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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended March 31, 2024

 

OR

 

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

 

For the transition period from to

 

Commission File Number: 001-39346

 

MoneyLion Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

85-0849243

(State or other jurisdiction of
incorporation or organization)

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

249-245 West 17th Street, 4th Floor

New York, New York

10011

(Address of principal executive offices)

(Zip Code)

 

(212) 300-9865

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, par value $0.0001 per share

ML

The New York Stock Exchange

Redeemable warrants, each whole warrant exercisable for 1/30th of one share of Class A common stock

ML WS

The New York Stock Exchange

 

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

 

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

 

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

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

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

 

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

 

There were 10,787,979 shares of the registrant’s Class A common stock, par value $0.0001 per share, outstanding as of May 1, 2024.

 


 

MoneyLion Inc.

TABLE OF CONTENTS

QUARTERLY REPORT ON FORM 10-Q

For the Quarterly Period Ended March 31, 2024

 

Page

PART I – FINANCIAL INFORMATION

 

Item 1.

Financial Statements

1

Unaudited Consolidated Balance Sheets

1

Unaudited Consolidated Statements of Operations

2

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

3

Unaudited Consolidated Statements of Cash Flows

4

Notes to Unaudited Consolidated Financial Statements

5

Item 2.

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

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

34

PART II - OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

37

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

37

Item 3.

Defaults Upon Senior Securities

37

Item 4.

Mine Safety Disclosures

37

Item 5.

Other Information

37

Item 6.

Exhibits

39

Signatures

40

 

i


 

INTRODUCTORY NOTE

General

 

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. “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, par value $0.0001 per share (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 New York Stock Exchange (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. These statements are based on the beliefs and assumptions of the management of MoneyLion. Although MoneyLion believes that its respective plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, MoneyLion cannot assure you that it will achieve or realize these plans, intentions or expectations. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates,” or “intends” or similar expressions. The forward-looking statements are based on projections prepared by, and are the responsibility of, MoneyLion’s management.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

iii


 

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

 

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

 

MoneyLion’s ability to maintain the listing of its Class A Common Stock and its publicly traded warrants to purchase Class A Common Stock (the “Public Warrants”) on the NYSE and any volatility in the market price of MoneyLion’s securities; and

 

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

 

These and other factors are more fully discussed in our filings with the U.S. Securities and Exchange Commission (the “SEC”), including the “Risk Factors” section in our Annual Report on Form 10-K for the year ended December 31, 2023, and Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q.

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

 

iv


 

Risk Factor Summary

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

 

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

 

Any failure to effectively match consumer leads from our Channel Partners with product offerings from our Product Partners or any reduced marketing spend by such Product Partners on our Enterprise platform could have a material adverse effect on our business, financial condition, results of operations and cash flows.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Our risk management processes and procedures may not be effective.

 

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

 

Our business may be adversely affected by economic conditions and other factors, including adverse developments affecting financial institutions or the financial services industry generally, that we cannot control.

 

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

 

v


 

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

 

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

 

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

 

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

 

If we are unable to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

 

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

 

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

 

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

 

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

 

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

 

The risks described above should be read together with the “Cautionary Statement Regarding Forward-Looking Statements” herein, the other risk factors set forth under Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q, the “Risk Factors” section in the Annual Report on Form 10-K for the year ended December 31, 2023, our consolidated financial statements and the related notes presented in Part I, Item 1 “Financial Statements” in this Quarterly Report on Form 10-Q and the other documents that we file with the SEC. Our business, prospects, financial condition or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial.

 

vi


 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

MONEYLION INC.

CONSOLIDATED BALANCE SHEETS

(dollar amounts in thousands, except per share amounts)

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

 

Cash

 

$

93,177

 

 

$

92,195

 

Restricted cash, including amounts held by variable interest entities (VIEs) of $5,724 and $128

 

 

8,725

 

 

 

2,284

 

Consumer receivables

 

 

217,049

 

 

 

208,167

 

Allowance for credit losses on consumer receivables

 

 

(34,303

)

 

 

(35,329

)

Consumer receivables, net, including amounts held by VIEs of $138,185 and $131,283

 

 

182,746

 

 

 

172,838

 

Enterprise receivables, net

 

 

17,518

 

 

 

15,978

 

Property and equipment, net

 

 

1,975

 

 

 

1,864

 

Intangible assets, net

 

 

172,375

 

 

 

176,541

 

Other assets

 

 

61,404

 

 

 

53,559

 

Total assets

 

$

537,920

 

 

$

515,259

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Secured loans, net

 

$

64,408

 

 

$

64,334

 

Accounts payable and accrued liabilities

 

 

50,043

 

 

 

52,396

 

Warrant liability

 

 

729

 

 

 

810

 

Other debt, net, including amounts held by VIEs of $129,675 and $125,419

 

 

129,675

 

 

 

125,419

 

Other liabilities

 

 

22,607

 

 

 

15,077

 

Total liabilities

 

 

267,462

 

 

 

258,036

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Class A Common Stock, $0.0001 par value; 66,666,666 shares authorized as of March 31, 2024 and December 31, 2023, 10,820,256 and 10,787,923 issued and outstanding, respectively, as of March 31, 2024 and 10,444,627 and 10,412,294 issued and outstanding, respectively, as of December 31, 2023

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

975,801

 

 

 

969,641

 

Accumulated deficit

 

 

(695,644

)

 

 

(702,719

)

Treasury stock at cost, 32,333 shares as of March 31, 2024 and December 31, 2023

 

 

(9,700

)

 

 

(9,700

)

Total stockholders' equity

 

 

270,458

 

 

 

257,223

 

Total liabilities and stockholders' equity

 

$

537,920

 

 

$

515,259

 

 

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

1


 

MONEYLION INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollar amounts in thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Revenue

 

 

 

 

 

Service and subscription revenue

$

118,073

 

 

$

90,741

 

Net interest income on loan receivables

 

2,933

 

 

 

2,928

 

Total revenue, net

 

121,006

 

 

 

93,669

 

Operating expenses

 

 

 

 

 

Provision for credit losses on consumer receivables

 

20,230

 

 

 

16,511

 

Compensation and benefits

 

24,786

 

 

 

24,408

 

Marketing

 

10,866

 

 

 

6,392

 

Direct costs

 

31,389

 

 

 

29,802

 

Professional services

 

5,766

 

 

 

4,999

 

Technology-related costs

 

6,586

 

 

 

6,038

 

Other operating expenses

 

10,320

 

 

 

8,995

 

Total operating expenses

 

109,943

 

 

 

97,145

 

Net income (loss) before other (expense) income and income taxes

 

11,063

 

 

 

(3,476

)

Interest expense

 

(6,817

)

 

 

(7,511

)

Change in fair value of warrant liability

 

81

 

 

 

(149

)

Change in fair value of contingent consideration from mergers and acquisitions

 

 

 

 

246

 

Other income

 

2,359

 

 

 

1,649

 

Net income (loss) before income taxes

 

6,686

 

 

 

(9,241

)

Income tax benefit

 

(389

)

 

 

(24

)

Net income (loss)

 

7,075

 

 

 

(9,217

)

Accrual of dividends on preferred stock

 

 

 

 

(1,977

)

Net income (loss) attributable to common shareholders

$

7,075

 

 

$

(11,194

)

 

 

 

 

 

Net income (loss) per share, basic

$

0.67

 

 

$

(1.29

)

Net income (loss) per share, diluted

$

0.60

 

 

$

(1.29

)

Weighted average shares used in computing net income (loss) per share, basic

 

10,526,417

 

 

 

8,652,218

 

Weighted average shares used in computing net income (loss) per share, diluted

 

11,810,917

 

 

 

8,652,218

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Class A Common Stock

 

 

Additional

 

 

Accumulated

 

 

Treasury

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Deficit

 

 

Stock

 

 

Equity

 

Balances at January 1, 2024

 

 

10,412,294

 

 

$

1

 

 

$

969,641

 

 

$

(702,719

)

 

$

(9,700

)

 

$

257,223

 

Stock-based compensation

 

 

 

 

 

 

 

 

6,497

 

 

 

 

 

 

 

 

 

6,497

 

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

 

 

375,629

 

 

 

 

 

 

(337

)

 

 

 

 

 

 

 

 

(337

)

Net income

 

 

 

 

 

 

 

 

 

 

 

7,075

 

 

 

 

 

 

7,075

 

Balances at March 31, 2024

 

 

10,787,923

 

 

$

1

 

 

$

975,801

 

 

$

(695,644

)

 

$

(9,700

)

 

$

270,458

 

 

 

Redeemable Convertible

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

Preferred Stock (Series A)

 

 

 

Class A Common Stock

 

 

Additional

 

 

Accumulated

 

 

Treasury

 

 

Stockholders'

 

 

Shares

 

 

 

Amount

 

 

 

Shares (1)

 

 

Amount (1)

 

 

Paid-in Capital(1)

 

 

Deficit

 

 

Stock

 

 

Equity

 

Balances at January 1, 2023

 

25,655,579

 

 

 

$

173,208

 

 

 

 

8,587,345

 

 

$

1

 

 

$

766,839

 

 

$

(657,979

)

 

$

(9,700

)

 

$

99,161

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,705

 

 

 

 

 

 

 

 

 

5,705

 

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

 

 

 

 

 

 

 

 

 

100,797

 

 

 

 

 

 

(599

)

 

 

 

 

 

 

 

 

(599

)

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

 

 

 

 

 

 

 

 

 

110,925

 

 

 

 

 

 

1,913

 

 

 

 

 

 

 

 

 

1,913

 

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

 

46,080

 

 

 

 

120

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of preferred stock to common stock

 

(64

)

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued dividends on preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,977

)

 

 

 

 

 

 

 

 

(1,977

)

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

505

 

 

 

 

 

 

505

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,217

)

 

 

 

 

 

(9,217

)

Balances at March 31, 2023

 

25,701,595

 

 

 

$

173,328

 

 

 

 

8,799,069

 

 

$

1

 

 

$

771,881

 

 

$

(666,691

)

 

$

(9,700

)

 

$

95,491

 

 

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

 

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

 

3


 

MONEYLION INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

$

7,075

 

 

$

(9,217

)

Adjustments to reconcile net income (loss) to net cash from operating activities:

 

 

 

 

 

Provision for losses on receivables

 

20,230

 

 

 

16,511

 

Depreciation and amortization expense

 

6,212

 

 

 

6,184

 

Change in deferred fees and costs, net

 

356

 

 

 

616

 

Change in fair value of warrants

 

(81

)

 

 

149

 

Change in fair value of contingent consideration from mergers and acquisitions

 

 

 

 

(246

)

Gain on foreign currency translation

 

(97

)

 

 

(7

)

Stock compensation expense

 

6,497

 

 

 

5,705

 

Deferred income taxes

 

236

 

 

 

(93

)

Changes in assets and liabilities:

 

 

 

 

 

Accrued interest receivable

 

(38

)

 

 

(27

)

Enterprise receivables, net

 

(1,540

)

 

 

(4,130

)

Other assets

 

(1,364

)

 

 

(1,250

)

Accounts payable and accrued liabilities

 

(2,256

)

 

 

(9,805

)

Other liabilities

 

(1,591

)

 

 

(1,710

)

Net cash provided by operating activities

 

33,639

 

 

 

2,680

 

Cash flows from investing activities:

 

 

 

 

 

Net originations and collections of finance receivables

 

(27,722

)

 

 

(19,647

)

Purchase of property and equipment and software development

 

(2,157

)

 

 

(1,037

)

Settlement of contingent consideration related to mergers and acquisitions

 

 

 

 

(350

)

Net cash used in investing activities

 

(29,879

)

 

 

(21,034

)

Cash flows from financing activities:

 

 

 

 

 

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

 

4,000

 

 

 

(24,000

)

Payments 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

 

(337

)

 

 

(599

)

Net cash provided by (used in) financing activities

 

3,663

 

 

 

(24,599

)

Net change in cash and restricted cash

 

7,423

 

 

 

(42,953

)

Cash and restricted cash, beginning of period

 

94,479

 

 

 

153,709

 

Cash and restricted cash, end of period

$

101,902

 

 

$

110,756

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid for interest

$

6,448

 

 

$

7,465

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

Accrued dividends on preferred stock

$

 

 

$

1,977

 

Equity issued as consideration for mergers and acquisitions

$

 

 

$

120

 

Equity issued as settlement of contingent consideration related to Malka Acquisition

$

 

 

$

1,913

 

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

$

8,885

 

 

$

 

 

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

4


 

MONEYLION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share amounts or as otherwise indicated)

(Unaudited)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

 

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

 

MoneyLion is a leader in financial technology, powering the next generation of personalized products and financial content for American consumers. MoneyLion designs and offers modern personal finance products, tools and features and curate money-related content that delivers actionable insights and guidance to its users. MoneyLion also operates and distributes embedded finance marketplace solutions that match consumers with personalized third-party offers from its partners, providing convenient access to an expansive breadth of financial solutions that enable consumers to borrow, spend, save and achieve better financial outcomes. In addition, MoneyLion provides creative media and brand content services to clients across industries through its media division and leverages its adaptive, in-house content studio to produce and deliver engaging and dynamic content in support of MoneyLion's product and service offerings.

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 income (loss); therefore, there is no difference between net income (loss) and comprehensive income (loss) for the three months ended March 31, 2024 and 2023.

 

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.”

 

5


 

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”), 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, which includes adjusting the description of any activity that may have been transacted on a pre-Reverse Stock Split basis.

 

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, 2023. Included herein are certain updates to those policies and the related disclosures.

Revenue Recognition and Related Receivables—The following table summarizes revenue by type for the three months ended March 31, 2024 and 2023:

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Consumer revenues

 

 

 

 

 

 

Service and subscription fees

 

$

85,209

 

 

$

62,438

 

Net interest income on finance receivables

 

 

2,933

 

 

 

2,928

 

Total consumer revenues

 

 

88,142

 

 

 

65,366

 

Enterprise service revenues

 

 

32,864

 

 

 

28,303

 

Total revenue, net

 

$

121,006

 

 

$

93,669

 

 

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.

6


 

 

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 had no assets measured at fair value on a recurring or non-recurring basis as of March 31, 2024 and December 31, 2023. The Private Placement Warrants (as defined herein) were measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 and are further described in Note 12, “Stock Warrants.” The Company had no liabilities measured at fair value on a non-recurring basis as of March 31, 2024 nor December 31, 2023. There have been no transfers between levels during the three months ended March 31, 2024 and 2023.

 

The Company also has financial instruments which are not measured at fair value. The Company has evaluated cash (Level 1), restricted cash (Level 1) and consumer receivables, net (Level 3) and believes the carrying value approximates the fair value due to the short-term nature of these balances. The carrying value of the secured loans approximates their fair value based on the relatively short duration these instruments have been outstanding and the secured loans' variable interest rate based on market rates. The carrying value of other debt approximates its fair value based on the relatively short duration these instruments have been outstanding and availability of alternative financing sources at similar interest rates with the same terms. The fair value of secured loans and other debt would be based on Level 2 fair value measurements.

 

Recently Adopted Accounting Pronouncements—The Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which, along with subsequent related ASUs, creates a new credit impairment standard for financial assets measured at amortized cost and available-for-sale debt securities. The ASU requires financial assets measured at amortized cost (including loans, trade receivables and held-to-maturity debt securities) to be presented at the net amount expected to be collected, through an allowance for credit losses that are expected to occur over the remaining life of the asset, rather than incurred losses. The ASU requires that credit losses on available-for-sale debt securities be presented as an allowance rather than as a direct write-down. The measurement of credit losses for newly recognized financial assets (other than certain purchased assets) and subsequent changes in the allowance for credit losses are recorded in the statement of operations as the amounts expected to be collected change. The Company adopted ASU 2016-13 and the related subsequent ASUs effective January 1, 2023, and applied the changes prospectively, recognizing a cumulative-effect adjustment to the beginning balance of retained earnings as of the adoption date. Upon adoption, the Company increased consumer receivables, net by $692, decreased enterprise receivables, net by $187 and reduced accumulated deficit by $505. The adoption of the new guidance did not impact the Company’s unaudited consolidated interim statements of operations or cash flows.

 

Recently Issued Accounting Pronouncements Not Yet Adopted—The Company currently qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012. Accordingly, the Company has the option to adopt new or revised accounting guidance either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods applicable to private companies. The Company has elected to adopt new or revised accounting guidance within the same time period as private companies, unless, as indicated below, management determines it is preferable to take advantage of early adoption provisions offered within the applicable guidance.

 

7


 

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The guidance expands the disclosures required for reportable segments in the Company's annual and interim consolidated financial statements, primarily through enhanced disclosures about significant segment expenses. The standard will be effective for the Company beginning with the Company's annual reporting for fiscal year 2025 and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact of this standard on its disclosures.

 

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The guidance requires disclosure of disaggregated income taxes paid, prescribes standardized categories for the components of the effective tax rate reconciliation and modifies other income tax-related disclosures. The standard will be effective for the Company beginning with the Company's annual reporting for fiscal year 2026 and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact of this standard on its income tax disclosures.

 

3. CONSUMER RECEIVABLES

 

The Company’s finance receivables consist of secured personal loans and principal amounts of Instacash advances. Secured loan principal balances are either partially or fully deposited into an escrow account upon origination with any remaining balance being given to the borrower. 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. The Company has elected to not measure an allowance for losses on accrued interest receivable. 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 $237 and $307 for the three months ended March 31, 2024 and 2023.

 

Fees receivable 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 90 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 90 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 March 31, 2024 and December 31, 2023 and the consumer receivables activity, charge-off rates and aging by product for the three months ended March 31, 2024 and 2023.

 

8


 

Consumer receivables consisted of the following:

 

 

March 31,

 

 

December 31,

 

 

2024

 

 

2023

 

Loan receivables

$

68,918

 

 

$

66,815

 

Instacash receivables

 

127,491

 

 

 

120,336

 

Finance receivables

 

196,409

 

 

 

187,151

 

Fees receivable

 

15,102

 

 

 

16,137

 

Subscription receivables

 

4,138

 

 

 

3,491

 

Deferred loan origination costs

 

60

 

 

 

86

 

Accrued interest receivable

 

1,340

 

 

 

1,302

 

Consumer receivables, before allowance for credit losses

$

217,049

 

 

$

208,167

 

 

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

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Beginning balance

$

5,761

 

 

$

5,784

 

Provision for credit losses on receivables

 

368

 

 

 

1,520

 

Loan receivables charged off

 

(2,150

)

 

 

(4,189

)

Recoveries

 

629

 

 

 

2,676

 

Ending balance

$

4,608

 

 

$

5,791

 

 

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

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Beginning balance

$

25,992

 

 

$

23,240

 

Provision for credit losses on receivables

 

17,596

 

 

 

10,081

 

Instacash receivables charged off

 

(23,036

)

 

 

(19,828

)

Recoveries

 

6,093

 

 

 

6,193

 

Ending balance

$

26,645

 

 

$

19,686

 

 

Changes in the allowance for losses on fees receivable were as follows:

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Beginning balance

$

2,552

 

 

$

908

 

Provision for credit losses on receivables

 

1,595

 

 

 

4,174

 

Fees receivable charged off

 

(2,933

)

 

 

(4,825

)

Recoveries

 

785

 

 

 

761

 

Ending balance

$

1,999

 

 

$

1,018

 

 

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

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Beginning balance

$

1,024

 

 

$

1,292

 

Provision for credit losses on receivables

 

671

 

 

 

736

 

Subscription receivables charged off

 

(1,162

)

 

 

(1,356

)

Recoveries

 

518

 

 

 

306

 

Ending balance

$

1,051

 

 

$

978

 

 

9


 

The following is an assessment of the repayment performance of loan receivables as of March 31, 2024 and December 31, 2023 and presents the contractual delinquency of the loan receivables portfolio:

 

 

March 31, 2024

 

 

December 31, 2023

 

 

Amount

 

 

Percent

 

 

Amount

 

 

Percent

 

Current

$

59,681

 

 

 

86.6

%

 

$

58,980

 

 

 

88.2

%

 

 

 

 

 

 

 

 

 

 

 

Delinquency:

 

 

 

 

 

 

 

 

 

 

 

31 to 60 days

 

5,657

 

 

 

8.2

%

 

 

4,451

 

 

 

6.7

%

61 to 90 days

 

3,580

 

 

 

5.2

%

 

 

3,384

 

 

 

5.1

%

Total delinquency

 

9,237

 

 

 

13.4

%

 

 

7,835

 

 

 

11.8

%

Loan receivables before allowance for credit losses

$

68,918

 

 

 

100.0

%

 

$

66,815

 

 

 

100.0

%

 

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 March 31, 2024 and December 31, 2023 and presents the contractual delinquency of the Instacash receivables portfolio:

 

 

March 31, 2024

 

 

December 31, 2023

 

 

Amount

 

 

Percent

 

 

Amount

 

 

Percent

 

Current

$

110,440

 

 

 

86.6

%

 

$

104,541

 

 

 

86.9

%

 

 

 

 

 

 

 

 

 

 

 

Delinquency:

 

 

 

 

 

 

 

 

 

 

 

31 to 60 days

 

9,567

 

 

 

7.5

%

 

 

8,829

 

 

 

7.3

%

61 to 90 days

 

7,484

 

 

 

5.9

%

 

 

6,966

 

 

 

5.8

%

Total delinquency

 

17,051

 

 

 

13.4

%

 

 

15,795

 

 

 

13.1

%

Instacash receivables before allowance for credit losses

$

127,491

 

 

 

100.0

%

 

$

120,336

 

 

 

100.0

%

 

The following is an assessment of the repayment performance of fees receivable as of March 31, 2024 and December 31, 2023 and presents the contractual delinquency of the fees receivable portfolio:

 

 

March 31, 2024

 

 

December 31, 2023

 

 

Amount

 

 

Percent

 

 

Amount

 

 

Percent

 

Current

$

12,758

 

 

 

84.5

%

 

$

13,971

 

 

 

86.6

%

 

 

 

 

 

 

 

 

 

 

 

Delinquency:

 

 

 

 

 

 

 

 

 

 

 

31 to 60 days

 

1,320

 

 

 

8.7

%

 

 

1,197

 

 

 

7.4

%

61 to 90 days

 

1,024

 

 

 

6.8

%

 

 

969

 

 

 

6.0

%

Total delinquency

 

2,344

 

 

 

15.5

%

 

 

2,166

 

 

 

13.4

%

Fees receivable before allowance for credit losses

$

15,102

 

 

 

100.0

%

 

$

16,137

 

 

 

100.0

%

 

10


 

The following is an assessment of the repayment performance of subscription receivables as of March 31, 2024 and December 31, 2023 and presents the contractual delinquency of the subscription receivables portfolio:

 

 

March 31, 2024

 

 

December 31, 2023

 

 

Amount

 

 

Percent

 

 

Amount

 

 

Percent

 

Current

$

2,982

 

 

 

72.1

%

 

$

2,786

 

 

 

79.8

%

 

 

 

 

 

 

 

 

 

 

 

Delinquency:

 

 

 

 

 

 

 

 

 

 

 

31 to 60 days

 

701

 

 

 

16.9

%

 

 

407

 

 

 

11.7

%

61 to 90 days

 

455

 

 

 

11.0

%

 

 

298

 

 

 

8.5

%

Total delinquency

 

1,156

 

 

 

27.9

%

 

 

705

 

 

 

20.2

%

Subscription receivables before allowance for credit losses

$

4,138

 

 

 

100.0

%

 

$

3,491

 

 

 

100.0

%

 

4. PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Leasehold improvements

 

$

1,860

 

 

$

1,932

 

Furniture and fixtures

 

 

255

 

 

 

361

 

Computers and equipment

 

 

2,597

 

 

 

2,551

 

 

 

4,712

 

 

 

4,844

 

Less: accumulated depreciation

 

 

(2,737

)

 

 

(2,980

)

Property and equipment, net

 

$

1,975

 

 

$

1,864

 

Total depreciation expense related to property and equipment was $186 and $304 for the three months ended March 31, 2024 and 2023, respectively.

 

5. INTANGIBLE ASSETS

 

Intangible assets consisted of the following:

 

 

 

 

March 31,

 

 

December 31,

 

 

 

Useful Life

 

2024

 

 

2023

 

Proprietary technology and capitalized internal-use software

 

3 - 7 years

 

$

44,943

 

 

$

43,105

 

Work in process

 

 

 

 

1,680

 

 

 

1,695

 

Customer relationships

 

10 - 15 years

 

 

160,500

 

 

 

160,500

 

Trade names

 

9 - 15 years

 

 

15,960

 

 

 

15,960

 

Less: accumulated amortization

 

 

 

 

(50,708

)

 

 

(44,719

)

Intangible assets, net

 

 

 

$

172,375

 

 

$

176,541

 

 

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 internal-use software were $1,860 for the three months ended March 31, 2024 and were $1,162 for the three months ended March 31, 2023.

 

For the three months ended March 31, 2024 and 2023, total amortization expense was $6,026 and $5,880, respectively.

11


 

The following table summarizes estimated future amortization expense of intangible assets placed in service at March 31, 2024 for the years ending:

Remainder of 2024

 

 

 

 

 

$

18,173

 

2025

 

 

 

 

 

 

24,231

 

2026

 

 

 

 

 

 

24,231

 

2027

 

 

 

 

 

 

23,659

 

2028

 

 

 

 

 

 

21,350

 

Thereafter