The accompanying notes are an integral part of
these consolidated financial statements.
The accompanying notes are an integral part of
these consolidated financial statements.
The accompanying notes are an integral part of
these consolidated financial statements.
The accompanying notes are an integral part of
these consolidated financial statements.
NOTES TO 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 Business Combination Closing Date, “Fusion”
and after the 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 Business Combination Closing Date, “MoneyLion” or the “Company”, and after the
Business Combination Closing Date, “Legacy MoneyLion”), a Delaware corporation.
Pursuant to the terms of the Merger Agreement,
immediately upon the completion of the Business Combination and the other transactions contemplated by the Merger Agreement (the “Business
Combination Closing”), each of the following transactions occurred in the following order: (i) Merger Sub merged with and into Legacy
MoneyLion, with Legacy MoneyLion surviving the merger as a wholly owned subsidiary of Fusion (the “Merger”); (ii) Legacy MoneyLion
changed its name to “MoneyLion Technologies Inc.”; and (iii) Fusion changed its name to “MoneyLion Inc.” Following
the Business Combination, MoneyLion Inc. became a publicly traded company, with Legacy MoneyLion, 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 MoneyLion Class A Common Stock to the
PIPE Investors for $10.00 per share, for an aggregate commitment amount of $250,000 (the “PIPE Financing”). Pursuant to the
Subscription Agreements, Fusion gave certain re-sale registration rights to the PIPE Investors with respect to the PIPE Shares. The PIPE
Financing was consummated substantially concurrently with the Business Combination Closing.
MoneyLion 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 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 variable interest entities (“VIEs”) for which the Company is the primary
beneficiary. All intercompany transactions and balances have been eliminated in consolidation. The Company does not have any items of
other comprehensive loss; therefore, there is no difference between net loss and comprehensive loss for the three months ended March 31,
2022 and 2021.
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 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
consolidated financial statements contain all adjustments, consisting of normal recurring adjustments and adjustments to eliminate intercompany
transactions and balances, necessary for a fair presentation of its financial position and its results of operations, changes in redeemable
convertible preferred stock, redeemable noncontrolling interests and stockholders’ equity (deficit) and cash flows.
The Company’s accounting policies are set
forth in Part II, Item 8 “Summary of Significant Accounting Policies” of the Company’s Notes to Consolidated Financial
Statements included in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021. Included herein are
certain updates to those policies.
Revenue Recognition and Related Receivables—The
following 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 individual subscription agreements, as the control of the membership services is delivered
to the customer evenly throughout that term. Subscription receivables are recorded at the amount billed to the customer. The Company policy
is to suspend recognition of subscription revenue when the last scheduled subscription payment is 30 days past due, or when, in the Company’s
estimation, the collectability of the account is uncertain. Membership subscription revenue is recognized gross over time.
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 related accrued interest receivables on loan-related receivables are accrued based upon the daily principal amount outstanding
except for loans that are on nonaccrual status. The Company recognizes interest income using the interest method. The Company’s
policy is to suspend recognition of interest income on finance receivables and place the loan on nonaccrual status when the account is
60 days or more past due on a contractual basis or when, in the Company’s estimation, the collectability of the account is uncertain,
and the account is less than 90 days contractually past due.
Enterprise service revenues—The Company
provides services to enterprise clients to allow them to better connect with existing end-users and reach new potential end-users. These
services include lead generation services, advertising services and digital media and content production services custom designed to promote
enterprise clients’ products and services.
The Company has a single performance obligation
to provide lead generating services to financial 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 not limited to cost per funded loan, cost per approved
credit card, cost per click or cost per savings accounts, or revenue share based on successful lead conversion. The transaction fees and
revenue share are considered revenue from contracts with Product Partners, including financial institutions and other financial service
providers. These fees and revenue share to which 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 distinct services,
the Company applies the variable consideration exception and allocates the variable consideration to the period in which the fees are
earned, and recognizes revenue over time.
The Company generates advertising fees by displaying
ads on the Company’s mobile application and by sending emails or other messages to potential end-users to promote the enterprise
clients’ services. For advertising services, the Company enters into agreements with the enterprise clients in the form of a signed
contract, which specifies the terms of the services and fees, prior to running advertising and promotional campaigns. The Company recognizes
revenue from the display of impression-based ads and distribution of impression-based emails in the period in which the impressions
are delivered in accordance with the contractual terms of the enterprise clients’ arrangements. Impressions are considered delivered
when a member clicks on the advertisement or promotion.
Digital media and content production services
provided to enterprise clients are generally earned and recognized over time as the performance obligations within the contracts are satisfied.
Payment terms vary from contract to contract such that collections may occur in advance of services being rendered, as services are rendered
or after services are rendered. Contracts for digital media and content production services are typically short-term in duration.
Allowance for Losses on Receivables—An
allowance for losses on consumer receivables is established to provide for probable losses incurred in the Company’s consumer receivables
at the balance sheet date and is established through a provision for losses on receivables. Charge-offs, net of recoveries, are charged
directly to the allowance. The allowance is based on management’s assessment of many factors, including changes in the nature, volume,
and risk characteristics of the consumer receivables portfolio, including trends in delinquency and charge-offs and current economic conditions
that may affect the consumer’s ability to pay. The allowance is developed on a general basis and each period management assesses
each product type by origination cohort in order to determine the forecasted performance of those cohorts and arrive at an appropriate
allowance rate for that period. While management uses the best information available to make its evaluation, future adjustments to the
allowance may be necessary if there are significant changes in any of the factors.
The Company’s charge-off policy is to charge-off
finance receivables for loans and related accrued interest receivables, net of expected recoveries, in the month in which the account
becomes 90 days contractually past due and charge-off finance receivables for advances and related fee receivables in the month in which
the account becomes 60 days past due. If an account is deemed to be uncollectable prior to this date, the Company will charge-off the
receivable in the month it is deemed uncollectable.
The Company determines the past due status using
the contractual terms of the finance receivables. This is the credit quality indicator used to evaluate the required allowance for losses
on finance receivables for each portfolio of products.
An allowance for losses on service and subscription
fee receivables is established to provide probable losses incurred in the Company’s service and subscription fee receivables at
the balance sheet date and is established through a provision for losses on receivables. Charge-offs, net of recoveries, are charged directly
to the allowance. The allowance is based on management’s assessment of historical charge-offs and recoveries on these receivables,
as well as certain qualitative factors including current economic conditions that may affect the customers’ ability to pay. Prior
to the period ended June 30, 2021, the allowance related to these receivables had not been material to the consolidated financial statements.
Receivables from enterprise services have a low
rate of default, and as such the related allowance is not material. The Company monitors enterprise receivable default rates for any indication
of a deterioration in average credit quality that may result in more material levels of allowance for losses.
Intangible Assets—The Company’s
intangible assets are made up of internal use software and acquired proprietary technology, customer relationships and trade names. The
Company capitalizes qualifying internal use software development costs that are incurred during the application development stage, provided
that management with the relevant authority authorizes the project, it is probable the project will be completed, and the software will
be used to perform the function intended. Costs incurred during the application development stage internally or externally are capitalized
and amortized on a straight-line basis over the expected useful life of three to seven years depending on the nature of the software
development. Costs related to preliminary project activities and post-implementation operation activities, including training and
maintenance, are expensed as incurred.
Stock-Based Compensation—The
Company accounts for the restricted stock units (“RSUs”) and performance share units (“PSUs”) granted to employees
or directors as stock-based compensation expense based on their grant date fair value. The 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 assessed each reporting period and expense related to these PSUs is adjusted by
a factor consistent with the expected performance as of the reporting date.
The Company accounts for its stock options granted
to employees or directors as stock-based compensation expense based on their grant date fair value. The Company uses 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 the
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 the Company’s consolidated statement of operations. Forfeitures are accounted for
as they are incurred.
Valuation of consideration transferred related
to mergers and acquisitions— The Company determined that the contingent 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. For provisions that do not meet all the criteria for equity treatment, the contingent consideration
is required to be recorded at fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the contingent consideration are recognized as a non-cash gain or loss on the statements of operations. As such, the MALKA and
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 MALKA and Even Financial contingent consideration was estimated using a Monte Carlo Simulation Model.
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.
Leases—Effective January 1, 2022,
arrangements containing leases are evaluated as an operating or finance lease at lease inception. No finance leases were identified. For
operating leases, the Company 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. 2016-02, the Company recognized an aggregate lease liability
and right-of-use asset of $3,551, calculated based on the present value of the remaining minimum lease payments for qualifying leases
as of January 1, 2022. The cumulative-effect adjustment recognized to the beginning balance of retained earnings was not material. The
adoption of the new guidance did not impact the Company’s unaudited consolidated interim statements of operations or cash flows.
Recently Issued Accounting Pronouncements Not
Yet Adopted—The Company currently qualifies as an “emerging growth company” under the Jumpstart Our Business Startups
Act of 2012. Accordingly, the Company has the option to adopt new or revised accounting guidance either (i) within the same periods
as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods applicable to private companies.
The Company has elected to adopt new or revised accounting guidance within the same time period as private companies, unless, as indicated
below, management determines it is preferable to take advantage of early adoption provisions offered within the applicable guidance.
In 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 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 believes the adoption impact of ASU 2019-12 will not 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
London 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 has no significant contracts based on LIBOR
as of March 31, 2022. As such, the Company currently does not intend to elect the optional expedients and exceptions.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt
With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies the accounting for
certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s
own equity. The updated standard will be effective for the Company on January 1, 2024; however, early adoption of the ASU is permitted
on January 1, 2021. The Company is in process of evaluating the impact that the updated standard will have on its consolidated financial
statements and related disclosures.
4. BUSINESS COMBINATION
On September 21, 2021, Fusion held a Special Meeting
(the “Special Meeting”) at which the Fusion stockholders considered and adopted, among other matters, the Merger Agreement
and the transactions contemplated therein (the “Business Combination Transactions”). On September 22, 2021, the parties to
the Merger Agreement consummated the Business Combination Transactions and the MoneyLion Class A Common Stock and Public Warrants
(as defined herein) began trading on the NYSE under the symbols “ML” and “ML WS”, respectively. See Part II, Item
8 “Business Combination” in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021 further
discussion of these matters.
5. CONSUMER RECEIVABLES
The Company’s finance receivables consist
of secured personal loans and principal amounts of Instacash advances. Accrued interest receivables represent the interest accrued on
the loan receivables based upon the daily principal amount outstanding. Fees receivables represent the amounts due to the Company for
tips and instant transfer fees related to the Instacash advance product. Subscription receivables represent the amounts billed to customers
for subscription services. The credit quality and future repayment of consumer receivables are dependent upon the customer’s ability
to perform under the terms of the agreement. Factors such as unemployment rates and housing values, among others, may impact the customer’s
ability to perform under the loan or advance terms. When assessing provision for losses on consumer receivables, the Company takes into
account the composition of the outstanding consumer receivables, charge-off rates to date and the forecasted principal loss rates. The
tables below show consumer receivables balances as of March 31, 2022 and December 31, 2021 and the consumer receivables activity, charge-off
rates and aging by product for the three months ended March 31, 2022 and 2021.
Consumer receivables consisted of the following:
| |
March 31, | | |
December 31, | |
| |
2022 | | |
2021 | |
Unsecured personal loan receivables | |
$ | - | | |
$ | 1 | |
Secured personal loan receivables | |
| 71,610 | | |
| 77,491 | |
Loan receivables | |
| 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 losses on consumer
receivables were as follows:
| |
Three Months Ended
March 31, | |
| |
2022 | | |
2021 | |
Beginning balance | |
$ | 22,323 | | |
$ | 9,127 | |
Provision for credit losses on receivables | |
| 23,044 | | |
| 5,708 | |
Receivables charged off | |
| (37,284 | ) | |
| (14,436 | ) |
Recoveries | |
| 14,208 | | |
| 9,828 | |
Ending balance | |
$ | 22,291 | | |
$ | 10,227 | |
Changes in the allowance for losses on finance
receivables were as follows:
| |
Three Months Ended
March 31, | |
| |
2022 | | |
2021 | |
Beginning balance | |
$ | 21,625 | | |
$ | 9,127 | |
Provision for credit losses on receivables | |
| 19,502 | | |
| 4,859 | |
Finance receivables charged off | |
| (32,958 | ) | |
| (12,962 | ) |
Recoveries | |
| 13,269 | | |
| 9,203 | |
Ending balance | |
$ | 21,438 | | |
$ | 10,227 | |
Changes in the allowance for losses on fees receivable were as follows:
| |
Three Months Ended March 31, | |
| |
2022 | | |
2021 | |
Beginning balance | |
$ | 420 | | |
$ | - | |
Provision for credit losses on receivables | |
| 2,001 | | |
| 615 | |
Fees receivable charged off | |
| (2,708 | ) | |
| (948 | ) |
Recoveries | |
| 779 | | |
| 333 | |
Ending balance | |
$ | 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 | | |
$ | - | |
The following is an assessment of the repayment
performance of loans as of March 31, 2022 and December 31, 2021 and presents the contractual delinquency of the loans receivable portfolio:
| |
March 31, 2022 | | |
December 31, 2021 | |
| |
Amount | | |
Percent | | |
Amount | | |
Percent | |
Current | |
$ | 60,642 | | |
| 84.7 | % | |
$ | 66,514 | | |
| 85.8 | % |
| |
| | | |
| | | |
| | | |
| | |
Delinquency: | |
| | | |
| | | |
| | | |
| | |
31 to 60 days | |
| 5,887 | | |
| 8.2 | % | |
| 6,577 | | |
| 8.5 | % |
61 to 90 days | |
| 5,081 | | |
| 7.1 | % | |
| 4,401 | | |
| 5.7 | % |
Total delinquency | |
| 10,968 | | |
| 15.3 | % | |
| 10,978 | | |
| 14.2 | % |
Loan receivables before allowance for loan losses | |
$ | 71,610 | | |
| 100.0 | % | |
$ | 77,492 | | |
| 100.0 | % |
The following is an assessment of the repayment
performance of Instacash receivables as of March 31, 2022 and December 31, 2021 and presents the contractual delinquency of the Instacash
receivables portfolio:
| |
March 31, 2022 | | |
December 31, 2021 | |
| |
Amount | | |
Percent | | |
Amount | | |
Percent | |
Current | |
$ | 60,364 | | |
| 90.2 | % | |
$ | 55,963 | | |
| 89.1 | % |
| |
| | | |
| | | |
| | | |
| | |
Delinquency: | |
| | | |
| | | |
| | | |
| | |
31 to 60 days | |
| 6,587 | | |
| 9.8 | % | |
| 6,820 | | |
| 10.9 | % |
61 to 90 days | |
| - | | |
| 0.0 | % | |
| - | | |
| 0.0 | % |
Total delinquency | |
| 6,587 | | |
| 9.8 | % | |
| 6,820 | | |
| 10.9 | % |
Instacash receivables before allowance for loan losses | |
$ | 66,951 | | |
| 100.0 | % | |
$ | 62,783 | | |
| 100.0 | % |
The following is an assessment of the repayment
performance of fees receivable as of March 31, 2022 and December 31, 2021 and presents the contractual delinquency of the fees receivable
portfolio:
| |
March 31, 2022 | | |
December 31, 2021 | |
| |
Amount | | |
Percent | | |
Amount | | |
Percent | |
Current | |
$ | 7,725 | | |
| 80.7 | % | |
$ | 6,682 | | |
| 79.9 | % |
| |
| | | |
| | | |
| | | |
| | |
Delinquency: | |
| | | |
| | | |
| | | |
| | |
31 to 60 days | |
| 1,842 | | |
| 19.3 | % | |
| 1,684 | | |
| 20.1 | % |
61 to 90 days | |
| - | | |
| 0.0 | % | |
| - | | |
| 0.0 | % |
Total delinquency | |
| 1,842 | | |
| 19.3 | % | |
| 1,684 | | |
| 20.1 | % |
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 | % |
6. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
| |
March 31, | | |
December 31, | |
| |
2022 | | |
2021 | |
Leasehold improvements | |
$ | 486 | | |
$ | 545 | |
Furniture and fixtures | |
| 612 | | |
| 573 | |
Computers and equipment | |
| 2,230 | | |
| 2,209 | |
Construction in process | |
| 33 | | |
| - | |
| |
| 3,361 | | |
| 3,327 | |
Less: accumulated depreciation | |
| (1,221 | ) | |
| (1,526 | ) |
Furniture and equipment, net | |
$ | 2,140 | | |
$ | 1,801 | |
Total depreciation expense related to property
and equipment was $230 and $63 for the three months ended March 31, 2022 and 2021, respectively.
7. INTANGIBLE ASSETS
Goodwill 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:
| |
| |
March 31, | | |
December 31, | |
| |
Useful Life | |
2022 | | |
2021 | |
Proprietary technology and capitalized internal-use software | |
3 - 7 years | |
$ | 34,791 | | |
$ | 11,623 | |
Work in process | |
| |
| 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 | |
| |
| (8,934 | ) | |
| (5,760 | ) |
Intangible assets, net | |
| |
$ | 212,948 | | |
$ | 25,124 | |
For the three months ended March 31, 2022 and
2021, total amortization expense was $3,191 and $451, respectively.
The following table summarizes estimated future
amortization expense of intangible assets placed in service at March 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 | |
8. OTHER ASSETS
Other assets consisted of the following:
| |
March 31, | | |
December 31, | |
| |
2022 | | |
2021 | |
Receivable from payment processors | |
$ | 18,309 | | |
$ | 18,576 | |
Prepaid expenses | |
| 8,370 | | |
| 8,836 | |
Operating lease right-of-use assets | |
| 8,722 | | |
| - | |
Other | |
| 2,531 | | |
| 1,016 | |
Total other assets | |
$ | 37,932 | | |
$ | 28,428 | |
9. VARIABLE INTEREST ENTITIES
The following table summarizes the VIEs’
assets and liabilities included in the Company’s consolidated financial statements, after intercompany eliminations, as of 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.
10. DEBT
The Company’s debt as of March 31, 2022
and December 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:
|
● |
$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”). |
In connection with the foregoing, the Company
borrowed Term A-1 Loans in an aggregate principal amount of $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 facility 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 Company and its subsidiaries.
With respect to the Term A-2 Loans, pursuant to the Monroe Credit Agreement, the lenders thereunder were deemed to have rolled over their
$20.0 million aggregate principal amount of term loans outstanding under the Borrower’s existing second lien loan with affiliates
of Monroe Capital (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.
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 is required to pay a premium ranging from 0.00% to 3.00% of the principal amount of
such prepayment depending on the Monroe Term Loans repaid and the date of the prepayment, plus, in the case of any Monroe Term Loans other
than Term A-2 Loans and in the event the prepayment occurs within 12 months after the closing date, all interest that would have otherwise
been payable on the amount of the principal prepayment from the date of prepayment to and including the date that is 12 months after the
closing date.
The Monroe Credit Agreement contains customary
representations and warranties and customary affirmative and negative covenants, including financial covenants with respect to minimum
adjusted revenue, EBITDA, liquidity and unrestricted cash (all as defined in the Monroe Credit Agreement). The negative covenants, among
other things, limit or restrict the ability of the “Loan Parties” (as defined in the Monroe Credit Agreement) and their subsidiaries
to: incur additional indebtedness; incur additional liens; make dividends, distributions and other restricted payments; merge, consolidate,
sell, transfer, dispose of, convey or lease assets or equity interests; purchase or otherwise acquire assets or equity interests; modify
organizational documents; enter into certain transactions with affiliates; enter into restrictive agreements; engage in other business
activities; and make investments.
The obligations under the Monroe Credit Agreement
are guaranteed by MoneyLion Inc., as parent, and each of its direct and indirect existing and future wholly-owned subsidiary, other than
SPVs, certain foreign subsidiaries, certain regulated subsidiaries and certain other excluded subsidiaries (the “Guarantors”).
The Monroe Credit Agreement is entered into by MoneyLion Technologies Inc. The Monroe Credit Agreement is secured with a perfected, first-priority
security interest in substantially all tangible and intangible assets of MoneyLion Technologies Inc. and each Guarantor, subject to certain
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.
11. LEASES
All long-term leases identified by the Company
are classified as operating leases. Lease expenses related to long-term leases were $620 for the 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 right-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 March 31, 2022 consolidated balance sheet.
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 maintained a valuation allowance of $66,049 and $83,153, respectively. The valuation allowance was recorded due to the fact that
the Company has incurred operating losses to date.
Realization of deferred tax assets is dependent
upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset
by a valuation allowance. The valuation allowance decreased by approximately $17,100 during the three months ended March 31, 2022 and
increased by approximately $22,800 during the three months ended March 31, 2021.
The 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 valuation allowance due to the change in the overall net deferred tax asset. While this adjustment is
a result of the Even Acquisition, ASC 805 requires that the benefits be recognized in income or equity, as applicable, and not as a component
of acquisition accounting. The partially offsetting increase to the valuation allowance of approximately $11,300 was in relation to normal
business operations.
Total 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 has completed a review to determine
whether the future utilization of net operating loss and credit carryforwards will be restricted due to ownership changes that have occurred.
The study determined that there will be no limit after December 31, 2025. Due to the net operating loss carryovers, the statute 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 entitled 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 Company’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 the election of directors. Generally, all matters to be voted on by the 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 holders 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 the 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 holders of any shares of the preferred stock MoneyLion may issue in the future.
Series A Redeemable Convertible Preferred Stock—Each
holder of the 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 and 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 Legacy MoneyLion Common Stock as could be determined by dividing the applicable original issue
price by the applicable conversion price in effect at the time of conversion.
Pursuant to the Merger Agreement, all outstanding
shares of Legacy MoneyLion’s redeemable convertible preferred stock automatically converted into 116,264,374 shares of
MoneyLion Class A Common Stock after giving effect to the Exchange Ratio upon the Business Combination Closing. See Part II, Item 8 “Business
Combination” in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021 for further discussion
of the Business Combination.
14. STOCK-BASED COMPENSATION
2021 Stock Incentive 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
option to purchase shares of Legacy MoneyLion Common Stock (a “Legacy MoneyLion Option”) that was outstanding and unexercised
as of immediately prior to the Business 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 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 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 Options was to provide the holders with awards of equal
value to the original awards. Accordingly, the impact of the conversion was such that the number of shares issuable under the modified
awards and the related exercise prices were adjusted using the Exchange Ratio with all other terms remaining unchanged. The conversion
ratio adjustment was without substance (akin to a stock split), and therefore, the effect of the change in the number of shares and the
exercise price and share value were equal and offsetting to one another. As a result, the fair value of the modified awards was equal
to the fair value of the awards immediately before the modification and, therefore, there was no incremental compensation expense to be
recognized. There were no changes to the vesting period within the 2021 Plan.
Stock-based compensation of $3,268 and $518 was
recognized during the three months ended March 31, 2022 and 2021, 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 for the three months ended March 31, 2022:
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 warrants outstanding to purchase an aggregate of 17,500,000 shares of
the MoneyLion Class A Common Stock (the “Public Warrants”) and private placement warrants outstanding to purchase an aggregate
of 8,100,000 shares of the MoneyLion Class A Common Stock (the “Private Placement Warrants”).
The Public Warrants meet the conditions for equity
classification in accordance with ASC 815-40. At the time of the 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. The Private Placement Warrants are accounted for as
liabilities in accordance with ASC 815-40 and are presented within warrant liability on the consolidated balance sheets. The warrant liability
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
liability in the consolidated statement of operations.
The Private Placement Warrants were valued using
a Black-Scholes Option Pricing Model, which is calculated using Level 3 inputs. The primary unobservable input utilized in determining
fair value of the Private Placement Warrants is the expected volatility of the MoneyLion Class A Common Stock.
The following table presents the quantitative
information regarding Level 3 fair value measurement of the Private Placement Warrants:
| |
March 31, | |
| |
2022 | |
Strike price | |
$ | 11.50 | |
Expected Volatility | |
| 68 | % |
Expected Dividend | |
| - | |
Expected Term in Years | |
| 4.48 | |
Risk Free Interest Rate | |
| 2.43 | % |
Warrant Value Per Share | |
$ | 0.54 | |
The following table presents the changes in the
liability related to the Private Placement Warrants:
| |
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
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 the fiscal year ended December
31, 2021.
16. NET LOSS PER SHARE (As Restated)
The following table sets forth the computation
of net loss per common share for the three months ended March 31, 2022 and 2021:
| |
Three Months Ended
March 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Numerator: | |
| | |
| |
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 | ) |
Denominator: | |
| | | |
| | |
Weighted-average common shares outstanding - basic and diluted (1) | |
| 230,737,284 | | |
| 48,348,187 | |
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 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 4, “Business Combination,” for details. |
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 receive
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 for the three months ended March 31, 2022 and 2021.
The following potential common shares have been
excluded from the computation of diluted net loss per share for the three months ended March 31, 2022 and 2021:
| |
March 31, | |
| |
2022 | | |
2021 | |
Conversion of convertible preferred stock (1) | |
| 28,693,931 | | |
| 116,264,374 | |
Warrants to purchase common stock and redeemable convertible preferred stock (1) | |
| 25,599,889 | | |
| 14,738,710 | |
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 | |
| 136,987,426 | | |
| 172,093,809 | |
| (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 4, “Business Combination” for details. |
17. COMMITMENTS AND CONTINGENCIES
Legal Matters—The Company is subject
to regulatory examination by the California Department of Financial Protection and Innovation (the “CA DFPI”). With respect
to its activities in California, the Company received a report of examination in 2020 from the CA DFPI regarding MoneyLion of California,
LLC, MoneyLion’s subsidiary, and a follow-up request for information in May 2021. This matter is ongoing, and the Company intends
to continue to fully cooperate with the CA DFPI in this matter. In addition, the CA DFPI is currently conducting an industry-wide investigation
of companies that provide earned wage access products and services, including Instacash. The Company intends to continue cooperating fully
in this investigation and to that end entered into a memorandum of understanding (“MOU”) with the CA DFPI on February 23,
2021. The MOU requires the Company to regularly provide certain information to the CA DFPI and adhere to certain best practices regarding
Instacash while the CA DFPI continues to investigate. Any potential impacts on the Company’s financial condition or operations relating
to these CA DFPI matters are unknown at this time.
The Company is also in the process of responding
to Civil Investigative Demands (“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 (the “CFPB”) relating to the Company’s compliance with the Military
Lending Act and its 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 the Company’s financial condition or operations are unknown at this time.
We have received and are in the process of responding
to investigative subpoenas from the SEC concerning IIA, which primarily held assets from institutional investors and was the Company’s
primary source of funding for originated receivables through the end of the fourth quarter of 2021. The Company is cooperating with the
investigation and cannot predict its outcome or any potential impact on the Company’s financial condition or operations.
18. 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.
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
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 requiring disclosure.
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations
The following Management’s
Discussion and Analysis of Financial Condition and Results of Operations summarizes the significant factors affecting the consolidated
operating results, financial condition, liquidity and capital resources of MoneyLion and is intended to help the reader understand MoneyLion,
our operations and our present business environment. This discussion should be read in conjunction with MoneyLion’s unaudited consolidated
financial statements and notes to those financial statements included in Part I, Item 1 “Financial Statements” within this
Quarterly 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 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.
This Management’s Discussion
and Analysis 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 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.
Overview
MoneyLion is a leading digital
financial 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 are offered through our marketplace and network affiliate partners. We engage
and educate our customers with daily, money-related and money-adjacent content, delivered through a hyper-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 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:
RoarMoney 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 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 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 Wealth 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 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 to their recurring income deposits. Customers can access Instacash
advances at any time during a regular deposit period up to their advance limit, providing customers with the flexibility to cover temporary
cash needs and avoid costly overdraft fees. There are no fees associated with regular delivery of funds to either a RoarMoney account
(typically delivered within 12-48 hours) or an external checking account (typically delivered within two to five business
days). However, customers have the option to pay an additional fee in order to receive their funds on an expedited basis (typically within
minutes or less), the amount of which is based on the amount of the disbursement and whether the funds are delivered to a RoarMoney account
or an external checking account. Customers may also choose to leave MoneyLion an optional tip for use of the Instacash service. We earn
revenue from tips and instant transfer fees, both reflected in service and subscription fees.
Credit Builder Plus —
Our Credit Builder Plus membership program offers a proven path for our customers to access credit and establish or rebuild history, build
savings, establish financial literacy and track their financial health. For a monthly cost of $19.99, customers receive a suite of services
including banking and investment accounts, credit tracking and financial literacy content, rewards programs and access to loans of up
to $1,000 at competitive rates offered by MoneyLion lending subsidiaries, allowing our customers to establish up to twelve months
of payment history with all three credit bureaus. We offer our Credit Builder Plus members access to the Lion’s Share Loyalty Program,
where members can earn rewards of up to $19.99 per month. We earn revenue from monthly subscription fees paid by our customers. These
fees are reflected in service and subscription fees. As part of the Credit Builder Plus membership program, members may apply for a Credit
Builder Plus secured personal loan. In addition to a free standard disbursement option, we also offered our customers an option to disburse
their funds to their MoneyLion-serviced RoarMoney bank account or external bank account on an expedited basis for an instant transfer
fee. This instant disbursement option for Credit Builder Plus loans was removed in the second quarter of 2021. 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 service and subscription fees.
Financial Tracking
— We offer our customers access to financial tracking tools such as Financial Heartbeat, GamePlan and credit score tracking. Financial
Heartbeat is an intelligent, automated tool that guides customers on their financial journey. Financial Heartbeat evaluates customers’
financial situation across four key dimensions: SAVE (savings and financial preparedness), SPEND (spending and personal
budget), SHIELD (insurance needs and coverage) and SCORE (credit tracking and health). Through our easy-to-use interface,
customers can review the key issues impacting their financial situation, decide what actions to take, evaluate which products to use and
receive guidance on how to stay motivated on their journey towards financial wellness. GamePlan provides our customers with a personalized
action plan, including a checklist with tasks, meant to help them reach their financial goals across different categories such as spending,
saving and more. Financial tracking tools are offered to our customers at no cost and we do not earn revenue from these services.
MoneyLife —
Consistent with our vision of establishing MoneyLion as a lifestyle brand, in 2021 we introduced MoneyLife, an online financial education
content destination. MoneyLife is an influencer-focused, video content-driven educational platform where customers can share and discover
ideas, advice and insights regarding their financial lives. 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 and increase customer engagement and
cross-sell opportunities for both MoneyLion and 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.
Even Financial
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 —
The COVID-19 pandemic has caused substantial changes in consumer behavior, restrictions on business and individual activities and high
unemployment rates, which led to reduced economic activity and may continue to cause economic volatility. There continue to be significant
uncertainties associated with the COVID-19 pandemic, including with respect to the course, duration and severity of the virus and additional
variants, future actions that may be taken by governmental authorities and private businesses to contain the COVID-19 pandemic or to mitigate
its impact and the effectiveness of such actions, the timing and speed of economic recovery and the ultimate effectiveness of vaccinations
for COVID-19.
In response to the economic
uncertainty caused by the pandemic, during 2021, we made certain operational changes and implemented certain consumer support programs
which were immaterial to our performance. For example, we reduced our marketing activities such as advertising through digital platforms,
which have since returned to pre-pandemic levels and also reduced our sponsorship arrangements with third parties. In addition, we implemented
underwriting policy changes on a targeted basis to more closely manage credit risk while we further evaluated market conditions. Our underwriting
models are dynamic relative to real time changes in our customer’s income and credit profiles and our credit performance remained
steady as our underwriting models quickly adapted to these changes. To further support our customers, we expanded our payment deferral
options and reduced certain fees, while providing them with relevant content and resources on topics like unemployment insurance and stimulus
checks. For instance, for our secured personal loan customers with no prior missed payments, we offered payment 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 allowed them to change the scheduled repayment date by up to 14 days. Once the advance
was repaid, the customer could request another change to the scheduled repayment on another 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 advance. Despite the economic uncertainty as a result
of COVID-19, we have increased the number of customers on our platform.
Management will continue to
monitor the nature and extent of potential impact to the business as the pandemic continues.
Business Combinations (As
Restated) — Since January 1, 2021, we have completed the following business combinations:
|
● |
Merger with Fusion – On September 22, 2021, Legacy MoneyLion completed the Business Combination with Fusion and became a publicly traded company. The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP, for which Legacy MoneyLion was determined to be the accounting acquirer. Since the Business Combination was accounted for as a reverse recapitalization, no goodwill or other intangible assets were recorded, in accordance with U.S. GAAP. Under this method of accounting, Fusion was treated as the “acquired” company for financial reporting purposes. Operations prior to the Business Combination are those of Legacy MoneyLion. See Part II, Item 8 “Business Combination” in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021 for additional information. |
|
● |
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 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 25% of our Credit Builder Plus members who met the minimum eligibility criteria received a Lion’s
Share reward.
Product mix
We offer various products
and services on our platform, including a membership program, loans, cash advances, affiliate offers and cryptocurrency, investment and
bank accounts. 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 were primarily financed through IIA until the end of the fourth quarter of 2021. Beginning in the fourth quarter of 2021,
we transitioned our primary source of funding for originated receivables from IIA to special purpose 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 Originations
as the dollar volume of the secured personal loans originated and cash advances funded within the stated period. We consider Total Originations
to be a key performance metric as it can be used to measure the usage and engagement of the customers across our secured personal lending
and Instacash products and is a significant driver of net interest income on finance receivables and service and subscription fees. Total
Originations were $408 million and $189 million for the three months ended March 31, 2022 and 2021, respectively, and were originated
directly by MoneyLion.
Adjusted Revenue
Adjusted Revenue is defined
as total revenue, net, plus amortization of loan origination costs less provision for loss on subscription receivables, provision for
loss on fees receivables and revenue derived from phased out products. We believe that Adjusted Revenue provides a meaningful understanding
of revenue from ongoing products and recurring revenue for comparability purposes. Adjusted Revenue is a non-GAAP measure and should not
be viewed as a substitute for total revenue, net. Refer to the “Non-GAAP Measures” section below for further discussion.
Our Adjusted Revenue is further
broken into the following categories:
| |
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
Revenue across the categories of consumer revenue and enterprise revenue helps provide our management with a better understanding of Adjusted
Revenue by type and may help to inform strategic pricing and resource allocations across our products.
Adjusted Gross Profit and Adjusted EBITDA
Adjusted Gross Profit is defined
as gross profit less revenue derived from phased out products. Adjusted EBITDA is defined as net income (loss) plus interest expense related
to corporate debt, income tax expense (benefit), depreciation and amortization expense, change in fair value of warrants, change in fair
value of subordinated convertible notes, 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 Adjusted Gross Profit and Adjusted EBITDA provide a meaningful
understanding of an aspect of profitability based on our current product portfolio. These are non-GAAP measures and should not be viewed
as a substitute for gross profit nor net income (loss). Refer to the “Non-GAAP Measures” section below for further
discussion.
Results of Operations for the Three Months
Ended March 31, 2022 and 2021
Revenues
The following table is reference
for the discussion that follows.
| |
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 various product-related fees, providing membership subscriptions, performing enterprise services and originating loans.
Total revenues increased by
$36.6 million, or 110.4%, to $69.7 million for the three months ended March 31, 2022, as compared to $33.1 million for the same period
in 2021.
Service and subscription fees
Service and subscription fees
increased by $15.9 million, or 52.3%, to $46.4 million for the three months ended March 31, 2022, as compared to $30.5 million for the
same period in 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 income on finance 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 $0.9 million, or 54.5%, to $2.6 million for the three months ended March 31, 2022, as compared to $1.7 million
for the same period in 2021. The increase in net interest income on finance receivables was driven by an over 40% year-over-year origination
growth on our Credit Builder Plus loan program across both existing and new customers. The amortization of loan origination costs increased
by $0.1 million to $0.3 million for the three months ended March 31, 2022, as compared to $0.2 million for the same period in 2021.
Enterprise service revenues
Enterprise service revenues
increased by $19.8 million, or 1,983.5%, to $20.8 million for the three months ended March 31, 2022, as compared to $1.0 million for the
same period in 2021. This increase was primarily attributable to the acquisitions of Even Financial and MALKA, which significantly expanded
the Company’s affiliate marketing platform, number of enterprise partners and digital media and content production services.
Operating Expenses
The following table is reference
for the 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 | |
Our operating expenses consist
of the following:
Provision for credit losses on consumer receivables
Provision for credit losses
on consumer receivables consists of amounts charged during the period to maintain an allowance for credit and advance losses. The allowance
represents management’s estimate of the credit losses in our consumer receivable portfolio and is based on management’s assessment
of many factors, including changes in the nature, volume and risk characteristics of the consumer receivables portfolio, including trends
in delinquency and charge-offs and current economic conditions that may affect the customer’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.
Compensation and benefits
Compensation and benefits
increased by $15.0 million, or 212.4%, to $22.0 million for the three months ended March 31, 2022, as compared to $7.1 million for the
same period in 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 advertising through digital platforms of $3.4 million and other
marketing-related activities of $3.8 million.
Direct costs
Direct costs increased by
$11.3 million, or 114.1%, to $21.2 million for the three months ended March 31, 2022, as compared to $9.9 million for the same period
in 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 internet hosting expenses of $0.6 million, software licenses
and subscriptions of $0.8 million and depreciation and amortization related to equipment and software 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 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 $4.7 million, or 319.7%, to $6.2 million for the three months ended March 31, 2022, as compared to $1.5 million for the same period
in 2021. This increase resulted from an increase in average debt outstanding during the three months ended March 31, 2022 compared to
the same period in 2021. See Part I, Item 1 “Financial Statements — Debt” for more information.
Change in fair value of warrant liability
Change in fair value of warrant
liability was a benefit of $3.9 million for the three months ended March 31, 2022, as compared to an expense of $31.2 million for the
same period in 2021. The change in fair value of warrant liability was due to changes in inputs that drive the warrant liability fair
value calculations.
Change in fair value of subordinated convertible
notes
Change in fair value of subordinated
convertible notes had no expense for the three months ended March 31, 2022 compared to an expense of $39.9 million for the three 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 Business Combination Closing in September 2021; the noteholders subsequently received
shares of MoneyLion Class A Common Stock upon the Business Combination Closing.
Change in fair value of contingent consideration
from mergers and acquisitions (As Restated)
Change in fair value of contingent
consideration from mergers and acquisitions was an expense of $4.7 million for the three months ended March 31, 2022, as compared to zero
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 2021. The majority of other expense in the three months ended March 31, 2022 was related to expenses from debt transactions during
the period.
Income tax (benefit) expense
See Part I, Item 1 “Financial
Statements — Income Taxes” for an explanation of the significant income tax benefit recorded during the three months ended
March 31, 2022.
Non-GAAP Measures
In addition to total revenue,
net, net income (loss) and gross profit, which are measures presented in accordance with U.S. GAAP, management believes that Adjusted
Revenue, Adjusted Gross Profit and Adjusted EBITDA provide relevant and useful information which is widely used by analysts, investors
and competitors in our industry in assessing performance. Adjusted Revenue, Adjusted Gross Profit and Adjusted EBITDA are supplemental
measures of MoneyLion’s performance that are neither required by nor presented in accordance with U.S. GAAP. Adjusted Revenue, Adjusted
Gross Profit and Adjusted EBITDA should not be considered as substitutes for U.S. GAAP metrics such as total 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 Revenue
as total revenue, net plus amortization of loan origination costs less provision for loss on subscription receivables, provision for loss
on fees receivables and revenue derived from phased out products. The definition of Adjusted Revenue previously removed non-operating
income, which has been moved out of total revenue, net and into other (expense) income as part of our GAAP financial statement reclassification.
We believe that Adjusted Revenue provides a meaningful understanding of revenue from ongoing products and recurring revenue for comparability
purposes.
We define Adjusted Gross Profit
as gross profit less revenue derived from phased out products. The definition of Adjusted Gross Profit previously removed non-operating
income, which has been moved out of total revenue, net and 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 these measures provide a meaningful understanding of an aspect of profitability based on our
current product portfolio.
Adjusted Revenue, Adjusted
Gross Profit and Adjusted EBITDA are useful to an investor in evaluating our performance because these measures:
|
● |
are widely used by investors to measure a company’s operating performance; |
|
● |
are metrics used by rating agencies, lenders and other parties to evaluate our credit worthiness; and |
|
● |
are used by our management for various purposes, including as measures of performance and as a basis for strategic planning and forecasting. |
The reconciliation of total
revenue, net to Adjusted Revenue for the three months ended March 31, 2022 and 2021 is as follows:
| |
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 credit losses on receivables related to subscription 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 subscription 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. |
|
(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 revenue, net as it is related to revenue-based receivables. For U.S. GAAP reporting purposes, provision for loss on receivables related to subscription 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. |
|
(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 Part I, Item 1 “Financial Statements — Summary of Significant Accounting Policies” for further discussion. |
|
(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, 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 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 to March 31, 2022 from December 31,
2021
| |
March 31, | | |
December 31, | | |
Change | |
| |
2022 | | |
2021 | | |
$ | | |
% | |
| |
(As Restated) | |
Assets | |
| | |
| | |
| | |
| |
Cash and restricted cash | |
$ | 248,987 | | |
$ | 246,224 | | |
$ | 2,763 | | |
| 1.1 | % |
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 | |
| 2,140 | | |
| 1,801 | | |
| 339 | | |
| 18.8 | % |
Goodwill and intangible assets, net | |
| 374,626 | | |
| 77,665 | | |
| 296,961 | | |
| 382.4 | % |
Other assets | |
| 37,932 | | |
| 28,428 | | |
| 9,504 | | |
| 33.4 | % |
Total assets | |
$ | 809,235 | | |
$ | 491,538 | | |
$ | 317,697 | | |
| 64.6 | % |
Liabilities and Stockholders’ Equity | |
| | | |
| | | |
| | | |
| | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Debt agreements | |
| 240,915 | | |
| 186,591 | | |
| 54,324 | | |
| 29.1 | % |
Accounts payable and accrued liabilities | |
| 44,961 | | |
| 36,868 | | |
| 8,093 | | |
| 22.0 | % |
Warrant liability | |
| 4,350 | | |
| 8,260 | | |
| (3,910 | ) | |
| -47.3 | % |
Other liabilities | |
| 91,881 | | |
| 38,135 | | |
| 53,746 | | |
| 140.9 | % |
Total liabilities | |
| 382,107 | | |
| 269,854 | | |
| 112,253 | | |
| 41.6 | % |
Redeemable convertible preferred stock (Series A) | |
| 193,647 | | |
| - | | |
| 193,647 | | |
| nm | |
Stockholders’ equity: | |
| | | |
| | | |
| | | |
| | |
Common Stock | |
| 24 | | |
| 23 | | |
| 1 | | |
| 4.3 | % |
Additional paid-in capital | |
| 722,048 | | |
| 701,234 | | |
| 20,814 | | |
| 3.0 | % |
Accumulated deficit | |
| (478,891 | ) | |
| (469,873 | ) | |
| (9,018 | ) | |
| 1.9 | % |
Treasury stock | |
| (9,700 | ) | |
| (9,700 | ) | |
| - | | |
| 0.0 | % |
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 $2.8 million, or 1.1%, to $249.0 million as of March 31, 2022, as compared to $246.2 million as of December 31, 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.
Consumer receivables, net
Consumer receivables, net
remained stable at $131.3 million as of March 31, 2022, as compared to $131.4 million as of December 31, 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 attributable to the acquisition of Even Financial, which significantly expanded the Company’s affiliate marketing
platform and 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
$9.5 million, or 33.4%, to $37.9 million as of March 31, 2022, as compared to $28.4 million as of December 31, 2021. This was primarily
attributable to the new lease accounting standard adopted during the first quarter of 2022 which resulted in an operating lease right-of-use
asset of $8.7 million as of March 31, 2022.
Liabilities
Debt agreements
Debt agreements increased
by $54.3 million, or 29.1%, to $240.9 million as of March 31, 2022, as compared to $186.6 million as of December 31, 2021. Refer to the
Part 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 $8.1 million, or 22.0%, to $45.0 million as of March 31, 2022, as compared to $36.9 million as of December 31, 2021,
which was primarily attributable to new accounts payable and accruals of $10.1 million associated with Even Financial, which the Company
acquired during the first quarter of 2022.
Warrant liability
Warrant liability decreased
by $3.9 million, or 47.3%, to $4.4 million as of March 31, 2022, as compared to $8.3 million as of December 31, 2021. Refer to the “Results
of Operations for the Three Months Ended March 31, 2022 and 2021” section above for further discussion on the change in fair value
of warrant liability.
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 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 $293.2 million, including the contribution of cash held in Fusion’s trust account from its
initial public offering of $91.1 million, post redemption of Fusion’s common stock held by Fusion’s public stockholders prior
to the Business Combination, and $250.0 million of private investment in public equity (“PIPE”) at $10.00 per share of MoneyLion
Class A Common Stock, net of transaction expenses. Prior to the Business Combination, the funds received from previous common stock and
redeemable convertible preferred stock equity financings, as well as the Company’s ability to obtain lending commitments, provided
the liquidity necessary for the Company to fund its operations. We believe our existing cash and cash equivalents and cash flows from
operating activities will be sufficient to meet our operating working capital needs for at least the next twelve months. Our future financing
requirements will depend on several factors including our growth, the timing and level of spending to support continued development of
our platform, the expansion of marketing activities and merger and acquisition activity. In addition, growth of our finance receivables
increases our liquidity needs, and any failure to meet those liquidity needs could adversely affect our business. Additional funds may
not be available on terms favorable to us or at all. If the Company is unable to generate positive operating cash flows, additional debt
and equity financings or refinancing of existing debt financings may be necessary to sustain future operations.
Receivables originated on
our platform, including Credit Builder 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 March 31, 2022 and December 31, 2021:
| |
March 31, | | |
December 31, | |
| |
2022 | | |
2021 | |
Cash | |
$ | 185,009 | | |
$ | 201,763 | |
Restricted cash | |
| 63,978 | | |
| 44,461 | |
Receivable from payment processor | |
$ | 18,309 | | |
$ | 18,576 | |
Cash Flows
The following table presents
cash (used in) provided by operating, investing and financing activities during the three months ended March 31, 2022 and 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 | |
Operating Activities
Net cash used in operating
activities was $8.7 million for the three months ended March 31, 2022 compared to net cash provided by operating activities of $3.3 million
for the three months ended March 31, 2021. This was primarily driven by a decrease in profitability, after adjusting for non-cash activity
included in our net loss, of approximately $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 revenues and changes in working capital.
Investing Activities
Net cash used in investing
activities was $42.3 million and $15.1 million for the three months ended March 31, 2022 and 2021, respectively. The increase in cash
used in investing activities was primarily related to a $7.8 million increase in net originations and collections of finance receivables
and $18.6 million spent on the Even Acquisition, net of cash received, during the three months ended March 31, 2022.
Financing Activities
Net cash provided by financing
activities was $53.7 million and $50.7 million for the three months ended March 31, 2022 and 2021, respectively. The increase in cash
provided by financing activities was primarily attributable to an increase in net proceeds from financing sources during the three months
ended March 31, 2022.
Financing Arrangements
Refer to the Part I, Item
1 “Financial Statements — Debt” for further discussion on financing transactions during the period.
Contractual Obligations
The table below summarizes
debt, lease and other long-term minimum cash obligations outstanding as of March 31, 2022:
| |
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 March 31, 2022, the Company
did not have any material off-balance sheet arrangements.
Critical Accounting Policies and Estimates
See Part I, Item 1 “Financial
Statements — Summary of Significant Accounting Policies” for a description of critical accounting policies and estimates.
Recently Issued and Adopted Accounting Pronouncements
See Part 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.