a significant impact on the MoneyLion’s future reported financial position and results as a consequence of the reverse recapitalization. The most significant change in MoneyLion’s future reported financial position and results is an estimated net increase in cash (as compared to the MoneyLion’s consolidated balance sheet at December 31, 2020) of approximately $301,062. 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 September 30, 2021, $11,136 in transaction costs remained unpaid.
The transaction closed on September 22, 2021, and on the following day the Company’s Class A Common Stock and Public Warrants (as defined herein) began trading on the New York Stock Exchange (“NYSE”)NYSE under the symbols “ML” and “ML WS”, respectively, for tradingrespectively. See Part II, Item 8 “Business Combination” in the public market.Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021 further discussion of these matters.
4.5. CONSUMER 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 financeloan 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. MembershipSubscription receivables represent the amounts billed to customers for membership subscription services. The credit quality and future repayment of financeconsumer receivables isare 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 financeconsumer receivables, the Company takes into account the composition of the outstanding financeconsumer receivables, charge-off rates to date and the forecasted principal loss rates. Please see theThe tables below forshow consumer receivables balances as of March 31, 2022 and December 31, 2021 and the finance receivableconsumer receivables activity, charge-off rates and aging by product for the ninethree months ended September 30, 2021March 31, 2022 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.2021.
Receivables consisted of the following:
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Finance receivables | $ | 116,028 | $ | 62,758 | ||||
| Fees receivable | 7,338 | 2,913 | ||||||
| Membership receivables | 3,283 | 1,885 | ||||||
| Deferred loan origination costs | 1,528 | 615 | ||||||
| Accrued interest receivable | 1,104 | 623 | ||||||
| Receivables, before allowance for loan losses | $ | 129,281 | $ | 68,794 | ||||
FinanceConsumer receivables consisted of the following:
| September 30, 2021 | December 31, 2020 | |||||||
| Loan receivables | $ | 69,571 | $ | 43,870 | ||||
| Instacash receivables | 46,457 | 18,888 | ||||||
| Finance receivables, before allowance for loan losses | $ | 116,028 | $ | 62,758 | ||||
Loans receivables consisted of the following:
| March 31, | December 31, | |||||||||||||||
| September 30, 2021 | December 31, 2020 | 2022 | 2021 | |||||||||||||
| Unsecured personal loan receivables | $ | - | $ | 66 | $ | - | $ | 1 | ||||||||
| Secured personal loan receivables | 69,571 | 43,804 | 71,610 | 77,491 | ||||||||||||
| Loan receivables | $ | 69,571 | $ | 43,870 | 71,610 | 77,492 | ||||||||||
| Instacash receivables | 66,951 | 62,783 | ||||||||||||||
| Finance receivables | 138,561 | 140,275 | ||||||||||||||
| Fees receivable | 9,567 | 8,366 | ||||||||||||||
| Membership receivables | 3,408 | 3,099 | ||||||||||||||
| Deferred loan origination costs | 992 | 929 | ||||||||||||||
| Accrued interest receivable | 1,106 | 1,072 | ||||||||||||||
| Receivables, before allowance for credit losses | $ | 153,634 | $ | 153,741 | ||||||||||||
Changes in the allowance for loan losses on consumer receivables were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2022 | 2021 | |||||||||||||||||||
| Beginning balance | $ | 14,701 | $ | 5,259 | $ | 9,127 | $ | 6,613 | $ | 22,323 | $ | 9,127 | ||||||||||||
| Provision for loss on receivables | 15,238 | 10,456 | 36,644 | 14,587 | ||||||||||||||||||||
| Provision for credit losses on receivables | 23,044 | 5,708 | ||||||||||||||||||||||
| Receivables charged off | (20,979 | ) | (13,308 | ) | (51,819 | ) | (30,517 | ) | (37,284 | ) | (14,436 | ) | ||||||||||||
| Recoveries | 7,831 | 6,263 | 22,839 | 17,987 | 14,208 | 9,828 | ||||||||||||||||||
| Ending balance | $ | 16,791 | $ | 8,670 | $ | 16,791 | $ | 8,670 | $ | 22,291 | $ | 10,227 | ||||||||||||
Changes in the allowance for losses on finance receivables were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2022 | 2021 | |||||||||||||||||||
| Beginning balance | $ | 14,223 | $ | 5,259 | $ | 9,127 | $ | 6,613 | $ | 21,625 | $ | 9,127 | ||||||||||||
| Provision for loss on receivables | 12,542 | 6,622 | 30,877 | 9,242 | ||||||||||||||||||||
| Provision for credit losses on receivables | 19,502 | 4,859 | ||||||||||||||||||||||
| Finance receivables charged off | (17,851 | ) | (8,346 | ) | (44,996 | ) | (22,836 | ) | (32,958 | ) | (12,962 | ) | ||||||||||||
| Recoveries | 7,261 | 5,135 | 21,167 | 15,651 | 13,269 | 9,203 | ||||||||||||||||||
| Ending balance | $ | 16,175 | $ | 8,670 | $ | 16,175 | $ | 8,670 | $ | 21,438 | $ | 10,227 | ||||||||||||
Changes in allowance for losses on membership receivables were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Beginning balance | $ | 197 | $ | - | $ | - | $ | - | ||||||||
| Provision for loss on receivables | 1,025 | 3,355 | 2,204 | 4,713 | ||||||||||||
| Membership receivables charged off | (1,089 | ) | (4,320 | ) | (2,576 | ) | (6,791 | ) | ||||||||
| Recoveries | 137 | 965 | 642 | 2,078 | ||||||||||||
| Ending balance | $ | 270 | $ | - | $ | 270 | $ | - | ||||||||
Changes inthe allowance for losses on fees receivable were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2022 | 2021 | |||||||||||||||||||
| Beginning balance | $ | 281 | $ | - | $ | - | $ | - | $ | 420 | $ | - | ||||||||||||
| Provision for loss on receivables | 1,671 | 479 | 3,563 | 632 | ||||||||||||||||||||
| Provision for credit losses on receivables | 2,001 | 615 | ||||||||||||||||||||||
| Fees receivable charged off | (2,039 | ) | (642 | ) | (4,247 | ) | (890 | ) | (2,708 | ) | (948 | ) | ||||||||||||
| Recoveries | 433 | 163 | 1,030 | 258 | 779 | 333 | ||||||||||||||||||
| Ending balance | $ | 346 | $ | - | $ | 346 | $ | - | $ | 492 | $ | - | ||||||||||||
Changes in the allowance for losses on subscription receivables were as follows:
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Beginning balance | $ | 278 | $ | - | ||||
| Provision for credit losses on receivables | 1,541 | 234 | ||||||
| Membership receivables charged off | (1,618 | ) | (526 | ) | ||||
| Recoveries | 160 | 292 | ||||||
| Ending balance | $ | 361 | $ | - | ||||
As of September 30, 2021, theThe following is an assessment of the credit qualityrepayment performance of finance receivablesloans as of March 31, 2022 and December 31, 2021 and presents the contractual delinquency of the financeloans receivable portfolio:
| September 30, 2021 | March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||
| Current | $ | 102,091 | 88.0 | % | $ | 60,642 | 84.7 | % | $ | 66,514 | 85.8 | % | ||||||||||||
| Delinquency: | ||||||||||||||||||||||||
| 31 to 60 days | 9,522 | 8.2 | % | 5,887 | 8.2 | % | 6,577 | 8.5 | % | |||||||||||||||
| 61 to 90 days | 4,415 | 3.8 | % | 5,081 | 7.1 | % | 4,401 | 5.7 | % | |||||||||||||||
| Total delinquency | 13,937 | 12.0 | % | 10,968 | 15.3 | % | 10,978 | 14.2 | % | |||||||||||||||
| Finance receivables before allowance for loan losses | $ | 116,028 | 100.0 | % | ||||||||||||||||||||
| Loan receivables before allowance for loan losses | $ | 71,610 | 100.0 | % | $ | 77,492 | 100.0 | % | ||||||||||||||||
As of December 31, 2020, theThe following is an assessment of the credit qualityrepayment performance of financeInstacash receivables as of March 31, 2022 and December 31, 2021 and presents the contractual delinquency of the finance receivableInstacash receivables portfolio:
| December 31, 2020 | March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||
| Current | $ | 54,247 | 86.4 | % | $ | 60,364 | 90.2 | % | $ | 55,963 | 89.1 | % | ||||||||||||
| Delinquency: | ||||||||||||||||||||||||
| 31 to 60 days | 6,148 | 9.8 | % | 6,587 | 9.8 | % | 6,820 | 10.9 | % | |||||||||||||||
| 61 to 90 days | 2,363 | 3.8 | % | - | 0.0 | % | - | 0.0 | % | |||||||||||||||
| Total delinquency | 8,511 | 13.6 | % | 6,587 | 9.8 | % | 6,820 | 10.9 | % | |||||||||||||||
| Finance receivables before allowance for loan losses | $ | 62,758 | 100.0 | % | ||||||||||||||||||||
| Instacash receivables before allowance for loan losses | $ | 66,951 | 100.0 | % | $ | 62,783 | 100.0 | % | ||||||||||||||||
As of September 30, 2021, theThe following is an assessment of the credit qualityrepayment performance of loansfees receivable as of March 31, 2022 and December 31, 2021 and presents the contractual delinquency of the financefees receivable loans portfolio:
| September 30, 2021 | March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||
| Current | $ | 59,573 | 85.6 | % | $ | 7,725 | 80.7 | % | $ | 6,682 | 79.9 | % | ||||||||||||
| Delinquency: | ||||||||||||||||||||||||
| 31 to 60 days | 5,583 | 8.0 | % | 1,842 | 19.3 | % | 1,684 | 20.1 | % | |||||||||||||||
| 61 to 90 days | 4,415 | 6.4 | % | - | 0.0 | % | - | 0.0 | % | |||||||||||||||
| Total delinquency | 9,998 | 14.4 | % | 1,842 | 19.3 | % | 1,684 | 20.1 | % | |||||||||||||||
| Loan receivables before allowance for loan losses | $ | 69,571 | 100.0 | % | ||||||||||||||||||||
| Fees receivable before allowance for loan losses | $ | 9,567 | 100.0 | % | $ | 8,366 | 100.0 | % | ||||||||||||||||
The following is an assessment of the repayment performance of subscription receivables as of March 31, 2022 and December 31, 2021 and presents the contractual delinquency of the subscription receivables portfolio:
| March 31, 2022 | December 31, 2021 | |||||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||||
| Current | $ | 2,486 | 72.9 | % | $ | 2,227 | 71.8 | % | ||||||||
| Delinquency: | ||||||||||||||||
| 31 to 60 days | 466 | 13.7 | % | 514 | 16.6 | % | ||||||||||
| 61 to 90 days | 456 | 13.4 | % | 358 | 11.6 | % | ||||||||||
| Total delinquency | 922 | 27.1 | % | 872 | 28.2 | % | ||||||||||
| Membership receivables before allowance for loan losses | $ | 3,408 | 100.0 | % | $ | 3,099 | 100.0 | % | ||||||||
As of December 31, 2020, the following is an assessment of the credit quality of loans and presents the contractual delinquency of the finance receivable loan portfolio:
| December 31, 2020 | ||||||||
| Amount | Percent | |||||||
| Current | $ | 38,133 | 86.9 | % | ||||
| Delinquency: | ||||||||
| 31 to 60 days | 3,374 | 7.7 | % | |||||
| 61 to 90 days | 2,363 | 5.4 | % | |||||
| Total delinquency | 5,737 | 13.1 | % | |||||
| Loan receivables before allowance for loan losses | $ | 43,870 | 100.0 | % | ||||
As of September 30, 2021, the following is an assessment of the credit quality of Instacash and presents the contractual delinquency of the finance receivable Instacash portfolio:
| September 30, 2021 | ||||||||
| Amount | Percent | |||||||
| Current | $ | 42,518 | 91.5 | % | ||||
| Delinquency: | ||||||||
| 31 to 60 days | 3,939 | 8.5 | % | |||||
| 61 to 90 days | - | 0.0 | % | |||||
| Total delinquency | 3,939 | 8.5 | % | |||||
| Instacash receivables before allowance for loan losses | $ | 46,457 | 100.0 | % | ||||
As of December 31, 2020, the following is an assessment of the credit quality of Instacash and presents the contractual delinquency of the finance receivable Instacash portfolio:
| December 31, 2020 | ||||||||
| Amount | Percent | |||||||
| Current | $ | 16,114 | 85.3 | % | ||||
| Delinquency: | ||||||||
| 31 to 60 days | 2,774 | 14.7 | % | |||||
| 61 to 90 days | - | 0.0 | % | |||||
| Total delinquency | 2,774 | 14.7 | % | |||||
| Instacash receivables before allowance for loan losses | $ | 18,888 | 100.0 | % | ||||
As of September 30, 2021, the following is an assessment of the credit quality of membership receivables and presents the contractual delinquency of the membership receivable portfolio:
| September 30, 2021 | ||||||||
| Amount | Percent | |||||||
| Current | $ | 2,398 | 73.0 | % | ||||
| Delinquency: | ||||||||
| 31 to 60 days | 461 | 14.0 | % | |||||
| 61 to 90 days | 424 | 13.0 | % | |||||
| Total delinquency | 885 | 27.0 | % | |||||
| Membership receivables before allowance for loan losses | $ | 3,283 | 100.0 | % | ||||
As of December 31, 2020, the following table shows the aging of the membership receivable balance:
| December 31, 2020 | ||||||||
| Amount | Percent | |||||||
| Current | $ | 1586 | 84.1 | % | ||||
| Delinquency: | ||||||||
| 31 to 60 days | 168 | 9.0 | % | |||||
| 61 to 90 days | 131 | 6.9 | % | |||||
| Total delinquency | 299 | 15.9 | % | |||||
| Membership receivables before allowance for loan losses | $ | 1,885 | 100.0 | % | ||||
As of September 30, 2021, the following is an assessment of the credit quality of fees receivable and presents the contractual delinquency of the fees receivable portfolio:
| September 30, 2021 | ||||||||
| Amount | Percent | |||||||
| Current | $ | 7,025 | 95.7 | % | ||||
| Delinquency: | ||||||||
| 31 to 60 days | 285 | 3.9 | % | |||||
| 61 to 90 days | 28 | 0.4 | % | |||||
| Total delinquency | 313 | 4.3 | % | |||||
| Fees receivable before allowance for loan losses | $ | 7,338 | 100.0 | % | ||||
As of December 31, 2020, the following is an assessment of the credit quality of fees receivable and presents the contractual delinquency of the fees receivable portfolio:
| December 31, 2020 | ||||||||
| Amount | Percent | |||||||
| Current | $ | 2,435 | 83.6 | % | ||||
| Delinquency: | ||||||||
| 31 to 60 days | 478 | 16.4 | % | |||||
| 61 to 90 days | - | 0.0 | % | |||||
| Total delinquency | 478 | 16.4 | % | |||||
| Fees receivables before allowance for loan losses | $ | 2,913 | 100.0 | % | ||||
5.6. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
| September 30, | December 31, | March 31, | December 31, | |||||||||||||
| 2021 | 2020 | 2022 | 2021 | |||||||||||||
| Leasehold improvements | $ | 464 | $ | 464 | $ | 486 | $ | 545 | ||||||||
| Furniture and fixtures | 448 | 448 | 612 | 573 | ||||||||||||
| Computers and equipment | 1,058 | 796 | 2,230 | 2,209 | ||||||||||||
| Construction in process | 33 | - | ||||||||||||||
| 1,970 | 1,708 | 3,361 | 3,327 | |||||||||||||
| Less: accumulated depreciation | (1,382 | ) | (1,206 | ) | (1,221 | ) | (1,526 | ) | ||||||||
| Furniture and equipment, net | $ | 588 | $ | 502 | $ | 2,140 | $ | 1,801 | ||||||||
Total depreciation expense related to property and equipment was $199$230 and $249 for the nine months ended September 30, 2021 and 2020, respectively, and $76 and $74$63 for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively.
7. INTANGIBLE ASSETS
6. INTANGIBLE ASSETSGoodwill as of March 31, 2022 and December 31, 2021 was $161,678 and $52,541, respectively. The increase relates to goodwill acquired from the acquisition of Even Financial. See Note 18, “Mergers and Acquisitions,” for more information regarding goodwill and other intangible assets acquired from Even Financial.
Intangible assets consisted of the following:
| September 30, | December 31, | March 31, | December 31, | |||||||||||||||
| 2021 | 2020 | Useful Life | 2022 | 2021 | ||||||||||||||
| Capitalized internal-use software | $ | 5,444 | $ | 5,374 | ||||||||||||||
| Proprietary technology | 6,130 | 6,130 | ||||||||||||||||
| Proprietary technology and capitalized internal-use software | 3 - 7 years | $ | 34,791 | $ | 11,623 | |||||||||||||
| Work in process | 1,481 | 1,481 | 2,291 | 1,481 | ||||||||||||||
| Customer relationships | 10 - 15 years | 159,820 | 5,960 | |||||||||||||||
| Trade names | 10 - 15 years | 24,980 | 11,820 | |||||||||||||||
| Less: accumulated amortization | (5,014 | ) | (3,710 | ) | (8,934 | ) | (5,760 | ) | ||||||||||
| Intangible assets, net | $ | 8,041 | $ | 9,275 | $ | 212,948 | $ | 25,124 | ||||||||||
For the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, total amortization expense was $1,304$3,191 and $562, respectively. For the three months ended September 30, 2021 and 2020, total amortization expense was $410 and $212,$451, respectively.
The following table summarizes estimated future amortization expense of intangible assets placed in service at September 30, 2021March 31, 2022 for the years ending:
| Remainder of 2022 | $ | 16,951 | ||
| 2023 | 22,219 | |||
| 2024 | 22,087 | |||
| 2025 | 22,087 | |||
| 2026 | 22,087 | |||
| Thereafter | 105,226 | |||
| $ | 210,657 |
| 2021 | $ | 454 | ||
| 2022 | 1,347 | |||
| 2023 | 1,012 | |||
| 2024 | 876 | |||
| 2025 | 876 | |||
| Thereafter | 1,995 | |||
| $ | 6,560 |
7.8. OTHER ASSETS
Other assets consisted of the following:
| September 30, | December 31, | March 31, | December 31, | |||||||||||||
| 2021 | 2020 | 2022 | 2021 | |||||||||||||
| Receivable from payment processor - Debit card collections | $ | 11,679 | $ | 5,600 | ||||||||||||
| Receivable from payment processor - Other | 1,363 | 1,936 | ||||||||||||||
| Receivable from payment processors | $ | 18,309 | $ | 18,576 | ||||||||||||
| Prepaid expenses | 10,107 | 1,591 | 8,370 | 8,836 | ||||||||||||
| Operating lease right-of-use assets | 8,722 | - | ||||||||||||||
| Other | 3,764 | 2,575 | 2,531 | 1,016 | ||||||||||||
| Total other assets | $ | 26,913 | $ | 11,702 | $ | 37,932 | $ | 28,428 | ||||||||
8.9. VARIABLE INTEREST ENTITIES
As of September 30, 2021 and December 31, 2020, theThe following table summarizes the VIEs’ assets and liabilities included in MoneyLion Inc.’sthe Company’s consolidated financial statements, after intercompany eliminations:eliminations, as of March 31, 2022 and December 31, 2021:
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Assets: | ||||||||
| Restricted cash | $ | 61,888 | $ | 39,396 | ||||
| Consumer receivables | 152,491 | 109,877 | ||||||
| Allowance for losses on consumer receivables | (23,596 | ) | (17,081 | ) | ||||
| Consumer receivables, net | 128,895 | 92,796 | ||||||
| Total assets | $ | 190,783 | $ | 132,192 | ||||
| Liabilities: | ||||||||
| Other debt | $ | 152,625 | $ | 143,000 | ||||
| Total liabilities | $ | 152,625 | $ | 143,000 | ||||
Beginning in the fourth quarter of 2021, the Company’s primary source of funding for originated receivables became 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 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 loan and Instacash receivables with a net asset balance that equals or exceeds 90% of the aggregate principal amounts of the loans financed through the SPV Credit Facilities. Proceeds received from the SPV Credit Facilities can only be used to purchase loan and Instacash receivables. The payments and interest, as applicable, received from the loan 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. “Debt” for discussion of the ROAR 1 SPV Credit Facility and the ROAR 2 SPV Credit Facility.
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Assets: | ||||||||
| Cash | $ | 2,539 | $ | 390 | ||||
| Finance receivable | 114,811 | 60,845 | ||||||
| Allowance for losses on finance receivable | (15,505 | ) | (8,581 | ) | ||||
| Finance receivables, net | 99,306 | 52,264 | ||||||
| Total assets | $ | 101,845 | $ | 52,654 | ||||
9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES10. DEBT
Accounts payableThe Company’s debt as of March 31, 2022 and accrued liabilities consistedDecember 31, 2021 is presented below:
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| First Lien Loan | $ | - | $ | 24,028 | ||||
| Second Lien Loan | - | 20,000 | ||||||
| Monroe Term Loans | 90,000 | - | ||||||
| Unamortized discounts and debt issuance costs | (1,710 | ) | (437 | ) | ||||
| Total secured loans | $ | 88,290 | $ | 43,591 | ||||
| ROAR 1 SPV Credit Facility | $ | 83,000 | $ | 78,000 | ||||
| ROAR 2 SPV Credit Facility | 73,000 | 68,000 | ||||||
| Unamortized discounts and debt issuance costs | (3,375 | ) | (3,000 | ) | ||||
| Total other debt | $ | 152,625 | $ | 143,000 | ||||
For more information regarding debt instruments outstanding as of December 31, 2021, see Part II, Item 8 “Debt” in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021.
Monroe Term Loans—In March 2022, the Company entered into a credit agreement (the “Monroe Credit Agreement”) with certain financial institutions from time to time party thereto, as lenders, and Monroe Capital Management Advisors, LLC, as administrative agent and lead arranger (“Monroe Capital”). The Monroe Credit Agreement provides for the following:
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Accounts payable and accrued expenses | $ | 37,770 | $ | 20,365 | ||||
| Accrued personnel expenses | 737 | 541 | ||||||
| Interest payable | 197 | 62 | ||||||
| Accrued other | 7,430 | - | ||||||
| Total accounts payable and accrued liabilities | $ | 46,134 | $ | 20,968 | ||||
| ● | $70,000 aggregate principal amount of term loans (the “Term A-1 Loans”), available to be drawn at the closing date; |
| ● | $20,000 aggregate principal amount of term loans (the “Term A-2 Loans”), as described further below; |
| ● | $20,000 aggregate principal amount of delayed draw term loans (the “Term B Loans”), which are available to be drawn for a period of 18-months following the closing date, subject to certain conditions set forth in the Monroe Credit Agreement; and |
| ● | subject to certain conditions set forth in the Monroe Credit Agreement, the ability to incur incremental commitments of up to $60,000 million aggregate principal amount of Term A-1 Loans or Term B Loans (the “Incremental Term Loans”; the Term A-1 Loans, the Term A-2 Loans, the Term B Loans and, if applicable, the Incremental Term Loans, collectively, the “Monroe Term Loans”). |
As of September 30, 2021, accounts payable and accrued expenses included approximately $11,136 related to transaction costs incurred but not yet paid, and accrued other included $7,430 related to MoneyLion’s D&O insurance.
10. DEBT
Second Lien Loan — In April 2020,connection with the foregoing, 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. The Second Lien Loan bears interest at the greater of (a) 12%, and (b) a fluctuating rate of interest per annum equal to the Wall Street Journal Prime Rate plus 5.75%, not to exceed 15%. Interest only is payable until April 30, 2022, and thereafter outstanding principal will be repaidborrowed Term A-1 Loans in twelve equal installments through the facility maturity date of May 1, 2023. The Second Lien Loan is 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 IIA and all of the related SPVs. Under the terms of the Loan and Security Agreement the Company is 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, 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$70.0 million. Proceeds of the Term A-1 Loans were used (a) to repay in full the approximately $24.0 million aggregate principal amount outstanding under the Company’s existing first lien loan remained the same. Upon the consummationfacility with Silicon Valley Bank, as lender (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 Business Combination,Company and its subsidiaries. With respect to the Company repaidTerm A-2 Loans, pursuant to the original $5,000Monroe Credit Agreement, the lenders thereunder were deemed to have rolled over their $20.0 million aggregate principal balance owed to MLi Subdebt Facility 1 LLC, togetheramount of term loans outstanding under the Borrower’s existing second lien loan with accrued interest and fees. As of September 30, 2021, the $20,000 principal balance owed to affiliates of Monroe Capital Management Advisors, LLC remains outstanding.(the “Second Lien Loan”) in the same aggregate principal amount as their respective commitments with respect to the Term A-2 Loans, following which all obligations in respect of the Second Lien Loan were deemed to be satisfied and paid in full.
Subordinated Convertible Notes— In December 2020,The Term A-1 Loans and Term B Loans bear annual interest, payable monthly, at a floating rate measured by reference to, at the Company’s option, either (a) a base rate then in effect (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 floor of 1.00%) 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 Monroe Credit Agreement) or (b) an adjusted one-month or three-month SOFR (subject to a floor of 1.00%) 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 Term A-2 Loans bear 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%. The interest rate as of March 31, 2022 on the Term A-1 Loans and Term A-2 Loans was 9.50% and 12.00%, respectively.
The Term A-1 Loans and the Term B Loans mature on March 24, 2026, and the Term A-2 Loans mature on May 1, 2023. The Monroe Term Loans may be prepaid at the Company’s option at any time, in minimum principal amounts, and are subject to mandatory prepayment in an amount equal to 100% of the 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 soldis required to pay a third-party lender $10,000premium ranging from 0.00% to 3.00% of 3% Subordinated Convertible Notes maturingthe principal amount of such prepayment depending on July 31, 2021, the proceedsMonroe Term Loans repaid and the date of which were usedthe 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 conduct its business.and including the date that is 12 months after the closing date.
In January 2021, the Company soldThe Monroe Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants, including financial covenants with respect to third-party lenders $36,750 of 3% subordinated convertible notes as part of the same series of notes issued in December 2020 maturing on July 31, 2021 (collectively, the “Subordinated Convertible Notes”), the proceeds of which were used to conduct its business. Upon maturity or certain events, the Subordinated Convertible Notes could have been converted into preferred shares at conversion pricesminimum adjusted revenue, EBITDA, liquidity and unrestricted cash (all as defined in the Subordinated Convertible Notes. In July 2021,Monroe Credit Agreement). The negative covenants, among other things, limit or restrict the Subordinated Convertible Note agreements were amended to extendability of the maturity date to September 30, 2021.“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.
On September 22, 2021,The obligations under the Business Combination was completedMonroe Credit Agreement are guaranteed by MoneyLion Inc., as parent, and the convertible notes were convertedeach 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 Monroe Credit Agreement is entered into by MoneyLion Technologies Inc. The Monroe Credit Agreement is secured with a total of 10,068,133 sharesperfected, first-priority security interest in substantially all tangible and intangible assets of MoneyLion Class A Common Stock. PriorTechnologies Inc. and each Guarantor, subject to the conversion, the carrying value of the convertible notes was $100,311.certain customary exceptions.
The settlement of the First Lien Loan was accounted for as a debt extinguishment and the Second Lien Loan was accounted for as a debt modification resulting in total expense recognized of $730 comprised of settlement fees and the write off of unamortized deferred financing costs.
Other Debt—11. LEASES
In August 2016,All long-term leases identified by the Company entered into a $50,000 credit and security agreement (the “2016 Credit Agreement”) with a lenderare classified as operating leases. Lease expenses related to long-term leases were $620 for the funding of finance receivables.three months ended March 31, 2022. Short-term lease expense, variable lease expense and sublease income were not material for the three months ended March 31, 2022. The 2016 Credit Agreement allowed for increasesright-of-use assets and lease liabilities were $8,722 and $8,977, respectively, and were included in other assets and other liabilities, respectively, on the maximum borrowings under the agreement up to $500,000, bore interest at a rate as defined in the 2016 Credit Agreement and matures in February 2023. The 2016 Credit Agreement also required the Company to adhere to certain financial covenants along with certain other financial reporting requirements. The Company did not meet certain of these covenant requirements as of DecemberMarch 31, 2019, for which it received a waiver from the lender. The 2016 Credit Agreement was terminated upon the Closing of the Business Combination by mutual agreement of the Company and the lender; there was no outstanding2022 consolidated balance under the 2016 Credit Agreement at the time of termination.sheet.
In April 2020,Maturities of the Company’s long-term operating lease liabilities were as follows:
| March 31, 2022 | ||||
| Remainder of 2022 | $ | 1,733 | ||
| 2023 | 2,870 | |||
| 2024 | 2,683 | |||
| 2025 | 2,496 | |||
| 2026 | 1,268 | |||
| Thereafter | 1,672 | |||
| Total lease payments | 12,722 | |||
| Less: imputed interest | 3,745 | |||
| Lease liabilities | $ | 8,977 | ||
| Weighted-average remaining lease term (years) | 4.8 | |||
| Weighted-average discount rate | 14.3 | % | ||
12. INCOME TAXES (As Restated)
As of March 31, 2022 and December 31, 2021, the Company borrowed $3,207 frommaintained a bank under the SBA’s Paycheck Protection Program introduced as partvaluation allowance 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$66,049 and $83,153, respectively. The valuation allowance was recorded due to the entire outstanding balancefact that the Company has incurred operating losses to date.
Realization of deferred tax assets is dependent upon future earnings, if any, the PPP Loantiming and amount of $3,207 which resulted inare uncertain. Accordingly, the net deferred tax assets have been fully offset by a gain which is included as a component of other operating (income) expenses in the condensed consolidated statements of operationsvaluation allowance. The valuation allowance decreased by approximately $17,100 during the ninethree months ended September 30,March 31, 2022 and increased by approximately $22,800 during the three months ended March 31, 2021.
In September 2021, ROAR 1 SPV Finance LLC, an indirect wholly owned subsidiaryThe Company’s financial statements included a full valuation allowance against net deferred tax assets before the acquisition of Even Financial. After considering the Even Acquisition, the projected consolidated results, and the available net deferred tax liability from Even Financial of approximately $28,400, the Company was able to release part of the Company (the “ROAR 1 SPV Borrower”), entered intovaluation allowance due to the change in the overall net deferred tax asset. While this adjustment is a $100,000 credit agreement (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, bears interest at a rate of 12.5% and matures in March 2025, unless it is extended to March 2026. Under the termsresult of the ROAR 1 SPV Credit Facility,Even Acquisition, ASC 805 requires that the ROAR 1 SPV Borrower is subjectbenefits be recognized in income or equity, as applicable, and not as a component of acquisition accounting. The partially offsetting increase to certain covenants. Asthe valuation allowance of September 30, 2021, thereapproximately $11,300 was no outstanding principal balance.in relation to normal business operations.
11. INCOME TAXESTotal U.S. federal and state operating loss carryforwards as of March 31, 2022 and December 31, 2021 were approximately $703,800 and $517,700, respectively. U.S. federal net operating loss carryforwards begin to expire in 2033, and state operating loss carryforwards begin to expire in 2027. U.S. federal net operating losses of approximately $341,300 carry forward indefinitely.
As of March 31, 2022, the Company’s federal research and development credit carryforwards for income tax purposes were approximately $1,200. If not used, the current carryforwards will expire beginning in 2034.
The Company is currently performing an analysishas completed a review to determine 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 occurred over time and also relatedhave occurred. The study determined that there will be no limit after December 31, 2025. Due to the Business Combination. Oncenet operating loss carryovers, the analysisstatute of limitations remains open for federal and state returns.
13. COMMON AND PREFERRED STOCK (As Restated)
MoneyLion Class A Common Stock—Each holder of the shares of MoneyLion Class A Common Stock is complete, any limitation that is triggeredentitled to one vote for each share of MoneyLion Class A Common Stock held of record by such holder on all matters on which stockholders generally are entitled to vote, as provide by the ownership changes would resultCompany’s Certificate of Incorporation (as amended from time to time). The holders of the shares of MoneyLion Class A Common Stock do not have cumulative voting rights in an adjustmentthe election of directors. Generally, all matters to be voted on by the valuation allowance on deferred tax assets.holders of MoneyLion 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 Bylaws (as amended from time to time).
Subject to preferences that may be applicable to any outstanding preferred stock, the holders of shares of MoneyLion Class A Common Stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by MoneyLion’s board of directors out of funds legally available therefor.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of MoneyLion’s affairs, the holders of the shares of MoneyLion Class A Common Stock are entitled to share ratably in all assets remaining after payment 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 MoneyLion Class A Common Stock, then outstanding, if any.
The Company is currently performing an analysisholders of shares of MoneyLion Class A Common Stock have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to determine whether a portionthe shares of MoneyLion Class A Common Stock. The rights, preferences and privileges of holders of shares of MoneyLion Class A Common Stock will be subject to those of the transaction costs paid by Fusion orholders of any shares of the preferred stock MoneyLion related tomay issue in the Business Combination can be deducted for tax purposes. Once the analysis is complete, transaction costs that are deductible for tax purposes (if any) will be reflected as a deferred tax asset and there will be a corresponding increase to the valuation allowance on deferred tax assets.
12. COMMON STOCKfuture.
Following the ClosingSeries A Redeemable Convertible Preferred Stock—Each holder of the Business Combination on September 22, 2021, 970,000 shares of Series A Redeemable Convertible Preferred Stock (other than certain regulated holders subject to the Bank Holding Company Act of 1956, as amended) is entitled to vote as a single class with the holders of the MoneyLion Class A Common Stock were redeemed for $9,700.
13. REDEEMABLE CONVERTIBLE PREFERRED STOCKand the holders of any other class or series of capital stock of MoneyLion then entitled to vote.
Holders of the Series A Redeemable Convertible Preferred Stock are entitled to a 30 cent cumulative annual dividend per share, payable at the Company’s election in either cash or MoneyLion Class A Common Stock (or a combination thereof), with any dividends on the MoneyLion Class A Common Stock valued based on the per share volume-weighted average price of the shares of MoneyLion Class A Common Stock on the NYSE for the 20 trading days ending on the trading day immediately prior to the date on which the dividend is paid.
Upon a liquidation of the Company, holders of the Series A Redeemable Convertible Redeemable Preferred Stock will be entitled to a liquidation preference of the greater of $10.00 per share or the amount per share that such holder would have received had the Series A Redeemable Convertible Preferred Stock been converted into MoneyLion Class A Common Stock immediately prior to the liquidation. Redemption of the Series A Redeemable Convertible Preferred Stock via a liquidation event is not considered probable based on management’s assessment at March 31, 2022.
Shares of Series A Convertible Redeemable Preferred Stock are convertible into shares of MoneyLion Class A Common Stock on a one-for-one basis, subject to customary anti-dilution adjustments. The Series A Redeemable Convertible Preferred Stock (i) is convertible at any time upon the holder’s election and (ii) automatically converts into MoneyLion Class A Common Stock if the per share volume-weighted average price of the shares of MoneyLion Class A Common Stock on the NYSE equals or exceeds $10.00 on any 20 trading days (which may be consecutive or nonconsecutive) within any consecutive 30 trading day period that ends no later than the last day of the lockup period that applies to such shares of Series A Redeemable Convertible Preferred Stock.
Preferred Stock Issued Before the Business Combination—Each share of Legacy MoneyLion’s redeemable convertible preferred stock was convertible at the option of the holder, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into a number of fully paid and non-assessable shares of common stockLegacy 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 after giving effect to the Exchange Ratio upon the closing of the Business Combination.Combination Closing. See Note 3,Part II, Item 8 “Business Combination” in the Company’s Annual Report on Form 10-K/A for additional information onthe fiscal year ended December 31, 2021 for further discussion of the Business Combination.
14. STOCK OPTIONS
2014 Stock Option Plan
Prior to the Business Combination, MoneyLion’s Amended and Restated 2014 Stock Option Plan (the “2014 Plan”) allowed the Company to provide benefits in the form of stock options. The Company had designated a total of 2,492,060 shares of common stock to the 2014 Plan. Upon the Closing, the remaining unallocated share reserve under the 2014 Plan was cancelled and no new awards will be granted under such plan.
14. STOCK-BASED COMPENSATION
2021 Stock OptionIncentive Plan
At the Special Meeting, Fusion stockholders approved the Company’s Omnibus Incentive Plan (the “2021 Plan”). As of the Business Combination Closing, each Legacy MoneyLion Optionoption to purchase shares of Legacy MoneyLion Common Stock (a “Legacy MoneyLion Option”) that was outstanding and unexercised as of immediately prior to the Effective TimeBusiness Combination Closing Date automatically 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 Legacy MoneyLion Option as of immediately prior to the effective time,Business Combination Closing Date, multiplied by the Exchange Ratio (rounded down to the nearest whole share), at an exercise price per share equal to the exercise price per share of such Legacy MoneyLion Option in effect immediately prior to the effective time,Business Combination Closing Date, divided by the Exchange Ratio (rounded up to the nearest whole cent). The intent behind the terms in the Merger Agreement related to the exchange of the Legacy MoneyLion stock options isOptions was to provide the holders with awards of equal value to the original awards. Accordingly, the impact of the conversion iswas such that the number of shares issuable under the modified awards and the related exercise prices arewere adjusted using the Exchange Ratio with all other terms remaining unchanged. The conversion ratio adjustment iswas 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 arewere 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 shouldto be recognized. There were no changes to the vesting period within the plan.
The 2021 Plan permits the Company to deliver up to 56,697,934 shares of MoneyLion Common Stock pursuant to awards issued under the 2021 Plan, including 17,712,158 shares of MoneyLion Common Stock and up to 38,985,776 shares of MoneyLion Common Stock subject to outstanding prior awards. The number of shares of MoneyLion Common Stock reserved for issuance under the 2021 Plan will automatically increase on the first day of each fiscal year, beginning on January 1, 2022, by the lesser of (i) 2% of the total number of outstanding shares of MoneyLion Common Stock on December 31st of the immediately preceding calendar year and (ii) such smaller number of shares of MoneyLion Common Stock as determined by the MoneyLion Board.Plan.
The weighted average grant date fair value of options granted under the 2021 Plan during the nine months ended September 30, 2021 and 2020 was $1.50 and $0.34, respectively. These prices were determined using the Black-Scholes Merton option pricing model, which analyzes volatility, lack of marketability, and comparable companies, among other factors in determining the fair value of each share granted. Assumptions used for the options granted during the nine months ended September 30, 2021 and 2020 are as follows:
| Nine Months Ended September 30, | ||||||||
| 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 | % | ||||
Stock-based compensation of $2,425$3,268 and $1,082$518 was recognized during the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, respectively.
The number of units awarded under the 2021 Plan are generally based on a weighted average of the MoneyLion Class A Common Stock in the days leading up to the grant. Fair values for options are calculated using a Black-Scholes option pricing model and PSUs with market conditions are fair valued using a Monte Carlo simulation model. Other grants are generally valued using the share price of MoneyLion Class A Common Stock on the day of grant. The following table represents activity within the 2021 Plan since Decemberfor the three months ended March 31, 2020:2022:
| Weighted | ||||||||||||||||
| Number | Weighted Average Exercise | Average Contractual | Aggregate Intrinsic | |||||||||||||
| of Shares | Price Per Share | Term | Value | |||||||||||||
| Options outstanding at December 31, 2020 | 35,453,516 | $ | 0.38 | 8.1 Years | $ | 226,548 | ||||||||||
| Options granted | 6,524,723 | 2.57 | ||||||||||||||
| Options exercised | (2,062,803 | ) | 0.34 | $ | (13,268 | ) | ||||||||||
| Options forfeited | (539,915 | ) | 0.93 | |||||||||||||
| Options expired | (1,752,896 | ) | 0.20 | |||||||||||||
| Options outstanding at September 30, 2021 | 37,622,625 | $ | 0.80 | 7.9 Years | $ | 224,759 | ||||||||||
| Exercisable at September 30, 2021 | 17,764,012 | 0.36 | 7.0 Years | $ | 113,938 | |||||||||||
| Unvested at September 30, 2021 | 19,858,613 | $ | 1.19 | |||||||||||||
| Type | Vesting Conditions | Units Granted | Weighted Average Grant Date Fair Value | Weighted Average Strike Price | ||||||||||
| Restricted Stock Unit | Service-based | 10,990,884 | $ | 2.42 | n/a | |||||||||
| Performance Stock Unit | Service and performance-based | 2,492,919 | $ | 2.69 | n/a | |||||||||
| Performance Stock Unit | Service and market-based | 9,303,278 | $ | 0.92 | n/a | |||||||||
| Options | Service-based | 822,631 | $ | 2.07 | $ | 1.14 | ||||||||
15. STOCK WARRANTS
Public Warrants and Private Placement Warrants
As a result of the Business Combination, MoneyLion acquired from Fusion, as of September 22, 2021, Public Warrantspublic warrants outstanding to purchase an aggregate of 17,500,000 shares of the Company’sMoneyLion Class A Common Stock (the “Public Warrants”) and Private Placement Warrantsprivate placement warrants outstanding to purchase an aggregate of 8,100,000 shares of the Company’s Class A Common Stock. Each whole Warrant entitles the registered holder to purchase one whole share ofMoneyLion Class A Common Stock at a price of $11.50 per share, at any time commencing on 12 months from closing of Fusion’s initial public offering.
Redemption of Warrants for Cash
Once the warrants become exercisable, 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(the “Private Placement Warrants are identical to the Public Warrants except that the Private Placement Warrants will be exercisable on a cashless basis and be 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 Class A Common Stock equal to the quotient obtained by dividing the product of the number of shares of 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 (a “Make-Whole Exercise”Warrants”). For these purposes, the “historical fair market value” shall mean the average last reported sale price of the Class A Common Stock of MoneyLion. 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,Business Combination, 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 September 30, 2021, the aggregate value of the Private Placement Warrants was $22,916, representing warrants outstanding to purchase 8,100,000 shares of MoneyLion 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 unaudited condensed consolidated balance sheet.sheets. The warrant liabilities areliability is measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrants payableliability in the unaudited condensed consolidated statement of operations.
The Private Placement Warrants are measured at fair value on a recurring basis. The Private Placement Warrants were valued using a Black-Scholes Option Pricing Model, which is considered to be acalculated using Level 3 fair value measurement.inputs. The primary unobservable inputsinput utilized in determining fair value of the Private Placement Warrants is the expected volatility of the Company’s common stock.MoneyLion Class A Common Stock.
The following table presents the quantitative information regarding Level 3 fair value measurement of warrants:the Private Placement Warrants:
| September 30, | March 31, | |||||||
| 2021 | 2022 | |||||||
| Strike price | $ | 11.50 | $ | 11.50 | ||||
| Expected Volatility | 65 | % | 68 | % | ||||
| Expected Dividend | - | - | ||||||
| Expected Term in Years | 4.98 | 4.48 | ||||||
| Risk Free Interest Rate | 0.98 | % | 2.43 | % | ||||
| Warrant Value Per Share | $ | 2.83 | $ | 0.54 | ||||
The following table presents the changes in the fair value ofliability related to the warrants:Private Placement Warrants:
| September 30, 2021 | ||||
| Public and Private Placement | ||||
| Warrants | ||||
| Initial Measurement, September 22, 2021 | $ | 29,467 | ||
| Mark-to-market adjustment | $ | (6,551 | ) | |
| Warrants payable balance, September 30, 2021 | $ | 22,916 | ||
| March 31, 2022 | ||||
| Private Placement | ||||
| Warrants | ||||
| Warrants payable balance, December 31, 2021 | $ | 8,260 | ||
| Mark-to-market adjustment | $ | (3,910 | ) | |
| Warrants payable balance, March 31, 2022 | $ | 4,350 | ||
For more information regarding the Public Warrants and Private Placement Warrants, see Part II, Item 8 “Stock Warrants” in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021.
Legacy MoneyLion Warrants
See Note 3,For details on Legacy MoneyLion warrants, see Part II, Item 8 “Business Combination” in the Company’s Annual Report on Form 10-K/A for details on the Legacy MoneyLion Warrants.fiscal year ended December 31, 2021.
16. NET INCOME (LOSS)LOSS PER SHARE (As Restated)
As of September 30, 2021 and 2020, theThe following table sets forth the computation of net loss per common share:share for the three months ended March 31, 2022 and 2021:
| Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2022 | 2021 | |||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||
| Net loss | $ | (20,283 | ) | $ | (5,490 | ) | $ | (132,878 | ) | $ | (11,153 | ) | $ | (9,978 | ) | $ | (73,406 | ) | ||||||
| Net income attributable to redeemable noncontrolling interests | (3,520 | ) | (1,967 | ) | (9,364 | ) | (6,480 | ) | - | (2,767 | ) | |||||||||||||
| Reversal of previously accrued / (accrual of) dividends on redeemable convertible preferred stock | 52,466 | (4,387 | ) | 42,728 | (12,817 | ) | ||||||||||||||||||
| Net income (loss) attributable to common stockholders | $ | 28,663 | $ | (11,844 | ) | $ | (99,514 | ) | $ | (30,450 | ) | |||||||||||||
| Accrual of dividends on preferred stock | (1,028 | ) | (4,842 | ) | ||||||||||||||||||||
| Net loss attributable to common shareholders | $ | (11,006 | ) | $ | (81,015 | ) | ||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||
| Weighted-average common shares outstanding - basic and diluted (1) | 62,314,396 | 44,857,889 | 53,119,751 | 45,253,509 | 230,737,284 | 48,348,187 | ||||||||||||||||||
| Net income (loss) per share attributable to common stockholders - basic and diluted | $ | 0.46 | $ | (0.26 | ) | $ | (1.87 | ) | $ | (0.67 | ) | |||||||||||||
| Net loss per share attributable to common stockholders - basic and diluted (1) | $ | (0.05 | ) | $ | (1.68 | ) | ||||||||||||||||||
| (1) | Prior period results have been adjusted to reflect the exchange of Legacy MoneyLion’s |
The
For the three months ended March 31, 2022 and 2021, the Company’s potentially dilutive securities, which include stock options, RSUs, PSUs, preferred stock, the right to purchase common stockreceive earnout shares 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.same for the three months ended March 31, 2022 and 2021.
The Company excluded the following potential common shares have been excluded from the computation of diluted net loss per share because including them would have an anti-dilutive effect for the three months ended March 31, 2022 and nine months ended September 30, 2021 and 2020:2021:
| September 30, | March 31, | |||||||||||||||
| 2021 | 2020 | 2022 | 2021 | |||||||||||||
| Conversion of redeemable convertible preferred stock (1) | 0 | 107,410,844 | ||||||||||||||
| Conversion of convertible preferred stock (1) | 28,693,931 | 116,264,374 | ||||||||||||||
| Warrants to purchase common stock and redeemable convertible preferred stock (1) | 25,600,000 | 16,286,818 | 25,599,889 | 14,738,710 | ||||||||||||
| Options to purchase common stock (1) | 37,622,625 | 34,935,030 | ||||||||||||||
| PSUs, RSUs and options to purchase common stock (1) | 65,193,606 | 41,090,725 | ||||||||||||||
| Right to receive earnout shares | 17,500,000 | - | ||||||||||||||
| Total common stock equivalents | 63,222,625 | 158,632,692 | 136,987,426 | 172,093,809 | ||||||||||||
| Prior period results have been adjusted to reflect the exchange of Legacy MoneyLion Common Stock for MoneyLion Class A Common Stock at |
17. COMMITMENTS AND CONTINGENCIES
Lease Commitments—The Company’s lease commitments did not materially change during the three or nine months ended September 30, 2021.
Legal Matters—The Company is subject to regulatory examination by the California Department of Financial Protection and Innovation (the “CA DFPI”). In October 2020,With respect to its activities in California, the Company received a report of examination forin 2020 from the CA DFPI regarding MoneyLion of California, LLC, ourMoneyLion’s subsidiary, and a follow-up request for information in May 2021. The report of examination identified certain compliance exceptionsThis matter is ongoing, and required the Company intends to take corrective actions, including customer refunds relatingcontinue to legacy loan products thatfully cooperate with the Company no longer offers. The Company isCA DFPI in the process of completing the required corrective actions and has enhanced its policies and procedures for compliance with applicable provisions of the California Financial Code going forward.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 ourthe Company’s financial condition or operations relating to the MOUthese CA DFPI matters are unknown at this time.
In 2019, 2020 and 2021,The Company is also in the Company receivedprocess of responding to Civil Investigative Demands (the “CIDs”(“CIDs”) 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. The Company is cooperating with each of these state regulators and intends to take any corrective actions required to maintain compliance with applicable state laws. The Company cannot predict the outcome or any potential impact on its financial condition or operations at this time.
We have received and are in the process of responding to CIDs from the Consumer Financial Protection Bureau (“CFPB”(the “CFPB”) relating to ourthe Company’s compliance with the Military Lending Act and ourits membership model. The Company will continue to provide to the CFPB all of the information and documents required by the CIDs and intends to continue to fully cooperate with the CFPB in this investigation. The investigation is ongoing and any potential impact on ourthe Company’s financial condition or operations are unknown at this time.
With respect to the MoneyLion’s activities in Colorado, the Company
We have received a report of examination in 2021 from the Colorado Department of Law’s Consumer Protection Unit (“Colorado Consumer Protection Unit”) regarding MoneyLion of Colorado, LLC, our subsidiary. The report of examination identified certain compliance exceptions and required the Company to take corrective actions relating to our recordkeeping and customer disclosures, and potentially including customer refunds on certain loans. The Company isare in the process of responding to the Colorado Consumer Protection Unit’s report of examination and requests for information and intends to take all corrective actions required to maintain compliance with applicable Colorado state law going forward.
With respect to MoneyLion’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 MoneyLion’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 membership program but continued the investigation into lending activity. The Company has fully cooperated with the Minnesota DOC in the investigation. The Company is in the process of finalizing a resolution with the Minnesota DOC with respect to the prior lending activity. The Company does not expect that this resolution will have any material impact on its financial condition or operations.
In February and March 2021, the Company received investigative subpoenas from the SecuritiesSEC concerning IIA, which primarily held assets from institutional investors and Exchange Commission concerningwas the Invest in America Credit Fund 1.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 which is at an early stage, and cannot predict its outcome or any potential impact on ourthe Company’s financial condition or operations.
18. MERGERS AND ACQUISITIONS (As Restated)
Even Financial—On February 17, 2022, the Company completed its previously announced acquisition (the “Even Acquisition”) of Even Financial 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 and Fortis Advisors LLC, a Delaware limited liability company, solely in its capacity as representative of the equityholders of Even Financial.
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 Product 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 Financial an aggregate of 28,164,811 shares of the Company’s Series A Redeemable Convertible Preferred Stock, along with an additional 529,120 shares of Series A Redeemable Convertible Preferred Stock to advisors of Even Financial for transaction expenses, valued at $193,647, (ii) paid to certain Even Financial management equityholders approximately $14,514 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, of which the vested portion at the acquisition date was valued at $8,963. The equityholders and advisors of Even Financial are also entitled to receive an additional payment from the Company of up to an aggregate of 8,000,000 shares of Series A Redeemable Convertible Preferred Stock, based on the attributed revenue of Even Financial’s business during the 13-month period commencing January 1, 2022 (the “Earnout”), and certain recipients of options to acquire shares of the Company’s Class A common stock are entitled to receive dividend equivalents in lieu of receiving Series A Redeemable Convertible Preferred Stock, subject to certain conditions (the “Preferred Stock Equivalents”). The combined value of the Earnout and Preferred Stock Equivalents was $45,336 as of the closing of the Even Acquisition. The total purchase price was approximately $271,030, 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 and pay $2,868 of seller transaction costs.
The fair value of Even Financial’s acquired assets and liabilities were as follows:
| February 17, | ||||
| 2022 | ||||
| Assets | ||||
| Cash and cash equivalents | $ | 4,501 | ||
| Enterprise receivables | 9,863 | |||
| Property and equipment | 441 | |||
| Intangible assets | 190,320 | |||
| Goodwill | 109,375 | |||
| Other assets | 3,354 | |||
| Total assets | 317,854 | |||
| Liabilities and Equity | ||||
| Liabilities: | ||||
| Accounts payable and accrued liabilities | 9,258 | |||
| Other liabilities | 37,566 | |||
| Total liabilities | 46,824 | |||
| Net assets and liabilities acquired | $ | 271,030 | ||
The Earnout and Preferred Share Equivalents were valued at $46,424 as of March 31, 2022, and were included in other liabilities on the consolidated balance sheet. The $368 change in fair value for the three months ended March 31, 2022 was included on the consolidated statement of operations as a component of the change in fair value of contingent consideration from mergers and acquisitions.
Due to the closing of the Even Acquisition occurring on February 17, 2022, there has not been sufficient time to finalize business combination accounting and related valuations of assets and liabilities acquired and consideration transferred as required by U.S. GAAP. Therefore, all balances recorded and disclosed as of March 31, 2022 are preliminary and subject to change.
The Company’s pro forma revenue and net loss for the three months ended March 31, 2022 and 2021 below have been prepared as if Even Financial had been purchased on January 1, 2021. The Company made certain pro forma adjustments related to amortization of intangible assets, intercompany activity and interest expense.
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenue | $ | 78,813 | $ | 41,603 | ||||
| Net loss | $ | (14,347 | ) | $ | (82,357 | ) | ||
The unaudited pro forma financial information above is not necessarily indicative of what the Company’s consolidated results actually would have been if the Even Acquisition had been completed at January 1, 2021. 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”) of MALKA. MALKA is a creator network and content platform that provides digital media and content production services to us and to its own clients in entertainment, sports, gaming, live streaming and other sectors. The MALKA Acquisition accelerates MoneyLion’s ability 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.
With respect to MoneyLion’s activities in Virginia, the Company received CIDs from the office of the Attorney General of the Commonwealth of Virginia in October 2021 relating to our lending activity in Virginia. We are cooperating with the investigation, which is at an early stage, and we cannot predict its outcome or any potential impact on our financial condition or operations.
18.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 MALKA Acquisition.
The payable in restricted shares based on 2021 and 2022 operating performance and the Make-Whole Provision were valued at $22,855 and $29,561 as of March 31, 2022 and December 31, 2021, respectively, and were included in other liabilities on the consolidated balance sheets. The $4,292 change in fair value for the three months ended March 31, 2022 was included on the consolidated statement 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 assets and liabilities were as follows:
| November 15, | ||||
| 2021 | ||||
| Assets | ||||
| Cash and cash equivalents | $ | 51 | ||
| Other receivables | 4,760 | |||
| Property and equipment | 1,281 | |||
| Intangible assets | 17,780 | |||
| Goodwill | 30,976 | |||
| Other assets | 98 | |||
| Total assets | 54,946 | |||
| Liabilities and Equity | ||||
| Liabilities: | ||||
| Accounts payable and accrued liabilities | 1,971 | |||
| Other liabilities | 290 | |||
| Total liabilities | 2,261 | |||
| Net assets and liabilities acquired | $ | 52,685 | ||
19. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through November 15, 2021,May 16, 2022, the date on which these consolidated financial statements were available to be issued, and concluded that there were no material subsequent events required to be disclosed.requiring disclosure.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF MONEYLION
UnlessThe following Management’s Discussion and Analysis of Financial Condition and Results of Operations summarizes the context otherwise requires, all referencessignificant 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 unaudited consolidated financial statements and notes to those financial statements included in Part I, Item 1 “Financial Statements” within this sectionQuarterly Report on Form 10-Q/A. References to “we,” “us,” “our,” “Company” or “MoneyLion” refer to MoneyLion Technologies Inc. and, as context requires, its wholly-owned subsidiaries for the periods prior to the Business Combination Closing Date (as defined in our unaudited interim financial statements) and to MoneyLion Inc. and, as context requires, its wholly-owned subsidiaries for the period thereafter. “Fusion” refers to Fusion Acquisition Corp. for the periods prior to the Business Combination Closing Date.
The following discussionThis Management’s Discussion and analysisAnalysis of Financial Condition and Results of Operations gives effect to the restatement of our unaudited interim consolidated financial statements for the period ended March 31, 2022. See the Explanatory Note to this Quarterly Report on Form 10-Q/A and Note 2, “Restatement of Previously Issued Financial Statements,” to the unaudited consolidated financial statements included in Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q/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 May 16, 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.
Reclassification—The acquisitions of MALKA and Even Financial and related ongoing integration activities have caused significant changes to the revenue and cost structure of the Company such that the organization of financial statement line items in both the consolidated balance sheets and the consolidated statements of operations used in prior reporting periods are no longer sufficient to properly present the Company’s financial condition and results of operations should be readas of March 31, 2022. Reclassifications have been performed relative to the previous presentation of the consolidated balance sheet as of December 31, 2021 and the consolidated statement of operations for the quarter ended March 31, 2021 to present in conjunction witha new format that better represents the new revenue and cost structure of the Company. The reclassifications had no impact on previously reported total assets, total liabilities or net income (loss) and an immaterial impact on total revenue, net. There was no impact on the consolidated statements of cash flows or consolidated statements of redeemable convertible preferred stock, redeemable noncontrolling interests and stockholders’ equity (deficit). There are also related reclassifications and expanded disclosure, where necessary, contained within the notes to the consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis includes forward-looking statements that involve risks and uncertainties. You should review the sections titled “Cautionary Note on Forward-Looking Statements” and “Risk Factors” for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.statements.
Overview
MoneyLion offersis a full-serviceleading digital financial platform (the “Platform”)services and lifestyle content platform. We provide consumers a full suite of financial and non-financial solutions, bundling proprietary, low-cost financial products with products that provides convenient, low-cost access to banking, borrowing,are offered through our marketplace and investing solutions tailored fornetwork affiliate partners. We engage and educate our customers rooted in data,with daily, money-related and delivered through our proprietary technology platform. The Platform is based upon analytical models that power recommendations which are designed to help customers achieve their financial goals, ranging from building savings, improving credit health, and managing unexpected expenses. The Platform ismoney-adjacent content, delivered through a mobile applicationhyper-personalized feed, to empower our customers at all times. When our customers enjoy periods of financial excess, we provide tools for them to easily manage their spending and an online dashboard.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 also leverage our distinct data, technology and network advantages to deliver leading embedded finance marketplace solutions for our Enterprise Partners, allowing them to better connect with existing end-users and reach new potential end-users, complemented by advertising services and digital media and content production services custom designed to promote Enterprise Partners’ products and services. We believe that the combination of solutions that MoneyLion provides uniquely positions us to disrupt how financial products are consumed, unlocking a total addressable market that we estimate to be over $274 billion.
The Company’s key consumer product offerings include:
Membership programsRoarMoney Premium Mobile Banking — RoarMoney is our Federal Deposit Insurance Corporation-insured digital demand deposit account with zero minimums, premium features and rewards. Our RoarMoney demand deposit accounts are currently issued by MetaBank, N.A. (“MetaBank”), a South Dakota-based, nationally chartered bank owned by Meta Financial Group, Inc. (NASDAQ: CASH). 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 introducedearn revenue from interchange fees from payment networks based on customer expenditures on the debit card. We also earn revenue from cardholder fees such as a small monthly administrative fee charged to our customers and a fee charged to customers when an out-of-network ATM is utilized to withdraw cash. Both interchange fees and cardholder fees are reflected in service and subscription fees. We incur direct costs in connection with the RoarMoney account offering, which include fees paid to the payment networks 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 Plus membership in late 2017, allowingWealth LLC (“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. Through MoneyLion Investing, customers are able to develop sound investing habits by enabling certain account features, including auto-investing and round ups. Auto-investing allows our customers to among other things,automatically contribute into their investment account with recurring deposits directly into the account. With round ups, customers can also choose to automatically 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 Investing account and invested in accordance with the customer’s chosen investment strategy. We earn revenue from a small monthly administration fee from our customers who use this product, which is 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 LLC and its affiliate, Zero Hash Liquidity Services LLC (collectively, “Zero Hash”). 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 New York and Hawaii. 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 choose to automatically 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 are currently in the process of adding an additional cryptocurrency, Solana, to the MoneyLion Crypto platform and anticipate adding an additional cryptocurrency, Avalanche, during the end of the second quarter of 2022 or beginning of the third quarter of 2022. Both MoneyLion and Zero Hash must consent in writing before adding any additional digital assets to the program. We earn revenue from Zero Hash as they pay us a share of the fees that they earn from our customers in exchange for MoneyLion enabling Zero Hash to effect digital currency-related transactions for our customers. This revenue is reflected in service and subscription fees.
Instacash — Instacash is our 0% APR advance product that gives customers early access affordableto 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 service and subscription fees.
Credit Builder Plus — Our Credit Builder Plus membership program offers a proven path for our customers to access credit through asset collateralization,and establish or rebuild history, build savings, improveestablish financial literacy and track their financial health. This program evolved into theFor 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 membership, introduced in 2019 and intended to emphasize the program’s ability to help our customers build credit while also saving. We offer these programs directly to our customers. Members also receivemembers access to premium mobile banking services, managed investment services, credit tracking services,the Lion’s Share Loyalty Program, where members can earn rewards and increased limitsof up to interest-free Instacash advances.$19.99 per month. We earn revenue from monthly membershipsubscription fees paid by our customers. These fees are reflected in membershipservice and subscription revenue.
Secured personal loans — We provide our customers with access to Credit Builder Plus loans, personal term loans that are partially secured by the customers’ assets maintained by ML Wealth and held at our third-party broker-dealer partner. These loans are provided directly by MoneyLion and accessed asfees. As part of the Credit Builder Plus Membershipmembership program, and are not available onmembers may apply for a standalone basis.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. 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.service and subscription fees.
Instacash — We offer our customers access to Instacash, an interest-free advance product, which allows them to access funds based primarily on a percentage of income or other recurring income amounts detected through a linked external bank account or through direct deposit to their RoarMoney bank account. Instacash is provided directly by MoneyLion and is available to our customers on a standalone basis. While access to Instacash is free for our customers, we provide them the option to leave us a tip. In addition to a free standard disbursement option, we also offer our customers an option to disburse their funds to their RoarMoney bank account or external bank account on an expedited basis for an instant transfer fee. We earn revenue from tips and instant transfer fees, both reflected in fee income.
RoarMoney Premium Mobile Banking — Through our bank partnership with MetaBank, we provide our customers a FDIC-insured digital demand deposit account, which includes issuance of a physical and virtual MoneyLion-branded debit card with features such as up to two-day early direct deposit and rewards. Our RoarMoney account is available to our customers on a standalone basis. We earn revenue from interchange fees from payment networks based on customer expenditures on the debit card. We also earn revenue from cardholder fees such as a small monthly administrative fee charged to our customers and a fee charged to customers when an out-of-network ATM is utilized to withdraw cash. Both interchange fees and cardholder fees are reflected in fee income. We incur direct costs, which include fees paid to the payment networks and our partner bank.
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. 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.
Managed investing — Through our partnership with various third parties, we offer our customers automated investing tools with various diversified investment options tailored to their risk tolerance preferences. Our customers are also able to invest in thematic portfolios, such as ones focused on cash flow growth or innovation. Our managed investment account is available on a standalone basis. We earn revenue from a small monthly administration fee from our customers who use this product, which is reflected in fee income.
Cryptocurrency — Through our partnership with Zero Hash, we introduced a cryptocurrency offering on a limited basis in the third quarter of 2021, which was formally launched in early Q4 2021. This offering allows our customers to buy and sell digital currencies, which are limited at launch to Bitcoin and Ether. Under the terms of the partnership agreement, MoneyLion is not directly involved in any cryptocurrency transactions or the exchange of fiat funds for cryptocurrency taking place at or through Zero Hash. We earn revenue from Zero Hash as they pay us a share of the fees they earn from our customers in exchange for MoneyLion enabling Zero Hash to effect digital currency-related transactions for our customers. This revenue is reflected in fee income and is immaterial to revenue in the third quarter of 2021.
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 advice platformtool that guides customers on their financial journey. Financial Heartbeat evaluates customers’ financial situation across four key dimensions: SAVE (savings and financial preparedness), SPEND (spending(spending and personal budget), SHIELD (insurance needs and coverage) and SCORE (credit tracking and health). CustomersThrough 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.
Unsecured personal loans — Through our partnership with a third party as well as directly by MoneyLion, we offered unsecured personal loans to our customers of up to $15,000. These loans were available on a standalone basis and their average duration was 13.4 months. The funding process for unsecured personal loans was the same as our Credit Builder Plus loans. While we do not provide a guarantee for the performance of loans and other receivables that we originate, we sell these loans and other receivables at a discount of approximately 10% to IIA. The credit policy for automated decisioning and manual reviews was developed and executed by MoneyLion. For loans made within our partnership with a third party, the credit policies were also reviewed and approved by the third party. We earn revenue from interest income, which is reflected in net interest income on finance receivables, and fees, which are 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.these services.
Credit-related decision servicingMoneyLife — Consistent with our vision of establishing MoneyLion provided credit-related decision servicing to third parties. We earned revenue from fees generated from this service. These fees are reflectedas a lifestyle brand, 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 are currently financed through IIA. IIA was formed in 2016 and2021 we introduced MoneyLife, an online financial education content destination. MoneyLife is an indirect wholly owned subsidiaryinfluencer-focused, video content-driven educational platform where customers can share and discover ideas, advice and insights regarding their financial lives. 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. 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. Through MoneyLife, we provide an additional daily destination site for current customers, drive additional prospective customers to MoneyLion Inc. As of December 31, 2020, IIA had assets of approximately $86 million, primarily from institutional investors, and has been our primary source of fundingincrease customer engagement and cross-sell opportunities for originated receivables since 2018. IIA is organized as a Delaware limited liability companyboth MoneyLion and is treated as a partnership for United States income tax purposes. IIA’s membership interests are issued in separately designated series, with each series consisting of Class A Units and Class B Units. IIA investors own all non-voting Class B Units of the applicable series they invest in, which entitles them to a targeted, non-guaranteed, preferred return of typically 12% per year. ML Capital III, an indirect wholly owned MoneyLion subsidiary, is the managing member of IIA and owns the Class A Units of each series, which entitles ML Capital III to returns that exceed the targeted preferred return on the Class B Units. IIA uses 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 and Invest in America Notes SPV IV LLC, each an indirect wholly owned MoneyLion subsidiary. The collateral consists of a portfolio of underlying MoneyLion loans and advance receivables. Investors in Class B Units fund their investment into IIA at the time of subscription, which proceeds are used to finance receivables originated on MoneyLion’s platform.its affiliate partners.
The Company’s key enterprise service offerings include:
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 platforms. Our customers can access these offers on a standalone basis. We earn revenue from fees from our affiliate partners based on a range of criteria depending on each affiliate relationship including, but not limited to, customers’ clicks, impressions, completed transactions or a share of revenue generated for the affiliate partner. This revenue is reflected in enterprise service revenues.
EvenFinancial Marketplace — Through Even Financial, we digitally connect and match 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. Our infrastructure leverages machine learning and advanced data science to solve a significant pain point in financial services customer acquisition, bridging financial institutions and channel partners via Even Financial’s API and embedded finance marketplaces. Even Financial’s network includes over 400 Product Partners and 500 Channel Partners, covering a breadth of financial services including loans, credit cards, mortgages, savings, and insurance products. We earn revenue, which is reflected in enterprise service revenue, from our Product Partners based on performance structure. We incur direct costs related to the fees paid to our Channel Partners.
Digital Media and Content Production — Through MALKA, we offer digital media and content production services provided to enterprise clients in entertainment, sports, gaming, live streaming and other sectors. We produce content across every digital medium, from creative advertising campaigns and original branded content to e-gaming livestreams, podcast series, feature length documentaries, sports representation and marketing. We earn revenue, which is reflected in enterprise service revenue, from our enterprise clients based on performance obligations within our contracts with them.
Recent Developments
Recent events impacting our business are as follows:
COVID-19 — In March 2020, the World Health Organization recognized a globalThe COVID-19 pandemic known as the coronavirus or COVID-19. Duehas caused substantial changes in consumer behavior, restrictions on business and individual activities and high unemployment rates, which led to thereduced economic uncertainty that this hasactivity and canmay continue to cause there is an added risk factor ineconomic volatility. There continue to be significant uncertainties associated with the overall future outlookCOVID-19 pandemic, including with respect to the course, duration and severity of the Company. 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 including reductionsand implemented certain consumer support programs which were immaterial to our performance. For example, we reduced our marketing activities such as advertising through digital platforms, thatwhich have since returned to pre-pandemic levels. Welevels and also reduced our sponsorship arrangements with third parties. WeIn addition, we implemented underwriting policy changes on a targeted basis as pockets of risk and opportunity had been identified, 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 offeroffered payment deferrals 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 allowallowed them to change the scheduled repayment date by up to 14 days. Once the advance iswas repaid, the customer could request another change to the scheduled repayment on another salary advance. While there is no limit to the number of changes a customer may be granted, they are limited to one at a time and per salary advance. These programs are immaterial to our performance.
While there has been an increase inDespite the economic uncertainty due to the pandemic, there was an uptick inas a result of COVID-19, we have increased the number of customers on our platform in the second quarter of 2020 due to factors including government-initiated lockdowns and temporary or continued closure of local branches of many banks and credit unions. We expect this trend to continue although the rate of customer acquisition as a result of COVID-19 may be slower.platform.
In April 2020, the Company borrowed $3.2 million from a bank under the SBA’s 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 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) — During December 2020,Since January 1, 2021, we acquired Wealth Technologies, Inc. (“WTI”). Additionally, we merged with Fusion Acquisition Corp. (“Fusion”) on September 22, 2021. See below for further discussion.have completed the following business combinations:
| ● | Merger with Fusion |
| ● | MALKA Acquisition – On November 15, 2021, MoneyLion completed its acquisition of MALKA (the “MALKA Acquisition”). MALKA is a creator network and content platform that provides digital media and content production services to us and to its own clients in entertainment, sports, gaming, live streaming and other sectors. The MALKA Acquisition accelerates MoneyLion’s ability 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. We intend 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. Upon the closing of the MALKA Acquisition, MoneyLion issued 3,206,167 restricted shares of MoneyLion Class A Common Stock and paid approximately $10.0 million in cash to the Selling Members 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 $10.9 million as of the MALKA Acquisition Closing Date. MoneyLion also paid down approximately $2.2 million of MALKA debt facilities. The Selling Members 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 total purchase price of the MALKA Acquisition was approximately $52.7 million. |
| ● | Even Acquisition – On February 17, 2022, MoneyLion completed its acquisition of Even Financial (the “Even Acquisition”). 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 Product 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 Financial an aggregate of 28,164,811 shares of the Company’s Series A Redeemable Convertible Preferred Stock, along with an additional 529,120 shares of Series A Redeemable Convertible Preferred Stock to advisors of Even Financial for transaction expenses, valued at $0.2 million, (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, of which the vested portion at the acquisition date was valued at $8.9 million. The equityholders and advisors of Even Financial are also entitled to receive an additional payment from the Company of up to an aggregate of 8,000,000 shares of Series A Redeemable Convertible Preferred Stock, based on the attributed revenue of Even Financial’s business during the 13-month period commencing January 1, 2022 (the “Earnout”), and certain recipients of options to acquire shares of the Company’s Class A common stock are entitled to receive dividend equivalents in lieu of receiving Series A Redeemable Convertible Preferred Stock, subject to certain conditions (the “Preferred Stock Equivalents”). The combined value of the Earnout and Preferred Stock Equivalents was $45.3 million as of the closing of the Even Acquisition. The total purchase price was approximately $270 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 and pay $2.9 million of seller transaction costs. |
Factors Affecting Our Performance
The Company is subject to a number of risks including, but not limited to, the need for successful development of products, the need for additional capital (or financing) to fund operating losses, competition from substitute products and services from larger companies, protection of proprietary technology, dependence on key individuals and risks associated with changes in information technology.
New customer growth and increasing usage across existing customers
Our ability to effectively acquire new customers through our acquisition and marketing efforts, and drive usage of our products across our existing customers is key to our growth. We invested in the platform approach and believe our customers’ experience is enhanced by using our full product suite as we can better tailor the insights and recommendations. In turn, this generates higher revenue and lifetime value from our customer base.
Product expansion and innovation
We believe in the platform approach and providing relevant products to our customers to help them better manage their financial lives, both in times of need and excess. We will continue to invest in enhancing our existing suite of products and developing new products. Any factors that impair our ability to do so may negatively impact our efforts towards retaining and attracting customers.
General economic and market 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. 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 advances and loan volume.
Competition
We compete with several larger financial institutions and technology platforms that offer similar products and services. We compete with those that offer both single point solutions similar to any one of our products as well as more integrated, complete solutions. Some of our competitors may have access to more resources than we do and thus may be able to offer better pricing or benefits to our customers.
Pricing of our products
We derive a substantial portion of our revenue from fees earned from our products. 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 to customers who utilize multiple products to expand usage of our platform. We may also lower pricing on our products to acquire new customers. For example, we offer our customers discounts such as Shake ‘N’ Bank cashback and other cashback rewards opportunities as part of our RoarMoney bank account product offering and such discounts are provided to customers based on eligible MoneyLion debit card transactions. On average, approximately 50%40% of our eligible RoarMoney bank account customers receive this benefit. 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 40%25% of our Credit Builder Plus members who met the minimum eligibility criteria received a Lion’s Share reward.
Product mix
We provideoffer various products and services on our platform, including a membership program, loans, earned incomecash advances, affiliate offers and cryptocurrency, investment and bank accounts, and eachaccounts. Each product has a different profitability profile. The relative usage of products with high or low profitability and their lifetime value could have an impact on our performance.
Access and cost of financing
Our credit products and other receivables are currentlywere primarily financed through IIA and associateduntil 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 to special purpose vehicles.vehicle financings from third-party institutional lenders. Loss of one or more of the financing sources we have for our credit products 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.
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, cash advance, managed investment account, cryptocurrency account or affiliate product. Total Customers also include customers that have submitted for, received and clicked on at least one offer, including loans, credit cards, mortgages, savings and insurance products, from a Product Partner via our Even Financial marketplace. 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 3.9 million and 1.8 million as of March 31, 2022 and 2021, 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, cash 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. Total Products also include products that our Total Customers have submitted for, received and clicked on via our Even Financial marketplace. If a customer has funded multiple secured personal loans or cash advances or received and clicked on multiple products via our Even Financial 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 9.0 million and 5.1 million as of March 31, 2022 and 2021, respectively.
Enterprise Partners
Enterprise Partners is comprised of Product Partners and Channel Partners. We define Product Partners as financial institutions and financial service providers. 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 980 as of March 31, 2022, comprised of 424 Product Partners and 556 Channel Partners.
Total Originations
We define total originationsTotal Originations as the dollar volume of the secured personal loans originated and Instacashcash advances funded within the stated period. We consider total originationsTotal 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 and Instacash products and is a significant driver of net interest income on finance receivables and fee income.service and subscription fees. Total originationsOriginations were $274$408 million and $117$189 million for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively. Total originations were $700 million and $255 million for the nine months ended September 30, 2021 and 2020, respectively, and were originated directly by MoneyLion.
Total Customers
We define total customers as those customers 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 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 2.7 million and 1.2 million as of September 30, 2021 and 2020, respectively. For the years ended December 31, 2020 and 2019, approximately 33% and 46%, respectively, of our total customers that have opened a banking or managed investment account have funded accounts. For the years ended December 31, 2020 and 2019, approximately 53% and 57%, respectively, of our total customers have engaged in any activity on our platform.
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, 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 6.9 million and 4.0 million as of September 30, 2021 and 2020, respectively.
Adjusted Revenue
Adjusted revenueRevenue is defined as total revenues,revenue, net, plus amortization of loan origination costs less provision for loss on membershipsubscription receivables, provision for loss on fees receivables and revenue derived from products that have been phased out and non-operating income.products. We believe that adjusted revenueAdjusted Revenue provides a meaningful understanding of revenue from ongoing products and recurring revenue for comparability purposes. Adjusted revenueRevenue is a non-GAAP measure and should not be viewed as a substitute for total revenues,revenue, net. Refer to the “Non-GAAP Measures” section below for further discussion.
Our adjusted revenueAdjusted Revenue is further broken into the following categories:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||
| Fees | $ | 32,841 | $ | 15,427 | $ | 86,392 | $ | 40,495 | ||||||||
| Payments | 2,990 | 1,434 | 10,450 | 4,505 | ||||||||||||
| Advice | 3,394 | 719 | 7,208 | 1,957 | ||||||||||||
| Interest | 2,755 | 1,581 | 6,886 | 3,645 | ||||||||||||
| Adjusted Revenue | $ | 41,979 | $ | 19,160 | $ | 110,935 | $ | 50,603 | ||||||||
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| (in thousands) | ||||||||
| Consumer | $ | 45,724 | $ | 31,489 | ||||
| Enterprise | 20,753 | 996 | ||||||
| Adjusted Revenue | $ | 66,477 | $ | 32,485 | ||||
This breakdown of adjusted revenueAdjusted Revenue across the categories of fees, payments, advice,consumer revenue and interestenterprise revenue helps provide our management with a better understanding of adjusted revenueAdjusted Revenue by type and may help to inform strategic pricing and resource allocations across our products.
Adjusted Gross Profit and Adjusted EBITDA
Adjusted gross profitGross Profit is defined as gross profit less revenue derived from products that have been phased out products. Adjusted EBITDA is defined as net income (loss) plus interest expense related to corporate debt, income tax expense (benefit), depreciation and non-operating income.amortization expense, change in fair value of warrants, change in fair value of subordinated convertible notes, change in fair value of contingent consideration from mergers and acquisitions, stock-based compensation and one-time expenses less origination financing cost of capital. We believe that adjusted gross profit providesAdjusted Gross Profit and Adjusted EBITDA provide a meaningful understanding of onean aspect of profitability based on our current product portfolio. Adjusted gross profit is aThese are non-GAAP measuremeasures 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 Three Months Ended March 31, 2022 and Nine Months Ended September 30, 2021 and 2020
Revenues
The following table is reference for the discussion that follows.
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | |||||||||||||||||||||||||||||
| 2021 | 2020 | $ | % | 2021 | 2020 | $ | % | |||||||||||||||||||||||||
| (in thousands, except for percentages) | (in thousands, except for percentages) | |||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||
| Net interest income on finance receivables | $ | 2,293 | $ | 1,654 | $ | 639 | 38.6 | % | $ | 5,716 | $ | 3,617 | $ | 2,099 | 58.0 | % | ||||||||||||||||
| Membership subscription revenue | 8,347 | 8,435 | (88 | ) | -1.0 | % | 23,709 | 22,778 | 931 | 4.1 | % | |||||||||||||||||||||
| Affiliates income | 3,175 | 518 | 2,657 | 512.9 | % | 6,444 | 1,368 | 5,076 | 371.1 | % | ||||||||||||||||||||||
| Fee income | 30,402 | 12,471 | 17,931 | 143.8 | % | 79,659 | 28,924 | 50,735 | 175.4 | % | ||||||||||||||||||||||
| Other income | 3 | 39 | (36 | ) | -92.3 | % | 21 | 174 | (153 | ) | -87.9 | % | ||||||||||||||||||||
| Total Revenues, net | 44,220 | 23,117 | 21,103 | 91.3 | % | 115,549 | 56,861 | 58,688 | 103.2 | % | ||||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||||||||||
| Marketing | 13,531 | 2,921 | 10,610 | 363.2 | % | 27,060 | 7,404 | 19,656 | 265.5 | % | ||||||||||||||||||||||
| Provision for loss on receivables | 15,238 | 10,456 | 4,782 | 45.7 | % | 36,644 | 14,587 | 22,057 | 151.2 | % | ||||||||||||||||||||||
| Other direct costs | 1,828 | 1,183 | 645 | 54.5 | % | 6,983 | 3,137 | 3,846 | 122.6 | % | ||||||||||||||||||||||
| Interest expense | 1,627 | 865 | 762 | 88.1 | % | 4,947 | 2,316 | 2,631 | 113.6 | % | ||||||||||||||||||||||
| Personnel expenses | 15,483 | 4,672 | 10,811 | 231.4 | % | 30,736 | 15,704 | 15,032 | 95.7 | % | ||||||||||||||||||||||
| Underwriting expenses | 2,158 | 1,137 | 1,021 | 89.8 | % | 5,702 | 4,553 | 1,149 | 25.2 | % | ||||||||||||||||||||||
| Information technology expenses | 1,195 | 1,725 | (530 | ) | -30.7 | % | 5,009 | 5,089 | (80 | ) | -1.6 | % | ||||||||||||||||||||
| Bank and payment processor fees | 6,770 | 3,697 | 3,073 | 83.1 | % | 18,526 | 8,987 | 9,539 | 106.1 | % | ||||||||||||||||||||||
| Change in fair value of warrant liability | (6,551 | ) | (228 | ) | (6,323 | ) | - | 42,239 | (228 | ) | 42,467 | - | ||||||||||||||||||||
| Change in fair value of subordinated convertible notes | - | - | - | - | 49,561 | - | 49,561 | - | ||||||||||||||||||||||||
| Professional fees | 4,678 | 1,879 | 2,799 | 149.0 | % | 12,715 | 4,516 | 8,199 | 181.6 | % | ||||||||||||||||||||||
| Depreciation expense | 486 | 286 | 200 | 69.9 | % | 1,502 | 811 | 691 | 85.2 | % | ||||||||||||||||||||||
| Occupancy expense | (46 | ) | 314 | (360 | ) | -114.6 | % | 719 | 913 | (194 | ) | -21.2 | % | |||||||||||||||||||
| Gain on foreign currency translation | (135 | ) | (43 | ) | (92 | ) | 214.0 | % | (178 | ) | (155 | ) | (23 | ) | 14.8 | % | ||||||||||||||||
| Other operating expenses | 8,242 | (257 | ) | 8,499 | - | 6,221 | 393 | 5,828 | 1483.0 | % | ||||||||||||||||||||||
| Total operating expenses | 64,504 | 28,607 | 35,897 | 125.5 | % | 248,386 | 68,027 | 180,359 | 265.1 | % | ||||||||||||||||||||||
| Net loss before income taxes | (20,284 | ) | (5,490 | ) | (14,794 | ) | 269.5 | % | (132,837 | ) | (11,166 | ) | (121,671 | ) | 1089.7 | % | ||||||||||||||||
| Income tax benefit | (1 | ) | - | (1 | ) | - | 41 | (13 | ) | 54 | -415.4 | % | ||||||||||||||||||||
| Net loss | $ | (20,283 | ) | $ | (5,490 | ) | $ | (14,793 | ) | 269.5 | % | $ | (132,878 | ) | $ | (11,153 | ) | $ | (121,725 | ) | 1091.4 | % | ||||||||||
Revenues
| Three Months Ended March 31, | Change | |||||||||||||||
| 2022 | 2021 | $ | % | |||||||||||||
| (In thousands, except for percentages) | ||||||||||||||||
| Consumer revenues | ||||||||||||||||
| Service and subscription fees | $ | 46,394 | $ | 30,472 | $ | 15,922 | 52.3 | % | ||||||||
| Net interest income on finance receivables | 2,568 | 1,662 | 906 | 54.5 | % | |||||||||||
| Total consumer revenues | 48,962 | 32,134 | 16,828 | 52.4 | % | |||||||||||
| Enterprise service revenues | 20,752 | 996 | 19,756 | 1,983.5 | % | |||||||||||
| Total revenue, net | $ | 69,714 | $ | 33,130 | $ | 36,584 | 110.4 | % | ||||||||
We generate revenues primarily from originating loans,various product-related fees, providing membership subscriptions, various product related feesperforming enterprise services and promoting affiliate services.originating loans.
Total revenues increased by $21.1$36.6 million, or 91.3%110.4%, to $44.2$69.7 million for the three months ended September 30, 2021,March 31, 2022, as compared to $23.1$33.1 million for the same period in 2020.2021.
Total revenuesService and subscription fees
Service and subscription fees increased by $58.7$15.9 million, or 103.2%52.3%, to $115.5$46.4 million for the ninethree months ended September 30, 2021,March 31, 2022, as compared to $56.9$30.5 million for the same period in 2020.2021. The increase in service and subscription fees were driven by increases in fee income related to instant transfer fees and tips from Instacash of $15.4 million driven by the growth of Instacash advances, across both existing and new customers, and an increase in subscription fees of $1.4 million due to an increased number of customers using the Credit Builder Plus membership program. These increases were partially offset by decreases in fee income related to interchange, cardholder and administration fees from our bank and investment accounts of $0.9 million driven by lower payment volume.
Net Interest Incomeinterest income on Finance Receivablesfinance receivables
Net interest income on finance receivables is generated by interest earned on Credit Builder Plus loans, which is partially offset by the amortization of loan origination costs.
Net interest income on finance receivables increased by $0.6$0.9 million, or 38.6%54.5%, to $2.3$2.6 million for the three months ended September 30, 2021,March 31, 2022, as compared to $1.7 million for the same period in 2020.
Net2021. The increase in net interest income on finance receivables increasedwas driven by $2.1 million, or 58.0%, to $5.7 million, for the nine months ended September 30, 2021, as compared to $3.6 million for the same period in 2020. Net interest incomean over 40% year-over-year origination growth on finance receivables is generated by interest earned on unsecured personal loans, ML Plus loans, andour Credit Builder Plus loans, which is offset by theloan program across both existing and new customers. The amortization of loan origination costs.
Net interest income on finance receivables is comprised of the following:
Credit Builder Plus loans
Net interest income related to Credit Builder Plus loanscosts increased by $1.4$0.1 million to $2.8$0.3 million for the three months ended September 30, 2021, as compared to $1.4 million for the same period in 2020. The increase is largely attributable to the growth of Credit Builder Plus loans, across both existing and new customers.
Net interest income related to Credit Builder Plus loans increased by $4.2 million to $6.9 million for the nine months ended September 30, 2021, as compared to $2.7 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 contributed 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 $0.2 million to $0.0 million for the three months ended September 30, 2021,March 31, 2022, as compared to $0.2 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.2021.
Enterprise service revenues
Net interest income relatedEnterprise service revenues increased by $19.8 million, or 1,983.5%, to ML Plus loans decreased by $1.0 million to $0.0$20.8 million for the ninethree months ended September 30, 2021,March 31, 2022, as compared to $1.0 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 $0.3 million to $0.0 million for the three months ended September 30, 2021, as compared to $0.3 million for the same period in 2020. During the first quarter of 2020, we phased out originating unsecured personal loans.
Net interest income related to unsecured personal loans decreased by $1.5 million to $(0.1) million for the nine months ended September 30, 2021, as compared to $1.3 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.
The amortization of loan origination costs increased by $0.3 million, or 124.5%, to $0.5 million for the three months ended September 30, 2021, as compared to $0.2 million for the same period in 2020.
The amortization of loan origination costs decreased by $0.3 million, or 23.8%, to $1.0 million for the nine months ended September 30, 2021, as compared to $1.4 million for the same period in 2020.
Membership Subscription Revenue
Membership subscription revenue decreased by $0.1 million, or 1.0%, to $8.3 million, for the three months ended September 30, 2021, as compared to $8.4 million for the same period in 2020. The decrease is due to a non-recurring adjustment of $1.8 million in the third quarter of 2020. Revenue would have increased $1.7 million during this period excluding this adjustment.
Membership subscription revenue increased by $0.9 million, or 4.1%, to $23.7 million, for the nine months ended September 30, 2021, as compared to $22.8 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 membership fee charged to customers as we still offered the higher priced ML Plus membership in the first and second quarter of 2020, and a non-recurring adjustment of $1.8 million in the third quarter of 2020. Revenue would have increased $2.7 million during this period excluding this adjustment.
Affiliates Income
Affiliates income increased by $2.7 million, or 512.9%, to $3.2 million, for the three months ended September 30, 2021, as compared to $0.5 million for the same period in 2020.2021. This increase was primarily attributable to an increase in income generated from running campaigns promoting variousthe acquisitions of Even Financial and MALKA, which significantly expanded the Company’s affiliate marketing platform, number of enterprise partners through ourand digital platform.media and content production services.
Affiliates income increased by $5.1 million, or 371.1%, to $6.4 million, for the nine months ended September 30, 2021, as compared to $1.4 million for the same period in 2020. This increase was primarily attributable to an increase in income generated from running campaigns promoting various affiliate partners through our digital platform.
Fee IncomeOperating Expenses
Fee income increased by $17.9 million, or 143.8%, to $30.4 million,The following table is reference for the three months ended September 30, 2021, as compared to $12.5 million for the same period in 2020.discussion that follows:
| Three Months Ended March 31, | Change (As Restated) | |||||||||||||||
2022 (As Restated) | 2021 | $ | % | |||||||||||||
| (In thousands, except for percentages) | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Provision for credit losses on consumer receivables | 23,044 | 5,708 | 17,336 | 303.7 | % | |||||||||||
| Compensation and benefits | 22,043 | 7,057 | 14,986 | 212.4 | % | |||||||||||
| Marketing | 11,416 | 4,363 | 7,053 | 161.7 | % | |||||||||||
| Direct costs | 21,204 | 9,903 | 11,301 | 114.1 | % | |||||||||||
| Professional services | 7,288 | 3,586 | 3,702 | 103.2 | % | |||||||||||
| Technology-related costs | 4,505 | 2,199 | 2,306 | 104.9 | % | |||||||||||
| Other operating expenses | 10,769 | 1,082 | 9,687 | 895.3 | % | |||||||||||
| Total operating expenses | 100,269 | 33,898 | 66,371 | 195.8 | % | |||||||||||
| Other (expense) income | ||||||||||||||||
| Interest expense | (6,174 | ) | (1,471 | ) | (4,703 | ) | 319.7 | % | ||||||||
| Change in fair value of warrant liability | 3,910 | (31,230 | ) | 35,140 | nm | |||||||||||
| Change in fair value of subordinated convertible notes | - | (39,939 | ) | 39,939 | nm | |||||||||||
| Change in fair value of contingent consideration from mergers and acquisitions | (4,660 | ) | - | (4,660 | ) | nm | ||||||||||
| Other (expense) income | (916 | ) | 27 | (943 | ) | nm | ||||||||||
| Total other (expense) income | (7,840 | ) | (72,613 | ) | 64,773 | -89.2 | % | |||||||||
| Income tax (benefit) expense | (28,417 | ) | 25 | (28,442 | ) | nm | ||||||||||
Fee income increased by $50.7 million, or 175.4%, to $79.7 million, for the nine months ended September 30, 2021, as compared to $28.9 million for the same period in 2020.
Fee income is primarily comprised of the following:
Instant transfer fees
Fee income related to instant transfer fees on Instacash, Credit Builder Plus loans and ML Plus loans increased by $13.8 million to $21.2 million, for the three months ended September 30, 2021, as compared to $7.5 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. This was slightly offset by the decrease in instant transfer fees on Credit Builder Plus loans as beginning in Q2 2021, the instant transfer disbursement option was removed for Credit Builder Plus loans.
Fee income related to instant transfer fees on Instacash, Credit Builder Plus loans and ML Plus loans increased by $37.3 million to $52.7 million, for the nine months ended September 30, 2021, as compared to $15.3 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. This was slightly offset by the decrease in instant transfer fees on Credit Builder Plus loans as beginning in Q2 2021, the instant transfer disbursement option was removed for Credit Builder Plus loans.
Tips
Fee income related to tips from Instacash increased by $2.6 million to $6.0 million, for the three months ended September 30, 2021, as compared to $3.3 million for the same period in 2020. This increase was driven by the growth of Instacash advances, across both existing and new customers
Fee income related to tips from Instacash increased by $8.1 million to $15.8 million, for the nine months ended September 30, 2021, as compared to $7.7 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 $1.2 million to $2.3 million, for the three months ended September 30, 2021, as compared to $1.2 million for the same period in 2020. This increase was driven by an increase in bank account customers.
Fee income related to interchange fees from our bank account increased by $5.0 million to $8.7 million, for the nine months ended September 30, 2021, as compared to $3.7 million for the same period in 2020. This increase was driven by an increase in bank account customers.
Cardholder fees
Fee income related to cardholder fees from our bank account increased by $0.4 million to $0.7 million, for the three months ended September 30, 2021, as compared to $0.3 million for the same period in 2020. This increase was primarily driven by a small monthly administration fee that we began charging our bank account customers in the third quarter of 2020 as well as an increase in bank account customers.
Fee income related to cardholder fees from our bank account increased by $1.0 million to $1.8 million, for the nine months ended September 30, 2021, as compared to $0.8 million for the same period in 2020. This increase was primarily driven by a small monthly administration fee that we began charging our bank account customers in the third quarter of 2020 as well as an increase in bank account customers.
Administration fees
Fee income related to administration fees from our managed investment account increased by $0.0 million to $0.2 million, for the three months ended September 30, 2021, as compared to $0.2 million for the same period in 2020.
Fee income related to administration fees from our managed investment account increased by $0.2 million to $0.7 million, for the nine months ended September 30, 2021, as compared to $0.5 million for the same period in 2020. We charge our investment account customers a small administration fee, which we transitioned from a quarterly to monthly frequency, while holding the fee amount the same, in the fourth quarter of 2020.
Credit-related decision services fees
Fee income related to credit-related decision services decreased to zero, for the three months ended September 30, 2021, as compared to $0.0 million for same period in 2020.
Fee income related to credit-related decision services decreased to zero, for the nine months ended September 30, 2021, as compared to $0.7 million for same period in 2020.
These decreases in revenue are 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.
Operating Expenses
Our operating expenses consist of the following:
Marketing
Marketing increased by $10.6 million, or 363.2% to $13.5 million for the three months ended September 30, 2021, as compared to $2.9 million for the same period in 2020. This increase resulted primarily from an increase in costs related to advertising through digital platforms of $9.3 million and other marketing related activities of $1.6 million, offset by a decrease in costs related to sponsor agreements with third parties of $0.3 million. Marketing costs also included $0.8 million in the third quarter of 2021 related to the Business Combination.
Marketing increased by $19.7 million, 265.5%, to $27.1 million for the nine months ended September 30, 2021, as compared to $7.4 million for the same period in 2020. This increase resulted primarily from an increase in costs related to advertising through digital platforms of $16.0 million, sponsor agreements with third parties of $0.2 million and other marketing related activities of $3.5 million. Marketing costs also included $1.1 million in the nine months ended September 30, 2021, related to the Business Combination.
Provision for losscredit losses on consumer receivables
Provision for losscredit losses on receivables increased by $4.8 million, or 45.7%, to $15.2 million for the three months ended September 30, 2021, as compared to $10.5 million for the same period in 2020. This increase resulted primarily from an increase to provision related to Instacash principal receivables of $3.7 million, Instacash instant transfer fees and tips of $1.2 million and Credit Builder Plus loan receivables of $0.0 million, both evidenced by the increase in total originations from $117 million for the three months ended September 30, 2020 compared to $274 million for the same period in 2021. Provision related to membership fees decreased by $2.3 million due to a non-recurring adjustment of $2.3 million in the third quarter of 2020. Provision related to membership fees would have decreased $0.0 million during this period excluding this adjustment. Related to the ML Plus loans, a legacy product we transitioned from in the second quarter of 2020, the provision increased by $2.2 million, from $(2.5) million in the three months ended September 30, 2020 compared to $(0.3) million for the same period in 2021.
Provision for loss on receivables increased by $22.1 million, or 151.2%, to $36.6 million for the nine months ended September 30, 2021, as compared to $14.6 million for the same period in 2020. This increase resulted primarily from an increase to provision related to Instacash of $18.4 million, Instacash instant transfer fees and tips of $2.9 million and Credit Builder Plus loan receivables of $1.1 million, both evidenced by the increase in total originations from $255 million for the nine months ended September 30, 2020 compared to $700 million for the same period in 2021. Related to the ML Plus loans, a legacy product we transitioned from in the second quarter of 2020, the provision increased by $2.2 million, from $(3.1) million in the nine months ended September 30, 2020 compared to $(0.9) million for the same period in 2021. These increases were offset by a decrease in provision related to membership fees of $2.5 million due to a non-recurring adjustment of $2.3 million in the third quarter of 2020. Provision related to membership fees would have decreased $0.1 million during this period excluding this adjustment.
Provision for loss onconsumer 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 loanconsumer 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 borrower’scustomer’s ability to pay.
Provision for credit losses on consumer receivables increased by $17.3 million, or 303.7%, to $23.0 million for the three months ended March 31, 2022, as compared to $5.7 million for the same period in 2021. This increase resulted primarily from an increase to provision related to Instacash advance receivables of $12.5 million, Instacash instant transfer fees and tips of $1.4 million and Credit Builder Plus loan receivables of $1.7 million, evidenced by the increase in Total Originations from approximately $189 million for the three months ended March 31, 2021 compared to approximately $408 million for the same period in 2022. Provision related to subscription 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 decreased by $0.4 million.
Other direct costsCompensation and benefits
Other direct costsCompensation and benefits increased by $0.6$15.0 million, or 54.5%212.4%, to $1.8$22.0 million for the three months ended September 30, 2021,March 31, 2022, as compared to $1.2$7.1 million for the same period in 2020.2021. This increase was driven primarily by $7.0 million of additional compensation and benefits expenses attributable to the acquisitions of Even Financial and MALKA, an increase in stock-based compensation of $2.9 million and a $1.2 million increase in discretionary incentive bonuses due to increased headcount throughout 2021.
Marketing
Marketing increased by $7.1 million, or 161.7%, to $11.4 million for the three months ended March 31, 2022, as compared to $4.4 million for the same period in 2021. This increase resulted primarily from an increase in costs related to our bank account offering, paid to our partner bank, card associationsadvertising through digital platforms of $3.4 million and third-party service providers, which is largely driven by the increase in bank account customers.other marketing-related activities of $3.8 million.
Direct costs
Other directDirect costs increased by $3.8$11.3 million, or 122.6%114.1%, to $7.0$21.2 million for the ninethree months ended September 30, 2021,March 31, 2022, as compared to $3.1$9.9 million for the same period in 2020.2021. The increase was primarily driven by $10.5 million of direct costs related to Even and MALKA, $2.2 million of increased payment processing fees and $0.7 million of increased underwriting expenses driven by growth in total originations and total customers; partially offset by a $2.1 million decrease in costs related to our bank account offering.
Professional services
Professional services increased by $3.7 million, or 103.2%, to $7.3 million for the three months ended March 31, 2022, as compared to $3.6 million for the same period in 2021. This increase resulted primarily from an increase in fees related to accounting and consulting services of $1.8 million and legal services of $1.6 million, supporting our public reporting and other transaction-related requirements.
Technology-related costs
Technology-related costs increased by $2.3 million, or 104.9%, to $4.5 million for the three months ended March 31, 2022, as compared to $2.2 million for the same period in 2021. This increase resulted primarily from an increase in costs related to our bank account offering, paidinternet hosting expenses of $0.6 million, software licenses and subscriptions of $0.8 million and depreciation and amortization related to our partner bank, card associationsequipment and third-party service providers, which is largelysoftware of $0.5 million.
Other operating expenses
Other operating expenses increased by $9.7 million to $10.8 million for the three months ended March 31, 2022, as compared to $1.1 million for the same period in 2021. The increase was driven by $2.4 million of additional amortization expenses which was primarily attributable to the increase in bank account customers.acquisitions of Even Financial and MALKA, $2.0 million of insurance-related expenses, $1.7 million related to a reserve for costs related to ongoing legal matters, and $1.8 million for other general operating expenses.
Our other (expense) income consists of the following:
Interest expense
Interest expense increased by $0.8$4.7 million, or 88.1%319.7%, to $1.6$6.2 million for the three months ended September 30, 2021,March 31, 2022, as compared to $0.9$1.5 million for the same period in 2020.2021. This increase resulted from an increase in interest expense incurred related to our debt.
Interest expense increased by $2.6 million, or 113.6%, to $4.9 million foraverage debt outstanding during the ninethree months ended September 30, 2021, asMarch 31, 2022 compared to $2.3 million for the same period in 2020. This increase resulted from an increase in interest expense incurred related to our debt.
Personnel expenses2021. See Part I, Item 1 “Financial Statements — Debt” for more information.
Personnel expense increased by $10.8 million, or 231.4%, to $15.5 million for the three months ended September 30, 2021, as compared to $4.7 million for the same period in 2020. This increase resulted from an increase in personnel related costs of $10.6 million, including $6.3 million in non-recurring, discretionary incentive bonus expense related to the Business Combination, and stock-based compensation of $0.2 million.
Personnel expense increased by $15.0 million, or 95.7%, to $30.7 million for the nine months ended September 30, 2021, as compared to $15.7 million for the same period in 2020. This increase resulted from an increase in personnel related costs of $13.7 million, including $6.3 million in non-recurring, discretionary incentive bonus expense related to the Business Combination, and stock-based compensation of $1.3 million.
Underwriting expenses
Underwriting expense increased by $1.0 million, or 89.8%, to $2.2 million for the three months ended September 30, 2021, as compared to $1.1 million for the same period in 2020. This increase resulted primarily from an increase in data costs and administrative fees for total originations.
Underwriting expense increased by $1.1 million, or 25.2%, to $5.7 million for the nine months ended September 30, 2021, as compared to $4.6 million for the same period in 2020. This increase resulted primarily from an increase in data costs for total originations.
IT expenses
IT expense decreased by $0.5 million, or 30.7%, to $1.2 million for the three months ended September 30, 2021, as compared to $1.7 million for the same period in 2020. This decrease resulted primarily from a decrease in software licenses and subscriptions of $0.8 million, which includes a non-recurring adjustment of $1.0 million in the third quarter of 2021. IT expense would have increased by $0.5 million during this period excluding this adjustment. This was offset by an increase in internet hosting expenses of $0.3 million.
IT expense decreased by $0.1 million, or 1.6%, to $5.0 million for the nine months ended September 30, 2021, as compared to $5.1 million for the same period in 2020. This decrease resulted primarily from a decrease in software licenses and subscriptions of $0.6 million, which includes a non-recurring adjustment of $1.0 million in the third quarter of 2021. IT expense would have increased by $0.9 million during this period excluding this adjustment. This was offset by an increase in internet hosting expenses of $0.5 million.
Bank and payment processor fees
Bank and payment processor fees increased by $3.1 million, or 83.1%, to $6.8 million for the three months ended September 30, 2021, as compared to $3.7 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.
Bank and payment processor fees increased by $9.5 million, or 106.1%, to $18.5 million for the nine months ended September 30, 2021, as compared to $9.0 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 $(6.6)a benefit of $3.9 million for the three months ended September 30, 2021,March 31, 2022, as compared to $(0.2)an expense of $31.2 million for the same period in 2020.
Change2021. The change in fair value of warrant liability was $42.2 million fordue to changes in inputs that drive the nine months ended September 30, 2021, as compared to $(0.2) million for the same period in 2020.warrant liability fair value calculations.
Change in fair value of subordinated convertible notes
Change in fair value of subordinated convertible notes was zerohad no expense for the three months ended September 30, 2021, asMarch 31, 2022 compared to zeroan expense of $39.9 million for the same period in 2020. The Subordinated Convertible Notesthree months ended March 31, 2021. There was no activity for the three months ended March 31, 2022 because the subordinated convertible notes were converted into common stock immediately prior to the Closing of the Business Combination and the noteholders subsequently received shares of MoneyLion Class A common stock (“MoneyLion Common Stock” or “MoneyLion Class A Common Stock”) upon the Closing of the Business Combination.
Change in fair value of subordinated convertible notes was $49.6 million for the nine months ended September 30, 2021, as compared to zero for the same period in 2020. This 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 Closing of the Business Combination, and2021; the noteholders subsequently received shares of MoneyLion Class A Common Stock upon the ClosingBusiness Combination Closing.
Change in fair value of the Business Combination.contingent consideration from mergers and acquisitions (As Restated)
Professional fees
Professional fees increased by $2.8 million, or 149.0%, toChange in fair value of contingent consideration from mergers and acquisitions was an expense of $4.7 million for the three months ended September 30, 2021,March 31, 2022, as compared to $1.9zero for the same period in 2021. No contingent consideration from mergers and acquisitions was outstanding for the three months ended March 31, 2021.
Other (expense) income
Other (expense) income decreased by $0.9 million to other expense of $0.9 million for the three months ended March 31, 2022, as compared to $0.0 million for the same period in 2020. This increase resulted primarily from an increase2021. The majority of other expense in feesthe three months ended March 31, 2022 was related to accounting or consulting services of $1.6 million and legal services of $1.2 million, resulting in partexpenses from supplemental accounting and legal support related todebt transactions during the Business Combination.period.
Professional fees increased by $8.2 million, or 181.6%, to $12.7 million for the nine months ended September 30, 2021, as compared to $4.5 million for the same period in 2020. This increase resulted primarily from an increase in fees related to accounting or consulting services of $5.5 million and legal services of $2.7 million, resulting in part from supplemental accounting and legal support related to the Business Combination.Income tax (benefit) expense
Other Operating Expenses
Other operating expenses increased by $8.5 million to $8.2 millionSee Part I, Item 1 “Financial Statements — Income Taxes” for an explanation of the significant income tax benefit recorded during the three months ended September 30, 2021, as compared to $(0.3) million for the same period in 2020. The increase is driven by $5.3 million in losses for unrecovered customer purchase transactions related to our banking product, $1.5 million related to a reserve for costs related to ongoing legal matters, $0.8 million insurance expenses and other general operating expenses.March 31, 2022.
Other operating expenses increased by $5.8 million to $6.2 million for the nine months ended September 30, 2021, as compared to $0.4 million for the same period in 2020. The increase is driven by $5.3 million in losses for unrecovered customer purchase transactions related to our banking product, $1.8 million related to a reserve for costs related to ongoing legal matters, $0.8 million insurance expenses and other general operating expenses. This is 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 balance of the PPP loan in the second quarter of 2021.
Non-GAAP Measures
In addition to total revenues,revenue, net, and net income (loss) and gross profit, which are measures presented in accordance with U.S. GAAP, management believes that adjusted revenueAdjusted Revenue, Adjusted Gross Profit and adjusted gross profitAdjusted EBITDA provide relevant and useful information which is widely used by analysts, investors and competitors in our industry in assessing performance. Adjusted revenueRevenue, Adjusted Gross Profit and adjusted gross profitAdjusted EBITDA are supplemental measures of MoneyLion’s performance that are neither required by nor presented in accordance with U.S. GAAP. Adjusted revenueRevenue, Adjusted Gross Profit and adjusted gross profitAdjusted EBITDA should not be considered as substitutes for U.S. GAAP metrics such as total revenues,revenue, 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 revenueAdjusted Revenue as total revenues,revenue, net plus amortization of loan origination costs less provision for loss on membershipsubscription receivables, provision for loss on fees receivables and revenue derived from products that have been phased out products. The definition of Adjusted Revenue previously removed non-operating income, which has been moved out of total revenue, net and non-operating income.into other (expense) income as part of our GAAP financial statement reclassification. We believe that adjusted revenueAdjusted Revenue provides a meaningful understanding of revenue from ongoing products and recurring revenue for comparability purposes.
We define adjusted gross profitAdjusted Gross Profit as gross profit less revenue derived from products that have been phased out products. The definition of Adjusted Gross Profit previously removed non-operating income, which has been moved out of total revenue, net and non-operating income.into other (expense) income as part of our GAAP financial statement reclassification. We define Adjusted 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 warrant liability, change in fair value of subordinated convertible notes, change in fair value of contingent consideration from mergers and acquisitions, stock-based compensation and one-time expenses less origination financing cost of capital. We believe that adjusted gross profit providesthese measures provide a meaningful understanding of onean aspect of profitability based on our current product portfolio.
Adjusted revenueRevenue, Adjusted Gross Profit and adjusted gross profitAdjusted EBITDA are useful to an investor in evaluating our performance because these measures:
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The reconciliation of total revenues,revenue, net to adjusted revenueAdjusted Revenue for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 is as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Total revenues, net | $ | 44,220 | $ | 23,117 | $ | 115,549 | $ | 56,861 | ||||||||
| Add back: | ||||||||||||||||
| Amortization of loan origination costs(1) | 464 | 207 | 1,039 | 1,364 | ||||||||||||
| Less: | ||||||||||||||||
| Provision for loss on receivables - membership receivables (2) | (1,025 | ) | (3,355 | ) | (2,204 | ) | (4,713 | ) | ||||||||
| Provision for loss on receivables - fees receivables (3) | (1,671 | ) | (479 | ) | (3,563 | ) | (632 | ) | ||||||||
| Revenue derived from products that have been phased out(4) | (6 | ) | (311 | ) | 119 | (2,167 | ) | |||||||||
| Non-operating income(5) | (3 | ) | (18 | ) | (6 | ) | (112 | ) | ||||||||
| Adjusted Revenue | $ | 41,979 | $ | 19,160 | $ | 110,935 | $ | 50,603 | ||||||||
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| (in thousands) | ||||||||
| Total revenues, net | $ | 69,714 | $ | 33,130 | ||||
| Add back: | ||||||||
| Amortization of loan origination costs1 | 324 | 81 | ||||||
| Less: | ||||||||
| Provision for credit losses on receivables - subscription receivables2 | (1,541 | ) | (234 | ) | ||||
| Provision for credit losses on receivables - fees receivables3 | (2,001 | ) | (615 | ) | ||||
| Revenue derived from products that have been phased out4 | (20 | ) | 124 | |||||
| Adjusted Revenue | $ | 66,477 | $ | 32,485 | ||||
| (1) | Amortization of loan origination costs are included within net interest income from finance receivables. |
| (2) | We deduct provision for |
| (3) | We deduct provision for credit losses on receivables related to fees receivables from total revenue, net as it is related to revenue-based receivables. For U.S. GAAP reporting purposes, provision for loss on receivables related to fees receivables is included within provision for loss on receivables on the statement of operations. Refer to Part I, Item 1 “Financial Statements — Summary of Significant Accounting Policies” for further discussion. |
| (4) | Revenue derived from products that have been phased out includes net interest income and fees related to unsecured personal loans, which are included within net interest income from finance receivables and fee income, respectively. Revenue from unsecured personal loans was zero and $(0.1) million for the three months ended March 31, 2022 and 2021, respectively. |
The reconciliation of gross profit, which is prepared in accordance with U.S. GAAP, to Adjusted Gross Profit for the three months ended March 31, 2022 and 2021 is as follows:
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| (in thousands) | ||||||||
| Total revenue, net | $ | 69,714 | $ | 33,130 | ||||
| Less: | ||||||||
| Cost of Sales | ||||||||
| Direct costs | (21,204 | ) | (9,903 | ) | ||||
| Provision for credit losses on receivables - subscription receivables1 | (1,541 | ) | (234 | ) | ||||
| Provision for credit losses on receivables - fees receivables2 | (2,001 | ) | (615 | ) | ||||
| Technology related costs | (2,461 | ) | (1,406 | ) | ||||
| Professional services | (1,056 | ) | (741 | ) | ||||
| Compensation and benefits | (1,014 | ) | (886 | ) | ||||
| Other operating expenses | (104 | ) | (50 | ) | ||||
| Gross Profit | $ | 40,333 | $ | 19,294 | ||||
| Less: | ||||||||
| Revenue derived from products that have been phased out3 | (20 | ) | 124 | |||||
| Adjusted Gross Profit | $ | 40,314 | $ | 19,418 | ||||
| (1) | We deduct provision for credit losses on receivables related to subscription receivables from total |
| (2) | We deduct provision for credit losses on receivables related to fees receivables from total revenue, net as it is related to revenue-based receivables. For U.S. GAAP reporting purposes, provision for loss on receivables related to fees receivables is included within provision for loss on receivables on the statement of operations. Refer to the |
| (3) | Revenue derived from products that have been phased out includes net interest income and fees related to unsecured personal loans, which are included within net interest income from finance receivables and fee income, |
The reconciliation of gross profit, which is prepared in accordance with U.S. GAAP, to adjusted gross profit for the three and nine months ended September 30, 2021 and 2020 is as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||
| Total revenue, net | $ | 44,220 | $ | 23,117 | $ | 115,549 | $ | 56,861 | ||||||||
| Less: | ||||||||||||||||
| Cost of Sales | ||||||||||||||||
| Bank and payment processor fees | (6,770 | ) | (3,697 | ) | (18,526 | ) | (8,987 | ) | ||||||||
| Underwriting expenses | (2,158 | ) | (1,137 | ) | (5,702 | ) | (4,553 | ) | ||||||||
| Provision for loss on receivables - membership receivables (1) | (1,025 | ) | (3,355 | ) | (2,204 | ) | (4,713 | ) | ||||||||
| Provision for loss on receivables - fees receivables (2) | (1,671 | ) | (479 | ) | (3,563 | ) | (632 | ) | ||||||||
| IT expenses | (1,633 | ) | (1,294 | ) | (4,493 | ) | (3,817 | ) | ||||||||
| Professional fees | (978 | ) | (632 | ) | (2,460 | ) | (2,037 | ) | ||||||||
| Personnel expenses | (1,015 | ) | (815 | ) | (2,805 | ) | (2,662 | ) | ||||||||
| Other direct costs | (1,828 | ) | (1,183 | ) | (6,983 | ) | (3,137 | ) | ||||||||
| Other operating (income) expenses | (184 | ) | 419 | (285 | ) | 337 | ||||||||||
| Gross Profit | $ | 26,960 | $ | 10,944 | $ | 68,529 | $ | 26,662 | ||||||||
| Less: | ||||||||||||||||
| Revenue derived from products that have been phased out(3) | (6 | ) | (311 | ) | 119 | (2,167 | ) | |||||||||
| Non-operating income(4) | (3 | ) | (18 | ) | (6 | ) | (112 | ) | ||||||||
| Adjusted Gross Profit | $ | 26,951 | $ | 10,614 | $ | 68,643 | $ | 24,383 | ||||||||
The reconciliation of net loss, which is prepared in accordance with U.S. GAAP, to Adjusted EBITDA for the three months ended March 31, 2022 and 2021 is as follows:
| Three Months Ended March 31, | ||||||||
2022 (As Restated) | 2021 | |||||||
| (in thousands) | ||||||||
| Net income (loss) | $ | (9,978 | ) | $ | (73,406 | ) | ||
| Add back: | ||||||||
| Interest related to corporate debt1 | 1,387 | 1,471 | ||||||
| Income tax expense (benefit) | (28,417 | ) | 25 | |||||
| Depreciation and amortization expense | 3,421 | 514 | ||||||
| Changes in fair value of warrant liability | (3,910 | ) | 31,230 | |||||
| Changes in fair value of subordinated convertible notes | - | 39,939 | ||||||
| Change in fair value of contingent consideration from mergers and acquisitions | 4,660 | - | ||||||
| Stock-based compensation expense | 3,268 | 518 | ||||||
| One-time expenses2 | 4,777 | 1,262 | ||||||
| Less: | ||||||||
| Origination financing cost of capital3 | - | (2,767 | ) | |||||
| Adjusted EBITDA | $ | (24,792 | ) | $ | (1,213 | ) | ||
| (1) | We add back the interest expense related to all outstanding corporate debt, excluding outstanding principal balances related to the Roar 1 SPV Credit Facility and the Roar 2 SPV Credit Facility. For U.S. GAAP reporting purposes, interest expense related to corporate debt is included within interest expense in the statement of operations. |
| (2) | We add back other one-time expenses, including those related to transactions, including mergers and acquisitions and financings, that occurred, litigation-related expenses and non-recurring costs or gains. Generally, these expenses are included within other expenses or professional fees in the statement of operations. |
| (3) | Origination financing cost of capital represents the preferred return attributable to IIA investors. This is included within temporary equity on historical consolidated balance sheets. Since we transitioned away from IIA in December 2021, this will have no impact on our Adjusted EBITDA going forward. |
Changes in Financial Condition as of September 30, 2021 andto March 31, 2022 from December 31, 20202021
| September 30, | December 31, | Change | March 31, | December 31, | Change | |||||||||||||||||||||||||||
| 2021 | 2020 | $ | % | 2022 | 2021 | $ | % | |||||||||||||||||||||||||
| (As Restated) | ||||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Cash and restricted cash | $ | 299,002 | $ | 20,927 | $ | 278,075 | 1328.8 | % | $ | 248,987 | $ | 246,224 | $ | 2,763 | 1.1 | % | ||||||||||||||||
| Receivables | 129,281 | 68,794 | 60,487 | 87.9 | % | |||||||||||||||||||||||||||
| Allowance for losses on finance receivables | (16,791 | ) | (9,127 | ) | (7,664 | ) | 84.0 | % | ||||||||||||||||||||||||
| Receivables, net | 112,490 | 59,667 | 52,823 | 88.5 | % | |||||||||||||||||||||||||||
| Consumer receivables | 153,634 | 153,741 | (107 | ) | -0.1 | % | ||||||||||||||||||||||||||
| Allowance for credit losses on consumer receivables | (22,291 | ) | (22,323 | ) | 32 | -0.1 | % | |||||||||||||||||||||||||
| Consumer receivables, net | 131,343 | 131,418 | (75 | ) | -0.1 | % | ||||||||||||||||||||||||||
| Enterprise receivables | 14,207 | 6,002 | 8,205 | 136.7 | % | |||||||||||||||||||||||||||
| Property and equipment, net | 588 | 502 | 86 | 17.1 | % | 2,140 | 1,801 | 339 | 18.8 | % | ||||||||||||||||||||||
| Goodwill and intangible assets, net | 29,606 | 30,840 | (1,234 | ) | -4.0 | % | 374,626 | 77,665 | 296,961 | 382.4 | % | |||||||||||||||||||||
| Other assets | 26,913 | 11,707 | 15,206 | 129.9 | % | 37,932 | 28,428 | 9,504 | 33.4 | % | ||||||||||||||||||||||
| Total assets | $ | 468,599 | $ | 123,643 | $ | 344,956 | 279.0 | % | $ | 809,235 | $ | 491,538 | $ | 317,697 | 64.6 | % | ||||||||||||||||
| Liabilities, Redeemable Convertible Preferred Stock, Redeemable Noncontrolling Interests and Stockholders’ Deficit | ||||||||||||||||||||||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
| Debt arrangements | $ | 43,626 | $ | 46,602 | $ | (2,976 | ) | -6.4 | % | |||||||||||||||||||||||
| Debt agreements | 240,915 | 186,591 | 54,324 | 29.1 | % | |||||||||||||||||||||||||||
| Accounts payable and accrued liabilities | 46,134 | 20,968 | 25,166 | 120.0 | % | 44,961 | 36,868 | 8,093 | 22.0 | % | ||||||||||||||||||||||
| Warrant liability | 22,916 | 24,667 | (1,751 | ) | -7.1 | % | 4,350 | 8,260 | (3,910 | ) | -47.3 | % | ||||||||||||||||||||
| Other liabilities | 91,881 | 38,135 | 53,746 | 140.9 | % | |||||||||||||||||||||||||||
| Total liabilities | 112,676 | 92,237 | 20,439 | 22.2 | % | 382,107 | 269,854 | 112,253 | 41.6 | % | ||||||||||||||||||||||
| Redeemable convertible preferred stock (Series A-1, A-2, A-3, B, B-2, C, C-1) | - | 288,183 | (288,183 | ) | - | |||||||||||||||||||||||||||
| Redeemable noncontrolling interests | 123,549 | 71,852 | 51,697 | 71.9 | % | |||||||||||||||||||||||||||
| Stockholders’ deficit: | ||||||||||||||||||||||||||||||||
| Common stock | 23 | - | 23 | - | ||||||||||||||||||||||||||||
| Redeemable convertible preferred stock (Series A) | 193,647 | - | 193,647 | nm | ||||||||||||||||||||||||||||
| Stockholders’ equity: | ||||||||||||||||||||||||||||||||
| Common Stock | 24 | 23 | 1 | 4.3 | % | |||||||||||||||||||||||||||
| Additional paid-in capital | 671,906 | - | 671,906 | - | 722,048 | 701,234 | 20,814 | 3.0 | % | |||||||||||||||||||||||
| Accumulated deficit | (429,855 | ) | (327,629 | ) | (102,226 | ) | 31.2 | % | (478,891 | ) | (469,873 | ) | (9,018 | ) | 1.9 | % | ||||||||||||||||
| Treasury stock | (9,700 | ) | (1,000 | ) | (8,700 | ) | - | (9,700 | ) | (9,700 | ) | - | 0.0 | % | ||||||||||||||||||
| Total stockholders’ deficit | 232,374 | (328,629 | ) | 561,003 | -170.7 | % | ||||||||||||||||||||||||||
| Total liabilities, redeemable convertible preferred stock, redeemable noncontrolling interests and stockholders’ deficit | $ | 468,599 | $ | 123,643 | $ | 344,956 | 279.0 | % | ||||||||||||||||||||||||
| Total stockholders’ equity | 233,481 | 221,684 | 11,797 | 5.3 | % | |||||||||||||||||||||||||||
| Total liabilities, redeemable convertible preferred stock and stockholders’ equity | $ | 809,235 | $ | 491,538 | $ | 317,697 | 64.6 | % | ||||||||||||||||||||||||
Assets
Cash and restricted cash
Cash and restricted cash increased by $278.1$2.8 million, or 1.1%, to $299.0$249.0 million as of September 30, 2021,March 31, 2022, as compared to $20.9$246.2 million as of December 31, 2020.2021. 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,Consumer receivables, net
Receivables,Consumer receivables, net increased by $52.8 million, or 88.5%, to $112.5remained stable at $131.3 million as of September 30, 2021,March 31, 2022, as compared to $59.7$131.4 million as of December 31, 2020.2021. The decrease in loan receivables from December 31, 2021 to March 31, 2022 was mostly offset by increases in Instacash receivables.
Enterprise receivables
Enterprise receivables increased by $8.2 million, or 136.7%, to $14.2 million as of March 31, 2022, as compared to $6.0 million as of December 31, 2021. 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 continues to see strong growth. This was 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. Referattributable to the “Resultsacquisition of Operations forEven Financial, which significantly expanded the ThreeCompany’s affiliate marketing platform and Nine Months Ended September 30, 2021 and 2020” section above for further discussion on the changes in revenues and provisions for loss on receivables.number of Enterprise Partners.
Goodwill and intangible assets, net
Goodwill and intangible assets, net increased by $297.0 million, or 382.4%, to $374.6 million as of March 31, 2022, as compared to $77.7 million as of December 31, 2021. This increase was attributable to the Even Acquisition, which closed in the first quarter of 2022.
Other assets
Other assets increased by $15.2$9.5 million, or 129.9%33.4%, to $26.9$37.9 million as of September 30, 2021,March 31, 2022, as compared to $11.7$28.4 million as of December 31, 2020.2021. This iswas primarily attributable to the new lease accounting standard adopted during the first quarter of 2022 which resulted in an increase in prepaid expensesoperating lease right-of-use asset of $8.5$8.7 million including $7.3 million in insurance premiums, and receivable from payment processor – debit card collectionsas of $6.1 million.March 31, 2022.
Liabilities
Debt arrangementsagreements
Debt arrangements decreasedagreements increased by $3.0$54.3 million, or 6.4%29.1%, to $43.6$240.9 million as of September 30, 2021,March 31, 2022, as compared to $46.6$186.6 million as of December 31, 2020. This decrease is attributable to the conversion of the fair value convertible note of $14.0 million, repayment of the $5.0 million related party loan and forgiveness of the PPP loan of $3.2 million, offset by the additional $20.0 million borrowings on the second lien loan.2021. Refer to the “Financing Arrangements” section belowPart I, Item 1 “Financial Statements — Debt” for further discussion on financing transactions during the period.
Accounts payable and accrued expenses (As Restated)
Accounts payable and accrued expenses increased by $25.2$8.1 million, or 120.0%22.0%, to $46.1$45.0 million as of September 30, 2021,March 31, 2022, as compared to $21.0$36.9 million as of December 31, 2020,2021, which iswas primarily attributable to an increase in operating expensesnew accounts payable and accruals of $10.1 million associated with Even Financial, which the Company acquired during the period and $11.1 millionfirst quarter of transaction costs related to the Business Combination that remain unpaid as of September 30, 2021. Refer to the “Results of Operations for the Three and Nine Months Ended September 30, 2021 and 2020” section above for further discussion on operating expense activity during the period.2022.
Warrant liability
Warrant liability decreased by $1.8$3.9 million, or 7.1%47.3%, to $22.9$4.4 million as of September 30, 2021,March 31, 2022, as compared to $24.7$8.3 million as of December 31, 2020.2021. Refer to the “Results“Results of Operations for the Three and Nine Months Ended September 30, 2021March 31, 2022 and 2020”2021” section above for further discussion on the change in fair value of warrant liabilityliability.
Other liabilities (As Restated)
Other liabilities increased by $53.7 million, or 140.9%, to $91.9 million as of March 31, 2022, as compared to $38.1 million as of December 31, 2021. The increase was primarily attributable to an increase in liabilities related to contingent consideration from mergers and acquisitions of $44.5 million primarily related to the Even Acquisition and an increase from the new lease accounting standard adopted during the period.first quarter of 2022 which resulted in operating lease liability of $8.7 million as of March 31, 2022.
Liquidity and Capital Resources
As a result of the Business Combination, we raised net proceeds of $301.1$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 Stockcommon 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, and the expansion of marketing activities.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. We continue to evaluate third-party sources of funding for our finance receivables. 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 Plus loans and Instacash advances, were primarily financed through IIA until the end of the fourth quarter of 2021. 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 March 31, 2022, there was an outstanding principal balance of $83 million under the ROAR 1 SPV Credit Facility and an outstanding principal balance of $73 million under the ROAR 2 SPV Credit Facility. See Part I, Item 1 “Financial Statements — Variable Interest Entities” for more information on the ROAR 1 SPV Credit Facility and ROAR 2 SPV Credit Facility.
The following table presents the Company’s cash, restricted cash and receivable from payment processor, as of September 30, 2021March 31, 2022 and December 31, 2020:2021:
| September 30, | December 31, | |||||||||||||||
| 2021 | 2020 | March 31, | December 31, | |||||||||||||
| (in thousands) | 2022 | 2021 | ||||||||||||||
| Cash | $ | 295,645 | $ | 19,406 | $ | 185,009 | $ | 201,763 | ||||||||
| Restricted cash | 3,357 | 1,521 | 63,978 | 44,461 | ||||||||||||
| Receivable from payment processor - Debit card collections | 11,679 | 5,600 | ||||||||||||||
| Receivable from payment processor - Other | 1,363 | 1,936 | ||||||||||||||
| Receivable from payment processor | $ | 18,309 | $ | 18,576 | ||||||||||||
Cash Flows
The following table presents cash (used in) provided by (used in) operating, investing and financing activities during the ninethree months ended September 30, 2021March 31, 2022 and 2020:2021:
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Net cash (used in) provided by operating activities | $ | (8,651 | ) | $ | 3,291 | |||
| Net cash used in investing activities | (42,279 | ) | (15,145 | ) | ||||
| Net cash provided by financing activities | 53,693 | 50,743 | ||||||
| Net increase in cash and restricted cash | $ | 2,763 | $ | 38,889 | ||||
| Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| (in thousands) | ||||||||
| Net cash provided by (used in) operating activities | $ | (2,062 | ) | $ | 1,402 | |||
| Net cash used in investing activities | (91,215 | ) | (23,505 | ) | ||||
| Net cash provided by financing activities | 371,352 | (941 | ) | |||||
| Net decrease in cash and restricted cash | $ | 278,075 | $ | (23,044 | ) | |||
Operating Activities
Net cash used in operating activities was $2.1$8.7 million for the ninethree months ended September 30, 2021 and was primarily dueMarch 31, 2022 compared to the net loss of $132.9 million and net cash outflow from changes in other assets of $15.2 million and gain on loan forgiveness of $3.2 million, offset by the provision for losses on receivables of $36.6 million, changes in accounts payable and accrued liabilities of $13.7 million, and stock compensation expense of $2.4 million. Other adjustments to arrive at net cash from operating activities include $42.2 million from the change in fair value of warrants and $49.6 million from the change in fair value of subordinated convertible notes.
Net cash provided by operating activities was $1.4of $3.3 million for the ninethree months ended September 30, 2020 andMarch 31, 2021. This was primarily due to thedriven by a decrease in profitability, after adjusting for non-cash activity included in our net loss, of $11.2approximately $13.1 million during the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily as the result of increases in operating expenses and interest expense, which were partially offset by increases in net cash outflow fromrevenues and changes in other assets of $4.2 million, offset by provision for losses on receivables of $14.6 million and stock compensation expense of $1.1 million.working capital.
Investing Activities
Net cash used in investing activities was $91.2$42.3 million and $15.1 million for the ninethree months ended September 30,March 31, 2022 and 2021, and was primarily due to net originations and collections on finance receivables, driven by growthrespectively. The increase in total originations.
Net cash used in investing activities was $23.5primarily related to a $7.8 million for the nine months ended September 30, 2020 and was primarily due toincrease in net originations and collections onof finance receivables and $18.6 million spent on the Even Acquisition, net of $22.5 million and purchases of property and equipment of $1.0 million.cash received, during the three months ended March 31, 2022.
Financing Activities
Net cash provided by financing activities was $371.4$53.7 million and $50.7 million for the ninethree months ended September 30,March 31, 2022 and 2021, and was primarily due to proceeds from the reverse capitalization, net of transaction costs (related to consummation of the Business Combination) of $301.1 million, contributions from redeemable noncontrolling interests of $53.0 million, proceeds from issuance of subordinated convertible notes of $36.8 million and borrowings from secured lenders of $20.0 million, offset by redeemed stock options of $10.7 million, redemption of founder’s common stock of $9.7 million, redemptions by redeemable noncontrolling interests of $4.6 million, distributions to redeemable noncontrolling interests of $7.1 million and repayment of a related party loan of $5.0 million.
Netrespectively. The increase in cash usedprovided by financing activities was $0.9 million forprimarily attributable to an increase in net proceeds from financing sources during the ninethree months ended September 30, 2020 and was primarily due to the repayments to secured lenders of $18.3 million, redemptions by redeemable noncontrolling interests of $13.1 million and distributions to redeemable noncontrolling interests of $3.0 million, offset by borrowings from secured lenders of $16.7 million, issuance of Series C-1 redeemable convertible preferred stock of $12.0 million and proceeds from the issuance of a related party loan of $5.0 million.March 31, 2022.
Financing Arrangements
The following transactions have provided MoneyLion with liquidity and cash resources.
Secured Loans
Secured Bank Loan— In September 2018, the Company entered into a Loan and Security Agreement (“Secured Bank Loan”) with a bank for a 6.75% $20 million loan. Interest only was payable monthly through September 27, 2019. AccordingRefer to the terms ofPart I, Item 1 “Financial Statements — Debt” for further discussion on financing transactions during the Secured Bank Loan, the outstanding principal on that date was converted to a term loan payable with principal and interest payable in 36 monthly installments, maturing on September 27, 2022. The loan was secured 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. Under the terms of the Secured Bank Loan, the Company was subject to certain covenants, as defined, including the requirement to maintain a cash balance, as defined, at the bank of $15 million. The Secured Bank Loan was paid off in 2020.
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 $5.0 million. The Second Lien Loan bears interest at the greater of (a) 12%, and (b) a fluctuating rate of interest per annum equal to the Wall Street Journal Prime Rate plus 5.75%, not to exceed 15%. Interest only is payable until April 30, 2022, and thereafter outstanding principal will be repaid in twelve equal installments through the facility maturity date of May 1, 2023. The Second Lien Loan is 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 IIA and all of the related SPVs. Under the terms of the Loan and Security Agreement the Company is 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 $25.0 million, 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 $5.0 million principal balance owed to MLi Subdebt Facility 1 LLC, together with accrued interest and fees. As of September 30, 2021, the $20.0 million principal balance owed to affiliates of Monroe Capital Management Advisors, LLC remains outstanding.
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 million first-lien loan facility consisting of a $20.0 million revolving credit line and $5.0 million term loan. The revolving line bears interest at the greater of (i) Wall Street Journal Prime Rate+2.25% and (ii) 6.50%. The revolving line matures on May 1, 2022. The term loan bears interest at the greater of (i) Wall Street Journal Prime Rate+3.25% and (ii) 7.50%. Interest only on the term loan was payable until September 1, 2021, and thereafter outstanding principal is payable in thirty-nine equal installments through the facility maturity date of May 1, 2024. The First Lien Loan is 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. Under the terms of the Loan and Security Agreement, the Company is subject to certain covenants, as defined. Additionally, the Company granted the bank lender warrants to receive 12,792 shares of the Company’s common stock at an exercise price as defined in the First Lien Loan. The Company used the First Lien Loan proceeds to repay in full the Secured Bank Loan and for general corporate purposes.
Secured Debt Agreements — In March 2018, and then in April 2018, IIA Notes SPV II LLC and IIA Notes SPV III LLC, indirect wholly owned subsidiaries of the Company, entered into Loan and Security Agreements (the “Secured Debt Agreements”) with separate lenders establishing a total credit facility of a minimum of $20.0 million, which could have been increased to $27.0 million upon mutual agreement between the lenders and the Company. Borrowings under these agreements were secured by a security interest in certain consumer finance loans. These agreements matured at various dates through 2020 and carried a total interest rate of 14%. The Company borrowed a total of $22.0 million under these credit facilities. In January 2019, the Company repaid $11.0 million of the outstanding Secured Debt. As of December 31, 2019, the balance due under the Secured Debt Agreements was $11.0 million. In August 2020, IIA Notes SPV III repaid in full the approximately $11.5 million that was outstanding under the Secured Debt Agreements and terminated the facility.
Subordinated Convertible Notes— In December 2020, the Company sold to a third-party lender $10 million of 3% subordinated convertible notes maturing on July 31, 2021, the proceeds of which were used to conduct its business. In January 2021, as part of the same series of notes issued in December 2020, the Company sold to third-party lenders $36.8 million maturing on July 31, 2021 (collectively, the “Subordinated Convertible Notes”). On July 22, 2021, the Subordinated Convertible Notes were amended to extend their maturity date to September 30, 2021. The Company elected the fair value option to account for the Subordinated Convertible Note and recorded it at fair value and subsequently remeasured it to fair value at the reporting date. Changes in fair value were recognized as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss. The Subordinated Convertible Notes were converted into common stock immediately prior to the Closing of the Business Combination., and the noteholders subsequently received 10,068,133 shares of MoneyLion Class A Common Stock upon the Closing of the Business Combination. Prior to the conversion, the carrying value of the convertible notes was $100.3 million.
Other
In August 2016, the Company entered into a $50 million credit and security agreement (the “2016 Credit Agreement”) with a lender for the funding of finance receivables. The 2016 Credit Agreement allowed for increases in the maximum borrowings under the agreement up to $500 million, bore interest at a rate as defined in the 2016 Credit Agreement and matures in February 2023. The 2016 Credit Agreement also required the Company to adhere to certain financial covenants along with certain other financial reporting requirements. 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 Closing of the Business Combination by mutual agreement of the Company and the lender; there 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. The warrants vested in tranches based upon the occurrence of certain advance events. Through September 30, 2021, all tranches were exercised and converted into MoneyLion Common Stock in connection with the Business Combination.
In April 2020, the Company borrowed $3.2 million from a bank under the SBA’s 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 application for forgiveness with respect to the entire outstanding balance of the PPP Loan.
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 million credit agreement (the “ROAR 1 SPV Credit Facility”) with a lender for the funding of finance receivables, which secure the SPV Credit Facility. The ROAR 1 SPV Credit Facility allows for increases in maximum borrowings under the agreement of up to $200 million, bears interest at a rate of 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 September 30, 2021, there was no outstanding principal balance.
Equity
Common Stock
After the Closing of the Business Combination, MoneyLion’s new Charter 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
Each share of Legacy MoneyLion’s redeemable convertible preferred stock was convertible at the option of the holder, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into a number of fully paid and non-assessable shares of common stock as is 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 upon the closing of the Business Combination.period.
Contractual Obligations
The table below summarizes debt, lease and other long-term minimum cash obligations outstanding as of DecemberMarch 31, 2020:2022:
| Payments Due by Period | ||||||||||||||||||||
| Total | 2021 | 2022 – 023 | 2024 – 2025 | Thereafter | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| First lien loan | $ | 25,000 | $ | 1,111 | $ | 23,334 | $ | 555 | $ | — | ||||||||||
| Subordinated convertible notes, at fair value | 14,000 | 14,000 | — | — | — | |||||||||||||||
| Second lien loan | 5,000 | — | 5,000 | — | — | |||||||||||||||
| Other debt | 3,207 | — | 3,207 | — | — | |||||||||||||||
| Operating lease obligations | 2,519 | 1,119 | 822 | 578 | — | |||||||||||||||
| Total | $ | 49,726 | $ | 16,230 | $ | 32,363 | $ | 1,133 | $ | — | ||||||||||
| Total | Remainder 2022 | 2023 – 2024 | 2025 – 2026 | Thereafter | ||||||||||||||||
| Monroe Term Loans | 90,000 | - | 20,000 | 70,000 | - | |||||||||||||||
| ROAR 1 SPV Credit Facility | 83,000 | - | - | 83,000 | - | |||||||||||||||
| ROAR 2 SPV Credit Facility | 73,000 | - | - | 73,000 | - | |||||||||||||||
| Operating lease obligations | 12,722 | 1,733 | 5,553 | 3,764 | 1,672 | |||||||||||||||
| Total | $ | 258,722 | $ | 1,733 | $ | 25,553 | $ | 229,764 | $ | 1,672 | ||||||||||
Secured Loans and Other Debt
For more information regarding our secured loans and other debt, see Part I, Item 1 “Financial Statements — Debt” in this Quarterly Report on Form 10-Q/A.
Equity
Series A Redeemable Convertible Preferred Stock
In connection with the acquisition of Even Financial, the Company issued 28,693,931 shares of Series A Redeemable Convertible Preferred Stock. For more information regarding the Series A Redeemable Convertible Preferred Stock, see Part I, Item 1 “Financial Statements — Common and Preferred Stock.”
Off-Balance Sheet Arrangements
At September 30, 2021,March 31, 2022, the Company did not have any material off-balance sheet arrangements.
Critical Accounting Policies and Estimates
See Note 2 to our unaudited interim financial statements included elsewhere in this Quarterly Report on Form 10-QPart I, Item 1 “Financial Statements — Summary of Significant Accounting Policies” for a description of Critical Accounting Policies.critical accounting policies and estimates.
Recently Issued and Adopted Accounting Pronouncements
See Note 2 to our unaudited interim financial statements included elsewhere in this Quarterly Report on Form 10-QPart I, Item 1 “Financial Statements — Summary of Significant Accounting Policies” for a description of recently issued accounting pronouncements that may potentially impact our results of operations, financial condition or cash flows.
Item 3. Quantitative and Qualitative DisclosureDisclosures 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 RateRates 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 lot 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, and future funding arrangements may, bear a variable interest rate. 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 March 31, 2022, would result in an approximately $0.9 million impact to annual interest expense.
Emerging Growth Company
MoneyLion is an emerging growth company, as defined in the JOBS Act. The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards applicable to public companies, allowing them to delay the adoption of those standards until those standards would otherwise apply to private companies. MoneyLion has elected to use this extended transition period under the JOBS Act. Further, the financial statements of MoneyLion also take advantage of the extended transition period for complying with new or revised accounting standards applicable to public companies. As a result, following the Business Combination, MoneyLion’s consolidated financial statements may not be comparable to the financial statements of companies that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make common stock less attractive to investors.
Item 4. 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:
| ● | the manner in which the Company accounted for the conversion of subordinated convertible notes and exercise of stock warrants into equity in connection with the Business Combination Closing, as the subordinated convertible notes and the stock warrants should have been marked to fair value as of the Business Combination Closing, with the related change in fair value recorded in operating expenses before the liabilities were reclassified to equity, instead of reclassifying these liabilities to equity based on their June 30, 2021 fair value measurement; and |
| ● | the failure to include the impact of dilutive securities in the calculation of diluted net income per share for the three months ended September 30, 2021. |
Further information about the Q3 2021 Restatement is described in 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 Q1 2022 Financial Statements
For information about the restatement of the financial statements and related financial information included in the Company’s FY 2021 10-K (the “FY 2021 Restatement”) and the restatement of the Original Financial Statements and related financial information pursuant to this Amendment (the “Q1 2022 Restatement” and together with the Q3 2021 Restatement and the FY 2021 Restatement, the “Restatements”), see the Explanatory Note to this Amendment and Note 2, “Restatement of Previously Issued Financial Statements,” to the unaudited consolidated financial statements included in Part I, Item 1 “Financial Statements” of this Amendment.
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 Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), such as this Quarterly Report on Form 10-Q/A, is recorded, processed, summarized, and reported within the time period specified in the Securities and Exchange Commission’sSEC’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) and 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) and chief financial officer (principal financial officer), the effectiveness of our disclosure controls and procedures as of September 30, 2021,March 31, 2022, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officerschief executive officer (principal executive officer) and chief financial officer (principal financial officer) concluded that, in light of the Restatements, as of September 30, 2021,well as the related material weakness identified in connection therewith, our disclosure controls and procedures were effective. not effective as of March 31, 2022. As a result, we performed additional analysis as deemed necessary to ensure that our consolidated financial statements included in this Quarterly Report on Form 10-Q/A were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q/A present fairly, in all material respects, our financial position, result of operations and cash flows for the periods presented.
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 March 31, 2022 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.
In connection with our remediation efforts of the material weakness in our internal control over financial reporting 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 design 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 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.
PARTPart II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are a partysubject to various litigationclaims and legal proceedings in the ordinary course of business, including 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, incidental to the conductincluding 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, and could materially and adversely impact our business. Refer to Note 17 (Commitmentbusiness, financial condition, operating results and Contingencies) to the consolidated financial statements included incash flows. See Part I, Item 11A “Risk Factors — Risks Relating to Legal and Regulatory Matters — Unfavorable outcomes in legal proceedings may harm our business and results of thisoperations” in our Annual Report on Form 10-Q.10-K/A for the fiscal year ended December 31, 2021 filed with the SEC on August 11, 2022.
The Company isState Regulatory Examinations and Investigations
We hold a number of state licenses in connection with our business activities and must comply with various licensing, compliance and other requirements in the states in which we operate. In most states in which we operate, one or more regulatory agencies have authority with respect to regulation and enforcement under applicable state laws, and we may also be subject to regulatorythe supervisory and examination authority of state regulators. 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 respect to our activities in California, we received a report of examination in 2020 from the California Department of Financial Protection and Innovation (the “CA DFPI”). In October 2020, the Company received a report of examination for regarding MoneyLion of California, LLC, our subsidiary, and a follow-up request for information in May 2021. The report of examination identified certain compliance exceptionsThis matter is ongoing, and requiredwe intend to continue to fully cooperate with the Company to take corrective actions, including customer refunds relating to legacy loan products that the Company no longer offers. The Company isCA DFPI in the process of completing the required corrective actions and has enhanced its policies and procedures for compliance with applicable provisions of the California Financial Code going forward.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 intendsWe intend 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 Companyus 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 the MOUthese CA DFPI matters are unknown at this time.
In 2019, 2020 and 2021,We are also in the Company receivedprocess of responding to Civil Investigative Demands (the “CIDs”(“CIDs”) or other investigatory requests relating to our provision of consumer financial services from the Consumer Financial Protection Bureau (“CFPB”)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
We have received and are in the process of responding to CIDs from the CFPB relating to our compliance with the Military Lending Act and our membership model. The CompanyWe will continue to provide to the CFPB all of the information and documents required by the CIDs and intendsintend to continue to fully cooperate with the CFPB in this investigation. The investigation is ongoing and any potential impact on our financial condition or operations are unknown at this time.
With respect to the MoneyLion’s activities in Colorado, the CompanySEC Investigation
We have received a report of examination in 2021 from the Colorado Department of Law’s Consumer Protection Unit (“Colorado Consumer Protection Unit”) regarding MoneyLion of Colorado, LLC, our subsidiary. The report of examination identified certain compliance exceptions and required the Company to take corrective actions relating to our recordkeeping and customer disclosures, and potentially including customer refunds on certain loans. The Company isare in the process of responding to the Colorado Consumer Protection Unit’s report of examination and requests for information and intends to take all corrective actions required to maintain compliance with applicable Colorado state law going forward.
With respect to MoneyLion’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 MoneyLion’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 membership program but continued the investigation into lending activity. The Company has fully cooperated with the Minnesota DOC in the investigation. The Company is in the process of finalizing a resolution with the Minnesota DOC with respect to the prior lending activity. The Company does not expect that this resolution will have any material impact on its financial condition or operations.
In February and March 2021, the Company received investigative subpoenas from the SecuritiesSEC concerning IIA, which primarily held assets from institutional investors, and Exchange Commission concerningwas our primary source of funding for originated receivables through the Invest in America Credit Fund 1. The Company isend of the fourth quarter of 2021. We are cooperating with the investigation which is at an early stage, and cannot predict its outcome or any potential impact on our financial condition or operations.
With respect to MoneyLion’s activities in Virginia, the Company received CIDs from the office of the Attorney General of the Commonwealth of Virginia in October 2021 relating to our lending activity in Virginia. We are cooperating with the investigation, which is at an early stage, and we cannot predict its outcome or any potential impact on our financial condition or operations.
Item 1A. Risk Factors
As of the date of this Quarterly Report on Form 10-Q,10-Q/A, there have been no material changes to the risk factors disclosed in our Registration StatementAnnual Report on Form S-1,10-K/A, filed with the SEC on October 20, 2021.August 11, 2022. However, we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On September 22, 2021, weFebruary 17, 2022, MoneyLion issued 25,000,000to the equityholders of Even Financial an aggregate of 28,164,811 shares of Series A Redeemable Convertible Preferred Stock with a face value of $10.00 per share, issued an aggregate of 529,120 shares of Series A Redeemable Convertible Preferred Stock to advisors of Even Financial for transaction expenses and 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 and advisors of Even Financial are also entitled to receive an additional payment from MoneyLion of up to an aggregate of 8.0 million shares of Series A Redeemable Convertible Preferred Stock, with a face value of $10.00 per share, based on the Even Financial Earnout.
On March 28, 2022 and March 31, 2022, in connection with MoneyLion’s acquisition of MALKA, MoneyLion issued 1,209,592 and 2,958,116 restricted shares of MoneyLion Class A Common Stock, respectively, to certain qualified institutional buyersJeffrey Frommer, Lyusen Krubich, Daniel Fried and accredited investors that agreedPat Capra, the former shareholders of MALKA, pursuant to purchase such shares in connection with the Business Combination for aggregate considerationearnout and make-whole provisions of $250,000,000.the Membership Interest Purchase Agreement governing the MALKA Acquisition.
TheSuch offers, sales and issuances of theMoneyLion securities described in the preceding paragraph were deemed to be exempt from registration either under Rule 701 promulgated under the Securities Act or Rule 701,of 1933, as amended (the “Securities Act”), in that the transactions were under compensatory benefit plans and contracts relating to compensation, or underreliance on Section 4(a)(2) of the Securities Act in that theas transactions were betweenby an issuer and its employees and did not involve anyinvolving a public offering within the meaning of Section 4(a)(2).offering. The recipients of such securities were our employees, directors or consultants and receivedin each of these transactions acquired the securities under our equity incentive plans.
Purchasesfor investment only and not with a view to or for sale in connection with any distribution thereof. No underwriters were involved in any of Equity Securities by the Issuer and Affiliated Purchasersforegoing transactions.
| Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum That may Yet Be Purchased Under the Plans or Programs | ||||||||||||
| September 1 - September 30, 2021(1) | 2,244,130 | $ | 10.00 | - | $ | - | ||||||||||
| Total | 2,244,130 | $ | 10.00 | - | $ | - | ||||||||||
Item 3. DefaultsDefault Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
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.
| * | Filed herewith. |
| ** | The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q/A 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. |
| † | 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). The registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit or an unredacted copy of the exhibit, as applicable, to the SEC upon request. |
SIGNATURESIGNATURES
Pursuant to the requirements 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.
| Date: | By: | /s/ Richard Correia |
Richard Correia Chief Financial Officer and Treasurer (Principal Financial Officer) | ||
| Date: August 11, 2022 | By: | /s/ Mark Torossian |
Mark Torossian (Principal Accounting Officer) | ||
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