UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
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 |
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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
MoneyLion Inc.
TABLE OF CONTENTS
QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period Ended June 30, 2023
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Page |
PART I – FINANCIAL INFORMATION |
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Item 1. |
1 |
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1 |
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2 |
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Unaudited Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity |
3 |
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5 |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
29 |
Item 3. |
47 |
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Item 4. |
48 |
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PART II - OTHER INFORMATION |
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Item 1. |
51 |
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Item 1A. |
52 |
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Item 2. |
53 |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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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 previously outstanding Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), converted to Class A Common Stock. The total number of shares of preferred stock of the Company authorized for issuance remained at 200,000,000. Stockholders who would have been entitled to receive fractional shares as a result of the Reverse Stock Split were instead entitled to a cash payment in lieu thereof at a price equal to the fraction of one share to which the stockholder was otherwise entitled multiplied by the closing price per share of the Class A Common Stock on the NYSE on the effective date of the Reverse Stock Split.
The effects of the Reverse Stock Split have been reflected in this 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:
iii
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:
v
The risks described above should be read together with the “Cautionary Statement Regarding Forward-Looking Statements” herein, any 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)
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June 30, |
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December 31, |
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2023 |
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2022 |
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Assets |
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Cash |
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$ |
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$ |
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Restricted cash, including amounts held by variable interest entities (VIEs) of $ |
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Consumer receivables |
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Allowance for credit losses on consumer receivables |
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Consumer receivables, net, including amounts held by VIEs of $ |
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Enterprise receivables, net |
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Property and equipment, net |
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Intangible assets, net |
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Goodwill |
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— |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities, Redeemable Convertible Preferred Stock and Stockholders' Equity |
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Liabilities: |
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Secured loans, net |
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$ |
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$ |
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Accounts payable and accrued liabilities |
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Warrant liability |
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Other debt, net, including amounts held by VIEs of $ |
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Other liabilities |
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Total liabilities |
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(Note 15) |
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Redeemable convertible preferred stock (Series A), $ |
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— |
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Stockholders' equity: |
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Class A Common Stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Treasury stock at cost, |
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( |
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Total stockholders' equity |
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Total liabilities, redeemable convertible preferred stock and stockholders' equity |
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$ |
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$ |
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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)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenue |
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Service and subscription revenue |
$ |
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$ |
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$ |
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$ |
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Net interest income on loan receivables |
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Total revenue, net |
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Operating expenses |
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Provision for credit losses on consumer receivables |
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Compensation and benefits |
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Marketing |
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Direct costs |
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Professional services |
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Technology-related costs |
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Other operating expenses |
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Total operating expenses |
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Net loss before other (expense) income and income taxes |
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Interest expense |
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( |
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Change in fair value of warrant liability |
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Change in fair value of contingent consideration from mergers and acquisitions |
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Goodwill impairment loss |
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— |
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Other income (expense) |
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Net loss before income taxes |
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Income tax (benefit) expense |
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( |
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( |
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( | ) |
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Net loss |
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( |
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( |
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Reversal of previously accrued / (accrued) dividends on preferred stock |
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Net loss attributable to common shareholders |
$ |
( |
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$ |
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$ |
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$ |
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Net loss per share, basic and diluted(1) |
$ |
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$ |
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$ |
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$ |
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Weighted average shares used in computing net loss per share, basic and diluted(1) |
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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)
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Redeemable Convertible |
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Total |
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Preferred Stock (Series A) |
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Class A Common Stock |
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Additional |
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Accumulated |
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Treasury |
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Stockholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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Paid-in Capital |
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Deficit |
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Stock |
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Equity |
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Balances at April 1, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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Exercise of stock options and warrants and vesting of RSUs and PSUs, net of tax withholdings |
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— |
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— |
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( |
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— |
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— |
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Issuance of options and preferred stock in connection with Engine Acquisition and the related contingent consideration, net of working capital adjustments |
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— |
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Voluntary conversion of preferred stock to common stock |
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— |
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— |
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Reversal of previously accrued dividends on preferred stock |
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— |
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— |
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— |
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— |
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— |
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Settlement of accrued dividends on preferred stock |
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— |
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Automatic conversion of redeemable convertible preferred stock (Series A) |
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— |
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— |
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— |
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Other |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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Balances at June 30, 2023 |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( | ) |
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$ |
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Redeemable Convertible |
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Total |
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Preferred Stock (Series A) |
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Class A Common Stock |
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Additional |
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Accumulated |
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Treasury |
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Stockholders' |
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Shares |
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Amount |
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Shares(1) |
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Amount(1) |
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Paid-in Capital(1) |
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Deficit |
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Stock |
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Equity |
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Balances at January 1, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Stock-based compensation |
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Exercise of stock options and warrants and vesting of RSUs and PSUs, net of tax withholdings |
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— |
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Issuance of common stock in connection with earnout and make-whole provisions related to the acquisition of Malka Media Group LLC |
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Issuance of equity in connection with Engine Acquisition and the related contingent consideration, net of working capital adjustments |
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Voluntary conversion of preferred stock to common stock |
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Reversal of previously accrued dividends on preferred stock |
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Settlement of accrued dividends on preferred stock |
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Automatic conversion of redeemable convertible preferred stock (Series A) |
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|
|
|
— |
|
|
|
|
|||
Other |
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
||
Net loss |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balances at June 30, 2023 |
|
— |
|
|
|
$ |
— |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( | ) |
|
$ |
( |
) |
|
$ |
|
||||
3
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 |
|
|
Paid-in Capital(1) |
|
|
Deficit |
|
|
Stock |
|
|
Equity |
|
||||||||
Balances at April 1, 2022 |
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||||
Stock-based compensation |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Exercise of stock options and warrants and vesting of RSUs and PSUs, net of tax withholdings |
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Issuance of common stock in connection with earnout and make-whole provisions related to the acquisition of Malka Media Group LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Issuance of options and preferred stock in connection with Engine Acquisition, net of working capital adjustments |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Accrued dividends on preferred stock |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Other |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net loss |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balances at June 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( | ) |
|
$ |
( |
) |
|
$ |
|
||||||
|
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 |
|
— |
|
|
|
$ |
— |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Stock-based compensation |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Exercise of stock options and warrants and vesting of RSUs and PSUs, net of tax withholdings |
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Issuance of common stock in connection with earnout and make-whole provisions related to the acquisition of Malka Media Group LLC |
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||||
Issuance of options and preferred stock in connection with Engine Acquisition, net of working capital adjustments |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Accrued dividends on preferred stock |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Other |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
( |
) |
|
Net loss |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balances at June 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( | ) |
|
$ |
( |
) |
|
$ |
|
||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
MONEYLION INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(Unaudited)
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Provision for losses on receivables |
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization expense |
|
|
|
|
|
|
|
|
|
|
|
||||
Change in deferred fees and costs, net |
|
|
|
|
|
|
|
|
|
|
|
||||
Change in fair value of warrants |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Change in fair value of contingent consideration from mergers and acquisitions |
|
( | ) |
|
|
( | ) |
|
|
( | ) |
|
|
( | ) |
Gains on foreign currency translation |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Expenses related to debt modification and prepayments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Goodwill impairment loss |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Stock compensation expense |
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred income taxes |
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Changes in assets and liabilities, net of effects of business combination: |
|
|
|
|
|
|
|
|
|
|
|
||||
Accrued interest receivable |
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Enterprise receivables, net |
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Other assets |
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Accounts payable and accrued liabilities |
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Other liabilities |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) operating activities |
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Net originations and collections of finance receivables |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Purchase of property and equipment and software development |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Acquisition of Engine, net of cash acquired |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Settlement of contingent consideration related to mergers and acquisitions |
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Net cash used in investing activities |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Repayments to secured/senior lenders |
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Fees related to debt prepayment |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Net (repayments to) proceeds from special purpose vehicle credit facilities |
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
Borrowings from secured lenders |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Payment of deferred financing costs |
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Payments related to the automatic conversion of redeemable convertible preferred stock (Series A) in lieu of fractional shares of common stock and dividends on preferred stock |
|
( | ) |
|
|
— |
|
|
|
( | ) |
|
|
— |
|
(Payments) proceeds related to issuance of common stock related to exercise of stock options and warrants, net of tax withholdings related to vesting of stock-based compensation |
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Other |
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Net cash (used in) provided by financing activities |
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Net change in cash and restricted cash |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Cash and restricted cash, beginning of period |
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and restricted cash, end of period |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
||||
Cash paid for interest |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Voluntary conversion of preferred stock to common stock |
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Automatic conversion of redeemable convertible preferred stock (Series A) to common stock |
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Reversal of previously accrued / (accrued) dividends on preferred stock |
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Issuance of common stock to settle accrued dividends on preferred stock and Preferred Stock Equivalents |
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Equity issued as consideration for mergers and acquisitions |
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||
Equity issued as settlement of contingent consideration related to Malka Acquisition |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Equity issued as settlement of contingent consideration related to Engine Acquisition |
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Contingent consideration issued related to mergers and acquisitions |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
Lease liabilities incurred in exchange for operating right-of-use assets |
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
The accompanying notes are an integral part of these consolidated financial statements.
5
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 $
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.
6
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 and six months ended June 30, 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
In addition, as a result of the Reverse Stock Split, proportionate adjustments were made to the number of shares of Class A Common Stock underlying the Company’s outstanding equity awards, the number of shares issuable upon the exercise of the Company’s outstanding warrants and the number of shares issuable under the Company’s equity incentive plans and certain existing agreements, as well as the exercise, grant and acquisition prices of such equity awards and warrants, as applicable. Furthermore, proportionate adjustments were made to the conversion factor at which the Company’s previously outstanding Series A Convertible Preferred Stock, par value $
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—The Company'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.
7
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 and six months ended June 30, 2023 and 2022:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Consumer revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Service and subscription fees |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Net interest income on finance receivables |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total consumer revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Enterprise service revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Allowance for Losses on Receivables—An allowance for losses on consumer receivables is established to provide for current expected credit losses in the Company’s consumer receivables at the balance sheet date and is established through a provision for losses on receivables. Charge-offs, net of recoveries, are charged directly to the allowance. The allowance is based on management’s assessment of many factors, including changes in the nature, volume, and risk characteristics of the consumer receivables portfolio, including trends in delinquency and charge-offs and current economic conditions that may affect the consumer’s ability to pay. The allowance is developed on a general basis and each period management assesses each product type by origination cohort in order to determine the forecasted performance of those cohorts and arrive at an appropriate allowance rate for that period. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in any of the factors.
The Company’s charge-off policy is to charge-off finance receivables for loans and related accrued interest receivables, net of expected recoveries, in the month in which the account becomes 90 days contractually past due and charge-off finance receivables for Instacash advances and related fee receivables in the month in which the account becomes 90 days past due effective January 1, 2023 and 60 days past due prior to January 1, 2023. If an account is deemed to be uncollectable prior to this date, the Company will charge-off the receivable in the month it is deemed uncollectable.
The Company determines the past due status using the contractual terms of the finance receivables. This is the credit quality indicator used to evaluate the required allowance for losses on finance receivables for each portfolio of products.
An allowance for losses on service and subscription fee receivables is established to provide for current expected credit losses in the Company’s service and subscription fee receivables at the balance sheet date and is established through a provision for losses on receivables. Charge-offs, net of recoveries, are charged directly to the allowance. The allowance is based on management’s assessment of historical charge-offs and recoveries on these receivables, as well as certain qualitative factors including current economic conditions that may affect the customers’ ability to pay.
8
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.
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
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.
Goodwill—The Company performs goodwill impairment testing annually on the last day of the fiscal year or more frequently if indicators of potential impairment exist. A potential impairment indicator was identified on each of June 30, 2022, September 30, 2022, December 31, 2022 and June 30, 2023 due to a decline in the price of the Class A Common Stock and the Company's related market capitalization and, as such, the Company performed a goodwill impairment test as of June 30, 2022, September 30, 2022, December 31, 2022 and June 30, 2023. The goodwill impairment test is performed at the consolidated company level since the Company represents one reporting unit.
The Company first evaluates whether it is more likely than not that the fair value of the reporting unit has fallen below its carrying amount. No indicators of fair value falling below the reporting unit carrying amount were noted on a quantitative or qualitative basis during the June 30, 2022 assessment nor the September 30, 2022 assessment.
9
The June 30, 2022 and September 30, 2022 assessments indicated that the fair value of the reporting unit exceeded the reporting unit's carrying value. The fair value of the reporting unit was calculated by valuing the Class A Common Stock and the Company's Series A Preferred Stock, primarily based on the Class A Common Stock price per share. The calculation of fair value also includes an estimated control premium based on consultation between the Company's management and third-party valuation specialists.
The December 31, 2022 assessment indicated that the carrying value of the reporting unit exceeded the reporting unit's fair value, resulting in a goodwill impairment loss of $
The discounted cash flow method calculation estimates the future cash flows from the reporting unit using a multi-year forecast, and a terminal value calculated using a long-term growth rate that was informed based on our industry, analyst reports of a public company peer set, current and expected future economic conditions and management expectations. The discount rate used to discount these future cash flows was determined using a capital asset pricing model based on the market value of equity of a public company peer set, adjusted for risk characteristics and expectations specific to the reporting unit, combined with an assessment of the cost of debt. The discount rates used for the reporting unit in the Company's December 31, 2022 impairment analysis was
The guideline public company method utilized the Company's historical and forecasted revenue to enterprise value ratio to determine revenue multiples to calculate the enterprise value of the reporting unit. The guideline public company method also includes an estimated control premium based on consultation between the Company's management and third-party valuation specialists.
The June 30, 2023 assessment indicated that the carrying value of the reporting unit exceeded the reporting unit's fair value, resulting in a goodwill impairment loss of $
Intangible Assets—The Company’s intangible assets are made up of internal use software and acquired proprietary technology, customer relationships and trade names. The Company capitalizes qualifying internal use software development costs that are incurred during the application development stage, provided that management with the relevant authority authorizes the project, it is probable the project will be completed, and the software will be used to perform the function intended. Costs incurred during the application development stage internally or externally are capitalized and amortized on a straight-line basis over the expected useful life of five years. Costs related to preliminary project activities and post-implementation operation activities, including training and maintenance, are expensed as incurred.
Recently Adopted Accounting Pronouncements—The Company
10
The Company
The Company
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 June 30, 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.
11
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 $
Fees receivables represent the amounts due to the Company for tips and instant transfer fees related to the Instacash earned wage access product. Subscription receivables represent the amounts billed to customers for subscription services.
The credit quality and future repayment of consumer receivables are dependent upon the customer’s ability to perform under the terms of the agreement. Factors such as unemployment rates and housing values, among others, may impact the customer’s ability to perform under the loan or Instacash advance terms though no direct correlation between charge-off rates and these factors has been identified in the Company's analysis. When assessing provision for losses on consumer receivables, the Company takes into account the composition and delinquency status of the outstanding consumer receivables and the related forecasted principal loss rates based on recent historical experience. Recent historical loss rates are updated on a quarterly basis. Charge-offs of consumer receivable balances occur after becoming 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. Consumer receivable charge-offs typically occur within one year of origination. The tables below show consumer receivables balances as of June 30, 2023 and December 31, 2022 and the consumer receivables activity, charge-off rates and aging by product for the three and six months ended June 30, 2023 and 2022.
Consumer receivables consisted of the following:
|
June 30, |
|
|
December 31, |
|
||
|
2023 |
|
|
2022 |
|
||
Loan receivables |
$ |
|
|
$ |
|
||
Instacash receivables |
|
|
|
|
|
||
Finance receivables |
|
|
|
|
|
||
Fees receivable |
|
|
|
|
|
||
Subscription receivables |
|
|
|
|
|
||
Deferred loan origination costs |
|
|
|
|
|
||
Accrued interest receivable |
|
|
|
|
|
||
Consumer receivables, before allowance for credit losses |
$ |
|
|
$ |
|
||
12
Changes in the allowance for losses on loan receivables were as follows:
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Beginning balance |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision for credit losses on receivables |
|
|
|
|
|
|
|
|
|
|
|
||||
Loan receivables charged off |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
||||
Ending balance |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Changes in the allowance for losses on Instacash receivables were as follows:
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Beginning balance |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision for credit losses on receivables |
|
|
|
|
|
|
|
|
|
|
|
||||
Instacash receivables charged off |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
||||
Ending balance |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Changes in the allowance for losses on fees receivable were as follows:
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Beginning balance |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision for credit losses on receivables |
|
|
|
|
|
|
|
|
|
|
|
||||
Fees receivable charged off |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
||||
Ending balance |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Changes in the allowance for losses on subscription receivables were as follows:
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Beginning balance |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision for credit losses on receivables |
|
|
|
|
|
|
|
|
|
|
|
||||
Subscription receivables charged off |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
||||
Ending balance |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
13
The following is an assessment of the repayment performance of loan receivables as of June 30, 2023 and December 31, 2022 and presents the contractual delinquency of the loan receivables portfolio:
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||||||||||
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
||||
Current |
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Delinquency: |
|
|
|
|
|
|
|
|
|
|
|
||||
31 to 60 days |
|
|
|
|
% |
|
|
|
|
|
% |
||||
61 to 90 days |
|
|
|
|
% |
|
|
|
|
|
% |
||||
Total delinquency |
|
|
|
|
% |
|
|
|
|
|
% |
||||
Loan receivables before allowance for credit losses |
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Loan receivables that are 61 to 90 days contractually past due are placed on non-accrual status.
The following is an assessment of the repayment performance of Instacash receivables as of June 30, 2023 and December 31, 2022 and presents the contractual delinquency of the Instacash receivables portfolio:
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||||||||||
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
||||
Current |
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Delinquency: |
|
|
|
|
|
|
|
|
|
|
|
||||
31 to 60 days |
|
|
|
|
% |
|
|
|
|
|
% |
||||
61 to 90 days |
|
|
|
|
% |
|
|
|
|
|
% |
||||
Total delinquency |
|
|
|
|
% |
|
|
|
|
|
% |
||||
Instacash receivables before allowance for credit losses |
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
The following is an assessment of the repayment performance of fees receivable as of June 30, 2023 and December 31, 2022 and presents the contractual delinquency of the fees receivable portfolio:
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||||||||||
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
||||
Current |
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Delinquency: |
|
|
|
|
|
|
|
|
|
|
|
||||
31 to 60 days |
|
|
|
|
% |
|
|
|
|
|
% |
||||
61 to 90 days |
|
|
|
|
% |
|
|
|
|
|
% |
||||
Total delinquency |
|
|
|
|
% |
|
|
|
|
|
% |
||||
Fees receivable before allowance for credit losses |
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
14
The following is an assessment of the repayment performance of subscription receivables as of June 30, 2023 and December 31, 2022 and presents the contractual delinquency of the subscription receivables portfolio:
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||||||||||
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
||||
Current |
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Delinquency: |
|
|
|
|
|
|
|
|
|
|
|
||||
31 to 60 days |
|
|
|
|
% |
|
|
|
|
|
% |
||||
61 to 90 days |
|
|
|
|
% |
|
|
|
|
|
% |
||||
Total delinquency |
|
|
|
|
% |
|
|
|
|
|
% |
||||
Subscription receivables before allowance for credit losses |
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
4
Property and equipment consisted of the following:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Leasehold improvements |
|
$ |
|
|
$ |
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Computers and equipment |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Furniture and equipment, net |
|
$ |
|
|
$ |
|
||
Total depreciation expense related to property and equipment was $
5. INTANGIBLE ASSETS
Changes in goodwill were as follows:
|
Goodwill Before Impairment |
|
|
Cumulative Goodwill Impairments |
|
|
Goodwill |
|
|||
Balance at December 31, 2022 |
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Goodwill impairment loss |
|
— |
|
|
|
( |
) |
|
$ |
( |
) |
Other |
|
|
|
|
— |
|
|
|
|
||
Balance at June 30, 2023 |
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
Intangible assets consisted of the following:
|
|
|
|
June 30, |
|
|
December 31, |
|
||
|
|
Useful Life |
|
2023 |
|
|
2022 |
|
||
Proprietary technology and capitalized internal-use software |
|
|
$ |
|
|
$ |
|
|||
Work in process |
|
|
|
|
|
|
|
|
||
Customer relationships |
|
|
|
|
|
|
|
|||
Trade names |
|
|
|
|
|
|
|
|||
Less: accumulated amortization |
|
|
|
|
( |
) |
|
|
( |
) |
Intangible assets, net |
|
|
|
$ |
|
|
$ |
|
||
15
The Company capitalizes certain internal-use software development costs, consisting primarily of contractor costs and employee salaries and benefits allocated to the software. Capitalization of costs incurred in connection with internally developed software commences when both the preliminary project stage is completed and management has authorized further funding for the project, based on a determination that it is probable the project will be completed and used to perform the function intended. Costs incurred for enhancements that are expected to result in additional functionalities are capitalized in a similar manner. Capitalization of costs ceases no later than the point at which the project is substantially complete and ready for its intended use, at which point amortization of capitalized costs begins. All other costs are expensed as incurred. Costs capitalized in connection with internally developed software were $
For the three months ended June 30, 2023 and 2022, total amortization expense was $
The following table summarizes estimated future amortization expense of intangible assets placed in service at June 30, 2023 for the years ending:
Remainder of 2023 |
|
|
|
|
|
$ |
|
|
2024 |
|
|
|
|
|
|
|
|
2025 |
|
|
|
|
|
|
|
|
2026 |
|
|
|
|
|
|
|
|
2027 |
|
|
|
|
|
|
|
|
Thereafter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
6
Other assets consisted of the following:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Receivable from payment processors |
|
$ |
|
|
$ |
|
||
Prepaid expenses |
|
|
|
|
|
|
||
Operating lease right-of-use assets |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total other assets |
|
$ |
|
|
$ |
|
||
7. VARIABLE INTEREST ENTITIES
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
16
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 9, “Debt” in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
The Company’s debt as of June 30, 2023 and December 31, 2022 is presented below:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Monroe Term Loans |
|
$ |
|
|
$ |
|
||
Unamortized discounts and debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Total secured loans, net |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
ROAR 1 SPV Credit Facility |
|
$ |
|
|
$ |
|
||
ROAR 2 SPV Credit Facility |
|
|
|
|
|
|
||
Unamortized discounts and debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Total other debt, net |
|
$ |
|
|
$ |
|
||
For more information regarding debt instruments outstanding as of December 31, 2022, see Note 9, “Debt” in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
The Monroe Term Loans (as defined below) are comprised of term loans with a principal balance of $
17
Amendment to Monroe Term Loans—The Company is party to the Credit Agreement, dated as of March 24, 2022 (as amended by Amendment No. 1 to Credit Agreement, dated as of March 30, 2023, the “Credit Agreement”), by and among certain financial institutions from time to time party thereto (together with their respective successors and permitted assigns, the “Lenders”), as lenders, and Monroe Capital Management Advisors, LLC, a Delaware limited liability company (“Monroe Capital”), as administrative agent and lead arranger. Pursuant to the Credit Agreement, on March 24, 2022, the Company borrowed (a) $
On April 28, 2023, the Company entered into Amendment No. 2 to Credit Agreement (“Amendment No. 2”) with the Lenders and Monroe Capital in order to extend the maturity date of the Term A-2 Loans and proactively manage the Company's interest expense through the remainder of 2023. Pursuant to Amendment No. 2, the Company, the Lenders and Monroe Capital agreed that the Company would: (i) pay $
Amendment No. 2 was accounted for as a debt modification. Costs associated with Amendment No. 2 were not material.
9
The Company is party to operating leases for all of its offices. Many leases contain
Maturities of the Company’s long-term operating lease liabilities, which are included in other liabilities on the consolidated balance sheet, were as follows:
|
|
June 30, 2023 |
|
|
Remainder of 2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
Total lease payments |
|
|
|
|
Less: imputed interest |
|
|
|
|
|
$ |
|
||
Weighted-average remaining lease term (years) |
|
|
|
|
Weighted-average discount rate |
|
|
% |
|
18
10. INCOME TAXES
As of June 30, 2023 and December 31, 2022, the Company maintained a valuation allowance of $
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by approximately $
The effective tax rate differs from the statutory tax rate of
Total U.S. federal and state operating loss carryforwards as of June 30, 2023 and December 31, 2022 were approximately $
As of June 30, 2023, the Company’s federal research and development credit carryforwards for income tax purposes were approximately $
Due to the net operating loss carryovers, the statute of limitations remains open for federal and state returns.
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. Due to the Engine Acquisition, the Company experienced an ownership change on February 17, 2022. Thus, the Company's net operating loss carryforwards are subject to an annual limitation of approximately $
The Company also acquired federal net operating losses in the Engine Acquisition. It was determined that the Engine net operating losses acquired are also subject to a Section 382 annual limitation of approximately $
19
11. COMMON AND PREFERRED STOCK
Class A Common Stock—Each holder of the shares of Class A Common Stock is entitled to
Subject to preferences that may be applicable to any outstanding preferred stock, the holders of shares of 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 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 Class A Common Stock, then outstanding, if any.
The holders of shares of Class A Common Stock have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the shares of Class A Common Stock. The rights, preferences and privileges of holders of shares of Class A Common Stock will be subject to those of the holders of any shares of the preferred stock MoneyLion may issue in the future.
Series A Preferred Stock—Prior to the Automatic Conversion Event (as described below), the Company had shares of Series A Preferred Stock outstanding. Holders of the shares of Series A Preferred Stock (other than certain regulated holders subject to the Bank Holding Company Act of 1956, as amended) were entitled to vote as a single class with the holders of the 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 Preferred Stock were entitled to a 30 cent cumulative annual dividend per share, payable at the Company’s election in either cash or Class A Common Stock (or a combination thereof), with any dividends on the Class A Common Stock valued based on the per share volume-weighted average price of the shares of Class A Common Stock on the NYSE for the 20 trading days ending on the trading day immediately prior to the dividend payment date.
Holders of the Series A Preferred Stock were entitled to a liquidation preference in the event of the Company's liquidation equal to the greater of $
20
As of the close of trading on the NYSE on May 26, 2023, the per share volume-weighted average price of the shares of Class A Common Stock on the NYSE equaled or exceeded $
On June 30, 2023, the Company paid the accrued annual dividend on the previously outstanding shares of Series A Preferred Stock for the dividend payment period ending December 31, 2022 to all holders of record as of the applicable dividend record date (the “2022 Annual Dividend”). The 2022 Annual Dividend was paid in a mixture of Class A Common Stock and cash through the issuance of
12. STOCK-BASED COMPENSATION
Omnibus Incentive Plan
At the Company's 2022 Annual Meeting of Stockholders (the "2022 Annual Meeting"), Company stockholders approved the Company's Amended and Restated Omnibus Incentive Plan (as may be amended or restated from time to time, the “Incentive Plan”), as further described in the Company's Definitive Proxy Statement for the 2022 Annual Meeting, filed with the SEC on April 29, 2022.
Stock-based compensation of $
The number of units awarded under the Incentive Plan are generally based on a weighted average of the Class A Common Stock in the days leading up to the grant. Fair values for restricted stock units ("RSUs") and performance stock units ("PSUs") based on the Company’s operating performance are valued based on the price of the Class A Common Stock at the time of 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. The following table represents activity within the Incentive Plan for the six months ended June 30, 2023:
Type |
|
Vesting Conditions |
|
Units Granted |
|
|
Weighted Average Grant Date Fair Value |
|
|
Weighted Average Strike Price |
||
Restricted Stock Unit |
|
|
|
|
|
$ |
|
|
n/a |
|||
Performance Stock Unit |
|
|
|
|
|
$ |
|
|
n/a |
|||
The following table represents outstanding equity awards as of June 30, 2023:
Type |
|
Vesting Conditions |
|
Units Outstanding |
|
|
Weighted Average Grant Date Fair Value |
|
|
Weighted Average Strike Price |
|
|||
Restricted Stock Unit |
|
|
|
|
|
$ |
|
|
n/a |
|
||||
Performance Stock Unit |
|
|
|
|
|
$ |
|
|
n/a |
|
||||
Performance Stock Unit |
|
|
|
|
|
$ |
|
|
n/a |
|
||||
Options |
|
|
|
|
|
$ |
|
|
$ |
|
||||
21
13. STOCK WARRANTS
Public Warrants and Private Placement Warrants
As a result of the Business Combination, MoneyLion acquired from Fusion Acquisition Corp., as of September 22, 2021, public warrants outstanding to purchase an aggregate of
The Public Warrants meet the conditions for equity classification in accordance with ASC 815-40. 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 are valued based on the per warrant price of the Public Warrants, subject to adjustments to account for differences in contractual terms between the Private Placement Warrants and the Public Warrants. The per warrant price of the Public Warrants as of June 30, 2023 was $
The following table presents the quantitative information regarding Level 3 fair value measurement of the Private Placement Warrants:
|
June 30, |
|
|
|
2023 |
|
|
Strike price |
$ |
|
|
Expected Volatility |
|
% |
|
Expected Dividend - Class A Common Stock |
|
|
|
Expected Term in Years |
|
|
|
Risk Free Interest Rate |
|
% |
|
Warrant Value Per Share |
$ |
|
|
The following table presents the changes in the liability related to the Private Placement Warrants:
|
|
Private Placement |
|
|
|
|
Warrants |
|
|
Warrants payable balance, December 31, 2022 |
|
$ |
|
|
Mark-to-market adjustment |
|
|
( |
) |
Warrants payable balance, June 30, 2023 |
|
$ |
|
|
For more information regarding the Public Warrants and Private Placement Warrants, see Note 14, “Stock Warrants” in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
22
14. NET LOSS PER SHARE
The following table sets forth the computation of net loss per share of Class A Common Stock for the three and six months ended June 30, 2023 and 2022:
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Reversal of previously accrued / (accrued) dividends on preferred stock |
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Net loss attributable to common shareholders |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding - basic and diluted(1) |
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share attributable to common stockholders - basic and diluted(1) |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
For the three and six months ended June 30, 2023 and 2022, 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, 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 and six months ended June 30, 2023 and 2022.
The following potential common shares have been excluded from the computation of diluted net loss per share for the three and six months ended June 30, 2023 and 2022:
|
June 30, |
|
|||||
|
2023 |
|
|
2022 |
|
||
Conversion of convertible preferred stock(1) |
|
- |
|
|
|
|
|
Warrants to purchase common stock and redeemable convertible preferred stock(1) |
|
|
|
|
|
||
PSUs, RSUs and options to purchase common stock(1) |
|
|
|
|
|
||
Right to receive earnout shares(1) |
|
|
|
|
|
||
Total common stock equivalents |
|
|
|
|
|
||
23
15. COMMITMENTS AND CONTINGENCIES
Legal Matters—From time to time, the Company is subject to various claims and legal proceedings in the ordinary course of business, including lawsuits, arbitrations, class actions and other litigation. The Company is also the subject of various actions, inquiries, investigations and proceedings by regulatory and other governmental agencies. The outcome of any such legal and regulatory matters, including those discussed in this Note 15, is inherently uncertain, and some of these matters may result in adverse judgments or awards, including penalties, injunctions or other relief, which could materially and adversely impact the Company's business, financial condition, operating results and cash flows. See Part I, Item 1A “Risk Factors — Risks Relating to Legal and Accounting Matters — Unfavorable outcomes in legal proceedings may harm our business, financial condition, results of operations and cash flows” in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
The Company has determined, based on its current knowledge, that the aggregate amount or range of losses that are estimable with respect to its legal proceedings, including the matters described below, would not have a material adverse effect on its business, financial position, results of operations or cash flows. As of June 30, 2023, amounts accrued were not material. Notwithstanding the foregoing, the ultimate outcome of legal proceedings involves judgments, estimates and inherent uncertainties, and cannot be predicted with certainty. It is possible that an adverse outcome of any matter could be material to the Company's business, financial position, results of operations or cash flows as a whole for any particular reporting period of occurrence. In addition, it is possible that a matter may prompt litigation or additional investigations or proceedings by other government agencies or private litigants.
The Company holds a number of state licenses in connection with its business activities, and must also comply with other applicable compliance and regulatory requirements in the states where it operates. In most states where the Company operates, one or more regulatory agencies have authority with respect to regulation and enforcement of the Company's business activities under applicable state laws, and the Company may also be subject to the supervisory and examination authority of such state regulatory agencies. Examinations by state regulators have and may continue to result in findings or recommendations that require the Company, among other potential consequences, to provide refunds to customers or to modify its internal controls and/or business practices.
In the ordinary course of its business, the Company is and has been from time to time subject to, and may in the future be subject to, governmental and regulatory examinations, information requests, investigations and proceedings (both formal and informal) in connection with various aspects of its activities by state agencies, including the California Department of Financial Protection and Innovation, the Attorney General of the Commonwealth of Virginia, the New York Attorney General’s Office and the Colorado Department of Law, certain of which may result in adverse judgments, settlements, fines, penalties, restitution, disgorgement, injunctions or other relief. The Company has responded to and cooperated with the relevant state agencies and will continue to do so in the future, as appropriate.
On September 29, 2022, the Consumer Financial Protection Bureau (the “CFPB”) initiated a civil action in the United States District Court for the Southern District of New York ("SDNY") against MoneyLion Technologies Inc., ML Plus LLC and the Company's 38 state lending subsidiaries, alleging violations of the Military Lending Act and the Consumer Financial Protection Act. The CFPB is seeking injunctive relief, redress for allegedly affected consumers and civil monetary penalties. On January 10, 2023, the Company moved to dismiss the lawsuit, asserting various constitutional and merits-based arguments. On June 13, 2023, the CFPB filed its first amended complaint, alleging substantially similar claims as those asserted in its initial complaint. On July 11, 2023, the Company moved to dismiss the lawsuit, again asserting various constitutional and merit-based arguments. The Company continues to believe the CFPB’s claims are meritless and is vigorously defending against the lawsuit. Nevertheless, at this time, the Company cannot predict or determine the timing or final outcome of this matter or the effect that any adverse determinations the lawsuit may have on its business, financial condition or results of operations.
24
On July 21, 2023, Jeffrey Frommer, Lyusen Krubich, Daniel Fried and Pat Capra, the former equity owners of MALKA (collectively, the “Seller Members”), brought a civil action in the SDNY against MoneyLion Technologies Inc. alleging, among other things, breaches of the Membership Interest Purchase Agreement governing the MALKA Acquisition (the “MIPA”). Among other claims, the Seller Members allege that they are entitled to payment of $
On July 27, 2023, MassMutual Ventures US II LLC, Canaan X L.P., Canaan XI L.P., F-Prime Capital Partners Tech Fund LP and GreatPoint Ventures Innovation Fund II, L.P., each of which are former equityholders of Even Financial Inc. and former holders of the Company’s Series A Preferred Stock (collectively, the “Former Preferred Stockholders”), brought a civil action in the SDNY against MoneyLion Inc., its Board of Directors and certain officers seeking declaratory relief and related damages. The Former Preferred Stockholders allege that the -for-30 Reverse Stock Split of the Class A Common Stock effected on April 24, 2023 was undertaken in a manner designed to trigger the Automatic Conversion Event pursuant to which all outstanding shares of Series A Preferred Stock automatically converted into certain shares of Class A Common Stock following the close of trading on the NYSE on May 26, 2023. The Former Preferred Stockholders further allege that the Definitive Proxy Statement the Company filed with the SEC on March 31, 2023 relating to the Special Meeting of Stockholders to approve the Reverse Stock Split proposal contained false and/or misleading statements and material omissions, and that the Company improperly failed to obtain the separate vote of the holders of the Series A Preferred Stock to approve the Reverse Stock Split. In connection therewith, the Former Preferred Stockholders assert claims against all defendants under Section 14(a) of the Securities Exchange Act of 1934 and for breach of the Certificate of Designations governing the Series A Preferred Stock, and a claim against the individual defendants for breach of fiduciary duty. The Company believes that the Former Preferred Stockholders’ claims are meritless and intends to vigorously defend against the lawsuit. Nevertheless, at this time, the Company cannot predict or determine the timing or final outcome of this matter or the effect that any adverse determinations the lawsuit may have on its business, financial condition or results of operations.
16. MERGERS AND ACQUISITIONS
Engine—On February 17, 2022, the Company completed the acquisition of all voting interest in Even Financial Inc., which was subsequently renamed to Engine, pursuant to the Amended and Restated Agreement and Plan of Merger, by and among the Company, Epsilon Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of the Company, Even Financial Inc. and Fortis Advisors LLC, a Delaware limited liability company, solely in its capacity as representative of the equityholders of Even Financial Inc. Engine powers the leading embedded finance marketplace solutions MoneyLion offers to its Enterprise Partners through which consumers are connected and matched with real-time, personalized financial product and service recommendations. For the over 1,000 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.
25
At the closing of the Engine Acquisition, the Company (i) issued to the equityholders of Even Financial Inc. an aggregate of
Pursuant to the Amended and Restated Agreement and Plan of Merger, dated as of February 17, 2022, governing the Engine Acquisition, the equityholders and advisors of Even Financial Inc. were entitled to receive an additional payment from the Company of up to an aggregate of
The fair value of Even Financial Inc.’s acquired assets and liabilities assumed were as follows:
|
|
February 17, |
|
|
|
|
2022 |
|
|
Assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
Enterprise receivables |
|
|
|
|
Property and equipment |
|
|
|
|
Intangible assets |
|
|
|
|
Goodwill |
|
|
|
|
Other assets |
|
|
|
|
Total assets |
|
|
|
|
Liabilities |
|
|
|
|
Accounts payable and accrued liabilities |
|
|
|
|
Deferred tax liability |
|
|
|
|
Other liabilities |
|
|
|
|
Total liabilities |
|
|
|
|
Net assets and liabilities acquired |
|
$ |
|
|
The goodwill related to the Engine Acquisition was not tax deductible and was comprised of expected synergies from combining operations and the value of intangible assets that do not qualify for separate recognition.
26
The following table presents the changes in the liability related to the Earnout and Preferred Stock Equivalents:
|
|
|
|
|
Preferred Stock |
|
||
|
|
Earnout |
|
|
Equivalents |
|
||
Balance as of December 31, 2022 |
|
$ |
|
|
$ |
|
||
Change in fair value of contingent consideration |
|
|
( |
) |
|
|
( |
) |
Settlement of contingent consideration |
|
|
( |
) |
|
|
( |
) |
Balance as of June 30, 2023 |
|
$ |
- |
|
|
$ |
- |
|
The Earnout and Preferred Stock Equivalents were valued using a Monte Carlo simulation model as of December 31, 2022, which is calculated using Level 3 inputs. The primary unobservable inputs utilized in determining the fair value of the Earnout and Preferred Stock Equivalents are the expected volatility of the Class A Common Stock and the revenue levels of Engine.
In May 2023, the Earnout was settled through the issuance of
In June 2023, the Preferred Stock Equivalents were settled through the issuance of
The Company’s pro forma revenue and net loss for the six months ended June 30, 2022 below has been prepared as if Even Financial Inc. had been purchased on January 1, 2022. The Company made certain pro forma adjustments related to amortization of intangible assets, intercompany activity and interest expense.
|
Six Months Ended June 30, 2022 |
|
|
|
(unaudited) |
|
|
Revenue |
$ |
|
|
Net loss |
$ |
( |
) |
The unaudited pro forma financial information above is not necessarily indicative of what the Company’s consolidated results actually would have been if the Engine Acquisition had been completed at January 1, 2022. In addition, the unaudited pro forma information above does not attempt to project the Company’s future results.
MALKA—On November 15, 2021, MoneyLion completed 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 unsettled restricted shares payable relating to the MALKA Acquisition earnout and the related make-whole were valued at $
17. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through August 8, 2023, the date on which these consolidated financial statements were available to be issued, and concluded that the following subsequent events were required to be disclosed:
27
On July 14, 2023, the Company paid $
On July 28, 2023, the Company entered into a sublease for
28
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. References to “we,” “us,” “our,” “Company” or “MoneyLion” refer to MoneyLion Inc. and, as context requires, its wholly-owned subsidiaries.
Overview
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. We offer our core suite of innovative first-party financial products and services, along with personalized and actionable financial and non-financial offers in our Consumer marketplace from our Product Partners. We power leading embedded finance marketplace solutions for our Enterprise Partners, connecting and matching consumers with real-time, personalized product and service recommendations through our proprietary integrative technology, and provide complementary data products and services that optimize their marketplace integrations and competitiveness. We also offer creative media and marketing services to clients across industries through our media division and leverage these same creative resources to produce and deliver engaging and dynamic content in support of our product and service offerings.
We have purposefully built our platform in pursuit of our mission to rewire the financial system. We aim to build tools to help consumers through all of their financial inflection points through the use of comprehensive, data-driven analytics that connect consumers with the appropriate financial solution for their individual needs, whether through our first-party products or an offering through our marketplace platforms. As of June 30, 2023, we had 9.9 million Total Customers who used 17.3 million Total Products and over 1,000 Enterprise Partners in our network. We utilize innovative approaches to financial advice, education and literacy by delivering our customers dynamic money-related content, positioning ourselves at the forefront of evolving trends in media consumption so that our customers can better understand and manage their finances. By providing both access and ability and shortening the distance between education and action, we empower customers to take control of their money, no matter their financial circumstances – Every Time You Money.
In our Consumer business, we primarily earn revenue as follows:
29
In our Enterprise business, we primarily earn revenue, reflected in enterprise service revenues, as follows:
Recent Developments
Recent events impacting our business are as follows:
Automatic Conversion Event
Pursuant to the Certificate of Designations of the Series A Preferred Stock (the "Certificate of Designations"), the Series A Preferred Stock was convertible (i) at any time upon the holder’s election and (ii) automatically in the event that the per share volume-weighted average price of the shares of Class A Common Stock on the NYSE equaled or exceeded $10.00 on any 20 trading days (consecutive or nonconsecutive) within any consecutive 30 trading day period ending no later than the last day of the lockup period applicable to such shares of Series A Preferred Stock.
As of the close of trading on the NYSE on May 26, 2023, the per share volume-weighted average price of the shares of Class A Common Stock on the NYSE equaled or exceeded $10.00 for the twentieth trading day within a consecutive thirty trading day period ending no earlier than the last day of the lockup period applicable to such shares of Series A Preferred Stock (the “Automatic Conversion Event”). Accordingly, as a result of the Automatic Conversion Event, following the close of trading on the NYSE on May 26, 2023, all 30,049,053 shares of Series A Preferred Stock issued and outstanding automatically converted into 1,012,293 shares of newly issued Class A Common Stock based on the conversion rate provided in the Certificate of Designations. In lieu of any fractional shares otherwise issuable to any holder of the Series A Preferred Stock, the Company issued cash in accordance with the terms of the Certificate of Designations.
Upon the Automatic Conversion Event, the MoneyLion Inc. Preferred Share Dividend Replacement Program governing the Preferred Stock Equivalents (as defined below) immediately and automatically terminated in accordance with its terms, following which all Preferred Stock Equivalents were forfeited.
Amendment to Monroe Term Loans
As previously reported, the Company is party to that certain Credit Agreement, dated as of March 24, 2022 (as amended by Amendment No. 1 to Credit Agreement, dated as of March 30, 2023, the “Credit Agreement”), by and among certain financial institutions from time to time party thereto (together with their respective successors and permitted assigns, the “Lenders”), as lenders, and Monroe Capital Management Advisors, LLC, a Delaware limited liability company (“Monroe Capital”), as administrative agent and lead arranger. Pursuant to the Credit Agreement, on March 24, 2022, the Company borrowed (a) $70.0 million aggregate principal amount of term loans (the “Term A-1 Loans”), with a maturity date of March 24, 2026, and (b) $20.0 million aggregate principal amount of term loans (the “Term A-2 Loans” and together with the Term A-1 Loans, the "Monroe Term Loans"), with a maturity date of May 1, 2023.
30
On April 28, 2023, the Company entered into Amendment No. 2 to Credit Agreement (“Amendment No. 2”) with the Lenders and Monroe Capital in order to extend the maturity date of the Term A-2 Loans and proactively manage the Company's interest expense through the remainder of 2023. Pursuant to Amendment No. 2, the Company, the Lenders and Monroe Capital agreed that the Company would: (i) pay $5.0 million of the outstanding principal balance of the Term A-2 Loans on May 1, 2023, $10.0 million of the outstanding principal balance of the Term A-2 loans on July 15, 2023 and the remaining outstanding principal balance of the Term A-2 Loans in full on October 15, 2023, and (ii) prepay $5.0 million of the outstanding principal balance of the Term A-1 Loans on October 15, 2023, with the remaining outstanding principal balance of the Term A-1 Loans continuing to be due on the original maturity date of March 24, 2026. The Company is and was, prior to the entry into Amendment No. 2, in compliance with all of its covenants under the Credit Agreement. Costs associated with Amendment No. 2 were not material.
Reverse Stock Split
On April 24, 2023, the Company amended the Certificate of Incorporation to effect, effective as of 5:01 p.m. Eastern Time on April 24, 2023, the 1-for-30 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 previously outstanding Series A Preferred Stock were converted to Class A Common Stock. The total number of shares of preferred stock of the Company authorized for issuance remained at 200,000,000. Stockholders who would have been entitled to receive fractional shares as a result of the Reverse Stock Split were instead entitled to a cash payment in lieu thereof at a price equal to the fraction of one share to which the stockholder was otherwise entitled multiplied by the closing price per share of 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.
Business Combinations — Since January 1, 2022, we have completed the following business combination:
31
At the closing of the Engine Acquisition, we (i) issued to the equityholders of Even Financial Inc. an aggregate of 28,164,811 shares of Series A Preferred Stock, along with an additional 529,120 shares of Series A Preferred Stock to advisors of Even Financial Inc. for transaction expenses, valued at $193.7 million, (ii) paid to certain Even Financial Inc. management equityholders approximately $14.5 million in cash and (iii) exchanged 8,883,228 options to acquire Even Financial Inc. common stock for 196,728 options to acquire Class A Common Stock, of which the vested portion at the acquisition date was valued at $9.0 million. In addition, certain recipients of options to acquire shares of Class A Common Stock were entitled to receive dividend equivalents in lieu of receiving Series A Preferred Stock, subject to certain conditions (the “Preferred Stock Equivalents”). The total purchase price was approximately $271.1 million, subject to customary purchase price adjustments for working capital and inclusive of amounts used to repay approximately $5.7 million of existing indebtedness of Even Financial Inc. and pay $2.9 million of seller transaction costs.
Pursuant to the Amended and Restated Agreement and Plan of Merger, dated as of February 17, 2022, governing the Engine Acquisition (the "Engine Merger Agreement"), the equityholders and advisors of Even Financial Inc. were entitled to receive an additional payment from the Company of up to an aggregate of 8,000,000 shares of Series A Preferred Stock, based on the attributed revenue of Engine’s business during the 13-month period commencing January 1, 2022 (the “Earnout”). On May 22, 2023, in connection with Engine's partial achievement of the Earnout, the Company issued 4,354,092 shares of Series A Preferred Stock and, in lieu of fractional shares and with respect to recipients otherwise ineligible to receive shares, approximately $0.5 million in cash to the former equityholders and advisors of Even Financial Inc.
Factors Affecting Our Performance
We are subject to a number of risks including, but not limited to, the need for successful development of products, services and functionality; the need for additional capital (or financing) to fund operating losses; competition with substitute products and services from larger companies; protection of proprietary technology and information; dependence on key individuals; and risks associated with changes in information technology. For additional information, see the "Risk Factors" section in our Annual Report on Form 10-K for the year ended December 31, 2022.
New Customer and Client Growth and Increasing Usage Across Existing Customers and Clients
Our ability to effectively acquire new customers and clients through our acquisition and marketing efforts and drive usage of our products and services across our existing customers and clients is key to our growth, particularly as a significant portion of the revenue we generate in our business is derived from transaction-based fees. We believe our customers’ experience is enhanced by using our full suite of first-party financial products and services, complemented by the full spectrum of offers available in our marketplace, as we can better tailor the insights and recommendations we provide to them. In order to grow our business, we must engage and retain customers and continue to expand their use of our platform by cross-selling additional functionality, products and services to them. In our Enterprise business, we are dependent in part on our relationships with our Enterprise Partners, and any failure to effectively match consumers leads from our Channel Partners with product and service offerings from our Product Partners, or any reduced marketing spend by such Product Partners on our Enterprise platform, could adversely affect our business and results of operations.
Expansion and Innovation of Products, Services and Functionality
We will continue to invest in expanding and enhancing the products, services and functionality available through our platform for our customers and clients. Our ability to expand, enhance and sell additional functionality, products and services to our existing customers and clients may require more sophisticated and costly development, sales or engagement efforts. Any factors that impair our ability to do so may negatively impact our efforts towards retaining and attracting customers and clients.
32
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. For example, with respect to our Consumer business, the willingness of our customers to spend, invest or borrow may fluctuate with their level of disposable income. Other factors such as interest rate fluctuations or monetary policies may also impact our customers’ behavior and our own ability to fund Instacash advances and loan volume. In addition, in our Enterprise business, adverse macroeconomic conditions, such as significant tightening of credit markets, may cause our Product Partners to reduce their marketing spend or advertising on our platform or may cause a reduction in client spending in our media division, which could adversely affect our business and results of operations.
Seasonality
We may experience seasonal fluctuations in our revenue. During the fourth quarter, revenue in our Consumer business may benefit from increased consumer spending during the holiday season, which may increase demand for our loan and Instacash earned wage access products and services as consumers seek additional liquidity. During the first quarter, we may see weaker demand for our loan and Instacash earned wage access products and services as a result of the impact of tax refunds on consumers' liquidity needs, but stronger demand for our banking and investment products and services. In our Enterprise business, due to corporate client advertising spending patterns throughout the year, we may generate higher revenue in our media division in the second and fourth quarters compared to other quarters. Adverse events that occur during these months could have a disproportionate effect on our financial results for the year. Seasonal trends may be superseded by market or macroeconomic events, which can have a significant impact on our business, as described above.
Competition
We compete across our business lines with a variety of competitors, including traditional banks and credit unions; new entrants obtaining banking licenses; non-bank digital providers offering banking-related services; specialty finance and other non-bank digital providers offering consumer lending-related or earned wage access products; digital wealth management platforms such as robo-advisors offering consumer investment services and other brokerage-related services; and digital financial platform, embedded finance and marketplace competitors, which aggregate and connect consumers to financial product and service offerings. In addition, we face competition in our media division from others in the digital media and content creation industry, which range from large and established media companies, including social media companies and production studios, to emerging start-ups. We expect our competition to continue to increase. The success of our business depends on our ability to compete effectively and attract new and retain existing customers and clients, which depends upon many factors both within and beyond our control.
Pricing of Our Products and Services
We derive a substantial portion of our revenue from fees earned from our products and services. The fees we earn are subject to a variety of external factors such as competition, interchange rates and other macroeconomic factors, such as interest rates and inflation, among others. We may provide discounts or other incentives and rewards that we pay for to customers who utilize multiple products and services to expand usage of our platform. We may also lower pricing on our products and services to acquire new customers. As the market for our platform matures, or as new or existing competitors introduce new products, services or functionality that compete with ours, we may experience pricing pressure and be unable to retain current customers and clients and attract new customers and clients at prices that are consistent with our pricing model and operating budget. Our pricing strategy may prove to be unappealing to our customers and clients, and our competitors could choose to bundle certain products and services competitive with ours. If this were to occur, it is possible that we would have to change our pricing strategies or reduce our prices, which could adversely affect our business.
33
Product and Service Mix
We offer various products and services on our platform, including our core suite of first-party financial products and services, a broad range of financial and non-financial offers in our Consumer marketplace and embedded finance marketplace solutions and media services in our Enterprise business. Each product and service has a different profitability profile. The relative usage of products and services with high or low profitability and their lifetime value could have an impact on our performance.
Access and Cost of Financing
Our credit products, earned wage access product and other receivables are primarily financed by special purpose vehicle financings from third-party institutional lenders. The loss of one or more of the financing sources we have for our credit products, earned wage access product and other receivables could have an adverse impact on our performance, and it could be costly to obtain new financing.
Key Performance Metrics
We regularly review several metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Total Customers
We define Total Customers as the cumulative number of customers that have opened at least one account, including banking, membership subscription, secured personal loan, Instacash advance, managed investment account, cryptocurrency account and customers that are monetized through our marketplace and affiliate products. Total Customers also include customers that have submitted for, received or clicked on at least one marketplace loan offer. Previously, Total Customers included all customers that submitted for or clicked on an offer through our marketplace but were not necessarily monetized, which we changed beginning in the third quarter of 2022 in order to more accurately reflect management’s view of our customers. 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 9.9 million and 4.6 million as of June 30, 2023 and 2022, respectively. Total Customers for all prior periods have been recast to present the updated definition of Total Customers.
Total Products
We define Total Products as the total number of products that our Total Customers have opened, including banking, membership subscription, secured personal loan, Instacash advance, managed investment account, cryptocurrency account and monetized marketplace and affiliate products, as well as customers who signed up for our financial tracking services (with either credit tracking enabled or external linked accounts), whether or not the customer is still registered for the product. Total Products also include marketplace loan offers that our Total Customers have submitted for, received or clicked on through our marketplace. If a customer has funded multiple secured personal loans or Instacash advances or opened multiple products through our marketplace, it is only counted once for each product type. Previously, Total Products included all products for which our Total Customers submitted or clicked on an offer but were not necessarily monetized, which we changed beginning in the third quarter of 2022 in order to more accurately reflect management’s view of our products. 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 17.3 million and 10.1 million as of June 30, 2023 and 2022, respectively. Total Products for all prior periods have been recast to present the updated definition of Total Products.
34
Enterprise Partners
Enterprise Partners is comprised of Product Partners and Channel Partners. We define Product Partners as providers of the financial and non-financial products and services that we offer in our marketplaces, including financial institutions, financial services providers and other affiliate partners. We define Channel Partners as organizations that allow us to reach a wide base of consumers, including but not limited to news sites, content publishers, product comparison sites and financial institutions. Enterprise Partners were 1,110, comprising 505 Product Partners and 605 Channel Partners, and 1,011, comprising 433 Product Partners and 578 Channel Partners, as of June 30, 2023 and 2022, respectively.
Total Originations
We define Total Originations as the dollar volume of the secured personal loans originated and Instacash advances funded within the stated period. We consider Total Originations to be a key performance metric as it can be used to measure the usage and engagement of the customers across our secured personal lending product and Instacash earned wage access product and is a significant driver of net interest income on finance receivables and service and subscription fees. Total Originations were $550 million and $439 million for the three months ended June 30, 2023 and 2022, respectively, and $1,056 million and $847 million for the six months ended June 30, 2023 and 2022, respectively. All originations were originated directly by MoneyLion.
Gross Profit
The calculation of gross profit, which is prepared in accordance with U.S. GAAP, for the three and six months ended June 30, 2023 and 2022 is as follows:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Total revenue, net |
|
$ |
106,541 |
|
|
$ |
87,340 |
|
|
$ |
200,210 |
|
|
$ |
157,054 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of Sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Direct costs |
|
|
(32,230 |
) |
|
|
(29,386 |
) |
|
|
(62,032 |
) |
|
|
(50,590 |
) |
Provision for credit losses on receivables - subscription receivables1 |
|
|
(1,189 |
) |
|
|
(1,221 |
) |
|
|
(1,925 |
) |
|
|
(2,762 |
) |
Provision for credit losses on receivables - fees receivables2 |
|
|
(3,869 |
) |
|
|
(2,204 |
) |
|
|
(8,043 |
) |
|
|
(4,205 |
) |
Technology related costs |
|
|
(3,006 |
) |
|
|
(2,525 |
) |
|
|
(6,280 |
) |
|
|
(4,986 |
) |
Professional services |
|
|
(1,270 |
) |
|
|
(1,129 |
) |
|
|
(2,627 |
) |
|
|
(2,185 |
) |
Compensation and benefits |
|
|
(2,283 |
) |
|
|
(2,657 |
) |
|
|
(4,825 |
) |
|
|
(3,671 |
) |
Other operating expenses |
|
|
(92 |
) |
|
|
(118 |
) |
|
|
(222 |
) |
|
|
(222 |
) |
Gross Profit |
|
$ |
62,602 |
|
|
$ |
48,100 |
|
|
$ |
114,256 |
|
|
$ |
88,433 |
|
35
Adjusted EBITDA
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, goodwill impairment loss, stock-based compensation and one-time expenses less origination financing cost of capital. We believe Adjusted EBITDA provides a meaningful understanding of an aspect of profitability based on our current product portfolio. Adjusted EBITDA is a non-GAAP measure and should not be viewed as a substitute for net income (loss). Refer to the “— Non-GAAP Measures” section below for further discussion.
Results of Operations for the Three and Six Months Ended June 30, 2023 and 2022
Revenues
The following table is reference for the discussion that follows.
|
|
Three Months Ended June 30, |
|
|
Change |
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||||||
|
|
(In thousands, except for percentages) |
|
|||||||||||||||||||||||||||||
Consumer revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Service and subscription fees |
|
$ |
66,268 |
|
|
$ |
50,768 |
|
|
$ |
15,500 |
|
|
|
30.5 |
% |
|
$ |
128,706 |
|
|
$ |
97,162 |
|
|
$ |
31,544 |
|
|
|
32.5 |
% |
Net interest income on finance receivables |
|
|
3,304 |
|
|
|
2,517 |
|
|
|
787 |
|
|
|
31.3 |
% |
|
|
6,232 |
|
|
|
5,085 |
|
|
|
1,147 |
|
|
|
22.6 |
% |
Total consumer revenues |
|
|
69,572 |
|
|
|
53,285 |
|
|
|
16,287 |
|
|
|
30.6 |
% |
|
|
134,938 |
|
|
|
102,247 |
|
|
|
32,691 |
|
|
|
32.0 |
% |
Enterprise service revenues |
|
|
36,969 |
|
|
|
34,055 |
|
|
|
2,914 |
|
|
|
8.6 |
% |
|
|
65,272 |
|
|
|
54,807 |
|
|
|
10,465 |
|
|
|
19.1 |
% |
Total revenue, net |
|
$ |
106,541 |
|
|
$ |
87,340 |
|
|
$ |
19,201 |
|
|
|
22.0 |
% |
|
$ |
200,210 |
|
|
$ |
157,054 |
|
|
$ |
43,156 |
|
|
|
27.5 |
% |
We generate revenues primarily from various product-related fees, providing membership subscriptions, performing enterprise services and originating loans.
Service and subscription fees
Service and subscription fees increased by $15.5 million, or 30.5%, to $66.3 million for the three months ended June 30, 2023, as compared to $50.8 million for the same period in 2022. The increase in service and subscription fees was driven by increases in fee income related to instant transfer fees and tips from Instacash advances of $14.5 million, which was driven by the growth of Instacash advances across both existing and new customers, an increase in cardholder fees from RoarMoney accounts of $0.6 million due to an increased number of customers using RoarMoney and new foreign transaction and instant transfer fees, an increase in subscription fees of $0.2 million due to an increased number of customers using our membership program, and an increase of $0.2 million in revenue from a transaction volume-based incentive payment program from a third-party payment network.
Service and subscription fees increased by $31.5 million, or 32.5%, to $128.7 million for the six months ended June 30, 2023, as compared to $97.2 million for the same period in 2022. The increase in service and subscription fees was driven by increases in fee income related to instant transfer fees and tips from Instacash advances of $29.9 million, which was driven by the growth of Instacash advances across both existing and new customers, an increase in cardholder fees from RoarMoney accounts of $1.2 million due to an increased number of customers using RoarMoney and new foreign transaction launched in Q2 2022 and instant transfer fees launched in Q3 2022, and an increase of $0.5 million in revenue from a transaction volume-based incentive payment program from a third-party payment network.
36
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 $0.8 million, or 31.3%, to $3.3 million for the three months ended June 30, 2023, as compared to $2.5 million for the same period in 2022. The increase in net interest income on finance receivables was driven by the origination growth on our Credit Builder Plus loan program across both existing and new customers. The amortization of loan origination costs decreased by $0.1 million to $0.0 million for the three months ended June 30, 2023, as compared to $0.1 million for the same period in 2022.
Net interest income on finance receivables increased by $1.1 million, or 22.6%, to $6.2 million for the six months ended June 30, 2023, as compared to $5.1 million for the same period in 2022. The increase in net interest income on finance receivables was driven by the origination growth on our Credit Builder Plus loan program across both existing and new customers. The amortization of loan origination costs decreased by $0.3 million to $0.2 million for the six months ended June 30, 2023, as compared to $0.5 million for the same period in 2022.
Enterprise service revenues
Enterprise service revenues increased by $2.9 million, or 8.6%, to $37.0 million for the three months ended June 30, 2023, as compared to $34.1 million for the same period in 2022. This increase was primarily driven by stronger performance within our Consumer and Enterprise Marketplace.
Enterprise service revenues increased by $10.5 million, or 19.1%, to $65.3 million for the six months ended June 30, 2023, as compared to $54.8 million for the same period in 2022. This increase was primarily driven by stronger performance within our Consumer and Enterprise Marketplace.
37
Operating Expenses
The following table is reference for the discussion that follows:
|
|
Three Months Ended June 30, |
|
|
Change |
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||||||
|
|
(In thousands, except for percentages) |
|
|||||||||||||||||||||||||||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Provision for credit losses on consumer receivables |
|
$ |
25,562 |
|
|
$ |
26,981 |
|
|
$ |
(1,419 |
) |
|
|
-5.3 |
% |
|
$ |
42,073 |
|
|
$ |
50,025 |
|
|
$ |
(7,952 |
) |
|
|
-15.9 |
% |
Compensation and benefits |
|
|
22,572 |
|
|
|
26,498 |
|
|
|
(3,926 |
) |
|
|
-14.8 |
% |
|
|
46,980 |
|
|
|
48,541 |
|
|
|
(1,561 |
) |
|
|
-3.2 |
% |
Marketing |
|
|
6,549 |
|
|
|
9,477 |
|
|
|
(2,928 |
) |
|
|
-30.9 |
% |
|
|
12,941 |
|
|
|
20,893 |
|
|
|
(7,952 |
) |
|
|
-38.1 |
% |
Direct costs |
|
|
32,230 |
|
|
|
29,386 |
|
|
|
2,844 |
|
|
|
9.7 |
% |
|
|
62,032 |
|
|
|
50,590 |
|
|
|
11,442 |
|
|
|
22.6 |
% |
Professional services |
|
|
4,518 |
|
|
|
6,652 |
|
|
|
(2,134 |
) |
|
|
-32.1 |
% |
|
|
9,517 |
|
|
|
13,940 |
|
|
|
(4,423 |
) |
|
|
-31.7 |
% |
Technology-related costs |
|
|
5,611 |
|
|
|
5,409 |
|
|
|
202 |
|
|
|
3.7 |
% |
|
|
11,649 |
|
|
|
9,914 |
|
|
|
1,735 |
|
|
|
17.5 |
% |
Other operating expenses |
|
|
11,219 |
|
|
|
9,842 |
|
|
|
1,377 |
|
|
|
14.0 |
% |
|
|
20,214 |
|
|
|
20,611 |
|
|
|
(397 |
) |
|
|
-1.9 |
% |
Total operating expenses |
|
$ |
108,261 |
|
|
$ |
114,245 |
|
|
$ |
(5,984 |
) |
|
|
-5.2 |
% |
|
$ |
205,406 |
|
|
$ |
214,514 |
|
|
$ |
(9,108 |
) |
|
|
-4.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other (expense) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Interest expense |
|
$ |
(7,330 |
) |
|
$ |
(7,584 |
) |
|
$ |
254 |
|
|
|
-3.3 |
% |
|
$ |
(14,841 |
) |
|
$ |
(13,758 |
) |
|
$ |
(1,083 |
) |
|
|
7.9 |
% |
Change in fair value of warrant liability |
|
|
162 |
|
|
|
2,951 |
|
|
|
(2,789 |
) |
|
|
-94.5 |
% |
|
|
13 |
|
|
|
6,861 |
|
|
|
(6,848 |
) |
|
|
-99.8 |
% |
Change in fair value of contingent consideration from mergers and acquisitions |
|
|
6,367 |
|
|
|
8,480 |
|
|
|
(2,113 |
) |
|
|
-24.9 |
% |
|
|
6,613 |
|
|
|
3,820 |
|
|
|
2,793 |
|
|
|
73.1 |
% |
Goodwill impairment loss |
|
|
(26,721 |
) |
|
|
- |
|
|
|
(26,721 |
) |
|
nm |
|
|
|
(26,721 |
) |
|
|
- |
|
|
|
(26,721 |
) |
|
nm |
|
||
Other income (expense) |
|
|
1,257 |
|
|
|
9 |
|
|
|
1,248 |
|
|
|
13,866.7 |
% |
|
|
2,906 |
|
|
|
(907 |
) |
|
|
3,813 |
|
|
nm |
|
|
Total other (expense) income |
|
$ |
(26,265 |
) |
|
$ |
3,856 |
|
|
$ |
(30,121 |
) |
|
nm |
|
|
$ |
(32,030 |
) |
|
$ |
(3,984 |
) |
|
$ |
(28,046 |
) |
|
|
704.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Income tax (benefit) expense |
|
$ |
(262 |
) |
|
$ |
16 |
|
|
$ |
(278 |
) |
|
nm |
|
|
$ |
(286 |
) |
|
$ |
(28,401 |
) |
|
$ |
28,115 |
|
|
|
-99.0 |
% |
|
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 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 decreased by $1.4 million, or 5.3%, to $25.6 million for the three months ended June 30, 2023, as compared to $27.0 million for the same period in 2022. This decrease resulted primarily from a decrease to provision related to Instacash advance receivables of $1.8 million and decrease to provision related to Credit Builder Plus loan receivables of $1.2 million, which was partially offset by an increase in provision for Instacash instant transfer fees and tips of $1.7 million.
Provision for credit losses on consumer receivables decreased by $8.0 million, or 15.9%, to $42.1 million for the six months ended June 30, 2023, as compared to $50.0 million for the same period in 2022. This decrease resulted primarily from a decrease to provision related to Instacash advance receivables of $8.5 million, decrease to provision related to Credit Builder Plus loan receivables of $2.5 million and decrease to provision related to subscription fees of $0.8 million, which was partially offset by an increase in provision for Instacash instant transfer fees and tips of $3.8 million.
38
Compensation and benefits
Compensation and benefits decreased by $3.9 million, or 14.8%, to $22.6 million for the three months ended June 30, 2023, as compared to $26.5 million for the same period in 2022. This decrease was driven primarily by $3.8 million of reduced employee salary and benefits expenses as a result of expense reduction initiatives, $0.3 million of lower severance costs, and $0.2 million of lower incentive compensation expenses. This decrease was partially offset by $0.3 million of lower capitalized salaries in 2023 as a result of expense reduction initiatives.
Compensation and benefits decreased by $1.6 million, or 3.2%, to $47.0 million for the six months ended June 30, 2023, as compared to $48.5 million for the same period in 2022. This decrease was driven primarily by $4.8 million of reduced employee salary and benefits expenses as a result of expense reduction initiatives, $0.6 million of lower incentive compensation expenses, $0.4 million of lower severance costs, and $0.1 million of lower capitalized salaries expenses. This decrease was partially offset by $2.4 million of higher stock-based compensation expenses and a $1.9 million increase due to a full quarter impact of Engine salary and benefits expenses in 2023.
Marketing
Marketing decreased by $2.9 million, or 30.9%, to $6.5 million for the three months ended June 30, 2023, as compared to $9.5 million for the same period in 2022. This decrease resulted primarily from lower costs related to advertising through digital platforms.
Marketing decreased by $8.0 million, or 38.1%, to $12.9 million for the six months ended June 30, 2023, as compared to $20.9 million for the same period in 2022. This decrease resulted primarily from lower costs related to advertising through digital platforms.
Direct costs
Direct costs increased by $2.8 million, or 9.7%, to $32.2 million for the three months ended June 30, 2023, as compared to $29.4 million for the same period in 2022. The increase was primarily driven by $2.1 million of direct costs related to the growth of Enterprise revenues and an increase in payment processing fees of $0.6 million and underwriting expenses of $0.4 million, driven by growth in Total Originations and Total Customers, partially offset by a $0.2 million decrease in costs related to our MoneyLion Investing offering.
Direct costs increased by $11.4 million, or 22.6%, to $62.0 million for the six months ended June 30, 2023, as compared to $50.6 million for the same period in 2022. The increase was primarily driven by $8.4 million of direct costs related to the growth of Enterprise revenues and an increase in payment processing fees of $2.7 million and underwriting expenses of $0.7 million, driven by growth in Total Originations and Total Customers, partially offset by a $0.4 million decrease in costs related to our RoarMoney Banking and MoneyLion Investing offering.
Professional services
Professional services decreased by $2.1 million, or 32.1%, to $4.5 million for the three months ended June 30, 2023, as compared to $6.7 million for the same period in 2022. This decrease resulted primarily from $1.1 million of lower outside consulting expenses, $0.8 million of lower accounting and audit expenses, and $0.2 million of lower recruiting expenses.
Professional services decreased by $4.4 million, or 31.7%, to $9.5 million for the six months ended June 30, 2023, as compared to $13.9 million for the same period in 2022. This decrease resulted primarily from $1.8 million of lower outside consulting expenses, $1.1 million of lower legal expenses, $1.0 million of lower accounting and audit expenses, and $0.5 million of lower recruiting expenses.
39
Technology-related costs
Technology-related costs increased by $0.2 million, or 3.7%, to $5.6 million for the three months ended June 30, 2023, as compared to $5.4 million for the same period in 2022. This increase resulted primarily from an increase in depreciation and amortization related to equipment and software of $0.2 million.
Technology-related costs increased by $1.7 million, or 17.5%, to $11.6 million for the six months ended June 30, 2023, as compared to $9.9 million for the same period in 2022. This increase resulted primarily from a $1.3 million increase due to a full quarter impact of Engine expenses in 2023, an increase in expenses for software licenses and subscriptions of $0.2 million, and an increase in depreciation and amortization related to equipment and software of $0.2 million.
Other operating expenses
Other operating expenses increased by $1.4 million, or 14.0%, to $11.2 million for the three months ended June 30, 2023, as compared to $9.8 million for the same period in 2022. The increase was primarily driven by bad debt reserves and write-offs of Enterprise receivables of $1.0 million, higher expenses related to processing transactions in our Consumer business of $0.6 million and an increase in costs related to legal matters of $0.4 million, which was partially offset by lower corporate insurance expenses of $0.4 million and lower intangible amortization of $0.2 million.
Other operating expenses decreased by $0.4 million, or 1.9%, to $20.2 million for the six months ended June 30, 2023, as compared to $20.6 million for the same period in 2022. The decrease was primarily driven by a reduction in expenses related to processing of transactions in our Consumer business of $2.3 million, a reduction in costs related to legal matters of $1.0 million, and a reduction of corporate insurance expenses of $0.8 million, which was partially offset by an increase of $1.8 million of intangible amortization expenses attributable to the Engine Acquisition, an increase of $1.5 million related to bad reserves and write-offs of receivables and an increase in facilities expenses of $0.3 million.
Our other (expense) income consists of the following:
Interest expense
Interest expense decreased by $0.3 million, or 3.3%, to $7.3 million for the three months ended June 30, 2023, as compared to $7.6 million for the same period in 2022. This decrease resulted from a decrease in average debt outstanding during the three months ended June 30, 2023 compared to the same period in 2022. See Part I, Item 1 “Financial Statements — Debt” for more information.
Interest expense increased by $1.1 million, or 7.9%, to $14.8 million for the six months ended June 30, 2023, as compared to $13.8 million for the same period in 2022. This increase resulted from an increase in average debt outstanding during the six months ended June 30, 2023 compared to the same period in 2022. 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 $0.2 million for the three months ended June 30, 2023, as compared to a benefit of $3.0 million for the same period in 2022. 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 warrant liability was a benefit of $0.0 million for the six months ended June 30, 2023, as compared to a benefit of $6.9 million for the same period in 2022. The change in fair value of warrant liability was due to changes in inputs that drive the warrant liability fair value calculations.
40
Change in fair value of contingent consideration from mergers and acquisitions
Change in fair value of contingent consideration from mergers and acquisitions was a benefit of $6.4 million for the three months ended June 30, 2023, as compared to a benefit of $8.5 million for the same period in 2022. The change in benefit was primarily driven by the inputs used in computing the valuations of contingent consideration.
Change in fair value of contingent consideration from mergers and acquisitions was a benefit of $6.6 million for the six months ended June 30, 2023, as compared to a benefit of $3.8 million for the same period in 2022. The change in benefit was primarily driven by the inputs used in computing the valuations of contingent consideration.
Goodwill impairment loss
A goodwill impairment loss of $26.7 million was recorded during the three and six months ended June 30, 2023; there was no such loss in the prior periods in 2022. The goodwill impairment loss was primarily caused by a decline in the price of the Class A Common Stock and the Company's related market capitalization.
Other income (expense)
Other income increased by $1.2 million to $1.3 million for the three months ended June 30, 2023, as compared to $0.0 million for the same period in 2022. The increase was primarily related to interest income earned on interest bearing deposits.
Other income increased by $3.8 million to $2.9 million for the six months ended June 30, 2023, as compared to other expense of $0.9 million for the same period in 2022. The increase was primarily related to interest income earned on interest bearing deposits.
Income tax (benefit) expense
See Part I, Item 1 “Financial Statements — Income Taxes” for an explanation of the tax activity recorded during the six months ended June 30, 2023.
Non-GAAP Measures
In addition to net income (loss), which is a measure presented in accordance with U.S. GAAP, management believes that Adjusted EBITDA provides relevant and useful information which is widely used by analysts, investors and competitors in our industry in assessing performance. Adjusted EBITDA is a supplemental measure of our performance that is neither required by nor presented in accordance with U.S. GAAP. Adjusted EBITDA should not be considered as a substitute for U.S. GAAP metrics such as net income (loss) 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 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, goodwill impairment loss, stock-based compensation and one-time expenses less origination financing cost of capital. We believe that Adjusted EBITDA provides a meaningful understanding of an aspect of profitability based on our current product portfolio. In addition, Adjusted EBITDA is useful to an investor in evaluating our performance because it:
41
The reconciliation of net loss, which is prepared in accordance with U.S. GAAP, to Adjusted EBITDA for the three and six months ended June 30, 2023 and 2022 is as follows:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net loss |
|
$ |
(27,723 |
) |
|
$ |
(23,065 |
) |
|
$ |
(36,940 |
) |
|
$ |
(33,043 |
) |
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest related to corporate debt1 |
|
|
3,475 |
|
|
|
2,653 |
|
|
|
7,035 |
|
|
|
4,040 |
|
Income tax (benefit) expense |
|
|
(262 |
) |
|
|
16 |
|
|
|
(286 |
) |
|
|
(28,401 |
) |
Depreciation and amortization expense |
|
|
6,113 |
|
|
|
6,006 |
|
|
|
12,297 |
|
|
|
9,427 |
|
Changes in fair value of warrant liability |
|
|
(162 |
) |
|
|
(2,951 |
) |
|
|
(13 |
) |
|
|
(6,861 |
) |
Change in fair value of contingent consideration from mergers and acquisitions |
|
|
(6,367 |
) |
|
|
(8,480 |
) |
|
|
(6,613 |
) |
|
|
(3,820 |
) |
Goodwill impairment loss |
|
|
26,721 |
|
|
|
- |
|
|
|
26,721 |
|
|
|
- |
|
Stock-based compensation expense |
|
|
5,250 |
|
|
|
5,248 |
|
|
|
10,955 |
|
|
|
8,516 |
|
One-time expenses2 |
|
|
2,188 |
|
|
|
2,042 |
|
|
|
3,373 |
|
|
|
6,819 |
|
Adjusted EBITDA |
|
$ |
9,233 |
|
|
$ |
(18,531 |
) |
|
$ |
16,529 |
|
|
$ |
(43,322 |
) |
42
Changes in Financial Condition to June 30, 2023 from December 31, 2022
|
|
June 30, |
|
|
December 31, |
|
|
Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and restricted cash |
|
$ |
102,174 |
|
|
$ |
153,709 |
|
|
$ |
(51,535 |
) |
|
|
-33.5 |
% |
Consumer receivables |
|
|
188,370 |
|
|
|
169,976 |
|
|
|
18,394 |
|
|
|
10.8 |
% |
Allowance for credit losses on consumer receivables |
|
|
(31,755 |
) |
|
|
(24,841 |
) |
|
|
(6,914 |
) |
|
|
27.8 |
% |
Consumer receivables, net |
|
|
156,615 |
|
|
|
145,135 |
|
|
|
11,480 |
|
|
|
7.9 |
% |
Enterprise receivables, net |
|
|
21,253 |
|
|
|
19,017 |
|
|
|
2,236 |
|
|
|
11.8 |
% |
Property and equipment, net |
|
|
2,348 |
|
|
|
2,976 |
|
|
|
(628 |
) |
|
|
-21.1 |
% |
Goodwill and intangible assets, net |
|
|
185,253 |
|
|
|
220,847 |
|
|
|
(35,594 |
) |
|
|
-16.1 |
% |
Other assets |
|
|
50,297 |
|
|
|
54,658 |
|
|
|
(4,361 |
) |
|
|
-8.0 |
% |
Total assets |
|
$ |
517,940 |
|
|
$ |
596,342 |
|
|
$ |
(78,402 |
) |
|
|
-13.1 |
% |
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Debt agreements |
|
$ |
204,047 |
|
|
$ |
232,011 |
|
|
$ |
(27,964 |
) |
|
|
-12.1 |
% |
Accounts payable and accrued liabilities |
|
|
42,810 |
|
|
|
58,129 |
|
|
|
(15,319 |
) |
|
|
-26.4 |
% |
Warrant liability |
|
|
324 |
|
|
|
337 |
|
|
|
(13 |
) |
|
|
-3.9 |
% |
Other liabilities |
|
|
17,094 |
|
|
|
33,496 |
|
|
|
(16,402 |
) |
|
|
-49.0 |
% |
Total liabilities |
|
|
264,275 |
|
|
|
323,973 |
|
|
|
(59,698 |
) |
|
|
-18.4 |
% |
Series A Preferred Stock |
|
|
- |
|
|
|
173,208 |
|
|
|
(173,208 |
) |
|
|
-100.0 |
% |
Stockholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common Stock |
|
|
1 |
|
|
|
1 |
|
|
|
- |
|
|
|
0.0 |
% |
Additional paid-in capital |
|
|
957,778 |
|
|
|
766,839 |
|
|
|
190,939 |
|
|
|
24.9 |
% |
Accumulated deficit |
|
|
(694,414 |
) |
|
|
(657,979 |
) |
|
|
(36,435 |
) |
|
|
5.5 |
% |
Treasury stock |
|
|
(9,700 |
) |
|
|
(9,700 |
) |
|
|
- |
|
|
|
0.0 |
% |
Total stockholders' equity |
|
|
253,665 |
|
|
|
99,161 |
|
|
|
154,504 |
|
|
|
155.8 |
% |
Total liabilities, redeemable convertible preferred stock and stockholders' equity |
|
$ |
517,940 |
|
|
$ |
596,342 |
|
|
$ |
(78,402 |
) |
|
|
-13.1 |
% |
Assets
Cash and restricted cash
Cash and restricted cash decreased by $51.5 million, or 33.5%, to $102.2 million as of June 30, 2023, as compared to $153.7 million as of December 31, 2022. Refer to the “— Cash Flows” section below for further discussion on the net change in cash and restricted cash from operating activities, investing activities and financing activities during the period.
Consumer receivables, net
Consumer receivables, net increased by $11.5 million, or 7.9%, to $156.6 million as of June 30, 2023, as compared to $145.1 million as of December 31, 2022. The increase was primarily attributable to an increase in loan receivables and Instacash receivables from December 31, 2022 to June 30, 2023.
Enterprise receivables, net
Enterprise receivables, net increased by $2.2 million, or 11.8%, to $21.3 million as of June 30, 2023, as compared to $19.0 million as of December 31, 2022. This increase was primarily attributable to Enterprise Marketplace revenue growth.
43
Goodwill and intangible assets, net
Goodwill and intangible assets, net decreased by $35.6 million, or 16.1%, to $185.3 million as of June 30, 2023, as compared to $220.8 million as of December 31, 2022. This decrease was primarily attributable to the goodwill impairment recorded during the six months ended June 30, 2023 and amortization of intangible assets.
Other assets
Other assets decreased by $4.4 million, or 8.0%, to $50.3 million as of June 30, 2023, as compared to $54.7 million as of December 31, 2022. This was primarily attributable to a decrease in prepaid expenses and amortization of operating lease right-of-use assets.
Liabilities
Debt agreements
Debt agreements decreased by $28.0 million, or 12.1%, to $204.0 million as of June 30, 2023, as compared to $232.0 million as of December 31, 2022. Refer to Part I, Item 1 “Financial Statements — Debt” for further discussion of financing transactions.
Accounts payable and accrued expenses
Accounts payable and accrued expenses decreased by $15.3 million, or 26.4%, to $42.8 million as of June 30, 2023, as compared to $58.1 million as of December 31, 2022. The decrease was primarily attributable to annual bonuses paid, the settlement of dividends payable and lower litigation reserves during the six months ending June 30, 2023.
Warrant liability
Warrant liability activity between June 30, 2023 and December 31, 2022 was not significant. Refer to the “— Results of Operations for the Three and Six Months Ended June 30, 2023 and 2022” section above for further discussion on the change in fair value of warrant liability.
Other liabilities
Other liabilities decreased by $16.4 million, or 49.0%, to $17.1 million as of June 30, 2023, as compared to $33.5 million as of December 31, 2022. The decrease was primarily attributable to the settlement of all contingent consideration related to mergers and acquisitions and a reduction in insurance premium liabilities.
Liquidity and Capital Resources
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.
44
Receivables originated on our platform, including Credit Builder Plus loans and Instacash advances, were primarily financed through special purpose vehicle financings from third-party institutional lenders. As of June 30, 2023, there was an outstanding principal balance of $63.0 million under the ROAR 1 SPV Credit Facility and an outstanding principal balance of $59.0 million under the ROAR 2 SPV Credit Facility. For more information, see Note 9, “Debt” and Note 8, “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 and VIE considerations related to the ROAR 1 SPV Credit Facility and the ROAR 2 SPV Credit Facility, respectively.
The following table presents the Company’s cash, restricted cash and receivable from payment processor as of June 30, 2023 and December 31, 2022:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Cash |
|
$ |
96,739 |
|
|
$ |
115,864 |
|
Restricted cash |
|
|
5,435 |
|
|
|
37,845 |
|
Receivable from payment processor |
|
$ |
32,663 |
|
|
$ |
32,881 |
|
Cash Flows
The following table presents net change in cash and restricted cash from operating, investing and financing activities during the three and six months ended June 30, 2023 and 2022:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net cash provided by (used in) operating activities |
|
$ |
35,363 |
|
|
$ |
(859 |
) |
|
$ |
38,043 |
|
|
$ |
(9,510 |
) |
Net cash used in investing activities |
|
|
(35,589 |
) |
|
|
(31,264 |
) |
|
|
(56,623 |
) |
|
|
(73,543 |
) |
Net cash (used in) provided by financing activities |
|
|
(8,356 |
) |
|
|
356 |
|
|
|
(32,955 |
) |
|
|
54,049 |
|
Net change in cash and restricted cash |
|
$ |
(8,582 |
) |
|
$ |
(31,767 |
) |
|
$ |
(51,535 |
) |
|
$ |
(29,004 |
) |
Operating Activities
Net cash provided by operating activities was $35.4 million for the three months ended June 30, 2023 compared to net cash used in operating activities of $0.9 million for the three months ended June 30, 2022. This increase in net cash provided by operating activities was primarily driven by an increase in profitability, after adjusting for non-cash activity included in our net loss, of approximately $25.5 million during the three months ended June 30, 2023 compared to the three months ended June 30, 2022 and changes in working capital.
Net cash provided by operating activities was $38.0 million for the six months ended June 30, 2023 compared to net cash used in operating activities of $9.5 million for the six months ended June 30, 2022. This increase in net cash provided by operating activities was primarily driven by an increase in profitability, after adjusting for non-cash activity included in our net loss, of approximately $52.0 million during the six months ended June 30, 2023 compared to the six months ended June 30, 2022, which was partially offset by changes in working capital.
Investing Activities
Net cash used in investing activities was $35.6 million for the three months ended June 30, 2023 compared to net cash used in investing activities of $31.3 million for the three months ended June 30, 2022. The increase in net cash used in investing activities was primarily related to increases in finance receivable originations during the three months ended June 30, 2023 compared to the three months ended June 30, 2022.
45
Net cash used in investing activities was $56.6 million for the six months ended June 30, 2023 compared to net cash used in investing activities of $73.5 million for the six months ended June 30, 2022. The decrease in net cash used in investing activities was primarily related to $18.6 million spent on the Engine Acquisition, net of cash received, during the six months ended June 30, 2022, compared to no cash payments for acquisitions during the six months ended June 30, 2023.
Financing Activities
Net cash used in financing activities was $8.4 million for the three months ended June 30, 2023 compared to net cash provided by financing activities of $0.4 million for the three months ended June 30, 2022. The increase in cash used for financing activities was primarily attributable to an increase in principal payments during the three months ended June 30, 2023 compared to the three months ended June 30, 2022 and cash payments related to the Automatic Conversion Event of the Series A Preferred Stock and dividends on the Series A Preferred Stock that were paid during the three months ended June 30, 2023.
Net cash used in financing activities was $33.0 million for the six months ended June 30, 2023 compared to net cash provided by financing activities of $54.0 million for the six months ended June 30, 2022. The increase in cash used for financing activities was primarily attributable to a decrease in proceeds from debt issuances and an increase in principal payments during the six months ended June 30, 2023 compared to the six months ended June 30, 2022.
Financing Arrangements
Refer to 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 June 30, 2023:
|
|
Total |
|
|
Remainder of 2023 |
|
|
2024 – 2025 |
|
|
2026 – 2027 |
|
|
Thereafter |
|
|||||
Monroe Term Loans |
|
$ |
85,000 |
|
|
$ |
20,000 |
|
|
$ |
— |
|
|
$ |
65,000 |
|
|
$ |
— |
|
ROAR 1 SPV Credit Facility |
|
|
63,000 |
|
|
|
— |
|
|
|
63,000 |
|
|
|
— |
|
|
|
— |
|
ROAR 2 SPV Credit Facility |
|
|
59,000 |
|
|
|
— |
|
|
|
59,000 |
|
|
|
— |
|
|
|
— |
|
Operating lease obligations |
|
|
10,345 |
|
|
|
1,647 |
|
|
|
5,758 |
|
|
|
2,172 |
|
|
|
768 |
|
Vendor unconditional purchase obligations |
|
|
32,534 |
|
|
|
— |
|
|
|
15,534 |
|
|
|
17,000 |
|
|
|
— |
|
Total |
|
$ |
249,879 |
|
|
$ |
21,647 |
|
|
$ |
143,292 |
|
|
$ |
84,172 |
|
|
$ |
768 |
|
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.
2022 Annual Dividend and Dividend Replacements
On June 30, 2023, the Company paid the accrued annual dividend on the previously outstanding shares of Series A Preferred Stock for the dividend payment period ending December 31, 2022 to all holders of record as of the applicable dividend record date (the “2022 Annual Dividend”). The 2022 Annual Dividend was paid in a mixture of Class A Common Stock and cash through the issuance of 229,605 shares of Class A Common Stock and payment of approximately $3.0 million of cash.
46
In connection with the 2022 Annual Dividend, on June 30, 2023, the Company paid the corresponding dividend replacement to holders of the Preferred Stock Equivalents (the "2022 Annual Dividend Replacement"). The 2022 Annual Dividend Replacement was paid in a mixture of Class A Common Stock and cash through the issuance of 3,453 shares of Class A Common Stock and payment of approximately $0.3 million of cash.
Equity
Series A Preferred Stock Automatic Conversion Event
As a result of the Automatic Conversion Event (as described further above), following the close of trading on the NYSE on May 26, 2023, all 30,049,053 shares of Series A Preferred Stock issued and outstanding automatically converted into 1,012,293 shares of newly issued Class A Common Stock based on the conversion rate provided in the Certificate of Designations. For more information regarding the Automatic Conversion Event, see “— Recent Developments — Automatic Conversion Event.”
Upon the Automatic Conversion Event, the MoneyLion Inc. Preferred Share Dividend Replacement Program governing the Preferred Stock Equivalents immediately and automatically terminated in accordance with its terms, following which all Preferred Stock Equivalents were forfeited.
Off-Balance Sheet Arrangements
At June 30, 2023, 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates.
Interest Rates Risk
Interest rates may adversely impact our customers’ level of engagement on our platform and ability and willingness to pay outstanding amounts owed to us. While we do not charge interest on a lot of our products, higher interest rates could deter customers from utilizing our credit products and other loans. Moreover, higher interest rates may lead to increased delinquencies, charge-offs and allowances for loans and interest receivable, which could have an adverse effect on our operating results.
The Monroe Term Loans, and future funding arrangements may, bear a variable interest rate. The ROAR 1 SPV Credit Facility and ROAR 2 SPV Credit Facility have fixed interest rates. Given the fixed interest rates charged on many of our loans, a rising variable interest rate would reduce our interest margin earned in these funding arrangements. Dramatic increases in interest rates may make these forms of funding nonviable. A one percent change in the interest rate on our variable interest rate debt, based on principal balances as of June 30, 2023, would result in an approximately $0.9 million impact to annual interest expense.
47
Item 4. Controls and Procedures
Restatement of Q3 2021 Financial Statements
On March 10, 2022, the Company filed Amendment No. 1 to the Quarterly Report on Form 10-Q/A for the quarterly period ended September 30, 2021 (the “Q3 10-Q/A”) in order to restate (the “Q3 2021 Restatement”) the financial statements and related financial information contained in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021, originally filed with the SEC on November 15, 2021, arising from:
Further information about the Q3 2021 Restatement is described in the Q3 10-Q/A, filed with the SEC on March 10, 2022.
Restatement of FY 2021 and Q1 2022 Financial Statements
On August 11, 2022, the Company filed (a) Amendment No. 1 to the Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021 (the “FY 2021 10-K/A”) in order to restate (the “FY 2021 Restatement”) the financial statements and related financial information contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, originally filed with the SEC on March 17, 2022, and (b) Amendment No. 1 to the Quarterly Report on Form 10-Q/A for the quarterly period ended March 31, 2022 (the “Q1 2022 10-Q/A”) in order to restate (the “Q1 2022 Restatement” and together with the Q3 2021 Restatement and the FY 2021 Restatement, the “Restatements”) the financial statements and related financial information contained in the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, originally filed with the SEC on May 16, 2022, in each case arising from the manner in which the Company classified and accounted for the make-whole provision (the “Closing Make-Whole Provision”) relating to certain Class A Common Stock consideration paid and payable to the sellers of MALKA in connection with the closing of the MALKA Acquisition, as the Closing Make-Whole Provision should have been classified as a liability within the scope of Accounting Standards Codification 480, Distinguishing Liabilities from Equity, as of the closing date of the MALKA Acquisition, with subsequent changes in the fair value of such liability recorded in the consolidated statement of operations under change in fair value of contingent consideration from mergers and acquisitions. Further information about the FY 2021 Restatement and the Q1 2022 Restatement is described in the FY 2021 10-K/A and Q1 2022 10-Q/A, respectively, each filed with the SEC on August 11, 2022.
48
Material Weaknesses
We determined that the Restatements described above, as well as the prior restatement of our consolidated financial statements for the years ended December 31, 2020 and December 31, 2019 with respect to the treatment of the noncontrolling interests attributable to the Class B investors of IIA, resulted from a material weakness in our internal control over financial reporting, as we did not maintain an effective control environment as controls over technical and complex accounting did not operate as expected. This material weakness remained un-remediated as of each of the relevant reporting periods. Subsequently, during the audit of our financial statements for the year ended December 31, 2022, our auditors identified control deficiencies in our internal control over financial reporting as a result of a lack of properly designed controls related to the calculation of the fair value of our reporting unit undertaken as a part of goodwill impairment testing as of December 31, 2022. These control deficiencies could result in a misstatement of our goodwill, any related impairment or related disclosures that could result in a material misstatement of our financial results that may not be prevented or detected. We determined that these control deficiencies related to the previously identified material weakness related to technical and complex accounting, which remained un-remediated as of December 31, 2022. We did not maintain an effective control environment, as there were certain areas in which the accounting function did not operate as expected due to a lack of sufficient internal accounting resources, in particular technical accounting expertise with respect to complex financial instruments and fair value calculation, which resulted in undue reliance on third-party accounting and valuation experts, and inadequate level of precision embedded in control activities, as well as lack of sufficient formalization over processes and control evidence.
In addition to the foregoing material weakness, in connection with our assessment of our controls for the year ended December 31, 2022, we identified a separate material weakness in our internal control over financial reporting as of December 31, 2022 relating to a lack of properly designed controls, as well as insufficient written policies and procedures, in connection with our Enterprise revenue recognition accounting in accordance with standards under Accounting Standards Codification Topic 606, Revenue from Contracts with Customers. These control deficiencies could result in a misstatement of our Enterprise revenue accounts or disclosures that could result in a material misstatement of our financial results that may not be prevented or detected. Accordingly, we determined that these control deficiencies constitute a material weakness.
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of June 30, 2023, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, in light of the material weaknesses described above, as of June 30, 2023, our disclosure controls and procedures were not effective. As a result, we performed additional analysis as deemed necessary to ensure that our consolidated financial statements included in this Quarterly Report on Form 10-Q were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, result of operations and cash flows for the periods presented.
49
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended June 30, 2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting, other than as described below with respect to our ongoing remediation efforts.
In light of the material weaknesses identified and errors, including those resulting in the Restatements, as described above, we have added additional resources intended to enhance our accounting and financial reporting functions, including hiring additional qualified personnel with technical expertise. We continue to develop formal processes in consultation with our third-party professional advisors, including formalizing our control evidence and processes, that are intended to ensure a sufficient level of precision is embedded in all financial reporting control activities. In addition, we have enhanced the supervisory review of accounting procedures in financial reporting and expanded and improved our review process for complex securities and transactions and related accounting standards. In order to fully remediate the material weaknesses identified, we intend to continue to re-evaluate the design of, and validate, our internal controls to ensure that they appropriately address changes in our business that could impact our system of internal controls, review our current processes and procedures to identify potential control design enhancements to ensure that our financial reporting is complete and accurate and develop a monitoring protocol to enable management to validate the operating effectiveness of key controls over financial reporting. We believe that these actions will ultimately be effective in remediating the material weaknesses we have identified and will continue to evaluate our remediation efforts and report regularly to the Audit Committee of the Board of Directors on the progress and results of our remediation plan. We intend to complete the remediation by December 31, 2023, but these remediation measures may be time consuming and costly, and there is no assurance that we will be able to complete the remediation and put in place the appropriate controls within this timeframe or that these initiatives will ultimately have the intended effects.
50
Part II – OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are subject to various claims and legal proceedings in the ordinary course of business, including lawsuits, arbitrations, class actions and other litigation. We are also the subject of various actions, inquiries, investigations and proceedings by regulatory and other governmental agencies. The outcome of any such legal and regulatory matters, including those discussed in this section, is inherently uncertain, and some of these matters may result in adverse judgments or awards, including penalties, injunctions or other relief, which could materially and adversely impact our business, financial condition, operating results and cash flows. See Part I, Item 1A “Risk Factors — Risks Relating to Legal and Accounting Matters — Unfavorable outcomes in legal proceedings may harm our business, financial condition, results of operations and cash flows” in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
We have determined, based on our current knowledge, that the aggregate amount or range of losses that are estimable with respect to our legal proceedings, including the matters described below, would not have a material adverse effect on our business, financial position, results of operations or cash flows. As of June 30, 2023, amounts accrued were not material. Notwithstanding the foregoing, the ultimate outcome of legal proceedings involves judgments, estimates and inherent uncertainties, and cannot be predicted with certainty. It is possible that an adverse outcome of any matter could be material to our business, financial position, results of operations or cash flows as a whole for any particular reporting period of occurrence. In addition, it is possible that a matter may prompt litigation or additional investigations or proceedings by other government agencies or private litigants.
State Regulatory Examinations and Investigations
We hold a number of state licenses in connection with our business activities, and must also comply with other applicable compliance and regulatory requirements in the states where we operate. In most states where we operate, one or more regulatory agencies have authority with respect to regulation and enforcement of our business activities under applicable state laws, and we may also be subject to the supervisory and examination authority of such state regulatory agencies. Examinations by state regulators have and may continue to result in findings or recommendations that require us, among other potential consequences, to provide refunds to customers or to modify our internal controls and/or business practices.
In the ordinary course of our business, we are and have been from time to time subject to, and may in the future be subject to, governmental and regulatory examinations, information requests, investigations and proceedings (both formal and informal) in connection with various aspects of our activities by state agencies, including the California Department of Financial Protection and Innovation, the Attorney General of the Commonwealth of Virginia, the New York Attorney General’s Office and the Colorado Department of Law, certain of which may result in adverse judgments, settlements, fines, penalties, restitution, disgorgement, injunctions or other relief. We have responded to and cooperated with the relevant state agencies and will continue to do so in the future, as appropriate.
CFPB Litigation
On September 29, 2022, the Consumer Financial Protection Bureau (the "CFPB") initiated a civil action in the United States District Court for the Southern District of New York ("SDNY") against MoneyLion Technologies Inc., ML Plus LLC and our 38 state lending subsidiaries, alleging violations of the Military Lending Act and the Consumer Financial Protection Act. The CFPB is seeking injunctive relief, redress for allegedly affected consumers and civil monetary penalties. On January 10, 2023, we moved to dismiss the lawsuit, asserting various constitutional and merits-based arguments. On June 13, 2023, the CFPB filed its first amended complaint, alleging substantially similar claims as those asserted in its initial complaint. On July 11, 2023, we moved to dismiss the lawsuit, again asserting various constitutional and merit-based arguments. We continue to believe the CFPB’s claims are meritless and are vigorously defending against the lawsuit. Nevertheless, at this time, we cannot predict or determine the timing or final outcome of this matter or the effect that any adverse determinations the lawsuit may have on our business, financial condition or results of operations.
51
MALKA Seller Members Litigation
On July 21, 2023, Jeffrey Frommer, Lyusen Krubich, Daniel Fried and Pat Capra, the former equity owners of MALKA (collectively, the “Seller Members”), brought a civil action in the SDNY against MoneyLion Technologies Inc. alleging, among other things, breaches of the Membership Interest Purchase Agreement governing the MALKA Acquisition (the “MIPA”). Among other claims, the Seller Members allege that they are entitled to payment of $25.0 million of Class A Common Stock pursuant to the earnout provisions set forth in the MIPA, based on the Seller Members’ assertion that MALKA achieved certain financial targets for the year ended December 31, 2022 (such payment, the “2022 Earnout Payment”). We believe that the Seller Members are not entitled to any portion of the 2022 Earnout Payment under the terms of the MIPA and that the Seller Members’ claims in their lawsuit are meritless. We intend to vigorously defend against the lawsuit. Nevertheless, at this time, we cannot predict or determine the timing or final outcome of this matter or the effect that any adverse determinations the lawsuit may have on our business, financial condition or results of operations.
Former Series A Preferred Stockholders Litigation
On July 27, 2023, MassMutual Ventures US II LLC, Canaan X L.P., Canaan XI L.P., F-Prime Capital Partners Tech Fund LP and GreatPoint Ventures Innovation Fund II, L.P., each of which are former equityholders of Even Financial Inc. and former holders of the Company’s Series A Preferred Stock (collectively, the “Former Preferred Stockholders”), brought a civil action in the SDNY against MoneyLion Inc., our Board of Directors and certain officers seeking declaratory relief and related damages.
The Former Preferred Stockholders allege that the 1-for-30 Reverse Stock Split of the Class A Common Stock effected on April 24, 2023 was undertaken in a manner designed to trigger the Automatic Conversion Event pursuant to which all outstanding shares of Series A Preferred Stock automatically converted into certain shares of Class A Common Stock following the close of trading on the NYSE on May 26, 2023. The Former Preferred Stockholders further allege that the Definitive Proxy Statement we filed with the SEC on March 31, 2023 relating to the Special Meeting of Stockholders to approve the Reverse Stock Split proposal contained false and/or misleading statements and material omissions, and that we improperly failed to obtain the separate vote of the holders of the Series A Preferred Stock to approve the Reverse Stock Split. In connection therewith, the Former Preferred Stockholders assert claims against all defendants under Section 14(a) of the Securities Exchange Act of 1934 and for breach of the Certificate of Designations governing the Series A Preferred Stock, and a claim against the individual defendants for breach of fiduciary duty.
We believe that the Former Preferred Stockholders’ claims are meritless and intend to vigorously defend against the lawsuit. Nevertheless, at this time, we cannot predict or determine the timing or final outcome of this matter or the effect that any adverse determinations the lawsuit may have on our business, financial condition or results of operations.
Item 1A. Risk Factors
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, other than as set forth in the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023, filed with the SEC on May 9, 2023. In addition, we may disclose additional changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
52
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On May 22, 2023, pursuant to the Engine Merger Agreement, in connection with Engine's partial achievement of the Earnout, the Company issued 4,354,092 shares of Series A Preferred Stock and, in lieu of fractional shares and with respect to recipients otherwise ineligible to receive shares, approximately $0.5 million in cash to the former equityholders and advisors of Even Financial Inc. For more information regarding the Earnout and the Series A Preferred Stock, including the subsequent Automatic Conversion Event, see Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments — Automatic Conversion Event” and “— Business Combinations.”
Such offers, sales and issuances of MoneyLion securities were deemed to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof. No underwriters were involved in any of the foregoing transactions.
Item 3. Default Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
53
Item 6. Exhibits
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, the representations, warranties, covenants and agreements contained in such exhibits were made only for the purposes of such agreement and as of specified dates, were solely for the benefit of the parties to such agreement and may be subject to limitations agreed upon by the contracting parties. The representations and warranties may have been made for the purposes of allocating contractual risk between the parties to such agreements instead of establishing these matters as facts and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Unless otherwise explicitly stated therein, investors and security holders are not third-party beneficiaries under any of the agreements attached as exhibits hereto and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its affiliates or businesses. Moreover, the assertions embodied in the representations and warranties contained in each such agreement are qualified by information in confidential disclosure letters or schedules that the parties have exchanged. Moreover, information concerning the subject matter of the representations and warranties may change after the respective dates of such agreements, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
Exhibit No. |
|
Description |
3.1 |
|
|
3.1.1 |
|
|
10.1† |
|
|
31.1* |
|
|
31.2* |
|
|
32.1** |
|
|
32.2** |
|
|
101.INS |
|
Inline XBRL Instance Document. |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document. |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |
|
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101). |
* Filed herewith.
** The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
† Certain schedules and exhibits to this exhibit have been omitted pursuant to Regulation S-K Item 601(a)(5), or certain portions of this exhibit have been redacted pursuant to Regulation S-K Item 601(b)(10)(iv).
54
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
MONEYLION INC. |
|
|
|
|
Date: August 8, 2023 |
By: |
/s/ Richard Correia |
|
|
Richard Correia President, Chief Financial Officer and Treasurer (Principal Financial Officer) |
|
|
|
Date: August 8, 2023 |
By: |
/s/ Mark Torossian |
|
|
Mark Torossian (Principal Accounting Officer) |
55