UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(in thousands unless stated otherwise)
On February 17, 2022, MoneyLion Inc. (the “Company”) completed its previously announced acquisition (the “Even Acquisition”) of Even Financial Inc., a Delaware corporation (“Even Financial”), pursuant to the Amended and Restated Agreement and Plan of Merger, 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.
The following unaudited pro forma condensed combined financial information of the Company and Even Financial is presented to illustrate the estimated effects of the Even Acquisition, which estimated effects are collectively referred to as “adjustments” or “transaction accounting adjustments.”
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2021 combines the historical consolidated statements of operations of the Company and Even Financial after giving effect to the Even Acquisition as if it had occurred on January 1, 2021. The unaudited pro forma condensed combined balance sheet as of December 31, 2021 combines the historical consolidated balance sheets of the Company and Even Financial as of December 31, 2021 after giving effect to the Even Acquisition as if it had occurred on December 31, 2021. The unaudited pro forma condensed combined statement of operations and unaudited pro forma condensed combined balance sheet are collectively referred to as the “pro forma financial information.”
The pro forma financial information should be read in conjunction with the accompanying notes. In addition, the pro forma financial information is derived from and should be read in conjunction with the following historical consolidated financial statements and accompanying notes of the Company and Even Financial:
|•||Audited consolidated financial statements of the Company as of and for the fiscal year ended December 31, 2021 and the related notes included in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021; and|
|•||Audited consolidated financial statements of Even Financial as of and for the fiscal year ended December 31, 2021 and the related notes included in Even Financial’s consolidated financial statements included as Exhibit 99.1 to the Company’s Current Report on Form 8-K/A of which this pro forma financial information is a part (the “Form 8-K/A”).|
The pro forma financial information does not reflect adjustments for any other consummated or probable acquisitions by the Company since such transactions were not significant in accordance with Regulation S-X Rule 3-05, as amended by Release No. 33-10786, Amendments to Financial Disclosures About Acquired and Disposed Businesses, as adopted by the Securities and Exchange Commission on May 20, 2020.
The pro forma financial information has been prepared by the Company in accordance with Regulation S-X Article 11, Pro Forma Financial Information, as amended by the final rule, Release No. 33-10786, which is referred to herein as Article 11.
The Company and Even Financial prepare their respective financial statements in accordance with United States generally accepted accounting principles. The Even Acquisition will be accounted for using the acquisition method of accounting, with the Company being treated as the accounting acquirer. In identifying the Company as the acquiring entity for accounting purposes, the Company and Even Financial took into account a number of factors, including the relative voting rights of all equity instruments in the combined company, the composition of senior management of the combined company and the corporate governance structure of the combined company. No single factor was the sole determinant in the overall conclusion that the Company is the acquirer for accounting purposes; rather all factors were considered in arriving at such conclusion.
The transaction accounting adjustments are preliminary, based upon available information as of the date of the Form 8-K/A filing, and have been prepared solely for the purpose of this pro forma financial information. These adjustments are based on preliminary estimates and may be different from the adjustments that will be determined based on the finalization of acquisition accounting, and these differences could be material. The transaction accounting adjustments are based on preliminary estimates of the fair value of consideration related to the Even Acquisition, including the fair value of employee equity awards exchanged, and the fair values of assets acquired and liabilities assumed. Certain valuations and assessments related to the assets and liabilities acquired and consideration provided are in process and will not be completed until subsequent to the filing of the Form 8-K/A. The estimated fair values assigned in this unaudited pro forma financial information are preliminary and represent the Company’s current best estimates of fair value and are subject to revision.
The pro forma financial information is based on various adjustments and assumptions and is not necessarily indicative of what the Company’s consolidated statement of operations or consolidated balance sheet would have been had the Even Acquisition been completed as of the dates indicated or will be for any future periods. The pro forma financial information does not purport to project the future financial position or operating results of the Company. The pro forma financial information does not include adjustments to reflect any potential revenue, synergies or dis-synergies, or cost savings that may be achieved in the future, or the associated costs that may be necessary to achieve such revenues, synergies or cost savings.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of December 31, 2021
|Historical MoneyLion Inc.||Historical Even Financial Inc.||Transaction Accounting Adjustments||Notes||Pro Forma Combined|
|Allowance for credit losses on consumer receivables||(22,323||)||—||—||(22,323||)|
|Consumer receivables, net||131,418||—||—||131,418|
|Property and equipment, net||1,801||389||—||2,190|
|Intangible assets, net||25,124||1,882||188,438||5C||215,444|
|Liabilities and Stockholders' Equity|
|Accounts payable and accrued liabilities||36,868||11,229||(260||)||5B||47,837|
|Preferred stock||—||63,879||(63,876||)||5D, 5E||3|
|Additional paid-in capital||708,175||4,140||198,290||5D, 5E||910,605|
|Total stockholders' equity||233,234||2,642||199,791||435,667|
|Total liabilities and stockholders' equity||$||491,538||$||20,241||$||238,143||$||749,992|
See accompanying “Notes to Unaudited Pro Forma Condensed Combined Financial Statements.”
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2021
(in thousands, except share and per share data)
|Historical MoneyLion Inc.||Historical Even Financial Inc.||Transaction Accounting Adjustments||Notes||Pro Forma |
|Service and subscription revenue||$||164,072||$||58,433||$||(2,747||)||6 A||$||219,758|
|Net interest income on loan receivables||7,002||—||—||7,002|
|Total revenue, net||171,074||58,433||226,760|
|Provision for credit losses on consumer receivables||60,750||—||—||60,750|
|Compensation and benefits||45,693||19,143||—||64,836|
|Direct costs||44,130||41,199||(2,261||)||6 A||83,068|
|Technology related costs||9,210||3,169||1,709||6A, 6B||14,088|
|Other operating expenses||21,630||2,359||16,632||6 B||40,621|
|Total operating expenses||244,431||72,946||16,080||333,457|
|Net loss before other (expense) income and income taxes||(73,357||)||(14,513||)||(18,827||)||(106,697||)|
|Interest expense||(7,251||)||(341||)||341||6 C||(7,251||)|
|Change in fair value of warrant liability||(39,656||)||—||—||(39,656||)|
|Change in fair value of subordinated convertible notes||(41,877||)||—||—||(41,877||)|
|Change in fair value of contingent consideration from mergers and acquisitions||(6,229||)||—||—||(6,229||)|
|Net loss before income taxes||(164,819||)||(12,929||)||(18,486||)||(196,234||)|
|Income tax expense||56||39||—||95|
|Net income attributable to redeemable noncontrolling interests||(12,776||)||—||—||(12,776||)|
|Reversal of previously accrued dividends on preferred stock||42,728||—||—||42,728|
|Net loss attributable to common shareholders||$||(134,923||)||$||(12,968||)||$||(18,486||)||$||(166,377||)|
|Net loss per share, basic and diluted||$||(1.39||)||n/m||n/a||$||(1.71||)|
|Weighted average shares used in computing net loss per share, basic and diluted||97,158,738||n/m||n/a||97,158,738|
See accompanying “Notes to Unaudited Pro Forma Condensed Combined Financial Statements.”
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
(amounts in thousands, except share and per share data, unless otherwise indicated)
Note 1 – Description of the Transaction
On February 17, 2022, the Company completed the Even Acquisition. 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 Convertible Preferred Stock, par value $0.0001 per share (“Series A Convertible Preferred Stock”), along with an additional 529,120 shares of Series A Convertible Preferred Stock to advisors of Even Financial for transaction expenses, valued at $193,448, (ii) paid to certain Even Financial management equityholders approximately $14,514 in cash, and (iii) exchanged 8,883,228 options to acquire Even Financial common stock for 5,901,846 options to acquire shares of the Company’s Class A common stock, par value $0.0001 per share, valued at $8,985. 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 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 Convertible Preferred Stock, subject to certain conditions (the “Preferred Stock Equivalents”). The combined value of the Earnout and Preferred Stock Equivalents was $44,613 as of the closing of the Even Acquisition. The total purchase price was approximately $270,131, 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.
Note 2 – Basis of Presentation
The pro forma financial information was prepared accounting for the Even Acquisition using the acquisition method of accounting in accordance with Accounting Standards Codification Topic 805, “Business Combinations,” and is derived from the audited and historical financial statements of the Company and Even Financial.
The pro forma financial information has been prepared by the Company in accordance with Article 11. The pro forma financial information is not necessarily indicative of what the Company’s consolidated statement of operations or consolidated balance sheet would have been had the Even Acquisition been completed as of the dates indicated or will be for any future periods. The pro forma financial statements do not purport to project the future financial position or results of operations of the Company. The pro forma financial information reflects pro forma adjustments management believes are necessary to present fairly the Company’s pro forma results of operations and financial position as of and for the periods indicated. The pro forma adjustments are based on currently available information and assumptions management believes are, under the circumstances and given the information available at this time, reasonable, and reflective of adjustments necessary to report the Company’s financial condition and results of operations as if the Even Acquisition was completed as of the dates indicated.
The acquisition method of accounting uses the fair value concepts defined in ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). Fair value is defined in ASC 820 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value measurements can be highly subjective and can involve a high degree of estimation.
The determination of the fair value of the identifiable assets of Even Financial and the allocation of the estimated consideration to these identifiable assets and liabilities is preliminary and is pending finalization of various estimates, inputs and analyses. Certain valuations and assessments, including valuations of intangible assets, employee equity awards exchanged, the Earnout and the Series A Convertible Preferred Stock, as well as the assessment of the tax positions and rates of the combined business, are in process and may not be completed until December 31, 2022. Since this pro forma financial information has been prepared based on preliminary estimates of consideration and fair values attributable to the Even Acquisition, the actual amounts eventually recorded for the purchase accounting, including the identifiable intangibles and goodwill, may differ materially from the information presented.
The initial allocation of the preliminary estimated consideration in this pro forma financial information is based upon the estimated value of the consideration as of February 17, 2022.
At this preliminary stage, the estimated identifiable finite lived intangible assets include customer relationships, trade names and proprietary technologies. Goodwill represents the excess of the estimated fair value of the consideration transferred over the estimated fair value of Even Financial’s identifiable assets and liabilities acquired, including the fair value of the estimated identifiable finite assets and liabilities described above. Goodwill will not be amortized, but will be subject to periodic impairment testing. The goodwill balance shown in the pro forma financial information is calculated as of December 31, 2021 and is subject to change as a result of the same factors affecting both the estimated consideration and the estimated fair value of identifiable assets and liabilities acquired. The goodwill balance represents the combined company’s expectations of the strategic opportunities available to it as a result of the Even Acquisition, as well as other synergies that are expected to be derived from the Even Acquisition.
Upon completion of a formal valuation study, the estimated fair value of non-cash consideration transferred and the fair value of the acquired assets and liabilities will be updated, including the estimated fair value and useful lives of the identifiable intangible assets, and allocation of the excess consideration transferred, if any, will be recorded as goodwill.
The pro forma financial information does not reflect the following items:
|•||the impact of any potential revenues, benefits or synergies that may be achieved in the future or related costs that may be required to achieve such revenues, benefits or synergies; and|
|•||financial impacts of changes in cost structure or any restructuring activities as such changes, if any, have yet to be finalized or quantified.|
Note 3 – Preliminary Fair Value Estimate of Purchase Price Allocation to Assets Acquired and Liabilities
The purchase price allocation is being performed based on the assets and liabilities acquired from Even Financial, and the Company is performing a formal valuation study to update the estimates of fair value. For a majority of assets and liabilities acquired, the book value of the assets and liabilities was considered to be a reasonable estimate of fair value. The only assets or liabilities acquired being analyzed in the formal valuation study, excluding goodwill, are the intangible assets acquired. The final valuation study of the fair value of the acquired assets and liabilities, as well as the calculation of the fair value of the consideration transferred, could materially change. Below is a summary of the intangible assets acquired, the fair values preliminarily assigned to those intangible assets and the related estimated useful life:
|Estimated fair value|
Estimated useful lives
Note 4 – Adjustments to Reclassify Financial Statement Line Items
The acquisition of 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 of the Company and Even Financial used in prior reporting periods are no longer sufficient to properly present the Company’s nor Even Financial’s financial condition and results of operations. 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 year ended December 31, 2021 to present the financial statements 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 revenues, net.
Note 5 – Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet
|5A||To reflect the cash portion of the purchase price consideration issued, namely the payment of cash to Even Financial’s management equityholders, along with the repayment of outstanding debt of Even Financial and the payment of seller transaction expenses. The balance of outstanding debt has also been adjusted to include the repayment.|
|5B||To reflect the elimination of intercompany balances.|
|5C||To mark customer relationships, trade name and proprietary technology intangibles acquired to fair value as of the Even Acquisition. Assuming no changes in the consideration paid, a 10% increase or decrease in the fair value of identified intangible assets would affect goodwill identified as follows:|
in fair value
|Incremental fair value in excess of amounts historically recorded||Resulting Impact on goodwill|
|5D||Adjustment includes the recording of non-cash consideration issued relating to the Even Acquisition at fair value which includes Series A Convertible Preferred Stock, Company Class A common stock options provided to Even Financial common stock option holders, the Earnout and the Preferred Stock Equivalents. A 10% increase or decrease in the fair value of the non-cash consideration would affect goodwill identified as follows:|
|Assumed change in fair value||Fair value of non-cash consideration recorded||Resulting Impact on Goodwill|
|5E||Adjustment includes the write off of Even Financial’s historical stockholders’ equity.|
These amounts are preliminary and are subject to change upon the finalization of the accounting for the Even Acquisition. Further, the combined company’s ability to use net operating loss carryforwards to offset future taxable income for U.S. federal income tax purposes may be subject to limitations, which are in the process of being assessed.
Note 6 – Adjustments to the Unaudited Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 2021
|6A||Adjustment includes the elimination of intercompany activity.|
|6B||To reflect the incremental amortization related to the intangible assets recognized in the purchase price allocation as well as the increase in fair value of certain intangible assets as outlined in Note 3 above. A 10% increase or decrease in the fair value of identified intangible assets would affect amortization expense as follows:|
|Assumed change in fair value||Incremental fair value in excess of amounts historically recorded||Historical Amortization Recorded||Amortization Expense Based on Incremental Fair Value||Incremental Amortization Expense Recognized|
|6C||To remove interest expense related to Even Financial debt that was paid off in connection with the Even Acquisition.|