PROSPECTUS SUPPLEMENT

Filed pursuant to Rule

(To Prospectus dated July 7, 2022)

424(b)(3) of the Rules and

Regulations Under the

Securities Act of 1933

Registration Statement No. 333-260254

 

MONEYLION INC.

 

Class A Common Stock
Warrants to Purchase Class A Common Stock

 

Recent Developments

 

This prospectus supplement (the “Prospectus Supplement”) is being filed to update and supplement the information contained in the prospectus dated July 7, 2022 (as supplemented or amended from time to time, the “Prospectus”) with the information contained in MoneyLion Inc.’s Quarterly Report on Form 10-Q, which was filed with the Securities and Exchange Commission on May 9, 2023 (the “Q1 2023 Form 10-Q”).

 

Accordingly, we have attached the aforementioned Q1 2023 Form 10-Q to this Prospectus Supplement.

 

This Prospectus Supplement, together with the Prospectus, is to be used by the selling shareholders listed in the Prospectus in connection with offers and sales from time to time of the Class A common stock and warrants to purchase Class A common stock of MoneyLion Inc.

 

May 9, 2023

 

 


 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2023

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

 

Commission File Number: 001-39346

 

MoneyLion Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

85-0849243

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

30 West 21st Street, 9th Floor

New York, New York

10010

(Address of principal executive offices)

(Zip Code)

 

(212) 300-9865

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, par value $0.0001 per share

ML

The New York Stock Exchange

Redeemable warrants, each whole warrant exercisable for one share of Class A common stock, $0.0001 par value

ML WS

The New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

There were 8,798,196 shares of the registrant’s Class A common stock, par value $0.0001 per share, outstanding as of May 5, 2023.

 


 

MoneyLion Inc.

TABLE OF CONTENTS

QUARTERLY REPORT ON FORM 10-Q

For the Quarterly Period Ended March 31, 2023

 

Page

PART I – FINANCIAL INFORMATION

 

Item 1.

Financial Statements

1

Unaudited Consolidated Balance Sheets

1

Unaudited Consolidated Statements of Operations

2

Unaudited Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity

3

Unaudited Consolidated Statements of Cash Flows

4

Notes to Unaudited Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

42

Item 4.

Controls and Procedures

43

PART II - OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

46

Item 1A.

Risk Factors

47

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

48

Item 3.

Defaults Upon Senior Securities

48

Item 4.

Mine Safety Disclosures

49

Item 5.

Other Information

49

Item 6.

Exhibits

50

Signatures

51

 

i


 

INTRODUCTORY NOTE

General

 

On September 22, 2021, MoneyLion Inc., formerly known as Fusion Acquisition Corp., consummated a business combination (the “Business Combination”) with MoneyLion Technologies Inc., formerly known as MoneyLion Inc. Following the Business Combination, MoneyLion Inc. became a publicly traded company, with MoneyLion Technologies Inc. continuing the existing business operations as a subsidiary of MoneyLion Inc. MoneyLion Inc.’s Class A common stock, par value $0.0001 per share (the “Class A Common Stock”), is listed on the New York Stock Exchange (the “NYSE”) under the ticker symbol “ML.”

As used in this Quarterly Report on Form 10-Q, unless the context requires otherwise, references to “MoneyLion,” the “Company,” “we,” “us,” “our” and similar references refer to MoneyLion Inc. and, as context requires, its consolidated subsidiaries for the period following the Business Combination and to MoneyLion Technologies Inc. and, as context requires, its consolidated subsidiaries for the period prior to the Business Combination. "MALKA" refers to Malka Media Group LLC, a wholly-owned subsidiary of MoneyLion Technologies Inc., and "Engine" refers to ML Enterprise Inc., doing business as the brand "Engine by MoneyLion," a wholly-owned subsidiary of MoneyLion Technologies Inc. which was previously named "Even Financial Inc." and subsequently renamed in February 2023.

 

For convenience, the trademarks and service marks referred to in this Quarterly Report on Form 10-Q are listed without the ®, TM and SM symbols, but we intend to assert, and notify others of, our rights in and to these trademarks and service marks to the fullest extent under applicable law.

 

Reverse Stock Split

 

On April 24, 2023, the Company amended the Company's Fourth Amended and Restated Certificate of Incorporation (as amended from time to time, the "Certificate of Incorporation") to effect, effective as of 5:01 p.m. Eastern Time on April 24, 2023, a 1-for-30 reverse stock split (the "Reverse Stock Split") of the Class A Common Stock. At the effective time of the Reverse Stock Split, every 30 shares of Class A Common Stock either issued and outstanding or held as treasury stock were automatically reclassified into one new share of Class A Common Stock, and the total number of shares of Class A Common Stock authorized for issuance was reduced by a corresponding proportion from 2,000,000,000 shares to 66,666,666 shares. The Reverse Stock Split was approved by the Company's stockholders at a Special Meeting of Stockholders on April 19, 2023 and approved by the Board of Directors on April 21, 2023. The primary goal of the Reverse Stock Split was to increase the per share price of the Class A Common Stock in order to meet the minimum per share price requirement for continued listing on the NYSE. The Class A Common Stock began trading on the NYSE on an as-adjusted basis on April 25, 2023 under the existing trading symbol "ML."

 

In addition, as a result of the Reverse Stock Split, proportionate adjustments were made to the number of shares of Class A Common Stock underlying the Company’s outstanding equity awards, the number of shares issuable upon the exercise of the Company’s outstanding warrants and the number of shares issuable under the Company’s equity incentive plans and certain existing agreements, as well as the exercise, grant and acquisition prices of such equity awards and warrants, as applicable. Furthermore, proportionate adjustments were made to the conversion factor at which the Company’s Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), may be converted to Class A Common Stock. The total number of shares of preferred stock of the Company authorized for issuance remained at 200,000,000. Stockholders who would have been entitled to receive fractional shares as a result of the Reverse Stock Split were instead entitled to a cash payment in lieu thereof at a price equal to the fraction of one share to which the stockholder was otherwise entitled multiplied by the closing price per share of the Class A Common Stock on the NYSE on the effective date of the Reverse Stock Split.

 

The effects of the Reverse Stock Split have been reflected in this Quarterly Report on Form 10-Q for all periods presented.

 

ii


 

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, including the information incorporated herein by reference, contains forward-looking statements regarding, among other things, the plans, strategies and prospects, both business and financial, of MoneyLion Inc. and its wholly-owned subsidiaries. These statements are based on the beliefs and assumptions of the management of MoneyLion. Although MoneyLion believes that its respective plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, MoneyLion cannot assure you that it will achieve or realize these plans, intentions or expectations. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates,” or “intends” or similar expressions. The forward-looking statements are based on projections prepared by, and are the responsibility of, MoneyLion’s management.

 

Forward-looking statements are inherently subject to known and unknown risks and uncertainties, many of which may be beyond MoneyLion’s control. Forward-looking statements are not guarantees of future performance or outcomes, and MoneyLion’s actual performance and outcomes, including, without limitation, actual results of operations, financial condition and liquidity, and the development of the market in which MoneyLion operates, may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report on Form 10-Q. Factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation:

 

factors relating to the business, operations and financial performance of MoneyLion, including market conditions and global and economic factors beyond MoneyLion’s control;

 

MoneyLion's ability to acquire, engage and retain customers and clients and sell or develop additional functionality, products and services to them on the MoneyLion platform;

 

MoneyLion’s reliance on third-party partners, service providers and vendors, including its ability to comply with applicable requirements of such third parties;
 

 

demand for and consumer confidence in MoneyLion’s products and services, including as a result of any adverse publicity concerning MoneyLion;

 

any inaccurate or fraudulent information provided to MoneyLion by customers or other third parties;

 

MoneyLion’s ability to realize strategic objectives and avoid difficulties and risks of any acquisitions, strategic investments, entries into new businesses, joint ventures, divestitures and other transactions;

 

MoneyLion’s success in attracting, retaining and motivating its senior management and other key personnel;

 

MoneyLion’s ability to renew or replace its existing funding arrangements and raise financing in the future, to comply with restrictive covenants related to its long-term indebtedness and to manage the effects of changes in the cost of capital;

 

MoneyLion's ability to achieve or maintain profitability in the future;

 

intense and increasing competition in the industries in which MoneyLion and its subsidiaries operate;

 

risks related to the proper functioning of MoneyLion’s information technology systems and data storage, including as a result of cyberattacks, data security breaches or other similar incidents or disruptions suffered by MoneyLion or third parties upon which it relies;

 

MoneyLion’s ability to protect its intellectual property and other proprietary rights and its ability to obtain or maintain intellectual property, proprietary rights and technology licensed from third parties;

 

iii


 

MoneyLion’s ability to comply with extensive and evolving laws and regulations applicable to its business and the outcome of any legal or governmental proceedings that may be instituted against MoneyLion;

 

MoneyLion's ability to establish and maintain an effective system of internal controls over financial reporting;

 

MoneyLion’s ability to maintain the listing of its Class A common stock, par value $0.0001 per share (the "Class A Common Stock"), and of MoneyLion’s publicly traded warrants to purchase Class A Common Stock (the “Public Warrants”) on the NYSE and any volatility in the market price of MoneyLion’s securities; and

 

other factors detailed under Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q.

 

These and other factors are more fully discussed in our filings with the U.S. Securities and Exchange Commission (the “SEC”), including the “Risk Factors” section in our Annual Report on Form 10-K for the year ended December 31, 2022, and Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q.

These forward-looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q and our management’s current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We undertake no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

iv


 

Risk Factor Summary

Our business is subject to numerous risks and uncertainties, including those we face in connection with the successful implementation of our strategy and the growth of our business. The following considerations, among others, may offset our competitive strengths or have a negative effect on our business strategy, which could cause a decline in the price of shares of our securities and result in a loss of all or a portion of your investment:

 

If we are unable to acquire new customers and clients, engage and retain our existing customers and clients or sell additional functionality, products and services to them on our platform, our business will be adversely affected.

 

We depend on various third-party partners, service providers and vendors, and any adverse changes in our relationships with these third parties could materially and adversely affect our business, including if we fail to comply with applicable requirements of such third parties.

 

Demand for our products or services may decline if we do not continue to innovate or respond to evolving technology or other changes.

 

Adverse publicity concerning us, our business or our personnel or our failure to maintain our brand in a cost-effective manner could materially and adversely affect our business.

 

If the information provided to us by customers or other third parties is incorrect or fraudulent, we may misjudge a customer’s qualifications to receive our products and services and our results of operations may be harmed and could subject us to regulatory scrutiny or penalties.

 

Any acquisitions, strategic investments, entries into new businesses, joint ventures, divestitures and other transactions could fail to achieve strategic objectives, disrupt our ongoing operations or result in operating difficulties, liabilities and expenses, harm its business and negatively impact our results of operations.

 

We depend on our senior management team and other key personnel, and if we fail to attract, retain and motivate our personnel, our business, financial condition and results of operations could be adversely affected.

 

If our existing funding arrangements are not renewed or replaced or our existing funding sources are unwilling or unable to provide funding to us on terms acceptable to us, or at all, it could have a material adverse effect on our business, financial condition, results of operations and cash flows. We may be unsuccessful in managing the effects of changes in the cost of capital on our business.

 

We have a history of losses and may not achieve or maintain profitability in the future.

 

Our risk management processes and procedures may not be effective.

 

Our acquisition agreements contain contingent consideration, the value of which may impact future operating results and result in substantial dilution to our stockholders.

 

We operate in highly competitive industries, and our inability to compete successfully would materially and adversely affect our business, financial condition, results of operations and cash flows.

 

Our business may be adversely affected by economic conditions and other factors that we cannot control.

 

Cyberattacks, data security breaches or other similar incidents or disruptions suffered by us or third parties upon which we rely could have a material adverse effect on our business, harm our reputation and expose us to public scrutiny or liability.

 

Defects, failures or disruptions in our systems or those of third parties upon which we rely and resulting interruptions in the availability of our platform could harm our business and financial condition, harm our reputation, result in significant costs to us and expose us to substantial liability.

 

v


 

We may be unable to sufficiently obtain, maintain, protect or enforce our intellectual property and other proprietary rights, or we may be unable to obtain or maintain intellectual property, proprietary rights and technology licensed from third parties, which could reduce the value of our platform, products, services and brand, impair our competitive position and cause reputational harm.

 

We have in the past, and continue to be, subject to inquiries, subpoenas, exams, pending investigations, enforcement matters and litigation by state and federal regulators, the outcomes of which are uncertain and could cause reputational and financial harm to our business, financial condition, results of operations and cash flows.

 

Unfavorable outcomes in legal proceedings may harm our business, financial condition, results of operations and cash flows.

 

We have identified material weaknesses in our internal control over financial reporting, which subject us to additional risks and uncertainties. If we are unable to develop and maintain an effective system of internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

 

Our business is subject to extensive regulation, examination and oversight in a variety of areas, including registration and licensing requirements under federal, state and local laws and regulations. The legal and regulatory regimes governing certain of our products and services are uncertain and evolving.

 

If we fail to operate in compliance with state or local licensing requirements, it could adversely affect our business, financial condition, results of operations and cash flows.

 

The highly regulated environment in which our third-party financial institution partners operate may subject us to regulation and could have an adverse effect on our business, financial condition, results of operations and cash flows.

 

The collection, processing, use, storage, sharing and transmission of personally identifiable information ("PII") and other sensitive data are subject to stringent and changing state, federal and international laws, regulations and standards and policies and could give rise to liabilities as a result of our failure or perceived failure to protect such data, comply with privacy and data protection laws and regulations or adhere to the privacy and data protection practices that we articulate to our customers.

 

The market price of our securities, including the Class A Common Stock, may be volatile. Our failure to meet the continued listing requirements of the NYSE could result in a delisting of our securities.

 

The risks described above should be read together with the “Cautionary Statement Regarding Forward-Looking Statements” herein, the other risk factors set forth under Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q, the “Risk Factors” section in the Annual Report on Form 10-K for the year ended December 31, 2022, our consolidated financial statements and the related notes presented in Part I, Item 1 “Financial Statements” in this Quarterly Report on Form 10-Q and the other documents that we file with the SEC. Our business, prospects, financial condition or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial.

 

vi


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

MONEYLION INC.

CONSOLIDATED BALANCE SHEETS

(dollar amounts in thousands, except per share amounts)

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Cash

 

$

96,756

 

 

$

115,864

 

Restricted cash, including amounts held by variable interest entities (VIEs) of $12,302 and $36,235

 

 

14,000

 

 

 

37,845

 

Consumer receivables

 

 

176,211

 

 

 

169,976

 

Allowance for credit losses on consumer receivables

 

 

(27,473

)

 

 

(24,841

)

Consumer receivables, net, including amounts held by VIEs of $121,734 and $113,963

 

 

148,738

 

 

 

145,135

 

Enterprise receivables, net

 

 

22,961

 

 

 

19,017

 

Property and equipment, net

 

 

2,682

 

 

 

2,976

 

Intangible assets, net

 

 

189,394

 

 

 

194,247

 

Goodwill

 

 

26,721

 

 

 

26,600

 

Other assets

 

 

55,907

 

 

 

54,658

 

Total assets

 

$

557,159

 

 

$

596,342

 

Liabilities, Redeemable Convertible Preferred Stock and Stockholders' Equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Secured loans

 

$

88,726

 

 

$

88,617

 

Accounts payable and accrued liabilities

 

 

50,294

 

 

 

58,129

 

Warrant liability

 

 

486

 

 

 

337

 

Other debt, including amounts held by VIEs of $119,650 and $143,394

 

 

119,650

 

 

 

143,394

 

Other liabilities

 

 

29,184

 

 

 

33,496

 

Total liabilities

 

 

288,340

 

 

 

323,973

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

Redeemable convertible preferred stock (Series A), $0.0001 par value; 45,000,000 shares authorized as of March 31, 2023 and December 31, 2022, 25,701,595 and 25,655,579 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

 

 

173,328

 

 

 

173,208

 

Stockholders' equity:

 

 

 

 

 

 

Class A Common Stock, $0.0001 par value; 66,666,666 shares authorized as of March 31, 2023 and December 31, 2022, 8,831,402 and 8,799,069 issued and outstanding, respectively, as of March 31, 2023 and 8,619,678 and 8,587,345 issued and outstanding, respectively, as of December 31, 2022(1)

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

771,881

 

 

 

766,839

 

Accumulated deficit

 

 

(666,691

)

 

 

(657,979

)

Treasury stock at cost, 32,333 shares at March 31, 2023 and December 31, 2022(1)

 

 

(9,700

)

 

 

(9,700

)

Total stockholders' equity

 

 

95,491

 

 

 

99,161

 

Total liabilities, redeemable convertible preferred stock and stockholders' equity

 

$

557,159

 

 

$

596,342

 

 

(1)
Prior period results have been adjusted to reflect the Reverse Stock Split of the Class A Common Stock at a ratio of 1-for-30 that became effective April 24, 2023. See Note 1, “Description of Business and Basis of Presentation,” for details.

 

The accompanying notes are an integral part of these consolidated financial statements.

1


 

MONEYLION INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollar amounts in thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended March 31,

 

 

2023

 

 

2022

 

Revenue

 

 

 

 

 

Service and subscription revenue

$

90,741

 

 

$

67,146

 

Net interest income on loan receivables

 

2,928

 

 

 

2,568

 

Total revenue, net

 

93,669

 

 

 

69,714

 

Operating expenses

 

 

 

 

 

Provision for credit losses on consumer receivables

 

16,511

 

 

 

23,044

 

Compensation and benefits

 

24,408

 

 

 

22,043

 

Marketing

 

6,392

 

 

 

11,416

 

Direct costs

 

29,802

 

 

 

21,204

 

Professional services

 

4,999

 

 

 

7,288

 

Technology-related costs

 

6,038

 

 

 

4,505

 

Other operating expenses

 

8,995

 

 

 

10,769

 

Total operating expenses

 

97,145

 

 

 

100,269

 

Net loss before other (expense) income and income taxes

 

(3,476

)

 

 

(30,555

)

Interest expense

 

(7,511

)

 

 

(6,174

)

Change in fair value of warrant liability

 

(149

)

 

 

3,910

 

Change in fair value of contingent consideration from mergers and acquisitions

 

246

 

 

 

(4,660

)

Other income (expense)

 

1,649

 

 

 

(916

)

Net loss before income taxes

 

(9,241

)

 

 

(38,395

)

Income tax benefit

 

(24

)

 

 

(28,417

)

Net loss

 

(9,217

)

 

 

(9,978

)

Accrual of dividends on preferred stock

 

(1,977

)

 

 

(1,028

)

Net loss attributable to common shareholders

$

(11,194

)

 

$

(11,006

)

 

 

 

 

 

Net loss per share, basic and diluted(1)

$

(1.29

)

 

$

(1.43

)

Weighted average shares used in computing net loss per share, basic and diluted(1)

 

8,652,218

 

 

 

7,691,243

 

 

(1)
Prior period results have been adjusted to reflect the Reverse Stock Split of the Class A Common Stock at a ratio of 1-for-30 that became effective April 24, 2023. See Note 1, “Description of Business and Basis of Presentation,” for details.

 

The accompanying notes are an integral part of these consolidated financial statements.

2


 

MONEYLION INC.

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(amounts in thousands, except share amounts)

(Unaudited)

 

 

Redeemable Convertible

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

Preferred Stock (Series A)

 

 

 

Class A Common Stock

 

 

Additional

 

 

Accumulated

 

 

Treasury

 

 

Stockholders'

 

 

Shares

 

 

 

Amount

 

 

 

Shares(1)

 

 

Amount(1)

 

 

Paid-in Capital(1)

 

 

Deficit

 

 

Stock

 

 

Equity

 

Balances at January 1, 2023

 

25,655,579

 

 

 

$

173,208

 

 

 

 

8,587,345

 

 

$

1

 

 

$

766,839

 

 

$

(657,979

)

 

$

(9,700

)

 

$

99,161

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,705

 

 

 

 

 

 

 

 

 

5,705

 

Exercise of stock options and warrants and vesting of RSUs and PSUs, net of tax withholdings

 

 

 

 

 

 

 

 

 

100,797

 

 

 

 

 

 

(599

)

 

 

 

 

 

 

 

 

(599

)

Issuance of common stock in connection with earnout and make-whole provisions related to the acquisition of Malka Media Group LLC

 

 

 

 

 

 

 

 

 

110,925

 

 

 

 

 

 

1,913

 

 

 

 

 

 

 

 

 

1,913

 

Issuance of options and preferred stock in connection with Engine Acquisition, net of working capital adjustments

 

46,080

 

 

 

 

120

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of preferred stock to common stock

 

(64

)

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued dividends on preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,977

)

 

 

 

 

 

 

 

 

(1,977

)

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

505

 

 

 

 

 

 

505

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,217

)

 

 

 

 

 

(9,217

)

Balances at March 31, 2023

 

25,701,595

 

 

 

$

173,328

 

 

 

 

8,799,069

 

 

$

1

 

 

$

771,881

 

 

$

(666,691

)

 

$

(9,700

)

 

$

95,491

 

 

 

Redeemable Convertible

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

Preferred Stock (Series A)

 

 

 

Class A Common Stock

 

 

Additional

 

 

Accumulated

 

 

Treasury

 

 

Stockholders'

 

 

Shares

 

 

 

Amount

 

 

 

Shares(1)

 

 

Amount(1)

 

 

Paid-in Capital(1)

 

 

Deficit

 

 

Stock

 

 

Equity

 

Balances at January 1, 2022

 

 

 

 

$

 

 

 

 

7,682,748

 

 

$

1

 

 

$

701,256

 

 

$

(469,873

)

 

$

(9,700

)

 

$

221,684

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,268

 

 

 

 

 

 

 

 

 

3,268

 

Exercise of stock options and warrants and vesting of RSUs and PSUs, net of tax withholdings

 

 

 

 

 

 

 

 

 

29,996

 

 

 

 

 

 

421

 

 

 

 

 

 

 

 

 

421

 

Issuance of common stock in connection with earnout and make-whole provisions related to the acquisition of Malka Media Group LLC

 

 

 

 

 

 

 

 

 

138,923

 

 

 

 

 

 

10,278

 

 

 

 

 

 

 

 

 

10,278

 

Issuance of options and preferred stock in connection with Engine Acquisition, net of working capital adjustments

 

28,693,931

 

 

 

 

193,647

 

 

 

 

 

 

 

 

 

 

8,963

 

 

 

 

 

 

 

 

 

8,963

 

Accrued dividends on preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,028

)

 

 

 

 

 

 

 

 

(1,028

)

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,087

)

 

 

960

 

 

 

 

 

 

(127

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,978

)

 

 

 

 

 

(9,978

)

Balances at March 31, 2022

 

28,693,931

 

 

 

$

193,647

 

 

 

 

7,851,667

 

 

$

1

 

 

$

722,071

 

 

$

(478,891

)

 

$

(9,700

)

 

$

233,481

 

 

(1)
Prior period results have been adjusted to reflect the Reverse Stock Split of the Class A Common Stock at a ratio of 1-for-30 that became effective April 24, 2023. See Note 1, “Description of Business and Basis of Presentation,” for details.

 

The accompanying notes are an integral part of these consolidated financial statements.

3


 

MONEYLION INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

Net loss

$

(9,217

)

 

$

(9,978

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

 

 

Provision for losses on receivables

 

16,511

 

 

 

23,044

 

Depreciation and amortization expense

 

6,184

 

 

 

3,421

 

Change in deferred fees and costs, net

 

616

 

 

 

259

 

Change in fair value of warrants

 

149

 

 

 

(3,910

)

Change in fair value of contingent consideration from mergers and acquisitions

 

(246

)

 

 

4,660

 

(Gains) losses on foreign currency translation

 

(7

)

 

 

29

 

Expenses related to debt modification and prepayments

 

 

 

 

730

 

Goodwill impairment loss

 

 

 

 

 

Stock compensation expense

 

5,705

 

 

 

3,268

 

Deferred income taxes

 

(93

)

 

 

(28,442

)

Changes in assets and liabilities, net of effects of business combination:

 

 

 

 

 

Accrued interest receivable

 

(27

)

 

 

(34

)

Enterprise receivables, net

 

(4,130

)

 

 

1,658

 

Other assets

 

(1,250

)

 

 

666

 

Accounts payable and accrued liabilities

 

(9,805

)

 

 

(2,350

)

Other liabilities

 

(1,710

)

 

 

(1,672

)

Net cash provided by (used in) operating activities

 

2,680

 

 

 

(8,651

)

Cash flows from investing activities:

 

 

 

 

 

Net originations and collections of finance receivables

 

(19,647

)

 

 

(22,872

)

Purchase of property, equipment and software

 

(1,037

)

 

 

(823

)

Acquisition of Engine, net of cash acquired

 

 

 

 

(18,584

)

Settlement of contingent consideration related to mergers and acquisitions

 

(350

)

 

 

 

Net cash used in investing activities

 

(21,034

)

 

 

(42,279

)

Cash flows from financing activities:

 

 

 

 

 

Repayments to secured/senior lenders

 

 

 

 

(24,028

)

Fees related to debt prepayment

 

 

 

 

(375

)

Net (repayments to) proceeds from special purpose vehicle credit facilities

 

(24,000

)

 

 

10,000

 

Borrowings from secured lenders

 

 

 

 

69,300

 

Payment of deferred financing costs

 

 

 

 

(1,625

)

(Payments) proceeds from issuance of common stock related to exercise of stock options and warrants

 

(599

)

 

 

421

 

Net cash (used in) provided by financing activities

 

(24,599

)

 

 

53,693

 

Net change in cash and restricted cash

 

(42,953

)

 

 

2,763

 

Cash and restricted cash, beginning of period

 

153,709

 

 

 

246,224

 

Cash and restricted cash, end of period

$

110,756

 

 

$

248,987

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid for interest

$

7,465

 

 

$

4,990

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

Accrued dividends on preferred stock

$

1,977

 

 

$

1,028

 

Lease liabilities incurred in exchange for operating right-of-use assets

$

 

 

$

6,578

 

Equity issued as consideration for mergers and acquisitions

$

120

 

 

$

202,610

 

Equity issued as settlement of contingent consideration related to mergers and acquisitions

$

1,913

 

 

$

10,278

 

Contingent consideration issued related to mergers and acquisitions

$

 

 

$

45,336

 

 

The accompanying notes are an integral part of these consolidated financial statements.

4


 

MONEYLION INC.

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

 

MoneyLion Inc. (“MoneyLion” or the “Company”) was founded in 2013 and is headquartered in New York, New York. On September 22, 2021, MoneyLion Inc., formerly known as Fusion Acquisition Corp., consummated a business combination (the “Business Combination”) with MoneyLion Technologies Inc., formerly known as MoneyLion Inc. Following the Business Combination, MoneyLion Inc. became a publicly traded company, with MoneyLion Technologies Inc. continuing the existing business operations as a subsidiary of MoneyLion Inc. MoneyLion Inc.’s Class A common stock, par value $0.0001 per share (the “Class A Common Stock”), is listed on the New York Stock Exchange (the “NYSE”) under the ticker symbol “ML.”

 

MoneyLion is the go-to destination for consumer financial products and services and marketplace solutions, providing curated money-related content to engage, educate and empower customers. MoneyLion offers its core suite of innovative first-party financial products and services, along with personalized and actionable financial and non-financial offers in its Consumer marketplace. MoneyLion powers leading embedded finance marketplace solutions for its Enterprise Partners (as defined herein), connecting and matching consumers with real-time, personalized product and service recommendations through its proprietary integrative technology, and provides complementary data products and services that optimize their marketplace integrations and competitiveness. MoneyLion also offers creative media and marketing services to clients across industries through its media division and leverages these same creative resources to produce and deliver engaging and dynamic content in support of MoneyLion's product and service offerings.

On November 15, 2021, MoneyLion completed its acquisition of Malka Media Group LLC ("MALKA" and such transaction, the “MALKA Acquisition”). MALKA forms the basis of MoneyLion's media division and provides MoneyLion with the creative capabilities to produce and deliver engaging and dynamic content in support of MoneyLion's product and service offerings. MALKA also offers creative media and marketing services to clients in MoneyLion's Enterprise business. The MALKA Acquisition accelerated MoneyLion's ability to engage consumers across digital media, allowing it to directly connect with communities natively inside and outside of the MoneyLion platform.

5


 

On February 17, 2022, MoneyLion completed its acquisition of Even Financial Inc., which was subsequently renamed to ML Enterprise Inc., doing business as the brand Engine by MoneyLion ("Engine" and such acquisition, the “Engine Acquisition”). Engine powers the leading embedded finance marketplace solutions MoneyLion offers to its Enterprise Partners through which consumers are connected and matched with real-time, personalized financial product and service recommendations. For the over 1,000 Enterprise Partners in MoneyLion's network who integrate MoneyLion's software platform onto their properties, MoneyLion enables a more simple and efficient system of customer acquisition and also provides value-added data analytics and reporting services to enable them to better understand the performance of their marketplace programs and optimize their business over time. The Engine Acquisition expanded MoneyLion's addressable market, extended the reach of its own products and services and diversified its revenue mix.

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 Securities and Exchange Commission ("SEC"). The consolidated financial statements include the accounts of MoneyLion Inc. and its wholly owned subsidiaries and consolidated variable interest entities (“VIEs”) for which the Company is the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation. The Company does not have any items of other comprehensive loss; therefore, there is no difference between net loss and comprehensive loss for the three months ended March 31, 2023 and 2022.

 

Reverse Stock Split—On April 24, 2023, the Company amended the Company's Fourth Amended and Restated Certificate of Incorporation (as amended from time to time, the "Certificate of Incorporation") to effect, effective as of 5:01 p.m. Eastern Time on April 24, 2023, a 1-for-30 reverse stock split (the "Reverse Stock Split") of the Class A Common Stock. At the effective time of the Reverse Stock Split, every 30 shares of Class A Common Stock either issued and outstanding or held as treasury stock were automatically reclassified into one new share of Class A Common Stock, and the total number of shares of Class A Common Stock authorized for issuance was reduced by a corresponding proportion from 2,000,000,000 shares to 66,666,666 shares. The Reverse Stock Split was approved by the Company's stockholders at a Special Meeting of Stockholders on April 19, 2023 and approved by the Board of Directors on April 21, 2023. The primary goal of the Reverse Stock Split was to increase the per share price of the Class A Common Stock in order to meet the minimum per share price requirement for continued listing on the NYSE. The Class A Common Stock began trading on the NYSE on an as-adjusted basis on April 25, 2023 under the existing trading symbol "ML."

 

In addition, as a result of the Reverse Stock Split, proportionate adjustments were made to the number of shares of Class A Common Stock underlying the Company’s outstanding equity awards, the number of shares issuable upon the exercise of the Company’s outstanding warrants and the number of shares issuable under the Company’s equity incentive plans and certain existing agreements, as well as the exercise, grant and acquisition prices of such equity awards and warrants, as applicable. Furthermore, proportionate adjustments were made to the conversion factor at which the Company’s Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), may be converted to Class A Common Stock. The total number of shares of preferred stock of the Company authorized for issuance remained at 200,000,000. Stockholders who would have been entitled to receive fractional shares as a result of the Reverse Stock Split were instead entitled to a cash payment in lieu thereof at a price equal to the fraction of one share to which the stockholder was otherwise entitled multiplied by the closing price per share of the Class A Common Stock on the NYSE on the effective date of the Reverse Stock Split.

 

The effects of the Reverse Stock Split have been reflected in these consolidated financial statements and the accompanying footnotes for all periods presented, which includes adjusting the description of any activity that may have been transacted on a pre-Reverse Stock Split basis.

Receivable Funding—MoneyLion's primary source of funding for originated receivables is special purpose vehicle financings from third-party institutional lenders. For more information, Note 8, “Debt” and Note 7, “Variable Interest Entities” of the Company’s Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for discussion of the ROAR 1 SPV Credit Facility and the ROAR 2 SPV Credit Facility (each as defined in Company’s Annual Report on Form 10-K for the year ended December 31, 2022) and VIE considerations related to the ROAR 1 SPV Credit Facility and the ROAR 2 SPV Credit Facility, respectively.

 

6


 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 and stockholders’ equity and cash flows.

The Company’s accounting policies are set forth in Note 2, “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 for the year ended December 31, 2022. Included herein are certain updates to those policies and the related disclosures.

Revenue Recognition and Related Receivables—The following table summarizes revenue by type for the three months ended March 31, 2023 and 2022:

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Consumer revenues

 

 

 

 

 

 

Service and subscription fees

 

$

62,438

 

 

$

46,394

 

Net interest income on finance receivables

 

 

2,928

 

 

 

2,568

 

Total consumer revenues

 

 

65,366

 

 

 

48,962

 

Enterprise service revenues

 

 

28,303

 

 

 

20,752

 

Total revenue, net

 

$

93,669

 

 

$

69,714

 

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 90 days past due effective January 1, 2023 and 60 days past due prior to January 1, 2023. If an account is deemed to be uncollectable prior to this date, the Company will charge-off the receivable in the month it is deemed uncollectable.

The Company determines the past due status using the contractual terms of the finance receivables. This is the credit quality indicator used to evaluate the required allowance for losses on finance receivables for each portfolio of products.

An allowance for losses on service and subscription 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.

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.

 

7


 

Fair Value of Financial Instruments—Accounting Standards Codification ("ASC") 820, Fair Value Measurement (“ASC 820”), provides a single definition of fair value and a common framework for measuring fair value as well as disclosure requirements for fair value measurements used in financial statements. Under ASC 820, fair value is determined based upon the exit price that would be received by a company to sell an asset or paid by a company to transfer a liability in an orderly transaction between market participants, exclusive of any transaction costs. Fair value measurements are determined by either the principal market or the most advantageous market. The principal market is the market with the greatest level of activity and volume for the asset or liability. Absent a principal market to measure fair value, the Company uses the most advantageous market, which is the market from which the Company would receive the highest selling price for the asset or pay the lowest price to settle the liability, after considering transaction costs. However, when using the most advantageous market, transaction costs are only considered to determine which market is the most advantageous and these costs are then excluded when applying a fair value measurement. ASC 820 creates a three-level hierarchy to prioritize the inputs used in the valuation techniques to derive fair values. The basis for fair value measurements for each level within the hierarchy is described below, with Level 1 having the highest priority and Level 3 having the lowest.

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Observable inputs other than Level 1 quoted prices, such as quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active for identical or similar assets and liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – Valuations are based on inputs that are unobservable and significant to the overall fair value measurement of the assets or liabilities. Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

 

The Company has no assets measured at fair value on a recurring or non-recurring basis as of March 31, 2023 nor December 31, 2022. Liabilities measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 are the Private Placement Warrants (as defined herein) and contingent consideration related to mergers and acquisitions, which are further described in Note 13, "Stock Warrants," and Note 16, "Mergers and Acquisitions," respectively. The Company has no liabilities measured at fair value on a non-recurring basis as of March 31, 2023 nor December 31, 2022. There have been no transfers between levels during the three months ended March 31, 2023 and 2022.

 

The Company also has financial instruments which are not measured at fair value. The Company has evaluated cash, restricted cash, consumer receivables, net, enterprise receivables, net, receivables from payment processors, prepaid expenses, accounts payable and accrued liabilities and other financial instrument assets and liabilities, and believes the carrying value approximates the fair value due to the short-term nature of these balances. The fair value of the secured loans, other debt and lease liabilities approximate their carrying values.

 

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 accumulated deficit was not material. The adoption of the new guidance did not impact the Company’s unaudited consolidated interim statements of operations or cash flows.

 

8


 

The Company adopted ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) during the fourth quarter of fiscal year 2022. The amendments in the updated guidance simplify the accounting for income taxes by removing certain exceptions and improving consistent application of other areas of the topic by clarifying the guidance. The adoption of ASU No. 2019-12 did not have a material impact on the Company's financial statements or the related notes.

 

The Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which, along with subsequent related ASUs, creates a new credit impairment standard for financial assets measured at amortized cost and available-for-sale debt securities. The ASU requires financial assets measured at amortized cost (including loans, trade receivables and held-to-maturity debt securities) to be presented at the net amount expected to be collected, through an allowance for credit losses that are expected to occur over the remaining life of the asset, rather than incurred losses. The ASU requires that credit losses on available-for-sale debt securities be presented as an allowance rather than as a direct write-down. The measurement of credit losses for newly recognized financial assets (other than certain purchased assets) and subsequent changes in the allowance for credit losses are recorded in the statement of income as the amounts expected to be collected change. The Company adopted ASU 2016-13 and the related subsequent ASUs effective January 1, 2023, and applied the changes prospectively, recognizing a cumulative-effect adjustment to the beginning balance of retained earnings as of the adoption date. Upon adoption, the Company increased consumer receivables, net by $692, decreased enterprise receivables, net by $187 and reduced accumulated deficit by $505. The adoption of the new guidance did not impact the Company’s 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 March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitating of the Effects of Reference Rate Reform on Financial Reporting and subsequently issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions in which the reference London Interbank Offered Rate (“LIBOR”) or another reference rate is expected to be discontinued as a result of the Reference Rate Reform. These ASUs are intended to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The new guidance is effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022 and the expedients are available through December 31, 2024. Early adoption is permitted. The Company has no significant contracts based on LIBOR as of March 31, 2023. 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.

 

9


 

3. CONSUMER RECEIVABLES

 

The Company’s finance receivables consist of secured personal loans and principal amounts of Instacash advances. Secured loan principal balances are partially given to the borrower upon origination while the remaining balance is deposited into an escrow account. The funds in the escrow account may be used to pay the secured personal loan in full or can be released to the borrower once the secured personal loan is paid in full. Until such time, the funds in the escrow account may be collected by the Company in the event the borrower becomes contractually past due. Accrued interest receivables represent the interest accrued on the loan receivables based upon the daily principal amount outstanding except for loans that are on nonaccrual status.

 

The Company’s policy is to suspend recognition of interest income on secured personal loans and place the secured personal loan on nonaccrual status when the account is more than 60 days past due on a contractual basis or when, in the Company’s estimation, the collectability of the account is uncertain, and the account is less than 90 days contractually past due. Any accrued interest receivable that becomes 90 days past due on a contractual basis is charged-off by reversing net interest income on loan receivables. Net charge-offs of accrued interest income were $307 and $548 for the three months ended March 31, 2023 and 2022.

 

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 though no direct correlation between charge-off rates and these factors has been identified in the Company's analysis. When assessing provision for losses on consumer receivables, the Company takes into account the composition and delinquency status of the outstanding consumer receivables and the related forecasted principal loss rates based on recent historical experience. Recent historical loss rates are updated on a quarterly basis. Charge-offs of consumer receivable balances occur after becoming ninety days past contractually due unless specific circumstances are identified on an individual or group of receivables that indicate charge-off is not appropriate. The level of exceptions to charge-offs occurring once ninety days past due is not material. The tables below show consumer receivables balances as of March 31, 2023 and December 31, 2022 and the consumer receivables activity, charge-off rates and aging by product for the three months ended March 31, 2023 and 2022.

 

Consumer receivables consisted of the following:

 

 

March 31,

 

 

December 31,

 

 

2023

 

 

2022

 

Loan receivables

 

73,700

 

 

 

73,451

 

Instacash receivables

 

84,859

 

 

 

77,688

 

Finance receivables

 

158,559

 

 

 

151,139

 

Fees receivable

 

13,292

 

 

 

14,019

 

Subscription receivables

 

3,185

 

 

 

3,419

 

Deferred loan origination costs

 

80

 

 

 

331

 

Accrued interest receivable

 

1,095

 

 

 

1,068

 

Consumer receivables, before allowance for credit losses

$

176,211

 

 

$

169,976

 

 

10


 

Changes in the allowance for losses on loan receivables were as follows:

 

 

Three Months Ended March 31,

 

 

2023

 

 

2022

 

Beginning balance

$

5,784

 

 

$

6,494

 

Provision for credit losses on receivables

 

1,520

 

 

 

2,796

 

Loan receivables charged off

 

(4,189

)

 

 

(10,458

)

Recoveries

 

2,676

 

 

 

7,408

 

Ending balance

$

5,791

 

 

$

6,240

 

 

Changes in the allowance for losses on Instacash receivables were as follows:

 

 

Three Months Ended March 31,

 

 

2023

 

 

2022

 

Beginning balance

$

23,240

 

 

$

15,131

 

Provision for credit losses on receivables

 

10,081

 

 

 

16,706

 

Instacash receivables charged off

 

(19,828